John-Ensign_05132010_001.txt

Mr. 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 bailout 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 soar below zero, again the United States government stepped in to bail them out, allowing them to sidestep the pain of their financial mismanagement; pain that was then passed onto hard-working Americans, many of whom are barely scraping by during these difficult economic times.   This 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, and 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 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.  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 that the government gets out of the business of subsidizing mortgages.  Again, his amendment was defeated. 

Today we have another chance to listen to the American people and stop the bailouts of these mismanaged corporations.  Senator Session’s amendment, of which I am a cosponsor, will do just 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 precedence set during the crisis where the government was allowed to pick winners and losers.

This is not the first time that 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 3 to file Chapter 11 bankruptcy.  At the time, I argued that this was the best way to ensure that the automakers emerged in the future as successful companies, and I still feel this way.  Chapter 11 bankruptcy would have allowed the companies 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 that this was wrong at the time and I still feel like 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 Mae and Freddie Mac, and the financial firms, we can correct course to ensure that the American taxpayer gets 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.

Mr. President, the reality is that when Americans mismanage their funds or are unable to stay afloat under mounting debt, they file bankruptcy.  I’m sure that many would rather have the government step in to pay off their debt, but that is simply an unsustainable option.  The same argument can be made for  bailouts of financial firms. Bailout after bailout, footed by taxpayer dollars, will force our already debt-laden country even further into a debt that we cannot crawl out from and we are already rapidly approaching this reality.  These bailouts do not incentivize these institutions to minimize their risk, instead they go as far as to privatize their profits while socializing their losses. 

Senator Session’s amendment offers hard-working American families a reprieve from footing another financial sector bailout, while also discouraging these companies from continuing the irresponsible practices that got them into trouble in the first place.

Under the financial bill that we are currently debating, the government will continue to pick the winners and losers in the financial market and the taxpayer will continue to foot this bill unless we adopt Senator Session’s amendment.  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 tenants of Chapter 11 bankruptcy, but will be for the specific use of these financial institutions. This addition to the Bankruptcy Code creates a new pathway to limit the cascading spread of risk and panic through the financial system and assures the more orderly wind-down of financial institutions- insulated from bailouts and political influence.

Senator Session’s amendment delivers much-needed transparency, accountability, stability, and due process through the use of bankruptcy courts.  Further, to protect taxpayers, it specifically denies the federal government the authority to take over firms, dictate the terms of their 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 that they are not responsible for bailing out these financial institutions again.  The American people are working hard to weather through these economic times and we owe them much more than legislation that will continue to allow the government to pick the winners and losers, that will continue to allow companies to privatize their profits and socialize their risk and that will continue to force taxpayers to pay for irresponsible behavior that threatens the stability of our economy.