[Congressional Record Volume 147, Number 35 (Thursday, March 15, 2001)]
[Senate]
[Pages S2343-S2379]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY REFORM ACT OF 2001--Continued
Mr. SESSIONS. Mr. President, we are now proceeding on the bankruptcy
bill in the regular order.
I want to say a few general remarks about this process of bankruptcy.
It is provided for in the U.S. Constitution. It was not written out in
the early days of our founding precisely how bankruptcy law should
apply, but it did provide for uniform Federal laws of bankruptcy. So
our bankruptcy court system is a Federal court system presided over by
Federal bankruptcy judges, and all the clerks are Federal civil
servants.
England developed some procedures to deal with persons who owed
debts. Basically, they would turn over everything to the Crown, and
sometimes they would get thrown in jail. But their assets would be
distributed equally to whoever was claiming money from that person in
sort of a realistic-priority way.
Over the years, we have provided tremendous protections for the
person filing bankruptcy. It does aid them in a lot of different ways.
How does it actually work?
Let's say you are in debt and telephone calls start coming from the
creditors. You promised to pay certain debts and you are not paying
them. I do not know how we can complain too much about somebody calling
to ask what your intentions are about paying them. They become
burdensome on the family after a while, though--very burdensome. Then
people threaten lawsuits. Then they file lawsuits. And lawsuits get
carried on to judgment.
The person is being sued. They are being called. Their lives are
really being disrupted because they are unable to pay the debts they
owe. So under this circumstance, a person is allowed to file
bankruptcy. When bankruptcy is filed, that stops everything. You cannot
be harassed by phone calls or other claims for debts because all the
creditors--people who are claiming money--have to be sent a notice; and
when they get the notice that you filed bankruptcy, all they can do is
file a claim at the bankruptcy court.
They cannot keep bugging the individual American citizen. They have
to leave him or her alone or the bankruptcy judge will slap them with a
fine if they do that, because bankruptcy does stay those kinds of
activities. It stops the lawsuits. All lawsuits are stopped under the
bankruptcy. It is called a stay. A stay is issued, and the legal
proceedings stop, so a debtor can take a breather.
Basically, they go into court, if it is an individual. And the
individual has two choices. He can file, under current law, under
chapter 7. He can say: I am exempting my homestead. You can't take
that. And certain of my personal property, you can't take that. This is
all the money I have otherwise. This is all the assets I have. You take
that and divide it up among all those people I can't pay. It may be 5
cents on the dollar, 10 cents on the dollar, 50 cents on the dollar--
usually less than 10 cents on the dollar, or less than 30 cents on the
dollar, anyway--when they do that.
Then they wipe out those debts. They are forever gone. They signed a
contract. They signed agreements. They got sued. And they got judgments
against them. It is all wiped out; a person does not have to pay.
That goes on in America regularly. And it is a healthy thing for
people who are in debt so deep that it is not possible for them to get
out. And we affirm that.
So over the years bankruptcy law has been amended and improved. We
had a Bankruptcy Reform Act in 1978, the last real reform of bankruptcy
law in the United States. At that time, there
[[Page S2344]]
were fewer than 300,000--I think 270,000--bankruptcies a year.
Since 1978, bankruptcies have increased at a steady pace. Now the
filings exceed--well, in 1998 or 1999 it was 1.4 million. It dropped a
little last year, but it is projected to go up again significantly this
year. So we are talking about nearly 1.5 million filings this year. You
may say: That is not too many. We have 250, 260 million people in
America. A lot of them are children, and a lot of them are in jail, and
so on. You take those numbers down--who is really eligible--and that is
getting to be a significant number. We do not think about the fact that
it is happening every year. When you add up 5 years, that is 5, 6, 7
million people who have filed bankruptcy in a period of 5 years. That
becomes a significant portion of the American population. If they all
qualify, then I do not have a problem with it.
But what has occurred in recent years is the proliferation--and I
think virtually every city in America has it--of some sort of
promotional bankruptcy mill. For years, lawyers could not advertise.
Some people can still remember that day. But now they can. So you turn
on the TV at 11:30 at night or Saturday afternoon, or pick up the dime
store, corner market shopping guide, and there are these
advertisements: Wipe out your debts. Don't pay anybody you owe. Call
old Joe, your friendly lawyer. He will tell you how to do the deal.
So people call. They are in debt and having trouble managing their
money. Some of them are in debt because they could not help it--maybe
there were serious injuries, maybe medical causes, maybe bad business
deals, bad judgment. Some of them just cannot manage their money. Some
of them have drug problems. Some have alcohol problems. Some are just
unable to manage and just will not stop spending.
So they go to the lawyer. And this is fundamentally what the lawyer
tells them. He says: Now, when you get your paycheck, you save that
money, and you bring it straight to me--all that money--and maybe your
second check. As soon as I have $1,500 or $1,000, I will file your
bankruptcy. Don't pay any of your other debts. Don't pay any more
debts. He will say: Use your credit card. Run up everything you want to
on your credit card. Live off your credit card. Come down here, and we
will file bankruptcy as soon as you get your money together to pay
me. That is what has happened. That is the kind of message. They are
told this is the right thing to do. These people in debt are in
trouble. They are hurting. They are tired of people calling them. It is
embarrassing their children and their families. They want it to end.
This seems to be the best way out, so they do so. The numbers through
this promotional activity have been going through the roof.
A lot of people are troubled by it. People who are regularly involved
in bankruptcy and see what is happening are rightly concerned that
quite a number of people are filing who don't qualify, who really don't
meet our traditional standards of someone who cannot pay all or a part
of their debts.
The discussion went on for a number of years about how to deal with
it. A Federal bankruptcy commission dealt with it, others have dealt
with it, lawyers groups, experts, and so forth. We have had, in the
Senate and in the House of Representatives, hearings that have gone on
for over 4 years now. As a result of those hearings and refinements,
bankruptcy bills have come forward. One passed this body 2 years ago
with about 88 votes. The last one passed with 70 votes. It has passed
the House every year with a veto-proof margin, strong bipartisan
Republican and Democratic support.
We are dealing with this incredible surge in bankruptcies and trying
to do it in a way that allows everybody who previously legitimately
wanted to file bankruptcy, that they could file bankruptcy, by trying
to identify those who don't qualify and should be contained in their
filing. So this is a fundamental change in bankruptcy. We adopted what
has come to be called a means test. It says if you have the means to
pay some or all of your debt, we ought to set up a plan for you to do
so.
In law today, we have two sections. I mentioned chapter 7, where you
go in and wipe out all your debts. Basically, the debtor can choose
that. He can choose in which chapter he wants to go.
There is a another chapter called chapter 13. In that case, if you
file in chapter 13, all of the lawsuits stop; all of the phone calls
stop. The court sits down with the debtor and works out a payment
arrangement. They prioritize the debts to be paid. Some of them are
secured; some are not secured. The right priorities are all set. Then
that person basically takes his paycheck in every month. He or she
gives it to the court. He or she keeps enough money to live on. They
give the money to the court, and they pay out to the debtors every
dime.
Under chapter 13, many people work through their debts, people with
low incomes and higher incomes. They pay off all their debts.
In my State of Alabama, I am proud to say that in the southern
district of Alabama, where I practiced, 50 percent of the people who
filed filed under chapter 13. They wanted to pay their debts back. In
fact, there are some good incentives to filing under chapter 13, a lot
of good things for a creditor that I won't go into here.
They are doing it in Birmingham. In the northern district of Alabama,
I understand 60 percent file there. I also understand there are some
districts in New York and other places where less than 10 percent,
maybe even less than 5 percent use chapter 13. Just routinely, the
debtors come in and wipe out all their debts.
How should we deal with that? After much thought, it was decided that
we ought to focus this legislation on a relatively small number of
people filing for bankruptcy who have income sufficient to pay back
some or all of their debts. We thought that was a good approach, and it
has been widely received and voted on by most of the Members of this
body.
Basically, we drew a bright line. We said: Based on the size of your
family and the income of your family, if you make below median income,
which in America for a family of four is $50,000, you will be able to
file bankruptcy any way you want, 7 or 13, just like today.
There is no change for them in that regard. We believe probably 70,
80, 85 percent of the people who file bankruptcy are below median
income, but for that 20, that 10, that 15 percent who make above median
income--some make $70, $80, $90, $200,000, $250,000, some are doctors,
some are lawyers, some have professional incomes, and so forth--to them
we say: We are going to look at your income. We are going to look at
your earning possibilities. If you are able to pay back at least 25
percent of that debt over 3 to 5 years, we are going to put you in
chapter 13, as half the people in my State do anyway, and we are going
to ask you to try to pay those debts over that period of time. You will
be monitored by the court.
By the way, this bill says, in a historic step, child support and
alimony will be moved up to the top, to the first item that will be
paid. For 5 years, you will be under the supervision financially of a
Federal bankruptcy judge, and you will pay your alimony. You will pay
your child support on time. As a matter of fact, the judge will order a
repayment of past due alimony and child support under court
supervision.
I thought that ought to greatly please most people in America. It
deals only with the abusive cases. It confronts the problem we are
seeing in bankruptcy. Maybe somewhat fewer people will file if they
don't think they can get away with ripping off the average taxpayer,
citizen.
They say: These credit card companies, these are evil companies. They
go out and actually lend people money. They are not citizens, they are
corporations. They are evil. They are always trying to cheat you, and
we don't need to pay them. They care about this bill. Therefore, the
bill is no good.
That is silly. That is not right. The first principle of economics,
which a lot of people in this body apparently don't know or forgot, is
there is no such thing as a free lunch. Somebody is going to pay this
debt if you don't pay it. Somebody is going to eat that loss. If it is
a bank or a credit card company, they have computers. They figure it
out. They start seeing greater losses. What do they do? They have to
raise the interest rate on all of us.
Experts have studied this; economists have studied it. They have
concluded that the average debt-paying
[[Page S2345]]
American citizen who pays his bills is annually imposed a bankruptcy
cost of $450. That is about $40 a month they are having to pay every
month because other people in this country don't pay their debts.
They say: Well, maybe it was because they had a high medical bill.
Therefore, we don't want them to pay their hospital bill. Heaven knows,
they should not pay the doctor and the hospital who treated them and
helped them get well. This bill is oppressive because it would suggest
that people ought to pay their hospital bill if they can.
Basically, that is what the argument is. If you are making below
median income, lower than median income in America, then you can file,
just as you always did, and you can wipe out your bills to the
hospital, to any other people that you owe, including your bookie, I
guess--wipe that all out. But if you are making above median income,
and the judge finds you are able, only if he finds you are able to pay
25 percent of what you owe to the hospital over a period of 3 to 5
years, he can order a payment plan that requires you to pay that 25
percent. And he will allow you every month to have sufficient funds to
live on, in the court's judgment.
Well, I don't think this is oppressive. This is a reform. This is a
piece of legislation that deals with a fundamental question. I was
asked by a young reporter yesterday afternoon, while doing a piece for
one of the TV shows, ``Do you think this is a moral question?'' I said,
``I absolutely think it is a moral question.''
What we do here when we establish law, as our Founding Fathers always
knew, and I think we are forgetting, is that we are setting public
policy that guides and shapes American values. What we say you must do
and what we say you don't have to do shapes opinions and values.
So I think it is a bad suggestion, an unhealthy value to promote,
that a person who can pay a substantial portion of his or her debt can
just walk away from it--not pay the hospital, for example.
I have visited 20 hospitals in my home State this year. They have a
bad debt section that they write off regularly. They are not expecting
any great, huge surge of benefits from this bill. But why should you
not pay the hospital if you can pay a portion of it? What is bad about
them? Is that not a good institution that ought to be valued? Who else
is going to pay for the hospital if the person who is using it doesn't
pay?
Well, they say: Maybe you didn't have health care insurance. If you
make above the median income, you ought to have health care insurance.
Maybe somebody who is struggling to get by every day, who would be
below median income, is not able to take out health care insurance. If
you are making above median income, you need to have some health
insurance. Why should a person who is not responsible, making above
median income, who didn't have health insurance--why should they be
able to stiff the hospital when the ``honest Joe'' and his family, who
are making below median income, takes out his health insurance every
month and pays it and makes sure his hospital is paid if he and his
family go there?
I think it is a moral question. I think we need to set a public
policy that says, yes, we validate the great privilege of American
law--and that has really been increased in recent years--that allows a
person to wipe out their debts and start over again. We validate that.
We do not object to that. We have tried to create a bill that does just
that. But we also say that if you have a higher than average income and
you can pay some of those debts, we want to set up a system where you
pay them.
I believe this is a fair approach, a balanced approach, a generous
approach. And the legislation has quite a number of factors in it that
cut down on fraud and abuse. We raise up the protections for women and
children, as I said. We have tightened up the language on the bill to
reaffirm a debt from a person who maybe wants to keep his car, or a
washing machine, and they can come in and negotiate with them. We can
put extra protections in before they can reaffirm a debt after
bankruptcy and want to keep something, so that the creditors are
protected.
We put in another amendment that people have asked for. I think, in
general, I will challenge people to tell me what it is about this bill
that is precisely unfair to anybody. If we want to talk about the means
test, we will talk about that. That is the real change, the only thing
that really happens here of significance.
We have made a number of other improvements to reduce abuses and
problems with the bill and the processing of cases in bankruptcy, which
I think everybody would support.
We have had a lot of amendments. If anybody listens carefully, they
will find they are not focusing primarily on the improvement of
bankruptcy law and the administration of assets in a bankruptcy court.
They are focused on rules for credit cards or bank lending rules, all
of which are not in the jurisdiction of the Judiciary Committee. They
are in the jurisdiction of the Banking Committee. Periodically, that
kind of legislation comes forward. We will have amendments that touch
on issues outside the bill, but, for the most part, we are right on.
We had a vote on homestead. The homestead law in this bill eliminated
quite a number of abuses. The homestead law basically said that States
could set their own standard for how much you could protect in your
home. If you file bankruptcy, each State has a homestead limit--some as
low as $5,000; some are unlimited. So in certain States you can buy a
home and put $2 million into your home, and when you file bankruptcy,
you get to keep your home.
I never thought that was a good idea. I voted to eliminate that. Some
State laws have unlimited assets, and some Senators wanted to keep
that. They fought us and fought us and fought us. Frankly, after being
a cosponsor with Senator Kohl on a limit of $100,000, which we passed,
we went along with a compromise that we reached that restricted
homesteads, but not as much as I would like.
We just voted this morning to go back to the $100,000 limit. The vote
was here. I voted, as I agreed to last time, for the compromise. But I
certainly am happy with that public policy. I hope the Senators who
lost on that vote will see just how strong this body cares about it and
will realize they are not really benefiting, and the citizens of their
States are not benefiting by allowing a millionaire to keep a million
dollars in his home and not pay the gas station or local hospital or
bank.
So those are the kinds of things that have occurred. The complaints
here are either about issues outside of the reform of bankruptcy court
law or it is a matter in which we have it go.
I think we have done well. I salute Senator Hatch, the chairman of
the Judiciary Committee, for his steadfast leadership, and Senator
Grassley, who formerly chaired the Courts and Administration
Subcommittee, which I am honored now to chair, when this bill came out
of his subcommittee. He battled steadfastly to bring this bill up for a
vote. I believe we will be able to do that today.
I am quite confident we will have an overwhelming vote for one of the
most historic reforms that we can imagine. It will improve the
operation of bankruptcy courts, I am confident. If we made any errors
in it, I am willing to listen to that and make further amendments, if
needed.
I thank the Chair and yield the floor.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. 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, on the Leahy amendment, I will make a
few comments. It includes the spouse's income in a bankruptcy.
The PRESIDING OFFICER. The Chair notifies the Senator there is an
order for a vote to occur at this time.
Mr. LEAHY. I ask unanimous consent the Senator from Alabama be
allowed to proceed for 1 minute and then I be allowed to proceed for 1
minute.
The PRESIDING OFFICER. Is there objection?
Mr. REID. I have no objection, but reserving the right to object, it
is my
[[Page S2346]]
understanding that, regarding the previous order entered, we are going
to change the order in which the votes take place; is that right?
Mr. SESSIONS. I was going to make a change in the order according to
the agreement that has been reached.
Mr. REID. I withdraw my objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Alabama.
Mr. SESSIONS. I believe the Senator from Delaware has a request.
Mr. CARPER. I ask unanimous consent to speak for 1 minute to engage
in a colloquy with Mr. Leahy and Mr. Sessions.
Mr. LEAHY. Reserving the right to object, and I will not object, if
the Senator from Delaware amends that to also add 1 minute for the
Senator from Vermont.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Alabama.
Mr. SESSIONS. Mr. President, this would be an amendment on the
surface that appears to be good. However, I am of the firm opinion that
it would be unwise and cause a very difficult problem with filing for
bankruptcy. Under the present law, the median income is determined by
household size which includes a spouse when married and living
together. Yet a debtor filing singly will be tested based on his or her
income only and not based on the income of the spouse as well.
Under the current bill, for a debtor who is married but has been
abandoned by her spouse, that will be corrected. She will be tested
under the means test from her income. If she is abandoned, her expenses
will exceed her income and she will not be prevented from filing under
chapter 7.
However, the ability of couples to maneuver income----
The PRESIDING OFFICER. The Senator from Alabama has used his 1
minute.
Mr. SESSIONS. I thank the Chair.
Mr. LEAHY. Mr. President, I believe we are dealing with a bill with a
drafting error and I am trying to correct it. For example, in the bill
before the Senate, a battered spouse who flees the home with children
can be denied bankruptcy relief regardless of circumstances because the
bill would count her husband's income, as well, even though she did not
receive any money from him.
Without the Leahy amendment, it is hard to imagine a more antiwoman,
antichild, or antifamily result. My amendment would not allow separated
spouses to somehow shield assets when they file for bankruptcy because
the bill already counts income of the debtor from all sources. That is
why my amendment is supported by virtually every group in the country
that has advocated for battered women and battered spouses. They say,
we support this effort to correct this oversight which ``if left
unrepaired would create a severe injustice to many women, children, and
families across the country.''
The PRESIDING OFFICER. The Senator from Delaware.
Mr. CARPER. The amendment offered by Senator Leahy is a good
amendment and he has pointed to a problem with the bill, I think
unintentional.
This is the situation we face: We have a husband and a wife and they
are living separately, maybe at the end of their marriage, and the wife
wants to file for bankruptcy. The income of her spouse will be imputed,
regardless of whether or not that spouse is providing any kind of
support at all.
As a result, in most cases the wife would not be able to file chapter
7 and enjoy the benefit of safe harbor. Mr. Leahy would have us fix
that. That is a good thing.
Unfortunately, the problem that flows out of the amendment is that in
some cases that husband really is providing support for that spouse. It
is important we find that out; that we not create a situation,
unwittingly, where fraud could prevail and where that husband, in most
cases, is supporting the wife and supporting the family and does not
acknowledge as much. There is a simple way to fix it, and I hope in
conference Senator Leahy and others will find that appropriate fix.
Mr. LEAHY. Mr. President, I thank my friend from Delaware, but I note
my amendment does not allow a separated spouse to somehow shield assets
because the bill already counts income of the debtors from all sources.
The definition of ``current monthly income'' on page 18, lines 4 to
21, of the bill includes income from all sources. So if a battered
spouse or anybody else conceal income on a bankruptcy schedule, that is
a Federal crime.
What I do not want is a battered wife who is getting no income from a
separated spouse to suddenly, if she is out there trying to put her
financial situation in order, to have to consider the income of a
spouse from whom she is getting no income.
I ask unanimous consent a letter from the American Academy of
Matrimonial Lawyers, on behalf of a number of organizations, be printed
in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
American Academy of
Matrimonial Lawyers,
Chicago, IL, March 15, 2001.
Hon. Patrick Leahy,
Ranking Minority Member, Committee on the Judiciary, Russell
Senate Office Building, Washington, DC.
Dear Senator Leahy: I write in strong support of your
``separated spouse'' amendment to the pending means test
provisions of the bankruptcy bill not being considered by the
Senate.
I assume the current language in the bill is the result of
an unintentional drafting error. If left uncorrected, the
existing language will be draconian in its application to all
single parents with children who do not have the benefit of
any spousal income. It will particularly jeopardize a
battered spouse who flees her home with her children. This
debtor could be denied bankruptcy relief regardless of her
circumstances because the bill would count her husband's
income as well, even if she did not receive any money from
him.
The current language would impute to a single parent
debtor, for purposes of a means test, the income of a
separated spouse irrespective of whether the absentee spouse
actually contributes any income to the household.
There can be no justification that single parents with
children should suffer unduly in the bankruptcy process
because false and inflated income of an absentee spouse is
credited to debtor spouse. I support your laudable effort to
correct this oversight, which if left unrepaired, would
create a severe injustice to many women, children and
families across the country.
Respectfully yours,
Charles C. Shainberg.
Mr. SESSIONS. Mr. President, will the Senator yield for a question?
Mr. LEAHY. I don't think I have time left.
The PRESIDING OFFICER. The Senator's minute has expired.
The Senator from Alabama.
Mr. SESSIONS. Mr. President, I think we can fix this.
I ask unanimous consent the votes now commence under the previous
order, with the vote relative to the Boxer amendment being postponed,
to occur at the end of the voting sequence, and the Leahy amendment
being first in the sequence.
Mr. REID. No objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SESSIONS. I thank the Chair.
Vote On Amendment No. 19
The PRESIDING OFFICER. The question is on agreeing to amendment No.
19.
Mr. LEAHY. Have the yeas and nays been ordered, Mr. President?
The PRESIDING OFFICER. The yeas and nays have been ordered.
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. FITZGERALD (when his name was called). Present.
The result was announced--yeas 56, nays 43, as follows:
[Rollcall Vote No. 32 Leg.]
YEAS--56
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Byrd
Cantwell
Carnahan
Carper
Chafee
Cleland
Clinton
Collins
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Ensign
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Nelson (NE)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Snowe
Specter
Stabenow
Stevens
Torricelli
Wellstone
Wyden
NAYS--43
Allard
Allen
Bennett
Bond
Brownback
Bunning
[[Page S2347]]
Burns
Campbell
Cochran
Craig
Crapo
DeWine
Domenici
Enzi
Frist
Gramm
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Kyl
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Thomas
Thompson
Thurmond
Voinovich
Warner
ANSWERED ``PRESENT''--1
Fitzgerald
The amendment (No. 19) was agreed to.
Mr. LEAHY. Mr. President, I move to reconsider the vote.
Mr. CONRAD. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendments Nos. 70, 71, and 73
The PRESIDING OFFICER. The question is on agreeing to amendment No.
70 offered by Mr. Wellstone of Minnesota.
The Senator from Minnesota.
Mr. WELLSTONE. Mr. President, I have 1 minute; is that correct?
The PRESIDING OFFICER. The Senator is correct.
Mr. WELLSTONE. Would it be helpful, I say to the Senator from Utah
and the Senator from Vermont, if I did a quick summary of each one of
the amendments right now, one right after the other?
Mr. LEAHY. Mr. President, there is so much noise. I know the Senator
from Minnesota is addressing us. I couldn't hear him.
Mr. WELLSTONE. I asked my colleagues, if they want me to, I could do
quick summaries of each one of these amendments. They can respond and
then we can vote one after another, if that would expedite the process.
Mr. HATCH. That is fine with me.
The PRESIDING OFFICER. The Senator may proceed for 3 minutes.
Mr. WELLSTONE. Amendment No. 70, the first amendment, fixes the means
test so that it looks at present and future income, not over the past 6
months. If someone has been laid off work just yesterday and you look
at their income over the past 6 months, that is not a very accurate way
of determining whether or not they can file for chapter 7 or how they
can rebuild their lives. So this means test now in the bill is unfair.
This is a very important correction.
Amendment No. 71 strikes the 5-year waiting period for a new chapter
13 filing. I thought colleagues wanted people to go chapter 13. You
have an elderly person, a major medical bill puts them under. They file
for chapter 13 under existing law. If it happens a year from now, they
can file for chapter 13 again. With this bill, they can't file chapter
13 for 5 more years. This is especially discriminatory against elderly
people who are struggling with medical illness.
Finally, amendment No. 73, a safe harbor for folks who file because
of job losses as a result of unfair foreign trade. What I am saying is,
there are many egregious loopholes that will make it hard for people to
get the relief they need. At the very minimum, if you have people in
your State who have lost their jobs because of unfair competition,
because of unfair trade competition, at the very minimum, they ought to
be exempt from these very harsh provisions. Many of us come from States
where there are industrial workers. At the very minimum, we ought to be
there for them.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. How much time do we have?
The PRESIDING OFFICER. The Senator has 3 minutes.
Mr. HATCH. How much time remains? Did the Senator from Minnesota use
all his time?
Mr. WELLSTONE. Do I have time remaining?
The PRESIDING OFFICER. One minute 4 seconds.
Mr. WELLSTONE. Did my colleague from New Mexico need this minute and
a half?
Mr. DOMENICI. I would like to use half of it, if the Senator would
give it to me, and I would ask the permission of the Senate to use the
time for something else.
Mr. WELLSTONE. That would be fine.
Mr. DOMENICI. I so request.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The remarks of Mr. Domenici pertaining to the introduction of S. 543
are printed in today's Record under ``Statements on Introduced Bills
and Joint Resolutions.'')
Mr. HATCH. Has the time of the Senator from Minnesota expired?
The PRESIDING OFFICER. Yes.
Mr. HATCH. Mr. President, I will be short. I know these amendments
are well intentioned, but they are terrible amendments.
The first amendment allows dishonest debtors to shield legitimate
income from the court. The amendment creates a significant new loophole
for debtors to exploit. The amendment would create an inaccurate
picture of even an honest debtor's income by limiting the time period
over which the income was measured. The legislation already allows the
court to make adjustments to a debtor's income if necessary and, if
necessary, to do justice. That amendment should be defeated.
The second amendment will allow debtors to game the bankruptcy system
by repeatedly filing in chapter 13. By striking the 5-year waiting
period, the amendment encourages abusive repeat filings one right after
the other. I hope our colleagues will vote that down.
The third amendment would jeopardize bankruptcy reform by completely
exempting debtors who lose their jobs because of trade imports from the
provisions of the bill. Under the bill's means test, an unemployed
worker would still be able to discharge all of his or her debts under
chapter 7. This amendment, however, would exempt debtors from the
alimony, child support, and other important protections provided by
this bill. I worked long and hard for that, and I think almost
everybody in this body wants it. I can't imagine anybody voting for
that amendment, but I know it is well intentioned. We will leave it at
that.
I yield back the remainder of my time.
Vote on Amendment No. 70
The PRESIDING OFFICER. The question is on agreeing to amendment No.
70.
Mr. HATCH. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be. 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 22, nays 77, as follows:
[Rollcall Vote No. 33 Leg.]
YEAS--22
Akaka
Boxer
Carnahan
Clinton
Corzine
Daschle
Dayton
Dodd
Durbin
Feingold
Feinstein
Inouye
Kennedy
Kerry
Leahy
Levin
Murray
Nelson (FL)
Reed
Rockefeller
Sarbanes
Wellstone
NAYS--77
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Cantwell
Carper
Chafee
Cleland
Cochran
Collins
Conrad
Craig
Crapo
DeWine
Domenici
Dorgan
Edwards
Ensign
Enzi
Frist
Graham
Gramm
Grassley
Gregg
Hagel
Harkin
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Jeffords
Johnson
Kohl
Kyl
Landrieu
Lieberman
Lincoln
Lott
Lugar
McCain
McConnell
Mikulski
Miller
Murkowski
Nelson (NE)
Nickles
Reid
Roberts
Santorum
Schumer
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stabenow
Stevens
Thomas
Thompson
Thurmond
Torricelli
Voinovich
Warner
Wyden
ANSWERED ``PRESENT''--1
Fitzgerald
The amendment (No. 70) was rejected.
Mr. COCHRAN. Mr. President, I move to reconsider the vote by which
the amendment was agreed to.
Mr. WELLSTONE. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Vote on Amendment No. 71
The PRESIDING OFFICER. The question is on agreeing to the amendment
numbered 71 offered by Mr. Wellstone.
Mr. WELLSTONE. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
[[Page S2348]]
There is a sufficient second.
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. FITZGERALD (when his name was called). Present.
The result was announced--yeas 36, nays 63, as follows:
[Rollcall Vote No. 34 Leg.]
YEAS--36
Akaka
Bayh
Boxer
Cantwell
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Graham
Harkin
Hollings
Inouye
Jeffords
Kennedy
Kerry
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Reed
Reid
Rockefeller
Sarbanes
Schumer
Wellstone
Wyden
NAYS--63
Allard
Allen
Baucus
Bennett
Biden
Bingaman
Bond
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Carnahan
Carper
Chafee
Cleland
Cochran
Collins
Craig
Crapo
DeWine
Domenici
Ensign
Enzi
Feinstein
Frist
Gramm
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Johnson
Kyl
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Nelson (FL)
Nelson (NE)
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stabenow
Stevens
Thomas
Thompson
Thurmond
Torricelli
Voinovich
Warner
ANSWERED ``PRESENT''--1
Fitzgerald
The amendment (No. 71) was rejected.
Mr. LEAHY. Mr. President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 73, Withdrawn
Mr. WELLSTONE. Mr. President, I ask unanimous consent that the next
amendment be withdrawn. I will be back with this amendment, but I want
to move things along for a little while.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The amendment (No. 73) was withdrawn.
Mr. REID. 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.
Mrs. BOXER. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Smith of Oregon). Without objection, it is
so ordered.
Amendment No. 42, As Modified
Mrs. BOXER. Mr. President, I ask unanimous consent to modify my
amendment No. 42. It has been cleared on all sides. I send the
modification to the desk at this time.
The PRESIDING OFFICER. Is there objection to the modification?
Without objection, it is so ordered.
Mr. HATCH. Reserving the right to object, do we have a copy of that?
Mrs. BOXER. We showed it to the Senator's staff.
Mr. HATCH. I don't think we will object. It is OK. I withdraw my
reservation.
The PRESIDING OFFICER. Without objection, the amendment is so
modified.
The amendment, as modified, is as follows:
On page 147, line 3, strike ``$250'' and insert ``750''.
Mrs. BOXER. Mr. President, I thank Senator Biden, Senator Hatch, and
Senator Clinton, who worked so hard with me on this issue. I thank
Senator Phil Gramm as well. What we do is simply say that the
definition of a luxury item will be raised from $250 cumulative to
$750. Frankly, I don't think that is high enough, but it certainly
moves us in the right direction. I hate to think that people who
accumulate $250 on a credit card 90 days before bankruptcy will be
assumed to be a bad person and committing fraud. I think this is a step
in the right direction. I appreciate it.
I also thank Senator Hatch and Senator Leahy on the other issue that
they have agreed to place into the managers' amendment: My amendment to
ensure that public education expenses are protected in bankruptcy as
well as private education expenses. I am very pleased that would be in
the managers' amendment.
I will not ask for a rollcall vote but a voice vote on my amendment,
as modified.
The PRESIDING OFFICER. Does the Senator from Utah yield back time?
Mr. HATCH. I am happy to accept this amendment and modification. I
yield back whatever time we have.
The PRESIDING OFFICER. The question is on agreeing to amendment No.
42, as modified.
The amendment (No. 42), as modified, was agreed to.
Mrs. BOXER. Mr. President, I move to reconsider the vote.
