[Congressional Record Volume 151, Number 27 (Wednesday, March 9, 2005)]
[Senate]
[Pages S2306-S2342]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of S. 256, which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (S. 256) to amend title 11 of the United States 
     Code, and for other purposes.

  Pending:

       Dorgan/Durbin amendment No. 45, to establish a special 
     committee of the Senate to investigate the awarding and 
     carrying out of contracts to conduct activities in 
     Afghanistan and Iraq and to fight the war on terrorism.
       Reid (for Baucus) amendment No. 50, to amend section 
     524(g)(1) of title 11, United States Code, to predicate the 
     discharge of debts in bankruptcy by an vermiculite mining 
     company meeting certain criteria on the establishment of a 
     health care trust fund for certain individuals suffering from 
     an asbestos related disease.
       Dodd amendment No. 52, to prohibit extensions of credit to 
     underage consumers.
       Dodd amendment No. 53, to require prior notice of rate 
     increases.
       Kennedy (for Leahy/Sarbanes) amendment No. 83, to modify 
     the definition of disinterested person in the Bankruptcy 
     Code.
       Harkin amendment No. 66, to increase the accrual period for 
     the employee wage priority in bankruptcy.
       Dodd amendment No. 67, to modify the bill to protect 
     families.
       Dodd (for Kennedy) amendment No. 68, to provide a maximum 
     amount for a homestead exemption under State law.
       Dodd (for Kennedy) amendment No. 69, to amend the 
     definition of current monthly income.
       Dodd (for Kennedy) amendment No. 70, to exempt debtors 
     whose financial problems were caused by failure to receive 
     alimony or child support, or both, from means testing.
       Dodd (for Kennedy) amendment No. 72, to ensure that 
     families below median income are not subjected to means test 
     requirements.
       Dodd (for Kennedy) amendment No. 71, to strike the 
     provision relating to the presumption of luxury goods.

[[Page S2307]]

       Dodd (for Kennedy) amendment No. 119, to amend section 
     502(b) of title 11, United States Code, to limit usurious 
     claims in bankruptcy.
       Akaka amendment No. 105, to limit claims in bankruptcy by 
     certain unsecured creditors.
       Feingold amendment No. 87, to amend section 104 of title 
     11, United States Code, to include certain provisions in the 
     triennial inflation adjustment of dollar amounts.
       Feingold amendment No. 88, to amend the plan filing and 
     confirmation deadlines.
       Feingold amendment No. 90, to amend the provision relating 
     to fair notice given to creditors.
       Feingold amendment No. 91, to amend section 303 of title 
     11, United States Code, with respect to the sealing and 
     expungement of court records relating to fraudulent 
     involuntary bankruptcy petitions.
       Feingold amendment No. 92, to amend the credit counseling 
     provision.
       Feingold amendment No. 93, to modify the disclosure 
     requirements for debt relief agencies providing 
     bankruptcy assistance.
       Feingold amendment No. 94, to clarify the application of 
     the term disposable income.
       Feingold amendment No. 95, to amend the provisions relating 
     to the discharge of taxes under chapter 13.
       Feingold amendment No. 96, to amend the provisions relating 
     to chapter 13 plans to have a 5-year duration in certain 
     cases and to amend the definition of disposable income for 
     purposes of chapter 13.
       Feingold amendment No. 97, to amend the provisions relating 
     to chapter 13 plans to have a 5-year duration in certain 
     cases and to amend the definition of disposable income for 
     purposes of chapter 13.
       Feingold amendment No. 98, to modify the disclosure 
     requirements for debt relief agencies providing bankruptcy 
     assistance.
       Feingold amendment No. 99, to provide no bankruptcy 
     protection for insolvent political committees.
       Feingold amendment No. 100, to provide authority for a 
     court to order disgorgement or other remedies relating to an 
     agreement that is not enforceable.
       Feingold amendment No. 101, to amend the definition of 
     small business debtor.
       Talent amendment No. 121, to deter corporate fraud and 
     prevent the abuse of State self-settled trust law.
       Schumer amendment No. 129 (to amendment No. 121), to limit 
     the exemption for asset protection trusts.
       Durbin amendment No. 110, to clarify that the means test 
     does not apply to debtors below median income.
       Durbin amendment No. 112, to protect disabled veterans from 
     means testing in bankruptcy under certain circumstances.
       Boxer amendment No. 62, to provide for the potential 
     disallowance of certain claims.

