WASHINGTON, DC – U.S. Senator Pat Roberts today delivered the following remarks in a speech on the Senate floor:

“The American people are right to demand that they are never again put on the hook to bail out a failed company. They are right to demand that those who got us into the financial mess not be allowed to do so again. Unfortunately, the financial regulatory reform bill that the Senate is set to take up does not achieve these goals.

“As with any business, if it is mismanaged, if its leaders make poor decisions, the business should be allowed to fail. Success and failure have until recently, been the cornerstone of what has made our economy one of the strongest in the world.

“The bailouts of financial and auto companies have turned that philosophy on its head, and is, I think, a dangerous road to go down. We need to set a new course. It is what the American people want.

“This bill does not end bailouts. Instead, it allows some of the largest financial institutions to contribute to a “bailout fund” to be used if a company were to again fail. This does nothing to deter companies from taking risks that could lead to failure and the need for a future bailout.

“In fact, it sends a signal that the government will bail out institutions just as it did with Fannie Mae and Freddie Mac, the two troubled mortgage giants that have received $125.9 billion in direct government funding and now have an unlimited U.S. credit line. Yet there’s no mention of Fannie or Freddie in this bill. Failure to deal with Fannie and Freddie keeps taxpayers on the hook for more bailouts of these entities.

“The bill also allows the FDIC and the Federal Reserve to continue to come to the aid of failing financial firms, which means that the financial markets will be fully aware of the government’s authority and inclination to prop up large failed financial institutions.

“The very existence of this authority undercuts the claim that the government will ever actually wind up such firms. These firms, along with their creditors and shareholders, will take more risks and put the financial system in greater danger.

“There has also been much attention paid to the creation of a new Bureau of Consumer Financial Protection (BCFP). This sounds like a good idea at first. We all want to ensure strong consumer financial protections.

“Yet rather than working with regulators to strengthen existing consumer protection rules and crack down on unfair, deceptive and abusive practices, this provision adds another layer of bureaucracy and financial regulation that will ultimately be harmful for consumers – by raising their costs for financial products and limiting the types of financial products and services that are available to choose from.

“Not only that, this bill increases the regulatory burden for banks – including community banks – that are already subject to 1700 pages of regulations in just the consumer area alone. Under this bill, community banks would have to comply with an additional 27 new or expanded regulations, including new burdens on small business loans. No telling how many pages these new regulations will add or how much they will increase the cost of lending to small business.

“Finally, this bill harms the very innovation and entrepreneurship that has made our country successful and creating one of the strongest economies in the world. It does this by limiting the ability of small start-up companies to raise seed capital.

“Currently, angel investors – those higher income individuals who want to invest in a promising start-up company – must have a net worth of at least $1 million or income of $250,000. This bill increases those requirements to $2.3 million and $450,000 respectively.

“Estimates are that this provision, along with a provision in the bill that would subject start-ups and investors to 50 different sets of state regulations, would disqualify about 77 percent of current investors.

“In 2007 these individuals invested $26 billion in more than 57,000 ventures across the country. Companies such as Amazon, Google and Facebook all benefitted from angel investors. Yet this bill makes it harder for promising young companies to get the capital they need to get started, grow, and become successful.

“At a time when the unemployment rate is at 9.7 percent, the last thing Congress should do is make it more difficult for small businesses to start up and be successful. Small businesses are, as the president has acknowledged, the leading job creators in the country.

“I agree we need better regulation of our financial system. However, the financial regulatory reform bill that came out of the Banking Committee does not achieve that goal.

“However, it DOES increase the federal bureaucracy and make it more difficult and costly for consumers to obtain credit for their families and small businesses.

“This approach will not benefit consumers, community banks or our economy. We need to work to improve this bill. It is vital for our economy that we get it right when addressing financial regulatory reform because the consequences will be seen for years to come.”

Senator Roberts is a member of the Senate Agriculture Committee which reported out highly partisan legislation he opposed on derivatives, a key part of financial regulation reform. He supported a bipartisan alternative that would bring complete transparency to the currently unregulated swaps market and increase regulatory oversight.

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