[Congressional Record Volume 144, Number 128 (Wednesday, September 23, 1998)]
[Senate]
[Pages S10739-S10789]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 CONSUMER BANKRUPTCY REFORM ACT OF 1998

  The PRESIDING OFFICER (Mr. Bennett). Under the previous order, the 
Senate will now resume consideration of S. 1301, which the clerk will 
report.
  The assistant legislative clerk read as follows:

       A bill (S. 1301) to amend title 11, United States Code, to 
     provide for consumer bankruptcy protection, and for other 
     purposes.

  The Senate resumed consideration of the bill.
  Pending:

       Lott (for Grassley/Hatch) Amendment No. 3559, in the nature 
     of a substitute.
  Mr. DURBIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Illinois is recognized.
  Mr. DURBIN. Mr. President, I thank the majority leader for announcing 
the schedule this morning. Those who have followed the last few days of 
Senate debate know we are considering a reform of the bankruptcy code. 
We will be joined shortly by the Senator from Connecticut, Senator 
Dodd, who will offer an amendment.
  For those who have not paid attention to this debate, I hope that 
they have followed at least the outline of it and understand that what 
we are about is to try to change the bankruptcy code in a way that will 
reduce abusive filings--in other words, people who may be going into 
bankruptcy court to file for bankruptcy in a situation where they can, 
in fact, pay back either their debts or a sizable portion of those 
debts. We have tried to address this at several different levels. We 
have had a spirited debate about how to do it.
  We understand the complexity of this. Historically, there has been a 
national commission which has taken a look at this rather complicated 
area of the law. I find myself in an unusual position here, having 
worked with my staff and studied this issue for a year, because I come 
to this with an interesting experience when it comes to bankruptcy law. 
Thirty years ago, I took a course in bankruptcy in law school. Twenty 
years ago, I was appointed trustee of a bankruptcy in my hometown of 
Springfield, IL, in one case. Now I bring that wealth of experience to 
this debate in an attempt to try to find our way through a very 
complicated area of the law. It was interesting.
  Yesterday, when I spoke to a colleague of mine about bankruptcy, she

[[Page S10740]]

had said that she was surprised to learn how few people file bankruptcy 
with incomes over $50,000 a year. I told her that the average income of 
a person filing for bankruptcy in the United States of America is less 
than $18,000. So folks who are going into bankruptcy court, by and 
large, are people of very limited means. The average debt of the person 
going into bankruptcy court is about $28,000.
  So if we are out to stop the high rollers and the abusers of the 
system, I hope that we take care in this bill, as well as in 
conference, to protect the vast majority of people petitioning the 
bankruptcy court for relief of their debts, who are, in fact, in lower-
income categories, with a debt that is beyond their comprehension or at 
least their control.
  As we go about these changes, I am glad to see that we have included 
amendments that not only try to tighten up the procedures in the 
bankruptcy court, but also say to the people in the credit industry 
that they have an equal obligation here. We want you to continue to 
extend credit across America so that American families and businesses 
can use credit cards and second mortgages and other things to finance 
their lives and businesses; but we want you to be certain that you 
follow some rules, too.
  We have talked a lot about personal responsibility here when it comes 
to consumers. I think that is a valid observation. We also want to 
speak to corporate responsibility, so that those who are peddling these 
credit cards around the country, in fact, give full disclosure to the 
would-be consumers about the terms. Many of us will go home tonight and 
look through the mail, and you know what you are going to find--a stack 
of preapproved credit card applications. It is luring. People say: This 
can be easy. I will take all my debts and put them on one card. Look at 
this low interest rate; this is terrific. Let's do this right away.
  Yet, they find that it is a teaser rate and only applies for a few 
months. If they decide in some instances to pay off their credit card 
at the end of each month, they may face a penalty. Yes, a penalty for 
paying off the balance on your card because, of course, the company 
makes money if you continue to really roll over the debt month after 
month and pay interest.
  Senator Reed of Rhode Island successfully offered an amendment that 
said that you have to have full disclosure if that is going to occur, 
and other amendments in this bill try to say to the consumers that you 
have a right to know, too. For example, if you pay the minimum monthly 
balance on your credit card, we have a provision in this bill that says 
you should state right under it how long it will take to pay off the 
credit card debt and how much you will pay in interest if you pay the 
minimum monthly amount.
  So we are trying to strike a balance here--a balance that says those 
who come into court have to be, in fact, deserving of bankruptcy 
procedure, and that those who extend credit in this country have to be 
more open and honest in the way that they deal with consumers. I think 
that is the right balance. It still puts the burden on each of us to 
make the right decisions for ourselves and our families. It gives us 
the information about the credit card companies to make that decision 
more knowledgeably and with an understanding of what we are getting 
into.
  At this time, I see my colleague from the State of Connecticut is 
here to offer his amendment under the unanimous consent agreement.
  Mr. DODD addressed the Chair.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Connecticut is recognized to offer an amendment regarding student loans 
on which there will be 15 minutes: 10 minutes under the control of the 
Senator from Connecticut, and 5 minutes under the control of the 
Senator from Iowa.
  The Senator from Connecticut.
  Mr. DODD. Mr. President, first of all, we want to wrap this bill up, 
I gather, fairly quickly. I want to extend my congratulations to 
Senator Grassley of Iowa, Senator Hatch, my colleague from Utah, and 
Senator Durbin, the manager for this side of the aisle on this 
legislation. It has been a long journey for them, I know, in committee 
in trying to deal with this legislation. I am particularly grateful for 
the courtesies which they have extended to me, and for the various 
ideas we have had for inclusion in this legislation.


                Amendment No. 3614 to Amendment No. 3559

    (Purpose: To improve certain bankruptcy procedures relating to 
                          dependent children)

  Mr. DODD. Mr. President, with that in mind, I send an amendment to 
the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Connecticut (Mr. Dodd) proposes an 
     amendment numbered 3614 to amendment No. 3559.

  Mr. DODD. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place, insert the following:
       Sec.   . Protection of Savings Earmarked for the 
     Postsecondary Education of Children.--Section 541(b) of title 
     11, United States Code, as amended by section 403 of this Act 
     is amended--
       (1) in paragraph (6), by striking the period at the end and 
     inserting a semicolon; and
       (2) by inserting after paragraph (6) the following:
       ``(7) except as otherwise provided under applicable State 
     law, any funds placed in a qualified State tuition program 
     (as described in section 529(b) of the Internal Revenue Code 
     of 1986) at least 180 days before the date of entry of the 
     order for relief; or
       ``(8) any funds placed in an education individual 
     retirement account (as defined in section 530(b)(1) of the 
     Internal Revenue Code of 1986) at least 180 days before the 
     date of entry of the order for relief.''.

  Mr. DODD. Mr. President, this amendment is a third amendment to two 
others that have been offered and have actually been included in the 
managers' amendment.
  I thank, again, Senator Hatch, Senator Durbin, Senator Grassley, and 
others for their consideration.
  This amendment, the third, is designed to protect children who 
through no fault of their own are involved in bankruptcy. It provides 
legal and legitimate college savings accounts established for the 
benefit of children which will be beyond the reach of creditors.
  This amendment parallels Senator Hatch's provisions to protect 
retirement savings accounts, and particularly contains measures to 
prevent fraudulent transfers of assets intended solely to avoid the 
rightful reach of creditors. So we have written into this the exact 
same kind of parallel provisions that the seniors' retirement accounts 
include.
  The amendment complements other provisions that are included in the 
managers' amendment. Those provisions ensure that the lawful funds for 
the benefit of children--such as child support, disability payments, 
and foster care payments--would also be preserved for children and not 
creditors.
  Again, that goes back almost 100 years in trying to see to it that 
innocent children are not going to be harmed and hurt as a result of 
this process.
  In addition, we agreed that household goods exclusively and primarily 
for children, such as toys, children's furnishings, and items used by 
parents provided for their children, would also be protected.
  Again, it was a consensus. I commend my colleagues for recognizing 
that these issues are important as well.
  Taken together, the provisions of this amendment and the managers' 
amendment will continue the 95-year-old principle of the bankruptcy 
code that women and children must be first in bankrupt credit 
alliances.
  I believe that these important improvements in the bill reinforce the 
historic protections that are given families in bankruptcy proceedings. 
Those who are innocent and most vulnerable deserve the most protection.
  I am very grateful, as I said a moment ago, to the chairman of the 
full committee and the subcommittee and the ranking member, Senator 
Durbin, who has worked hard to ensure these protections for children 
and families were not weakened in the pending legislation.
  In the rush that was going on around here a number of weeks ago, we 
almost blew by these historic protections which we provide for 
families. As a result of their leadership, these protections have been 
included in legislation. I am confident that in conference they will 
preserve them.

[[Page S10741]]

  This amendment would strengthen the principle that children ought to 
come before credit card companies. Legal proceedings, including 
bankruptcy proceedings, should be designed to protect against the 
impoverishment of children and innocent adults. Otherwise, 
impoverishment will produce dependency, in which case no one wins--
neither the individual impoverished, nor the credit card company.
  I also would like to express for the record my concern that my 
colleagues in conference firmly support the Senate legislation. I think 
it is critically important that we hold these provisions.
  Again, we all recognize the importance of this legislation. There has 
been a flood of people taking advantage of the Bankruptcy Act. Too many 
have been doing that. This legislation is going to tighten that up 
considerably. But I think as we call for a higher degree of 
responsibility on the part of our citizenry when it comes to their 
fiscal and financial responsibility, it is also incumbent that we ask 
the credit card companies to exercise responsibility as well.
  This legislation, I think, strikes a good balance between stopping 
the incredible amount of people taking advantage of the Bankruptcy Act 
with little or no repercussions, it would appear, and also seeing to it 
that the innocents--particularly children--are not going to be 
adversely affected by this process.
  As has been noted by some of our colleagues over the last week or so, 
as you consider this bill, just last year alone 3 billion credit card 
solicitations were sent out across this country, many with already 
preapproved proposals.
  I hope that credit card companies will exercise some restraint and 
responsibility in trying to slow down what is an exploding amount of 
consumer debt in this country. During good times, no one talks about it 
much. But when you get a downturn in the economy, it becomes a major 
problem. There is corporate debt, and consumer debt. We have to try to 
get a better handle on it.
  I am very grateful to the managers of the legislation--I see my 
colleague from Iowa has arrived on the floor as well as the Senator 
from Utah--and for their consideration of this amendment.
  As I said, it tracks Senator Hatch's very good amendment on seniors' 
retirement accounts to see to it that education is going to be 
something that we continue to support as strongly as we have for the 
21st century because of rising college costs, to see to it that these 
educational accounts are going to be for the children that need them. I 
think it is a very wise decision. Indeed, I am grateful for their 
support.

  Mr. HATCH addressed the Chair.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I would like to commend my colleague, the 
distinguished Senator from Connecticut, for his initiative on this 
particular amendment, as well as his contributions to this legislation 
as a whole.
  We have worked closely on several issues on this bankruptcy 
legislation, including providing for enhanced protection of domestic 
and child support payments in bankruptcy. And I have appreciated both 
his and his staff's dedication, sincerity, and cooperation on this 
important bankruptcy legislation.
  I am sure my colleague, the chairman of the subcommittee, Senator 
Grassley, feels the same way.
  Mr. President, this amendment is well intentioned. I fully support 
the policy of providing enhanced protections for educational savings 
accounts in bankruptcy. That is why we have agreed to this amendment. 
However, Senator Dodd is aware that I have some concerns with the 
amendment as currently drafted, because it may have the unintended 
consequence of encouraging and rewarding fraud and abuse in bankruptcy.
  I thank the Senator from Connecticut for agreeing to work with us on 
this amendment as this legislation progresses to ensure that it will do 
just what it is intended to do; that is, protect funds that have been 
set aside for the education of the child of the debtor.
  Some of my specific concerns include the fact that under the 
amendment as currently drafted the debtor will not have to disclose the 
existence of these accounts in any way in the bankruptcy case, or the 
schedules filed with the court because they are deemed ``not the 
property of the estate.'' The trustees will not even know these 
accounts exist, and they cannot be audited.
  I would like to see these accounts to be created exempt properties of 
the estate of the bankrupt similar to the treatment we have given 
pension plans and retirement savings accounts in this legislation.
  Moreover, we need to place some limits on these accounts to prevent 
them from becoming bankruptcy shelters for those seeking to abuse the 
bankruptcy system as a financial planning tool.
  Again, this could be done by placing limits similar to those we have 
imposed on individual retirement accounts and the way we have done 
that.
  Finally, we need to ensure that the funds protected in such accounts 
will actually be spent on the education of the bankrupt's child, not 
simply withdrawn after bankruptcy to be used as the bankruptcy wishes, 
leaving the future education of the child in jeopardy.
  I know that the Senator from Connecticut shares my concerns that this 
amendment not provide a new means for fraud and abuse.
  Again, I thank him and his staff for their willingness to work with 
us to address these concerns.
  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. GRASSLEY. Mr. President, before we accept this amendment--I 
understand that we will do that, and I prefer that we do--I commend the 
Senator from Connecticut for his hard work on this issue. I have to say 
that I think the Senator is on to something here. We ought to encourage 
parents, obviously, to save for education and to protect these savings 
in bankruptcies. So philosophically we are all on the same page.
  The problem in a situation like this is the devil is in the details, 
especially when it comes to making changes to the bankruptcy code.
  I want to express my concern that the amendment of the Senator from 
Connecticut could unintentionally open a loophole for abuse. I 
understand that the Senator from Connecticut is also concerned about 
this and that he does not want any unintended consequences of his 
amendment which would allow for more bankruptcy abuse.
  Accordingly, I intend to continue working to improve this amendment 
so that it accomplishes its goal without giving crooks an opportunity 
to hide and shield their assets during bankruptcy proceedings.
  I had similar concerns about the amendment that Senator Hatch offered 
to protect retirement savings. I think we worked hard and good and 
accomplished a lot with Senator Hatch to tighten up that amendment.
  As a result, the amendment that we passed to protect the retirement 
accounts is better and less subject to abuse. I am sure that we can 
improve the amendment by Senator Dodd in the same way.
  I yield the floor.
  Mr. DODD. Mr. President, I ask my colleague to yield for a minute on 
that point, if I could. Let me again thank him for his courtesies and 
his staff's courtesies over the last number of days in working this 
out. He has made a very good point. What we will certainly try to do 
here--and I agree with him--is to see to it that this amendment, the 
safeguard aspects of it, conform in many ways--exactly, if it is not 
the case--with the retirement savings accounts since both are parallel 
ideas. I have instructed my staff to work with the Senator's staff to 
iron out those details, to check this out thoroughly. Obviously, I 
think we all agree this is needed to protect the long-term education 
needs of families, but obviously--and I want to state it very clearly--
it certainly also is our intention to see to it that people are not 
given an opportunity to avoid their responsibilities when it comes to 
their financial matters. So we think we can do that pretty effectively.
  My intention and that of the Senator from Iowa is to see that it is 
done before this bill goes to the President for his signature. I thank 
him again for his support.
  The PRESIDING OFFICER. Who yields time?
  Mr. GRASSLEY. We will yield back the time, if there is any on this 
side, on this Dodd amendment.

[[Page S10742]]

  Mr. DODD. I yield back the time.
  The PRESIDING OFFICER. Under the previous order, the Dodd amendment 
No. 3614 is agreed to and the motion to reconsider the vote is laid 
upon the table.
  The amendment (No. 3614) was agreed to.


                Amendment No. 3599 to Amendment No. 3559

 (Purpose: To express the sense of the Senate regarding misuse of the 
              homestead exemption to the bankruptcy laws)

  The PRESIDING OFFICER. Under the previous order, the Senator from 
Wisconsin, Mr. Kohl, is recognized to offer an amendment under a time 
limit of 10 minutes under his control and 5 minutes under the control 
of the Senator from Iowa.
  Mr. KOHL. I thank the Chair.
  Today I rise to offer an amendment to reaffirm the Senate's 
commitment to cap the homestead exemption. The Kohl-Sessions homestead 
cap is already in the bill, but a sense of the Senate on this issue is 
important. It sends a message to the House, which does not have a 
homestead cap in its bill, that this provision is essential to 
meaningful bankruptcy reform. The $100,000 cap in the homestead 
exemption is a bipartisan measure I offered with Senator Sessions which 
was endorsed by Senator Grassley and was approved unanimously in 
subcommittee. It also has the endorsement of the congressionally 
appointed National Bankruptcy Review Commission.
  Our bipartisan measure closes a loophole that allows too many debtors 
to keep their luxury homes while their legitimate creditors, such as 
children, ex-spousal alimony, State governments, universities, 
retailers, and banks, get left out in the cold. Currently, five 
States--Florida, Texas, Kansas, Iowa, and South Dakota--allow debtors 
to protect their homes no matter how high their value. And time after 
time, millionaire debtors take advantage of this loophole by moving to 
expensive homes in these States, especially Florida and Texas, and then 
declare bankruptcy, yet continue to live in a style which is not 
appropriate to their circumstances. Let me give you just a few 
examples.
  A failed Ohio savings and loan owner, who was convicted of securities 
fraud, wrote off almost $300 million in bankruptcy claims but still 
held onto the multimillion-dollar ranch that he bought in Florida. A 
convicted Wall Street financier filed bankruptcy while owing at least 
$50 million in debts and fines but still kept his $5 million mansion 
with 11 bedrooms and 21 bathrooms. After his law firm went bankrupt and 
creditors were already in the process of seizing his two homes in the 
New York area, former Baseball Commissioner Bowie Kuhn fled to a new $1 
million home in Florida although he and his partners were on the line 
for $100 million. This may not be the most common abuse of the 
bankruptcy system but it is the most egregious. And given this record, 
it is not surprising to hear complaints that bankruptcy is no longer 
used as a tool of last resort and that it has become just another kind 
of financial planning. If we really want to restore the stigma attached 
to bankruptcy, these high-profile abuses are the best places to start.
  Mr. President, our $100,000 homestead cap will stop these abuses, and 
unless we keep it in the bill in conference we will not really have 
bankruptcy reform at all, in my opinion. So I urge my colleagues to 
support this resolution.
  At this point I send my amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Wisconsin [Mr. Kohl] proposes an amendment 
     numbered 3599 to Amendment No. 3559.

  Mr. KOHL. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place, insert the following new section:

     SEC. __. SENSE OF THE SENATE REGARDING THE HOMESTEAD 
                   EXEMPTION.

       (a) Findings.--The Senate finds that--
       (1) one of the most flagrant abuses of the bankruptcy 
     system involves misuse of the homestead exemption, which 
     allows a debtor to exempt his or her home, up to a certain 
     value, as established by State law, from being sold off to 
     satisfy debts;
       (2) while the vast majority of States responsibly cap the 
     exemption at not more than $40,000, 5 States exempt homes 
     regardless of their value;
       (3) in the few States with unlimited homestead exemptions, 
     debtors can shield their assets in luxury homes while 
     legitimate creditors get little or nothing;
       (4) beneficiaries of the homestead exemption include 
     convicted insider traders and savings and loan criminals, 
     while shortchanged creditors include children, spouses, 
     governments, and banks; and
       (5) the homestead exemption should be capped at $100,000 to 
     prevent such high-profile abuses.
       (b) Sense of the Senate.--It is the sense of the Senate 
     that--
       (1) meaningful bankruptcy reform cannot be achieved without 
     capping the homestead exemption; and
       (2) bankruptcy reform legislation should include a cap of 
     $100,000 on the homestead exemption to the bankruptcy laws.

  Mr. KOHL. I believe that Senator Sessions is prepared to come down to 
the floor to talk on behalf of this amendment, and while he is on his 
way I suggest the absence of a quorum.
  Mr. GRASSLEY. Mr. President, before that happens, could I have the 
floor, please.
  The PRESIDING OFFICER. Will the Senator withhold his request?
  Mr. KOHL. I will.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. First of all, before I speak on this amendment, I want 
to make clear that everybody in this body ought to know that this issue 
is before us both as part of the bill and now on a motion to instruct 
because of the hard work of the Senator from Wisconsin. He is to be 
commended for that because there is abuse in this area and our bill 
reflects that.
  So I say to the other 99 Members of this body--and also it would 
include people who are helping Senator Kohl on this amendment--Senator 
Kohl should be recognized as a leader in this area to bring some 
uniformity to our bankruptcy code among the 50 States to stop a very 
serious abuse. I have been trying to work with the Senator from 
Wisconsin, supporting his amendment to cap homesteads since he offered 
that amendment in the subcommittee markup. In fact, he was the very 
first Senator to be recognized in our subcommittee when we had the 
markup of this bill. He was successful there.
  In the last Congress, I accepted Senator Kohl's amendment to cap 
homesteads at $500,000. This principle actually passed the Senate 
unanimously at the end of the 104th Congress, but the House failed to 
act on the technical corrections bill to which the homestead matter was 
attached.
  In this Congress, the idea of capping homesteads is a genuine 
bipartisan one, and I know both the Senator from Wisconsin and the 
junior Senator from Alabama are strong supporters of the $100,000 cap 
currently in this bill. But the fact is that the other body has passed 
a bill which does not have homestead caps. In other words, we have a 
key difference between House and Senate bills on this point.
  Obviously, I support the Senate bill, which I have worked on so hard 
with Senator Durbin, but I don't want to go into the conference 
situation with my hands tied in any way. Some have tried to get me to 
do this on other provisions in this legislation, and to do so prior to 
conference. I have resisted all efforts in this area. I am compelled to 
resist this effort of instructing conferees. However, I am not going to 
object to this sense of the Senate going into my bill since it restates 
what is already in the legislation, and I think that restatement is a 
perfectly legitimate thing for us to do this way. And so from that 
standpoint, I compliment Senator Kohl for his continued hard work and 
his efforts.
  I yield the floor.
  Mr. KOHL. I yield to Senator Durbin.
  Mr. DURBIN. I thank the Chair.
  I thank the Senator from Wisconsin and I rise in strong support of 
his resolution.
  Let's understand what we are talking about. We decided long ago that 
if a person filed bankruptcy, we would allow them to protect certain 
things that we considered essential, and one of those things was a 
home. Now, of course, that is understandable; 50 percent of the people 
filing for bankruptcy are homeowners; but we left it to the States to 
come up with the amount of money that your home could be worth, and you 
could exempt it.

[[Page S10743]]

  As a consequence, with 50 different States, we have basically 50 
different approaches. Some of these approaches, unfortunately, have led 
to abuse. The Senator from Wisconsin described two or three cases where 
people literally owed millions of dollars and quickly raced out to buy 
a multimillion-dollar home to put everything they could into it and to 
basically guard it away from any creditor in bankruptcy. I do not think 
that is what we had in mind when we put the homestead exemption in 
place. It was a legitimate effort to protect someone's home.
  I see the Senator from Alabama has taken the floor. I congratulate 
him, Senator Sessions, as well as Senator Kohl for their leadership 
here.
  Let me tell you why I think this is important. The idea behind this 
bill was to stop the abuses in bankruptcy. Professor Elizabeth Warren 
of Harvard Law School, whom I have really come to respect for her 
knowledge of this subject, calls the disparity among State homestead 
exemptions ``the biggest single scandal in the consumer bankruptcy 
system.''
  To think, in the instance of a doctor in Miami who refused to carry 
malpractice insurance, who was sued by four different people, one of 
them a person who lost a leg, and then when they went to collect 
against the doctor personally, because he had no insurance, he 
basically hid behind the homestead exemption and said, ``Everything I 
own is in my home and you cannot touch it''--that really is an abuse of 
the system. I am glad Senator Sessions and Senator Kohl have shown 
leadership on this and I am happy to support their efforts.
  Mr. KOHL. Does Senator Sessions wish to speak?
  The PRESIDING OFFICER. The Senator from Alabama is recognized.
  Mr. SESSIONS. Mr. President, I thank Senator Kohl and Senator Durbin 
for their leadership and commitment on this issue and others. This is 
simply a matter of fairness. The Constitution of the United States 
authorizes the bankruptcy system and provides for Congress to establish 
uniform bankruptcy laws. That is a matter that is without dispute. All 
bankruptcy cases are held in Federal court. It is not too much to ask, 
since we set every other rule involving bankruptcy, that this body 
would consider the abuses that arise from the disparity in treatment of 
homesteads throughout the country. It is really a shocking matter.
  The New York Times has written about this on a number of occasions 
and has given some of the examples that are afoot.

       The First American Bank and Trust Company in Lake Worth, 
     FL, closed in 1989, and its chief executive, Roy Talmo, filed 
     for personal bankruptcy in 1993. Despite owing $6.8 million, 
     Mr. Talmo was able to exempt a bounty of assets. During the 
     proceedings, he drove around Miami in a Rolls-Royce and 
     tended the grounds of his $800,000 tree farm in Boynton 
     Beach. Never one to slum it, Mr. Talmo had a 7,000 square-
     foot mansion with five fireplaces, 16th century European 
     doors and a Spanish-style courtyard, all on a 30-acre lot. 
     Yet in Mr. Talmo's estimation, this was chintzy. He also 
     owned an adjacent 112 acres and he tried to add those acres 
     to his homestead.

  The court finally refused to allow this 112 acres, but he was able to 
keep his homestead, live in this huge house, and keep all this money 
that ought to have been shared with his creditors. Bankruptcy is to 
help people start over again. It is not to help them defeat their 
creditors and remain millionaires.
  There is example after example in this New York Times article. 
Talmadge Wayne Tinsley maintained his house during bankruptcy and then 
he sold his house for $3.5 million, using the proceeds to write a check 
to the Internal Revenue Service and another one to pay off the 
mortgage. That left him $700,000 after closing costs and other expenses 
were deducted from the proceeds.
  In other words, if you have a multimillion-dollar mansion and go into 
bankruptcy, you put all your money--except what is in your house--into 
the bankruptcy pot that trickles out to the people to whom you owe 
money. You keep the house. As soon as your bankruptcy is over, you can 
turn around and sell this multimillion-dollar house and live like a 
king. That is why people are moving to Florida and Texas on the eve of 
filing bankruptcy.
  I live in Alabama. We have a very low homestead exemption, but it is 
only 50 miles from my home of Mobile to Pensacola, FL. Somebody from 
Mobile could easily move to Pensacola, buy a huge beach home, and then 
defraud his Alabama creditors.
  Some think this is a State matter. Senator Kohl talked about this. 
They say it is an advantage to the State. But the truth is, 90 percent 
of the people who abuse this system on the homestead--90 percent of 
their debts are going to be debts in their own State. So really it is a 
situation in which we have some Senators who are supposedly protecting 
State interests, but really they are not. I encourage these Senators to 
think about it. They are not protecting State interests because what 
this does is allow a scandal to take place. The people who most 
frequent lose in this process will be the lenders in their own States. 
That is just not fair. I believe the Bankruptcy Commission has listed 
this as one of their top priorities for reform.
  I can see how some Senators may not really be familiar with the 
bankruptcy process and might think they want to preserve their State 
systems. But bankruptcy is a classical Federal matter. It is set forth 
in the Constitution as a Federal matter. All bankruptcy cases are 
handled in Federal court, not State courts, and the bankruptcy court 
sets all the rules in almost every category. This is just one that we 
have, by tradition, allowed to be nonuniform. As a matter of fact, it 
has been challenged in the Supreme Court, on the basis that the 
nonuniformity violates the Constitution.
  The PRESIDING OFFICER (Mr. Brownback). The time of the Senator has 
expired.
  Mr. SESSIONS. Mr. President, I thank Senator Kohl for his leadership.
  Mr. KOHL. Mr. President, I end by suggesting this is a very important 
piece of legislation. I am concerned, if we do not have it in the final 
piece of legislation, that the administration will veto the Bankruptcy 
Reform Act. So I stress, we need to see to it that the conference 
report contains this homestead cap of $100,000.
  The PRESIDING OFFICER. The Senator from Iowa has 1 minute 30 seconds.
  Mr. GRASSLEY. Mr. President, I yield back the remainder of my time.
  The PRESIDING OFFICER. All time is yielded back. Under the previous 
order, the Kohl amendment, No. 3599, is agreed to. The motion to 
reconsider the vote is laid upon the table.
  The amendment (No. 3599) was agreed to.


                Amendment No. 3615 to Amendment No. 3559

 (Purpose: To provide for a study and report by the Board of Governors 
   of the Federal Reserve System regarding credit industry practices)

  The PRESIDING OFFICER. The hour of 10 a.m. having arrived, under the 
previous order, the Senator from California, Mrs. Feinstein, is 
recognized to speak for up to 10 minutes.
  Mrs. FEINSTEIN. Mr. President, on behalf of Senator Durbin, Senator 
Jeffords, and myself, I send an amendment to the desk.
  The PRESIDING OFFICER. Is there objection to considering this 
amendment at this time?
  Mr. GRASSLEY. Mr. President, reserving the right to object.
  The PRESIDING OFFICER. Is there objection?
  Without objection, the clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from California [Mrs. Feinstein], for herself, 
     Mr. Durbin and Mr. Jeffords, proposes an amendment numbered 
     3615 to amendment no. 3559.

  Mrs. FEINSTEIN. Mr. President, I ask unanimous consent that reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place in title VII, insert the 
     following:

     SEC.     . ENCOURAGING CREDITWORTHINESS.

       (a) Sense of the Congress.--It is the sense of the Congress 
     that--
       (1) certain lenders may sometimes offer credit to consumers 
     indiscriminately, without taking steps to ensure that 
     consumers are capable of repaying the resulting debt, and in 
     a manner which may encourage certain consumers to accumulate 
     additional debt; and
       (2) resulting consumer debt may increasingly be a major 
     contributing factor to consumer insolvency.

[[Page S10744]]

       (b) Study Required.--The Board of Governors of the Federal 
     Reserve System (hereafter in this section referred to as the 
     ``Board'') shall conduct a study of--
       (1) consumer credit industry practices of soliciting and 
     extending credit--
       (A) indiscriminately;
       (B) without taking steps to ensure that consumers are 
     capable of repaying the resulting debt; and
       (C) in a manner that encourages consumers to accumulate 
     additional debt; and
       (2) the effects of such practices on consumer debt and 
     insolvency.
       (c) Report and Regulations.--Not later than 24 months after 
     the date of enactment of this Act, the Board--
       (1) shall make public a report on its findings with respect 
     to the credit industry's indiscriminate solicitation and 
     extension of credit;
       (2) may issue regulations that would require additional 
     disclosures to consumers; and
       (3) may take any other actions, consistent with its 
     existing statutory authority, that the Board finds necessary 
     to ensure responsible industrywide practices and to prevent 
     resulting consumer debt and insolvency.

  Mrs. FEINSTEIN. Mr. President, I support S. 1301, and intend to vote 
for its passage. It gives bankruptcy judges the tools they need to 
require that capable debtors take responsibility for their debts. 
Furthermore, it does so in a manner that empowers bankruptcy judges to 
seek solutions to consumer insolvency, rather than straitjacketing them 
with a strict formula. Finally, S. 1301 contains strengthened 
provisions to protect the priority of child support and spousal 
support, which I supported in the Judiciary Committee.
  Responsibility cannot be a one-way street, however. The blame for the 
current record number of consumer bankruptcies lies not only with 
unsound consumer spending habits, but often with unwise and 
irresponsible lending practices that facilitate and even foster such 
recklessness. This amendment aims to deter such recklessness in credit 
practices.
  It authorizes the Federal Reserve Board to conduct a study of 
industry practices of soliciting and extending credit indiscriminately, 
without taking steps to ensure that consumers are capable of repaying 
their debt, or in a manner that encourages consumers to accumulate 
additional debt. The Federal Reserve Board is further authorized to 
study the effects of such practices on consumer debt and insolvency.
  Within two years of enactment, the Federal Reserve Board will make 
public a report on its findings, regarding the credit industry's 
indiscriminate solicitation and extension of credit.
  The amendment allows the Federal Reserve Board to issue regulations 
that would require additional disclosures to consumers, and to take any 
other actions, consistent with its statutory authority, that the board 
finds necessary to ensure responsible industrywide practices and to 
prevent resulting consumer debt and insolvency.
  This amendment directly addresses one of the major causes of personal 
bankruptcies: bad consumer debt.
  It's a simple matter of arithmetic. The typical family filing 
bankruptcy in 1997 owed more than one-and-a-half times its annual 
income in short-term, high interest debt. This means that the average 
family in bankruptcy, with a median income of just over $17,500, had 
$26,500 in credit card and other short-term, high interest debt.
  Studies by the Congressional Budget Office, the FDIC, and independent 
economists all link the rise in personal bankruptcies directly to the 
rise in consumer debt.
  Last year, the credit card industry sent out a record 3.1 billion 
unsolicited offers. That's 30 solicitations to every household in 
America. The number of solicitations jumped 20% last year alone. Based 
on industry estimates, between 1992 and 1996, credit card companies 
offered about a million dollars of credit to every household in the 
United States.
  There are well over a billion cards in circulation--a dozen credit 
cards for every household in the country. Three-quarters of all 
households have a least one credit card, and three out of four of them 
also carry credit card debt from month to month.
  Not surprisingly, credit card debt has increased accordingly. Credit 
card debt doubled between 1993 and 1997: The amount of credit card debt 
outstanding at the end of 1997 was $422 billion, twice as much as the 
amount in 1993.
  Credit card usage has grown fastest in recent years among debtors 
with the lowest incomes. Since the early 1990's, Americans with incomes 
below the poverty level nearly doubled their credit card usage, and 
those in the $10,000-25,000 income bracket came in a close second in 
the rise in debt. The result is not surprising: 27% of the under-
$10,000 families have consumer debt that is more than 40% of their 
income. Nearly one in ten has at least one debt that is more than sixty 
days past due. These are the families for whom real income has actually 
declined since 1989.
  Credit card issuers earn about 75% of their revenues from the 
interest paid by borrowers who do not pay in full each month. Several 
companies have instituted charges or even canceled credit cards for 
customers who pay in full each month, preferring customers with large 
credit balances who pay minimum monthly payments.
  As bankruptcy levels have risen, total credit card profitability has 
grown--credit card lending is now twice as profitable as all other 
lending activities. In the third quarter of 1997, credit card banks 
showed a 2.59% return on assets, compared to a 1.22% return on assets 
reported by all commercial banks.
  This amendment most likely would not affect the vast majority of the 
credit card industry, who responsibly check consumer credit history 
before issuing or ``pre-approving'' credit cards. Representatives of 
large credit card issuers such as Bank of America have assured me and 
my staff that they do not provide credit cards to consumers without a 
thorough credit history check.
  However, I should note that every credit card issuer that I and my 
staff spoke with said that one thing they do not check is income. In 
other words, credit card issuers have no idea whether persons to whom 
they issue credit cards have the means to pay their bills each month.
  Furthermore, major credit cards such as Visa and Mastercard do not 
require banks who issue their cards to check credit history.
  This bill would affect lenders who fail to even inquire into a 
consumer's ability to pay, or those who specifically target consumers 
who can't or won't repay balances.
  A growing segment of the credit industry known as ``sub-prime'' 
lenders increasingly searches for risky borrowers, who they know will 
make inappropriately low minimum monthly payments, carry large monthly 
balances from month to month, and pay high interest rates. Such lending 
has become the fastest growing, most-profitable subset of consumer 
lending. Although losses are substantial, interest rates of 18 to 40% 
on credit card debt make this lending profitable.
  Many of these often relatively unsophisticated borrowers don't 
realize that minimum monthly payments just put them deeper in a hole, 
which in many cases leads to bankruptcy. For example, industry analysts 
estimate that, using a typical minimum monthly payment rate on a credit 
card, in order to pay off a $2,500 balance--assuming the consumer never 
used the card to charge anything else ever again--it would take 34 
years to pay off the balance, and total payments would exceed 300% of 
the original principal.
  The FDIC observes that by marketing high-risk debt to customers who 
are at substantial risk for non-payment, credit card issuers have 
contributed to the rise in consumer bankruptcies.
  On May 2, 1997, the FDIC issued warnings to banks about the risks 
posed by increased subprime lending. Some industry analysts predict 
that overall loan default rates will double by the year 2001 and thus 
warn that ``by lowering their credit standards and saturating the 
market with loans, many banks will be unable to avoid potentially 
enormous delinquencies and write-offs.''
  Subprime lending is growing even among reputable lenders. Senator 
Lauch Faircloth, who notes that he ``abhors . . . constraints on the 
private sector,'' recently stated about the subprime market: ``We have 
very reputable, very fine institutions, spinning off subsidiaries to 
get into what I would consider very precarious, reckless, bordering on 
sleazebag lending.''
  Since the Senate Judiciary Committee considered this bill in June, I 
have received examples from constituents of credit card companies who 
offer credit

[[Page S10745]]

cards to persons who are wholly unable to afford them. I have also had 
my staff review solicitations they have received.
  I want to give you some examples of the sort of inappropriate credit 
card solicitations my constituents and my staff have received.
  A constituent from San Ramon, CA, wrote that her 7-year old son 
received a ``charter membership offer'' for a Visa Signature Card. The 
constituent writes:

       If banks are offering bankcards to small children, who else 
     (or what else) are they offering them to. This kind of 
     unsolicited mail is ridiculous.

  This is not an isolated occurrence. Both sons of a staff member who 
works in my San Francisco office received credit card offers--and 
they're 12 and 15 years old. The 12-year-old is an eighth grader, with 
no income other than a $25 a month allowance and gifts from his 
grandmother and holiday and birthday gifts. He is a Star Trek fan, and 
he was offered a ``Star Trek Platinum Plus MasterCard,'' with up to 
$100,000 in credit. The card features discounts on Star Trek 
merchandise and entertainment events. The solicitation noted an 
introductory 3.9 percent annual percentage rate in large, bold print. 
The small print on the back explains that the rate applies only to 
initial balance transfers and cash advance checks. The actual annual 
percentage rate is 14.99 percent.
  The 12-year-old's 15-year-old brother was also offered a credit line 
of up to $100,000 on the ``First USA Platinum MasterCard for Science 
Fiction Enthusiasts.'' This card offered a free space pen and a 9.99 
percent ``fixed'' annual percentage rate. The small print explained 
that if payment is received ``late'' twice in any 6-month period, the 
annual percentage rate balloons to 19.99 percent. If payment is not 
received for 2 consecutive months, the rate balloons further to 22.99 
percent.
  It's not just children. A constituent from Lakewood, CA, wrote to me 
last month:

       I am sending to you [a solicitation] which I received in 
     the mail yesterday. It was addressed to my mother and was 
     offering her a platinum credit card with a $100,000 credit 
     line. What's wrong with this? My mother's been dead for seven 
     years!

  The constituent continues:

       What really bugs me about this is that credit card 
     companies send out these solicitations for their plastic 
     cards and then when they get burned, they start crying foul. 
     They want all kinds of laws passed to protect them from 
     taking hits when it's their own practices that caused the 
     problem.

  A 22-year-old constituent from Pacifica, CA, who makes $25,000 a 
year, was offered 3 platinum cards with a credit limit of up to 
$100,000 on each card. Two of the cards advertised in large, bold 
print, ``introductory'' annual percentage rates of 3.9 percent for cash 
advance checks and balance transfers. The fine print on both cards 
disclosed the actual annual percentage rates on purchases of 14.99 
percent. The other card offered free mileage on US Airways. The fine 
print disclosed its annual percentage rate as 18.4 percent; 21.9 
percent if the account is in default.
  Another constituent, also from Pacifica, CA, who is unemployed, was 
offered a platinum card with an up to $50,000 credit line. As with a 
number of these offers, the solicitation boldly advertised an 
``introductory'' annual percentage rate of 3.9 percent for cash advance 
checks and balance transfers, but the fine print on both cards 
disclosed the actual annual percentage rate on purchases of 14.99 
percent. The other card offered free mileage on US Airways.
  Besides low introductory interest rates, which inevitably balloon, 
and frequent flier miles, the range of gifts offered to induce people 
to take on new credit cards is incredible. In the past couple of months 
that I have been asking my staff to save solicitations, ``free'' gifts 
offered to them--and to me--to take on new credit cards, have included 
everything from: free telephone calling cards, to transistor radios, 
attache cases, Godiva chocolates, Waterford crystal, and electronic 
organizers.
  And the credit card companies are anything if not persistent. Over 
the past couple months, one of my staff members has received 4 offers 
for second mortgages, totaling $75,000 in credit, one of which was sent 
twice; $230,000 in credit, with free gifts as incentives; and a 
``college alumni'' card, offering a ``third opportunity'' to apply.
  These sort of come-on's, targeting people who oftentimes are simply 
incapable of affording the credit card, are by no means unique to 
Californians.
  Bankruptcy Judge John Akard of the Northern District of Texas wrote 
that the attorneys for one couple who filed Chapter 13 bankruptcy asked 
them to record solicitations received after filing for bankruptcy. The 
received over 50 solicitations over the next 24 months, offering 
cumulatively over $2 million in credit; 25 of these were ``pre-
approved.''
  Consumer bankruptcy attorneys tell my staff that some companies send 
credit cards to bankruptcy filers courtesy of their bankruptcy 
attorneys.
  In fact, a staff member informed me that when he did pro bono work 
for indigent people filing bankruptcy, the pro bono attorneys had to 
constantly tell the bankruptcy filers not to take on new credit cards, 
which credit card companies targeted to them, knowing that they could 
not disavow their debt for a period of six years following bankruptcy.
  In many cases, credit cards offered to consumers who have no ability 
to repay them and no reason having them is a direct cause of personal 
bankruptcy. The U.S. Bankruptcy Trustee for the Southern District of 
California provided my office with some examples, taken directly from 
the rolls of recent bankruptcy filers in San Diego: One bankruptcy 
filer had $41,989 in debt, run up on 25 retail and credit cards--but 
only $17,520 in yearly income; another bankruptcy filer, had $23,826 in 
debt, run up on 6 credit cards and 7 retail cards--and only $4,320 in 
yearly income; still another bankruptcy filer had $28,054 in debt, run 
up on 6 credit cards and 9 retail cards, but only $11,520 in yearly 
income; and in the most egregious case, one filer had $97,372 in debt, 
run up on a total of 26 cards--13 credit cards and 13 retail cards--and 
had no yearly income. Another filer had over $50,000 in debt run up on 
7 credit cards--and no yearly income.
  Similarly, the United States Trustee for the Northern District of 
California provided my office with a case study of some of the recent 
bankruptcy cases filed in San Francisco; a ``naturopath'' with an 
annual income of $8,100, accumulated $44,690 in credit card debt, on 13 
credit cards before declaring bankruptcy; a truck driver with $22,368 
in annual income, accumulated $102,645 in credit card debt on 14 credit 
cards before declaring bankruptcy; an unemployed person with no annual 
income, accumulated $50,927 in debt on 14 different credit cards before 
declaring bankruptcy; and the list goes on.
  U.S. bankruptcy trustees have also provided my office with letter 
after letter, originally sent by U.S. bankruptcy panel trustees to 
creditors, alleging ``bad faith'' on behalf of consumers, because the 
debtor accumulated credit card debts they could have had no realistic 
expectation of repaying. For example, one letter notes that the debtor 
accumulated over $110,635 in credit card debt, but had $500 in monthly 
income, and had incurred a net loss in income in 1996 and 1997.
  If the consumer acted in bad faith, one wonders about the faith of 
the credit card companies that issued the credit cards in the first 
place and allowed the consumer to continue to accumulate debt.
  Obviously, in each of these cases, banks kept on issuing credit 
cards, and kept on allowing consumers to rack up still more debt on the 
cards, despite clear evidence that the consumer would never be able to 
repay the debt.
  During the debate on this bill, we have heard much about the 
financial burden that consumer bankruptcies levy on each of us as 
consumers. Clearly, part of the responsibility for that financial 
burden rests with the credit card companies and retailers who 
irresponsibly continue to issue credit in such cases. Indeed, industry 
consultants have estimated that credit card companies could cut their 
bankruptcy losses by more than 50% if they would institute minimal 
credit screening.
  As I mentioned at the outset, I support S. 1301, which gives 
bankruptcy judges effective tools to require responsible behavior from 
debtors once bankruptcies occur. This amendment is necessary to promote 
the responsible behavior needed to prevent such bankruptcies from 
occurring in the first

[[Page S10746]]

place, by preventing the runaway consumer debt that is one of the 
principal causes of the rise in personal bankruptcies.
  I urge my colleagues to vote for the adoption of this amendment.
  I end my comments with one statement: Responsibility is a two-way 
street. And what is sauce for the gander is also sauce for the credit 
card company.
  Mr. President, it is my understanding that the amendment has been 
accepted by both sides.
  I yield the floor.
  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, this amendment will be accepted. And I 
would like to say, after listening to Senator Feinstein's statement, as 
well as studying the legislation in great detail, we can 
enthusiastically back this and fight for its retention in conference as 
well. I was not that certain when I visited with the Senator privately, 
but I would like to state publicly that we think she has a very good 
idea here and that we can work to keep it in conference. I cannot 
guarantee anything, but at least I feel very strongly about it.
  It kind of backs up some of the things that we have done on 
disclosure in the managers' amendment as well. Those things will 
probably be much more controversial in conference than what the Senator 
from California is trying to do. She, from my standpoint, through the 
year that we have worked on this legislation, and being prodded also by 
the Senator from Illinois about the problems that we have or the 
potential problems we have with credit card companies, and they not 
being too careful in their anticipation of who they take on to give 
credit to, does back up the study that the Senator from California has 
called for.
  She does not give new statutory authority to the Federal Reserve. She 
does give the Federal Reserve authority, after the study, if the 
Federal Reserve wants to do it, to issue regulations that would require 
additional disclosure to consumers, then, within their existing 
statutory authority, if the board finds necessary, ``to ensure 
responsible industrywide practices and to prevent resulting consumer 
debt and insolvency.''
  This is all based upon a study which we believe, based upon our 
year's consideration of this legislation, probably is a very worthwhile 
thing for us to have and to promote. So with those ideas in mind, we 
accept the amendment and congratulate the Senator from California. Most 
importantly, we thank her for her cooperative attitude toward our 
resolving a lot of differences we have had with her original 
legislation.
  Mrs. FEINSTEIN. I thank the Senator.
  The PRESIDING OFFICER. Is there any further debate on Feinstein 
amendment No. 3615?
  Hearing none, the question is on agreeing to the amendment No. 3615.
  The amendment (No. 3615) was agreed to.
  Mr. GRASSLEY. I move to reconsider the vote and to lay that motion on 
the table.
  The motion to lay on the table was agreed to.
  Mr. GRASSLEY. I suggest the absence of a quorum.
  The legislative clerk proceeded to call the roll.
  Mr. BROWNBACK. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Hutchinson). Without objection, it is so 
ordered.
  Mr. BROWNBACK. Mr. President, I rise to make a few remarks on the 
Consumer Bankruptcy Reform Act, which is the pending business at this 
point in time.
  I commend the hard work of Senator Grassley and the Senate Judiciary 
Committee for crafting this much-needed reform of our bankruptcy laws. 
Bankruptcy filings rose to almost 1.4 million last year. That is up 
from 172,000 in just 1978--enormous growth in bankruptcy filings. More 
than 70 percent of those who filed for bankruptcy last year did so 
under chapter 7 of the U.S. bankruptcy code, which erases most debt 
incurred.
  The cost of these bankruptcies to the U.S. economy last year has been 
estimated at more than $44 billion--enormous cost. And these losses are 
passed on to consumers, costing every household that pays its bills 
$400 in hidden taxes. That is not fair to the millions of families who 
pay their bills--mortgages, car loans, student loans, and credit card 
tabs--every month.
  This legislation goes a long way in addressing the fraud and abuse of 
our bankruptcy system while ensuring that people who are in 
considerable economic pain will be protected.
  However, I am extremely concerned about a provision in this bill 
which places a cap on the homestead exemption. My State of Kansas has a 
homestead law in our State constitution dating back to 1859. Many 
farmers have used this law during times of economic hardship to protect 
their farms, their homes and their 160 acres. While the Consumer 
Bankruptcy Reform Act exempts family farmers from the homestead 
provision, many small farmers would not qualify under the bankruptcy 
code as a family farm because they or their spouse earn off-farm 
taxable income.
  I might note for my fellow Members that over half of the people 
involved in agriculture today in my State and in many States across the 
country have considerable off-farm income from either themselves or 
their spouses and yet are full-time involved in agriculture. They have 
the outside income for various numbers of reasons, but this provision 
will not allow them to qualify for that agricultural exemption, the 
family farm exemption, if it remains as we have it in this particular 
act.
  Many farming States have similar homestead laws dating back 
frequently to the time of statehood and of the settling of many places 
in the Midwest, where people could keep their home and 160 acres if 
they would just settle this land for a period of 5 years. That is the 
basis of this homestead law. This provision that is in the bankruptcy 
code and the changes that we have before us today could have a 
significant impact on farmers who are already faced with cash flow 
problems caused by low commodity prices.
  This bill also does not take into consideration the vastly different 
property values in various States that will be affected by this 
particular homestead provision.
  While I believe we should prevent fraud and abuse of our bankruptcy 
system, preempting State homestead laws and imposing a one-size-fits-
all approach is not the answer. I hope that my colleagues will consider 
this as we look forward in dealing with this provision and working 
together with the House to get a fine Consumer Bankruptcy Reform Act 
put together. We should not penalize, we should not usurp, the States 
that have put forward a particular homestead exemption.
  With that, Mr. President, I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DORGAN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DORGAN. Mr. President, I understand debate on the Harkin 
amendment was to begin at 11 a.m.?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. DORGAN. I ask unanimous consent that the full 45 minutes allowed 
for debate on the Harkin amendment begin now.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DORGAN. Mr. President, Senator Harkin is on his way. He spoke 
briefly on this amendment yesterday afternoon, and I would like to make 
a couple comments on it. This amendment is very simple. It is an 
amendment that expresses the sense of Congress that the Federal Reserve 
Board, through the Federal Open Market Committee, should reduce its 
Federal funds rate. The Federal Reserve Board will meet soon and 
consider once again what it wishes to do with monetary policy, and 
especially with short-term interest rates.
  I would like to show a couple of charts just to describe where we are 
at this point with the American economy.
  ``Consumer Price Index.'' As we know, the Federal Reserve Board has

[[Page S10747]]

been chasing inflation now for, oh, 4 years or so. Every quarter they 
have another discussion and wring their hands and gnash their teeth and 
fret and worry and sweat about what is happening to inflation and when 
the next wave of inflation is going to hit. Of course, inflation has 
gone down, down, way down.
  The Federal Reserve Board told us, by the way, at the start of this, 
that the inflation rate would jump up almost certainly if the 
unemployment rate went below 6 percent. Of course, the unemployment 
rate has been below 6 percent for over 4 years and the inflation rate 
keeps coming down. The Federal Reserve Board was dead wrong on that 
issue.
  But the Federal Reserve Board sits in that house of theirs on a hill 
impenetrable by the American public, closes its doors, makes its 
decisions in secret about interest rates. Only, and then tells us after 
the decisions are made what the interest rates in this country will be.
  The Federal funds rate set by the Federal Reserve's Open Market 
Committee is much higher than it ought to be. Prior to Mr. Greenspan 
becoming Chairman of the Federal Reserve Board, from 1950 to 1987, the 
average real Federal funds rate was 1.8 percent; for 37 years on 
average. The real Federal funds rate, the economic rent for money, 
adjusted for inflation, that was set by the Federal Reserve Board, was 
1.8 percent. Today that short-term interest rate, after inflation, is 
3.9 percent--the highest level since just before the last recession in 
1990.
  One must ask the question, Why, why are the American people in effect 
being taxed with higher interest rates? Why is the Federal Reserve 
Board punishing the American people with interest rates that are higher 
than they should be? The answer: Because they have served their 
constituent interests, which are the large money center banks; they 
want the higher interest rates. But that moves against the interests of 
the American people, of the people who produce and work and borrow.
  I have brought to the floor from time to time pictures of the Federal 
Reserve Board of Governors and the presidents of the regional Fed 
banks, and the reason I have done that is because they control monetary 
policy and nobody knows who they are. So I thought we should probably 
have pictures of all of them, when they were appointed, where they were 
educated, what their background is, and how much money they make. And 
so here, once again, is a picture of the Federal Reserve Board of 
Governors and the regional Fed bank presidents. On a rotating basis, 
these regional Fed bank presidents join the board of governors, they go 
into a room, shut the door, and in secret determine what our interest 
rates are going to be in this country. Here is who they are. You could 
put them all in a barrel, shake it up, roll it downhill, and you would 
always have somebody with a gray suit on top. They are economists. They 
all come from the same background. They all pretty much look the same, 
and they all pretty much think the same. There is not a person among 
them who represents somebody who manufactures something or fixes 
something or sells something, but that is the way the Fed is.

