http://www.c-spanarchives.org/congress/?q=node/77531&id=8983097partial transcript - balance at link - he wanted an investigation into the finanacial disaster and to know more about the money the Fed spent during the crisis.
"Mr. DORGAN. Madam President, I know this is a very important debate, this issue of the budget. This is: What are our priorities? I have said often that 100 years from now, we will all be dead and the only evidence of what our value system was right here, right know, will be evaluated by historians. Historians will be alive, and they will look back and say: What did that country believe in? What was their value system? What did they think was important? What did they invest in? So take a look
at all of this and then make judgments.
We will have a debate all this week on this issue: What is important for the country? What do we believe represents our highest set of values? Kids? I have always said I know what might be in second, third, or fourth place in people's lives, but I certainly know what is in first place--their kids, right? So what about our budget with respect to health care for kids, just as an example. When we establish the priorities of what is important in our country, this is where we do it: in the budget.
We debate it, we think about it, and then we say: This is what our country believes to be important. Here is what we should invest in to make this a better place in which to live.
I came to the floor to say something about the financial crisis and the financial meltdown in our country because that has a profound impact on this debate on the budget. This financial meltdown has begun to dry up the Federal revenues on the tax side. It has pushed up dramatically the expenditure side because we have what are called stabilizers in our economy. When people lose their jobs, they get unemployment checks. So we have these economic stabilizers that increase spending, even during
this financial crisis when you see decreased revenue. That has a huge impact on this budget.
If this financial crisis has this kind of an impact on the budget, then we have a right to know what has caused all of this to happen, and what can we do to make sure it never happens again.
Last week, the Secretary of the Treasury announced a number of steps for financial regulatory reform, and those are a move in the right direction. He says we are going to regulate hedge funds, we are going to require the oversight of what are unregulated derivatives--these fancy, exotic financial products these days--we are going to require many of them to be regulated, although not fully. He needs to go further. But the Secretary is moving in the right direction to regulate hedge funds, to get
rid of this dark money and bring derivatives and CDOs and credit default swaps and so on into the daylight. Then he talks about a powerful regulator that would be able to take a look at systemic risks and so on. I think all of that advances the ball and is in the right direction.
But this doesn't yet answer the larger question we have to answer with respect to this financial crisis and this meltdown. That larger question, using an automobile metaphor, is this: Is it time for a tuneup or is it time for a complete overhaul of the system? I come down on the side that you have to overhaul the entire system if you are going to provide the confidence needed in the American people going forward.
Now, let me explain how I see what has gone on. For the last 15, 20 years, we have had a bunch of people who were worshiping at the altar of this new type of finance--new financial instruments, new larger financial institutions, securitized credit, and selling the risk forward so that someone giving a home loan to a prospective homebuyer doesn't have to underwrite it or care so much about the risk, because they can sell that risk to an investment bank or a hedge fund, and sell it several times--these
fancy, complex financial products.
I mentioned credit default swaps. There also has been a dramatic expansion of debt and leverage with almost every part of our financial enterprise in this country. Congress repealed the protections that used to exist for banks called the Glass-Steagall Act. Congress not only repealed these protections that used to protect banks so they could not invest in real estate and securities, and so on, but then allowed for the creation of the very large holding companies so they could get involved in
one big financial swap--one-stop shopping. Gramm-Leach-Bliley did this, supported by the Clinton administration, I might say. These are all new-fashioned ideas. They got rid of the old-fashioned ideas, such as Glass-Steagall--just deregulate the market and don't worry about them.
Alan Greenspan chimed in, saying: I want to make a nice sound with all of this deregulation that is going on in Congress and I believe in self-regulation. We don't have to regulate. The Chairman of the Federal Reserve Board, Mr. Greenspan, said that would work. The lending terms and the incomes were from outer space; the incomes were unbelievable in all of these areas. And then the lending terms were completely unsupportable, and I will describe a few of those today.
We need to overhaul all this. What do we do to overhaul this? We have to get rid of this too-big-to-fail notion. We are now allowing banks that are too big to fail to merge with troubled banks, making them, apparently, too much bigger to fail, which is bizarre. We need to get rid of the holding companies, which never should have been allowed to happen in the first place. We need to go back to Glass-Steagall and create a portion of that to separate banking from the other risk enterprises.
Until we do that and address those fundamental questions, I think it is going to be very hard to instill the kind of confidence we want to instill in the American people. The New York Times asked the question in their editorial on Sunday of this week: What is it we are trying to fix? What caused the meltdown?
If you go back to the mid-1990s, I wrote an article in the Washington Monthly Magazine that was a cover story in 1994, I believe. The title was ``Very Risky Business.'' I wrote about derivatives, and I wrote that about tens of billions in derivatives that then existed. I introduced four pieces of regulation to regulate derivatives trading. None of it was acceptable because those involved in the new, modern approach to finance felt that you don't regulate these things. They will self-regulate
and everything will be fine.
Of course, it was not fine and we had not only the notion of too big to fail, but the repeal of Glass-Steagall. We had the deregulation of all of this and the fusing of banking with riskier enterprises in holding companies. Regulators came to town boasting about the fact that we were willing to be blind. We had products developed that were hard to understand for even those engaged in trading them. Coupled with that, we had an unbelievable culture of greed, and the result was a financial meltdown.
The question is, what has caused, as the New York Times said, this house of cards? What is the cause? Do we know? Well, the fact is we need to know in order to move forward. The American people need to know. There needs to be a narrative that says here is what happened. We understand a portion of what happened, and it has been a calamity. Nobody understands all of it. The Attorney General of New York is doing some investigations here and there, but there is no comprehensive investigation. I believe
there ought to be a select committee of the Senate, and I have introduced such legislation, with Senator McCain as a cosponsor. I believe we must do a select committee of the Senate to address these issues. I believe we also ought to have a financial crimes task force at the Justice Department to prosecute that which is discovered is illegal--a whole series of things.
We need to reconnect Glass-Steagall and decide that too big to fail is a doctrine that itself is old-fashioned, and we have to run our banks through a banking ``carwash'' of sorts, where you get rid of the bad assets and keep the good and rename them, if necessary. We need a banking system that is a circulatory system of our economy. But we cannot ignore what happened. We have to understand what happened and we have to fix it.
Let me go back to 1999, if I might, during the debate over the repeal of Glass-Steagall and passage of a bill called Gramm-Leach-Bliley. I was one of eight Senators who voted against it. On May 6, 1999, I said this bill will, in my judgment, raise the likelihood of future massive taxpayer bailouts. It will fuel the consolidation of mergers in the banking and financial services. I said that 10 years ago. I felt that would happen if we decided to let the big banks get bigger, without regulatory
involvement. I said during that debate that we will, in 10 years time, look back and say we should not have done that repeal of Glass-Steagall, because we forgot the lessons of the past...."
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