Mark R. Warner

Thank you for that kind introduction.

I appreciate that the Virginia Chamber has always represented the voice of business in Virginia. The Chamber also has not been willing to be viewed as a partisan entity, and you have supported folks in both parties who are working to get the job done.

I also want to thank the Virginia Chamber for standing with our gubernatorial administration back in 2004 as we worked to get Virginia’s balance sheet fixed. Our actions helped lead to Virginia’s designation as the nation’s ‘best managed state,’ the ‘best state for business,’ and the ‘best state for a child’s education.’

I think most of you know that I’ve spent most of my career in business, trying to meet a payroll. But you may not know that my first two businesses failed. If it hadn’t been for the opportunities offered by this country and our free enterprise system, I don’t’ know if I would have had a third chance.

It just so happened that my third shot came in the early 1980’s in the brand new cell phone industry, and I managed to eke out a nice living from that.

But I want you to know that I completely understand what it takes, and what it means, to build and maintain a successful business.

And let me just say, since we are in a candid forum, that there are issues on which I disagree with this President. But it’s also important to keep in mind that America’s problems – the deficit we have dug, the lack of appropriate oversight, in a variety of areas – did not begin in January of 2009.

When we look at how we got to this position, there is plenty of blame to go around: Democrats, Republicans, the regulators and, if we’re going to be completely honest, many Americans who took out mortgages they could not afford.

For the last decade, our economy has been based on an inflated housing market and exotic financial instruments. Our economy stood on top of a financial house of cards that allowed governments, businesses and American consumers to get dangerously overleveraged.

When the music finally stopped, we almost had a complete financial collapse.

As someone who’ll match my business credentials with anybody in this room, it stunned me when I started digging in, and learned just how close we came to a complete financial catastrophe – a fiscal disaster that could have been exponentially worse than it ultimately turned out to be.

That has resulted in a wild 20 months here in Washington. Let me briefly touch on some highlights – the good, the bad and the ugly.

I actually believe that history will treat President Bush and Secretary Hank Paulson well for their courage on the TARP legislation in the Fall of 2008. As ugly as that bank bailout was, I think it was necessary. In retrospect, it could have been better defined. But when the house was burning down, they demonstrated remarkable courage in taking those actions.

I also think that history will conclude that President Obama and Secretary Tim Geithner were right that last year’s stimulus bill was necessary. I will be the first to acknowledge that it was probably the worst piece of political marketing in history, but I believe the stimulus prevented an even worse economic catastrophe.

The stimulus package fell into three buckets.

The first bucket - $280 billion – represented the third largest tax cut in American history. Families got it, businesses got it, home and car buyers got it. Virginia families, in fact, have seen an average of $1,100 in payroll tax relief since last year.

The second bucket propped-up the states, and was crucial in preventing even deeper spending cuts and potential layoffs of teachers and deputy sheriffs. I remember being down in Richmond last January and a number of Republican legislators came up to me and said, ‘Governor, we’ll keep kicking you for all of this Washington spending, but please keep those stimulus checks coming!’

Because of the stimulus package, Virginia public schools have received nearly $2 billion. And it’s fair to say just about any highway or bridge project underway in Virginia today is the direct result of the stimulus program.

The third stimulus bucket probably represents good policy, but I’m not sure it was necessarily stimulative. This final third is funding a series of things that most of us in the room would consider to be worthwhile -- things like the clean-energy industry, building-out the national power grid, expanded broadband access and health IT and work on high-speed rail. These are areas in which we as a nation have fallen behind, and these are smart investments --but they are not immediately stimulative.

I want to be clear: no one is happy about where our economy is today.

But it is important to remember where we were in the Spring of 2009. The Dow was at 6,500, we were losing 700,000 jobs a month, we were not sure if we would ever see any money paid back from the TARP and we weren’t sure when we were going to see positive growth in the GDP.

Well, here we are in September 2010, and the Dow is back to 10,500, we’ve had three quarters of positive GDP and job growth, and we’re getting 80-to-90 cents repaid for every dollar spent through the TARP bank bill. 

Let's get serious about innovation and competitiveness 

America’s leading corporations have a combined two trillion dollars in cash sitting on their corporate balance sheets right now. But if you are a small business owner in America today, it continues to be extremely tough to get credit.

Last week, the Senate finished work on a package of new tools and significant tax breaks for small businesses – legislation that I’ve been working on for almost a year now.

It raises Small Business Administration loan limits and eliminates SBA fees. It builds-out what’s called the Capital Access Program, a small business lending program that’s proven effective in Virginia and 25 other states. It is estimated that a $1.5 billion investment in the Capital Access Program will leverage up to $30 billion dollars in lending to small businesses.

The small business package also provides about $12 billion in tax breaks for entrepreneurs and small business owners.

All of you know that small businesses are the lifeblood of any economy, and two-thirds of all jobs coming out of a recession come from small businesses. I think these new tools and tax breaks will help, at least around the margins.

The second thing I want to mention today is exports. We all know the statistics: yes, there are a billion people in China and a billion people in India, and they’re all competing for our jobs. But there are a billion people in China and a billion people in India that also want to buy our stuff.

Exporting may be the single biggest economic opportunity that we have.

We need to exponentially increase U.S. exports. The Administration is trying to do this. And my office recently hosted an export summit in Richmond to provide expertise and networking opportunities for almost 200 Virginia businesses.

The third issue I’ll mention today is the continuing need for our nation to adopt a portfolio approach to energy. I’m talking about renewable energy, like wind and solar. I’m talking about modern, safe nuclear power. Yes, it also means more natural gas and offshore oil production, once we’ve incorporated the lessons learned from the Gulf oil rig accident. A portfolio approach also includes clean coal technology and increased research and development into biofuels.

I happen to think the greatest job and wealth creator in this country over the next 25 years will be in the energy space. And right now, China is eating our lunch. I don’t believe the government should be picking the winners and losers, but I do believe we need to have a broad energy mix.

Fourth: we must work to strengthen our manufacturing base. You know, we could use fewer financial engineers and a few more real engineers that actually make stuff in this country.

There’s no reason we cannot have a strong manufacturing base once again in America. Germany has higher wages and higher taxes than us, yet Germany has climbed out of this worldwide recession based almost entirely on its manufacturing and its exports.

Here in America, the federal government has used just about all of the bullets we have available through fiscal stimulus and monetary policy. Now we must look for ways to provide more predictability and consistency to encourage corporate America to begin spending or investing some of the combined $2 trillion in cash that’s sitting on corporate balance sheets today.

I believe we need to look for ways in which we can adjust our tax policies to help jump-start research and development, encourage innovation and promote this new investment.

Over the longer-term, what looms out there is the federal budget deficit. Frankly, the rhetoric that both parties have offered -- that we either are going to solve the deficit by soaking those people at the very top, or that we are going to get rid of our deficits simply by cutting waste and fraud around the edges – doesn’t make any sense.

And it’s time for some straight talk about Social Security. As recently as 1950, eight workers supported every Social Security beneficiary. In just a few years, we will be down to two workers for every Social Security recipient.

That’s not politics: it’s math.

Tune out the hyperpartisanship

One thing that frustrates me is, as recently as three or four years ago, most of the major daily newspapers in Virginia had reporters up here covering Congress. They routinely reported on the work of Virginia’s congressional delegation for the folks back home.

Today, no Virginia newspaper has a presence on Capitol Hill. Everything you read and hear about Congress is mostly confined to the partisan noise you can find on cable TV at every hour of the day. And that’s true whether you choose to watch Fox News or MSNBC.

So you probably are not aware that, during last year’s health reform debate, I was one of only four Democrats to vote with 30 of the 40 Senate Republicans for medical malpractice tort reform. And while the overall health reform package was far from perfect, I can tell you it is neither as bad as the critics claim -- nor as good as many of its supporters might say.

You also may not know that I spent more than a year working on Wall Street reform with a strong Republican partner, Tennessee Senator Bob Corker. Our assignment, as junior members of the Banking Committee, was to come up with a series of tripwires to prevent any financial firm from becoming ‘too big to fail.’ We also agreed on an orderly resolution process that ends taxpayer bailouts. And our piece of the Wall Street reform bill received 95 votes in the Senate.

I recognize I am the only thing standing between you and lunch, so I’d like to leave you with this final thought on the hyper-partisan tone here in Washington.

I often tell people that, if you watch Fox News, you ought to turn on MSNBC every once in a while. And if you watch MSNBC, you ought to sample what’s on Fox News from time to time. Recognize that there are alternative views out there, and it’s not always just about the loudest voices on either extreme.

I urge you, as members of Virginia’s leading business organization, to seek out and support those individuals -- from both political parties -- who readily acknowledge that neither side has all the right answers.

And you should try to support those of us here in Washington who are working to find commonsense, bipartisan consensus. Resist the urge to simply follow that crowd which instinctively says ‘no.’

I would welcome that kind of partnership with you. And I stand ready, as always, to work with you as we try to get our country back on the right track.

Thank you very much.

Mr. WARNER. Mr. President, I appreciate the opportunity to join my colleague and friend, the chair of the Small Business Committee, the Senator from Louisiana, in support of this very important piece of legislation. Let me first of all say: In her inimitable style, she has been relentless on this issue. The Presiding Officer and I are both new Members. I think we have seen, in our short time here, certain Members who get that bit in their mouth and just will not let it go. On this issue, Senator Landrieu has truly been a leader. It is an issue of paramount importance.

I wish to answer the question of the Senator, but I wish to first of all preface it by saying what I hear in Virginia--and I know what the Senator hears in Louisiana, with all the other challenges Louisiana has--is our constituents want us to focus on jobs. On any historic basis coming out of recession, 65 to 70 percent of all the new jobs created come from small businesses.

And while we can point to certain positive signs in our economy right now--the Dow at 10,500 from a low of 6,500, 15, 16 months ago; corporate balance sheets, large Fortune 500 companies with more money on their balance sheets than at any point in recent history--good news. But if they are not hiring--and I hear from corporate CEOs, as well, their concern that the small businesses that are in their supply chain are going out of business, not just the small businesses that would normally go out with a traditional recession, but this recession has been so deep and so hard that we have now cut through the fat and we are into the muscle and bone. And if we continue to lose small businesses at the rate we are, then the ability to create a robust recovery will be dramatically stymied.