  When I was a kid in a town of 300 people in southwestern North 
Dakota, we had a circus come to town. That circus--it was a very small 
circus because you do not get a big top in a town of 300 people--but 
that circus had an elephant. It was the first elephant I had ever seen, 
and the first elephant, I think, that had ever come to my hometown. The 
thing that interested me as a little boy is that that big old elephant 
would stand out there by the tent and he had a steel cuff around his 
foot and a chain of about 6 or 8 feet attached to a stake that was 
pounded into the ground. I thought to myself, how on Earth can that 
little stake hold that big elephant? How can that work?
  Then I was told later, when I grew up, about that elephant and that 
chain and that stake. They say that when they capture wild elephants in 
Thailand, they get a wild elephant and they put a big metal cuff around 
the elephant's leg, put a chain on that cuff, and then they tie the 
other end of that chain to a big banyan tree. And for 6 days, 10 days, 
12 days, maybe 2 weeks that elephant will pull and struggle and grunt 
and groan and try to pull that chain away from that big banyan tree. Of 
course the banyan tree doesn't budge an inch. After a certain period of 
time, the elephant understands that the elephant cannot move. Then they 
take the chain off the banyan tree and just put a stake in the ground 
and the elephant stands there with a cuff around his leg and a chain 
and a small stake. The elephant is chained to his habit. His habit is 
he knows he cannot move.
  I was thinking about that the other day and I was thinking about the 
Federal Reserve Board. What a wonderful analogy, chained to his habit. 
You talk about a board chained to their habits, the Federal Reserve 
Board has been, for 4 or 5 years--despite all the evidence to the 
contrary in this country that the global economy is putting downward 
pressure on wages, that there are no new fires of inflation out there 
in the country, that the inflation rate is coming down even as the 
unemployment rate has come down. These gray-suited folks, chained to 
their old habits, have continued to insist, no, they must keep interest 
rates higher than they ought to be because they are worried about some 
future specter of inflation despite the fact that inflation is running 
in the opposite direction.
  What does that mean? What does it mean when these folks lock their 
doors and in secret say, ``We are going to keep interest rates higher 
than what it ought to be''? What it means is everybody who owns a 
house, everybody who is paying off a credit card, anybody who has any 
debt at all of any type is paying higher interest rates than they ought 
to pay. In a number of cases it means some homeowners might be paying 
$100 or $200 a month more in interest than they ought to pay. Somebody 
is just taking it out of their pocket. In effect, they have taxed 
them--to the detriment of the individual, to the reward of the lender. 
That is why I asked the question earlier: Whose interest does this Fed 
serve?
  Some say its constituent's interest is that of the big money center 
banks. It looks that way. How else would they justify interest rates 
that are more than 2 full percentage points above the real rate of 
inflation, when in fact for nearly 40 years prior to Mr. Greenspan 
joining the Federal Reserve Board the real interest rates above 
inflation set by the Board were 1.8 percent? How else would you justify 
that kind of massive overcharge of the American people through higher 
interest rates?
  The Federal funds rate is not charged to everybody. It happens to set 
the fee, set the charge. The prime rate comes off the Federal funds 
rate. Other rates come off the prime rate. The fact is, when the 
Federal Reserve Board decides in secret to set interest rates that are 
higher than they ought to be, then everybody else ends up paying more 
than they should pay. And who benefits? The big money center banks.

  It is interesting, these folks who will be in that room making the 
decision when the door is closed--the last dinosaur in America that 
makes decisions in secret, the last dinosaur that exists in our 
Government--when they go into a room and close that door and make 
decisions in secret, they will be representing--who? Who hired them? 
Their boards of directors. Who hires the regional Fed bank president? 
The regional board of directors. And who is that? The regional bankers. 
Whose interests are they going to look after in that room when the door 
is locked? They are not accountable. Their names did not come here for 
the Senate to say, yes, we would like to sanction you to go into a room 
and make decisions about monetary policy. They are not accountable to 
anybody. They were not confirmed by anybody. They are not accountable. 
Yet they go into a room with a locked door and make a secret decision 
with others and tell the American people what they are going to pay in 
interest rates.
  We have people come here and talk about taxes forever--that is a tax. 
A higher interest rate than ought to be paid is a tax; it is a big tax 
on almost all working families in this country. So who are these people 
going to represent? Are they going to be sent to the Open Market 
Committee to make decisions that contradict the interests of their 
boards of directors? I don't think so. Would it be logical to assume 
that

[[Page S10748]]

they would come to this decisionmaking point representing the interests 
of those who gave them their jobs? I think so.
  The amendment to be offered by Senator Harkin and myself and a couple 
of others is an amendment that asks the Congress to express itself to 
the Federal Reserve Board. I know we have people who say, ``Oh Lord, 
the last thing Congress ought to be involved in is monetary policy.'' 
Why should we not be involved in making our views known to the Federal 
Reserve Board? Anybody who comes out here opposing this, I would like 
to ask them this: If for 40 years the real economic rent for money set 
by the Fed through Federal funds rate is 1.8 percent, if that is the 
rate for 40 years, how do you justify having a rate that is nearly 2 
points higher, on average during the Greenspan years? How do you 
justify it? Do you think it is fine? If so, how do you justify taxing 
your constituents with the higher interest rate because the Fed decides 
it is going to represent their interests, not ours?
  I am not here arguing for easy money, easy credit. I am here arguing 
for fairness. I am here asking the Federal Reserve Board to represent 
the entire public interest here, not just their interest.
  Our economy, from most recent evidence, looks to be slowing down 
some. Our economy faces a number of international threats. We have an 
Asian economy that is in shreds--Korea, Japan, China, Indonesia. The 
difficulty in the Asian economy, a very significant difficulty, is 
beginning to be felt in this economy. It seems to me, when we have a 
Federal Reserve Board that imposes higher interest rates than are 
justified, much higher interest rates than we have historically had 
with respect to real economic rent for money, it seems to me when they 
do that at a time when we begin to face what appears to be some 
significant difficulty from external economic forces, the Fed ought to 
take a look at doing what it should have done long ago, and that is 
reduce real short-term interest rates to where they ought to be.
  I know this discussion causes a lot of people just to fog out and 
glaze over and go to sleep because, frankly, it is in the interests of 
those who make monetary policy to keep the monetary policy questions 
outside of the purview of public discussion. A century ago you could go 
to a barber shop or a bar in this country and get into an aggressive, 
interesting, lively discussion about interest rates. All over the 
country they talked about interest rates. Mr. President, 35 years ago 
there was going to be a one-quarter percent increase in the Federal 
funds rate. And the fellow who was heading the Federal Reserve Board 
was thinking about the one-quarter of 1 percent increase. There were 
front page headlines all across the country. Lyndon Johnson invited 
this fellow, the head of the Federal Reserve Board, McChesney Martin, 
invited him down to the ranch at Perdinales, in Texas, and they say 
almost squeezed the barbecue sauce out of that guy, he was so upset the 
Federal Reserve was going to increase interest rates by one-quarter of 
1 percent.
  Interest rates used to be part of substantial discussion and lively 
interest in this country, but we now have a Federal Reserve Board, as I 
said, that is the last dinosaur. It wants to keep monetary policy 
outside the purview of normal public debate. It wants to do what it 
wants to do in a locked room behind a closed door, and decide to keep 
interest rates about 2 full percentage points above where they ought to 
be given the real rate of inflation in this country today.
  The Senator from Iowa will offer an amendment. The sense of the 
Congress at the end is very simple. It is one short sentence:

       It is the sense of the Congress that the Federal Open 
     Market Committee should promptly reduce the Federal funds 
     rate.

  It is very simple. That is preceded by a series of pieces of 
information that make the case.
  Let me finish, Mr. President. I know Senator Harkin is on his way. I 
know Senator Domenici is also scheduled to speak. We have a vacancy on 
the Federal Reserve Board. There is one seat vacant. The Federal 
Reserve Board of Governors has seven people, all appointed by the 
President, confirmed by the Congress. The confirmation process requires 
there be accountability, so that is what we have, a Presidential 
appointment with confirmation.
  That is not the case with regional Federal bank presidents. They 
serve on the Open Market Committee and make decisions, but they are not 
confirmed by anybody.
  We have one vacancy. I have come to the floor to say I would like my 
Uncle Joe to be considered. My Uncle Joe is retired. My Uncle Joe used 
to fix generators and alternators in his shop behind his house. He is 
pretty good with his hands. He knows how to fix things. My theory is, 
there is nobody on the Fed who has ever fixed anything or ever 
manufactured anything or ever been in a part of the business where one 
is actually involved in a consumptive use of credit to make a business 
work.
  For a couple of centuries, we had tensions in this country between 
those who produced and those who financed production, and in some 
decades those who produced have had an upper hand, and in some decades 
those who financed production have had an upper hand. With the help of 
the Federal Reserve Board, in most recent years those who finance 
production have had the upper hand. That ought not be the case.
  There is a clear and compelling case, made by Senator Harkin 
yesterday, and I hope by myself, that the current Federal funds rate 
established by the Federal Reserve Board responds to a threat that does 
not exist and, as a result, keeps interest rates substantially higher 
than they should be on a real basis. As a result of that, the Federal 
Reserve overtaxes every American family that pays a higher cost for 
credit than can now be justified.
  The Congress has every right to send a message to the Federal Reserve 
Board that: ``When next you meet and close that door and begin deciding 
in secret the fate of this country's monetary policy and interest 
rates, we encourage you, given all the evidence, to decide to reduce 
interest rates.''
  Mr. President, I notice Senator Harkin has not yet arrived on the 
floor. Let me go down the findings briefly while we are awaiting 
Senator Harkin to come to the floor.
  While interest rates, we hear on the news, continue to decline, long-
term mortgage rates, and so on, the inflation rate, of course, is way, 
way, way down. The question is the real interest rates, the economic 
rent for money. And also the question is, What is happening to our 
economy? Is it slowing down? And if so, would paying higher interest 
rates, as imposed by the Federal funds rate, be beneficial to this 
economy?
  Real interest rates are at historically high levels, the highest in 9 
years--real interest rates. The Federal funds rate is 5.5 percent. It 
has been there since March of 1997, despite an inflation rate of 1.7 
percent. Between 1992 and 1994, the Federal funds rate averaged 3.6 
percent, while inflation was at 2.8 percent.
  The Chairman of the Federal Reserve Board, Mr. Greenspan, said during 
his testimony before the House Banking and Financial Services Committee 
on February 24 of this year:

       Statistically, it is a fact that real interest rates are 
     higher now than they have been on the average of post-World 
     War II periods.

  Actually, real interest rates are higher now than they have been 
prior to Mr. Greenspan becoming Chairman of the Fed. Inflation over the 
last 2 years, preceding the date of enactment of this act, was at its 
lowest level since the 1960s. Corporate earnings are down 1.3 percent 
from a year earlier, and, as I mentioned, farm debt is at its highest 
level since 1985. Broad commodity price indexes are extremely low. 
There are signs of global depression or at least severe recession and 
the potential of depression in parts of the economies of Asia, and 
there are signs that that will negatively impact this country through 
fewer purchases of U.S. exports and through a greater influx of cheap 
imports to the United States.
  We, as a result of this resolution, want to put the Senate on record 
as saying to the Federal Reserve Board: ``You ought to do what the 
evidence requires you to do; you ought to do what the American people 
know you should do; you ought to do what most good economists would 
advise you do now, even though you have not done it for sometime now; 
you ought to reduce the Federal funds rate to a level that is

[[Page S10749]]

fair and fairly reflects the economic rent for money relative to the 
real rate of inflation.''
  The Federal Reserve Board has kept the Federal funds rate 
artificially high because it has worried about inflation. As I 
indicated in the chart, the rate of inflation has come down, down, way 
down, even as unemployment has come down. The Federal Reserve Board, 
predicting new waves of inflation at every step along the way, has been 
consistently wrong about this. Some say the Federal Reserve Board 
should be given credit for the fact it is down. The Federal Reserve 
Board did nothing but predict this was going to be different. It 
requires no credit to be wrong.
  So I ask, and I think Senator Harkin would ask, the Federal Reserve 
Board to do the right thing when it meets in the Federal Open Market 
Committee, and make the reduction in interest rates that is justifiable 
and is important to this country.
  Mr. President, I reserve the remainder of the time, and I suggest the 
absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DOMENICI. Mr. President, I as unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DOMENICI. Mr. President, may I discuss with Senator Dorgan the 
current situation? We have a unanimous-consent agreement that says at 
11:45 a.m. I am to be recognized to move to table the amendment. I am 
here. I only have 5 minutes to speak, and I don't choose to use that at 
this moment.
  What is the Senator's understanding about how we are going to handle 
this unanimous-consent agreement that sets 11:45 a.m. as a vote time?
  Mr. DORGAN. Mr. President, the 11:45 a.m. time has been extended, I 
think, by about 8 minutes by unanimous consent.
  The PRESIDING OFFICER. By 5 minutes; the Senator is correct.
  Mr. DORGAN. By 5 minutes. That would be 11:50 a.m. I am waiting for 
Senator Harkin to arrive on the floor. He is the principal sponsor, 
along with myself, on the legislation. He wants to speak on it. I just 
finished speaking. I am waiting for Senator Harkin. I suspect he will 
want to provide some remarks, after which the Senator from New Mexico 
can proceed.
  Mr. DOMENICI. I appreciate that. I guess while we are in a quorum 
call, time is not running. I ask unanimous consent that up to 5 minutes 
of the quorum call not be charged and, thus, we will have 5 additional 
minutes before the time the Senator from New Mexico makes a motion to 
table.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DOMENICI. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. HARKIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HARKIN. Parliamentary inquiry. What is the floor situation right 
now in terms of time under the unanimous-consent agreement agreed to 
yesterday?
  The PRESIDING OFFICER. The Senator has the right to offer an 
amendment and the Senator has 15 minutes remaining on his time.
  Mr. HARKIN. I did not hear that. How much time?
  The PRESIDING OFFICER. Fifteen minutes.
  Mr. HARKIN. On our side?
  The PRESIDING OFFICER. That is correct.
  Mr. HARKIN. Fifteen minutes left on this side?
  The PRESIDING OFFICER. That is correct.
  Mr. HARKIN. Mr. President, I yield 7 minutes to the Senator from 
Minnesota, Senator Wellstone.
  The PRESIDING OFFICER. The Senator from Minnesota is recognized.
  Mr. WELLSTONE. Parliamentary inquiry, Mr. President. Has the 
amendment been called up?


                Amendment No. 3616 To Amendment No. 3559

(Purpose: To express the sense of the Congress regarding the reduction 
    of the Federal Funds rate by the Federal Open Market Committee)

  Mr. HARKIN. Mr. President, before I yield to the Senator, I ask that 
the amendment be called up at this time.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Iowa [Mr. Harkin] for himself, Mr. Dorgan, 
     Mr. Conrad, Mr. Wellstone, Mr. Bryan and Mr. Kerrey, proposes 
     an amendment numbered 3616 to amendment No. 3559.

  Mr. HARKIN. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place, insert the following:

     SEC.   . SENSE OF THE CONGRESS REGARDING INTEREST RATES.

       (a) Findings.--The Congress finds, as of the date of 
     enactment of this Act, that--
       (1) real interest rates are at historically high levels, 
     the highest in 9 years;
       (2) the Federal Funds rate is 5.5 percent, where it has 
     been since March 1997, despite an inflation rate of 1.6 
     percent;
       (3) between 1992 and 1994, the Federal Funds rate averaged 
     3.6 percent, while inflation was at 2.8 percent;
       (4) to confirm that real interest rates are historically 
     high, the Chairman of the Board of Governors of the Federal 
     Reserve System, Alan Greenspan, said during his Humphrey-
     Hawkins testimony before the Committee on Banking and 
     Financial Services of the House of Representatives on 
     February 24, 1998, ``Statistically, it is a fact that real 
     interest rates are higher now than they have been on the 
     average of the post-World War II period.'';
       (5) inflation over the 2 years preceding the date of 
     enactment of this Act was at its lowest level since the 
     1960's;
       (6) interest rates on 30-year Treasury bonds have sunk to 
     record lows and are below the Federal Funds rate, a signal 
     that the United States economy could be headed for a 
     recession;
       (7) United States corporate earnings in the second quarter 
     of 1998 were down 1.3 percent from a year earlier;
       (8) a reduction in interest rates would increase resources 
     for business growth;
       (9) the farm debt is at its highest level since 1985, and 
     broad commodity price indexes are extremely low;
       (10) there are significant, widespread signs of global 
     deflation, to which the United States has not been exposed 
     since the Great Depression;
       (11) there has been a deterioration in a number of 
     economies around the world, which will negatively impact the 
     United States through fewer purchases of United States 
     exports and a greater influx of cheap imports to the United 
     States;
       (12) the United States economy is a large, healthy economic 
     engine, and if the United States economy does slow, it would 
     be exceedingly difficult for the worldwide economy to 
     recover;
       (13) a decline in equity values could dampen confidence and 
     slow consumer and business spending, which together 
     represents four-fifths of the United States economy;
       (14) a decline in United States interest rates would help 
     bolster the currencies of countries throughout the world 
     suffering from economic hardships; and
       (15) a reduction in interest rates would strengthen the 
     United States economy over the next year while the world's 
     weakened economies recover.
       (b) Sense of the Congress.--It is the sense of the Congress 
     that the Federal Open Market Committee should promptly reduce 
     the Federal Funds rate.

  Mr. HARKIN. I yield to the Senator from Minnesota 7 minutes.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. WELLSTONE. I thank the Chair.
  I thank my colleague from Iowa.
  I do not think I am going to be able to do justice to the question 
that is before us. There was a bit of confusion. We were over hearing 
President Nelson Mandela and lost some valuable time on the floor, 
although I must say I would have never traded that experience to hear 
President Mandela.
  Mr. President, for the last few months, we have been so absorbed with 
the crisis at the White House I am afraid we have neglected another 
crisis that might end up having a far greater impact on ordinary 
working Americans. I am talking about a global economic crisis whose 
effects are already being felt on our shores.
  The situation in the global economy today is much more than 
troubling; it is dangerous. I believe we must act now to stop the world 
from slipping into a deflationary spiral. And by the way, I would like 
to give Bill Greider, and his book ``One World: Ready or Not,'' just a 
little bit of mention. I think Bill Greider deserves a tremendous 
amount of credit. That book, written about two

[[Page S10750]]

years ago, was really prophetic about where the international economy 
might go.
  As I said, I believe we must act now to stop the world from slipping 
into a deflationary spiral. Surely part of the solution--not the whole 
solution--is for the Federal Reserve to cut short-term interest rates 
significantly.
  I hope that Alan Greenspan, Chairman Greenspan, today in his 
testimony will, indeed, signal that he is ready to do that. This may be 
only one part of the solution, but it is an important part, and that is 
what this Sense-of-the-Congress resolution is all about.
  Mr. President, this global economic crisis is unlike anything many of 
us have ever experienced in our lifetimes. For the first time since the 
1930s, we see the GDP falling in over one-quarter of the world economy. 
Last week, President Clinton called this ``the greatest financial 
challenge in the last half-century.'' And he was right.
  If we choose to do nothing, we will have little hope of escaping from 
this crisis unscathed. As Chairman Greenspan recently testified, we 
cannot forever be an oasis of growth when so much of the world's 
economy is contracting.
  Lowering interest rates will address the global crisis in several 
ways. It will supply some much needed liquidity to a world economy 
starved by massive currency devaluations. It should help restart 
capital flows to crisis countries. Lower rates should also weaken the 
dollar, making it easier for foreign borrowers to repay their dollar-
dominated debt. Boosting the yen against the dollar should make other 
Asian countries more competitive and help stabilize their economies. 
The end result should be higher world economic growth and less 
instability in the financial markets.
  Mr. President, I cannot emphasize enough how important this Sense-of-
the-Congress amendment is, because we are attempting to send a signal 
here. I come from the Midwest. We see a contraction in the farm 
economy. We see farmers driven off the land because of record-low 
prices. But what I also see is an absolutely impossible situation right 
now where what is happening in this world economy is surely going to 
affect us. And there is no question that, by lowering interest rates in 
coordination with other countries--like Germany and the G-7 countries--
we can at least increase demand.
  If there is one thing we must do, it is increase demand in all of our 
economies so that people will be able to consume, so we will have 
markets to sell to. Bill Greider was right. The major threat right now, 
not only to the international economy but to our own economy, is not 
inflation. It is deflation.
  All the arguments about the NAIRU--the Non-Accelerating Inflation 
Rate of Unemployment--don't stand up. It is not true that when you have 
low levels of unemployment you automatically set into gear an 
inflationary spiral in your economy. That has not happened. There is no 
evidence that it will happen.
  The No. 1 enemy right now is not inflation, but the whole question of 
deflation, the whole question of a depression in a good part of the 
international economy which is going to dramatically, crucially, affect 
the quality of our lives, our children's lives and our grandchildren's 
lives.
  The Federal Reserve Board, led by Mr. Greenspan, must lower short-
term interest rates. They are too high. It makes no sense whatever--
from the point of view of the best macroeconomic management, from the 
point of view of economic performance, from the point of view of 
stimulating demand in these economies, from the point of view of 
coordinating with other countries like Germany--for the Federal Reserve 
Board not to lower the federal funds rate. That is what this resolution 
calls for. That is why I am pleased to join my colleague from Iowa.
  This is why a rising chorus of voices is now calling for lower rates. 
Many of them are conservatives. They include the Wall Street Journal, 
Jack Kemp, the National Association of Manufacturers, the Business 
Roundtable, Stephen Roache, C. Fred Bergsten, Roger Altman, Steve 
Forbes, and many others.
  But there are also many who don't share my sense of alarm. A few may 
simply be afraid to say anything that could trigger a panic. Others may 
not see any need to take precautions against a forecasted hurricane--
especially when the skies directly above us are sunny and clear. Well, 
maybe they are right. Maybe this storm will veer off course. But what 
if they're wrong?
  Some of my colleagues may well say, ``We already have low interest 
rates. The Fed hasn't raised short-term rates for a year and a half.'' 
True enough. But if you adjust those rates for inflation, they've 
actually been rising for some time. Chairman Greenspan himself 
testified earlier this year that ``Statistically, it is a fact that 
real interest rates are higher now than they have been on the average 
of the post World War II period.'' In fact, the inflation-adjusted 
federal funds rate hasn't been this high since 1989.
  Unfortunately, there has been a strong bias, at the Federal Reserve 
and elsewhere, against lowering rates, though this may be changing as 
we speak. The reason for this is simple: an inordinate fear of 
inflation. But inflation today stands at 1.6 percent, down from 3 
percent in 1996. Where is the evidence of any inflationary pressure on 
the horizon? This downward trend cannot be attributed solely to the 
Asian crisis, either: the producer price index fell for the first seven 
months of 1997, before the crisis even began. To quote Bruce Steinberg, 
chief economist at Merrill Lynch, ``People who cry about inflation are 
in some other universe of reality right now.''
  Moreover, an expected slowdown in economic growth should douse any 
possible inflationary pressures. Corporate earnings in the second 
quarter were down 1.3 percent from the previous year. Economic growth 
slowed from 5.5 percent in the first quarter to 1.6 percent in the 
second. The OECD predicts lower U.S. growth next year. Chairman 
Greenspan himself has acknowledged that ``there are the first signs of 
erosion at the edges, especially in manufacturing.'' Manufacturing 
capacity utilization is at a six year low, commodity prices are 
falling, and farm debt is the highest it's been since 1985. And the Fed 
says its monetary policy must be based on forecasts of economic 
conditions 6 to 9 months in the future!
  In his speech last week, President Clinton recognized that these new 
circumstances call for a reexamination of some of our most basic 
economic assumptions. ``For most of the last 30 years, the United 
States and the rest of the world has been preoccupied by inflation,'' 
he said. ``But clearly the balance of risks has now shifted, with a 
full quarter of the world's population living in countries with 
declining economic growth or negative economic growth. Therefore, I 
believe the industrial world's chief priority today, plainly, is to 
spur growth.''
  The Federal Reserve's obsession with inflation-fighting can be traced 
back to the so-called NAIRU [Non-Accelerating Inflation Rate of 
Unemployment] theory. What NAIRU boils down to is this: it's a belief 
that lowering unemployment too much will cause inflation to spiral out 
of control. Tragically, this theory has too often stood in the way of 
policies that would reduce unemployment.
  Yet it seems to have little, if any, correlation to our actual 
economic experience. For four years now we've had unemployment rates 
below 6 percent. They've been under 5 percent for well over a year. 
During that time, inflation has been falling, not rising. The fact is, 
there's little reason to believe low unemployment causes inflation to 
come unhinged. It seems to me that this NAIRU theory is about as out-
moded as the Nehru jacket. And frankly, I have serious doubts whether 
either of these fads was ever really defensible.
  In the past, the Fed has focused on fighting inflation over all other 
considerations, which puts it at odds with its own statutory mandate. 
Let me remind my colleagues, once again, that the Federal Reserve is a 
creature of Congress. The 1946 Employment Act directs the Fed to pursue 
policies of ``maximum employment, production, and purchasing power.'' 
The 1978 Humphrey-Hawkins Act amendments call for policies of ``full 
employment,'' ``balanced growth,'' and ``reasonable price stability.'' 
Instead, it seems the Fed sees its mandate as stifling real wage 
growth.
  Sometimes Washington seems like a different world than the one where 
most Americans live, and never more

[[Page S10751]]

so than when it's engulfed in scandal. But it can seem like a pretty 
odd place even in more normal times. In testimony before Congress, Fed 
Chairman Greenspan has seemed to express satisfaction that job 
insecurity keeps workers from demanding higher wages. More recently he 
has voiced concern that wages are rising, despite the fact that wage 
growth has not kept up with productivity. I'm not sure which is more 
outrageous: that anybody in a position of power in this country would 
say such things, or that so few people would be bothered by them.
  In all fairness, the Fed has resisted the temptation to raise short-
term rates for some time now. That's probably because falling 
unemployment has not led to higher wages until very recently, and 
inflation has continued on its downward path. But now, in the seventh 
year of this economic recovery, we are finally starting to see signs of 
wage growth. Real wages have risen 2.6 percent annually for the typical 
American worker since 1996, though they have still not regained their 
1989 levels. And the trend toward income inequality has also begun to 
slow.
  This is good news, and it is a tremendous breakthrough. The mystery 
of falling wages and rising inequality over the past three decades 
turns out to be not so mysterious after all. The fact is, we know how 
to raise wages and reduce inequality. We do not have to reinvent the 
wheel. Among other things, we need to maintain low unemployment over a 
sustained period. We've done this before and we can do it again. 
Surveying the U.S. economy since World War II, economist James 
Galbraith finds that income inequality has generally risen when 
unemployment was above 5 percent and fallen when unemployment was below 
5 percent.
  Simply put, we need to pursue a policy of full employment. The 1998 
Report of the Council of Economic Advisers hails recent trends in 
income inequality and concludes, ``Maintaining a full employment 
economy is essential if this progress is to continue.'' The experience 
of the last two years should drive that lesson home. It would be a 
tragedy if an unjustified fear of rising wages or an economic downturn 
kept us from continuing that progress. With economic growth falling 
overseas and the growing danger of deflationary aftershocks here at 
home, I believe the Fed needs to cut interest rates now.

  There are few things, I think, that would improve the lives of 
ordinary working Americans more than full employment. As the 1998 
Report of the Council of Economic Advisers says:

       A high employment economy brings enormous economic and 
     social benefits. Essential to personal economic security is 
     the knowledge that work is available to those who seek it, at 
     wages sufficient to keep them and their families out of 
     poverty. A tight labor market encourages the confidence of 
     job losers that they will be able to return to work, lures 
     discouraged workers back into the labor force, enhances the 
     prospects of those already at work to get ahead, enables 
     those who want or need to switch jobs to do so without a long 
     period of joblessness, and lowers the duration of a typical 
     unemployment spell. . . . Wasted resources from not producing 
     at potential, together with the human cost of unemployment, 
     are intolerable; the elimination of this waste is the 
     principal benefit of a sustained return to full employment.

  As James Galbraith argues in his powerful new book, Created Unequal, 
lower interest rates and full employment help sustain not only a 
healthy economy, but also a healthy society. Lower rates make it easier 
to balance the budget. They help reduce inequality by lowering 
unemployment and reducing poverty, by preserving a competitive dollar 
that doesn't destabilize wages, and by checking the unearned income of 
top earners. They ease social strains by pushing up wages and lifting 
the burden of private debt. For all these reasons, in a full employment 
economy, citizens are more able and willing to make necessary 
investments in education, training, infrastructure, research, and other 
public goods.
  But the flip side of this picture is not so rosy. Inequality has been 
rising since about 1970, and today is the highest it's been since the 
Great Depression. Growing inequality brings out the worst in us. It 
eats away at middle class solidarity. It encourages those who feel 
secure about their life chances to disavow any connection to their 
brethren in need. Growing inequality finds expression in bitter 
struggles over issues such as affirmative action, welfare, crime, 
entitlements, and even intelligence. And if income inequality had not 
so undermined middle class solidarity, I don't think the campaign to 
privatize Social Security would have ever gotten off the ground.
  There are specific responses to each of these challenges, but the 
larger issue is the erosion of solidarity among Americans of different 
economic circumstances. The answer, it seems to me, is clear. We must 
rebuild that solidarity with higher wages and lower inequality. These 
lessons have a direct bearing on one of the paramount issues before 
Congress today: an America with rising wages and declining inequality 
is an America that need not worry about the future of Social Security.
  What is true for the American economy is equally true for the world 
economy. The best global citizens are countries that generate their own 
domestic demand, and healthy demand depends on rising wages and lower 
inequality. There's been a lot of talk about virtuous cycles lately. 
Well, when income gains are broadly shared, it creates a virtuous cycle 
of mass purchasing power, growth, savings, and new investment. We can 
promote this kind of good citizenship by helping other countries raise 
their wages from the bottom up--through higher minimum wages, 
recognition of labor rights, and fiscal and monetary stimulus.
  This kind of policy would be good not only for them, but for us too. 
And it would be good for the global system as a whole. We cannot 
forever be the buyer of last resort. We cannot forever help other 
countries develop economically by absorbing all their manufacturing 
exports. They need to create their own domestic demand. Trade should be 
a complement to healthy demand at home, not a substitute for weak 
demand. Otherwise we cannot escape the trap of excess production and 
overcapacity, with too many goods being produced and not enough 
prosperous consumers to buy them. As the AFL-CIO urged back in January, 
``The United States, Europe, and Japan must work together to stimulate 
domestic demand in the developing economies and avert a dangerous 
tendency toward global deflation.''
  Needless to say, we haven't been doing that. It certainly hasn't 
helped that, working through the IMF and other multilateral 
institutions, we have imposed deflation on countries in Asia and the 
rest of the world. We have depressed foreign demand by insisting that 
other governments cut spending, close banks, weaken labor laws, and 
raise interest rates. And we've insisted that they deregulate financial 
markets to remove any checks on often destabilizing flows of foreign 
capital. As the AFL-CIO said back in February, ``These terms may solve 
some short-term credibility problems with foreign investors, but will 
necessarily exacerbate the tensions, inequality, and instability of the 
global economy.'' That, I believe, is exactly the problem facing us 
today.
  This is a time for bold new thinking. In his speech last Monday, 
President Clinton called on Chairman Greenspan and Secretary Rubin to 
convene a meeting of their counterparts in the G-7 and key developing 
countries within the next 30 days to strengthen the international 
financial architecture for the 21st Century. Fifty years ago, he said, 
we learned to tame the cycle of booms and busts that had plagued 
national economies, and we must now do the same for the international 
economy.
  But what does that entail, exactly? Countries must be able to reap 
the benefits of free-flowing capital in a way that is safe and 
sustainable, the President said. The IMF should emphasize pro-growth 
budget, tax, and monetary policies. The World Bank should embark on a 
new ``social compact'' initiative focusing on job assistance and basic 
needs of children and the elderly. The World Bank and the Asian 
Development Bank should both double their support for the social safety 
net in Asia.
  Meanwhile, it was reported yesterday that British Prime Minister Tony 
Blair has joined the call to restructure the institutions and rules 
governing the global financial system. And the IMF just released a 
report endorsing the kind of capital controls Chile has maintained for 
years to discourage destabilizing short-term capital inflows.

[[Page S10752]]

 This appears to represent a 180 degree about-face from its previous 
dogged insistence on liberalizing capital markets.
  These are extraordinary developments. I believe they are a sign of 
the seriousness of the crisis we face. They also indicate that deeply 
entrenched assumptions are now being reexamined. That's something we 
should welcome and encourage.
  I believe we can prevent the worst from happening, but we must act 
now. These are times that cry out for American leadership. The most 
pressing need, and our most immediate priority, must be to deliver a 
preemptive strike against deflation. At the next meeting of the FOMC, 
Federal Open Market Committee, on September 29, the Fed should lower 
interest rates significantly.
  Mr. HARKIN. How much time do I have remaining?
  The PRESIDING OFFICER. The Senator has 7 minutes 38 seconds 
remaining.
  Mr. HARKIN. I yield whatever time I consume.
  Mr. President, this amendment that we have offered is cosponsored by 
Senators Dorgan, Conrad, Wellstone, Robert Kerrey, and Senator Bryan.
  Because of the actions of the Federal Open Market Committee, real 
interest rates are rising. In fact, real interest rates are at 
historically high levels, the highest in 9 years, because inflation has 
fallen while the Federal Reserve failed to lower the Federal funds 
rate.
  This chart points it out. The Federal funds rate continues to go up 
at about 3.9 percent. Fed Chairman Greenspan said in February of this 
year:

       Statistically, it is a fact that real interest rates are 
     higher now than they have been on the average of the post-
     World War II period.

  I have said time and again that the high interest rate policy being 
imposed by the Federal Reserve is a stealth tax on hard-working 
American families, and I believe it is a contributing factor to the 
near collapse of several economies worldwide.
  Again, interest rates have a significant impact on virtually every 
family in America, every producer, business, and family farmer in this 
country. Lower rates have been needed for some time, but now quick 
action is truly crucial for our country's well-being. The economic 
signs not only in the U.S. economy but in economies worldwide demand 
swift and appropriate action.
  I note in the front page of the Washington Post this morning it says, 
``Signs Point to Interest Rate Cut,'' and:

       Federal Reserve Board Chairman Alan Greenspan will testify 
     before Congress today amid growing signs that he may propose 
     cutting interest rates when Fed policymakers meet next 
     Tuesday.

  And it goes on to say how many executives and economists have called 
for that.
  Now, the amendment that I have at the desk reads that we ask the 
Federal Open Market Committee to promptly reduce interest rates. Now, 
the Senator from New Mexico had suggested that perhaps we might want to 
alter that a little bit to just say that perhaps we should advise them 
or urge them to do something like that.
  I refer back to a congressional resolution passed by the Senate on 
December 18, 1982. It passed by 93-0. I believe the Senator from New 
Mexico may have been here at that time. I didn't check that, but I 
think he may have been here at that time. It passed 93-0. That 
resolution also called on the Fed to reduce interest rates. I will just 
read one sentence of it:

       It is the sense of the Congress that they should continue 
     to take such actions as are necessary to achieve and maintain 
     a level of interest rates low enough to generate significant 
     economic growth, and thereby reduce the current intolerable 
     level of unemployment.

  At that time, December 18, 1982, the Senate saw fit by a vote of 93-0 
to tell the Federal Open Market Committee that they should do 
something. That is what we are saying here in this resolution. They 
should promptly reduce interest rates because every sign points to the 
need to do so. Again, we could say that they should consider doing it, 
but I am just saying in 1982 we didn't say they should consider taking 
such actions. The resolution said, ``They should continue to take such 
actions.''
  So there was a direction from the Senate at that time to the Fed. To 
those who say we shouldn't interfere with the Fed, I say where in the 
Constitution of the United States is the Federal Reserve system given 
such a standing? It is nowhere to be found in the Constitution. Article 
I, section 8 of the Constitution gives the power to coin and regulate 
the power of money to Congress. We have, of course, delegated that 
power to the Federal Reserve System under the Federal Reserve Act, as 
amended, many times. Obviously, I don't believe Congress should coin 
money or regulate the value it. We couldn't do it. That is why we have 
the Federal Reserve.
  However, as policymakers, because the Federal Reserve is a creature 
of Congress, it exists only because of an amended law, passed by 
Congress. We have the right, and I believe the obligation, to tell the 
Federal Reserve what we feel, what we hear, what we see, what we think 
is happening in the economy. We are the policymakers and we should give 
them that guidance and direction when and if we believe that we should 
do so.
  Again, if there are those who don't believe that we should reduce 
interest rates, that we shouldn't tell the Federal Reserve that they 
should reduce interest rates, that I can understand. That is a clear 
policy difference. But to say that we shouldn't tell the Fed what to do 
flies in the face, I believe, of our responsibilities and our 
obligations as policymakers here in the U.S. Senate.
  Policy wise, I believe they should lower interest rates. So does the 
head of the National Association of Manufacturers, the president of 
General Motors, and a number of other economists both on the 
conservative side and on the liberal side. They are saying that we 
should lower interest rates.
  I think the purpose of this resolution and why I am offering it is to 
back up what I understand Chairman Greenspan is attempting to do. I 
understand there are still some members of the Federal Open Market 
Committee who don't believe we should lower interest rates. I think we 
should send them a very strong signal. We should back up what I 
understand Chairman Greenspan is now saying that they probably ought to 
do, and that is lower interest rates. That is the purpose of this 
amendment.
  Mr. ABRAHAM. Mr. President, although I agree with the economic case 
for lower interest rates made by the Senator from Iowa, I must vote to 
table this amendment. While Members of Congress and Senators certainly 
have the right to express their opinions about the conduct of monetary 
policy, it is highly inappropriate for the Congress as an institution 
to take formal legislative action designed to influence decisions made 
by the Federal Reserve board members. To do so would undermine the 
political independence of the Fed and thus the stability of our 
financial and monetary system.
  Having said this, Mr. President, I am concerned about the volatility 
and uncertainty enveloping worldwide financial markets and the role 
that U.S. monetary policy is playing in our global financial system. 
There are proliferating signs of deflation that many economists suggest 
are at least partially responsible for the recent market turmoil.
  Gold prices have fallen by more than 30% since early 1996, commodity 
prices have fallen to 21-year lows, the yield curve has now inverted 
and real interest rates remain very high. Chairman Greenspan himself 
has said in the past that these indicators were important signals of 
the direction of inflationary pressures.
  Nonetheless, rather than focusing on these market indicators, some 
members of the Fed appear to have placed more focus on the unemployment 
rate, rising stock prices and wage growth. In the meantime, corporate 
profits have declined on a year-over-year basis for the first time in a 
decade, farm prices are plummeting, bankruptcies have accelerated and 
now the stock market is reflecting slower growth ahead.
  Mr. President, in my judgment, the best environment for business is 
an environment of price stability. Price stability should be the 
Federal Reserve's number one priority. And this means avoiding both 
inflation and deflation. Today, it appears that the risks of deflation 
have risen excessively.

[[Page S10753]]

  History clearly shows that when monetary policy is focused on 
managing stock markets, wages or unemployment, mistakes can be made. I 
do not believe that higher rates of economic growth creates inflation. 
In my view, rising stock prices, rising wages, and falling unemployment 
reflect the incredible wealth creating capacity of a free market 
system, not the artificial result of an easy monetary policy. In 
today's high-tech world of higher productivity, using discredited 
models of the economy, based in the Phillips Curve, seems archaic.
  The recent currency devaluations in emerging economies has also 
increased deflationary pressures. As these currencies decline in value, 
the worldwide demand for U.S. dollars has dramatically increased. 
However, because there has been no matching increase in the supply of 
dollars, the global economy faces a severe liquidity squeeze. And as 
Mr. Greenspan said during his recent remarks at the University of 
California, Berkeley, `` it is just not credible that the United States 
can remain an oasis of prosperity unaffected by a world that is 
experiencing greatly increased stress.''
  Given the mounting evidence of deflation and the growing global 
financial difficulties, I believe the Federal Reserve should seriously 
consider reducing short-term interest rates at this juncture. The 
``real'' federal funds rate has steadily increased as inflation has 
declined, implying a continued tightening of monetary policy. A rate 
cut would provide much needed liquidity to global economy, stabilize 
world-wide financial markets, and ensure continued non-inflationary 
economic growth.
  Mr. President, in summary, while I personally believe that the 
economic case for lower interest rates is strong, I do not believe it 
is the proper role of the Congress to dictate that the Fed implement a 
specific monetary policy action through formal legislative action.
  Mrs. FEINSTEIN. Mr. President, I will vote to table this amendment to 
S. 1301, the Bankruptcy Reform bill, which expresses the sense of the 
Congress ``that the Federal Reserve Open Market Committee should 
promptly reduce the Federal Funds rate.'' My vote to table this 
amendment should not be construed as opposition to lower interest 
rates. Rather, I do not believe it is the duty of this body, nor do I 
believe that it is appropriate for this body, to tell the Federal 
Reserve Open Market Committee what to do.
  Mr. HARKIN. How much time remains?
  The PRESIDING OFFICER. The Senator has 50 seconds remaining.
  Mr. HARKIN. I reserve my 50 seconds.
  Mr. DOMENICI. Mr. President, the question before the U.S. Senate is 
not whether the Federal Reserve Board should reduce interest rates; it 
is whether or not the U.S. Senate should say that the Federal Open 
Market Committee should promptly reduce the Federal funds rate.
  Any Senators who have traveled the world, including Europe, and are 
asked what institution that the United States has in place that is the 
best thing going for global success, American capitalism and 
prosperity, guess what they will say? They won't say the Senate, they 
won't say the House, they won't say the President; they will say the 
Federal Reserve Board and its Chairman, who have been permitted, by act 
of Congress, to act independently of political pressures.

  Now, frankly, there is a very serious problem with global economic 
faltering. Nobody has an answer to it. There are many suggestions as to 
what we didn't do that we should do. But I submit, for the world to 
find out, after Alan Greenspan and this Federal Reserve Board have done 
a most marvelous job in controlling interest rates and monetary policy 
that the whole world is looking at and saying they did it perfect, 
absolutely right--for us to come along now and say, ``Well, look, that 
is really so, but we would like to tell them right now''--in a way 
taking away some of their independence because we want to put political 
pressure on them--``that they should promptly reduce interest rates,'' 
frankly, I believe we will send the wrong signal, because I think the 
signal we need is the stability of the Federal Reserve Board making 
decisions on behalf of America, and America in a global market. That is 
the kind of stability that the world is looking for.
  You know, I don't think anybody believes--and I am not saying Senator 
Harkin does--that we should regularly on the floor of the Senate be 
critiquing the Federal Reserve Board and then telling them what they 
ought to do. I don't think anybody thinks that. But I think we are 
falling right into that trap here.
  I have suggested--and I give it again to the sponsor--why don't we do 
what we ought to do and say the Federal Open Market Committee should 
seriously consider reducing the Federal funds rate? That way, we would 
be chiming in by whatever vote occurs with many people who think that, 
but we would not take this time in economic history to say that we are 
opting to say that the U.S. Senate says you should do it promptly. That 
is my argument. The Senate can do what it would like. I believe we 
ought not adopt it. If we want to state our case in this regard, we 
ought to state it another way, so that we are just joining in with 
comments and observations, but not drawing a conclusion that says if we 
were doing it, we would change it right now and we urge that you do 
that and do it promptly.
  That is essentially the issue.
  Mr. President, we are in the most complicated quasi-world recession 
that we have been in perhaps in modern times because capitalism is 
faltering around the world--not because capitalism and entrepreneurship 
doesn't work, but there are institutions that have fallen apart in 
other countries that are affecting us. I have no doubt that the Federal 
Reserve Board is going to do the right thing. There is no doubt in my 
mind that they are. I also suggest that if they reduce interest rates, 
everybody should not expect that the world economy is going to get 
fixed. There are many serious problems that it won't fix.
  I reserve the remainder of my time.
  Mr. HARKIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. HARKIN. Mr. President, this amendment does not set monetary 
policy. It is a nonbinding sense of the Congress. William Gaston from 
the Congressional Research Service writes in a CRS report that, 
``Congress has enacted nonbinding language to express its monetary 
policy preferences to the Fed.''
  The last time this Senate debated a sense-of-the-Senate resolution to 
ask the Fed to lower interest rates was December 18, 1982. Again, I 
will read--it did not say it should seriously consider, it said, ``It 
is declared that it is the sense of the Congress that they should 
continue to take such actions as are necessary.'' That is what it said 
in 1982. It didn't say they should ``seriously consider,'' but they 
should ``take such actions.''

  That is what this amendment says. It says they should reduce interest 
rates. The Business Roundtable said, ``The President and Congress 
should encourage the Federal Reserve to lower U.S. interest rates. . 
.'' not to seriously consider it.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. HARKIN. Mr. President, I ask unanimous consent for 1 more minute.
  Mr. DOMENICI. Mr. President, it is not that I am worried about 
arguments, but we have been changing to accommodate. But I will not 
oppose the Senator having 1 more minute.
  Mr. HARKIN. I thank the Senator.
  The PRESIDING OFFICER. The Senator is recognized for another minute.
  Mr. HARKIN. This says, ``The President and Congress should encourage 
the Federal Reserve to lower interest rates.'' It didn't say we should 
have them consider it. That time has passed. I might have agreed with 
the Senator from New Mexico a year ago, that they should consider it. 
Now the time is critical. If the Federal Open Market Committee doesn't 
act next week, they don't meet again until November. That is why it is 
so crucial that we, as policymakers, send a strong signal, not that 
they should consider reducing interest rates, but they ought to do it. 
We ought to back up what we know is right, back up what the Business 
Roundtable and almost every economist is saying that we have to do. Is 
that interfering with the Fed? Not at all. But it is telling them what 
we, as

[[Page S10754]]

policymakers, believe and feel they should do at their next meeting, 
and that is to promptly reduce interest rates.
  I thank the Senator from New Mexico.
  Mr. DOMENICI. Mr. President, I have been here a long time and I voted 
on that resolution that the Senator is talking about. I didn't think I 
ever voted on a resolution that told the Federal Reserve Board what to 
do in precise terms like, ``Lower the interest rates.'' The resolution 
that we adopted overwhelmingly was much more in the tone and tenor and 
words of what I recommended. It says: ``They should continue to take 
such actions as are necessary to achieve and maintain interest rates 
low enough to generate significant economic growth.''
  Frankly, that is precisely what we ought to be doing. We ought to be 
saying take whatever action is necessary; we should not say to them 
that we are saying, as a matter of policy, you should lower the 
interest rates. We ought not do that to the Federal Reserve. It will 
not do anything but discredit them over the long run and add 
instability where stability is needed.
  Mr. HARKIN. Maybe we could reach an agreement on language here.
  Mr. DOMENICI. I gave the Senator the language. I believe I am 
entitled to make a motion to table.
  The PRESIDING OFFICER. Under the previous order, the Senator is 
recognized to move to table the amendment.
  Mr. DOMENICI. I would like to do this, because there is a desire to 
talk for a minute. Without losing my right to move to table this when 
we come out of a quorum call, I ask unanimous consent that we can have 
a quorum call and that I may reserve the right to move to table. Is 
that language precise enough?
  The PRESIDING OFFICER. Yes.
  Without objection, it is so ordered.
  Mr. DOMENICI. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DOMENICI. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Burns). Without objection, it is so 
ordered.
  Mr. DOMENICI. Mr. President, pursuant to the order, I have a right to 
move to table at this point.
  I move to table the amendment, and ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion of 
the Senator from New Mexico to lay on the table the amendment of the 
Senator from Iowa. On this question, the yeas and nays have been 
ordered, and the clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. NICKLES. I announce that the Senator from Virginia (Mr. Warner) 
is necessarily absent.
  Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) is 
necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
who desire to vote?
  The result was announced--yeas 71, nays 27, as follows:

                      [Rollcall Vote No. 283 Leg.]

