{"database": "openregs", "table": "congressional_record", "rows": [["CREC-2008-12-11-pt1-PgS10902", "2008-12-11", 110, 2, null, null, "AUTOMOBILE INDUSTRY CRISIS", "SENATE", "SENATE", "ALLOTHER", "S10902", "S10904", "[{\"name\": \"Sheldon Whitehouse\", \"role\": \"speaking\"}, {\"name\": \"Carl Levin\", \"role\": \"speaking\"}, {\"name\": \"Claire McCaskill\", \"role\": \"speaking\"}]", null, "154 Cong. Rec. S10902", "Congressional Record, Volume 154 Issue 186 (Thursday, December 11, 2008)\n\n[Congressional Record Volume 154, Number 186 (Thursday, December 11, 2008)]\n[Senate]\n[Pages S10902-S10904]\nFrom the Congressional Record Online through the Government Publishing Office [www.gpo.gov]\n\n                       AUTOMOBILE INDUSTRY CRISIS\n\n  Mr. WHITEHOUSE. Madam President, I rise today to address what I feel\nis an unfortunate omission from our economic rescue strategy to date.\nThis week, we are considering another bailout which would give $15\nbillion in so-called bridge loans to America's struggling automakers.\n  Now, when we debated a bailout program to protect our Nation's\nfinancial system back in September, we created legislative branch roles\nand executive branch roles. We ultimately passed legislation that\nempowered the Department of the Treasury to invest up to $700 billion.\nDebate was rushed. The Treasury Secretary came to us on a Friday in\nSeptember and told leaders of both parties in both Houses that our\neconomy would collapse if we did not take immediate action. With the\nthreat of immediate financial calamity and the apparent good faith of\nSecretary Paulson, Congress moved quickly to pass the best bill we\ncould. Senator Chris Dodd of Connecticut and my colleague from Rhode\nIsland, Senator Jack Reed, worked heroically, almost around the clock,\nto negotiate for taxpayer protections and several levels of oversight.\nIn the end, we created a program of congressional and executive roles\nbut no judicial role. We ignored the role that courts can play here or,\nmore correctly, that executive agencies can play when supported by\njudicial or even quasi-judicial due process. We are about to ignore\nthat role again in the auto bailout.\n  Why is this point important? This is important because under our\nAmerican system of government, there are important powers of government\nthat can only be exercised after due process opportunity for a hearing.\nThe famous Supreme Court case of Fuentes v. Shevin is on point. I\nquote:\n\n       The constitutional right to be heard is a basic aspect of\n     the duty of government to follow a fair process of decision-\n     making when it acts to deprive a person of his possessions.\n\n  That is citation 407 U.S. 67 at 82.\n  In other words, some means of restructuring require due process if\nthey involve adjusting people's financial rights and claims. When we\nfail to provide that process, we unilaterally disarm government's\nresponse, taking away its ability to restructure using those means.\n  The price of this repeated omission has been high. Going back before\nwe even got into this current mess, when there was only a subprime\nmortgage problem, Senator Durbin of Illinois proposed a bill that would\nhave empowered bankruptcy judges to modify the terms of a mortgage on a\nperson's primary residence. One needed a due process hearing such as\nthat in order to adjust the rights within that mortgage of the banks\nand the myriad investors who bought strips of that mortgage when it was\ncarved up and sold to the four winds. Our Republican colleagues stymied\nthis provision which we now see could have kept tens of thousands of\nfamilies in their homes. Because the clarity and finality of a court\ndecision on a troubled mortgage was not available, there was little\nalternative to foreclosure, and troubled mortgages, by the tens of\nthousands, cascaded into foreclosure--numbers never before seen in our\nhistory. Our fault. Bad design. And every day we don't get it right,\nevery day we don't pass Senator Durbin's bill, that foreclosure problem\nworsens.\n  Similarly, as part of the $700 billion Wall Street bailout, we could\nhave addressed lavish and indefensible executive compensation by\nproviding for some judicial power to restructure these packages.\nBecause we didn't, these grotesque liabilities remain on the books of\nthe bailed out entities as obligations to their disgraced management.\nAccording to an analysis by the Wall Street Journal, the executive\ndeferred compensation obligations of bailed out Wall Street firms\namount to more than $40 billion. Banks participating in the bailout\nprogram carried these obligations on their books, and the cash from our\nbailout is being used to pay them--or will be used to pay them.