Panel I Of A Hearing Of The Senate Banking, Housing And Urban Affairs Committee
Statement
Copyright ©2009 by Federal News Service, Inc., Ste. 500, 1000 Vermont Ave, Washington, DC 20005 USA. Federal News Service is a private firm not affiliated with the federal government. No portion of this transcript may be copied, sold or retransmitted without the written authority of Federal News Service, Inc. Copyright is not claimed as to any part of the original work prepared by a United States government officer or employee as a part of that person's official duties. For information on subscribing to the FNS Internet Service at www.fednews.com, please email Carina Nyberg at cnyberg@fednews.com or call 1-202-216-2706.
SEN. DODD: The committee will come to order, if we may, and we've got a very busy morning this morning. Let me welcome all of my colleagues who are here. And I want to make a particular warm welcome to Mark Warner, our new colleague, who's here this morning, our new senator from the state of Virginia. Connecticut claims him a little bit as well, having grown up a bit there. So I've known Mark many, many years. And he's going to be a wonderful addition to the United States Senate, and we're thrilled that you're a member of this committee.
And I gather that Senator Kohl is going to be joining us, and I think Senator Bennet, the new senator from Colorado, will be joining us as well on this committee. And we appreciate the tremendous work of Bob Casey and Tom Carper, who are going to other committee assignments. But they were wonderful members of this committee, and I want to publicly thank them for their service over the last two years that I've had the privilege of chairing the committee.
I want to thank Richard Shelby again. We have known each other a long time, have served together for many, many years, and it's been a good relationship over these last years. We got a lot done on this committee. And I'm looking forward to a -- this Congress, we're obviously going to be a very busy committee, to put it mildly, with all the issues in front of us. And I enjoyed immensely the cooperation that I had from Senator Shelby and the members of the minority side as well. Bob Corker here -- on numerous occasions I drew him into situations he probably had some second thoughts about, but I -- but he was a great member and a real complement to the efforts we were making here.
So today we have a busy agenda --
SEN. RICHARD SHELBY (R-AL): Mr. Chairman, you weren't going to tell them how many years together we've been here?
SEN. DODD: I wasn't going to tell them that --
SEN. SHELBY: No, (they'd get ?) together.
SEN. DODD: -- (chuckles) -- but many years.
The way we're going to proceed is, I want to make an opening statement regarding our nominees, turn to Senator Shelby for any opening statements he would care to make, and then I'm going to turn to my colleagues who are here to introduce our witnesses this morning and of course several of our colleagues are also members of this committee. So we'll try and move along as quickly as we can here with these nominations.
So this morning we meet to consider five very distinguished individuals who President-elect Obama has designated for nomination to the Securities and Exchange Commission, to the Federal Reserve and to the President's Council of Economic Advisers, positions critical to restoring confidence in our financial system and stabilizing our underlying economy. I want to thank each of the nominees who are here today for appearing before this committee and for their willingness to accept the job that you're going to undertake.
Almost every day we hear more troubling economic news, including the loss of more than half a million jobs in our country in December, to some -- that some 9(,000) to 10,000 homes are entering foreclosure each and every day in our nation, or the prospect of another small business facing bankruptcy because of a combination of falling sales and lack of access to adequate credit. And so you arrive as nominees before this committee at a very, very critical moment in our nation's history.
On the first panel, we'll hear from the chairman-designate of the U.S. Securities and Exchange Commission. The securities markets consist of trillions of dollars' worth of stocks, options, municipal bonds, corporation bonds, mortgage-backed and asset-backed securities and other securities. Half of American families -- half of our families in this country are invested directly or indirectly in the securities markets. They invest for retirement, for college education and tuition. Many small businesses rely on securities markets to raise capital to expand their businesses and to make payroll. And the role that these markets play in the world's capital markets obviously is critical, as we all understand.
Given the correlation of the health of securities markets to our nation's economic stability, the Securities and Exchange Commission is an extremely important institution, to put it mildly. It oversees sales of securities, markets, mutual funds, investment advisers, credit rating agencies and accounting principles. It coordinates with securities regulators throughout the 50 states as well.
But perhaps most importantly, it is designed to protect investors. As former Chairman William Douglas said, the SEC is supposed to be the "investors' advocate," to quote him, responsible for ensuring that a family or a small business investing in hard- earned money can trust that the cops are on the beat and doing their job well.
But as we all know, the securities markets are in turmoil. Mortgage-backed securities markets have cratered, and literally billions of dollars have been lost. Major investment banks who contributed mightily to our financial problems have now been forced to either become bank holding companies or fail altogether. The charities and investors who entrusted their money in Bernard Madoff Investment LLC lost billions of dollars in a massive Ponzi scheme that undetected by the examiners of the SEC and FINRA not for years but for decades. How did that happen, and who was responsible for that?
