January 23, 2008

DODD’S BANKING COMMITTEE: HELPING WORKING FAMILIES, PROMOTING ECONOMIC PROSPERITY

Dodd meets with Treasury Secretary Paulson Thursday; Convenes hearing on foreclosure reduction, economic stimuli next week

Washington, D.C. – Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, today held a press conference to discuss the recent market volatility and downturn in the American economy, as well as the priorities that the Banking Committee will focus on over the year ahead to help working families and businesses achieve economic security and prosperity. Below are his remarks as prepared: Good afternoon. Thank you for being here. I would like to speak for a few moments today about the Banking Committee’s work in this new year. Then I will be happy to take your questions. About a year ago, I said that, as Chairman of the Committee on Banking, Housing and Urban Affairs, I intended for the Committee to pursue two objectives: first, to expand America’s economic prosperity; and second, to strengthen our nation’s security. Since that time, the Committee has passed 17 pieces of legislation – all with strong bipartisan support – and held 35 hearings that have significantly advanced each of these vital objectives. To create economic prosperity, we passed legislation to modernize the Federal Housing Administration, to toughen rules against currency manipulation, to create more safe and affordable student loans, to reform the National Flood Insurance Program, to reduce homelessness, and to expand homeownership opportunities for Native Americans and Hawaiians. To strengthen our security, we passed legislation to extend terrorism insurance for businesses and workers, to improve security for America’s 14 million transit riders, to reform the process for scrutinizing foreign investments in the United States, to stiffen penalties against companies that do business with terrorists and the countries that support them, and to allow and encourage divestment from companies that do business with Sudan. In addition to moving these important bills, the Committee held hearings on issues of vital importance – monetary policy, exchange rate policy, the securities markets, credit card marketing and billing practices, Iran sanctions, sovereign wealth funds, and the turmoil in the mortgage markets, to name a few. I want to thank my Ranking Member, Senator Shelby, and all the members of the Committee for their cooperation and constructive engagement in our work last year. I believe that the Committee and its members demonstrated an extraordinary ability to work in a bipartisan and effective manner. This year, I intend to continue to pursue these same objectives of prosperity and security. My resolve to do so is reinforced by my experience as a candidate for president. I have been privileged to speak with Americans from all across our country, and from all walks of life. Wherever I went, I found that our fellow citizens care about the same things: keeping our nation safe from real threats rather than contrived ones; expanding educational opportunity; creating a more level playing field for American companies and workers in the global marketplace; and looking after the needs of the consumers, the investors, and the businesses that form the strong backbone of a secure and prosperous nation. Despite the progress we have made over the past year, much more needs to be done. The challenges we face in achieving greater prosperity and security are in some respects more substantial than they were even 12 months ago. Americans today are worried, deeply worried, about their future and the future of our great nation. And they have a right to be. A year ago, I chaired the first hearing in the Congress on the subject of predatory lending. I talked then about the possibility that more than 2 million Americans could lose their homes as a result of such lending. Some scoffed at that prediction. Well, no one is scoffing now. Today, foreclosure rates persist at record levels. Estimates are that foreclosures will continue to climb for most of this year, dip briefly, then begin to rise again. As a result of predatory and abusive lending practices, the market for sub-prime, near-prime, and other forms of mortgage credit has gone into a virtual lock-down. Housing starts are at their lowest levels in a quarter-century. Home prices declined last year nation-wide, and are expected to decline again this year. That would be the first time since the Great Depression that national home prices have dropped two years in a row. In August, a Federal Reserve Governor testified before the Committee that the subprime mortgage mess was largely contained. Even a casual observer of the markets over the past 5 months understands that such a sentiment was at best wishful thinking, and at worst economic malpractice. The problems in the subprime market have spread like a contagion to other sectors of the economy – not just mortgage lending, but commercial lending, as well. Credit card delinquencies are on the rise – as consumers find themselves increasingly unable to tap the equity in their homes to help pay down credit card and other bills. Retail sales were down and unemployment was up significantly in December. Lastly, inflation increased by 4.1 percent last year – the largest increase in 17 years, driven mainly by the rising costs of energy, food, and health care. The first and highest priority of this Committee in the coming months will be to address the economic challenges facing our people, our businesses, and our markets. Action – what Franklin Roosevelt called “bold, persistent action” – is required. People want to know that their leaders understand their struggles and fears – and are acting to remedy them. A short-term stimulus package is important, and I am working with congressional leadership and the Administration to enact such a package. You should all have a copy of a letter that I sent to Majority Leader Reid last evening, outlining my ideas for a stimulus package. However, short-term stimulus, alone, is not enough. We must also take medium- and long-term steps to restore the confidence of consumers and investors in our economy. This includes especially confidence in the housing sector. To that end, the first hearing of the new year will be held next week and will focus on what steps are required to reduce foreclosures and stimulate the economy. During the recess, I spoke several times with Secretary Paulson about current developments in the markets and our shared commitment to act to right the country’s economic ship in the form of economic stimulus and other policy efforts. He and I will be meeting tomorrow to continue these discussions. In addition, I intend in the coming days for the Committee to hear from Secretary Paulson as well as the Chairman of the Federal Reserve, the Chairman of the Securities and Exchange Commission, and others about their views of the state of the economy and the financial markets and what should be done to stabilize and strengthen them – including representatives from organized labor, consumer groups and small businesses. We will also hear from other federal financial regulators – at HUD, the FDIC, the OCC, the OTS, the FHFB, and OFHEO about the state of the institutions and industries they oversee. These regulators have a front-line responsibility to ensure that our financial institutions and financial markets operate in a safe, sound, transparent and efficient manner. And we intend to ensure that they are meeting that responsibility. The Committee’s FHA reform bill, which passed the Senate in December, is a critical component of our efforts to put Americans into safe, secure, sustainable mortgages. I intend to continue to work with Sen. Shelby and other colleagues to resolve our differences with the House and send a bill to the President as soon as possible. And to that end, I will be meeting tomorrow morning with Chairman Frank to discuss our shared commitment to advancing this and other vital priorities. The lending reform bill that I introduced in December is another component of our efforts to restore fairness, stability, and liquidity to the mortgage markets. That legislation will be the subject of hearings, and I look forward to working with Sen. Shelby and other Committee members to move a strong bill to and through the Senate at the earliest opportunity. In addition, I would like to say to those who participated in the homeownership preservation summit that I convened last year: I appreciate your commitment to a comprehensive set of principles pledging to act to reduce foreclosures. And I look forward to having you before the Committee to discuss what steps you have taken to fulfil that commitment. Low-income housing is another area that will merit the Committee’s continued attention. Housing costs continue to rise at rates greater than family incomes. That dynamic puts more and more of our fellow Americans at risk of foreclosure, eviction, and homelessness. For that reason, the Reed-Allard homelessness prevention bill needs to be enacted. This legislation passed the Committee last year, but is being blocked on the Floor. I intend to do all I can to make it law. I also intend to examine what kind of job HUD is doing to discharge its responsibilities. And we will consider what additional resources and reforms are required to ensure that every American has an opportunity to live in safe, decent, affordable housing. Another priority in the housing sector will be a rigorous examination of the government-sponsored enterprises, which play such a significant role in financing home ownership. I have said before and I repeat today: I support reform that enhances the authority of the GSE regulator while at the same time improving the ability of the GSE’s to deepen the pool of capital for affordable housing. I think we can achieve that kind of reform, but it will require effort and compromise on the part of all concerned parties. And I intend to move to hearings and a mark-up early in the year on this issue. Subject areas beyond the economy, housing, and mortgage finance will also receive the attention of the Committee. Unlike our counterpart committee in the House, the Senate Banking Committee has jurisdiction over public transportation. The current statute which authorizes federal transit as well as highway programs is set to expire next year. Accordingly, it is not too soon to begin to lay the groundwork for the reauthorization of our transit laws. In my view, safe, modern, efficient transit networks in our country are absolutely essential to the growth of the economy and the health of our natural environment. I also believe that America desperately needs to revamp and reinvent our entire national infrastructure – from transportation systems to water systems to telecommunications systems. Last summer, Senator Hagel and I introduced legislation to establish a national infrastructure bank. This is a vitally important initiative, in our view. Using public and private resources, it can help leverage needed financing for infrastructure projects of national