[Congressional Record Volume 147, Number 30 (Thursday, March 8, 2001)]
[Senate]
[Pages S2018-S2055]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY REFORM ACT OF 2001
The ACTING PRESIDENT pro tempore. Under the previous order, the
Senate will now resume consideration of S. 420, which the clerk will
report.
The legislative clerk read as follows:
A bill (S. 420) to amend title 11, United States Code, and
for other purposes.
Pending:
Durbin amendment No. 17, as modified, to discourage certain
predatory lending practices.
Mr. SESSIONS. Mr. President, I ask unanimous consent that with
respect to S. 420 there be debate only until 10:30 a.m.
The ACTING PRESIDENT pro tempore. Is there objection?
Mr. REID. Reserving the right to object.
The ACTING PRESIDENT pro tempore. The Senator from Nevada.
Mr. REID. I say to my friend from Alabama, the acting leader, there
are a number of people who want to speak on the bill, probably not
going past 10:30 a.m. This is a very important piece of legislation. We
all recognize that. There have only been a few people who have had the
opportunity to speak about the bill generally. I think it is totally
appropriate that we talk about the bill until 10:30 a.m. There are
others who will come at a later time, not to offer amendments but to
speak about the bill.
Also, we are trying to work with the other side of the aisle. Senator
Leahy has indicated to me that he will be cooperative in trying to
obtain some time late this afternoon a list of amendments. We will be
working on that. Maybe we can come up with a list of amendments
sometime later today which will give us some idea of what we face next
week on this important legislation.
The ACTING PRESIDENT pro tempore. Is there objection?
Mr. SESSIONS. I thank the Senator. I do believe we need to move
toward that eventuality. I thank him for his leadership.
The ACTING PRESIDENT pro tempore. Is there objection?
Mr. DURBIN. Reserving the right to object, Mr. President.
The ACTING PRESIDENT pro tempore. The Senator from Illinois.
Mr. DURBIN. I have a pending amendment, and I wonder if the Senator
from Alabama can tell me, it is my understanding someone is preparing
either a second-degree amendment or a substitute; is the Senator from
Alabama aware of that?
Mr. SESSIONS. I know Senator Gramm is interested in your amendment.
He has not arrived yet. We will talk with him as soon as he arrives and
he can discuss that question.
Mr. DURBIN. I thank the Senator from Alabama. I continue to reserve
my right to object. I am going to object to the waiving of the reading
of any substitute or any second-degree amendment unless a copy is
presented to me in advance. I will afford the same courtesy on any
amendment which I offer on the floor. Those of us who would like to be
prepared to debate this want to see the language of the amendment so we
can be adequately prepared.
Mr. President, I do not object to the unanimous-consent request.
The ACTING PRESIDENT pro tempore. Is there further objection? Without
objection, it is so ordered.
Several Senators addressed the Chair.
The ACTING PRESIDENT pro tempore. The Senator from North Dakota.
Mr. SESSIONS. Mr. President, if the Senator will yield for a second.
We have not received all amendments, I say to Senator Durbin. It would
be more appropriate for people to file their amendments so we can study
them and be better prepared.
The ACTING PRESIDENT pro tempore. The Senator from North Dakota.
Mr. DORGAN. Mr. President, I want to speak for a few moments on the
bill. I will mention the amendment offered by Senator Durbin. I wanted
to come over yesterday, but I was not able to find the time to do that,
given the debate occurring on the floor.
I want to talk on the subject of bankruptcy. I have supported
bankruptcy reforms in the Congress. I voted for them. I felt the
pendulum on bankruptcy issues had swung a little too far to one side. I
still feel that way, and I hope I will be able to support the
legislation as it leaves the Senate. I suspect I will. I hope to
support the legislation coming out of conference again this year. It is
my hope to continue to support bankruptcy reform.
We no longer have debtor prisons in this country. We do not mark
people who go into debt and cannot get out of debt with some indelible
mark. We provide mechanisms by which people can get some relief for
themselves and their families in circumstances where, beyond their
control, they run into some financial trouble. That is as it should be.
As I said, the pendulum has swung too far. We have people now using
the access of bankruptcy legislation and the laws we put on the books
in some circumstances for convenience and in other circumstances in
ways that injure others in a significant way.
There are clearly people who have been subject to substantial medical
bills and other unforeseen circumstances well beyond their control who
access bankruptcy laws in a way they are intended to be accessed. There
are others who abuse them. I think all of us agree with that. Some load
up with credit and find ways to stick others with the debt they incur
and then rush to bankruptcy to say: Let me shed myself of this burden,
and I will let others hold the bag. Many of them are small business men
and women. What happens in those circumstances is unfair.
There is another side to this debate that I want to talk about for a
moment. While I support bankruptcy reform and believe it is necessary
and sound for this Congress to proceed in this direction, there is
also, with the extension of credit in this country, a fair amount of
greed and a substantial amount of unsound business practices.
The other day I was on the way to the Capitol in my car and had the
radio on, and I heard another advertisement from a lending company. The
advertisement said the following: Bad credit? No income? No
documentation? Come see us for a loan.
I will say that again because it is worth remembering. This is a
company that is advertising on the radio saying if you have bad credit,
if you do not have any income and you do not have any documentation,
come and get a
[[Page S2019]]
loan from us. We have all seen the ads and heard the ads. Bad credit?
No problem. Come our direction. We would like to give you a loan.
Our kids who begin college now find in their mailbox on the college
campus a preapproved credit card from many companies. They just
wallpaper the college campuses, offering credit cards to kids who have
no job and no income and then wonder why, when some of them use those
credit cards and get in trouble, they cannot pay the bill.
Companies that say if you have bad credit, we will give you credit,
if you have no job, we will give you a credit card, if you have no
income, we will give you a credit card--they do it by the millions--and
then they get into some difficulty and say to the Congress: Relieve us,
will you, of these bad business practices; we have wallpapered America
with credit cards and now some of them don't pay, so please help us--I
have no sympathy for those companies and do not want to do anything
that gives them comfort.
My 10-year-old son about 3 years ago--he is now 13, going to turn 14
next month--received a preapproved Diners Club card in the mail. I have
spoken about that on the floor previously in a discussion about
bankruptcy--a 10-year-old gets a solicitation from Diners Club for a
preapproved credit card. He is now living in Paris under an assumed
name. Not really.
When he saw that, he said: Dad, what does this mean?
I said: It means somebody is really stupid. You do not have a job,
you are 10 years old, and they did not mean you ought to have a credit
card. It does not matter to them. You are a bunch of letters. They send
them to everybody. It does not matter the circumstance.
Diners Club, when they heard me speak about this on the floor because
I read the letter and read the name of the person who signed the
letter, actually contacted me and said: Oh, this was a mistake. Yes, I
am sure it was a mistake.
There are mistakes all over the country: People getting credit card
applications, preapproved credit card solicitations without any thought
to who they are, where they are, how old they are, how much their
income is, or even if they have an income. It is evidence of something
gone wrong. It is unsound business practices.
In addition, if I had taken the time--and I did not on that
particular preapproved credit card application--to read the terms and
the conditions--and, indeed, you need glasses to do so because it is
always on the back side--what I would have found, I am sure, in that
circumstance with that company, and virtually every other, is they are
imposing terms and conditions for the cost of credit that are
outrageous. It should be called loansharking at the interest rates they
charge.
Incidentally, on the front of most of these envelopes--and I get a
lot of them, and I suspect most of my colleagues do and most Americans
do. You open your mailbox and every day you find a piece of mail that
says: We have a preapproved credit card waiting for you, and a big
circle on the front of the envelope, 1.9-percent interest rate or 2.9-
percent interest rate, and you open it up and read the fine print. What
you discover is, yes, there is a period of 3 months or 6 months where
they are going to charge a 1.9-percent interest rate, and then it goes
to 18 percent or 22 percent or whatever their percentage is. The small
type takes away what the big type gives.
My point is this: I am not interested in anybody crying crocodile
tears for companies that exhibit that kind of unsound business practice
and for companies that are so greedy for profits that they want to load
everybody up with debt by sending them plastic cards, even those who
have no income and no job. Now people say, but you need to be
responsible; it is your fault if you use those cards. Sure, there is
fault on both sides. My point is we are headed in the wrong direction.
Those who engage in these practices need no relief, in my judgment,
from this Congress.
My colleague, Senator Durbin, is offering an amendment that is fairly
simple. The credit card companies are resisting this aggressively. His
amendment simply says, on the statement where it states their minimum
payment, creditors must have a box that says if they make this minimum
payment, here is how long it will take to pay off the bill. Often, it
will be an eye-popping number. Make this minimum payment, they won't
pay this off for 8 or 10 years. My colleague from Illinois is saying it
makes sense to provide a little more information, truth in lending. I
will support that amendment.
There is an amendment that tightens up on the homestead exemption.
Frankly, we need to plug the loophole that deals with the homestead
exemptions. We don't want people filing for bankruptcy ending up with
$1 million or $2 million in a home that cannot be touched. There is an
old saying: The water ain't going to clear up until you get the hogs
out of the creek.
The hogs in this circumstance are the very companies that are asking
for relief because they have ``blizzarded'' this country with credit
card applications, and they should have known better.
As I indicated when I started, I intend to support bankruptcy
legislation. I also intend to support amendments to perfect this
legislation. When we send it to conference, as I believe we will, it is
my fervent hope the conference will send back a conference report that
has some balance, that recommends, I hope, that people not abuse
bankruptcy legislation, that bankruptcy ought not be convenient or
easy, that there is a burden with bankruptcy, but recognizes that some
need bankruptcy. Some who have suffered unforeseen circumstances,
perhaps devastating medical bills, through no fault of their own, need
to have some relief from imposing burdens. I have met people like that
with tears in their eyes and their chins quiver as they talk about the
$150,000 medical bill for a child with whom they are saddled. And every
month, in every way, they are besieged by bill collectors saying they
must make good on this debt, a debt that had to do with their child's
cancer treatment.
Should we find a way to help those people? Yes, there should be
bankruptcy proceedings that allow those people to be able to shed
themselves of part of that burden and to start anew.
But there are other stories that represent the abuse of bankruptcy
and that stick Main Street retailers and others with burdens they
should not have to bear.
As we adjust this pendulum on bankruptcy, we need to do it the right
way. Today, I wanted to come, as I did a year and a half ago, to say
there are those in my judgment who promote financial problems for some
Americans by what I think is irresponsible behavior in the development
of credit instruments that they then ``wallpaper'' America with.
Frankly, I don't think they deserve much relief. They don't deserve
any relief. What they deserve to know is that many of us believe they
ought to change their business practices and start sending credit cards
to people who can pay the bill, who have income.
I know my colleague from New Jersey wants to speak. I hope to work
with my colleagues on both sides of the aisle to see if we can perfect
this bill. It is my intention to want to support this going out of the
Senate and also out of the conference. I hope we can, coming out of
conference, keep a couple of the key provisions the Senate has already
expressed its will on with respect to homestead exemptions and
predatory practices and more.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SESSIONS. Mr. President, we talked a good bit about credit cards,
and the companies have been beaten up. They do make an awful lot of
mistakes. As the Senator understands, if a credit card is offered to a
person who is a minor and they were to even use it and buy goods with
it, they could not be forced to pay the debt because it would be an
invalid debt, but it does indicate some concern that people have about
receiving solicitations for credit cards.
You could also see they are offering competitive choices in credit
cards. Actually, for the first time in recent years, it seems to me
credit card companies are beginning to compete against one another in
offering better opportunities. I am not sure we ought to say that is a
particularly evil thing that low-income people are offered an
opportunity to have a credit card that will allow them to replace the
tire on their car when they may not have the
[[Page S2020]]
cash in their pocket, and then pay for it over the next month. It is
not a particularly bad thing.
The Banking Committee has jurisdiction over these issues. That is
ultimately where they should be decided. The bankruptcy bill is here to
create a system of bankruptcy courts in America, Federal courts, in how
they conduct their business. Those issues are not, in my view, the
issues that ought to be debated here but in a consideration of banking
questions.
I yield to the Senator from New Jersey.
The PRESIDING OFFICER (Mr. Allen). The Senator from New Jersey.
Mr. TORRICELLI. Mr. President, I thank the Senator from Alabama for
yielding.
I rise in support of the bankruptcy reform bill. Indeed, for as many
years as I have had the honor of serving in this institution, I have
been rising in support of the bankruptcy bill. I am very honored in
this cause to have worked with Senator Grassley, who chaired this
subcommittee when I was the ranking member on Judiciary. We worked for
countless hours to craft a bill that was both balanced and fair.
Indeed, this bankruptcy reform legislation already contains amendments
from Senators Durbin, Schumer, Reid, and on both sides of the aisle
Members who recognize there is a problem with the abuse of the
bankruptcy system but wanted to make sure that consumers had every
protection possible.
I am not here to state we have achieved the perfect legislation, nor
that it is balanced in every respect. I can only suggest there is one
thing upon which every Member of the Senate should be able to agree: it
is that current bankruptcy laws are not working. It is an abuse to
small and large business, creditors, and lenders. The system is broken.
We benefit nothing by pretending otherwise.
While not perfect legislation, it is fair. And it provides for a
functioning bankruptcy system for businesses and consumers alike. It is
for that reason I believe after several attempts to pass this
legislation, with the overwhelming support of a majority of Senators,
Members of both political parties, and a President who appears now
positioned to sign this bill, it is time at long last to get this done.
There are many Senators to be thanked before I go into the substance
of the legislation. Having already mentioned Senator Grassley, I also
mention Senator Biden. This legislation is in some significant measure
at his inspiration. He has, in my party, been my partner in crafting
this bill and moving it to this position. Even before he became a
Member of the Senate, Senator Carper, then Governor Carper of Delaware,
was a major force a year ago in crafting this legislation. He is also
to be thanked. Of course, all of this happened, as Senator Grassley and
I fashioned this legislation, under the leadership of Senator Hatch. I
am grateful to him.
Indeed, although Senator Leahy has expressed opposition to some
provisions of this bill, to the extent that it has been improved in
recent years, that is largely due to Senator Leahy's own involvement.
Similarly, although Senator Durbin has expressed reservations about
many provisions, before I became the ranking member of the subcommittee
Senator Durbin was in this position. To the extent there are good
consumer protection provisions in the legislation, it is largely at his
design.
Those are all the hands that have touched the legislation and brought
us to this point. Now Senator Sessions and I are here as two advocates
of the bill to suggest its passage. I don't think either of us would
argue that we have achieved every objective, simply that we are
providing a better system that is more fair. As I think Senator
Sessions has recognized, the reality is that in this country, no matter
what provision you might like to change in the current code or in this
legislation, you can broadly accept the principle: We have a problem.
In 1998 alone, nearly 1.5 million Americans sought bankruptcy
protection. The United States was in the midst of the most significant
large-scale economic expansion in the history of this Nation, or any
nation, and 1.5 million Americans were availing themselves of
bankruptcy protection. It is estimated that more than 70 percent of
those bankruptcy filings were done in chapter 7, which provides relief
for most unsecured debts. Conversely, only 30 percent were filed under
chapter 13, which requires a repayment plan. For all the discussion and
all the debate and all the delay, that, my colleagues, is the heart of
the matter--the overwhelming majority of 1.5 million Americans seeking
virtually complete relief from their financial obligations rather than
entering into a repayment plan, although they have the means to repay
some of their debts.
The Department of Justice actually reviewed these filings under
chapter 7 rather than chapter 13, and came to the conclusion that 13
percent of debtors filing in chapter 7, or 182,000 people each year,
actually had the financial means to repay their debts. That means $4
billion could have been paid back to creditors. It was not paid--it was
lost, although there was the means to repay it--because the law was
being abused.
It has been said on this floor that that was money lost to large
credit card companies and huge banks, major financial institutions. No
doubt there are large companies, private and public, that would have
received some of this $4 billion back each year. But they do not stand
alone; they were not the only ones abused. I do not rise today
primarily in their interests.
How about the small business owner, the retailer on Main Street who
has a small profit margin on the clothing he sells or the hardware?
When some declare complete bankruptcy, although they could have repaid
their debt, those small business owners have lost their product. They
made a sale that they thought would go to pay their debts, only to have
someone file bankruptcy, and they lose all the revenue. They have no
reserves. They have no place else to go. How about their family? Their
business could be lost, and indeed every year those businesses are
lost, family businesses that are abused by the misuse of the bankruptcy
system.
How about the small contractor, the plumber, the carpenter, or the
electrician who gives his labor, the sweat of his brow, even the
products he buys and resells, to have someone declare bankruptcy and
walk away from all their obligations? Although their labor has been
taken and the product they sold is gone, they are left with a debt, but
the abuse of the bankruptcy system leaves them and their family faced
with bankruptcy.
It may be true that if this bill is passed, the major banks in New
York or the major credit card companies may benefit. Indeed, if the law
is being abused to their disadvantage and they are losing the resources
of their stockholders or their employees, I make no apologies that this
bill helps them deal with an abuse. But they do not stand alone.
Overwhelmingly, proportionally, the principal benefit will go to other
small businesspeople.
I hear Members on this floor almost every day claiming that they
stand with the small businessperson, the family company, the middle-
class family, the working men. Here is your opportunity. How many of
those plumbers and electricians and small retailers, mom-and-pop
stores, will not make it through this year because someone takes their
labors or their products falsely, declares bankruptcy, abuses the
system even though they had the resources, as the Department of Justice
has demonstrated, to pay their bills? Rather than words of
encouragement, how about your vote in support of those small
businesses?
Then the critics will argue: You may be helping small business, but
surely this is a problem for the poor. I have suggested for 4 years,
and I will say so again today, with all respect to my colleagues who
oppose this bill we have so carefully drafted, that is simply just not
true. What this legislation does is assure that those with the ability
to repay a portion of their debts do so.
No Americans are so poor or undefended or powerless that they are
denied access to bankruptcy under this bill. We have done this by
changing the legislation through the years. This is not the legislation
that began in this process 4 years ago. We accomplish this goal by
establishing a flexible yet efficient screen to move debtors with the
ability to repay a portion of their debt into a repayment scheme. If
you are poor, if you have no ability to repay, your status will not be
changed; your
[[Page S2021]]
debts will be discharged. The bill provides judicial discretion to
assure that no one who is genuinely in need of debt relief will be
prevented from receiving what every American deserves--a fresh start.
This is a second-chance society. If you fail through no fault of your
own--or, indeed, even if it is your fault--and you have no ability to
repay, your debts will be discharged and every bankruptcy judge in
America will have the discretion to ensure that protection remains. No
matter how many times a Senator comes to this floor and says to the
contrary, it just is not so.
Critics have argued the bill also places an unfair burden on women
and single-parent families. Not by my authorship. It is not true; it is
not right; and I would not be standing here today if there were an
element of truth to it. It is unfounded.
The bill contains an amendment that Senator Hatch and I offered a
year ago that not only ensures women and children are not in an adverse
position they are now in a superior position. The Hatch-Torricelli
amendment facilitates child support collection by making it easier for
the person to whom support is owed to obtain information on the
debtor's whereabouts.
The ability of a father who walked out on a wife and a child under
current bankruptcy law and hides will no longer be possible. Under the
Hatch-Torricelli amendment, we will find you. That information is
available, and you will be forced to meet your obligation.
The bill also provides that the status of women and children under
the current law is further enhanced. Under current bankruptcy law,
women and children seeking support are seventh in line after rent,
storage, accountant fees, and tax claims. Every one of those stands
before a child today in need of child support from their father. That
is the current law. If you vote against this bill, that is the law you
are voting to maintain.
Don't suggest that Senator Grassley, Senator Hatch, or Senator Biden,
or I will come to this floor with something that does not enhance the
welfare of a wife, a parent, or a child. Indeed, it is the opposite. We
take those children from seventh in line in bankruptcy under current
law to first. No landlord is ahead of you, no government, no
accountant, and no lawyer. You get first claim on whatever revenue
remains.
In addition to these child support protections, the bill includes
other provisions designed to assure protection for other vulnerable
aspects of American society.
One that is the most important to me that I helped put in this
legislation is for those in nursing homes. There is a plague of nursing
home bankruptcies in America. When a nursing home goes bankrupt, this
legislation requires that an ombudsman be appointed to act as an
advocate for the patient; that those who are left vulnerable in the
nursing home have someone representing them in the process. They have
the greatest stake in bankruptcy. The patients are the most vulnerable.
Under current law, they have no one and they have nothing. If you
oppose this bill, you are voting to maintain that vulnerability. Under
provisions that I helped put in this legislation, that now ends.
We provide clear and specific rules for disposing of patients'
records so that in bankruptcy the records of those in the nursing home
will not become the public property of creditors, but it is protected.
These provisions could not be more important under current
circumstances with rising bankruptcy and the vulnerability of nursing
home patients.
One nursing home company alone recently with 300 homes went bankrupt
leaving 37,000 people without beds, without protection, and without an
advocate when it went bankrupt. That will not happen again under this
legislation.
Finally, and perhaps most importantly, it was always my goal--from
the original introduction of this legislation in our debates in the
Judiciary Committee under Senators Hatch and Leahy to the floor that
there be consumer protection in this bankruptcy bill. It was not enough
to provide fair bankruptcy protection for the industry which was losing
money due to unnecessary bankruptcy. It was not enough to provide
protections for the poor, for families, and for children. Real
bankruptcy reform must contain consumer protection. Indeed, no aspect
of the bill has been amended more or changed more significantly than
the consumer protection provisions of bankruptcy reform. That is as it
should be.
The credit card industry sends out some 3.5 billion solicitations a
year. Senator Dorgan and Senator Durbin have spoken about this, to
their credit, at length. Much of their criticism is well founded. These
solicitations by the credit card industry are more than 41 mailings for
every American household--14 for every man, woman, and child in the
country. It is an avalanche of solicitations with an invitation for a
mountain of debt.
But it is not merely the volume of the solicitation. It is also those
who are targeted for this availability of debt. High school student and
college student solicitations are at record levels. What happened to
Senator Dorgan is not unusual. Children everywhere are being invited to
participate in the American habit of addiction to debt.
It is not surprising, therefore, that the poor, along with the young,
have sometimes been victimized by these practices. Since the early
nineties, Americans with incomes below the poverty line have had their
credit card usage double. The result is not at all surprising. Twenty-
seven percent of families earning less than $10,000 have consumer debt
that is more than 40 percent of their income. These families have
virtually no chance to get out of debt, and the interest payments
consume what is required to maintain the lives of their families.
What is important is that we deal with these abuses by consumer
information, by full disclosure; that we strike a balance that we are
not unfairly denying the young or the poor credit when they need it,
want it, and deserve it for business opportunities, for education, and
to deal with crises in their families. That is the balance we tried to
strike in this bill. We achieve nothing by denying the poor or the
young the credit they need for their own means as long as we give them
the information so that they understand the situation and for
protecting against the abuse.
I believe we have struck a balance. It is not as I would have written
the bill personally. But in legislation and in an institution where
both political parties evenly share power, I believe it is the best we
can do. Most importantly, it is far better than the current law.
The bill now requires lenders to prominently disclose:
One, the effect of making only the minimum payment on the account
each month. That is not in the current law. If you vote against this
bill, you are voting that we will continue not to give people
information. We require it in this bill, and it is a significant
advantage.
Two, when late fees will be imposed so people understand the
consequences of not making their payments;
Three, the date on which an introduction or teaser rate will expire
as well as what the permanent rate will be at that time.
This is potentially the greatest abuse of the consumer who believes
they are getting an interest rate at a very low level only to discover
that they expire quickly and they are subjected to a higher rate that
they cannot pay or maintain.
In addition, the bill prohibits the cancelling of an account because
the consumer pays the balance in full each month and avoids incurring
the finance charge. We are, indeed, encouraging that kind of payment
and avoidance of debt and interest charges. That, we believe, makes
sense for the American consumer.
There is not every degree of consumer protection that all of us would
like, but no one can credibly argue that current law compared with this
legislation is superior. It is much superior.
Finally, let me raise the issue that was the focus of great debate in
the last Congress--the question of whether debtors seek to discharge
the judgment they owe because of their violence against abortion
clinics.
I believe because of the efforts of Senator Schumer and Senator Hatch
language assuring that those debts cannot be avoided is now in this
bill, and in my judgment, satisfactory to warrant, for those of us who
are concerned about abortion clinic violence
[[Page S2022]]
and the protection of women's rights, fair and balanced legislation.
So I urge the adoption, at long last, after years of work on a
bipartisan basis, of this important bankruptcy reform. There are not a
few Members but an overwhelming number of Senators who have amendments,
changes of laws, and their considerations in this legislation.
I am, again, very indebted to Senators Grassley, Hatch, Leahy, and
Biden for their extraordinary efforts that have brought this bill to
fruition. And I am very proud to join with Senator Grassley as the
principal coauthor and Democratic sponsor of this important
legislation.
Mr. President, I yield the floor.
The PRESIDING OFFICER. I thank the Senator from New Jersey.
The Senator from Texas, Mr. Gramm.
Mr. GRAMM. Mr. President, I wanted to come over this morning and talk
about an amendment offered by Senator Durbin. I am opposed to this
amendment. I believe, if adopted, this amendment would do great harm to
people in America who are trying to borrow money but do not have
perfect credit ratings. And, as a result, this amendment would deny
access to the American dream for millions of people who are fulfilling
that desire today.
In addition, I do not believe that the amendment is well intended in
that I sense it is really aimed at disrupting the bankruptcy bill. But,
beyond that, the amendment is very dangerous. I hope my colleagues and
their staffs, as we move toward a vote on this amendment, will listen
to what I have to say because it is very important that we understand
this amendment in context and the very real harm it would cause.
When a major piece of legislation, such as the bankruptcy bill, is
before the Senate, there is a natural tendency for those opposed to the
bill to just throw things into it, much as somebody would throw rocks
at a car or take other action to disrupt things. But the problem is,
these kinds of amendments have consequences.
No one in the Senate doubts that the bankruptcy bill is going to
become law. So I would urge Senators, whether they are for this
bankruptcy bill or not, to take a long, hard look at the Durbin
amendment to determine whether they want to risk the possibility of
such a dangerous provision becoming the law of the land.
Finally, before I explain this whole issue in some detail, let me say
there are few subjects that are less well understood than subprime
lending. In fact, the title ``subprime'' is counterintuitive--it
creates the impression that you are borrowing below prime, when
subprime means, in fact, you are paying above prime interest rates
because you do not qualify for prime lending.
So let me begin by talking about the Durbin amendment and what it
does. I want to explain why it is dangerous, and then I want to call on
my colleagues, whether they are for the bankruptcy bill or not, to join
Senator Hatch and others in tabling this amendment.
Let me make clear, this amendment is not going to become the law of
the land. This amendment is not going to be ultimately in the law books
of this country because it will hurt millions of people whom we should
not be hurting.
First, let me begin by defining subprime lending. Subprime lending is
basically lending that is made to people who do not have established
credit ratings or who have problem credit ratings.
There are people who would like to pass a law, I am sure, to say you
cannot lend to people above prime lending rates. If such a law were
passed, the net result would be that tens of millions of people would
never be able to borrow money through established channels. They would
be forced to go into the sort of black market of lending where you
borrow from your kin folks when you do not have access to credit.
Subprime lending has a bad name, but unjustifiably so, in my opinion.
When I was a boy, my mama wanted to buy a home. She borrowed the
money from a finance company, and she paid 4.5 percent interest. Gosh,
that sounds low today. But in the 1950s, that was 50 percent above
prime because banks were lending money at 3 percent. So you might say
my mama was exploited by a subprime loan because she was forced to pay
4.5 percent interest whereas other people living in the town where I
grew up were able to borrow at 3 percent.
But my mama was a single mom. She was a practical nurse who was on
call but did not have an established employer. The plain truth is, in
that day and time, banks did not lend money to people like my mother.
The rest of the story is that by getting this subprime loan, even
though she paid 50 percent above prime, my mother became the first
person in her family, I guess from Adam and Eve, ever to own the
dwelling in which she lived. And I think it is interesting that all of
her children have owned their own homes.
Some people look at subprime lending and see evil. I look at subprime
lending, and I see the American dream in action. My mother lived it as
a result of a finance company making a mortgage loan that a bank would
not make.
We are getting more people involved in subprime lending in America.
As a result, the margin between what people with good credit pay and
what people with troubled credit or no established credit pay is
beginning to narrow. The Durbin amendment would discourage people from
getting into subprime lending and would make it more difficult and more
expensive for people to borrow.
If you read the Durbin amendment--well, gosh, it just looks
wonderful. What it says is, if you are borrowing money at a subprime
rate and the person making the loan commits a material failure to
comply with--and then it lists an alphabet soup of provisions--then the
loan will be forgiven.
Let me explain what these provisions are. I think when you look at
them, you see how dangerous this provision would be.
One of the provisions of law--if you fail to comply with it, that
would mean, in essence, the loan would be free and you would not have
to pay it back--says that if I am going to give you, over the
telephone, information about the loan, I have to file, in writing, in
advance, that such a communication is going to take place.
Do we really want a provision of law that says if I am a lender, and
I am lending you money to buy a home, and I fail to file in writing
that we are going to be going over some of the terms on the telephone,
that you should not have to pay back the loan? Does anybody think that
makes sense?
Another provision has to do with notification in advance. And under
law, you are required to notify people of the terms of the loan 3 days
in advance of when the actual transaction is going to occur.
Does anybody here believe that if you made a mistake in making the
loan, and you notified people 2 days in advance, they should be
empowered simply not to pay the loan back? Does anybody think that
would be good public policy?
And finally, and perhaps most destructively, for the first time, this
amendment would give the borrower an incentive to game the system and
try to entice the lender into making a mistake. For example, suppose
the lender makes an error in complying with any one of the numerous,
different provisions of statute--either timing of notification, or
notification in writing that telephone communications are going to be
made--or the borrower creates, by refusing to send information back or
by disrupting the normal process, a confrontation between the borrower
and the lender, should the borrower benefit by having the loan
forgiven?
Does anybody doubt that under these circumstances there would be an
incentive for some borrowers to help create noncompliance with these
provisions--or look for such noncompliance at a later date? At a time
when millions of Americans now have an opportunity to own their first
home, buy an automobile, send their children to college, do we really
want a provision of law that will pit the borrower and the lender in a
gamesmanship situation where, if the lender makes a mistake or can be
enticed to do so, the loan is forgiven? Surely, no one could believe
this is good public policy, whether you are for the underlying
bankruptcy bill or not.
Secondly, it is not as if there are not already sufficient penalties
for violating all these provisions of law. Let me read the penalties.
[[Page S2023]]
The penalties for violating these provisions of law that are referred
to in the Durbin amendment read as follows:
Impose a civil money penalty ranging from $5,500 to more
than $1 million for each day of violation.
Does $1 million a day sound like a penalty to you? It does to me. One
million dollars a day would have a profound impact on every lender in
my hometown in College Station. I don't know about New York, but my
guess is no one anywhere would like to give up $1 million a day.
Termination of a bank's charter; subject a bank to an enforcement
agreement which could include restriction on the ability of the bank to
expand and grow--those are very severe penalties--subject directors and
officers to removal. Finally, there is the penalty of a temporary or
permanent injunction against the illegal activities.
It is not as if our truth in lending laws are toothless. The plain
truth is, these are some of the more severe monetary penalties that
exist in the civil laws of this country.
I urge my colleagues to reject this amendment. I ask them to reject
it for the following reasons: First, it has nothing to do with the
bankruptcy bill. It is an amendment aimed at derailing the bankruptcy
bill.
I understand being opposed to legislation. From time to time, I have
been called upon by my constituents and my conscience to try to derail
legislation I thought was bad. I understand that, and I respect it.
