Senate Proceeding 05-11-10 on May 11th, 2010 :: 3:12:45 to 3:17:50
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3:12:31 to 3:12:53( Edit History Discussion )

Judd Gregg: amendments package be in the record at this time with the attached a the presiding officer: is there objection? without admitted. mr. levin: i thank my friend. mr. gregg: mr. president, i wish to join congratulating senator corker, senator isaks, senator shelby and others who have come together around this issue of better underwriting standards. it's hard for me to understand why this would be resisted in

3:12:45 to 3:17:50( Edit History Discussion )
Speech By: Judd Gregg

3:12:54 to 3:13:14( Edit History Discussion )

Judd Gregg: this bill. because as has been outlined both by senator corker and by senator isakson it really was underwriting that created the problems which led our nation to the brink of a fiscal collapse. the way i described it is this: what we had was an inverted pyramid. you had this situation where an individual made a loan to

3:13:15 to 3:13:35( Edit History Discussion )

Judd Gregg: another individual. or a corporation made a loan to an individual. based on the value of a piece of property. unfortunately, when that loan was made, it was made in a way where nobody really looked at the value of the property relative to the ln. and nobody looked at whether or not the person who was getting

3:13:36 to 3:13:57( Edit History Discussion )

Judd Gregg: the loan could pay it back. because the system no longer had strong underwriting standard. and then that loan was taken and it was syndicated. it was synthesized and it became multiplied athe senator from tennese said into $600 trillion of notional value.

3:13:58 to 3:14:19( Edit History Discussion )

Judd Gregg: and we needed up with this huge pyramid of debt, built on the basis of this loan down here at the bottom of it between this corporation and this individual. is loan which was based on value which wasn't there and on ability to repay which wasn't there once the rates of the loan were reset.

3:14:20 to 3:14:41( Edit History Discussion )

Judd Gregg: so why did this happen? why was this loan so inappropriately made? it was inappropriately made because we had a breakdown in underwriting standards. i've been through three of these events in my professional career. once in the late 1970's. once when i was involved in representing a bank in new hampshire. once in the late 1980's when i

3:14:42 to 3:15:02( Edit History Discussion )

Judd Gregg: was governor of new hampshire. and now. three major financial disruptions which were created almost entirely by a failure in underwriting standards, where people were making loans that couldn't be paid back based on asset value which wasn't there. it jus was aggravated radically

3:15:03 to 3:15:26( Edit History Discussion )

Judd Gregg: this time because of the way the system suddenly took these loans and exploded them through the securitization process and the syndication process. and so, if you're going to fix this problem, if you're going to put in place a regulatory reform system which actually fixes the issues which caused the crisis, you've got to address underwriting standards.

3:15:27 to 3:15:47( Edit History Discussion )

Judd Gregg: and that's why the cochran -- corker amendment is so critical because this bill does not address underwriting standards in any other way in any significant manner. if you're going to have a legitimate effort to try to make sure this type of event doesn't occur again, y've got to put in place underwriting standards which establishes rules of the road which says that in the

3:15:48 to 3:16:09( Edit History Discussion )

Judd Gregg: future america will not allow this sort of proliferation of lending which is unsecured or not properly secured -- it's not unsecured. but not properly secured and where the person getting a loan, we know can't repay the obligation. ironically in this situation, these loans were made in some

3:16:10 to 3:16:30( Edit History Discussion )

Judd Gregg: instances with the full understanding that this wouldn't happen, that they couldn't repay and the value wasn't there? why? we separated underwriting standards from the process actually making the loan. people making the loans were only interested in the fee. they weren't intereste in whether the value was there of the security or they weren't interested whether the person

3:16:31 to 3:16:51( Edit History Discussion )

Judd Gregg: getting the money from the loan could repay it. they were just interested in the fee. well, this should stop. the language senator corker put forward would accomplish that. it would put in place not unusual underwriting standards, not new underwriting standards. it would eentially go back to the standards, the type of standards which he had at a

3:16:52 to 3:17:12( Edit History Discussion )

Judd Gregg: prior time when we didn't have this type of risk in the marketplace because people knew that when they borrowed money to buy a house, they were going to have to put money down. and if they didn't put the full amount of the value down, they were going to have to have insurance to cover the difference. and they knew that their credit worthiness was going to be checked and thoroughly checked, and their ability to pay the

3:17:13 to 3:17:34( Edit History Discussion )

Judd Gregg: loan was going to be checked. it is a totally reasonable approach. and if you're going to do one thing in this bill to avoid a future event such as we confronted in the 2008 where the financial industry in this country almost melted down, if you want to do one thing, you

3:17:35 to 3:17:50( Edit History Discussion )

Judd Gregg: should adopt the corker amendment. i don't understand any opposition to it. i don't understand the concept which would oppose it because it is basically good banking, good lending. and it's also good for the people who are borrowing the money because they're not going to get money just arbitrarily