Mr. LEAHY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 105
The PRESIDING OFFICER. The Senator from Vermont.
Mr. LEAHY. Mr. President, a number of Senators have been discussing
the issue of, for want of a better word, the cramdown issue. I ask
unanimous consent that it be in order, notwithstanding cloture, to send
to the desk an amendment related to the so-called cramdown issue, and
that it be considered.
The PRESIDING OFFICER. Without objection, it is so ordered. The clerk
will report the amendment.
The legislative clerk read as follows:
The Senator from Vermont [Mr. Leahy] proposes an amendment
numbered 105.
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 is as follows:
(Purpose: To change the period for no cramdown of debt secured by an
automobile from 5 years to 3 years)
On page 138, line 19, strike ``5-year'', and insert ``3-
year''.
Mr. LEAHY. Mr. President, I urge adoption of the amendment.
The PRESIDING OFFICER. Is there further debate on the amendment? The
question is agreeing to amendment No. 105.
The amendment (No. 105) was agreed to.
Mr. LEAHY. Mr. President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. REID. 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. REID. 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. REID. I further ask unanimous consent that the Senator from New
Jersey be recognized for up to 15 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. TORRICELLI. Mr. President, I thank the distinguished Senator from
Nevada for yielding the time.
For more than 4 years, this body has considered the need for
comprehensive bankruptcy reform. I have been very proud in each of
those years to work with Senator Hatch and Senator Grassley in
accommodating the needs of individual Senators in fashioning what I
think is a fair and balanced approach.
I am certainly grateful to each of them, as well as Senator Biden,
Senator Sessions, and Senator Leahy, for what I think has been an
extraordinary and a very balanced approach on incredibly complicated
legislation that has accommodated so many individual Senators.
We are now approaching the end of this very long and detailed debate.
I think it is worth noting, as we approach a final vote, that the
legislation before the Senate has not only been considered for many
years but has received extraordinarily broad and deep support in the
Congress. Indeed, very similar legislation passed the House of
Representatives 2 weeks ago on a bipartisan basis with more than 300
votes.
That legislation provided an important change to what is, by any
reasonable assessment, a very flawed bankruptcy system. Indeed, the
best evidence of the need for this reform is that in 1998 alone, in the
midst of one of the greatest economic expansions in
[[Page S2349]]
American history, nearly 1.5 million Americans sought bankruptcy
protection. This is a staggering 350-percent increase since 1980.
Indeed, while the filings may have been reduced slightly in 1999,
they are still far too high. It is estimated that 70 percent of filings
were made in chapter 7, allowing a debtor to obtain relief from almost
all of their unsecured debts. Conversely, only 30 percent of petitions
filed were under chapter 13, which requires a repayment plan. This is
the heart of the problem. People with an ability to repay some debts
are repaying almost no debts because current bankruptcy law allows them
to choose, totally escaping responsibility.
The Department of Justice estimated that 182,000 people last year
could have repaid some of these debts and didn't. The question has come
to the floor of the Senate, these 182,000 people, representing some $4
billion that could have been repaid but escaped repayment, what this
means in public policy. Members of the Senate appropriately have raised
questions about the impact on families, on poor people, on middle-
income people, and on small businesses. Each of us has an obligation to
ensure people meet their responsibilities, that we are not ending the
opportunities for people who want, need, and deserve a second chance in
American life.
To our credit, in our system we have allowed people who often,
through no fault of their own, face bankruptcy to get another chance.
We have been particularly sensitive to the poor, that those who have
been disadvantaged or face tragedy in their lives are given a chance to
reorganize their lives, to start over, through the protection of
bankruptcy. It is important that every Member of the Senate know that
this bankruptcy bill was rewritten to be sensitive to these needs, and
more.
It has been argued on the Senate floor that these protections would
help large American companies--credit card companies, banks, large
retailers--who sometimes now are left with the price of inappropriate
bankruptcies. It may help their interests. But how about the small
retailer or the consumer who ultimately pays for inappropriate
bankruptcies? How about the small business--the contractor, the
subcontractor--that is left to absorb the cost of these inappropriate
bankruptcies? It happens every day. As when one person or business
inappropriately files for bankruptcy, though they could pay the bills
and escape their obligation, that cost is passed along, not only to the
consumer who pays more for everything in every store through every
product but the subcontractors, the mom-and-pop businesses that are
sometimes forced out of business by abuse of the bankruptcy law.
I believe this reform and these changes protect them as well. But
even so, if we did so while still victimizing the single mother or the
child or child support, it wouldn't be worth doing. Indeed, I would be
here opposing the bill rather than fighting for it.
That is not what we did. This bill protects the American family, the
vulnerable child, the single mother. Under current bankruptcy law, a
single parent and the child are seventh in line behind the Government,
accountants, rent, storage, and tax claims. Under this bill, a mother
and child seeking money in bankruptcy stand behind no one. They are
first in line in claiming assets in any bankruptcy.
Second, the question has been brought to the Senate, How about those
who are poor and seek protection in bankruptcy? Are they jeopardized if
they are not single mothers or not children who, through no fault of
their own, find themselves in bankruptcy?
This bill provides a waiver so any judge can use discretion to ensure
any citizen who needs bankruptcy protection because of extraordinary or
extenuating circumstances, who is otherwise not eligible, can and will
get it.
Finally, the question has been raised on the Senate floor: Is it not
true that all the fault of bankruptcy is not with the individual, it is
sometimes with unscrupulous, unnecessary, even unconscionable credit
solicitations? I cannot tell the Senate that in every way this bill
provides all the consumer protection I think it should have. Rarely in
the Senate do we get to vote on perfect legislation as envisioned by
any Member. The question is, as in protection for women and children,
Is it better than current law? Unquestionably, the answer is yes.
There are 3.5 billion solicitations for credit cards in America every
year, 41 mailings for every man, woman, and child in the country. The
issue before the Senate is, If this bill is passed, is the consumer
better protected than under current law?
Under this bill, we will require the prominent disclosure of the
impact of making only minimum payments every month so every consumer
knows. Every consumer today does not know.
It will require the disclosure of late fees, what they will be, and
when they will be imposed. That is not required under current law.
It will require disclosure of the date under which introductory or
teaser rates will expire, as well as what the permanent rate will be
after that time. That is not required under current law.
I do not say this will provide perfect consumer protection but it is
better consumer protection.
So in all these ways we have taken a difficult situation, recognizing
the reality of abuse of bankruptcy laws, and provided a more fair bill,
with access to the courts, protecting the most vulnerable with
meaningful consumer protection. For all those reasons I ask Members of
the Senate who on several occasions previously have voted for this bill
to do so again, recognizing the balance we have tried to reach in one
of the most extraordinarily complex pieces of legislation in which I
have ever been involved, and that we follow our 300 colleagues in the
House, vote for this legislation, get it to the President in the belief
that he will sign bankruptcy reform and will provide these added
protections for American businesses, large and small, and for American
consumers.
With all the costs being imposed on American businesses in difficult
and competitive times, one of the costs that should not be imposed is
unfair and unreasonable petitions for bankruptcy from people and
businesses that have the ability to repay these debts.
At long last, after all these years, having spoken on this floor more
times than I care to remember for bankruptcy reform, this is my last
speech. The Senate is nearing its last action. It is time to vote for
the bill and implement bankruptcy reform. I yield the floor.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Mr. President, I ask unanimous consent the Senator from
Delaware be recognized. We are trying to work out a unanimous consent
agreement here. He will yield to us at such time as that is ready to
go.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. CARPER. Mr. President, I thank Senator Reid. As we come to a
conclusion on this bill, I just ask a couple of rhetorical questions I
want us to consider. One of those is, do we believe as a people--not
just as a Senate but as a people--that those in our country who incur
substantial debt, in many cases through no fault of their own, should
be able to gain access to help, to the forgiveness that can be found in
a bankruptcy court? I think most of us would say, yes, they ought to
have that right.
If we ask the second question: If someone filing for bankruptcy has
the ability to repay a portion of their debts, should we expect that of
them? I think most of us in this Chamber and across the country would
agree, if they have the ability to repay a portion of their debts, they
ought to do that.
Those are really the easy questions. The harder question in this
debate is how do you determine who has the ability to repay a portion
of their debts? In some cases, we give to a bankruptcy judge the
discretion to make those decisions. In the legislation before us today,
that we will vote on in a short while for final passage, we go a step
beyond that. It is a good step.
What we do is provide, in essence, a safe harbor for those who really
do not have a whole lot of money in the first place, so they can gain
access to file
[[Page S2350]]
under chapter 7 and not have to go through an extended process of
demonstrating a need or lack of means.
The way it works is pretty simple. I will discuss it again. I want to
reiterate it.
Those families whose income is below 100 percent of family median
income--that is about $46,000 in Delaware for a family of four; in
Alabama it might be $33,000; in Connecticut it might be $50,000--have a
safe harbor. They can go right to chapter 7 and file. That is pretty
much the ball game.
For those whose income is between 100 percent of median income and
150 percent of median income, they have the option to get an expedited
review, and in all likelihood will go ahead and file under chapter 7 as
well.
For those people who have extenuating circumstances, and they don't
meet either the test of safe harbor, the test of 100 percent or 150
percent of median family income, or they have extra medical expenses,
those can be taken into account. If they have extra expenses for
educational needs, those can become extenuating circumstances. For
people who have seen a marriage end or for people who have lost their
jobs, those can be extenuating circumstances and be accounted for by a
bankruptcy judge who is given discretion to decide whether or not a
person can then go ahead and file under chapter 7.
There is another very important change in the bill. I would like to
share a letter I received from the child support enforcement agency in
my State. As in other States, Delaware has a child support enforcement
agency to make sure parents meet their obligations to their children
for whom they do not have custody. In my State, our child support
enforcement agency endorsed this legislation.
Frankly, that has been the case in virtually every State across
America. The reason they do it is simple. This legislation makes it
more likely that people who have an obligation to the children for whom
they don't have custody will meet their obligations. Similarly, people
who have an obligation to their spouse or former spouse for alimony
will meet that obligation.
Under current law, once satisfied in bankruptcy, there are secured
creditors, and there is money left over. When it comes to unsecured
creditors, children and former spouses are near the end of the line.
Under this bill, children, alimony payments, and child support
payments move not to the end of the line under the nonsecured creditors
but to the front of the line. That is an important change of which we
need to be mindful.
I know not everybody agrees with what we have done. There is some
disagreement as well.
We had debate on an amendment that said to those people who might try
to take their assets and go to a State where there is no limit on the
amount of money they can put into an estate, a home, or residence to
protect it from bankruptcy--we have attempted to make a real change
there--to the extent they would have done it, it would have had to have
been at least 2 years before bankruptcy, and it is capped at $150,000.
I know that causes heartburn for some people. But it also goes a long
way in protecting the abuses that occasionally occur when people do
just that.
I thank Senator Hatch and Senator Sessions. I express my thanks to
those on our side--especially to Senator Biden and Senator Torricelli,
and others--who have worked real hard to get us to a compromise which I
think is fairer to creditors and certainly fairer to those who incur
debt than is the current case.
I think it significantly increases the ability for those who have the
capability of paying their debts to do so while better ensuring that
those who do not will not be punished.
I yield back the floor.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. LOTT. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Ensign). Without objection, it is so
ordered.
Mr. LOTT. Mr. President, I believe we are ready to go with a
unanimous consent agreement which will allow us to complete action on
this legislation and hopefully go to conference. Let me propound the
request, see if we can get it locked in so that we can go ahead and get
a vote here shortly. Let me note before I do that, we may allow, for
instance, 10 minutes or 15 minutes for debate. I am assuming that maybe
most of it will be yielded back. Obviously, you don't have to use the
full time. That is why we do put some amount of time in here so that it
will be available if there is a need for it.
I ask unanimous consent that Senator Sessions be recognized to offer
his amendment No. 59, that it be considered in order, and there be up
to 10 minutes for debate, and following that debate, the amendment be
agreed to and the motion to reconsider be laid upon the table. I
further ask unanimous consent that Senator Feingold then be recognized
to call up his amendment No. 51 and there be up to 15 minutes for
debate and, following the debate, a vote occur.
I further ask unanimous consent that all of the pending amendments be
withdrawn, and I ask unanimous consent that following that, the Senate
proceed to a managers' amendment, to be followed by third reading of
the Senate bill, and the Senate proceed to the House companion bill,
H.R. 333, and that the text of S. 420 be inserted, the bill be advanced
to third reading, and passage occur on H.R. 333, as amended, and the
Senate bill be placed on the calendar.
Mr. WELLSTONE. Mr. President, I object.
The PRESIDING OFFICER. Objection is heard.
Mr. REID. Will the Senator allow me to make a statement?
Mr. LOTT. I yield to Senator Reid for a comment at this point.
Mr. REID. I ask that we vote on the Senate bill. That is what we had
agreed to do.
Mr. LOTT. Mr. President, on that, since the Chair asked for consent
and it was objected to, Senator Reid is suggesting that a change be
made. For the information of all Senators, this is standard and routine
language necessary to send a bill to conference. This action is made
and agreed to 40, 50 times on average in a year of a Senate session.
However, this objection indicates to me that, once again, the goal here
is to try to make it difficult for us to get to conference. The Senator
from Minnesota knows what the rules are and what his rights are. You
recall last year we had a hard time getting the bankruptcy bill into
conference. It was for a different set of reasons, but that is what we
have here, too.
Again, I may have to go through some hoops to get this bill to
conference. That could take some time, and I am prepared to do that,
since there was objection heard. I think that with the kind of support
this bill has, with Senators speaking for it on both sides of the
aisle, and with 80 Senators voting to invoke cloture, surely a bill
with that kind of support--and I assume there are going to be about 80
votes for it on final passage--we should find a way to get it to
conference.
Since objection was heard, then I renew my request but amend it to
withdraw the reference to the House companion bill so that passage
would occur on the Senate bill.
The PRESIDING OFFICER. Is there objection?
Mr. REID. Reserving the right to object, Mr. President, I say to my
friend from Alabama principally, because of a Senator wanting to vote
on the underlying Feingold amendment and time being so precious, would
the Senator from Alabama agree to roll those, have his after Senator
Feingold debates his?
Mr. SESSIONS. We are not going to vote on my amendment.
Mr. REID. That is correct.
Mr. SESSIONS. I would like to have it accepted before, and I would
not need but 1 minute to comment on it.
Mr. REID. Senator Feingold is here on the floor. The other question
is, he has another amendment; it was my understanding that that was not
going to be offered.
Mr. FEINGOLD. I would just need a couple minutes to offer that as
well.
Mr. LOTT. Mr. President, I thought we clearly had an understanding on
that. That additional Feingold amendment was not included in the UC. I
[[Page S2351]]
urge the Senators to let us proceed with this UC because we are under
severe time constraints now. Could we proceed with the UC as requested?
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, reserving the right to object, I want to
be clear on the amendment No. 51, that was No. 51, as modified. The
leader originally said amendment No. 51.
Mr. REID. As modified.
Mr. FEINGOLD. As modified.
Mr. LOTT. We will make that change in the request: Amendment No. 51,
as modified.
Mr. FEINGOLD. Although I had intended to offer the other amendment,
given the situation here, even though it is a very worthy amendment and
really should be brought up on the floor, I am going to withdraw it at
this time.
Mr. LOTT. I would like to express our appreciation to Senator
Feingold for his willingness to do that in an effort to accommodate
Senators on both sides of the aisle.
Mr. REID. Mr. Leader, I will just briefly say it is my fault. I
explained that to Senator Hatch, and that was the agreement we had. I
apologize to my friend from Wisconsin.
Prior to passage, Senator Daschle wishes 5 minutes and Senator John
Kerry 10 minutes.
Mr. LOTT. Mr. President, I would modify the request but also would
need to reserve an equal amount of time for Senator Hatch or his
designee of 15 minutes in addition to that 15 minutes.
Mr. SESSIONS. Reserving the right to object, I want to be sure that
the modified language Senator Feingold cared about and that he wanted
in there--we have agreed on that language?
Mr. FEINGOLD. Mr. President, it is my understanding that we have
agreed on the modification.
Mr. SESSIONS. I believe we have, and I will not object.
Mr. REID. The Chair has not accepted the unanimous consent agreement
yet; is that true?
I have been informed that the manager on this side wants 5 minutes,
and the manager on the other side wants 5 minutes before final passage.
Mr. LOTT. I believe Senator Hatch would be in control, or his
designee, of a total of 20 minutes and 20 minutes on the other side
divided among Senators Daschle, Leahy, Kerry and I hope none of them
will take the full time.
The PRESIDING OFFICER. Is there objection to the leader's request, as
amended?
Without objection, it is so ordered.
Mr. LOTT. I yield the floor.
The PRESIDING OFFICER. The Senator from Alabama.
Amendment No. 59, As Modified
Mr. SESSIONS. Mr. President, I offer my amendment No. 59, as
modified.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Alabama [Mr. Sessions] proposes an
amendment numbered 59, as modified.
The amendment is as follows:
On page 148, strike line 4 and all that follows through
page 151, line 15, and insert the following:
(a) In General.--Section 362(b) of title 11, United States
Code, is amended--
(1) by inserting after paragraph (21), as added by this
Act, the following:
``(23) under subsection (a)(3), of the commencement or
continuation of any eviction, unlawful detainer action, or
similar proceeding by a lessor against a debtor seeking
possession of residential property--
``(A) on which the debtor resides as a tenant; and
``(B) with respect to which--
``(i) the debtor fails to make a rental payment that first
becomes due under the unexpired specific term of a rental
agreement or lease or under a tenancy under applicable State,
or local rent control law, after the date of filing of the
petition or during the 10-day period preceding the date of
filing of the petition, if the lessor files with the court a
certification that the debtor has not made a payment for rent
and serves a copy of the certification upon the debtor; or
``(ii) the debtor has a month to month tenancy (or one of
shorter term) other than under applicable State or local rent
control law where timely payments are made pursuant to clause
(i), if the lessor files with a court a certification that
the requirements of this clause have been met and serves a
copy of the certification upon the debtor.
``(24) under subsection (a)(3), of the commencement or
continuation of any eviction, unlawful detainer action, or
similar proceeding by a lessor against a debtor seeking
possession of residential property, if during the 2-year
period preceding the date of filing of the petition, the
debtor or another occupant of the leased premises--
``(A) commenced another case under this title; and
``(B) failed to make any rental payment that first became
due under applicable nonbankruptcy law after the date of
filing of the petition for that other case;
``(25) under subsection (a)(3), of an eviction action, to
the extent that it seeks possession based on endangerment of
property or the illegal use of controlled substances on the
property, if the lessor files with the court a certification
that such an eviction has been filed or the debtor has
endangered property or illegally used or allowed to be used a
controlled substance on the property during the 30-day period
preceding the date of filing of the certification, and serves
a copy of the certification upon the debtor;''; and
(2) by adding at the end of the flush material at the end
of the subsection the following: ``With respect to the
applicability of paragraph (23) or (25) to a debtor with
respect to the commencement or continuation of a proceeding
described in any such paragraph, the exception to the
automatic stay shall become effective on the 15th day after
the lessor meets the filing and notification requirements
under any such paragraph, unless--
``(A) the debtor files a certification with the court and
serves a copy of that certification upon the lessor on or
before that 15th day, that--
``(i) contests the truth or legal sufficiency of the
lessor's certification; or
``(ii) states that the tenant has taken such action as may
be necessary to remedy the subject of the certification under
paragraph (23)(B)(i), except that no tenant may take
advantage of such remedy more than once under this title; or
``(B) the court orders that the exception to the automatic
stay shall not become effective, or provides for a later date
of applicability.''.
(3) by adding at the end of the flush material added by
paragraph (2), the following:
Where a debtor makes a certification under subparagraph (A),
the clerk of the court shall set a hearing on a date no later
than 10 days after the date of the filing of the
certification of the debtor and provide written notice
thereof. If the debtor can demonstrate to the satisfaction of
the court that the sent payment due post-petition or 10 days
prior to the petition was made prior to the filing of the
debtor's certification under subparagraph (A), or that the
situation giving rise to the exception in paragraph (25) does
not exist or has been remedied to the court's satisfaction,
then a stay under subsection (a) shall be in effect until the
termination of the stay under this section. If the debtor
cannot make this demonstration to the satisfaction of the
court, the court shall order the stay under subsection (a)
lifted forthwith. Where a debtor does not file a
certification under subparagraph (A), the stay under
subsection (a) shall be lifted by operation of laws and the
clerk of the court shall certify a copy of the bankruptcy
docket as sufficient evidence that the automatic stay of
subsection (a) is lifted.
Mr. SESSIONS. Mr. President, Senator Feingold and I have worked on
this for some time. He cares very deeply about this. I did, too, as a
matter of legal principle and what I thought was correct. I think we
have language with which both of us can live. The perfect being the
enemy of the good, we might as well just take the good and bring this
matter to a conclusion.
I yield the floor.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, as the Senator from Alabama suggested, I
don't think either one of us is entirely happy with the outcome of
this. I hope we have something that takes a more reasonable approach to
the landlord-tenant situation.
Mr. SESSIONS. Mr. President, I yield back my time on the amendment
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. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
The PRESIDING OFFICER. Under the previous order, the amendment No.
59, as modified, is agreed to.
The amendment (No. 59), as modified, was agreed to.
The PRESIDING OFFICER. The Senator from Wisconsin is recognized.
Amendment No. 51, As Modified
Mr. FEINGOLD. Mr. President, I send amendment No. 51, as modified, to
the desk.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows.
The Senator from Wisconsin [Mr. Feingold], for himself, Mr.
Thompson and Mr. Wellstone, proposes an amendment numbered
51, as modified.
[[Page S2352]]
The amendment is as follows:
(Purpose: To strike section 1310, relating to barring certain foreign
judgments)
On page 439, strike line 19 and all that follows through
page 440, line 12.
Mr. FEINGOLD. Mr. President, I am happy to be joined in offering this
bipartisan amendment by the Senator from Tennessee, Mr. Thompson, and
the Senator from Minnesota, Mr. Wellstone. I ask unanimous consent they
be listed as original cosponsors.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. FEINGOLD. Mr. President, this amendment would delete section 1310
from the bill. Section 1310 is the epitome of a special interest fix--
its language purports to be general, it identifies no particular
person, but it is targeted to affect only a tiny number of people who
were involved in cases arising out of transactions with Lloyd's of
London, a large multinational insurance company.
Those people who invested with Lloyd's are called ``names.'' This
provision, which bars the enforcement of certain foreign judgments
against some of the ``names'' has nothing whatsoever to do with
bankruptcy law. Very few people have heard of it but it has some
history: It has been quietly promoted for at least a couple of years
now, but it has never been the subject of a full hearing in the
Judiciary committee. It found its way into the conference report that
served as a vehicle for bankruptcy legislation last year, although it
had never been debated or discussed in committee or on the floor. Let
me emphasize that point: this special provision was nowhere to be found
in the Senate bankruptcy bill in the last Congress. Nor was it in the
House bankruptcy bill last year. Yet somehow, late last year, it was
quietly slipped into the conference vehicle that was negotiated in
secret. That vehicle was the empty shell of a bill unrelated to
bankruptcy, into which was inserted the version of the bankruptcy bill
favored by the majority leadership, along with the special-interest
provision that my amendment seeks to strike. Somebody in Congress
arranged that, but nobody in Congress ever voted on it. In the end,
last year's conference report was vetoed.
As a result Section 1310 has been treated as part of the bill we
started with this year, and it has reappeared in the version of the
bill before us: the same provision, designed to assist only about 250
investors in Lloyds of London, the Names, who lost money on asbestos-
related claims in the 1980s. These individuals had judgments entered
against them in British courts, and American courts repeatedly have
declined to throw out those judgments. In fact, eight circuit courts
have ruled that these investors' disputes with Lloyds should be settled
in British courts. Now, to be fair, the Names have attorneys who argue
that the British courts won't treat their clients fairly and that their
clients have suffered as a result. So they have been seeking special
treatment from the Congress, and if the final conference vehicle had
not been vetoed last year they would have succeeded.
Mr. President, this provision has been opposed by the State
Department, under President Bill Clinton and George W. Bush. The State
Department is worried about the impact of a law that gives the back of
the hand to respected foreign courts, courts that we will rightly
expect to respect and enforce the judgments of American courts. Here is
what a State Department spokesman had to say about this issue in a
Reuters article, dated March 13:
We have reservations about section 1301. There are
commercial disputes involving U.S. and British companies
every day. It is inevitable that, in some of those disputes,
U.S. parties will lose.
But this cannot be the basis for the U.S. Congress to
overturn decisions of both British and U.S. courts. Such
action would be directly at odds with our own international
economic policy, which promotes a rules-based system premised
on the rule of law to protect U.S. investors abroad.
Just this morning Mr. President, I received a letter in support of
our amendment, signed by Secretary of State Colin Powell and Secretary
of the Treasury Paul O'Neill.
I ask unanimous consent that the text of the letter be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
The Secretary of State,
Washington, March 15, 2001.
Hon. Russell D. Feingold,
U.S. Senate.
Dear Senator Feingold: We write in support of the amendment
that you and Senator Thompson have introduced to S. 420 (The
Bankruptcy Reform Act). The Administration supports the
overall bankruptcy reforms contained in S. 420. However, the
Administration opposes Section 1310, which would bar
enforcement in the United States of any foreign judgment
between 1975 and 1993 if a U.S. court finds that the judgment
was derived from fraud.
Section 1310 is intended to provide relief for some
American investors who have a private commercial dispute with
the Lloyd's of London (UK) insurance market that, according
to the contracts they signed with Lloyd's, must be heard in
British courts. U.S. courts have dismissed all attempts by
these investors to sue here, requiring that they resolve
their dispute in the United Kingdom as provided by their
contractors. U.S. courts have upheld the enforcement of the
U.K. court judgments. The investors now want legislation to
overturn these decisions.
By directing the outcome in these court cases, Section 1310
has the potential to undercut the rule of law as it applies
across international borders today, with serious consequences
for U.S. commercial and other interests. Commercial disputes
involving American and British companies arise every day, and
it is inevitable that American parties sometimes lose.
However, that cannot be the basis for federal legislation to
overturn the decisions of both British and U.S. courts. Such
action would be directly at odds with our goals of promoting
a rules-based system to protect U.S. investors abroad.
The American investors have had the opportunity to argue
the merits of their position before U.S. courts, as well as
in the United Kingdom, but have not prevailed. For example,
under U.S. law, our courts can refuse to enforce foreign
court judgments if they find that the foreign court failed to
follow fundamental standards of fairness and due process, or
if the judgments violated our public policy. State and
federal courts hearing these cases have not found this
threshold to be met.
In these circumstances, intervening in these private
commercial matters through legislation could open the door to
reciprocal treatment in other countries. The result would be
to undercut the orderliness and predictability that are
essential to international business transactions and crucial
to our Nation's economic well-being. It could also weaken our
ability to negotiate new international rules on enforcement
of civil judgments and to promote the enforcement of child
custody cases.
We respectfully urge that the Senate adopt the amendment to
remove Section 1310 from the Bankruptcy Reform Act.
Sincerely,
Paul H. O'Neill,
Secretary of the Treasury.
Colin L. Powell,
Secretary of State.
Mr. FEINGOLD. The Organization for International Investment, the
National Association of Insurance Commissioners, and the Council of
Insurance Agents and Brokers oppose the provision because of their
concern over its potential impact on the international insurance
market.
Now I realize there are arguments on the other side. The Names argue
that they were defrauded by Lloyds, misled into investing when Lloyds
knew that there were going to be many claims based on asbestos
litigation. And despite their consistent losses in courts on both sides
of the Atlantic, they might be right, and maybe the courts have been
wrong not to let them make their claims of fraud in the way that they
desired.
They may believe they were right to try to avoid the judgments
against them. But Mr. President, I don't think we in the Senate are in
a better position than the courts to assess those arguments at this
point. I am not yet convinced that this is a matter that should be
addressed by legislation, certainly not by bankruptcy legislation, and
very certainly not without a hearing. At the very least, we need to
have a full hearing and air these issues in a public forum, that will
lend itself to a thoughtful and deliberate consideration of the issues.
The kind of insiders' deal that led to this provision being added for a
small group of people should be unacceptable to anyone who cares about
maintaining the people's confidence in the integrity of the legislative
process.
I hope my colleagues will join me in this bipartisan effort to strike
this provision for a few simple reasons: It is a special deal for a
very small group of people--they represent about one one-millionth of
our population, but they somehow had the clout to get it inserted into
the bill; it will undermine
[[Page S2353]]
the ability of American courts to see their judgments enforced abroad;
and it has not been fully considered by the Judiciary Committee or the
full Senate--there have been no hearings, no debate and until the last
few days, no knowledge by most members that this provision was even a
part of the bill.
We should strike Section 1310 and then we should ensure that it does
not sneak back into the bill at a later date. If we adopt this
amendment, I will keep an open mind on the issue of the remaining
Lloyds names if it comes before the committee in the future, and I
won't oppose a request to the chairman of the Judiciary Committee to
schedule a hearing to examine the issues in full if the Names wish to
pursue a legislative remedy through the normal channels. But until
then, this special interest provision has no place in the bankruptcy
bill or any other bill.
Mrs. LANDRIEU. Mr. President, I have received a number of letters on
this subject. I ask unanimous consent that they be printed in the
Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
New York, NY.
Re 8-420 Bankruptcy Abuse Prevention and Consumer Protection
Act of 2001, Sec. 1310. Enforcement of Certain Foreign
Judgments Barred.
Dear Senator Landrieu: I write to enlist your support in
protecting hundreds of innocent victims from what many
consider to be the biggest, most sophisticated, deliberate
securities fraud in financial history that has been
perpetrated by Lloyd's of London.
In the mid-seventies, when Lloyd's realized the extent of
their exposure from underwriting insurance policies exposed
to huge losses from asbestosis and pollution they set out to
recruit Americans and other foreign investors to fund their
losses. They did this with what we now know were fallacious
financial statements for unregistered securities. More than
three thousand Americans, who are called Names, were
recruited. They were induced on the basis of Lloyd's three
hundred year history to undertake what was purported to be a
safe, conservative investment. My involvement with Lloyd's
has resulted, so far, in the loss of my family home, over
three hundred thousand dollars and my good health. Stress
from Lloyd's produced heart attack. Am 77.
Over the years, many Names have become old and the draining
of their resources has brought much hardship to those
employed and to those no longer employed, especially those
who were counting on some income from their Lloyd's
investment to help sustain them in retirement. The constant
stress, effort and anxiety endured in battling for our
constitutional right to a fair trail, which Lloyd's has
fought with over eighty million dollars paid to lawyers,
lobbyists and campaign contributions to legislators and
insurance commissioners, has taken a toll on all of us. Names
have already sacrificed millions of dollars, stock and real
estate to satisfy Lloyd's claims, but they are not through
with having us cover their losses and that is why we need
your help in passing Sec. 1310. I implore you to resist
efforts by those conspiring to deny Names of their right to
due process. The deceit and arrogance of Lloyd's can no
longer be tolerated.
For the full, sordid story of fraud at Lloyd's I refer you
to www.truthaboutlloyds, the special twenty-four page report
in the February 21, 2000 European Edition of Time magazine
and current articles in the Los Angeles Times on the former
California Insurance Commissioner's acceptance of gifts and
four hundred thousand dollars from Lloyd's and their lawyers,
LeBoeuf, Lamb, Greene & MacRae, for among other things
promoting opposition in the insurance and legal communities
to the just claims and interests of the Names.