But I urge my colleagues, whether they are for the bankruptcy bill or
not, not to vote for a provision which will be very destructive of home
mortgage lending for people who find the greatest difficulty in getting
a mortgage; that is, people who don't have established credit or who
have troubled credit.
The biggest problem of all I save for last, and that is, we wouldn't
just drive up the cost of lending with this amendment, where every bank
or every lending institution has to realize that a technical error--the
failure to notify in writing before they talk to somebody on the phone,
or the failure to give a 3-day notice, any one of these errors--could
mean the loan is uncollectible. What do you think that is going to
mean? It is going to mean that thousands of lenders are going to get
out of the subprime lending area exactly at the moment in history when
more and more lenders are getting into it.
When they get into it, rates come down; when they get out of it,
rates go up. Anybody who ever took freshman economics could understand
that.
Thousands of lending institutions in America are going to look at the
Durbin amendment and realize that an error--and it is not required that
they intended to commit the violation; there is no provision in the
amendment that there be intent, but just an error that is somewhat
material, such as notifying 2 days ahead of time instead of 3 days
ahead of time what is going to be in a closing, for example--makes the
loan uncollectible. And when that happens, thousands of lenders who are
lending today to people with troubled credit, giving them an
opportunity to own a home, clean up their credit record and become part
of mainstream America, are going to quit lending. Nobody with good
sense can argue otherwise.
If I were running a little bank in College Station, and I could have
a loan made uncollectible because of an error I made where there was no
intention to make the error, I would stop making those kinds of loans.
There are plenty of prime loans that can be made to people with good
credit.
The second thing that is going to happen is, even the financial
institutions that can afford to incur these risks are going to charge
higher interest rates because the risk has to be incurred.
What is the net result of the Durbin amendment, if it were adopted?
The net result is fewer institutions will be making subprime loans,
fewer Americans with no established credit or with troubled credit will
be able to get mortgages, and when they do, there will be higher costs
to get those mortgages. That is what this amendment is about.
Finally, let me address the vast majority of Members of the Senate
who are for the bankruptcy bill. This amendment is not going to become
law. If this amendment is adopted, we are going to have a conference,
and we are going to have to go through this long process which could
end up derailing the bankruptcy bill. I am sure many people who are for
this amendment hope that happens. My guess is we can fix it but only
after a tremendous amount of work. In addition, we voted on this
very amendment when we considered this bill last year, and we rejected
it.
We have written many provisions into the bill to try to satisfy those
who really blame lenders for bankruptcy instead of borrowers, some of
which are not good public policy. However, in terms of trying to
satisfy people, which is necessary to pass a big bill such as this, as
chairman of the Banking Committee, I have tried to reach an
accommodation.
This amendment, A, is dangerous; B, it would hurt people who want to
own their own homes; C, it will mean we will have a lot more bad
amendments offered that won't be offered if we reject this amendment.
It is my understanding that Senator Hatch or Senator Grassley intends
to move to table this amendment. I urge my colleagues to look at this
amendment very carefully, look at the points I have made, and reject
this amendment.
I yield the floor.
The PRESIDING OFFICER. The Senator from Kansas.
Mr. BROWNBACK. Mr. President, what is the pending business before the
Senate?
The PRESIDING OFFICER. The Chair advises that the pending business is
the Durbin amendment No. 17.
Mr. BROWNBACK. Mr. President, I rise to address the bankruptcy bill
that is before the Senate, and in particular a provision that is in
this overall compromise language that is being brought in front of the
body, something I want to point out to a number of my colleagues.
Overall, I believe this legislation is a good piece of legislation.
We have worked hard on it. We have worked for a number of years on it.
We have worked to be able to craft this bill. The conference report
passed with over 70 votes, which is a substantial vote, and the
agreement of a number of people.
One of the pieces of the compromise was the homestead compromise and
matters regarding the homestead provisions.
This is when you go into bankruptcy, what amount of property that is
considered your homestead can be protected in bankruptcy, if you do not
have a direct loan against it or purchase money loan against your house
and a contiguous acreage, or in the case of a farm home and 160
contiguous acres. This is a very important compromise in the current
bill, and I seek to keep this compromise language and not for that to
be changed.
Kansas, along with other States, has within our State constitution
the protection of homesteads. It dates back to the days when we had the
Homestead Act, when you could go out West and settle, and if you farmed
it for 5 years, 160 acres, you could keep it. It was yours. The way we
settled much of the West was if you tame the 160 acres for 5 years, it
was yours. Built within our constitution is the statement that if you
don't borrow directly against this land, if you keep it clear and free
of other loans and you go through bankruptcy, you can keep this.
Back in a prior lifetime, I was a practicing lawyer. I examined a
number of abstracts. We would go through farm cycles where prices would
be good and they would go down. Then a number of people would borrow
and they would lose everything they had except their homestead. They
could rebuild the farm based on that.
You could go through abstracts of land titles and find that here was
a case where a guy borrowed this, this, and this, and he didn't borrow
against the homestead. He lost everything else but not the homestead.
He rebuilt from that. It almost followed the farm cycle with farm
prices.
So the homestead provision within the bankruptcy code in allowing
States to have their homestead provision, as opposed to a federalized
homestead provision, is very important to my State, to me, and to a
number of States that have this type of homestead provision in their
State law or, more so, in
[[Page S2024]]
my home State constitution. This has been in Kansas's constitution--or
a provision of this--dating back to 1859, and going back even to
territorial days in Kansas. Many farmers have used this law during
economic hardship to protect their farms, their homes.
We worked hard last year and this year to get a compromise because a
number of people don't like each State having its own homestead. They
think there was fraud from some people who were moving to another State
to take advantage of the homestead laws that might be easier in one
State or another. We worked to get a compromise to work this out.
I want to put this out. Other people want to speak on this, and this
is a very important point to me and my State. The compromise we put
into the bill, some people wanted to change this and others wanted to
protect States rights. The current bill provides that within the 2
years prior to bankruptcy, no one may protect more than $100,000 worth
of new equity obtained in one's homestead. You have 2 years, $100,000.
This would prevent debtors from shifting assets into their homes to
avoid creditors.
Studies have shown that abuse of State homestead laws is very rare.
Yet we are overturning over 130 years of bankruptcy law by imposing
Federal standards--this would be the first time we have done Federal
standards on homestead in bankruptcy law. In 130 years of bankruptcy
law, this would be the first time we have done it. We should not do
that, particularly based on such scant evidence.
Seven States have constitutional provisions that are different from
the $100,000 homestead cap that may be offered by someone on the floor,
just across the board. Somebody was saying a $125,000 homestead cap.
Either one would take and federalize State law, State constitutional
law--constitutional law--if we go with this homestead cap that some
propose, based upon anecdotal evidence of some abuse of this.
If there is fraud involved in moving from one State to another one,
and taking money to put it into a bigger homestead to protect it, that
can be set aside now by the bankruptcy court under a fraudulent
practice, and it frequently is. That is the way that is done.
I urge my colleagues not to federalize this area that has been under
the control of the States, that is in State constitutional law in my
State and in seven other States. If this is passed, a number of us will
say this is not something we can tolerate or work with at all. This is
something that would cause a number of us to work against the bill.
Some want to get the bill off and don't want it to pass anyway. Maybe
that makes this a better provision to them, but I don't think this is
one that we ought to be doing at all for the first time ever. It is one
that I vigorously oppose--if an amendment is proposed to change the
compromise that is in the bankruptcy bill currently on the floor.
I urge my colleagues to vote against any change in this homestead
provision away from what is crafted in this carefully balanced
legislation we have before us.
I yield the floor.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. LEAHY. Mr. President, I will be very brief.
All Members of the Senate have, by nature, two residences--in our
home States, of course, and wherever they reside during the time we are
in session serving in the Senate.
I feel very fortunate to have my residence in Vermont, a beautiful
State. It is out in the country on a dirt road with a gorgeous view. I
also am fortunate that my residence here is in the Commonwealth of
Virginia. In that regard, I believe I am represented, at least
temporarily, by two friends from Virginia, the distinguished senior
Senator, Mr. Warner, whom I have known for decades and with whom I have
been close personal friends, and the current occupant of the Chair, the
newest Senator from Virginia, a former Governor, Mr. Allen. In that
regard, I wish a happy birthday to the current occupant of the Chair,
Senator Allen, and wish him many more such birthdays. I realize that he
is in a difficult position. Under the rule, he cannot respond to this.
But I did want to do that and tell him how much my family and I enjoy
our temporary residence in the beautiful Commonwealth of Virginia.
Mr. President, I am going to offer, at some appropriate point, two
amendments. I understand that the distinguished chairman and others
have adopted this basically no-amendment posture. They can always vote
these down. But one of my amendments would clarify when a debtor's
current monthly income should be measured. The current monthly income
is a cornerstone of the bill's controversial means test provision. No
matter whether one is for or against the means test, the provision
should be at least as clearly drafted as possible. My amendment would
avoid unnecessary future litigation by clarifying that current monthly
income is measured from the last day of the calendar month immediately
preceding the bankruptcy filing.
Under section 102 of the bill, a presumption of abuse--requiring
dismissal of the bankruptcy case or conversion to chapter 13--arises
when a chapter 7 debtor has a defined level of ``current monthly
income'' available, after necessary expenses, to pay general unsecured
debt. ``Current monthly income'' is defined in the bill as the debtor's
``average monthly income . . . derived during the 6-month period
preceding the date of determination.'' It is ambiguous in defining what
that 6-month period is.
Since accuracy of the schedule is of vital importance, and subject to
audit, it is important that we know exactly what it is. My amendment
would resolve the ambiguity and deal with full calendar months of
income data, and to give a cutoff date prior to the bankruptcy filing.
My other amendment would be on the separated spouse and the means
test safe harbor. On page 17, line 8, the language should mirror the
other safe harbor provisions in the bill. The way it is set up in the
bill, as currently drafted, is provided by the distinguished chairman,
the distinguished senior Senator from Delaware, and others. Even though
parents might legally be separated, if one spouse files for bankruptcy,
the income of the other spouse would count to determine whether the
parent's income exceeds the means test for the purposes of the safe
harbor, for access to chapter 7.
What this means is if a battered spouse flees her home with her
children, she can be denied bankruptcy relief regardless of her
circumstances because in the Hatch-Biden, et al, bill, her husband's
income would be counted, even though she receives no money from him.
I cannot think of anything that is more antiwoman, antichild, or
antifamily.
I ask unanimous consent that my two amendments be filed and be
available for consideration at the appropriate time and in the
appropriate sequence because I do want to correct this antiwoman,
antichild, and antifamily result, something I do not think is intended
by the drafters of the bankruptcy law, but it is just one more example
of some of the things that should be corrected in this bill.
The PRESIDING OFFICER. The Senator has the right to submit those
amendments.
The Senator from Illinois, Mr. Durbin.
Amendment No. 17, as modified
Mr. DURBIN. Mr. President, I join the Senator from Vermont in wishing
the Presiding Officer a happy birthday and say this great opportunity
you have to sit as Presiding Officer of the Senate and listen to these
wonderful speeches has to be the greatest gift we can offer you. We
wish you the very best in the years to come.
The pending amendment is an amendment to the bankruptcy reform bill
relative to the practice of predatory lending. Predators, you may
recall from having watched a few movies, are those who prey on other
things. In this case, we have people offering credit in a predatory
fashion.
Who are these folks? You have heard about them. They are the people
who look for the retirees, the widows who are living by themselves in
the home they saved up for their entire lives, who are brought into
some mortgage scheme or second mortgage scheme and end up signing
papers that are, frankly, a very bad deal. They end up paying interest
rates far above the market rate. They face the possibility of balloon
[[Page S2025]]
payments that are impossible for them to make so they can secure a few
dollars for perhaps consolidating some other loans or home
improvements.
Time after time, these predatory lenders look for the elderly. They
look for low-income people. They go to poor neighborhoods and seek out
folks with limited knowledge of the law or a limited understanding of
English. They have them sign these papers, and literally they watch
their lives disappear. Everything they have saved up for in a lifetime
ends up disappearing because of these con artists who claim to be
creditors offering them money under terms which are not reasonable by
any standard in America.
Is this a rare situation? Unfortunately, it is a growing phenomenon
in this country. We see these people going forward offering what is
known as subprime lending and subprime mortgages.
They argue in the industry that these people are not good credit
risks, so you cannot give them the ordinary interest rates and terms;
you have to make it a little tougher. I understand that. We do not want
to close out the market for people who are on the edges of credit
availability. We want to make certain they have access, too.
Believe me, the cases that have been documented time and again in the
Senate and the House of Representatives, in State after State, are not
those cases. The creditors are not lending to folks on the edge. These
are people who are pushing these poor elderly and retired folks over
the edge. A lifetime of savings for a home that a widow is living in
absolutely vanishes when these con artists get a chance.
Where do they finally get their relief? If not through foreclosure in
civil courts, in bankruptcy court. When that elderly widow has lost
everything, cannot make any payments whatsoever, and finally goes to
bankruptcy court and says, I just cannot do it anymore, guess who is
standing first in line to get paid in full? These sharks, these people
who time and again have taken advantage of the poor and the elderly
across America.
A lot of people have come to me since I offered this amendment and
have said: We just got contacted by the finance industry. The banks of
this country are worried about your amendment. They are opposed to your
amendment. They think you are going to create some real hardship in
their industry.
The answer is, yes, I am going to create hardship in their industry
with this amendment, hardship for the people who are giving their
industry a bad name. If it is a good bank, if it is a good mortgage
lender, if it is following the law of our country, they need not fear
the Durbin amendment. The Durbin amendment is going after the bad
actors and bad players, and the people who are opposing it in so many
different ways are trying to shield the people who are violating the
law and making these bad loans.
The people who are opposing my amendment and want to table it in a
vote later today are those who want to make certain that the people
taking advantage of the poorest and most vulnerable Americans are
protected in bankruptcy court.
My amendment says explicitly that in order to be stopped from
recovering in bankruptcy court, you must have violated the law--a
material violation of the law, not something technical--a material
violation of the law. I happen to believe that before you can walk into
a court, you have to have clean hands, and the clean hands suggest that
if I am coming into court and I want to recover under my contract, I
have obeyed the law and followed it in all of my dealings.
It sounds pretty basic to me. It is a threshold question that should
be asked of anyone in bankruptcy court, but if you listen to the
opponents of my amendment, they say: No way. You may have violated
every law on the book to get into bankruptcy court, but once you are
there, you are under the protective shield of the U.S. Government. You
are able to use our bankruptcy laws and our bankruptcy courts to reach
miserable ends when it comes to the poor people who have been
exploited.
It is amazing to me that at this stage in this prosperity we have
enjoyed in our economy and all the things that have happened in
America, we still have Members of the Senate and House of
Representatives who are coming to the rescue of these bottom feeders in
the credit industry. They are standing here defending them and giving
them a chance to continue to exploit some of the poorest people, some
of the most vulnerable people, in America.
Some say: Durbin, there you go again; you are exaggerating this; it
is not such a big problem. Let me tell you a few things I have learned
in the course of preparing this amendment.
A group in Chicago--I represent the State of Illinois--I take a look
at their information from time to time. It is called the National
Training and Information Center. In September 1999, they took a look at
the mortgage foreclosures in my home State. The Chicagoland home loan
foreclosures doubled, increasing from 2,074 in 1993 to 3,964 in 1998.
In a 5-year period of time, a prosperous time in America, mortgage
foreclosures doubled in the Chicagoland area. The greatest percentage
was in the suburbs, not in the inner city.
The increase in foreclosures in my State corresponds to the increase
in originations by subprime lenders, not home loan originations. Loans
by subprime lenders, the people about whom I am talking, increased from
3,137 in 1991 to 50,953 in 1997, a 1,524-percent increase.
Subprime lenders and services were responsible for 30 foreclosures in
1993. This number skyrocketed to 1,417 in 1998, a 4,623-percent
increase.
Subprime lenders and services were responsible for 1.4 percent of
foreclosures in 1993 and 35.7 percent in 1998.
The people who oppose my amendment say: Let the free market work; let
the buyer beware; there are plenty of laws on the books. But these
statistics tell the story. The people who are taking advantage of the
most vulnerable--the widows, the elderly--are doing quite well, thank
you. What do they end up with after they have gone through their
nefarious scheme? The home a person has worked a lifetime to own, to
live in, to retire in, to feel safe in.
The people who oppose my amendment say we need to protect these
subprime lenders. The opponents of my amendment want to ignore the
reality of what is happening. Subprime lending increases dramatically,
mortgage foreclosures increase dramatically, and these subprime lenders
go into bankruptcy courts and take homes away from Americans, and the
people who oppose my amendment on the Senate floor say: Look the other
way, this is the market at work, Senator; don't stick your nose into
it.
I think this Senate ought to come to the aid of people who don't have
the lobbyists sitting in the lobby of the Senate just outside that
door. We ought to be considering people who can't afford to bring
lobbyists to the Senate. We ought to consider the people who worked
hard to make America a great nation, obeyed the laws, paid their taxes,
had their small savings account and looked forward to their security
and retirement in that little home, and then they were preyed upon and
exploited by these people. These people want to walk into our
bankruptcy courts and use the laws of the bankruptcy system in order to
recover that home and take it away from someone.
Watch the vote on the motion to table the Durbin amendment and you
will see a long line of Senators who will stand up and say these
subprime lenders deserve the protection of the law. The Durbin
amendment says pointblank they will be disqualified from using the
bankruptcy court if they have materially violated the law in order to
obtain this mortgage. That is what this debate is all about. This is a
test of a number of things about the Senate: How many people care about
consumers in this place? How many people are dedicated to business
interests, regardless of whether they are unethical and unscrupulous?
Mr. GRAMM. Point of order.
Is the Senator suggesting that Members of the Senate are not voting
their conscience on this bill? Is the Senator suggesting that there are
Members who are voting for special interests instead of what they
believe in? If so, that is a violation of the rules of the Senate.
Mr. DURBIN. I would like to respond to the Senator from Texas. Those
who want to take the side of the financial industry in opposition to
this amendment should be held accountable for
[[Page S2026]]
the fact that they are turning their backs on consumers. I do not
question the motive of any Senator and his vote, but the Senator knows
as well as I do how this is lined up: Consumers on one side, banks on
the other side.
Let me state what is at stake here are credit practices that no one
in the Senate should condone; frankly, no reputable bank or financial
institution should condone. If you are a bank or an institution
following the law of this Nation, making certain your people issue
loans that are reasonable and in compliance with the law, you have
nothing to fear from this amendment. But if you are a fly-by-night
storefront operation exploiting poor people and the elderly in this
country, you bet this amendment makes you nervous, and it should.
Because it means that ultimately the bankruptcy court will not be there
as your court of last resort.
The subprime mortgage industry offers home mortgage loans to high-
risk borrowers--I acknowledge that--loans carrying far greater interest
rates and fees than conventional and carrying extremely high profit
margins. Yesterday I went through some of the cases which you would not
believe, cases where they took people on a modest Social Security
income of $500 a month, lured them into signing up for second mortgages
and mortgages on their home with payments they could never afford to
make, with balloon payments down the line of $40,000 and $50,000,
impossible for these poor people to make, and then when they get in so
deeply they couldn't see daylight, they said, we have a new idea, we
are going to refinance your original loan. And guess what. They dug a
deeper hole for these poor people, and ultimately they lost everything.
They went into the bankruptcy court saying, we want you as a judge in
bankruptcy, to give us a right to take this home away.
According to the Mortgage Market Statistical Annual for 2000,
subprime loan originations increased from $35 billion in 1994 to $160
billion in 1999. As a percentage of all mortgage originations, the
subprime market share increased from less than 5 percent in 1994 to
almost 13 percent in 1999. By 1999, outstanding subprime mortgages
amounted to $370 billion. The data also shows a substantial growth in
subprime lending. The number of home purchase and refinance loans that
have been reported by lenders specializing in subprime lending
increased almost tenfold between 1993 and 1998, from 104,000 to
997,000. The number of subprime refinance loans also increased during
that period from 80,000 to 790,000.
The growth of this type of lending should be of concern to every
person in America, not just on the issue but because the victims
involved are our parents, our grandparents, the neighbor down the
block, the widow trying to make a meager living. They are being preyed
on by these people.
The growth of the subprime lending industry is of concern first,
because of the reprehensible tactics called predatory lending practices
which some of the companies use to conduct their business; and second,
because of the people, the senior citizens and the low income, the
financially vulnerable, who they often target with loans.
According to the 1998 data, low-income borrowers accounted for 41
percent of subprime refinance mortgages. African-American borrowers
accounted for 19 percent of all subprime refinance loans.
I would like to give some additional information about the situation
in my home State of Illinois and in the city of Chicago. In an April
2000 study released by the Department of Housing and Urban Development,
subprime loans were over eight times as likely to be in predominantly
black neighborhoods in Chicago than in white neighborhoods. In
predominantly black neighborhoods in Chicago, subprime lending
accounted for 52 percent of home refinance loans originated during
1998, compared with 6 percent in predominantly white neighborhoods.
Now, subprime somehow sounds as if it is a deal. If it is a subprime
loan, it is under conditions, interest rates, and terms far worse than
any people would face in the normal course of business. Homeowners in
middle-income predominantly black neighborhoods in Chicago are six
times as likely as homeowners in middle-income white neighborhoods to
have subprime loans. In 1998, only 8 percent of the borrowers in
middle-income white neighborhoods obtained subprime refinance loans; 48
percent of borrowers in middle-income black neighborhoods refinanced in
the subprime market.
We had a hearing recently on Capitol Hill in one of the Senate
subcommittees of the Governmental Affairs Committee and brought in
people and let them tell the story. Imagine the situation with which we
were presented. A young woman came in and said: My mother and I decided
we would buy a home--an African-American mother and her daughter. She
said: I had a nice job but it was our first chance in the history of
our family to own a home. She said to the Senators: You can't imagine
how exciting it was, the idea we were finally going to have our little
home.
I know what it meant to my family when we bought our first home. I
know what it means to families across America. This is the American
dream. This is your chance. Sadly, she got hooked up with one of these
outfits. She wasn't a business major. She didn't have a lawyer to turn
to and an accountant to ask questions. She was an average American
trying to do the right thing for her mom and herself. She ended up
getting into one of these nightmare situations where the home she
bought was over-appraised, where she ended up with a mortgage she could
never possibly pay, with terms and conditions that, frankly, guaranteed
failure. And that is what happened. As a result of that second mortgage
on her home, there was a foreclosure that led her to bankruptcy court,
and the bankruptcy court basically said the company that ripped her off
could take her home away. End of the American dream for someone who was
trying to do the right thing.
In 1998, my colleague, Senator Charles Grassley, Republican from
Iowa, chaired the Special Committee on Aging, on predatory lending
practices. William Brennan, director of the Home Defense Program of
Atlanta, GA, Legal Aid Society, put a human face on the issue. He told
us the story of Genie McNab, a 70-year-old woman living in Decatur, GA.
Mrs. McNab is retired and lives alone on Social Security retirement
benefits. In November of 1996, with the ``help'' --I use that word
advisedly--of a mortgage broker, she obtained a 15-year mortgage loan
for $54,300 from a large national finance company. Her annual rate of
interest is 12.85 percent. Under the terms of the mortgage, she will
pay $596 a month until the year 2011, when she will be required to make
a final payment of $47,599. By the time she is done, her $54,200 loan
will have cost $154,967. When Mrs. McNab turns 83 years old, under the
terms of this wonderful deal offered to her, she will be saddled with a
balloon payment which will be impossible for her to make. She will face
foreclosure. She will be forced to consider bankruptcy. And when she
walks into the bankruptcy court, if the Durbin amendment is not
adopted, the person who fleeced her out of her home and her life
savings, with a big grin on his face and a lawyer at his side, is going
to recover. He is going to take away everything this poor lady has. She
will face the loss of her home and her financial security, not to
mention her dignity and her sense of well-being.
Ironically, Mrs. McNab paid a mortgage broker $700 to find this
wonderful arrangement, a mortgage broker who also collected a $1,100
fee from the mortgage lender. Sadly, Mrs. McNab is the typical target
of the high-cost mortgage lender, an elderly person living alone on a
fixed income. We can have all the hearings we want on Capitol Hill in
the Select Committee on Aging, we can talk about the greatest
generation ever that served in World War II, we can talk about our
respect for our seniors--and we should. But this amendment will be a
test of respect for senior citizens who were the victims of so many of
these lenders.
This lady, living alone on a fixed income, was just the target these
companies look for. The death of a spouse, the loss of a spouse's
income, a large medical bill, an expensive home repair, mounting credit
card debt, and many of these people are pushed right over the edge,
right into bankruptcy court.
These are real life circumstances that make Mrs. McNab and others an
irresistible target for these loan sharks and for members of the
subprime mortgage industry.
[[Page S2027]]
According to a former career employee of the industry who testified
before the Senate Special Committee on Aging, he told the story about
what they are looking for when they go out trying to find people to
sign up for these loans. Incidentally, the man was so confident that he
had to testify anonymously, behind a screen. He was afraid some of the
companies that were involved in some of these practices would figure
out who he is. So anonymously he testified before the Senate behind a
screen so no one would see him, and here is what he said about his
experience in the subprime mortgage industry:
My perfect customer would be an uneducated woman who is
living on a fixed income--hopefully from her deceased
husband's pension and Social Security--who has her house paid
off, is living off of credit cards, but having a difficult
time keeping up with payments, and who must make a car
payment in addition to her credit card payments.
That is the perfect target. That is what he is looking for. This
industry professional candidly acknowledged that unscrupulous lenders
specifically marketed their loans to elderly widows, blue-collar
workers, people who have not attended college, people on fixed incomes,
non-English-speaking people, and people who have significant equity in
their homes. These are people who have worked a lifetime and made the
mortgage payments, finally burned the mortgage in a little family
celebration, sitting in that home looking forward to comfortable years,
and in come these sharks swimming around in the waters of their home.
When it is all over, they are devoured in bankruptcy court. We are
talking about reforming this court.
They targeted another such person in the District of Columbia,
Washington DC, Helen Ferguson. She came before the Senate Aging
Committee, Senator Grassley's committee. She was 76 years old when she
testified. She told us as a result of predatory lending practices, she
was about to lose her home. In 1991, Mrs. Helen Ferguson had a total
monthly income of $504 from Social Security. With the help of her
family, she made a $229 monthly mortgage payment on her house--
certainly a modest lifestyle by any measure. However, on her fixed
income she could not keep up with needed home repairs. She began
hearing and seeing these radio and TV ads for low-interest home
improvement loans, so she called one. Mrs. Ferguson thought she had
signed up for a $25,000 loan. In reality, this lender collected over
$5,000 in fees and settlement charges from her on a $15,000 loan. The
interest rate he charged her? 17 percent. Her mortgage payments went up
to $400 a month, almost twice what they were before.
Over the next few years, the lender repeatedly tried to convince Mrs.
Ferguson the answer to her concerns was to take out more loans. He
called her--even called her sister at home and at work, trying to
encourage them to sign up for more loans--what a nice gesture. He sent
Christmas cards to the family, and letters expressing real concern
about the problems they were facing.
In March of 1993, Mrs. Ferguson finally gave in to this lender,
borrowing money to make home repairs. By March of 1994, she couldn't
keep up with the mortgage payments. She signed up for a loan with
another lender, unaware that it had a variable interest rate and terms
that would cause her payments to rise to $600, eventually $723 a month.
Remember, this lady started off back in 1991 with a $229 monthly
mortgage payment. She is now up to $723 a month, thanks to the helping
hand and assistance of these subprime lenders who are looking at this
great target--Mrs. Ferguson's home. For this loan, this next loan, she
paid another $5,000 in broker's fees. She is putting an additional
mortgage on this little home, and $5,000 of the new mortgage is going
straight to the broker; it isn't going back to her, more than 14
percent in total fees and settlement charges on the front end of this
subprime mortgage.
The first lender also continued to solicit her. She eventually signed
up for more loans. She could not get out from under. They kept saying
one more loan and she would be just fine. Each time, the lender
persuaded her that refinancing would enable her to meet her monthly
payments. Mrs. Ferguson was the target of a predatory loan practice
known as loan flipping. The Durbin amendment specifically cites that
type of practice as a violation, a material violation of the law that
should make certain they cannot go to bankruptcy court and take Mrs.
Ferguson's home away from her after they have been engaged in this kind
of conduct for over a decade. She was the target of this practice of
loan flipping, and in such cases, lenders purposely structure the loans
with monthly payments they know the homeowner cannot afford so that at
the point of default, it provides the lender with additional points and
fees. They make money on these every single time, and in the case of
some of Mrs. Ferguson's loans, not only did the lender prepare two sets
of documents and rush the signing, but the lender's representatives
took with them all the papers from the mortgage closing and mailed them
to her only after the 3-day rescission period was expired, and the
check for home repairs was spent.
You have heard about that. If you make a bad deal, you have 3 days to
change your mind. They took the papers away at the closing and said
they would mail them to her. She got them 3 days later. They knew what
they were doing.
Some opposed say Mrs. Ferguson just needs a good lawyer. A good
lawyer for a lady making $500 a month on Social Security, who has seen
her monthly mortgage go from $229 to $723? She has to go find a good
lawyer to fight these folks?
That is what they think is the recourse here, that is the remedy.
They are going to argue we do not need the Durbin amendment; Mrs.
Ferguson can get her day in court. Let her come down on K Street in
Washington, DC, and find a nice law firm to take care of her. We know
better than that. People such as Mrs. Ferguson around America are going
to be those who don't ever want to have been seen in a courtroom. They
come into bankruptcy court ashamed.
After a lifetime of saving and sacrifice, they are forced into this
predicament, and the people opposed to my amendment tell us once they
get to bankruptcy court let the buyer beware. Let the people take her
home if they want.
Eventually, Mrs. Ferguson was obligated to make monthly payments of
more than $800, although her income was still $504 a month, and the
lenders knew it. That is another provision in the Durbin amendment. If
they knowingly make loans to people who cannot afford to repay them,
they have violated the law. It is a material violation of the law to
drag these people into debt so deeply they can never get out again and
to know it walking in the front door.
In 5 years, the debt on her home increased from $20,000 to $85,000.
For some wealthy people in America that may not sound like much, but
for a lady living on $500 a month, it is a mountain she will never be
able to climb. She felt helpless and overwhelmed. She contacted AARP.
She didn't know where to turn. She realized these lenders had violated
the Federal law in what they had done.
Lump-sum balloon payments on short-term loans, loan flipping, the
extension of credit with the complete disregard for a borrower's
ability to repay--these are not the only abusive mortgage practices.
Lenders on these second mortgages sometime include harsh repayment
penalties in the loan terms, rollover fees, charges into the loan, or
negatively amortize the loan payments so the principal actually
increases over time.
You can never catch up with it. It just keeps growing, all of which
is prohibited by law, although many ordinary homeowners do not know
what the law says.
Some of these homeowners will not make it to a lawyer or other source
of help before financial meltdown occurs. When they realize what has
happened, these consumers are often on the brink of foreclosure and
bankruptcy.
There are some protections built into current law. I have no quarrel
with this. But you cannot call these protections ``ample'' when they
permit a gross injustice. There exist out there lenders who illegally
trap families into insurmountable debt, force the families into
bankruptcy, and then actually continue to pursue their greed by staking
their claim in bankruptcy proceedings.
The debate on the bankruptcy reform bill before us started I guess
about 5
[[Page S2028]]
years ago. The argument from the people who wanted to change the law is
that too many people were coming to bankruptcy court and filing for
bankruptcy and they really shouldn't, they should pay back their debt.