So what do we do? There is no single silver bullet. And what the Senator from Louisiana has crafted is a menu of options for small businesses, to get them that additional assistance, particularly in terms of access to credit, that will allow them to get back and do what they do best--continue to innovate, grow, and create jobs.

The Senator asked me what I am hearing from other Governors. Other Governors, Democratic and Republican alike, are saying that we in Congress have to focus on jobs. The issue of credit and access to credit to small businesses is paramount to all of them, and they want to see this legislation passed.

I was a former chair of the NGA. This is the kind of issue where Governors of both parties come together because we don't see these issues simply through Democratic or Republican partisan lenses. And sometimes this is the kind of bill that, candidly, as I remember as Governor, you kind of scratch your head and say: This is kind of a no-brainer. This bill is paid for. Why would not the Congress do all it can to support small business?

The Senator has outlined, and I know I was repeating some of the items, but I want to reinforce again--I want to particularly focus on one part of this legislation, but there are really four buckets here. They are, how can we expand some of the initiatives within the Small Business Administration that were put in place, particularly in the trough of the down turn, to make sure that these SBA programs, which have been vitally important to small business lending, are maintained--the 90-percent matches, some of the other loan guarantee programs?

I should acknowledge right here that I think the Administrator of the SBA, Karen Mills, has done a remarkable job in streamlining a lot of the processes. I have heard from banks for years about their challenges in dealing with SBA. Well, the current SBA team realizes this is a moment of crisis, and they have done everything possible to streamline their procedures. They need to have these tools put back in place so that the SBA can continue to do the very important work and, candidly, work that goes much broader in terms of a portfolio of small businesses that they are now attracting to their programs than in the past.

I would also acknowledge the dramatic increase in the number of particularly independent and community-based banks that are now accessing and using SBA programs. If we don't pass this legislation, these programs will be dramatically cut back, No. 1.

No. 2, the Senator has crafted, again, at her committee, in a bipartisan way, a whole series of targeted small business tax cuts, a kind of accelerated depreciation that will have the ability to write off core investments, the ability to focus on these job creators. How can we give them a little bit of a break right now, during these challenging times, in our Tax Code?

The third bucket in this program is building on a proposal the Senator and I and others had. We actually suggested this to the administration last October, but they have now built in a $30 billion lending program. The interesting thing about this lending program is it actually, on CBO scoring, scores as a net positive. So this is money not only that we will recover, but we will make--albeit a small one--a profit on it, to shore up particularly independent and community-based banks and give them a direct incentive in terms of increasing their small business lending.

Then a fourth bucket, one that I have been working on--and I wish to commend both my colleagues from Michigan, Senator Levin and Senator Stabenow. They have been very active in this as well--which is saying: Can we take what is already working in the marketplace at a State level and build upon it? This is the so-called Capital Access Program. Twenty-six States in America already have this program in place, and those States that do not have it can, in effect, piggyback on other State programs. So there is no need to create new bureaucracy. There is no need to create tons of new paperwork.

I hear, I say to the Senator, from my banking community that this particular initiative is one that they are perhaps even the most supportive of because they know how to do it, they know how to access it, and it can immediately generate a great deal of additional lending.

Let me take a moment, at the Senator's discretion and time--I know this is her hour, but I wish to take one moment to explain it because I think we have focused on the lending facility, we focused on SBA, we focused on some of the tax cuts, but the Capital Access Program has not received as much attention. Each State has slight variations, but let me describe how this initiative works.

Basically, the independent bank, frankly, at this point is probably a little leery of making a loan, even to a relatively healthy small business because chances are, most small businesses coming out of this recession, their cash flows are down, and if they have real estate as collateral, it has perhaps declined in value. So while I have great sympathy for the small businesses that cannot get their credit lines renewed, I also understand the bankers' predicament in that small business credit isn't quite as good as it was, perhaps, in 2007.

So how does this program work to benefit these small businesses? What it basically does is it creates a separate loss reserve pool for small businesses that fall into this category. What does that mean? If a small business was coming to a bank, a local bank in Baton Rouge or a local bank in Martinsville, VA, wanting to borrow $100,000, the bank would charge that small business a couple of extra points--$2,000 or $3,000 out of that loan that would go into a separate loss reserve pool. We, with this Capital Access Program, would then match that separate loss reserve pool for, again, a matching amount of points, 2 or 3 additional points. So on a $100,000 loan, you would have $6,000 that would be absorbed, first dollar loss, if this loan went into default. Now, the bank still has to do its due diligence because if you eat through that $6,000, the bank has to bear the burden. But it gives you a little cushion there. It takes that marginal credit and makes it creditworthy during these challenging times.

Think about this $100,000 with that $6,000 loss reserve pool taken times a hundred or times a million. You could have a $100 million basket of small business loans with a $6 million reserve, and suddenly you have a very valuable tool that can be used by banks across the country.

The roughly $1.4 billion, $1.5 billion that is in the legislation in this program, it has been estimated it will be leveraged. And I know ``leverage'' is a bad word in this Hall at this point, and I particularly have pointed out some of the concerns of overleveraging. But because the person who is receiving the loan is putting up money and we from the government side are putting up money, we actually double every dollar we put out, and on an actual dollar basis, we are going to be leveraging the Federal dollar commitment 20 to 30 times. So that means this $1.4 billion, $1.5 billion can create $50 billion of additional small business lending. Think about the power of this tool, a tool that banks are familiar with, a tool that already exists in 26 States, a short-term shot in the arm for an awful lot of small businesses that might not prefer to use the SBA program, might not want to go through a bank, that might want to access the lending facility. It just gives us one more tool.

So I hope my colleagues and folks who are watching and listening will recognize that what the Senator from Louisiana has tried to create is a menu of options because there is no one-size-fits-all in the case of small businesses. Their needs are different. The banking community's desires are different. I think she has crafted a great tool that will dramatically help small business lending.

If we want to go back to our constituents in the month of August and talk about a real, live deliverable, if we want to talk about what we have done in a tangible way that will get credit back into the small business lending pool, that could be delivered by Labor Day, we need to make sure we move forward on this important piece of legislation.

I again commend the chair of the Small Business committee for her relentless work on this issue. I hope our colleagues from the other side of the aisle will hear all of the various business organizations across the political spectrum that are supporting this legislation. My hope is that we can deal with the amendments, get those amendments dispensed with at some point during the day, and pass this bill today because it is very important to making sure this recovery we are just starting to creep into is actually not a jobless recovery but a recovery that creates jobs. To do that, we have to have these small businesses healthy.

I rise today to mark a sad day for the National Capital Region. On the eve of the one year anniversary of the deadliest accident in Metro’s history, I would like to extend my deepest condolences to the families of the nine victims who perished on June 22, 2009. On that day at 5:02 pm, a Red Line train collided with another train that sat stopped between the Takoma and Fort Totten stops as it waited for the Fort Totten station to clear. The first car of the moving train, an outdated model over 30 years old, sustained tremendous structural damage which resulted in significant casualties. As a Virginian, this issue is especially important to me because one of the nine victims who died – the train’s operator – as well as fifteen of the eighty people injured were fellow Virginians.

The unfortunate events of that day shed light on some glaring problems with our nation’s public transportation systems, and should provide us with a sense of urgency to accomplish the task of ensuring the safety of public transportation users.

Metro itself and its oversight agency (the Tri-State Oversight Committee – TOC) are both in dire need of reform. While it has taken steps towards addressing the problem, Metro needs to continue to make safety its top priority. Full analysis of potential hazards and safety concerns needs to be done, and Metro must start regimented data collection efforts so that safety problems can be tracked and prioritized. Top Metro executives – those with decision-making authority – need to be involved in critical safety conversations, and need to have the relevant information in their hands when making important safety decisions.

I am proud that we have been able to provide $1.5 billion in federal funds over 10 years to make capital improvements to Metro, but this cannot be a blank check. Replacing the outdated 1000 series rail cars is a huge priority, and Metro is poised to sign the contract that will enable them to phase out the older cars with newer, safer models. But more needs to be done. Metro also needs to demonstrate safety improvements it has been making and ensure that it will continue to make safety its top priority if it expects continued financial support.

More broadly, this accident has highlighted that the safety of our public transportation systems should be a priority nationwide. We have been working in the Senate to develop a legislative approach to that will ensure proper safety standards are in place. Incredibly, FTA currently has no authority to regulate our nation’s transit agencies or establish national safety standards. Senators Dodd, Shelby and Menendez are currently drafting new legislation that will give FTA the tools to develop a national transit safety plan while also providing states the resources and flexibility to put in place more robust transit safety oversight practices. The Banking Committee, of which I am a member, will soon consider this legislation and I am pleased that we are moving towards making progress in this area so that preventable tragedies, such as the one that occurred a year ago, will be a thing of the past.

Mr. WARNER. I appreciate the opportunity to follow the chair and the ranking member of the Banking Committee and the chair and the ranking member of the Agriculture Committee on this critically important debate.

I commend their work, the great amount of work that has been done, actually, in a bipartisan fashion already on this important piece of legislation. There are differences. But an awful lot of work has gone into getting this product that now can be fully aired on the floor of the Senate.

I want to pay particular compliments to my dear friend, someone I had the opportunity to actually work for close to 30 years ago, the chairman of the Banking Committee, who, while I am a new guy in the Senate, seems to me, on this bill, has kind of done it the old-fashioned way. He has had an open door to any Member of both sides of the aisle.

As this issue got more and more complex, he asked various members of the committee to roll up their sleeves and take on portions. Senator Corker and I--and nobody has been a better partner than Bob Corker for me during this process--took on a major portion of the bill. Then, as we kind of got to the Senate floor, time and again--and I will come back to certain specific examples--he has said: How can we find that common ground that seems to be so often missing from this debate?

I also commend the ranking member, Senator Shelby. Nobody has been kinder and no one has spent more time with me kind of helping me learn the ropes of this institution than Senator Shelby. But I also have to say that as we get into the substance, some of the comments that have been made from my colleagues, particularly on the other side, do not resemble the bill we are actually starting debate on, particularly some of the portions in which I personally have been very involved.

I want to try to address some of those briefly. In some of the comments we have heard from my colleagues, they have talked about that we did not put in too big to fail. If there was one overriding challenge that we were all tasked with--I believe my colleagues from the other side of the aisle would completely concur with this--it was ending too big to fail and never again exposing taxpayers to the financial mistakes made by large systemically important institutions, made by Wall Street.