\nTaxpayer dollars will end up in the pockets of the scoundrels who\ntanked those firms. I contend we have to find ways in which the court\nsystem, due process, can be brought to bear on this problem. But again,\nthe inaction on that so far is our fault. Bad design. Unilateral\ndisarmament in the face of the Wall Street meltdown.\n  Now we have the auto bailout plan with its provision for a ``car\nczar,'' but once again, lacks a role for those due process powers of\ngovernment. Once we are committed to this deal--once we are in--the\nonly tool we will have at that negotiating table is Uncle Sam's\ncheckbook--that, and the somewhat improbable threat to walk away and\ntank the auto companies after having put $15 billion into them. So now\nwe will have to negotiate about the companies' continuing lavish\nexecutive and board compensation packages and other obligations\nimpeding a fair and rational recovery. As for looking backwards at\npreexisting obligations, as we say in Rhode Island, forget about it.\nThat requires due process. We have created no process to even invoke\ngovernment's power to review those. So the effect of all of this is to\nencourage special interests to play the holdout in the auto\nnegotiations and dare us to tank the companies. It is going to be a\nhigh stakes game of chicken and, no matter who wins, the taxpayers\nlose.\n  We created this ``hold out'' problem by not providing a judicial role\nin the restructuring. We could, for example, give the car czar the\npowers of a judicially appointed conservator or receiver--those are\nroles I have held--and the power to go to court for an order approving\nhis plan or her plan over the objections of any holdouts. If we did\nthat, it would change the bargaining position of the holdouts. This\njudicial due process would allow the strong powers of government that\nrequire due process to be brought to bear on this mess. We do this in a\nlot of different contexts.\n  Bankruptcy courts oversee restructuring all the time and so do other\nquasi-judicial bodies. For example, the FDIC has the power under\ncurrent law to place a troubled bank into receivership and wind it down\nas if in chapter 7, or put it under conservatorship to restructure it\nas if in chapter 11. The bankruptcy courts and the FDIC possess the\ntools necessary to cut through whatever Gordian knots may snarl\nrestructuring plans absent that power.\n\n[[Page S10903]]\n\nThe judicial imprimatur will also increase public confidence in the\nfairness and the propriety of these plans. There is flexibility about\nhow we do this. We don't have to have it be the FDIC. We don't have to\nhave it be a bankruptcy court to recognize the due process powers of\ngovernment.\n  Fuentes v. Shevin again, and I quote:\n\n       Due process tolerates variances in the form of a hearing\n     ``appropriate to the nature of the case,'' and ``depending\n     upon the importance of the interests involved and the nature\n     of the subsequent proceedings, if any.''\n\n  I hope my colleagues will recognize the importance of authorizing\njudicially supervised powers in these bailout plans. I pledge to work\nhard with anyone who wants to achieve this goal. It is vital, I\ncontend, to recognize that directed judicial oversight expands\ngovernment's powers and authorities to do the things the public and the\ncircumstances demand. It gives us a means to unsnarl the foreclosure\nmess on Main Street, to restructure obscene executive compensation on\nWall Street, and to force good-faith negotiations in Detroit.\n\n  We cannot ignore the judicial power in restructuring companies and\nindustries. We must not let that sword sleep in our hands. Times are\nbleak in Detroit, as they are around the country. The automobile\nindustry stands on the brink of collapse, and the jobs of thousands--\nsome say millions--of workers hang in the balance.\n  Michigan shares the sad distinction with my home State of Rhode\nIsland in having the Nation's highest unemployment rate, 9.3 percent,\nin October. Families are struggling in Rhode Island and across the\ncountry. That is the background against which we must consider whether\nto bail out yet another industry. In making such a weighty decision, I\nimplore my colleagues, we must not consider just whether but how we go\nabout doing this.\n  I contend that we should empower our Government to take steps that we\nhave, to date, foreclosed--steps that exercise the power of Government\nthat can be only exercised after due process of law. I hope we consider\nthat.