They argued that the people who were filing for bankruptcy had
forgotten the moral stigma of declaring bankruptcy in America. Yet when
I look at this situation, where is the moral stigma? Shouldn't the
moral stigma be on the conscience of these lenders who have dragged
these poor unsuspecting people into a situation where they have no hope
and nowhere else to turn? When it comes to that moral stigma, it will
be interesting on the vote on the Durbin amendment as to whether the
people believe, in voting in the Senate, there is any moral culpability
on the part of those who have taken advantage so many times.
Yesterday, Senator Hatch said that my amendment ``will adversely
affect the availability of credit to certain consumers, many of whom
may be low-income and minorities whom this amendment purports to
protect. Moreover, the secondary market for such mortgages will also be
affected thereby placing an upward pressure on the pricing of such
loans.''
Well, if Senator Hatch really feels that way, then he should be
joining me in supporting this amendment. This amendment will not affect
available credit for anyone. Nor will it affect the secondary market.
The only ones affected by this amendment are the low-life lenders who
are breaking the law, and ruining people's lives in the process. They
are the only ones who should be concerned. Because they will no longer
be able to profit from their unscrupulous practices.
And the finance industry ought to think twice about harboring and
protecting these people. It doesn't give their industry a good name or
a good reputation.
Senator Hatch also said yesterday that my amendment ``does not
require any finding that such a violation was the cause of the debtor
going into bankruptcy. Now that's just not good law. That's not the way
we should be making law. Nor does it require that a violation of the
Home Ownership and Equity Protection Act had to have been found for
this draconian remedy to take place.''
Mr. HATCH. Mr. President, will the Senator yield?
Mr. DURBIN. I am happy to yield for a question.
Mr. HATCH. Could the Senator give me some indication when he is
willing to go to a vote on this amendment?
Mr. DURBIN. I am hoping to in just a few moments.
Mr. HATCH. When the Senator has concluded, I will move to table.
Mr. DURBIN. I only yielded for the purpose of a question.
Mr. HATCH. I understand. I am just wondering if we can have some idea
when we can go to a vote, and then I would be able to give people some
sort of notice.
Mr. DURBIN. I think that is reasonable. I would say no more than 20
minutes.
Mr. HATCH. On your amendment, and then Senator Gramm.
Mr. GRAMM. I think I can do it in 10 minutes.
Mr. HATCH. Then about 10 until 12; is that all right? I will make a
motion to table. Could I ask unanimous consent?
Mr. GRAMM. Could we divide the time so the Senator would have his
time and I would have mine? I sense that the Senator is somewhat caught
up in this and would like to speak. And I want to be sure I get the
opportunity.
Mr. DURBIN. The Senator from Texas is correct, I am caught up in
this. I think we have 40 minutes remaining. I will take 15, if the
Senator from Texas would like to take 15. How is that?
Mr. GRAMM. That is all right.
Mr. HATCH. If I could move to table at 10 until 12, and let everybody
know, is that OK?
Mr. DURBIN. I want to make sure I understand what the Senator is
saying. If we could have the time between now and 11:50 evenly divided,
that would be fine.
Mr. HATCH. I ask unanimous consent that be the case, and I will move
to table at the conclusion of that time.
No second degree will be in order.
Mr. DURBIN. That is right.
Mr. HATCH. Before the vote--in other words, we will divide the time
up until 10 until 12, equally divided with no further amendments before
the vote, and I will move to table at that time, and we will have a
vote.
The PRESIDING OFFICER (Mr. Allard). Is there objection?
Mr. DURBIN. The point made by the staff is well taken. If the motion
does not prevail, the amendment will still be pending and open for
debate and amendment; is that correct?
Mr. HATCH. That is right.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. DURBIN. I thank the Senator from Utah.
What is interesting from the parliamentary side is, once you have
made a motion to table, it is not debatable and it all comes to an end.
I will make a few comments in closing, and Senator Gramm will have
his opportunity, and the Senate will vote on whether to table the
Durbin amendment.
For those who have not heard the Durbin amendment, it says if you are
going to go to bankruptcy court and claim protection to try to pursue a
mortgage foreclosure, you have to walk into bankruptcy court with clean
hands. You cannot be an unscrupulous, illegal lender taking advantage
and exploiting poor people, elderly, and widows, and walk into
bankruptcy court and say I want the protection of the law.
The people who oppose it will say folks just have to come to
understand the conditions of these mortgages; they have to learn a
little bit about the law; they have to understand this is an industry
that is out to make a profit, too.
I think there is truth to that. I think people have to come into
these transactions with some basic understanding of the law. But think
about the people we are talking about here. These are 70- and 80-year-
old retirees who are losing their homes to these loan sharks who know
the law inside and out. These are people with limited understanding of
the law, maybe limited education, and maybe limited understanding of
the English language. These are the victims. These are the targets. And
to argue that these are the people who should understand the great law
of America is to suggest that each one of us knows what the backs of
our monthly statements from the credit card companies really mean.
I am a lawyer. I haven't flipped over to see the faint type and small
letters on the back side of a page to determine the conditions of my
credit card. How many times have you stopped to read it? I haven't. I
am not sure I could understand it if I did. That is the reality. I am a
lawyer; these folks are not. These are people who have done the right
thing in America, and they are the victims.
Senator Hatch also said yesterday that my amendment ``does not
require any finding that such a violation was the cause of the debtor
going into bankruptcy. Now that's just not good law. That's not the way
we should be making law. Nor does it require that a violation of the
Home Ownership and Equity Protection Act had to have been found for
this draconian remedy to take place.''
Now let me get this straight. If a lender breaks the law, if it's
been demonstrated that they clearly violated the Truth-in-Lending Act,
the portion dealing with predatory mortgages and burdened a family with
an outrageous, morally indefensible loan, if they have done all that,
then the bankrupted family still has to prove that is why they went
bankrupt.
Think about that. After they have lost their homes to this
unscrupulous lender, some of the critics of this amendment say the
burden is still on the borrower: You have to prove I was unscrupulous.
You have to prove this lender did illegal things. If they can't, then
the lawbreaker can still sit down at the table and take the family's
assets.
I can think of no better example than that of what a bad law really
looks like. My amendment addresses it.
Yesterday, we learned from Jodie Bernstein, Director of the FTC
Bureau of Consumer Protection that a lending arm of Citigroup ``hid
essential information from consumers, misrepresented loan terms,
flipped loans [repeatedly offering to consolidate debt
[[Page S2029]]
into home loans] and packed optional fees to raise the costs of the
loans.'' And that the ``primarily victimized'' . . . were the most
vulnerable, hardworking people who had to borrow to meet emergency
needs and often had no other access to capital.
The FTC lawsuit comes after almost 3 years of investigation. Well we
have an opportunity to help curb these predatory lending practices
today by passing my amendment.
Why do we need my amendment to deal with predatory lending practices?
Because of: the statistics I mentioned earlier; because of victims of
predatory lending like Ms. McNab and Ms. Ferguson; and because of suits
like that filed by the FTC against a lending arm of Citigroup--
predatory lending is an epidemic.
We can end this epidemic with this amendment. Current law is not
sufficient to deal with it. If current law were enough, we wouldn't be
standing here today; we wouldn't have seen the dramatic increase in
these loans nor the dramatic increase in mortgage foreclosures directly
attributable to these loans.
The problem of predatory financial practices in the high-cost
mortgage industry is relevant to bankruptcy because it is driving
vulnerable people into bankruptcy.
These people are not entering bankruptcy in order to abuse the
system, they are filing bankruptcy because the reprehensible tactics of
unscrupulous lenders have driven them into insolvency and threatens
their homes, cars, and other necessities.
The question is whether my colleagues in the Senate want to vote to
protect these victims by voting for the Durbin amendment.
My amendment prohibits a high-cost mortgage lender that extended
credit in violation of the provisions of the Truth in Lending Act from
collecting its claim in bankruptcy.
For people, such as Genie McNab, Helen Ferguson, Goldie Johnson, and
the Mason family, about whom I talked yesterday, if they go to the
bankruptcy court seeking last-resort help for the financial distress
that an unscrupulous lender has caused them, the claim of the predatory
home lender will not be allowed if the Durbin amendment passes. If
those who move to table my amendment--if Senator Hatch or Senator Gramm
prevail--these predatory lenders, guilty of abusive practices, will
have the protection of the bankruptcy court. If my amendment passes,
they will not.
My amendment is narrowly drawn. It simply says that a creditor who
violates the law cannot then ask for the law to protect them in
bankruptcy court. I do not think my colleagues, in their effort to
create a bankruptcy system more favorable to creditors, want to protect
these unscrupulous people in the process.
Congress has seen fit to pass laws to protect consumers from some of
the egregious practices of predatory lenders, including the Home
Ownership Equity Protection Act and the Truth in Lending Act.
And I might say, just briefly, my first exposure to Capitol Hill came
as a college student in this town. I worked for a Senator from Illinois
whose name was Paul Douglas. He served from 1948 to 1966. He was an
extraordinary man who fought for consumers during his entire career.
Maybe some of that has rubbed off in the way I view politics.
But one of things he pushed for his entire career--and he did not
serve long enough to see happen--was the passage of the Truth In
Lending Act, which said that instead of ``buyer beware,'' the consumer
should be informed. I think that is a good law for America. People who
are abusing that law, a law that has been the law of America now for 33
years, should not have the protection of bankruptcy law when they go to
court.
If this bankruptcy legislation is enacted into law, it will force all
debtors, including those who fall below median income, to jump through
all sorts of new hoops so we can be satisfied the debtor is not abusing
the bankruptcy system. Cumbersome and burdensome new requirements are
being placed on all debtors to weed out the abusers of the system.
In this case, we are not talking about debtors who are acting
illegally; we are simply talking about abusive creditors whom I believe
are acting illegally and should be held accountable.
My amendment does address their illegal practices. We don't live in a
perfect world. We live in a world where predatory lending is all too
common and growing in America. Think about how it has grown. Now put it
in the context of a slowed-down economy, perhaps a recession--people
finding they are losing their jobs; they don't have as much income, but
their debts are growing. People will then, in desperation, turn to
second mortgages for repairs at home or to overcome a family crisis.
These will be the new class and the new array of victims of these
predatory lending practices. Those are the ones about whom I am most
concerned. If this Durbin amendment does not pass, you will see these
numbers continue to increase.
We know many of the victims of predatory lending end up in bankruptcy
court. This Congress should not allow these people to be victimized
twice--first by the predatory lenders, and second, in the bankruptcy
court.
Close the loophole that now exists. Shut the bankruptcy courthouse
doors to creditors who illegally prey on the most vulnerable in our
society, including older Americans, minorities, and low-income
families. If the lender has failed to follow the law with the
requirements of the Truth in Lending Act for high-cost second
mortgages, the lender should have absolutely no claim against the
bankruptcy estate. Bankruptcy courts always consider creditors' claims
and whether they are fraudulent or not. They make this decision before
they can go forward and pursue them in the bankruptcy court. All I am
saying is, they should also say if they have violated the law in
illegally offering these mortgages, they cannot use bankruptcy court.
My amendment is not aimed at all subprime lenders. If they are
following the law, they have nothing to fear. If they are not following
the law, they are going to hate the Durbin amendment. Indeed, it is
aimed at the worst and most predatory of these subprime lenders.
My provision is aimed only at practices that are already illegal and,
as the amendment says, materially illegal. It does not deal with
technical or immaterial violations of the Truth in Lending Act.
Disallowing the claims of predatory lenders and bankruptcy cases will
not end these predatory practices altogether. Yet it is a valuable step
to curb creditor abuse in a situation where the lender bears primary
responsibility for the deterioration of a consumer's financial
situation.
I have supported bankruptcy reform laws. I hope I can support this
one. But if we are going to take a no-amendment strategy on the floor
of the Senate, if we will not hold abusive and unscrupulous creditors
accountable for their activity, you cannot say this is a balanced bill.
It is tipped to make sure the credit industry always wins and the
consumer always loses.
This Congress, this Senate, represents not only bankers and lenders,
it represents ordinary American families, retirees, people who vote,
and people who care. We have to make certain the amendments we
consider, the bankruptcy law we pass, remembers those people who cannot
afford a lobbyist, those people who, frankly, have found themselves at
a tragedy they never envisioned in their lives. They have to be
remembered on the floor of the Senate.
I urge my colleagues on both sides of the aisle to think twice about
this. The last time I offered this amendment, one Republican Senator
voted against it who later told me: I wish I would have known what was
in there. I wish I would have read some of the stories I heard about in
my State about predatory lending. That Senator is going to reconsider
the vote that is cast today.
I hope some of my friends on the Republican side will not take an
automatic reaction against every amendment. This is a good-faith
amendment. And when you go home and hear about these practices in your
home State, and about families who are exploited, you will be able to
say--if you vote for the Durbin amendment--I did what I could to stop
these people who are taking advantage and exploiting these poor people
across America. But if you vote down this amendment--business as usual,
what a banner day for the subprime loan industry, for the sharks on the
street who will go out looking--
[[Page S2030]]
as this person said here in closed testimony, anonymously--for that
elderly woman who is on Social Security, who has a home with a value to
it that you can extend into a loan she can never pay back, so that the
subprime lender will realize his version of the American dream--he will
own the home; it will be the home of the person who saved their entire
life, hoping they could retire there in peace and tranquility.
Mr. President, I yield the floor.
Mr. GRAMM addressed the Chair.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. Mr. President, as always, our colleague has done an
excellent job. He begins by telling us that only people who ruin
people's lives could be opposed to the amendment. He tells us the
amendment has to do with people who won World War II. He tells us the
sharks on the street are the subprime lenders who are affected. And
then he tells us it is a choice between those who respond to special
interests and his choice in defending the individual, people who do not
have lobbyists.
I think we have heard an excellent speech, but it has no relevance to
the amendment that is before us.
The amendment before us, paradoxically, would hurt the very people
our colleague appears to champion. I wonder how many Members of the
Senate are members of families who have received a subprime loan.
As I mentioned earlier, when I was a boy, my mama bought a home on
Dogwood Avenue in Columbus, GA, for $9,300. She borrowed the money from
a subprime lender. She paid 4.5 percent interest. The going market rate
was 3 percent. She paid a premium of 50 percent. What incredible
exploitation. The problem is, there is another side to that story.
She was a practical nurse. She did not have a full-time job. She
worked on call. She had three children. Banks did not make loans to
people like my mother. As a result of that loan, at a 50-percent
premium, so far as I am aware, she was the first person in her family,
from Adam and Eve, ever to own her own home. It profoundly affected her
life, and it affected my life too. None of her children have ever
failed to own their own home.
So our colleague would have us believe that because you are paying a
premium, because you have no established credit, or because you have
troubled credit, that somehow this kind of lending is illegitimate, or
in today's terms, it is predatory.
The Senator from Illinois's amendment has nothing to do with
predatory lending. Is our colleague not aware that Fannie Mae and
Freddie Mac are now moving into subprime lending, that the premium that
people with no credit ratings or poor credit ratings are paying is
declining because of increased competition? Is our colleague suggesting
that because every lender in America opposes this amendment, they are,
by definition, people who ruin other people's lives?
Let me explain this amendment. When you cut through all of the
wonderful rhetoric and every horror story ever recorded, where hundreds
of laws have been broken and where remedy is available and is being
undertaken, in every case that was cited by our colleague the lender
violated dozens of Federal statutes that have nothing to do with this
amendment.
What this amendment says, basically, is the following: If in any
material way you violate roughly a dozen provisions of the Truth in
Lending Act, the loan is not enforceable and lenders can't collect.
Let me give three examples of what constitutes a violation or would
be subject to a bankruptcy judge's determination as being a material
violation. You are now required under truth in lending to give written
notice to a borrower that you are going to give them information over
the telephone. If you failed to do that in writing 3 days before you
actually gave the information and judged to be in violation, you would
not be able to collect on the loan.
You are required before a transaction is entered into to give 3 days'
notice. What if you gave 2 days' notice? You would be subject to not
being able to collect a loan. You are required to provide the notice in
a certain typeset. Under the amendment of the Senator from Illinois, if
you were judged by a bankruptcy judge to have typeset that was too
small, then the loan would be uncollectible.
Now what do you think is going to happen if these provisions become
law? Thousands of reputable lenders who are making loans to people who
otherwise could not own their own home will get out of the mortgage-
making business. Millions of people who could have the dream of home
ownership would lose it because of this amendment.
Our colleague tells us that remedy is needed. It is as if he didn't
know we have just undertaken, with every financial regulator,
promulgation of new regulations related to so-called predatory lending.
One of the areas they are rulemaking on is balloon payments, the very
thing about which he talks.
Over and over again, basically what we are being asked to do is
something that will hurt not the lender--there are plenty of prime
loans to be made but the people who do not have established credit or
who have marred credit. The net result is that millions of people will
not be able to get loans.
There is one other problem. There are very strict penalties for
violating the provisions of law referred to in this amendment. You can
be fined $1 million a day. You can have your bank charter terminated.
You can have the directors and officers removed. You can have an
injunction. Those are all penalties imposed on the bank.
Imagine if we actually had a provision of law which said that if an
error is made--and there is nothing about intent in this amendment--
then the loan is forgiven.
Can you imagine a situation where we are going to pit the borrower
and the lender against each other, where the borrower would have an
incentive not to respond, not to send in information, to try to find a
way to produce an error so the loan would have to be forgiven? The net
result is that while Fannie Mae and Freddie Mac are now getting into
subprime lending, these kinds of provisions would drive them out. These
provisions would end up driving people who want to own their own home
into the hands of the very unscrupulous lenders about which our
colleague talks.
We have heard a wonderful speech. It talks about horror stories that
have existed and do exist. We have legislated over and over to deal
with those problems. The idea of saying that because an error was made
which was unintentional in areas related to type size, notification in
advance of telephone discussions, notification prior to a transaction,
that those kinds of changes could render the loan uncollectible would
mean thousands of lending institutions that today are making home
ownership possible would get out of that kind of lending. That is why
every lender in America is opposed to this amendment.
I urge my colleagues to let the Federal Reserve and our bank
regulators, who are looking right at this moment at predatory lending,
come up with regulations that make sense and will help more than they
hurt. I am moved, and I know anybody is moved who listened to the
speech in advocating this amendment. But I urge my colleagues to get
beyond the speech and look at the amendment.
Can you imagine putting lenders in a situation where technical
errors, unintentionally made, could result in a loan's not being
collectible? Banks in cities such as my hometown of College Station
would get out of subprime lending under those circumstances in droves.
And the cost of the loans that would be made would go up.
The problem our colleague talks about is real. The emotion he
presents is real and well intended. The remedy he proposes makes all of
the problems worse. It drives out not the bad lender but the good
lender. It drives out not the loan shark but the legitimate lender who
is getting into this area of lending and driving down interest rates
and helping people own their own home.
I wish we could pass a law that would say that everybody had good
credit, that everybody had established patterns of behavior paying back
debt, and that somehow that could change behavior. Such a law could not
be passed and would not be reasonable. It would violate human nature.
To pass a law that basically says you can't collect a loan based on
an unintentional error is to assault the whole foundation of the credit
system of the
[[Page S2031]]
United States of America and greatly undercut the ability of moderate-
income people, people who have checkered credit ratings, people who
have no credit ratings, from ever getting a loan.
I urge my colleagues to support tabling this amendment. I yield the
remainder of my time to Senator Hatch.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, how much time do we have?
The PRESIDING OFFICER. One minute.
Mr. HATCH. I ask unanimous consent that I have 1 additional minute.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HATCH. Mr. President, the Home Ownership and Equity Protection
Act, HOEPA, already gives borrowers numerous protections and built-in
``super-remedies'' including the consumer's right to rescind the loan,
actual and statutory damages, class action law suits, attorneys fees
and costs. This amendment imposes a drastic and unnecessary new penalty
on lenders by taking away their right to get paid in bankruptcy--and
thus gives the debtor a ``free house''--in the event of a violation of
HOEPA. This amendment will create litigation within litigation. Also,
the amendment as written would make any secured loan, whether or not
subject to HOEPA, even if fully compliant with all other banking laws,
subject to the draconian remedies of this amendment for a violation of
the Home Ownership and Equity Protection Act.
This provides a major disincentive, as the distinguished Senator from
Texas, the chairman of the Banking Committee, has made the case, for
making loans to people on the margin, taking the American dream of home
ownership out of reach for them. I join with the distinguished Senator
from Texas in making it clear that this amendment does precisely the
opposite.
That is what our very effective colleague, with all of the horror
stories he mentioned, has been advocating. Frankly, I hope we vote this
amendment down because it will be a disaster in bankruptcy law. I think
it will be a disaster for those folks who currently benefit from fair
lending. Where there is unfair lending, I have no doubt the laws will
take care of that. This amendment will work exactly to the contrary.
Mr. President, I will move to table the amendment following the
closing statement of Senator Durbin.
The PRESIDING OFFICER. The time of the Senator from Utah has expired.
There remains 41 seconds for the Senator from Illinois.
Mr. DURBIN. Mr. President, this amendment says that if you have
materially violated the law, if you have exploited the poor victims in
America who can lose their homes because of predatory lending, you
cannot have the protection of the bankruptcy court. Senator Grassley
from Iowa, who is on the floor, held hearings on this in State after
State.
This is a scourge on retired people and people on fixed incomes. Will
we come to their rescue? Watch the vote.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, 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 question is on agreeing to the motion to table.
The clerk will call the roll.
The legislative clerk called the roll.
Mr. FITZGERALD (When his name was called). Present.
The result was announced--yeas 50, nays 49, as follows:
[Rollcall Vote No. 18 Leg.]
YEAS--50
Allard
Allen
Bennett
Bond
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Craig
Crapo
DeWine
Domenici
Ensign
Enzi
Frist
Gramm
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Johnson
Kyl
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Nelson (NE)
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Stevens
Thomas
Thompson
Thurmond
Torricelli
Voinovich
Warner
NAYS--49
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Byrd
Cantwell
Carnahan
Carper
Cleland
Clinton
Collins
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Jeffords
Kennedy
Kerry
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Specter
Stabenow
Wellstone
Wyden
ANSWERED ``PRESENT''--1
Fitzgerald
The motion was agreed to.
Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
Mr. GRAMM. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. The Senator from New York is recognized.
Amendment No. 25
Mr. SCHUMER. Mr. President, I have an amendment at the desk.
The PRESIDING OFFICER. The clerk will report.
The senior assistant bill clerk read as follows:
The Senator from New York [Mr. Schumer] proposes an
amendment numbered 25.
Mr. SCHUMER. Mr. President, I ask unanimous consent the reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To make an amendment with respect to the preservation of
claims and defenses upon the sale or transfer of a predatory loan)
At the end of subtitle A of title II, add the following:
SEC. 204. PRESERVATION OF CLAIMS AND DEFENSES UPON SALE OR
TRANSFER OF PREDATORY LOANS.
Section 363 of title 11, United States Code, is amended by
adding at the end the following:
``(p) Notwithstanding subsection (f), the sale by a trustee
or transfer under a plan of reorganization of any interest in
a consumer credit transaction that is subject to the Truth In
Lending Act (15 U.S.C. 1601 et seq.), or a consumer credit
contract as defined by the Federal Trade Commission
Preservation of Claims Trade Regulation, is subject to all
claims and defenses which the consumer could assert against
the debtor.''.
Amend the table of contents accordingly.
Mr. KERRY. Mr. President, I ask my colleague if he will yield for a
question?
Mr. SCHUMER. I am happy to yield to my colleague.
Mr. KERRY. I ask unanimous consent I be recognized after the Senator
has completed his amendment for the purposes of submitting an
amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BENNETT. Mr. President, reserving the right to object.
Mr. KERRY. I believe it was ordered.
The PRESIDING OFFICER. The Senator from Utah, I believe you are a
little tardy.
Mr. KERRY. I thank the Chair.
The PRESIDING OFFICER. The Senator from New York.
Mr. SCHUMER. Mr. President, I am offering a very limited amendment to
the bankruptcy code relating to subprime lenders that engage in
predatory lending practices and then declare bankruptcy as a way to
avoid liability for their role in destroying the lives of decent, hard-
working American families.
Let me state, while I supported the amendment of my good friend from
Illinois, this is a much narrower amendment. In fact, it conforms to
what the Senator from Texas has said.
The PRESIDING OFFICER. The Senator will suspend. Let's see if we can
get order in the Senate Chamber.
Mr. SCHUMER. Thank you, Mr. President.
The PRESIDING OFFICER. Will our guests and all others be in order,
please. The Senator from New York.
Mr. SCHUMER. Mr. President, my good friend from Texas, Senator Gramm,
had mentioned that the previous amendment went way beyond the scope of
the bankruptcy bill dealing with RESAP and TILA. This amendment does
not. It limits things strictly to the bankruptcy code and it is an
amendment that is needed to ensure that the bankruptcy code is not used
to exacerbate the effects of illegal predatory lending practices.
In the past decade we have had remarkable prosperity. More than half
of
[[Page S2032]]
all Americans invested in the stock market. Unemployment figures hit
all-time lows. Despite a recent slowing, more families than ever own
their own homes.
While we have made enormous progress towards providing all of our
citizens with the opportunity to achieve the American dream of home
ownership, the invidious practice of predatory lending is stripping
hard-working individuals and families of their savings, and it is
sinking them into debt and devastating them financially. For many, it
has turned the American dream into the American nightmare.
Nowhere is the problem more prevalent than in my home State of New
York. Now there are some who would argue, despite the evidence to the
contrary, that there is no such thing as predatory lending, but I know
we all know better. We know the costs that predatory lending has caused
to people. When borrowers encounter a predatory lender, they are
manipulated and deceived through a barrage of aggressive and misleading
tactics, stripped of the equity in their homes, robbed of their life
savings, led into foreclosure, often forced into bankruptcy, and, of
course, the predators as a matter of practice target the most
vulnerable: unsophisticated first-time home buyers, elderly, minority
community, low-income neighborhoods.
We have a new problem with these predatory lenders. That is what this
amendment seeks to avoid. In recent months, several large subprime
lenders have obtained orders from bankruptcy courts, providing for the
sale of their loans or the servicing rights associated with them under
section 363 of the bankruptcy code. Consumers who have attempted to
challenge these loans or their servicing obligations based on
violations of fair lending laws have been told by the purchasers of
these loans they were sold free and clear of any consumer claims and
defenses. The fact that innocent borrowers can be left in the lurch is
flatout wrong.
Here you have the situation where a predatory lender has come in,
gotten a loan, and then declared bankruptcy, shielding that predatory
lender from a claim that the innocent homeowner is making. That is
wrong. All this amendment does, staying within the confines of the
bankruptcy code, not dealing with banking issues--I am a member of the
Banking Committee but I agree that is the place where we should deal
with those issues--is seek to prevent the bankruptcy code from
shielding these lenders from the rightful claims of innocent borrowers
who have their life savings at stake.
It is heartbreaking and maddening to hear how decent, hard-working
people have had their lives destroyed because of predatory lenders when
they sought little more than to obtain their piece of the rock, the
American dream--home ownership. It is frustrating when the bankruptcy
code is used to help these predatory lenders hide from the law.
By adopting this amendment, we can take a very small but important
step against predatory lending. We will prevent predatory lenders from
being able to use bankruptcy as a means by which to shield themselves
from liability and cut off consumer claims and defenses.
Let me repeat that because that is the nub of this limited but
important amendment which I hope we will accept without controversy. We
will prevent predatory lenders from being able to use the bankruptcy
code as a means by which to shield themselves from liability and cut
off consumer claims and defenses. And we will protect consumers from
those who seek to purchase predatory loans with the knowledge that the
consumer's right has been undermined.
In short, we can send a powerful message that we are committed to
protecting individuals and their families from those who rob them of
their dreams and then seek to cloak themselves behind the veil of the
bankruptcy law.
I sincerely hope we can accept this amendment. It is fair. It is
limited to the bankruptcy code. It was intended to and it makes the
code immune from the practices of predatory lenders that the code was
never intended to protect from the homeowners they rip off.
I yield the floor.
The PRESIDING OFFICER. Is there further debate on the amendment of
the Senator from New York?
Mr. SCHUMER. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Does the Senator from New York seek the yeas
and nays?
Mr. SCHUMER. I will be happy, before I do, to yield to my colleague
from Iowa.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Let me state the situation for the Senator from New
York. We can have the yeas and nays, but we cannot have a vote on this
right away.
Mr. SCHUMER. That is OK. Unless the Senator from Iowa would accept
this amendment?
Mr. GRASSLEY. We are not prepared to make that decision yet.
Mr. SCHUMER. I will be happy to ask for the yeas and nays and delay
the vote until a time auspicious to the floor manager.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. GRASSLEY. Mr. President, I agree to temporarily lay aside the
amendment of the Senator from New York so we can proceed to the
amendment of the Senator from Massachusetts.
Mr. SCHUMER. If the Senator from Iowa will yield, as long as we get
the yeas and nays on this amendment in due course.
The PRESIDING OFFICER. We had the sufficient second.
Mr. GRASSLEY. The point is we can assure the Senator from New York
the yeas and nays on his amendment. We can't assure the Senator from
New York when we are going to vote on the amendment.
Mr. SCHUMER. That is fine.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The Senator from Massachusetts is recognized.
Mr. KERRY. Mr. President, thank you very much.
Amendment No. 26
Mr. KERRY. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Massachusetts [Mr. Kerry] proposes an
amendment numbered 26.
Mr. KERRY. Mr. President, I ask unanimous consent the reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To strike certain provisions relating to small businesses,
and for other purposes)
On page 187, strike lines 4 and 5.
On page 202, strike line 9 and all that follows through
page 223, line 12, and insert the following:
SEC. 420. STUDY OF OPERATION OF TITLE 11, UNITED STATES CODE,
WITH RESPECT TO SMALL BUSINESSES.
Not later than 2 years after the date of 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, United States Code, and that
cause certain small businesses to successfully complete cases
under chapter 11 of such title;
(B) how Federal laws relating to bankruptcy may be made
more effective and efficient in assisting small businesses to
remain viable;
(C) what factors, if any, would indicate the need for any
additional procedures or reporting requirements for small
businesses that file petitions for bankruptcy under chapter
11 of title 11, United States Code;
(D) what length of time is appropriate for small business
debtors and entrepreneurs to file and confirm a
reorganization plan under title 11, United States Code,
including the factors considered to arrive at that
conclusion; and
(E) how often a small business debtor files separate
petitions for bankruptcy protection within a 2-year period;
and
(2) submit a report summarizing the study required by
paragraph (1) to the President pro tempore of the Senate and
the Speaker of the House of Representatives, and the
Committees on Small Business of the Senate and the House of
Representatives.
Mr. KERRY. Mr. President, I come to the floor today with this
amendment
[[Page S2033]]
as the ranking member of the Small Business Committee of the Senate, a
committee which we all know is designed to try to help empower
America's small businesses to do what they do best, which is to create
jobs.
Everyone in the Senate knows that almost all of the job growth of our
country comes from small businesses, and, frankly, I think it is about
80 percent of the jobs in the Nation that come from small businesses.
We have tried to do as much as possible in the Senate in recent years
to encourage small businesses to be able to act as the incubator of our
economy. Together with Senator Bond, chairman of the committee, I think
the Small Business Committee has been able to be particularly
responsive to the needs of those businesses.
We have heard Alan Greenspan talk a lot about the so-called
``virtuous economic cycle'' that we lived through in the course of the
last decade, and I think all of us look with special sensitivity to the
impact the bankruptcy bill might have on small businesses.