Thank you for your kind attention and, I hope, your vote in
favor of S. 420, Sec. 1310.
Yours truly,
Edith Anthoine.
____
San Antonio TX,
March 13, 2001.
Hon. Mary Landrieu,
Hart Office Building,
Washington, DC.
Dear Senator Landrieu: I am an 80-year-old grandmother who
has worked and saved all my life and who attempts to live
honorably, only to be cheated and lied to by fancy pants,
smooth talking Englishmen representing Lloyd's of London. For
the past decade I have been traumatized by their threats.
Much of my life savings have been depleted by their
fraudulent representations. They have used every legal trick
known, plus many they invented, to keep out of U.S. courts
because they, along with those who have aided and abetted
them, know that their lawlessness and misdeeds would be
exposed.
As I understand the Bankruptcy Bill, Section 1310 prohibits
the granting of a foreign judgment without giving the
defrauded defendant an opportunity to present the merits of
his/her case in a U.S. court. It seems to me that any fair-
minded person would savor the justice implicit in this
Amendment. Foreign interlopers who commit fraud in this
country should not use the technicalities of foreign
judgments to harvest their fraudulent gains. This will
provide Constitutional due process to me and other Lloyd's
victims. It will also provide American due process to future
victims of fraud by foreigners.
I urge, and count on you to enthusiastically support this
Amendment. Thank you for your help on this vital matter.
Sincerely yours,
Joan B. Wilson.
____
March 13, 2001.
Dear Senator Landrieu, I am a senior citizen and am among
those who have been hurt by Lloyds.
Right now, of course, I need what funds I do have to live
on as I cannot work anymore. We (my now deceased husband &
myself) had to sell an income producing apartment house in
downtown Reno in order to pay what they requested of our
letter of credit. In addition they wanted even more than
that. We could not pay it. So, we were not ``wealthy
Americans'' who could afford a big loss, or who refused to
pay--we just didn't have it.
With the constant threat of Lloyds grabbing everything--
life as you may understand--was not easy. However, compared
to those who went bankrupt or homeless--as dreadful as our
situation was, we were better off than those who went
bankrupt or lost their homes. Lloyds is without a conscience.
Sincerely,
Beverly Hudson.
____
New Orleans, LA,
March 13, 2001.
Re Section 1310 of the Bankruptcy Bill (S-420).
Hon. Mary Landrieu,
Hart Senate Office Building,
Washington, DC.
Dear Senator Landrieu: I am a 72-year-old widow whose
husband was an investor in Lloyd's of London along with my
son and daughter. When my husband learned of Lloyd's fraud
and the devastating affect it could have upon our two
children he spent tireless hours attempting to right this
very very wrong. It seemed at every turn, Lloyd's was far too
powerful and far too well heeled, for my husband to fight
this massive institution. As the stress continued to mount
against him, in November of 1993 he died of a heart attack.
What Lloyd's of London did to my husband and my family, I
will never forgive. It is my understanding that you are
making the effort to stand up for the rights of Lloyd's
investors by urging the passage of Section 1310 in the
Bankruptcy Bill. It is my understanding that Section 1310 is
designed to provide a level playing field, something that
neither my husband nor children have had in connection with
their investment at Lloyd's. You are absolutely doing the
right thing.
I would ask that you let other colleagues in the Senate
know that if Section 1310 is not passed it will likely wipe
out all that my husband and two children have worked for. I
ask for my children, that you ask your colleagues to pass
Section 1310 and give all of Lloyd's investors a fighting
chance to put Lloyd's fraud behind them forever.
I would also like to thank you very much on behalf of my
family for taking the time to correct this wrong and not
having asked for anything in return.
Thank you very much,
Ruth G. Tufts.
____
San Antonio, TX,
March 13, 2001.
Senator Mary Landrieu of Louisiana,
U.S. Senate.
I am writing to you about S. 420 Bankruptcy Bill, Sec.
1310. I am desperately in need of your support of this
legislation. It will allow me to raise a defense of fraud
prior to any enforcement of Lloyd's of London judgment
against me issued by a thoroughly biased English Court. Why
is Lloyd's so fearful of facing the U.S. Justice system if
they are not guilty?
Lloyd's of London purposely withheld and actively concealed
information from U.S. citizens regarding existing asbestos
claims. I foolishly believed their prior reputation and
invested the inheritance that my father worked so hard for--
only to lose it all--and much more. I was repeatedly falsely
reassured in written communications that ``things would
certainly improve next year''. As you no doubt know, the U.S.
Justice Department and Postal Service is currently
investigating Lloyd's. How can they have any credibility at
all? I resigned in 1993 and have been fighting them at great
financial and emotional expense ever since.
I am not a wealthy person. I am the same Shirley Cook,
third grade teacher, mentioned in the Time Magazine article
of February 28, 2000. I am now retired, age 65 and receive
slightly over $20,000.00 per year in retirement. I live in a
quite average house with a leaky roof and currently drive a
seven year automobile.
Lloyd's has offered me a ``settlement'' of its fraudulent
claims against me, but offer no legitimate proof of the
validity of their demands. Even worse, there is no finality.
If they want more money anytime in the future, all they have
to do is bill me. If I move, I must notify them of my
whereabouts! In fact, by payment of the settlement offer, I
absolve them of any past, present or future claim of fraud
and give up all rights to recourse of any kind. This is
certainly not the American way. It is a travesty, and to me,
personally, a tragedy.
[[Page S2354]]
I implore you to vigorously support and vote for justice
for the Americans, your constituents, who were ill treated by
a foreign court favoring a dishonest foreign company.
Most respectfully,
Shirley M. Cook.
____
San Antonio, TX,
March 13, 2001.
Hon. Mary Landrieu,
Hart Senate Office Building,
Washington, DC.
Dear Senator Landrieu: As an 80 year old grandmother, who
has been thoroughly skinned by Lloyd's of London, I am again
dismayed by their arrogance and audacity in coming to
Washington to oppose legislation aimed at assuring Americans
Constitutional due process in United States courts.
It is obvious to me that they are afraid that a trial on
the merits would expose their fraud and deviousness. The
United States Department of Justice, the Postal Service and
the California Attorney General all seem to smell a rat in
their behavior. Please don't let them pull the wool over the
eyes of the Senate. I plead with you to support Section 1310
of the Bankruptcy Bill.
Trusting your wisdom and support, I remain
Respectfully and sincerely yours,
Joan B. Wilson.
____
New York, NY,
March 13, 2001.
Senator Mary Landrieu,
U.S. Senate,
Washington, DC.
Dear Senator Landrieu: I write to you in explanation of why
it seems so terribly important that you vote for the bill
which includes section 1301: it's a request for your
understanding of the difficulty of being 79 years old and
under acute stress because I wait to see what terrible move
Lloyd's will make next. I'm not the suicide type and I intend
to fight to the last ditch, but they have made light of the
many years I have worked and lived carefully, of the fact
that I trusted them on their assurance that Names would be
first in their consideration, that they would certainly honor
my request for modest and safe participation in their
investments.
I had a sum of money because I lost my husband in an
airplane accident from which I miraculously was rescued. The
court awarded me some money. That together with my earnings
which were at the time $39,000 annually, gave me $400,000,
which was enough for them to accept me. Obviously it had to
be a modest participation. I told them my goals were to make
a bit of supplementary money annually. They appeared to
understand. But what they did was something else again. They
put me on syndicates which they knew to be already
treacherous--with upcoming liabilities of billions of
dollars. What kind of a character does that? Do they deserve
the immunity that their courts have granted them? The inside
traders all took themselves off the syndicates. The man who
handled my affairs retired (in his 50s) and I should have
suspected.
I'm still working. I really dare not stop. If we can get
1301 through, we will not be ducking our debts. We will
simply be getting the time and opportunity to bring our fraud
charges to the American court system where we as citizens
should be able to plead our case and have it aired once and
for all. Please help to give us that chance.
Thank you for your attention to my letter.
Sincerely yours,
Barbara Lyons.
____
New Orleans, LA,
March 13, 2001.
Re Section 1310 of the Bankruptcy Bill (S-420).
Hon. Mary Landrieu,
Hart Senate Office Building,
Washington, DC.
Dear Senator Landrieu: I respectfully urge your continued
support of Section 1310 and that you inform your Senate
colleagues of the importance of this provision, which will do
no more than give me and hundreds of other defrauded U.S.
citizens the ability to defend ourselves against the fraud
perpetrated by Lloyd's of London.
Already as a result of Lloyd's fraud, I have had several
hundred thousand dollars confiscated by them; my wife and I
have partitioned our community to protect what is left of our
estate, and I have spent countless hours and spent thousands
of dollars in attorneys fees preparing for bankruptcy and
otherwise fighting the terrible Lloyd's nemace.
If Section 1310 is not adopted, it is highly likely that
Lloyd's will successfully (and wrongly) reap the rewards of
their fraud against those hundreds of U.S. citizens and,
personally, require me to file for bankruptcy.
As always, your help in protecting me, the citizens of
Louisiana, and in this case hundreds of U.S. citizens across
the country, is most appreciated.
Sincerely,
Thomas O. Lind.
Mr. THOMPSON. Mr. President, I agree with my colleague's assessment.
This is simply an effort to abrogate a series of contracts. This was a
contract dispute involving thousands of people; 97 percent of those
people settled those lawsuits. There were some who didn't settle them.
They went to court in England and raised a fraud claim and lost. They
went to court in this country and raised the fraud claim and lost.
In fact, there were two sets of lawsuits in England and two sets in
America, and in every case the ultimate disposition at the appellate
court level--five appellate courts in the U.S. ruled on the venue
question, for example. In each and every case, they had their day in
court and they lost. Some of them were on the fraud issue and some on
other issues.
The bottom line is that it is not our job in Congress to determine
factual issues in a lawsuit. So after having lost two sets of lawsuits
in each country, they have here a provision in the bankruptcy bill that
would in effect open the lawsuit again. It says, ``notwithstanding any
other provision of law or contract . . ..'' So it is a clear abrogation
of contracts and opens the situation again for courts in this country.
In addition to that, I am afraid it is clearly unconstitutional.
Specifically, it violates article III in that it represents a
congressional attempt to dictate a result with respect to the parties
in a final determination by an article III court. As Judge Posner, of
the Sixth Circuit, said, this thing has been litigated in England. The
English system comports to our system. It is not exactly as if there
was a due process of law situation. Most of us understand from where
our court system comes. It was litigated. By this law, we are
attempting to open up and overturn a final determination by an American
court. If we get in the business in the Congress of overturning
lawsuits with results we don't like, we will have clearly gone down a
slippery slope and will be going contrary to the rule of law.
Secretary Powell and Secretary O'Neill have sent us a letter, and it
contains this provision:
By directing the outcome in these court cases, Section 1310
has the potential to undercut the rule of law as it applies
across international borders today, with serious consequences
for U.S. commercial and other interests.
I think they are right. Our sympathy is with the 300 or so Americans
who had the opportunity to litigate this and lost, just as our sympathy
is with the several thousand people who lost money and settled the
lawsuits.
But the rule of law must prevail, and we must be concerned about our
own commercial interests if, in fact, we do this when we have a British
citizen over here in our court that makes a similar determination.
Mr. FEINGOLD. Mr. President, how much time do I have?
The PRESIDING OFFICER. Two minutes.
Mr. FEINGOLD. I ask the Senator from Tennessee if he will yield so I
can offer a minute to the Senator from Texas and a minute to the
Senator from Delaware.
Mr. THOMPSON. Yes.
Mr. FEINGOLD. I thank the Senator from Tennessee.
I yield a minute to the Senator from Texas.
Mr. GRAMM. Mr. President, all over the world tonight, legislative
bodies are meeting to try to protect their citizens from living up to
obligations that they have with American economic interests. All over
the world tonight, legislative bodies that don't live up to the
standards we have set for this, the greatest deliberative body in
history, are trying to change domestic laws to make it possible for
people to violate international standards of business.
There is no one in this body I care more about than the distinguished
Senator from Alabama, and I have no doubt that there may very well have
been wrongs committed in terms of selling people part of this
liability. But I urge my colleagues tonight to look at the big issue of
the viability of world commerce, and the enforceability of contracts,
and to live up to the standards of the greatest deliberative body in
history by adopting this amendment.
Mr. FEINGOLD. I thank the Senator.
I yield the remainder of my time to Senator Biden.
Mr. BIDEN. Mr. President, I associate myself with the remarks of the
Senator from Tennessee, as well as the Senator from Texas.
International relations, this would be a very serious mistake for us to
make. Beyond commerce, this will do damage, in my view,
[[Page S2355]]
to our relations also with Great Britain. This will make it difficult
for us to make the case that when we want foreign courts to make
concessions based upon our needs, for them to be willing to do so, I
think it is a mistake.
I understand and admire the Senator from Alabama for his desire to
protect the interests of a citizen or citizens of his State, or others,
but I think this is a mistake.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alabama has 7\1/2\ minutes.
Mr. SESSIONS. Mr. President, I will refer to a letter from
Congressman Henry Hyde, chairman of the House of Representatives
Committee on International Relations and former chairman of the House
Judiciary Committee, a man of great knowledge and experience. He says:
This provision does not impact State regulation of
insurance and it does not violate any treaty obligations of
this country. Consistent with the Hague Convention,
recognition of a foreign award may be refused if the court in
the country where enforcement is sought finds that
``recognition or enforcement of the award would be contrary
to the public policy of that country.'' It certainly is
contrary to the public policy of this country [Chairman
Hyde continues] for an individual to be defrauded and then
denied the right to assert fraud as a defense.
I ask unanimous consent to have printed in the Record letters from
the former Chief Justice of the Supreme Court of Alabama, and a former
Democratic Senator from this body, Howell Heflin, who said:
As a former judge, I am appalled at this entire situation.
I also ask unanimous consent to have a letter from Senator Robert
Kerrey of Nebraska and Mary Landrieu of Louisiana in reference to this
matter, as well as a letter from Laura Unger, acting chairman of the
Securities and Exchange Commission, printed in the Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
U.S. Securities and Exchange
Commission,
Washington, DC, March 1, 2001.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services, House of
Representatives, Rayburn House Office Building,
Washington, DC.
Dear Chairman Oxley: Thank you for your letter dated
February 28, 2001 regarding Lloyd's of London. As you stated
in your letter, the SEC has filed a number of briefs amicus
curiae with United States Courts of Appeals stating that
forum selection provisions entered into between Lloyd's and
plaintiffs in the cases violated the anti-waiver provisions
of the United States federal securities laws. The SEC stated
that these provisions acted to prohibit courts from giving
effect to contractual provisions precluding purchasers from
obtaining relief under the federal securities laws.
As we stated in our briefs, Congress has made a legislative
determination of the rights and obligations necessary to
protect investors in the United States and directed that
those provisions cannot be waived. As a result, we continue
to believe that the antiwaiver provisions of the federal
securities laws render void any agreement to waive compliance
with those laws. The SEC, however, submitted its briefs
solely to address the legal issue of the applicability of the
anti-waiver provisions and took no position on any other
issue.
I hope this information is helpful. If you have any further
questions, please do not hesitate to contact me.
Sincerely,
Laura S. Unger,
Acting Chairman.
____
U.S. Senate,
Washington, DC, May 16, 2000.
Hon. Orrin Hatch,
Chairman, Committee on the Judiciary,
Washington, DC.
Dear Mr. Chairman: We are writing you regarding an issue of
concern to a number of us on both sides of the aisle. As we
understand it, you are aware that English courts have entered
summary judgments against hundreds of Americans who contend
that they were defrauded in the United States by Lloyd's of
London. These Americans were deprived of the right in these
actions of raising a fraud defense to Lloyd's claims. As a
result, they have asked Congress to give them the right to
raise their fraud claims in any collection action brought by
Lloyd's in the United States. They are merely asking to have
their day in court.
Enclosed is a copy of the proposed language which would
provide these Americans with the right to their day in court.
As you will see, it is limited in scope and the burden of
proof will be upon those seeking to raise a fraud defense to
prove such fraud. The amendment would in no way mandate how a
court might ultimately decide whether fraud occurred. It
simply gives these Americans their day in court.
We hope that it could be included in the pending bankruptcy
legislation when it emerges from conference. We would
appreciate your consideration in this regard.
Sincerely,
Mary L. Landrieu,
U.S. Senator.
____
Howell Heflin,
U.S. Senator (Retired),
Tuscumbia, AL, March 2, 2001.
Hon. Russell D. Feingold,
U.S. Senator, Hart Senate Office Building, Washington, DC.
Dear Russ: I am writing you about a matter which will be on
the Senate floor next week. I would prefer to visit directly
with you, but unfortunately I am unable to make the trip at
this time.
Our State Democratic Party chairman here in Alabama, Jack
Miller, and his law firm are old friends and supporters who
have been involved with me from the time I first ran for
Chief Justice of the Alabama Supreme Court and throughout my
political career. They tell me that over the last three
years, they have been working with a group of Americans who
invested in Lloyd's of London and they have been trying to
help them secure ``their day in court.'' This group invested
in the 1980s before it was generally known that Lloyd's was
facing horrendous asbestos losses. When they invested, they
were not told of these losses. Obviously, had they been aware
of the losses, they would not have made the investments.
Despite the strong support of the SEC, including the SEC's
filing of amicus briefs with various courts, these Americans
have not been allowed to assert their claims of fraud by
Lloyd's. Lloyd's has used an agreement executed by agents
appointed by Lloyd's to preclude these Americans from raising
fraud as a defense. Lloyd's did this by passing a by-law
which authorized LLoyd's to appoint an agent for the
investors. The agent then signed away the investors' right to
assert fraud as a defense or to question how Lloyd's had
calculated what they allegedly owed. As a result of the
agent's actions, the investors were just given a sheet of
paper with the amounts owed and no backup information and
they were not permitted to question how the numbers were
calculated. Some of the investors instructed their agent not
to sign away their rights and those agents which followed the
investors' instructions were replaced by Lloyd's with an
agent which would do as LLoyd's instructed in direct
contravention of the instructions from the principal.
As a former judge, I am appalled at this entire situation.
As I understand it, the provision in the pending bankruptcy
bill, Section 1310, simply will give these Americans the
right to have their case heard. The burden will be on them to
prove by clear and convicing evidence, the highest civil
standard, that they were defrauded.
There are no treaty implications. The Hague Convention only
applies to arbitral awards, not judgements. Further, Article
V of the Convention permits host countries to refuse
enforcement of judgements which contravene the public policy
of the host country. It would be difficult to find a
situation which is more clearly against our country's public
policy.
I hear that you have been concerned over the increasing use
of arbitration provisions in the United States. Likewise, I
am seriously concerned. What LLoyd's is attempting to do
takes such provisions to a new level. The consumer is not
only expected to sign away his constitutional rights and
securities law protections, it can be done for him by another
who is appointed his agent by the other party.
Finally, I gather that you have some questions regarding
how this provision became part of the bankruptcy bill. As I
understand it, my friends here in Alabama have been working
for years to find a legislative vehicle to help these
Americans secure a day in court. They have had bipartisan
support, including former Senator Bob Kerrey and Senator Mary
Landrieu. During their efforts over the last several years,
the firm contacted Senator Jeff Sessions since the firm and
Senator Sessions are both from Mobile. As a former U.S.
Attorney, Senator Sessions agreed that these people had not
been accorded their rights and he agreed to support their
efforts.
I know that my friends here in Alabama would like the
opportunity to meet with you and to respond to any questions
you might have concenring this matter. If your scheduled
permits this to occur, please let me know.
Thank you for considering what I have to say. I hope that
it won't be too long before we can visit in person again.
Sincerely yours,
Howell Heflin.
____
House of Representatives, Committee on International
Relations,
Washington, DC, March 5, 2001.
Hon. Jesse Helms,
Chairman, Senate Committee on Foreign Relations, Washington,
DC.
Dear Chairman Helms: I am strongly supportive of Section
1310 of S. 420, the Bankruptcy Reform Act of 2001, and I seek
your support of this provision as well. It is important that
this provision remain in the Senate bill and not be stricken.
This provision is necessary to allow American investors who
believe they may have been defrauded by Lloyd's of London an
opportunity to be heard in American courts.
[[Page S2356]]
Section 1310 is narrowly drafted to address the unique
circumstances facing those Americans who were recruited in
the United States to invest in Lloyd's before 1994 without
full disclosure that they would be saddled with asbestos
liabilities. The English court which rendered summary
judgments in favor of Lloyd's and against the American
investors denied those investors the right to assert fraud as
an affirmative defense. Section 1310 provides a measured
remedy in these cases, where, by clear and convincing
evidence, the burden of proof is on the American investor to
assert and prove fraud. As you are probably aware, a number
of Members and Senators on both sides of the aisle, as well
as the Securities and Exchange Commission have endeavored to
give the Americans who believe they have been defrauded by
Lloyd's legal forum in American courts with respect to the
representations that were made to them in this country by
Lloyd's and its agents. (See attached copy of the
Commission's letter to Chairman Oxley)
The provision does not impact state regulation of insurance
and it does not violate any treaty obligations of this
country. Consistent with the Hague Convention, recognition of
a foreign award may be refused if the court in the country
where enforcement is sought finds that ``recognition or
enforcement of the award would be contrary to the public of
that country.'' It is certainly contrary to the public policy
of this country for an individual to be defrauded and then
denied the right to assert fraud as a defense.
If you have any questions concerning this provision or my
support of it, I would be happy to discuss this matter with
you.
Sincerely,
Henry Hyde.
Mr. SESSIONS. This is a front page copy of Time magazine:
Lloyd's of London, 1688--?
Its watchword is utmost good faith. So why does Lloyd's
stand accused of the greatest swindle ever?
I was a Federal prosecutor for 12 years in Alabama. I was also in
litigation. I am personally aware that there is fraud in big insurance
companies. I had the opportunity and the responsibility to prosecute
perhaps the largest insurance fraud case in the history of the United
States that had even been investigated by committees here in the
Senate. In that case, people were defrauded out of over $50 million-
plus. The guy who did that, Alan Teal, was convicted. It just so
happened he had previously, years before, been a member of Lloyd's.
That has nothing to do with this, but I relay it here to let you know
that I understand insurance fraud and I have been involved in
prosecuted the big cases.
In addition, I was involved in asbestos litigation in the late 1970s.
I know in the late 1970s there were thousands of asbestos cases being
filed, tens of thousands were being filed, and more were on the way.
Everyone knew it. Plaintiffs were beginning to win tremendous verdicts.
Everybody who knew anything about the litigation wondered if there
would ever be enough money to pay those verdicts.
During this same period of time, the companies that had the
guaranteeing of the insurance, the reinsurance, was Lloyd's of London.
What did they do? They were sending representatives to the United
States, asking those people to invest hundreds of thousands of dollars
of their own money into these accounts, and they told them: People have
done well investing in Lloyd's. We think you will do well. But you are
liable for everything that can come up. It is in the fine print. But
they invested, thinking Lloyd's had a good reputation. The company
began in 1688 with Members of Parliament, with lords and earls as
investors in this.
So they invested, little knowing that the bullet was already in the
heart, that this company faced absolute financial ruin as a result of
the most unprecedented series of lawsuits in American history, asbestos
lawsuits.
Now, when this case went to trial, they said they had a trial over
there. They passed a securities law in England similar to our
securities law, except they exempted one named entity--Lloyd's of
London. Many Members of Parliament who passed that law were investors
in Lloyd's. I don't know if they recused themselves or not.
These are some of the facts at which we are looking. The heart of the
claim is this, that these American investors were not allowed to put on
evidence in the British court that omission could lead to liability. In
other words, they were not allowed to show under the law under which
they were forced to operate, that Lloyd's had any duty to tell them
when they were investing in these syndicates, that they were doomed to
lose, and there would be money they would have to pay--really, tens of
billions of dollars in asbestos claims, enough to ruin all of Lloyd's.
They sold these investments to American citizens, who did not fully
know what they were facing. As one said, these were massive,
unquantifiable losses that were heading Lloyd's way like a tidal wave,
visible only to the few professional insiders who were tracking
asbestos claims.
That was a fraud, I think, under any definition of the word.
The British judge, who excluded all evidence except the written
documents that were submitted to the investors as the only evidence
that went in on the question of fraud, those documents were submitted
and they said you could be liable for any claims that may come against
Lloyd's, but they did not say this tidal wave of claims was coming.
Up to 7 or more people all over the world, possibly up to 12, have
committed suicide as a result of this. It has ruined the lives of many,
many citizens.
The judge who tried the case and who was bound by the law so he
didn't let this evidence in, said, ``The catalog of failings and
incompetence in the 1980s by underwriters, managing agents, members and
agents and others is staggering and has brought disgrace on one of the
city's great markets.'' He goes on to skewer Lloyd's for their
behavior, yet we can't get a remedy.
This says you don't get money as a result, you only go to court and
show in a court of law you may have been defrauded.
Mr. President, let me take just a moment to more fully explain the
issues involved in this section of S. 420 that we are debating here
today.
The Lloyd's of London provision would allow American investors in
Lloyd's to defend against debt collection actions by Lloyd's in
American courts by attempting to show that Lloyd's defrauded them when
it recruited them as investors in the United States. The investors
claim that Lloyd's of London recruited them as investors with unlimited
liability and without disclosing to them massive impending liabilities
for asbestos and pollution losses.
This provision was added in the quasi-conference on the Bankruptcy
Bill last year. Republicans and Democrats alike agreed to it.
The provision was in the Bankruptcy bill as introduced and passed by
the Judiciary Committee of the House and by the whole House this year.
It was in the Bankruptcy Bill as introduced and passed by the Senate
Judiciary Committee this year where Senator Feingold mentioned his
objections to it.
There are legitimate arguments on both sides of this issue. I have
listened to investors, and I have listened to Lloyd's of London.
Further, my colleague from Wisconsin has spoken against this provision,
and I respect his view.
Lloyd's asserts that an English court has found that Lloyd's, as a
corporate entity, was not liable for fraud to several American
investors that participated in that trial; that international law and
comity among nations demands that we respect the judgment of the
English courts;
That the agreements signed by the investors had forum-selection and
choice-of-law clauses which provided that any dispute would be
litigated in English courts under English law; and
That American courts have upheld the forum-selection and choice-of-
law clauses.
On the other hand, the investors contend that Parliament precluded
suits against Lloyd's for negligence and breach of contract in 1982 and
for securities fraud in 1986; that after the investment contract was
signed, Lloyd's changed its by-laws to require investors to pay their
losses before asserting fraud as a defense even though many investors
can't afford to pay their losses in full!;
That the English court failed to address allegations of fraud that
took place in America;
That in 1995 a Colorado court, at the behest of state attorneys
working under Gale Norton, issued a preliminary injunction against
Lloyd's stating its statements to American investors were ``materially
misleading and false because, as a result of underwriting and
reinsurance of asbestos-related liabilities in various syndicates,
which
[[Page S2357]]
liabilities had not been disclosed to [investors], those [investors] .
. . are exposed to indefinite liability both in terms of amount and
duration . . . .'';
That in 1996, Lloyd's settled the fraud claims of numerous State
securities regulators by agreeing to reduce its claims against settling
investors by $62 million; and
That in the February 26th edition of the Wall Street Journal it was
reported that Lloyd's is currently under criminal investigation
relating to defrauding its American investors.
In my view, this comes down to a very simple question:
Is this situation egregious enough to warrant an exception to the
general rule of comity on judgments?
I believe that it is because of my personal experience as both
Attorney General my State and a federal prosecutor.
I prosecuted criminals who defrauded policy-holders and investors.
In 1979, I became aware that insurance companies knew of large
asbestos losses discovered in litigation in Pascagoula, Mississippi,
and that these losses would be catastrophic to the insurance companies.
I know what it means to a family to be defrauded by an insurance
company. It is wrong.
I believe in the sanctity of contract, but there is no contract if
the investors were fraudulently induced to enter the investment
agreement.
I believe in comity with the British government, but there is no
comity if Parliament protects Lloyd's, but Congress does not protect
American investors.
I believe that helping wealthy investors should not be at the top of
our priority list, but many of these investors are not wealthy and as
Time Magazine reported some have even lost their homes to Lloyd's.
I also believe that defrauding investors is intolerable, but that it
is possible Lloyd's did not commit fraud.
However, under the current post-contract term that requires the
investors to pay before they assert fraud as a defense, investors who
cannot afford to pay their loss in full cannot prevent debt collection
actions by Lloyd's even if Lloyd's did defraud them.
This amendment says that international comity is a two-way street.
The British Parliament cannot protect wealthy British Investors from
negligence and securities law claims and expect the American Congress
not to at least give American investors a chance to assert fraud as a
defense to debt-collection actions--a right that the investors had when
they signed their investment contracts but that was unilaterally
stripped away from them by Lloyd's after the fact.
Accordingly, I support this narrow provision in the bill to allow
pre-1994 American investors to assert fraud as a defense prior to
payment. If they cannot prove fraud by clear and convincing evidence,
they will lose. If they can prove it, they will win. That is only fair.
Mr. FEINGOLD. I ask for the yeas and nays on the amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the Feingold amendment, No. 51, as
modified.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk called the roll.
Mr. FITZGERALD (when his name was called). Present.
Mr. STEVENS (when his name was called). Present.
Mr. REID. I announce that the Senator from California (Mrs. Boxer) is
necessarily absent.
The result was announced--yeas 79, nays 18, as follows:
(Rollcall Vote No. 35 Leg.)
YEAS--79
Akaka
Allard
Allen
Bayh
Biden
Bond
Brownback
Burns
Byrd
Cantwell
Carnahan
Carper
Chafee
Cleland
Clinton
Cochran
Collins
Conrad
Corzine
Craig
Crapo
Daschle
Dayton
DeWine
Dodd
Domenici
Dorgan
Durbin
Edwards
Ensign
Enzi
Feingold
Feinstein
Frist
Graham
Gramm
Hagel
Harkin
Hollings
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Leahy
Levin
Lieberman
Lincoln
Lugar
McCain
McConnell
Mikulski
Miller
Murkowski
Murray
Nelson (NE)
Nickles
Reed
Reid
Roberts
Rockefeller
Santorum
Sarbanes
Schumer
Shelby
Smith (OR)
Snowe
Specter
Stabenow
Thomas
Thompson
Torricelli
Voinovich
Warner
Wellstone
Wyden
NAYS--18
Baucus
Bennett
Bingaman
Breaux
Bunning
Campbell
Grassley
Gregg
Hatch
Helms
Hutchinson
Kyl
Landrieu
Lott
Nelson (FL)
Sessions
Smith (NH)
Thurmond
ANSWERED ``PRESENT''--2
Fitzgerald
Stevens
NOT VOTING---1
Boxer
The amendment (No. 51), as modified, was agreed to.
Mr. HATCH. Mr. President, I move to reconsider the vote.
Mr. LEAHY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. Under the previous order, the pending
amendments are withdrawn.
The Senator from Utah.
Amendments Nos. 15 as modified, 16, 20 as modified, 24, 30 as modified,
35, 38 as modified, 43, 45 as modified, 49, 50, 54 as modified, 58, 60
as modified, 66 as modified, 81 as modified, 106, 107, 108, and 109
Mr. HATCH. Mr. President, I have sent a package of amendments to the
desk that have been cleared by both sides. Pursuant to the prior
agreement, I ask unanimous consent that the package be agreed to at
this time, and I also ask unanimous consent the pending Breaux
amendment No. 94 be withdrawn, pursuant to previous agreement.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 94) was withdrawn.