importance. It is my hope and intention to give this initiative considerable priority before Senator Hagel’s retirement from the Senate becomes effective at the end of the year. This is a priority issue for the country – and it will be a priority for this Committee. The Committee will also focus on the regulation of industrial loan corporations – or ILC’s. In the Fall, I released a draft of legislation to reform the regulation of these entities, and to begin to close the loophole that allows commercial entities to own taxpayer-insured depository institutions. I have received many helpful and positive comments from a wide variety of stakeholders – including Chairman Bair, whose work in this area, as in the area of subprime lending, has been invaluable. It is my hope and intent to move ILC legislation in the next few weeks. During this time when the financial system is experiencing unprecedented volatility and instability, it is important to advance legislation that can help improve the safety, soundness, and competitiveness of the lending sector. I spoke earlier about the Committee’s concern about credit card marketing and billing practices. That concern has only grown as Americans are finding it harder to rely solely on their salaries and wages to pay the bills for gas, for housing, for health care and for education. Accordingly, examining this market will continue to be a high priority. In the area of insurance, we have several priorities. One is to enact comprehensive Flood Insurance reform. Sen. Shelby’s leadership has been particularly important in this effort. We were able to move a strong bill through the Committee. Regrettably, before the bill was even brought to the Floor, at least two Senators announced their intention to put holds on it. I intend to do all I can to move this legislation to the President’s desk before the end of the year. Businesses and homeowners in risk-prone areas often need more than flood insurance. They need affordable property insurance to protect them from the risk of hurricanes and other natural perils. In too many communities, however – particularly along our eastern and Gulf coasts – too many Americans are finding affordable property insurance increasingly difficult to find. The Committee held a hearing on this problem last year. We intend to continue our oversight efforts. And we will continue to explore what market-based steps we might take to ensure that high insurance costs do not price citizens out of their homes and businesses. We will also examine what effect insurance regulation is having on the insurance marketplace. State regulation of insurance has been a source of important innovation and consumer protection. At the same time, there is no question that the insurance market has changed and is now national and international in scope. The Committee will examine proposals to reform and improve insurance regulation – including surplus lines regulation and an Optional Federal Charter. In the area of securities, there are numerous issues that merit the Committee’s attention: executive compensation, proxy access, hedge fund regulation, and accounting and regulatory issues surrounding the increasing globalization of securities markets. Senator Reed has examined a number of these issues already in his capacity as Chairman of the Securities Subcommittee. I look forward to continuing to work with him to further examine these and other very important issues. I have spoken before about the significant jurisdiction of the Committee over areas affecting our homeland and national security. As I did last year, I will continue to assert the Committee’s jurisdiction in these areas. That means, among other priorities, examining the impact of foreign investment in the United States. During the past several weeks alone, tens of billions of dollars in foreign investment – particularly investment from sovereign wealth funds – has made its way into our country – primarily to help sustain financial institutions. While foreign investment in the United States is in many respects to be encouraged, we must remain vigilant about ensuring that such investment is consistent with our national security and economic growth. Similarly, we need to reform and strengthen our ability to police our markets and ensure that sensitive “dual-use” technologies do not fall into the wrong hands. To that end, I would hope to advance export control legislation. Tracking down and punishing illegal exporters is simply too important a priority to ignore – not only to our national security, but also to our long-term economic competitiveness. Likewise, we will and must continue the effort to identify and dismantle the networks that finance terror. That is particularly true of Iran. Administration experts tell us that Iran abandoned its effort to build a nuclear weapon four years ago. At the same time, however, Iran remains a threat to peace and stability in the Middle East and elsewhere. I chaired a hearing last year on Iranian sanctions. I intend to continue that oversight this year – including by examining the effectiveness of current efforts to counter exports of sensitive technologies to Iran, and to halt the financing by the regime there of terror-related activities. I have laid out the components of this Committee’s agenda to secure and expand our nation’s economic prosperity and strengthen our national security. I look forward to working with my colleagues on the Committee to achieve positive progress for the people of our great country. I’d be happy to take any questions.