What I have not heard from my colleagues--and I guess this will be assent--is that a lot of the things that we have put in this legislation, bipartisan, take us down that path. We have created a systemic risk council so for the first time the regulators can actually get above their silo-like focus, so they can look ahead of the crisis and create early trip wires to make sure we do not get to the kind of catastrophic place we ended up in September of 2008.

This systemic risk council will make sure that these systemically important firms--and there will be systemically firms no matter what we do--but that the price of getting so large will actually be borne by those institutions and not by the taxpayers.

So what are those speed bumps, as I have called them? Increased capital requirements, making sure there is a better management of leverage, making sure they actually have in place risk management plans.

Then we have created two brand new tools that regulators have never had before. In fact, the price of getting so large, one is a whole new--and I apologize to my colleagues and those who are viewing because some of this is in the weeds, but the weeds are where billions of dollars are made or lost.

But we are creating a whole new area of capital that is called contingent debt, that any of these firms will have to put in place. That debt will convert to equity and dilute shareholders and dilute management if any firm even gets close to getting into trouble.

It will be an immediate check by current management on not getting too far over the edge, because we believe the bankruptcy process should be the way that firms unwind themselves; if they get into trouble, go into bankruptcy. They may or may not come out at the other end, but you have to have a plan in place.

We have spent an awful lot of time looking back, back to the Bear Stearns crisis, the Lehman crisis, AIG. All of the stories show there was no plan in place for how to unwind these firms.

So we have given this risk council the ability to require these systemically important firms to basically put forward a plan on how they will unwind themselves in bankruptcy at no risk to taxpayers. If the regulators do not approve, they have the ultimate sanction of actually being able to break up these firms.

Now, time and again, in this legislation--and I hear some of my colleagues saying: We are going to always default to resolution. If this works, resolution should rarely and hopefully never, ever have to be called upon. But who would have ever predicted that we would have ever gotten to the point of complete financial meltdown of September 2008? So we cannot go responsibly forward without also having--and we heard this from people across the spectrum--without having some form of a resolution plan in place.

There has been a great deal of comment made about the notion that the chairman's bill says we ought to go ahead and in effect ask these financially important firms to pony up a little bit of the resources so that if one of them gets into trouble and has to be unwound, there is some capital available to, in effect, keep the firm operating so the market doesn't lose faith in that institution and then create a financial run. We saw institutions that seemed to be very well capitalized but, because the market lost faith in them, their capital disappeared virtually overnight. You have to make sure there is an assurance that the firm can continue to operate and be out of business.

Senator Corker and I looked at different options, but we thought perhaps the best way is to have some resources available, whether the number is $50 billion, as the chairman proposed, or a lesser amount, subject to valid debate, and perhaps the industry ought to be paying for that.

I have heard others criticize that, but what I have not heard from my colleagues on the other side is, if the industry is not going to pay to keep these firms alive through the process of being put out of business--again, resolution means your firm is going out of business, your management is gone, your shareholders are gone, your unsecured creditors are gone. No rational management team would ever want this to happen. They would always prefer bankruptcy. That is how we have tilted this process. But if you are going to do that, you need to put them out in an orderly way. You don't want to have what happened when there was no plan to unwind Lehman. What I would ask is, if they don't like the prefund from industry--and some even in the Treasury don't like it--then who will pay and how do we make sure taxpayers are not exposed?

My two goals are--and I know Senator Corker agrees--that taxpayers should not be exposed, and you have to have some liquidity operating so you can keep the firm operating so you can put it out of business.

I have also heard critiques that somehow in this process there would be some preference for one creditor over another. Nothing could be further from the truth in terms of what the Dodd bill proposes. It is as if somehow a whole new process was created out of whole cloth where somehow the firm that was going to be put out of business was going to be choosing which creditor was going to be paid or not paid. Nothing could be further from the truth. The model I believe the chairman's bill adopted was basically the model the FDIC uses as it puts banks out of business through the normal resolution process.

The fact is, the FDIC is charged, as this resolution authority is charged, to say you have to maximize value as you put the firm out of business. So, yes, you may have to pay the electric bill to keep the lights on, but there will be a recoupment process at the end so that creditors balance out. It is not some new process. This has been used for decades relatively effectively.

I also heard comments made about some new bureaucracy in the Office of Financial Resolution. Nothing could be further from the truth. One thing we heard time and again as institutions came in, as regulators came in, was that too often they didn't have current real-time data. So when AIG was going down, nobody knew the extent of the interconnectedness. When Lehman went down, nobody understood the state of their transactions. The Office of Financial Resolution that is proposed is to make sure that the regulators--experts from all across the field, not Wall Street--have real-time data on the state of interconnectedness of all the transactions that take place on a daily basis. To me this could be one of the most effective tools in this whole piece of legislation, making sure we have an immediate snapshot of the market.

In the consumer area, I think there is, again, broad agreement that we need to improve consumer protections; that we ought to make sure financial products are regulated by the nature of the product, not by the charter of the organization that is issuing the product.

There are still parts we need to work on. We need to make sure, particularly for community-based banks, that a community-based bank, a smaller institution that didn't create the crisis in the first place, doesn't have one regulator come in on a Monday on a consumer issue and another come in on a Wednesday on safety and soundness, and get conflicting advice. How we get enforcement right is an issue we have to work through. But again, common ground can be found on this issue.

I commend the Agriculture chair and Senator Chambliss on the issue on derivatives. There has been a lot of discussion. There is an agreement that derivatives, while they have been oftentimes appropriately vilified as some of the tools that created the crisis, are also a useful way that legitimate businesses hedge risk. At the same time, as we try to put in place new rules around derivatives, we don't want to push the whole derivatives market offshore. While I commend the end-use exemption that was created and the goal of trying to get everything cleared and on exchanges, my hope is we can put some penalties in place. Some of the penalties the Agriculture Committee has put in place perhaps could be triggered if the banks do not end up meeting what they basically said, not overusing the end-use exemption or not getting all their products cleared or on the exchanges. My concern is that no matter how good the end-use exemption we write, there will always be more resources on Wall Street to find ways around even the best written legislation on something where as much money was put in place. So putting in place trip wires that might then cause a Draconian response would help self-police the industry.

One more example of the approach Chairman Dodd has taken on this bill. In my background, I spent 20 years in the finance industry before I was Governor. I was in the early stage capital formation business, something that is very important in the tech community. A lot of firms that are thrown around on this floor and elsewhere I have been a client of, worked with, worked against. One of the areas I had great concerns about in an earlier draft was anything that might stop or slow the ability for startup companies to access capital. There were some provisions in the bill that looked at the definition of a qualified investor that could hurt the creation of angel investors which are so critical to creating new jobs. There were perhaps provisions put in around the SEC in terms of new deals that might have to be vetted for a long period.

If you are a startup company, you don't have 120 days before you can raise your dollars to kind of get to the next step to stay alive. I cite these two examples because instead of simply saying no to the chairman, I said: Yes, you raise good points. Others have raised these points. They are changing the bill. I think that spirit is what the chairman is going to bring to the debate.

In the 20 years of being in the finance business or around the finance business, I came to this body thinking I might know a little something about this subject. There was probably a month in which I realized that whatever I knew was incremental and that the last year and a half I have had to go back and retest all of my assumptions. It has been an enormously challenging and exciting experience. I come away from this year and a half--again, particularly working with Senator Corker, where we had everybody from across the political spectrum talk to us to get us up to speed on these issues--with a couple conclusions.

One, there is no Democratic or Republican solution to financial regulatory reform. If there is ever an area that should not be broken down on partisanship, it is this issue. Second, what the market craves most is predictability. Sometimes it is overstated: if you do this, oh, my gosh, it will be the death knell of American capitalism--there has to be balance. But oftentimes those statements are overstated. At the end of the day, what the market wants is a good, commonsense bill that will set the tone, not just for the next year or two but for the next 20 to 30 years.

Finally, because of the good work of Chairman Dodd, Senator Shelby, and many others, common ground is attainable. I look forward to spending as much time as needed and appreciate in particular those on the Republican side who agreed to bring this bill to the floor and no longer are there going to be political shenanigans; let's air these issues back and forth.

There is a lot more to say about some of the critiques that are made of the bill. I look forward to that discussion and look forward to working toward that common ground so we end up with 21st century financial rules of the road.

I yield the floor.

The PRESIDING OFFICER. The Senator from Connecticut.

Mr. DODD. Mr. President, before we hear from my colleague from California, I thank Senator Warner of Virginia. He is a relatively new Member of this body and a new member of the committee, but I can't even begin to aptly characterize his contribution to this product. Since day one, he has been at every meeting, been involved in almost every conversation about this bill, particularly the focus that he and Senator Bob Corker agreed to take on in working out title I and title II of the bill dealing with resolution authority and too big to fail. His background, his experience, his knowledge made a wonderful contribution to this product. His interest in other matters is valued as well, because he brings two decades of living in a world in which these matters were something he absolutely grappled with. We have a long journey in front of us in the coming weeks to get through all of this, but his continuing involvement in this Chamber on this subject matter will be invaluable to all of us as we go forward. I thank him for that.

Mr. WARNER. Mr. President, I rise today to urge my colleagues to support bringing forward Chairman Dodd's regulatory reform bill. The chairman has just spoken with great passion about how we got here. I want to take perhaps somewhat of a similar tack and describe, as a new Member, why I think this legislation is so terribly important.

I have had the opportunity today and on other Mondays, as is often noted, to sit in the chair and listen to my colleagues come in and talk about this issue. I heard today my colleagues talk about health care, talk about stimulus, talk about unemployment, as somehow reasons why we should not start a debate about financial regulatory reform. I am not sure I understand the connection.

Candidly, the American people could do with a little less political theater and a little more action. Regardless of what happens this afternoon at the vote at 5 o'clock, I hope--and I honestly believe most of my colleagues on both sides of the aisle hope--that we will get to that agreement in a bipartisan new set of rules of the road for the financial sector that will stand the test of time for not a year or two but for decades to come.

Before I get into a substantive discussion about how we got here and how I believe the Dodd bill takes dramatic steps forward, there is one other issue I need to address. I have sat in the chair as the Presiding Officer and have heard--and I know as Presiding Officer we have to bite our tongues sometimes--colleagues come forward and somehow portray this piece of legislation as a partisan product.

