Restoring American Finacial Stability Act of 2010

Floor Speech

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Mr. ENSIGN. Madam President, we are venturing down a dangerous path that threatens to put the economic future of our country in jeopardy. When the housing market collapsed, the government stepped in with a blank check to bail out the Nation's largest mortgage giants--Fannie Mae and Freddie Mac. When the automakers started to feel the pinch of a downward economic turn, again the government stepped in, taxpayer money in hand, and bailed them out. When the giants of the financial market started to see their bank accounts drop below zero, again the U.S. Government stepped in to bail them out, allowing them to sidestep the pain of their financial mismanagement--pain that was then passed on to hard-working Americans, many of whom are barely scraping by during these difficult economic times.

The pain was certainly not felt by the managers of these institutions when they received exorbitant bonuses, despite their bad performance.

This country has witnessed bailout after bailout after bailout. Yet not one piece of legislation has passed this body that would establish protections for taxpayers to ensure that we do not remain on the hook for bailing out these institutions every single time they mismanage themselves.

Unfortunately, this financial reform bill that we have before us continues this trend. Last week, I offered an amendment that would have restricted the size of Fannie Mae and Freddie Mac so they would not continue to be too big to fail. My amendment was defeated, largely along party lines.

Senator McCain offered an amendment this week that would have reduced the size of Fannie and Freddie, while moving to let them stand on their own so the government gets out of the business of subsidizing mortgages. Again, his amendment was defeated, largely along party lines.

Today, we have another chance to listen to the American people and to stop the bailouts of these mismanaged corporations. The amendment offered by Senator Sessions, of which I am a cosponsor, will do this by taking away the bailout option, to, instead, force these companies to declare bankruptcy. This amendment will produce a clear set of rules which will create certainty in the marketplace, rather than continuing the precedents set during the crisis where the government was allowed to pick winners and losers.

This is not the first time I fought against these bailouts. In 2008, when we were debating the bailout of the automakers, I offered an amendment, along with Senator Shelby, that would have required the big three to file Chapter 11 bankruptcy. At that time, I argued that this was the best way to ensure the automakers would emerge in the future as successful companies. I still believe that. Chapter 11 bankruptcy would have allowed them to restructure their firms and would have protected the employees of these automakers by keeping politics out of the process by eliminating the need for an auto czar. Unfortunately, the government stepped in and, with the exception of Ford, decided to bail them out. I thought this was wrong at that time, and I still believe this was the wrong thing to do.

While we cannot erase the decisions of the past that led to the bailouts of the automakers, Fannie and Freddie and the financial firms, we can correct course to ensure that the American taxpayers get off the hook for bailing out these industries in the future by forcing them to file bankruptcy, should they mismanage their finances again in the future.

The reality is, when Americans mismanage their funds or are unable to stay afloat under mounting debt, they file bankruptcy. I am sure many would rather have the government step in and pay off their debt, but this is simply an unsustainable option.

The same argument can be made for bailouts of financial firms. Bailout after bailout footed by the taxpayers will force our already debt-laden country into further debt that we cannot afford to crawl out from under. We are already rapidly approaching this reality. These bailouts do not incentivize these institutions to minimize their risks. Instead, they go as far as to privatize the profits while socializing the risks of their losses.

The amendment offered by Senator Sessions offers hard-working Americans a reprieve from footing another financial sector bailout. But he also discourages these companies from continuing the irresponsible practices that got them into trouble in the first place. Under the financial bill we are currently debating, the government will continue to pick winners and losers and the taxpayer will continue to foot the bill, unless we adopt the amendment offered by Senator Sessions. This amendment would make these companies utilize an enhanced bankruptcy process, which would ensure that the costs are covered by the financial institutions and their creditors, not the taxpayer.

The amendment creates a new chapter 14 in the Bankruptcy Code that will utilize many of the tenets in chapter 11 reorganization bankruptcy but will be for the specific use of the big financial institutions. This addition to the Bankruptcy Code creates a new pathway to limit the cascading spread of risk and panic throughout the financial system and ensures the more orderly wind down of these financial institutions insulated from bailouts and political influence.

The amendment offered by Senator Sessions delivers much needed transparency, accountability, stability, and due process through the use of bankruptcy courts and the expertise that we have in bankruptcy courts. Further, to protect the taxpayers, it specifically denies the Federal Government the authority to take over firms, dictate the terms of the reorganization or liquidation, and support them with Federal bailouts. This amendment guarantees real reform that will result in real stability.

This is what the American people are asking us to do. They are asking us to make sure they are not the ones responsible for bailing out these financial giants that make poor decisions. The American people are working hard to weather through these tough economic times, and we owe them much more than legislation that will continue to allow the government to pick winners and losers and will allow too big to fail to continue.

I hope we adopt the Sessions amendment. Unfortunately, almost every good amendment that has been offered to this Wall Street bill has been defeated, largely along party lines. This is an amendment that will actually stop too big to fail. It is a responsible amendment. It is my hope that we will finally adopt a good amendment to this bill.

I yield the floor and I suggest the absence of a quorum.

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