                                YEAS--71

     Abraham
     Allard
     Ashcroft
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Burns
     Byrd
     Campbell
     Chafee
     Coats
     Cochran
     Collins
     Coverdell
     Craig
     D'Amato
     DeWine
     Dodd
     Domenici
     Durbin
     Enzi
     Faircloth
     Feinstein
     Frist
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Jeffords
     Kempthorne
     Kerry
     Kohl
     Kyl
     Landrieu
     Leahy
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Wyden

                                NAYS--27

     Akaka
     Baucus
     Boxer
     Bryan
     Bumpers
     Cleland
     Conrad
     Daschle
     Dorgan
     Feingold
     Ford
     Gorton
     Harkin
     Hollings
     Inouye
     Johnson
     Kennedy
     Kerrey
     Lautenberg
     Levin
     Lieberman
     Mikulski
     Reed
     Reid
     Sarbanes
     Torricelli
     Wellstone

                             NOT VOTING--2

     Glenn
     Warner
       
  The motion to lay on the table the amendment (No. 3616) was agreed 
to.
  Mr. DOMENICI. Mr. President, I move to reconsider the vote by which 
the motion was agreed to.
  Mr. GRASSLEY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. DOMENICI addressed the Chair.
  The PRESIDING OFFICER. The Senator from New Mexico. Will the Senator 
from New Mexico withhold? May we have order in the Chamber, please? All 
conversations should be moved to the cloakrooms. The Senator from New 
Mexico deserves to be heard.
  The Senator from New Mexico.
  Mr. DOMENICI. Mr. President, a number of Senators who voted on the 
motion to table which I proposed indicated that they would like to see 
an expression regarding the interest rates, but not a mandate. I ask 
unanimous consent--I am not sure I will get it --but I ask unanimous 
consent that it be in order that I offer a similar resolution, but the 
resolve clause would state:

       It is the sense of the Congress that the Federal Open 
     Market Committee should consider reducing the Federal funds 
     rate.

  The PRESIDING OFFICER. Is there objection?
  Mr. HARKIN. I object.
  The PRESIDING OFFICER. Objection is heard.
  Mr. DOMENICI. Mr. President, I say to Senators, I will speak to the 
leader and maybe we can offer it somewhere else. We cannot offer it on 
this bill. I regret we cannot vote on it. I yield the floor.
  Mr. HARKIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa. Will the Senator 
suspend? May we have order in the Chamber, please? All conversations in 
the aisle should be moved to the cloakrooms.
  The Senator from Iowa.
  Mr. HARKIN. Mr. President, usually when votes are cast, I don't like 
to revisit them. People have their reasons; we vote and we move on 
around here. But I heard so much in the well from people voting on this 
last sense-of-the-Senate resolution that I felt I should take a little 
bit of time to perhaps clarify a couple of things and to make an 
additional point.
  First of all, this was a sense-of-the-Congress amendment. It was 
nonbinding. Someone said, ``We shouldn't be legislating what the 
Federal Reserve should do.'' With that I wholeheartedly agree. We were 
not legislating a law to tell the Federal Reserve what to do, No. 1. 
That is my first point. This was a nonbinding sense of the Congress--we 
adopt those all the time around here--basically to say, ``Here is what 
I, a policymaker, think should be done.''
  Secondly, this is not without precedent. This body has in the past 
voted on sense-of-the Congress amendments and resolutions that have 
told the Fed what we believe they should do.
  Third, I heard it said that we should not be politicizing the Fed. 
With that I wholeheartedly agree. But article I, section 8 of the 
Constitution gives the power to coin money and regulate the value 
thereof to the Congress of the United States. It did not give it to the 
Federal Reserve System.
  The Congress, in its wisdom, in the past set up the Federal Reserve 
System to do that. We delegated our powers to the Fed to do that. Over 
the intervening years, we have amended the Federal Reserve Act. It is 
not carved in stone. It has been amended and changed several times 
since 1913. But the Federal Reserve System remains a creature of 
Congress. It exists only by the laws passed by the Congress. It is not 
a separate branch of Government.
  It is not some kind of supreme being, some kind of item of sanctity 
that we can never touch. I believe it is not only our right but our 
responsibility as policymakers at certain times, if we feel a certain 
way, to be able to tell the Federal Reserve System what we believe they 
should do.
  So on this past vote I have no quarrel with anyone who believes the 
Federal Reserve should not lower interest rates. I may debate that 
point with

[[Page S10755]]

them, because I believe they should lower interest rates. That is a 
good debating point. But if someone voted on this and said no, the 
Federal Reserve should not lower interest rates, that I believe is a 
valid position that someone might hold, of which I disagree.
  Mr. REID. Would the Senator from Iowa yield for a question?
  Mr. HARKIN. Let me finish this, and I will.
  But to say we cannot vote to tell the Fed what to do because it would 
be politicizing it or we cannot interfere I believe somehow is an 
abdication of our responsibilities, not only our rights but our 
responsibilities as policymakers to tell a creature of the Congress 
what we believe they should do. We do not do it very often in terms of 
the Fed. In fact, I pointed out the last time we had a Sense of the 
Congress calling on the Fed to lower interest rates was in 1982. So 
this is not something we take lightly.
  But I believe at this point in time, with the world economy being 
what it is, with the tremendous drop in commodities and commodity 
prices here and around the world, with the specter of depression and 
deflation facing us--almost every economist, conservative, liberal, 
head of the Business Roundtable, head of General Motors, head of the 
National Association of Manufacturers, all say the Fed should lower 
interest rates.
  I offered this amendment, along with others, in good faith, to back 
them up to say, yes, you should lower interest rates. And that is what 
this was meant to do, to send that sense of the Congress that that is 
what we believe they should do. Obviously, we did not prevail. So I can 
only assume that most people do not believe they should lower interest 
rates.
  I would be delighted to yield to my friend from Nevada for a 
question.
  Mr. REID. Does the Senator from Iowa realize that Senator Dorgan and 
I have offered legislation on several occasions to have the Federal 
Reserve System audited on a yearly basis? Is the Senator aware we have 
done that?
  Mr. HARKIN. This Senator is not aware of that specific legislation, 
no.
  Mr. REID. Would the Senator acknowledge that the Federal Reserve 
Board--it would be a good idea to see how they spend their money?
  Mr. HARKIN. We don't know that?
  Mr. REID. The Federal Reserve System is not audited.
  Mr. HARKIN. No. I ask the Senator--I am not being facetious. Is the 
Senator from Nevada telling me that the General Accounting Office, the 
GAO, does not audit----
  Mr. REID. Absolutely not.
  Mr. HARKIN. Can the Senator tell me why the GAO does not audit the 
Federal Reserve?
  Mr. REID. The Senator from North Dakota and I have been wondering for 
a couple of years. We have offered legislation time and time again to 
have the Federal Reserve System audited, like every other Government 
entity in this country. But no. In fact, we asked for a General 
Accounting Office study to find out a little bit about the inner 
workings of the Federal Reserve System, and we found, among other 
things, they have what we refer to as a ``slush fund,'' what they refer 
to as a ``rainy day fund'' that they have kept there for 80 years, or 
thereabouts, 70-some-odd years. It is billions of dollars that they 
just keep there.
  That money, we believe, should be taken out of the Federal Reserve 
System and applied toward the deficit to take down the debt that we 
owe. But no, they keep hanging on to that money year after year.
  I appreciate, very much, this amendment having been offered by the 
Senator from Iowa, because, if nothing else, it allows me the 
opportunity to ask the Senator from Iowa a question: Shouldn't we audit 
the Federal Reserve System? The American public thinks so, but here the 
message is without response. We cannot get people to support us on 
that.
  Mr. HARKIN. This Senator was not aware of that.
  Is the Senator telling me that the Federal Reserve, which I have just 
stated is a creature of Congress, and exists by law, that the General 
Accounting Office, our accountant, cannot audit the Federal Reserve?
  Mr. REID. Cannot, does not, and will not.
  Mr. HARKIN. I would respond to the Senator by again asking the 
Senator a question. Have we ever tried to pass something here to have 
an audit done for the Federal Reserve?
  Mr. REID. Yes.
  Mr. DORGAN. I wonder if the Senator would yield for a question.
  Mr. HARKIN. I yield to the Senator from North Dakota for a question.
  Mr. DORGAN. The Senator from Nevada talked about this audit that was 
done of the Fed by the GAO. What the audit showed was a $3.7 billion 
fund accumulated at the Federal Reserve Board--$3.7 billion. And they 
pointed out that the Fed has not had a loss for nearly 80 years--will 
never have a loss. You can't lose money when you create money. So there 
was no reason to have a rainy day fund or some sort of provisional fund 
of $3.7 billion. And the GAO recommended that it be returned to the 
Treasury. It belongs to the American people.
  Not only has it not been returned, the $3.7 billion has now been 
increased to $5.2 billion. So you have to say to somebody, if you think 
there is reason to get some of these resources to do something with 
it--pay down the Federal debt or to do some of the other issues--there 
is $5.2 billion down at the Fed that they have for a rainy day fund, 
and they never have rain down there. They create money. They make their 
own money. And they have never had an annual loss, and will never have 
a loss; and yet they have squirreled away $5.2 billion of resources. 
And we have raised this issue.
  The GAO--not us--the GAO says that ought to be returned. But it will 
not be, I assume because this Senate--Congress says, ``Gee, we don't 
want to touch that house on the Hill that's got those big gates around 
it, the big fence. And it's an American dinosaur. We can't crawl in 
there and see what's going on.'' But the GAO did a 2-year study. I 
would commend my colleagues to take a look at what they found in that 
study.
  There is plenty wrong down there. There is not good accounting. There 
is not good contracting. There is a rainy day fund of billions of 
dollars. So there is plenty of work to do with the Fed.
  I ask the Senator from Iowa, isn't it the case that all we were doing 
today was to say, ``Gee, we think it's time for you to reduce interest 
rates the next time you meet, given all the evidence that exists''?
  Several Senators addressed the Chair.
  Mr. HARKIN. I yield to my friend from Nevada.
  Mr. REID. I say to my friend from Iowa, I do not think the Senator 
from Iowa realizes, in the GAO report we also found that the governors 
of the Federal Reserve System, some of them fly first class, some of 
them fly whatever class they want. We found the most interesting things 
there, how they have no rules or guidance, how they travel, how their 
expenses are determined.
  I recommend to my friend from Iowa, and everyone within the sound of 
our voices, that we need to take a better look at the Federal Reserve 
System. I commend and applaud the Senator from Iowa for bringing this 
amendment here today because it gives us a chance to focus, as you have 
said, on a creature we created. Congress created this. And we have 
statements here: ``Hey, we can't suggest to the Federal Reserve System 
because it might hurt us internationally.'' Congress created the 
Federal Reserve System. Can't we do a little bit about it, for example, 
to see how they spend their money? The answer to this point is no.
  Mr. HARKIN. I hope that the Senator, then, would try again to bring 
up some legislation to provide for an audit of the Federal Reserve. I 
honestly cannot believe we are not doing that. I appreciate the Senator 
for his enlightenment on that issue.
  I yield to the Senator from Utah for a question.
  Mr. BENNETT. I cannot let this exchange go without giving a word or 
two of explanation. The Federal Reserve Board, as the Senator from Iowa 
has accurately stated, was created by the Congress, and presents to the 
Congress an audited statement of its financials every year. It is 
addressed to the Speaker of the House.
  It is true that it was not done by the General Accounting Office, but 
they are audited by a legitimate outside auditor, and their activities, 
down to the penny, are reported to the Speaker

[[Page S10756]]

of the House in a written document every year. I will be happy to 
supply it to any Member of this body that may wish it.

  Mr. HARKIN. I thank the Senator for this enlightenment.
  I am responding to what the Senator from Nevada said, that they were 
not audited.
  Mr. BENNETT. The Senator from Nevada is correct; they are not audited 
regularly by the General Accounting Office, but it is audited. A copy 
of the audited and exact financial activities of the Federal Reserve 
Board are submitted in writing to the Speaker of the House every year.
  I have constituents who are constantly saying to me that the Federal 
Reserve Board is owned by a group of Swiss bankers or foreign interests 
somewhere and that it has never been audited. I always send them a copy 
of the audited report of the Federal Reserve Board that is submitted to 
the Speaker so that they can know that this creation of the Congress 
does not go unexamined by an appropriate auditing firm.
  It is true to say that it is not audited regularly by the General 
Accounting Office. I think that is the point the Senator from Nevada 
was making. However, I think we should not let people be under the 
assumption that the Federal Reserve Board goes without anybody paying 
any attention to how they handle their money.
  Mr. HARKIN. Without losing my right to the floor, I yield for a 
further answer from the Senator from Nevada.
  Mr. REID. I say to my friend from Utah through the Senator from Iowa 
that I think this is something that really deserves a debate. I hope 
that when our bill is offered on a subsequent occasion that the Banking 
Committee will at least give us a hearing on this.
  I say to my friend from Utah, yes, there is a document that they call 
an audit, but it is a self-audit. You cannot audit yourself. That is, 
in effect, what has happened. We think there should be oversight by the 
Congress of the United States which created the Federal Reserve System. 
They shouldn't be able to hire whoever they want to look at their 
books. They may do a great job, but from a perception standpoint it 
doesn't look great.
  When the General Accounting Office tried to get the information 
requested by the Senator from Nevada and the Senator from North Dakota, 
it was extremely difficult to get. The Federal Reserve System is an 
island to itself. They don't like to be messed with, bothered, or give 
information.
  Mr. HARKIN. If I might yield further without losing my right to the 
floor, I yield to the Senator.
  Mr. BENNETT. Mr. President, I am happy to have a debate about this 
with the Senator from Nevada or anyone else. I think it is a legitimate 
issue to be aired, but I did not want to let the opportunity go by with 
the misimpression that some might have gathered. I know it was not 
intended for the Senator from Nevada to grant that misimpression, but 
some might have the misimpression that the Federal Reserve Board does 
not respond to the Congress that created it in an orderly fashion.
  Mr. HARKIN. If I might say to my friend from Utah and Nevada, is it 
proscribed by law that the GAO cannot audit the Federal Reserve? Is 
that proscribed or is it just that they don't do it until we tell them 
to do it?
  Mr. REID. I say to my friend from Iowa, I can't answer that question. 
I just know they don't do it. They have never done it.
  When we asked for the review by the General Accounting Office of the 
Federal Reserve System, they fought us every step of the way. It took 2 
years to get information that should have been obtained in a matter of 
a couple of months.
  Mr. HARKIN. I ask the Senator from Utah if they do this audit that 
the Senator says is done what would be wrong with having the GAO do 
their own separate audit? What is wrong with that?
  Mr. BENNETT. I don't know, either, I say to the Senator from Iowa. I 
have not looked into that.
  Frankly, I have examined the annual report that the Fed submits to 
the Congress, addressed, as I say, to the Speaker of the House every 
year. They do it in accordance with law. They respond to the law that 
created them in that fashion. At least to my satisfaction, after 
examining that document, I haven't felt the need for any additional 
information.

  As to whether there is a legal proscription against GAO, I have no 
knowledge one way or the other.
  Mr. HARKIN. I thank the Senator from Utah.
  Again, this raises another issue that was not in the sense-of-the-
Congress amendment that I sent to the desk on which we just expressed 
ourselves.
  I wanted to get back to the point, again, that it is a creature of 
Congress. I am somewhat disturbed, not so much by the outcome of the 
vote. I have lost votes around this place before. That is not the 
point. But the issue is the kind of talk that I heard among Senators 
after voting on this that, (a) we shouldn't politicize the Fed; (b) we 
shouldn't tell the Fed what to do; (c) the Fed is a separate entity and 
we shouldn't have anything to do with them.
  I just don't understand where this comes from. I don't understand why 
this is the perception of so many people. I don't know why the Federal 
Reserve System has become so sacrosanct that we simply cannot deal with 
it. It is like the ``Holy of Holies.''
  I find it strange that, as policymakers, we can't stand up and tell 
the Fed what we think they should do. That is not politicizing it. To 
politicize it would be for us to pass a law mandating that interest 
rates be at a certain level, or a law mandating that the Federal 
Reserve should vote this way or that. That is politicizing. That is 
what this Senator would even vote against.
  But for the Senate to say to the Federal Reserve, a creature of the 
Congress, we have looked at the landscape, we see what is happening in 
our economy, we see what is happening worldwide, we don't like what we 
see. We believe that the time has come to lower interest rates. We 
believe something should be done.
  Now, again, I see nothing wrong with this debate. I think that is 
part not only of our rights, but our responsibility.
  I want to take a couple more minutes to say why I believe so deeply 
and so strongly that we should be saying to the Fed that they should 
lower interest rates. Sometimes you would think this is a liberal 
proposition. I don't define it in terms of left, right, liberal, 
conservative. I really don't define it in that way. I define it in 
terms of whether or not we believe interest rates should be lower or 
whether we think they shouldn't be lower; whether we think the economy 
is going into a recession, or whether we think the economy may be 
verging on inflation. If you think the economy is experiencing an 
acceleration of inflation, you would not want to cut interest rates; if 
you think the economy is verging on recession, you would want to lower 
interest rates.
  That is where I believe we are. Don't take my word for it. I will 
point out what the Business Roundtable said on September 16, last week:

       The President and Congress should encourage the Federal 
     Reserve to lower U.S. interest rates. In addition, the 
     President, Congress and the Federal Reserve should work with 
     our international trading partners to stimulate their 
     domestic economies.
       . . .. should encourage the Federal Reserve to lower U.S. 
     interest rates.

  It doesn't say we should ask the Fed to ``consider.'' It doesn't say 
that. It says they should ``lower'' the rates, not ``consider.''
  There is talk that the Senator from New Mexico wants an amendment to 
say that we would just consider, that we should tell the Fed they 
should consider lowering interest rates. I don't believe that language 
is strong enough. Again, it is as if for some reason we almost have to 
ask the Fed for their permission to tell them what we think they should 
do.
  Mr. WELLSTONE. Will the Senator yield?
  Mr. HARKIN. I yield for a question to my friend from Minnesota.
  Mr. WELLSTONE. Mr. President, for some reason I don't understand, as 
well, why Senators are unwilling to speak to this issue and provide our 
judgment about what should be done. We don't talk about monetary policy 
much.
  The Business Roundtable says, ``The President and Congress should 
encourage the Federal Reserve to lower U.S.

[[Page S10757]]

interest rates.'' The Business Roundtable doesn't fit into the label 
``liberal,'' although I think that label is irrelevant. Why has the 
Business Roundtable taken that position? What is it about real interest 
rates that is so important to the people you represent in Iowa and the 
people I represent in Minnesota? Can we talk for a moment about that?
  Mr. HARKIN. Sure. I thank the Senator. That is really the point. I 
have a chart to show that the real Federal funds rate is at its highest 
level in nine years. What does that mean? What that means is that real 
rates of interest are at a very high point. For example, even Chairman 
Greenspan said earlier this year that real interest rates are at a 
historically high level, compared to all the years from World War II 
until now.
  What does that mean? Well, that means that the farmers in America 
whose commodity prices are going down all the time, our livestock 
producers and our farmers have to pay exorbitantly high interest 
rates--real interest rates--when they are already squeezed with low 
prices. It means that our business sector, small businesses, and others 
who are creating jobs, who need to borrow money for expansion or even 
for job training or retraining, find that they are squeezed because of 
high interest rates. So they don't do it. So what happens then is our 
economy starts to slow down.
  I will point out that in the first quarter of this year, our growth 
was 5.5 percent; it was 1.6 percent in the last quarter. Many economic 
signs point to a possible recession, possibly a downward spiral in 
prices. Then we see what is happening in foreign economies and in 
foreign currencies. Because of our high interest rates, we find that 
their economies are going down and they, in turn, can't buy any of our 
products because of the excessively strong dollar that we have. So when 
you add it all up, because of the insistence of the Fed to keep a tight 
money policy, high interest rate policy, they have moved us to the 
brink of recession.
  In further responding to the Senator's question, from 1994 to 1995 
the Federal Reserve raised interest rates by 100 percent, from three 
percent to six percent. They raised interest rates because they were 
beholden--most of them, or at least the voting majority--to an economic 
theory called NAIRU, Non-Accelerating Inflation Rate of Unemployment. 
That is a fancy term. What some economists have believed in the past is 
if unemployment fell to a certain level, inflation would take off and 
it would spiral upward and accelerate--it would not just rise, it would 
accelerate, if unemployment got to a certain level.
  Well, a couple years ago, economists said they thought that rate was 
6 percent. They thought that if unemployment went below 6 percent, we 
would be in deep trouble. Then unemployment went below 6 percent and 
the Fed said, ``Oh, my gosh, we have to tighten monetary policy,'' and 
they started raising interest rates. Inflation never went up. Then 
unemployment went down. And, they said, ``Well, we changed our minds. 
The natural rate of unemployment is actually 5.5 percent.'' Well, then 
unemployment went below 5.5 percent. Now we are at 4.5 percent 
unemployment, and still no inflation. Yet, the Federal Reserve has 
continued to keep a tight money, high interest rate policy in effect, 
because they were afraid; they felt that because of this economic 
theory, inflation was going to take off.
  What happened is, because of that high interest rate policy, our 
farmers are squeezed, our consumers are squeezed, homeowners have to 
pay more monthly interest on mortgages on their homes, small businesses 
pay more money when they borrow to expand, or they just don't do it. A 
larger business, whether it is General Motors or Ford, would have to 
pay higher interest rates. The economy starts to slow down. That is 
exactly what happened.
  I submit further to my friend from Minnesota that because of their 
policies over the last couple years, because they would not move, it 
has helped generate the kind of economic collapse we have seen in other 
parts of the world. The high interest rate policy at the Fed is a 
contributing factor to the continual decline of the Asian economy.

  Mr. WELLSTONE. If the Senator will yield, I will not take much more 
time. I have two quick questions, I say to my colleague from Florida, 
because I know he is waiting. I will ask the question to the Senator 
from Iowa who gives the lengthy answers. I think it is just incredible, 
I say to my colleague from Iowa, it is just incredible how this whole 
issue of real interest rates and monetary policy--which has such a 
critical impact on small business, on farmers, and on industry and 
housing --is taken off the table. We are even unwilling to give our 
best judgment as to what the Federal Reserve ought to do. It is amazing 
to me.
  Let me ask you this question: Would you agree----
  Mr. HARKIN. I will keep it short.
  Mr. WELLSTONE. I want to hear the Senator's answer, because this is a 
critical issue. Would you agree that our taking the lead in lowering 
short-term interest rates also would be critical to what the Germans 
might do, what the other G-7 countries might do? Shouldn't this be put 
in the context of a coordinated response at an international level, 
dealing with this contraction of the international economy, dealing 
with this problem of deflation? Maybe you could spell out a little bit 
what you mean.
  In other words, the Senator talked about the effects of high real 
interests rates within our country, but could we not also say another 
part of the argument is the effect on exchange rates? That a strong 
dollar ultimately means other countries will try and export their way 
out of crisis? That they will dump a lot of products on our market and 
end up competing with workers in our country?
  Aren't you really saying that, in the absence of something being done 
through monetary policy, we are not going to be able to get enough 
demand going in these countries? That we are not going to have enough 
economic stimulus? That people are not going to have money to buy 
products, which would help create jobs? And that the major problem is 
not going to be what you were talking about--inflation, which the Fed 
seems to be excessively focused on--but deflation? Am I not correct 
that that is part of what is going on?
  Mr. HARKIN. Absolutely.
  Mr. WELLSTONE. Bill Greider, who wrote, ``One World: Ready or Not,'' 
has been talking about this for some time. In part, you are talking 
about the effects of monetary policy within our country. But you are 
also talking about our taking the lead in trying to fashion a 
coordinated response at an international level to deal with what has 
happened. We have a depression in part of the international economy.
  Mr. HARKIN. The Senator is right. I wish the Fed would pay more 
attention to Bill Greider's writings. Monetary policy has to work for 
all of our people, not just a few. It has to be cognizant of what is 
happening to ordinary people in this country.
  As the Senator spoke about what is happening internationally, I was 
looking through the papers. The Wall Street Journal pointed this out in 
an editorial on August 31, calling for the Fed to lower interest rates. 
They said, ``Since last year, currencies in emerging markets, from 
Thailand to Russia, have been collapsing like popped bubble wrap.'' 
This is a significant threat to us and people in those countries. Our 
dollar is much too strong right now. Because of that, they can't get 
the kinds of foodstuffs and things they need for their own people.
  (Ms. COLLINS assumed the Chair.)
  If we want to help the Japanese economy and the Asian economy, what 
we should do is lower interest rates. Many economists have noted that 
the value of currencies in several countries will not only reduce the 
rate of inflation but also sharply increase our trade deficit, 
eliminating many jobs and slowing growth in the process.
  Again, if we don't address this because of their slowdown, because 
they are not buying our products, we are going to lose jobs in this 
country. We are going to have a drastic slowdown.
  The fear I have, I say to my friend from Minnesota, is that we may 
have waited too long. The Fed was so frozen by this outdated, outmoded 
economic concept called NAIRU that they couldn't see what was really 
happening because they only focused on the rate of unemployment, and 
that caused them to be blind to everything else that was going on.

[[Page S10758]]

  Mr. WELLSTONE. I ask my colleague, this concept that he is talking 
about--NAIRU--is the idea that if you reduce employment too much, you 
automatically set off an inflationary spiral?
  Mr. HARKIN. Inflation would not only start but accelerate.
  Mr. WELLSTONE. My last question, I say to my colleague--and I look 
forward to coming to the floor and having a further discussion about 
this. I hope we are wrong. But I think this discussion of political 
economy, both in terms of what is happening to the global economy and 
also what is happening in our own economy, is going to become a very, 
very critical issue. We are seeing it already in agriculture. But this 
is just the beginning.
  But this is my last question. Is it not also true that, when they 
talk about the alleged danger of unemployment continuing to go down, 
that this would also bring up the bargaining power of wage earners? It 
wouldn't be just a matter of unemployment going down. This would also 
mean that people in a tight labor market would see their wages go up 
and would have a better chance of working at living-wage jobs? I think 
the Federal Reserve Board tends to be more responsive to bond holders, 
financial people, and the creditors, and they want to keep interest 
rates up.
  Isn't it also true that having real interest rates so high is one of 
the reasons we have a maldistribution of wealth and income today in 
this country? We have this paradox of some people being able to 
purchase all the goods that make life richer in possibility. But then 
we also have so many families--maybe the majority of families in our 
country--who cannot. Maybe this is one of these hidden issues that we 
don't talk about, with everything swirling around in Washington, that 
so many families are still struggling to make ends meet and do well by 
their kids.
  What would be the harm in moving toward full employment? What would 
be the harm in making sure that wage earners make better wages? What 
would be the harm in having more people have access to living-wage 
jobs? Isn't the whole question of real interest rates one piece of it?
  Mr. HARKIN. I say to the Senator from Minnesota that he is absolutely 
correct.
  Mr. WELLSTONE. I agree.
  Mr. HARKIN. It is bigger by a tremendous magnitude.
  We deal here in budgets in terms of billions of dollars. I know it 
sounds like a lot of money. But what the Fed does affects the entire $7 
trillion economy.
  The Senator from Minnesota is absolutely right, what the Federal 
Reserve System does has a more profound effect on the daily lives of 
our citizens--how they live, how they are able to take care of their 
families, what kind of jobs they have, and what they have paid--than 
anything that we ever vote on around here in terms of budget matters.
  I thank the Senator for his inquiries and enlightenment on this 
issue. He has been a long-time fighter for the average working families 
and making sure that working people get a fair deal. I know the Senator 
from Minnesota understands that if you have lower interest rates, that 
helps working families. It helps families.
  The Senator from Minnesota also knows, as most of us know, that in 
the last couple of years, with this tight money policy, this high 
interest rate policy at the Federal Reserve, some people have said, 
``Well, gee, whatever they have done has been good. Our economy is 
great. Whatever the Fed has done is good. Look at what is happening in 
our economy. Look what is happening in our economy. Unemployment is 
down.''
  That is true. But if unemployment is so low, I ask you, why is it 
that when I went to Sioux City last Friday and visited the food bank, 
or earlier on when I visited the food bank in Des Moines, I was told by 
the directors of those two food banks that their demand for commodity 
foods--that the USDA commodities plus the food they get contributed 
from businesses, churches, and schools--is skyrocketing higher than 
ever?
  I did some checking. It is not only in Iowa, but in almost every 
State, the demand for food at our food banks has gone up in the last 
year or so. Why? If everyone is working, unemployment is so low, and 
the Fed has done such a great job, it is because, as I have been told 
and as I have found out, many of these people are working--usually 
single parents, usually single mothers with one or more children. They 
go to work every day. They work every day. They make a paycheck. They 
qualify for food stamps. They get food stamps. And then the food stamps 
run out before the end of the month. The only place they have to go is 
to the food bank to get free food.
  Don't take my word for it. Ask your staffs. Go out and ask your food 
banks. In any State, go out and ask those food banks. Find out what is 
happening. You will find that it is true. The demand for food from 
those food banks has gone up and continues to go up, and they are 
concerned about what is going to happen this winter.
  What has that to do with the Federal Reserve System? I am just 
saying, if they have done such a good job in this economy, why are they 
falling below the safety net? Because the high interest rate policy has 
ignored what is happening to the working families of America. A lower 
interest rate policy, everyone agrees, might mean that wages might go 
up and that businesses might be able to pay more in wages. I don't see 
anything drastically wrong with that. I think it would be a good thing 
for this country if wages went up. It would give people a little bit 
more buying power.
  Again, what we are seeing happen in our country happened in the 
1920s. Fewer and fewer people are making more and more money. More and 
more people are making less and less and having less of a stake in our 
economy. It is true. It is happening in the agriculture sector, too.
  Neil Harroly, the distinguished agricultural economist at Iowa State, 
said what we are seeing in agriculture is not like the 1980s, it is 
like the 1920s. I think that is also what we are seeing happening in 
our country, too. So that is why I make the strong case that we have an 
obligation.
  I see my friend from Florida is ready to speak. I am going to wrap up 
very shortly, but I just want to make a couple of points.
  The Federal Open Market Committee may or may not be in a mode to 
lower interest rates. I quote the September 18 issue of the Christian 
Science Monitor, which noted that some Fed policymakers ``remain in a 
hawkish anti-inflation mode rather than worrying about the impact of 
deflation.''
  These include William Poole, president of the St. Louis Regional Fed; 
Fed Governor Edward Gramlich; and an analyst, Jerry Gordon, president 
of the Cleveland Fed.
  I don't say that. I am just quoting from the Christian Science 
Monitor.
  Madam President, I ask unanimous consent that the article be printed 
in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

          [From Christian Science Monitor, September 18, 1998]

New Signs of Weakness In U.S. Economic `Fortress' Forecast For Slowdown

                         (By David R. Francis)

       Concern is growing in the top echelons of Wall Street and 
     Washington that cheap exports from overseas--everything from 
     shovels to chopsticks--may drive down the American economy. 
     The ``R'' word--recession--is now being heard more often.
       As troubles persist in East Asia, Russia, and Latin 
     America, US companies are finding fewer buyers for their 
     goods overseas while foreign products are filling US shelves 
     and showrooms. The concern was reflected on Wall Street 
     Thursday, as stock prices plunged in early trading.
       It was a ``double whammy,'' says Joel Prakken, chief 
     economist of Macroeconomic Advisers in St. Louis. Investors 
     were disturbed by new statistics on the American economy and 
     by unsettling testimony to Congress by Federal Reserve 
     Chairman Alan Greenspan and Treasury Secretary Robert Rubin 
     Wednesday.
       Though terming the United States economy strong, Mr. 
     Greenspan noted, ``There are the first signs of erosion at 
     the edges, especially in manufacturing.''
       A plunge in prices on the Tokyo Stock Exchange to a 12-year 
     low didn't help. In New York Thursday, the Dow Jones 
     Industrial Average dropped more than 200 points in early 
     trading.
       Economists still are forecasting moderate economic growth 
     in the US this year and in 1999. ``The slowdown is a little 
     worse than we thought,'' says David Wyss, chief economist of 
     Standard & Poor's DRI, an economic consulting firm in 
     Lexington, Mass. ``And the risks of a recession are 
     rising.''

[[Page S10759]]

       Nonetheless, DRI sees growth in the national output of 
     goods and services at about a 2.5 percent annual rate the 
     rest of this year, helped by a rebound from the General 
     Motors strike. Mr. Wyss predicts 1.5 percent growth next 
     year.
       He would like to see the Federal Reserve cut interest 
     rates. Wall Street would, too. It wants interest rates 
     lowered by other industrial nations as well. One reason for 
     the less-than-happy face of many investors yesterday was Mr. 
     Greenspan's testimony that, ``at the moment, there is no 
     endeavor to coordinate interest-rate cuts'' among the major 
     powers.
       Wyss hopes for and expects lower U.S. rates by the end of 
     the year, though not necessarily at the Fed's next gathering 
     Sept. 29.
       Some of those policymakers remain in a hawkish anti-
     inflation mode, rather than worrying about the impact of 
     falling prices (deflation). These include William Poole, 
     president of the St. Louis regional Fed, Fed Governor Edward 
     Gramlich, and, analysts say, Jerry Jordan, president of the 
     Cleveland Fed. ``They have got to come around,'' says Wyss. 
     ``I'm not sure what it will take.''
       Some, though, oppose a Fed rate cut at this time. They 
     don't see the economy slowing that much. Prakken, for one, 
     expects a 2 percent growth in gross domestic product next 
     year.
       One concern of economists is that the decline in stock 
     prices itself will hurt growth. Wyss figures $2 trillion in 
     paper household wealth disappeared between the July 17 peak 
     in the stock market and the end of August. If the downturn 
     lasts, it could trim consumer spending by as much as $50 
     billion.
       The Asian crisis has hit U.S. exports hard, too. ``The 
     trade data were terrible,'' says Wyss.
       The U.S. trade deficit widened to $13.9 billion in July. 
     Currency devaluations and depressed economies in Asia 
     resulted in exports hitting a 17-month low.
       So far this year, the trade deficit in goods and services 
     is running at a record annual rate of $185 billion, 68 
     percent higher than last year's record deficit of $110 
     billion. America's deficit with Pacific Rim countries hit 
     $87.8 billion in the first seven months--42 percent above the 
     imbalance for the period in 1997.
       ``The trade balance could get a lot worse if there is 
     another round of devaluations,'' warns C. Fred Bergsten, 
     director of the Institute of International Economics in 
     Washington.
       The inflation news was not so bad. In August, the Consumer 
     Price Index was up a seasonally adjusted 0.2 percent, same as 
     in July. For the year, inflation is running at a 1.6 percent 
     annual rate, compared with 1.7 percent for all of last year.
       Prakken expresses concern that the ``core'' inflation 
     rate--a measure that removes volatile energy and food 
     prices--is up 2.5 percent for the past year. His partial 
     explanation of the stock market decline is that Wall Street 
     is finally recognizing that corporate shares have been 
     overpriced, and that earnings will not rise nearly as much as 
     analysts had anticipated.
       He expects a ``virtual stall'' in earnings. The reasons: 
     reduced profits from overseas operation as well as rising 
     wages at home and difficulties in cost cutting.

  Mr. HARKIN. I thank the President.
  As David Wisk, chief economist of Standard & Poor's DRI, has 
complained, ``They have got to come around. I'm not sure what it will 
take.''
  Let me repeat that. As David Wisk, chief economist of Standard & 
Poor's DRI, said, ``They''--the Federal Reserve--``have got to come 
around. I'm not sure what it will take.''
  I thought one of the things it might take is for the Senate of the 
United States to clearly express itself to the members of the Federal 
Open Market Committee to lower interest rates now.
  There are increasing signs of a possible recession. Thirty-year 
Treasury bond rates have sunk to record lows and are now below the 
short-term Federal funds rate. This is a drastic warning signal.
  Again, I would point to the chart here ``30-year Bonds'' now lower 
than the Federal funds rate. That should scare us all. That should 
point to what we have to do in terms of lowering our short-term 
interest rates. Wholesale prices slid a steep 0.4 percent in August. In 
fact, for the first 8 months of this year producer prices have fallen 
at a 1.4-percent annual rate, compared with a 1.2-percent rise in 1997.
  Again, I have talked about our farmers at great length and about what 
is happening to them and what is happening to our commodity prices.
  I would start to wrap up my comments again just by saying that if 
someone voted because they don't want to lower interest rates, that is 
fine. While I think they are wrong, I will be glad to debate that, if 
we could ever get a debate on this issue in the Senate; no one seems to 
want to debate that issue.
  Do we say somehow we can't express ourselves in telling the Federal 
Open Market Committee that they should lower interest rates--our 
language said promptly reduce interest rates--that somehow we can't say 
that because the Fed is independent, because the Fed is so sacrosanct 
that we can't touch it, that somehow we have to couch it in weak terms 
such as the Fed should only ``consider'' lowering interest rates? Why 
do we have to beg the Federal Open Market Committee to do something? 
Does the Congress of the United States work for the Federal Reserve 
System? Are they our bosses? Are they the ones who pull the strings and 
tell us what we can and cannot do?
  We seem very reluctant in even expressing our views, because somehow 
it would politicize the Fed. We were not politicizing the Fed; that 
would take legislation. This was a sense-of-the-Congress, a non-binding 
resolution.
  I hope that the members of the Federal Open Market Committee will 
promptly reduce interest rates six days from today. Unfortunately, as 
the Christian Science Monitor recently reported, there are members of 
the Fed Open Market Committee who still believe we should worry about 
an acceleration in inflation. I am just hopeful that Mr. Greenspan and 
others do not take this vote as a vote that they should not reduce 
interest rates.
  A number of Senators said to me, ``Well, that's what they are going 
to do anyway.'' Well, I am not so certain. I hope they will. They 
should have reduced interest rates two years ago when I took to the 
floor at that time and started calling on the Fed to do that because 
there were drastic signs in our economy, that there was little 
inflation in the economy, that there was no reason for them not to 
reduce interest rates at that time to help our farmers and our working 
families out there. I just hope it is not too late. I just hope that 
the Federal Reserve does not misinterpret this vote.
  One of the reasons that I objected to the Senator from New Mexico 
bringing up this other sense of the Senate that would just ask them to 
consider lowering interest rates is that I personally believe it is 
beneath our dignity and our responsibility and rights as Senators to go 
hat in hand to the Federal Reserve and sort of beg them to do something 
when we ought to be able to stand on our own two feet and tell them 
what we believe they should do.
  I yield the floor.
  Mr. GRAHAM addressed the Chair.
  The PRESIDING OFFICER (Mr. Santorum). The Senator from Florida.


                         Privilege of the Floor

  Mr. GRAHAM. Mr. President, before proceeding with my remarks, I ask 
unanimous consent that Ms. Allison Morgan, of my staff, be granted 
floor privileges during the remaining consideration of the bankruptcy 
reform bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                     FEDERAL DISTRICT COURT JUDGES

  Mr. GRAHAM. Mr. President, today I rise to discuss the issue of the 
congressional response, or in this case, the lack of response to the 
need for additional Federal district court judges. We are facing an 
increasing disparity between the judicial resources available at many 
of our Federal district courts and the workload imposed upon those 
judges.
  The question might be asked, ``Why are you offering this amendment to 
a bankruptcy reform bill?'' It is interesting to note that the 
underlying legislation would create 18 new Federal bankruptcy 
judgeships. The basis of those 18 new Federal bankruptcy judgeships is 
that this legislation is created in response to additional workloads 
requiring that additional number of judges in order to discharge their 
responsibilities.
  I suggest that, similarly, we should apply the same rationale to our 
Federal district court judges, and that is--that as their workload 
increases, either because of demographic or economic or social 
circumstances, or because we add to their workload by expanding their 
jurisdiction, it is our commensurate responsibility to increase the 
number of Federal district judge positions. These judge positions are 
responsible for handling some of the most complex civil and criminal 
cases in our judiciary.
  In recognition of that, in March of 1997, the Judicial Conference of 
the

[[Page S10760]]

United States, chaired by the Chief Justice of the U.S. Supreme Court, 
recommended the creation of 24 additional permanent and 12 additional 
temporary Federal district court positions. The Judicial Conference 
also recommended the establishment of 12 additional judges to the 
circuit courts of appeals. However, my remarks this afternoon are 
confined to the needs that exist with the U.S. district court judges.
  Mr. BRYAN. Will the Senator from Florida yield for a question?
  Mr. GRAHAM. I will yield to my friend and colleague from Nevada.
  Mr. BRYAN. I appreciate the courtesy of the senior Senator from 
Florida.
  I note from the chart the Senator has brought to the floor that the 
State of Nevada is included. The Judicial Conference has recommended, 
as I understand, two additional district court judges for Nevada. Would 
it be the Senator's intention to include in the amendment that he is 
about to discuss with greater particularity the two additional judges 
that were recommended by the Conference for Nevada?
  Mr. GRAHAM. Absolutely, I say to my friend. I am not proposing that 
this Congress insert its greater wisdom for that of the Judicial 
Conference. I am proposing that we accede to the wisdom of the Judicial 
Conference and where it, for instance, has recommended two additional 
permanent Federal judgeships in Nevada, that the Congress should 
sanction them. The reason for the recommendation of two additional 
judges in Nevada is that, of the 93 districts, including those in the 
50 States plus the District of Columbia and Puerto Rico, of that 
number, the Nevada district ranks eighth in terms of caseload. Its 
caseload of 736 cases per judge is 171 percent of the stated standard 
that is used by the Judicial Conference to indicate that new judges are 
needed.
  Mr. BRYAN. I appreciate the statesmanship my friend has provided and 
the information that is made available with respect to the situation in 
Nevada. I might just add to the comments of the Senator that, having 
lived in Nevada for more than 57 years and knowing each of our four 
district court judges personally, I do not know of a harder working 
bench at either the State or Federal level anywhere in America. 
Frankly, it required considerable statesmanship of the former chief 
judge in Nevada in electing to take senior status, which the Senator 
from Florida fully understands, that allowed a new district court judge 
to come on board. That senior judge, together with another colleague of 
his who is a senior judge, maintains an extraordinarily active 
caseload. So that has helped but has not eliminated the backlog to 
which the Senator has addressed his comments.
  I must say, ``justice delayed is justice denied.'' The State of 
Nevada has the fastest growing population in the country over the past 
decade. That is reflected in the litigation in the Federal court 
system, based not only in the demographics but other situations which I 
am sure the Senator will allude to. So I want to join with the Senator 
from Florida in calling this very important issue to the attention of 
our colleagues and the American people. This is not an issue about 
lawyers or judges per se. What we are talking about are the needs of 
people who have their issues brought to the Federal court system and 
who are entitled to have those issues resolved in a prompt manner. With 
respect to those who violate Federal law, they need to have those 
matters addressed promptly in the interests of justice for all 
Americans. I think the proposal the Senator is about to unveil and 
explain in greater detail is entitled to the support of our colleagues. 
I wish him well and pledge my support in his efforts.
  I thank him again for his leadership on this issue.
  Mr. GRAHAM. I appreciate those very generous comments of the Senator. 
As my colleague knows, his State is not alone. This map indicates in 
blue those States that have been determined by the Judicial Conference, 
chaired by our chief justice, to require one or more additional Federal 
judges in order to keep pace with that particular judicial district's 
workload.
  The States of Alabama, California, Florida, New Mexico, North 
Carolina, Texas, Arizona, Colorado, Nevada, New York, Oregon and 
Virginia would all receive permanent additional judges under the 
Judicial Conference's report.
  Mr. BRYAN. I thank the Senator for his comments.
  Mr. GRAHAM. As an example--I see we are joined by the Senator from 
Alabama. The middle district of his State happens to be the seventh 
busiest district in the country with a workload that is 176 percent of 
the standard which the Judicial Conference utilizes in assessing 
whether an additional Federal district judge is appropriate.
  Mr. SESSIONS. Will the Senator from Florida yield?
  Mr. GRAHAM. I yield to the Senator from Alabama.
  Mr. SESSIONS. Mr. President, I do respect the concern of the Senator 
from Florida. As a Federal prosecutor for almost 15 years in Alabama, 
which is part of the 11th circuit, of which Florida is a part--the 11th 
circuit, I have come to admire and be extremely impressed with the 
workload and work ethic of the Florida Federal judges, as well as the 
Alabama Federal judges. Both groups have very high caseloads, higher 
than the national average. I think probably the middle district of 
Florida, and maybe the southern district of Florida, are two of the top 
districts in the country in so needing additional judges. The middle 
district of Alabama, as you noted, has one of the very highest 
caseloads.
  I would share, this bankruptcy bill actually reduces the workload for 
Federal district judges a bit by not having them handle appeals from 
bankruptcy. That is the only thing it really affects for Federal 
district judges, because bankruptcy judges are separate.
  I would just want to advise the Senator from Florida, I share his 
concern, but I have been working with Senator Grassley, who chairs this 
subcommittee involving courts and administrative matters. He has been 
studying this. We have been having some hearings from judges, 
particularly courts of appeals. But we have not, in depth, analyzed 
this problem yet. I know Senator Grassley intends to.
  I would like to share some things. If a business had a court like the 
middle district of Florida that not only has a heavy caseload--it has 
complicated, big drug cases, international cases--they would probably 
look at the D.C. circuit that has 15 judges and they average 259 cases 
per judge instead of 855 in Florida and they might decide the 
taxpayers--or their business--would be better served if we shifted some 
from places that are not so busy to those that are more busy. I hope we 
will be able to analyze that, because a Federal judgeship, once you 
approve it, is a lifetime appointment. They get it for life and it 
costs $1 million a year for each Federal judge. What we need to begin 
to look at is some of those circuits that need to shift some judges to 
high-work districts. We could do that over the years. I think Senator 
Grassley is committed to this. I am on that subcommittee so I am 
concerned about it. If we do it right, we can improve justice with a 
minimal cost to the taxpayer. I think that is what we are called to do 
and I thank the Senator from Florida for raising the problem.
  Mr. GRAHAM. Mr. President, I appreciate the comments of the Senator 
from Alabama who, from his long experience in a variety of significant 
legal positions, is very familiar with the basic principle of my 
remarks, which is the relationship between changing workload and demand 
on judicial resources.
  The Judicial Conference has proposed as a method of balancing that 
workload of judicial resources--a formula. That formula essentially 
takes the number of cases filed within a particular Federal district, 
weights those cases based on their complexity, and then divides that 
number by the number of judges currently assigned to the district. The 
standard for each Federal district judge is 430 weighted cases per 
year. When the caseload exceeds 430, that district is entitled to be 
reviewed for purposes of an additional judge. These judgeships are 
needed to help the Federal judiciary, a co-equal branch of our 
Government, to fulfill its constitutional obligations. It should be 
understood that Congress has not granted the Federal judiciary any 
additional Article III judges since 1990.
  During the previous three occasions on which Congress has authorized 
new Federal judgeships under the standards of the Judicial Conference, 
the cycle

[[Page S10761]]

for such authorization has been six years. For instance, in September 
of 1976, the Judicial Conference recommended 106 permanent and 1 
temporary Federal district judge. Congress considered that 
recommendation and, on October 20, 1978, approved 113 permanent and 4 
temporary judges. That was done under a Senate which was in Democratic 
control.
  Mr. President, 6 years later, in September of 1982, the Judicial 
Conference recommended 43 permanent, 8 temporary, and 2 conversions 
from temporary to permanent. On July 10, 1984, a Republican Senate 
authorized 53 permanent, 8 temporary, and 2 temporary to permanent 
conversions.
  In 1990, June, the Judicial Conference recommended 47 permanent, 29 
temporary, and various conversions. Then on December 1, 1990, a 
Democratic Senate approved 61 permanent and 13 temporary and various 
conversions.

  The point of this is that on a bipartisan basis, whether it was a 
Republican Senate or a Democratic Senate, every 6 years since 1978, the 
Congress has responded to the Judicial Conference's recommendation. It 
is also significant that in each one of those cases, the Congress 
actually approved more judges than the Judicial Conference had 
recommended.
  However, the last recommendation that was made was in March of 1997, 
following recommendations that were unheeded in September of 1992 and 
in September of 1994. There were recommendations made in March of 1996 
to convert a temporary judge to a permanent judge and to convert a 
temporary extended to a permanent status. But there have been no new 
judgeships created since December 1, 1990. So we are now 2 years past 
the point which has been the standard for the creation of new Federal 
judgeships as recommended by the Judicial Conference.
  Mr. President, I submit that it is high time for us to respond to the 
need for more U.S. district court judges in accordance with the 
Judicial Conference's recommendation. Today, many of our district court 
judges are strained beyond capacity in trying to meet the increasing 
caseloads which they face.
  For example, in 1997, the Federal judiciary saw increases in both 
criminal and civil cases.
  The number of cases filed in the district courts increased by 24 
percent.
  The most significant increases occurred in drug and immigration 
cases, particularly, as this chart will indicate, in many of our border 
States which are the front lines for drug and immigration litigation.
  This growth in Federal caseloads has been coupled with a growing 
trend by the Congress to federalize an increasing number of laws that 
have traditionally been considered State responsibilities. These new 
laws have opened our courts to more cases without the requisite judges 
to meet the demand. For that reason, it is essential that we take this 
opportunity to eliminate the disparity between resources and workload 
in the Federal judiciary by an expansion in the number of judges at the 
earliest possible time.
  I do not submit my word as being final in this matter. Let me quote 
the December of 1997 statement by the Chief Justice of the United 
States Supreme Court and the Chair of the Judicial Conference, The 
honorable William Rehnquist. This is what the Chief Justice had to say 
about the current status of our Federal judiciary:

       Fiscal year 1997 saw courts of appeals and bankruptcy 
     filings at the highest rates in history. District courts also 
     were very busy. In addition to a small increase in civil 
     filings, there was a five percent increase in criminal cases 
     in 1997, producing the largest federal criminal caseload in 
     sixty years.

  The Chief Justice went on to say:

       Many factors have produced this upward spiral, including 
     laws enacted by Congress that expand federal jurisdiction 
     over crimes involving drugs and firearms, Supreme Court 
     decisions, large class-action litigation, and changes in 
     executive prosecution policies.