\n  Madam President, I ask unanimous consent that the Wall Street Journal\narticle to which I referred be printed in the Record.\n  There being no objection, the material was ordered to be printed in\nthe Record, as follows:\n\n              [The Wall Street Journal, October 31, 2008]\n\n                    Banks Owe Billions to Executives\n\n                         (By Ellen E. Schultz)\n\n       Financial giants getting injections of federal cash owed\n     their executives more than $40 billion for past years' pay\n     and pensions as of the end of 2007, a Wall Street Journal\n     analysis shows.\n       The government is seeking to rein in executive pay at banks\n     getting federal money, and a leading congressman and a state\n     official have demanded that some of them make clear how much\n     they intend to pay in bonuses this year.\n       But overlooked in these efforts is the total size of debts\n     that financial firms receiving taxpayer assistance previously\n     incurred to their executives, which at some firms exceed what\n     they owe in pensions to their entire work forces.\n       The sums are mostly for special executive pensions and\n     deferred compensation, including bonuses, for prior years.\n     Because the liabilities include stock, they are subject to\n     market fluctuation. Given the stock-market decline of this\n     year, some may have fallen substantially.\n       Some examples: $11.8 billion at Goldman Sachs Group Inc.,\n     $8.5 billion at J.P. Morgan Chase & Co., and $10 billion to\n     $12 billion at Morgan Stanley.\n       Few firms report the size of these debts to their\n     executives. (Goldman is an exception.) In most cases, the\n     Journal calculated them by extrapolating from figures that\n     the firms do have to disclose.\n       Most firms haven't set aside cash or stock for these IOUs.\n     They are a drag on current earnings and when the executives\n     depart, employers have to pay them out of corporate coffers.\n       The practice of incurring corporate IOUs for executives'\n     pensions and past pay is perfectly legal and is common in big\n     business, not limited to financial firms. But liabilities\n     grew especially high in the financial industry, with its\n     tradition of lavish pay.\n       Deferring compensation appeals both to employers, which\n     save cash in the near term, and to executives, who delay\n     taxes and see their deferred-pay accounts grow, sometimes\n     aided by matching contributions. In some cases, firms give\n     top executives high guaranteed returns on these accounts.\n       The liabilities are an essentially hidden obligation. Even\n     when the debts to their executives total in the billions,\n     most companies lump them into ``other liabilities''; only a\n     few then identify amounts attributable to deferred pay.\n       The Journal was able to approximate companies' IOUs, in\n     some cases, by looking at an amount they report as deferred\n     tax assets for ``deferred compensation'' or ``employee\n     benefits and compensation.'' This figure shows how much a\n     company expects to reap in tax benefits when it ultimately\n     pays the executives what it owes them.\n       J.P. Morgan, for instance, reported a $3.4 billion deferred\n     tax asset for employee benefits in 2007. Assuming a 40%\n     combined federal and state tax rate--and backing out\n     obligations for retiree health and other items--implies the\n     bank owed about $8.2 billion to its own executives. A person\n     familiar with the matter confirmed the estimate.\n       Applying the same technique to Citigroup Inc. yields\n     roughly a $5 billion IOU, primarily for restricted stock of\n     executives and eligible employees. Someone familiar with the\n     matter confirmed the estimate.\n       The Treasury is infusing $25 billion apiece into J.P.\n     Morgan and Citigroup as it seeks to get credit flowing. In\n     return, the federal government is getting preferred stock in\n     the banks and warrants to buy common shares. The Treasury is\n     injecting $125 billion into nine big banks and making a like\n     amount available for other banks that apply.\n       It's imposing some restrictions on how they pay top\n     executives in the future, such as curtailing new ``golden\n     parachutes'' and barring a tax deduction for any one person's\n     pay above $500,000. But the rules won't affect what the banks\n     already owe their executives or make these opaque debts more\n     transparent.