I have only been here for 15 months but in the 15 months I have had the honor of serving this body, I have not seen any piece of legislation that anywhere approaches the type of bipartisan input, discussion, and ongoing dialog that Chairman Dodd's bill has. Literally, in the 15 months I have had the honor of serving on the Banking Committee, we held dozens if not hundreds of hearings on the objectives of this legislation, objectives, again, that I think colleagues on both sides of the aisle agree upon: making sure there is never again taxpayer bailouts for mistakes made by too large financial institutions, making sure we have more transparency and, as the chairman said, a return of a sense of fairness to our whole financial product system and, third, that ultimately the American people, the consumers of this Nation, will make sure there is somebody watching out for the financial products that sometimes they have been purchasing without appropriate knowledge or appropriate recourse, when these products explode in their faces.

Again, unlike the Presiding Officer who served around this body for many years, I am a new Member. But I saw where the chairman did something I thought was somewhat unusual with a major piece of legislation. Rather than saying he had all the knowledge and all the input, he actually invited in the members of the committee, junior members, senior members of both parties to set up working groups to take on some of the challenging aspects of this bill--consumer protection, systemic risk, corporate governance, the whole question of derivatives. Let me state absolutely, because I can state from the systemic risk/too big to fail portions, the products we developed that are critical parts of this legislation are bipartisan in nature, bipartisan in ideas, and find that common ground that has been so absent from so many of the previous debates we have had over the last 15 months--I think particularly about the fact of the systemic risk, too big to fail, and resolution authorities Senator Corker and I worked on. There has been no better partner I could have had than Senator Bob Corker, grinding through hundreds of hours, recognizing there was no Democratic or Republican response to systemic risk and too big to fail, but we had to get it right. While there may be parts of this bill that can still be tightened and need to be tweaked here and there, and the Senator and I may add a few improvements, on the overarching goal of making sure the taxpayers never again would be on the hook, I believe we have taken giant steps forward.

As you heard from the chairman already, those conversations are ongoing even today. Please, while we kind of get sometimes subject in this body to hyperbole, anyone who makes the claim that this legislation is partisan only doesn't recognize the facts or has not seen the experience of the members of the Banking Committee over the last 15 months.

Let me also acknowledge--and I recognize I have a number of things I want to say and maybe other Members want to come, but let me acknowledge something else about this discussion. Sixteen months ago, when I came to this body, I actually thought I knew something about the financial services sector. I spent 20 years prior to being Governor around financial services, taking companies public. I had some ideas about how we would sort through these issues. I have to tell you what I quickly found was that oftentimes my original idea, or oftentimes the simplistic sound bite solution that I thought might be the solution, more often

than not proved not to be the case and that trying to sort our way through this labyrinth of financial rules and regulations in a way that brings appropriate regulation but maintains America's preeminent role as the capital markets' capital of the world has been challenging.

Again I thank my colleague Senator Corker. I think we both realize there is no Democratic or Republican way to get this right but we had to get it right. Over the last year we have set up literally dozens of seminars where we invited members of the Banking Committee to come in and kind of get up to speed as well. Fifteen months later, with this legislation now before the floor, I think we have taken giant steps forward in getting it right.

I also want to revisit for a moment, before we get to the substance of the bill, how we got here. I have actually been stunned sometimes, sitting in the Presiding Officer's chair, hearing colleagues come in and try to cite as the causation of the crisis that arose in 2007 and 2008 a single legislative action back in the 1970s or a single individual's activities over the last two decades. The claims are so patently absurd, sometimes they do not even bear recognition or bear rebuttal. But it is important to take a moment to look back on the fact that none of us comes with clean hands to this process of how we got to such a mess in 2008 that we were on the verge of financial meltdown.

Think about the fact back in the early 1990s, back in 1993, Congress actually passed legislation to give the Federal Reserve the responsibility to regulate mortgages--responsibility that we have seen time and again they didn't take up the challenge to meet.

The Presiding Officer spoke very eloquently earlier this afternoon about the actions of Congress in 1999, the Gramm-Leach-Bliley bill, that basically broke down the walls between traditional depository bank and investment banking that had been set up by the Glass-Steagall Act in the early 1930s. Where the Presiding Officer and I may differ now is I am not sure we can unscramble those eggs, but clearly we needed a little more thought back in 1999, as we internationalized our financial markets and turned these large institutions into financial supermarkets, which was one of the precipitating factors in this crisis as well.

Candidly, bank regulators were not given the tools to regulate, and oftentimes regulators of both depository institutions, their bank holding companies, and their securities firms, had no collaboration or coordination.

During our hearings in the Banking Committee when we looked into one of the most egregious excesses in the last few years, the Bernie Madoff scandals, we heard regulators had started down the path to try to find out the source of some of the criminality that took place in the Madoff case, only to find because of our mismatch of regulatory structure they got to a door they couldn't open because that was the purview of another regulator.

Regulators, under our existing rules, were actually prohibited from looking at derivatives. Derivatives, as the Chairman mentioned, in the last decade have gone from what seems like a large number--$90-plus billion--to literally hundreds of trillions of dollars in value.

Responsibility continues, again, in some of our monetary policy. In the early part of the 2000s--and again, not many people sounded the alarm at that point. We over-relied on low interest rates and monetary policy to pull us out of the 2001 recession. But as we came out of that 2001 recession, we left those monetary policies in place, which led to a housing bubble for which we are still paying the price.

I know some of my colleagues on the other side said this bill does not take on the GSEs, Fannie Mae and Freddie Mac. And, yes, to a degree, they are right. And then, in a subsequent action, we will have to make sure we have a new model in place for these institutions. But that should not be used as an excuse to not put in place major financial regulatory reform.

Candidly, if we are going to be really truthful with each other and the American people, we have to acknowledge that everyone--not just the banks but everyone--got overleveraged. Quite honestly, we all, the American people, probably need to take a look in the mirror as well. I think, as we bought those adjustable rate mortgages; took out that second and third loan on our home; ended up getting that deal that seemed too good to be true; moved away from the conventional idea that you ought to go ahead and, before you get a mortgage, be able to put 20 percent down and be able to show you can pay it back, we all got swept up in this ``who cares about tomorrow; let's just borrow for today.''

We also saw innovations, and American capitalism has worked pretty well, particularly in the last 100 years. But we particularly saw innovations in the last 5 or 6 years alone, innovations that originated on Wall Street that were supposed to be about better pricing risks: derivatives and all of their cousins, nephews, and bastard offspring. But these tools that were supposed to be a better price risk we have now found were more about fee generation for the banks that created them and, instead of lowering overall risk, created this inter-tangled web that, once you started to put the string on, potentially brought about the whole collapse of our markets.

Time and again, we saw, rather than transparency in the market, opaqueness and regulators who never looked beyond their silos.

I think most all of our colleagues want reform. Colleagues on both sides of the aisle want to get it right. But I believe there are two real dangers as we go down this reform path. One is to resort to sound-bite solutions that at first blush sound like an easy way to solve the problem but in actuality may not get to the solution we need.

I know we are going to have a fervent debate on this floor--and I look forward to it--about the question of whether the challenge with some of our institutions was their market cap or was it really putting pressure on the regulators to look at their level of interconnectedness and the level of risk-taking that was taking place. I look forward to that. There are valid points on both sides. When we get to that debate, I will point out the fact that in Canada, where there is actually a higher concentration of the banking industry than in the United States, because there was greater regulatory oversight and actual restrictions on leverage, those Canadian banks didn't fall prey to the same kind of excess we found here in the United States.

I know the chairman and Chairman Lincoln are working through the question of derivatives, where they should be housed, because they do provide important tools when used properly. And there will be a spirited debate on whether we should break off derivatives functions from financial institutions. I look forward to that discussion. By simply breaking off these products into a more unregulated sector of the industry, we could, in effect, if we do not do it right, create an even greater harm down the road than we have right now.

So the first challenge is to make sure we don't fall prey to the simple solutions and recognize the complexities of these issues.

The other challenge we have to be aware of is the converse. I know the chairman has heard, I know the Presiding Officer has heard--any of us who have tried to get into this issue have had folks from the financial industry come in and talk to us about the unforeseen consequences of any of our actions. Some of those arguments are valid, but oftentimes those arguments are simply--they always start the same: We favor financial reform, but don't touch our portion of the financial sector because if you do this, the unintended consequences would be enormous.

Because the knowledge level and the complexity of these discussions are so challenging, what we also have to fight against in this body is the more easy process to default to the status quo because timidity in this case will not solve this crisis and will not provide the new 21st-century financial rules of the road we need.

We can't be afraid to shine the light on markets or, for that matter, to raise the cost of certain activities, because the unforeseen consequences of the interconnection of these activities, as we saw in 2007 and 2008, pose grave risk to our financial system--and as we have seen with the 8 million jobs lost and literally trillions of dollars of value lost from the American public.

So what does S. 3217 do to accomplish this? I spent most of my time on the two titles that Senator Corker and I worked on and the chairman and his staff adopted and changed a bit but that still provide the framework and, I believe, the right structure.

First--the chairman has already mentioned this--we create for the first time ever an early warning system on systemic risk. If there is one thing that has become clear from all of the hearings that have been held, not just at the Banking Committee but under Senator Levin's Investigations Committee and Chairman Lincoln's Agriculture Committee, it is that there was very little combination and sharing of information between the regulatory silos.

The chairman's bill creates a nine-member Financial Oversight Council chaired by the Treasury Secretary and made up of the Federal financial regulators. This group will bear the responsibility, both good and bad, if they mess up, of spotting systemic risk and putting speed bumps in place because we can never prevent another future crisis, but to do all we can to slow and minimize the chance of those crises. The most important part of this systemic risk council is it will actually share information, so no longer will we have one regulator who is looking at the holding company, another regulator looking at the depository institution, a third looking at the securities concerns and not sharing that data.

We will place increased cost on the size and complexity of firms. The largest, most interconnected firms will be required--not optional but required--to have higher capital, lower leverage, better liquidity, better risk management. Those have all been traditional tools that have already been in our regulatory system, but this systemic risk council will require those large institutions to meet all of these higher costs--in effect, their cost of being so large and interconnected.

But what we are also bringing to the table are three brand new tools that I think, if executed and implemented correctly, will provide tremendous value in preventing that next financial crisis. Those three tools are contingent debt, our so-called funeral plans, and third, the Office of Financial Research. Since these are new tools, let me spend a moment on each.