  I think our Chief Justice's statement is a strong message to the 
Congress, Mr. President.
  If I can illustrate what is happening on a national basis by 
reference to what is happening in my home State of Florida, I have seen 
the strain placed on the judiciary due to lack of adequate judicial 
resources needed to fulfill its constitutional obligations.
  Two of Florida's three districts are feeling the crushing pressure of 
this strain. These two districts have one of the highest caseloads per 
judge in the Nation. Under the Judicial Conference recommendation, 
Florida should receive six additional judgeships that include two 
additional judges in the southern district of Florida, three permanent 
judges in the middle district of Florida, and one temporary position in 
the middle district.
  In the southern district of Florida, the court's weighted filings 
stand at 590 per judgeship. This is in contrast to the average used by 
the Judicial Conference of 430.
  In the middle district, the story is even worse. This court's 
weighted filing is 809 filings per judgeship, which is 88 percent above 
the acceptable levels the Judicial Conference has established, and is 
the third highest number in the Nation.
  Mr. President, if I can make reference to this chart which indicates 
that as recently as 1990, the number of weighted cases in the middle 
district of Florida were 509 as against a national average of 448. At 
that time, the middle district was overburdened but not in a crisis 
situation.
  By 1993, the number had increased to 729, while the national average 
had dropped to 417. It is significant that there were additional judges 
added as a result of that December 1990 act of Congress, but it took a 
full 3 years before the effect of those additional judges had the 
consequence of reducing the average in the middle district of Florida 
to 575. No new judges have been added since that period, and currently, 
at the time of the preparation of this chart, the number was 812 
weighted cases per judge in the middle district. I have heard that this 
figure may have now grown to 855.
  As a result of this, a significant case backlog has developed. 
Currently, the middle district has 1,200 criminal cases pending and 
over 6,000 cases pending on the civil side.
  In response to this growing backlog of civil cases, Florida's middle 
district chief judge, Elizabeth Kovachevich, was forced this summer to 
declare a state of emergency. She closed the Federal courthouses in 
Jacksonville and Orlando and reassigned these district judges to work 
with the Tampa district judges in an aggressive targeting and disposing 
of the oldest pending civil cases. While such innovative measures may 
be effective in the short term, Congress will need to find the long-
term solution of providing adequate judicial resources.
  This increase in caseload is not only a problem for the Florida 
courts, but nationally. This chart, again, illustrates the number of 
States which the Judicial Conference has found additional judicial 
resources are required.
  The southern district of California is 100 percent above acceptable 
levels of the Judicial Conference; the district of Arizona, 83 percent 
above acceptable levels. As our friend and colleague from Alabama has 
already spoken, the middle district of Alabama is 76 percent over 
acceptable levels. The western district of North Carolina, 70 percent 
over acceptable levels.
  The caseload in all of these districts, and all the other districts 
the Judicial Conference has recommended for additional judgeships, only 
stand to get worse until Congress acts and acts with a sense of 
urgency.
  The U.S. Federal district courts are the first line of defense for 
most of our citizens involved in the Federal judicial system. Most 
Federal cases are disposed of at the district court level. But by not 
acting soon, we make it harder for thousands of crime victims and civil 
litigants in our district courts to receive the justice which they 
deserve.
  Mr. President, as I have indicated, I am prepared to offer my 
amendment to the bankruptcy bill to authorize additional Federal 
judgeships. Before proceeding, however, I would like to inquire as to 
the plans for consideration of this issue by the Judiciary Committee 
next year.
  I wonder if my distinguished colleague from the State of Utah, 
chairman of the Senate Committee on the Judiciary, which has oversight 
on these matters, could engage me in a discussion regarding this 
matter.
  Mr. HATCH. Mr. President, I am pleased to engage in a discussion with 
the distinguished Senator from Florida on the substance of this matter.
  Mr. GRAHAM. Mr. President, I thank the Senator for his time.

[[Page S10762]]

  I ask the chairman, is it his assessment that a number of Federal 
district court jurisdictions face a growing disparity between resources 
and workload?
  Mr. HATCH. I agree with the view that there appears to be a workload 
problem facing a number of district courts in Florida and some other 
areas. The Senate Judiciary Committee intends to act to review the 
matter and where necessary provide the additional judicial resources to 
those jurisdictions in need, if warranted and appropriate.
  Mr. GRAHAM. In my home State of Florida, I have seen the strain 
placed on the Judiciary due to the lack of judicial resources needed to 
fulfill its constitutional obligations.
  Will the Senator from Utah agree to review the Judicial Conference 
recommendations and the need for additional judges early next year?
  Mr. HATCH. As I have indicated to my colleague, I will, as the 
chairman of the Judiciary Committee, review this matter early next year 
and work with my colleague from Iowa, Senator Grassley, in a good-faith 
effort to consider this issue early next year.
  Mr. GRAHAM. I thank Senator Hatch for his support and for his work in 
this area critical to the State of Florida and the Nation.
  I also thank the Administrative Office of the U.S. Courts for their 
assistance during this process.
  I look forward to working with all my Senate colleagues in 
considering this important issue in future.
  Mr. President, in our colloquy, Senator Hatch recognizes, as he has 
done on many previous occasions, the importance of a strong judiciary 
in order to meet our Government's responsibility of equal justice to 
all of its citizens, and indicates that it is his intention that the 
Judiciary Committee consider this urgent need for additional judicial 
resources early in the next Congress. So I will desist from offering an 
amendment at this time on this legislation to that effect, and look 
forward to working with Senator Hatch and the other members of the 
Judiciary Committee to see that this important responsibility of the 
Congress is discharged as quickly as possible.
  Thank you, Mr. President.
  Mr. MACK. Mr. President, I come before the Senate in support of 
today's colloquy regarding Federal judgeship needs in Florida. Although 
I was unable to participate in the colloquy between my esteemed 
colleagues, Senators Hatch and Graham, I wish to express my support for 
their position. It is my hope that the Judiciary Committee will lend 
serious consideration to Florida's unique and acute judgeship needs.
  The pressures currently upon Florida's court system, particularly in 
the Middle District, are some of the most severe in the nation. The 
Judicial Conference of the United States has recommended three 
permanent district judgeships and one temporary judgeship for the 
Middle District. This is the most judgeships recommended for any 
federal district in the nation.
  Statistics kept by the Administrative Office of the U.S. Courts 
underscore the need for additional judgeships in this district. Recent 
statistics place Florida's Middle District second in the nation in 
weighted case filings per judge, with an average of 855. This is far 
above the national average of 519 weighted case filings per judge. It 
is expected that these numbers will continue to climb, given this 
area's explosive population growth. Although fifty-five percent of 
Florida's population currently resides in the Middle District, the 
district is home to only one-third of the state's federal judges. 
According to projected population growth figures, the Middle District 
will comprise two-thirds of the state's population by the year 2005.
  The Middle District contains some of the world's most frequently 
visited cities, beaches and tourist attractions, including Disney World 
in Orlando and Busch Gardens in Tampa. The heavy flow of both tourists 
and the ``snowbird'' population serve to make the needs of this 
judicial district unique.
  Adding to this problem, what will be the nation's largest federal 
prison, the Coleman Prison Complex, is scheduled to be completed in 
1999 in the Middle District. This will place an additional strain on 
the already overburdened courts of this district due to increased 
prisoner petitions. Further complicating the problem, a portion of the 
Middle District has recently been designated a High Intensity Drug 
Trafficking Area. An increase in drug cases will result as criminals 
are apprehended and prosecuted, placing additional demands upon this 
district.
  It is not possible to provide Floridians with a safe environment and 
access to justice unless there is a court system in place which can 
handle the demands of this dynamic and growing part of our country. 
Increased judicial resources are integral in providing such a court 
system.
  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER (Mr. Roberts). The distinguished Senator from 
Iowa is recognized.
  Mr. GRASSLEY. I listened to everything that the Senator from Florida 
has said and of course, have had to be considering the points of view 
that he makes, as well as a lot of my colleagues, and will be happy to 
continue working with him.
  Mr. President, my subcommittee has been looking at the need for 
increased or decreased numbers of judges across the country.
  I've been looking at the middle district of Florida for some time, 
and have corresponded and met with the chief judge.
  At this time, I am still not clear on what the needs of the district 
are or how its caseload is being managed. For instance, how are the 
many senior judges in the district helping with the caseload? I asked 
the chief judge this, and all I got were the judges certification 
papers that didn't say much of anything about caseload. It mostly 
mentioned what conferences they attended. I would ask the proponents to 
explain to us how the senior judges and magistrates help in reducing 
the caseload? Do the proponents realize that the senior judges in the 
middle district don't even take full cases?
  Nevertheless, I will continue working with my colleagues regarding 
judgeship needs. I will soon be releasing a subcommittee report on our 
efforts to review the circuit courts.
  The bottom line I've been advocating is that if we increase judges, 
we need to also decrease judges where they're not needed. I know this 
is a new concept, and one that has been met with some resistance. But, 
I intend to continue this effort in the next Congress.


                Amendment No. 3617 To Amendment No. 3559

  Mr. GRASSLEY. Mr. President, I send to the desk the manager's 
amendment and ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Iowa [Mr. Grassley] proposes an amendment 
     numbered 3617 to amendment No. 3559.

  Mr. GRASSLEY. I ask unanimous consent that reading of the amendment 
be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place, insert the following:

     SEC.   . TREASURY DEPARTMENT STUDY REGARDING SECURITY 
                   INTERESTS UNDER AN OPEN END CREDIT PLAN.

       (a) Within 180 days of the enactment of this Act, the 
     Federal Reserve Board in consultation with the Treasury 
     Department, the general credit industry, and consumer groups, 
     shall prepare a study regarding the adequacy of information 
     received by consumers regarding the creation of security 
     interests under open end credit plans.
       (b) Findings.--This study shall include the Board's 
     findings regarding:
       (1) whether consumers understand at the time of purchase of 
     property under an open end credit plan that such property may 
     serve as collateral under that credit plan;
       (2) whether consumers understand at the time of purchase 
     the legal consequences of disposing of property that is 
     purchased under an open credit plan and is subject to a 
     security interest under that plan; and
       (3) whether creditors holding security interests in 
     property purchased under an open end credit plan use such 
     security interests to coerce reaffirmations of existing debts 
     under section 524 of the United States Bankruptcy Code.

     In formulating these findings, the Board shall consider, 
     among other factors it deems relevant, prevailing industry 
     practices in this area.
       (c) Disclosure Recommendations.--This study shall also 
     include the Board's recommendations regarding the utility and 
     practicality of additional disclosures by credit card issuers 
     at the time of purchase regarding security interests under 
     open end credit plans, including, but not limited to:

[[Page S10763]]

       (1) disclosures of the specific property in which the 
     creditor will receive a security interest;
       (2) disclosures of the consequences of nonpayment of the 
     card balance, including how the security interest may be 
     enforced; and
       (3) disclosures of the process by which payments made on 
     the card will be credited with respect to the lien created by 
     the security contract and other debts on the card.
       (d) The Board shall submit this report to the Senate 
     Committee on the Judiciary, the Senate Committee on Banking, 
     Housing, and Urban Affairs, the House Committee on the 
     Judiciary, and the House Committee on Banking and Financial 
     Services within the time allotted by this section.
       Insert at an appropriate place:
       Section 546 of title 11, United States Code, is amended by 
     inserting at the end thereof--
       ``(I) Notwithstanding section 545(2) and (3) of this title, 
     the trustee may not avoid a warehouseman's lien for storage, 
     transportation or other costs incidental to the storage and 
     handling of goods, as provided by Section 7-209 of the 
     Uniform Commercial Code.''
       Insert at an appropriate place:
       Section 330(a) of Title 11 is amended:
       (1) in subsection (3)(A) after the word ``awarded'', by 
     inserting ``to an examiner, Chapter 11 trustee, or 
     professional person'', and
       (2) by adding at the end of subsection (3)(A) the 
     following:
       ``(3)(B) In determining the amount of reasonable 
     compensation to be awarded a trustee, the court shall treat 
     such compensation as a commission based on the results 
     achieved.''
       On page 59 of amendment 3595, after clause ``(v)'', insert:
        ``(vi) not unfair because excessive in amount based upon 
     the value of the collateral.''
       On page 60 of amendment 3595, after clause ``(iii)'' 
     insert:
        ``(iv) the following statement: If your current rate is a 
     temporary introductory rate, your total costs may be 
     higher.''

  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. GRASSLEY. I urge adoption of the amendment.
  The PRESIDING OFFICER. If there is no further debate on the 
amendment, the question is on agreeing to the amendment.
  The amendment (No. 3617) was agreed to.


                     Definition of Household Goods

  Mr. DODD. Mr. President, a provision of this bill that the Senator 
from Illinois and I drafted and had put into the Managers' Package 
would require the Federal Trade Commission to promulgate regulations to 
define household goods ``in a manner suitable and appropriate for cases 
under Title 11 of the U.S. Code.'' What would be ``suitable and 
appropriate'' in the bankruptcy context?
  Mr. DURBIN. The Federal Trade Commission should keep in mind that the 
definition will define the household goods that a debtor may keep after 
the bankruptcy, as part of the debtor's fresh start. The defining 
regulations should specify any tangible personal property reasonably 
necessary for the support of the debtor and the debtor's dependents.
  Mr. DODD. May I add something?
  Mr. DURBIN. Certainly.
  Mr. DODD. My concern with the definition is particularly for 
children, and is about personal property of little value to creditors. 
Would you agree that the Federal Trade Commission should promulgate 
regulations that will allow debtors to keep property that is commonly 
used by children or commonly used for the upbringing of children?
  Mr. DURBIN. Are you talking about items like bicycles or toys or 
washing machines?
  Mr. DODD. Yes. A debtor's child and parent should be allowed to keep 
these items. Children's property generally has no resale value, but 
replacement costs can be substantial.
  Mr. DURBIN. I would agree. Similarly, I believe the Federal Trade 
Commission should keep in mind that when we talk about a dependent of 
the debtor we are referring to people like an elderly parent or 
relative, or a disabled person. Property belonging to a dependent 
elderly or disabled person should also figure into the definition.
  Moreover, I would note that although some members of the Judiciary 
Committee have tried to tell the FTC what to do, this provision 
ultimately leaves the decision in the hands of the FTC. We have never 
had hearings or conducted any inquiry whatsoever into what household 
goods are necessary or appropriate in bankruptcy. The point of this 
provision is to ask the FTC to make the necessary inquiries and provide 
a suitable definition. As the lead Democratic co-sponsor of this bill, 
as the author of this provision--which I proposed during the Committee 
debate--and as the ranking member on the Subcommittee with jurisdiction 
over the bankruptcy code, I believe the FTC is much better suited to do 
this than we. In addition, I would note that the definition of 
dependent must be drawn from the bankruptcy code itself in order for 
any FTC definition to be at all meaningful or useful.
  Mr. DODD. As the co-author of this provision, I concur.
  Mr. DURBIN. Let me take this opportunity to compliment the 
distinguished Senator from Connecticut for all of his hard work on this 
issue. He identified the unique problems of children in bankruptcy 
before anyone else, and no one has worked harder on this problem than 
he. We both had different approaches to the household goods issue, and 
the provision in this bill blends our two approaches.
  Mr. DODD. And I think we have achieved a sensible result. In light of 
the fact that we have taken no testimony on this issue and have no real 
expertise in this area, it only makes sense to have the FTC attempt to 
craft a definition. I compliment the Senator from Illinois for his 
efforts. It has been a pleasure working with him.


                  patent reform legislation amendment

  Mr. HATCH. Mr. President, let me take a moment to speak about an 
amendment that has not been discussed in the last several days. Under 
the unanimous-consent agreement, I am permitted and had planned to 
offer a scaled-down version of broadly supported and bipartisan patent 
reform legislation, which was favorably reported to the Senate by the 
Judiciary Committee more than a year ago. Nevertheless, having spoken 
with the majority leader, and in the interest of expediting activity on 
pending Senate business, I have agreed to withhold my amendment.
  But I want to take a moment to clarify why I believe this amendment 
is so important. In short, the provisions of this amendment represent 
the most important and most comprehensive reforms to our nation's 
patent system in nearly half a century. In the last 50 years, our 
nation has witnessed an explosion of technology growth and a tremendous 
expansion of the global market for American intellectual property. Yet 
our patent laws have remained largely unchanged. My bill would effect 
those changes that are necessary to bring our patent system up to speed 
with the growing demands of the global economy, to preserve American 
competitiveness into the 21st century, and to ensure adequate 
protection for American innovators, both at home and abroad.
  In all, there have been nine days of hearings and 78 witnesses who 
have testified in the House and Senate on the provisions of this 
legislation. Seventeen of those witnesses appeared before the Senate 
Judiciary Committee. In addition, I have engaged in endless 
negotiations to address concerns regarding the effect of the bill on 
small businesses and independent inventors. The result of that process 
was a comprehensive package of amendments that was endorsed by the 
Judiciary Committee, including several outspoken opponents of the 
original bill, in an overwhelming bipartisan 17-1 vote last year. Since 
then, I have sought a vote on the Senate floor for this legislation, 
thus far without success.
  The failure to bring this bill to a vote in the Senate has largely 
been the result of the opposition of a very few Senators who have 
objected to even its consideration by the full Senate. Over the past 
year, I have made numerous additional changes to the bill in an attempt 
to address their concerns. As a result of those changes, the bill now 
enjoys even broader support, ranging from the smallest of American 
entrepreneurs and innovators to Fortune 100 companies. It is endorsed 
by the small business community, as well as by the experts on the 
subject, including 5 of the past 6 commissioners of the Patent and 
Trademark Office and thousands of patent practitioners and patent 
owners. Unfortunately, despite my efforts, and despite this broad 
support, a vocal minority, which apparently opposes any patent reform, 
continues to object this bill. Repeated invitations to sit

[[Page S10764]]

down with them to fashion a reasonable accommodation have been 
rejected.
  Mr. President, at some point, the interests of inventors, the 
continued strength of our intellectual property base, consumers, and an 
overwhelming majority of the Senate must prevail over the interests of 
the few who would oppose any patent reform. I believe that this 
legislation must be debated and real patent reforms enacted if America 
is to retain its competitive edge into the next century.
  In acceding to the majority leader's request to refrain from 
exercising my rights in offering this bill as an amendment to the 
bankruptcy bill, I am relying on his assurance that this patent reform 
legislation will be brought up for floor consideration and a vote early 
next year, with the expectation being that we complete action on the 
measure prior to March 1999. I would reiterate my willingness and 
desire to work with my colleagues to resolve any outstanding concerns, 
and I hope any Senator who still has genuine concerns with this bill 
will take me up on my offer.
  I look forward to working with my colleagues and to seeing reasonable 
patent reforms enacted by the Senate next year.


                         Drunk-Driving Victims

  Mr. LAUTENBERG. Mr. President, I would like to commend the authors of 
this legislation, Senators Durbin and Grassley, for their efforts on 
this legislation and their acceptance of my amendment which will help 
prevent drunk drivers from escaping the debts they owe to their victims 
by filing for bankruptcy.
  As my colleagues know, Congress has always worked in a bipartisan way 
when working to protect the victims of drunk-drivers under the 
Bankruptcy Code. In 1984, Congress passed the Bankruptcy Amendments and 
Federal Judgeship Act of 1984 which contained provisions to prevent 
drunk drivers from avoiding their debts to victims by filing for 
bankruptcy under Chapter 7. Although that Act closed a loophole in 
Chapter 7 of the Bankruptcy Code, drunk drivers began to file for 
bankruptcy under Chapter 13. Consequently, in 1990, Congress passed 
another measure to protect drunk-driving victims under Chapter 13.
  As originally drafted, S. 1301 contained a number of provisions that 
would have diluted the ability of drunk-driving victims to receive 
damages. Consequently, I drafted an amendment designed to ensure that 
victims would be paid for their injuries when the drunk driver filed 
for bankruptcy. Additionally, the amendment extended protections to 
victims of drunk boaters. The Coast Guard reports that drunk boating 
continues to be a problem with more than 200 fatalities in some years, 
and I thought it was important that irresponsible boaters not be able 
to escape liability by filing for bankruptcy.
  I am pleased that Senators Durbin and Grassley have incorporated my 
amendment into the managers' amendment. I appreciate their efforts and 
cooperation. We must ensure that the victims of drunk drivers and drunk 
boaters are protected in bankruptcy and I urge the conferees to make 
this issue a priority when working out differences with the House bill.
  Mr. LEAHY. Mr. President, I urge my colleagues to support the 
Consumer Bankruptcy Reform Act, S. 1301. Senator Durbin and Senator 
Grassley have worked together to mold a bipartisan bill that seeks to 
correct abuses in the bankruptcy system while preserving access to it 
for honest debtors. Every American agrees with the basic principle that 
debts should be repaid. The vast majority of Americans are able to meet 
their obligations. But, for those who fall on financial hard times, 
bankruptcy should be available in a fair and balanced way.
  Unfortunately, more and more Vermonters and more and more Americans 
are filing for bankruptcy. The numbers are disturbing. While the 
unemployment rate keeps going down and inflation remains low, the 
nation's personal bankruptcies keep going up. Thus, this rise in 
bankruptcy filings has occurred at the same time that we enjoy a robust 
economy. If fact, Vermont's unemployment rate hit a 10-year low just 
the other day. Vermont's personal bankruptcy rate increased by about 40 
percent for each of the last two years.
  Still, Vermont was ranked next to last among the 50 states in 
personal bankruptcy filings last year. In most other states, personal 
bankruptcy rates increased even more dramatically while unemployment 
rates declined. I do not know all the answers why more and more 
Americans are filing for bankruptcy. I think some may be abusing the 
system. I think most are not. My guess is that stagnant wages and more 
consumer credit card debt are the primary reasons.
  Where there are abuses in the bankruptcy law, we should move to 
correct them. I believe that this bill does that by establishing 
standards for bankruptcy judges to consider with respect to Chapter 7 
and 13 filings and by discouraging bad-faith repeat filings. This bill 
also includes better bankruptcy data collection procedures so that we 
can learn more about the root causes of the recent rise in bankruptcy 
filings. Accurate data will also allow us to better evaluate the impact 
of this reform legislation.
  But we must also remember that bankruptcy serves as a safety net for 
many of our constituents. Those who use bankruptcy are the most 
vulnerable of the American middle class. They are older Americans who 
have lost their jobs or are unable to pay their medical debts. They are 
women attempting to raise their families or secure alimony and child 
support after a divorce. They are individuals struggling to recover 
from unemployment. This bankruptcy reform bill protects them.
  As we move forward with reforms that are appropriate to eliminate 
abuses in the system, we need to remember the people who use the 
system, both the debtor and the creditor. We need to balance the 
interests of creditors with those of middle class Americans who need 
the opportunity to resolve overwhelming financial burdens.
  Unfortunately, the House-passed consumer bankruptcy reform bill 
requires an arbitrary means testing of debtors to be eligible for 
Chapter 7 filings. Many bankruptcy practitioners and bankruptcy judges 
predict that the radical means-testing requirements in the House bill 
would swamp the bankruptcy process with a flood of new litigation over 
a debtor's filing status. Indeed, the Congressional Budge Office 
estimates that H.R. 3150 would cost taxpayers up to $16 million a year 
for new bankruptcy judges and other court administrative expenses. 
Moreover, CBO estimates that the House bill would impose new private 
sector mandates, as defined in the Unfunded Mandates Reform Act, of at 
least $100 million on our economy. We need balanced bankruptcy reform, 
not more unfunded mandates and costs to taxpayers.
  The House bankruptcy reform bill also fails to adequately protect our 
most vulnerable citizens--our children. More than one-third of the one 
million annual bankruptcies involve spouse and child support orders. 
But the House bill proposes profound changes to the bankruptcy code for 
spouse and child support obligations by placing them on a equal footing 
with some consumer debt. As a result, custodial parents and ex-spouses 
may have to fight in court against the deep pockets of corporate 
lenders with little chance of success. This is unacceptable for 
America's children.
  I believe that the Senate version of the Consumer Bankruptcy Reform 
Act, S. 1301, carefully balances the competing interests of debtors and 
creditors. The bankruptcy reform bill passed by the House of 
Representatives, H.R. 3150 is not a balanced piece of legislation. The 
Administration has promised a veto if the House bill were to be adopted 
by Congress.
  I have already spoken to the other Senators who will serve on a 
House-Senate bankruptcy reform conference about holding firm to the 
Senate bill in conference. If we want to enact balanced bankruptcy 
reforms into law this year, the Senate bill is that measure. If this 
Congress wants to enact consumer bankruptcy reforms into law, then the 
conference report must be along the lines of S. 1301. I am glad to 
report that a majority of the Republicans who will serve on the 
conference with Senator Durbin and me agree. I expect that we will 
strongly support the Senate position and prevail in conference.
  I hope that the Senate will adopt this bipartisan bill that corrects 
the abuses in the bankruptcy system without unfairly penalizing women 
and children

[[Page S10765]]

who depend on child support and alimony, as well as older Americans and 
small business owners.
  I want to take a moment to commend Senator Durbin for his leadership 
and for working to reform our bankruptcy system in a fair and balanced 
manner. Senator Durbin has served as a most effective manager of this 
important measure. He has been informed and exercised good judgment at 
every turn. He has met every challenge and maintained the 
bipartisanship that made this possible. Without his extraordinary 
efforts, there would be no bankruptcy reform legislation being 
considered for final passage by the Senate.
  I also commend Senator Grassley. I know that is has not always been 
easy for him to keep this legislation on course. I know that some in 
his caucus have criticized his efforts to be fair and to continue to 
work in a bipartisan fashion. I am glad that he did not succumb to that 
bad advice. Senator Grassley and I have worked together for many years. 
We agree on many things and we have disagreed on some. I congratulate 
him for his outstanding efforts as the principal author, subcommittee 
chairman and floor manager of this bill. He has done a fine job and 
created a measure for which he deserves our thanks. In this effort I 
have tried to be constructive--even foregoing offering an important 
amendment to this particular bill, at Senator Hatch's request.
  I also want to applaud the work of the staff on the Senate Judiciary 
Committee principally responsible for this bill: Victoria Bassetti and 
Anne McCormick with Senator Durbin, and Kolan Davis and John McMickle 
with Senator Grassley. Each worked hard on this very complex issue and 
helped craft a fine piece of bipartisan legislation. They were here 
late into many nights and worked ceaselessly for the public interest.
  I urge my colleagues to support S. 1301, the Consumer Bankruptcy 
Reform Act. It is a bill that the Senate should pass.
  Mr. FEINGOLD. Mr. President, although I object to numerous provisions 
in the underlying bill, S. 1301, the Consumer Bankruptcy Reform Act, I 
was pleased to work with the Chairman and Ranking Member to include 
provisions important to the farmers of this country.
  Mr. President, everyone knows that family farming is a high risk 
business. One that's effected more by outside, unanticipated forces--
for example, unstable markets, weather, and disease--than any other 
industry. To survive in such a volatile vocation, farmers are often 
given a bit of flexibility. This flexibility is the key to the survival 
of most family farms.
  Unfortunately, some farmers become overburdened by the financial 
hazards associated with the business and seek assistance in dealing 
with their creditors. In 1986, Senator Grassley added Chapter 12 to the 
bankruptcy code to satisfy the unique risks and needs of family 
farmers. Prior to that, farmers were forced to file for bankruptcy 
under Chapter 11, the Small Business specific Chapter.
  Although Chapter 12 has provided much needed relief for hundreds of 
family farmers, through the years, Chapter 12 has become outdated; its 
definitions, eligibility requirements and other provisions have not 
kept pace with changes in agriculture or in the nation's economy. Most 
disturbingly, the out of date eligibility requirements of this 
provision have excluded many who need it most and forced many farmers 
into Chapter 11.
  I was pleased that three amendments I authored with Senators Conrad 
and Bob Kerrey were accepted by Senators Grassley and Durbin and 
included in the manager's amendment. Two of these provision change the 
eligibility requirements of Chapter 12 to include those originally 
intended under the 1986 statute.
  One provision indexes the Chapter 12 debt limit. The current maximum 
debt limit on Chapter 12 is $1,500,000. This limit has not been changed 
since the 1986 law took effect, while most other Code dollar figures 
have been increased for inflation and will have automatic adjustments 
in the future. At this point, the debt limits exclude many farmers for 
whom Chapter 12 was originally intended.
  A second eligibility problem had been the requirement that more than 
50% of a farm family's taxable income for the prior year came from a 
farming operation. Farm families, expecting low return on their 
commodities, usually seek off-farm employment for one of the household 
adults. A few years of low prices and negligible farm income would make 
many farmers ineligible under this provision. Current law assumes that 
farmers throw in the towel after just one bad year. I cannot think of 
one Wisconsin farmer that gives up that easily. They keep working and 
hope for better markets next year. My provision changes this 
requirement so that farmers have a bit more flexibility. More 
specifically, my amendment will allow the 50% income requirement can be 
satisfied in any of the past three years.
  The last provision simply prohibits retroactive assessment of 
disposable income by the courts. To have a payback schedule confirmed 
by the bankruptcy courts, a debtor in Chapter 12 must commit projected 
disposable income--over and above living expenses, operating expenses 
and secured debt payments--to pay unsecured debtors. Some courts have 
started ``adjusting'' these payments upward in hindsight, if the 
debtor's income was greater than projected. My amendment will make 
Chapter 12 consistent with Chapter 13 and prohibit the retroactive 
assessment and instead modifies the coming year's payment schedule to 
reflect the additional income.
  Again, Mr. President, I wish to thank Senators Kerrey, Conrad, 
Grassley and Durbin for their work on these amendments. It will give 
family farmers across the country the flexibility they need to make 
good on their debts.
  Mr. WELLSTONE. Mr. President, there is no doubt that more and more 
Americans are turning to the consumer bankruptcy system and the 
financial protection it offers. More than 1.3 million families filed 
for bankruptcy last year. Where there is fraud and abuse we must take 
steps to reduce and eliminate it. But this bill will not help reduce 
fraud. It will encourage riskier lending habits by credit companies. It 
will lead to more credit being extended to poor families. It will 
ensure that those families will file more bankruptcies. It will force 
these families to file different types of bankruptcies, the kind of 
bankruptcy that ensures that they will never be free of their debt and 
able to restart their lives.
  This is a complex issue and I must provide some background in order 
to explain my stance. There are two types of bankruptcies that 
individuals can file: Chapter 7 and Chapter 13. Under current law, 
individuals can choose either type. Chapter 7 bankruptcy allows debtors 
to discharge all their debt (besides child support, taxes, home loans, 
and student loans). Chapter 13 bankruptcies discharge no debt, but 
allow debtors to bargain directly with their creditors on reduced debt 
and payment schedules. Under the bill we passed today, Chapter 7 
bankruptcies, which have provided a new start to millions of families 
over the years, will become a thing of the past. First of all, a judge 
now will have discretion to reject a debtor's Chapter 7 claim, and 
require her to file under Chapter 13, if it can be proven that the 
debtor has the ability to pay off 30% of her debt over the next five 
years. Secondly, any of the debtor's creditors can enter the court--
without legal counsel--and require the court to make a judgement as to 
whether the debtor can afford this 30%. Thirdly, if the judge believes 
that the debtor can pay off this 30%, the debtor's attorney--and this 
is unheard of in the law to date--will be forced to pay the cost of the 
Chapter 13 Trustee. This is a hugely expensive tax on bankruptcy 
attorneys and they will certainly avoid taking on new Chapter 7 
bankruptcies.
  The truth is that this bill treats all debtors as likely criminals. 
Yes, bankruptcies in this country are up. But debtors now wait longer 
to file bankruptcy and are deeper in debt than those who filed 
bankruptcy a decade ago. Furthermore, increased filings can be 
attributed to job loss, divorce, increasing health care costs, 
declining real wages--and most importantly--an entire industry of easy 
credit which ten years ago did not exist in any where near today's 
scale.
  Harvard Business School researchers David Moss and Gibbs Johnson 
state ``the evidence suggests that shifts in

[[Page S10766]]

the volume of and distribution of consumer credit--rather than 
declining stigma [of bankruptcies]--are the most likely sources of the 
recent surge in consumer filings.'' They add that the surge of filings 
that began in the late 1980s can be attributed to ``consumer creditors 
[which] began reaching substantially further down into the income 
distribution beginning in the mid 1980s.'' It should also be noted that 
credit-card mail solicitations have skyrocketed, from 3.1 million mail 
solicitations in 1996 to over 881 million mail solicitations in 1997. 
Yet it is this consumer credit industry that benefits most from this 
bill; because it is this industry that will use this bill to prevent 
individuals from discharging their credit card debt. Simply put, this 
bill will increase the amount of money that credit card companies would 
receive from low-income bankrupt debtors. Meanwhile, opponents argue 
that sophisticated individuals with good legal advice will be able to 
get around the bill's new changes (as is often the case with financial 
laws).
  Who will benefit from this bill? I will quote Senator Metzenbaum, 
Public Citizen, and Consumers Union: ``The only reason we're having 
this debate is because the credit industry, primarily the credit card 
industry, has spent well-orchestrated millions on ads and lobbyists 
demonizing American families in crisis.'' Even the title of a Wall 
Street Journal article says it all: ``As Bankruptcies Surge, Creditors 
Lobby Hard to Get Tougher Laws; But Whether Many People Shirk Bills 
They Can Pay Remains Open To Debate; Changing the Lender's Image.'' I 
quote from that article: ``As the legislation moves quickly through 
Congress, many academics, lawyers, and judges who specialize in 
bankruptcy question why. A government-appointed commission spent two 
years studying the matter and was deeply divided. Five of its nine 
members found no major abuse of the system or need for a crackdown: 
only two endorsed anything like the bills Congress is embracing. More 
than 100 jurists wrote lawmakers to urge them to slow down.* * * A 
major reason [for the bill]? A multi-million public-relations and 
lobbying blitz run largely by companies with the most to gain: credit 
card issuers and other lenders.''
  Who will suffer under this bill? When job loss, divorce, or medical 
emergency strike, some families have no choice but to file for 
bankruptcy in order to stabilize themselves. Divorced women file for 
bankruptcy in greater proportions than divorced men. Victims of abuse 
file for bankruptcy, often from debt incurred entirely by those who 
abused them. Single parents are forced into bankruptcy after any 
substantial period of unemployment. African Americans and Hispanics are 
dramatically over-represented in bankruptcy. With health insurance in 
its current state, families that suffer even one major medical 
emergency often find themselves in need of bankruptcy protection. But 
this bill responds to the need of these families by basically re-
instituting life-long debtor's prison. All to the benefit of easy-
credit companies. I could not in good conscience support this bill.
  Mr. KOHL. Mr. President, the dramatic rise in bankruptcies is very 
troubling, regardless of whether the blame lies with credit card 
companies, a culture that disparages personal responsibility, the 
bankruptcy code or, most probably, with all of the above. While none of 
us wants to return to the era of ``debtors' prison,'' we need to do 
something to reverse this trend.
  But true ``reform'' will only occur if we prevent the most egregious 
abuse of the bankruptcy laws--misuse of the homestead exemption. And we 
will only have true reform if we target other abuses without 
overburdening the vast majority of debtors who truly need--and 
deserve--relief. And, true reform also requires a balanced approach 
that targets abusive practices by creditors as well as by debtors.
  That is why I intend to vote for this bill. It does all three: 
prevents the most egregious abuses by capping the homestead exemption, 
uses ``means testing'' to deter other serious abuses without placing 
unfair burdens on honest debtors, and requires credit card companies to 
disclose the information consumers need to make intelligent choices.
  In particular, let me focus on the cap on the homestead exemption 
that Senator Sessions and I introduced in subcommittee. This proposal, 
which was adopted by a unanimous 7-0 vote in subcommittee and was 
unanimously reaffirmed on the floor through a Sense of the Senate 
resolution, closes a loophole that allows too many debtors to shield 
their assets in luxury homes, while their creditors get left out in the 
cold. Currently, a handful of states allow debtors to protect their 
homes no matter how high their value. And time after time, millionaire 
debtors move to states with unlimited exemptions, like Florida and 
Texas, declare bankruptcy--yet continue to live like kings while their 
creditors get little or nothing. If we want to restore the stigma 
attached to bankruptcy, these high profile abuses are the best place to 
start.
  Our proposal is simple and effective. It caps at $100,000 the maximum 
homestead exemption that an individual filing bankruptcy can claim. 
With the cap in place, bankrupt debtors will retain their right to a 
roof over their heads, but not to luxury accommodations.
  I am concerned, however, that if this homestead cap is dropped in 
Conference, the President will veto the bill. That is, if it reaches 
him, because if the cap is removed, I'll filibuster the Conference 
Report myself.
  But since all of the conferees support the homestead cap provision, 
and since the Senate has now gone on record as saying that the ``cap'' 
is ``essential to meaningful bankruptcy reform,'' I am confident that 
we won't have to go that route.
  Mr. President, when people talk about bankruptcy abuse, the notion of 
stashing cash in a lavish Florida home is the first thing they think 
about. And that's not surprising. To borrow a phrase from Bill Bennett, 
Congress needs to act responsibly to put ``a death to this outrage.''
  Overall, I commend Senators Grassley and Durbin for their hard work 
and close collaboration. I look forward to a final product that 
continues tackling the worst abuses, while still helping honest 
debtors.
  Mr. REED. Mr. President, I voted in favor of S. 1301, the Consumer 
Bankruptcy Reform Act of 1998, to address certain abuses regarding 
consumer bankruptcy laws, while providing bankruptcy protection to 
those who genuinely need it. Indeed, in recent years, there have been 
record increases in bankruptcy filings. In 1997 alone there were 1.3 
million bankruptcy filings--an all-time high. While I think this 
increase is in part a result of the significant rise in outstanding 
consumer credit, I believe it is also attributable to the reduced 
stigma associated with filing for bankruptcy. As such, I believe that 
S. 1301 will be an important tool in curtailing irresponsible debtor 
practices.
  The version of S. 1301 passed by the Senate is the product of 
significant compromise by both Democrats and Republicans and is much-
improved over the Judiciary Committee-passed bill. I am pleased that my 
amendments prohibiting certain credit card terminations, limiting 
consumer debit card liability, and providing greater disclosure for 
``high LTV'' loans were adopted by the Senate. Nonetheless, I am 
concerned about the means-testing provisions in the bill and would be 
inclined to oppose the Conference Report if the means-testing 
provisions are made mandatory or if consumer credit protections are 
deleted.
  S. 1301 signifies a fundamental change in bankruptcy policy by 
establishing a system of means testing for determining eligibility for 
Chapter 7 relief. Heretofore, debtors have had the power to determine 
the type of bankruptcy relief to be sought, regardless of their ability 
to repay. S. 1301, however, gives a bankruptcy judge the discretion to 
convert a Chapter 7 case to Chapter 13 upon a motion by the creditor, 
if the debtor can afford to repay 30 percent of his or her debts.
  My concern with the provision is that it does not contemplate whether 
the creditor acted responsibly and in good faith in extending credit to 
the debtor. Statistics showing that household debt has increased to 104 
percent of household income, as compared to 24 percent in 1975, 
suggests that some creditors may be irresponsibly extending credit. In 
response to my concerns, I offered an amendment to the bill that would 
have required creditors to act in

[[Page S10767]]

good faith in their dealings with debtors. Unfortunately, this 
amendment did not pass.
  Despite my concerns with the means testing provision, I was able to 
support the bill because the means testing provision does not require 
the judge to convert a case to Chapter 13, but instead gives the judge 
discretion. If the Conference Report eliminates this judicial 
discretion and incorporates the House-passed means testing provision 
that requires conversion, I would have a difficult time supporting the 
Conference Report.
  Lastly, my support for S. 1301 was in part predicated on the 
significant consumer credit protections incorporated in the bill. For 
example, the bill includes an amendment that I offered that would 
prohibit credit card companies from terminating a consumer's account 
simply because the consumer paid his or her bill in full each month. 
This is a detestable practice which flies in the face of the goals 
being promoted in S. 1301. If this provision, or other such provisions 
are not included in the Conference Report, I would seriously consider 
opposing the Conference Report.
  Mr. GRAMS. Mr. President, on July 6th, the Federal Financial 
Institutions Examination Council (FFIEC), published for public comment 
in the Federal Register, its proposed changes to its Uniform Policy for 
Classification of Consumer Installment Credit Based on Delinquency 
Status. FFEIC is on the verge of adopting the changes in the proposals, 
with or without modifications based on the public input they received. 
I would like to ask my distinguished colleague, the Senator from Iowa 
whether the bankruptcy reform legislation currently before the Senate 
would significantly affect the agency's policy guidelines? My concern 
is that shortly after the FFIEC's new guidelines are adopted, it will 
have to rewrite them, according to the new bankruptcy reform 
legislation.
  Mr. GRASSLEY. That is correct. If the bill before us is enacted this 
fall, it will have a substantial impact upon creditors' recovery in 
many consumer bankruptcy cases. It will take some time to evaluate the 
full impact of the new law.
  Mr. GRAMS. Accordingly then, it is my view that the FFIEC should 
delay implementing any changes to its Uniform Policy for Classification 
of Consumer Installment Credit Based on Delinquency Status until it is 
clear whether and in what final form the bankruptcy reform is enacted.
  Mr. GRASSLEY. I would agree with my colleague from Minnesota and urge 
FFIEC to delay implementing changes to its Uniform Policy for 
Classification of Consumer Installment Credit Based on Delinquency 
Status, in light of the pending bankruptcy reform legislation.
  The PRESIDING OFFICER. Are there further amendments?
  If there are no further amendments, the question is on agreeing to 
the substitute amendment, as amended.
  The substitute amendment (No. 3559), as amended, was agreed to.
  Mr. GRASSLEY. I move to reconsider the vote.
  Mr. DURBIN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The question is on agreeing to the reported 
committee substitute amendment, as amended.
  Without objection, the committee substitute amendment, as amended, is 
agreed to.
  The committee substitute amendment, as amended, was agreed to.
  The PRESIDING OFFICER. The question is on the engrossment and third 
reading of the bill.
  The bill was ordered to be engrossed for a third reading and was read 
the third time.
  Mr. GRASSLEY. I ask for the yeas and nays.
  The PRESIDING OFFICER. If the Senator would withhold for a moment.
  Under the previous order, the Senate will now proceed to the House 
companion bill, which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (H.R. 3150) to amend title 11 of the United States 
     Code, and for other purposes.

  The Senate proceeded to consider the bill.
  The PRESIDING OFFICER. Under the previous order, all after the 
enacting clause of H.R. 3150 is stricken and the text of S. 1301, as 
amended, is inserted in lieu thereof.
  The question is on the engrossment of the amendment and third reading 
of the bill.
  The amendment was ordered to be engrossed and the bill to be read a 
third time.
  The bill was read a third time.
  Mr. GRASSLEY. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The bill having been read the third time, the 
question is, Shall the bill, as amended, pass? The yeas and nays have 
been ordered. The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from Virginia (Mr. Warner), 
is necessarily absent.
  Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn), is 
necessarily absent.
  The PRESIDING OFFICER (Mr. Thomas). Are there any other Senators in 
the Chamber desiring to vote?
  The result was announced--yeas 97, nays 1, as follows:

                      [Rollcall Vote No. 284 Leg.]

                                YEAS--97

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Chafee
     Cleland
     Coats
     Cochran
     Collins
     Conrad
     Coverdell
     Craig
     D'Amato
     Daschle
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Enzi
     Faircloth
     Feingold
     Feinstein
     Ford
     Frist
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Helms
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Mikulski
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Wyden

                                NAYS--1

       
     Wellstone
       

                             NOT VOTING--2

     Glenn
     Warner
       
  The bill (H.R. 3150), as amended, passed as follows:

       Resolved, That the bill from the House of Representatives 
     (H.R. 3150) entitled ``An Act to amend title 11 of the United 
     States Code, and for other purposes.'', do pass with the 
     following amendment:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Consumer 
     Bankruptcy Reform Act of 1998''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                    TITLE I--NEEDS-BASED BANKRUPTCY

Sec. 101. Conversion.
Sec. 102. Dismissal or conversion.

        TITLE II--ENHANCED PROCEDURAL PROTECTIONS FOR CONSUMERS

Sec. 201. Allowance of claims or interests.
Sec. 202. Exceptions to discharge.
Sec. 203. Effect of discharge.
Sec. 204. Automatic stay.
Sec. 205. Discharge.
Sec. 206. Discouraging predatory lending practices.
Sec. 207. Enhanced disclosure for credit extensions secured by 
              dwelling.
Sec. 208. Dual-use debit card.
Sec. 209. Enhanced disclosures under an open end credit plan.
Sec. 210. Violations of the automatic stay.
Sec. 211. Discouraging abusive reaffirmation practices.
Sec. 212. Sense of the Senate regarding the homestead exemption.
Sec. 213. Encouraging creditworthiness.
Sec. 214. Treasury Department study regarding security interests under 
              an open end credit plan.

  TITLE III--IMPROVED PROCEDURES FOR EFFICIENT ADMINISTRATION OF THE 
                           BANKRUPTCY SYSTEM

Sec. 301. Notice of alternatives.
Sec. 302. Fair treatment of secured creditors under chapter 13.
Sec. 303. Discouragement of bad faith repeat filings.
Sec. 304. Timely filing and confirmation of plans under chapter 13.
Sec. 305. Application of the codebtor stay only when the stay protects 
              the debtor.

[[Page S10768]]

Sec. 306. Improved bankruptcy statistics.
Sec. 307. Audit procedures.
Sec. 308. Creditor representation at first meeting of creditors.
Sec. 309. Fair notice for creditors in chapter 7 and 13 cases.
Sec. 310. Stopping abusive conversions from chapter 13.
Sec. 311. Prompt relief from stay in individual cases.
Sec. 312. Dismissal for failure to timely file schedules or provide 
              required information.
Sec. 313. Adequate time for preparation for a hearing on confirmation 
              of the plan.
Sec. 314. Discharge under chapter 13.
Sec. 315. Nondischargeable debts.
Sec. 316. Credit extensions on the eve of bankruptcy presumed 
              nondischargeable.
Sec. 317. Definition of household goods and antiques.
Sec. 318. Relief from stay when the debtor does not complete intended 
              surrender of consumer debt collateral.
Sec. 319. Adequate protection of lessors and purchase money secured 
              creditors.
Sec. 320. Limitation.
Sec. 321. Miscellaneous improvements.
Sec. 322. Bankruptcy judgeships.
Sec. 323. Definition of domestic support obligation.
Sec. 324. Priorities for claims for domestic support obligations.
Sec. 325. Requirements to obtain confirmation and discharge in cases 
              involving domestic support obligations.
Sec. 326. Exceptions to automatic stay in domestic support obligation 
              proceedings.
Sec. 327. Nondischargeability of certain debts for alimony, 
              maintenance, and support.
Sec. 328. Continued liability of property.
Sec. 329. Protection of domestic support claims against preferential 
              transfer motions.
Sec. 330. Protection of retirement savings in bankruptcy.
Sec. 331. Additional amendments to title 11, United States Code.
Sec. 332. Debt limit increase.
Sec. 333. Elimination of requirement that family farmer and spouse 
              receive over 50 percent of income from farming operation 
              in year prior to bankruptcy.
Sec. 334. Prohibit retroactive assessment of disposable income.
Sec. 335. Amendment to section 1325 of title 11, United States Code.
Sec. 336. Protection of savings earmarked for the postsecondary 
              education of children.

                    TITLE IV--FINANCIAL INSTRUMENTS

Sec. 401. Bankruptcy Code amendments.
Sec. 402. Recordkeeping requirements.
Sec. 403. Damage measure.
Sec. 404. Asset-backed securitizations.
Sec. 405. Prohibition on certain actions for failure to incur finance 
              charges.
Sec. 406. Fees arising from certain ownership interests.
Sec. 407. Bankruptcy fees.
Sec. 408. Applicability.

            TITLE V--ANCILLARY AND OTHER CROSS-BORDER CASES

Sec. 501. Amendment to add a chapter 6 to title 11, United States Code.
Sec. 502. Amendments to other chapters in title 11, United States Code.

                        TITLE VI--MISCELLANEOUS

Sec. 601. Executory contracts and unexpired leases.
Sec. 602. Expedited appeals of bankruptcy cases to courts of appeals.
Sec. 603. Creditors and equity security holders committees.
Sec. 604. Repeal of sunset provision.
Sec. 605. Cases ancillary to foreign proceedings.
Sec. 606. Limitation.
Sec. 607. Amendment to section 546 of title 11, United States Code.
Sec. 608. Amendment to section 330(a) of title 11, United States Code.

                    TITLE VII--TECHNICAL CORRECTIONS

Sec. 701. Definitions.
Sec. 702. Adjustment of dollar amounts.
Sec. 703. Extension of time.
Sec. 704. Who may be a debtor.
Sec. 705. Penalty for persons who negligently or fraudulently prepare 
              bankruptcy petitions.
Sec. 706. Limitation on compensation of professional persons.
Sec. 707. Special tax provisions.
Sec. 708. Effect of conversion.
Sec. 709. Automatic stay.
Sec. 710. Amendment to table of sections.
Sec. 711. Allowance of administrative expenses.
Sec. 712. Priorities.
Sec. 713. Exemptions.
Sec. 714. Exceptions to discharge.
Sec. 715. Effect of discharge.
Sec. 716. Protection against discriminatory treatment.
Sec. 717. Property of the estate.
Sec. 718. Preferences.
Sec. 719. Postpetition transactions.
Sec. 720. Technical amendment.
Sec. 721. Disposition of property of the estate.
Sec. 722. General provisions.
Sec. 723. Appointment of elected trustee.
Sec. 724. Abandonment of railroad line.
Sec. 725. Contents of plan.
Sec. 726. Discharge under chapter 12.
Sec. 727. Extensions.
Sec. 728. Bankruptcy cases and proceedings.
Sec. 729. Knowing disregard of bankruptcy law or rule.
Sec. 730. Rolling stock equipment.
Sec. 731. Curbing abusive filings.
Sec. 732. Study of operation of title 11 of the United States Code with 
              respect to small businesses.
Sec. 733. Transfers made by nonprofit charitable corporations.
Sec. 734. Effective date; application of amendments.

                    TITLE I--NEEDS-BASED BANKRUPTCY

     SEC. 101. CONVERSION.

       Section 706(c) of title 11, United States Code, is amended 
     by inserting ``or consents to'' after ``requests''.

     SEC. 102. DISMISSAL OR CONVERSION.