It is with that concern I come to the floor today with deep concern
about a particular provision within the bankruptcy bill that, in my
judgment, runs counter to the policies we have been putting in place in
the last years as we tried to have low-documentation loans, lift the
regulatory burden on small businesses, lift the paperwork burden on
small businesses, and, indeed, expand the capacity for entrepreneurship
and for growth.
There is no evidence at all that small business bankruptcies are a
problem which somehow warrant the rather extraordinary increase in
regulatory oversight this bill seeks to impose on those businesses.
I am offering an amendment that would strike the small business
subtitle of the Bankruptcy Reform Act and include in its place a study
of the causes of small business bankruptcy and how Federal law
regarding small business bankruptcy can be made more effective and more
efficient.
Let me preface my comments about the specifics of this particular
section that I seek to strike by saying that I share with all my
colleagues who support the bankruptcy bill the notion that a decision
to file for bankruptcy obviously should not be used as an economic tool
to avoid responsibility for unsound business decisions, nor should it
be an effort to get out from under a reckless act by either an
individual or a business.
There has been a decline, as we all know, in the stigma of filing for
personal bankruptcy, and certainly we would agree that appropriate
changes are necessary in order to ensure that bankruptcy not be
considered a lifestyle choice.
During the 105th and 106th Congresses, I have supported legislation
that would increase personal responsibility in bankruptcy, and I have
offered amendments that improve the number of small business provisions
in the bill.
It has been Congress' long-held belief that regulatory and procedural
burdens, however, should be lowered to whatever degree we can for small
business--i.e., when it is possible and when it is rational to do so or
when it doesn't somehow create another set of problems.
The Senate previously passed legislation to reduce that regulatory
burden on small business, including most recently the Regulatory
Flexibility Act and the Small Business Regulatory Enforcement Fairness
Act.
Both of them have brought about fundamental changes in the way
Federal agencies develop regulations.
In fiscal year 1999, changes to final regulations throughout the
Federal Government reduced the compliance costs for small businesses by
almost $5.3 billion.
I respectfully submit the provisions of this bankruptcy bill will set
back those very efforts of the Senate, and most importantly they do so
without an adequate showing and without any adequate demonstration that
this is, in fact, necessary.
I ask my colleagues, What is the evidence on which we are going to
potentially proceed in the Senate to literally punish entrepreneurship?
As we can see in this chart, the degree to which small businesses
have been carrying the heavy load of creating jobs during our recent
economic expansion for every single year over the last decade, small
firms have developed more jobs than large firms. In many years, small
firm job creation has exceeded the growth of large firms by 2 or 3 to
1.
In 1992-1993 it was extraordinary the degree to which small firms
eclipsed large firms. But even most recently, from 1994-1995 and 1996-
1997, we have had the same trend during which small businesses have
clearly exceeded the extraordinary growth level of all of the economy.
It would be insane for us to come in here now without an adequate
showing of need and turn around and burden some businesses with
proceedings that will cost them extraordinary amounts of administrative
time, which in a small business is exceedingly difficult to comply
with.
I ask those who promote this legislation, are we imposing on small
businesses these kinds of requirements because small businesses have
somehow been egregious in the bankruptcy process? The answer to that is
no. There is no showing. In fact, the showing is to the contrary.
Business bankruptcy chapter 11 filings from 1987 to the year 2000 show
a decline in the numbers in thousands of small business bankruptcies.
In fact, over the past decade, we have gone from 24,000 in the year
1991 to just below 10,000 last year, 23.7 million business tax returns
filed in 1997, and a record 885,416 new small firms with employees
opened their doors.
The numbers show us that of approximately 23.7 million business tax
returns, and 885,000 new small businesses, only 10,000 were forced to
file for bankruptcy.
Are those that filed for bankruptcy somehow doing such an injury to
our economy that it measures the kind of response we see in this
legislation?
A 1999 SBA study found that 79 percent of small businesses that filed
for bankruptcy had each incurred less than $500,000 in debt. The study
also found that about 45 percent of bankruptcy cases had one or no
employees. Less than 5 percent of the bankruptcy cases represented
companies with 50 or more employees.
The median assets of small businesses that filed for bankruptcy was
just $94,000. So, once again, we have to measure the intrusive nature
of the reporting requirements placed in this legislation versus the
overall positive impact that small businesses have had versus the
extraordinarily small impact of those small businesses that have filed
for bankruptcy.
In November of last year, Wei Fan of the University of Michigan and
Michelle White of the University of California at San Diego released a
report on personal bankruptcy and its effects on entrepreneurial
activity. The study concludes that while the bankruptcy reform bill is
intended to reduce abuse in the bankruptcy system, an unintended
consequence of adopting those reforms would be a substantial reduction
in the level of self-employment by U.S. households.
Elizabeth Warren, a professor of Harvard Law School, and a recognized
leader on the bankruptcy issue, believes the small business provisions
in the bankruptcy bill would be the first piece of Federal legislation
that actively discriminates against small businesses and denies them
protection available to large businesses.
Ms. Warren believes the additional reporting requirements will be
extraordinarily difficult and expensive for small businesses to produce
on a monthly basis. She concludes:
A decision by Congress in 2001 that small businesses should
bear greater costs, face shorter deadlines, file more papers
and lose any flexibility that a supervising judge might
provide is a decision to shut down small businesses simply
because they are small.
Mr. President, I ask unanimous consent her letter be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Harvard Law School,
Cambridge, MA, March 7, 2001.
Senator Kit Bond,
Russell Senate Building,
Washington, DC.
Senator John Kerry,
Russell Senate Building,
Washington, DC.
Dear Senator Bond and Senator Kerry: As the Senate
considers Senate Bill 420, I ask that you pay particular
attention to the business provisions. They will have a
direct, immediate and adverse impact on businesses in
Missouri, Massachusetts and across the country.
[[Page S2034]]
Unlike the consumer provisions which have received
substantial attention, the proposed amendments that would
alter the rules of business reorganizations have remained
largely unnoticed. According to data released last week by
the Administrative Office of the U.S. Courts, 9,197
businesses filed for Chapter 11 reorganization during 2000.
The proposed amendments would dramatically change the rules
for every one of these businesses and for the thousands more
businesses expected to file this year.
The proposed changes make it much more difficult for these
businesses to reorganize successfully. The entrepreneurs and
shareholders of these businesses will be affected, as will an
estimated two million employees who work for businesses
filing for bankruptcy and the communities across the country
where these businesses buy goods and pay taxes.
I am particularly concerned about a group of provisions,
sections 431-443, that target small businesses and single
them out for reduced access to Chapter 11. This would be the
first piece of federal legislation in history that actively
discriminates against small businesses and denies them
protection available to large businesses.
The impact of the small business provisions would be
substantial. More than 80% of the chapter 11 cases would fall
within the new constraints of ``small business'' in Sec. 420.
In many communities, all the businesses would come within its
sweep. Businesses that are vital to smaller communities would
not have the same opportunities to reorganize as their
larger counterparts.
The provisions allowing the court to combine the hearing on
approval of the disclosure statement are meritorious. The
remainder of the provisions that apply to ``small business''
(which the bill defines as any and every business with debts
of $3.0 million or less) restrict the discretion of the court
to control the plan confirmation process. These provisions
force the court to liquidate the business or dismiss the
proceedings for failure to comply with technical and
burdensome reporting requirements.
Secton 434, for example, would impose regular reports on
the debtor's profitability. This kind of report has very
limited usefulness for the creditors because accounting
profits are subject to manipulation, so that judges and
creditors do not rely on them in small business cases.
Instead, they look at the debtor's cash disbursements and
receipts. Nonetheless, these reports may be very difficult
and expensive for small businesses to produce on a monthly
basis. A debtor that fails to produce it faces dismissal--
with the inevitable loss of jobs. The deadlines in the bill
impose a similar stranglehold on the business regardless of
the progress of the case toward successful reorganization.
The 175-day deadline in Sec. 438 and the inconsistent 300-day
deadline in Sec. 437 are artificial. They ignore, for
example, the delays in plan confirmation that are beyond the
debtor's control and have nothing to do with the viability of
the business. For example, a state regulatory action that
takes places outside of the bankruptcy court may need to run
its course before a plan can be formed.
In addition, provisions outside sections 431-443 would doom
small businesses. The draconian provisions of Sec. 708 and
Sec. 321(d) of the bill--introducing the concept of non-
dischargeability in corporate reorganizations, large or
small--would provide a major setback to the rehabilitation of
any corporation. These provisions would fall especially hard
on small businesses that could not afford increased
litigation costs and would be destroyed by a single
recalcitrant creditor. The provisions are particuarly
counterproductive because Sec. 708 punishes the wrong people.
The appropriate remedy when management has misbehaved is to
file the management and to sue them personally, not to saddle
the surviving company with litigation that will sink it and
repayments that will come out of the pockets of the innocent
creditors. By permitting litigation over nondischargeability,
the innocent creditors are put to the choice of letting one
creditor take all the assets of the business or litigating
nondischargeability. Most will choose to fight rather than
give up, but if everyone fights, the case is prolonged,
assets are dissipated and no one wins except the lawyers.
This provision hinders reorganizations without doing anything
to hold the right people accountable for the false
statements.
Before the adoption of the 1978 Code, Congress has
implemented a system by which small businesses and large
businesses were to be dealt with separately in
reorganization. The difference was that Congress had decided
that more constraints should be imposed on big businesses
than on small ones. Congress understood that small
businesses already in financial trouble have the best
chance to reorganize and pay their creditors if they are
not saddled with an expensive administrative apparatus.
This bill stands that laudable, common sense concept on its
head. A decision by Congress in 2001 that small businesses
should bear greater costs, face shorter deadlines, file more
papers and lose any flexibility that a supervising judge
might provide is a decision to shut down small businesses
simply because they are small.
There are no data to suggest that entrepreneurs are abusing
the bankruptcy system or that they are somehow less
trustworthy than people running bigger businesses. To single
out the hardworking men and women who run these businesses
for unfavorable treatment solely on the basis of their size
is indefensible. I hope you will persuade your colleagues to
strike these provisions from the bill.
Very Truly Yours,
Elizabeth Warren,
Leo Gottlieb Professor of Law.
Mr. KERRY. Mr. President, the provisions included in the Bankruptcy
Reform Act impose new technical and burdensome reporting requirements
for small businesses that file for bankruptcy that are far more
stringent on small businesses than they are on big businesses.
Furthermore, the bill would provide creditors with greatly enhanced
powers to force small businesses to liquidate their assets at a time it
may not be advisable, and with reporting requirements that may, in
fact, force a liquidation that does not have to take place.
Specifically, the bill will require small businesses to provide
periodic financial and other reports containing information ranging
from cash receipts, cash disbursements, and comparisons of actual cash
receipts and disbursements with projections in prior reports.
Just in case they missed anything, the bill includes a provision that
includes reports on such matters as are in the best interests of the
debtor and the creditors. This shifts all of the power in such a way as
to place an extraordinary burden on mom-and-pop stores and mom-and-pop
operations and small businesses that simply do not have the capacity to
be able to comply.
Any big business would have difficulty complying with these
burdensome requirements. But I think we ought to measure what we are
doing here against the necessity that we see in the declining number of
bankruptcies, the declining level of assets that are at stake, and the
great upside of what these entities provide to the country.
So for that reason, I hope my colleagues will join me in specifically
asking for a study, a short-term study, that will enable us to better
judge whether these changes in the current system are needed. I believe
we ought to do everything possible to ensure the viability of small
businesses and to assist in fostering entrepreneurship in the economy.
The Bankruptcy Reform Act, as it is today constructed, does not meet
that challenge.
I ask my colleagues to join me in removing the small business
provisions, undertake the study, and then we can revisit it, if we need
to, based on a sound analysis of precisely how we might proceed in a
least intrusive, a least burdensome manner.
I thank the Chair.
Mr. President, 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.
Mr. KERRY. I recognize my colleague probably wants to set the time
for that vote at some future time. That is fine with me.
Mr. GRASSLEY. Thank you.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I am not going to respond to the
substance of the amendment but to give some background on where we have
come over the last 5 or 6 years on this legislation for the
consideration of people who will want to debate against the amendment
by the Senator from Massachusetts.
I suggest to you that when Senator Heflin from Alabama was a Member
of the Senate, he and I served as either chairman or ranking member of
the judiciary subcommittee on courts that has jurisdiction over
bankruptcy issues for the period of time that he and I served together
in the Senate, which, I think, was 16 years--1980 to 1996.
Just prior to that time, and my coming to the Senate, the Senate had
adopted the last bankruptcy reform legislation, which I think was in
1978 or 1979.
During the period of time he and I served as either chairman or
ranking member--depending upon which party was in the majority--he and
I sponsored some technical corrections and some small changes to the
last major overhaul of the bankruptcy law. But as time went on, into
the early 1990s, Senator Heflin and I came to the conclusion that there
were changes in the economy--the globalization of the economy and a lot
of other reasons--
[[Page S2035]]
and that we ought to give considerable attention to greater changes of
the bankruptcy code rather than the very small changes we enacted from
time to time during the 1980s.
He and I also came to the conclusion we would probably not have the
time, as the two Senators shouldering the responsibilities on
bankruptcy legislation, to do it through our subcommittee. So we set up
the Bankruptcy Commission of which this legislation we are dealing with
now is a product. That commission was not made up of any Members of
Congress. It was made up of appointees by legislative leaders and by
the President of the United States. These people truly are authorities
in bankruptcy legislation, including Professor Warren from Harvard, who
was rapporteur for the commission, and is the person Senator Kerry was
quoting. And he put a letter in the Record that was from her.
The commission studied the issues for over a year, and put a lot of
work into recommendations for both consumer bankruptcy and for business
bankruptcy reform. There was an awful lot within the commission on
consumer bankruptcy reform that was very controversial and did not have
even near-unanimous recommendations. There was a majority report, but
not an overwhelming majority report, on consumer bankruptcy.
But when it came to the recommendations of the commission on business
bankruptcy reform, the recommendations of the commission came down to
the Congress on an 8-1 vote.
So we are being asked by the Senator from Massachusetts to do this
amendment for the sake of small business. I think it is essential that
all of us take into consideration the needs of small business; so I do
not find fault with the interests he is trying to espouse here. But I
think we need to take into consideration that his amendment is taking
the business bankruptcy provisions of our bill and setting them aside
and asking us to study what we should do in regard to business
bankruptcy reform.
I don't think enough has changed in the last 4 or 5 years that an 8-1
recommendation of the Bankruptcy Commission for business bankruptcy
reform should be undone by this amendment of the Senator from
Massachusetts.
I hope people will take into consideration the work Senator Heflin
and I--we alone, almost totally for the rest of the Senate--had put
into bankruptcy legislation through the 1980s into the 1990s, and
particularly our recommendation of going to a commission instead of our
doing it, so we would have the most expertise involved with the changes
and the reforming of business and personal bankruptcy. We set this
commission up to do exactly what it did. It came out with an
overwhelming recommendation that is before the Senate.
Beyond that, in the period of time of 1997-1998, when we moved the
commission's recommendations through the Senate, through the House,
through conference, through the House a second time, dying on the floor
of the Senate because it came late in the session, and then starting
over again with the same commission recommendations in 1999, moving it
through the Senate, moving it through the House, moving it through
conference, moving it through the House, moving it through the Senate,
moving it to the President of the United States where it was subjected
to a pocket veto--through all of this consideration of the Bankruptcy
Commission's recommendations, there has been little dispute about the
business provisions compared to the more controversial aspects of the
consumer and personal bankruptcy recommendations of the commission.
That is directly related to the fact that the commission's
recommendations came out 8-1 and, almost unchanged, have become the
legislation that first Senator Durbin and I introduced and then,
because Senator Durbin was not on the Judiciary Committee in the
Congress of 1999 and 2000, it was Senator Torricelli who joined me in
introducing bankruptcy legislation. That was introduced in exactly the
same way in the last Congress, as a result of our moving ahead with the
same conference report that President Clinton pocket vetoed for the
underlying legislation that we have before us, almost unchanged again,
in legislation introduced as the Grassley-Torricelli-Biden-Hatch-
Sessions legislation that is before us.
I don't know why all of a sudden somebody thinks we ought to throw
these fairly noncontroversial small business and business bankruptcy
provisions out of this bill for further study. Each Member of this body
is going to have to make up his or her mind on the substance of the
amendment by Senator Kerry. I want them to at least understand that we
are where we are now not by some flippant decision of a couple Members
of the Senate that we should be here, rather that these provisions are
the recommendations of a study of the bankruptcy commission. So the
small business provisions we have now before us are based on a study of
a commission and recommended by that commission on an 8-1 vote.
I yield the floor and ask unanimous consent to set aside the
amendment of the Senator from New York, the Senator from Massachusetts,
so we can now proceed to the amendment of the Senator from California.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator from California is recognized.
Amendment No. 27
Mrs. FEINSTEIN. Mr. President, I thank the manager of the bill, the
distinguished Senator from Iowa. I call up amendment No. 27.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:
The Senator from California [Mrs. Feinstein], for herself,
Mr. Jeffords and Mr. Durbin, proposes an amendment numbered
27.
Mrs. FEINSTEIN. I ask unanimous consent that reading of the amendment
be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 27) is as follows:
(Purpose: To make an amendment with respect to extensions of credit to
underage consumers)
At the end of Title XIII, add the following:
SEC. 1311. ISSUANCE OF CREDIT CARDS TO UNDERAGE CONSUMERS.
(a) Applications by Underage Consumers.--Section 127(c) of
the Truth in Lending Act (15 U.S.C. 1637(c)) is amended by
adding at the end the following:
``(8) Applications from underage obligors.--
``(A) Prohibition on issuance.--Except in response to a
written request or application to the card issuer that meets
the requirements of subparagraph (B), a card issuer may not--
``(i) issue a credit card account under an open end
consumer credit plan to, or establish such an account on
behalf of, an obligor who has not attained the age of 21; or
``(ii) increase the amount of credit authorized to be
extended under such an account to an obligor described in
clause (i).
``(B) Application requirements.--A written request or
application to open a credit card account under an open end
consumer credit plan, or to increase the amount of credit
authorized to be extended under such an account, submitted by
an obligor who has not attained the age of 21 as of the date
of such submission, shall require--
``(i) submission by the obligor of information regarding
any other credit card account under an open end consumer
credit plan issued to, or established on behalf of, the
obligor (other than an account established in response to a
written request or application that meets the requirements of
clause (ii) or (iii)), indicating that the proposed extension
of credit under the account for which the written request or
application is submitted would not thereby increase the total
amount of credit extended to the obligor under any such
account to an amount in excess of $2,500 per card (which
amount shall be adjusted annually by the Board to account for
any increase in the Consumer Price Index);
``(ii) the signature of a parent or guardian of that
obligor indicating joint liability for debts incurred in
connection with the account before the obligor attains the
age of 21; or
``(iii) submission by the obligor of financial information
indicating an independent means of repaying any obligation
arising from the proposed extension of credit in connection
with the account.
``(C) Notification.--A card issuer of a credit card account
under an open end consumer credit plan shall notify any
obligor who has not attained the age of 21 that the obligor
is not eligible for an extension of credit in connection with
the account unless the requirements of this paragraph are
met.
``(D) Limit on enforcement.--A card issuer may not collect
or otherwise enforce a debt arising from a credit card
account under an open end consumer credit plan if the obligor
had not attained the age of 21 at the time the debt was
incurred, unless the requirements of this paragraph have been
met with respect to that obligor.
``(9) Parental approval required to increase credit lines
for accounts for which parent is jointly liable.--In addition
to
[[Page S2036]]
the requirements of paragraph (8), no increase may be made in
the amount of credit authorized to be extended under a credit
card account under an open end credit plan for which a parent
or guardian of the obligor has joint liability for debts
incurred in connection with the account before the obligor
attains the age of 21, unless the parent or guardian of the
obligor approves, in writing, and assumes joint liability
for, such increase.''.
(b) Regulatory Authority.--The Board of Governors of the
Federal Reserve System may issue such rules or publish such
model forms as it considers necessary to carry out paragraphs
(8) and (9) of section 127(c) of the Truth in Lending Act, as
amended by this section.
(c) Effective Date.--Paragraphs (8) and (9) of section
127(c) of the Truth in Lending Act, as amended by this
section, shall apply to the issuance of credit card accounts
under open end consumer credit plans, and the increase of the
amount of credit authorized to be extended thereunder, as
described in those paragraphs, on and after the date of
enactment of this Act.
Mrs. FEINSTEIN. Mr. President, I offer this amendment cosponsored by
Senator Jeffords and Senator Durbin.
The amendment would put a $2,500 cap on any credit card issued to a
minor--that is, an individual under 21--unless the minor submits an
application with the signature of his parent or guardian indicating
joint liability for debt or the minor submits financial information
indicating an independent means or an ability to repay the debt that
the card accrues.
The amendment would give parents who cosign for liability on their
child's credit card the opportunity to have some say in the credit
limit on the card.
Why is this amendment needed? Supporters of bankruptcy reform have
justified this bill on the basis of personal responsibility. I agree
with that basic presumption. Responsible debtors should pay back the
debts they can afford to repay. The bill, however, must be balanced. If
Congress really intends to tackle the surging tide of bankruptcy cases,
our laws must enforce responsibility on the part of creditors as well.
One area where I think creditors must show more responsibility is the
marketing of credit cards to minors. For those under 18, there are some
protections. In each of the 50 States, juveniles under 18 lack the
authority to sign contracts with narrow exceptions. Thus, if a credit
card company issued a card to a 15-year-old, the company would not be
able to legally enforce its debt in bankruptcy court.
Yet, there is a gaping loophole with respect to college students. It
is almost impossible for students on campus to avoid credit card
offers. Applications are stuffed in plastic bags at the campus
bookstore, solicitations hang from bulletin boards, and credit card
representatives set up tables at student unions, enticing students with
free gifts.
Credit cards are increasingly pressed on college students, even those
with no income or no credit history. A parent's signature is not
required. With their low monthly payments, these cards are very
attractive to cash-strapped students and appear to impose little
financial burden.
Minors today are getting credit cards at younger and younger ages. In
1994, 66 percent of college students with at least one card received
their first card before college or during their freshman year. In 1998,
81 percent had received their first card by the end of their freshman
year.
The cards are attractive because minimum payments are typically low.
However, if students just make the minimum payments, they get in way
over their heads.
For example, if a student makes just a $25 minimum payment on a
$1,500 line of credit, at 19.8 percent interest, it will take 282
months to pay off the debt.
Not surprisingly, with credit cards flooding college campuses,
student debts are rising.
Nellie Mae, the student loan giant, found that 78 percent of
undergraduate students who applied for credit-based loans with Nellie
Mae in the year 2000 had credit cards. This is up from 67 percent in
1998.
Of the 78 percent of undergraduates who had credit cards in Nellie
Mae's Year 2000 study, the average student had three cards, with 32
percent having four or more credit cards.
The average debt of these credit-card owning undergraduates was
$2,748. This is up from an average of $1,879 in Nellie Mae's 1998
study. Some 13 percent of these students had balances of $3,000 to
$7,000 and 9 percent owed amounts exceeding $7,000.
Traditionally, American youth under 25 have contributed marginally to
the ranks of our nation's bankruptcy filers.
However, over the past 10 years, our youth have represented a larger
and larger slice of those who file for bankruptcy.
In 1996, only 1 percent of personal bankruptcies were by those age 25
or younger. By 1998, that number had risen to almost 5 percent. In
1999, a year later, the number rose to 6.8 percent of all bankruptcy
filers.
In committee, I was asked the question: What does this have to do
with bankruptcy? I would like to answer it. A seven times greater
percentage of minors are filing for bankruptcy today than just 5 years
ago, and the great bulk of this is credit card debt.
Credit cards are a major factor in student and youth debt. For
example, at the Consumer Credit Counseling Service of Greater Denver,
more than half of all clients are ages 18 to 35. On average, they have
30 percent more debt than all other age groups.
Let me give you a couple of examples of the runup of credit card debt
that has plagued so many unwary youth.
A USA Today article on February 13, 2001, describes the case of
Jennifer Massey. As a freshman at the University of Houston, Jennifer
signed up for a credit card. She got a free T-shirt. A year later, she
had piled on $20,000 in debt on 14 credit cards.
Another case: A young Mexican American from Los Angeles declared
bankruptcy just last July after racking up $20,000 in credit card
expenses. Most of it was for clothes, dinners, and drinks with friends.
A West Virginia student saddled with student loans filled out
applications for 10 major credit cards and was approved for every
single one--showing no ability to repay that debt.
A youngster at Georgetown University fell into debt totaling over
$10,000. Unable to make even the minimum payments, she had to turn to
her parents in order to bail her out.
Alex, a college freshman, found himself over $5,000 in credit card
debt by the end of his first semester. His parents had to take out a
loan to pay off his debt to the credit card company. When Alex
graduated in 1999, his family was still making payments on the loan to
pay off his debt from his freshman year.
Let me give you the case of Sean Moyer. He was a student at the
University of Oklahoma who ran up more than $10,000 in debt. The
crushing debt was one of the factors he cited before committing suicide
on February 7, 1998, at the age of 22.
Contrary to what you may hear from the opposition to this amendment,
this amendment is not about the right of an 18-year-old to get a credit
card. I have no problem with that. The concern is the unlimited credit
that the youngster can place on that card.
Like any other adult who seeks credit, a minor who has independent
means to repay debts is entitled to credit based on his ability to pay.
A minor with adequate resources, or with a parental cosigner, can get a
credit limit under this amendment of $5,000, $10,000, or $20,000.
I just want to say that this amendment places the $2,500 debt limit
on each credit card--not the combination of credit cards, but each
credit card. We think it is fair, and we think it is responsible.
During a recent ``60 Minutes II'' interview, sources in the credit
card industry stated that even if a student's application for credit
indicates no source of income, the student still gets approved for
credit. The credit card company assumes that the student has other
means to pay because they buy books, clothes, CDs, or that a parent is
going to bail them out.
So without this amendment, credit card companies can continue to lend
reckless amounts of money to college students that any reasonable
inquiry into the student's financial status would indicate the student
could not afford. Then, when a student can't pay his or her debt, the
lender can pressure the parent to assume the liability or use the full
power of the bankruptcy court to recover the amount it is owed.
[[Page S2037]]
The bankruptcy court should not be used as a collection agency for
ill-advised extensions of credit to college students by credit card
lenders.
I also want to briefly discuss the section of this amendment that
would give a parent who cosigns for a credit card some measure of
control over future expansion of credit limits on the card. Under
current law, if a parent assumes joint liability for a credit card with
his or her minor child, the parent has no control over the debt limit
on the card. A credit card company can raise the debt limit without
consulting the parent. The credit card company can even raise the debt
limit if the parent expressly objects to any further increase.
Let me give you a case written up in the Los Angeles Times. I ask
unanimous consent that the Times story be printed in the Record at the
end of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See Exhibit 1).
Mrs. FEINSTEIN. This is the case of Dr. James Whitemore, a retired
surgeon from Carson, CA. When his son Quentin entered Cal-State
Dominguez Hill, Dr. Whitemore cosigned his son's application for credit
with the stipulation that the debt limit remain at $500. But without
Dr. Whitemore's knowledge, MBNA, the credit card issuer, raised his
son's credit limit repeatedly until it finally reached $9,000. After
several years, Quentin's balance reached $9,089 and MBNA determined his
account to be delinquent.
MBNA, then rediscovered Dr. Whitemore. After failing to contact the
doctor as it increased his son's liability, the company then demanded
that Dr. Whitemore assume responsibility for the debt as guarantor. I
think this is wrong. This amendment would correct that.
I also want to respond to those who question the link between credit
card debt and bankruptcy. All-purpose credit card debt is the most
frequently listed debt in bankruptcy files. Eighty-eight percent of the
debtors in bankruptcy have credit card debt of some kind.
According to a study by Harvard Professor Elizabeth Warren, the
median debtors in bankruptcy are carrying six times higher credit card
debts than other cardholders.
Homeowners in the United States spend, on average, about $18 of every
$100 of take-home pay for principal, interest, taxes, and insurance on
their mortgage payments. A family spending more than $28 is considered
house poor. Median debtors in bankruptcy owe $47 of each $100 of income
to their credit card.
Experts who testified before Congress on this issue have linked the
share rise in consumer debt and the corresponding rise in consumer
bankruptcy to lower credit standards.
As I have said, today, a seven times greater percentage of youth go
through bankruptcy than did 5 years ago. So this is clearly a problem
that is increasing.
I don't believe minors should have their credit histories ruined when
they take their first steps as adults; nor should we put parents in the
position of having to bail out their kids to protect their kids' future
credit rating. A credit card limit, per card, of $2,500, I believe, is
prudent and wise. If a youngster wants to go beyond that, they have to
show that they can pay it back or, secondly, have a parent or guardian
cosign.
I am very pleased to join with Senator Jeffords and Senator Durbin in
presenting this amendment.
Exhibit 1
[From the Los Angeles Times, Jan. 17, 1999]
Son's Debt Plagues Dad for 7 Years
(By Kenneth Reich)
Guaranteeing a credit card for a child about to go off to
college is fairly common, but it seldom generates as much
trouble as it did for Dr. James H. Whitmore, a retired
surgeon from Carson.
He has been through a seven-year drama that is not over
yet.
When his son, Quentin Whitmore, entered Cal State Dominguez
Hills in 1992, he wanted him to have a credit card. This is
natural, since even if, as in this case, the child is going
to be close to home, the parent knows he will be more on his
own and may need emergency financial resources.
And so, after some exploring, Whitmore agreed to co-sign
his son's application with MBNA of Wilmington, Del. ``This I
did with the stipulation that his credit limit be $500,'' he
recalls.
At first, all went well. Quentin Whitmore was making small
payments on the card out of the allowances his dad gave him.
But then, without ever notifying his dad, MBNA, which
describes itself as ``the largest independent credit card
lender in the world with $59.6 billion in loans,'' repeatedly
raised young Whitmore's credit limit. It finally hit $9,000.
By the end of 1996, the balance on the card, including late
charges, reached $9,089, and MBNA declared the account
delinquent. It informed Whitmore Sr. that he owed that amount
as guarantor.
The doctor refused to pay. As MBNA put the sum out for
collection and subsequently entered a bad credit report
against both father and son, Whitmore insisted he had never
authorized raising the limit and therefore was not
responsible for the debts on the card above $500. He did send
in $500.
I asked Whitmore whether he wasn't teed off at his son too.
``I remonstrated with my son and guess what happened?'' he
said. ``His grades went from A's to nothing. One entire year
was wasted.''
Quentin Whitmore, now 24 and still a Dominguez Hills
student, explained it this way:
``When I received the credit raises, I assumed [my father]
had approved them. I never thought to call him, because at
the outset MBNA had agreed not to raise the limits unless he
gave his approval.''
A Quicken survey last year revealed nearly half of college
students bounce checks, 71% of those with cards fail to pay
off balances monthly and most estimate that they will have
$15,000 in debt before graduation. So young Whitmore's
extravagance, or needs, may not be that unusual.
I asked MBNA whether it would acknowledge a mistake in
raising young Whitmore's limit so high.
That was indeed a mistake, said Brian Dalphon, a MBNA
senior vice president. He said his credit account was never
coded as either a student or a guarantor account, as it
should have been.
``When we assign a credit line to a student, it's at a
lower limit, initially $500 [as in Whitmore's case],'' he
explained. ``And we're very conservative with it. We don't
raise the limits very quickly. A typical credit line for a
student remains at $500 to $1,000.''
When Dr. Whitmore was first billed as the guarantor,
however, he was unsuccessful for months in resisting.
