|Date||May 18, 2009 (111th Congress, 1st Session)|
|Staff Contact||Andy Koenig|
S. 386 is being considered on the floor under suspension of the rules, requiring a two-thirds majority vote for passage. This legislation was introduced by Sen. Patrick Leahy (D-VT) on February 5, 2009. The bill passed the Senate on April 28, 2009, by a vote of 92-4. On Wednesday, May 6, 2009, the House passed S. 386, with amendments, by a vote of 367-59-1. The Senate then agreed to the House amendments with one change, outlined below. The House must now consider the Senate amendment to the bill.
S. 386 would broaden the coverage of current laws against financial crimes, including fraud affecting mortgages, securities, and federal assistance and relief programs. The bill authorizes the appropriation of $245 million for each Fiscal Year 2010 and 2011 for the Department of Justice (DOJ), the U.S. Postal Service, the Inspector General for the Department of Housing and Urban Development (HUD), the U.S. Secret Service, and other federal agencies to investigate and prosecute violators of the bill. The bill also amends certain provisions of the False Claims Act (FCA), which allows private individuals with knowledge of past or present fraud committed against the government to file claims against federal contractors.
The bill also established a Congressional Financial Markets Commission to examine all causes, domestic and global, of the current financial and economic crisis. Though members of Congressional commissions are traditionally evenly divided between the Majority and the Minority, the Financial Market Commission would be made up of six Democrats and four Republicans, making the commission decidedly partisan. The Senate amendment to S. 386 would require at least one vote from a commission member nominated by the Minority for the Commission to subpoena a witness.
S. 386 is based on the pretence that mortgage lender fraud was a large contributing factor to the subprime housing crisis and the current economic downturn. According to the Senate report 111-001, Wall Street financers fraudulently gave out mortgages to consumers that could not afford them, then packaged the mortgages into securities and sold them on the market. As Home prices dipped, these securities lost value, which led to "even more fraud and victimizing investors nationwide." Thus, the contention of the Senate Report that accompanies S. 386 is that the world-wide financial downturn was caused by private fraud and a lack of government regulation and oversight. To fix this problem in the future, the bill would establish new fraud laws and authorize $490 million over the next two years for the Department of Justice and other agencies to investigate any violations.
Some Members may be concerned that despite the assertions of the Senate Report, our current financial crisis has many causes, and while many individuals made unwise decisions, the failure of government policy and the market distortions it caused are the seeds of the crisis.
CBO estimates that implementing S. 386 would cost $490 million over the 2010-2014 period, assuming appropriation of the authorized amounts.