\n       Asked about the Journal's calculation, the Treasury said,\n     ``Every bank that accepts money through the Capital Purchase\n     Program must first agree to the compensation restrictions\n     passed by Congress just last month--and every bank that is\n     receiving money has done so.''\n       Bear Stearns Cos., the first financial firm the U.S.\n     backstopped, owed its executives $1.7 billion for accrued\n     employee compensation and benefits at the start of the year,\n     according to regulatory filings. When Bear Stearns ran into\n     trouble after investing heavily in risky mortgage-backed\n     securities, the government stepped in, arranging a sale of\n     the firm and taking responsibility for up to $29 billion of\n     its losses.\n       The buyer, J.P. Morgan, says it will honor the debt to Bear\n     Stearns executives, which it said is shrunken because much of\n     it was in stock that sank in value.\n       J.P. Morgan will also honor deferred-pay accounts at\n     another institution it took over, Washington Mutual Inc. It\n     couldn't be determined how big this IOU is. J.P. Morgan's\n     move will leave the WaMu executives better off than holders\n     of that ailing thrift's debt and preferred stock, who are\n     expected to see little recovery. J.P. Morgan's share of the\n     federal capital injection is $25 billion.\n       Obligations for executive pay are large for a number of\n     reasons. Even as companies have complained about the cost of\n     retiree benefits, they have been awarding larger pay and\n     pensions to executives. At Goldman, for example, the $11.8\n     billion obligation primarily for deferred executive\n     compensation dwarfed the liability for its broad-based\n     pension plan for all employees. That was just $399 million,\n     and fully funded with set-aside assets.\n       The deferred-compensation programs for executives are like\n     401(k) plans on steroids. They create hypothetical\n     ``accounts'' into which executives can defer salaries,\n     bonuses and restricted stock awards. For top officers,\n     employers often enhance the deferred pay with matching\n     contributions, and even assign an interest rate at which the\n     hypothetical account grows.\n       Often, it is a generous rate. At Freddie Mac, executives\n     earned 9.25% on their deferred-pay accounts in 2007,\n     regulatory filings show--a better deal than regular employees\n     of the mortgage buyer could get in a 401(k). Since all this\n     money is tax-deferred, the Treasury, and by extension the\n     U.S. taxpayer, subsidizes the accounts.\n       In addition, because assets are rarely set aside for\n     executive IOUs, they have a greater impact on firms' earnings\n     than rank-and-file pension plans, which by law must be\n     funded.\n       Bank of America Corp.'s $1.3 billion liability for\n     supplemental executive pensions reduced earnings by $104\n     million in 2007, filings show. By contrast, the bank's\n     regular pension plan is overfunded, and the surplus helped\n     the plan contribute $32 million to earnings last year.\n       While disclosing its liability for executive pensions, the\n     bank doesn't disclose its IOU executives' deferred\n     compensation, and it couldn't be calculated. The bank's share\n     of the federal capital injection is $25 billion.\n       Bank of America has agreed to acquire Merrill Lynch & Co.\n     Merrill is a rare example of a firm that has set aside assets\n     for its deferred-pay obligation: $2.2 billion, matching the\n     liability. Morgan Stanley also says its liability for\n     executives' deferred pay is largely funded.\n       To be sure, deferred-compensation accounts can shrink.\n     Those of lower-level executives usually track a mutual fund,\n     and decline if it does. Often the accounts include restricted\n     shares, which also may lose value, especially this year. To\n     the extent financial-firm executives were being paid in\n     restricted stock, many have lost huge amounts of wealth in\n     this year's stock-market plunge.\n       The value of Morgan Stanley Chief Executive John Mack's\n     deferred-compensation account declined by $1.3 million in\n     fiscal 2007, to $19.9 million; much of it was in company\n     shares. Mr. Mack didn't accept a bonus in 2007.\n\n[[Page S10904]]\n\n       Executives can even lose their deferred pay altogether if\n     their employer ends up in bankruptcy court. When Lehman\n     Brothers Holdings Inc. filed for bankruptcy last month, most\n     executives became unsecured creditors. The government didn't\n     come to Lehman's aid.