One of the things we saw in the 2007, 2008 crisis was that as these firms got to their day of reckoning, it became virtually impossible for them to raise additional capital and shore up their equity. Once they start going down the tubes, the ability to attract new investors, particularly from a management team that sometimes doesn't recognize how far and how close they are coming to the brink, is a great challenge.

So working with folks from the Fed and experts across the country, this bill includes a whole new category within the capital structure of those large institutions: contingent debt. There will be funds within the capital structure that will convert into equity at the earliest signs of a crisis. Why is this important? This is important because if this debt converts into equity, the effect it has on the existing shareholders is it dilutes them. It takes money right out of their pockets. So existing shareholders will have a real incentive to hold management accountable, not to take undue risks, because long before bankruptcy or resolution we will be able to have this trigger in place that will convert this debt into equity, diluting existing shareholders and, candidly, diluting management as well. How effectively we use this tool has yet to be seen, but it will provide another early warning check on these large institutions.

The second new addition to the chairman's bill is basically funeral plans for these large institutions. What do I mean? I mean a management team will have to come before their regulators and explain how they can unwind themselves in an orderly way through the bankruptcy process.

We heard stories--I will not mention the institution--we heard stories in the height of the crisis in 2008 about how certain very large international institutions in effect came before the regulators and said: You have to bail us out because we cannot go through bankruptcy; it is just too hard. Never again should any institution be allowed to be in that position. And if we use this tool correctly--this is an area where I know the Presiding Officer has great interest--if the regulator does not sign off on the funeral plan for this institution, on how it can unwind itself, even with many of its international divisions, through an orderly bankruptcy process, then the regulator can, in effect, make this institution sell off or dispose of parts that can't be done through a regular order of bankruptcy. By doing this, we create the expectation in the marketplace that bankruptcy will always be the preferred option.

Never again will there be an excuse that, we are too big and too complicated to go through that orderly process. Creditors and the market will know there is a plan in place that has to have been approved by the regulator and constantly updated so we have a way out.

The third area--again, I was very pleased to hear the chairman mention this because within the press and the commentary, it has gotten no information or no focus at all--is the creation of a new Office of Financial Research within the Treasury.

One of the things we heard time and again from regulators as we kind of went back and looked at how we got in the crisis of 2007 and 2008 was that the regulators didn't realize the state of interconnectedness of some of the institutions they were supposed to be regulating. No one had a current, real-time market snapshot of all of the transactions that were taking place on a daily basis, so nobody knew what would happen if you pulled the string on AIG, even though it was their London-based office, what would happen if those contracts suddenly all became suspect.

By creating this Office of Financial Research, we will give the regulators and the systemic risk council, on a daily basis, the current state of play across all the markets of the world.

This tool, if used correctly, would be another terribly important early warning system. But as the chairman has mentioned, with all this good work, we still can't predict there will never be another financial crisis. Chances are Wall Street and others, creativity being what they are, will find some way, even with all this additional regulatory structure and oversight. We can never predict there might not be another crisis. So what do we do?

First and foremost, what this bill puts in place is a strong presumption for bankruptcy so that creditors and the market alike will know what happens if they get themselves in trouble. Particularly for these largest institutions that are systemically important, they will have to have their preapproved, in effect, bankruptcy funeral plan on the shelf so that we can pull that off in the event of a crisis and allow the institution to go through an orderly bankruptcy process. Again, bankruptcy will be the preferred option of any reasonable management team because through bankruptcy there is at least some chance they may emerge on the other side in some form or another. They may be able to keep their job, if they are part of management. Some shareholders may still have some equity remaining.

What happens if we have a firm that doesn't see the inevitable and isn't willing to move to bankruptcy? What happens if we have a circumstance where the failure of an institution could cause systemic risk and bring down the whole system?

With an appropriate check and balance--and again, I commend Senator Corker for his additions--in effect, simultaneous action of three keys: the Treasury Secretary, the head of the Fed, the FDIC, and additional oversight--all of these actions taking place, there then is an ability to say, how do we resolve an institution, in effect put it out of business--unlike in 2008 where the government invested, in effect, in a conservatorship approach that said: We will prop you up to keep you alive because we don't know what to do with you to keep you alive because you are so large and systemically important.

We have created in this bill a resolution process that says: If you as a management team are crazy enough not to go into bankruptcy, but actually allow resolution to take place, you are going out of business. Senator Corker said: You are toast. Your management team is toast. Your equity is toast. Your unsecured creditors are toast. You are going away.

Again, we are going to put this institution out of business in a way that does not harm the overall financial system. We have to have an orderly process.

We saw during the crisis of 2008 what happens when one of these institutions fails without any game plan. We saw the value of these institutions disappear overnight as confidence in the market, confidence within the market in the institution was lost. So working with my colleagues and experts from the FDIC and others, we said: What you have to do is, you have to have some dollars available to keep the lights on so that you can sell off the portions of the institution that are systemically important and unwind this in an orderly way that doesn't have an effect, the equivalent of a run on the bank or a run on the financial system.

Again, we have heard critiques of the approach Senator Corker and I came up with in this resolution fund, this ``how do you put yourself out of business in an orderly way'' fund. We actually thought it ought to be paid for by the financial industry, with the ability then to have that fund, in effect, replenished after the crisis is over.

I saw polling today that shows the overwhelming majority of Americans actually think the financial sector ought to bear the cost of unwinding one of these large, systemically important firms. Let me say, if there are other ways to do it--as a matter of fact, some in the administration have suggested other ways--I am sure we can find common ground as long as we do have at least two principles: First and foremost, the taxpayer must be protected, and industry, not the taxpayer, has to take the financial exposure. Second, funding has to be available quickly to allow resolution to work in a way to orderly unwind the process. But it ought to be done in a [Page: S2618] GPO's PDF way--again, this is where some of the judgment comes in--where there is not so much capital available that we create a moral hazard, but a bailout fund is created.

Personally, I believe the House legislation goes too far in creating a fund of that size. I think the chairman's mark strikes a much more appropriate balance. But if there are ways to do this that protect the taxpayer, allow speedy resolution with funds that will be available so we don't have a run on the market, a run on the institution that creates more systemic risk, as long as the industry at the end of day is going to pay for it, I am sure there are other ways and we can find that common ground.

What we did in this process of resolution is we said: Let's take what is working. Let's see what is best from the FDIC process which currently resolves banks on a regular basis. One of the things I have heard from some of my colleagues on the other side--I don't know about their community banks, but my community banks in Virginia; I would bet the community banks in Delaware and the community banks in Connecticut--we don't want to get stuck paying the bills for the large Wall Street firms that bring the system to the brink of financial catastrophe. So, again, one of the aspects of the chairman's bill is to make sure any resolution process does not burden, charge, or in any way otherwise interfere with community banks.

What we think we have struck is a process that puts costs on those institutions that make the business decision to get large and systemically important. We think we have put in place abilities for the regulators, with the funeral plans, to make sure if this interconnectedness is so large that they can't go through bankruptcy, then we can stop them from taking on these new activities. But because we can't always predict eventuality, we have then said: If you need to use a resolution process, let's make sure it is orderly, paid for by industry, and that you have stood it up in a way that no rational management team would ever expect or want to choose resolution.

I know my colleague from New Hampshire has been a great partner in this legislation and is on the Senate floor. I will end with just a couple more moments. There are other parts of this bill that have not received a lot of attention. In this bill, the chairman has included an office of national insurance.

One of the things we saw in the crisis in the fall of 2008 was that nobody knew how entangled AIG's activities were with the whole financial system. This doesn't get to the question of who should regulate insurance companies, but it does create at the Federal level at least the knowledge within the insurance sector of its interconnectedness. The chairman has mentioned that he and Chairman Lincoln are working to grapple through one of the toughest parts of the bill--again, an area I know my colleague, Senator Gregg, has been working on: How we get it right around derivatives.

Again, there is no policy difference. Both sides agree derivatives are an important tool when used appropriately. Particularly industrial companies need to use the derivative to hedge against future risk within their business. The challenge is, how do we not draw that end user exemption so large that every institution on Wall Street suddenly transforms itself into an industrial end user. Secondly, while these contracts are unique, they have to have more light shown on them in terms of clearing and exchanges.

I know Chairman Dodd and Chairman Lincoln and Senator Reid and Senator Gregg will be working through this. One suggestion I would have--because as someone who has seen Wall Street act time and again, I wish them all the luck--part of my concern is that whatever rule we come up with, there is so much financial incentive on the other side that a year or two from now, we may be back because they found a way around it that we again need to give the regulators certain trip wires. I, for one, believe we ought to take the industry at its word. The industry says end users are only going to be 10 percent of total derivative contracts. Then let's put that in as a regulatory goal. If they end up exceeding that, then we can bring draconian consequences to bear. Or if they say, yes, we can make most of these transactions and most of these contracts transparent through clearing or exchange, great; let's accept them at their word.

But if they don't get to those totals, then perhaps some of the actions that particularly Members on my side of the aisle would like to take can be put in place. But, again, folks of goodwill can find common agreement.

Finally, the area around consumer protection, where the chairman and the ranking member have worked at great length to kind of sort this through, everybody agrees on the common goal. There needs to be enhanced consumer protection, particularly for the whole nonregulated portion of the financial industry that now exceeds the regulatory half. Too often it was the community bank that was chasing the mortgage broker on some of the bad financial products because there was no regulation on the mortgage broker to start with. So, again, there will be differences, but I think the approach of the chairman, which is to keep this with the appropriate rulemaking ability but to make sure, particularly for those smaller banks, that we don't end with conflicting information of a consumer regulator showing up on Monday and a safety and soundness regulator showing up on Wednesday, to do that in a combined fashion so there is commonality of message, particularly to smaller banks, that strikes that right balance.

Again, I can only say for the banks in my State of Virginia, those smaller banks who oftentimes have said they didn't cause the crisis--and they didn't--they are the first to say: We need enhanced consumer protection to make sure that our financial products are regulated by the type of product, not by the charter of the institution that issues the product. There may be ways to improve on this section. But, again, I think Senator Dodd and Senator Shelby are working to get it right.

We have seen, as well, major action on the rating agencies, questions around underwriting. There are tremendous parts of this bill that haven't been the subject of great criticism because they are that common ground that, I think Senator Shelby has said in earlier quotes, 80 or 90 percent of both sides agree on. Where we don't agree, we ought to debate and offer amendments.