       (a) In General.--Section 707 of title 11, United States 
     Code, is amended--
       (1) by striking the section heading and inserting the 
     following:

     ``Sec. 707. Dismissal of a case or conversion to a case under 
       chapter 13'';

     and
       (2) in subsection (b)--
       (A) by inserting ``(1)'' after ``(b)''; and
       (B) in paragraph (1), as redesignated by subparagraph (A) 
     of this paragraph--
       (i) in the first sentence--

       (I) by striking ``but not'' and inserting ``or'';
       (II) by inserting ``, or, with the debtor's consent, 
     convert such a case to a case under chapter 13 of this 
     title,'' after ``consumer debts''; and
       (III) by striking ``substantial abuse'' and inserting 
     ``abuse''; and

       (ii) by striking the last sentence and inserting the 
     following:
       ``(2) In considering under paragraph (1) whether the 
     granting of relief would be an abuse of the provisions of 
     this chapter, the court shall consider whether--
       ``(A) under section 1325(b)(1), on the basis of the current 
     income of the debtor, the debtor could pay an amount greater 
     than or equal to 30 percent of unsecured claims that are not 
     considered to be priority claims (as determined under 
     subchapter I of chapter 5); or
       ``(B) the debtor filed a petition for the relief in bad 
     faith.
       ``(3)(A) If a panel trustee appointed under section 
     586(a)(1) of title 28 brings a motion for dismissal or 
     conversion under this subsection and the court grants that 
     motion and finds that the action of the counsel for the 
     debtor in filing under this chapter was not substantially 
     justified, the court shall order the counsel for the debtor 
     to reimburse the trustee for all reasonable costs in 
     prosecuting the motion, including reasonable attorneys' fees.
       ``(B) If the court finds that the attorney for the debtor 
     violated Rule 9011, at a minimum, the court shall order--
       ``(i) the assessment of an appropriate civil penalty 
     against the counsel for the debtor; and
       ``(ii) the payment of the civil penalty to the panel 
     trustee or the United States trustee.
       ``(C) In the case of a petition referred to in subparagraph 
     (B), the signature of an attorney shall constitute a 
     certificate that the attorney has--
       ``(i) performed a reasonable investigation into the 
     circumstances that gave rise to the petition; and
       ``(ii) determined that the petition--
       ``(I) is well grounded in fact; and
       ``(II) is warranted by existing law or a good faith 
     argument for the extension, modification, or reversal of 
     existing law and does not constitute an abuse under paragraph 
     (1) of this subsection.
       ``(4)(A) Except as provided in subparagraph (B), the court 
     may award a debtor all reasonable costs in contesting a 
     motion brought by a party in interest (other than a panel 
     trustee or United States trustee) under this subsection 
     (including reasonable attorneys' fees) if--
       ``(i) the court does not grant the motion; and
       ``(ii) the court finds that--
       ``(I) the position of the party that brought the motion was 
     not substantially justified; or
       ``(II) the party brought the motion solely for the purpose 
     of coercing a debtor into waiving a right guaranteed to the 
     debtor under this title.
       ``(B) A party in interest that has a claim of an aggregate 
     amount less than $1,000 shall not be subject to subparagraph 
     (A).
       ``(5) However, only the judge, United States trustee, 
     bankruptcy administrator or panel trustee may bring a motion 
     under this section if the debtor and the debtor's spouse 
     combined, as of the date of the order for relief, have 
     current monthly total income equal to or less than the 
     national median household monthly income calculated on a 
     monthly basis for a household of equal size. However, for a 
     household of more than 4 individuals, the median income shall 
     be that of a household of 4 individuals plus $583 for each 
     additional member of that household.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 7 of title 11, United States Code, is 
     amended by striking the item relating to section 707 and 
     inserting the following:

``707. Dismissal of a case or conversion to a case under chapter 13.''.

        TITLE II--ENHANCED PROCEDURAL PROTECTIONS FOR CONSUMERS

     SEC. 201. ALLOWANCE OF CLAIMS OR INTERESTS.

       Section 502 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(k)(1) The court may award the debtor reasonable 
     attorneys' fees and costs if, after an objection is filed by 
     a debtor, the court--
       ``(A)(i) disallows the claim; or
       ``(ii) reduces the claim by an amount greater than 20 
     percent of the amount of the initial claim filed by a party 
     in interest; and
       ``(B) finds the position of the party filing the claim is 
     not substantially justified.
       ``(2) If the court finds that the position of a claimant 
     under this section is not substantially

[[Page S10769]]

     justified, the court may, in addition to awarding a debtor 
     reasonable attorneys' fees and costs under paragraph (1), 
     award such damages as may be required by the equities of the 
     case.''.

     SEC. 202. EXCEPTIONS TO DISCHARGE.

       Section 523 of title 11, United States Code, is amended--
       (1) in subsection (a)(2)(A), by striking ``a false 
     representation'' and inserting ``a material false 
     representation upon which the defrauded person justifiably 
     relied''; and
       (2) by striking subsection (d) and inserting the following:
       ``(d)(1) Subject to paragraph (3), if a creditor requests a 
     determination of dischargeability of a consumer debt under 
     this section and that debt is discharged, the court shall 
     award the debtor reasonable attorneys' fees and costs.
       ``(2) In addition to making an award to a debtor under 
     paragraph (1), if the court finds that the position of a 
     creditor in a proceeding covered under this section is not 
     substantially justified, the court may award reasonable 
     attorneys' fees and costs under paragraph (1) and such 
     damages as may be required by the equities of the case.
       ``(3)(A) A creditor may not request a determination of 
     dischargeability of a consumer debt under subsection (a)(2) 
     if--
       ``(i) before the filing of the petition, the debtor made a 
     good faith effort to negotiate a reasonable alternative 
     repayment schedule (including making an offer of a reasonable 
     alternative repayment schedule); and
       ``(ii) that creditor refused to negotiate an alternative 
     payment schedule, and that refusal was not reasonable.
       ``(B) For purposes of this paragraph, the debtor shall have 
     the burden of proof of establishing that--
       ``(i) an offer made by that debtor under subparagraph 
     (A)(i) was reasonable; and
       ``(ii) the refusal to negotiate by the creditor involved to 
     was not reasonable.''.

     SEC. 203. EFFECT OF DISCHARGE.

       Section 524 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(i) The willful failure of a creditor to credit payments 
     received under a plan confirmed under this title (including a 
     plan of reorganization confirmed under chapter 11 of this 
     title) in the manner required by the plan (including 
     crediting the amounts required under the plan) shall 
     constitute a violation of an injunction under subsection 
     (a)(2).
       ``(j) An individual who is injured by the failure of a 
     creditor to comply with the requirements for a reaffirmation 
     agreement under subsections (c) and (d), or by any willful 
     violation of the injunction under subsection (a)(2), shall be 
     entitled to recover--
       ``(1) the greater of--
       ``(A)(i) the amount of actual damages; multiplied by
       ``(ii) 3; or
       ``(B) $5,000; and
       ``(2) costs and attorneys' fees.''.

     SEC. 204. AUTOMATIC STAY.

       Section 362(h) of title 11, United States Code, is amended 
     to read as follows:
       ``(h)(1) An individual who is injured by any willful 
     violation of a stay provided in this section shall be 
     entitled to recover--
       ``(A) actual damages; and
       ``(B) reasonable costs, including attorneys' fees.
       ``(2) In addition to recovering actual damages, costs, and 
     attorneys' fees under paragraph (1), an individual described 
     in paragraph (1) may recover punitive damages in appropriate 
     circumstances.''.

     SEC. 205. DISCHARGE.

       Section 727 of title 11, United States Code, is amended--
       (1) in subsection (c), by adding at the end the following:
       ``(3)(A) A creditor may not request a determination of 
     dischargeability of a consumer debt under subsection (a) if--
       ``(i) before the filing of the petition, the debtor made a 
     good faith effort to negotiate a reasonable alternative 
     repayment schedule (including making an offer of a reasonable 
     alternative repayment schedule); and
       ``(ii) that creditor refused to negotiate an alternative 
     payment schedule, and that refusal was not reasonable.
       ``(B) For purposes of this paragraph, the debtor shall have 
     the burden of proof of establishing that--
       ``(i) an offer made by that debtor under subparagraph 
     (A)(i) was reasonable; and
       ``(ii) the refusal to negotiate by the creditor involved to 
     was not reasonable.''; and
       (2) by adding at the end the following:
       ``(f)(1) The court may award the debtor reasonable 
     attorneys' fees and costs in any case in which a creditor 
     files a motion to deny relief to a debtor under this section 
     and that motion--
       ``(A) is denied; or
       ``(B) is withdrawn after the debtor has replied.
       ``(2) If the court finds that the position of a party 
     filing a motion under this section is not substantially 
     justified, the court may assess against the creditor such 
     damages as may be required by the equities of the case.''.

     SEC. 206. DISCOURAGING PREDATORY LENDING PRACTICES.

       Section 502(b) of title 11, United States Code, is 
     amended--
       (1) in paragraph (8), by striking ``or'' at the end;
       (2) in paragraph (9), by striking the period at the end and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(10) the claim is based on a secured debt if the creditor 
     has failed to comply with the requirements of subsection (a), 
     (b), (c), (d), (e), (f), (g), (h), or (i) of section 129 of 
     the Truth in Lending Act (15 U.S.C. 1639).''.

     SEC. 207. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS SECURED 
                   BY DWELLING.

       (a) Open-End Credit Extensions.--
       (1) Credit applications.--Section 127A(a)(13) of the Truth 
     in Lending Act (15 U.S.C. 1637a(a)(13)) is amended--
       (A) by striking ``consultation of tax advisor.--A statement 
     that the'' and inserting the following: ``tax 
     deductibility.--A statement that--
       ``(A) the''; and
       (B) by striking the period at the end and inserting the 
     following: ``; and
       ``(B) in any case in which the extension of credit exceeds 
     the fair market value of the dwelling, the interest on the 
     portion of the credit extension that is greater than the fair 
     market value of the dwelling is not tax deductible for 
     Federal income tax purposes.''.
       (2) Credit advertisements.--Section 147(b) of the Truth in 
     Lending Act (15   U.S.C. 1665b(b)) is amended--
       (A) by striking ``If any'' and inserting the following:
       ``(1) In general.--If any''; and
       (B) by adding at the end the following:
       ``(2) Credit in excess of fair market value.--Each 
     advertisement described in subsection (a) that relates to an 
     extension of credit that may exceed the fair market value of 
     the dwelling shall include a clear and conspicuous statement 
     that--
       ``(A) the interest on the portion of the credit extension 
     that is greater than the fair market value of the dwelling is 
     not tax deductible for Federal income tax purposes; and
       ``(B) the consumer may want to consult a tax advisor for 
     further information regarding the deductibility of interest 
     and charges.''.
       (b) Non-Open End Credit Extensions.--
       (1) Credit applications.--Section 128 of the Truth in 
     Lending Act (15 U.S.C. 1638) is amended--
       (A) in subsection (a), by adding at the end the following:
       ``(15) In the case of a consumer credit transaction that is 
     secured by the principal dwelling of the consumer, in which 
     the extension of credit may exceed the fair market value of 
     the dwelling, a clear and conspicuous statement that--
       ``(A) the interest on the portion of the credit extension 
     that is greater than the fair market value of the dwelling is 
     not tax deductible for Federal income tax purposes; and
       ``(B) the consumer should consult a tax advisor for further 
     information regarding the deductibility of interest and 
     charges.''; and
       (B) in subsection (b), by adding at the end the following:
       ``(3) In the case of a credit transaction described in 
     paragraph (15) of subsection (a), disclosures required by 
     that paragraph shall be made to the consumer at the time of 
     application for such extension of credit.''.
       (2) Credit advertisements.--Section 144 of the Truth in 
     Lending Act (15 U.S.C. 1664) is amended by adding at the end 
     the following:
       ``(e) Each advertisement to which this section applies that 
     relates to a consumer credit transaction that is secured by 
     the principal dwelling of a consumer in which the extension 
     of credit may exceed the fair market value of the dwelling 
     shall clearly and conspicuously state that--
       ``(1) the interest on the portion of the credit extension 
     that is greater than the fair market value of the dwelling is 
     not tax deductible for Federal income tax purposes; and
       ``(2) the consumer may want to consult a tax advisor for 
     further information regarding the deductibility of interest 
     and charges.''.
       (c) Effective Date.--This section shall become effective 
     one year after the date of enactment of this Act.

     SEC. 208. DUAL-USE DEBIT CARD.

       (a) Consumer Liability.--
       (1) In general.--Section 909 of the Electronic Fund 
     Transfer Act (15 U.S.C. 1693g) is amended--
       (A) by redesignating subsections (b) through (e) as 
     subsections (d) through (g), respectively;
       (B) in subsection (a)--
       (i) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively, and indenting 
     appropriately;
       (ii) by inserting ``Cards Necessitating Unique 
     Identifier.--
       ``(1) In general.--'' after ``(a)'';
       (iii) by striking ``other means of access can be identified 
     as the person authorized to use it, such as by signature, 
     photograph,'' and inserting ``other means of access can be 
     identified as the person authorized to use it by a unique 
     identifier, such as a photograph, retina scan,''; and
       (iv) by striking ``Notwithstanding the foregoing,'' and 
     inserting the following:
       ``(2) Notification.--Notwithstanding paragraph (1),''; and
       (C) by inserting before subsection (d), as so designated by 
     this section, the following new subsections:
       ``(b) Cards Not Necessitating Unique Identifier.--A 
     consumer shall be liable for an unauthorized electronic fund 
     transfer only if--
       ``(1) the liability is not in excess of $50;
       ``(2) the unauthorized electronic fund transfer is 
     initiated by the use of a card that has been properly issued 
     to a consumer other than the person making the unauthorized 
     transfer as a means of access to the account of that consumer 
     for the purpose of initiating an electronic fund transfer;
       ``(3) the unauthorized electronic fund transfer occurs 
     before the card issuer has been notified that an unauthorized 
     use of the card has occurred or may occur as the result of 
     loss, theft, or otherwise; and
       ``(4) such unauthorized electronic fund transfer did not 
     require the use of a code or other unique identifier (other 
     than a signature), such as a photograph, fingerprint, or 
     retina scan.
       ``(c) Notice of Liability and Responsibility To Report Loss 
     of Card, Code, or Other

[[Page S10770]]

     Means of Access.--No consumer shall be liable under this 
     title for any unauthorized electronic fund transfer unless 
     the consumer has received in a timely manner the notice 
     required under section 905(a)(1), and any subsequent notice 
     required under section 905(b) with regard to any change in 
     the information which is the subject of the notice required 
     under section 905(a)(1).''.
       (2) Conforming amendment.--Section 905(a)(1) of the 
     Electronic Fund Transfer Act (15 U.S.C. 1693c(a)(1)) is 
     amended to read as follows:
       ``(1) the liability of the consumer for any unauthorized 
     electronic fund transfer and the requirement for promptly 
     reporting any loss, theft, or unauthorized use of a card, 
     code, or other means of access in order to limit the 
     liability of the consumer for any such unauthorized 
     transfer;''.
       (b) Validation Requirement for Dual-Use Debit Cards.--
       (1) In general.--Section 911 of the Electronic Fund 
     Transfer Act (15 U.S.C. 1693i) is amended--
       (A) by redesignating subsection (c) as subsection (d); and
       (B) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Validation Requirement.--No person may issue a card 
     described in subsection (a), the use of which to initiate an 
     electronic fund transfer does not require the use of a code 
     or other unique identifier other than a signature (such as a 
     fingerprint or retina scan), unless--
       ``(1) the requirements of paragraphs (1) through (4) of 
     subsection (b) are met; and
       ``(2) the issuer has provided to the consumer a clear and 
     conspicuous disclosure that use of the card may not require 
     the use of such code or other unique identifier.''.
       (2) Technical and conforming amendment.--Section 911(d) of 
     the Electronic Fund Transfer Act (15 U.S.C. 1993i(d)) (as 
     redesignated by subsection (a)(1) of this section) is amended 
     by striking ``For the purpose of subsection (b)'' and 
     inserting ``For purposes of subsections (b) and (c)''.

     SEC. 209. ENHANCED DISCLOSURES UNDER AN OPEN END CREDIT PLAN.

       (a) Amendments to the Truth in Lending Act.--
       (1) Enhanced disclosure of repayment terms.--
       (A) In general.--Section 127(b) of the Truth in Lending Act 
     (15 U.S.C. 1637(b)) is amended by adding at the end the 
     following:
       ``(11)(A) In a clear and conspicuous manner, repayment 
     information that would apply to the outstanding balance of 
     the consumer under the credit plan, including--
       ``(i) the required minimum monthly payment on that balance, 
     represented as both a dollar figure and a percentage of that 
     balance;
       ``(ii) the number of months (rounded to the nearest month) 
     that it would take to pay the entire amount of that current 
     balance if the consumer pays only the required minimum 
     monthly payments and if no further advances are made;
       ``(iii) the total cost to the consumer, including interest 
     and principal payments, of paying that balance in full if the 
     consumer pays only the required minimum monthly payments and 
     if no further advances are made; and
       ``(iv) the following statement: `If your current rate is a 
     temporary introductory rate, your total costs may be 
     higher.'.
       ``(B) In making the disclosures under subparagraph (A) the 
     creditor shall apply the annual interest rate that applies to 
     that balance with respect to the current billing cycle for 
     that consumer in effect on the date on which the disclosure 
     is made.''.
       (B) Publication of model forms.--Not later than 180 days 
     after the date of enactment of this Act, the Board of 
     Governors of the Federal Reserve System shall publish model 
     disclosure forms in accordance with section 195 of the Truth 
     in Lending Act for the purpose of compliance with section 
     127(b)(11) of the Truth in Lending Act, as added by this 
     paragraph.
       (C) Civil liability.--Section 130(a) of the Truth in 
     Lending Act (15 U.S.C. 1640(a)) is amended, in the 
     undesignated paragraph following paragraph (4), by striking 
     the second sentence and inserting the following: ``In 
     connection with the disclosures referred to in subsections 
     (a) and (b) of section 1637 of this title, a creditor shall 
     have a liability determined under paragraph (2) only for 
     failing to comply with the requirements of section 1635, 
     1637(a), or of paragraph (4), (5), (6), (7), (8), (9), (10), 
     or (11) of section 1637(b) or for failing to comply with 
     disclosure requirements under State law for any term or item 
     that the Board has determined to be substantially the same in 
     meaning under section 1610(a)(2) as any of the terms or items 
     referred to in section 1637(a), paragraph (4), (5), (6), (7), 
     (8), (9), (10), or (11) of section 1637(b) of this title.''.
       (2) Disclosures in connection with solicitations.--
       (A) In general.--Section 127(c)(1)(B) of the Truth in 
     Lending Act (15 U.S.C. 1637(c)(1)(B)) is amended by adding 
     the following:
       ``(iv) Credit worksheet.--An easily understandable credit 
     worksheet designed to aid consumers in determining their 
     ability to assume more debt, including consideration of the 
     personal expenses of the consumer and a simple formula for 
     the consumer to determine whether the assumption of 
     additional debt is advisable.
       ``(v) Basis of preapproval.--In any case in which the 
     application or solicitation states that the consumer has been 
     preapproved for an account under an open end consumer credit 
     plan, the following statement must appear in a clear and 
     conspicuous manner: `Your preapproval for this credit card 
     does not mean that we have reviewed your individual financial 
     circumstances. You should review your own budget before 
     accepting this offer of credit.'.
       ``(vi) Availability of credit report.--That the consumer is 
     entitled to a copy of his or her credit report in accordance 
     with the Fair Credit Reporting Act.''.
       (B) Publication of model forms.--Not later than 180 days 
     after the date of enactment of this Act, the Board of 
     Governors of the Federal Reserve System shall publish model 
     disclosure forms in accordance with section 195 of the Truth 
     in Lending Act for the purpose of compliance with section 
     127(c)(1)(B) of the Truth in Lending Act, as amended by this 
     paragraph.
       (b) Effective Date.--The provisions of this section shall 
     become effective on January 1, 2001.

     SEC. 210. VIOLATIONS OF THE AUTOMATIC STAY.

       (a) Section 362(a) is amended by adding after paragraph (8) 
     the following:
       ``(9) any communication threatening a debtor, at any time 
     after the commencement and before the granting of a discharge 
     in a case under this title, an intention to file a motion to 
     determine the dischargeability of a debt, or to file a motion 
     under section 707(b) of title 11, United States Code, to 
     dismiss or convert a case, or to repossess collateral from 
     the debtor to which the stay applies.''.

     SEC. 211. DISCOURAGING ABUSIVE REAFFIRMATION PRACTICES.

       Section 524 of title 11, United States Code, is amended--
       (1) in subsection (c)(2)(B) by adding at the end the 
     following:
       ``(C) such agreement contains a clear and conspicuous 
     statement which advises the debtor what portion of the debt 
     to be reaffirmed is attributable to principal, interest, late 
     fees, creditor's attorneys fees, expenses or other costs 
     relating to the collection of the debt.''.
       (2)(A) in subsection (c)(6)(B), by inserting after ``real 
     property'' the following: ``or is a debt described in 
     subsection (c)(7)''; and
       (B) by adding at the end of subsection (c) the following:
       ``(7) in a case concerning an individual, if the 
     consideration for such agreement is based in whole or in part 
     on an unsecured consumer debt, or is based in whole or in 
     part upon a debt for an item of personalty the value of which 
     at point of purchase was $250 or less, and in which the 
     creditor asserts a purchase money security interest, the 
     court, approves such agreement as--
       ``(A) in the best interest of the debtor in light of the 
     debtor's income and expenses;
       ``(B) not imposing an undue hardship on the debtor's future 
     ability of the debtor to pay for the needs of children and 
     other dependents (including court ordered support);
       ``(C) not requiring the debtor to pay the creditor's 
     attorney's fees, expenses or other costs relating to the 
     collection of the debt;
       ``(D) not entered into to protect property that is 
     necessary for the care and maintenance of children or other 
     dependents that would have nominal value on repossession;
       ``(E) not entered into after coercive threats or actions by 
     the creditor in the creditor's course of dealings with the 
     debtor.
       ``(F) not unfair because excessive in amount based upon the 
     value of the collateral.''.
       (3) in subsection (d)(2) by striking ``subsections (c)(6)'' 
     and inserting ``subsections (c)(6) and (c)(7)'', and after 
     ``of this section,'' by striking ``if the consideration for 
     such agreement is based in whole or in part on a consumer 
     debt that is not secured by real property of the debtor'' and 
     adding at the end: ``as applicable''.

     SEC. 212. SENSE OF THE SENATE REGARDING THE HOMESTEAD 
                   EXEMPTION.

       (a) Findings.--The Senate finds that--
       (1) one of the most flagrant abuses of the bankruptcy 
     system involves misuse of the homestead exemption, which 
     allows a debtor to exempt his or her home, up to a certain 
     value, as established by State law, from being sold off to 
     satisfy debts;
       (2) while the vast majority of States responsibly cap the 
     exemption at not more than $40,000, 5 States exempt homes 
     regardless of their value;
       (3) in the few States with unlimited homestead exemptions, 
     debtors can shield their assets in luxury homes while 
     legitimate creditors get little or nothing;
       (4) beneficiaries of the homestead exemption include 
     convicted insider traders and savings and loan criminals, 
     while shortchanged creditors include children, spouses, 
     governments, and banks; and
       (5) the homestead exemption should be capped at $100,000 to 
     prevent such high-profile abuses.
       (b)  Sense of the Senate.--It is the sense of the Senate 
     that--
       (1) meaningful bankruptcy reform cannot be achieved without 
     capping the homestead exemption; and
       (2) bankruptcy reform legislation should include a cap of 
     $100,000 on the homestead exemption to the bankruptcy laws.

     SEC. 213. ENCOURAGING CREDITWORTHINESS.

       (a) Sense of the Congress.--It is the sense of the Congress 
     that--
       (1) certain lenders may sometimes offer credit to consumers 
     indiscriminately, without taking steps to ensure that 
     consumers are capable of repaying the resulting debt, and in 
     a manner which may encourage certain consumers to accumulate 
     additional debt; and
       (2) resulting consumer debt may increasingly be a major 
     contributing factor to consumer insolvency.
       (b) Study Required.--The Board of Governors of the Federal 
     Reserve System (hereafter in this section referred to as the 
     ``Board'') shall conduct a study of--
       (1) consumer credit industry practices of soliciting and 
     extending credit--
       (A) indiscriminately;
       (B) without taking steps to ensure that consumers are 
     capable of repaying the resulting debt; and

[[Page S10771]]

       (C) in a manner that encourages consumers to accumulate 
     additional debt; and
       (2) the effects of such practices on consumer debt and 
     insolvency.
       (c) Report and Regulations.--Not later than 24 months after 
     the date of enactment of this Act, the Board--
       (1) shall make public a report on its findings with respect 
     to the credit industry's indiscriminate solicitation and 
     extension of credit;
       (2) may issue regulations that would require additional 
     disclosures to consumers; and
       (3) may take any other actions, consistent with its 
     existing statutory authority, that the Board finds necessary 
     to ensure responsible industrywide practices and to prevent 
     resulting consumer debt and insolvency.

     SEC. 214. TREASURY DEPARTMENT STUDY REGARDING SECURITY 
                   INTERESTS UNDER AN OPEN END CREDIT PLAN.

       (a) Study.--Within 180 days of the enactment of this Act, 
     the Federal Reserve Board in consultation with the Treasury 
     Department, the general credit industry, and consumer groups, 
     shall prepare a study regarding the adequacy of information 
     received by consumers regarding the creation of security 
     interests under open end credit plans.
       (b) Findings.--This study shall include the Board's 
     findings regarding--
       (1) whether consumers understand at the time of purchase of 
     property under an open end credit plan that such property may 
     serve as collateral under that credit plan;
       (2) whether consumers understand at the time of purchase 
     the legal consequences of disposing of property that is 
     purchased under an open end credit plan and is subject to a 
     security interest under that plan; and
       (3) whether creditors holding security interests in 
     property purchased under an open end credit plan use such 
     security interests to coerce reaffirmations of existing debts 
     under section 524 of the United States Bankruptcy Code.

     In formulating these findings, the Board shall consider, 
     among other factors it deems relevant, prevailing industry 
     practices in this area.
       (c) Disclosure Recommendations.--This study shall also 
     include the Board's recommendations regarding the utility and 
     practicality of additional disclosures by credit card issuers 
     at the time of purchase regarding security interests under 
     open end credit plans, including, but not limited to--
       (1) disclosures of the specific property in which the 
     creditor will receive a security interest;
       (2) disclosures of the consequences of nonpayment of the 
     card balance, including how the security interest may be 
     enforced; and
       (3) disclosures of the process by which payments made on 
     the card will be credited with respect to the lien created by 
     the security contract and other debts on the card.
       (d) Submission of Report.--The Board shall submit this 
     report to the Senate Committee on the Judiciary, the Senate 
     Committee on Banking, Housing, and Urban Affairs, the House 
     Committee on the Judiciary, and the House Committee on 
     Banking and Financial Services within the time allotted by 
     this section.

  TITLE III--IMPROVED PROCEDURES FOR EFFICIENT ADMINISTRATION OF THE 
                           BANKRUPTCY SYSTEM

     SEC. 301. NOTICE OF ALTERNATIVES.

       (a) In General.--Section 342 of title 11, United States 
     Code, is amended by striking subsection (b) and inserting the 
     following:
       ``(b) Before the commencement of a case under this title by 
     an individual whose debts are primarily consumer debts, that 
     individual shall be given or obtain (as required in section 
     521(a)(1), as part of the certification process under 
     subchapter 1 of chapter 5) a written notice prescribed by the 
     United States trustee for the district in which the petition 
     is filed pursuant to section 586 of title 28. The notice 
     shall contain the following:
       ``(1) A brief description of chapters 7, 11, 12, and 13 and 
     the general purpose, benefits, and costs of proceeding under 
     each of those chapters.
       ``(2) A brief description of services that may be available 
     to that individual from a credit counseling service that is 
     approved by the United States trustee or the bankruptcy 
     administrator for that district.''.
       (b) Debtor's Duties.--Section 521 of title 11, United 
     States Code, is amended--
       (1) by inserting ``(a)'' before ``The debtor

     shall--'';
       (2) by striking paragraph (1) and inserting the following:
       ``(1) file--
       ``(A) a list of creditors; and
       ``(B) unless the court orders otherwise--
       ``(i) a schedule of assets and liabilities;
       ``(ii) a schedule of current income and current 
     expenditures;
       ``(iii) a statement of the debtor's financial affairs and, 
     if applicable, a certificate--

       ``(I) of an attorney whose name is on the petition as the 
     attorney for the debtor or any bankruptcy petition preparer 
     signing the petition pursuant to section 110(b)(1) indicating 
     that such attorney or bankruptcy petition preparer delivered 
     to the debtor any notice required by section 342(b); or
       ``(II) if no attorney for the debtor is indicated and no 
     bankruptcy petition preparer signed the petition, of the 
     debtor that such notice was obtained and read by the debtor;

       ``(iv) copies of any Federal tax returns, including any 
     schedules or attachments, filed by the debtor for the 3-year 
     period preceding the order for relief;
       ``(v) copies of all payment advices or other evidence of 
     payment, if any, received by the debtor from any employer of 
     the debtor in the period 60 days prior to the filing of the 
     petition;
       ``(vi) a statement of the amount of projected monthly net 
     income, itemized to show how calculated; and
       ``(vii) a statement disclosing any reasonably anticipated 
     increase in income or expenditures over the 12-month period 
     following the date of filing;''; and
       (3) by adding at the end the following:
       ``(b)(1) At any time, a creditor, in the case of an 
     individual under chapter 7 or 13, may file with the court 
     notice that the creditor requests the petition, schedules, 
     and a statement of affairs filed by the debtor in the case 
     and the court shall make those documents available to the 
     creditor who requests those documents.
       ``(2) At any time, a creditor, in a case under chapter 13, 
     may file with the court notice that the creditor requests the 
     plan filed by the debtor in the case and the court shall make 
     that plan available to the creditor who requests that plan.
       ``(c) An individual debtor in a case under chapter 7 or 13 
     shall file with the court--
       ``(1) at the time filed with the taxing authority, all tax 
     returns, including any schedules or attachments, with respect 
     to the period from the commencement of the case until such 
     time as the case is closed;
       ``(2) at the time filed with the taxing authority, all tax 
     returns, including any schedules or attachments, that were 
     not filed with the taxing authority when the schedules under 
     subsection (a)(1) were filed with respect to the period that 
     is 3 years before the order for relief;
       ``(3) any amendments to any of the tax returns, including 
     schedules or attachments, described in paragraph (1) or (2); 
     and
       ``(4) in a case under chapter 13, a statement subject to 
     the penalties of perjury by the debtor of the debtor's income 
     and expenditures in the preceding tax year and monthly 
     income, that shows how the amounts are calculated--
       ``(A) beginning on the date that is the later of 90 days 
     after the close of the debtor's tax year or 1 year after the 
     order for relief, unless a plan has been confirmed; and
       ``(B) thereafter, on or before the date that is 45 days 
     before each anniversary of the confirmation of the plan until 
     the case is closed.
       ``(d)(1) A statement referred to in subsection (c)(4) shall 
     disclose--
       ``(A) the amount and sources of income of the debtor;
       ``(B) the identity of any persons responsible with the 
     debtor for the support of any dependents of the debtor; and
       ``(C) the identity of any persons who contributed, and the 
     amount contributed, to the household in which the debtor 
     resides.
       ``(2) The tax returns, amendments, and statement of income 
     and expenditures described in paragraph (1) shall be 
     available to the United States trustee, any bankruptcy 
     administrator, any trustee, and any party in interest for 
     inspection and copying, subject to the requirements of 
     subsection (e).
       ``(e)(1) Not later than 30 days after the date of enactment 
     of the Consumer Bankruptcy Reform Act of 1998, the Director 
     of the Administrative Office of the United States Courts 
     shall establish procedures for safeguarding the 
     confidentiality of any tax information required to be 
     provided under this section.
       ``(2) The procedures under paragraph (1) shall include 
     restrictions on creditor access to tax information that is 
     required to be provided under this section.
       ``(3) Not later than 1 year after the date of enactment of 
     the Consumer Bankruptcy Reform Act of 1998, the Director of 
     the Administrative Office of the United States Courts shall 
     prepare, and submit to Congress a report that--
       ``(A) assesses the effectiveness of the procedures under 
     paragraph (1); and
       ``(B) if appropriate, includes proposed legislation--
       ``(i) to further protect the confidentiality of tax 
     information; and
       ``(ii) to provide penalties for the improper use by any 
     person of the tax information required to be provided under 
     this section.
       ``(f) If requested by the United States trustee or a 
     trustee serving in the case, the debtor provide a document 
     that establishes the identity of the debtor, including a 
     driver's license, passport, or other document that contains a 
     photograph of the debtor and such other personal identifying 
     information relating to the debtor that establishes the 
     identity of the debtor.''.
       (c) Title 28.--Section 586(a) of title 28, United States 
     Code, is amended--
       (1) in paragraph (5), by striking ``and'' at the end;
       (2) in paragraph (6), by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(7) on or before January 1 of each calendar year, and 
     also not later than 30 days after any change in the nonprofit 
     debt counseling services registered with the bankruptcy 
     court, prescribe and make available on request the notice 
     described in section 342(b)(3) of title 11 for each district 
     included in the region.''.

     SEC. 302. FAIR TREATMENT OF SECURED CREDITORS UNDER CHAPTER 
                   13.

       (a) Restoring the Foundation for Secured Credit.--Section 
     1325(a) of title 11, United States Code, is amended--
       (1) in paragraph (5), by striking the matter preceding 
     subparagraph (A) and inserting the following:
       ``(5) with respect to an allowed claim provided for by the 
     plan that is secured under applicable nonbankruptcy law by 
     reason of a lien on property in which the estate has an 
     interest or is subject to a setoff under section 553--''; and
       (2) by adding at the end of the subsection the following 
     flush sentence:

     ``For purposes of paragraph (5), section 506 shall not apply 
     to a claim described in that paragraph.''.
       (b) Payment of Holders of Claims Secured by Liens.--Section 
     1325(a)(5)(B)(i) of title 11, United States Code, is amended 
     to read as follows:
       ``(B)(i) the plan provides that the holder of such claim 
     retain the lien securing such claim

[[Page S10772]]

     until the debt that is the subject of the claim is fully paid 
     for, as provided under the plan; and''.
       (c) Determination of Secured Status.--Section 506 of title 
     11, United States Code, is amended by adding at the end the 
     following:
       ``(e) Subsection (a) shall not apply to an allowed claim to 
     the extent attributable in whole or in part to the purchase 
     price of personal property acquired by the debtor during the 
     90-day period preceding the date of filing of the 
     petition.''.

     SEC. 303. DISCOURAGEMENT OF BAD FAITH REPEAT FILINGS.

       Section 362(c) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(1)'' before ``Except as'';
       (2) by striking ``(1) the stay'' and inserting ``(A) the 
     stay'';
       (3) by striking ``(2) the stay'' and inserting ``(B) the 
     stay'';
       (4) by striking ``(A) the time'' and inserting ``(i) the 
     time'';
       (5) by striking ``(B) the time'' and inserting ``(ii) the 
     time''; and
       (6) by adding at the end the following:
       ``(2) Except as provided in subsections (d) through (f), 
     the stay under subsection (a) with respect to any action 
     taken with respect to a debt or property securing such debt 
     or with respect to any lease shall terminate with respect to 
     the debtor on the 30th day after the filing of the later case 
     if--
       ``(A) a single or joint case is filed by or against an 
     individual debtor under chapter 7, 11, or 13; and
       ``(B) a single or joint case of that debtor (other than a 
     case refiled under a chapter other than chapter 7 after 
     dismissal under section 707(b)) was pending during the 
     preceding year but was dismissed.
       ``(3) If a party in interest so requests, the court may 
     extend the stay in a particular case with respect to 1 or 
     more creditors (subject to such conditions or limitations as 
     the court may impose) after providing notice and a hearing 
     completed before the expiration of the 30-day period 
     described in paragraph (2) only if the party in interest 
     demonstrates that the filing of the later case is in good 
     faith with respect to the creditors to be stayed.
       ``(4) A case shall be presumed to have not been filed in 
     good faith (except that such presumption may be rebutted by 
     clear and convincing evidence to the contrary)--
       ``(A) with respect to the creditors involved, if--
       ``(i) more than 1 previous case under any of chapters 7, 
     11, or 13 in which the individual was a debtor was pending 
     during the 1-year period described in paragraph (1);
       ``(ii) a previous case under any of chapters 7, 11, or 13 
     in which the individual was a debtor was dismissed within the 
     period specified in paragraph (2) after--
       ``(I) the debtor, after having received from the court a 
     request to do so, failed to file or amend the petition or 
     other documents as required by this title; or
       ``(II) the debtor, without substantial excuse, failed to 
     perform the terms of a plan that was confirmed by the court; 
     or
       ``(iii)(I) during the period commencing with the dismissal 
     of the next most previous case under chapter 7, 11, or 13 
     there has not been a substantial change in the financial or 
     personal affairs of the debtor;
       ``(II) if the case is a chapter 7 case, there is no other 
     reason to conclude that the later case will be concluded with 
     a discharge; or
       ``(III) if the case is a chapter 11 or 13 case, there is 
     not a confirmed plan that will be fully performed; and
       ``(B) with respect to any creditor that commenced an action 
     under subsection (d) in a previous case in which the 
     individual was a debtor, if, as of the date of dismissal of 
     that case, that action was still pending or had been resolved 
     by terminating, conditioning, or limiting the stay with 
     respect to actions of that creditor.
       ``(5)(A) If a request is made for relief from the stay 
     under subsection (a) with respect to real or personal 
     property of any kind, and the request is granted in whole or 
     in part, the court may, in addition to making any other order 
     under this subsection, order that the relief so granted shall 
     be in rem either--
       ``(i) for a definite period of not less than 1 year; or
       ``(ii) indefinitely.
       ``(B)(i) After an order is issued under subparagraph (A), 
     the stay under subsection (a) shall not apply to any property 
     subject to such an in rem order in any case of the debtor.
       ``(ii) If an in rem order issued under subparagraph (A) so 
     provides, the stay shall, in addition to being inapplicable 
     to the debtor involved, not apply with respect to an entity 
     under this title if--
       ``(I) the entity had reason to know of the order at the 
     time that the entity obtained an interest in the property 
     affected; or
       ``(II) the entity was notified of the commencement of the 
     proceeding for relief from the stay, and at the time of the 
     notification, no case in which the entity was a debtor was 
     pending.
       ``(6) For purposes of this section, a case is pending 
     during the period beginning with the issuance of the order 
     for relief and ending at such time as the case involved is 
     closed.''.

     SEC. 304. TIMELY FILING AND CONFIRMATION OF PLANS UNDER 
                   CHAPTER 13.

       (a) Filing of Plan.--Section 1321 of title 11, United 
     States Code, is amended to read as follows:

     ``Sec. 1321. Filing of plan

       ``The debtor shall file a plan not later than 90 days after 
     the order for relief under this chapter, except that the 
     court may extend such period if the need for an extension is 
     attributable to circumstances for which the debtor should not 
     justly be held accountable.''.
       (b) Confirmation of Hearing.--Section 1324 of title 11, 
     United States Code, is amended by adding at the end the 
     following: ``That hearing shall be held not later than 45 
     days after the filing of the plan, unless the court, after 
     providing notice and a hearing, orders otherwise.''.

     SEC. 305. APPLICATION OF THE CODEBTOR STAY ONLY WHEN THE STAY 
                   PROTECTS THE DEBTOR.

       Section 1301(b) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(1)'' after ``(b)''; and
       (2) by adding at the end the following:
       ``(2)(A) Notwithstanding subsection (c) and except as 
     provided in subparagraph (B), in any case in which the debtor 
     did not receive the consideration for the claim held by a 
     creditor, the stay provided by subsection (a) shall apply to 
     that creditor for a period not to exceed 30 days beginning on 
     the date of the order for relief, to the extent the creditor 
     proceeds against--
       ``(i) the individual that received that consideration; or
       ``(ii) property not in the possession of the debtor that 
     secures that claim.
       ``(B) Notwithstanding subparagraph (A), the stay provided 
     by subsection (a) shall apply in any case in which the debtor 
     is primarily obligated to pay the creditor in whole or in 
     part with respect to a claim described in subparagraph (A) 
     under a legally binding separation or property settlement 
     agreement or divorce or dissolution decree with respect to--
       ``(i) an individual described in subparagraph (A)(i); or
       ``(ii) property described in subparagraph (A)(ii).
       ``(3) Notwithstanding subsection (c), the stay provided by 
     subsection (a) shall terminate as of the date of confirmation 
     of the plan, in any case in which the plan of the debtor 
     provides that the debtor's interest in personal property 
     subject to a lease with respect to which the debtor is the 
     lessee will be surrendered or abandoned or no payments will 
     be made under the plan on account of the debtor's obligations 
     under the lease.''.

     SEC. 306. IMPROVED BANKRUPTCY STATISTICS.

       (a) Amendment.--Chapter 6 of part I of title 28, United 
     States Code, is amended by adding at the end the following:

     ``Sec. 159. Bankruptcy statistics

       ``(a) The clerk of each district shall compile statistics 
     regarding individual debtors with primarily consumer debts 
     seeking relief under chapters 7, 11, and 13 of title 11. 
     Those statistics shall be in a form prescribed by the 
     Director of the Administrative Office of the United States 
     Courts (referred to in this section as the `Office').
       ``(b) The Director shall--
       ``(1) compile the statistics referred to in subsection (a);
       ``(2) make the statistics available to the public; and
       ``(3) not later than October 31, 1998, and annually 
     thereafter, prepare, and submit to Congress a report 
     concerning the information collected under subsection (a) 
     that contains an analysis of the information.
       ``(c) The compilation required under subsection (b) shall--
       ``(1) be itemized, by chapter, with respect to title 11;
       ``(2) be presented in the aggregate and for each district; 
     and
       ``(3) include information concerning--
       ``(A) the total assets and total liabilities of the debtors 
     described in subsection (a), and in each category of assets 
     and liabilities, as reported in the schedules prescribed 
     pursuant to section 2075 of this title and filed by those 
     debtors;
       ``(B) the current total monthly income, projected monthly 
     net income, and average income and average expenses of those 
     debtors as reported on the schedules and statements that each 
     such debtor files under sections 111, 521, and 1322 of title 
     11;
       ``(C) the aggregate amount of debt discharged in the 
     reporting period, determined as the difference between the 
     total amount of debt and obligations of a debtor reported on 
     the schedules and the amount of such debt reported in 
     categories which are predominantly nondischargeable;
       ``(D) the average period of time between the filing of the 
     petition and the closing of the case;
       ``(E) for the reporting period--
       ``(i) the number of cases in which a reaffirmation was 
     filed; and
       ``(ii)(I) the total number of reaffirmations filed;
       ``(II) of those cases in which a reaffirmation was filed, 
     the number in which the debtor was not represented by an 
     attorney; and
       ``(III) of those cases, the number of cases in which the 
     reaffirmation was approved by the court;
       ``(F) with respect to cases filed under chapter 13 of title 
     11, for the reporting period--
       ``(i)(I) the number of cases in which a final order was 
     entered determining the value of property securing a claim in 
     an amount less than the amount of the claim; and
       ``(II) the number of final orders determining the value of 
     property securing a claim issued;
       ``(ii) the number of cases dismissed for failure to make 
     payments under the plan; and
       ``(iii) the number of cases in which the debtor filed 
     another case within the 6 years previous to the filing; and
       ``(G) the extent of creditor misconduct and any amount of 
     punitive damages awarded by the court for creditor 
     misconduct.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 6 of title 28, United States Code, is 
     amended by adding at the end the following:

``159. Bankruptcy statistics.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect 18 months after the date of enactment of 
     this Act.

[[Page S10773]]

     SEC. 307. AUDIT PROCEDURES.

       (a) Amendments.--Section 586 of title 28, United States 
     Code, is amended--
       (1) in subsection (a), as amended by section 301 of this 
     Act, by striking paragraph (6) and inserting the following:
       ``(6) make such reports as the Attorney General directs, 
     including the results of audits performed under subsection 
     (f); and''; and
       (2) by adding at the end the following:
       ``(f)(1)(A) The Attorney General shall establish procedures 
     to determine the accuracy and completeness of petitions, 
     schedules, and other information which the debtor is required 
     to provide under sections 521 and 1322 of title 11, and, if 
     applicable, section 111 of title 11, in individual cases 
     filed under chapter 7 or 13 of such title.
       ``(B) Those procedures shall--
       ``(i) establish a method of selecting appropriate qualified 
     persons to contract to perform those audits;
       ``(ii) establish a method of randomly selecting cases to be 
     audited, except that not less than 1 out of every 500 cases 
     in each Federal judicial district shall be selected for 
     audit;
       ``(iii) require audits for schedules of income and expenses 
     which reflect greater than average variances from the 
     statistical norm of the district in which the schedules were 
     filed; and
       ``(iv) establish procedures for providing, not less 
     frequently than annually, public information concerning the 
     aggregate results of such audits including the percentage of 
     cases, by district, in which a material misstatement of 
     income or expenditures is reported.
       ``(2) The United States trustee for each district is 
     authorized to contract with auditors to perform audits in 
     cases designated by the United States trustee according to 
     the procedures established under paragraph (1).
       ``(3)(A) The report of each audit conducted under this 
     subsection shall be filed with the court and transmitted to 
     the United States trustee. Each report shall clearly and 
     conspicuously specify any material misstatement of income or 
     expenditures or of assets identified by the person performing 
     the audit. In any case where a material misstatement of 
     income or expenditures or of assets has been reported, the 
     clerk of the bankruptcy court shall give notice of the 
     misstatement to the creditors in the case.
       ``(B) If a material misstatement of income or expenditures 
     or of assets is reported the United States trustee shall--
       ``(i) report the material misstatement, if appropriate, to 
     the United States Attorney pursuant to section 3057 of title 
     18, United States Code; and
       ``(ii) if advisable, take appropriate action, including but 
     not limited to commencing an adversary proceeding to revoke 
     the debtor's discharge pursuant to section 727(d) of title 
     11, United States Code.''.
       (b) Amendments to Section 521 of Title 11, U.S.C.--Section 
     521 of title 11, United States Code, is amended in paragraphs 
     (3) and (4) by adding ``or an auditor appointed pursuant to 
     section 586 of title 28, United States Code'' after ``serving 
     in the case''.
       (c) Amendments to Section 727 of Title 11, U.S.C.--Section 
     727(d) of title 11, United States Code, is amended--
       (1) by deleting ``or'' at the end of paragraph (2);
       (2) by substituting ``; or'' for the period at the end of 
     paragraph (3); and
       (3) adding the following at the end of paragraph (3)--
       ``(4) the debtor has failed to explain satisfactorily--
       ``(A) a material misstatement in an audit performed 
     pursuant to section 586(f) of title 28, United States Code; 
     or
       ``(B) a failure to make available for inspection all 
     necessary accounts, papers, documents, financial records, 
     files and all other papers, things, or property belonging to 
     the debtor that are requested for an audit conducted pursuant 
     to section 586(f) of title 28, United States Code.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect 18 months after the date of enactment of 
     this Act.

     SEC. 308. CREDITOR REPRESENTATION AT FIRST MEETING OF 
                   CREDITORS.

       Section 341(c) of title 11, United States Code, is amended 
     by inserting after the first sentence the following: 
     ``Notwithstanding any local court rule, provision of a State 
     constitution, any other Federal or State law that is not a 
     bankruptcy law, or other requirement that representation at 
     the meeting of creditors under subsection (a) be by an 
     attorney, a creditor holding a consumer debt or any 
     representative of the creditor (which may include an entity 
     or an employee of an entity and may be a representative for 
     more than one creditor) shall be permitted to appear at and 
     participate in the meeting of creditors in a case under 
     chapter 7 or 13, either alone or in conjunction with an 
     attorney for the creditor. Nothing in this subsection shall 
     be construed to require any creditor to be represented by an 
     attorney at any meeting of creditors.''.

     SEC. 309. FAIR NOTICE FOR CREDITORS IN CHAPTER 7 AND 13 
                   CASES.

       Section 342 of title 11, United States Code, is amended--
       (1) in subsection (c), by striking ``, but the failure of 
     such notice to contain such information shall not invalidate 
     the legal effect of such notice''; and
       (2) by adding at the end the following:
       ``(d)(1) If the credit agreement between the debtor and the 
     creditor or the last communication before the filing of the 
     petition in a voluntary case from the creditor to a debtor 
     who is an individual states an account number of the debtor 
     that is the current account number of the debtor with respect 
     to any debt held by the creditor against the debtor, the 
     debtor shall include that account number in any notice to the 
     creditor required to be given under this title.
       ``(2) If the creditor has specified to the debtor, in the 
     last communication before the filing of the petition, an 
     address at which the creditor wishes to receive 
     correspondence regarding the debtor's account, any notice to 
     the creditor required to be given by the debtor under this 
     title shall be given at such address.
       ``(3) For purposes of this section, the term `notice' shall 
     include--
       ``(A) any correspondence from the debtor to the creditor 
     after the commencement of the case;
       ``(B) any statement of the debtor's intention under section 
     521(a)(2);
       ``(C) notice of the commencement of any proceeding in the 
     case to which the creditor is a party; and
       ``(D) any notice of a hearing under section 1324.
       ``(e)(1) At any time, a creditor, in a case of an 
     individual under chapter 7 or 13, may file with the court and 
     serve on the debtor a notice of the address to be used to 
     notify the creditor in that case.
       ``(2) If the court or the debtor is required to give the 
     creditor notice, not later than 5 days after receipt of the 
     notice under paragraph (1), that notice shall be given at 
     that address.
       ``(f) An entity may file with the court a notice stating 
     its address for notice in cases under chapter 7 or 13. After 
     the date that is 30 days following the filing of that notice, 
     any notice in any case filed under chapter 7 or 13 given by 
     the court shall be to that address unless specific notice is 
     given under subsection (e) with respect to a particular case.
       ``(g)(1) Notice given to a creditor other than as provided 
     in this section shall not be effective notice until that 
     notice has been brought to the attention of the creditor.
       ``(2) If the creditor has designated a person or department 
     to be responsible for receiving notices concerning bankruptcy 
     cases and has established reasonable procedures so that 
     bankruptcy notices received by the creditor will be delivered 
     to that department or person, notice shall not be brought to 
     the attention of the creditor until that notice is received 
     by that person or department.''.

     SEC. 310. STOPPING ABUSIVE CONVERSIONS FROM CHAPTER 13.

       Section 348(f)(1) of title 11, United States Code, is 
     amended--
       (1) in subparagraph (A), by striking ``and'' at the end;
       (2) in subparagraph (B)--
       (A) by striking ``in the converted case, with allowed 
     secured claims'' and inserting ``only in a case converted to 
     chapter 11 or 12 but not in a case converted to chapter 7, 
     with allowed secured claims in cases under chapters 11 and 
     12''; and
       (B) by striking the period and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(C) with respect to cases converted from chapter 13, the 
     claim of any creditor holding security as of the date of the 
     petition shall continue to be secured by that security unless 
     the full amount of that claim determined under applicable 
     nonbankruptcy law has been paid in full as of the date of 
     conversion, notwithstanding any valuation or determination of 
     the amount of an allowed secured claim made for the purposes 
     of the chapter 13 proceeding.''.

