Order for Recess

Floor Speech

ORDER FOR RECESS -- (Senate - September 25, 2008)

Mr. REID. Madam President, I ask unanimous consent at the hour of 4 p.m. we have a recess until 5:30.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. REID. There is an all-Senators briefing starting at 4 o'clock. I thank the distinguished Senator from Rhode Island, one of my good friends.

Mr. WHITEHOUSE. I applaud the majority leader for the enormous, hard, successful work he is doing in these hours.

The PRESIDING OFFICER. The Senator from Rhode Island is recognized.

Mr. WHITEHOUSE. Democracy as an institution will not do well if we are all satisfied to be told what we want to hear and not what we need to know. Democracy will not address problems well if our elected leaders traffic in ideology instead of respecting reality. Reality bites hard when she is ignored. Democracy will not flourish if leaders tout for special interests instead of fighting for the public interest.

Democracy will suffer a terrible blow when the days of reckoning come, when the rendezvous with reality occurs and our people, particularly our young people, turn to us and say: How could you? How could you not have warned us? How could you not have been square with us? How could you have been so irresponsible?

As elected officials, we have a trust and we had better begin to honor it. So as we grapple with the proposal for the biggest bailout in history, a $700 billion patch on Wall Street and our credit market, what do we look for next? What is the next wave that will hit? Well, I fear the next internal wave we face could be credit card debt.

We have 115 million households in America. They have 1.2 billion credit cards; 115 million households in America with 1.2 billion credit cards. The total credit card debt that Americans will carry by the end of this year will likely be $1 trillion.

To put that in context, our international gross domestic product is only $14 trillion. With that many cards in use and that much debt piled up, we now have a pretty fixed pool of credit card borrowers out there. This is not an expanding market. The Bush economy has stressed this pool of borrowers and stressed them hard.

The average middle-class family under age 55 makes $2,000 less than when George W. Bush took office. Their average family expenses have increased by $4,600 since George W. Bush took office. If you add the two together, the average middle-class family is $6,600 a year worse off after 8 years of Republican misrule.

So they are stressed. They are not whiners, as Senator Gramm, one of the Presidential candidate's campaign advisers, said, and the economy around them is not fundamentally sound, as one of our Presidential candidates has busily been telling Americans until it had become too preposterous to continue saying it.

So what happens to these stressed families? Well, the credit card companies see a family stressed, and they see them as a worse credit risk, so they raise their interest rates and they impose steep penalties and fees. It is an industry where when you are down, they make it even worse for you.

So now the family is more stressed. So they fall more behind, and a vicious cycle emerges. Another vicious cycle operates right alongside. One credit card company finds a new dirty trick to gouge the consumer, so they make more money. Investors and competitors see them making more money, and in a market economy, capital goes to the highest rate of return.

So now all the other credit card companies have to copy them to compete. So that credit card agreement gets more and more pages, longer and longer, more tricks to hit you with fees, penalties, and rate hikes. They get more devious and complex, and nobody can get off that merry-go-round, because if they try, they will lose their competitive position to the worst of the lot.

So you have two vicious cycles and they converge and together they can drive credit card debt in only one direction. The tricks and traps and rate increases and penalties and fees get worse and worse, driven by the jungle force of competition among the credit card companies. Struggling families see credit costs rising ever higher, driving them further and further underwater, with no end in sight.

There is no present mechanism to interrupt these gathering forces. Now, in a reality-based mode of governing, prudent men and women would do something. There should be consequences when abusive lenders take advantage of families in difficult circumstances.

This summer our majority whip, Senator Dick Durbin from Illinois, and I introduced the Consumer Credit Fairness Act, legislation that would provide a powerful incentive for loan companies to keep their rates and fees at reasonable levels and would give borrowers leverage to negotiate better terms. It would interrupt the vicious cycle.

But more can be done. For generations, for generations in this country, the 50 States had the power to enforce their own what were called usury laws, laws that limited the amount of interest that could be charged to fair and nonabusive levels, and they were able to enforce their usury laws against anyone. They were their citizens and they could protect them.

Then, in 1978, in a fairly narrow decision, construing the National Banking Act, the U.S. Supreme Court decided Marquette v. First Bank of Omaha and decided that States could only set limits on the interest rates and fees charged by in-state credit card companies.

So what do you expect would happen? Predictably, credit card companies began moving to States with the weakest lending laws, with the worst consumer protections, setting off what has become a race to the bottom among credit card companies, all at the expense of consumers.

I intend to propose that we restore to our sovereign States the rights they historically enjoyed for two centuries, to set limits on the interest rates and fees charged to their own citizens. It does not seem like asking a lot. I will soon be introducing legislation to accomplish this. I encourage my colleagues to try to help me bring this to reality.

If we simply reempower the States to protect their own citizens from unscrupulous lending practices, we can end the confluence of these two vicious cycles before this situation, too, gets out of hand.

While the current economic crisis gives us this moment of clarity, this moment of reality, this moment of reality-based governing, while this $700 billion rendezvous with reality has our attention, before we revert to claims that the No. 1 issue facing the United States is to drill for more oil or whatever we get back to, while we have a moment of honest focus, this is our chance to get ahead of one of these problems.

We will still have the $7.7 trillion Bush debt to deal with, we will still have the $34 trillion Medicare debt to deal with, we will still have the $734 trillion trade deficit to deal with, we will still have our energy hemorrhage to deal with, and we will still have global warming to deal with, to name a few.

But let's get ahead of this one. Let's not mess up this one.

I yield the floor.

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