|12:56 PM EDT||
Andy Barr, R-KY 6th
Mr. BARR. Mr. Speaker, I thank the gentleman from New Jersey, my friend who has, himself, shown a considerable amount of leadership on this issue in making sure that American companies on Main Street and all across this country have access to reliable, affordable capital to grow their businesses and create jobs.
I also want to thank the gentleman from Florida for participating in the discussion here today in a bipartisan manner and for his support. And I also thank my colleagues both on this side and that side of the aisle for their support and for recognizing that we do need to fix this problem.
H.R. 4167, the Restoring Proven Financing for American Employers Act, is about jobs and economic growth. It is about reliable access to affordable credit to small, midcap, and emerging-growth companies, in fact, some of the most dynamic and job-producing companies in America.
As the U.S. Chamber of Commerce states in its letter of support, my legislation is necessary to ``fix the adverse impacts of the Volcker Rule upon thousands of Main Street businesses.''
This legislation, as has been mentioned earlier, passed out of the Financial Services Committee on a March 14 strongly bipartisan vote of 53-3. I want to thank Congresswoman Carolyn Maloney of New York for her support and work in developing this commonsense legislation to provide a necessary clarification of the Volcker Rule while maintaining the original legislative intent regarding the treatment of collateralized loan obligations.
While there are several exemptions provided in the statute included in section 619 of the Dodd-Frank law, which authorizes the Volcker Rule, that legislative language states:
Nothing in this section shall be construed to limit or restrict the ability of a banking entity or nonbank financial company supervised by the Federal Reserve Board to sell or securitize loans in a manner otherwise permitted by law.
Nevertheless, despite this plain language in the statute, certain asset-backed securities originally thought to be exempt by the Volcker Rule are now subject to the covered fund definition.
So the pragmatic need to provide this defined, narrow fix is why the legislation is endorsed by the American Bankers Association, by the Kentucky Bankers Association, and by the small community banks around this country, the Independent Community Bankers of America. And it is why a small community bank in my home State of Kentucky contacted my office in January. He alerted us to the fact that failing to fix this problem could very well mean significant losses to that small community bank, possible
layoffs of employees, and higher borrowing rates and fees for the customer in the local community.
So getting this issue right and fixing the problem is important to community banks. It is important to U.S. employers and businesses on Main Street. It is important to a whole lot of jobs that support families in Kentucky and around this country. And here is why: collateralized loan obligations, or CLOs, have proven to be a critical source of funding for U.S. businesses over the last 20 years.
Today, CLOs continue to provide over $300 billion in financing to U.S. companies, including companies that are well-known to all of us in this Chamber--Dunkin' Donuts, American Airlines, Burger King, Toys ``R'' Us, Neiman Marcus, Delta Air Lines, Goodyear Tire, and even a mattress and bedding company in my hometown of Lexington, Kentucky, Tempur Sealy. Yet, this valuable form of corporate finance that supports jobs is under assault due to the regulators' implementation of the Volcker Rule, which
makes it impermissible for banks to retain or invest in these assets.
According to the U.S. Chamber of Commerce, H.R. 4167 would ``preserve [Page: H3259]
this important source of financing that supports growth and job creation throughout our economy.'' CLOs have a proven track record of success, and they ``performed very well before, during and since the financial crisis.''
According to the Kentucky Bankers Association, investment in CLOs is a ``conservative addition to an existing and balanced investment approach'' and a ``thoughtful solution to the equity problem'' that banks face. In fact, the default rate on CLOs in the last 20 years has been less than one-half of 1 percent.
Yet, despite this proven track record and despite this critical source of funding for growing U.S. companies and job producers in America, the Volcker Rule regulators require that banks divest of their CLO holdings. The consequences will be a fire sale in the market that will cause significant losses to banks currently holding what are known as legacy CLOs.
Looking forward, it will increase the cost of borrowing in the future for U.S. businesses looking to expand, grow, and create much-needed jobs.
These warnings may sound abstract. So let me explain how this affects a real business that employs many of my constituents in Kentucky's Sixth Congressional District. Tempur-Pedic is a high-end mattress bedding company, and they produce, through space-age technology, very comfortable, high-end beds for the top of the market. But they knew that in order to be resilient and to be growing in the future, they needed to acquire a competitor that covered the rest of the marketplace--the value products,
the midlevel products, and a lower but higher level form of mattress so that in the event of an economic downturn or competitive pressures in the marketplace, they would have a cross-section of the entire marketplace with all price points of bedding.
So Tempur-Pedic used CLO financing, where it didn't have access to affordable corporate bond financing, as affordable corporate bond financing. They accessed CLO financing and closed this transaction where they acquired a well-known company to a lot of Americans, Sealy, and that transaction closed in March of 2013. This allowed them to expand their business and create already in just a year's time 200 new jobs in my district.
Thanks to CLO financing, Tempur Sealy is now a more resilient company and better poised for growth in the future. And if Tempur Sealy sees an opportunity to grow even more and is in need of a commercial loan, we want to make sure that this source of affordable financing is there for them and for all U.S. companies.
H.R. 4167 is a defined, narrow fix which clarifies that the Volcker Rule should not be construed to require the divestiture of any debt securities of CLOs prior to July 21, 2017, if such CLOs were issued before January 21, 2014.
H.R. 4167 also clarifies that a bank shall not be considered to have an ownership interest in a CLO for purposes of enforcement of the Volcker Rule if such debt security has no indicia of ownership other than the right to participate in removal for cause or in the selection of a replacement investment manager or investment adviser of the CLO.
So, in sum, Mr. Speaker, this legislation is a bipartisan, commonsense fix to a real world problem voiced by community banks and emerging growth companies like Tempur Sealy in my own district that will benefit these companies all around the country. So I urge a vote in support of H.R. 4167, the Restoring Proven Financing for American Employers Act.