I look forward to candidly working with a number of colleagues on the other side of the aisle on technical amendments to this bill where we think we can make it slightly better. But if we are going to get there, we have to get to the debate.

I hope we move past procedural back-and-forth that, as a new guy, I still don't fully understand. I think it is time to fully debate this bill out in the open. The chairman made mention of what has been taking place in the last few weeks in Greece. I know the Presiding Officer has helped educate me on a whole new activity that is taking place in the financial markets right now around high-speed trading and co-location that could be the forbear of the next financial crisis.

How irresponsible would we be, 18 months after, again, the analogy of the chairman, after our house was broken into, when we haven't even put new locks on the door, if we ended up with another robbery, whether it was caused by international action or whether it was caused by high-speed trading, because we don't have new rules of the road in place?

In the 15 months I have had the honor of serving in the Senate, I can't think of a piece of legislation that better represents what is good about the Senate, folks on both sides of the aisle coming forth with their ideas, trying to fashion a good piece of legislation. I can't think of an area where there is less traditional partisan, left versus right, Democrat versus Republican divides. I can't think of an applause line better, whether I am talking to a group of liberal bloggers or folks from the tea party, than the notion that we have to end taxpayer bailouts.

I urge my colleagues on both sides of the aisle, let's get through the procedural wrangling. Let's find that common ground that I think we are 90 percent of the way there. Let's pass a bill that gets 60, 70, 80 Members of the Senate and set financial rules of the road that will last not just for the next congressional session but for decades to come.

I yield the floor.

Senator Warner spoke on the Senate floor to explain his efforts to prevent taxpayer-funded bailouts and correct misleading characterizations over the past several days about proposed Wall Street reforms.  

Mr. WARNER: Mr. President, today I also rise to discuss Financial Reform. And, to be blunt, to try to set the record straight about some misleading statements that have been made on this floor about both the process and the substance of the bill that the Banking Committee recently approved.

Under Chairman Chris Dodd’s leadership, and working with Ranking Member Richard Shelby, I’ve worked hard since coming to the Senate to understand the root causes of this crisis, the crisis we are beginning to emerge from economically and to recognize that we’ve got to have a robust solution in place to make sure that we never again are confronted with type of crisis and the lack of preparation that this nation faced back in the Fall of 2008.

I also came to this body, Mr. President, as somebody who spent a lot of time around the capital markets -- quite candidly, I’ll put up my free market and pro-capitalist credentials up against anybody in this body. And I come to the floor today as somebody who’s tried to recognize that the financial crisis, perhaps more than any other issue that we address, doesn’t have a Democratic or Republican origin or solution set, that we’ve got to recognize that perhaps on this piece of legislation, more than ever, we’ve got to have a bipartisan basis to establish a long-term financial framework for the next hundred years.

I’m very proud of the fact that we’ve worked so far in a bipartisan way. I have particularly appreciated the partnership I’ve built over the last year with Republican Senator Bob Corker from Tennessee. We both recognized that while we both had backgrounds in business and both had experience and exposure to the capital markets, the complexity of trying to rewrite the financial rules -- not only for this country but, because the rest of the world will follow what America does, for the whole world – would require a great deal of humility and recognition that we have got more to learn. So Senator Corker and I, starting early in 2009, started holding a series of seminars where we invited established financial leaders and members of both parties to come and just learn with us as we tried to put in place rules and regulations governing the financial system.

While I’ve been particularly disappointed in the Republican leader’s comments yesterday, I still believe there is a path to a bipartisan bill. What we need to do is simply lower the rhetoric and do what is needed for the American people: put in place a robust set of rules and a robust regime of reforms that will ensure that the American taxpayer will never again have to bail-out firms that are too-big-to-fail. This is one area – whether it’s a liberal blog site or a Tea Party convention – where you get unanimity of opinion that never again should the American taxpayers be put at risk because of the interconnectedness of large financial firms.

Soon, the Senate will consider the bill that Chairman Dodd has put together. And while there are bits and pieces that different folks will disagree with, this is a strong bill that vastly improves the regulation and structure of our financial markets. Let me repeat: Senator Dodd has put together a strong bill.

One part of the bill that Senator Corker and I have been particularly engaged in is on systemic risk -- in ending the notion of too-big-to-fail. And that was the subject yesterday of some wildly inaccurate statements on this floor. I have to admit that I’m deeply invested in this section because of the months of work that Senator Corker and I put into this area. Let me acknowledge at the front-end that there are parts of this section that both Senator Corker and I will want to amend. Those changes and amendments -- we could probably reach agreement on within five or ten minutes. But the basic structure that we set up is one that I believe will lead to meaningful financial reform.

Now let’s get to what we’re talking about. At the outset, we recognized that the regulatory system and the legal system have no recourse or rules on how we deal with an impending financial crisis and there was very little collaboration and coordination between different regulators. You might have the prudential supervisor that’s looking at the depository institution having one view of an institution, and you might have another regulator that’s looking at the banking holding structure have another view, and, because these complex institutions may also have securities aspects, you could have the S.E.C. have a third view. There was no coordinated place beyond the stove pipes and beyond the silos where all the regulators could come together and recognize that while an institution’s single actions or a single sector might not pose a systemic risk, these risks, when aggregated together, put our financial system in jeopardy.

So what do we propose? Working with Senator Corker and experts from the industry, we propose creating a systemic risk council that would, in effect, be the early warning system to spot these large systemically risky institutions and put some speed bumps in their path.

I may not agree with some of the members on my own side of the aisle that say we ought to go out and proactively break up these institutions just because they’re too large. Size in and of itself was not the problem in certain cases. It was the interconnectedness of these institutions’ activities and the fact that if you started to pull on the string of these activities, you would in effect collapse the whole house of cards. It was not size alone; it was interconnectedness and recognizing how we spot that interconnectedness at the front end and put speed bumps on these large, systemically risky institutions.

One of the things that we found in our investigations was that the regulators often do not have current, real-time data on the extent of these transactions and this interconnectedness. So a part of the bill that has received very little attention is the creation of the Office of Financial Research, which will aggregate, on a daily basis, all the transactions of these interconnected institutions and provide the regulators with the transparency to know what’s going on beyond the last quarterly report. This information will go to the systemic risk council. This systemic risk council will then be able to put in place what I call speed bumps on these systemically large institutions.

Increased capital: One of the questions that comes back time and again from financial experts is that we need to increase the capital reserves levels of many of these large institutions. We’ve got to look at their liquidity. In certain cases, the institutions that failed during the crisis were not insolvent but, this can be addressed because of new sets of financial structures we will require in these large institutions will convert to equity in the precursor before a crisis takes place. In effect, shareholders will be diluted by this contingent capital requirement, putting more pressure on management not to take undue risks.

We believe these speed bumps, while they may not prevent any future crisis, will be huge impediments to these large, systemically risky institutions taking undue risk and outrageous actions.

We’ve also put a new requirement in place, one that again has not gotten a lot of review. But we will require the managements of these large institutions to put in place their own “funeral plans,” their own plans on how they will unwind their institution through an orderly bankruptcy process. I believe there were large, systemically important institutions in the Fall of 2008 that came to the regulators and said, “We’re so big and interconnected that we wouldn’t even know how to unwind ourselves.” Never again should we allow that to happen. We allow the regulators to work on and bless the “funeral plans” that these systemically large institutions will put in place.

Now, we think that we have put out these appropriate barriers that will restrict some of the unduly risky activities on these large institutions, but you can’t predict and can’t foresee every crisis. So what we need to do is set a framework on how we would address the crisis if these speed bumps and this early warning system doesn’t fully function.

I don’t completely agree with my colleague from Delaware. I do believe we need a strong, robust bankruptcy process that gives predictability to investors so they know what will happen through normal dissolution of a firm that’s made mistakes in the marketplace. And we need to ensure that bankruptcy becomes the normal default process. Having these firms write their own bankruptcy plans that have been approved by the regulators will give us guidance on that path.

We also have to realize that when there may be a management team that doesn’t see the handwriting on the wall or when a failing firm, even with all these checks, becomes systemically risky, we have the ability to act. But let me state very clearly: with the resolution process that was put in the Dodd bill, no rational management team would ever elect to choose it because it will lead to extermination of the firm. The shareholder’s equity will be wiped out. Resolution will never be chosen as a preferred route -- bankruptcy will be the preferred route.

Even in that case, we still put additional protections in place so no future administration – and, having seen the blowback from the public on using resolution in 2008, I can’t imagine any administration actually wanting to use this mechanism -- but Senator Corker and I have spent a great deal of time on this so that resolution is not misused. We put in place very strict criteria before it can be implemented. We require three keys, in effect, to be turned simultaneously. It’s the nuclear option analogy of different keys being turned before this tool could be used. We require the chair of the Federal Reserve, the FDIC, and the Treasury Secretary, in consultation with the President, to all agree that we have to act to move a firm into resolution rather than going through bankruptcy.

But, again, that’s not all. Senator Corker, I think, rightfully pointed out that we need, in case there was an overly aggressive administration, a judicial check, as well. So we put an additional judicial check in place before resolution could be implemented. So resolution -- only as a last resort, only as a path to make sure that the parts of systemically important firms can be transferred to some other existing entity, not preserved. The firm will be wiped out, but the functions that are important don’t bring down the overall financial system.

One of the most curious comments of the Republican Leader yesterday was the critique that if you invoke resolution, the question becomes where’s the money going to come from and who’s going to pay for it? What I found very curious from the Republican Leader’s comment yesterday was that we -- and this was by no means set in stone -- put in place a $50 billion fund that would be prefunded by the industry. It’s not the $150 billion that was in the House Bill that potentially could create what’s called a moral hazard. But a dollar amount up-front -- and it could go down lower -- would keep the lights on at these institutions until the FDIC could get in and, in effect, borrow against the unencumbered assets of the firm to get the real dollars in place to keep the resolution process going in an appropriately functioning way.