Finally, the Los Angeles County Consumer Affairs Department
agreed to intervene for him.
Timothy Bissell, the agency's assistant director, observed,
``As a matter of contract law, MBNA could not hold him
responsible for a higher amount than $500 unless they had
notified him they were raising the credit limit.''
* * *
On Oct. 27, 1997, 10 months after trying to bill Dr.
Whitmore, MBNA First Vice President Edward Matthews informed
the department that the doctor was being absolved of
responsibility for the debt above $500 and that a bad
reference was being stricken from his credit file.
``I apologize for any inconvenience Dr. Whitmore has been
caused by this situation,'' he wrote. ``Due to a keying error
when the account was established in 1992, the account
received automatic credit line increases until December 1996
as a result of Quentin Whitmore's previous satisfactory
payment history.''
But, at that time, the nature of the keying error was left
obscure. And the ``satisfactory payment history'' was left
undetailed.
The Whitmores say the delinquency took the better part of a
year to develop, after payment requests far outstripped young
Whitmore's ability to pay.
Quentin Whitmore's account has now been closed, Dalphon
said.
But, Dr. Whitmore said, his son will keep his bad credit
rating for several years, and six months ago, when the senior
Whitmore last checked, he said he found his own credit record
still impaired.
MBNA proposed 18 months ago to forgive 50% of Quentin
Whitmore's balance if he agreed to pay monthly installments
of $378.
But Dr. Whitmore said his son ``has absolutely no income''
as he continues his studies.
``So I called them and told them that if they would remove
all the late charges, the excess limit charges and reduce
this to the absolute minimum that he originally charged, then
I would negotiate a settlement with them under these
conditions and pay them off myself, But they refused.''
Dalphon declined to say whether MBNA continues to try to
collect.
Dr. Whitmore remains unhappy.
``I do not feel that MBNA's hands are clean in this
matter,'' he said. ``If the limits on this account had not
been raised, then my son would not have been able to abuse
it. If what the credit card companies are doing to our youth
before they can develop a sense of financial responsibility
is legal, then new laws are needed.''
But, of course, MBNA denies its policy is to raise limits
on students. It maintains that what happened was another of
these electronic glitches I sometimes write about.
Mrs. FEINSTEIN. Mr. President, I 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.
[[Page S2038]]
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. Does the Senator ask that the pending
amendments be laid aside?
Mr. SESSIONS. I object. We want to see a copy before we change the
order of business.
Mr. BINGAMAN. Mr. President, I suggest the absence of a quorum. I am
glad to share it with the Senator.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. BINGAMAN. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 28
Mr. BINGAMAN. Mr. President, I ask unanimous consent that the pending
amendment be set aside so I can call up an amendment that is at the
desk.
The PRESIDING OFFICER. Without objection, it is so ordered. The clerk
will report.
The assistant legislative clerk read as follows:
The Senator from New Mexico [Mr. Bingaman], for himself,
Mr. Daschle, Mr. Leahy, Mr. Dorgan, Mr. Kennedy, Ms.
Mikulski, Mr. Levin, Mr. Dodd, Mr. Schumer, Mr. Breaux, Mr.
Durbin, Mr. Kerry, Mr. Dayton, Ms. Cantwell, Mr. Corzine,
Mrs. Clinton, Mr. Reid, Mr. Akaka, Mrs. Carnahan, Mr.
Rockefeller, Mr. Conrad, Mr. Wellstone, Ms. Landrieu, Mr.
Kohl, Mr. Nelson of Nebraska, Mr. Reed, Mr. Lieberman, Mr.
Bayh, Mr. Sarbanes, Ms. Stabenow, Ms. Lincoln, Mr. Hollings,
Mr. Domenici and Mrs. Boxer, proposes an amendment numbered
28.
Mr. BINGAMAN. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To increase the authorization of appropriations for low-
income energy assistance, weatherization, and State energy emergency
planning programs, to increase Federal energy efficiency by
facilitating the use of private-sector partnerships to prevent energy
and water waste, and for other purposes)
At the appropriate place in the bill, add the following:
TITLE--EMERGENCY ENERGY ASSISTANCE AND CONSERVATION MEASURES
SEC. 01. SHORT TITLE.
This title may be cited as the `Energy Emergency Response
Act of 2001'.
SEC. 02. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds that--
(1) high energy costs are causing hardship for families;
(2) restructured energy markets have increased the need for
a higher and more consistent level of funding for low-income
energy assistance programs;
(3) conservation programs implemented by the States and the
low-income weatherization program reduce costs and need for
additional energy supplies;
(4) energy conservation is a cornerstone of national energy
security policy;
(5) the Federal Government is the largest consumer of
energy in the economy of the United States; and
(6) many opportunities exist for significant energy cost
savings within the Federal Government.
(b) Purposes.--The purpose of this title are to provide
assistance to those individuals most affected by high energy
prices and to promote and accelerate energy conservation
investments in private and Federal facilities.
SEC. 03. INCREASED FUNDING FOR LIHEAP, WEATHERIZATION AND
STATE ENERGY GRANTS.
(a) LIHEAP.--(1) Section 2602(b) of the Low-Income Home
Energy Assistance Act of 1981 (42 U.S.C. 8621(b)) is amended
by striking the first sentence and inserting the following:
``There are authorized to be appropriated to carry out the
provisions of this title (other than section 2607A),
$3,400,000,000 for each of fiscal years 2001 through 2005.''.
(2) Section 2605(b)(2) of the Low-Income Home Energy
Assistance Act of 1981 (42 U.S.c. 8624(b)(2)) is amended by
adding at the end the following:
``And except that during fiscal year 2001, a State may make
payments under this title to households with incomes up to
and including 200 percent of the poverty level for such
Stat;''.
(b) Weatherization Assistance.--Section 422 of the Energy
Conservation and Production Act (42 U.S.C. 6872) is amended
by striking ``For fiscal years 1999 through 2003 such sums as
may be necessary'' and inserting: ``$310,000,000 for fiscal
years 2001 and 2002, $325,000,000 for fiscal year 2003,
$400,000,000 for fiscal year, and $500,000,000 for fiscal
year 2005.''.
(c) State Energy Conservation Grants.--Section 365(f) of
the Energy Policy and Conservation act (42 U.S.C. 6325(f)) is
amended by striking ``for fiscal years 1999 through 2003 such
sums as may be necessary'' and inserting: ``$75,000,000 for
each of fiscal years 2001 through 2005''.
SEC. 04. FEDERAL ENERGY MANAGEMENT REVIEWS.
Section 543 of the National Energy Conservation Policy Act
(42 U.S.C. 8253) is amended by adding at the end the
following:
(e) Priority Response Reviews.--Each agency shall--
``(1) not later than October 1, 2001, undertake a
comprehensive review of all practicable measures for--
(A) increasing energy and water conservation, and
(B) using renewable energy sources; and
``(2) not later than 180 days after completing the review,
implement measures to achieve not less than 50 percent of
the potential efficiency and renewable savings identified
in the review.''
SEC. 05. COST SAVINGS FROM REPLACEMENT FACILITIES.
Section 801(a) of the National Energy Conservation Policy
Act (42 U.S.C. 8287(a)) is amended by adding at the end the
following:
``(3)(A) In the case of an energy savings contract or
energy savings performance contract providing for energy
savings through the construction and operation of one or more
buildings or facilities to replace one or more existing
buildings or facilities, benefits ancillary to the purpose of
such contract under paragraph (1) may include savings
resulting from reduced costs of operation and maintenance at
such replacement buildings or facilities when compared with
costs of operation and maintenance at the buildings or
facilities being replaced.
``(B) Notwithstanding paragraph (2)(B), aggregate annual
payments by an agency under an energy savings contract or
energy savings performance contract referred to in
subparagraph (A) may take into account (through the
procedures developed pursuant to this section) savings
resulting from reduced costs of operation and maintenance as
described in subparagraph (A).''.
SEC. 06. REPEAL OF ENERGY SAVINGS PERFORMANCE CONTRACT
SUNSET.
Section 801(c) of the National Energy Conservation Policy
Act (42 U.S.C. 8287(c)) is repealed.
SEC. 07. ENERGY SAVINGS PERFORMANCE CONTRACT DEFINITIONS.
(a) Energy Savings.--Section 804(2) of the National Energy
Conservation Policy Act (42 U.S.C. 8287c(2)) is amended to
read as follows:
``(2) The term `energy savings' means a reduction in the
cost of energy, water, or wastewater treatment from a base
cost established through a methodology set forth in the
contract, used by either--
``(A) an existing federally owned building or buildings or
other federally owned facilities as a result of--
``(i) the lease or purchase of operating equipment,
improvements, altered operation and maintenance, or technical
services;
``(ii) more efficient use of existing energy sources by
cogeneration or heat recovery, excluding any cogeneration
process for other than a federally owned building or
buildings or other federally owned facilities; or
``(iii) more efficient use of water at an existing
federally owned building or buildings in either interior or
exterior applications; or
``(B) a replacement facility under section 801(a)(3).''.
(b) Energy Savings Contract.--Section 804(3) of the
National Energy Conservation Policy Act (42 U.S.C. 8287c(3))
is amended to read as follows:
``The terms `energy savings contract' and `energy savings
performance contract' mean a contract which provides for--
``(A) the performance of services for the design,
acquisition, installation, testing, operation, and, where
appropriate, maintenance and repair, of an identified energy,
water conservation, or wastewater treatment measure or series
of measures at one or more locations; or
``(B) energy savings through the construction and operation
of one or more buildings or facilities to replace one or more
existing buildings or facilities.''.
(c) Energy or Water Conservation Measure.--Section 804(4)
of the National Energy Conservation Policy Act (42 U.S.C.
8287c(4)) is amended to read as follows:
``The term `energy or water conservation measure' means--
``(A) an energy conservation measure, as defined in section
551(4) (42 U.S.C. 8259(4)); or
``(B) a water conservation measure that improves the
efficiency of water use, is life cycle cost effective, and
involves water conservation, water recycling or reuse,
improvements in operation or maintenance efficiencies,
retrofit activities or other related activities, not
affecting the power generating operations at a Federally-
owned hydroelectric dam''.
Mr. BINGAMAN. Mr. President, the amendment we are now discussing and
that I have offered on behalf of myself and over 30 cosponsors
addresses an important problem that is being felt this winter all
across America. High energy costs have hit low-income and working
Americans hard this winter, and this coming summer promises to be just
as expensive in many parts of our country.
The high heating bills this winter are the result of a combination of
two primary factors: First, higher demand resulting from colder than
average
[[Page S2039]]
weather across the country, we have just seen another major snowstorm
in the Northeast, and second, a supply shortfall that stems from lack
of drilling 2 years ago when the oil and gas prices were so low.
The combination of these two factors has resulted in natural gas and
propane bills that are as much as 200 percent higher this year than
they were last year. Heating oil prices have been well above last
year's average as well. Natural gas prices and tight generating
capacity are driving up electricity prices around the country. Of
course, California is the area of our country that has gotten the most
attention in this regard, but electricity prices in other parts of the
country have also escalated.
We can predict now that many people in southern States will be
especially burdened this summer because of the high cost of trying to
maintain air-conditioning.
Applications for energy assistance have increased dramatically this
year. Over 5 million households in the United States may be unable to
pay their energy bills this winter. That is a figure that is up
substantially from last year. The State-by-State increase in caseloads
coming from assistance requests is illustrated on this chart that is
provided by the National Energy Assistance Directors Association.
When one looks at some of the figures on this chart, the point I am
making becomes very clear. The chart is titled, ``Low-Income Home
Energy Assistance Program, Increase in Caseloads'' as of the First of
March.
As of the first of March, the increase in caseloads in my State this
year over last year is 100 percent. We have twice as many people
requesting assistance. In Oklahoma, it is 50 percent above last year.
In Louisiana, it is 91 percent above last year. In Mississippi, it is
50 percent above last year. I can go all around this chart and one can
see the increases different States have experienced. There are over 20
States reporting increases greater than 26 percent.
I ask unanimous consent that a copy of the survey detailing the
critical situation we have in each of our States be printed in the
Record at the end of my statement.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. BINGAMAN. Mr. President, many consumers who cannot pay their
energy bills have been protected so far by the so-called cutoff laws.
Those are laws which prohibit utility companies from terminating
service to customers during the winter. But these prohibitions against
terminating utility service expire in March or in April, and when they
do, the seriousness of the situation for low-income working Americans
will become harshly obvious to all of us.
According to a recent survey by the National Council of State
Legislators, 18 States have extended income eligibility limits because
so many people just above the current thresholds are struggling to pay
their utility bills. Thirty-one States either have already increased or
hope to increase benefit levels in an effort to keep net costs to those
in need at the same level as in previous winters. Many States have
expressed a serious need for additional funds to extend eligibility and
benefit levels.
The reality is that many States have already depleted their LIHEAP
and weatherization funding, the funding that we appropriated for these
programs in the last year. Without additional funds, assistance to low-
income working families for the summer cooling season is going to be
impossible.
People tend to forget the severe toll the summer heat takes on many
people in this country, particularly on our senior citizens. Just last
year, the State of Texas was forced to impose a moratorium on utilities
cutting off service during the summer. Usually there is a moratorium
against cutting off utility service during the winter, but Texas was
forced to impose it in the summer.
According to the Austin American Statesman of August 11, 2000:
With 54 heat-related deaths across Texas this summer, the
state Public Utilities Commission on Thursday stopped
electric companies from shutting off service for nonpayment
until the end of September. The commission wanted to prevent
any more deaths because fans or air conditioners were just
not used for fear of high bills.
The Texas experience last summer was especially heartbreaking in its
magnitude--54 deaths. But this was not the first time this circumstance
has occurred and it will not be the last.
The chairman of the Texas commission lamented the fact that the
process had taken so long. A moratorium on disconnections helps with
the immediate problem of no service, but it does not address the bill
that will eventually have to be paid by each of these families.
Many who remember the days of childhood without air-conditioning
forget the fact that most of us, including myself, did not live in the
midst of concrete cities. These cities have been referred to as modern-
day heat islands. During the summer, not just in the Southern States,
it is our parents and grandparents who are most vulnerable during heat
waves. Unfortunately, many seniors living on fixed incomes often
consider air-conditioning a luxury, not a health necessity.
This is not a partisan issue. The provisions of this amendment are
the same or very similar to those contained in the bill introduced by
Senator Murkowski, the same bill the majority leader cosponsored last
week when he declared his support for LIHEAP on the Senate floor. But,
he declared his support for it as part of a broader package that will
not be brought to the floor until several months in the future.
I hope the vision of a one-shot comprehensive energy bill does not
cause delay our acting on such an immediate need, especially when human
lives are at stake. Especially given the administration has been saying
it will not even have a proposal to us for several more months. It
seems every time they report on their progress it is to report the 2-
month clock is starting again. Clearly, they are working in good faith
on a comprehensive bill or comprehensive set of proposals for dealing
with our long-term energy problems, but that does not relieve us of the
responsibility to deal with this immediate problem and to deal with it
now.
I support taking a comprehensive look at energy. I think it is
important to have a balanced framework in order to evaluate the various
tradeoffs. In fact, I am working with colleagues in the Senate to put
such a bill together. My experience is the last time the Congress
passed a major energy bill, the Energy Policy Act of 1992, it took an
entire Congress and it resulted in a Christmas tree with several strong
branches on which to hang many ornaments, a tremendous number of which
were never implemented and were never funded by the Congress.
That is not the best approach to take in dealing with this immediate
problem. Energy issues are complex, they often involve billions of
dollars of investment, in very long-lived capital equipment. We need to
focus on manageable sections in the interest of developing the best
policy outcomes based on a common set of principles.
I have a chart that shows what I consider to be fundamental
principles for a long-term energy policy. I want to make the point that
this amendment I am now talking about, and urging my colleagues to
consider, is not an alternative to a long-term bill, but is consistent
with such a framework. It is only distinct in that we are dealing with
an immediate problem.
These are some common principles that need to be dealt with for a
successful long-term energy strategy. Let me briefly mention them.
First, we need a new model of Federal-State cooperation to ensure
reliable and affordable energy supplies. If we had had better
coordination in the past, perhaps we would not be needing to consider
the amendment I have brought up today. That we don't have them in place
is not the fault of the federal government or that of any individual
state. By their very definition, restructured markets have changed the
very framework upon which many of our energy policies and institutions
were based.
Second, fuel and technology diversity need to be increased and
emphasized. We need to have improved distribution systems for energy.
Third, we need to have a balance of supply-and-demand-side options
with a commitment to efficiency, environmental quality and climate
change mitigation.
[[Page S2040]]
Fourth, we need targeted tax and economic incentives to address
market failures. We all recognize there are market failures, there are
inefficiencies in the market.
Finally, we have to have comprehensive research and development in
order to ensure a full complement of technologies and fuels to meet our
energy needs.
All five of these items are principles for a long term policy. We are
going to propose a set of provisions that incorporate those principles
in the larger bill I mentioned before. But, we have immediate needs for
energy assistance that cannot wait for months while we debate the very
real energy issues this country faces.
It was well recognized at the time we passed the appropriations bill
last year that LIHEAP funding was going to be inadequate to do the job
in this current year. Individuals, families, and small businesses that
are suffering today from energy bills they cannot pay cannot just wait
while we debate a long term energy policy. We should not wait. To
borrow a catch phrase from President Bush, they need an immediate
helping hand.
The amendment I am offering today takes the first concrete steps in
providing that hand, that assistance, the first concrete steps to put
measures in place to address this remainder of this winter's financial
distress and to deal with the high cost of electricity that we can all
see coming at us this summer.
The amendment raises the authorized limits governing the low-income
home energy assistance program, raising the limit to alleviate
financial burdens on low- and middle-income families in the near term.
At present, it is only authorized in fiscal year 2001 at the $2 billion
level. That is a base level that has been relatively flat since the
mid-1980s--just to show how long we have gone without any change in
this authorization.
The amendment raises the base funding requirement to $3.4 billion for
fiscal year 2001, each of the fiscal years 2001 to 2005. The increase
comes close to addressing the erosion in the program due to inflation
since President Reagan was in the White House.
The amendment also gives States additional flexibility in this fiscal
year on income levels for recipients by increasing eligibility from 150
percent of poverty to 200 percent of poverty. This change only applies
for the remainder of this fiscal year but will give States the
flexibility to help working families and senior citizens with whatever
additional funds we can send to those States. This adjustment is at the
request of many of our States.
Third, the amendment raises the authorization levels for this fiscal
year and succeeding years for the low-income weatherization program and
the State conservation and emergency planning grants. The immediate
increase in the authorization for the weatherization program of $310
million is for the remainder of this fiscal year and the fiscal year
2002 compared to the current appropriations level of $162 million. The
weatherization program is a sound and long-term investment in energy
efficiency. A one-time investment of weatherization yields savings of
$300 to $470 per household annually thereafter. This program, however,
requires trained staff. Erratic and insufficient funding of the
weatherization program has diminished its effectiveness in recent
years.
Increased energy efficiency is the least cost solution to meeting our
energy needs. The weatherization program was funded at nearly three
times the current level in the 1980s. This amendment will increase the
weatherization authorization in an attempt to catch up with the 1980s
level in real dollars.
The fourth thing this amendment does is increase the authorization
for grants to State energy programs up to $75 million. This program
funds State conservation and emergency planning. The extremely low
level of funding in recent years has diminished the State's ability to
implement State level conservation plans and to plan for emergencies in
coordination with the Department of Energy and with neighboring States.
I cannot overemphasize how critical it is to have better coordination
of overall energy planning and emergency response preparedness. The
power situation in the western states is just the most recent example
of where better regional planning could have reduced costs and provided
greater reliability. Heating oil markets in the northeast and gasoline
supply problems in the midwest last summer are just a few examples of
where a little more advanced preparedness could have reduced disruption
and impact on consumers. I would note that for all the lamenting the
lack of an energy policy on the part of many members of this body, it
was the Republican majority that eliminated coordinated emergency
planning from the Department of Energy budget in 1995.
I urge the Congress to enact these amendments and to encourage the
President to propose an emergency supplemental bill for these programs.
Let's stop debating form over substance and get it done now.
We all know that even if we adopt the amendment I have sent to the
desk, it will only increase the authorization levels for these
programs. We still need the funding. I very much hope the President
will take the lead in requesting the increased funding from this
Congress so we can actually send the assistance to the States and it
can go to the families who need it.
Finally, my amendment contains a package of provisions aimed at
quickly increasing the energy efficiency of Federal facilities around
the country. Many of these facilities are very wasteful in their use of
energy and water--two commodities that could be in short supply this
summer in many parts of the country. Federal agencies spend $4 billion
per year to heat, cool, and power their facilities. Too much of that is
wasted. If federal agencies aggressively reduce their energy waste,
their neighbors will enjoy the benefits of increased supplies of
electricity, and taxpayers will benefit by paying less for the power
that would have been wasted. Under an existing Executive order, federal
facilities are required to increase energy efficiency by 30 percent by
2005 and 35 percent by 2010 relative to 1985, but there is some
evidence that this Executive order is not being aggressively
implemented.
This amendment calls for a concerted effort by facility managers to
meet the Executive order targets early, thereby saving taxpayer
dollars, reducing stress on the power grid and demand for fuels.
Specifically, my amendment calls for each Federal agency to complete a
comprehensive review this fiscal year of all practicable measures for
increasing energy and water conservation and using renewable energy
sources.
The agencies then have 180 days to implement measures to achieve 50
percent of the potential savings identified in their reviews. That
could result in a measurable reduction in federal energy consumption by
this time next year, if we get started now.
Federal agencies could also use this authority to investigate siting
new generating capacity at their facilities, to further ease stress in
our power system this summer. We won't be building many new central
electricity generating stations before the summer, but we could start
installing a lot of distributed generation at Federal facilities,
particularly proven technologies such as ground-source heat pumps, that
could dramatically reduce the power requirements for heating and
cooling Federal buildings.
My amendment also makes it easier for federal agencies to use
partnering tools with the private sector, known as energy savings
performance contracts (or ESPCs), to reduce energy costs through
facility upgrade and replacement. ESPCs offer perhaps the fastest means
for rapidly improving the efficiency of the existing building stock
owned by Federal agencies.
These are targeted measures that will help relieve the immediate
needs of our citizens who cannot cope with the high energy bills this
winter, and provide incentives for the Federal government to do its
part to decrease energy consumption now.
I urge the adoption of this amendment.
Exhibit 1
National Energy Assistance Director's Association State-by-State Low-
Income Home Energy Assistance Program Survey Responses (February 7,
2001)
alabama
The Alabama LIHEAP program estimates it will award regular
benefits to 6.9% more
[[Page S2041]]
households this year (75,000 vs. 70,146). Although higher
benefits are being provided to those households that heat
with propane or natural gas, more is needed since the cost of
these fuels has already risen 50-65%. Alabama continues to
provide weatherization and furnace repair services as part of
its crisis program.
california
Requests for assistance by phone are running almost 60%
higher than last year at this time. California's natural gas
prices have risen 40-50% this year, but definitive
information is not yet available on electricity rates
statewide. The state's LIHEAP program allows the maximum
eligibility criteria of 60% of sate median income and plans
to increase the benefit levels for this year's eligible
households in response to significant increases in natural
gas and electricity prices. Supplemental funds are needed to
increase both the benefit levels and the number of households
served. Additional funding is also needed to increase the
furnace repair and replacement programs.
colorado
Colorado expects to serve 41% more households this year
than last (75,000 vs. 53,182). Program benefit levels have
been increased by 125%, while eligibility has been expanded
from 150% to 185% of the federal poverty guidelines. Natural
gas and propane have doubled in price and the state's largest
natural gas provider recently asked the Public Utilities
Commission for another increase of about 5%. These increases
have placed unreasonable burdens on low-income households, as
well as those whose income is slightly over the current
eligibility criteria. Colorado needs additional funds to
increase eligibility to 200% of the federal poverty level,
increase the benefit amount, increase outreach to ensure
needy households are aware of the program, and increase
funding for weatherization and the summer grants program
operated by the Colorado Energy Assistance Foundation.
connecticut
Connecticut estimates it will provide LIHEAP benefits to
21% more households this year (68,000 vs. 56,340). According
to representatives from the natural gas companies, prices are
currently 39% higher this year and the State LIHEAP program
reports oil prices are running 34.6% higher than last year.
This year income limits for LIHEAP eligibility were raised to
60% of the State median income for all fuel types, as
compared to last year's limit of 150% of the federal poverty
income guidelines. All benefit amounts have also been
increased. Additionally, $400,000 has been set aside for
furnace repairs and/or replacements for households whose
heating systems are determined to be unsafe or inoperable.
Supplemental funding is needed in order to expand the
application period. The program currently pays for fuel
beginning November 1st, but would like to change that date to
October 15th (the date when landlords are required to begin
providing heat) and extend the last date for fuel to April
15th (the end of the utility moratorium).
delaware
Delaware expects a 12.6% increase in the number of regular
benefits awarded (11,500 vs. 10,215) and a 6.9% increase in
the number of households receiving crisis assistance (from
2,807 to 3,000), although these numbers do not include the
summer cooling assistance program. Regular LIHEAP benefits
have increased an average of 20% (from $206 to $241). Some
households also receive up to $400 from the crisis program,
although the average is $200. Eligibility for the regular
program has remained at 150% of the federal poverty
guidelines, but crisis eligibility guidelines were increased
to 200% of poverty. In order to respond to numerous inquiries
the state has received requesting assistance with furnace
repairs/replacements, additional funding is needed.
georgia
The number of households assisted by Georgia's LIHEAP
program is expected to double this year (120,000 vs. 60,710).
LIHEAP eligibility has been expanded to 150% of the federal
poverty guidelines and may be further increased to 60% of the
state median income. The amount currently provided to
households does not have a significant impact--the maximum
$194 benefit cannot fill a propane tank so the household
cannot benefit from energy assistance unless they are
prepared to supplement the balance. All LIHEAP funds have
been utilized for direct financial client benefit services
due to the colder than usual temperatures and the rapidly
rising fuel prices. Additional funding is needed to serve
more households and keep the program open longer, as well as
provide supplemental and crisis payments.
florida
Florida expects to serve 23% more clients this winter
season than last year (42,500 vs. 34,393). In addition, the
state is expecting to provide assistance this summer to an
additional 31,000 clients for cooling assistance, about the
same level as last year. Natural gas prices have increased by
about 110%, while electricity prices at one utility have
increased by 15.5%. Florida has increased its benefit level
from a maximum of $300 to $1,000 per household. In addition,
Florida is providing assistance to restore home power,
including: paying deposits, late fees and reconnect fees;
purchasing and/or repairing of non-portable heating
equipment; repairing or replacing unsafe fuel oil or propane
tanks; and paying fees required to assure the continuation or
resumption of services. At the current rate of demand for
services, the state expects to be out of funds by the end of
March with little or no funds available for summer cooling.
Additional funds would be used to address unmet needs and to
continue providing services through the summer which is
typically the state's peak demand time.
idaho
The number of households served by Idaho's LIHEAP program
is expected to increase by 31% (30,930 vs. 23,529); average
benefits are expected to increase by 14%. Fuel prices
increased for natural gas by 48%; electricity by 6% and home
heating oil by 40%. Although no change has been made to the
LIHEAP income eligibility criteria (133% of federal poverty
guidelines), this year the program application period will be
extended to May 31st (rather than March 31st). Supplemental
funding is needed to serve these additional eligible
households, as well as to finance weatherization activities.
illinois
The number of households served by Illinois' LIHEAP program
is expected to increase by 41% (350,000 vs. 247,000). Prices
for natural gas, electricity, kerosene and electricity have
increased from 2 to 4 times depending on the utility
provider. The state has increased benefits increased by 35%
and increased eligibility to 150%. If additional funding were
available, the state would probably expand the program's
eligibility and benefit levels.
iowa
In Iowa approximately 21% more households have been
certified and approved than last year at this time (75,000
vs. 62,000). Last year the average residential customer spent
$354 on their total gas bill for the period November through
March. It is projected the same customer will spend $807 for
the same period this year. Although the average LIHEAP
benefit has increased from $204 to $306, an additional $351
per household is needed in order for this year's
participating households to have the same percentage of their
total household income going towards winter gas bills as last
year's participating households.
Iowa conducted a survey of last year's LIHEAP recipients to
determine what these households do when faced with
unaffordable bills. Over 20 percent reported going without
needed medical care or prescription drugs in order to pay
their heating bills and 12 percent reported without food in
order to pay those same bills. The report, Iowa's Cold
Winters: LIHEAP Recipient Perspective, documents an
affordability crisis that existed prior to this year's rising
fuel costs.
Last winter, LIHEAP recipients experienced winter home
heating burdens of 8.2 percent on average--this figure does
not include winter non-heat electric burdens. Heating costs
represent approximately 40% of a household's total energy
bill. Last winter, the LIHEAP program was able to reduce the
average heating burden of 8.2% to 3.5% of total household
income. For comparison, the typical non-low income
household's heating burden is less than 2%. In order for this
year's participating households to have the same percentage
of their total household income going towards winter gas
bills as last year's participating households, the Iowa
LIHEAP program needs an additional $20.5 million.
To date, approximately 2,000 applications statewide that
are not eligible for any benefit because the household was
just over our income guidelines. Many of these households are
elderly Iowans whose recent Social Security increase put them
a few dollars a month over our maximum allowable income.
These same households report tremendous out-of-pocket
medical/prescription drug costs coupled with home energy
bills they simply cannot afford without making extreme
sacrifices. Federal rules would allow LIHEAP to increase our
income guidelines from 150% of the federal poverty level to
185%. Unfortunately, this option cannot be considered at this
time. In the absence of additional funding, the state plan's
to continue to give, on average, a benefit of $306 to all
eligible households that apply, and at some point in the
future determine what if any supplemental payment we might be
able to make.
kansas
Kansas expects to serve 18% more households this year
(31,000 vs. 26,143). LIHEAP benefits have been increased by
31% to help offset the burden of higher gas prices--which are
now more than double last year's rates. Supplemental funding
is needed to provide benefits to additional eligible clients
and bring the energy burdens of Kansas households to a
manageable range.
maine
The number of households assisted by Maine's LIHEAP program
is expecting to increase by 32% from (58,000 vs. 44,000). The
state has already received 65,000 applicants this year,
however they only have adequate funds to serve 58,000. As a
result of the 40% increase in fuel costs this year, LIHEAP
eligible households are utilizing the available funds so
quickly the state is unable to
handle the demand and all resources have
been obligated. Unfortunately, the state has
been forced to decrease funding for weatherizataion services,
furnace repair, and administration. The income guidelines
were increased from 125% of the federal poverty guidelines to
175% and the average benefit was decreased from $490 to $350
in order to
[[Page S2042]]
serve the additional households this change would create.
Maine desperately needs additional funds to increase fuel
assistance benefits, increase emergency funding, and provide
for furnace repair or replacement.
MASSACHUSETTS
The number of households assisted by Massachusetts' LIHEAP
program is expecting to increase by 9% (123,000 vs. 113,408).
Last year, LIHEAP eligibility limits were raised to 200% of
the federal poverty guidelines and benefits were extended to
households with incomes up to 60% of state median income that
heat with oil or propane. If the household's consumption
exceeds the threshold established for the fuel type, 50% is
added to the excess over the threshold or the high energy
benefit, whichever is greater, is added to the regular
benefit.
Oil prices in Massachusetts have risen by 36%, electricity
by 42% and natural gas by 39%, with additional rate increases
proposed. Massachusetts operates weatherization programs,
system repair and replacement programs and conservation
programs funded by the utilities through the legislative act
on utility restructure. These are operated through a network
of programs in the community action agencies throughout the
state. Individual agencies distribute blankets but it is not
a statewide coordinated effort as is the weatherization
program.