     SEC. 311. PROMPT RELIEF FROM STAY IN INDIVIDUAL CASES.

       Section 362(e) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(1)'' after ``(e)''; and
       (2) by adding at the end the following:
       ``(2) Notwithstanding paragraph (1), in the case of an 
     individual filing under chapter 7, 11, or 13, the stay under 
     subsection (a) shall terminate on the date that is 60 days 
     after a request is made by a party in interest under 
     subsection (d), unless--
       ``(A) a final decision is rendered by the court during the 
     60-day period beginning on the date of the request; or
       ``(B) that 60-day period is extended--
       ``(i) by agreement of all parties in interest; or
       ``(ii) by the court for such specific period of time as the 
     court finds is required for good cause.''.

     SEC. 312. DISMISSAL FOR FAILURE TO TIMELY FILE SCHEDULES OR 
                   PROVIDE REQUIRED INFORMATION.

       Section 707 of title 11, United States Code, as amended by 
     section 102 of this Act, is amended by adding at the end the 
     following:
       ``(c)(1) Notwithstanding subsection (a), and subject to 
     paragraph (2), if an individual debtor in a voluntary case 
     under chapter 7 or 13 fails to file all of the information 
     required under section 521(a)(1) within 45 days after the 
     filing of the petition commencing the case, the case shall be 
     automatically dismissed effective on the 46th day after the 
     filing of the petition.
       ``(2) With respect to a case described in paragraph (1), 
     any party in interest may request the court to enter an order 
     dismissing the case. The court shall, if so requested, enter 
     an order of dismissal not later than 5 days after that 
     request.
       ``(3) Upon request of the debtor made within 45 days after 
     the filing of the petition commencing a case described in 
     paragraph (1), the court may allow the debtor an additional 
     period of not to exceed 50 days to file the information 
     required under section 521(a)(1) if the court finds 
     justification for extending the period for the filing.''.

     SEC. 313. ADEQUATE TIME FOR PREPARATION FOR A HEARING ON 
                   CONFIRMATION OF THE PLAN.

       Section 1324 of title 11, United States Code, as amended by 
     section 304 of this Act, is amended--
       (1) by striking ``After'' and inserting the following:
       ``(a) Except as provided in subsection (b) and after''; and
       (2) by adding at the end the following:

[[Page S10774]]

       ``(b) If not later than 5 days after receiving notice of a 
     hearing on confirmation of the plan, a creditor objects to 
     the confirmation of the plan, the hearing on confirmation of 
     the plan may be held no earlier than 20 days after the first 
     meeting of creditors under section 341(a).''.

     SEC. 314. DISCHARGE UNDER CHAPTER 13.

       Section 1328(a) of title 11, United States Code, is amended 
     by striking paragraphs (1) through (3) and inserting the 
     following:
       ``(1) provided for under section 1322(b)(5);
       ``(2) of the kind specified in paragraph (2), (4), (5), 
     (8), or (9) of section 523(a);
       ``(3) for restitution, or a criminal fine, included in a 
     sentence on the debtor's conviction of a crime; or
       ``(4) for restitution, or damages, awarded in a civil 
     action against the debtor as a result of willful or malicious 
     injury by the debtor that caused personal injury to an 
     individual or the death of an individual.''.

     SEC. 315. NONDISCHARGEABLE DEBTS.

       Section 523(a) of title 11, United States Code, is amended 
     by inserting after paragraph (14) the following:
       ``(14A) incurred to pay a debt that is nondischargeable by 
     reason of section 727, 1141, 1228 (a) or (b), or 1328(b), or 
     any other provision of this subsection, where the debtor 
     incurred the debt to pay such a nondischargeable debt with 
     the intent to discharge in bankruptcy the newly-created 
     debt.''.

     SEC. 316. CREDIT EXTENSIONS ON THE EVE OF BANKRUPTCY PRESUMED 
                   NONDISCHARGEABLE.

       Section 523(a)(2) of title 11, United States Code, as 
     amended by section 202 of this Act, is amended--
       (1) in subparagraph (A), by striking the semicolon at the 
     end and inserting the following: ``(and, for purposes of this 
     subparagraph, consumer debts owed in an aggregate amount 
     greater than or equal to $400 incurred for goods or services 
     not reasonably necessary for the maintenance or support of 
     the debtor or a dependent child of the debtor to a single 
     creditor that are incurred during the 90-day period preceding 
     the date of the order for relief shall be presumed to be 
     nondischargeable under this subparagraph); or'';
       (2) in subparagraph (B), by striking ``or'' at the end; and
       (3) by striking subparagraph (C).

     SEC. 317. DEFINITION OF HOUSEHOLD GOODS AND ANTIQUES.

       Not later than 180 days after the date of enactment of this 
     Act, the Federal Trade Commission shall promulgate 
     regulations defining ``household goods'' under section 
     522(c)(3) in a manner suitable and appropriate for cases 
     under title 11 of the United States Code. If new regulations 
     are not effective within 180 days of enactment of this Act, 
     then ``household goods'' under section 522(c)(3) shall have 
     the meaning given that term in section 444.1(i) of title 16, 
     of the Code of Federal Regulations, except that the term 
     shall also include any tangible personal property reasonably 
     necessary for the maintenance or support of a dependent 
     child.

     SEC. 318. RELIEF FROM STAY WHEN THE DEBTOR DOES NOT COMPLETE 
                   INTENDED SURRENDER OF CONSUMER DEBT COLLATERAL.

       (a) Automatic Stay.--Section 362 of title 11, United States 
     Code, as amended by section 303, is amended--
       (1) in subsection (c)(1), in the matter preceding 
     subparagraph (A), by striking ``(e) and (f)'' and inserting 
     ``(e), (f), and (h)'';
       (2) by redesignating subsection (h) as subsection (i); and
       (3) by inserting after subsection (g) the following:
       ``(h) In an individual case under chapter 7, 11, or 13 the 
     stay provided by subsection (a) is terminated with respect to 
     property of the estate securing in whole or in part a claim 
     that is in an amount greater than $3,000, or subject to an 
     unexpired lease with a remaining term of at least 1 year (in 
     any case in which the debtor owes at least $3,000 for a 1-
     year period), if within 30 days after the expiration of the 
     applicable period under section 521(a)(2)--
       ``(1)(A) the debtor fails to timely file a statement of 
     intention to surrender or retain the property; or
       ``(B) if the debtor indicates in the filing that the debtor 
     will retain the property, the debtor fails to meet an 
     applicable requirement to--
       ``(i) either--
       ``(I) redeem the property pursuant to section 722; or
       ``(II) reaffirm the debt the property secures pursuant to 
     section 524(c); or
       ``(ii) assume the unexpired lease pursuant to section 
     365(d) if the trustee does not do so; or
       ``(2) the debtor fails to timely take the action specified 
     in a statement of intention referred to in paragraph (1)(A) 
     (as amended, if that statement is amended before expiration 
     of the period for taking action), unless--
       ``(A) the statement of intention specifies reaffirmation; 
     and
       ``(B) the creditor refuses to reaffirm the debt on the 
     original contract terms for the debt.''.
       (b) Debtor's Duties.--Section 521(a)(2) of title 11, United 
     States Code, as redesignated by section 301(b) of this Act, 
     is amended--
       (1) in the matter preceding subparagraph (A), by striking 
     ``consumer'';
       (2) in subparagraph (B)--
       (A) by striking ``forty-five days after the filing of a 
     notice of intent under this section'' and inserting ``30 days 
     after the first meeting of creditors under section 341(a)''; 
     and
       (B) by striking ``forty-five-day period'' and inserting 
     ``30-day period''; and
       (3) in subparagraph (C), by inserting ``, except as 
     provided in section 362(h)'' before the semicolon.

     SEC. 319. ADEQUATE PROTECTION OF LESSORS AND PURCHASE MONEY 
                   SECURED CREDITORS.

       (a) In General.--Chapter 13 of title 11, United States 
     Code, is amended by adding after section 1307 the following:

     ``Sec. 1307A. Adequate protection in chapter 13 cases

       ``(a)(1)(A) On or before the date that is 30 days after the 
     filing of a case under this chapter, the debtor shall make 
     cash payments in an amount determined under paragraph (2)(A), 
     to--
       ``(i) any lessor of personal property; and
       ``(ii) any creditor holding a claim secured by personal 
     property to the extent that the claim is attributable to the 
     purchase of that property by the debtor.
       ``(B) The debtor or the plan shall continue making the 
     adequate protection payments until the earlier of the date on 
     which--
       ``(i) the creditor begins to receive actual payments under 
     the plan; or
       ``(ii) the debtor relinquishes possession of the property 
     referred to in subparagraph (A) to--
       ``(I) the lessor or creditor; or
       ``(II) any third party acting under claim of right, as 
     applicable.
       ``(2) The payments referred to in paragraph (1)(A) shall be 
     determined by the court.
       ``(b)(1) Subject to the limitations under paragraph (2), 
     the court may, after notice and hearing, change the amount 
     and timing of the dates of payment of payments made under 
     subsection (a).
       ``(2)(A) The payments referred to in paragraph (1) shall be 
     payable not less frequently than monthly.
       ``(B) The amount of a payment referred to in paragraph (1) 
     shall not be less than the reasonable depreciation of the 
     personal property described in subsection (a)(1), determined 
     on a month-to-month basis.
       ``(c) Notwithstanding section 1326(b), the payments 
     referred to in subsection (a)(1)(A) shall be continued in 
     addition to plan payments under a confirmed plan until actual 
     payments to the creditor begin under that plan, if the 
     confirmed plan provides--
       ``(1) for payments to a creditor or lessor described in 
     subsection (a)(1); and
       ``(2) for the deferral of payments to such creditor or 
     lessor under the plan until the payment of amounts described 
     in section 1326(b).
       ``(d) Notwithstanding sections 362, 542, and 543, a lessor 
     or creditor described in subsection (a) may retain possession 
     of property described in that subsection that was obtained in 
     accordance with applicable law before the date of filing of 
     the petition until the first payment under subsection 
     (a)(1)(A) is received by the lessor or creditor.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 13 of title 11, United States Code, is 
     amended by inserting after the item relating to section 1307 
     the following:

``1307A. Adequate protection in chapter 13 cases.''.

     SEC. 320. LIMITATION.

       Section 522 of title 11, United States Code, as amended by 
     section 207(a), is amended--
       (1) in subsection (b)(3)(A), by inserting ``subject to 
     subsection (n),'' before ``any property''; and
       (2) by adding at the end the following new subsection:
       ``(n)(1) Except as provided in paragraph (2), as a result 
     of electing under subsection (b)(3)(A) to exempt property 
     under State or local law, a debtor may not exempt any amount 
     of interest that exceeds in the aggregate $100,000 in value 
     in--
       ``(A) real or personal property that the debtor or a 
     dependent of the debtor uses as a residence;
       ``(B) a cooperative that owns property that the debtor or a 
     dependent of the debtor uses as a residence; or
       ``(C) a burial plot for the debtor or a dependent of the 
     debtor.
       ``(2) The limitation under paragraph (1) shall not apply to 
     an exemption claimed under subsection (b)(2)(A) by a family 
     farmer for the principal residence of that farmer.''.

     SEC. 321. MISCELLANEOUS IMPROVEMENTS.

       (a) Who May Be a Debtor.--Section 109 of title 11, United 
     States Code, is amended by adding at the end the following:
       ``(h)(1) Subject to paragraphs (2) and (3) and 
     notwithstanding any other provision of this section, an 
     individual may not be a debtor under this title unless that 
     individual has, during the 90-day period preceding the date 
     of filing of the petition of that individual, received credit 
     counseling, including, at a minimum, participation in an 
     individual or group briefing that outlined the opportunities 
     for available credit counseling and assisted that individual 
     in performing an initial budget analysis, through a credit 
     counseling program (offered through an approved credit 
     counseling service described in section 111(a)) that has been 
     approved by--
       ``(A) the United States trustee; or
       ``(B) the bankruptcy administrator for the district in 
     which the petition is filed.''.
       ``(2)(A) Paragraph (1) shall not apply with respect to a 
     debtor who resides in a district for which the United States 
     trustee or bankruptcy administrator of the bankruptcy court 
     of that district determines that the approved credit 
     counseling services for that district are not reasonably able 
     to provide adequate services to the additional individuals 
     who would otherwise seek credit counseling from those 
     programs by reason of the requirements of paragraph (1).
       ``(B) Each United States trustee or bankruptcy 
     administrator that makes a determination described in 
     subparagraph (A) shall review that determination not later 
     than one year after the date of that determination, and not 
     less frequently than every year thereafter.
       ``(3)(A) Subject to subparagraph (B), the requirements of 
     paragraph (1) shall not apply

[[Page S10775]]

     with respect to a debtor who submits to the court a 
     certification that--
       ``(i) describes exigent circumstances that merit a waiver 
     of the requirements of paragraph (1);
       ``(ii) states that the debtor requested credit counseling 
     services from an approved credit counseling service, but was 
     unable to obtain the services referred to in paragraph (1) 
     during the 5-day period beginning on the date on which the 
     debtor made that request; and
       ``(iii) is satisfactory to the court.
       ``(B) With respect to a debtor, an exemption under 
     subparagraph (A) shall cease to apply to that debtor on the 
     date on which the debtor meets the requirements of paragraph 
     (1), but in no case may the exemption apply to that debtor 
     after the date that is 30 days after the debtor files a 
     petition.''.
       (b) Chapter 7 Discharge.--Section 727(a) of title 11, 
     United States Code, is amended--
       (1) in paragraph (9), by striking ``or'' at the end;
       (2) in paragraph (10), by striking the period and inserting 
     ``; or''; and
       (3) by adding at the end the following:
       ``(11) after the filing of the petition, the debtor failed 
     to complete an instructional course concerning personal 
     financial management described in section 111 that was 
     administered or approved by--
       ``(A) the United States trustee; or
       ``(B) the bankruptcy administrator for the district in 
     which the petition is filed.''.
       (c) Chapter 13 Discharge.--Section 1328 of title 11, United 
     States Code, is amended by adding at the end the following:
       ``(f) The court shall not grant a discharge under this 
     section to a debtor, unless after filing a petition the 
     debtor has completed an instructional course concerning 
     personal financial management described in section 111 that 
     was administered or approved by--
       ``(1) the United States trustee; or
       ``(2) the bankruptcy administrator for the district in 
     which the petition is filed.''.
       (d) Debtor's Duties.--Section 521 of title 11, United 
     States Code, as amended by sections 301(b) and 318(b) of this 
     Act, is amended by adding at the end the following:
       ``(e) In addition to the requirements under subsection (a), 
     an individual debtor shall file with the court--
       ``(1) a certificate from the credit counseling service that 
     provided the debtor services under section 109(h); and
       ``(2) a copy of the debt repayment plan, if any, developed 
     under section 109(h) through the credit counseling service 
     referred to in paragraph (1).''.
       (e) Exceptions to Discharge.--Section 523(d) of title 11, 
     United States Code, as amended by section 202 of this Act, is 
     amended by striking paragraph (3)(A)(i) and inserting the 
     following:
       ``(i) within the applicable period of time prescribed under 
     section 109(h), the debtor received credit counseling through 
     a credit counseling program in accordance with section 
     109(h); and''.
       (f) General Provisions.--
       (1) In general.--Chapter 1 of title 11, United States Code, 
     is amended by adding at the end the following:

     ``Sec. 111. Credit counseling services; financial management 
       instructional courses

       ``(a) The clerk of each district shall maintain a list of 
     credit counseling services that provide 1 or more programs 
     described in section 109(h) and that have been approved by--
       ``(1) the United States trustee; or
       ``(2) the bankruptcy administrator for the district.
       ``(b) The United States trustee or each bankruptcy 
     administrator referred to in subsection (a)(1) shall--
       ``(1) make available to debtors who are individuals an 
     instructional course concerning personal financial 
     management, under the direction of the bankruptcy court; and
       ``(2) maintain a list of instructional courses concerning 
     personal financial management that are operated by a private 
     entity and that have been approved by the United States 
     trustee or that bankruptcy administrator.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of chapter 1 of title 11, United States Code, is 
     amended by adding at the end the following:

``111. Credit counseling services; financial management instructional 
              courses.''.
       (g) Definitions.--Section 101 of title 11, United States 
     Code, as amended by section 317 of this Act, is amended--
       (1) by inserting after paragraph (13) the following:
       ``(13A) `debtor's principal residence'--
       ``(A) means a residential structure, including incidental 
     property, without regard to whether that structure is 
     attached to real property; and
       ``(B) includes an individual condominium or co-operative 
     unit;''; and
       (2) by inserting after paragraph (27A), as added by section 
     318 of this Act, the following:
       ``(27B) `incidental property' means, with respect to a 
     debtor's principal residence--
       ``(A) property commonly conveyed with a principal residence 
     in the area where the real estate is located;
       ``(B) all easements, rights, appurtenances, fixtures, 
     rents, royalties, mineral rights, oil or gas rights or 
     profits, water rights, escrow funds, or insurance proceeds; 
     and
       ``(C) all replacements or additions;''.

     SEC. 322. BANKRUPTCY JUDGESHIPS.

       (a) Short Title.--This section may be cited as the 
     ``Bankruptcy Judgeship Act of 1998''.
       (b) Temporary Judgeships.--
       (1) Appointments.--The following judgeship positions shall 
     be filled in the manner prescribed in section 152(a)(1) of 
     title 28, United States Code, for the appointment of 
     bankruptcy judges provided for in section 152(a)(2) of such 
     title:
       (A) One additional bankruptcy judgeship for the eastern 
     district of California.
       (B) Four additional bankruptcy judgeships for the central 
     district of California.
       (C) One additional bankruptcy judgeship for the southern 
     district of Florida.
       (D) Two additional bankruptcy judgeships for the district 
     of Maryland.
       (E) One additional bankruptcy judgeship for the eastern 
     district of Michigan.
       (F) One additional bankruptcy judgeship for the southern 
     district of Mississippi.
       (G) One additional bankruptcy judgeship for the district of 
     New Jersey.
       (H) One additional bankruptcy judgeship for the eastern 
     district of New York.
       (I) One additional bankruptcy judgeship for the northern 
     district of New York.
       (J) One additional bankruptcy judgeship for the southern 
     district of New York.
       (K) One additional bankruptcy judgeship for the eastern 
     district of Pennsylvania.
       (L) One additional bankruptcy judgeship for the middle 
     district of Pennsylvania.
       (M) One additional bankruptcy judgeship for the western 
     district of Tennessee.
       (N) One additional bankruptcy judgeship for the eastern 
     district of Virginia.
       (2) Vacancies.--The first vacancy occurring in the office 
     of a bankruptcy judge in each of the judicial districts set 
     forth in paragraph (1) that--
       (A) results from the death, retirement, resignation, or 
     removal of a bankruptcy judge; and
       (B) occurs 5 years or more after the appointment date of a 
     bankruptcy judge appointed under paragraph (1);
     shall not be filled.
       (c) Extensions.--
       (1) In general.--The temporary bankruptcy judgeship 
     positions authorized for the northern district of Alabama, 
     the district of Delaware, the district of Puerto Rico, the 
     district of South Carolina, and the eastern district of 
     Tennessee under section 3(a) (1), (3), (7), (8), and (9) of 
     the Bankruptcy Judgeship Act of 1992 (28 U.S.C. 152 note) are 
     extended until the first vacancy occurring in the office of a 
     bankruptcy judge in the applicable district resulting from 
     the death, retirement, resignation, or removal of a 
     bankruptcy judge and occurring--
       (A) 8 years or more after November 8, 1993, with respect to 
     the northern district of Alabama;
       (B) 10 years or more after October 28, 1993, with respect 
     to the district of Delaware;
       (C) 8 years or more after August 29, 1994, with respect to 
     the district of Puerto Rico;
       (D) 8 years or more after June 27, 1994, with respect to 
     the district of South Carolina; and
       (E) 8 years or more after November 23, 1993, with respect 
     to the eastern district of Tennessee.
       (2) Applicability of other provisions.--All other 
     provisions of section 3 of the Bankruptcy Judgeship Act of 
     1992 remain applicable to such temporary judgeship position.
       (d) Technical Amendment.--The first sentence of section 
     152(a)(1) of title 28, United States Code, is amended to read 
     as follows: ``Each bankruptcy judge to be appointed for a 
     judicial district as provided in paragraph (2) shall be 
     appointed by the United States court of appeals for the 
     circuit in which such district is located.''.
       (e) Travel Expenses of Bankruptcy Judges.--Section 156 of 
     title 28, United States Code, is amended by adding at the end 
     the following new subsection:
       ``(g)(1) In this subsection, the term `travel expenses'--
       ``(A) means the expenses incurred by a bankruptcy judge for 
     travel that is not directly related to any case assigned to 
     such bankruptcy judge; and
       ``(B) shall not include the travel expenses of a bankruptcy 
     judge if--
       ``(i) the payment for the travel expenses is paid by such 
     bankruptcy judge from the personal funds of such bankruptcy 
     judge; and
       ``(ii) such bankruptcy judge does not receive funds 
     (including reimbursement) from the United States or any other 
     person or entity for the payment of such travel expenses.
       ``(2) Each bankruptcy judge shall annually submit the 
     information required under paragraph (3) to the chief 
     bankruptcy judge for the district in which the bankruptcy 
     judge is assigned.
       ``(3)(A) Each chief bankruptcy judge shall submit an annual 
     report to the Director of the Administrative Office of the 
     United States Courts on the travel expenses of each 
     bankruptcy judge assigned to the applicable district 
     (including the travel expenses of the chief bankruptcy judge 
     of such district).
       ``(B) The annual report under this paragraph shall 
     include--
       ``(i) the travel expenses of each bankruptcy judge, with 
     the name of the bankruptcy judge to whom the travel expenses 
     apply;
       ``(ii) a description of the subject matter and purpose of 
     the travel relating to each travel expense identified under 
     clause (i), with the name of the bankruptcy judge to whom the 
     travel applies; and
       ``(iii) the number of days of each travel described under 
     clause (ii), with the name of the bankruptcy judge to whom 
     the travel applies.
       ``(4)(A) The Director of the Administrative Office of the 
     United States Courts shall--
       ``(i) consolidate the reports submitted under paragraph (3) 
     into a single report; and
       ``(ii) annually submit such consolidated report to 
     Congress.
       ``(B) The consolidated report submitted under this 
     paragraph shall include the specific information required 
     under paragraph (3)(B), including the name of each bankruptcy 
     judge with respect to clauses (i), (ii), and (iii) of 
     paragraph (3)(B).''.

     SEC. 323. DEFINITION OF DOMESTIC SUPPORT OBLIGATION.

       Section 101 of title 11, United States Code, as amended by 
     section 321(g) of this Act, is amended--

[[Page S10776]]

       (1) by striking paragraph (12A); and
       (2) by inserting after paragraph (14) the following:
       ``(14A) `domestic support obligation' means a debt that 
     accrues before or after the entry of an order for relief 
     under this title that is--
       ``(A) owed to or recoverable by--
       ``(i) a spouse, former spouse, or child of the debtor or 
     that child's legal guardian; or
       ``(ii) a governmental unit;
       ``(B) in the nature of alimony, maintenance, or support 
     (including assistance provided by a govermental unit) of such 
     spouse, former spouse, or child, without regard to whether 
     such debt is expressly so designated;
       ``(C) established or subject to establishment before or 
     after entry of an order for relief under this title, by 
     reason of applicable provisions of--
       ``(i) a separation agreement, divorce decree, or property 
     settlement agreement;
       ``(ii) an order of a court of record; or
       ``(iii) a determination made in accordance with applicable 
     nonbankruptcy law by a governmental unit; and
       ``(D) not assigned to a nongovernmental entity, unless that 
     obligation is assigned voluntarily by the spouse, former 
     spouse, child, or parent solely for the purpose of collecting 
     the debt.''.

     SEC. 324. PRIORITIES FOR CLAIMS FOR DOMESTIC SUPPORT 
                   OBLIGATIONS.

       Section 507(a) of title 11, United States Code, is 
     amended--
       (1) by striking paragraph (7);
       (2) by redesignating paragraphs (1) through (6) as 
     paragraphs (2) through (7), respectively;
       (3) in paragraph (2), as redesignated, by striking 
     ``First'' and inserting ``Second'';
       (4) in paragraph (3), as redesignated, by striking 
     ``Second'' and inserting ``Third'';
       (5) in paragraph (4), as redesignated, by striking 
     ``Third'' and inserting ``Fourth'';
       (6) in paragraph (5), as redesignated, by striking 
     ``Fourth'' and inserting ``Fifth'';
       (7) in paragraph (6), as redesignated, by striking 
     ``Fifth'' and inserting ``Sixth'';
       (8) in paragraph (7), as redesignated, by striking 
     ``Sixth'' and inserting ``Seventh''; and
       (9) by inserting before paragraph (2), as redesignated, the 
     following:
       ``(1) First, allowed claims for domestic support 
     obligations to be paid in the following order on the 
     condition that funds received under this paragraph by a 
     governmental unit in a case under this title be applied:
       ``(A) Claims that, as of the date of entry of the order for 
     relief, are owed directly to a spouse, former spouse, or 
     child of the debtor, or the parent of such child, without 
     regard to whether the claim is filed by the spouse, former 
     spouse, child, or parent, or is filed by a governmental unit 
     on behalf of that person.
       ``(B) Claims that, as of the date of entry of the order for 
     relief, are assigned by a spouse, former spouse, child of the 
     debtor, or the parent of that child to a governmental unit or 
     are owed directly to a governmental unit under applicable 
     nonbankruptcy law.''.

     SEC. 325. REQUIREMENTS TO OBTAIN CONFIRMATION AND DISCHARGE 
                   IN CASES INVOLVING DOMESTIC SUPPORT 
                   OBLIGATIONS.

       Title 11, United States Code, is amended--
       (1) in section 1129(a), by adding at the end the following:
       ``(14) If the debtor is required by a judicial or 
     administrative order or statute to pay a domestic support 
     obligation, the debtor has paid all amounts payable under 
     such order or statute for such obligation that become payable 
     after the date on which the petition is filed.'';
       (2) in section 1325(a)--
       (A) in paragraph (5), by striking ``and'' at the end;
       (B) in paragraph (6), by striking the period at the end and 
     inserting ``; and''; and
       (C) by adding at the end the following:
       ``(7) if the debtor is required by a judicial or 
     administrative order or statute to pay a domestic support 
     obligation, the debtor has paid all amounts payable under 
     such order for such obligation that become payable after the 
     date on which the petition is filed.''; and
       (3) in section 1328(a), as amended by section 314 of this 
     Act, in the matter preceding paragraph (1), by inserting ``, 
     and with respect to a debtor who is required by a judicial or 
     administrative order to pay a domestic support obligation, 
     certifies that all amounts payable under such order or 
     statute that are due on or before the date of the 
     certification (including amounts due before or after the 
     petition was filed) have been paid'' after ``completion by 
     the debtor of all payments under the plan''.

     SEC. 326. EXCEPTIONS TO AUTOMATIC STAY IN DOMESTIC SUPPORT 
                   OBLIGATION PROCEEDINGS.

       Section 362(b) of title 11, United States Code, is 
     amended--
       (1) by striking paragraph (2) and inserting the following:
       ``(2) under subsection (a)--
       ``(A) of the commencement or continuation of an action or 
     proceeding for--
       ``(i) the establishment of paternity as a part of an effort 
     to collect domestic support obligations; or
       ``(ii) the establishment or modification of an order for 
     domestic support obligations; or
       ``(B) the collection of a domestic support obligation from 
     property that is not property of the estate;'';
       (2) in paragraph (17), by striking ``or'' at the end;
       (3) in paragraph (18), by striking the period at the end 
     and inserting a semicolon; and
       (4) by adding at the end the following:
       ``(19) under subsection (a) with respect to the withholding 
     of income pursuant to an order as specified in section 466(b) 
     of the Social Security Act (42 U.S.C. 666(b)); or
       ``(20) under subsection (a) with respect to--
       ``(A) the withholding, suspension, or restriction of 
     drivers' licenses, professional and occupational licenses, 
     and recreational licenses pursuant to State law, as specified 
     in section 466(a)(16) of the Social Security Act (42 U.S.C. 
     666(a)(16)) or with respect to the reporting of overdue 
     support owed by an absent parent to any consumer reporting 
     agency as specified in section 466(a)(7) of the Social 
     Security Act (42 U.S.C. 666(a)(7));
       ``(B) the interception of tax refunds, as specified in 
     sections 464 and 466(a)(3) of the Social Security Act (42 
     U.S.C. 664 and 666(a)(3)); or
       ``(C) the enforcement of medical obligations as specified 
     under title IV of the Social Security Act (42 U.S.C. 601 et 
     seq.).''.

     SEC. 327. NONDISCHARGEABILITY OF CERTAIN DEBTS FOR ALIMONY, 
                   MAINTENANCE, AND SUPPORT.

       Section 523 of title 11, United States Code, as amended by 
     section 202 of this Act, is amended--
       (1) in subsection (a), by striking paragraph (5) and 
     inserting the following:
       ``(5) for a domestic support obligation;'';
       (2) in subsection (c), by striking ``(6), or (15)'' and 
     inserting ``or (6)''; and
       (3) in paragraph (15), by striking ``governmental unit'' 
     and all through the end of the paragraph and inserting a 
     semicolon.

     SEC. 328. CONTINUED LIABILITY OF PROPERTY.

       Section 522 of title 11, United States Code, is amended--
       (1) in subsection (c), by striking paragraph (1) and 
     inserting the following:
       ``(1) a debt of a kind specified in paragraph (1) or (5) of 
     section 523(a) (in which case, notwithstanding any provision 
     of applicable nonbankruptcy law to the contrary, such 
     property shall be liable for a debt of a kind specified in 
     section 523(a)(5);''; and
       (2) in subsection (f)(1)(A), by striking the dash and all 
     that follows through the end of the subparagraph and 
     inserting ``of a kind that is specified in section 523(a)(5); 
     or''.

     SEC. 329. PROTECTION OF DOMESTIC SUPPORT CLAIMS AGAINST 
                   PREFERENTIAL TRANSFER MOTIONS.

       Section 547(c)(7) of title 11, United States Code, is 
     amended to read as follows:
       ``(7) to the extent such transfer was a bona fide payment 
     of a debt for a domestic support obligation; or''.

     SEC. 330. PROTECTION OF RETIREMENT SAVINGS IN BANKRUPTCY.

       (a) In General.--Section 522 of title 11, United States 
     Code, is amended--
       (1) in subsection (b)--
       (A) in paragraph (2)--
       (i) by striking ``(2)(A) any property'' and inserting:
       ``(3) Property listed in this paragraph is--
       ``(A) any property'';
       (ii) in subparagraph (A), by striking ``and'' at the end;
       (iii) in subparagraph (B), by striking the period at the 
     end and inserting ``; and''; and
       (iv) by adding at the end the following:
       ``(C) retirement funds to the extent that those funds are 
     in a fund or account that is exempt from taxation under 
     section 401, 403, 408, 408A, 414, 457, or 501(a) of the 
     Internal Revenue Code of 1986 and which has not been pledged 
     or promised to any person in connection with any extension of 
     credit.'';
       (B) by striking paragraph (1) and inserting:
       ``(2) Property listed in this paragraph is property that is 
     specified under subsection (d) of this section, unless the 
     State law that is applicable to the debtor under paragraph 
     (3)(A) of this subsection specifically does not so 
     authorize.'';
       (C) in the matter preceding paragraph (2)--
       (i) by striking ``(b)'' and inserting ``(b)(1)'';
       (ii) by striking ``paragraph (2)'' both places it appears 
     and inserting ``paragraph (3)'';
       (iii) by striking ``paragraph (1)'' each place it appears 
     and inserting ``paragraph (2)''; and
       (iv) by striking ``Such property is--''; and
       (D) by adding at the end of the subsection the following:
       ``(4) For purposes of paragraph (3)(C), the following shall 
     apply:
       ``(A) If the retirement funds are in a retirement fund that 
     has received a favorable determination pursuant to section 
     7805 of the Internal Revenue Code of 1986, and that 
     determination is in effect as of the date of the commencement 
     of the case under section 301, 302, or 303, those funds shall 
     be presumed to be exempt from the estate.
       ``(B) If the retirement funds are in a retirement fund that 
     has not received a favorable determination pursuant to such 
     section 7805, those funds are exempt from the estate if the 
     debtor demonstrates that--
       ``(i) no prior determination to the contrary has been made 
     by a court or the Internal Revenue Service; and
       ``(ii)(I) the retirement fund is in substantial compliance 
     with the applicable requirements of the Internal Revenue Code 
     of 1986; or
       ``(II) the retirement fund fails to be in substantial 
     compliance with such applicable requirements, the debtor is 
     not materially responsible for that failure.
       ``(C) A direct transfer of retirement funds from 1 fund or 
     account that is exempt from taxation under section 401, 403, 
     408, 408A, 414, 457, or 501(a) of the Internal Revenue Code 
     of 1986, pursuant to section 401(a)(31) of the Internal 
     Revenue Code of 1986, or otherwise, shall not cease to 
     qualify for exemption under paragraph (3)(C) by reason of 
     that direct transfer.
       ``(D)(i) Any distribution that qualifies as an eligible 
     rollover distribution within the meaning of section 402(c) of 
     the Internal Revenue Code of 1986 or that is described in 
     clause (ii) shall not cease to qualify for exemption under 
     paragraph (3)(C) by reason of that distribution.
       ``(ii) A distribution described in this clause is an amount 
     that--
       ``(I) has been distributed from a fund or account that is 
     exempt from taxation under section 401, 403, 408, 408A, 414, 
     457, or 501(a) of the Internal Revenue Code of 1986; and

[[Page S10777]]

       ``(II) to the extent allowed by law, is deposited in such a 
     fund or account not later than 60 days after the distribution 
     of that amount.''; and
       (2) in subsection (d)--
       (A) in the matter preceding paragraph (1), by striking 
     ``subsection (b)(1)'' and inserting ``subsection (b)(2)''; 
     and
       (B) by adding at the end the following:
       ``(12) Retirement funds to the extent that those funds are 
     in a fund or account that is exempt from taxation under 
     section 401, 403, 408, 408A, 414, 457, or 501(a) of the 
     Internal Revenue Code of 1986.''.
       (b) Automatic Stay.--Section 362(b) of title 11, United 
     States Code, is amended--
       (1) in paragraph (17), by striking ``or'' at the end;
       (2) in paragraph (18), by striking the period and inserting 
     ``; or'';
       (3) by inserting after paragraph (18) the following:
       ``(19) under subsection (a), of withholding of income from 
     a debtor's wages and collection of amounts withheld, pursuant 
     to the debtor's agreement authorizing that withholding and 
     collection for the benefit of a pension, profit-sharing, 
     stock bonus, or other plan established under section 401, 
     403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue 
     Code of 1986 that is sponsored by the employer of the debtor, 
     or an affiliate, successor, or predecessor of such employer--
       ``(A) to the extent that the amounts withheld and collected 
     are used solely for payments relating to a loan from a plan 
     that satisfies the requirements of section 408(b)(1) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1108(b)(1)); or
       ``(B) in the case of a loan from a thrift savings plan 
     described in subchapter III of title 5, that satisfies the 
     requirements of section 8433(g) of that title.''; and
       (4) by adding at the end of the flush material following 
     paragraph (19) the following: ``Paragraph (19) does not apply 
     to any amount owed to a plan referred to in that paragraph 
     that is incurred under a loan made during the 1-year period 
     preceding the filing of a petition. Nothing in paragraph (19) 
     may be construed to provide that any loan made under a 
     governmental plan under section 414(d) of the Internal 
     Revenue Code of 1986 constitutes a claim or a debt under this 
     title.''.
       (c) Exceptions To Discharge.--Section 523(a) of title 11, 
     United States Code, as amended by section 202, is amended--
       (1) by striking ``or'' at the end of paragraph (17);
       (2) by striking the period at the end of paragraph (18) and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(19) owed to a pension, profit-sharing, stock bonus, or 
     other plan established under section 401, 403, 408, 408A, 
     414, 457, or 501(c) of the Internal Revenue Code of 1986, 
     pursuant to--
       ``(A) a loan permitted under section 408(b)(1) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1108(b)(1)); or
       ``(B) a loan from the thrift savings plan described in 
     subchapter III of title 5, that satisfies the requirements of 
     section 8433(g) of that title.

     Paragraph (19) does not apply to any amount owed to a plan 
     referred to in that paragraph that is incurred under a loan 
     made during the 1-year period preceding the filing of a 
     petition. Nothing in paragraph (19) may be construed to 
     provide that any loan made under a governmental plan under 
     section 414(d) of the Internal Revenue Code of 1986 
     constitutes a claim or a debt under this title.''.
       (d) Plan Contents.--Section 1322 of title 11, United States 
     Code, is amended by adding at the end the following:
       ``(f) A plan may not materially alter the terms of a loan 
     described in section 362(b)(19).''.

     SEC. 331. ADDITIONAL AMENDMENTS TO TITLE 11, UNITED STATES 
                   CODE.

       (a) Section 507(a) of title 11, United States Code, is 
     amended by inserting after paragraph (9) the following:
       ``(10) Tenth, allowed claims for death or personal injuries 
     resulting from the operation of a motor vehicle or vessel if 
     such operation was unlawful because the debtor was 
     intoxicated from using alcohol, a drug or another 
     substance.''.
       (b) Section 523(a)(9) of title 11, United States Code, is 
     amended by inserting ``or vessel'' after ``vehicle''.

     SEC. 332. DEBT LIMIT INCREASE.

       Section 104(b) of title 11, United States Code, is amended 
     by adding at the end the following:
       ``(4) The dollar amount in section 101(18) shall be 
     adjusted at the same times and in the same manner as the 
     dollar amounts in paragraph (1) of this subsection, beginning 
     with the adjustment to be made on April 1, 2001.''.

     SEC. 333. ELIMINATION OF REQUIREMENT THAT FAMILY FARMER AND 
                   SPOUSE RECEIVE OVER 50 PERCENT OF INCOME FROM 
                   FARMING OPERATION IN YEAR PRIOR TO BANKRUPTCY.

       Section 101(18)(A) of title 11, United States Code, is 
     amended by striking ``the taxable year preceding the taxable 
     year'' and inserting ``at least one of the three calendar 
     years preceding the year''.

     SEC. 334. PROHIBITION OF RETROACTIVE ASSESSMENT OF DISPOSABLE 
                   INCOME.

       (a) Section 1225(b) of title 11, United States Code, is 
     amended by adding at the end the following:
       ``(3) If the plan provides for specific amounts of property 
     to be distributed on account of allowed unsecured claims as 
     required by paragraph (1)(B) of this subsection, those 
     amounts equal or exceed the debtor's projected disposable 
     income for that period, and the plan meets the requirements 
     for confirmation other than those of this subsection, the 
     plan shall be confirmed.
       (b) Section 1229 of title 11, United States Code, is 
     amended by adding at the end the following:
       ``(d)(1) A modification of the plan under this section may 
     not increase the amount of payments that were due prior to 
     the date of the order modifying the plan.
       ``(2) A modification of the plan under this section to 
     increase payments based on an increase in the debtor's 
     disposable income may not require payments to unsecured 
     creditors in any particular month greater than the debtor's 
     disposable income for that month unless the debtor proposes 
     such a modification.
       ``(3) A modification of the plan in the last year of the 
     plan shall not require payments that would leave the debtor 
     with insufficient funds to carry on the farming operation 
     after the plan is completed unless the debtor proposes such a 
     modification.''.

     SEC. 335. AMENDMENT TO SECTION 1325 OF TITLE 11, UNITED 
                   STATES CODE.

       Section 1325(b)(2) of title 11, United States Code, is 
     amended by inserting after ``received by the debtor'', 
     ``(other than child support payments, foster care payments, 
     or disability payments for a dependent child made in 
     accordance with applicable nonbankruptcy law and which is 
     reasonably necessary to be expended)''.

     SEC. 336. PROTECTION OF SAVINGS EARMARKED FOR THE 
                   POSTSECONDARY EDUCATION OF CHILDREN

       Section 541(b) of title 11, United States Code, as amended 
     by section 404 of this Act, is amended--
       (1) in paragraph (6), by striking the period at the end and 
     inserting a semicolon; and
       (2) by inserting after paragraph (6) the following:
       ``(7) except as otherwise provided under applicable State 
     law, any funds placed in a qualified State tuition program 
     (as described in section 529(b) of the Internal Revenue Code 
     of 1986) at least 180 days before the date of entry of the 
     order for relief; or
       ``(8) any funds placed in an education individual 
     retirement account (as defined in section 530(b)(1) of the 
     Internal Revenue Code of 1986) at least 180 days before the 
     date of entry of the order for relief.''.

                    TITLE IV--FINANCIAL INSTRUMENTS

     SEC. 401. BANKRUPTCY CODE AMENDMENTS.

       (a) Definitions of Swap Agreement, Securities Contract, 
     Forward Contract, Commodity Contract, and Repurchase 
     Agreement.--Title 11, United States Code, is amended--
       (1) in section 101--
       (A) in paragraph (25)--
       (i) by striking ``means a contract'' and inserting 
     ``means--
       ``(A) a contract'';
       (ii) by striking ``, or any combination thereof or option 
     thereon;'' and inserting ``, or any other similar 
     agreement;''; and
       (iii) by adding at the end the following new subparagraphs:
       ``(B) any combination of agreements or transactions 
     referred to in subparagraphs (A) and (C);
       ``(C) any option to enter into any agreement or transaction 
     referred to in subparagraph (A) or (B);
       ``(D) a master agreement that provides for an agreement or 
     transaction referred to in subparagraph (A), (B) or (C), 
     together with all supplements to any such master agreement, 
     without regard to whether the master agreement provides for 
     an agreement or transaction that is not a forward contract 
     under this paragraph, except that the master agreement shall 
     be considered to be a forward contract under this paragraph 
     only with respect to each agreement or transaction under the 
     master agreement that is referred to in subparagraph (A), (B) 
     or (C); or
       ``(E) a security agreement or arrangement or other credit 
     enhancement related to any agreement or transaction referred 
     to in subparagraph (A), (B), (C) or (D);'';
       (B) by amending paragraph (47) to read as follows:
       ``(47) the term `repurchase agreement' (which definition 
     also applies to a reverse repurchase agreement)--
       ``(A) means--
       ``(i) an agreement, including related terms, which provides 
     for the transfer of 1 or more certificates of deposit, 
     mortgage-related securities (as such term is defined in the 
     Securities Exchange Act of 1934), mortgage loans, interests 
     in mortgage-related securities or mortgage loans, eligible 
     bankers' acceptances, qualified foreign government securities 
     or securities that are direct obligations of, or that are 
     fully guaranteed as to principal and interest by, the United 
     States or any agency of the United States against the 
     transfer of funds by the transferee of such certificates of 
     deposit, eligible bankers' acceptances, securities, loans or 
     interests with a simultaneous agreement by such transferee to 
     transfer to the transferor thereof certificates of deposit, 
     eligible bankers' acceptances, securities, loans, or 
     interests as described above, at a date certain not later 
     than 1 year after such transfers or on demand, against the 
     transfer of funds; or any other similar agreement; and
       ``(ii) any combination of agreements or transactions 
     referred to in clauses (i) and (iii);
       ``(iii) any option to enter into any agreement or 
     transaction referred to in clause (i) or (ii);
       ``(iv) a master agreement that provides for an agreement or 
     transaction referred to in clauses (i), (ii) or (iii), 
     together with all supplements, without regard to whether the 
     master agreement provides for an agreement or transaction 
     that is not a repurchase agreement under this subparagraph, 
     except that the master agreement shall be considered to be a 
     repurchase agreement under this subparagraph only with 
     respect to each agreement or transaction under the master 
     agreement that is referred to in clause (i), (ii) or (iii); 
     or
       ``(v) a security agreement or arrangement or other credit 
     enhancement related to any agreement or transaction referred 
     to in clauses (i), (ii), (iii) or (iv); and
       ``(B) does not include any repurchase obligation under a 
     participation in a commercial mortgage loan,


[[Page S10778]]


     and, for purposes of this paragraph, the term `qualified 
     foreign government security' means a security that is a 
     direct obligation of, or that is fully guaranteed by, the 
     central government of a member of the Organization for 
     Economic Cooperation and Development.''; and
       (C) by amending paragraph (53B) to read as follows:
       ``(53B) the term `swap agreement'--
       ``(A) means--
       ``(i) any agreement, including the terms and conditions 
     incorporated by reference in any such agreement, which is an 
     interest rate swap, option, future, or forward agreement, 
     including a rate floor, rate cap, rate collar, cross-currency 
     rate swap, and basis swap; a spot, same day-tomorrow, 
     tomorrow-next, forward, or other foreign exchange or precious 
     metals agreement; a currency swap, option, future, or forward 
     agreement; an equity index or equity swap, option, future, or 
     forward agreement; a debt index or debt swap, option, future, 
     or forward agreement; a credit spread or credit swap, option, 
     future, or forward agreement; a commodity index or commodity 
     swap, option, future, or forward agreement;
       ``(ii) any agreement similar to any other agreement or 
     transaction referred to in this subparagraph that--

       ``(I) is presently, or in the future becomes, regularly 
     entered into in the swap agreement market (including terms 
     and conditions incorporated by reference therein); and
       ``(II) is a forward, swap, future, or option on 1 or more 
     rates, currencies, commodities, equity securities or other 
     equity instruments, debt securities or other debt 
     instruments, or economic indices or measures of economic risk 
     or value;

       ``(iii) any combination of agreements or transactions 
     referred to in this subparagraph;
       ``(iv) any option to enter into any agreement or 
     transaction referred to in this subparagraph;
       ``(v) a master agreement that provides for an agreement or 
     transaction referred to in clause (i), (ii), (iii), or (iv), 
     together with all supplements to any such master agreement, 
     without regard to whether the master agreement contains an 
     agreement or transaction that is described in any of such 
     clause, except that the master agreement shall be considered 
     to be a swap agreement only with respect to each agreement or 
     transaction under the master agreement that is referred to in 
     clause (i), (ii), (iii), or (iv); or
       ``(C) is applicable for purposes of this title only and 
     shall not be construed or applied to challenge or affect the 
     characterization, definition, or treatment of any swap 
     agreement or any instrument defined as a swap agreement 
     herein, under any other statute, regulation, or rule, 
     including the Securities Act of 1933, the Securities Exchange 
     Act of 1934, the Public Utility Holding Company Act of 1935, 
     the Trust Indenture Act of 1939, the Investment Company Act 
     of 1940, the Investment Advisers Act of 1940, the Securities 
     Investor Protection Act of 1970, the Commodity Exchange Act, 
     and the regulations prescribed by the Securities and Exchange 
     Commission or the Commodity Futures Trading Commission.'';
       (2) by amending section 741(7) to read as follows:
       ``(7) the term `securities contract'--
       ``(A) means--
       ``(i) a contract for the purchase, sale, or loan of a 
     security, a certificate of deposit, a mortgage loan or any 
     interest in a mortgage loan, or a group or index of 
     securities, certificates of deposit, or mortgage loans or 
     interests therein (including any interest therein or based on 
     the value thereof) or option on any of the foregoing, 
     including any option to purchase or sell any such security, 
     certificate of deposit, loan, interest, group or index or 
     option;
       ``(ii) any option entered into on a national securities 
     exchange relating to foreign currencies;
       ``(iii) the guarantee by or to any securities clearing 
     agency of any settlement of cash, securities, certificates of 
     deposit, mortgage loans or interest therein, or group or 
     index of securities, certificates of deposit, or mortgage 
     loans or interests therein (including any interest therein or 
     based on the value thereof) or option on any of the 
     foregoing, including any option to purchase or sell any such 
     security, certificate of deposit, loan, interest, group or 
     index or option;
       ``(iv) any margin loan;
       ``(v) any other agreement or transaction that is similar to 
     any agreement or transaction referred to in this 
     subparagraph;
       ``(vi) any combination of the agreements or transactions 
     referred to in this subparagraph;
       ``(vii) any option to enter into any agreement or 
     transaction referred to in this subparagraph;
       ``(viii) a master agreement that provides for an agreement 
     or transaction referred to in clause (i), (ii), (iii), (iv), 
     (v), (vi), or (vii), together with all supplements to any 
     such master agreement, without regard to whether the master 
     agreement provides for an agreement or transaction that is 
     not a securities contract under this subparagraph, except 
     that the master agreement shall be considered to be a 
     securities contract under this subparagraph only with respect 
     to each agreement or transaction under the master agreement 
     that is referred to in clause (i), (ii), (iii), (iv), (v), 
     (vi), or (vii); and
       ``(ix) any security agreement or arrangement or other 
     credit enhancement related to any agreement or transaction 
     referred to in this subparagraph; and
       ``(B) does not include any purchase, sale, or repurchase 
     obligation under a participation in or servicing agreement 
     for a commercial mortgage loan.''; and
       (3) in section 761(4)--
       (A) by striking ``or'' at the end of subparagraph (D); and
       (B) by adding at the end the following new subparagraphs:
       ``(F) any other agreement or transaction that is similar to 
     any agreement or transaction referred to in this paragraph;
       ``(G) any combination of the agreements or transactions 
     referred to in this paragraph;
       ``(H) any option to enter into any agreement or transaction 
     referred to in this paragraph;
       ``(I) a master agreement that provides for an agreement or 
     transaction referred to in subparagraph (A), (B), (C), (D), 
     (E), (F), (G) or (H), together with all supplements to any 
     such master agreement, without regard to whether the master 
     agreement provides for an agreement or transaction that is 
     not a commodity contract under this paragraph, except that 
     the master agreement shall be considered to be a commodity 
     contract under this paragraph only with respect to each 
     agreement or transaction under the master agreement that is 
     referred to in subparagraph (A), (B), (C), (D), (E), (F), (G) 
     or (H); or
       ``(J) a security agreement or arrangement or other credit 
     enhancement related to any agreement or transaction referred 
     to in this paragraph;''.
       (b) Definitions of Financial Institution, Financial 
     Participant, and Forward Contract Merchant.--Section 101 of 
     title 11, United States Code, is amended--
       (1) by amending paragraph (22) to read as follows:
       ``(22) the term `financial institution' means a Federal 
     reserve bank, or a person that is a commercial or savings 
     bank, industrial savings bank, savings and loan association, 
     trust company, or receiver or conservator for such person 
     and, when any such Federal reserve bank, receiver, or 
     conservator or person acting as agent or custodian for a 
     customer in connection with a securities contract, as defined 
     in section 741(7) of this title, such customer;'';
       (2) by inserting after paragraph (22) the following new 
     paragraph:
       ``(22A) the term `financial participant' means any entity 
     that, at the time it enters into a securities contract, 
     commodity contract or forward contract, or at the time of the 
     filing of the petition, has 1 or more agreements or 
     transactions that is described in section 561(a)(2) with the 
     debtor or any other entity (other than an affiliate) of a 
     total gross dollar value of at least $1,000,000,000 in 
     notional or actual principal amount outstanding on any day 
     during the previous 15-month period, or has gross mark-to-
     market positions of at least $100,000,000 (aggregated across 
     counterparties) in 1 or more such agreements or transactions 
     with the debtor or any other entity (other than an affiliate) 
     on any day during the previous 15-month period;''; and
       (3) by amending paragraph (26) to read as follows:
       ``(26) the term `forward contract merchant' means a Federal 
     reserve bank, or a person whose business consists in whole or 
     in part of entering into forward contracts as or with 
     merchants or in a commodity, as defined or in section 761(8) 
     of this title, or any similar good, article, service, right, 
     or interest which is presently or in the future becomes the 
     subject of dealing or in the forward contract trade;''.
       (c) Definition of Master Netting Agreement and Master 
     Netting Agreement Participant.--Section 101 of title 11, 
     United States Code, is amended by inserting after paragraph 
     (38) the following new paragraphs:
       ``(38A) the term `master netting agreement' means an 
     agreement providing for the exercise of rights, including 
     rights of netting, setoff, liquidation, termination, 
     acceleration, or closeout, under or in connection with 1 or 
     more contracts that are described in any 1 or more of 
     paragraphs (1) through (5) of section 561(a), or any security 
     agreement or arrangement or other credit enhancement related 
     to 1 or more of the foregoing. If a master netting agreement 
     contains provisions relating to agreements or transactions 
     that are not contracts described in paragraphs (1) through 
     (5) of section 561(a), the master netting agreement shall be 
     deemed to be a master netting agreement only with respect to 
     those agreements or transactions that are described in any 1 
     or more of the paragraphs (1) through (5) of section 561(a);
       ``(38B) the term `master netting agreement participant' 
     means an entity that, at any time before the filing of the 
     petition, is a party to an outstanding master netting 
     agreement with the debtor;''.
       (d) Swap Agreements, Securities Contracts, Commodity 
     Contracts, Forward Contracts, Repurchase Agreements, and 
     Master Netting Agreements Under the Automatic-Stay.--
       (1) In general.--Section 362(b) of title 11, United States 
     Code, is amended--
       (A) in paragraph (6), by inserting 
     ``, pledged to, and under the control of,'' after ``held 
     by'';
       (B) in paragraph (7), by inserting 
     ``, pledged to, and under the control of,'' after ``held 
     by'';
       (C) by amending paragraph (17) to read as follows:
       ``(17) under subsection (a), of the setoff by a swap 
     participant of any mutual debt and claim under or in 
     connection with 1 or more swap agreements that constitute the 
     setoff of a claim against the debtor for any payment due from 
     the debtor under or in connection with any swap agreement 
     against any payment due to the debtor from the swap 
     participant under or in connection with any swap agreement or 
     against cash, securities, or other property of the debtor 
     held by, pledged to, and under the control of, or due from 
     such swap participant to guarantee, secure, or settle any 
     swap agreement;'';
       (D) in paragraph (20), by striking ``or'' at the end;
       (E) in paragraph (21), by striking the period and inserting 
     ``; or''; and
       (F) by inserting after paragraph (18) the following new 
     paragraph:
       ``(22) under subsection (a), of the setoff by a master 
     netting agreement participant of a mutual debt and claim 
     under or in connection with

