Financial Crisis Commission Act

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In response to the financial crisis that continues to plague our economy, I introduced legislation with U.S. Senator Kent Conrad, D-N.D., to create a Financial Crisis Commission that will be charged with fully investigating the near collapse of the banking system and the loss of tens of trillions of dollars. It is imperative that we gather all the facts and not rush to legislate as we seek to recover from today’s financial crisis.

On April 22, the Senate overwhelmingly passed my amendment with Senator Conrad to the Senate’s version of the financial fraud bill that would create a Financial Crisis Commission. The House passed the financial fraud bill, 367-59, on May 6 with amended language that included the Financial Crisis Commission. On May 14, the Senate, on a unanimous consent motion, agreed to relatively small changes to the bill and sent it back to the House. On May 18, the House agreed to the Senate’s changes. On May 20, President Obama signed the legislation into law.

The 10-member, bipartisan Financial Markets Commission will be modeled after the 9-11 Commission, which thoroughly and independently investigated the failures leading up to the September 11, 2001, terrorist attacks and made sound recommendations on where we needed to improve to prevent another attack in the future.

Likewise, the Financial Markets Commission will have until December 2010 to investigate all the circumstances that led to this financial crisis. The panel will have the authority to refer to the U.S. Attorney General and state attorneys general any evidence that institutions or individuals may have violated existing laws. At the end of its investigation, the Commission will report its findings and conclusions to the Congress and the President.

This bipartisan Commission will include two appointees each by the Speaker of the House and the Senate Democratic Leader as well as one appointee each from the House Republican Leader, the Senate Republican Leader, the Chairman and the Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, as well as the Chairman and the Ranking Member of the House Financial Services Committee.

The Speaker and Senate Democratic Leader will choose the commission’s chair. The Senate and House Republican Leaders will select the vice-chair. Members of Congress as well as federal and state employees are prohibited from serving on the Commission.

I believe we must not rush to legislate and regulate without all the facts. This legislation will help Congress understand exactly what happened to our financial system and why. I firmly believe a bipartisan and independent commission is best way to investigate what led to the failures in our banking system.

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Ben Bernanke

On, January 28, 2010, I voted to confirm Ben Bernanke to a second term as chairman of the Federal Reserve. The full Senate approved Chairman Bernanke’s nomination by a vote of 70-30.

While I do have concerns regarding Chairman Bernanke, I have greater reservations about changing leadership at the Federal Reserve during the worst financial and economic crisis since the Great Depression. If Chairman Bernanke was not confirmed, Vice Chairman Donald Kohn would have assumed leadership of the Federal Reserve temporarily while President Obama started the confirmation process over with a new nominee. This would have brought more uncertainty at a time we can least afford it. While some may disagree with some of Chairman Bernanke’s decisions, the fact is that during the most difficult economic crisis our country has ever faced, his policies helped avert a collapse and set us on the road to recovery.
If Chairman Bernanke had not been confirmed, there was speculation that President Obama would have looked within his administration to fill the job. The two names mentioned most were Larry Summers, director of President Obama’s National Economic Council, and Christina Romer, chair of the Council of Economic Advisers. I believe Chairman Bernanke is a better choice than either of these individuals.
I believe there should be more transparency at the Federal Reserve, and that’s why I was the fourth senator to co-sponsor legislation to require the Government Accountability Office to conduct a comprehensive and independent audit of the Federal Reserve.

S.604, the Federal Reserve Sunshine Act, would mandate an audit of the Federal Reserve by the Comptroller General of the United States to be reported to the leadership of Congress, along with the leadership of committees of jurisdiction. The audit would be completed by the end of 2010. It was the intent of Congress in 1913 to create the Federal Reserve as an independent non-partisan organization, and the Federal Reserve has been exempt of audit ever since. However, the time has come where there is a need for more accountability across the board.

I’m pleased Chairman Bernanke also has heard the message that the American people want more transparency. On January 19, 2010, he asked federal auditors to review the Federal Reserve Bank of New York’s role in the much-criticized rescue of the American International Group in 2008. I believe this is a step in the right direction.

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Economic Stimulus

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When President Obama took office in January 2009, he called on Congress to pass a second economic stimulus. The House of Representatives passed its version by a vote of 244-188, but it was a non-starter for me, as it did not address the core problems that created the current economic crisis.

During Senate debate numerous Republican alternatives were offered - alternatives that put money directly in the pockets of the American people. I supported these amendments as I feel the American people know how to spend their money more effectively than the government does and will provide the best stimulus to the economy.

This economic stimulus package devoted too much money to programs that will not provide the stimulus our economy so desperately needs, and too little money to infrastructure and incentives for investment. I voted no on the stimulus bill H.R.1, and despite my efforts to create a more bipartisan and effective piece of legislation, the stimulus passed the Senate by a vote of 60 to 38.

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Tax Credits for Homebuyers

I believe our economic problems started with the housing market and that we must restore the housing market if we are going to restore our economy. We need to further restore the housing market and energize housing demand by expanding the first-time home buyer tax credit passed by Congress earlier this year.

I worked with Senate leadership to craft a compromise to extend and expand the current first-time home buyer tax credit, which was set to expire on November 30, 2009. This compromise was included in legislation to extend unemployment benefits, which passed the Senate by a vote of 98 to 0 on Nov. 4. The House passed the bill by a vote of 403 to 12 on Nov. 5, and President Obama signed it into law on Nov. 6.

This compromise will extend the current $8,000 first-time homebuyer tax credit, as well as establish a new $6,500 tax credit for “move-up” buyers so long as the home they are leaving has been used as a principal residence for five years or more. Both the $8,000 first-time home buyer credit as well as the $6,500 credit for “move-up” buyers will sunset on April 30, 2010. However, individuals who have contracts to buy a home as of April 30, 2010, will still qualify for the credit so long as they complete the transaction within 60 days.

The income limits to be eligible for both the first-time tax credit or the move-up tax credit are $125,000 for an individual or $225,000 for a couple. The cost of the home being purchased may not exceed $800,000 in order to be eligible for the credit. For purchases made in 2010, taxpayers will be able to claim the credit on their 2009 income tax return. Home buyers will not have to repay the credit, provided the home remains their principal residence for 36 months after the purchase date. However, the recapture provision will not apply in the case of a member of the Armed Forces, military intelligence or Foreign Service who is on qualified official extended duty. In addition, members of the military who have been deployed overseas for 90 days or more in 2008 or 2009 will have until April 30, 2011, to claim the home buyer tax credit.

The compromise also includes anti-fraud language that provides math authority to the IRS to do greater oversight during the processing of the return rather than waiting for an audit situation. It requires the taxpayer claiming the credit to be 18 or older as well as requiring a HUD-1 settlement statement to be attached when claiming the credit.

I have pushed hard for a non-repayable tax credit for homebuyers because I know that it will work. In the mid-1970s, America faced a similar housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. Interest rates rose, the economy slowed and America was left with a three-year supply of vacant homes. Congress responded by passing a $2,000 tax credit for anyone purchasing a new home for their principal residence. I was in the real estate industry in Atlanta at the time, and the results were clear and swift as home values stabilized, housing inventory dropped and the market recovered.

One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can. Today, in the United States, one in two sales made every day is a short sale or a foreclosure. That is an unhealthy market, and it is continuing to precipitate a downward spiral in values, loss of equity by the American people and a protracted, difficult economic time for our country.

Our economic crisis started with housing, and our economy will continue to suffer unless we do something now to immediately fix the housing problem.

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