MICHIGAN
The number of households served in Michigan's LIHEAP
program has increased by 24% through December 31. At the
current rate of increase, the state is expected to serve
almost 362,000 this year vs. 291,831 last year. Energy prices
have increased significantly, heating oil by 70% and propane
by 100%. However our three largest natural gas vendors have
had no increase due to rules by the Public Service
Commission. Those rules will be lifted this spring and we
expect at least 40% to 60% increase in the cost of natural
gas. Benefit caps have been increased twice since the start
of the winter heating season.
MINNESOTA
Minnesota's LIHEAP caseload is projected to increase by 10%
(107,000 vs. 96,924). Eligibility has remained at 50% of the
state median income, although benefits have been increased
from an average of $415 in FY 2000 to $475 this year. This
resulted in an increase to the maximum assistance from $900
to $1,200. Natural gas prices have risen 304%, propane costs
are up 73% and oil is 27% higher. Weatherization and furnace
repair continue to be offered. The state needs additional
funding to increase benefits since the increases previously
provided barely make a dent in the bills experienced by
Minnesota households this year.
NEW HAMPSHIRE
New Hampshire LIHEAP program is expected to serve almost
20% more households than it did last year (27,500 vs.
23,081). Applications for assistance are running 31% higher
than last year and the number of requests for requests for
emergency assistance have increased by 88%. Funds previously
set-aside for weatherization and administration have been
redirected to client benefits as a result of the critical
need this winter season.
Last year the income eligibility criteria was expanded to
60% of the state median income, which has also been retained
this year. Had this not occurred, approximately 3,000
families who received LIHEAP benefits last year at the higher
eligibility level would have suffered. The basic benefit
matrix was increased by 65% so that benefits now range from
$240 to $1200. Given that the projected need far outweighs
available funding, New Hampshire is in serious need of
additional LIHEAP funding to ensure the program will be able
to serve all eligible households seeking assistance. As of
January 12, 2001, 2,967 households had already exhausted
their program benefits, so additional funding is also needed
increase benefit amounts. Finally, additional funding is
needed to restore program components currently suspended,
including weatherization.
new jersey
New Jersey expects to serve almost 25% more households this
year (150,000 vs. 120,000). In addition, 55,182 elderly and/
or disabled households with incomes over the LIHEAP
eligibility limit, but under the income cap for the state
funded supplemental Lifeline utility assistance program,
received a one time benefit of either $100 (electric heat) or
$215 (gas, oil or propane heat). The state has recently
raised its income eligibility limit to 175% of poverty. The
state is considering a number of options for the additional
emergency funds received, one of which includes higher income
eligibility.
new mexico
New Mexico expects to serve almost double the number of
households this year (80,000 vs. 48,405). Natural gas prices
have risen 20% since last year, while kerosene/propane has
increased by 200%. Because of the increase in applicants,
grant payments were not increased, however, the program did
provide an emergency payment for oil and bulk propane in
addition to the regular payment in order to purchase the same
amount of fuel. Additional funds are needed to serve the
increasing number of applicants and provide supplemental or
second benefits to offset the tremendous price increases.
Although the Native American tribes in New Mexico receive
their own LIHEAP allocation, the state is also concerned
about helping the tribes serve additional eligible households
in their jurisdiction.
new york
The percentage of households served by New York State's
LIHEAP program is expected to increase by 18% (818,000 vs.
691,500). Last February, New York expanded its LIHEAP income
eligibility criteria to 60% of the state median income, which
has been retained for FY 2001. The regular benefit was
increased by $50 and, as of January 2001, a second emergency
benefit is now allowed. The program continues to provide
weatherization, furnace repair and furnace replacement.
Additional funding is needed in order to provide a second
regular benefit to offset the rising energy burdens felt by
New York residents. 691,500 regular benefits Emergency
program? 195,500 emergency benefits were issued.
north dakota
North Dakota expects to serve 15% more households in its
regular and emergency LIHEAP programs this year. The state
has increased the program eligibility criteria from 150% of
poverty to 60% of the state's median income and has continued
its weatherization and furnace replacement programs.
Residents have seen the cost of natural gas rise by 29%,
propane by 40% and heating oil by 47%. If prices remain high,
the state will need a 40% increase in funds to maintain
program benefit levels. So far, state spending for winter
home heating benefits is running 92% higher than last year at
this time.
ohio
The percentage of households assisted by Ohio's LIHEAP
program is expected to increase by about 15% in the regular
program (224,700 vs. 195,380) and emergency programs (126,000
vs. 109,656) this year. The benefit levels of both program
components have been increased to help offset the increases
in home heating costs. Natural gas prices have increased
between 35 and 50% this year, as have propane and oil.
Additional funding is needed to expand the income guidelines
from 150% of the federal poverty guidelines to 60% of the
state median income, which would greatly increase the number
of potential applicants and enable the state to assist those
who are not currently served but whose energy burdens have
skyrocketed.
oklahoma
Oklahoma is expecting an increase of 50% in the number of
households served this year (86,000 vs. 57,300) although
income eligibility remains at 110% of the federal poverty
guidelines. Oklahoma's LIHEAP program reports natural gas
prices have almost doubled and an additional $23 million is
needed just to maintain the same out-of-pocket expense to the
low and fixed income clients. December 2000 had the coldest
average temperature in recorded history in Oklahoma.
oregon
The caseload in Oregon's LIHEAP program is expected to rise
by 82% this year (88,547 vs. 48,547). Although there has been
no increase in benefits and no changes to the eligibility
criteria, an emergency payment was authorized for oil and
bulk propane in addition to the regular payment so that
households could purchase the same amount of fuel that the
benefits would have purchased last year. The contingency
funds previously targeted for weatherization have been
redirected to client benefits instead. There has been a
significant increase in the demand for benefits this year and
additional funds are needed to accommodate this, as well as
to provide additional crisis benefits to clients who heat
with oil or bulk propane.
pennsylvania
The percentage of households assisted by Pennsylvania's
regular LIHEAP program is expecting to increase by almost 32
percent (280,750 vs. 213,032). Applications for crisis
assistance are also expected to increase by a similar
percentage (101,500 vs. 76,700). Income eligibility in
Pennsylvania's LIHEAP program was increased from 110% to 135%
of the federal poverty guidelines and the maximum crisis
award is up from $250 to $400. As a result of the contingency
funds awarded to Pennsylvania this year, applications will
continue to be accepted until April 30th, the maximum crisis
benefit will be increased to $700 and the crisis eligibility
will be expanded to 150% of the poverty level. Pennsylvania
residents have seen the price of deliverable fuels rise by
50% and gas by 40%. Additional funding is needed to expand
the eligibility criteria for all applicants to 150% of the
federal poverty guidelines, increase benefits to offset the
higher energy burdens and develop a spring/summer cooling
program.
rhode island
The percentage of households served by the Rhode Island
LIHEAP program is expected to increase by 33% (26,000 vs.
19,500). Energy prices have shown significant increases.
Prices for natural gas prices have increased by 30-40%,
electricity by 40-50% and the home heating oil by 50%. To
help offset these increases, the LIHEAP minimum benefit was
increased from $200 to $325, which resulted in an increase in
the average award from $390 to $550. Emergency oil delivery
has also been increased from 100 gallons to 200 gallons.
Eligibility criteria remains at the 60% state median income
level. Although LIHEAP funds have been set aside for
weatherization activities, boiler or furnace replacement,
blankets and hats for elderly and shut-in clients and summer
crisis programs, additional funding is needed to expand the
crisis and emergency assistance programs, as well as to
implement bulk fuel purchases.
[[Page S2043]]
south carolina
A 24% overall increase in the number of households served
is expected this year and benefits and LIHEAP eligibility
criteria have been increased and expanded to assist clients
in coping with higher energy prices. Additional funds are
needed to provide furnace repair/replacement services, which
are currently not available.
SOUTH DAKOTA
South Dakota expects a 30% increase in the number of
households served (15,000 vs. 11,500) in its regular LIHEAP
program. Income eligibility criteria has not changed (140% of
poverty), but benefits have been increased by 60% for natural
gas, oil and propane users to offset the higher costs of
these fuels. Weatherization and furnace repair and
replacement programs continue to be offered. Additional funds
are needed to further increase the benefit levels, as well as
expand the eligibility criteria to enable more households to
participate.
VERMONT
A 10% increase is expected in the number of households
served by Vermont's LIHEAP program this year (23,900 vs.
21,637). Home heating prices have risen as follows: oil 50%;
propane 45%; and kerosene 45% and although some increases
were made to the benefits this year, additional funds are
needed to keep up with the fuel price increases, as well as
to provide emergency furnace repair/replacement and
weatherization services.
WASHINGTON
Washington's LIHEAP caseload is expected to increase by 50%
this year (75,000 vs. 49,770). Neither benefits nor
eligibility criteria have changed this year, but fuel costs
have increased significantly. Natural gas prices are up by
26%, electricity by 15% and kerosene by 60%. Supplemental
funding would enable higher benefits to be awarded to offset
the higher energy burden experienced by Washington households
this year, as well as enable additional households to be
served.
WEST VIRGINIA
West Virginia expects to serve almost 55% more households
this year (55,000 vs. 38,804). Heating costs have increased
on average by about 12%. Benefits levels were increased by
raising the minimum payment by $50 and the maximum benefit
from $475 to $600. Additional funding would probably be used
to assist customers with cooling costs during the summer, and
to expand the LIHEAP program to include more customers.
WISCONSIN
Wisconsin expects to serve 25% more households in its
regular LIHEAP program (110,100 vs. 88,105) and emergency
program (25,000 vs. 20,152) this year. The average benefit
has been increased and additional funds have been targeted
for crisis assistance. Residents have seen the cost of
natural gas rise by 101%, propane by 62% and heating oil by
30%. Additional funding is needed to further increase the
benefit levels to more adequately mitigate the effects of the
price spikes, as well as to expand outreach efforts and
assist additional eligible households.
Mr. BINGAMAN. Mr. President, I don't know if it is the will of the
managers of the bill to have a vote at this time. I am certainly ready
for a vote whenever time is appropriate.
I ask for the yeas and nays on the amendment.
The PRESIDING OFFICER. Is there a sufficient second?
At the moment, there is not a sufficient second.
Mr. BINGAMAN. Mr. President, I will renew that request when we have
more Senators on the floor.
I yield the floor.
Mr. KENNEDY. Mr. President, this amendment includes essential short-
term responses to the energy difficulties that American families face
right now. It includes protections for working families who must heat
their homes during the severe winters that we have in the Northeast and
Midwest, and for families who must cool their homes during times of
extreme heat in the South and West. Many families cannot afford sudden
and dramatic increases in their heating costs, yet they must heat their
homes to survive. This year 123,000 Massachusetts families needed help
with their heating costs under the Low Income Home Energy Assistance
Program, a 10 percent increase in need over last year. In Boston alone,
community action agencies made over 1,500 emergency heating oil
deliveries this winter.
The expanded relief afforded working families under this Amendment is
a fitting--and I say crucial--addition to a bankruptcy bill that seeks
to limit the debt relief available to consumers. I am proud to join my
colleagues in proposing to improve this bankruptcy bill with energy
protections for middle and low-income families.
Over the next year, Congress faces difficult choices in planning the
Nation's energy future, choices that will have profound long-term
consequences for every sector of the Nation's economy. Republicans
insist on debating controversial proposals like oil drilling in
wildlife refuges but even if they succeed in forcing the drilling to
begin, any oil found there will not have any effect on the domestic
energy supply for 5 or even 10 years.
While we take the time that is necessary to debate long-term energy
policy, a foot of snow remains on the ground in Boston today. The cold
weather brings immediate needs to families and small businesses,
including many who work in the transportation industry. These needs
cannot and should not continue be ignored. Unless Congress acts now,
many families will suffer in the cold through the remainder of the
winter, they will endure the summer's heat without respite, and they
will be the first to feel the effects of any destabilization in the
larger economy.
Especially as Congress acts to weaken the bankruptcy protections
available to low-income consumers, it must account for their legitimate
short-term energy needs. This amendment accomplishes this work in a
straightforward way, by: increasing authorized funding for the Low
Income Home Energy Assistance Program, the Weatherization Assistance
Program, and State Energy Grants; expanding state options for providing
energy assistance to any family earning under 200 percent of poverty;
and requiring the federal government to lead by example in all manners
of energy conservation.
The fact that we cannot solve all of the Nation's energy problems
overnight does not excuse us from doing what we know works to protect
families in the near term. The sponsors of this amendment are clear
that a strong safety net for low-income working families, conservation,
and energy efficiency are actions that can and must be taken
immediately in response to the energy difficulties that we all know
consumers throughout the Nation are facing today.
I urge my colleagues to support this amendment.
The PRESIDING OFFICER. The Senator from Alabama is recognized.
Mr. SESSIONS. Mr. President, I thank the Senator for his concern
about energy policy in America. I share that. Those of us who worked
for 4 years on the bankruptcy bill know that we need to remain focused
on this bill.
I hope there is some way we can avoid having an energy debate delay
our ability to bring to a conclusion the bill that is before us today,
the bankruptcy legislation. To date, we have been pretty good about
that. People are bringing their amendments down. They have been
relevant amendments for the most part. Some have not been very relevant
but at least arguably relevant. I think this one is particularly
nongermane to the matter before us.
I want to say with regard to energy policy, it has been obvious to me
for some time that this Nation has been operating within a rosy
scenario. We have blithely gone along, even though we have so much more
superior technology today and are so much more capable of producing
energy without any environmental damage, virtually no environmental
damage, and at the same time we have been declaring time and time again
that we will not allow energy reserves to be produced.
One of the reasons is there is a group in this country that favors
high energy prices. This is a no-growth group that is not in the
mainstream. But every time there is an opportunity to bring on a new
supply of energy, they object. It is their joy when prices go up
because they think somehow that will cause people to burn less fuel and
emit less pollutants. They are not concerned the average family in
Alabama 2\1/2\ years ago maybe spending $100 a month for their gasoline
bill for their automobile and now spending $150 is because we
allowed ourselves to become increasingly dependent on foreign oil.
Those OPEC nations got together and politically jacked up the price
by withholding supplies. They are not concerned we can't bring nuclear
power on line. That has been blocked in any number of different ways
leaving us now totally dependent for new electricity generation on
natural gas which places electric generation in competition with
homeowners. And we are seeing huge increases in natural gas prices in
my State.
I see the Senator from Maryland. Is he prepared to speak on the
bankruptcy bill?
[[Page S2044]]
Mr. SARBANES. I want to speak with respect to an amendment that was
offered a short while ago and is still pending before the body.
Mr. SESSIONS. I would be delighted to yield to him, Mr. President,
because he will be speaking on a pending bankruptcy amendment.
The PRESIDING OFFICER (Mr. Fitzgerald). The Senator from Maryland is
recognized.
Amendment No. 25
Mr. SARBANES. Mr. President, I rise to speak in favor of the
amendment offered just a short while ago by my very able colleague from
New York, Senator Schumer, which I cosponsored. I thank Senator Schumer
for his leadership on this amendment which seeks to ensure--there is
some ambiguity--that the claims and defenses that would have existed
with respect to a predatory loan will survive at sale or loan and
passage through a bankruptcy proceeding.
Last year, just to illustrate the dimensions of this problem, the New
York Times and ABC News broke a story about a company called First
Alliance Corporation. First Alliance was a predator mortgage lender
which engaged in deceptive and fraudulent practices.
Like many predatory lenders, First Alliance targeted elderly
homeowners, many of whom were ill, for the hard sell. In fact, First
Alliance developed a script for its lending staff called ``The Track,''
which detailed a set of tricks that could be used to distract and
deceive trusting homeowners. Indeed, according to press accounts, a
California appeals court found that First Alliance ``trained its
employees to use various methods, including deception, to sell its
services.''
This guidebook to deception is only part of the story. Loan officers
did not disclose, as required by the Truth in Lending Act, the true
costs of the loan. Even where the documents told the true story, the
loan officers would lie to the customer about the meaning of the
documents.
This is not an idle or empty accusation. This is not speculation. One
customer of First Alliance taped her conversation with a loan officer
to play for her husband later on because she had become so confused by
the transaction. So we know these violations occur.
Over time, a number of State attorneys general started investigating
First Alliance, and a growing number of victims of these practices
brought suit.
Under the Truth in Lending Act and State fraud and other statutes,
the victims have the right to seek redress that makes them whole and in
some cases to collect damages. Under threat from many such lawsuits,
First Alliance declared bankruptcy. In other words, the company that
had engaged in these practices, which was now being called to account
for those practices by the State attorneys general and by those people
victimized--utilizing the Truth in Lending Act, and State fraud and
other statutes--that company declared bankruptcy. Other subprime
predatory lenders engaging in similar practices have sought the
protection of bankruptcy courts as the suits have piled up. A number of
these firms have sold their loan portfolios, or the servicing rights to
their loans, in their bankruptcy proceedings.
What this amendment would do is it would ensure that the claims that
rest against these deceptive and fraudulent loans would survive the
bankruptcy process. It is arguable that that is what existing law
provides, but it is not altogether clear. This seeks to make that
crystal clear.
The amendment is necessary because some are now advancing the
argument that going through bankruptcy is essentially equivalent to
laundering the loan; in other words, what was dirty going into the
bankruptcy proceeding comes out clean. But of course what that means is
that innocent homeowners who sought a loan, homeowners who were tricked
and lied to, homeowners who have legitimate claims to relief under
existing law, might end up without a remedy and might end up losing
their homes.
Indeed, one could argue that the current ambiguity encourages these
lenders to go into bankruptcy. If bankruptcy results in these loans
being laundered--cleaned up--then those loans, those assets, become
more valuable after bankruptcy than they were before. If you can pass
them through that process and, in effect, block out the victims from
seeking the remedies to which existing law entitles them, then the
asset is more valuable if it passes through the bankruptcy proceeding.
Obviously, anyone stopping to think about this, even for a moment,
would conclude that this is wrong. If a consumer has a legitimate claim
because a loan was made without complying with the law, that consumer
should be able to pursue the claim regardless of whether the company
that made the loan went through bankruptcy or not.
Indeed, one of the arguments that was used earlier today in the
debate, in opposing the amendment that was offered by Senator Durbin,
was that remedies against predatory, fraudulent, and unfair loans
already exist in the law today. That argument was used to say that the
Durbin amendment was not necessary. The fact of the matter is, if we
want to ensure that such protections do in fact exist and that they are
not wiped out by the bankruptcy proceeding, we need to adopt this
amendment.
Let me make one final point. This amendment does not create any new
causes of action or create liability where none currently exists. All
it does is, it simply maintains the same claim against the loan on both
sides of the bankruptcy process. So it precludes using the bankruptcy
process to wipe out these claims and remedies that are available to the
consumer because the lender has engaged in predatory and fraudulent
practices.
I am very frank to say to you I think it is a small but significant
step to providing victims of predatory lending the opportunity to
obtain a measure of relief with respect to the exploitation that has
been practiced upon them.
I urge the adoption of the amendment which Senator Schumer offered
just a short while ago and which is pending at the desk along with, as
I understand it, a number of other amendments which will be voted upon
later in our proceedings.
Mr. President, I yield the floor.
Mr. SESSIONS. Will the Senator yield?
Mr. SARBANES. Certainly.
Mr. SESSIONS. I know the Senator is a distinguished member of the
Banking Committee and understands these matters far better than I. But
this deals with a situation in which a lending institution violated the
law in making certain loans and was subject to lawsuit; is that right?
Mr. SARBANES. That is right. First of all, let me make very clear,
the number of institutions engaged in these kinds of practices is
limited. They are the worst of the bunch. The responsible people in the
industry do not want these people engaged in these kinds of practices.
But, unfortunately, there are people who are really engaged in
essentially what is a ripoff. And there are some existing protections
against some practices that are provided in the law, in the Truth in
Lending Act at the Federal level and in State fraud statutes, so that
the victims can bring suit and obtain a remedy with respect to the way
they have been exploited by a loan.
All this amendment says if those kinds of business enterprises which
have engaged in this practice declare bankruptcy, they then cannot use
the bankruptcy proceeding to, in effect, erase those claims--in other
words, take what is a dirty asset, or a dirty loan, into bankruptcy and
bring it out on the other side as a clean loan where you then say to
the consumer: It's too bad, you just can't get any recourse because
this loan has gone through the bankruptcy process.
So this would maintain the consumer's rights that he had going into
the bankruptcy on the other side. It does not add to those rights.
Those rights are defined by existing law--Federal and State--so it
would not substantively expand the recourse, but procedurally it would
maintain the existing remedies.
Mr. SESSIONS. I think I understand the goal. And I am sympathetic to
that. I guess we are wrestling with the question, Would it simply come
down to the fact that you are telling the borrowers who have been
abused that if they are not able to make their claim, before or while
the case is in bankruptcy, against that bankrupt estate,
[[Page S2045]]
under current law it is lost, but under your law they could make their
claim against whoever bought or purchased the loan?
We can talk about it later. We don't want to make assets unsalable.
Mr. SARBANES. They declare bankruptcy and then they sell these loan
portfolios or the servicing rights to the loans, often in the course of
the bankruptcy proceedings. If you allow that to happen, then you have
an incentive for these companies to use the bankruptcy proceeding as a
way of cleaning up their loans. So they go into bankruptcy, they use
the bankruptcy proceeding to sell them off to somebody, but the victim
has no recourse. We are saying if it goes in as a predatory fraudulent
loan, the person who has been victimized ought not to lose his remedy
because they can wash it through the bankruptcy proceeding.
Mr. SESSIONS. Does the amendment make any difference between a
reorganization and a liquidation circumstance?
Mr. SARBANES. I don't think it does. I would have to doublecheck and
let the Senator know.
Mr. SESSIONS. Is the Senator aware of how this could affect Fannie
Mae or any of those type loans?
Mr. SARBANES. Any purchaser of such loans would have to be on guard
because they would not be able to take them free and clear because the
claims would stay with the loan.
Mr. SESSIONS. They would be less valuable as an asset to sell.
Mr. SARBANES. Potentially.
Mr. SESSIONS. I think I am beginning to comprehend it. I know there
are very delicate issues involved in these matters. It may well be the
Senator has an amendment that would benefit us. I will be glad to look
at it.
Mr. SARBANES. I thank the Senator.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. LEAHY. 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. LEAHY. Mr. President, is there an amendment pending?
The PRESIDING OFFICER. The Bingaman amendment No. 28 is now pending.
Amendment No. 20
Mr. LEAHY. Mr. President, I ask unanimous consent that that be set
aside and I be allowed to call up amendment No. 20 introduced earlier
this morning on current monthly income.
The PRESIDING OFFICER. Without objection, it is so ordered. The clerk
will report.
The legislative clerk read as follows:
The Senator from Vermont [Mr. Leahy] proposes an amendment
numbered 20.
Mr. LEAHY. 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 (No. 20) is as follows:
(Purpose: To resolve an ambiguity relating to the definition of current
monthly income)
On page 18, beginning on line 9, strike ``preceding the
date of determination'' and insert ``ending on the last day
of the calendar month immediately preceding the date of the
bankruptcy filing''.
Mr. LEAHY. Mr. President, this amendment clarifies when a debtor's
current monthly income should be measured. The debtor's current monthly
income is the cornerstone of the bill's means test provision which has
become quite controversial. Whether one supports or opposes the means
test, I think everybody should agree, for or against it, that it ought
to be as clearly drafted as possible.
Assuming that passed as it is now, my amendment would avoid what I
think would be unnecessary future litigation or would clarify that
currently monthly income is measured from the last day of the calendar
month immediately preceding the bankruptcy filing.
Allow me tell you what this means. Under the bill's current language,
currently monthly income could be the 6-month period ending on the date
the debtor's schedules were prepared, which could be a substantial time
before the case was filed, or it could be the filing date, or it could
be some later date, such as the time of a hearing on a motion to
convert or dismiss the case based on the debtor's ability to pay. So it
becomes a moving target.
Since accuracy of the schedules is of vital importance and subject to
audit, it is important that debtors and their counsel be given clear
direction as to the time on which income must be averaged. My amendment
would resolve the ambiguity so as to deal with full calendar months of
income data and to give a cutoff date prior to the bankruptcy filing.
As amended, this definition would apply to average monthly income
derived during the 6-month period ending on the last day of the
calendar month immediately preceding the bankruptcy filing. Everybody
would know where we are.
That is a relatively simple amendment. I think actually if one looks
back on this, it would seem to be a drafting error. That is why I
brought it up earlier this morning: more to improve the bill so we are
not stuck with a bill that, if it does pass, we find ourselves
litigating for the next year or two on issues none of us intended,
whether for or against the bill.
That is what it is. I hope Senators will take a look at it.
The PRESIDING OFFICER. The Senator from North Dakota.
Amendment No. 29 to Amendment No. 20
Mr. CONRAD. Mr. President, I send to the desk an amendment in the
second degree.
The PRESIDING OFFICER. The clerk will report.
Mr. SESSIONS. Mr. President, I object.
The PRESIDING OFFICER. The Senator has that right.
The clerk will report.
The legislative clerk read as follows:
The Senator from North Dakota [Mr. Conrad] proposes an
amendment numbered 29 to amendment No. 20.
Mr. SESSIONS. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
Mr. CONRAD. I object.
The PRESIDING OFFICER. Objection is heard. The clerk will continue
the reading of the amendment.
The legislative clerk continued the reading of the amendment.
Mr. CONRAD. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Is there objection?
Mr. SESSIONS. I object.
The PRESIDING OFFICER. Objection is heard. The clerk will continue
the reading of the amendment.
Mr. LEAHY. 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 (No. 29) is as follows:
(Purpose: To establish an off-budget lockbox to strengthen Social
Security and Medicare)
At the end of the amendment No. 20 insert the following:
TITLE __--SOCIAL SECURITY AND MEDICARE OFF-BUDGET LOCKBOX ACT OF 2001
SEC. __01. SHORT TITLE.
This title may be cited as the ``Social Security and
Medicare Off-Budget Lockbox Act of 2001''.
SEC. __02. STRENGTHENING SOCIAL SECURITY POINTS OF ORDER.
(a) In General.--Section 312 of the Congressional Budget
Act of 1974 (2 U.S.C. 643) is amended by inserting at the end
the following:
``(g) Strengthening Social Security Point of Order.--It
shall not be in order in the House of Representatives or the
Senate to consider a concurrent resolution on the budget (or
any amendment thereto or conference report thereon) or any
bill, joint resolution, amendment, motion, or conference
report that would violate or amend section 13301 of the
Budget Enforcement Act of 1990.''.
(b) Super Majority Requirement.--
(1) Point of order.--Section 904(c)(1) of the Congressional
Budget Act of 1974 is amended by inserting ``312(g),'' after
``310(d)(2),''.
(2) Waiver.--Section 904(d)(2) of the Congressional Budget
Act of 1974 is amended by inserting ``312(g),'' after
``310(d)(2),''.
(c) Enforcement in Each Fiscal Year.--The Congressional
Budget Act of 1974 is amended in--
(1) section 301(a)(7) (2 U.S.C. 632(a)(7)), by striking
``for the fiscal year'' through the period and inserting
``for each fiscal year covered by the resolution''; and
(2) section 311(a)(3) (2 U.S.C. 642(a)(3)), by striking
beginning with ``for the first fiscal year'' through the
period and insert the following: ``for any of the fiscal
years covered by the concurrent resolution.''.
[[Page S2046]]
SEC. __03. MEDICARE TRUST FUND OFF-BUDGET.
(a) In General.--
(1) General exclusion from all budgets.--Title III of the
Congressional Budget Act of 1974 is amended by adding at the
end the following:
``exclusion of medicare trust fund from all budgets
``Sec. 316. (a) Exclusion of Medicare Trust Fund From All
Budgets.--Notwithstanding any other provision of law, the
receipts and disbursements of the Federal Hospital Insurance
Trust Fund shall not be counted as new budget authority,
outlays, receipts, or deficit or surplus for purposes of--
``(1) the budget of the United States Government as
submitted by the President;
``(2) the congressional budget; or
``(3) the Balanced Budget and Emergency Deficit Control Act
of 1985.
``(b) Strengthening Medicare Point of Order.--It shall not
be in order in the House of Representatives or the Senate to
consider a concurrent resolution on the budget (or any
amendment thereto or conference report thereon) or any bill,
joint resolution, amendment, motion, or conference report
that would violate or amend this section.''.
(2) Super majority requirement.--
(A) Point of Order.--Section 904(c)(1) of the Congressional
Budget Act of 1974 is amended by inserting ``316,'' after
``313,''.
(B) Waiver.--Section 904(d)(2) of the Congressional Budget
Act of 1974 is amended by inserting ``316,'' after ``313,''.
(b) Exclusion of Medicare Trust Fund From Congressional
Budget.--Section 301(a) of the Congressional Budget Act of
1974 (2 U.S.C. 632(a)) is amended by adding at the end the
following: ``The concurrent resolution shall not include the
outlays and revenue totals of the Federal Hospital Insurance
Trust Fund in the surplus or deficit totals required by this
subsection or in any other surplus or deficit totals required
by this title.''
(c) Budget Totals.--Section 301(a) of the Congressional
Budget Act of 1974 (2 U.S.C. 632(a)) is amended by inserting
after paragraph (7) the following:
``(8) For purposes of Senate enforcement under this title,
revenues and outlays of the Federal Hospital Insurance Trust
Fund for each fiscal year covered by the budget
resolution.''.
(d) Budget resolutions.--Section 301(i) of the
Congressional Budget Act of 1974 (2 U.S.C. 632(i)) is amended
by--
(1) striking ``Social Security Point of Order.--It shall''
and inserting ``Social Security and Medicare Points of
Order.--
``(1) Social security.--It shall''; and
(2) inserting at the end the following:
``(2) Medicare.--It shall not be in order in the House of
Representatives or the Senate to consider any concurrent
resolution on the budget (or amendment, motion, or conference
report on the resolution) that would cause a decrease in
surpluses or an increase in deficits of the Federal Hospital
Insurance Trust Fund in any of the fiscal years covered by
the concurrent resolution.''.
(e) Medicare Firewall.--Section 311(a) of the Congressional
Budget Act of 1974 (2 U.S.C. 642(a)) is amended by adding
after paragraph (3), the following:
``(4) Enforcement of medicare levels in the senate.--After
a concurrent resolution on the budget is agreed to, it shall
not be in order in the Senate to consider any bill, joint
resolution, amendment, motion, or conference report that
would cause a decrease in surpluses or an increase in
deficits of the Federal Hospital Insurance Trust Fund in any
year relative to the levels set forth in the applicable
resolution.''.
(f) Baseline to Exclude Hospital Insurance Trust Fund.--
Section 257(b)(3) of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended by striking ``shall be
included in all'' and inserting ``shall not be included in
any''.
(g) Medicare Trust Fund Exempt From Sequesters.--Section
255(g)(1)(B) of the Balanced Budget and Emergency Deficit
Control Act of 1985 is amended by adding at the end the
following:
``Medicare as funded through the Federal Hospital Insurance
Trust Fund.''.
(h) Budgetary Treatment of Hospital Insurance Trust Fund.--
Section 710(a) of the Social Security Act (42 U.S.C. 911(a))
is amended--
(1) by striking ``and'' the second place it appears and
inserting a comma; and
(2) by inserting after ``Federal Disability Insurance Trust
Fund'' the following: ``, Federal Hospital Insurance Trust
Fund''.