The amendments (Nos. 15 as modified, 16, 20 as modified, 24, 30 as
modified, 35, 38 as modified, 43, 45 as modified, 49, 50, 54 as
modified, 58, 60 as modified, 66 as modified, 81 as modified, 106, 107,
108, and 109) were agreed to, as follows:
amendment no. 15, as modified
(Purpose: To clarify provisions relating to involuntary cases)
On page 413, after line 25, insert the following:
SEC. 1237. INVOLUNTARY CASES.
Section 303 of title 11, United States Code, is amended--
(1) in subsection (b)(1), by--
(A) inserting ``as to liability or amount'' after ``bona
fide dispute''; and
(B) striking ``if such claims'' and inserting ``if such
undisputed claims''; and
(2) in subsection (h)(1), by inserting before the semicolon
the following: ``as to liability or amount''.
____
amendment no. 16
(Purpose: To provide for family fishermen)
At the appropriate place insert the following:
SEC. ____. FAMILY FISHERMEN.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (7) the following:
``(7A) `commercial fishing operation' includes--
``(A) the catching or harvesting of fish, shrimp, lobsters,
urchins, seaweed, shellfish, or other aquatic species or
products;
``(B) for purposes of section 109 and chapter 12,
aquaculture activities consisting of raising for market any
species or product described in subparagraph (A); and
``(C) the transporting by vessel of a passenger for hire
(as defined in section 2101 of title 46) who is engaged in
recreational fishing;
``(7B) `commercial fishing vessel' means a vessel used by a
fisherman to carry out a commercial fishing operation;'';
(2) by inserting after paragraph (19) the following:
``(19A) `family fisherman' means--
``(A) an individual or individual and spouse engaged in a
commercial fishing operation (including aquaculture for
purposes of chapter 12)--
``(i) whose aggregate debts do not exceed $1,500,000 and
not less than 80 percent of whose aggregate noncontingent,
liquidated debts (excluding a debt for the principal
residence of such individual or such individual and spouse,
unless such debt arises out of a commercial fishing
operation), on the date the case is filed, arise out of a
commercial fishing operation owned or operated by such
individual or such individual and spouse; and
``(ii) who receive from such commercial fishing operation
more than 50 percent of such individual's or such
individual's and spouse's gross income for the taxable year
preceding the taxable year in which the case concerning such
individual or such individual and spouse was filed; or
``(B) a corporation or partnership--
``(i) in which more than 50 percent of the outstanding
stock or equity is held by--
[[Page S2358]]
``(I) 1 family that conducts the commercial fishing
operation; or
``(II) 1 family and the relatives of the members of such
family, and such family or such relatives conduct the
commercial fishing operation; and
``(ii)(I) more than 80 percent of the value of its assets
consists of assets related to the commercial fishing
operation;
``(II) its aggregate debts do not exceed $1,500,000 and not
less than 80 percent of its aggregate noncontingent,
liquidated debts (excluding a debt for 1 dwelling which is
owned by such corporation or partnership and which a
shareholder or partner maintains as a principal residence,
unless such debt arises out of a commercial fishing
operation), on the date the case is filed, arise out of a
commercial fishing operation owned or operated by such
corporation or such partnership; and
``(III) if such corporation issues stock, such stock is not
publicly traded;''; and
(3) by inserting after paragraph (19A) the following:
``(19B) `family fisherman with regular annual income' means
a family fisherman whose annual income is sufficiently stable
and regular to enable such family fisherman to make payments
under a plan under chapter 12 of this title;''.
(b) Who May Be a Debtor.--Section 109(f) of title 11,
United States Code, is amended by inserting ``or family
fisherman'' after ``family farmer''.
(c) Chapter 12.--Chapter 12 of title 11, United States
Code, is amended--
(1) in the chapter heading, by inserting ``OR FISHERMAN''
after ``FAMILY FARMER'';
(2) in section 1201, by adding at the end the following:
``(e)(1) Notwithstanding any other provision of law, for
purposes of this subsection, a guarantor of a claim of a
creditor under this section shall be treated in the same
manner as a creditor with respect to the operation of a stay
under this section.
``(2) For purposes of a claim that arises from the
ownership or operation of a commercial fishing operation, a
co-maker of a loan made by a creditor under this section
shall be treated in the same manner as a creditor with
respect to the operation of a stay under this section.'';
(3) in section 1203, by inserting ``or commercial fishing
operation'' after ``farm'';
(4) in section 1206, by striking ``if the property is
farmland or farm equipment'' and inserting ``if the property
is farmland, farm equipment, or property of a commercial
fishing operation (including a commercial fishing vessel)'';
and
(5) by adding at the end the following:
``Sec. 1232. Additional provisions relating to family
fishermen
``(a)(1) Notwithstanding any other provision of law, except
as provided in subsection (c), with respect to any commercial
fishing vessel of a family fisherman, the debts of that
family fisherman shall be treated in the manner prescribed in
paragraph (2).
``(2)(A) For purposes of this chapter, a claim for a lien
described in subsection (b) for a commercial fishing vessel
of a family fisherman that could, but for this subsection, be
subject to a lien under otherwise applicable maritime law,
shall be treated as an unsecured claim.
``(B) Subparagraph (A) applies to a claim for a lien
resulting from a debt of a family fisherman incurred on or
after the date of enactment of this chapter.
``(b) A lien described in this subsection is--
``(1) a maritime lien under subchapter III of chapter 313
of title 46 without regard to whether that lien is recorded
under section 31343 of title 46; or
``(2) a lien under applicable State law (or the law of a
political subdivision thereof).
``(c) Subsection (a) shall not apply to--
``(1) a claim made by a member of a crew or a seaman
including a claim made for--
``(A) wages, maintenance, or cure; or
``(B) personal injury; or
``(2) a preferred ship mortgage that has been perfected
under subchapter II of chapter 313 of title 46.
``(d) For purposes of this chapter, a mortgage described in
subsection (c)(2) shall be treated as a secured claim.''.
(d) Clerical Amendments.--
(1) Table of chapters.--In the table of chapters for title
11, United States Code, the item relating to chapter 12, is
amended to read as follows:
``12. Adjustments of Debts of a Family Farmer or Family Fisherman with
Regular Annual Income...................................1201''.....
(2) Table of sections.--The table of sections for chapter
12 of title 11, United States Code, is amended by adding at
the end the following new item:
``1232. Additional provisions relating to family fishermen.''.
(e) Applicability.--
Nothing in this section shall change, affect, or amend the
Fishery Conservation and Management Act of 1976 (16 U.S.C.
1801, et seq.).
Amend the table of contents accordingly.
____
amendment no. 20, as modified
(Purpose: To resolve an ambiguity relating to the definition of current
monthly income)
On page 18, beginning on line 10, after ``preceding the
date of determination'' insert ``, which shall be the date
which is the last day of the calendar month immediately
preceding the date of the bankruptcy filing. If the debtor is
providing the debtor's current monthly income at the time of
the filing, and otherwise the date of determination shall be
such date on which the debtor's current monthly income is
determined by the court for the purposes of this Act.''.
____
amendment no. 24
(Purpose: To amend the definition of a bankruptcy petition preparer)
On page 85, beginning on line 12, strike ``a person, other
than''.
____
amendment no. 30, as modified
(Purpose: To provide a clarification of postpetition wages and
benefits)
At the end of title III, add the following:
SEC. 330. CLARIFICATION OF POSTPETITION WAGES AND BENEFITS.
Section 503(b)(1)(A) of title 11, United States Code, is
amended to read as follows:
``(A) the actual, necessary costs and expenses of
preserving the estate, including wages, salaries, or
commissions for services rendered after the commencement of
the case, and wages and benefits awarded pursuant to an
action brought in a court of law or the National Labor
Relations Board as back pay attributable to any period of
time after commencement of the case as a result of the
debtor's violation of Federal or State law, without regard to
when the original unlawful act occurred or to whether any
services were rendered if the court determines that the award
will not substantially increase the probability of layoff or
termination of current employees or of nonpayment of domestic
support obligations during the case;''
____
amendment no. 35
(Purpose: To clarify the duties of a debtor who is the plan
administrator of an employee benefit plan)
At the appropriate place, insert the following:
SEC. ____. DUTIES WITH RESPECT TO A DEBTOR WHO IS A PLAN
ADMINISTRATOR OF AN EMPLOYEE BENEFIT PLAN.
(a) In General.--Section 521(a) of title 11, United States
Code, as so designated by section 106(d) of this Act, is
amended-
(1) in paragraph (4), by striking ``and'' at the end;
(2) in paragraph (5), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(6) unless a trustee is serving in the case, if at the
time of filing, the debtor, served as the administrator (as
defined in section 3 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002)) of an employee benefit
plan, continue to perform the obligations required of the
administrator.''.
(b) Duties of Trustees.--Section 704(a) of title 11, United
States Code, as so designated and otherwise amended by this
Act, is amended--
(1) in paragraph (10), by striking ``and'' at the end;
(2) in paragraph (11), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(12) where, at the time of the time of the commencement
of the case, the debtor served as the administrator (as
defined in section 3 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002)) of an employee benefit
plan, continue to perform the obligations required of the
administrator;''.
(c) Conforming Amendment.--Section 1106(a) of title 11,
United States Code, is amended by striking paragraph (1) and
inserting the following:
``(1) perform the duties of the trustee, as specified in
paragraphs (2), (5), (7), (8), (9), (10), (11), and (12) of
section 704;''.
Amend the table of contents accordingly.
____
amendment no. 38, as modified
(Purpose: To allow a debtor to purchase health insurance)
Page 25, line 7, insert the following new subsection and
redesignate the subsequent subsections accordingly:
``(i) Special Allowance for Health Insurance.--Section
1329(a) of title 11, United States Code, is amended by
inserting the following new paragraph--
`` `(4) reduce amounts to be paid under the plan by the
actual amount expended by the debtor to purchase health
insurance for the debtor and any dependent of the debtor (if
those dependents do not otherwise have health insurance
coverage) if the debtor documents the cost of such insurance
and demonstrates that--
`` `(A) such expenses are reasonable and necessary;
`` `(B)(i) if the debtor previously paid for health
insurance, the amount is not materially larger than the cost
the debtor previously paid or the cost necessary to maintain
the lapsed policy, or;
`` `(ii) if the debtor did not have health insurance, the
amount is not materially larger than the reasonable cost that
would be incurred by a debtor who purchases health insurance
and who has similar income, expenses, age, health status, and
lives in the same geographic location with the same number of
dependents that do not otherwise have health insurance
coverage; and
`` `(C) the amount is not otherwise allowed for purposes of
determining disposable income under section 1325(b) of this
title.
Upon request of any party in interest the debtor shall file
proof that a health insurance policy was purchased.' ''
[[Page S2359]]
____
amendment no. 43
(Purpose: To address exceptions to discharge)
On page 173, line 11, strike ``discharge a debtor'' and
insert ``discharge an individual debtor''.
On page 244, line 8, strike ``described in section
523(a)(2)'' and insert ``described in subparagraph (A) or (B)
of section 523(a)(2) that is owed to a domestic governmental
unit or owed to a person as the result of an action filed
under subchapter III of chapter 37 of title 31, United States
Code, or any similar State statute,''.
____
amendment no. 45, as modified
(Purpose: To make amendments with respect to filings by small business
concerns, and for other purposes)
On page 212, strike line 8 and all that follows through
page 212, line 14, and insert the following:
SEC. 438. PLAN CONFIRMATION DEADLINE.
Section 1129 of title 11, United States Code, is amended by
adding at the end the following:
``(e)(1) In a small business case, the plan shall be
confirmed not later than 45 days after the date that a plan
is filed with the court as provided in section 1121(e).
``(2) The 45 day period referred to in paragraph (1) may be
extended only if--
``(A) the debtor, after notice and hearing, demonstrates
that it is more likely than not that the court will confirm a
plan within a reasonable period of time;
``(B) a new deadline is imposed at the time at which the
extension is granted; and
``(C) the order extending time is signed before the
existing deadline has expired.''.
On page 217, line 16, strike ``establishes'' and all that
follows through ``time'' on line 20 and insert the following:
``establishes that--
``(A) there is a reasonable likelihood that a plan will be
confirmed within the timeframes established in sections
1121(e) and 1129(e) of this title, as amended, or in cases in
which these sections do not apply, within a reasonable period
of time''.
____
Amendment No. 49
(Purpose: To provide that Federal election law fines and penalties are
nondischargeable debts)
At the appropriate place, insert the following:
SEC. . FEDERAL ELECTION LAW FINES AND PENALTIES AS
NONDISCHARGEABLE DEBT.
Section 523(a) of title 11, United States Code, is amended
by inserting after paragraph (14A) (as added by this Act) the
following:
``(14B) incurred to pay fines or penalties imposed under
Federal election law;''.
Amend the table of contents accordingly.
____
Amendment No. 50
(Purpose: to provide that political committees may not file for
bankruptcy)
At the appropriate place, insert the following:
SEC. . NO BANKRUPTCY FOR INSOLVENT POLITICAL COMMITTEES.
Section 105 of title 11, United States Code, is amended by
adding at the end the following:
``(e) A political committee subject to the jurisdiction of
the Federal Election Commission under Federal election laws
may not file for bankruptcy under this title.''.
Amend the table of contents accordingly.
____
Amendment No. 54, as modified
(Purpose: To encourage debtors to file in chapter 13 to repay their
debts)
On page 151, strike line 23 and all that follows through
page 152, line 3, and insert the following:
``(f) Notwithstanding subsections (a) and (b), the court
shall not grant a discharge of all debts provided for by the
plan or disallowed under section 502, if the debtor has
received a discharge: (1) in a case filed under chapter 7, 11
or 12 of this title during the three-year period preceding
the date of the order for relief under this chapter, or (2)
in a case filed under chapter 13 of this title during the
two-year period preceding the date of such order, except that
if the debtor demonstrates extreme hardship requiring that a
chapter 13 case be filed, the court may shorten the two-year
period.''.
____
AMENDMENT NO. 58
(Purpose: To make an amendment to preserve the existing bankruptcy
appellate structure while providing a mechanism for obtaining early
review by the court of appeals in appropriate circumstances)
Strike section 1235 and insert the following:
SEC. 1235. EXPEDITED APPEALS OF BANKRUPTCY CASES TO COURTS OF
APPEALS.
(a) Appeals.--Section 158 of title 28, United States Code,
is amended--
(1) in subsection (c)(1), by striking ``Subject to
subsection (b),'' and inserting ``Subject to subsections (b)
and (d)(2),''; and
(2) in subsection (d)--
(A) by inserting ``(1)'' after ``(d)''; and
(B) by adding at the end the following:
``(2)(A) A court of appeals that would have jurisdiction of
a subsequent appeal under paragraph (1) or other law may
authorize an immediate appeal of an order or decree, not
otherwise appealable, that is entered in a case or proceeding
pending under section 157 or is entered by the district court
or bankruptcy appellate panel exercising jurisdiction under
subsection (a) or (b), if the bankruptcy court, district
court, bankruptcy appellate panel, or the parties acting
jointly certify that--
``(i) the order or decree involves--
``(I) a substantial question of law;
``(II) a question of law requiring resolution of
conflicting decisions; or
``(III) a matter of public importance; and
``(ii) an immediate appeal from the order or decree may
materially advance the progress of the case or proceeding.
``(B) An appeal under this paragraph does not stay
proceedings in the court from which the order or decree
originated, unless the originating court or the court of
appeals orders such a stay.''.
(b) Procedural Rules.--
(1) Temporary application.--A provision of this subsection
shall apply to appeals under section 158(d)(2) of title 28,
United States Code, as added by subsection (a) of this
section, until a rule of practice and procedure relating to
such provision and appeal is promulgated or amended under
chapter 131 of such title.
(2) Certification.--A district court, bankruptcy court, or
bankruptcy appellate panel may enter a certification as
described in section 158(d)(2) of title 28, United States
Code, during proceedings pending before that court or panel.
(3) Procedure.--Subject to the other provisions of this
subsection, an appeal by permission under section 158(d)(2)
of title 28, United States Code, shall be taken in the manner
prescribed in rule 5 of the Federal Rules of Appellate
Procedure.
(4) Filing petition.--When permission to appeal is
requested on the basis of a certification of the parties, a
district court, bankruptcy court, or bankruptcy appellate
panel, the petition shall be filed within 10 days after the
certification is entered or filed.
(5) Attachment.--When permission to appeal is requested on
the basis of a certification of a district court, bankruptcy
court, or bankruptcy appellate panel, a copy of the
certification shall be attached to the petition.
(6) Panel and clerk.--In a case pending before a bankruptcy
appellate panel in which permission to appeal is requested,
the terms ``district court'' and ``district clerk'', as used
in rule 5 of the Federal Rules of Appellate Procedure, mean
``bankruptcy appellate panel'' and ``clerk of the bankruptcy
appellate panel'', respectively.
(7) Application of rules.--In a case pending before a
district court, bankruptcy court, or bankruptcy appellate
panel in which a court of appeals grants permission to
appeal, the Federal Rules of Appellate Procedure apply to the
proceedings in the court of appeals, to the extent relevant,
as if the appeal were taken from a final judgment, order, or
decree of a district court, bankruptcy court, or bankruptcy
appellate panel exercising appellate jurisdiction under
subsection (a) or (b) of section 158 of title 28, United
States Code.
____
AMENDMENT NO. 60, AS MODIFIED
(Purpose: To make technical corrections to Title IX--Financial Contract
Provisions)
On page 294, line 10, delete the comma after ``mortgage'';
On page 295, line 15, insert ``mortgage'' before ``loan'';
On page 296, line 25, strike ``or'' and insert
``including'';
On page 299, line 17, strike ``or'' and insert
``including'';
On page 301, line 18, strike ``or any'' and insert
``including any'';
On page 302, line 23, insert ``mortgage'' before ``loans'';
On page 303, line 3, insert ``mortgage'' before ``loans'';
On page 304, line 16, strike ``or'' after ``(V)'' and
insert ``including'';
On page 306, line 10, insert ``is of a type'' after
``clause and'';
On page 308, line 5, strike ``or any'' and insert
``including any'';
On page 308, line 23, strike ``the Gramm-Leach-Bliley
Act,'' and insert ``the Gramm-Leach-Bliley Act, and'';
On page 308, line 25, strike all after ``2000'' and insert
a period following ``2000'';
On page 309, strike line 1 through 3;
On page 320, line 10, strike ``and'';
On page 321, line 4, strike the period at the end of the
line and insert ``; and''
On page 321, insert after line 4 the following:
``(3) by including at the end of section 11(e) the
following new paragraph:
`(____) Savings Clause.--The meaning of terms used in this
subsection (e) are applicable for purposes of this subsection
(e) only, and shall not be construed or applied so as to
challenge or after the characterization, definition, or
treatment of any similar terms under any other statute,
regulation, or rule, including the Gramm-Leach-Bliley Act,
the Legal Certainty for Bank Products Act of 2000, the
securities law (as that term is defined in section 3(a)(47)
of the Securities Exchange Act of 1934), and the Commodity
Exchange Act.''
On page 327, line 7, strike ``408'' and insert ``407A'';
On page 327, line 20, strike ``or'' the second time it
appears;
On page 328, line 3, strike all following ``receiver''
through ``agency'' on line 4;
[[Page S2360]]
On page 328, line 7, strike all following ``receiver''
through ``bank'' on line 9;
On page 328, line 12, strike the comma after ``Act'';
On page 328, line 18, strike all following ``conservator''
through ``agency'' on line 20;
On page 338, line 23, strike all following ``conservator''
through ``bank'' on line 25;
On page 329, line 25, insert ``in the case of an uninsured
national bank or uninsured Federal branch or agency'' after
``Currency'';
On page 330, line 1, insert ``in the case of a corporation
chartered under section 25A of the Federal Reserve Act, or an
uninsured State member bank that operates, or operates as a
multilateral clearing organization pursuant to section 409 of
the Act,'';
On page 330, line 3, insert ``solely'' before ``to
implement''.
On page 330, line 5, strike ``to implement this section,''
and insert ``, limited solely to implementing paragraphs (8),
(9), (10) and (11) of section 11(e) of the Federal Deposit
Insurance Act,'';
On page 330, line 7, insert ``each'' before ``shall
ensure'';
On page 330, line 8, strike ``that the'' and insert ``that
their'';
On page 332, line 4, strike ``(D), or'' and insert ``(D)
including'';
On page 333, line 14, insert ``mortgage'' before ``loans'';
On page 333, line 18, insert ``mortgage'' before ``loans'';
On page 334, line 21, strike ``(iv), or'' and insert ``(vi)
including'';
On page 336, line 5, strike ``or an'' and insert ``or'';
On page 336, line 8, strike ``or a'' and insert ``or'';
On page 336, line 10, strike ``credit spread, total return,
or a'' and insert ``total return, credit spread or'';
On page 336, line 22, insert after ``(I)'' the following:
``is of a type that'';
On page 338, line 13, strike ``(v), or'' and insert ``(v);
including'';
On page 338, line 18, strike ``do'';
On page 339, line 9, insert ``and'' after ``Act,'';
On page 339, line 10, strike all after ``2000'' through
``Commission'' on line 13 and insert a period after ``2000'';
On page 340, line 20, insert ``mortgage'' before ``loan'';
On page 342, line 2, strike ``or any'' and insert
``Including any'';
On page 343, line 21, strike ``or any'' and insert
``including any'';
On page 346, line 7, strike ``or'' the first time it
appears;
On page 346, line 25, Insert ``, including any guarantee or
reimbursement obligation related to 1 or more of the
foregoing'' following ``foregoing'';
On page 352, line 24, strike ``a securities clearing
agency,'' after ``association,'';
On page 353, line 25, insert ``a securities clearing
agency,'' before ``a contract market'';
On page 355, line 5, strike ``a securities clearing
agency,'' after ``association,'';
On page 355, line 6, strike the end parenthesis after
``Act'';
On page 358, line 13, strike ``5(c)'' and insert ``5c(c)'';
On page 358, line 24, strike ``a national securities
exchange'';
On page 359 line 4 strike ``a securities clearing agency,''
after ``association'';
On page 363, line 13, insert ``a securities clearing
agency,'' after ``association,'';
On page 365, strike lines 18 through 22, and on page 366,
strike lines 1 through 2, and insert in lieu thereof the
following:
``(H) Recordkeeping Requirements.--The Corporation, in
consultation with the appropriate Federal banking agencies,
may by regulation require more detailed recordkeeping by any
insured depository institution with respect to qualified
financial contracts (including market valuations) only if
such insured depository institution is in a troubled
condition (as such term is defined by the Corporation
pursuant to 12 USC 1831i).'';
On page 372, line 18, insert ``governmental unit, limited
liability company (including a single member limited
liability company),'' after ``partnership,'';
On page 373, line 22, insert ``on or'' after ``State law'';
On page 374, line 10, insert ``and'' before ``the
Commodity'' and strike all after ``Act'' through line 12 and
insert a period after ``Act''.
____
AMENDMENT NO. 66 AS MODIFIED
(Purpose: To save taxpayers $4,000,000 over 5 years, the costs
associated with the storage of the tax returns of debtors in certain
bankruptcy cases, according to the Congressional Budget Office)
Strike line 21, page 160 to line 12, page 161 and insert
thereof:
``(f) An individual debtor in a case under chapter 7, 11,
or 13 shall file with the court at the request of the Judge,
U.S. Trustee, any party in interest--
``(1) at the time filed with the taxing authority, the
Federal tax returns or transcript thereof required under
applicable law, with respect to the period from the
commencement of the case until such time as the case is
closed;
``(2) at the time filed with the taxing authority, the
Federal tax returns or transcript thereof required under
applicable law, that were not filed with the taxing authority
when the schedules under subsection (a)(1) were filed with
respect to the period that is 3 years before the order of
relief;
``(3) any amendments to any of the Federal tax returns or
transcripts thereof described in paragraph (1) or (2); and''.
____
AMENDMENT NO. 81, AS modified
(Purpose: To require the General Accounting Office to conduct a study
of the reaffirmation process, and for other purposes)
At the end of subtitle A of title II, add the following:
SEC. 204. GAO STUDY ON REAFFIRMATION PROCESS.
(a) Study.--The General Accounting Office (in this section
referred to as the ``GAO'') shall conduct a study of the
reaffirmation process under title 11, United States Code, to
determine the overall treatment of consumers within the
context of that process, including consideration of--
(1) the policies and activities of creditors with respect
to reaffirmation; and
(2) whether consumers are fully, fairly and consistently
informed of their rights pursuant to this title.
(b) Report to Congress.--Not later than 1\1/2\ years after
the date of enactment of this Act, the GAO shall submit a
report to the Congress on the results of the study conducted
under subsection (a), together with any recommendations for
legislation to address any abusive or coercive tactics found
within the reaffirmation process.
____
AMENDMENT NO. 106
(Purpose: To improve the bill)
On page 187, line 20, strike ``(25)'' and insert ``(24)''.
On page 187, line 21, strike ``(26)'' and insert ``(25)''.
On page 191, strike line 25 and insert the following:
(2) in subsection (i), as so redesignated, by inserting
``and subject to the prior rights of holders of security
interests in such goods or the proceeds thereof,'' after
``consent of a creditor,''; and
On page 192, line 1, strike ``(2)'' and insert ``(3)''.
On page 199, line 4, strike ``through (5)'' and insert
``and (4)''.
On page 255, line 8, strike ``(26)'' and insert ``(25)''.
On page 255, line 10, strike ``(27)'' and insert ``(26)''.
On page 278, line 9, strike ``(28)'' and insert ``(27)''.
On page 281, line 23, strike ``(28)'' and insert ``(27)''.
On page 347, line 21, strike ``to, under'' and insert ``to
and under''.
On page 347, line 24, strike ``to, under'' and insert ``to
and under''.
On page 348, line 13, strike ``to, under'' and insert ``to
and under''.
On page 348, line 17, strike ``(27)'' and insert ``(26)''.
On page 348, line 19, strike ``(28)'' and insert ``(27)''.
On page 349, line 8, strike ``to, under'' and insert ``to
and under''.
On page 349, line 21, strike ``(28)'' and insert ``(27)''.
On page 361, line 23, strike ``(28)'' and insert ``(27)''.
On page 362, lines 4 and 8, strike ``(28)'' each place it
appears and insert ``(27)''.
On page 385, line 10, strike ``, including'' and insert ``.
If the health care business is a long-term care facility, the
trustee may appoint''.
On page 385, line 13, add at the end the following: ``In
the event that the trustee does not appoint the State Long-
Term Care Ombudsman to monitor the quality of patient care in
a long-term care facility, the court shall notify the
individual who serves as the State Long-Term Care Ombudsman
of the name and address of the individual who is
appointed.''.
On page 386, line 12, insert after the first period the
following: ``If the individual appointed as ombudsman is a
person who is also serving as a State Long-Term Care
Ombudsman appointed under title III or title VII of the Older
Americans Act of 1965 (42 U.S.C. 3021 et seq., 3058 et seq.),
that person shall have access to patient records, consistent
with authority spelled out in the Older Americans Act and
State laws governing the State Long-Term Care Ombudsman
program.''.
On page 388, line 4, strike ``(28)'' and insert ``(27)''.
On page 388, line 6, strike ``(29)'' and insert ``(28)''.
On page 394, strike lines 9 through 13.
Redesignate sections 1220 through 1223 as sections 1219
through 1222, respectively.
On page 397, strike line 16 and all that follows through
page 398, line 12.
On page 405, line 13, strike ``after'' and insert ``prior
to''.
On page 406, line 5, strike ``after'' and insert ``prior
to''.
Redesignate sections 1225 through 1236 as sections 1223
through 1234, respectively.
Amend the table of contents accordingly.
____
AMENDMENT NO. 107
(Purpose: To provide for an additional bankruptcy judgeship for the
district of Nevada)
On page 400, insert between lines 10 and 11 the following:
(T) One additional bankruptcy judgeship for the district of
Nevada, and one for the district of Delaware.
____
AMENDMENT NO. 108
(Purpose: To correct the treatment of certain spousal income for
purposes of means testing)
On page 10, line 14, after ``private'' insert ``or public''
and
[[Page S2361]]
On page 10, line 17, after ``necessary'' insert ``, and
that such expenses are not already accounted for in the
Internal Revenue Service Standards referred to in 707(b)(a)
of this title.''
____
amendment no. 109
At the end of the bill, add the following:
TITLE XV--MISCELLANEOUS PROVISIONS
SEC. 1501. REIMBURSEMENT OF RESEARCH, DEVELOPMENT, AND
MAINTENANCE COSTS.
(a) In General.--Not later August 1, 2001, the Federal Crop
Insurance Corporation shall promulgate final regulations to
carry out section 522(b) of the Federal Crop Insurance Act (7
U.S.C. 522(b)), without regard to--
(1) the notice and comment provisions of section 553 of
title 5, United States Code;
(2) the Statement of Policy of the Secretary of Agriculture
effective July 24, 1971 (36 Fed. Reg. 13804), relating to
notices of proposed rulemaking and public participation in
rulemaking; and
(3) chapter 35 of title 44, United States Code (commonly
known as the ``Paperwork Reduction Act'').
(b) Congressional Review of Agency Rulemaking.--In carrying
out this section, the Corporation shall use the authority
provided under section 808 of title 5, United States Code.
(c) Effective Date.--The final regulations promulgated
under subsection (a) shall take effect on the date of
publication of the final regulations.
Amend the table of contents accordingly.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. LEAHY. Mr. President, just so Senators know, that included the
Baucus, Feingold, Feinstein, Leahy, Schumer, Wellstone, Leahy, Ensign/
Reid, Leahy, Kohl/Kennedy, Levin/Grassley, Biden/Specter/Sessions/
Leahy, Collins/Kerry, Gramm of Texas, Reed of Rhode Island, Kennedy,
Leahy, Bond/Kerry, Boxer, and Grassley amendments.
amendment no. 30, as modified
Mr. KENNEDY. Mr. President, this bipartisan amendment protects
workers who face bankruptcy because they are owed money by employers
for back pay. This amendment was passed by voice vote last year, but
was dropped in conference. This should be a noncontroversial change, a
change that would ensure that workers receive all the wages that are
due them, workers who were denied minimum wage or overtime pay, workers
who were victims of discrimination, workers who were wrongfully fired,
and veterans who were denied jobs when they returned from active
military duty.
Amending the bankruptcy bill to protect the back pay of workers is
especially appropriate, because back pay awards help many of the people
that this legislation places at risk, low income families, minorities,
and women. My amendment helps workers take care of their families.
Collecting a back pay award would give them more of the resources they
need to afford food, clothing, and health care without turning to
credit cards.
Our bankruptcy laws already protect wages so that businesses can
continue to pay their workers during a reorganization. And some courts
have taken the important step of requiring employers facing bankruptcy
to live up to their obligations to provide back pay awards. This change
would ensure that all workers are treated the same, no matter what
bankruptcy court their employer has filed in.
The Department of Labor and the National Labor Relations Board obtain
back pay awards on behalf of workers. For fiscal year 1998, the NLRB
got back pay awards on behalf of about 24,000 workers, with an average
award of $3,750 per worker. During the past 5 years, the NLRB also
recovered about $1 million on behalf of approximately 300 American
veterans who were wrongfully denied jobs after they returned to work
from active military duty.