[[Page S10779]]

     1 or more master netting agreements to the extent such 
     participant could offset the claim under paragraph (6), (7), 
     or (17) for each individual contract covered by the master 
     netting agreement in issue.''.
       (2) Limitation.--Section 362 of title 11, United States 
     Code, is amended by adding at the end the following new 
     subsection:
       ``(i) Limitation.--The exercise of rights not subject to 
     the stay arising under subsection (a) pursuant to paragraph 
     (6), (7), (17), or (22) of subsection (b) shall not be stayed 
     by any order of a court or administrative agency in any 
     proceeding under this title.''.
       (e) Limitation of Avoidance Powers Under Master Netting 
     Agreement.--Section 546 of title 11, United States Code, is 
     amended--
       (1) in subsection (g) (as added by section 103 of Public 
     Law 101-311)--
       (A) by striking ``under a swap agreement'';
       (B) by striking ``in connection with a swap agreement'' and 
     inserting ``under or in connection with any swap agreement'';
       (2) by redesignating subsection (g) (as added by section 
     222(a) of Public Law 103-394) as subsection (i); and
       (3) by inserting before subsection (i) (as redesignated) 
     the following new subsection:
       ``(h) Notwithstanding sections 544, 545, 547, 548(a)(2), 
     and 548(b) of this title, to the extent that under subsection 
     (e), (f), or (g), the trustee may not avoid a transfer made 
     by or to a master netting agreement participant under or in 
     connection with each individual contract covered by any 
     master netting agreement that is made before the commencement 
     of the case, the trustee may not avoid a transfer made by or 
     to such master netting agreement participant under or in 
     connection with the master netting agreement in issue, except 
     under section 548(a)(1) of this title.''.
       (f) Fraudulent Transfers of Master Netting Agreements.--
     Section 548(d)(2) of title 11, United States Code, is 
     amended--
       (1) in subparagraph (C), by striking ``and'';
       (2) in subparagraph (D), by striking the period and 
     inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(E) a master netting agreement participant that receives 
     a transfer in connection with a master netting agreement 
     takes for value to the extent of such transfer, but only to 
     the extent that such participant would take for value under 
     paragraph (B), (C), or (D) for each individual contract 
     covered by the master netting agreement in issue.''.
       (g) Termination or Acceleration of Securities Contracts.--
     Section 555 of title 11, United States Code, is amended--
       (1) by amending the section heading to read ``Contractual 
     right to liquidate, terminate, or accelerate a securities 
     contract''; and
       (2) in the first sentence, by striking ``liquidation'' and 
     inserting ``liquidation, termination, or acceleration''.
       (h) Termination or Acceleration of Commodities or Forward 
     Contracts.--Section 556 of title 11, United States Code, is 
     amended--
       (1) by amending the section heading to read ``Contractual 
     right to liquidate, terminate, or accelerate a commodities 
     contract or forward contract''; and
       (2) in the first sentence, by striking ``liquidation'' and 
     inserting ``liquidation, termination, or acceleration''.
       (i) Termination or Acceleration of Repurchase Agreements.--
     Section 559 of title 11, United States Code, is amended--
       (1) by amending the section heading to read ``Contractual 
     right to liquidate, terminate, or accelerate a repurchase 
     agreement''; and
       (2) in the first sentence, by striking ``liquidation'' and 
     inserting ``liquidation, termination, or acceleration''.
       (j) Liquidation, Termination, or Acceleration of Swap 
     Agreements.--Section 560 of title 11, United States Code, is 
     amended--
       (1) by amending the section heading to read ``Contractual 
     right to liquidate, terminate, or accelerate a swap 
     agreement''; and
       (2) in the first sentence, by striking ``termination of a 
     swap agreement'' and inserting ``liquidation, termination, or 
     acceleration of 1 or more swap agreements''; and
       (3) by striking ``in connection with any swap agreement'' 
     and inserting ``in connection with the termination, 
     liquidation, or acceleration of 1 or more swap agreements''.
       (k) Liquidation, Termination, Acceleration, or Offset Under 
     a Master Netting Agreement and Across Contracts.--Title 11, 
     United States Code, is amended by inserting after section 560 
     the following new section:

     ``Sec. 561. Contractual right to terminate, liquidate, 
       accelerate, or offset under a master netting agreement and 
       across contracts

       ``(a) In General.--Subject to subsection (b), the exercise 
     of any contractual right, because of a condition of the kind 
     specified in section 365(e)(1), to cause the termination, 
     liquidation, or acceleration of or to offset, or net 
     termination values, payment amounts or other transfer 
     obligations arising under or in connection with the 
     termination, liquidation, or acceleration of 1 or more--
       ``(1) securities contracts, as defined in section 741(7);
       ``(2) commodity contracts, as defined in section 761(4);
       ``(3) forward contracts;
       ``(4) repurchase agreements;
       ``(5) swap agreements; or
       ``(6) master netting agreements,
     shall not be stayed, avoided, or otherwise limited by 
     operation of any provision of this title or by any order of a 
     court or administrative agency in any proceeding under this 
     title.
       ``(b) Exception.--
       ``(1) A party may exercise a contractual right described in 
     subsection (a) to terminate, liquidate, or accelerate only to 
     the extent that such party could exercise such a right under 
     section 555, 556, 559, or 560 for each individual contract 
     covered by the master netting agreement in issue.
       ``(2)(A) A party may not exercise a contractual right 
     described in subsection (a) to offset or to net obligations 
     arising under, or in connection with, a commodity contract 
     against obligations arising under, or in connection with, any 
     instrument listed in subsection (a) if the obligations are 
     not mutual.
       ``(B) If a debtor is a commodity broker subject to 
     subchapter IV of chapter 7 of this title, a party may not net 
     or offset an obligation to the debtor arising under, or in 
     connection with, a commodity contract against any claim 
     arising under, or in connection with, other instruments 
     listed in subsection (a) if the party has no positive net 
     equity in the commodity account at the debtor, as calculated 
     under subchapter IV.
       ``(c) Definition.--As used in this section, the term 
     `contractual right' includes a right set forth in a rule or 
     bylaw of a national securities exchange, a national 
     securities association, or a securities clearing agency, a 
     right set forth in a bylaw of a clearing organization or 
     contract market or in a resolution of the governing board 
     thereof, and a right whether or not evidenced in writing 
     arising under common law, under law merchant, or by reason of 
     normal business practice.''.
       (l) Municipal Bankruptcies.--Section 901 of title 11, 
     United States Code, is amended--
       (1) by inserting ``, 555, 556'' after ``553''; and
       (2) by inserting ``, 559, 560, 561, 562'' after ``557''.
       (m) Ancillary Proceedings.--Section 304 of title 11, United 
     States Code, is amended by adding at the end the following 
     new subsection:
       ``(d) Any provisions of this title relating to securities 
     contracts, commodity contracts, forward contracts, repurchase 
     agreements, swap agreements, or master netting agreements 
     shall apply in a case ancillary to a foreign proceeding under 
     this section or any other section of this title so that 
     enforcement of contractual provisions of such contracts and 
     agreements in accordance with their terms will not be stayed 
     or otherwise limited by operation of any provision of this 
     title or by order of a court in any proceeding under this 
     title, and to limit avoidance powers to the same extent as in 
     a proceeding under chapter 7 or 11 of this title (such 
     enforcement not to be limited based on the presence or 
     absence of assets of the debtor in the United States).''.
       (n) Commodity Broker Liquidations.--Title 11, United States 
     Code, is amended by inserting after section 766 the following 
     new section:

     ``Sec. 767. Commodity broker liquidation and forward contract 
       merchants, commodity brokers, stockbrokers, financial 
       institutions, securities clearing agencies, swap 
       participants, repo participants, and master netting 
       agreement participants

       ``Notwithstanding any other provision of this title, the 
     exercise of rights by a forward contract merchant, commodity 
     broker, stockbroker, financial institution, securities 
     clearing agency, swap participant, repo participant, or 
     master netting agreement participant under this title shall 
     not affect the priority of any unsecured claim it may have 
     after the exercise of such rights or affect the provisions of 
     this subchapter IV regarding customer property or 
     distributions.''.
       (o) Stockbroker Liquidations.--Title 11, United States 
     Code, is amended by inserting after section 752 the following 
     new section:

     ``Sec. 753. Stockbroker liquidation and forward contract 
       merchants, commodity brokers, stockbrokers, financial 
       institutions, securities clearing agencies, swap 
       participants, repo participants, and master netting 
       agreement participants

       ``Notwithstanding any other provision of this title, the 
     exercise of rights by a forward contract merchant, commodity 
     broker, stockbroker, financial institution, securities 
     clearing agency, swap participant, repo participant, or 
     master netting agreement participant under this title shall 
     not affect the priority of any unsecured claim it may have 
     after the exercise of rights or affect the provisions of this 
     subchapter regarding customer property or distributions.''.
       (p) Setoff.--Section 553 of title 11, United States Code, 
     is amended--
       (1) in subsection (a)(3)(C), by inserting ``(except for a 
     setoff of a kind described in section 362(b)(6), 362(b)(7), 
     362(b)(17), 555, 556, 559, 560, or 561 of this title)'' 
     before the period; and
       (2) in subsection (b)(1), by striking ``362(b)(14),'' and 
     inserting ``362(b)(17), 555, 556, 559, 560, 561''.
       (q) Securities Contracts, Commodity Contracts, and Forward 
     Contracts.--Title 11, United States Code, is amended--
       (1) in section 362(b)(6), by striking ``financial 
     institutions,'' each place such term appears and inserting 
     ``financial institution, financial participant'';
       (2) in section 546(e), by inserting ``financial 
     participant'' after ``financial institution,'';
       (3) in section 548(d)(2)(B), by inserting ``financial 
     participant'' after ``financial institution,'';
       (4) in section 555--
       (A) by inserting ``financial participant'' after 
     ``financial institution,''; and
       (B) by inserting before the period ``, a right set forth in 
     a bylaw of a clearing organization or contract market or in a 
     resolution of the governing board thereof, and a right, 
     whether or not in writing, arising under common law, under 
     law merchant, or by reason of normal business practice''; and
       (5) in section 556, by inserting ``, financial 
     participant'' after ``commodity broker''.
       (r) Technical and Conforming Amendment.--Section 104 of 
     title 11, United States Code, is amended by adding at the end 
     the following new subsection:

[[Page S10780]]

       ``(c) Exception For Certain Defined Terms.--No adjustments 
     shall be made under this section to the dollar amounts set 
     forth in the definition of the term `financial participant' 
     in section 101(22A).''.

     SEC. 402. RECORDKEEPING REQUIREMENTS.

       Section 11(e)(8) of the Federal Deposit Insurance Act (12 
     U.S.C. 1821(e)(8)) is amended by adding at the end the 
     following new subparagraph:

     SEC. 403. DAMAGE MEASURE.

       (a) Title 11, United States Code, is amended by inserting 
     after section 561 (as added by section 7(k)) the following 
     new section:

     ``Sec. 561. Damage measure in connection with swap 
       agreements, securities contracts, forward contracts, 
       commodity contracts, repurchase agreements, or master 
       netting agreements

       ``If the trustee rejects a swap agreement, securities 
     contract as defined in section 741 of this title, forward 
     contract, repurchase agreement, or master netting agreement 
     pursuant to section 365(a) of this title, or if a forward 
     contract merchant, stockbroker, financial institution, 
     securities clearing agency, repo participant, master netting 
     agreement participant, or swap participant liquidates, 
     terminates, or accelerates any such contract or agreement, 
     damages shall be measured as of the earlier of--
       ``(1) the date of such rejection; or
       ``(2) the date of such liquidation, termination, or 
     acceleration.''.
       (b) Claims Arising From Rejection.--Section 502(g) of title 
     11, United States Code, is amended--
       (1) by designating the existing text as paragraph (1); and
       (2) by adding at the end the following new paragraph:
       ``(2) A claim for damages calculated in accordance with 
     section 562 of this title shall be allowed under subsection 
     (a),(b), or (c) of this section or disallowed under 
     subsection (d) or (e) of this section as if such claim had 
     arisen before the date of the filing of the petition.''.

     SEC. 404. ASSET-BACKED SECURITIZATIONS.

       Section 541 of title 11, United States Code, is amended--
       (1) in subsection (b), by striking ``or'' at the end of 
     paragraph (4);
       (2) by redesignating paragraph (5) of subsection (b) as 
     paragraph (6);
       (3) by inserting after paragraph (4) of subsection (b) the 
     following new paragraph:
       ``(5) any eligible asset (or proceeds thereof), to the 
     extent that such eligible asset was transferred by the 
     debtor, before the date of commencement of the case, to an 
     eligible entity in connection with an asset-backed 
     securitization, except to the extent such asset (or proceeds 
     or value thereof) may be recovered by the trustee under 
     section 550 by virtue of avoidance under section 548(a); 
     or''; and
       (4) by adding at the end the following new subsection:
       ``(e) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Asset-backed securitization.--The term `asset-backed 
     securitization' means a transaction in which eligible assets 
     transferred to an eligible entity are used as the source of 
     payment on securities, the most senior of which are rated 
     investment grade by 1 or more nationally recognized 
     securities rating organizations, issued by an issuer;
       ``(2) Eligible asset.--The term `eligible asset' means--
       ``(A) financial assets (including interests therein and 
     proceeds thereof), either fixed or revolving, including 
     residential and commercial mortgage loans, consumer 
     receivables, trade receivables, and lease receivables, that, 
     by their terms, convert into cash within a finite time 
     period, plus any rights or other assets designed to assure 
     the servicing or timely distribution of proceeds to security 
     holders;
       ``(B) cash; and
       ``(C) securities.
       ``(3) Eligible entity.--The term `eligible entity' means--
       ``(A) an issuer; or
       ``(B) a trust, corporation, partnership, or other entity 
     engaged exclusively in the business of acquiring and 
     transferring eligible assets directly or indirectly to an 
     issuer and taking actions ancillary thereto;
       ``(4) Issuer.--The term `issuer' means a trust, 
     corporation, partnership, or other entity engaged exclusively 
     in the business of acquiring and holding eligible assets, 
     issuing securities backed by eligible assets, and taking 
     actions ancillary thereto.
       ``(5) Transferred.--The term `transferred' means the 
     debtor, pursuant to a written agreement, represented and 
     warranted that eligible assets were sold, contributed, or 
     otherwise conveyed with the intention of removing them from 
     the estate of the debtor pursuant to subsection (b)(5), 
     irrespective, without limitation of--
       ``(A) whether the debtor directly or indirectly obtained or 
     held an interest in the issuer or in any securities issued by 
     the issuer;
       ``(B) whether the debtor had an obligation to repurchase or 
     to service or supervise the servicing of all or any portion 
     of such eligible assets; or
       ``(C) the characterization of such sale, contribution, or 
     other conveyance for tax, accounting, regulatory reporting, 
     or other purposes.''.

     SEC. 405. PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO INCUR 
                   FINANCE CHARGES.

       Section 106 of the Truth in Lending Act (15 U.S.C. 1605) is 
     amended by adding at the end the following:
       ``(g) Prohibition on Certain Actions for Failure To Incur 
     Finance Charges.--A creditor may not, solely because a 
     consumer has not incurred finance charges in connection with 
     an extension of credit--
       ``(1) refuse to renew or continue to offer the extension of 
     credit to that consumer; or
       ``(2) charge a fee to that consumer in lieu of a finance 
     charge.''.

     SEC. 406. FEES ARISING FROM CERTAIN OWNERSHIP INTERESTS.

       Section 523(a)(16) of title 11, United States Code, is 
     amended--
       (1) by striking ``dwelling'' the first place it appears;
       (2) by striking ``ownership or'' and inserting 
     ``ownership,'';
       (3) by striking ``housing'' the first place it appears; and
       (4) by striking ``but only'' and all that follows through 
     ``such period,'', and inserting ``or a lot in a homeowners 
     association, for as long as the debtor or the trustee has a 
     legal, equitable, or possessory ownership interest in such 
     unit, such corporation, or such lot,''.

     SEC. 407. BANKRUPTCY FEES.

       Section 1930 of title 28, United States Code, is amended--
       (1) in subsection (a), by striking ``Notwithstanding 
     section 1915 of this title, the parties'' and inserting 
     ``Subject to subsection (f), the parties''; and
       (2) by adding at the end the following:
       ``(f)(1) The Judicial Conference of the United States shall 
     prescribe procedures for waiving fees under this subsection.
       ``(2) Under the procedures described in paragraph (1), the 
     district court or the bankruptcy court may waive a filing fee 
     described in paragraph (3) for a case commenced under chapter 
     7 of title 11 if the court determines that an individual 
     debtor is unable to pay that fee in installments.
       ``(3) A filing fee referred to in paragraph (2) is--
       ``(A) a filing fee under subsection (a)(1); or
       ``(B) any other fee prescribed by the Judicial Conference 
     of the United States under subsection (b) that is payable to 
     the clerk of the district court or the clerk of the 
     bankruptcy court upon the commencement of a case under 
     chapter 7 of title 11.
       ``(4) In addition to waiving a fee described in paragraph 
     (3) under paragraph (2), the district court or the bankruptcy 
     court may waive any other fee prescribed under subsection (b) 
     or (c) if the court determines that the individual is unable 
     to pay that fee in installments.''.

     SEC. 408. APPLICABILITY.

       The amendments made by this title shall apply with respect 
     to cases commenced or appointments made under any Federal or 
     State law after the date of enactment of this Act.

            TITLE V--ANCILLARY AND OTHER CROSS-BORDER CASES

     SEC. 501. AMENDMENT TO ADD A CHAPTER 6 TO TITLE 11, UNITED 
                   STATES CODE.

       (a) In General.--Title 11, United States Code, is amended 
     by inserting after chapter 5 the following:

          ``CHAPTER 6--ANCILLARY AND OTHER CROSS-BORDER CASES

``Sec.
``601. Purpose and scope of application.

                   ``SUBCHAPTER I--GENERAL PROVISIONS

``602. Definitions.
``603. International obligations of the United States.
``604. Commencement of ancillary case.
``605. Authorization to act in a foreign country.
``606. Public policy exception.
``607. Additional assistance.
``608. Interpretation.

``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE 
                                 COURT

``609. Right of direct access.
``610. Limited jurisdiction.
``611. Commencement of bankruptcy case under section 301 or 303.
``612. Participation of a foreign representative in a case under this 
              title.
``613. Access of foreign creditors to a case under this title.
``614. Notification to foreign creditors concerning a case under this 
              title.

    ``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

``615. Application for recognition of a foreign proceeding.
``616. Presumptions concerning recognition.
``617. Order recognizing a foreign proceeding.
``618. Subsequent information.
``619. Relief that may be granted upon petition for recognition of a 
              foreign proceeding.
``620. Effects of recognition of a foreign main proceeding.
``621. Relief that may be granted upon recognition of a foreign 
              proceeding.
``622. Protection of creditors and other interested persons.
``623. Actions to avoid acts detrimental to creditors.
``624. Intervention by a foreign representative.

     ``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN 
                            REPRESENTATIVES

``625. Cooperation and direct communication between the court and 
              foreign courts or foreign representatives.
``626. Cooperation and direct communication between the trustee and 
              foreign courts or foreign representatives.
``627. Forms of cooperation.

                 ``SUBCHAPTER V--CONCURRENT PROCEEDINGS

``628. Commencement of a case under this title after recognition of a 
              foreign main proceeding.
``629. Coordination of a case under this title and a foreign 
              proceeding.

[[Page S10781]]

``630. Coordination of more than 1 foreign proceeding.
``631. Presumption of insolvency based on recognition of a foreign main 
              proceeding.
``632. Rule of payment in concurrent proceedings.

     ``Sec. 601. Purpose and scope of application

       ``(a) The purpose of this chapter is to incorporate the 
     Model Law on Cross-Border Insolvency so as to provide 
     effective mechanisms for dealing with cases of cross-border 
     insolvency with the objectives of--
       ``(1) cooperation between--
       ``(A) United States courts, United States Trustees, 
     trustees, examiners, debtors, and debtors in possession; and
       ``(B) the courts and other competent authorities of foreign 
     countries involved in cross-border insolvency cases;
       ``(2) greater legal certainty for trade and investment;
       ``(3) fair and efficient administration of cross-border 
     insolvencies that protects the interests of all creditors, 
     and other interested entities, including the debtor;
       ``(4) protection and maximization of the value of the 
     debtor's assets; and
       ``(5) facilitation of the rescue of financially troubled 
     businesses, thereby protecting investment and preserving 
     employment.
       ``(b) This chapter applies where--
       ``(1) assistance is sought in the United States by a 
     foreign court or a foreign representative in connection with 
     a foreign proceeding;
       ``(2) assistance is sought in a foreign country in 
     connection with a case under this title;
       ``(3) a foreign proceeding and a case under this title with 
     respect to the same debtor are taking place concurrently; or
       ``(4) creditors or other interested persons in a foreign 
     country have an interest in requesting the commencement of, 
     or participating in, a case or proceeding under this title.
       ``(c) This chapter does not apply to--
       ``(1) a proceeding concerning an entity identified by 
     exclusion in subsection 109(b); or
       ``(2) a natural person or a natural person and that 
     person's spouse who have debts within the limits specified in 
     under section 109(e) and who are citizens of the United 
     States or aliens lawfully admitted for permanent residence in 
     the United States.

                   ``SUBCHAPTER I--GENERAL PROVISIONS

     ``Sec. 602. Definitions

       ``For the purposes of this chapter, the term--
       ``(1) `debtor' means an entity that is the subject of a 
     foreign proceeding;
       ``(2) `establishment' means any place of operations where 
     the debtor carries out a nontransitory economic activity;
       ``(3) `foreign court' means a judicial or other authority 
     competent to control or supervise a foreign proceeding;
       ``(4) `foreign main proceeding' means a foreign proceeding 
     taking place in the country where the debtor has the center 
     of its main interests;
       ``(5) `foreign nonmain proceeding' means a foreign 
     proceeding, other than a foreign main proceeding, taking 
     place in a country where the debtor has an establishment;
       ``(6) `trustee' includes a trustee, a debtor in possession 
     in a case under any chapter of this title, or a debtor under 
     chapters 9 or 13 of this title; and
       ``(7) `within the territorial jurisdiction of the United 
     States' when used with reference to property of a debtor 
     refers to tangible property located within the territory of 
     the United States and intangible property deemed to be 
     located within that territory, including any property that 
     may properly be seized or garnished by an action in a Federal 
     or State court in the United States.

     ``Sec. 603. International obligations of the United States

       ``To the extent that this chapter conflicts with an 
     obligation of the United States arising out of any treaty or 
     other form of agreement to which it is a party with 1 or more 
     other countries, the requirements of the treaty or agreement 
     prevail.

     ``Sec. 604. Commencement of ancillary case

       ``A case under this chapter is commenced by the filing of a 
     petition for recognition of a foreign proceeding under 
     section 615.

     ``Sec. 605. Authorization to act in a foreign country

       ``A trustee or another entity designated by the court may 
     be authorized by the court to act in a foreign country on 
     behalf of an estate created under section 541. An entity 
     authorized to act under this section may act in any way 
     permitted by the applicable foreign law.

     ``Sec. 606. Public policy exception

       ``Nothing in this chapter prevents the court from refusing 
     to take an action governed by this chapter if the action 
     would be manifestly contrary to the public policy of the 
     United States.

     ``Sec. 607. Additional assistance

       ``(a) Nothing in this chapter limits the power of the 
     court, upon recognition of a foreign proceeding, to provide 
     additional assistance to a foreign representative under this 
     title or under other laws of the United States.
       ``(b) In determining whether to provide additional 
     assistance under this title or under other laws of the United 
     States, the court shall consider whether such additional 
     assistance, consistent with the principles of comity, will 
     reasonably assure--
       ``(1) just treatment of all holders of claims against or 
     interests in the debtor's property;
       ``(2) protection of claim holders in the United States 
     against prejudice and inconvenience in the processing of 
     claims in such foreign proceeding;
       ``(3) prevention of preferential or fraudulent dispositions 
     of property of the debtor;
       ``(4) distribution of proceeds of the debtor's property 
     substantially in accordance with the order prescribed by this 
     title; and
       ``(5) if appropriate, the provision of an opportunity for a 
     fresh start for the individual that such foreign proceeding 
     concerns.

     ``Sec. 608. Interpretation

       ``In interpreting this chapter, the court shall consider 
     its international origin, and the need to promote an 
     application of this chapter that is consistent with the 
     application of similar statutes adopted by foreign 
     jurisdictions.

``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE 
                                 COURT

     ``Sec. 609. Right of direct access

       ``(a) A foreign representative is entitled to commence a 
     case under section 604 by filing a petition for recognition 
     under section 615, and upon recognition, to apply directly to 
     other Federal and State courts for appropriate relief in 
     those courts.
       ``(b) Upon recognition, and subject to section 610, a 
     foreign representative has the capacity to sue and be sued.
       ``(c) Recognition under this chapter is prerequisite to the 
     granting of comity or cooperation to a foreign proceeding in 
     any State or Federal court in the United States. Any request 
     for comity or cooperation in any court shall be accompanied 
     by a sworn statement setting forth whether recognition under 
     section 615 has been sought and the status of any such 
     petition.
       ``(d) Upon denial of recognition under this chapter, the 
     court may issue appropriate orders necessary to prevent an 
     attempt to obtain comity or cooperation from courts in the 
     United States without such recognition.

     ``Sec. 610. Limited jurisdiction

       ``The sole fact that a foreign representative files a 
     petition under sections 604 and 615 does not subject the 
     foreign representative to the jurisdiction of any court in 
     the United States for any other purpose.

     ``Sec. 611. Commencement of bankruptcy case under section 301 
       or 303

       ``(a) Upon filing a petition for recognition, a foreign 
     representative may commence--
       ``(1) an involuntary case under section 303; or
       ``(2) a voluntary case under section 301 or 302, if the 
     foreign proceeding is a foreign main proceeding.
       ``(b) The petition commencing a case under subsection (a) 
     of this section must be accompanied by a statement describing 
     the petition for recognition and its current status. The 
     court where the petition for recognition has been filed must 
     be advised of the foreign representative's intent to commence 
     a case under subsection (a) of this section prior to such 
     commencement.
       ``(c) A case under subsection (a) shall be dismissed unless 
     recognition is granted.

     ``Sec. 612. Participation of a foreign representative in a 
       case under this title

       ``Upon recognition of a foreign proceeding, the foreign 
     representative in that proceeding is entitled to participate 
     as a party in interest in a case regarding the debtor under 
     this title.

     ``Sec. 613. Access of foreign creditors to a case under this 
       title

       ``(a) Foreign creditors have the same rights regarding the 
     commencement of, and participation in, a case under this 
     title as domestic creditors.
       ``(b)(1) Subsection (a) of this section does not change or 
     codify law in effect on the date of enactment of this chapter 
     as to the priority of claims under section 507 or 726, except 
     that the claim of a foreign creditor under those sections 
     shall not be given a lower priority than the class of general 
     unsecured claims without priority solely because the holder 
     of such claim is a foreign creditor.
       ``(2)(A) Subsection (a) of this section and paragraph (1) 
     of this subsection do not change or codify law in effect on 
     the date of enactment of this chapter as to the allowability 
     of foreign revenue claims or other foreign public law claims 
     in a proceeding under this title.
       ``(B) Allowance and priority as to a foreign tax claim or 
     other foreign public law claim shall be governed by any 
     applicable tax treaty of the United States, under the 
     conditions and circumstances specified therein.

     ``Sec. 614. Notification to foreign creditors concerning a 
       case under this title

       ``(a) Whenever in a case under this title, notice is to be 
     given to creditors generally or to any class or category of 
     creditors, such notice shall also be given to the known 
     creditors generally, or to creditors in the notified class or 
     category, that do not have addresses in the United States. 
     The court may order that appropriate steps be taken with a 
     view to notifying any creditor whose address is not yet 
     known.
       ``(b) The notification to creditors with foreign addresses 
     described in subsection (a) shall be given individually, 
     unless the court considers that, under the circumstances, 
     some other form of notification would be more appropriate. No 
     letters rogatory or other similar formality is required.
       ``(c) When a notification of commencement of a case is to 
     be given to foreign creditors, the notification shall--
       ``(1) indicate the time period for filing proofs of claim 
     and specify the place for their filing;
       ``(2) indicate whether secured creditors need to file their 
     proofs of claim; and
       ``(3) contain any other information required to be included 
     in such a notification to creditors pursuant to this title 
     and the orders of the court.
       ``(d) Any rule of procedure or order of the court as to 
     notice or the filing of a claim shall provide such additional 
     time to creditors with foreign addresses as is reasonable 
     under the circumstances.

[[Page S10782]]

    ``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

     ``Sec. 615. Application for recognition of a foreign 
       proceeding

       ``(a) A foreign representative applies to the court for 
     recognition of the foreign proceeding in which the foreign 
     representative has been appointed by filing a petition for 
     recognition.
       ``(b) A petition for recognition shall be accompanied by--
       ``(1) a certified copy of the decision commencing the 
     foreign proceeding and appointing the foreign representative;
       ``(2) a certificate from the foreign court affirming the 
     existence of the foreign proceeding and of the appointment of 
     the foreign representative; or
       ``(3) in the absence of evidence referred to in paragraphs 
     (1) and (2), any other evidence acceptable to the court of 
     the existence of the foreign proceeding and of the 
     appointment of the foreign representative.
       ``(c) A petition for recognition shall also be accompanied 
     by a statement identifying all foreign proceedings with 
     respect to the debtor that are known to the foreign 
     representative.
       ``(d) The documents referred to in paragraphs (1) and (2) 
     of subsection (b) must be translated into English. The court 
     may require a translation into English of additional 
     documents.

     ``Sec. 616. Presumptions concerning recognition

       ``(a) If the decision or certificate referred to in section 
     615(b) indicates that the foreign proceeding is a foreign 
     proceeding within the meaning of section 101(23) and that the 
     person or body is a foreign representative within the meaning 
     of section 101(24), the court is entitled to so presume.
       ``(b) The court is entitled to presume that documents 
     submitted in support of the petition for recognition are 
     authentic, whether the documents have been subjected to legal 
     processing under applicable law.
       ``(c) In the absence of evidence to the contrary, the 
     debtor's registered office, or habitual residence in the case 
     of an individual, is presumed to be the center of the 
     debtor's main interests.

     ``Sec. 617. Order recognizing a foreign proceeding

       ``(a) Subject to section 606, an order recognizing a 
     foreign proceeding shall be entered if--
       ``(1) the foreign proceeding is a foreign main proceeding 
     or foreign nonmain proceeding within the meaning of section 
     602 and is a foreign proceeding within the meaning of section 
     101(23);
       ``(2) the person or body applying for recognition is a 
     foreign representative within the meaning of section 101(24); 
     and
       ``(3) the petition meets the requirements of section 615.
       ``(b) The foreign proceeding shall be recognized--
       ``(1) as a foreign main proceeding if it is taking place in 
     the country where the debtor has the center of its main 
     interests; or
       ``(2) as a foreign nonmain proceeding if the debtor has an 
     establishment within the meaning of section 602 in the 
     foreign country where the proceeding is pending.
       ``(c) A petition for recognition of a foreign proceeding 
     shall be decided upon at the earliest possible time. Entry of 
     an order recognizing a foreign proceeding shall constitute 
     recognition under this chapter.
       ``(d) The provisions of this subchapter do not prevent 
     modification or termination of recognition if it is shown 
     that the grounds for granting it were fully or partially 
     lacking or have ceased to exist, but in considering such 
     action the court shall give due weight to possible prejudice 
     to parties that have relied upon the granting of recognition. 
     The foreign proceeding may be closed in the manner prescribed 
     for a case under section 350.

     ``Sec. 618. Subsequent information

       ``From the time of filing the petition for recognition of 
     the foreign proceeding, the foreign representative shall file 
     with the court promptly a notice of change of status 
     concerning--
       ``(1) any substantial change in the status of the foreign 
     proceeding or the status of the foreign representative's 
     appointment; and
       ``(2) any other foreign proceeding regarding the debtor 
     that becomes known to the foreign representative.

     ``Sec. 619. Relief that may be granted upon petition for 
       recognition of a foreign proceeding

       ``(a) From the time of filing a petition for recognition 
     until the petition is decided upon, the court may, at the 
     request of the foreign representative, where relief is 
     urgently needed to protect the assets of the debtor or the 
     interests of the creditors, grant relief of a provisional 
     nature, including--
       ``(1) staying execution against the debtor's assets;
       ``(2) entrusting the administration or realization of all 
     or part of the debtor's assets located in the United States 
     to the foreign representative or another person designated by 
     the court, including an examiner, in order to protect and 
     preserve the value of assets that, by their nature or because 
     of other circumstances, are perishable, susceptible to 
     devaluation or otherwise in jeopardy; and
       ``(3) any relief referred to in paragraph (3), (4), or (7) 
     of section 621(a).
       ``(b) Unless extended under section 621(a)(6), the relief 
     granted under this section terminates when the petition for 
     recognition is decided upon.
       ``(c) It is a ground for denial of relief under this 
     section that such relief would interfere with the 
     administration of a foreign main proceeding.
       ``(d) The court may not enjoin a police or regulatory act 
     of a governmental unit, including a criminal action or 
     proceeding, under this section.
       ``(e) The standards, procedures, and limitations applicable 
     to an injunction shall apply to relief under this section.

     ``Sec. 620. Effects of recognition of a foreign main 
       proceeding

       ``(a) Upon recognition of a foreign proceeding that is a 
     foreign main proceeding--
       ``(1) section 362 applies with respect to the debtor and 
     that property of the debtor that is within the territorial 
     jurisdiction of the United States; and
       ``(2) transfer, encumbrance, or any other disposition of an 
     interest of the debtor in property within the territorial 
     jurisdiction of the United States is restrained as and to the 
     extent that is provided for property of an estate under 
     sections 363, 549, and 552.

     Unless the court orders otherwise, the foreign representative 
     may operate the debtor's business and may exercise the powers 
     of a trustee under section 549, subject to sections 363 and 
     552.
       ``(b) The scope, and the modification or termination, of 
     the stay and restraints referred to in subsection (a) of this 
     section are subject to the exceptions and limitations 
     provided in subsections (b), (c), and (d) of section 362, 
     subsections (b) and (c) of section 363, and sections 552, 555 
     through 557, 559, and 560.
       ``(c) Subsection (a) of this section does not affect the 
     right to commence individual actions or proceedings in a 
     foreign country to the extent necessary to preserve a claim 
     against the debtor.
       ``(d) Subsection (a) of this section does not affect the 
     right of a foreign representative or an entity to file a 
     petition commencing a case under this title or the right of 
     any party to file claims or take other proper actions in such 
     a case.

     ``Sec. 621. Relief that may be granted upon recognition of a 
       foreign proceeding

       ``(a) Upon recognition of a foreign proceeding, whether 
     main or nonmain, where necessary to effectuate the purpose of 
     this chapter and to protect the assets of the debtor or the 
     interests of the creditors, the court may, at the request of 
     the foreign representative, grant any appropriate relief, 
     including--
       ``(1) staying the commencement or continuation of 
     individual actions or individual proceedings concerning the 
     debtor's assets, rights, obligations or liabilities to the 
     extent they have not been stayed under section 620(a);
       ``(2) staying execution against the debtor's assets to the 
     extent it has not been stayed under section 620(a);
       ``(3) suspending the right to transfer, encumber or 
     otherwise dispose of any assets of the debtor to the extent 
     this right has not been suspended under section 620(a);
       ``(4) providing for the examination of witnesses, the 
     taking of evidence or the delivery of information concerning 
     the debtor's assets, affairs, rights, obligations or 
     liabilities;
       ``(5) entrusting the administration or realization of all 
     or part of the debtor's assets within the territorial 
     jurisdiction of the United States to the foreign 
     representative or another person, including an examiner, 
     designated by the court;
       ``(6) extending relief granted under section 619(a); and
       ``(7) granting any additional relief that may be available 
     to a trustee, except for relief available under sections 522, 
     544, 545, 547, 548, 550, and 724(a).
       ``(b) Upon recognition of a foreign proceeding, whether 
     main or nonmain, the court may, at the request of the foreign 
     representative, entrust the distribution of all or part of 
     the debtor's assets located in the United States to the 
     foreign representative or another person, including an 
     examiner, designated by the court, provided that the court is 
     satisfied that the interests of creditors in the United 
     States are sufficiently protected.
       ``(c) In granting relief under this section to a 
     representative of a foreign nonmain proceeding, the court 
     must be satisfied that the relief relates to assets that, 
     under the law of the United States, should be administered in 
     the foreign nonmain proceeding or concerns information 
     required in that proceeding.
       ``(d) The court may not enjoin a police or regulatory act 
     of a governmental unit, including a criminal action or 
     proceeding, under this section.

     ``Sec. 622. Protection of creditors and other interested 
       persons

       ``(a) In granting or denying relief under section 619 or 
     621, or in modifying or terminating relief under subsection 
     (c) of this section, the court must find that the interests 
     of the creditors and other interested persons or entities, 
     including the debtor, are sufficiently protected.
       ``(b) The court may subject relief granted under section 
     619 or 621 to conditions it considers appropriate.
       ``(c) The court may, at the request of the foreign 
     representative or an entity affected by relief granted under 
     section 619 or 621, or at its own motion, modify or terminate 
     such relief.

     ``Sec. 623. Actions to avoid acts detrimental to creditors

       ``(a) Upon recognition of a foreign proceeding, the foreign 
     representative has standing in a pending case under another 
     chapter of this title to initiate actions under sections 522, 
     544, 545, 547, 548, 550, and 724(a).
       ``(b) When the foreign proceeding is a foreign nonmain 
     proceeding, the court must be satisfied that an action under 
     subsection (a) of this section relates to assets that, under 
     United States law, should be administered in the foreign 
     nonmain proceeding.

     ``Sec. 624. Intervention by a foreign representative

       ``Upon recognition of a foreign proceeding, the foreign 
     representative may intervene in any proceedings in a State or 
     Federal court in the United States in which the debtor is a 
     party.

[[Page S10783]]

     ``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN 
                            REPRESENTATIVES

     ``Sec. 625. Cooperation and direct communication between the 
       court and foreign courts or foreign representatives

       ``(a) In all matters included within section 601, the court 
     shall cooperate to the maximum extent possible with foreign 
     courts or foreign representatives, either directly or through 
     the trustee.
       ``(b) The court is entitled to communicate directly with, 
     or to request information or assistance directly from, 
     foreign courts or foreign representatives, subject to the 
     rights of parties in interest to notice and participation.

     ``Sec. 626. Cooperation and direct communication between the 
       trustee and foreign courts or foreign representatives

       ``(a) In all matters included in section 601, the trustee 
     or other person, including an examiner, designated by the 
     court, shall, subject to the supervision of the court, 
     cooperate to the maximum extent possible with foreign courts 
     or foreign representatives.
       ``(b) The trustee or other person, including an examiner, 
     designated by the court is entitled, subject to the 
     supervision of the court, to communicate directly with 
     foreign courts or foreign representatives.
       ``(c) Section 1104(d) shall apply to the appointment of an 
     examiner under this chapter. Any examiner shall comply with 
     the qualification requirements imposed on a trustee by 
     section 322(a).

     ``Sec. 627. Forms of cooperation

       ``Cooperation referred to in sections 625 and 626 may be 
     implemented by any appropriate means, including--
       ``(1) appointment of a person or body, including an 
     examiner, to act at the direction of the court;
       ``(2) communication of information by any means considered 
     appropriate by the court;
       ``(3) coordination of the administration and supervision of 
     the debtor's assets and affairs;
       ``(4) approval or implementation of agreements concerning 
     the coordination of proceedings; and
       ``(5) coordination of concurrent proceedings regarding the 
     same debtor.

                 ``SUBCHAPTER V--CONCURRENT PROCEEDINGS

     ``Sec. 628. Commencement of a case under this title after 
       recognition of a foreign main proceeding

       ``After recognition of a foreign main proceeding, a case 
     under another chapter of this title may be commenced only if 
     the debtor has assets in the United States. The effects of 
     that case shall be restricted to the assets of the debtor 
     that are within the territorial jurisdiction of the United 
     States and, to the extent necessary to implement cooperation 
     and coordination under sections 625, 626, and 627, to other 
     assets of the debtor that are within the jurisdiction of the 
     court under sections 541(a) and 1334(e), to the extent that 
     such other assets are not subject to the jurisdiction and 
     control of a foreign proceeding that has been recognized 
     under this chapter.

     ``Sec. 629. Coordination of a case under this title and a 
       foreign proceeding

       ``Where a foreign proceeding and a case under another 
     chapter of this title are taking place concurrently regarding 
     the same debtor, the court shall seek cooperation and 
     coordination under sections 625, 626, and 627, and the 
     following shall apply:
       ``(1) When the case in the United States is taking place at 
     the time the petition for recognition of the foreign 
     proceeding is filed--
       ``(A) any relief granted under sections 619 or 621 must be 
     consistent with the case in the United States; and
       ``(B) even if the foreign proceeding is recognized as a 
     foreign main proceeding, section 620 does not apply.
       ``(2) When a case in the United States under this title 
     commences after recognition, or after the filing of the 
     petition for recognition, of the foreign proceeding--
       ``(A) any relief in effect under sections 619 or 621 shall 
     be reviewed by the court and shall be modified or terminated 
     if inconsistent with the case in the United States; and
       ``(B) if the foreign proceeding is a foreign main 
     proceeding, the stay and suspension referred to in section 
     620(a) shall be modified or terminated if inconsistent with 
     the case in the United States.
       ``(3) In granting, extending, or modifying relief granted 
     to a representative of a foreign nonmain proceeding, the 
     court must be satisfied that the relief relates to assets 
     that, under the law of the United States, should be 
     administered in the foreign nonmain proceeding or concerns 
     information required in that proceeding.
       ``(4) In achieving cooperation and coordination under 
     sections 628 and 629, the court may grant any of the relief 
     authorized under section 305.

     ``Sec. 630. Coordination of more than 1 foreign proceeding

       ``In matters referred to in section 601, with respect to 
     more than one foreign proceeding regarding the debtor, the 
     court shall seek cooperation and coordination under sections 
     625, 626, and 627, and the following shall apply:
       ``(1) Any relief granted under section 619 or 621 to a 
     representative of a foreign nonmain proceeding after 
     recognition of a foreign main proceeding must be consistent 
     with the foreign main proceeding.
       ``(2) If a foreign main proceeding is recognized after 
     recognition, or after the filing of a petition for 
     recognition, of a foreign nonmain proceeding, any relief in 
     effect under section 619 or 621 shall be reviewed by the 
     court and shall be modified or terminated if inconsistent 
     with the foreign main proceeding.
       ``(3) If, after recognition of a foreign nonmain 
     proceeding, another foreign nonmain proceeding is recognized, 
     the court shall grant, modify, or terminate relief for the 
     purpose of facilitating coordination of the proceedings.

     ``Sec. 631. Presumption of insolvency based on recognition of 
       a foreign main proceeding

       ``In the absence of evidence to the contrary, recognition 
     of a foreign main proceeding is for the purpose of commencing 
     a proceeding under section 303, proof that the debtor is 
     generally not paying its debts.

     ``Sec. 632. Rule of payment in concurrent proceedings

       ``Without prejudice to secured claims or rights in rem, a 
     creditor who has received payment with respect to its claim 
     in a foreign proceeding pursuant to a law relating to 
     insolvency may not receive a payment for the same claim in a 
     case under any other chapter of this title regarding the 
     debtor, so long as the payment to other creditors of the same 
     class is proportionately less than the payment the creditor 
     has already received.''.
       (b) Clerical Amendment.--The table of chapters for title 
     11, United States Code, is amended by inserting after the 
     item relating to chapter 5 the following:

``6. Ancillary and Other Cross-Border Cases..................601''.....

     SEC. 502. AMENDMENTS TO OTHER CHAPTERS IN TITLE 11, UNITED 
                   STATES CODE.

       (a) Applicability of Chapters.--Section 103 of title 11, 
     United States Code, is amended--
       (1) in subsection (a), by inserting before the period the 
     following: ``and this chapter, sections 307, 555 through 557, 
     559, and 560 apply in a case under chapter 6''; and
       (2) by adding at the end the following:
       ``(j) Chapter 6 applies only in a case under that chapter, 
     except that section 605 applies to trustees and to any other 
     entity designated by the court, including an examiner, under 
     chapters 7, 11, and 12, to debtors in possession under 
     chapters 11 and 12, and to debtors or trustees under chapters 
     9 and 13 who are authorized to act under section 605.''.
       (b) Definitions.--Section 101 of title 11, United States 
     Code, is amended by striking paragraphs (23) and (24) and 
     inserting the following:
       ``(23) `foreign proceeding' means a collective judicial or 
     administrative proceeding in a foreign state, including an 
     interim proceeding, pursuant to a law relating to insolvency 
     in which proceeding the assets and affairs of the debtor are 
     subject to control or supervision by a foreign court, for the 
     purpose of reorganization or liquidation;
       ``(24) `foreign representative' means a person or body, 
     including 1 appointed on an interim basis, authorized in a 
     foreign proceeding to administer the reorganization or the 
     liquidation of the debtor's assets or affairs or to act as a 
     representative of the foreign proceeding;''.
       (c) Amendments to Title 28, United States Code.--
       (1) Procedures.--Section 157(b)(2) of title 28, United 
     States Code, is amended--
       (A) in subparagraph (N), by striking ``and'' at the end;
       (B) in subparagraph (O), by striking the period at the end 
     and inserting ``; and''; and
       (C) by adding at the end the following:
       ``(P) recognition of foreign proceedings and other matters 
     under chapter 6.''.
       (2) Bankruptcy cases and proceedings.--Section 1334(c) of 
     title 28, United States Code, is amended by striking 
     ``Nothing in'' and inserting ``Except with respect to a case 
     under chapter 6 of title 11, nothing in''.
       (3) Duties of trustees.--Section 586(a)(3) of title 28, 
     United States Code, is amended by inserting ``6,'' after 
     ``chapter''.

                        TITLE VI--MISCELLANEOUS

     SEC. 601. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.

       Section 365(d)(4) of title 11, United States Code, is 
     amended to read as follows:
       ``(4)(A) Subject to subparagraph (B), in any case under any 
     chapter of this title, an unexpired lease of nonresidential 
     real property under which the debtor is the lessee shall be 
     deemed rejected and the trustee shall immediately surrender 
     that nonresidential real property to the lessor if the 
     trustee does not assume or reject the unexpired lease by the 
     earlier of--
       ``(i) the date that is 120 days after the date of the order 
     for relief; or
       ``(ii) the date of the entry of an order confirming a plan.
       ``(B) The court may extend the period determined under 
     subparagraph (A) only upon a motion of the lessor.''.