SEC. __04. PREVENTING ON-BUDGET DEFICITS.
(a) Points of Order To Prevent On-Budget Deficits.--Section
312 of the Congressional Budget Act of 1974 (2 U.S.C. 643) is
amended by adding at the end the following:
``(h) Points of Order To Prevent On-Budget Deficits.--
``(1) Concurrent resolutions on the budget.--It shall not
be in order in the House of Representatives or the Senate to
consider any concurrent resolution on the budget, or
conference report thereon or amendment thereto, that would
cause or increase an on-budget deficit for any fiscal year.
``(2) Subsequent legislation.--It shall not be in order in
the House of Representatives or the Senate to consider any
bill, joint resolution, amendment, motion, or conference
report if--
``(A) the enactment of that bill or resolution as reported;
``(B) the adoption and enactment of that amendment; or
``(C) the enactment of that bill or resolution in the form
recommended in that conference report,
would cause or increase an on-budget deficit for any fiscal
year.''.
(b) Super Majority Requirement.--
(1) Point of Order.--Section 904(c)(1) of the Congressional
Budget Act of 1974 is amended by inserting ``312(h),'' after
``312(g),''.
(2) Waiver.--Section 904(d)(2) of the Congressional Budget
Act of 1974 is amended by inserting ``312(h),'' after
``312(g),''.
Mr. SESSIONS. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BOND. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 26
Mr. BOND. Mr. President, I thank my colleagues for allowing me to go
forward. I apologize. We have several markups going on today, and I was
unable to be here to discuss the small business bankruptcy provision.
My colleague and friend, Senator Kerry of Massachusetts, offered an
amendment which would delete the small business changes in chapter 11
and replace them with a study of the factors that cause small
businesses to enter into bankruptcy and any changes to chapter 11 that
might be appropriate.
At first blush, the amendment would not appear to be a problem.
Senator Kerry and I have worked together in the Small Business
Committee on many things over the years. We take a great deal of pride
in the fact that assisting small business has generally received
overwhelming bipartisan support in this body.
I find some problems with the amendment and with the proposal
requested by the distinguished Senator from Massachusetts because the
report that he seeks actually has already occurred. Approximately 4
years ago, the National Bankruptcy Review Commission conducted a wide-
ranging study of how well the bankruptcy code was working. There was a
small business working group on the commission that looked particularly
at chapter 11 and made an assessment of how well the chapter was
serving small business debtors and creditors.
The small business provisions in this bill are a result of that
study, that work, and the recommendations of the working group of that
commission.
Let's remember that under chapter 11, the debtor is still managing a
business during the bankruptcy proceeding. The small business working
group found that in too many small business cases, there are no strong
creditors committees to oversee how the debtors are managing the
company, and the courts are not doing an adequate job of overseeing the
debtors.
As a result, the working group noted that chapter 11 debtors often
lived under the protection of the bankruptcy code literally for years,
often without providing any meaningful return to unsecured creditors
and diminishing their assets in the process. Accordingly, the
commission recommended chapter 11 be amended in two principal ways.
First, there should be standard reports filed with the courts on a
regular basis so that courts can follow how a debtor is progressing in
bankruptcy.
Second, there should be presumptive plan filing and plan confirmation
deadlines specifically tailored to fit the needs of small business
cases. If these deadlines cannot be met, the commission recommended
that the bankruptcy court hold a factfinding hearing. In that hearing,
the court can look at all the evidence and determine whether a small
business is likely to be able to confirm a plan of reorganization
within a reasonable period of time.
The intent of the provisions is not to eliminate a small business'
ability to reorganize or to place restrictive requirements on it. It is
merely a procedure that would permit courts to review on a regular
basis the progress of a small business attempting to reorganize so that
the court can step in if it appears that the small business does not
have a realistic ability to reorganize.
The establishment of such a process is important for small business.
First, the small business provisions establish standard disclosure
statements and
[[Page S2047]]
debtor reporting requirements that will assist small businesses
entering chapter 11. These provisions have been widely supported as
dramatically improving the chapter 11 process with small business
debtors. Standard requirements will get rid of what is now a costly
burden on small business debtors to draft from scratch a reorganizing
plan and a prospectus-type disclosure statement.
In other words, what is in the bill, what would be stricken by this
amendment, actually does simplify the process significantly for the
small business.
One must remember that small businesses are on both sides of
bankruptcies in this country; they are both creditors and debtors.
Small business creditors are significantly harmed if their fellow small
business debtors, who do not have a realistic opportunity to
reorganize, languish in bankruptcy while their assets deteriorate.
These small business creditors will receive significantly less on their
claims and are substantially harmed.
One of the most important points I can make on this is, if there is
no protection for small business creditors, then there is likely to be
no credit for small businesses. Let us go back and think about that a
minute.
If a small business that gets into trouble cannot go into bankruptcy,
and if there is no means for the creditor to realize something from the
assets of the debtor or get some reasonable plan of accommodation, then
the creditor, the lender, is at risk of losing perhaps the entire loan
to the small business. That is why I say if you do not have a
reasonable bankruptcy procedure, then you are going to curtail the
availability of credit.
We have seen in other countries where they do not have good
bankruptcy provisions that treat fairly the debtors, the creditors, and
all other interested parties, and they have a very difficult time
getting credit for the businesses.
The committee has worked hard, following the commission to study
bankruptcy and the work of the small business working group, to come up
with provisions that are reasonable. These provisions in this bill are
designed to facilitate the proceeding without imposing undue burdens.
That is why I am advised that the National Federation of Independent
Businesses, the National Association of Credit Managers, and the U.S.
Chamber of Commerce oppose this amendment.
They recognize if you inhibit the ability of small business creditors
to get relief, you will make it much less likely that creditors supply
the credit for small business needs.
Lastly, I point out that Congress has approved these provisions
several times. These provisions have been in the bankruptcy bill in one
form or another since the 105th Congress and have been amended during
that time. My colleague from Massachusetts amended the provisions last
Congress significantly to increase the amount of time a small business
has to file a reorganization plan under chapter 11.
I hope we can all agree we need an approach that is balanced between
small business debtors and creditors. We should permit every small
business that gets into credit trouble to have the ability to
reorganize. That is what these provisions are intended to do. That is
why I ask my colleagues to oppose this amendment.
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. CONRAD. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
Mr. SESSIONS. I object.
The PRESIDING OFFICER. The objection is heard. The clerk will
continue to call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. SESSIONS. 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. SESSIONS. Mr. President, I ask unanimous consent that amendment
No. 29 be modified to be considered a first-degree amendment and laid
aside.
I further ask consent that it now be in order for Senator Sessions to
offer an amendment relating to lockbox, and that following the
reporting by the clerk, Senator Conrad be recognized, and following his
remarks, Senator Domenici, or his designee be recognized. I further ask
consent that no amendments be in order to either amendment, and that
following Monday's debate the amendments be laid aside until the hour
of 2:15 p.m. on Tuesday, and there be 30 minutes for closing remarks on
the issue to be equally divided in the usual form on Tuesday.
I further ask consent that the Senate proceed to a vote in relation
to amendment No. 29, to be followed by a vote in relation to the second
lockbox amendment, beginning at 2:45 p.m. Tuesday.
The PRESIDING OFFICER. Is there objection?
Mr. REID. Reserving the right to object, Mr. President, I say to the
acting leader, the manager of the bill--I have a couple points of
clarification. We are concerned about being in session Friday. I
understand the leader is not available. We hope that we can work that
out prior to when we close tonight because Senator Conrad wants to be
able to talk on this amendment tomorrow, in addition to Monday.
It is my understanding there will be a separate agreement later today
to stack some votes Tuesday morning on the amendments that are now
pending; is that right?
Mr. SESSIONS. If we can get an overall agreement, which we have been
seeking, an agreed-upon list of amendments, which has not yet been
forthcoming, which is critical to final disposition of this bill.
Mr. REID. I am quite confident by the end of the vote we will be able
to have a finite list of amendments to give to you and the leader. The
last thing: Is this going to be the last vote of the day? We have had a
number of inquiries in the Cloakroom.
Mr. SESSIONS. I think it hinges on the same problem. If we don't have
on overall agreement, there might be more votes.
Mr. REID. That sounds pretty weak. On behalf of Senator Leahy, we are
doing our best to move this legislation along. We appreciate the
cooperation of the majority in allowing this matter to go forward on
this basis. We feel with the time we have spent doing this, we could
have gone forward with the amendment and be at the same place we are.
Having said that, we have no objection to the unanimous consent
agreement.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 29, as modified, is as follows:
AMENDMENT NO. 29, AS MODIFIED
(Purpose: To establish an off-budget lockbox to strengthen Social
Security and Medicare)
At the end of the bill insert the following:
TITLE XX--SOCIAL SECURITY AND MEDICARE OFF-BUDGET LOCKBOX ACT OF 2001
SEC. __01. SHORT TITLE.
This title may be cited as the ``Social Security and
Medicare Off-Budget Lockbox Act of 2001''.
SEC. __02. STRENGTHENING SOCIAL SECURITY POINTS OF ORDER.
(a) In General.--Section 312 of the Congressional Budget
Act of 1974 (2 U.S.C. 643) is amended by inserting at the end
the following:
``(g) Strengthening Social Security Point of Order.--It
shall not be in order in the House of Representatives or the
Senate to consider a concurrent resolution on the budget (or
any amendment thereto or conference report thereon) or any
bill, joint resolution, amendment, motion, or conference
report that would violate or amend section 13301 of the
Budget Enforcement Act of 1990.''.
(b) Super Majority Requirement.--
(1) Point of order.--Section 904(c)(1) of the Congressional
Budget Act of 1974 is amended by inserting ``312(g),'' after
``310(d)(2),''.
(2) Waiver.--Section 904(d)(2) of the Congressional Budget
Act of 1974 is amended by inserting ``312(g),'' after
``310(d)(2),''.
(c) Enforcement in Each Fiscal Year.--The Congressional
Budget Act of 1974 is amended in--
(1) section 301(a)(7) (2 U.S.C. 632(a)(7)), by striking
``for the fiscal year'' through the period and inserting
``for each fiscal year covered by the resolution''; and
(2) section 311(a)(3) (2 U.S.C. 642(a)(3)), by striking
beginning with ``for the first fiscal year'' through the
period and insert the following: ``for any of the fiscal
years covered by the concurrent resolution.''.
SEC. __03. MEDICARE TRUST FUND OFF-BUDGET.
(a) In General.--
(1) General exclusion from all budgets.--Title III of the
Congressional Budget
[[Page S2048]]
Act of 1974 is amended by adding at the end the following:
``exclusion of medicare trust fund from all budgets
``Sec. 316. (a) Exclusion of Medicare Trust Fund From All
Budgets.--Notwithstanding any other provision of law, the
receipts and disbursements of the Federal Hospital Insurance
Trust Fund shall not be counted as new budget authority,
outlays, receipts, or deficit or surplus for purposes of--
``(1) the budget of the United States Government as
submitted by the President;
``(2) the congressional budget; or
``(3) the Balanced Budget and Emergency Deficit Control Act
of 1985.
``(b) Strengthening Medicare Point of Order.--It shall not
be in order in the House of Representatives or the Senate to
consider a concurrent resolution on the budget (or any
amendment thereto or conference report thereon) or any bill,
joint resolution, amendment, motion, or conference report
that would violate or amend this section.''.
(2) Super majority requirement.--
(A) Point of Order.--Section 904(c)(1) of the Congressional
Budget Act of 1974 is amended by inserting ``316,'' after
``313,''.
(B) Waiver.--Section 904(d)(2) of the Congressional Budget
Act of 1974 is amended by inserting ``316,'' after ``313,''.
(b) Exclusion of Medicare Trust Fund From Congressional
Budget.--Section 301(a) of the Congressional Budget Act of
1974 (2 U.S.C. 632(a)) is amended by adding at the end the
following: ``The concurrent resolution shall not include the
outlays and revenue totals of the Federal Hospital Insurance
Trust Fund in the surplus or deficit totals required by this
subsection or in any other surplus or deficit totals required
by this title.''
(c) Budget Totals.--Section 301(a) of the Congressional
Budget Act of 1974 (2 U.S.C. 632(a)) is amended by inserting
after paragraph (7) the following:
``(8) For purposes of Senate enforcement under this title,
revenues and outlays of the Federal Hospital Insurance Trust
Fund for each fiscal year covered by the budget
resolution.''.
(d) Budget resolutions.--Section 301(i) of the
Congressional Budget Act of 1974 (2 U.S.C. 632(i)) is amended
by--
(1) striking ``Social Security Point of Order.--It shall''
and inserting ``Social Security and Medicare Points of
Order.--
``(1) Social security.--It shall''; and
(2) inserting at the end the following:
``(2) Medicare.--It shall not be in order in the House of
Representatives or the Senate to consider any concurrent
resolution on the budget (or amendment, motion, or conference
report on the resolution) that would cause a decrease in
surpluses or an increase in deficits of the Federal Hospital
Insurance Trust Fund in any of the fiscal years covered by
the concurrent resolution.''.
(e) Medicare Firewall.--Section 311(a) of the Congressional
Budget Act of 1974 (2 U.S.C. 642(a)) is amended by adding
after paragraph (3), the following:
``(4) Enforcement of medicare levels in the senate.--After
a concurrent resolution on the budget is agreed to, it shall
not be in order in the Senate to consider any bill, joint
resolution, amendment, motion, or conference report that
would cause a decrease in surpluses or an increase in
deficits of the Federal Hospital Insurance Trust Fund in any
year relative to the levels set forth in the applicable
resolution.''.
(f) Baseline To Exclude Hospital Insurance Trust Fund.--
Section 257(b)(3) of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended by striking ``shall be
included in all'' and inserting ``shall not be included in
any''.
(g) Medicare Trust Fund Exempt From Sequesters.--Section
255(g)(1)(B) of the Balanced Budget and Emergency Deficit
Control Act of 1985 is amended by adding at the end the
following:
``Medicare as funded through the Federal Hospital Insurance
Trust Fund.''.
(h) Budgetary Treatment of Hospital Insurance Trust Fund.--
Section 710(a) of the Social Security Act (42 U.S.C. 911(a))
is amended--
(1) by striking ``and'' the second place it appears and
inserting a comma; and
(2) by inserting after ``Federal Disability Insurance Trust
Fund'' the following: ``, Federal Hospital Insurance Trust
Fund''.
SEC. __04. PREVENTING ON-BUDGET DEFICITS.
(a) Points of Order To Prevent On-Budget Deficits.--Section
312 of the Congressional Budget Act of 1974 (2 U.S.C. 643) is
amended by adding at the end the following:
``(h) Points of Order To Prevent On-Budget Deficits.--
``(1) Concurrent resolutions on the budget.--It shall not
be in order in the House of Representatives or the Senate to
consider any concurrent resolution on the budget, or
conference report thereon or amendment thereto, that would
cause or increase an on-budget deficit for any fiscal year.
``(2) Subsequent legislation.--It shall not be in order in
the House of Representatives or the Senate to consider any
bill, joint resolution, amendment, motion, or conference
report if--
``(A) the enactment of that bill or resolution as reported;
``(B) the adoption and enactment of that amendment; or
``(C) the enactment of that bill or resolution in the form
recommended in that conference report,
would cause or increase an on-budget deficit for any fiscal
year.''.
(b) Super Majority Requirement.--
(1) Point of Order.--Section 904(c)(1) of the Congressional
Budget Act of 1974 is amended by inserting ``312(h),'' after
``312(g),''.
(2) Waiver.--Section 904(d)(2) of the Congressional Budget
Act of 1974 is amended by inserting ``312(h),'' after
``312(g),''.
Mr. SESSIONS. Mr. President, I ask unanimous consent that a vote
occur in relation to the Kerry amendment No. 26 relative to small
business at 3:30 p.m. today and that no second-degree amendments or
further debate be in order prior to the vote.
Finally, I ask consent that there be 10 minutes equally divided in
the usual form prior to the vote in relation to the Kerry amendment.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Amendment No. 32
Mr. SESSIONS. Mr. President, I send to the desk an amendment to
establish a procedure to safeguard the surpluses of the Social Security
and Medicare hospital insurance trust fund.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Alabama [Mr. Sessions] proposes an
amendment numbered 32.
Mr. REID. Mr. President, I ask unanimous consent that the reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To establish a procedure to safeguard the surpluses of the
Social Security and Medicare hospital insurance trust funds)
At the end of the bill insert the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Social Security and Medicare
Lock-Box Act of 2001.''
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.--The Congress finds that--
(1) the Balanced Budget Act of 1997 and strong economic
growth have ended decades of deficit spending;
(2) the Government is able to meet its current obligations
without using the social security and medicare surpluses;
(3) fiscal pressures will mount as an aging population
increases the Government's obligations to provide retirement
income and health services;
(4) social security and medicare hospital insurance
surpluses should be used to reduce the debt held by the
public until legislation is enacted that reforms Social
Security and Medicare;
(5) preserving the social security and medicare hospital
insurance surpluses would restore confidence in the long-term
financial integrity of social security and medicare; and
(6) strengthening the Government's fiscal position through
debt reduction would increase national savings, promote
economic growth, and reduce its interest payments.
(b) Purpose.--It is the purpose of this Act to--
(1) prevent the surpluses of the social security and
medicare hospital insurance trust funds from being used for
any purpose other than providing retirement and health
security; and
(2) use such surpluses to pay down the national debt until
such time as medicare and social security legislation is
enacted.
SEC. 3. PROTECTION OF SOCIAL SECURITY AND MEDICARE SURPLUSES.
(a) Protection of Social Security and Medicare Surpluses.--
Title III of the Congressional Budget Act of 1974 is amended
by adding at the end the following new section:
``lock-box for social security and hospital insurance surpluses
``Sec. 316. (a) Lock-Box for Social Security and Hospital
Insurance Surpluses.--
``(1) Concurrent resolutions on the budget.--
``(A) In general.--It shall not be in order in the House of
Representatives or the Senate to consider any concurrent
resolution on the budget, or an amendment thereto or
conference report thereon, that would set forth a surplus for
any fiscal year that is less than the surplus of the Federal
Hospital Insurance Trust Fund for that fiscal year.
``(B) Exception.--(i) Subparagraph (A) shall not apply to
the extent that a violation of such subparagraph would result
from an assumption in the resolution, amendment, or
conference report, as applicable, of an increase in outlays
or a decrease in revenue relative to the baseline underlying
that resolution for social security reform legislation or
medicare reform legislation for any such fiscal year.
``(ii) If a concurrent resolution on the budget, or an
amendment thereto or conference report thereon, would be in
violation of subparagraph (A) because of an assumption of an
increase in outlays or a decrease in revenue relative to the
baseline underlying that resolution for social security
reform legislation or medicare reform legislation for any
such fiscal year, then that resolution shall include a
statement identifying any such increase in outlays or
decrease in revenue.
[[Page S2049]]
``(2) Spending and tax legislation.--
``(A) In general.--It shall not be in order in the House of
Representatives or the Senate to consider any bill, joint
resolution, amendment, motion, or conference report if--
``(i) the enactment of that bill or resolution, as
reported;
``(ii) the adoption and enactment of that amendment; or
``(iii) the enactment of that bill or resolution in the
form recommended in that conference report.
would cause the surplus for any fiscal year covered by the
most recently agreed to concurrent resolution on the budget
to be less than the surplus of the Federal Hospital Insurance
Trust Fund for that fiscal year.
``(B) Exception.--Subparagraph (A) shall not apply to
social security reform legislation or medicare reform
legislation.
``(b) Enforcement.--
``(1) Budgetary levels with respect to concurrent
resolutions on the budget.--For purposes of enforcing any
point of order under subsection (a)(1), the surplus for any
fiscal year shall be--
``(A) the levels set forth in the later of the concurrent
resolution on the budget, as reported, or in the conference
report on the concurrent resolution on the budget; and
``(B) adjusted to the maximum extent allowable under all
procedures that allow budgetary aggregates to be adjusted for
legislation that would cause a decrease in the surplus for
any fiscal year covered by the concurrent resolution on the
budget (other than procedures described in paragraph
(2)(A)(ii)).
(2) Current levels with respect to spending and tax
legislation.--
``(A) In general.--For purposes of enforcing subsection
(a)(2), the current levels of the surplus for any fiscal year
shall be--
``(i) calculated using the following assumptions--
``(I) direct spending and revenue levels at the baseline
levels underlying the most recently agreed to concurrent
resolution on the budget; and
`(II) for the budget year, discretionary spending levels at
current law levels and, for outyears, discretionary spending
levels at the baseline levels underlying the most recently
agreed to concurrent resolution on the budget; and
``(ii) adjusted for changes in the surplus levels set forth
in the most recently agreed to concurrent resolution on the
budget pursuant to procedures in such resolution that
authorize adjustments in budgetary aggregates for updated
economic and technical assumptions in the mid-session report
of the Director of the Congressional Budget Office.
Such revisions shall be included in the first current level
report on the congressional budget submitted for publication
in the Congressional Record after the release of such mid-
session report.
``(B) Budgetary treatment.--Outlays (or receipts) for any
fiscal year resulting from social security or medicare reform
legislation in excess of the amount of outlays (or less than
the amount of receipts) for that fiscal year set forth in the
most recently agreed to concurrent resolution on the budget
or the section 302(a) allocation for such legislation, as
applicable, shall not be taken into account for purposes of
enforcing any point of order under subsection (a)(2).
``(3) Disclosure of hi surplus.--For purposes of enforcing
any point of order under subsection (a), the surplus of the
Federal Hospital Insurance Trust Fund for a fiscal year shall
be the levels set forth in the later of the report
accompanying the concurrent resolution on the budget (or, in
the absence of such a report, placed in the Congressional
Record prior to the consideration of such resolution) or in
the joint explanatory statement of managers accompanying such
resolution.
``(c) Additional Content of Reports Accompanying Budget
Resolutions and of Joint Explanatory Statements.--The report
accompanying any concurrent resolution on the budget and the
joint explanatory statement accompanying the conference
report on each such resolution shall include the levels of
the surplus in the budget for each fiscal year set forth
in such resolution and of the surplus or deficit in the
Federal Hospital Insurance Trust Fund, calculated using
the assumptions set forth in subsection (b)(2)(A).
``(d) Definitions.--As used in this section:
``(1) The term `medicare reform legislation' means a bill
or a joint resolution to save Medicare that includes a
provision stating the following: `For purposes of section
316(a) of the Congressional Budget Act of 1974, this Act
constitutes medicare reform legislation.
``(2) The term `social reform legislation' means a bill or
a joint resolution to save social security that includes a
provision stating the following: `For purposes of section
316(a) of the Congressional Budget Act of 1974, this Act
constitutes social security reform legislation.'.
``(e) Waiver and Appeal.--Subsection (a) may be waived or
suspended in the Senate only by an affirmative vote of three-
fifths of the Members, duly chosen and sworn. An affirmative
vote of three-fifths of the Members of the Senate, duly
chosen and sworn, shall be required in the Senate to sustain
an appeal of the ruling of the Chair on a point of order
raised under this section.
``(f) Effective Date.--This section shall cease to have any
force or effect upon the enactment of social security reform
legislation and medicare reform legislation.''
(b) Conforming Amendment.--The item relating to section 316
in the table of contents set forth in section 1(b) of the
Congressional Budget and Impoundment Control Act of 1974 is
amended to read as follows:
``Sec. 316. Lock-box for social security and hospital insurance
surpluses.''.
SEC. 4. PRESIDENT'S BUDGET.
(a) Protection of Social Security and Medicare Surpluses.--
If the budget of the United States Government submitted by
the President under section 1105(a) of title 31, United
States Code, recommends an on-budget surplus for any fiscal
year that is less than the surplus of the Federal Hospital
Insurance Trust Fund for that fiscal year, then it shall
include a detailed proposal for social security reform
legislation or medicare reform legislation.
(b) Effective Date.--Subsection (a) shall cease to have any
force or effect upon the enactment of social security reform
legislation and medicare reform legislation as defined by
section 316(d) of the Congressional Budget Act of 1974.
Amendment No. 29, As Modified
The PRESIDING OFFICER. Under the order, the Senator from North Dakota
is recognized next.
Mr. CONRAD. Mr. President, the amendment I have sent to the desk is
an amendment to provide protection to both the Social Security trust
fund surplus and the Medicare Hospital Insurance Trust Fund surplus.
Mr. President, this is legislation I offered last year that passed the
Senate on a bipartisan basis with 60 votes.
I hope that again this year we can send a very strong signal in this
body that we fully intend to protect the Social Security and Medicare
trust funds; that we intend to establish a lockbox to wall off those
trust funds from being used for any other purpose; that we would assure
the American people that the Social Security trust fund and the
Medicare Trust Fund will not be raided, will not be used for other
spending, will not be used for any other purpose, will not be used for
a tax cut; that we will assure those who are the beneficiaries of
Social Security and Medicare--those who make payments to those
programs--that the money they have paid in will be used for the
purposes intended.
This amendment, very simply, takes the Medicare Hospital Insurance
trust fund completely off budget the same way we have protected the
Social Security fund. It would add points of order to ensure that
neither Social Security nor Medicare surpluses could be used for any
other purpose.
As you know, Social Security is already off budget. This amendment
would treat the Medicare Trust Fund the same way as we already treat
the Social Security trust funds. It would also create points of order
against any legislation that would reduce the Medicare Hospital
Insurance trust fund surpluses. Similar points of order already apply
to Social Security.
In addition, the amendment strengthens existing rules that protect
Social Security. For example, we establish a point of order protecting
Social Security's off-budget status. Our amendment also includes a
point of order protecting Social Security surpluses in every year
covered by a budget resolution, which is a strengthening over current
law. Again, this is largely, almost entirely, the amendment that passed
the Senate Chamber last year with 60 votes, and it was a strong
bipartisan vote.
Many of us believe we should not raid the Social Security and
Medicare trust funds, period. Ninety-eight Senators voted last year in
favor of this principle; 60 voted for my proposal; I believe over 50
voted for Senator Ashcroft's proposal. But when you looked at the vote,
98 Senators voted for one or the other. I ask my colleagues to again
endorse that principle.
Again, if we look at the specifics, it protects Social Security
surpluses in each and every year. It takes the Medicare Hospital
Insurance trust fund off budget. It gives Medicare the same protections
as Social Security, and it contains strong enforcement. That is
precisely what we offered last year. That is precisely what passed last
year. I hope we don't take a step backward this year and water down
these protections.
Now, some have said if we save both the Social Security and Medicare
trust fund surpluses that we will get into excess cash buildup between
now and the end of this 10-year budget forecast period. Let me just
indicate, as this chart shows, we can save all of the Social Security
surplus, and all of the Medicare
[[Page S2050]]
Hospital Insurance surplus, and not have any cash buildup problem until
out in the year 2010. So we don't have a problem for 9 years of any
cash buildup, no problem at all until the year 2010. So we have plenty
of time to respond to that, if, indeed, it ever develops.
As we all know, this is based on a 10-year forecast. It is a forecast
that may come true, and may not come true.
We are all working off a CBO projection that is a 10-year projection,
which the forecasting agency itself tells us only has a 10-percent
chance of coming through--10 percent. When we use this figure, $5.6
trillion surplus over the next 10 years, the forecasting agency has
told us that only has a 10-percent chance of coming true. There is a
45-percent chance it will be more; there is a 45-percent chance it will
be less. The only prudent thing to do in those circumstances is to bet
that it may well be less because if, in fact, we overestimate, that has
very serious implications of putting us back into deficit.
Speaker Hastert said this about the House lockbox bill:
We are going to wall off Social Security trust funds and
Medicare trust funds and consequently, we pay down the public
debt when we do that. . . . So we are going to continue to do
that. That's in the parameters of our budget, and we are not
going to dip into that at all.
Unfortunately, the version that passed the House has an enormous
trapdoor in it. They say they are walling off Social Security, they say
they are walling off Medicare, but then when you read the fine print,
you find out they do not really intend to do that at all. They are
fully prepared to dip into those trust funds for other purposes. Our
amendment prevents that.
If we do not protect the Medicare surplus, we will reduce the
solvency of the Medicare Hospital Insurance Trust Fund, reversing years
of steady progress in shoring up this program.
Let's have a brief history lesson and remind ourselves that in 1992
the Medicare trust fund was projected to become insolvent in the year
2002. That is just 9 years ago. The actuaries studied the program and
said we are headed for insolvency in the Medicare program in the year
2002, but by last year, that date was estimated to be 2025, an
improvement of 23 years. That is because of actions that were taken in
the Congress of the United States to extend the solvency of the
Medicare program.
Those efforts have worked, but if we now start to spend from the
trust fund, and if we take the $500 billion Medicare Part A trust fund
surplus projected for the next 10 years and use it for other purposes,
we will make Medicare insolvent by the year 2009, 16 years earlier than
is now projected.
Some have argued that since beneficiary premiums only cover 25
percent of Medicare Part B costs, there is a deficit in that part of
Medicare. Part B is funded by premiums and by the general fund.
The question before this body is, Do we protect the Hospital
Insurance Trust Fund that exists for Medicare in the same way that we
protect the trust fund that exists for Social Security?
Last year, overwhelmingly our colleagues said yes: we should provide
the same protection to the Medicare trust fund that we provide the
Social Security trust fund. I hope we will provide that same protection
again this year.
Some say because Part B only has 25 percent of its costs covered by a
premium, therefore it is in deficit. That is not what the law says or
what the actuaries report, but that is the rhetoric being used by some
who want to justify a raid on the Hospital Insurance Trust Fund for
Medicare.
They are saying, yes, there is a trust fund for Part A of Medicare
and, yes, it is in surplus by $500 billion, but they say Part B only
gets 25 percent of its costs covered by premiums; therefore, it is in
deficit; therefore, there is no surplus anywhere in Medicare. That is
simply false. We know that there is a Hospital Insurance Trust Fund
designated in law, and it has $500 billion, according to the
Administration.
For those who say because Medicare overall is challenged fiscally,
therefore there is no reason to protect the Hospital Insurance Trust
Fund, let's just take that money and jackpot it and make it available
for other expenditure, make it available for defense, make it available
for agriculture, make it available for education, make it available for
whatever other worthy purpose somebody might conjure up, make it
available for a tax cut. The problem with that is, if you take the
trust fund surplus that is in existence today in Medicare and you raid
it and you use it for other purposes, you shorten the period of
solvency of Medicare and you bankrupt the program. It is that simple.
It is robbing Peter to pay Paul. It is digging the ditch deeper before
starting to fill it in.
We should not tolerate raiding either the Social Security trust fund
or the Medicare trust fund. In the private sector, if anybody tried to
raid the retirement funds of a company, if anybody tried to raid the
health plans of a company, they would be in violation of Federal law.
They would be on their way to a Federal institution. It would not be
the Congress of the United States, and it would not be the White House.
They would be incarcerated because they would have violated Federal
law.
This is a critically important decision that we will make. This is a
fundamental decision. Do we protect the Social Security trust fund? Do
we protect the Medicare Hospital Insurance Trust Fund or don't we? Do
we open the door to a raid on both those funds? I very much hope that
the answer in this Chamber, as it was last year, is a resounding no;
that we make very clear to any who would raid these trust funds that
they are off limits, that they will not be touched, that we are not
going to accept using these funds for other purposes. That is what the
American people want us to do. That is what we will have an opportunity
to do when we vote on this amendment, and we should not take other
plans that use the same words but have a trapdoor to them that opens
the door to a raid on these trust funds. That would be, I believe, a
serious mistake.