Similarly, for fiscal year 1999 the Department of Labor got back pay
awards on behalf of about 2,000 workers, with an average award of about
$900 per worker.
If these back pay awards do not receive protection in bankruptcy,
most workers will never receive them. They will have earned the back
pay, but will never see a dime. Without this amendment, workers lose
twice--first when they are wrongfully denied wages, and then again when
they are unable to collect the wages because their employers have
declared bankruptcy.
Mr. KOHL. Mr. President, I am pleased that the Senate agreed to
accept this amendment as part of the bankruptcy bill. Last session, my
amendment was accepted by the Senate only to be stripped out of the
conference report. The compromise reached on the amendment this year
should ensure that it remains in the bill this year. In addition, I
would like to thank Senator Kennedy for joining me this year in
offering this amendment.
The amendment corrects an inconsistency in current law regarding the
treatment of backpay awards issued for violations of state or federal
laws such as whistle blower protection laws, the Fair Labor Standards
Act, or civil rights laws. For example, an employee who works ten hours
of overtime during a pay period, but is only paid for nine, or an
employee who is wrongfully fired for being a whistle blower does not
currently receive the same treatment as the employee who continues to
work for the bankrupt company postpetition. Some courts have held that
where an award of backpay covers a time both before and after the
employer's bankruptcy petition, the entire award is considered a
general unsecured claim.
This amendment would clarify the treatment of backpay awards for the
postpetition period. For example, the postpetition backpay due an
employee who has been reinstated after a successful suit under
whistleblower protection laws would clearly be an administrative
expense under 11 U.S.C. Sec. 503(b)(1)(A). So too would backpay due to
workers whose overtime compensation was illegally denied or reduced.
Under the terms of the compromise agreed to in this amendment, before
the postpetition award is treated as an administrative expense, the
bankruptcy court must first determine that ``the award will not
substantially increase the probability of layoff or termination of
current employees or nonpayment of domestic support obligations during
the case.'' The court should evaluate the possible impact of the award
in the context of all other administrative expenses being awarded. The
term ``substantial'' will ensure that the bankruptcy court only refuses
to treat postpetition backpay awards as an administrative expense in
the rarest of circumstances.
In general, these backpay awards range on average from only a few
hundred dollars up to a couple of thousand dollars. Given that these
awards are so small, there is virtually no chance that the award will
substantially affect any part of an ongoing business concern. Should
the award of the postpetition amount be significantly more than a
couple of thousand dollars, it is still highly unlikely that it will
substantially change the probability of layoff or termination of other
employees.
This amendment is an important clarification to the code. I am
pleased that the Senate recognized the consequence of these
postpetition backpay awards.
amendment no. 107, as modified
Mr. ENSIGN. Mr. President, today I introduce, along with the senior
Senator from Nevada, an amendment to the Bankruptcy Reform Act of 2001
to create an additional bankruptcy judgeship position for the District
of Nevada.
This amendment follows the recommendation of the Judicial Conference
Committee on the Administration of the Bankruptcy Committee to the
Judicial Conference of the United States that legislation be
transmitted to Congress to create an additional judgeship for the
District of Nevada.
The combination of a rapidly growing population in Nevada and a high
number of bankruptcy filings makes it imperative for Nevada to have
another judgeship. Nevada continues to be the fastest growing state in
the nation, and the Las Vegas metropolitan area remains one of the most
rapidly growing cities. Between 1990 and 1999, the population of the
state of Nevada grew by more than 66 percent. Its population growth is
projected to increase by 10 percent from 2000 to 2005. At this current
rate of growth, the Las Vegas area alone will nearly double to 2.5
million people in the next ten years.
Unfortunately, the growth in bankruptcy case filings in Nevada has
been even more dramatic. Between 1990 and 1999 case filings grew by
more than 226 percent. In 2000, the District of Nevada was ranked fifth
highest in U.S. total filings per capita and first in the U.S. in
filings of Chapter 7 per capita. By every measure, weighted filings per
judgeship, case filings per judgeship,
[[Page S2362]]
Chapter 11 filings--the District of Nevada measured well above the
national average.
The population growth in my state and the increased number of case
filings clearly justifies the need for an additional bankruptcy
judgeship position for the District of Nevada. We offer this amendment
today in the hopes that we can accomplish this critical task for our
home state of Nevada.
Mr. LEAHY. Mr. President, I am pleased that we finally adopted the
amendments in the managers' package to improve this bill. I thank the
efforts of Senators Hatch, Daschle, Grassley, and Reid.
For the information of my colleagues, we adopted the following
amendments to improve this bill.
We adopted an amendment by Senator Baucus to resolve an ambiguity
regarding involuntary bankruptcies.
We adopted an amendment by Senator Boxer to provide that public
education expenses are treated equally with private education expenses
in the bill's means-test.
We adopted an amendment by Senator Feinstein regarding bankruptcy
petition preparers.
We adopted an amendment by Senator Jack Reed calling for a General
Accounting Office review of the bill's reaffirmation provisions.
We adopted an amendment by Senator Feingold to make Federal Election
Commission fines and judges non-dischargeable in a bankruptcy
proceeding.
We adopted another amendment by Senator Feingold to clarify that the
Federal Election Commission has jurisdiction over insolvent Political
Action Committees.
We adopted an amendment that I offered to clarify the definition of
current monthly income in the bill's means-test to prevent unnecessary
litigation.
We adopted another Leahy amendment to allow a person who has
successfully completed a chapter 13 plan and paid off all her creditors
to file another chapter 13 plan if some unforeseen economic disaster--
such as a job loss or high medical expenses--hits that person within
two years of the first chapter 13 completion.
We adopted a third Leahy amendment to modify the requirements for
debtors to file tax returns to only Federal returns or transcripts to
streamline the process and reduce unnecessary court storage costs.
We adopted an amendment by Senator Schumer and Senator Grassley on
corporate business reorganizations to prevent a single creditor from
alleging fraud to delay the reorganization and to clarify that debts
from violations of the False Claims Act are non-dischargeable in
bankruptcy.
We adopted an amendment by Senator Wellstone to clarify that the
companies in bankruptcy must fulfil their legal obligations as sponsors
and administrators of health care and other benefit plans.
We adopted an amendment by Senators Reid and Ensign to authorize a
bankruptcy judgeship for Nevada the fastest growing state in the
nation.
We also adopted, at the request of Senators Biden and Carper, an
authorization for an additional bankruptcy judgeship for the District
of Delaware, which has the heaviest caseload of bankruptcy cases in the
country.
We accepted a colloquy between Senator Levin and Senator Grassley to
ensure that spikes in gasoline prices will be taken into account in the
bill's means-test.
We adopted an amendment by Senators Kohl and Kennedy to require that
back pay awards are given the same priority as regular wages in
bankruptcy proceedings.
We adopted an amendment by Senator Gramm, which Senator Sarbanes has
cleared as the ranking member of the Senate Banking Committee, making
corrections to the bill's financial contract provisions.
We adopted an amendment by Senators Bond and Kerry to improve the
bill's small business provisions.
We adopted an amendment by Senator Kennedy to include health
insurance costs in the bill's means-test.
We adopted an amendment by Senator Collins and Senator Kerry on
family fisherman protection in bankruptcy.
We adopted an amendment by Senators Sessions, Leahy, Specter, and
Biden regarding appeals of bankruptcy cases.
I am glad we made these important bipartisan changes to improve this
bill and add more balance and fairness to it.
Amendment No. 59, As Further Modified
Mr. SESSIONS. Mr. President, I ask unanimous consent that amendment
No. 59 be further modified so that it strikes section 311 of the Kohl
amendment No. 68.
The PRESIDING OFFICER. Without objection, it is so ordered. The
amendment (No. 59), as further modified, is as follows:
Strike section 311 of Kohl amendment No. 68, and insert the
following:
(a) In General.--Section 362(b) of title 11, United States
Code, is amended--
(1) by inserting after paragraph (21), as added by this
Act, the following:
``(23) under subsection (a)(3), of the commencement or
continuation of any eviction, unlawful detainer action, or
similar proceeding by a lessor against a debtor seeking
possession of residential property--
``(A) on which the debtor resides as a tenant; and
``(B) with respect to which--
``(i) the debtor fails to make a rental payment that first
becomes due under the unexpired specific term of a rental
agreement or lease or under a tenancy under applicable State,
or local rent control law, after the date of filing of the
petition or during the 10-day period preceding the date of
filing of the petition, if the lessor files with the court a
certification that the debtor has not made a payment for rent
and serves a copy of the certification upon the debtor; or
``(ii) the debtor has a month to month tenancy (or one of
shorter term) other than under applicable State or local rent
control law where timely payments are made pursuant to clause
(i), if the lessor files with a court a certification that
the requirements of this clause have been met and serves a
copy of the certification upon the debtor.
``(24) under subsection (a)(3), of the commencement or
continuation of any eviction, unlawful detainer action, or
similar proceeding by a lessor against a debtor seeking
possession of residential property, if during the 2-year
period preceding the date of filing of the petition, the
debtor or another occupant of the leased premises--
``(A) commenced another case under this title; and
``(B) failed to make any rental payment that first became
due under applicable nonbankruptcy law after the date of
filing of the petition for that other case;
``(25) under subsection (a)(3), of an eviction action, to
the extent that it seeks possession based on endangerment of
property or the illegal use of controlled substances on the
property, if the lessor files with the court a certification
that such an eviction has been filed or the debtor has
endangered property or illegally used or allowed to be used a
controlled substance on the property during the 30-day period
preceding the date of filing of the certification, and serves
a copy of the certification upon the debtor;''; and
(2) by adding at the end of the flush material at the end
of the subsection the following; ``With respect to the
applicability of paragraph (23) or (25) to a debtor with
respect to the commencement or continuation of a proceeding
described in any such paragraph, the exception to the
automatic stay shall become effective on the 15th day after
the lessor meets the filing and notification requirements
under any such paragraph, unless--
``(A) the debtor files a certification with the court and
serves a copy of that certification upon the lessor on or
before that 15th day, that--
``(i) contests the truth or legal sufficiency of the
lessor's certification; or
``(ii) states that the tenant has taken such action as may
be necessary to remedy the subject of the certification under
paragraph (23)(B)(i), except that no tenant may take
advantage of such remedy more than once under this title; or
``(B) the court orders that the exception to the automatic
stay shall not become effective, or provides for a later date
of applicability.''.
(3) by adding at the end of the flush material added by
paragraph (2), the following:
``Where a debtor makes a certification under subparagraph
(A), the clerk of the court shall set a hearing on a date no
later than 10 days after the date of the filing of the
certification of the debtor and provide written notice
thereof. If the debtor can demonstrate to the satisfaction of
the court that the sent payment due post-petition or 10 days
prior to the petition was made prior to the filing of the
debtor's certification under subparagraph (A), or that the
situation giving rise to the exception in paragraph (25) does
not exist or has been remedied to the court's satisfaction,
then a stay under subsection (a) shall be in effect until the
termination of the stay under this section. If the debtor
cannot make this demonstration to the satisfaction of the
court, the court shall order the stay under subsection (a)
lifted forthwith. Where a debtor does not file a
certification under subparagraph (A), the stay under
subsection (a) shall be lifted by operation of law and the
clerk of the court shall certify a copy of the bankruptcy
docket as sufficient evidence that the automatic stay of
subsection (a) is lifted.''
[[Page S2363]]
fluctuating gas prices
Mr. LEVIN. Mr. President, as the Senator knows, gas prices have
fluctuated significantly in the last year. In my own state of Michigan,
gas prices went from .80 cents a gallon in October 1999 to a high of
$1.46 a gallon by June 2000. The Internal Revenue Service, IRS, Local
Standards for Operating Costs and Public Transportation Costs, which
includes costs for gasoline, are revised in October of each year but
are often based on statistics from as long as 2 or 3 years before that.
The IRS standards for gasoline costs can be out of date in a fast
changing economy.
In the event a debtor has experienced significant increases in the
costs of buying gasoline for their car, how would the means test adjust
for this?
Mr. GRASSLEY. Mr. President, under the special circumstances
provision, the debtor could explain in the debtor's petition why an
additional allowance in excess of the amounts allowed under the
Internal Revenue Standards was reasonable and necessary. As a practical
matter, if the costs for gas have increased significantly over the
costs for gas used by the Internal Revenue Service, the excess costs of
gasoline over the IRS standard should and would be allowed under the
special circumstances provision.
Mr. NELSON of Florida. Mr. President, I am opposed to the Bankruptcy
Reform Act of 2001. I do not take my decision to vote against this
legislation lightly. The growing personal debt of the American people
and the dramatic rise in bankruptcy filings over the last 10 years
should give us all reason for concern.
However, this legislation simply fails as a matter of sound public
policy. Rather than addressing this complex issue with a solution that
focuses on consumer and private sector responsibility, this bill almost
exclusively places the burden of change on the people that bankruptcy
law is supposed to help. It almost completely ignores the aggressive
marketing practices of lenders who in some cases, seem to have lost the
ability to judge a bad credit risk.
It is difficult to have sympathy for an industry that mails three
billion solicitations a year, and expends very little effort to ensure
that they are marketing to people who have the financial means or are
even old enough to hold a credit card. It's clear that young and low-
income individuals, who often have the least ability to repay, are
prime targets of the credit industry's overly aggressive marketing
tactics.
It appears that these companies have made a calculation that it is
more profitable to have liberal lending policies and higher interest
rates, than it is to deny credit or at least putting a reasonable
credit limit in place.
I have heard many of my colleagues talk a lot over the past week
about how consumers need to be more financially responsible. Fair
enough. But I'm here to say that we should also demand more
responsibility from big lenders who fail to do their homework.
Especially in a time of economic slow-down, I do not believe we
should make it more difficult for people to get a fresh start unless we
also make further demands of an industry that could solve many of its
problems by simply making credit available responsibly.
I realize that this legislation also would benefit many small
businesses that extend credit to their customers, and that are
sometimes forced to foot the bill for individuals who choose to abuse
the system. My concern about reckless lending practices is not aimed at
the small businessman, and, I strongly want to stamp out abuse in the
bankruptcy system.
However, a better bankruptcy bill would encourage responsible
marketing of credit services and would include stronger provisions to
curb predatory lending. This bill falls short of the mark in these
areas and as result will not get my vote.
Mr. KERRY. Mr. President, the Bankruptcy Reform bill we are voting on
today has a valid, uncontroversial and necessary purpose. It is
intended to curb bankruptcy abuse and ensure that those who can afford
to pay their debts, do pay their debts. And I would say to you, Mr.
President, if this were--all about those goals--if this were a debate
about personal responsibility--there would be a very different dialogue
in the United States Senate and it would have given us a very different
bill than the one we're voting on today. But Mr. President the bill we
are voting on is seriously flawed and will harm innocent debtors who
are genuinely in need of the protections and ``fresh start'' that
bankruptcy procedures are intended to provide. It is for that reason
that I must vote against this bill.
During the 106th Congress, I voted in favor of the Senate bankruptcy
bill, because I believe that we need to reform the system and curb
abuse. I had some serious reservations about that bill and had hoped
that many of the concerns I had at that time would be addressed in
conference. Unfortunately the conference bill, like the bill we are
voting on today, did not target only those who abuse the bankruptcy
system. What we needed during the 106th Congress, and what we need now,
is bankruptcy reform that does not lump together those who need the
protections of bankruptcy with those who abuse the system.
We must absolutely prevent the abuse of the bankruptcy system by the
millionaires whom we know have received the protections of the
bankruptcy system despite their ability to repay their debts. But even
beyond the flagrant, high profile abuse of the bankruptcy system that
we have read about in the papers, we must also be sure that every
consumer acts responsibly and does not charge meals, vacations and
clothes that he can't afford, only to turn to the bankruptcy system to
bail him out of his debt.
At the same time, we must not forget that a fresh start in bankruptcy
serves a valuable purpose for many individuals who truly need its
protections. When an individual gets into financial trouble because,
for example, she has catastrophic, unforeseen medical expenses, it is
better for her, for her creditors and even for society as a whole if
she is given the opportunity to have her debts discharged and is given
a fresh start. The alternative is that the innocent but unlucky debtor
may have as much as 25 percent of her wages garnished by her creditors.
Most people live paycheck to paycheck and would be put in serious
financial trouble if their paychecks were reduced by that much. In
those circumstances, consumers have no choice but to cut back on other,
important expenses. They stop paying for their auto insurance and
health insurance. They deplete any savings they might have and stop
contributing to their retirement accounts. This is a perverse result
that doesn't benefit anyone and certainly should not be the outcome of
our efforts to reform the bankruptcy system.
As you know, this bill implements a means-testing system that would
create a presumption that a Chapter 7 bankruptcy, or fresh start
bankruptcy, should be dismissed or converted to a Chapter 13
reorganization if a certain financial formula is satisfied. The
means test applies an IRS standard to determine whether a case should
be dismissed or converted. The IRS standard is inflexible, and it
provides no room for a bankruptcy judge to determine whether the
circumstances that led to the debtor's financial situation warrant
treatment under Chapter 7. A father with a sick child is treated the
same way as a reckless spender who ran up his credit cards on luxury
items. Judges should have some discretion to distinguish those
situations and exempt from means-testing debtors who, due to
circumstances beyond their control, have come to the court to ask for
the protection bankruptcy is intended to provide.
The purpose of the means test is to ensure that more individuals file
in Chapter 13 and therefore pay off more of their debts. That sounds
like a laudable goal. But it is likely to fail. Simply because more
people are forced into Chapter 13 plans does not mean that they will be
able to successfully complete those plans. Even under the current
system, only a third of those who file for Chapter 13 successfully
complete their plans. Simply funneling more individuals into Chapter 13
does not in any way guarantee that more debts will be paid off.
Finally, the means test imposes financial disclosure requirements
that put significant burdens on all debtors, not just the ten percent
or fewer whom experts say abuse the system. Under the means test,
everyone who files for
[[Page S2364]]
bankruptcy must engage in more preparation, more paperwork and more
attorney and other expenses prior to filing for bankruptcy, leaving
fewer assets to distribute to creditors.
A narrowly targeted reform bill designed to reduce abuse of the
system would have provided bankruptcy judges with the discretion to
dismiss or convert a case to Chapter 7, but would not have mandated it.
It would have provided creditors the opportunity to ask for a dismissal
or conversion, but would not have put the burden on every filer to
prove that he or she deserves the protections of Chapter 7. This bill
simply fails to take that reasonable, targeted approach toward curbing
abuse.
In its attempt to thwart abuse of the system, the bill we are voting
will also result in some innocent debtors losing their rented homes and
apartments. Current bankruptcy law allows individuals in bankruptcy to
remain in their apartments as long as they keep paying their rent while
the bankruptcy is pending, and as long as they repay any unpaid rent. A
landlord must go to the bankruptcy court for permission to evict
tenants who have filed for bankruptcy. There is no question that some
tenants will abuse this provision, and withhold rent while gambling on
the fact that the time and expense of going to bankruptcy court will
prevent the landlord from getting permission to evict the tenant. This
bill, which allows landlords to evict debtors without going to
bankruptcy court, punishes the innocent tenant who is paying his rent
while it attempts to get at those who abuse the system. And once again,
the answer lies in more narrowly targeting reform. We simply need to
make it easier and less expensive for a landlord to evict a tenant when
that tenant has failed to pay his rent. It is not necessary, nor is it
good public policy, to allow a landlord to evict a tenant who is paying
rent and who will pay back any debts owed.
Perhaps one of the most disturbing parts of the bill is its impact on
children. The bill's supporters claim that by moving child support
claims from seventh to first priority in Chapter 7 cases, the bill
``puts child support first.'' What they don't say is that this
provision is virtually meaningless and will help very few children. The
reason is because few debtors in Chapter 7 have any assets to
distribute to priority unsecured creditors, such as credit card
companies, after secured creditors receive the value of their
collateral. Therefore, this change would affect only the smallest
number of cases.
In addition, by forcing more debtors to file Chapter 13, more debt,
including credit card debt, will have to be repaid. The result is that
banks and credit card companies will be in direct competition with
single parents trying to collect child support after bankruptcy. Once
again, Mr. President, a bill that claims to reform the system may
actually make it worse for those most in need.
While this bill puts more burdens on the innocent debtor, it does not
place more responsibility on the creditors who provide the consumers
with the opportunity to take on increasing amounts of debt. A simple
provision requiring credit card bills to state the length of time it
would take and the interest that would be paid on the current debt if
only the monthly minimum was paid would have provided real reform. Such
a provision would have provided valuable information to consumers, and
given them the tools they need to decide whether they can afford to
take on any new debt. This bill, however, fails to include such a
balanced reform provision. Instead, it includes an inadequate
disclosure provision that would free 80% of all banks from any
disclosure responsibility and place the burden of disclosure on the
Federal Reserve for two years. After that time, it is unclear whether
and how the consumer disclosure requirements would be maintained.
This bill is not only detrimental to consumers, but it also hurts our
small businesses. This effort to reform our bankruptcy laws will make
it more difficult for entrepreneurs to start a small business and
impose additional regulations and reporting requirements on small
businesses who file for bankruptcy. I believe we must do everything
possible to ensure the viability of small businesses and to assist in
fostering entrepreneurship in our economy. It has been the Congress's
long-held belief that regulatory and procedural burdens should be
lowered for small business wherever possible. However, the Bankruptcy
Reform Act fails to meet this challenge. Instead, this legislation
promotes additional red tape and a government bureaucracy that we have
worked to reduce for small business. Specifically, the provisions
included in the Bankruptcy Reform Act impose new technical and
burdensome reporting requirements for small businesses who file for
bankruptcy that are more stringent on small businesses than they are on
big business. Further, the bill will provide creditors with greatly
enhanced powers to force small businesses to liquidate their assets.
Any big business would have difficulty complying with these new
burdensome reporting requirements. But think of the difficulties an
entrepreneur or a mom and pop grocery store will have in complying with
this dizzying array of new and complex reporting and other
requirements. These small businesses are the most likely to need, but
least likely to be able to afford, the assistance of a lawyer or an
accountant to comply with these new taxing requirements. That is why
during the consideration of this bill I offered an amendment to strike
the small business provisions which will make it easier for creditors
to force liquidations of small business during the bankruptcy process.
Unfortunately, that amendment was not adopted.
A limited number of provisions do help small businesses and family
fishing businesses. The amendments that I offered last year to extend
the reorganization plan filing and confirmation deadlines for small
business are included in this bill along with a provision to include
small businesses in the creditors committee. Those amendments help
small businesses, but they cannot compensate for the greater burdens
this bill imposes.
Additionally, I am pleased that an amendment sponsored by Senator
Collins and I which will extend Chapter 12 bankruptcy protections to
our family fishermen has been included in the bill. Mr. President,
small, family-owned fishing businesses are in serious trouble. Severe
environmental factors such as coastal pollution, warmer oceans and
changing currents have resulted in severely depleted fish stocks around
the country. We are making progress in rebuilding stocks, however, the
cost of this progress has been a steep decline in the amount of fishing
allowed in Georges Bank and the Gulf of Maine. This in turn has made it
much more difficult for fishermen in Massachusetts and Maine to
maintain profitable businesses.
This amendment Senator Collins and I sponsored will ensure that
fishermen have the flexibility under Chapter 12 of the bankruptcy code
to wait out the rebuilding of our commercial fish stocks without back-
tracking on our conservation gains to date. It will help preserve the
rich New England fishing heritage in Massachusetts without wiping out
the fiercely independent small-boat fishermen.
Despite those provisions, which I do believe improve the system,
overall this bill does not provide for real bankruptcy reform. Mr.
President, sponsors of this bill say it is necessary because we are in
the midst of a ``bankruptcy crisis.'' There has been widespread and
justifiable concern over the increase in consumer bankruptcies during
the 1990s. There were more than 1.4 million bankruptcy filings in 1998.
However, personal bankruptcy filings have fallen steadily since then,
down to 1.3 million in 1999 and to 1.2 million last year. That is fewer
bankruptcies per capita than there were at the time the bankruptcy bill
was first introduced. I cannot help but think that had we enacted
bankruptcy reform in 1998, the sponsors of the bill would have been
taking credit for this downturn in bankruptcies.
But without congressional intervention, bankruptcies have been on the
decline. The reason, Mr. President, is simple. Lenders are profit-
maximizing institutions which select their own credit criteria. If
there is an increase in personal bankruptcies, credit card companies
simply won't offer their cards to consumers who don't have the means to
pay. The free-market thus corrects any upswing in bankruptcy.
Although the free market will correct the over-extension of credit to
[[Page S2365]]
those who can least afford it, the market will not address the small
percentage of bankruptcy filers who abuse the system. We need
legislation for that. But that legislation should be targeted; it
should be narrowly crafted; and it should avoid punishing those who
truly need and deserve bankruptcy protection. This bill does not do
that, and I must vote against it.
Mr. HATCH. Mr. President, I am pleased that S. 420, the bankruptcy
legislation, cures some abuses in the Bankruptcy Code regarding
executory and unexpired leases.
One provision, Section 404 of the bill, amends Section 365(d)(4) of
the Bankruptcy Code. Presently, Section 365(d)(4) provides a retail
debtor 60 days to decide whether to assume or reject its lease. A
bankruptcy judge may extend this deadline for cause, and therein is the
problem. Too many bankruptcy judges have allowed this exception
essentially to eliminate any notion of a reasonable and firm deadline
on a retail debtor's decision to assume or reject a lease. Bankruptcy
judges have been extending this deadline for months and years, often to
the date of confirmation of a plan.
This situation is unfair. A shopping center operator is a compelled
creditor. It has no choice but to continue to provide space and
services to the debtor in bankruptcy. Yet, the current Code permits a
retail debtor as much as years to decide what it will do with its
lease. Coupled with the increased use of bankruptcy by retail chains,
the Bankruptcy Code is tipped unfairly against the shopping center
operator.
Some stores curtail their operations or go dark, and still the lessor
cannot regain control of its space.
This legislation, like the conference report in the last two
Congresses, ends this abuse. It imposes a firm, bright line deadline on
a retail debtor's decision to assume or reject a lease, absent the
lessor's consent. It permits a bankruptcy trustee to assume or reject a
lease on a date which is the earlier of the date of confirmation of a
plan or the date which is 120 days after the date of the order for
relief. A further extension of time may be granted, within the 120-day
period, for an additional 90 days, for cause, upon motion of the
trustee or lessor. Any subsequent extension can only be granted by the
judge upon the prior written consent of the lessor: either by the
lessor's motion for an extension, or by a motion of the trustee,
provided that the trustee has the written approval of the lessor. This
is important. We are taking away the bankruptcy judges' discretion to
grant extensions of the time for the retail debtor to decide whether to
assume or reject a lease after a maximum possible period of 210 days
from the time of entry of the order of relief. Beyond that maximum
period, there is no authority in the judge to grant further time unless
the lessor has agreed in writing to the extension.
Retail debtors filing for bankruptcy will factor into their plans
this new deadline. Most retail chains undertake a careful review of
their financial condition and business outlook before they file for
bankruptcy. They will already have an understanding of which leases are
ones they wish to assume and which ones they wish to dispose of. The
legislation gives them an additional 120 days to decide on what to do
with their leases, once they file for bankruptcy. Within that 120 day
time period, an additional 90 days can be granted for cause. A further
extension may be negotiated by the retail debtor and the lessor if
circumstances warrant, and any such extension can be granted by a judge
only with prior written consent of the lessor. Further, a lessor's
prior written approval of one such extension does not constitute
approval for any further extensions, each such extension beyond the 210
day period requires the lessor's prior written approval. The current
imbalance between the retail debtor and the lessor will be redressed by
the legislation.
The bill in Section 404 also amends Section 365(f)(1) of the
Bankruptcy Code to make sure that all of the provisions of Section
365(b) are adhered to and that Section 365(f) does not override Section
365(b).
This addresses another growing abuse under the Bankruptcy Code. The
bill makes clear that an owner must be able to retain control over the
mix of retail uses in a shopping center. When an owner enters into a
use clause with a retail tenant forbidding assignments of the lease for
a use different than that specified in the lease, that clause should be
honored. Congress has so intended already, but bankruptcy judges have
sometimes ignored the law.
Congress made clear, in Section 365(f)(2)(B), that the trustee may
assign an executory contract or unexpired lease of the debtor, only if
the trustee makes adequate assurance of future performance under the
contract or lease.
In Section 365(b)(3), Congress provided that for purposes of the
Bankruptcy Code:
``Adequate assurance of future performance of a lease of
real property in a shopping center includes adequate
assurance--
``(A) of the source of rent and other consideration due
under such lease, and in the case of an assignment, that the
financial condition and operating performance of the proposed
assignee and its guarantors, if any, shall be similar to the
financial condition and operating performance of the debtor
and its guarantors, if any, as of the time the debtor became
the lessee under the lease;
(B) that any percentage rent due under such lease will not
decline substantially;
(C) that assumption or assignment of such lease is subject
to all provisions thereof, including (but not limited to)
provisions such as a radius, location, use, or exclusivity
provision, and will not breach any such provision contained
in any other lease, financing agreement, or master agreement
relating to such shopping center; and
(D) that assumption or assignment of such lease will not
disrupt any tenant mix or balance in such shopping center.
Congress added these provisions to the Code in recognition that a
shopping center must be allowed to protect its own integrity as an on
going business enterprise, notwithstanding the bankruptcy of some of
its retail tenants. A shopping center operator, for example, must be
able to determine the mix of retain tenants it leases to. Congress
decided that use or similar restrictions in a retail lease, which the
retailer cannot evade under nonbankruptcy law, should not be evaded in
bankruptcy.
Regrettably, bankruptcy judges have not followed this Congressional
mandate. Under another provision of the Code, Section 365(f), a number
of bankruptcy judges have misconstrued the Code and allowed the
assignment of a lease even though terms of the lease are not being
followed. This ignores Section 365(b)(3) and is wrong.
For example, if a shopping center's lease with an educational
retailer requires that the premises shall be used solely for the
purpose of conducting the retail sale of educational items, as the
lease in the In re Simon Property Group, L.P. v. Learningsmith, Inc.
case provided, then the lessor has a right to insist on adherence to
this use clause, even if the retailer files for bankruptcy. The clause
is fully enforceable if the retailer is not in a bankruptcy proceeding,
and the retailer should not be able to evade it in bankruptcy.
Otherwise, the shopping centers operator loses control over the nature
of his or her business.
Unfortuantley, in the Learningsmith case, the judge allowed the
assignment of the lease to a candle retailer because it offered more
money than an educational store to buy the lease, in contravention of
Section 365(b)(3) of the Code. As a result, the lessor lost control
over the nature of its very business, operating a particular mix of
retail stores. If other retailers file for bankruptcy in that shopping
center, the same result can occur.
The bill remedies this problem by amending Section 365(f)(1) to make
clear it operates subject to all provisions of Section 365(b).
The legal holding in the Learningsmith case, and other cases like it
which do not enforce Section 365(b), particularly 365(b)(3), are
overturned by this legislation.
Mr. GRAMM. Mr. President, Title IX of S. 420, the Bankruptcy Reform
Act of 2001, involves financial contract provisions. The provisions of
Title IX have been carefully crafted with the assistance of the
President's Working Group on Financial Markets following a review of
current statutory provisions governing the treatment of qualified
financial contracts and similar financial contracts upon the insolvency
of a counterparty.