\n       In assessing liabilities, the Journal examined federal\n     year-end 2007 filings by the first nine banks to get capital\n     injections, plus six other banks and financial firms\n     embroiled in the financial crisis. In many cases, the firms\n     didn't report enough data to estimate their obligations to\n     executives. As for identifying amounts due individual\n     executives, company filings provided a look at only the top\n     few, and not a full picture of what they were owed.\n       Just as banks aren't the only financial firms getting\n     federal aid amid the crisis, they aren't the only ones facing\n     scrutiny of their compensation programs.\n       Struggling insurer American International Group Inc. agreed\n     to suspend payment of deferred pay for some former top\n     executives pending a review by New York state Attorney\n     General Andrew Cuomo. Mr. Cuomo is also demanding to know\n     this year's bonus plans for the first nine banks getting\n     federal cash, as is House Oversight Committee Chairman Henry\n     Waxman.\n       Among the payouts AIG agreed not to make are disbursements\n     from a $600 million bonus pool for executives of a unit that\n     ran up huge losses with complex financial products. AIG also\n     is suspending $19 million of deferred compensation for Martin\n     Sullivan, whom AIG ousted as chief executive in June. His\n     successor as CEO, Robert Willumstad, who left when the U.S.\n     stepped in to rescue AIG in September, has said he's forgoing\n     $22 million in severance because he wasn't there long enough\n     to execute his strategy for AIG.\n       However, the giant insurer--whose total liability for its\n     executives' deferred pay couldn't be calculated--says most of\n     the managers will receive the compensation. ``Of course,\n     we'll be looking at all these to make sure they're consistent\n     with the requirement of the program,'' said spokesman\n     Nicholas Ashooh.\n       AIG isn't eligible for the government's capital-injection\n     plan, since it's not a bank, but it's getting plenty of U.S.\n     aid of another sort. The Treasury has made $123 billion of\n     credit available, a little more than two-thirds of which MG\n     has borrowed so far.\n       Fannie Mae and Freddie Mac also don't get in on the\n     capital-injection plan for banks. But under a federal\n     ``conservatorship,'' the Treasury agreed to provide each with\n     up to $100 billion of capital if needed. In return, the\n     government got preferred shares in the firms and the right to\n     acquire nearly 80% of them.\n       Their regulator, the Federal Housing Finance Agency, says\n     it will bar golden-parachute severance payouts to the\n     mortgage buyers' ousted chief executives. The executives\n     remain eligible for their pensions.\n       Fannie Mae had a liability of roughly $500 million for\n     executive pensions and deferred compensation at the end of\n     2007, judging by the size of its deferred tax assets. A\n     spokesman for the firm wouldn't discuss the estimate or\n     whether the executives would get the assets.\n       At Freddie Mac, most will. ``Deferred compensation belongs\n     to the officers who earned it,'' said Shawn Flaherty, a\n     spokeswoman.\n       Indeed, in September Freddie Mac made its deferred-\n     compensation plan more flexible, allowing executives to\n     receive their money earlier than initially spelled out.\n     ``Officers were nervous about market changes,'' said Ms.\n     Flaherty. ``We wanted a retention tool for top talent.''\n\n  Mr. WHITEHOUSE. I thank the Chair, yield the floor, and I suggest the\nabsence of a quorum.\n  The PRESIDING OFFICER. The clerk will call the roll.\n  The assistant legislative clerk proceeded to call the roll.\n  Mr. LEVIN. Madam President, I ask unanimous consent that the order\nfor the quorum call be rescinded.\n  The PRESIDING OFFICER. Without objection, it is so ordered.\n  Mr. LEVIN. Madam President, I ask unanimous consent that the\nPresiding Officer, the Senator from Missouri, be recognized for up to 5\nminutes, and that I be recognized for 30 minutes in morning business.\n  The PRESIDING OFFICER. Without objection, it is so ordered.\n  Mr. LEVIN. I suggest the absence of a quorum.\n  The PRESIDING OFFICER. The clerk will call the roll.\n  The legislative clerk proceeded to call the roll.\n  Mrs. McCASKILL. Mr. President, I ask unanimous consent that the order\nfor the quorum call be rescinded.