One other thing I want to point out about the President's budget that
is carefully hidden in the numbers: Although the President claims there
is enough in his so-called contingency fund to protect Medicare, in
fact that is not the case. In the year 2005, the contingency fund
totals $36 billion, but the Medicare trust fund surplus is $47 billion.
That means if you protect Medicare under the President's budget, you
will be raiding the Social Security trust fund to the tune of $11
billion in that year or you will be in deficit by $11 billion.
I think that is another demonstration that the tax cut offered by the
President is so large that it threatens to put us back into deficit,
because that is exactly what it does in the year 2005 if you protect
Social Security and Medicare. Under the President's budget, we will be
back in deficit in the year 2005 if, in fact, we protect the trust
funds of Social Security and Medicare.
I believe Senator Kerry is to be recognized for final debate on his
amendment. I look forward to talking more about this amendment
tomorrow, on Monday and again on Tuesday.
I conclude by saying once more that last year we had a strong
bipartisan vote. We had nearly 20 Republican Senators join a group of
Senators on this side. We had over 60 votes to protect Social Security
and Medicare trust funds. I hope we have a vote that is even stronger
this year.
I yield the floor.
Amendment No. 26
The PRESIDING OFFICER. Under the previous order, the pending
amendment is laid aside and there are now 10 minutes equally divided on
the Kerry amendment No. 26.
Mr. KERRY. Mr. President, let me address quickly the elements of my
amendment which seek to strike the small business provision within this
bankruptcy bill. I emphasize to my colleagues, we don't strike it and
not do anything; we strike it and ask for a study by the Small Business
Administration for the most efficient and effective way of dealing with
small business bankruptcies. The reason for that is as follows:
My colleague, Senator Grassley, a little while ago--and I respect
enormously the efforts he is making on this bill, and I respect the
efforts generally in the Senate to try to reform the bankruptcy code--
but Senator Grassley talked about how the Bankruptcy Review Commission
voted out the small business provisions. He talked about an 8-1 vote.
Let me emphasize to
[[Page S2051]]
all my colleagues, the vote of the Bankruptcy Review Commission was 8-1
on the entire report. But indeed on the particular provision with
respect to small business, the commission was very divided. It was an
extraordinarily close vote, 5-4. That 5-4 vote reflected the tension
that existed over this question of how to treat small business. There
was not a generalized acceptance of their approach.
Second, we in the Senate are just beginning to focus on what the
potential impact to small business might be as a consequence of this
bill. I emphasize to my colleagues there are two reviews of this
bankruptcy effort. One is the commission. But the National Bankruptcy
Conference, which is a conference made up of experts, also has weighed
in on this bill. The National Bankruptcy Conference has endorsed my
approach to this issue of striking the small business sections. In
other words, the National Bankruptcy Conference and many of the small
business entities of the country believe that what the Senate is about
to do is undo some of the things we attempted in the last few years
with the small business regulatory reform and all of the efforts we
have undertaken to lift from small business in this country undue
amounts of paper burden, regulatory burden, government-mandated
intrusion.
What we will be doing in this bankruptcy bill is putting back on to
small businesses the very kind of burden we have tried to lift. I
emphasize the National Bankruptcy Conference endorses my approach,
which is to strike this section and ask for a Small Business
Administration analysis of what will happen. I remind my colleagues,
the number of chapter 11 filings with respect to small business has
dramatically decreased over the last decade from 24,000 in 1991 to
below 10,000 last year.
The fact is there is no showing whatever on the record that small
businesses represent the kind of problem that invites the kind of
onerous, intrusive documentation and recordation that is in this
legislation.
If small business fails to comply with the new reporting requirements
that are in this legislation, then creditors are given entirely new
powers, and those powers could force bankruptcy court judges to
liquidate small businesses or to completely dismiss their proceedings.
This could force many small businesses to expend a huge amount of
resources to fend off challenges by any creditor simply for not
complying with one of the new burdensome reporting requirements that
are put into this legislation.
These requirements place a burden on small mom-and-pop operations
that are the lifeblood of the growth of this country. Sixty to eighty
percent of the jobs in this country are created by small business,
maintained by small business, and almost all the growth in the country.
There is no showing that small businesses present the kind of problem
with respect to the bankruptcy process that merits this kind of
approach.
I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator's time has expired.
Who yields time in opposition?
Mr. HATCH. Mr. President, the effect of the amendment is to strike
section 431 to 445, all of subtitle B of title IV of the bill, the
provisions which reform bankruptcies for companies that are ``small
businesses''. A ``small business'' is a company that, together with its
affiliates, has debts under $3,000,000 and is not primarily a real
estate owning and operating company, but only if an unsecured
creditor's committee has not been appointed. Also propose a Small
Business Administration study of bankruptcy and small businesses.
Our present law: Although the Bankruptcy Code now contains provisions
on small business bankruptcies, they are optional and rarely used.
Present chapter 11 is complicated and expensive for debtors. It is a
lawyer's paradise because their services are very necessary. Chapter
11s also tend to be long drawn out affairs, seemingly managed by the
professionals to extract the largest possible fees. Small business
creditors often complain about the delays and expense of trying to
collect debts owed them.
On bill provisions, the bill provides the following reforms:
It creates streamlined, standardized forms so small business
bankruptcies can be more cheaply managed by small business debtors.
Under present law, a chapter 11 reorganization is made expensive by the
need to tailor a plan and disclosure statement, a job done by a highly
paid lawyer.
The bill creates nationwide uniform reporting requirements so that
chapter 11 cases involving a small business can be standardized,
simplifying the procedures debtors must comply with.
The bill standardizes the information a small business must provide
to the trustee, like tax returns, schedules, financials and the like.
Debtors must meet plan filing and confirmation time deadline
standards, specially developed for small business cases.
The duties of the United States trustee with respect to a small
business case are spelled out.
The bill also contains controls on abusive use of chapter 11, like
multiple filing of cases and unreasonable delay in resolving the case.
It contains a study of small business bankruptcy by the Small
Business Administration.
Requires in single asset real estate company cases that interest be
paid to creditors at a certain point in the case.
Provides administrative expense priority to any amount the debtor
owes arising from certain real estate lease defaults.
In response, Congress created in 1994 a National Bankruptcy Review
Commission to study the bankruptcy laws and suggest reforms, which
closely studied small business bankruptcy and recommended reforms. The
provisions the Kerry amendment would cut out are the result of those
recommendations.
The NBRC found that small business bankruptcies needed reforms in
order to benefit both small business debtors and to benefit small
businesses when they were creditors. The bill provides the protections
and benefits the NBRC recommended.
The amendments streamline bankruptcy for small businesses. It allows
them to save lawyer fees. It allows them to promptly reorganize, to
their benefit and that of their creditors.
Additional study is unnecessary. This matter has already been studied
for 4 years by a blue ribbon panel of bankruptcy experts, who
unanimously recommended the reforms. But even if more study is
necessary, the bill provides for the same study Senator Kerry is now
proposing.
Oppose the Kerry amendment. Senator Kerry last year sponsored an
amendment that seriously impaired the reforms in this part of the bill.
He now seeks to gut them completely. It is clear that he opposes all
reform. Yet reform is needed.
Mr. GRASSLEY. I wish to respond to Senator Kerry's comments about my
representation of the Bankruptcy Review Commission.
The commissioners themselves said the vote was 8 to 1 on the small
business provisions. So it is not accurate that there are major
tensions with respect to these provisions.
I have a letter that I will put in the Record that shows a former
commissioner of the Bankruptcy Commission saying the vote was 8 to 1 on
the small business provisions.
I ask unanimous consent the letter be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Bankruptcy Tax Consultant
To: Senator Charles E. Grassley
From: James I. Shepard
Senator Grassley: The National Bankruptcy Review Commission
adopted the Small Business Provisions in its report with
solid support, the vote was 8 to 1 in favor. There was little
dissension, the vote was NOT 5 to 4 as has been stated, the
Commission was not bitterly divided but, in fact, was
strongly in favor of the provisions.
Thank You,
James I. Shepard.
Mr. HATCH. Mr. President, is all time yielded back?
The PRESIDING OFFICER. All time has expired.
Mr. HATCH. I yield back whatever time I have.
I move to table, and I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the motion to table.
[[Page S2052]]
The clerk will call the roll.
The legislative clerk called the roll.
Mr. FITZGERALD (when his name was called). Present.
Mr. NICKLES. I announce that the Senator from Idaho (Mr. Crapo), the
Senator from Oklahoma (Mr. Inhofe), and the Senator from Virginia (Mr.
Warner) are necessarily absent.
The result was announced--yeas 55, nays 41, as follows:
[Rollcall Vote No. 19 Leg.]
YEAS--55
Allard
Allen
Bayh
Bennett
Biden
Bingaman
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Carper
Chafee
Cleland
Cochran
Collins
Craig
DeWine
Domenici
Ensign
Enzi
Frist
Gramm
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Jeffords
Kyl
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Nelson (NE)
Nickles
Reid
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
NAYS --- 41
Akaka
Baucus
Boxer
Byrd
Cantwell
Carnahan
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Reed
Rockefeller
Sarbanes
Schumer
Stabenow
Torricelli
Wellstone
Wyden
ANSWERED ``PRESENT''--1
Fitzgerald
NOT VOTING--3
Crapo
Inhofe
Warner
The motion was agreed to:
Mr. LOTT. Mr. President, I move to reconsider the vote, and I move to
lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. LOTT. Mr. President, I believe the Senator from Massachusetts
wishes to speak for a few moments about an unrelated issue, perhaps.
Before he does that, I want to notify all Senators that we are trying
to work to get an agreement on how to proceed for the balance of today,
Friday, and next week.
I had hoped we could get a list of amendments that would be offered,
a realistic list, and in return we would agree that there would be no
further votes this afternoon, or tomorrow, even though we will continue
trying to work and also have work completed on Monday.
I say to both sides of the aisle that I am getting disturbed that the
leadership continues to bend over backward to try to accommodate
everybody's schedule. We are not getting a lot of response in kind.
Senators don't particularly want to vote on Tuesday afternoons.
Senators don't wish to be here on Friday or on Monday. Senators come up
with--we have probably close to a hundred amendments on the bankruptcy
bill on the two sides. We must finish this bill next week, by Thursday
night. I don't want to file cloture, but when I look at the list with
which we have just been presented, and considering the fact there is no
desire to work on Friday, it is not practical that we can finish this
up by next Thursday, unless we find some way to cut down the amendments
considerably, move faster, or file cloture.
After that, we have to go to campaign finance reform, on Monday, the
19th. We are going to have to do the budget resolution in a relatively
short period of time, in the next month or so. We have to do the
education bill. Good work is being done in that committee. Basically,
bankruptcy is going to have to be done next week. I don't want to cut
anybody off.
We have bent over backward in many ways to get this bill done. We are
going to try to get an agreement as to how this bill will be completed
by next Thursday night. Senator Daschle may want to comment.
The PRESIDING OFFICER. The Democratic leader is recognized.
Mr. DASCHLE. Mr. President, I add my voice to the majority leader's
admonition to all of those who have amendments. He and I have worked on
this from the very beginning of the year and have used the regular
order to accommodate all Senators, first in committee, and now on the
floor.
I don't have any qualms about the interests on the part of so many
Senators to express themselves. That is what the legislative process is
all about. But let me say this will not be the only bill we take up
this year. There will be other legislation. It is fair to say that if
cloture is filed--and I hope that will be unnecessary--it will probably
be invoked.
Senator Lott came to me a few minutes ago to express an interest in
filing--even today. I urged him to hold off filing today in order to
accommodate Senators who may have amendments that are not relevant. In
order for that to happen, we have to see, give and take on both sides.
We are going to have to have a unanimous consent agreement that if he
holds off on filing cloture, we can have that vote, perhaps Wednesday,
so we can finish on Friday. Like he has noted, we have campaign finance
reform that is already part of a unanimous consent agreement scheduled
for the week after. So there is no question that we are going to have
to finish this bill next week. There are over a hundred amendments. I
think it is going to require some real cooperation on the part of all
Senators, if we are going to address this matter in a meaningful way,
orderly way, and in a way that is fair.
Anybody can object to the unanimous consent request we are going to
make. If I were the majority leader, I guess if that were the case, I
would probably file cloture and move on. I hope that won't be
necessary. I hope we can accommodate those Senators who have amendments
that are not necessarily germane, but I hope we can finish the bill.
I hope those who have a litany of amendments--some Senators have
expressed an interest in offering 8 to 10 amendments. I am not very
sympathetic to that. There are a lot of other issues out there that can
be addressed on other bills down the road. So let's show a little
cooperation, a little effort to be accommodating. Let's recognize that
we have a lot of work to do. The only way we will get it done is if
everybody plays fairly and does what they can to accommodate the needs
of scheduling.
I yield the floor.
Mr. REID. Will the majority leader yield?
Mr. LOTT. Mr. President, I am glad to yield.
Mr. REID. I say to the two leaders, I have spoken to Senator Conrad
and he has a very important amendment pending. He said he would be
willing to speak tomorrow for a reasonable period of time, and Monday
there would be ample opportunity to offer lots of amendments.
Mr. LOTT. Mr. President, let me say that I appreciate that. I
understand Senator Bingaman has an amendment that he can offer now, and
we could continue to make progress. His amendment has been cleared. So
we will continue to work. It may be necessary to be in session
tomorrow. We are working on another issue to get completed tonight or
first thing in the morning--in spite of the fact that I had hoped we
could get a limited list of amendments--a reasonable one--in return for
not having further votes tonight or tomorrow, but we didn't get
that. We did not get that, but I did want to say there will be no
further votes today. Members are encouraged to continue to offer
amendments. We will work tonight, perhaps tomorrow. There will be votes
on next Tuesday morning as previously ordered and on Tuesday at 2:45
p.m.
Again, it is previously ordered. I want Senators to understand we
will have a vote Tuesday morning. So Senators need to be here on Monday
in order to be here for the recorded vote Tuesday morning.
In that connection, again I urge Senators to continue to work
tonight, come to the floor and work with the managers to offer
amendments tomorrow and/or Monday.
I believe we are ready to propound a unanimous consent request.
After consultation with Senator Daschle, I ask unanimous consent that
any votes ordered for today be postponed and stacked to occur beginning
at 11 a.m. on Tuesday, March 13, with the concurrence of both managers.
The PRESIDING OFFICER. Without objection, it is so ordered.
[[Page S2053]]
Mr. LOTT. Mr. President, I ask unanimous consent that there be 5
minutes equally divided for explanation of each amendment beginning at
10 a.m. on Tuesday, to be debated in the order they were offered. In
other words, even if debate occurs later today or Monday--just so
Senators understand--before the vote there will be 5 minutes equally
divided on each amendment.
I further ask unanimous consent that when the votes occur at 11 a.m.
on Tuesday, the first vote be limited to 15 minutes in length, with all
succeeding votes 10 minutes in length.
I further ask unanimous consent that all first-degree amendments in
order to the pending S. 420 be limited to the following list which I
now send to the desk, and any second-degree amendments must be relevant
to the first-degree amendments.
The PRESIDING OFFICER. Without objection, it is so ordered.
The list of amendments is as follows:
Amendment List to S. 420
republican amendments
B. Smith:
1. Relevant.
1. Relevant to List.
Gramm:
4. Relevant to List.
1. Credit Card.
Specter:
1. Pardon Guidelines.
K. Hutchison:
1. 2nd Degree on Homesteads.
Collins:
1. Fishermen.
Nickles:
2. Relevants.
Hatch:
1. Relevant.
Lott:
14. Relevant to List.
Sessions:
1. Landlord Tenant.
1. Appeals.
democratic amendments
Baucus:
1. Involuntary Bankruptcy.
Bingaman:
1. Energy Assistance/Conservation.
2. Relevant.
Bond:
1. Relevant.
Boxer:
1. Relevant.
2. Relevant.
3. Relevant.
4. Relevant.
5. Non-Relevant.
6. Non-Relevant.
Breaux:
1. Ergonomics.
Byrd:
1. Relevant.
2. Relevant.
Carnahan:
1. Means Testing re: Home Energy Costs.
Conrad:
1. Non-Relevant.
Daschle:
1. Relevant.
2. Relevant.
Dayton:
1. Trade Adjustment Assistance.
2. Relevant.
Dodd:
1. Credit Card.
Dorgan:
1. Relevant.
2. Relevant.
Durbin:
1. Cramdown.
2. Predatory Lending.
3. Credit Card Disclosure.
4. Non-Relevant.
5. Relevant.
Hollings:
Lock Box.
Feingold:
1. Section 1310.
2. Definition of Household Goods.
3. FEC Fines & Penalties.
4. Insolvent & Political Committees.
5. Relevant.
6. Relevant.
7. Landlord Tenants.
Feinstein:
1. Guns.
2. Cap to Credit Cards to Minors.
3. Parental Notification of Limit Increase.
4. Technical Amdt on Landlord/Tenants.
5. Bankruptcy Petition Preparers.
6. Delete Sect. 226-229.
7. Second Degree to a Wyden Amdt.
8. Relevant.
9. Non-Relevant.
Kennedy:
1. Health Care.
2. Means Test.
3. Pensions.
4. Non-Relevant.
5. Non-Relevant.
Kerry:
1. Small Business.
Kohl-Feinstein:
1. Homestead Caps.
Kohl:
2. Back Pay.
Leahy:
1. Identity Theft & Financial Privacy.
2. Chapter 13 Length.
3. Chapter 13 IRS Standards.
4. Tax Returns.
5. Current Monthly Income.
6. Separated Spouses.
7. Relevant.
8. Relevant.
9. Non-Relevant.
10. Appeals.
11. Relevant.
Levin:
1. Red Lining.
2. Relevant.
3. Credit Card Grace Period.
4. Means Test re: Gas Prices.
5. Cramdown.
Reed:
1. Reaffirms GAO Study.
Reid:
1. Relevant.
2. Relevant.
3. Non-Relevant.
Schumer:
1. Predatory Lending.
2. Finance Charges.
3. Corporate Reorganization.
4. Creditor Abuses.
5. Safe Harbors.
6. Means Test.
7. Relevant.
8. Relevant.
9. Non-Relevant.
Wellstone:
1. Payday Loan.
2. Low Income Safe Harbor.
3. Relevant.
4. Trade Related Job Loss Safe Harbor.
5. Benefit Program Administration.
6. Means Test Fix.
7. Trade Adjustment Assistance.
8. Relevant.
9. Relevant.
10. Non-Relevant.
Wyden:
1. Protecting Electricity Rate Payers.
Mr. BINGAMAN. Mr. President, by way of explanation, am I correct in
assuming that this does not preclude us from offering an amendment that
can be adopted by voice vote?
Mr. LOTT. Mr. President, it would have to be on the list.
Mr. BINGAMAN. It is the one I called up earlier.
Mr. LOTT. I believe the Senator from New Mexico has two listed. I
believe his amendment is one of these two that are listed.
Mr. BINGAMAN. We can vote that this afternoon.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LOTT. In light of the agreement, Mr. President, there will be no
further votes tonight. The Senate will be considering the bill over the
next couple of days, hopefully tomorrow as well as Monday, so that
amendments can be offered and debated. The next votes will occur
beginning at 11 a.m. on Tuesday.
In addition, the lockbox votes are scheduled to occur at 2:45 p.m. on
Tuesday. I urge Senators who have amendments to schedule floor time
with the managers. Again, I hope there is no desire to try to drag this
out through the week and not complete it. I do not think that would be
fair to anybody. We have other work to do. Senator Daschle has assured
me, as he just said, that he understands and wants to join in getting
this done by next Thursday night or Friday morning.
As we assess the situation, if it becomes necessary, I will be
prepared to file cloture on Monday or Tuesday so we can finish this not
later than Thursday night or Friday.
I yield the floor.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, there is an amendment that I sent to the
desk and explained earlier on energy assistance. I ask unanimous
consent that my colleague, Senator Domenici, be added as a cosponsor of
that amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BINGAMAN. Mr. President, I also ask unanimous consent that after
the vote on this amendment, which I expect in the next 3 or 4 minutes
after I speak and Senator Murkowski speaks, Senator Kerry from
Massachusetts be allowed to speak as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 28, As Modified
Mr. BINGAMAN. Mr. President, I send a modification of my amendment to
the desk.
The PRESIDING OFFICER. Without objection, the amendment will be so
modified.
The amendment, as modified, reads as follows:
[[Page S2054]]
(Purpose: To increase the authorization of appropriations for low-
income energy assistance, weatherization, and State energy emergency
planning programs, to increase Federal energy efficiency by
facilitating the use of private-sector partnerships to prevent energy
and water waste, and for other purposes)
Strike all and insert the following:
TITLE--EMERGENCY ENERGY ASSISTANCE AND CONSERVATION MEASURES
SEC. 01. SHORT TITLE.
This title may be cited as the ``Energy Emergency Response
Act of 2001''.
SEC. 02. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds that--
(1) high energy costs are causing hardship for families;
(2) restructured energy markets have increased the need for
a higher and more consistent level of funding for low-income
energy assistance programs;
(3) conservation programs implemented by the States and the
low-income weatherization program reduce costs and need for
additional energy supplies;
(4) energy conservation is a cornerstone of national energy
security policy;
(5) the Federal Government is the largest consumer of
energy in the economy of the United States; and
(6) many opportunities exist for significant energy cost
savings within the Federal Government.
(b) Purposes.--The purposes of this title are to provide
assistance to those individuals most affected by high energy
prices and to promote and accelerate energy conservation
investments in private and Federal facilities.
SEC. 03. INCREASED FUNDING FOR LIHEAP, WEATHERIZATION AND
STATE ENERGY GRANTS.
(a) LIHEAP.--(1) Section 2602(b) of the Low-Income Home
Energy Assistance Act of 1981 (42 U.S.C. 8621(b)) is amended
by striking the first sentence and inserting the following:
``There are authorized to be appropriated to carry out the
provisions of this title (other than section 2607A),
$3,400,000,000 for each of fiscal years 2001 through 2005.''.
(2) Section 2605(b)(2) of the Low-Income Home Energy
Assistance Act of 1981 (42 U.S.C. 8624(b)(2)) is amended by
adding at the end the following:
``And except that during fiscal year 2001, a State may make
payments under this title to households with incomes up to
and including 200 percent of the poverty level for such
State;''.
(b) Weatherization Assistance.--Section 422 of the Energy
Conservation and Production Act (42 U.S.C. 6872) is amended
by striking `For fiscal years 1999 through 2003 such sums as
may be necessary' and inserting: ``$310,000,000 for fiscal
years 2001 and 2002, $325,000,000 for fiscal year 2003,
$400,000,000 for fiscal year, and $500,000,000 for fiscal
year 2005.''.
(c) State Energy Conservation Grants.--Section 365(f) of
the Energy Policy and Conservation Act (42 U.S.C. 6325(f)) is
amended by striking ``for fiscal years 1999 through 2003 such
sums as may be necessary'' and inserting: ``$75,000,000 for
each of fiscal years 2001 through 2005.''
SEC. 04. FEDERAL ENERGY MANAGEMENT REVIEWS.
Section 543 of the National Energy Conservation Policy Act
(42 U.S.C. 8253) is amended by adding at the end the
following:
``(e) Priority Response Reviews.--Each agency shall--
``(1) not later than October 1, 2001, undertake a
comprehensive review of all practicable measures for--
``(A) increasing energy and water conservation, and
``(B) using renewable energy sources; and
``(2) not later than 180 days after completing the review,
implement measures to achieve not less than 50 percent of the
potential efficiency and renewable savings identified in the
review.''.
SEC. 05. COST SAVINGS FROM REPLACEMENT
FACILITIES.
Section 801(a) of the National Energy Conservation Policy
Act (42 U.S.C. 8287(a)) is amended by adding at the end the
following:
``(3)(A) In the case of an energy savings contract or
energy savings performance contract providing for energy
savings through the construction and operation of one or more
buildings or facilities to replace one or more existing
buildings or facilities, benefits ancillary to the purpose of
such contract under paragraph (1) may include savings
resulting from reduced costs of operation and maintenance at
such replacement buildings or facilities being replaced.
``(B) Notwithstanding paragraph (2)(B), aggregate annual
payments by an agency under an energy savings contract or
energy savings performance contract referred to in
subparagraph (A) may take into account (through the
procedures developed pursuant to this section) savings
resulting from reduced costs of operation and maintenance as
described in subparagraph (A).''.
SEC. 06. REPEAL OF ENERGY SAVINGS PERFORMANCE CONTRACT
SUNSET.
Section 801(c) of the National Energy Conservation Policy
Act (42 U.S.C. 8287(c)) is repealed.
SEC. 07. ENERGY SAVINGS PERFORMANCE CONTRACT DEFINITIONS.
(a) Energy Savings.--Section 804(2) of the National Energy
Conservation Policy Act (42 U.S.C. 8287c(2)) is amended to
read as follows:
``(2) The term `energy savings' means a reduction in the
cost of energy, water, or wastewater treatment from a base
cost established through a methodology set forth in the
contract, used by either--
``(A) an existing federally owned building or buildings or
other federally owned facilities as a result of--
``(i) the lease or purchase of operating equipment,
improvements, altered operation and maintenance, or technical
services;
``(ii) more efficient use of existing energy sources by
cogeneration or heat recovery, excluding any cogeneration
process for other than a federally owned building or
buildings or other federally owned facilities; or
``(iii) more efficient use of water at an existing
federally owned building or buildings, in either interior or
exterior applications; or
``(B) a replacement facility under section 801(a)(3).''.
(b) Energy Savings Contract.--Section 804(3) of the
National Energy Conservation Policy Act (42 U.S.C. 8287c(3))
is amended to read as follows;
``The terms `energy savings contract' and `energy savings
performance contract' mean a contract which provides for--
``(A) the performance of services for the design,
acquisition, installation, testing, operation, and, where
appropriate, maintenance and repair, of an identified energy,
water conservation, or wastewater treatment measure or series
of measures at one or more locations; or
``(B) energy savings through the construction and operation
of one or more buildings or facilities to replace one or more
existing buildings or facilities.''.
(c) Energy or Water Conservation Measure.--Section 804(4)
of the National Energy Conservation Policy Act (42 U.S.C.
8287c(4)) is amended to read a follows:
``The term `energy or water conservation measure' means--
``(A) an energy conservation measure, as defined in section
551(4) (42 U.S.C. 8259(4)); or
``(B) a water conservation measure that improves the
efficiency of water use, is life cycle cost effective, and
involves water conservation, water recycling or reuse,
improvements in operation or maintenance efficiencies,
retrofit activities or other related activities, not
affecting the power generating operations at a Federally-
owned hydroelectric dam''.
SEC. 08. EFFECTIVE DATE.
This title and the amendments made by this title shall take
effect upon the date of enactment of this title.
Mr. BINGAMAN. Mr. President, for clarification, this modification
merely changes the effective date of the amendment. The amendment I
offered will raise the amount authorized to be appropriated by this
Congress for weatherization programs and for low-income home energy
assistance programs. Those are programs that help individuals and
families around this country who are faced with rising and enormously
increased natural gas bills and electricity bills and those who will be
faced with substantial increases in those utility bills this summer for
air-conditioning purposes.
It is important that we increase this authorization level and that we
do so right away. It is also important that we appropriate money
quickly. I am hoping we will see progress on that front, working with
the administration in the next few weeks. I am certainly going to be
urging the President and those in the Department of Energy to strongly
support an appropriation in this area.
This is an important thing to do. This is not a substitute for a
comprehensive energy bill by any means. Senator Murkowski has
introduced a comprehensive bill. I am working on developing a bill that
is also much more broad in its reach and deals with the long-term
energy needs of the country. This merely tries to deal with the
immediate crisis.
It is very important we do this. I am very pleased all Senators have
indicated support for this measure.
I yield the floor. I know Senator Murkowski wishes to speak on this
same subject.
The PRESIDING OFFICER. The Senator from Alaska.
Mr. MURKOWSKI. I thank the Chair.
I join Senator Bingaman in urging support of the Bingaman amendment.
It is cleared, as he indicated, on our side. I remind my colleagues
that energy affects America's families and businesses. We are seeing
higher energy costs, lost jobs, and reduced prosperity. We know, as
Senator Bingaman indicated, that the amendment cannot replace the need
for a comprehensive energy policy.
We have a crisis in this country. We are addressing the symptoms and
not the causes. That is easier said than done. We are going to have to
get into those causes. We certainly agree we need to provide additional
funds for the weatherization assistance and the LIHEAP program.
As you might know, Mr. President, these programs are in title VI of
the
[[Page S2055]]
Murkowski-Breaux National Energy Security Act of 2001. Let me explain
briefly the difference because we are very close.
As Senator Bingaman knows, we are going to be holding hearings on
these matters beginning next week. We will hold a hearing each week.
On LIHEAP, we have proposed an increased base from $2 billion to $3
billion and an increase in emergency funds from $600 million to $1
billion. The Bingaman amendment increases the base from $2 billion to
$3.4 billion, so there is an increase. However, there are no emergency
funds.
In weatherization, Senator Bingaman's proposal and our proposal in
title VI increases to $500 million by the year 2005. In weatherization
State energy programs, we propose an increase of $125 million by 2005,
and it is my understanding the Bingaman amendment proposes $75 million
by 2005. We have set State energy efficiency goals to reduce energy use
by 25 percent by 2010, compared to 1990 levels, and we encourage State
and regional energy planning to go ahead.
I remind everyone, while we need immediate relief until we get an
energy plan passed in its entirety that addresses supply and
conservation, we are not going to have the immediate relief we would
like. We only increase authorizations by this in a sense. It is better
to address these programs, along with the other energy needs, through
the comprehensive approach which I think is an obligation of the Energy
Committee which we collectively work toward. A piecemeal approach to
energy policy hasn't gotten us anywhere and that is part of the problem
of where we are today.
My point is, for example, what are we going to do this summer when
gasoline supplies run short, as they are expected to do, and the
consumers pay up to $2 per gallon? Will we take the opportunity now to
address the need for refining capacity in a comprehensive bill while we
have the opportunity? Or will we avoid the tough political expensive
decisions and instead come back here at a later time and increase
LIHEAP yet again?
I think the time has come to make those tough decisions. I look
forward to working with my colleague. We want to find a solution to add
fuel to the tank of our economic engine now that it is running almost
on empty. We will have to enact this year a comprehensive national
energy policy. Otherwise, we will be forever chasing high energy prices
with yet more temporary funds and placing the economic health and the
national security of the country at risk.
Just as we can and need to get our way out of this energy crisis, we
cannot buy our way out. The energy crisis, as we know, will not go away
until we make the tough decisions that are needed to increase the
supply of conventional fuels and improve our energy efficiency and
conservation and expand the use of alternative fuel and renewables.
I congratulate Senator Bingaman and would like to be added as a
cosponsor to his legislation.
I again reemphasize the reality that the American people expect us to
address this crisis that impacts every American family. This amendment
does not solve the underlying problem we face. We should and must
address the illness, not the symptoms.
We must develop a comprehensive national energy strategy; again, one
that ensures clean, secure, and affordable energy supply into the next
decade.
I look forward to working with my colleague and others to develop
this comprehensive energy strategy.
I yield to the Senator from Massachusetts.
The PRESIDING OFFICER. Under the previous order, the Senator from
Massachusetts is recognized.
Mr. KERRY. Mr. President, it is my understanding there is no further
debate, this is accepted, and we can vote now.
The PRESIDING OFFICER. If there is further debate on the amendment,
the question is on agreeing to the amendment, No. 28, as modified.
The amendment (No. 28), as modified, was agreed to.
Mr. KERRY. I move to reconsider the vote by which the amendment was
agreed to.
Mr. MURKOWSKI. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. The Senator from Massachusetts.
____________________