Title IX amends the Bankruptcy Code, the Federal Deposit Insurance
Act, FDIA, as amended by the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, FIRREA, the payment system risk reduction
and
[[Page S2366]]
netting provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1991, FDICIA, and the Securities Investor Protection
Act of 1970, SIPI. These amendments address the treatment of certain
financial transactions following the insolvency of a party to such
transactions. The amendments are designed to clarify and improve the
consistency between the applicable statutes and to minimize the risk of
a disruption within or between financial markets upon the insolvency of
a market participant.
Since its adoption in 1978, the Bankruptcy Code has been amended
several times to afford different treatment for certain financial
transactions upon the bankruptcy of a debtor, as compared with the
treatment of other commercial contracts and transactions. These
amendments were designed to further the policy goal of minimizing the
systemic risks potentially arising from certain interrelated financial
activities and markets. Similar amendments have been made to the FDIA
and the FDICIA. Both the Federal Deposit Insurance Corporation, FDIC,
and the Securities investor Protection Corporation, SIPC, have issued
policy statements and letters clarifying general issues in this regard.
Systemic risk has been defined as the risk that a disruption at a
firm, in a market segment, to a settlement system, etc., can cause
widespread difficulties at other firms, in other market segments or in
the financial system as a whole. If participants in certain financial
activities are unable to enforce their rights to terminate financial
contracts with an insolvent entity in a timely manner, to offset or net
payment and other transfer obligations and entitlements arising under
such contracts, and to foreclose on collateral securing such contracts,
the resulting uncertainty and potential lack of liquidly could increase
the risk of an inter-market disruption.
Congress has in the past taken steps to ensure that the risk of such
systemic events is minimized. For example, both the Bankruptcy Code and
the FDIA contain provisions that protect the rights of financial
participants to terminate swap agreements, forward contracts,
securities contracts, commodity contracts and repurchase agreements
following the bankruptcy or insolvency of a counterparty to such
contracts or agreements. Furthermore, other provisions prevent
transfers made under such circumstances from being avoided as
preferences or fraudulent conveyances, except when made with actual
intent to defraud and taken in bad faith. Protections also are afforded
to ensure that the acceleration, termination, liquidation, netting,
setoff and collateral foreclosure provisions of such transactions and
master agreements for such transactions are enforceable.
In addition, FDICIA sought to protect the enforceability of close-out
netting provisions in ``netting contracts'' between ``financial
institutions.'' FDICIA states that the goal of enforcing netting
arrangements is to reduce systemic risk within the banking system and
financial markets.
The orderly resolution of insolvencies involving counterparties to
such contracts also is an important element in the reduction of
systemic risk. The FDIA allows the receiver for an insolvent insured
depository institution the opportunity to review the status of certain
contracts to determine whether to terminate or transfer the contracts
to new counterparties. These provisions provide the receiver with
flexibility in determining the most appropriate resolution for the
failed institution and facilitate the reduction of systemic risk by
permitting the transfer, rather than termination, of such contracts.
In general, Title IX is designed to clarify the treatment of certain
financial contracts upon the insolvency of a counterparty and to
promote the reduction of systemic risk. It furthers the goals of prior
amendments to the Bankruptcy Code and the FDIA regarding the treatment
of those financial contracts and of the payment system risk reduction
provisions in FDICIA. It has four principal purposes:
1. To strengthen the provisions of the Bankruptcy Code and the FDIA
that protect the enforceability of acceleration, termination,
liquidation, close-out netting, collateral foreclosure and related
provisions of certain financial agreements and transactions.
2. To harmonize the treatment of these financial agreements and
transactions under the Bankruptcy Code and the FDIA.
3. To amend the FDIA and FDICIA to clarify that certain rights of the
FDIC acting as conservator or receiver for a failed insured depository
institution (and in some situations, rights of SIPC and receivers of
certain uninsured institutions) cannot be defeated by operation of the
terms of FDICIA.
4. To make other substantive and technical amendments to clarify the
enforceability of financial agreements and transactions in bankruptcy
or insolvency.
All these changes are designed to further minimize systemic risk to
the banking system and the financial markets.
In section 901, subsections (a) through (f) amend the FDIA
definitions of ``qualified financial contract,'' ``securities
contract,'' ``commodity contract,'' ``forward contract,'' ``repurchase
agreement'' and ``swap agreement'' to make them consistent with the
definitions in the Bankruptcy Code and to reflect the enactment of the
Commodity Futures Modernization Act of 2000 (CFMA). It is intended that
the legislative history and case law surrounding those terms, to the
date of this amendment, be incorporated into the legislative history of
the FDIA.
Subsection (b) amends the definition of ``securities contract''
expressly to encompass margin loans, to clarify the coverage of
securities options and to clarify the coverage of repurchase and
reverse repurchase transactions. The inclusion of ``margin loans'' in
the definition is intended to encompass only those loans commonly known
in the securities industry as ``margin loans,'' such as arrangements
where a securities broker or dealer extends credit to a customer in
connection with the purchase, sale or trading of securities, and does
not include loans that are not commonly referred to as ``margin
loans,'' however documented. The reference in subsection (b) to a
``guarantee by or to any securities clearing agency'' is intended to
cover other arrangements, such as novation, that have an effect similar
to a guarantee. The reference to a ``loan'' of a security in the
definition is intended to apply to loans of securities, whether or not
for a ``permitted purpose'' under margin regulations. The reference to
``repurchase and reverse repurchase transactions'' is intended to
eliminate any inquiry under the qualified financial contract provisions
of the FDIA as to whether a repurchase or reverse repurchase
transaction is a purchase and sale transaction or a secured financing.
Repurchase and reverse repurchase transactions meeting certain criteria
are already covered under the definition of ``repurchase agreement'' in
the FDIA (and a regulation of the FDIC). Repurchase and reverse
repurchase transactions on all securities (including, for example,
equity securities, asset-backed securities, corporate bonds and
commercial paper) are included under the definition of ``securities
contract''.
Subsection (b) also specifies that purchase, sale and repurchase
obligations under a participation in a commercial mortgage loan do not
constitute ``securities contracts.'' While a contract for the purchase,
sale or repurchase of a participation may constitute a ``securities
contract,'' the purchase, sale or repurchase obligation embedded in a
participation agreement does not make that agreement a ``securities
contract.''
A number of terms used in the qualified financial contract
provisions, but not defined therein, are intended to have the meanings
set forth in the analogous provisions of the Bankruptcy Code or FDICIA
(for example, ``securities clearing agency''). The term ``person,''
however, is not intended to be so interpreted. Instead, ``person'' is
intended to have the meaning set forth in 1 U.S.C. Sec. 1.
Subsection (e) amends the definition of ``repurchase agreement'' to
codify the substance of the FDIC's 1995 regulation defining repurchase
agreement to include those on qualified foreign government securities.
See 12 CFR Sec. 360.5. The term ``qualified foreign government
securities'' is defined to include those that are direct obligations
of, or fully guaranteed by, central governments of members of the
Organization for Economic Cooperation and Development, OECD. Subsection
(e) reflects developments in the repurchase
[[Page S2367]]
agreement markets, which increasingly use foreign government securities
as the underlying asset. The securities are limited to those issued by
or guaranteed by full members of the OECD, as well as countries that
have concluded special lending arrangements with the International
Monetary fund associated with the Fund's General Arrangements to
Borrow.
Subsection (e) also amends the definition of ``repurchase agreement''
to include those on mortgage-related securities, mortgage loans and
interests therein, and expressly to include principal and interest-only
U.S. government and agency securities as securities that can be the
subject of a ``repurchase agreement.''
This amendment is not intended to affect the status of repos
involving securities or commodities as securities contracts, commodity
contracts, or forward contracts, and their consequent eligibility for
similar treatment under the qualified financial contract provisions. In
particular, an agreement for the same and repurchase of a security
would continue to be a securities contract as defined in the FDIA, even
if not a ``repurchase agreement'' as defined in the FDIA. Similarly, an
agreement for the sale and repurchase of a commodity, even though not a
``repurchase agreement'' as defined int he FDIA, would continue to be a
forward contract for purposes of the FDIA.
Subsection (e), like subsection (b) for ``securities contracts,''
specifies that repurchase obligations under a participation in a
commercial mortgage loan do not make the participation agreement a
``repurchase agreement.'' such repurchase obligations embedded in
participations in commercial loans (such as recourse obligations) do
not constitute a ``repurchase agreement.'' However, a repurchase
agreement involving the transfer of participations in commercial
mortgage loans with a simultaneous agreement to repurchase the
participation on demand or at a date certain one year or less after
such transfer would constitute a ``repurchase agreement'', as well as a
``securities contract''.
Subsection (f) amends the definition of ``swap agreement'' to include
an ``interest rate swap, option, future, or forward agreement,
including a rate floor, rate cap, rate collar, cross-currency rate
swap, and basis swap; a spot, same day-tomorrow, tomorrow-next,
forward, or other foreign exchange of precious metals agreement; a
currency swap, option, future, or forward agreement; an equity index or
equity sway, option future, or forward agreement; a debt index or debt
swap, option, future, or forward agreement; a total return, credit
spread or credit swap, option, future, or forward agreement; a
commodity index or commodity swap, option, future, or forward
agreement; or a weather swap, weather derivative, or weather option.''
As amended, the definition of ``swap agreement'' will update the
statutory definition and achive contractual netting across economically
similar transactions.
The definition of ``swap agreement'' originally was intended to
provide sufficient flexibility to avoid the need to amend the
definition as the nature and uses of swap transactions matured. to that
end, the phrase ``or any other similar agreement'' was included int he
definition. (The phrase ``or any similar agreement'' has been added to
the definition of ``forward contract,'' ``commodity contract,''
``repurchase agreement'' and ``securities contract'' for the same
reason.) To clarify this, subsection (f) expands the definition of
``swap agreement'' to include ``any agreement or trqansaction that is
similar to any other agreement or transaction referred to in Section
11(e)(8)(D)(vi) of the FDIA and is of a type that has been, is
presently, or in the future becomes, the subject of recurrent dealings
in the swap markets and that is a forward, swap, future, or option on
one or more rates, currencies, commodities, equity securities or other
equity instruments, debt securities or other debt
instruments, quantitative measures associated with an occurrence,
extent of an occurrence, or contingency associated with a financial,
commercial, or economic consequence, or economic or financial indices
or measures of economic or financial risk or value.''
The definition of ``swap agreement,'' however, should not be
interpreted to permit parties to document non-swaps as swap
transactions. Traditional commercial arrangements, such as supply
agreements, or other non-financial market transactions, such as
commercial, residential or consumer loans, cannot be treated as
``swaps'' under either the FDIA or the Bankruptcy Code simply because
the parties purport to document or label the transactions as ``swap
agreements.'' In addition, these definitions apply only for purposes of
the FDIA and the Bankruptcy Code. These definitions, and the
characterization of a certain transaction as a ``swap agreement,'' are
not intended to affect the characterization, definition, or treatment
of any instruments under any other statute, regulation, or rule
including, but not limited to, the statutes, regulations or rules
enumerated in subsection (f). Similarly, Section 914 and a new
paragraph of Section 11(e) of the FDIA provide that the definitions of
``securities contract,'' ``repurchase agreement,'' ``forward
contract,'' and ``commodity contract,'' and the characterization of
certain transactions as such a contract or agreement, are not intended
to affect the characterization, definition, or treatment of any
instruments under any other statute, regulation, or rule including, but
not limited to, the statutes, regulations or rules enumerated in
subsection (f).
The definition also includes any security agreement or arrangement,
or other credit enhancement, related to a swap agreement, including any
guarantee or reimbursement obligation related to a swap agreement. This
ensures that any such agreement, arrangement or enhancement is itself
deemed to be a swap agreement, and therefore eligible for treatment as
such for purposes of termination, liquidation, acceleration, offset and
netting under the FDIA and the Bankruptcy Code. Similar changes are
made in the definitions of ``forward contract,'' ``commodity
contract,'' ``repurchase agreement'' and ``securities contract.''
The use of the term ``forward'' in the definition of ``swap
agreement'' is not intended to refer only to transactions that fall
within the definition of ``forward contract.'' Instead, a ``forward''
transaction could be a ``swap agreement'' even if not a ``forward
contract.''
Subsection (g) amends the FDIA by adding a definition for
``transfer,'' which is a key term used in the FDIA, to ensure that it
is broadly construed to encompass dispositions of property or interests
in property. The definition tracks that in section 101 of the
Bankruptcy Code.
Subsection (h) makes clarifying technical changes to conform the
receivership and conservatorship provisions of the FDIA. This
subsection (h) also clarifies that the FDIA expressly protects rights
under security agreements, arrangements or other credit enhancements
related to one or more qualified financial contracts, QFCs. An example
of a security arrangement is a right of setoff, and examples of other
credit enhancements are letters of credit, guarantees, reimbursement
obligations and other similar agreements.
Subsection (i) clarifies that no provision of Federal or state law
relating to the avoidance of preferential or fraudulent transfers,
including the anti-preference provision of the National Bank Act, can
be invoked to avoid a transfer made in connection with any QFC of an
insured depository institution in conservatorship or receivership,
absent actual fraudulent intent on the part of the transferee.
Section 902 provides that no provision of law, including FDICIA,
shall be construed to limit the power of the FDIC to transfer or to
repudiate any QFC in accordance with its powers under the FDIA. As
discussed below, there has been some uncertainty regarding whether or
not FDICIA limits the authority of the FDIC to transfer or to repudiate
QFCs of an insolvent financial institution. Section 902, as well as
other provisions in the Act, clarify that FDICIA does not limit the
transfer powers of the FDIC with respect to QFCs.
Section 902 denies enforcement to ``walkaway'' clauses in QFCs. A
walkaway clause is defined as a provision that, after calculation of a
value of a party's position or an amount due to or from one of the
parties upon termination, liquidation or acceleration of the QFC,
either does not create a payment obligation of a party or extinguishes
a payment obligation of a
[[Page S2368]]
party in whole or in part solely because of such party's status as a
non-defaulting party.
In Section 903, subsection (a) amends the FDIA to expand the transfer
authority of the FDIC to permit transfers of QFCs to ``financial
institutions'' as defined in FDICIA or in regulations. This provision
will allow the FDIC to transfer QFCs to a non-depository financial
institution, provided the institution is not subject to bankruptcy or
insolvency proceedings.
The new FDIA provision specifies that when the FDICa QFCs that are
cleared on or subject to the rules of a particular clearing
organization, the transfer will not require the clearing organization
to accept the transferee as a member of the organization. This
provision gives the FCIC flexibility in resolving QFCs cleared on or
subject to the rules of a clearing organization to accept for clearing
any QFCs from the transferee, except on the terms and conditions
applicable to other parties permitted to clear through that clearing
organization. ``Clearing organization'' is defined to mean a ``clearing
organization'' within the meaning of FDICIA, as amended both by the
CFMA and by Section 906 of the Act.
The new FDIA provision also permits transfers to an eligible
financial institution that is a non-U.S. person, or the branch or
agency of a on-U.S. person or a U.S. financial institution that is not
an FDIC-insured institution if, following the transfer, the contractual
rights of the parties would be enforceable substantially to the same
extent as under the FDIA. It is expected that the FDIC would not
transfer QFCs to such a financial institution if there were an
impending change of law that would impair the enforceability of the
parties' contractual rights.
Subsection (b) amends the notification requirements following a
transfer of the QFCs of a failed depository institution to require the
FDIC to notify any party to a transferred QFC of such transfer by 5:00
p.m. Eastern Time on the business day following the date of the
appointment of the FDIC acting as receiver or following the date of
such transfer by the FDIC acting as a conservator. This amendment is
consistent with the policy statement on QFCs issued by the FDIC on
December 12, 1989.
Subsection (c) amends the FDIA to clarify the relationship between
the FDIA and FDICIA. There has been some uncertainty whether FDICIA
permits counterparties to terminate or liquidate a QFC before the
expiration of the time period provided by the FDIA during which the
FDIC may repudiate or transfer a QFC in a conservatorship or
receivership. Subsection (c) provides that a party may not terminate a
QFC based solely on the appointment of the FDIC as receiver until 5:00
p.m. (Eastern Time) on the business day following the appointment of
the receiver or after the person has received notice of a transfer
under FDIA section 11(d)(9), or based solely on the appointment of the
FDIC as conservator, notwithstanding the provisions of FDICIA. This
provides the FDIC with an opportunity to undertake an orderly
resolution of the insured depository institution.
The amendment also prohibits the enforcement of rights of termination
or liquidation that arise solely because of the insolvency of the
institution or are based on the ``financial condition'' of the
depository institution in receivership or conservatorship. For example,
termination based on a cross-default provision in a QFC that is
triggered upon a default under another contract could be rendered
ineffective if such other default was caused by an acceleration of
amounts due under that other contract, and such acceleration was based
solely on the appointment of a conservator or receiver for that
depository institution. Similarly, a provision in a QFC permitting
termination of the QFC based solely on a downgraded credit rating of a
party will not be enforceable in an FDIC receivership or
conservatorship because the provision is based solely on the financial
condition of the depository institution in default. However, any
payment, delivery or other performance-based default, or breach of a
representation or covenant putting in question the enforceability of
the agreement, will not be deemed to be based solely on financial
condition for purposes of this provision. The amendment is not intended
to prevent counterparties from taking all actions permitted and
recovering all damages authorized upon repudiation of any QFC by a
conservator or receiver, or from taking actions based upon a
receivership or other financial condition-triggered default in the
absence of a transfer (as contemplated in Section 11 (e)(10) of the
FDIA).
The amendment allows the FDIC to meet its obligation to provide
notice to parties to transferred QFCs by taking steps reasonably
calculated to provide notice to such parties by the required time. This
is consistent with the existing policy statement on QFCs issued by the
FDIC on December 12, 1989.
Finally, the amendment permits the FDIC to transfer QFCs of a failed
depository institution to a bridge bank or a depository institution
organized by the FDIC for which a conservator is appointed either (i)
immediately upon the organization of such institution or (ii) at the
time of a purchase and assumption transaction between the FDIC and the
institution. This provision clarifies that such institutions are not to
be considered financial institutions that are ineligible to receive
such transfers under FDIA section 11(e)(9). This is consistent with the
existing policy statement on QFCs issued by the FDIC on December 12,
1989.
Section 904 limits the disaffirmance and repudiation authority of the
FDIC with respect to QFCs so that such authority is consistent with the
FDIC's transfer authority under FDIA section 11(e)(9). This ensures
that no disaffirmance, repudiation or transfer authority of the FDIC
may be exercised to ``cherry-pick'' or otherwise treat independently
all the QFCs between a depository institution in default and a person
or any affiliate of such person. The FDIC has announced that its policy
is not to repudiate or disaffirm QFCs selectively. This unified
treatment is fundamental to the reduction of systemic risk.
Section 905 states that a master agreement for one or more securities
contracts, commodity contracts, forward contracts, repurchase
agreements or swap agreements will be treated as a single QFC under the
FDIA (but only to the extent the underlying agreements are themselves
QFCs). This provision ensures that cross-product netting pursuant to a
master agreement, or pursuant to an umbrella agreement for separate
master agreements between the same parties, each of which is used to
document one or more qualified financial contracts, will be enforceable
under the FDIA. Cross-product netting permits a wide variety of
financial transactions between two parties to be netted, thereby
maximizing the present and potential future risk-reducing benefits of
the netting arrangement between the parties. Express recognition of the
enforceability of such cross-product master agreements furthers the
policy of increasing legal certainty and reducing systemic risks in the
case of an insolvency of a large financial participant.
In section 906, subsection (a)(1) amends the definition of ``clearing
organization'' to include clearinghouses that are subject to exemptions
pursuant to orders of the Securities and Exchange Commission or the
Commodity Futures Trading Commission and to include multilateral
clearing organizations, the definition of which was added to FDICIA by
the CFMA.
Subsection (a)(2). FDICIA provides that a netting arrangement will be
enforced pursuant to its terms, notwithstanding the failure of a party
to the agreement. However, the current netting provisions of FDICIA
limit this protection to ``financial institutions,'' which include
depository institutions. This subsection amends the FDICIA definition
of covered institutions to include (i) uninsured national and State
member banks, irrespective of their eligibility for deposit insurance
and (ii) foreign banks, including the foreign bank and its branches or
agencies as a combined group, or only the foreign bank parent of a
branch or agency. The latter change will extend the protections of
FDICIA to ensure that U.S. financial organizations participating in
netting agreements with foreign banks are covered by the Act, thereby
enhancing the safety and soundness of these arrangements. It is
intended that a non-defaulting foreign bank and its branches and
agencies be considered to be a single financial institution for
purposes of the bilateral netting provisions of FDICIA (except to the
extent
[[Page S2369]]
that the non-defaulting foreign bank and its branches and agencies on
the one hand, and the defaulting financial institution, on the other,
have entered into agreements that clearly evidence an intention that
the non-defaulting foreign bank and its branches and agencies be
treated as separate financial institutions for purposes of the
bilateral netting provisions of FDICIA).
Subsection (a)(3) amends FDICIA to provide that, for purposes of
FDICIA, two or more clearing organizations that enter into a netting
contract are considered ``members'' of each other. This assures the
enforceability of netting arrangements involving two or more clearing
organizations and a member common to all such organizations, thus
reducing systemic risk in the event of the failure of such a member.
Under the current FDICIA provisions, the enforceability of such
arrangements depends on a case-by-case determination that clearing
organizations could be regarded as members of each other for purposes
of FDICIA.
Subsection (a)(4) amends the FDICIA definition of netting contract
and the general rules applicable to netting contracts. The current
FDICIA provisions require that the netting agreement must be governed
by the law of the United States or a State to receive the protections
of FDICIA. However, many of these agreements, particularly netting
arrangements covering positions taken in foreign exchange dealings, are
governed by the laws of a foreign country. This subsection broadens the
definition of ``netting contract'' to include those agreements governed
by foreign law, and preserves the FDICIA requirement that a netting
contract not be invalid under, or precluded by, Federal law.
Subsections (b) and (c) establish two exceptions to FDICIA's
protection of the enforceability of the provisions of netting contracts
between financial institutions and among clearing organization members.
First, the termination provisions of netting contracts will not be
enforceable based solely on (i) the appointment of a conservator for an
insolvent depository institution under the FDIA or (ii) the appointment
of a receiver for such institution under the FDIA, if such receiver
transfers or repudiates QFCs in accordance with the FDIA and gives
notice of a transfer by 5:00 p.m. on the business day following the
appointment of a receiver. This change is made to confirm the FDIC's
flexibility to transfer or repudiate the QFCs of an insolvent
depository institution in accordance with the terms of the FDIA. This
modification also provides important legal certainly regarding the
treatment of QFCs under the FDIA, because the current relationship
between the FDIA and FDICIA is unclear.
The second exception provides that FDICIA does not override a stay
order under SIPA with respect to foreclosure on securities, but not
cash, collateral of a debtor, section 911 makes a conforming change to
SIPA. There is also an exception relating to insolvent commodity
brokers.
Subsections (b) and (c) also clarify that a security agreement or
other credit enhancement related to a netting contract is enforceable
to the same extent as the underlying netting contract.
Subsection (d) adds a new section 407 to FDICIA. This new section
provides that, notwithstanding any other law, QFCs with uninsured
national banks, uninsured Federal branches or agencies, or Edge Act
corporations, or uninsured State member banks that operate, or operate
as, a multilateral cleaning organization and that are placed in
receivership or conservatorship will be treated in the same manner as
if the contract were with an insured national bank or insured Federal
branch for which a receiver or conservator was appointed. This
provision will ensure that parties to QFCs with these institutions will
have the same rights and obligations as parties entering into the same
agreements with insured depository institutions. The new section also
specifically limits the powers of a receiver or conservator for such an
institution to those contained in 12 U.S.C. Sec. Sec. 1821(e)(8), (9),
(10), and (11), which address QFCs.
While the amendment would apply the same rules to such institutions
that apply to insured institutions, the provision would not change the
rules that apply to insured institutions. Nothing in this section would
amend the International Banking Act, the Federal Deposit Insurance Act,
the national Bank Act, or other statutory provisions with respect to
receiverships of insured national banks or Federal branches.
In section 907, subsection (a)(1) amends the Bankruptcy Code
definitions of `'repurchase agreement'' and ``swap agreement'' to
conform with the amendments to the FDIA contained in sections 901(c)
and 901(f) of the Act.
In connection with the definition of ``repurchase agreement,'' the
term ``qualified foreign government securities'' is defined to include
securities that are direct obligations of, or fully guaranteed by,
central governments of members of the Organization for Economic
Cooperation and Development OECD. This language reflects developments
in the repurchase agreement markets, which increasingly use foreign
government securities as the underlying asset. The securities are
limited to those issued by or guaranteed by full members of the OECD,
as well as countries that have concluded special lending arrangements
with the International Monetary Fund associated with the Fund's General
Arrangements to Borrow.
Subsection (a)(1) also amends the definition of ``repurchase
agreement'' to include those on mortgage-related securities, mortgage
loans and interests therein, and expressly to include principal and
interest-only U.S. government and agency securities as securities that
can be the subject of a ``repurchase agreement.'' The reference in the
definition to United States government- and agency-issued or fully
guaranteed securities is intended to include obligations issued or
guaranteed by Fannie Mae and the Federal Home Loan Mortgage Corporation
(Feddie Mac) as well as all obligations eligible for purchase by
Federal Reserve banks under the similar language of section 14(b) of
the Federal Reserve Act.
This amendment is not intended to affect the status of repos
involving securities or commodities as securities contracts, commodity
contracts, or forward contracts, and their consequent eligibility for
similar treatment under other provisions of the Bankruptcy Code. In
particular, an agreement for the sale and repurchase of a security
would continue to be a securities contract as defined in the Bankruptcy
Code and thus also would be subject to the Bankruptcy Code provisions
pertaining to securities contracts, even if not a ``repurchase
agreement'' as defined in the Bankruptcy Code. Similarly, an agreement
for the sale and repurchase of a commodity, even though not a
``repurchase agreement'' as defined in the Bankruptcy Code, would
continue to be a forward contract for purposes of the Bankruptcy Code
and would be subject to the Bankruptcy Code provisions pertaining to
forward contracts.
Subsection (a)(1) specifies that repurchase obligations under a
participation in a commercial mortgage loan do not make the
participation agreement a ``repurchase agreement.'' Such repurchase
obligations embedded in participations in commercial loans, such as
recourse obligations, do not constitute a ``repurchase agreement.''
However, a repurchase agreement involving the transfer of
participations in commercial mortgage loans with a simultaneous
agreement to repurchase the participation on demand or at a date
certain one year or less after such transfer would constitute a
``repurchase agreement'', as well as a ``securities contract''.
The definition of ``swap agreement'' is amended to include an
``interest rate swap, option, future, or forward agreement, including a
rate floor, rate cap, rate collar, cross-currency rate swap, and basis
swap; a spot, same day-tomorrow, tomorrow-next, forward, or other
foreign exchange or precious metals agreement; a currency swap, option,
future, or forward agreement; an equity index or equity swap, option,
future, or forward agreement; a debt index or debt swap, option,
future, or forward agreement; a total return, credit spread or credit
swap, option, future, or forward agreement; a commodity index or
commodity swap, option, future, or forward agreement; or a weather
swap, weather derivative, or weather option.'' As amended, the
definition of ``swap agreement'' will update the statutory definition
and achieve contractual netting across economically similar
transactions.
[[Page S2370]]
The definition of ``swap agreement'' originally was intended to
provide sufficient flexibility to avoid the need to amend the
definition as the nature and uses of swap transactions matured. To that
end, the phrase ``or any other similar agreement'' was included in the
definition. The phrase ``or any similar agreement'' has been added to
the definitions of ``forward contract,'' ``commodity contract,''
``repurchase agreement,'' and ``securities contract'' for the same
reason. To clarify this, subsection (a)(1) expands the definition of
``swap agreement'' to include ``any agreement or transaction that is
similar to any other agreement or transaction referred to in [Section
101(53B) of the Bankruptcy Code] and that is of a type that has been,
is presently, or in the future becomes, the subject of recurrent
dealings in the swap markets and that is a forward, swap, future, or
option on one or more rates, currencies, commodities, equity securities
or other equity instruments, debt securities or other debt instruments,
quantitative measures associated with an occurrence, extent of an
occurrence, or contingency associated with a financial, commercial, or
economic consequence, or economic or financial indices or measures of
economic or financial risk or value.''
The definition of ``swap agreement'' in this subsection should not be
interpreted to permit parties to document non-swaps as swap
transactions. Traditional commercial arrangements, such as supply
agreements, or other non-financial market transactions, such as
commercial, residential or consumer loans, cannot be treated as
``swaps'' under either the FDIA or the Bankruptcy Code because the
parties purport to document or label the transactions as ``swap
agreements.'' These definitions, and the characterization of a certain
transaction as a ``swap agreement,'' are not intended to affect the
characterization, definition, or treatment of any instruments under any
other statute, regulation, or rule including, but not limited to, the
statutes, regulations or rules enumerated in subsection (a)(1)(C).
Similarly, Section 914 provides that the definitions of ``securities
contract,'' ``repurchase agreement,'' ``forward contract,'' and
``commodity contract,'' and the characterization of certain
transactions as such a contract or agreement, are not intended to
affect the characterization, definition, or treatment of any
instruments under any other statute, regulation, or rule including, but
not limited to, the statutes, regulations or rules enumerated in the
definition of ``swap agreement.''
The definition also includes any security agreement or arrangement,
or other credit enhancement, related to a swap agreement, including any
guarantee or reimbursement obligation related to a swap agreement. This
ensures that any such agreement, arrangement or enhancement is itself
deemed to be a swap agreement, and therefore eligible for treatment as
such for purposes of termination, liquidation, acceleration, offset and
netting under the Bankruptcy Code and the FDIA. Similar changes are
made in the definitions of ``forward contract,'' ``commodity
contract,'' ``repurchase agreement,'' and ``securities contract.'' An
example of a security arrangement is a right of setoff; examples of
other credit enhancements are letters of credit and other similar
agreements. A security agreement or arrangement or guarantee or
reimbursement obligation related to a ``swap agreement,'' ``forward
contract,'' ``commodity contract,'' ``repurchase agreement'' or
``securities contract'' will be such an agreement or contract only to
the extent of the damages in connection with such agreement measured in
accordance with Section 562 of the Bankruptcy Code (added by the Act).
This limitation does not affect, however, the other provisions of the
Bankruptcy Code (including Section 362(b)) relating to security
arrangements in connection with agreements or contracts that otherwise
qualify as ``swap agreements,'' ``forward contracts,'' ``commodity
contracts,'' ``repurchase agreements'' or ``securities contracts.''
The use of the term ``forward'' in the definition of ``swap
agreement'' is not intended to refer only to transactions that fall
within the definition of ``forward contract.'' Instead, a ``forward''
transaction could be a ``swap agreement'' even if not a ``forward
contract.''
Subsections (a)(2) and (a)(3) amend the Bankruptcy Code definitions
of ``securities contract'' and ``commodity contract,'' respectively, to
conform them to the definitions in the FDIA.
