Senate Proceeding on Feb 1st, 2010 :: 4:14:50 to 4:24:30
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4:14:46 to 4:15:07( Edit History Discussion )

Johnny Isakson: patricia smith to show that, yes, this body will stand up for workers and dot right mr. president, i yield the floor.. a senator: mr. president? the presiding officer: the senator from georgia. mr. isakson: i'd like to be recognized for up tten minutes as if in morning business. the presiding officer: without objection. mr. isakson: mr. president, i rise tonight following on the

4:14:50 to 4:24:30( Edit History Discussion )
Speech By: Johnny Isakson

4:15:08 to 4:15:28( Edit History Discussion )

Johnny Isakson: heels of two more bank closings in my state last friday. not new banks, one of them over 60 years old, one of them over 100 yearsld. i want to talk for a few minutes tonight about the unintended consequences of well-intended regulation. we're now going into the 26th

4:15:29 to 4:15:49( Edit History Discussion )

Johnny Isakson: month of the current recession. this will arguably be the longest recession postworld war ii america's experienced. i can tell you from having gone through four of the recessions post1960, this is by far the worst of anything we've experienced. we're at a point where we've got to make good, solid decisions,

4:15:50 to 4:16:10( Edit History Discussion )

Johnny Isakson: but we've got to help our economy, help our businesses and help our financial institutions. don't get me wrong at the outset, i'm not talng about waiving or dispensing or looking the other way. i'm not talking about loosey-goosey regulation which got us into the mess we're in, shoddy underwriting and poor credit. what i'm talking about are

4:16:11 to 4:16:32( Edit History Discussion )

Johnny Isakson: realistic approaches to difficult problems and look into our past to understand the answers for our future. i want to talk about rule 114, which is called mark to market. mark to market is where an appraisal of an asset held by a bank is apraised at what it would sell for today, in many cases because of a difficult real estate market in both

4:16:33 to 4:16:53( Edit History Discussion )

Johnny Isakson: commercial and residential, those values are dramatically deprsed. in most cases below the loan that's against them. the asset deteriorates. the asset side of the balance sheet of the bank deteriorates. you have difficult problems. in the late 1980's and earl lip 1990's -- early 1990's we had

4:16:54 to 4:17:15( Edit History Discussion )

Johnny Isakson: something called the resolution trust corpotion, the r.t.c. it was kind of a bad bank that took the assets of the failed savings and loans around the united states. we waived mark to market for three years, had a three-year moratorium. the banking institution and their regulators could deal with loans in a practical, pragmatic

4:17:16 to 4:17:36( Edit History Discussion )

Johnny Isakson: way, rather than a draconian rigid application of mark to market. secondly, we've got to consider doing something on the appraisal rules that have been passed down. i have talked to our secretary of h.u.d. on this and intend to talk more about it. i was in clayton county, georgia, south of atlanta just two weeks ago, a county that's been hit hard by the housing

4:17:37 to 4:17:59( Edit History Discussion )

Johnny Isakson: recession, a county where values are 42% below what they were in 2006. that is a significant decline. and talked to one realtor after another and one lender after another who told me the interesting thing that's happening. with the new appraisal regulations, the appraisals on these houses when they sell at a short sale or foreclosure are

4:18:00 to 4:18:20( Edit History Discussion )

Johnny Isakson: coming in at exceedingly low values. but when the people have their homeowners insurance to insure the house, they're having to insure the house f more than they paid for it. why? because you can buy houses in a lot of markets in georgia today and around the country for less than it would cost to replace. when i entered the business in

4:18:21 to 4:18:42( Edit History Discussion )

Johnny Isakson: the 1960's, cost to replace was the principal way in which you evaluated real estate. it later became comparable sales took over cost to replace. i think it's time we looked at cost to replace becoming the primary mechanism to establish the value for financing purposes and for lending purposes. the short sale situation is another problem.

4:18:43 to 4:19:04( Edit History Discussion )

Johnny Isakson: it has taken banks in some cases 10 to 12 months to give somebody an answer on a short sale. a short sale is when you've got a house and you're in default, you can't pay your loan but it's not in foreclosure yet. you find a buyer who can pay 80 cents on a dollar. say you owe $1 hundred and they can pay $80.

