Dodd-Frank Legislation
Floor Speech
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Mr. MERKLEY. Mr. President, 7 years ago, Wall Street came closer to imploding than at any other time since the Great Depression. Wall Street had stacked the deck for themselves and against consumers by turning a banking system that in the past had helped families and businesses build their prosperity into a casino for Wall Street's own big bets. When things went badly, taxpayers were left holding the bag.
While our economy has slowly returned, the memory of the crisis is fresh in the minds of American families--millions of families who lost their jobs, millions of families who lost their homes, millions of families who lost their retirement savings.
For this reason, there is broad bipartisan support across America for not allowing the return of the Wall Street casino, with 9 in 10 likely voters saying it is important to ensure they are safe and fair for consumers and that they are designed to build the success of consumers.
Through the Wall Street reform bill, we ended predatory home lending practices. We stopped teaser rates that then had exploding interest loans. These loans went from 3 or 4 percent in the beginning, and then, after 2 years, would turn into 9 percent or 10 percent, ensuring that the family was unable to make their payments. We stopped the kickbacks that went to loan originators to steer their unsuspecting home-buyer clients into high-cost loans. We stopped the liar loans designed to fail just after originators got their commissions. In short, we restored home ownership and home loans as a powerful, wealth-building tool for the middle class in America. Indeed, over the course of the post-World War II history, home ownership has been the most significant wealth builder for the middle class. Wall Street turned it into a predatory, wealth-stripping experience, and we restored it to ensure the financial success of working families.
We ensured that banks and financial institutions have skin in the game, mandating they retain risk in the products they sell. We established the Consumer Financial Protection Bureau, or CFPB, to prevent scams from stripping wealth from our working families.
Before we established the Consumer Financial Protection Bureau, consumer protection was handled by the Federal Reserve. The Federal Reserve also handled monetary policy. Monetary policy was much more exciting, and perhaps they thought it was more up to their sophisticated educations. They took consumer protection and put it in the basement of the Federal Reserve, and they locked it up and then threw away the key. They never honored their responsibilities for consumer protection, allowing all of these predatory practices that we had to end through the Dodd-Frank legislation.
To date, the CFPB has returned more than $11 billion to 25 million wronged consumers. That is a pretty impressive record. Show me something else that has brought a little bit of justice and a lot of financial restitution to 25 million wronged American citizens.
The commonsense reforms we established laid the groundwork for a financial system that is not premised on elevating quarterly profit margins on Wall Street. It is not about the size of bonuses on Wall Street but is instead about providing a foundation for our businesses and families to thrive financially. That is building the future prosperity of America.
Nobody wants to repeat the financial collapse, the bailouts, and the economic recession. We spent 6 years digging out of the hole that was created. But despite the fact that to return to this model would be so destructive to American families, there are at this very moment colleagues of mine gathering in rooms in the Senate and in the House who are preparing policy riders to return us back to those dark days. They want to add policy riders to the financial year 2016 appropriations bills designed to turn back these improvements that restored home ownership for American families, that restored financial systems for small businesses. I wholeheartedly oppose attaching these policy riders to the spending bills. And the American people don't like it either.
So what is going on? One conversation is to design policy riders to reverse the improvements we made in mortgage guidelines, to ensure that mortgages did build the wealth of the middle class instead of preying on the middle class.
Second, there are conversations going on about policy riders designed to weaken the tools and authorities of the Financial Stability Oversight Council, or FSOC. During 2002, 2007, 2008, we didn't have anyone systemically looking at weaknesses in the system. I remember looking at a chart that laid out the vast growth in predatory teaser rate loans that started in 2003. As that chart surged upwards for those loans as a percent of all loans done in America, the number of prime loans came down just as dramatically. We now understand why. The originators were telling their customers: You don't want this prime loan--this low-interest rate locked in for 30 years. You want this teaser rate loan. You get a little bit of a lower rate in the beginning.
They never explained to their customer that their interest rate was going to go up dramatically just 2 years later to a level they wouldn't be able to afford, and yet that originator was getting undisclosed kickbacks.
I say this because had there been an FSOC in place, we would have been reviewing that chart and saying: Wait; what is going wrong? From 2003 to 2005, we have this huge surge in predatory lending. Why do we have this huge collapse of prime lending?
They would have talked to the Wall Street Journal. The Wall Street Journal ran an article, an analysis, a study that looked at this and virtually said that all those folks who are being steered into these subprime loans qualified for prime loans. This is the essence of a predatory practice. An FSOC would have seen that and said that something needs to be done. That is why we have it--to look at bubbles or possible bubbles in our economy or practices in our economy that are going to cause a future collapse and to remedy these problems before they happen. Despite that, we have folks right now trying to undo the creation of the FSOC or disable it from being able to do its job.
There is another group that is gathering to try to undermine the success or ability of having a watchdog--the Consumer Financial Protection Bureau--on the beat, ending predatory loan practices from here forward.
They can't just go through statute, because as soon as they outlaw this practice over here, another one develops over here. There are newly invented strategies to continuously find new ways to turn solid, successful financial products into predatory products--misleading products, gouging products, products that explode in a couple years that consumers are not fully informed on. So we have to have a commission to be able to stop those practices.
It is the same thing we have in consumer products. We don't have detailed legislation that says: You can't design a toaster with this, this, this, and this. Instead, we have a Consumer Product Safety Commission that looks at it and says: These new products are unsafe, and for these reasons they can't be allowed. New products come in, they get examined, and they make sure we continue to have safe products. It should be the same for our financial products.
The CFPB has done an extraordinary job ending predatory practices and returning funds to ordinary working families. If you want working families to fail, then allow predatory products. If you want them to succeed, if you have a vision for America that involves the success of families, then let's end these financial wealth-stripping predatory practices. That means the CFPB has to be able to do its job. So it would be 100 percent the wrong direction to put these policy riders in the dark of night to dismantle the Dodd-Frank protections on these spending bills.
The Senate Democratic caucus is going to keep fighting for our American families. We are going to keep fighting for our American consumers. We are going to keep fighting for the success of individuals across this country and to ensure that the Wall Street casino stays closed.
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