Subsection (a)(2), like the amendments to the FDIA, amends the
definition of ``securities contract'' expressly to encompass margin
loans, to clarify the coverage of securities options and to clarify the
coverage of repurchase and reverse repurchase transactions. The
inclusion of ``margin loans'' in the definition is intended to
encompass only those loans commonly known in the securities industry as
``margin loans,'' such as arrangements where a securities broker or
dealer extends credit to a customer in connection with the purchase,
sale or trading of securities, and does not include loans that are not
commonly referred to as ``margin loans,'' however documented. The
reference in subsection (b) to a ``guarantee'' by or to a ``securities
clearing agency'' is intended to cover other arrangements, such as
novation, that have an effect similar to a guarantee. The reference to
a ``loan'' of security in the definition is intended to apply to loans
of securities, whether or not for a ``permitted purpose'' under margin
regulations. The reference to ``repurchase and reverse repurchase
transactions'' is intended to eliminate any inquiry under Section 555
and related provisions as to whether a repurchase or reverse repurchase
transaction is a purchase and sale transaction or a secured financing.
Repurchase and reverse repurchase transactions meeting certain criteria
are already covered under the definition or ``repurchase agreement'' in
the Bankruptcy Code. Repurchase and reverse repurchase transactions on
all securities (including, for example, equity securities, asset-backed
securities, corporate bonds and commercial paper) are included under
the definition of ``securities contract''. A repurchase or reverse
repurchase transaction which is a ``securities contract'' but not a
``repurchase agreement'' would thus be subject to the ``counterparty
limitations'' contained in Section 555 of the Bankruptcy Code (i.e.,
only stockbrokers, financial institutions, securities clearing agencies
and financial participants can avail themselves of Section 555 and
related provisions).
Subsection (a)(2) also specifies that purchase, sale and repurchase
obligations under a participation in a commercial mortgage loan do not
constitute ``securities contracts.'' While a contract for the purchase,
sale or repurchase of a participation may constitute a ``securities
contract,'' the purchase, sale or repurchase obligation embedded in a
participation agreement does not make that agreement a ``securities
contract.''
Subsection (b) amends the Bankruptcy Code definitions of ``financial
institution'' and ``forward contract merchant.'' The definition for
``financial institution'' includes Federal Reserve Banks and the
receivers or conservators of insolvent depository institutions. With
respect to securities contracts, the definition of ``financial
institution'' expressly includes investment companies registered under
the Investment Company Act of 1940.
Subsection (b) also adds a new definition of ``financial
participant'' to limit the potential impact of insolvencies upon other
major market participants. This definition will allow such market
participants to close-out and net agreements with insolvent entities
under sections 362(b)(6), 555 and 556 even if the creditor could not
qualify as, for example, a commodity broker. Sections 362(b)(6), 555
and 556 preserve the limitations of the right of close-out and net such
contracts, in most cases, to entities who qualify under the Bankruptcy
Code's counterparty limitations. However, where the counterparty has
transactions with a total gross dollar value of at least $1 billion in
notional or actual principal amount outstanding on any day during the
previous 15-month period, or has gross mark-to-market positions of at
least $100 million (aggregated across counterparties) in one or more
agreements or transactions on any day during the previous 15-month
period, sections 362(b)(6), 555 and 556 and corresponding amendments
would permit it to exercise netting and related rights irrespective of
its inability otherwise to satisfy those counterparty limitations. This
change
[[Page S2371]]
will help prevent systemic impact upon the markets from a single
failure, and is derived from threshold tests contained in Regulation EE
promulgated by the Federal Reserve Board in implementing the netting
provisions of the Federal Deposit Insurance Corporation Improvement
Act. It is intended that the 15-month period be measured with reference
to the 15 months preceding the filing of a petition by or against the
debtor.
``Financial participant'' is also defined to include ``clearing
organizations'' within the meaning of FDICIA, as amended by the CFMA
and Section 906 of the Act. This amendment, together with the inclusion
of ``financial participants'' as eligible counterparties in connection
with ``commodity contracts,'' ``forward contracts'' and ``securities
contracts'' and the amendments made in other Sections of the Act to
include ``financial participants'' as counterparties eligible for the
protections in respect of ``swap agreements'' and ``repurchase
agreements,'' take into account the CFMA and will allow clearing
organizations to benefit from the protections of all of the provisions
of the Bankruptcy Code relating to these contracts and agreements. This
will further the goal of promoting the clearing of derivatives and
other transactions as a way to reduce systemic risk. The definition of
``financial participant'' (as with the other provisions of the
Bankruptcy Code relating to ``securities contracts,'' ``forward
contracts,'' ``commodity contracts,'' ``repurchase agreements'' and
``swap agreements) is not mutually exclusive, i.e., an entity that
qualifies as a ``financial participant'' could also be a ``swap
participant,'' ``repo participant,'' ``forward contract merchant,''
`commodity broker,'' ``stockbroker,'' ``securities clearing agency''
and/or ``financial institution.''
Subsection (c) adds to the Bankruptcy Code new definitions for the
terms ``master netting agreement'' and master netting agreement
participant.''
The definition of ``master netting agreement'' is designed to protect
the termination and close-out netting provisions of cross-product
master agreements between parties. Such an agreement may be used (i) to
document a wide variety of securities contracts, commodity contracts,
forward contracts, repurchase agreements and swap agreements of (ii) as
an umbrella agreement for separate master agreement between the same
parties, each of which is used to document a discrete type of
transaction. The definition includes security agreements or
arrangements or other credit enhancements related to one or more such
agreements and clarifies that a master netting agreement will be
treated as such even if it documents transactions that are not within
the enumerated categories of qualifying transactions (but the
provisions of the Bankruptcy Code relating to master netting agreements
and the other categories of transactions will not apply to such other
transactions).
A ``master netting agreement participant'' is an entity that is a
party to an outstanding master netting agreement with a debtor before
the filing of a bankruptcy petition.
Subsection (d) amends section 362(b) of the Bankruptcy Code to
protect enforcement, free from the automatic stay, of setoff or netting
provisions in swap agreements and in master netting agreements and
security agreements or arrangements related to one or more swaping
agreements or master netting agreements. This provision parallels the
other provisions of the Bankruptcy Code that protect netting provisions
of securities contracts, commodity contracts, forward contracts, and
repurchase agreements. Because the relevant definitions include related
security agreements, the references to ``setoff' in these provisions,
as well in section 362(b)(6) and (7) of the Bankruptcy Code, are
intended to refer also to rights to foreclose on, and to set off
against-obligations to return, collateral securing swap agreements,
mater netting agreements, repurchase agreements, securities contracts,
commodity contracts, or forward contracts. Collateral may be pledged to
cover the cost of replacing the defaulted transactions in the relevant
market, as well as other costs and expenses incurred or estimated to be
incurred for the purpose of hedging or reducing the risks arising out
of such termination. Enforcement of these agreements and arrangement
free from the automatic stay is consistent with the policy goals of
minimizing systemic risk.
Subsection (d) also clarifies that the provisions protecting setoff
and foreclosure in relation to securities contracts, commodity
contracts, forward contracts, repurchase agreements, swap agreements,
and master netting agreements free from the automatic stay apply to
collateral pledged by the debtor but that cannot technically be ``held
by'' the creditor, such as receivables and book-entry securities, and
to collateral that has been repledged by the creditor and securities
re-sold pursuant to repurchase agreements.
The current codification of section 546 of the Bankruptcy Code
contains two subsections designated as ``(g)''; subsection (e) corrects
this error.
Subsections (e) and (f) amend sections 546 and 548(d) of the
Bankruptcy Code to provide that transfers made under or in connection
with a master netting agreement may not be avoided by a trustee except
where such transfer is made with actual intent to hinder, delay or
defraud and not taken in good faith. This amendment provides the same
protections for a transfer made under, or in connection with, a master
netting agreement as currently is provided for margin payments,
settlement payments and other transfers received by commodity brokers,
forward contract merchants, stockbrokers, financial institutions,
securities clearing agencies, repo participants, and swap participants
under Sections 546 and 548(d), except to the extent the trustee could
otherwise avoid such a transfer made under an individual contract
covered by such master netting agreement.
Subsections (g), (h), (i) and (j) clarify that the provisions of the
Bankruptcy Code that protect (i) rights of liquidation under securities
contracts, commodity contracts, forward contracts and repurchase
agreements also protect rights of termination or acceleration under
such contracts, and (ii) rights to terminate under swap agreements also
protect rights of liquidation and acceleration.
Subsection (k) adds a new section 561 to the Bankruptcy Code to
protect the contractual right of a master netting agreement participant
to enforce any rights of termination, liquidation, acceleration, offset
or netting under a master netting agreement. Such rights include rights
arising (i) from the rules of a derivatives clearing organization,
multilateral clearing organization, securities clearing agency,
securities exchange, securities association, contract market,
derivatives transaction execution facility or board of trade, (ii)
under common law, law merchant or (iii) by reason of normal business
practice. This reflects the enactment of the CFMA and the current
treatment of rights under swap agreements under section 560 of the
Bankruptcy Code. Similar changes to reflect the enactment of the CFMA
have been made to the definition of ``contractual right'' for purposes
of Sections 555, 556, 559 and 560 of the Bankruptcy Code.
Subsections (b)(2)(A) and (b)(2)(B) of new Section 561 limit the
exercise of contractual rights to net or to offset obligations where
the debtor is a commodity broker and one leg of the obligations sought
to be netted relates to commodity contracts traded on or subject to the
rules of a contract market designated under the Commodity Exchange Act
or a derivatives transaction execution facility registered under the
Commodity Exchange Act. Under subsection (b)(2)(A) netting or
offsetting is not permitted in these circumstances if the party seeking
to net or to offset has no positive net equity in the commodity
accounts at the debtor. Subsection (b)(2)(B) applies only if the debtor
is a commodity broker, acting on behalf of its own customer, and is in
turn a customer of another commodity broker. In that case, the latter
commodity broker may not net or offset obligations under such commodity
contracts with other claims against its customer, the debtor.
Subsections (b)(2)(A) and (b)(2)(B) limit the depletion of assets
available for distribution to customers of commodity brokers. This is
consistent with the principle of subchapter IV of chapter 7 of title 11
that gives priority to customer claims in the bankruptcy of a commodity
[[Page S2372]]
broker. Subsection (b)(2)(C) provides an exception to subsections
(b)(2)(A) and (b)(2)(B) for cross-margining and other similar
arrangements approved by, or submitted to and not rendered ineffective
by, the Commodity Futures Trading Commission, as well as certain other
netting arrangements.
For the purposes of Bankruptcy Code sections 555, 556, 559, 560 and
561, it is intended that the normal business practice in the event of a
default of a party based on bankruptcy or insolvency is to terminate,
liquidate or accelerate securities contracts, commodity contracts,
forward contracts, repurchase agreements, swap agreements and master
netting agreements with the bankrupt or insolvent party.
The protection of netting and offset rights in sections 560 and 561
is in addition to the protections afforded in sections 362(b)(6),
(b)(7), (b)(17) and (b)(28).
Under the Act, the termination, liquidation or acceleration rights of
a master netting agreement participant are subject to limitations
contained in other provisions of the Bankruptcy Code relating to
securities contracts and repurchase agreements. In particular, if a
securities contract or repurchase agreement is documented under a
master netting agreement, a party's termination, liquidation and
acceleration rights would be subject to the provisions of the
Bankruptcy Code relating to orders authorized under the provisions of
SIPA or any statute administered by the SEC. In addition, the netting
rights of a party to a master netting agreement would be subject to any
contractual terms between the parties limiting or waiving netting or
set off rights. Similarly, a waiver by a bank or a counterparty of
netting or set off rights in connection with QFCs would be enforceable
under the FDIA.
Section 502 of the Act clarifies that, with respect to municipal
bankruptcies, all the provisions of the Bankruptcy Code relating to
securities contracts, commodity contracts, forward contracts,
repurchase agreements, swap agreements and master netting agreements
(which by their terms are intended to apply in all proceedings under
title 11) will apply in a Chapter 9 proceeding for a municipality.
Although sections 555, 556, 559 and 560 provide that they apply in any
proceeding under the Bankruptcy Code, Section 502 makes a technical
amendment in Chapter 9 to clarify the applicability of these
provisions.
New section 561 of the Bankruptcy Code clarifies that the provisions
of the Bankruptcy Code related to securities contracts, commodity
contracts, forward contracts, repurchasing agreements, swap agreements
and master netting agreements apply in a proceeding ancillary to a
foreign insolvency proceeding under new Chapter 15.
Subsections (l) and (m) clarify that the exercise of termination and
netting rights will not otherwise affect the priority of the creditor's
claim after the exercise of netting, foreclosure and related rights.
Subsection (n) amends section 553 of the Bankruptcy Code to clarify
that the acquisition by a creditor of setoff rights in connection with
swap agreements, repurchase agreements, securities contracts, forward
contracts, commodity contracts and master netting agreements cannot be
avoided as a preference.
This subsection also adds setoff of the kinds described in sections
555, 556, 559, 560, and 561 of the Bankruptcy Code to the types of
setoff excepted from section 553(b).
Subsection (o), as well as other subsections of the Act, adds
references to ``financial participant'' in all the provisions of the
Bankruptcy Code relating to securities, forward and commodity contracts
and repurchase and swap agreements.
Section 908 amends section 11(e)(8) of the Federal Deposit Insurance
Act to explicitly authorize the FDIC, in consultation with appropriate
Federal banking agencies, to prescribe regulations on recordkeeping by
any insured depository institution with respect to QFCs only if the
insured depository institution is in a troubled condition (as such term
is defined in the FDIA).
Section 909 amends FDIA section 13(e)(2) to provide that an agreement
for the collateralization of governmental deposits, bankruptcy estate
funds, Federal Reserve Bank or Federal Home Loan Bank extensions of
credit or one or more QFCs shall not be deemed invalid solely because
such agreement was not entered into contemporaneously with the
acquisition of the collateral or because of pledges, delivery or
substitution of the collateral made in accordance with such agreement.
The amendment codifies portions of policy statements issued by the
FDIC regarding the application of section 13(e), which codifies the
``D'Oench Duhme'' doctrine. With respect to QFCs, this codification
recognizes that QFCs often are subject to collateral and other security
arrangements that may require posting and return of collateral on an
ongoing basis based on the mark-to-market value of the collateralized
transactions. The codification of only portions of the existing FDIC
policy statements on these and related issues should not give to any
negative implication regarding the continued validity of these policy
statements.
Section 910 adds a new section 562 to the Bankruptcy Code providing
that damage under any swap agreement, securities contract, forward
contract, commodity contract, repurchase agreement or master netting
agreement will be calculated as of the earlier of (i) the date of
rejection of such agreement by a trustee or (ii) the date of
liquidation, termination or acceleration of such contract or agreement.
New section 562 provides important legal certainty and makes the
Bankruptcy Code consistent with the current provisions related to the
timing of the calculation of damages under QFCs in the FDIA.
Section 911 amends SIPA to provide that an order or decree issued
pursuant to SIPA shall not operate as a stay of any right of
liquidation, termination, acceleration, offset or netting under one or
more securities contracts, commodity contracts, forward contracts,
repurchase agreements, swap agreements or master netting agreements (as
defined in the Bankruptcy Code and including rights of foreclosure on
collateral), except that such order or decree may stay any right to
foreclose on or dispose of securities (but not cash) collateral pledged
by the debtor or sold by the debtor under a repurchase agreement or
lent by the debtor under a securities lending agreement. A
corresponding amendment to FDICIA is made by section 906. A creditor
that was stayed in exercising rights against such securities would be
entitled to post-insolvency interest to the extent of the value of such
securities.
Section 912 generally protects asset-backed securitization
transactions from legal uncertainties and disruptions related to the
bankruptcies of certain parties and allows for the further development
of structured finance. Asset securitization involves the issuance of
securities supported by assets having an ascertainable cash flow or
market value. Securitization of receivables, such as small-business
loans, commercial and multifamily mortgages, and car loans, allows for
the funding of such loans from capital market sources. The process
generally enlarges the pool of capital available and reduces financing
costs for vital lending purposes such as the financing of small-
business operations and home ownership.
Through a number of definitions designed to ensure that the exclusion
from property of the estate applies only to the intended type of
transaction, new section 541(b)(5) of the Bankruptcy Code excludes from
the property of a debtor's estate any ``eligible asset'', and proceeds
thereof, tot he extent that such eligible asset was ``transferred'' by
the debtor, before the date of commencement of the case, to an
``eligible entity'' in connection with an ``asset-backed
securitization.'' Each term is explicitly defined to reflect its
specific role or application in the securitization process to ensure
that only bona fide securitizations are eligible for the safe harbor
exclusion. All defined elements of a securitization must be present for
the safe harbor to apply. Other commercial transactions lacking any of
the defined elements, such as transactions documented and structured as
collateralized lending arrangements and other commercial asset sales or
financings that are unrelated to securitization transactions, would be
ineligible for the safe harbor provided by section 541(b)(5).
The phrase ``to the extent'' in new section 541(b)(5) makes clear
that a
[[Page S2373]]
portion of the eligible asset may remain part of the debtor's estate,
for example, where the eligible entity obtains the right to receive
only interest payments on the first 10 percent of payments due on a
receivable in connection with an asset-backed securitization. In
addition, the reference to section 548(a) in new section 541(b)(5) will
make clear that the safe harbor does not supersede a trustee's power to
avoid fraudulent transfers.
New section 541(b)(5) is not intended to override state law
requirements, if any, regarding ``perfection'' of an asset sale.
However, regardless of strict compliance with such state
law requirements, new section 541(b)(5) is intended to provide an
exclusion of the debtor's interest in eligible assets, and proceeds
thereof, from the debtor's estate, upon compliance with section
541(b)(5). Thus, despite an eligible entity's failure to have properly
perfected a sale for state law purposes, the eligible assets in
question would remain excluded from the debtor's estate. In such event,
however, a third party creditor with an interest in such eligible
assets under state law would not be precluded from asserting, outside
of the bankruptcy proceedings, such interest against the issuer or any
other party purporting to have an interest in those assets. In other
words, the amendments do not purport to extinguish any party's interest
in the securitized assets other than the debtor's interest to the
extent transferred by the debtor to the securitization vehicle. In
order to provide certainty to participants in the asset-backed
securities marked, including both issuers and purchasers of such
securities, it is noted that the ``strong-arm'' provisions of section
544 of the Bankruptcy Code are not intended to override the general
rule set forth in new section 541(b)(5) so as to bring such assets back
into the debtor's estate.
Frequently, asset securitizations involve the issuance of more than
one class of securities with differing payment priorities,
subordination provisions and other characteristics. The definition of
``asset-backed securitization'' contained in new section 541(e)(1)
requires that at least one tranche of the asset-backed securities
backed by the eligible assets in question be rated investment grade,
thereby requiring that each asset-backed securitization as to which
eligible assets are excluded from the debtor's estate be a carefully
reviewed transaction subjected to third party scrutiny by a nationally
recognized statistical rating organization. The investment-grade rating
requirement applies only when the security is initially issued. In view
of the cost and time associated with obtaining an investment-grade
rating, such ratings are generally not pursued for smaller
transactions. These and other burdens of the rating process add further
protection against potential abuse of the safe harbor for sham
transactions and ensure its application of its intended purpose--to
preserve payments on asset-backed securities issued in the public and
private markets.
New section 541(e)(4) defines the term ``eligible asset.'' This
definition is based upon the definition provided in rule 3a-7 under the
Investment Company Act of 1940, which provides an exemption from
registration under the Investment Company Act for issuers of asset-
backed securities (i.e., issuers in the business of purchasing, or
otherwise acquiring, and holding eligible assets). The phrase ``or
other assets'' is intended to cover assets often conveyed in connection
with securitization transactions such as letters of credit, guarantees,
cash collateral accounts, and other assets that are provided as
additional credit support. This phrase would also cover other assets,
such as swaps, hedge agreements, etc., that are provided to protect
bondholders against interest rate, currency and other market risks. The
inclusion of cash and securities as eligible assets allows so-called
market-value based securitizations of equity and other non-amortizing
securities to fall within the purview of the amendment, although
securitizations of such securities are not included under Rule 3a-7 and
therefore would be subject to regulation under the Investment Company
Act if another exemption therefrom were not available.
New sections 541(e)(3) and (4) define the terms ``eligible entity''
and ``issuer,'' respectively. The definitions exclude operating
companies by encompassing only single purpose entities. Because
securitization transactions often involve intermediary transferees, an
eligible entity can be either an issuer or an entity engaged
exclusively in the business of acquiring and transferring eligible
assets directly or indirectly to an issuer.
New section 541(e)(5) defines the term ``transferred.'' In order for
the eligible assets to be excluded from the debtor's estate under
section 541, the debtor must represent and warrant in a written
agreement that such eligible assets were sold, contributed or otherwise
conveyed with the intention of removing them from the debtor's estate
pursuant to section 541 (whether or not reference is made to section
541 in the written agreement). The definition makes clear that the
debtor's written intention as to the exclusion of the eligible assets
will be honored, regardless of the state law characterization of the
transfer as a sale, contribution or other conveyance, and regardless of
any other aspect of the transaction (such as the debtor's holding an
interest in the issuer or any securities issued by the issuer, the
ongoing servicing obligation of the debtor; the tax and accounting
characterization; or any recourse to the debtor, whether relating to a
breach of a representation, warranty or covenant, or otherwise) which
may affect a state law analysis as to the true sale.
In Section 913, subsection (a) provides that the amendments made
under Title IX take effect on the date of enactment.
Subsection (b) provides that the amendments made under Title IX shall
not apply with respect to cases commenced, or to conservator/receiver
appointments made, before the date of enactment. The amendments would,
however, apply to contracts entered into prior to the date of
enactment, so long as a Bankruptcy Code case were commenced or a
conservator/receiver appointment were made on or after the date of
enactment under any Federal or state law.
Section 914 provides that the meaning of terms used in Title IX are
applicable for purposes of Title IX only, and shall not be construed or
applied so as to challenge or affect the characterization, definition,
or treatment of any similar terms under any other statute, regulation,
or rule, including the Gramm-Leach-Bliley Act, the Legal Certainty for
Bank Products Act of 2000, the securities laws (as that term is defined
in Section 3(a)(47) of the Securities Exchange Act of 1934), and the
Commodity Exchange Act.
Mr. HUTCHINSON. Mr. President, I rise in support of S. 420, the
Bankruptcy Reform Act of 2001, and I commend Senators Grassley, Hatch,
and Sessions for their hard work, dedication, and perseverence. As a
result of their efforts, a sense of balance and fairness has been
restored to our legal system and American consumers and businesses will
both benefit.
This bill is long overdue as over the past decade there has been an
explosion in the number of bankruptcy filings. Last year, there were
1.25 million total bankruptcy filings in America, in 1990, a mere ten
years earlier, there were 782,960 filings. In Arkansas, there were
7,062 filings in 1990 and 16,784 in 2000. This explosion is due in no
small part to the current Bankruptcy Code's generous, no questions
asked policy of providing complete debt forgiveness under Chapter 7
without seriously considering whether a person filing bankruptcy can
repay some or all of those debts.
Furthermore, the United States economy loses $40 billion annually as
a result of bankruptcy filings and the U.S. Department of Justice
estimates that creditors lose $3.22 billion every year because of
bankruptcies filed by persons who could repay their debts. These losses
are passed on to all consumers--including, and especially, those who
responsibly pay at least part of their debts but choose not use the
bankruptcy code to escape them. The Congressional Budget Office
estimates that as a result each American household pays an extra $400
annually in the form of higher costs for goods, services, and credit.
The Bankruptcy Reform Act of 2001 will reduce the number of frivolous
bankruptcy filings while still allowing those who truly need help to
obtain a fresh start. I am proud to support this legislation and I ask
my colleagues to
[[Page S2374]]
join me in support of the Bankruptcy Reform Act of 2001.
Mrs. MURRAY. Mr. President, I rise to express my support for the
bankruptcy reform legislation. This legislation offers an imperfect but
fairly balanced approach to reforming the bankruptcy system. Through
the amendment process we have improved the bill, but it could be more
fair to all sectors of our society. I am disappointed some good
amendments that would have improved the legislation were rejected.
The bankruptcy reform legislation that passed the House a couple of
weeks ago is less friendly to individuals in adverse circumstances not
of their own doing. If this bankruptcy reform bill is weakened in
conference, I will have a hard time supporting it. I will likely oppose
a conference agreement that looks at all like the House bill.
In recent years, consumer bankruptcy filings have dramatically
increased. We debated bankruptcy reform in the last two Congresses.
Those discussions showed our desire to elevate personal responsibility
in consumer financial transactions; to prevent bankruptcy filings from
being used by consumers as a financial planning tool; and, to recapture
the stigma associated with a bankruptcy filing. It is clear the system
is broke, and bankruptcy reform is needed.
I voted for bankruptcy reform in both the 105th and 106th Congresses,
and I plan to vote for this bill. Despite these votes, I have
reservations about how the unintended consequences of this bill will
affect the less fortunate.
The bill will have an enormous impact on women and child support. The
largest growing group of filers are women, usually single mothers. The
bill's overall philosophy of pushing debtors from chapter 7 to chapter
13 will have an unintended effect on women. They usually have fewer
means and are more susceptible to crafty creditors seeking to
intimidate and reaffirm their debts. They need the protection of
chapter 7, but could be pushed into chapter 13.
Women will also be disadvantaged by provisions in this bill that fail
to prioritize domestic obligations. Under the provisions of this bill,
women will find themselves competing with powerful commercial creditors
for necessary resources, such as past-due child support, from spouses
who are in bankruptcy. It is unfair to place the critical needs of
families and single mothers trying to survive behind those of well-off
commercial creditors.
Another problem with this bill is the new filing requirements are
very complex, which could result in unintended discrimination against
lower-income individuals and families. Many low-income families don't
have the means to combat most creditors. Because debtors must prove
they are filing for legitimate reasons, those without the means to
combat powerful commercial interests will be placed at an unfair
disadvantage.
I was also disappointed that the U.S. Senate failed to adopt some
very good amendments that would have significantly improved the bill.
Senator Kohl offered an amendment that would have limited the practice
of wealthy debtors shielding themselves from creditors in bankruptcy
behind State homestead exemption laws that allow them to shelter large
amounts of money in a new home. His amendment would have placed a
national cap on this exemption, and limited the abusive practice of
sheltering large amounts of money in large homes. I supported this
needed amendment, but it was rejected on the floor of the Senate.
Several amendments were also offered that would have restricted the
marketing to and use of credit cards by young people. Credit card
companies are aggressively marketing to young people, and many young
people are getting into massive debt. Companies should only be allowed
to offer credit cards to those who can pay for them.
Finally, I am disappointed that amendments were rejected that would
have limited predatory lending practices. Some of these predatory loans
can have interest rates over 100%.
I was pleased to see that the bill included language to end the
practice of using the bankruptcy code to escape civil punishment for
violence, intimidation or threats against individuals using family
planning services. This provision was added in the Judiciary Committee
and greatly improves the bill. It ensures that those who violate the
law cannot escape justice through the bankruptcy laws. This critical
provision of this bill that must not be stripped or drastically changed
in conference.
Overall, this is a decent bill that will improve on the current
abuses of the bankruptcy system. While I have concerns over many of
this bill's provisions, I hope they can be dealt with in conference or
in future legislation.
This bill should be strengthened in conference, not weakened as has
happened to other versions of bankruptcy legislation. I will closely
examine a conference agreement with this in mind before voting to send
this legislation to the President.
Mr. LEVIN. Mr. President, once again the Senate will vote on a
bankruptcy reform bill. In the last session of Congress, when the
bankruptcy bill came before the Senate, I voted in favor of the bill. I
said at the time that because of the amendments adopted in the Senate,
the bill was a more reasonable approach to bankruptcy reform that had
been reported by the Judiciary Committee. However, I further stated
that if the legislation came back from conference, without those modest
amendments, I would consider opposing the bill. In the end, the
bankruptcy legislation came back from conference in a form that I could
not support. The conferees who worked out the differences on the bill
deleted or weakened many of the provisions I had supported.
Today, I will vote for this bill with the hope that it does not
return from conference in a form I cannot support. The Senate today
adopted the Kohl amendment establishing a nationwide homestead cap.
That provision must be retained in conference. The Senate has now
spoken twice with respect to homestead abuse. We cannot legitimately
reform the bankruptcy system if we do not prevent wealthy debtors from
shielding luxurious homes while shedding thousands of dollars of debt
in bankruptcy.
In addition, the conferees should keep in the final bill, the
amendment making debts arising from clinic violence nondischargeable,
the amendment on landlord-tenant, the amendment on separated spouses,
and the amendment on the means test with respect to high energy costs.
It is also my hope that the conference will yield more protections for
consumers.
If the bankruptcy bill comes back from conference without these and
some of the other reasonable amendments adopted in the Senate, I may
once again be forced to oppose the final legislation.
Mrs. CLINTON. Mr. President, I rise today in support of final passage
of S. 420, the Bankruptcy Reform Act. Many of my colleagues may
remember that I was a strong critic of the bill that passed out of the
106th Congress because I did not believe it provided a balanced
approach to bankruptcy reform.
While we have yet to achieve the kind of bankruptcy reform I believe
is possible, I have worked with a number of people over the past three
years to make improvements that bring us closer to our goals,
particularly when it comes to child support.
Women can now be assured that they can continue to collect child
support payments after the child's father has declared bankruptcy. The
legislation makes child support the first priority during bankruptcy
proceedings.
This year, we have made more progress. The Senate agreed to include a
revised version of Senator Schumer's amendment to ensure that any debts
resulting from any act of violence, intimidation, or threat would be
non-dischargeable. Earlier today, this body agreed to include a cap on
the homestead exemption to ensure that wealthy debtors could not shield
their wealth by purchasing a mansion in a state with no cap on
homestead exemption. And finally, today I worked hard to make sure that
once a person has been declared bankrupt, single mothers can still
collect the child support they depend upon. Senator Hatch and I passed
an amendment to ensure that child's custodian--usually the mother--will
be informed by the bankruptcy trustee of her right to have the State
child support agency collect the non-dischargeable child support from
the ex-spouse.
[[Page S2375]]
In addition, I was concerned about competing non-dischargeable debt
so I worked hard with Senator Boxer to ensure that more credit card
debt can be erased so that women who use their credit cards for food,
clothing and medical expenses in the 90 days before bankruptcy do not
have to litigate each and every one of these expenses for the first
$750.
Let me be very clear--I will not vote for final passage of this bill
if it comes back from conference if these kind of reforms are missing.
I am voting for this legislation because it is a work in progress, and
it is making progress towards reform.
Bankruptcy reform is important. I grew up with a father who worked
hard to avoid having debts. In recent weeks, I have heard form many
small credit unions throughout New York, hard working small lenders
whose entire membership suffers when the credit union is faced with
covering bankruptcy losses.
One credit union from Hoosick Falls has assets of only $2.5 million,
but when one of their members filed a Chapter 7 bankruptcy, this small
credit union was left with a bill of thousands, which penalized the
entire 1,000 membership with increased fees.
Reform is needed. The right kind of reform is necessary. We're on our
way toward that goal, and I hope we can achieve final passage of a good
bankruptcy reform bill this year.
Mrs. FEINSTEIN. Mr. President, I rise in support of final passage of
the bankruptcy bill.
The Senate has worked on this legislation for over four years. The
Judiciary Committee, on which I sit, has debated this issue again and
again, and we have even sent a bill to the President although that bill
was fatally flawed and was vetoed as a result.