Is $50 billion the right number? It may not be. Reasonable people can disagree. $25 billion might be the right number. There may be even other paths. Senator Corker and I worked on the notion of a trust that could be created. But what I find curious is no one in the financial sector that we have spoken to thinks this will be an adequate amount of capital to resolve the whole crisis. The funding to resolve the whole crisis will come from the ability we give the FDIC to borrow against the unencumbered assets. If there is a better way to get there, we’re all for it. At least I can say from my side that I’m willing to look at any other option. But what I find curious is I believe that if we had not put up this industry-prefunded amount to, in effect, bridge until we can actually get the FDIC process in place, we would hear criticisms from some who would say that not putting up any industry-prefunding would allow taxpayer exposure. And one of the things we want to make clear is that taxpayers are never, ever exposed to the kind of risk that took place in 2008.

Did we put in place something that is perfect? No. There are ways we can improve. But the framework we put in place, the almost uniform response we have received has been that we have taken a gigantic step towards ending too-big-to-fail with a rational, thoughtful approach.

I see my colleague, the Senator from Tennessee, has arrived on the floor, and again I want to compliment him for his work. Both of us have said at the outset that, for neither one of us, has this been religion. We just need to get it right. If we have to ruffle a few feathers on both sides of the aisle so that never again are the American taxpayers put in the same position they were put in in 2008, then so be it.

I appreciate the Senator from Tennessee’s good work on this effort. I appreciate our working together on a preference toward bankruptcy, that we have to an initial check, that we don’t go out and grab firms willy-nilly. I ask my colleagues on both sides of the aisle to lower the rhetoric a bit, to recognize that this can and still should be the place where this Senate shows it can work in a bipartisan fashion to put a set of rules in place so that we can put the appropriate speed bumps in our financial system for those firms that are systemically important -- that we do put in place financial rules of the road for the 21st Century -- that we do allow America to continue to be the financial capital and financial innovator of the world. I think we can still get there, and I look forward to working not only with my friend from Tennessee but also colleagues on both sides of the aisle to get it right.

I yield the floor.

Mr. Warner: Mr. President. I rise today in support of the legislation that the Chairman of the Finance Committee talked about and talking about it from a slightly different direction. We’ve spent a lot of time talking in this body about the necessity for us to focus on jobs and how Americans feel about that search for jobs. We read about unemployment numbers at 9.7 percent, and while we say with some relief that the numbers didn’t pop up during February, those numbers are still way too high.

I had a personal experience that I wasn’t planning on speaking about on the floor, but I wanted to share with my colleagues and others in the hall, an event that is actually still happening about 45 minutes south of this chamber. My office had decided to sponsor a jobs fair, where we would bring together more than 30 federal agencies and we located this jobs fair down 45 minutes south of here at the University of Mary Washington, at their Stafford Campus.

For those of you who don’t follow the ins and outs of Northern Virginia, we are blessed in Virginia with a rather low unemployment rate. Statewide, our unemployment rate is actually 7 percent, and in Northern Virginia our numbers are even much, much lower than that. As we put together this jobs fair, we were well represented with over 30 federal agencies from TSA to the Peace Corps, to the Fish and Wildlife Service.

We put out the word not knowing what kind of response we were going to get. This was the first jobs fair I had hosted as a U.S. Senator and at first we were a little worried. Last Wednesday, we had only about 75 R.S.V.P. for this jobs fair on this college campus south of Washington. But by Friday night, we’d had nearly 3,000 folks sign-up. By yesterday afternoon, we realized that our numbers were topping out over 5,000. We were warning people that perhaps all the accommodations we put in place weren’t ready to handle this many folks, so we extended the hours of the jobs fair from 12 noon to 4 o’clock today.

When my staff started showing up this morning at 6:30/7, there were 500 people waiting in their cars, many of them who’d been sleeping there for hours. By 9 o’clock, when the jobs fair was supposed to stat, 3,000 people were in line.

I showed up there about 9:30, and regrettably by noon we had topped out over 5,000, probably closer to 7,000, with folks clogging the roads trying to come to this jobs fair in Stafford County, Virginia. Unfortunately, we had to cut if off at that point and put out the word that we would try to have another jobs fair with these federal agencies and some private-sector partners within the next few weeks.

The response was overwhelming. As I mentioned earlier, I spent about an hour simply going up and down the line of folks who were waiting. Many of these folks were people who had graduate degrees -- almost all of them had college degrees. They looked like any of the kind of workforce we’d see crossing any parts of the nation’s Capital today. I heard stories after stories of folks who’d never, ever expected to show up at a federal job fair, folks who never, ever expected to see their lives turned topsy-turvy by unemployment, or by folks who were still unable to change jobs because of their constraints on health care.

None of these folks were looking for a handout; they were just looking for that opportunity to talk to some of the 35-plus representatives from federal agencies about the possibilities of getting a job. All they wanted to do was try to do a better job for themselves and for their families.

So as we return to debate on the so-called tax extender bill, when we work with the Presiding Officer on efforts to free up credit for small business owners, when we talk about how we can provide other kind of incentives to the private sector to jump-start the economy. While it was great to provide the possibility of these jobs in the public sector, the vast majority of jobs will and should be created in the private sector.

As we think about this piece of legislation right now and make sure that our tax code is supportive enough of these private sector efforts, I saw the reason for these efforts in the thousands in one of the most prosperous parts of our whole country, here in Northern Virginia. I came back more charged up than ever that what we do here is more important than ever, that the folks there in that line didn’t understand rules about filibusters or holds or all the other procedural back-and-forth that sometimes seems to dominate the floor here. What they did want us to do here is put that aside -- put our partisanship aside – and get the job done of trying to create more and more jobs all across the country.

It’s my hope in the coming weeks when we have this next job fair -- I'm sure we’ll have the same kind of response. I look forward to the day hopefully in the not-too-distant future, when we have a jobs fair that we get a few folks, but that we don’t get overwhelmed with the kind of literally unprecedented numbers of the 7,000 folks we see today.

I would like to begin by commending Chairman Dodd for his leadership in bringing forward this bill. It is bold, broad and comprehensive, and it is vitally necessary that we move forward with the process of reviewing, improving, and passing it into law.

It was not easy to get here – we have had dozens and dozens of hearings. I have tried to work across the aisle with my colleague from Tennessee, Senator Corker, to better educate myself and to bring in outside experts who could speak directly to us and our colleagues about these very complex issues.

Chairman Dodd’s work and that of his outstanding staff obviously began before I arrived here last fall when they worked with the Bush administration to stabilize our financial system and prevent a depression. He started, and many of us have supported, this enormous effort to stabilize the economy -- some of it unpopular and an easy target of criticism.

We should all keep in mind that in March, the Dow was at 6500, GDP growth was negative 6.5% right after a previous quarter of negative 5.4%. If we said in March that by Thanksgiving we would have an economy with third quarter GDP growth of 3.5%... with a Dow once again over 10,000… and with indications of increased stability in the housing market, we would have been called wildly optimistic.

But while having the Dow over 10,000 is a positive development, it means nothing to those who have just lost their jobs and had their retirement savings depleted.

A basic trust in our financial system has been broken, and we must fix it.

We need to make sure that the small business owner in Norfolk has access to credit so they can buy inventory, or hire more workers.

We need to fix our capital markets so that the engineer graduating from Virginia Tech with an idea for a start-up can find access to capital and grow that startup and develop the next transformative technology.

We need to make sure that the retiree in Abingdon can have confidence that her financial advisor is looking out for her best interests and that her savings won’t disappear because the markets have tanked.

Banking seemed exciting when it was booking year after year of record profits. But those gains were black magic. The magic of the marketplace has turned into a nightmare for families, homeowners, and most businesses. It is time to make banking boring again.

In recent years, we have been favoring debt over equity. Why would anyone invest in the equity of a start-up when you could leverage-up through debt and financial engineering to get a guaranteed return, even though it doesn’t create anything new or productive? Our bias towards debt over equity needs to be examined.

I’ll match my free market credentials with anyone but I believe we need to have rules of the road. I emphatically believe we must fix our regulatory structure in order to grow and prosper once again. Right now, investors and entrepreneurs are sitting on the sidelines of our economy. They don’t trust the current system and they aren’t sure what the next one will look like. They need these rules so that they can go out and invest, innovate, and even take measured risks with some confidence.

This is the only way we can return to sustainable growth and innovation, and create jobs over the next ten, twenty, or thirty years.

We have to make this bill as good as we can. But we have to remember that none of us here is capable of writing a perfect bill because none of us can anticipate the future. If there is a risk, it is in not acting.

Each of us here has some concerns about various provisions in the bill, and I know there are some concerns that the language before us meets the real intent. But I also know Chairman Dodd knows that and wants to use this process to make this bill as strong as possible.

We should not lose sight of the forest for the trees. The bill that comes before us today is better than any proposal to date to accomplish three things:

• Preventing and mitigating systemic risk while ending too big to fail;

• Coordinating our various federal regulators and ensuring that we have consistent coverage of the entire financial sector; and

• Restoring transparency and accountability to our system so that from the most sophisticated derivatives transactions to the simplest checking account transaction, anyone can use our financial sector with confidence.

I have paid specific attention to systemic risk regulation and resolution authority. Earlier this year, I spoke on the floor of the Senate about the need to create a strong systemic risk council, and I would like to thank the Chairman for including a number of my ideas in his “Agency for Financial Stability.” I may have one or two ideas to strengthen it further, but I know the bill starts from a strong base.

I am also concerned that we make sure our systemic resolution process is rarely, if ever, used, but is also effective and cost-efficient when implemented. I intend to keep working to ensure that prudential regulation is improved and that non-systemic resolution processes, such as FDIC’s current authority over depositories and bankruptcy work well enough that we don’t have to call upon the special process.

There are many more issues to talk about and discuss and there may be additional adjustments to make, but I would like to focus on the process we use here in the Senate. I know there are colleagues across the aisle who may not like everything in the bill. But for the sake of the confidence and well-being of the American people and our economy, we must move to legislate, and it would be best if we moved in a bipartisan manner.

I know Ranking Member Shelby has worked on these issues for many years, and cares very deeply about the work of this committee. I know he has spent many hours discussing this with Senator Dodd. I know other Senators across the aisle also care very deeply that we get this right. Senator Corker and I have had many discussions on these topics and tried to wrestle through these issues together.

As we move through this process, we should keep in mind that the vast majority of these are highly technical matters, and there is not a right or left, Democrat or Republican solution. We will have our disagreements, but I think we start by agreeing about the vast majority of this, and we have a real opportunity to come together in a bipartisan way and pass this vitally important and time-sensitive regulatory modernization.