In the last eight months, stocks have plummeted. Since last May, the Dow Jones and NASDAQ averages are down by about 40 percent, damaging the retirement savings and pension funds of millions of Americans, pounding endowments for universities and nonprofits, and endangering critical financing for small businesses and entrepreneurs.
Quite simply, these failures have undermined our economy. And understandably, there's been an erosion of confidence in the regulators. People have questioned the SEC's ability to spot problems or prevent them from occurring in the first place. After years of misleading sales pitches and credit ratings that proved to be wildly optimistic, many have completely lost faith in mortgage-backed securities.
As Columbia University's John Coffee has said, and I quote him, "It is time to find a tough cop for the Wall Street beat," someone who will restore confidence not only in the integrity of the market, but also in its regulators. There are a host of specific issues the commission must examine in the coming weeks and months, from accounting and securitization to credit-default swaps, credit-rating agencies, short selling, to the Madoff fraud -- on which this committee, by the way, will be scheduling a hearing on January 27th.
And it is absolutely critical that the chairman and commissioners make an extraordinary effort to pursue these issues fairly and independently, free from political considerations and from the industries which formally employ them. That has always been true, but it is particularly true in these days.
The committee also considers -- or will consider the nomination of one of the Federal Reserve Board governors, which is among the most important positions that we consider in this committee. In establishing the Federal Reserve, the Congress created a system in which the Fed governor's seat has a fixed 14-year term. Governors at the Fed enjoy third -- the third-longest term given to any appointee in the federal government, behind only the lifetime appointments awarded to judges and the 15-year term given to the comptroller general.
As such, a nominee to the Federal Reserve Board -- governors -- requires careful deliberation and thoughtful consideration. The seven Fed governors are the only individuals appointed by the president of the United States and confirmed by the United States Senate who have a voice in our nation's monetary policy. Entrusted to fulfill the Fed's dual mandate of promoting maximum employment and achieving price stability, they play a very critical role, as we all know, in creating the conditions necessary for our economy to grow and for every American to have the opportunity to share in that prosperity.
While the role of the Fed is critical to setting monetary policy, I'd also add it serves as a regulator of the safety and soundness of our largest lending institutions and, very significantly, as a regulator and enforcer of the laws passed by the United States Congress to protect consumers. These aspects are no less important than the Fed's monetary-policy responsibilities.
Chairman Bernanke has, in my opinion, been very forthright and active in identifying that the problems in the housing market are at the root of our economic crisis.
And I thank him, quite candidly, for his continued calls for concrete action, such as he did last week in a speech, a national given speech.
However, not all of the Federal Reserve governors have been as helpful. Indeed, when I asked Governor Duke at a hearing in October what the Fed was doing to comply with the law to prevent foreclosures on mortgages that the Fed effectively owns through the Bear-Stearns bailout, it took commissioner Duke -- Governor Duke, rather -- three months to respond, and then only half-heartedly. That's unacceptable.
It is my hope that Dan Tarullo will both be more responsive, but also, if confirmed, help steer the Fed on a better course so critical during these tough economic times.
On the second panel, we'll also have the nominees who will, if confirmed, comprise the President's Council of Economic Advisers. These men and women will be responsible for providing the president and the administration with the facts, economic projections and recommendations that will guide the administration policy and thinking in the coming days. That job has never been more critical than it is today, given the severe recession that we are battling and the unprecedented crisis that has gripped our nation's credit and financial markets.
The good news is that help is truly, in my view, on the way. The president-elect has laid out a bold plan to revive our economy by cutting taxes for middle-class Americans and investing in our nation's infrastructure, which is something that I, along with many of my colleagues on this committee, have long advocated.
The president-elect has also stated that he will make fundamental changes to the administration of the TARP program and take it in a sharply different direction. That is why I'm supporting the release of the second tranche of TARP funds, although I've been extremely disappointed, as most of my colleagues have been, in the way that the present administration has implemented the TARP program. Given the fragile state of our financial system, halting this program would, in my view, be the height of irresponsibility.
I'm sure that we will have an opportunity to discuss these with other issues with the distinguished CEA nominees in our second panel. I and others will introduce them individually at that time. And again, I thank my colleagues who are here to do so.
But this is a critical moment, as we all know, in our nation's history. And if we are to reestablish confidence in our financial system, then we must do so by looking out for the interests of the American people, their families, small businesses and others who've been caught by this credit crunch.
I know that each of the nominees share these priorities and, if confirmed, I know all of us look forward to working very closely with you to see to it that we achieve the results we all desire.
And now, I'd like to turn to my colleague from Alabama, the former chairman of the committee, Senator Shelby, for any comments he'd care to make.
Source