  The PRESIDING OFFICER. Under the previous order there will be 10 
minutes of debate equally divided on each of the following amendments: 
amendment No. 110, Amendment No. 66, amendment No. 62, and amendment 
No. 67.
  Mr. DURBIN. Mr. President, if you will please notify me when I have 1 
minute remaining of my 5 minutes allocated, I would appreciate it.
  The PRESIDING OFFICER. The Chair will so notify the Senator.
  Mr. DURBIN. The argument behind this bankruptcy reform bill is it is 
not going to affect people in lower income categories. Senators on the 
other side of the aisle have come to the floor and said: Don't worry 
about this bill. Yes, it is stricter, you have to file more documents, 
it will cost more in legal fees, but if your income is lower than the 
median income and you file for bankruptcy, it does not affect you. You 
are exempt from it.
  Senator after Senator has come to the floor and said that. I even 
asked Senator Sessions of Alabama on the floor yesterday: Is that your 
understanding, that if you are below median income you do not have to 
file all the papers for the means test? You don't have to go through 
some of the most harsh provisions of the bankruptcy bill? And he said 
yes, that was his understanding.
  My amendment is very simple. It clarifies what has been said over and 
over again, that the means test does not apply to debtors who go into 
bankruptcy court whose incomes fall below the median level. It adds 
only two sentences to the bill. It makes it clear that those lower 
income debtors only have to show the court, first, the documentation 
already required under chapter 7, and then their monthly income. Once 
they show the monthly income, if it is below the median income in that 
area, they are exempt from the means test. That is all my amendment 
says.
  Frankly, if colleagues on the other side of the aisle will not accept 
this amendment, I have to wonder whether they really believe this bill 
exempts lower income people. If it does not, it means everybody walking 
into bankruptcy court, not just those who can repay but many who have 
much lower salaries and incomes and cannot, is going to have to go 
through all of the procedural hooks and ladders set up by this S. 256. 
I don't think that is reasonable. It certainly is not the way this bill 
has been explained for the last 2 weeks. It is important that we read 
and recount what Senator Hatch said on February 28:

       Let me tell you at the outset, the poor are not affected by 
     the means test. The legislation provides a safe harbor for 
     those who fall below median income.

  The Republican leader came to the floor, and here is what he said:

       This bankruptcy reform act exempts anyone who earns less 
     than the median income in their State.

  Those are the words of Senator Frist.
  Senator Sessions:

       I remind all of my colleagues that people who are 
     economically distressed and have incomes below the median 
     income already will be exempt from the means test.

  If this is true, and I hope it is, there is no reason this amendment 
should not pass overwhelmingly, in fact by a voice vote. But if those 
who drew up this bill really want to put everybody through these means 
tests regardless of their income, even those in the lowest income 
categories, that is another story altogether.
  We know that half the people who go to bankruptcy court today are 
there because of medical bills. They are people who ended up with a 
mountain of debt because of an illness in their family. Do you know 
what else? Three-fourths of those people filing for bankruptcy because 
of medical bills had health insurance. They thought they had protected 
themselves and their families. They didn't have enough health insurance 
or they lost their job after the diagnosis. It happens.