\n  The PRESIDING OFFICER (Mr. Levin). Without objection, it is so\nordered.\n  Mrs. McCASKILL. Mr. President, I know we have an important piece of\nlegislation that we are going to vote on today. I desperately want to\nsupport that legislation. I wish to ask first and most importantly if\nanyone has the information as to whether the CEOs of Wells Fargo or\nBank of America or Citigroup have taken private jets in the last month.\nHas anyone asked the CEOs of Citigroup, Wells Fargo--all of these\nfinancial companies--to take a cut in compensation? Has anyone asked\nabout their workers and how much money they make and whether they are\noverpaid and whether they are competitive with the salaries of\ncommunity bankers across the country?\n  Every one of the institutions I named has gotten $15 billion or more\nof taxpayer money. Think about that for a minute. Citigroup has gotten\n$50 billion. Have we checked on their private jets? Have we checked on\ntheir CEO compensation? Have we checked on their work rules and whether\ntheir workers are given enough flexibility?\n  It is unbelievable to me that we are setting this double standard.\nThe thousands of jobs and families who build great American cars do not\ndeserve this incredible hypocrisy in terms of the different treatment\nthey are getting. What is good for the goose is good for the gander.\n  I say let's call in those CEOs of those big companies that have\ngotten more than $15 billion of our money and ask them when they are\ngoing to take a dollar in pay, ask them if they got here on a corporate\njet, ask them if their workers have cut their pay to $14 an hour, ask\nthem if they have talked about cutting their pension costs and their\nhealth care costs. Until we do that, we ought to be quiet about the\nAmerican autoworkers, and we ought to be quiet about these companies\nthat have reduced fixed costs, that have agreed to sell corporate jets,\nthat have agreed to cut executive compensation.\n  I want to support this bill on behalf of manufacturing in the United\nStates of America, on behalf of wonderful, hard-working families in\nMissouri. However, there is one problem that has arisen, and that is,\nunfortunately, in this bill right now, as written, is a provision to\nincrease the pay of Federal judges. Wrong time, wrong place.\n  We have unemployment numbers today that show we have the highest\nunemployment in this country we have had in decades. We have families\nall over this Nation who are scared today, who are not buying Christmas\npresents. Federal judges get lifetime appointments and they never take\na dime's cut in pay. They die with the same salary they have today. My\nphone is ringing off the hook from people who want to be Federal\njudges. I am having to have staff work overtime to handle all the phone\ncalls I am getting from people who think there may be a Federal\njudgeship opening in the eastern district of Missouri and how badly\naccomplished, wonderful, smart lawyers want that Federal appointment.\n  We are not hurting for qualified applicants for the Federal\njudiciary. Is it fair that they have not gotten a cost-of-living\nincrease like every other Federal employee? Probably not. But you know\nwhat is a lot more unfair is to give somebody with a lifetime\nappointment, great health care, no cut in pay when they actually\nretire, what is unfair is to give them a pay raise on this day in this\nbill at this time. It is not the right time. And if it is in the bill,\nI regrettably will have to vote against this legislation because I feel\nso strongly that it sends the wrong message to the United States of\nAmerica at this scary moment in our economic history.\n  Mr. President, I suggest the absence of a quorum.\n  The PRESIDING OFFICER. The clerk will call the roll.\n  The legislative clerk proceeded to call the roll.\n  Mr. LEVIN. Madam President, I ask unanimous consent that the order\nfor the quorum call be rescinded.\n  The PRESIDING OFFICER (Mrs. McCaskall). Without objection, it is so\nordered.\n\n                          ____________________"]], "columns": ["granule_id", "date", "congress", "session", "volume", "issue", "title", "chamber", "granule_class", "sub_granule_class", "page_start", "page_end", "speakers", "bills", "citation", "full_text"], "primary_keys": ["granule_id"], "primary_key_values": ["CREC-2008-12-11-pt1-PgS10902"], "units": {}, "query_ms": 20.775366050656885, "source": "Federal Register API & Regulations.gov API", "source_url": "https://www.federalregister.gov/developers/api/v1", "license": "Public Domain (U.S. Government data)", "license_url": "https://www.regulations.gov/faq"}