4:19:05 to 4:19:25( Edit History Discussion )

Johnny Isakson: you go to your bank and say will you accept 80 and let me sell this property rather than foreclose it. banks are reluctant to make decisions, therefore most of the time they didn't. those houses they could have sold on a short sale go into foreclosure. more often than not, they're

4:19:26 to 4:19:46( Edit History Discussion )

Johnny Isakson: vandalized, their value declines 1%, 2% a month. to show you the value of well-intended regulation, i want to commend the treasurer because last week the treasury issued a ruling to banks that received tarp money that they must respond within ten days on any short sale offer on a mortgage that that bank holds. you're going to see a remarkable

4:19:47 to 4:20:08( Edit History Discussion )

Johnny Isakson: change in denver, in atlanta, in houston and a lot of other places. you're going to see some sales that haven't been taking place start to take place. you're going to see some inventory be absorbed. i want to commend the treasury on their good approach to short sales. i want to talk a minute about lost sha. the fdic has come up with a loss share proposal for the banks

4:20:09 to 4:20:30( Edit History Discussion )

Johnny Isakson: that take the troubled assets of banks that are failed. the fdic says if you'll take these assets, we will guarantee the most you can lose is 20% of the value. we'll cover the other 80%. to make sure you don't get in worse trouble you can't extend beyond 10% of the debt owed to the borrower. the problem with that is a lot

4:20:31 to 4:20:51( Edit History Discussion )

Johnny Isakson: of these assets are in fact perform but they haven't been completed yet. and they complete the asset so it begins to pay back, sometimes you've got to extend credit beyond 10% or 15% or 20%. to have an absolute rule that you can't is causing loans to go bad or to go unfunded that otherwise should have been funded.

4:20:52 to 4:21:12( Edit History Discussion )

Johnny Isakson: mr. president, in 1974, we went through a housing recession as deep and as problematic as the one today. and foreclosures were every bit as rampant. maybe not as big in numbers but as rampant and as difficult. as is beginning to happen now, the commercial loans began to fail in 1975. an interesting happened around the country.

4:21:13 to 4:21:33( Edit History Discussion )

Johnny Isakson: commercial lenders and the regulators recognized very quickly if they foreclosed on commercial loans like they had foreclosed on residential loans, the banking system would collapse. the asset side of all, most all banks would collapse. and so what they decided to do was encourage banks to work out these assets by going to the

4:21:34 to 4:21:55( Edit History Discussion )

Johnny Isakson: developer who is in trouble, who owes the money and say if you'll deed this property back to us in lieu of foreclosure and then let us hire you on an earned on process so we can develop our way out of this debt rather than foreclose ourselves into a loss and more often than not, probably three out of every four transactions it happened. the house i live in today, i

4:21:56 to 4:22:16( Edit History Discussion )

Johnny Isakson: built on a lot i bought in a subdivision that had been taken back by the c&s national pwafrbg. they hired the developer to do a workout and bought it at a good price. it became a great development. the bank eventually was made whole. the bank would have lost lots of money if they had to take that theufrpbg and foreclose on it --

4:22:17 to 4:22:39( Edit History Discussion )

Johnny Isakson: thing and foreclose on it. i want to encourage our regulators to give the great american entrepreneurship the chance to work. some of these people are in trouble but there are avenues outside of that trouble. there's been a lot of talk about taxing banks that received tarp money. i want to address that for a second. the best i can tell, every bank that receive tarp money is

4:22:40 to 4:23:01( Edit History Discussion )

Johnny Isakson: paying it back in a 5% dividend. we're making a profit. the only people that haven't paid it back are g.m. and chrysler who probably never will. if we put that much more of a burden on top of the people that are paying us and paying a premium when we have a banking system under stress and under regulatory duress, we're only making it more and more possible or impossible for them to stay

4:23:02 to 4:23:22( Edit History Discussion )

Johnny Isakson: in busess, for them to be vibrant and come back to bring credit to our communities. on that point, with mark to market enforced in a draconian rate, with appraisal rules drivg down the values of properties that are financed by the banks, with the regulatory environment being so stiff to recognize losses and deteriorate the balance sheet, there is not

4:23:23 to 4:23:44( Edit History Discussion )

Johnny Isakson: any credit for small business to speak of. so we are making a recession that's deep, that is broad and that's pervasive worse because of the unintended consequences of well-intended regation. lastly, i want to -- i've enjoyed working with senator kaufman so much over this issue

4:23:45 to 4:24:05( Edit History Discussion )

Johnny Isakson: of short sales that i just want to put in one more plug for what we've plugged in this entire session and encourage the s.e.c. in the collapse that took place in the markets, one of the things that went away -- went out of hand was the short selling of financial stocks to terrible lows. that short telling took place in large measure because there was

4:24:06 to 4:24:27( Edit History Discussion )

Johnny Isakson: no uptick rule which was the old rule that was good for years on the stock market that once you had a declining value in a stock, if it ticked up on a trade, you selling from continuing to take place. we need the s.e.c. to revisit it. they took 30 days a year and a half ago and suspended it, and it helped. but we don't need those speculing in the marketplace

4:24:28 to 4:24:30( Edit History Discussion )

Johnny Isakson: to take unfair advantage of the values of equities that are