This bill is by no means perfect. However, the bill now before us is
better than the Conference Report we were faced with at the end of last
year, and it is better and more balanced than the bill presented to us
in the Judiciary Committee just a few weeks ago.
I believe that the modifications to the legislation made in Committee
and on the Floor merit a ``Yes'' vote on final passage.
Since the bill's introduction, I have consistently supported its
underlying goal of promoting personal responsibility--as, I think, has
every member of this Senate. Debtors who can pay back what they owe,
should pay what they owe or at least part of it.
Moreover, the bankruptcy code should not be a haven for irresponsible
individuals who have recklessly accumulated debts by spending freely
without regard to the consequences. After all, bankruptcy has a
societal cost.
And although much has been made of the big credit card companies and
banks, not every creditor is a big business. Many harmed by bankruptcy
filings are small businessmen and women dry cleaners, home repair
workers, and others.
An empirical review of bankruptcy filings indicates that reform is
needed. Despite a recent drop, bankruptcy filings continue to remain at
unacceptably high levels.
In 1980, individuals filed 287,000 bankruptcies.
In 1999, more than 1.3 million Americans filed for bankruptcy--an
increase of 358 percent over 20 years. Bankruptcy has become so
commonplace that more than one in a hundred households will file for
bankruptcy this year.
The bill we are voting on today appropriately readjusts our
bankruptcy laws so that bankruptcy filers must repay a portion of their
debts, if they can do so. At the same time, the bill protects debtors
below the median income who are truly in need of a fresh start.
This bill assists single parents with children in collecting child
support debt from the bankruptcy estate. Philip Strauss, Principal
Attorney of the San Francisco Department of Child Support Services,
testified on this issue at a February 8, Judiciary Committee hearing,
noting that the Bankruptcy Act of 2001 ``will enhance substantially the
enforcement of child support obligations against debtors in
bankruptcy.''
Specifically, the Bankruptcy Act of 2001 gives child support the
highest priority of unsecured claims in a bankruptcy estate. Moreover,
the bill prevents a debtor from confirming a bankruptcy plan if the
debtor does not make full payment of any child support becoming due
after the petition date.
This bill is significantly improved from the Conference Report I
voted against in December. While I voted for the Senate-passed
bankruptcy bill in the 106th Congress, I voted against the Conference
Report because the shadow conference deleted key Senate-passed
amendments and did not strike a fair enough balance between creditors
and debtors.
For example, last year, the Conference Report deleted a Senate passed
amendment that would prevent anti-abortion extremists from using
bankruptcy laws to avoid paying civil judgements against them under the
Freedom of Access to Clinic Entrances Act.
The FACE Act has led to successful criminal and civil judgements
against groups that use intimidation and outright violence to prevent
people from obtaining or providing reproductive health services. This
amendment is crucial to protecting a woman's safe access to
reproductive services.
This year, however, I am pleased that the Bankruptcy Act of 2001 has
incorporated a modified version of the FACE amendment, and now makes
``non-dischargeable'' all debts incurred for harassing, obstructing, or
other threatening violence against a person seeking any lawful goods
and services, including access to reproductive health clinics. I
appreciate the efforts of Senators Schumer and Hatch in coming to this
agreement.
Additionally, this bill includes the Kohl-Feinstein homestead
amendment, which places a nationwide $125,000 cap on the amount of
money a bankruptcy filer can shield from creditors simply by buying a
home. This amendment closes a loophole in bankruptcy code that permits
wealthy bankruptcy filers to hide their assets in multimillion dollar
estates.
This bill contains my amendment to curb abuses by bankruptcy mills.
These operations, generally under the control of a non-attorney
bankruptcy petition preparer, are often linked with price gouging of
debtors, incompetent service, and remain a significant source of fraud
in the bankruptcy system. California, in particular, has suffered from
the abuses of these mill operators.
Bankruptcy courts will now have the authority to fine these mill
operators $500 per violation, with triple fines if the mill operator
does not tell debtor she was filing for bankruptcy or advises the
debtor to hide assets. The amendment empowers the U.S. Trustee to take
enforcement actions against the mills, sets maximum fees for petition
preparers, and victims can sue for increased damages.
In addition, the Senate bill includes a compromise amendment I forged
with Senator Sessions and Senator Feingold to balance the needs of
landlords and tenants, when a tenant files bankruptcy.
Finally, this legislation contains my amendment directing the Federal
Reserve Board to investigate the practice of issuing credit cards
indiscriminately, without taking steps to ensure that consumers are
capable of repaying their debt, or in a manner that encourages
consumers to accumulate additional debt.
The amendment allows the Federal Reserve Board to issue regulations
that would require additional disclosures to consumers, and to take any
other actions, consistent with its statutory authority, that the Board
finds necessary to ensure responsible industry-wide practices and to
prevent resulting consumer debt and insolvency.
It was my hope that we could improve this bill even more--with limits
on how credit card companies provide products to minors, and with
disclosure and other requirements to give consumers the tools to handle
the burdens of credit card debt. I also believe bankruptcy judges
should have some discretion in applying the means test. Unfortunately,
several such amendments failed.
So I do have concerns about this bill, and I know that I will make
some people in my State unhappy by voting for it. I understand their
point of view, and by voting for this legislation I am not turning my
back on those concerns. I do think we should try this approach. If it
turns out that this bill does not appropriately solve the current
problems with our nation's bankruptcy laws, I will be on the front
lines of the fight to reopen this debate and to fix the glitches.
[[Page S2376]]
Nevertheless, this bill is a necessary, reasoned approach to solving
some real problems with our bankruptcy laws. Abuses are rampant. For
many, bankruptcy has become a financial planning tool, rather than its
intended use as an option of last resort. Something must be done, and I
will vote for this bill.
Mr. DOMENICI. Mr. President, I rise today in support of the
bankruptcy reform bill. We have been working on this reform for several
years now. Indeed, we passed this bill last year, only to have it
pocket vetoed by President Clinton. It is time we get it passed and
signed by the President.
Although there has been a slight decline in bankruptcies recently,
the 1990s saw a steady increase, despite a robust economy. There are
now more than a million bankruptcies a year. Many people are concerned
that bankruptcy is being used as a financial planning tool and the
public has become frustrated with many stories of bankruptcy abuse.
This bill goes a long way to curbing the abuse without undercutting
the truly needy debtor's right to a fresh start. This legislation
accounts for the honest but unfortunate debtor who faces mounting bills
as a result of medical expenses, divorce, and other reasonable causes.
However, it prevents a debtor from pursuing a lavish lifestyle and
then using bankruptcy to avoid obligations. Debtors must take
responsibility for their spending. After all, the money creditors lose
in bankruptcy is passed on to consumers in higher prices for consumer
goods, services, and credit. This often has the greatest adverse affect
on the neediest in our society.
This bill strikes a fair balance between the interests of debtors and
creditors. Those who truly need bankruptcy relief will receive a
``fresh start'' under Chapter 7. Those debtors who can afford to repay
some of their debt will be required to do so under a Chapter 13
repayment plan. It is just common sense that a debtor who can afford to
repay some of their debt should do so.
Here's how the crux of the bill works. The bankruptcy court looks at
100 percent of the debtor's living expenses, priority expenses, and
secured debt. If after their review, the debtor can still pay $10,000
or 25 percent of his or her debt, they are required to do so under a
Chapter 13 repayment plan. This makes sense.
The legislation also provides a $125,000 homestead exemption cap so
that the debtor cannot declare bankruptcy but still retain his million
dollar home. Again, this makes sense.
This is reasonable reform that benefits debtors, consumers, and
creditors alike and I will again vote for its passage.
Mr. DASCHLE. Mr. President, the bankruptcy bill before us today has
come this far because it is needed to address the record number of
bankruptcy filings this country has seen in recent years.
The number of personal bankruptcies hit 1.4 million in 1998--a new
record. While that number declined slightly last year--to 1.3 million
bankruptcy filings--it is still too high. It is still nearly twice the
number we saw in 1990, during the depths of a recession.
What accounts for this increase?
It's clear that most people who file for bankruptcy do so only after
suffering a serious reversal, such as serious illness, divorce or job
loss. And most do so only as a last resort.
But economic conditions clearly are not the only factor. If they
were, we would have seen a drop in bankruptcy filings during the 1990s,
given the booming economy. Instead, we saw record increases during the
90s.
Clearly, some people are gaming and abusing the bankruptcy system.
For them, the old stigma associated with bankruptcy has faded.
The purpose of this bill is to stop those abuses.
Many have asked--fairly--whether the solution it imposes is too tough
on ordinary debtors who deserve the protection of bankruptcy court.
Critics of this bill say that it makes it more difficult for people
who have incurred overwhelming debts through no fault of their own to
get back on their feet.
In many ways, I agree with them.
This bill could have been more balanced. It could have been crafted
in a way that would have allowed all consumers to have their problems
fully considered in bankruptcy court.
A number of Democratic Senators offered amendments that would have
made this bill better. Unfortunately, many of those amendments were
rejected.
I am pleased, however, that two key amendments were adopted. Both
Senator Schumer's amendment on clinic violence, and Senator Kohl's
amendment closing the homestead loophole, were needed to address real
abuses of the bankruptcy code.
If we are going to insist that consumers repay more of their debts,
certainly we should also insist that people who resort to violence at
health clinics must repay the debts they incur as a result of their
illegal behavior. And certainly we must ensure that people who declare
bankruptcy can't squirrel away millions of dollars in fancy homes that
creditors can't touch.
These abuses were not addressed in the bill President Clinton refused
to sign last year. Their inclusion in this bill is one reason I am able
to support it today.
A bigger reason for my support is a basic principle that I grew up
with. People who incur debts have a responsibility to repaying them if
they can.
That is a fundamental belief in South Dakota. It's part of the fabric
of who we are.
The pioneers who settled our state relied on each other during the
hard times, the weak harvests, and at planting times. They knew they
could trust each other to make good on their debts--because they had
to.
Their survival depended on it.
Most people I know still feel that way.
This bill is needed because of the people who do not share that
belief--the minority of people who see bankruptcy as an easy out,
rather than a last resort. It says to those people: ``Paying your debts
isn't a matter of choice. It's a matter of honor. And it is a legal
responsibility to which you will be held accountable.''
There are real costs when somebody does not repay their debts.
Somebody has to pick up the tab.
Some of those costs fall on lenders. But some are passed on to honest
borrowers who do repay their debts. They get stuck with higher interest
rates. So there are consumers on both sides of this equation.
Under current law, people can file under Chapter 7 to wipe out their
debts, and a judge can throw out a case if he or she determines that
the filer can afford to repay some of the debts. But there is no
consistent legal standard for determining one's ability to pay.
This bill establishes such a standard. It says that bankruptcy judges
must determine if a filer can pay $10,000--or 25 percent of his debts--
over the next five years.
It is important to note: This new standard does not apply to filers
who--after deducting food, rent, transportation, education and other
expenses--earn less than their state's median income. These people can
still file for relief under chapter 7.
Opponents of the bill say it imposes new legal hurdles and paper
burdens on consumers that will deny many the protection they deserve.
These are serious concerns.
We must monitor implementation of this new standard closely. If this
bill is enacted into law--if we see that creditors are abusing the
provisions of this law to harass debtors--we have a moral
responsibility to revisit this law. And I can tell you, I will be the
first Senator on this floor calling for that re-examination.
Time will tell if this bill strikes the right balance.
The Senate has heard good arguments on both sides of this debate.
Because of the improvements that were made in committee and on the
floor, and because of the fundamental values with which I was raised, I
will vote for it.
At the same time, I urge the conferees who will take it up next to
respect and preserve the balance in it, so it can continue to command
the broad, bipartisan support it will need to reach the President's
desk and be signed into law.
Mr. GRASSLEY. Mr. President, I encourage my colleagues to vote for
this important bankruptcy bill. We've been working on bankruptcy reform
for a long time, and it's high time that we
[[Page S2377]]
pass this bill. This bill will be a big step forward in restoring
personal responsibility and in cracking down on bankruptcy abuse. It
will also be a big step forward in providing key information to credit
card customers and helping people manage their debt.
Let me remind my colleagues that the fundamental question we face
with this bill is whether or not people should repay their debts. S.
420 provides that when a person can repay his or her debts, then that
person won't be able to take the easy way out. The bill will end the
free ride for wealthy deadbeats who walk away from their debts and pass
the tab on to honest consumers. No more will those freeloaders get off
scott free. But the bill does this by preserving the ability for people
who truly need to go into bankruptcy and wipe away their debts so they
can have a fresh start.
The point I'm trying to make is that we have a good balance in the
bill. Contrary to what our critics say, bankruptcy should not be easy.
Yes, we need to have a way for people who are in dire straits to be
able to start anew. Our bill does not close out the availability of
bankruptcy for these people. Yet, it is just and fair for people who
can pay their debts to do just that--pay up. I don't know what people
think, but the fact is that someone has to pay if people walk away from
their debts. It is not only businesses that have to pay--we all pay
when people walk away from their debts. Economic losses from bankruptcy
cause higher prices for goods and services, so everyone picks up the
tab--consumers, small businesses, the economy.
Our bill makes many improvements with the current system. We make it
harder for people to commit fraud and abuse. We prioritize certain
debts, such as child support and alimony. We include a number of
consumer protections, such as more expansive disclosure requirements,
credit counseling, and increased penalties for abusive creditors and
deceptive advertising. These are all important steps in correcting many
problems in the bankruptcy system.
An important provision in the bill is the permanent extension of
Chapter 12, which expired last June. Our family farmers need this
crucial protection because they can face bankruptcy due to low
commodity prices. The bill also provides significant new tax relief
when they sell off assets. This is an extra reason to vote for this
bill for my colleagues from farm country.
So, let me remind my colleagues again what this bill does. S. 420
reforms the bankruptcy system to require repayment of debts by
individuals who have the ability to pay, while protecting the right of
debtors to a financial fresh start. S. 420 strengthens protections for
child support and alimony payments by making family support obligations
a first priority in bankruptcy. S. 420 makes permanent Chapter 12
bankruptcy for family farmers and lessens the capital gains tax burden
on financially strapped farmers who declare bankruptcy.
S. 420 also creates new protections for patients when hospitals and
nursing homes declare bankruptcy. S. 420 requires credit card companies
to disclose the dangers of making only minimum payments and prohibits
deceptive advertising of low introductory rates. S. 420 strengthens
enforcement and penalties against abusive creditors for predatory debt
collection practices.
So the bill is fair and balanced. S. 420 deserves to be passed by an
overwhelming vote.
Mr. LEAHY. Mr. President, I have tried over the last several weeks to
improve this bankruptcy legislation through the legislative process. We
were able to have an informative hearing and a productive Committee
markup. Unfortunately, the Committee did not provide a Committee report
to inform other Senators of what was good about the bill and what
prompted eight members of the committee to vote against it.
This important matter was, instead, rushed to the floor last week.
Last Monday we began debating the bill, but on Tuesday, the first day
the bill was open to amendment, the Republican leadership abandoned
work on the bill. Instead, the Republican leadership chose to shift the
Senate's attention to overriding the ergonomics rule that had been
developed by the Department of Labor over the past decade.
On Wednesday we returned to the bankruptcy bill but beginning on
Thursday and carrying through until Tuesday of this week, the main
focus of the debate were the competing budgetary amendment on providing
a lockbox for Medicare. That too is an exceedingly important topic and
one on which a majority of the Senate voted to adopt the Democratic
lockbox proposal.
That proposal is not in the bill because after the vote the
Republican side invoked the Budget Act and the chair ruled that the
amendment, although supported by a majority of the Senate was not
consistent with the technical requirements of the Budget Act. That
debate was a major disruption in our efforts to otherwise improve the
bankruptcy bill.
Beginning last Wednesday and continuing through today I have offered
amendments to improve the bill and urged others with amendments to do
the same. There has never been an effort to filibuster this debate or
this bill. The only threat of a filibuster I can recall is when the
Republican chairman of the Banking Committee spoke against certain
amendments.
That threat was overcome and with the commitment of Senator Grassley
and the cooperation of Senator Hatch, we were able to obtain votes on
the Schumer predatory lending amendment and in relation to the Durbin
amendment. I thank both Senator Grassley and Senator Hatch for their
cooperation in this regard. In fact, once the Senate had an opportunity
to consider it, we voted to adopt the Schumer amendment.
Despite the lack of a filibuster threat or a filibuster, the
Republican Senate leadership filed a cloture petition on Monday
afternoon. There was no need for cloture then or on Wednesday when,
with the support of the Senate leadership, cloture was invoked. I voted
against cloture. I voted against it because I reject the use of cloture
as a time management tool. I believe that cloture is properly reserved
in the Senate to those circumstances where unreasonable delay or a
filibuster are interfering with the work of the Senate.
Unfortunately, over the last 6 years the Republican leadership has
abused the cloture process to avoid considering amendments and to
interfere with the Senate doing its work. In my view, the invocation of
cloture this week on this bill was unnecessary and unfortunate. It
signals a retreat from the progress shown by Senate adoption of S. Res.
8 in January and threatens a return to the dark days of the last few
Congresses when cloture became a regular instrument, rather than the
last resort, of Senate leadership.
Through the legislative process, through our hearing and Judiciary
Committee markup and by means of amendments being adopted on the Senate
floor, we have made some progress. It is sufficient for me to support
the bill.
I had hoped and worked for a more open process. I wanted to be able
to moderate the bill, improve it and be able to support it. I supported
the bankruptcy bill that passed the Senate 97 to one in the 105th
Congress.
I even supported the bankruptcy bill that passed the Senate in the
last Congress given the progress we showed during Senate consideration
and in hopes that we would be able to continue to improve the bill in
cooperation with the House. I vote for this bill in that same spirit--
to move the process forward and improve our legislative product.
Unfortunately, last year the conference that resulted was under the
auspices of the Foreign Relations Committee and not the Judiciary
Committee and the product that resulted was changed and tilted too
harshly against American consumers and working people. That was the
modified bill that I voted against last year, that was the bill the
President vetoed, and that was the bill that was the basis for S. 220
and S. 420 this year.
I am encouraged that we have included some privacy protection in the
bill. The Leahy-Hatch amendment adopted by the Judiciary Committee to
deal with the Toysmart.com-type situation and customer information of
bankrupt companies is a good start. It is something I have worked on
for some time and thank Senator Hatch for his joining with me in that
effort.
I am pleased that we were also able to add some protection today for
[[Page S2378]]
shielding the identity of children whose names appear in bankruptcy
records. By a vote of 99 to none, the Senate agreed to adopt our
amendment. I thank Senator Hatch for joining with me in that effort, as
well.
I filed amendments to do more to enforce financial privacy laws and
protections. Unfortunately, the bill still falls short in this regard.
I am encouraged that we have made progress in assuring access to
health clinics. Senator Schumer is to be commended for his steadfast
efforts in this regard. The Schumer-Leahy amendment that the Senate
adopted by a bipartisan vote with 80 Senators in favor last year was
dropped in S. 220 and S. 420. I again want to commend Senator Hatch for
working with Senator Schumer to include a modified version of Senator
Schumer's amendment in the bill.
I am encouraged that the Senate beat back an attempt to table the
Kohl-Feinstein amendment and their sensible cap on the homestead
exemption has been included in the bill. Throughout the debate
Republican supporters have indicated that a key outstanding issue is
the homestead exemption cap. That question was answered today when the
Senate adopted the Kohl-Feinstein amendment today.
I was pleased that we adopted the Bingaman LIHEAP amendment, which I
cosponsored, and the Carnahan energy cost amendment.
I am pleased that the Leahy amendment on separate spouses to protect
battered women was adopted by a bipartisan majority of Senators and I
thank them.
I am encouraged that we were able to make other improvements in the
measures included in the managers' package. We started work on that
package last Friday. Unfortunately Republican delay prevented its
adoption before the cloture vote on Wednesday.
I regret that we have not made the progress that we should have, and
that we have made in the past, in terms of providing consumers with
greater disclosures and protections to help them avoid overextending
their credit and consumption.
Early in the debate I took the bill's supporters at face value when
they argued that we need this bill to help small businesses. Those
claims began this debate and were repeated today. In between I gave
them the chance to shown that they meant it by voted for a small
business amendment that would have allowed small businesses, as already
defined in the bill, priority over large corporate creditors. That
amendment was unfortunately, and in my view unwisely, rejected.
We have also heard claims from the outset of this debate and through
today that the bill is needed to address the $500 a family ``tax'' that
bankruptcy abuse loads onto each American family. I have been asking
how this bill benefits the average American family and where that ``tax
refund'' is achieved. I have heard only silence from the other side. I
have noted in this year's debate and in debates past that billions of
dollars in benefits that are expected to flow to credit card companies
and other large corporate creditors, hundreds of millions to individual
companies.
What I have been asking is where this bill or those corporations'
practices will pass those benefits on ordinary Americans. Again, I have
heard only silence. In fact, the benefits of this bill will flow to the
profits of those large corporate interests. There is no provision in
this bill to lower annual fees for credit cards, for example. There is
no provision to lower interest rates for consumers. If this bill will
benefit creditors to the tune of $5 billion or over the next several
years, then why have then made no commitment to pass those benefits
through to their customers and American consumers?
Instead, what this bill does is require American taxpayers through
our taxpayer-financed bankruptcy courts to assist creditors in their
debt collection efforts and requires consumers to do more paperwork and
confront more rules and hurdles and government bureaucracy to file for
bankruptcy.
I will continue to work in good faith with Chairman Hatch, Senator
Grassley, Senator Sessions, Senator Biden and others who strongly
support S.420.
I will continue to work through the legislative process to improve
this measure, to add balance, moderation and fairness. I hope to be
able to support the final legislative product after a productive
conference. I trust that this Congress, the Senate conferees will
support the Senate position where we have made improvements to the bill
and not so easily abandon those advancements in our discussions with
our House counterparts. Had we done that in the 105th Congress, three
years ago, we would already have a reformed bankruptcy law.
Unfortunately, that was not the position of Republican Senate conferees
in those days.
I commend all Senators on both sides of the aisle who have worked so
hard this year to improve this bill. I commend those who have
participated in our debates and discussions. I especially appreciate
the help I received in managing this bill from Senator Schumer, who
consented to manage from time to time when I could not and who is the
Ranking Democrat on the Judiciary Subcommittee of jurisdiction, and
Senator Reid, who remains a great help in some many ways on so many
matters. I congratulate Senator Schumer, Senator Kohl, Senator
Feinstein, and Senator Feingold for the improvements they have been
able to make. I thank Senator Hatch for his courtesy to Senator Durbin
on his alternative amendment and thank Senator Grassley for his
courtesy to Senator Schumer with respect to his predatory lending
amendment. I thank Senator Biden for his support of our efforts to have
this matter considered by the Judiciary Committee.
I thank the staffs of all Senators who participated in this debate
for their hard work and, in particular, the staffs of Senators Kennedy,
Biden, Kohl, Feinstein, Feingold, Schumer, Durbin, Daschle, and Reid
and the staffs of Senators Hatch, Grassley and Sessions. In particular,
I want to thank the following staff: Makan Delrahaim, Renee Augustine,
Rita Lari, Kolan Davis, Ed Haden, Melody Barnes, Jim Greene, Victoria
Bassetti, Jeff Miller, David Hantman, Tom Oscherwitz, Jennifer Leach,
Bob Schiff, Ben Lawsky, Natacha Blain, Jim Williams, Mark Childress,
Jonathan Adelstein, Eddie Ayoob, Peter Arapis, Liz McMahon, and Greg
Cota. I appreciate the exceptional work of my counsel Ed Pagano, who
has labored long and hard to help improve this bill.
Although bankruptcy filing had been going down over the last two
years, I have seen recent reports that link this bill with an expected
rise in such filings. Unfortunately, the effect of House passage of its
bill has been to generate fear in the public that people had better
file for bankruptcy now rather than wait for the harsh and onerous new
burdens contemplated in that bill and, unfortunately, in the Senate
bill. I can understand if bankruptcy lawyers feel an obligation to
advise their clients of the possibility that the terms and paperwork
and costs of filing for bankruptcy may soon change.
Indeed, a principal reason Senator Feinstein successfully opposed the
Wyden-Smith amendment was a similar argument with respect to California
utilities--that a prospective change in the law would force them into
premature and possibly unnecessary bankruptcies.
In much the same way that the Bush administration's talk about
weakness in the economy has served to drive the market down, shatter
consumer confidence and contribute to a further weakening, this drive
for exacting requirements of those on the brink of insolvency seems to
be accelerating bankruptcy filings and contributing to the economic
downturn. That is an immediate and unfortunate byproduct of this
effort.
Perhaps it is appropriate that we end this phase of the debate today,
on March 15. It is on this day that we are reminded to beware the Ides
of March. There remains much about this bill that counsels caution.
Unless it is further moderated and balanced in discussions between the
Houses or at the insistence of the President, enactment of a bill like
the one the Senate is voting on today will be the start of a process
that will likely consume several years.
Just as the overreaching that occurred in so-called immigration
reform and welfare reform and telecommunications reform have required
us to revisit those matters and still require corrections, so, too, the
bankruptcy bill as currently constituted will result
[[Page S2379]]
in hardships and consequences that will require us to return to these
matters again and again in the days, months and years ahead.
In addition, I expect we will be hearing more about this bill and the
lobbying efforts and the contributions by the bill's corporate
beneficiaries as soon as next week, when campaign finance reform is
debated.
Mr. HATCH. Mr. President, S. 420, the Consumer Bankruptcy Reform Act,
is one of the most important legislative efforts to reform the
bankruptcy laws in decades.
I want to thank a few of the people who have worked on the bill. Let
me first acknowledge the majority leader, who has worked very hard to
keep this bill moving forward. Because of his dedication to the
important reforms in this bill, we now have legislation that makes
enormous strides in eliminating abuse in the bankruptcy system. I am
also grateful to the assistant majority Leader, Senator Nickles, along
with Senators Daschle and Reid for their efforts in trying to work with
us to move the legislation forward.
Let me also acknowledge the ranking Democratic member of the Senate
Judiciary Committee, Senator Leahy, who has worked where he can to
reach agreement on many of the bill's provisions, and who ably managed
the bill for his side of the aisle. I also want to commend my
colleagues, Senators Grassley, Biden and others for their sponsorship
of and leadership on this much needed legislation. I particularly
appreciate the dedication they have shown in working with me in making
the passage of this bill an inclusive and bipartisan process.
Also, let me express my thanks to Senator Sessions who has shown
unwavering dedication to accomplishing the important reforms in this
bill, to Senator Gramm for his efforts over the past several years in
helping see sensible reform through the Senate, and to the many other
members of the Senate for their hard work and cooperation.
At the Committee staff level, let me acknowledge a few people who
have worked very hard on this bill. Kolan Davis and Rita Lari Jochun,
of Senator Grassley's staff, along with Ed Haden and Brad Harris of
Senator Sessions' staff, all of whom deserve praise for their
impressive efforts on this legislation. In addition, Judiciary
Committee Staff Director, Makan Delrahim, who has been lead counsel on
this bill, and Judiciary Committee Counsel, Rene Augustine, who has
really been working day and night to make sure this bill stayed on
track.
Let me make one observation here. When we started this bankruptcy
reform process, Rene didn't have any children, and by the time this
bill becomes effective, she will have two children. Mr. President, I
feel like I have given birth twice during this process myself. Thanks
as well should be given to the Judiciary Committee's Chief Counsel,
Sharon Prost, and all of the other Judiciary Committee staff who have
worked hard on this.
On Senator Leahy's Committee staff, I want to acknowledge Minority
Chief Counsel Bruce Cohen, and thank counsel Ed Pagano for his efforts.
In addition, I want to recognize the efforts of Jennifer Leach of
Senator Torricelli's staff, as well as the dedicated work of Jim Greene
of Senator Biden's staff, as well as the very able Ben Lawsky of
Senator Schumer's staff.
I also want to commend John Mashburn and Dave Horpe of the majority
leader's staff, Stewart Verdery, Eric Ueland, and Matt Kirk of the
Assistant Majority Leader's staff, and Eddie Ayoob of the Minority
Whip's office for their efforts on this legislation.
Also, my thanks goes to Laura Ayoud, and others in the office of
Senate Legislative Counsel, for their extraordinary efforts that have
made this legislation possible.
The compelling need for this reform is underscored by the dramatic
rise we have seen over the past several years in bankruptcy filings.
The Bankruptcy Code was liberalized back in 1978, and since that time,
consumer bankruptcy filings have risen at an unprecedented rate.
Mr. President, the bankruptcy system was intended to provide a
``fresh start'' for those who truly need it. We need to preserve the
bankruptcy system within limits to allow individuals to emerge from
financial hardship. What we do not need is to preserve the elements of
the system that allow it to be abused--that allow some debtors to use
bankruptcy as a financial planning tool rather than as a last resort. I
firmly believe that by allowing people who can repay their debts to
avoid their financial obligations, we are doing a disservice to the
honest and hardworking people in this country who end up paying for it.
Mr. President, again I would like to applaud the bipartisan efforts
of my colleagues who have made S. 420 a broadly-supported bill. The
impact of this important legislation not only will be to curb the
rampant number of frivolous bankruptcy filings, but also will be to
give a boost to our economy.
Thank you. I yield the floor.
Mr. President, I ask for the yeas and nays on final passage.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. HATCH. Mr. President, all time is yielded back.
The PRESIDING OFFICER. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed for a third reading and was read
the third time.
The PRESIDING OFFICER. All time has been yielded back. The bill
having been read the third time, the question is, Shall the bill pass?
The yeas and nays have been ordered. The clerk will call the roll.
The legislative clerk called the roll.
Mr. FITZGERALD (when his name was called). Present.
Mr. REID. I announce that the Senator from California (Mrs. Boxer) is
necessarily absent.
I further announce that, if present and voting, the Senator from
California (Mrs. Boxer) would vote ``nay''.
The result was announced--yeas 83, nays 15, as follows:
[Rollcall Vote No. 36 Leg.]
YEAS--83
Akaka
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Breaux
Bunning
Burns
Byrd
Campbell
Cantwell
Carnahan
Carper
Chafee
Cleland
Clinton
Cochran
Collins
Conrad
Craig
Crapo
Daschle
DeWine
Domenici
Dorgan
Edwards
Ensign
Enzi
Feinstein
Frist
Graham
Gramm
Grassley
Gregg
Hagel
Hatch
Helms
Hollings
Hutchinson
Inhofe
Inouye
Jeffords
Johnson
Kohl
Kyl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McCain
McConnell
Mikulski
Miller
Murkowski
Murray
Nelson (NE)
Nickles
Reid
Roberts
Santorum
Schumer
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stabenow
Stevens
Thomas
Thompson
Thurmond
Torricelli
Voinovich
Warner
Wyden
NAYS--15
Brownback
Corzine
Dayton
Dodd
Durbin
Feingold
Harkin
Hutchison
Kennedy
Kerry
Nelson (FL)
Reed
Rockefeller
Sarbanes
Wellstone
ANSWERED ``PRESENT''
Fitzgerald
NOT VOTING--1
Boxer
The bill (S. 420), as amended, was passed, as follows:
[The bill was not available for printing. It will appear in a future
edition of the Record.]
Mr. REID. I move to reconsider the vote and move to lay that motion
on the table.
The motion to lay on the table was agreed to.
Mr. REID addressed the Chair.
The PRESIDING OFFICER. The Senator from Nevada.
____________________