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Mr. President, I rise today to once again join my colleagues in addressing the need for comprehensive health care reform. The Senator from New Hampshire, Mrs. Shaheen, earlier spoke on health care reform and its effect on small business. I know my colleague, Senator Udall from Colorado, is going to be speaking soon. And I know we are going to be joined, as well, a little bit later by Senator Landrieu, who takes a leadership role on the issues affecting small businesses, as chair of the Small Business Committee.

I rise today to stress how important health care reform is to the small business community. Currently, there are small businesses across America that have been hit very hard by the effects of the recession. Small businesses are struggling as they try to keep their doors open, with the enormous constriction of credit that is taking place. Small businesses are struggling to have the finances to expand; even healthy small businesses, as we have seen. Banks continue to draw back in capital and try to build up their own balance sheets. The people who have taken the hardest hit by the restriction on capital and the restriction on lending have been small businesses across this country.

So we have the enormous challenges small businesses have felt by the recession that has been exacerbated by the constriction of lending, and then we add on top of that the enormous challenges that small businesses face in the health care market. The only people who pay retail--who pay full price for their health care benefits in America today--are small businesses and those who purchase health care on the individual-based market. There is no group that will more benefit, or have more to gain from meaningful health care reform, than small businesses.

Small businesses currently lack the bargaining power of large firms and pay as much as 18 percent more for the same health insurance as larger companies. If you work in a large company you get the benefit of the larger pool, and you are better able to bargain for your health insurance rates. If you are poor and cannot afford health insurance, you get access to Medicaid. If you are a senior, you get access to Medicare. Small businesses are the group that falls through the cracks. They don't have access to this purchasing power, and consequently pay, on average, about 18 percent more for health insurance than larger companies.

As health insurance costs continue to rise, more and more small businesses can no longer even afford to offer health insurance to their employees. And if they do, their employees can't afford the co-payments to purchase health insurance. In fact, nearly one-quarter of the uninsured in our country works for small businesses. Between 2000 and 2009, the percentage of firms with less than 10 employees--the heart of small businesses--offering insurance coverage fell from 57 percent to 46 percent. Among people with employer-based coverage in January of 2006, one-sixth lost their coverage by 2008. Nearly three-quarters of small businesses that do not offer coverage to their employees cite high premiums as the reason. Small businesses want to offer health benefits to their employees, but are priced out of the market and cannot afford it.

Many small business employees are left uninsured and, in turn, rely on the health care system to pick up the costs when they get sick. It is these people who show up at emergency rooms and access the most inefficient part of our health care system. They are oftentimes not people who are unemployed, but employees of small businesses. Enacting market reforms such as creating insurance exchanges will finally give small businesses affordable options. Their employees will have a place to purchase insurance at large pool rates and, by insuring more people, reform will help drive down the cost of health insurance for all Americans. Insurance exchanges will also significantly reduce administrative costs for small businesses by enabling them to easily and simply compare the prices, benefits, and performance of health care plans.

I know a number of us are working on a series of amendments for when the health care bill gets to the Senate floor to try to make sure we add further disclosure requirements and more transparency to our health care system. Right now we don't have a free market in our health care system because nobody knows what the providers actually pay, and what the doctors and hospitals actually charge. Small businesses will benefit by trying to bring transparency to these health insurance exchanges.

Additionally, reform will enact consumer protections such as prohibiting insurance companies from denying coverage based on preexisting conditions and dropping people when they are sick. This is particularly a challenge to small businesses. If you only have a small group of employees and a few have preexisting conditions, those preexisting conditions drive up the cost of providing insurance for this smaller pool. Oftentimes this results in pricing small businesses out of the market. Reforms such as eliminating preexisting conditions will dramatically help small businesses and their employees obtain affordable health insurance.

These protections are vital for small business employees because they help level the playing field in the small group market. They guarantee the option of large pool rates, lower costs, and prohibit insurance companies from arbitrarily penalizing small businesses when one of their employees becomes seriously ill.

Lowering health care costs for employers is also key to our ability to compete in the global economy. If American business is going to come out of this recession and we can compete with countries around the world, we have to take on the cost of health insurance. American workers are more productive than any other workers in the world. But even with that increased productivity, if American businesses have to pay $3,000 to $4,000 more per employee because of higher health insurance costs than our competitors that puts American businesses at a dramatic disadvantage.

As health care costs continue to rise, other business investments are sacrificed. Forty percent of businesses say health care costs have a negative impact on other parts of their business. As I mentioned, with the great reduction of credit availability to small businesses and in this challenging economic climate, American businesses cannot afford to be at such a disadvantage. With health care reform, more of our Nation's dollars will go toward investments in our economy.

Health care costs also stifle productivity. Too many Americans end up staying in jobs simply because the employer provides health insurance. They aren't able to move around, or move into entrepreneurial startup firms where innovation and real growth potential takes place. Startup firms and, again, small businesses are often not able to offer health insurance. Consequently, we have good workers who are not able to move into these firms and help spur job growth because they are caught in dead-end jobs. They are constrained by the security of health insurance offered at their old jobs or perhaps because they have a preexisting condition and can't move to a new situation.

Again, if we do health insurance reform right, it will put in place reforms such as the elimination of preexisting conditions requirements that will allow more freedom of movement within the job workforce.

So, once again, I join my colleagues in making this case. We have made it time and again. Health care reform is necessary to make sure American businesses remain competitive. Health care reform is necessary because health care costs are the single largest driver of our Federal deficit. Health care reform is necessary because if we don't address rising costs, Medicare will be insolvent by 2017. If we don't reform the system, costs will also rise for families; an average Virginia family, for example, within the next decade, will be paying nearly 40 percent of their disposable income to meet their health insurance premiums.

I will close my comments with where I started. Small businesses are the only players in our market who still pay retail for their health care costs and are increasingly being priced out of the market. Reform is imperative for the small business community.

I know my friend, the Senator from Colorado, is about to speak, and our leader on small business issues, the Senator from Louisiana, who has been so diligent on leading these efforts and making sure that small businesses are protected in health care. We must get this right. We must get this bill to the floor. And we must provide needed relief to the small businesses that will generate the economic recovery that we're all hoping for.

Thank you, Mr. President. I yield the floor.

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Mr. WARNER. Mr. President, I thank my colleague from North Carolina for organizing the freshmen one more time to talk about our vision for health care reform. We invite our colleagues not only on our side of the aisle but our colleagues across the aisle to join us in this conversation about how to get health care reform right. I also commend my colleague from New Hampshire, Senator Shaheen, on her comments about how we can fix financial incentives in our current health care system. I think reforming our delivery system ought to be, clearly, part of any overall health care reform we take on.

I want to pick up, actually, where Senator Shaheen left off and talk about how we can readjust our financial incentives system in health care. We have them all wrong. We have a health care system right now that rewards bad practices. We have a health care system that rewards hospitals for multiple readmissions rather than a low readmission rate. We have a health care system that rewards volume of care rather than quality of care. Reforming the financial incentives in our delivery system has to be a key component of any health care reform going forward.

I join my colleagues in citing examples of delivery system reforms that are happening now in my own state. I have three examples here from the Commonwealth of Virginia.

In 2000, VCU Health System in Richmond, our capital, developed a system called Virginia Coordinated Care to manage health care services for the uninsured. The uninsured often rely on emergency rooms to be treated for their illnesses and then go back home until they get sick again. There is no continuity of care and oftentimes that uninsured person will end up back on an emergency room doorstep because, outside of being treated for the episodic incident, there was no management of that patient's care during that period.

What VCU developed was a program that assigned a primary care physician to oversee each uninsured patient's health. The goal was to increase coordination between doctors and hospitals and, as a result, increase accountability, improve quality of care, and lower costs.

The Virginia Coordinated Care program started with a few participants in 2000; by 2009, there were over 20,000 members. One of the most important outcomes of the program was a significant drop in emergency room visits by enrolled patients. By increasing continuity of care, emergency room visits dropped 14 percent between 2000 and 2005. Costs were reduced for Richmond area hospitals, as well as surrounding Virginia hospitals as fewer patients showed up at other emergency rooms. By treating the patient earlier in their illness the program achieved better quality of care, and better results for the health care system as a whole.

Another example of delivery system reform took place at another end of our State, at Sentara Healthcare, located in Norfolk, VA. In 1999, Sentara studies found that intensive care units that were monitored by a doctor full time had lower mortality rates and shorter length of stays than those that were not. In order to improve quality of care, Sentara worked with a company called VISICU to install Web-based television cameras in each patient's room. With this technology, a single physician in a central location can follow patients in multiple rooms at the same time. Again, this kind of logical approach produced more efficient care at a lower cost. Sentara saw a 25-percent reduction in mortality among these patients, a 17-percent reduction in their length of stay, and a 150-percent return on investment in the program.

Perhaps the best example is now being modeled by the Carilion Clinic in Roanoke, VA. Carilion Clinic is a multispecialty health care organization, with more than 600 doctors and 8 health care organizations.

In 2010, next year, Carilion Clinic will join with Engelberg Center for Health Care Reform at Brookings and the Dartmouth Institute for Health Policy and Clinical Practice to implement a new and innovative health care model that rewards providers for improving patient outcomes while also lowering costs. This Accountable Care Organization will encourage physicians, hospitals, insurance companies, and the government to work together to coordinate care, improve quality, and reduce costs. Under this model, providers will assume greater responsibility not only for treating the patient's illness but for the overall quality and cost of care to be delivered. They will actually be incentivized to take steps to keep patients healthy, while avoiding costly medications and procedures. Additionally, this model will encourage, and make it affordable, for doctors to finally practice preventive care. Carilion Clinic is doing the right thing: moving away from the current, and very flawed, fee-for-service system.

As long as our health care system--one-sixth of our economy-- continues to reward providers simply based on quantity rather than quality of care, we are never going to get health care reform right. By increasing coordination of care, and putting in place smarter financial incentives, we can have higher quality care at lower costs. We can focus on the health of patients, rather than the number of procedures. Changing our payment mechanisms and restructuring financial incentives are a key part of health care reform.

I know my freshmen colleagues stand ready to work with our colleagues on this side of the aisle, and I again invite our colleagues on the other side of the aisle to join us in this effort. Getting it right will lead to improved quality of care, lower costs, and a healthier America.

To view the video of Senator Warner's statement, click here.