     SEC. 602. EXPEDITED APPEALS OF BANKRUPTCY CASES TO COURTS OF 
                   APPEALS.

       (a) In General.--Section 158 of title 28, United States 
     Code, is amended--
       (1) by redesignating subsection (d) as subsection (e);
       (2) by inserting after subsection (c) the following new 
     subsection:
       ``(d)(1) Any final judgment, decision, order, or decree of 
     a bankruptcy judge entered for a case in accordance with 
     section 157 may be appealed by any party in such case to the 
     appropriate court of appeals if--
       ``(A) an appeal from such judgment, decision, order, or 
     decree is first filed with the appropriate district court of 
     the United States; and
       ``(B) the decision on the appeal described under 
     subparagraph (A) is not filed by a district court judge 
     within 30 days after the date such appeal is filed with the 
     district court.
       ``(2) On the date that an appeal is filed with a court of 
     appeals under paragraph (1), the chief judge for such court 
     of appeals shall issue an order to the clerk for the district 
     court from which the appeal is filed. Such order shall direct 
     the clerk to enter the final judgment, decision,

[[Page S10784]]

     order, or decree of the bankruptcy judge as the final 
     judgment, decision, order, or decree of the district 
     court.''; and
       (3) in subsection (e), (as redesignated by paragraph (1) of 
     this section) by striking ``subsections (a) and (b)'' and 
     inserting ``subsections (a), (b), and (d)''.
       (b) Technical and Conforming Amendments.--
       (1) Section 305(c) of title 11, United States Code, is 
     amended by striking ``section 158(d)'' and inserting 
     ``section 158(e)''.
       (2) Section 1334(d) of title 28, United States Code, is 
     amended by striking ``section 158(d)'' and inserting 
     ``section 158(e)''.
       (3) Section 1452(b) of title 28, United States Code, is 
     amended by striking ``section 158(d)'' and inserting 
     ``section 158(e)''.

     SEC. 603. CREDITORS AND EQUITY SECURITY HOLDERS COMMITTEES.

       Section 1102(a)(2) of title 11, United States Code, is 
     amended by inserting before the first sentence the following: 
     ``On its own motion or on request of a party in interest, and 
     after notice and hearing, the court may order a change in the 
     membership of a committee appointed under this subsection, if 
     the court determines that the change is necessary to ensure 
     adequate representation of creditors or equity security 
     holders.''.

     SEC. 604. REPEAL OF SUNSET PROVISION.

       Section 302 of the Bankruptcy Judges, United States 
     Trustees, and Family Farmer Bankruptcy Act of 1986 (28 U.S.C. 
     581 note) is amended by striking subsection (f).

     SEC. 605. CASES ANCILLARY TO FOREIGN PROCEEDINGS.

       Section 304 of title 11, United States Code, as amended by 
     section 410 of this Act, is amended by adding at the end the 
     following:
       ``(e)(1) In this subsection--
       ``(A) the term `domestic insurance company' means a 
     domestic insurance company, as that term is used in section 
     109(b)(2);
       ``(B) the term `foreign insurance company' means a foreign 
     insurance company, as that term is used in section 109(b)(3);
       ``(C) the term `United States claimant' means a beneficiary 
     of any deposit referred to in paragraph (2)(A) or any 
     multibeneficiary trust referred to in subparagraph (B) or (C) 
     of paragraph (2);
       ``(D) the term `United States creditor' means, with respect 
     to a foreign insurance company--
       ``(i) a United States claimant; or
       ``(ii) any business entity that operates in the United 
     States and that is a creditor; and
       ``(E) the term `United States policyholder' means a holder 
     of an insurance policy issued in the United States.
       ``(2) Notwithstanding subsections (b) and (c), the court 
     may not grant relief under subsection (b) to a foreign 
     insurance company that is not engaged in the business of 
     insurance or reinsurance in the United States with respect to 
     any claim made by a United States creditor against--
       ``(A) a deposit required by an applicable State insurance 
     law;
       ``(B) a multibeneficiary trust required by an applicable 
     State insurance law to protect United States policyholders or 
     claimants against a foreign insurance company; or
       ``(C) a multibeneficiary trust authorized under an 
     applicable State insurance law to allow a domestic insurance 
     company that cedes reinsurance to the debtor to reflect the 
     reinsurance as an asset or deduction from liability in the 
     ceding insurer's financial statements.''.

     SEC. 606. LIMITATION.

       Section 546(c)(1)(B) of title 11, United States Code, is 
     amended by striking ``20'' and inserting ``45''.

     SEC. 607. AMENDMENT TO SECTION 546 OF TITLE 11, UNITED STATES 
                   CODE.

       Section 546 of title 11, United States Code, is amended by 
     inserting at the end thereof:
       ``(I) Notwithstanding section 545 (2) and (3) of this 
     title, the trustee may not avoid a warehouseman's lien for 
     storage, transportation or other costs incidental to the 
     storage and handling of goods, as provided by section 7-209 
     of the Uniform Commercial Code.''.

     SEC. 608. AMENDMENT TO SECTION 330(A) OF TITLE 11, UNITED 
                   STATES CODE.

       Section 330(a) of title 11, United States Code, is 
     amended--
       (1) in subsection (3)(A) after the word ``awarded'', by 
     inserting ``to an examiner, chapter 11 trustee, or 
     professional person''; and
       (2) by adding at the end of subsection (3)(A) the 
     following:
       ``(3)(B) In determining the amount of reasonable 
     compensation to be awarded a trustee, the court shall treat 
     such compensation as a commission based on the results 
     achieved.''.

                    TITLE VII--TECHNICAL CORRECTIONS

     SEC. 701. DEFINITIONS.

       Section 101 of title 11, United States Code, as amended by 
     section 317, is amended--
       (1) by striking ``In this title--'' and inserting ``In this 
     title:'';
       (2) in each paragraph, by inserting ``The term'' after the 
     paragraph designation;
       (3) in paragraph (35)(B), by striking ``paragraphs (21B) 
     and (33)(A)'' and inserting ``paragraphs (23) and (35)'';
       (4) in each of paragraphs (35A) and (38), by striking ``; 
     and'' at the end and inserting a period;
       (5) in paragraph (51B)--
       (A) by inserting ``who is not a family farmer'' after 
     ``debtor'' the first place it appears; and
       (B) by striking ``thereto having aggregate'' and all that 
     follows through the end of the paragraph;
       (6) by amending paragraph (54) to read as follows:
       ``(54) The term `transfer' means--
       ``(A) the creation of a lien;
       ``(B) the retention of title as a security interest;
       ``(C) the foreclosure of a debtor's equity of redemption; 
     or
       ``(D) each mode, direct or indirect, absolute or 
     conditional, voluntary or involuntary, of disposing of or 
     parting with--
       ``(i) property; or
       ``(ii) an interest in property;'';
       (7) in each of paragraphs (1) through (35), in each of 
     paragraphs (36) and (37), and in each of paragraphs (40) 
     through (56A) (including paragraph (54), as amended by 
     paragraph (6) of this section), by striking the semicolon at 
     the end and inserting a period; and
       (8) by redesignating paragraphs (4) through (56A) in 
     entirely numerical sequence, so as to result in numerical 
     paragraph designations of (4) through (77), respectively.

     SEC. 702. ADJUSTMENT OF DOLLAR AMOUNTS.

       Section 104 of title 11, United States Code, is amended by 
     inserting ``522(f)(3), 707(b)(5),'' after ``522(d),'' each 
     place it appears.

     SEC. 703. EXTENSION OF TIME.

       Section 108(c)(2) of title 11, United States Code, is 
     amended by striking ``922'' and all that follows through 
     ``or'', and inserting ``922, 1201, or''.

     SEC. 704. WHO MAY BE A DEBTOR.

       Section 109(b)(2) of title 11, United States Code, is 
     amended by striking ``subsection (c) or (d) of''.

     SEC. 705. PENALTY FOR PERSONS WHO NEGLIGENTLY OR FRAUDULENTLY 
                   PREPARE BANKRUPTCY PETITIONS.

       Section 110(j)(3) of title 11, United States Code, is 
     amended by striking ``attorney's'' and inserting ``attorneys' 
     ''.

     SEC. 706. LIMITATION ON COMPENSATION OF PROFESSIONAL PERSONS.

       Section 328(a) of title 11, United States Code, is amended 
     by inserting ``on a fixed or percentage fee basis,'' after 
     ``hourly basis,''.

     SEC. 707. SPECIAL TAX PROVISIONS.

       Section 346(g)(1)(C) of title 11, United States Code, is 
     amended by striking ``, except'' and all that follows through 
     ``1986''.

     SEC. 708. EFFECT OF CONVERSION.

       Section 348(f)(2) of title 11, United States Code, is 
     amended by inserting ``of the estate'' after ``property'' the 
     first place it appears.

     SEC. 709. AUTOMATIC STAY.

       Section 362(b) of title 11, United States Code, as amended 
     by sections 326 and 401 of this Act, is amended--
       (1) in paragraph (21), by striking ``or'' at the end;
       (2) in paragraph (22), by striking the period at the end 
     and inserting a semicolon; and
       (3) by inserting after paragraph (22) the following:
       ``(23) under subsection (a) of this section of any transfer 
     that is not avoidable under section 544 and that is not 
     avoidable under section 549;
       ``(24) under subsection (a)(3) of this section, of the 
     continuation of any eviction, unlawful detainer action, or 
     similar proceeding by a lessor against a debtor involving 
     residential real property in which the debtor resides as a 
     tenant under a rental agreement and the debtor has not paid 
     rent to the lessor pursuant to the terms of the lease 
     agreement or applicable State law after the commencement and 
     during the course of the case;
       ``(25) under subsection (a)(3) of this section, of the 
     commencement or continuation of any eviction, unlawful 
     detainer action, or similar proceeding by a lessor against a 
     debtor involving residential real property in which the 
     debtor resides as a tenant under a rental agreement that has 
     terminated pursuant to the lease agreement or applicable 
     State law;
       ``(26) under subsection (a)(3) of this section, of any 
     eviction, unlawful detainer action, or similiar proceeding, 
     if the debtor has previously filed within the last year and 
     failed to pay post-petition rent during the course of that 
     case; or
       ``(27) under subsection (a)(3) of this section, of eviction 
     actions based on endangerment to property or person or the 
     use of illegal drugs.''.

     SEC. 710. AMENDMENT TO TABLE OF SECTIONS.

       The table of sections for chapter 5 of title 11, United 
     States Code, is amended by striking the item relating to 
     section 556 and inserting the following:

``556. Contractual right to liquidate a commodities contract or forward 
              contract.''.

     SEC. 711. ALLOWANCE OF ADMINISTRATIVE EXPENSES.

       Section 503(b)(4) of title 11, United States Code, is 
     amended by inserting ``subparagraph (A), (B), (C), (D), or 
     (E) of'' before ``paragraph (3)''.

     SEC. 712. PRIORITIES.

       Section 507(a) of title 11, United States Code, as amended 
     by section 323 of this Act, is amended--
       (1) in paragraph (3)(B), by striking the semicolon at the 
     end and inserting a period; and
       (2) in paragraph (7), by inserting ``unsecured'' after 
     ``allowed''.

     SEC. 713. EXEMPTIONS.

       Section 522 of title 11, United States Code, as amended by 
     section 320 of this Act, is amended--
       (1) in subsection (f)(1)(A)(ii)(II)--
       (A) by striking ``includes a liability designated as'' and 
     inserting ``is for a liability that is designated as, and is 
     actually in the nature of,''; and
       (B) by striking ``, unless'' and all that follows through 
     ``support''; and
       (2) in subsection (g)(2), by striking ``subsection (f)(2)'' 
     and inserting ``subsection (f)(1)(B)''.

     SEC. 714. EXCEPTIONS TO DISCHARGE.

       Section 523 of title 11, United States Code, is amended--
       (1) in subsection (a)(3), by striking ``or (6)'' each place 
     it appears and inserting ``(6), or (15)'';

[[Page S10785]]

       (2) as amended by section 304(e) of Public Law 103-394 (108 
     Stat. 4133), in paragraph (15), by transferring such 
     paragraph so as to insert it after paragraph (14) of 
     subsection (a);
       (3) in subsection (a)(9), by inserting ``, watercraft, or 
     aircraft'' after ``motor vehicle'';
       (4) in subsection (a)(15), as so redesignated by paragraph 
     (2) of this subsection, by inserting ``to a spouse, former 
     spouse, or child of the debtor and'' after ``(15)'';
       (5) in subsection (a)(17)--
       (A) by striking ``by a court'' and inserting ``on a 
     prisoner by any court'';
       (B) by striking ``section 1915 (b) or (f)'' and inserting 
     ``subsection (b) or (f)(2) of section 1915''; and
       (C) by inserting ``(or a similar non-Federal law)'' after 
     ``title 28'' each place it appears; and
       (6) in subsection (e), by striking ``a insured'' and 
     inserting ``an insured''.

     SEC. 715. EFFECT OF DISCHARGE.

       Section 524(a)(3) of title 11, United States Code, is 
     amended by striking ``section 523'' and all that follows 
     through ``or that'' and inserting ``section 523, 1228(a)(1), 
     or 1328(a)(1) of this title, or that''.

     SEC. 716. PROTECTION AGAINST DISCRIMINATORY TREATMENT.

       Section 525(c) of title 11, United States Code, is 
     amended--
       (1) in paragraph (1), by inserting ``student'' before 
     ``grant'' the second place it appears; and
       (2) in paragraph (2), by striking ``the program operated 
     under part B, D, or E of'' and inserting ``any program 
     operated under''.

     SEC. 717. PROPERTY OF THE ESTATE.

       Section 541(b)(4)(B)(ii) of title 11, United States Code, 
     is amended by inserting ``365 or'' before ``542''.

     SEC. 718. PREFERENCES.

       Section 547 of title 11, United States Code, is amended--
       (1) in subsection (b), by striking ``subsection (c)'' and 
     inserting ``subsections (c) and (h)''; and
       (2) by adding at the end the following:
       ``(h) If the trustee avoids under subsection (b) a security 
     interest given between 90 days and 1 year before the date of 
     the filing of the petition, by the debtor to an entity that 
     is not an insider for the benefit of a creditor that is an 
     insider, such security interest shall be considered to be 
     avoided under this section only with respect to the creditor 
     that is an insider.''.

     SEC. 719. POSTPETITION TRANSACTIONS.

       Section 549(c) of title 11, United States Code, is 
     amended--
       (1) by inserting ``an interest in'' after ``transfer of'';
       (2) by striking ``such property'' and inserting ``such real 
     property''; and
       (3) by striking ``the interest'' and inserting ``such 
     interest''.

     SEC. 720. TECHNICAL AMENDMENT.

       Section 552(b)(1) of title 11, United States Code, is 
     amended by striking ``product'' each place it appears and 
     inserting ``products''.

     SEC. 721. DISPOSITION OF PROPERTY OF THE ESTATE.

       Section 726(b) of title 11, United States Code, is amended 
     by striking ``1009,''.

     SEC. 722. GENERAL PROVISIONS.

       Section 901(a) of title 11, United States Code, as amended 
     by section 408, is amended by inserting ``1123(d),'' after 
     ``1123(b),''.

     SEC. 723. APPOINTMENT OF ELECTED TRUSTEE.

       Section 1104(b) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(1)'' after ``(b)''; and
       (2) by adding at the end the following:
       ``(2)(A) If an eligible, disinterested trustee is elected 
     at a meeting of creditors under paragraph (1), the United 
     States trustee shall file a report certifying that election. 
     Upon the filing of a report under the preceding sentence--
       ``(i) the trustee elected under paragraph (1) shall be 
     considered to have been selected and appointed for purposes 
     of this section; and
       ``(ii) the service of any trustee appointed under 
     subsection (d) shall terminate.
       ``(B) In the case of any dispute arising out of an election 
     under subparagraph (A), the court shall resolve the 
     dispute.''.

     SEC. 724. ABANDONMENT OF RAILROAD LINE.

       Section 1170(e)(1) of title 11, United States Code, is 
     amended by striking ``section 11347'' and inserting ``section 
     11326(a)''.

     SEC. 725. CONTENTS OF PLAN.

       Section 1172(c)(1) of title 11, United States Code, is 
     amended by striking ``section 11347'' and inserting ``section 
     11326(a)''.

     SEC. 726. DISCHARGE UNDER CHAPTER 12.

       Subsections (a) and (c) of section 1228 of title 11, United 
     States Code, are amended by striking ``1222(b)(10)'' each 
     place it appears and inserting ``1222(b)(9)''.

     SEC. 727. EXTENSIONS.

       Section 302(d)(3) of the Bankruptcy, Judges, United States 
     Trustees, and Family Farmer Bankruptcy Act of 1986 (28 U.S.C. 
     581 note) is amended--
       (1) in subparagraph (A), in the matter following clause 
     (ii), by striking ``or October 1, 2002, whichever occurs 
     first''; and
       (2) in subparagraph (F)--
       (A) in clause (i)--
       (i) in subclause (II), by striking ``or October 1, 2002, 
     whichever occurs first''; and
       (ii) in the matter following subclause (II), by striking 
     ``October 1, 2003, or''; and
       (B) in clause (ii), in the matter following subclause 
     (II)--
       (i) by striking ``before October 1, 2003, or''; and
       (ii) by striking ``, whichever occurs first''.

     SEC. 728. BANKRUPTCY CASES AND PROCEEDINGS.

       Section 1334(d) of title 28, United States Code, is 
     amended--
       (1) by striking ``made under this subsection'' and 
     inserting ``made under subsection (c)''; and
       (2) by striking ``This subsection'' and inserting 
     ``Subsection (c) and this subsection''.

     SEC. 729. KNOWING DISREGARD OF BANKRUPTCY LAW OR RULE.

       Section 156(a) of title 18, United States Code, is 
     amended--
       (1) in the first undesignated paragraph--
       (A) by inserting ``(1) the term'' before `` `bankruptcy''; 
     and
       (B) by striking the period at the end and inserting ``; 
     and''; and
       (2) in the second undesignated paragraph--
       (A) by inserting ``(2) the term'' before `` `document''; 
     and
       (B) by striking ``this title'' and inserting ``title 11''.

     SEC. 730. ROLLING STOCK EQUIPMENT.

       (a) In General.--Section 1168 of title 11, United States 
     Code, is amended to read as follows:

     ``Sec. 1168. Rolling stock equipment.

       ``(a)(1) The right of a secured party with a security 
     interest in or of a lessor or conditional vendor of equipment 
     described in paragraph (2) to take possession of such 
     equipment in compliance with an equipment security agreement, 
     lease, or conditional sale contract, and to enforce any of 
     its other rights or remedies under such security agreement, 
     lease, or conditional sale contract, to sell, lease, or 
     otherwise retain or dispose of such equipment, is not limited 
     or otherwise affected by any other provision of this title or 
     by any power of the court, except that that right to take 
     possession and enforce those other rights and remedies shall 
     be subject to section 362, if--
       ``(A) before the date that is 60 days after the date of 
     commencement of a case under this chapter, the trustee, 
     subject to the court's approval, agrees to perform all 
     obligations of the debtor under such security agreement, 
     lease, or conditional sale contract; and
       ``(B) any default, other than a default of a kind described 
     in section 365(b)(2), under such security agreement, lease, 
     or conditional sale contract--
       ``(i) that occurs before the date of commencement of the 
     case and is an event of default therewith is cured before the 
     expiration of such 60-day period;
       ``(ii) that occurs or becomes an event of default after the 
     date of commencement of the case and before the expiration of 
     such 60-day period is cured before the later of--
       ``(I) the date that is 30 days after the date of the 
     default or event of the default; or
       ``(II) the expiration of such 60-day period; and
       ``(iii) that occurs on or after the expiration of such 60-
     day period is cured in accordance with the terms of such 
     security agreement, lease, or conditional sale contract, if 
     cure is permitted under that agreement, lease, or conditional 
     sale contract.
       ``(2) The equipment described in this paragraph--
       ``(A) is rolling stock equipment or accessories used on 
     rolling stock equipment, including superstructures or racks, 
     that is subject to a security interest granted by, leased to, 
     or conditionally sold to a debtor; and
       ``(B) includes all records and documents relating to such 
     equipment that are required, under the terms of the security 
     agreement, lease, or conditional sale contract, that is to be 
     surrendered or returned by the debtor in connection with the 
     surrender or return of such equipment.
       ``(3) Paragraph (1) applies to a secured party, lessor, or 
     conditional vendor acting in its own behalf or acting as 
     trustee or otherwise in behalf of another party.
       ``(b) The trustee and the secured party, lessor, or 
     conditional vendor whose right to take possession is 
     protected under subsection (a) may agree, subject to the 
     court's approval, to extend the 60-day period specified in 
     subsection (a)(1).
       ``(c)(1) In any case under this chapter, the trustee shall 
     immediately surrender and return to a secured party, lessor, 
     or conditional vendor, described in subsection (a)(1), 
     equipment described in subsection (a)(2), if at any time 
     after the date of commencement of the case under this chapter 
     such secured party, lessor, or conditional vendor is entitled 
     pursuant to subsection (a)(1) to take possession of such 
     equipment and makes a written demand for such possession of 
     the trustee.
       ``(2) At such time as the trustee is required under 
     paragraph (1) to surrender and return equipment described in 
     subsection (a)(2), any lease of such equipment, and any 
     security agreement or conditional sale contract relating to 
     such equipment, if such security agreement or conditional 
     sale contract is an executory contract, shall be deemed 
     rejected.
       ``(d) With respect to equipment first placed in service on 
     or prior to October 22, 1994, for purposes of this section--
       ``(1) the term `lease' includes any written agreement with 
     respect to which the lessor and the debtor, as lessee, have 
     expressed in the agreement or in a substantially 
     contemporaneous writing that the agreement is to be treated 
     as a lease for Federal income tax purposes; and
       ``(2) the term `security interest' means a purchase-money 
     equipment security interest.
       ``(e) With respect to equipment first placed in service 
     after October 22, 1994, for purposes of this section, the 
     term `rolling stock equipment' includes rolling stock 
     equipment that is substantially rebuilt and accessories used 
     on such equipment.''.
       (b) Aircraft Equipment and Vessels.--Section 1110 of title 
     11, United States Code, is amended to read as follows:

[[Page S10786]]

     ``Sec. 1110. Aircraft equipment and vessels

       ``(a)(1) Except as provided in paragraph (2) and subject to 
     subsection (b), the right of a secured party with a security 
     interest in equipment described in paragraph (3), or of a 
     lessor or conditional vendor of such equipment, to take 
     possession of such equipment in compliance with a security 
     agreement, lease, or conditional sale contract, and to 
     enforce any of its other rights or remedies, under such 
     security agreement, lease, or conditional sale contract, to 
     sell, lease, or otherwise retain or dispose of such 
     equipment, is not limited or otherwise affected by any other 
     provision of this title or by any power of the court.
       ``(2) The right to take possession and to enforce the other 
     rights and remedies described in paragraph (1) shall be 
     subject to section 362 if--
       ``(A) before the date that is 60 days after the date of the 
     order for relief under this chapter, the trustee, subject to 
     the approval of the court, agrees to perform all obligations 
     of the debtor under such security agreement, lease, or 
     conditional sale contract; and
       ``(B) any default, other than a default of a kind specified 
     in section 365(b)(2), under such security agreement, lease, 
     or conditional sale contract--
       ``(i) that occurs before the date of the order is cured 
     before the expiration of such 60-day period;
       ``(ii) that occurs after the date of the order and before 
     the expiration of such 60-day period is cured before the 
     later of--
       ``(I) the date that is 30 days after the date of the 
     default; or
       ``(II) the expiration of such 60-day period; and
       ``(iii) that occurs on or after the expiration of such 60-
     day period is cured in compliance with the terms of such 
     security agreement, lease, or conditional sale contract, if a 
     cure is permitted under that agreement, lease, or contract.
       ``(3) The equipment described in this paragraph--
       ``(A) is--
       ``(i) an aircraft, aircraft engine, propeller, appliance, 
     or spare part (as defined in section 40102 of title 49) that 
     is subject to a security interest granted by, leased to, or 
     conditionally sold to a debtor that, at the time such 
     transaction is entered into, holds an air carrier operating 
     certificate issued pursuant to chapter 447 of title 49 for 
     aircraft capable of carrying 10 or more individuals or 6,000 
     pounds or more of cargo; or
       ``(ii) a documented vessel (as defined in section 30101(1) 
     of title 46) that is subject to a security interest granted 
     by, leased to, or conditionally sold to a debtor that is a 
     water carrier that, at the time such transaction is entered 
     into, holds a certificate of public convenience and necessity 
     or permit issued by the Department of Transportation; and
       ``(B) includes all records and documents relating to such 
     equipment that are required, under the terms of the security 
     agreement, lease, or conditional sale contract, to be 
     surrendered or returned by the debtor in connection with the 
     surrender or return of such equipment.
       ``(4) Paragraph (1) applies to a secured party, lessor, or 
     conditional vendor acting in its own behalf or acting as 
     trustee or otherwise in behalf of another party.
       ``(b) The trustee and the secured party, lessor, or 
     conditional vendor whose right to take possession is 
     protected under subsection (a) may agree, subject to the 
     approval of the court, to extend the 60-day period specified 
     in subsection (a)(1).
       ``(c)(1) In any case under this chapter, the trustee shall 
     immediately surrender and return to a secured party, lessor, 
     or conditional vendor, described in subsection (a)(1), 
     equipment described in subsection (a)(3), if at any time 
     after the date of the order for relief under this chapter 
     such secured party, lessor, or conditional vendor is entitled 
     pursuant to subsection (a)(1) to take possession of such 
     equipment and makes a written demand for such possession to 
     the trustee.
       ``(2) At such time as the trustee is required under 
     paragraph (1) to surrender and return equipment described in 
     subsection (a)(3), any lease of such equipment, and any 
     security agreement or conditional sale contract relating to 
     such equipment, if such security agreement or conditional 
     sale contract is an executory contract, shall be deemed 
     rejected.
       ``(d) With respect to equipment first placed in service on 
     or before October 22, 1994, for purposes of this section--
       ``(1) the term `lease' includes any written agreement with 
     respect to which the lessor and the debtor, as lessee, have 
     expressed in the agreement or in a substantially 
     contemporaneous writing that the agreement is to be treated 
     as a lease for Federal income tax purposes; and
       ``(2) the term `security interest' means a purchase-money 
     equipment security interest.''.

     SEC. 731. CURBING ABUSIVE FILINGS.

       (a) In General.--Section 362(d) of title 11, United States 
     Code, is amended--
       (1) in paragraph (2), by striking ``or'' at the end;
       (2) in paragraph (3), by striking the period at the end and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(4) with respect to a stay of an act against real 
     property under subsection (a), by a creditor whose claim is 
     secured by an interest in such real estate, if the court 
     finds that the filing of the bankruptcy petition was part of 
     a scheme to delay, hinder, and defraud creditors that 
     involved either--
       ``(A) transfer of all or part ownership of, or other 
     interest in, the real property without the consent of the 
     secured creditor or court approval; or
       ``(B) multiple bankruptcy filings affecting the real 
     property.

     If recorded in compliance with applicable State laws 
     governing notices of interests or liens in real property, an 
     order entered pursuant to this subsection shall be binding in 
     any other case under this title purporting to affect the real 
     property filed not later than 2 years after that recording, 
     except that a debtor in a subsequent case may move for relief 
     from such order based upon changed circumstances or for good 
     cause shown, after notice and a hearing.''.
       (b) Automatic Stay.--Section 362(b) of title 11, United 
     States Code, as amended by section 709, is amended--
       (1) in paragraph (24), by striking ``or'' at the end;
       (2) in paragraph (25) by striking the period at the end and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(26) under subsection (a) of this section, of any act to 
     enforce any lien against or security interest in real 
     property following the entry of an order under section 
     362(d)(4) as to that property in any prior bankruptcy case 
     for a period of 2 years after entry of such an order. The 
     debtor in a subsequent case, however, may move the court for 
     relief from such order based upon changed circumstances or 
     for other good cause shown, after notice and a hearing; or
       ``(27) under subsection (a) of this section, of any act to 
     enforce any lien against or security interest in real 
     property--
       ``(A) if the debtor is ineligible under section 109(g) to 
     be a debtor in a bankruptcy case; or
       ``(B) if the bankruptcy case was filed in violation of a 
     bankruptcy court order in a prior bankruptcy case prohibiting 
     the debtor from being a debtor in another bankruptcy case.''.

     SEC. 732. STUDY OF OPERATION OF TITLE 11 OF THE UNITED STATES 
                   CODE WITH RESPECT TO SMALL BUSINESSES.

       Not later than 2 years after the date of the enactment of 
     this Act, the Administrator of the Small Business 
     Administration, in consultation with the Attorney General, 
     the Director of the Administrative Office of United States 
     Trustees, and the Director of the Administrative Office of 
     the United States Courts, shall--
       (1) conduct a study to determine--
       (A) the internal and external factors that cause small 
     businesses, especially sole proprietorships, to become 
     debtors in cases under title 11 of the United States Code and 
     that cause certain small businesses to successfully complete 
     cases under chapter 11 of such title; and
       (B) how Federal laws relating to bankruptcy may be made 
     more effective and efficient in assisting small businesses to 
     remain viable; and
       (2) submit to the President pro tempore of the Senate and 
     the Speaker of the House of Representatives a report 
     summarizing that study.

     SEC. 733. TRANSFERS MADE BY NONPROFIT CHARITABLE 
                   CORPORATIONS.

       (a) Sale of Property of Estate.--Section 363(d) of title 
     11, United States Code, is amended--
       (1) by striking ``only'' and all that follows through the 
     end of the subsection and inserting ``only--
       ``(1) in accordance with applicable nonbankruptcy law that 
     governs the transfer of property by a corporation or trust 
     that is not a moneyed, business, or commercial corporation or 
     trust; and
       ``(2) to the extent not inconsistent with any relief 
     granted under subsection (c), (d), (e), or (f) of section 
     362''.
       (b) Confirmation of Plan for Reorganization.--Section 
     1129(a) of title 11, United States Code, is amended by adding 
     at the end the following:
       ``(14) All transfers of property of the plan shall be made 
     in accordance with any applicable provisions of nonbankruptcy 
     law that govern the transfer of property by a corporation or 
     trust that is not a moneyed, business, or commercial 
     corporation or trust.''.
       (c) Transfer of Property.--Section 541 of title 11, United 
     States Code, is amended by adding at the end the following:
       ``(e) Notwithstanding any other provision of this title, 
     property that is held by a debtor that is a corporation 
     described in section 501(c)(3) of the Internal Revenue Code 
     of 1986 and exempt from tax under section 501(a) of such Code 
     may be transferred to an entity that is not such a 
     corporation, but only under the same conditions as would 
     apply if the debtor had not filed a case under this title.''.
       (d) Applicability.--The amendments made by this section 
     shall apply to a case pending under title 11, United States 
     Code, on the date of enactment of this Act, except that the 
     court shall not confirm a plan under chapter 11 of this title 
     without considering whether this section would substantially 
     affect the rights of a party in interest who first acquired 
     rights with respect to the debtor after the date of the 
     petition. The parties who may appear and be heard in a 
     proceeding under this section include the attorney general of 
     the State in which the debtor is incorporated, was formed, or 
     does business.

     SEC. 734. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

       (a) Effective Date.--Except as provided in subsection (b), 
     this title and the amendments made by this title shall take 
     effect on the date of enactment of this Act.
       (b) Application of Amendments.--The amendments made by this 
     title shall apply only with respect to cases commenced under 
     title 11, United States Code, on or after the date of 
     enactment of this Act.

  Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
  Mr. DURBIN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. Under the previous order, the Senate insists

[[Page S10787]]

on its amendments and requests a conference with the House, and the 
Chair appoints conferees.
  Thereupon, the Presiding Officer (Mr. THOMAS) appointed Mr. Hatch, 
Mr. Grassley, Mr. Sessions, Mr. Leahy, and Mr. Durbin conferees on the 
part of the Senate.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, first of all I want to thank everyone in 
this body for the overwhelming vote of confidence on the work that 
Senator Durbin and I have done on this bankruptcy bill. Getting to this 
point has been a very tough process involving a lot of compromise and a 
lot of refinement.
  You heard me say on the first day of debate that for the entire time 
that I have been in the Senate and on this subcommittee on the subject 
of bankruptcy--maybe not on every subject, but the subject of 
bankruptcy--there has been a great deal of bipartisan cooperation, 
first of all between Senator Heflin of Alabama, now retired, and 
myself. Sometimes I was chairman when Republicans were in the majority. 
When we were in the minority, I was ranking member and he was chairman. 
But this legislation has always passed with that sort of tradition.
  So I want to say to all of my colleagues that I not only thank them 
for their support but, more importantly, thank Senator Durbin, who 
worked so closely with me on this legislation, and that tradition has 
continued. I thank him for carrying on that tradition, because I don't 
think we would have had the vote that we had today if it had not been 
for the bipartisanship that has been expressed since he first took over 
leadership for his party on our subcommittee.
  I also want to give commendation to his staff, Victoria Bassetti and 
Ann McCormick; and also to Senator Hatch's staff, Maken Delrahim and 
Rene Augustine; and also my staff, John McMickle and Kolan Davis, 
because without the long hours of staff work that went into this bill, 
we would not have had the great compromise that we had to make this 
vote possible.
  Mr. President, I'm pleased that we've come to the point where the 
Senate has passed the Grassley-Durbin consumer bankruptcy bill. Getting 
to this point has been a tough process involving a lot of compromise 
and refinement. Of course, I thank Senator Durbin for his help and 
suggestions for improving the bill. I think that Chairman Hatch also 
deserves a great deal of credit as well.
  The bill we voted is a very fair and balanced piece of legislation 
with broad support. The administration, in its ``statement of 
administration policy,'' encourages the Senate to pass this bill. The 
Judiciary Committee was almost unanimous in passing the bill, and many 
changes have been made to the version of the bill reported by the 
committee to accommodate the concerns of the minority. So, this is a 
bill I think we can all support regardless of party. Again, Senator 
Durbin has been instrumental in making this bill truly bi-partisan.
  As I've said numerous times on the floor during the debate on 
bankruptcy reform, the American people are four-square in support of 
meaningful bankruptcy reform. The fact is that some people use 
bankruptcy as a convenient financial planning tool to skip out on debts 
they could repay. This has to stop.
  Mr. President, there's no such thing as a free lunch. Bankruptcies of 
convenience are like shoplifting. Honest consumers have to pick up the 
tab for losses due to bankruptcy just as they pick up the tab for 
shoplifting. Bankruptcies of convenience impose a hidden bankruptcy tax 
of $400 per family of four. My bill will cut that tax.
  Mr. President, it's not just consumers paying higher prices who stand 
to lose from bankruptcy abuse. Small businesses, a vital component of 
our healthy economy, can be crippled by bankruptcy losses. That's why 
the National Federation of Independent Business supports bankruptcy 
reform.
  Let's cut the bankruptcy tax. Let's restore personal responsibility 
to the bankruptcy system. Let's help protect American consumers and 
small businesses.
  Mr. President, I want to thank the people from the administration, 
because they have followed the course of this legislation. They have 
issued a statement of administrative policy in support of this 
legislation.
  I ask unanimous consent that it be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

         Executive Office of the President, Office of Management 
           and Budget,
                               Washington, DC, September 17, 1998.

                   Statement of Administration Policy


            S. 1301--Consumer Bankruptcy Reform Act of 1998

              (Grassley (R) Iowa and Durbin (D) Illinois)

       The Administration encourages Senate passage of S. 1301 as 
     an important step toward balanced bankruptcy reform; however, 
     the Administration ultimately would support enactment of 
     bankruptcy legislation only if the essential reforms 
     incorporated by the Senate managers' amendment are preserved 
     and strengthened and the unbalanced and arbitrary elements of 
     the current House bill are omitted.
       The Administration supports bankruptcy reform that asks 
     both debtors and creditors to act more responsibly. Debtors 
     who genuinely have the ability to repay a portion of their 
     debts should remain responsible for those debts. But 
     creditors must also be responsible for treating debtors 
     fairly, recognizing creditors' superior information and 
     bargaining power.
       As reported from Committee, S. 1301 focused heavily on 
     perceived debtor abuse, with little to curtail abuses by 
     creditors. However, if changes incorporated in the manager's 
     amendment are adopted, the Senate bill will take significant 
     steps to address abusive practices by both debtors and 
     creditors. Essential changes included in the managers' 
     amendments include: (1) new disclosure requirements to ensure 
     that credit card companies provide consumers with the 
     information about their accounts that they need to manage 
     their budgets; (2) procedural protections to avoid 
     inappropriate and unwise reaffirmations of unsecured and 
     certain secured consumer debts; and (3) modifications made to 
     the nondischargeability provisions in the bill so that the 
     bill no longer inappropriately puts credit card debt in 
     competition with child support, alimony, and other societal 
     priorities like education loans and taxes.
       The Administration also strongly prefers the discretionary 
     approach to limiting access to Chapter 7 used in S. 1301 over 
     the rigid and arbitrary approach in the House bill. We 
     support changes made by the Senate bill to ensure that those 
     debtors denied access to Chapter 7 under Section 707(b) of 
     the Bankruptcy Code are those that have a strong likelihood 
     of successfully completing a Chapter 13 plan.
       More can and should be done to produce a truly balanced 
     bill. The bill must address the potentially coercive effect 
     of allowing creditors to bring 707(b) motions based on any 
     allegation of abuse and strengthen the protections against 
     coercive reaffirmations.
       The Administration also supports financial contract netting 
     provisions in the bill, which are important to reducing 
     systemic risk in our financial markets and are based on a 
     proposal from the President's Working Group on Financial 
     Markets.
       The Administration supports Senate passage of the ``Omnibus 
     Patent Act of 1998'' as an amendment to S. 1301 because that 
     bill supports American innovation through needed patent law 
     reforms. While the Administration is disappointed that the 
     bill does not include all of the performance based 
     organization reforms it proposed, the provision's inclusion 
     of the annual performance agreement is welcome.
       Finally, the Senate is expected to vote on an amendment to 
     raise wages of 12 million Americans and help ensure that 
     parents who work hard and play by the rules do not have to 
     raise their children in poverty. Two years ago, the President 
     signed into law a moderate increase in the minimum wage. The 
     results of that action are clear: it raised the wages of the 
     lowest paid workers and did not cost jobs. Now we must 
     continue to take actions to ensure that all Americans are 
     benefitting from our prospering economy. That is why the 
     Administration strongly supports raising the minimum wage by 
     $1 over two years.

  Mr. GRASSLEY. Mr. President, I thank Senator Durbin very much for his 
cooperation.
  Mr. DURBIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Thank you, Mr. President.
  I would like to echo the comments of Senator Grassley. I really 
believe this vote of 97 to 1 is a tribute to his patience, endurance, 
and hard work. It has been a joy to be with him as part of this 
process. We have serious differences on many aspects of this bill. I am 
sure we will continue to debate them. But the core bill is a bill which 
I was happy to support because I think it is a more reasonable approach 
to reforming bankruptcy. We attempt to reform it in the responsible 
way, trying to stop the abuses in filing in the bankruptcy court and at 
the same time calling on the credit industry to accept

[[Page S10788]]

some responsibility for those risky credit practices which lure 
unwitting consumers into a trap from which they cannot escape.
  I want to give acknowledgment as well to staff who have made this 
bill possible. Seated to my left is Victoria Bassetti, my staff 
attorney on the Judiciary Committee, who has spent more time looking at 
the bankruptcy code than almost anything else in the past year; Anne 
McCormick, who is with us as a detailee from the Department of Justice, 
who has done an extraordinary job; on the majority side, John McMickle 
and Kolan Davis have become friends during the course of this debate 
and have added greatly to the work product; Makan Delrahim and Rene 
Augustine of Senator Hatch's staff; Kara Stein and Brooke Byers of 
Senator Dodd's staff; Ed Pagano of Senator Leahy's staff; Kristi Lee of 
Senator Sessions' staff; and Brian Lee of Senator Kohl's staff; as well 
as Joel Wiginton, who once worked on my staff and now serves Senator 
Feingold. They all have added to the value of this bill. I thank each 
and every one of them.
  I would like to just note four or five things that I am particularly 
proud of in this legislation.
  We have worked back and forth in the banking industry, as well as 
with experts in the law, to come to a good conclusion about the ways to 
reduce abuse when it comes to bankruptcy filings.
  We have added some provisions here which I think many consumers will 
appreciate because it really does bring more balance to this endeavor.
  With the help of Senator Dodd, who is in the Chamber today, as well 
as Senator Sarbanes of Maryland, we have added some disclosure 
provisions to this bill which will make credit card statements clearer 
and make it more understandable when credit card companies solicit your 
business as to what you are going to have to do, how much you will have 
to pay in interest rates and what other conditions might be important 
to your relationship.
  We have an amendment here I am particularly proud of on predatory 
home lending. These are those unscrupulous credit practices where 
lenders prey particularly on senior citizens, forcing them into a 
situation where they sign second mortgages on their home without any 
real understanding of what they are getting into. They lose the most 
important asset in their life because of these unscrupulous practices. 
This bill comes down hard on that kind of conduct.
  We also have increased court supervision on reaffirmation. A person 
files for bankruptcy and says, Here is a debt which I will keep; I will 
continue to pay on it. For instance, a car loan because you need an 
automobile, or with a company that your family has done business with 
for generations. You reaffirm the debt. That is perfectly acceptable. 
It is something which should be encouraged where it works. But we say 
the court should look at it to make certain it is fair.
  I salute Senator Sessions and Senator Kohl for the homestead 
exemption cap. The unlimited homestead exemption in a few states is the 
single worst abuse in the bankruptcy system. Our friends in the House 
saw it differently on a floor vote. It is up to us in conference to 
convince them that ours is a better way. We protect retirement income 
in bankruptcy, a concept which I pushed for and was happy to join with 
Senator Hatch in finally passing in this Chamber.
  I thank Senator Feingold for his efforts to protect the poorest of 
the poor who file in bankruptcy. I also salute Senator Feinstein and 
others who have asked for studies which we think will improve credit 
practices in this country. And, finally, this bill provides for the 
creation of 18 new bankruptcy judgeships sorely needed in the States 
which will receive them.
  This is the first major legislation I have had in the Chamber. I 
don't expect every one of them to pass 97 to 1, but it really is a good 
feeling to know that all of this work over this time has resulted in a 
truly bipartisan response to this important issue.
  Thank you, Mr. President. I yield the floor.
  Mr. HATCH. Mr. President, S. 1301, the Consumer Bankruptcy Reform Act 
of 1998, was reported out of the Judiciary Committee with strong 
bipartisan support and is one of the most important legislative efforts 
to reform the bankruptcy laws in 20 years.
  I would like to begin by commending my colleagues, Senators Grassley 
and Durbin, respectively, the chairman and ranking minority member of 
the Subcommittee on Administrative Oversight and the Courts, for their 
tireless efforts in crafting this much needed legislation. I also want 
to thank them for conducting numerous important hearings at the 
subcommittee level on the complex issue of bankruptcy reform. I 
particularly appreciate the dedication they have shown to making the 
passage of this bill an inclusive and bipartisan process.
  The compelling need for reform is underscored by the dramatic rise in 
bankruptcy filings each year. The Bankruptcy Code was liberalized back 
in 1978, and ever since that time, consumer bankruptcy filings have 
gone up at an unprecedented rate. Even during the economic boom years 
of 1994 to 1997, consumer bankruptcy filings almost doubled.
  Mr. President, the bankruptcy system was intended to provide a 
``fresh start'' for those who need it. We need to preserve the 
bankruptcy system within limits to allow individuals to emerge from 
financial ruin, which may have been precipitated by unforeseen events 
such as medical problems or unemployment. What we don't need is to 
preserve those elements of the system that allow it to be abused, and 
that allow some debtors to use bankruptcy as a financial planning tool 
rather than as a last resort. I firmly believe that by allowing people 
to escape from their financial obligations, we are doing them a great 
disservice by not encouraging them to manage their finances and control 
their debt.
  It always has been my view that individuals should take personal 
responsibility for their debts, and repay them to the extent possible. 
Under the present system, it is too easy for debtors who have the 
ability to repay some of what they owe to file for Chapter 7 
bankruptcy. Under Chapter 7, debtors can liquidate their assets and 
discharge all debt, while protecting certain assets from liquidation, 
irrespective of their income. Mr. President, I believe that the 
complete extinguishing of debt should be reserved for debtors who truly 
cannot repay their debts.
  According to the Wall Street Journal (Nov. 8, 1996) bankruptcy 
protection laws give an alarming number of ``obscure, but perfectly 
legal places for anyone to hide assets.'' For instance, one Virginia 
multimillionaire incurred massive debt, but under State law was 
entitled to keep certain household goods, farm equipment, and ``one 
horse.'' This particular individual opted to keep a $640,000 race 
horse, noting that the law only limits the number of horses, but not 
the individual value of a horse.
  While this is a particularly egregious example, these kinds of 
loopholes exist in the Bankruptcy Code, and people are using them to 
avoid paying their debts. As a result, the rest of us end up footing 
the bill through higher prices and higher interest rates.
  S. 1301 provides a remedy for these abuses by adopting a needs-based 
approach to bankruptcy reform.
  It is important to note that the administration has urged that 
bankruptcy law should ``discourage bad faith repeat filings and other 
attempts to abuse the privilege accorded by access to bankruptcy.''
  This bipartisan legislation, created by Senators Grassley and Durbin, 
is carefully structured to achieve an appropriate balance between 
debtor and creditor rights. The legislation maintains the aspects of 
the bankruptcy system that serve those in need of a ``fresh start.'' At 
the same time, S. 1301 reforms current bankruptcy laws to prevent the 
system from being abused at the expense of all Americans.
  The impact of this important legislation will not only be to curb the 
rampant number of frivolous bankruptcy filings, but also to give a 
boost to our economy.
  Mr. President, again I would like to applaud the bipartisan efforts 
of my colleagues who have made S. 1301 a broadly supported bill.
  Mr. SARBANES. Mr. President, I would like to take this opportunity to 
congratulate Senator Durbin, the Ranking Member of the Courts 
Subcommittee, on passage of S.1301, the

[[Page S10789]]

Consumer Bankruptcy Reform Bill of 1998.
  I especially want to thank him for insisting that S.1301 address not 
only the need for greater responsibility on the part of debtors, but 
also the need for greater responsibility on the part of creditors. In 
particular, this bill takes notice of the fact that credit card 
companies often act as enablers to individuals who end up in bankruptcy 
after falling prey to one too many promises of easy credit from these 
companies. S.1301 requires that credit card companies provide consumers 
with the information they need to behave in a responsible manner, 
rather than luring them into tighter financial straits with false 
promises of easy credit.
  The bill that passed out of the Judiciary Committee did not take such 
an evenhanded approach, and I, among others both on and off the 
Judiciary Committee, noted the need to bring greater balance to this 
issue on the floor. Thanks to Senator Durbin's leadership, the efforts 
of several other Democratic Senators, and the cooperation of Senator 
Grassley and other Republicans, the bill we will soon pass is a product 
that, as amended, acknowledges the shared responsibility for the rise 
in bankruptcies between creditors and debtors, and strives to 
discourage reckless behavior on both sides of credit transactions.
  Mr. DURBIN. I thank my colleague from Maryland for his kind words, 
and for his assistance in making S.1301 a bill that the Senate can be 
proud of.
  As Ranking Member of the Senate Committee on Banking, Housing and 
Urban Affairs, Senator Sarbanes has long been interested in the issue 
of consumer lending practices, and his efforts were invaluable in 
drawing the necessary connection between increased bankruptcy filings 
and the lending practices of credit card companies.
  Due to the efforts of a number of Democratic Senators, including 
Senator Sarbanes, we were able to have inserted into the managers 
amendment to this bill a number of important provisions dealing with 
consumer credit information. These provisions require credit card 
companies to provide in their monthly statements and initial 
solicitation materials information that will help consumers manage 
their finances in a way that will, I believe, obviate the need for 
bankruptcy in many cases. The bill also now provides for studies 
regarding (1) the extension of credit to individuals with a high debt-
to-income ratio and (2) the use of credit card security interests to 
coerce reaffirmations of debt in bankruptcy.
  In short, we now have before us a bill that is balanced and that is 
not simply the wish list of the credit card companies. I thank Senator 
Sarbanes for helping to make this possible.
  Mr. SARBANES. I thank Senator Durbin for his kind words. I also note, 
however, that we still have much work to do in this area. None of the 
consumer-oriented provisions that we have succeeded in adding to S.1301 
are in the House-passed bankruptcy bill, and I daresay that the credit 
card companies are less than thrilled with even the modest steps we 
have taken on behalf of consumers here in the Senate. I ask my 
colleague from Illinois, is it not safe to expect that there will be 
efforts during the bankruptcy conference to strip out some of these 
provisions from the conference report, and to bring to the Senate a 
bankruptcy bill that is, once again, merely a wish list of the credit 
card companies?
  I further ask my colleague, will we not need to be vigilant in our 
efforts to preserve these consumer-oriented provisions during the 
conference?
  Mr. DURBIN. My colleague from Maryland sadly may be correct. Neither 
our Republican colleagues in the House nor the credit card companies 
are likely to be as enthusiastic as he or I about the efforts at 
cooperation and compromise that went into crafting the Senate bill.
  We will, indeed, have to be vigilant in regard to the consumer-
oriented provisions in S.1301, and I hope that we will be joined in 
this effort both by our Senate Republican colleagues, who have agreed 
to accept most of these provisions without any debate, as well as by 
the White House, which has indicated the importance of preserving the 
Senate managers' amendment to its own consideration of bankruptcy 
reform legislation. We have our work cut for us, but I commit to my 
colleague from Maryland that I will do my utmost to ensure that the 
bankruptcy conference report contains the vital consumer protections we 
worked so hard to add to the Senate bill.
  Mr. SARBANES. I thank my distinguished colleague from Illinois, and 
pledge my support for his efforts in this regard. Only if we are able 
to preserve our hard-fought gains in the Senate in conference will we 
be able to pass bankruptcy reform legislation that will stand the tests 
of time and fairness.
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona.

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