U.S. Senator Richard Shelby (R-Ala.), today made the following statement regarding his support for an amendment to the financial reform bill currently being considered in the U.S. Senate.
“Protecting taxpayers and ending bailouts are my top priorities in financial reform. Unfortunately, the bill Democrats originally brought to the Senate floor would have perpetuated back-door bailouts and institutionalized the notion that some firms in our country are ‘too big to fail.’ I thank Chairman Dodd for including my changes to the legislation that will correct these critical shortcomings. While this progress is encouraging, the overall legislation still has a long way to go to gain my support. My Republican colleagues and I will continue to offer constructive proposals to restrain the drastic government overreach in this bill and promote the competitiveness of our financial system during this time of economic difficulty. It is my hope that this legislation can be further improved to achieve these important goals as well.”
The full text of Senator Shelby’s statement is below:
“Mr. President, as drafted, the bill we are considering this week allows for bailouts. As a result, what my friends on the other side like to call ‘Wall Street Reform,’ is actually a Wall Street dream and a Main Street nightmare.
“I have, over the last several weeks, clearly articulated what needs to be changed because we must do everything we can to create a credible resolution regime that protects not only our financial system, but more importantly, the American taxpayer.
“Fortunately, the Chairman of the Banking Committee, Senator Chris Dodd and I have worked through a number of issues and resolved, to my satisfaction, the concerns that I expressed about government bailouts.
“I believe that it is simply unacceptable to expose innocent taxpaying American families to the excessively risky practices of Wall Street gamblers who are happy to enjoy the upside, but want to socialize the downside.
“Taxpayers should not incur losses from the bad outcome of private risks that they did not undertake.
“In order to achieve this, our amendment:
•eliminates the $50 billion bailout fund;
•significantly tightens up language in the bill dealing with the Fed’s ability to provide liquidity to the financial system in times of severe market distress;
•requires the approval of the Treasury Secretary before the Fed can undertake any emergency lending;
•establishes strict solvency and collateral requirements for any emergency Fed lending; and
•establishes strict accountability standards for any emergency Fed lending.
“We have tightened up the resolution language to ensure that the creditors of failing firms will receive bankruptcy-like treatment.
“A resolution regime for large failing financial institutions is simply not credible unless we make clear in language that backdoor bailouts are impossible.
“We have significantly tightened up language in the bill dealing with the provision of debt guarantees by the FDIC and Treasury.
“Any such guarantees will now require prior Congressional approval.
“We have also clarified and tightened the language in the bill regarding resolution and the powers of the Fed, FDIC, Treasury, and others to prevent bailouts.
“We have included provisions requiring post resolution reviews to determine whether regulators did all that they were supposed to do to prevent the failure of a systemically significant institution. Such a review is essential to hold regulators accountable for their actions or inaction as the case may be.
“Mr. President, we must put an end to the ad hoc responses of the Federal government which only lead to fear and panic. I believe these changes will help do that.
“I want to thank the Committee’s Chairman, Senator Chris Dodd, for working with me to tighten the language in this part of the bill.
“All of these changes are important and necessary to make bailouts a thing of the past. With these changes, I believe that we have done what Congress can do to prevent any future bailouts.
“It will now be up to the regulators to follow the law and do what we expect them to do.
“Mr. President, I strongly support these changes and I urge my colleagues to support them as well.
“I do not, however, want to leave the impression that I support the entire bill because we are making these necessary changes.
“Beyond resolution and government powers in a crisis, this over 1,500 page bill contains a broad reach into the global financial system and the American economy.
“Now that we are over this particular hurdle, I will be addressing many additional concerns that I have in the coming days.
“For now, however, I’m pleased to join with Chairman Dodd in supporting this amendment.”