  What we are saying is if you are in one of those terrible situations 
where things have gone terribly wrong for your family and you are 
facing bankruptcy and you are in a low-income category, for goodness' 
sakes, why would we heap more procedural requirements, more cost, more 
paperwork, more demands on the poorest among us?
  This amendment says what three Republican Senators have said on the 
floor word for word: If you are below the median income, you do not 
have to fill out the papers for the means test. I hope my colleagues, 
those who came to the floor and said this over and over again, agree to 
this amendment.
  The PRESIDING OFFICER. The Senator has 1 minute remaining.
  Mr. DURBIN. Thank you for notifying me of that.
  We are going to have several amendments this morning. Each one of 
these amendments tries to clarify this bill. This bill is being driven 
by the credit card and banking industry, you know, the same people who 
fill your mailbox with credit card applications you never asked for, 
the same people who show up at the Big Ten football game trying to 
peddle their credit cards to students--the same people are pushing this 
bill. They want folks to get deep in debt and if they file for 
bankruptcy never get out from under the debt--keep paying it for a 
lifetime: a literal debtors' prison.
  If we truly want to exempt the lowest income Americans from the worst 
provisions and toughest provisions of this bill, I encourage all of my 
colleagues to support amendment No. 110.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time? The Senator from Iowa is 
recognized.


                            Amendment No. 66

  Mr. HARKIN. Mr. President, I call up amendment No. 66 on behalf of 
myself, Senators Rockefeller, Leahy, Dayton, and Kennedy.
  The PRESIDING OFFICER. The amendment is pending.
  Mr. HARKIN. The amendment is pending?
  The PRESIDING OFFICER. Correct.
  Mr. HARKIN. I understand under the rule I have 5 minutes; is that 
correct?
  The PRESIDING OFFICER. That is correct.
  Mr. HARKIN. Mr. President, this is a straightforward amendment that 
protects the ability of workers to receive their pay, including 
vacation and sick pay and severance pay, when their company goes 
bankrupt. Under bankruptcy law, wages owed have long been

[[Page S2308]]

given an extremely high priority, as they should be. This bill raises 
the cap on how much pay can be received as a high priority to $10,000. 
Unfortunately, however, the bill puts a time limit on this of 180 days. 
In other words, under the bill a worker gets this preference, gets 
first-in-line priority preference for getting backpay and wages but 
only for the last 180 days prior to the company filing for bankruptcy. 
My amendment simply strikes the 180-day limitation. It doesn't touch 
the $10,000 limit.
  Why is this important? Many courts have ruled that severance pay is 
earned during the entire time a worker works for a company. If a 
worker, let's say, has worked for a company for 10 years and under the 
contractual agreement gets $500 per year severance pay for every year 
one worker worked for the company, if this worker has worked for the 
company for 10 years, this worker is due $5,000 in severance pay. The 
company goes bankrupt. He gets first in line, he gets his priority, but 
he can only get it for the last 180 days. So, instead of $5,000, he or 
she only gets $250. That is grossly unfair.
  We faced a similar problem with vacation pay. Again, vacation pay has 
been held to accrue over a certain time period, usually 1 year. So a 1-
year time period is when you accrue vacation pay. Let's say, though, 
that your company goes bankrupt. Let's say you have earned vacation pay 
for the whole year. Now you only get 180 days' credit, so you are 
getting about half of what you normally would get.
  Last, we have the issue of when does the 180-day clock start ticking. 
A lot of times, a company will file for bankruptcy long after it has 
closed a division here or a division there or closed an operation 
someplace and they have laid off people. This happens a lot.
  Let's say you have worked for a division in Louisiana, and the 
company, a national company, closed operations in that plant and they 
just laid you off. They have not gone bankrupt yet; they laid you off. 
Then 181 days later or 190 days or 200 days later the company files for 
bankruptcy, OK? Now that worker who worked in that division wants to 
get priority for back wages. I am sorry, you are out of luck. Why? 
Because you only get 180 days going back. You may have been laid off, 
but the company did not go bankrupt, so now you only get to go back 180 
days, and they lose their priority. This, again, is grossly unfair.
  Are there other examples where there is no time period for the 
collection or for getting into priority preference? I would just 
mention two. There is a priority for creditors of grain storage 
facilities. Let's say a farmer has grain in a storage facility. We are 
familiar with that in Iowa. This has happened many times in the past. 
Let's say the storage facility goes bankrupt. The farmer gets first-in-
line priority to get his pay for the grain stored in that facility. 
There is no time limit. It could be 2 years, 3 years; there is no time 
limit whatsoever. But under this bill, for workers, there is a 180-day 
time limit.
  For the child support and alimony priority--we have heard a lot of 
discussion about that--there is no cap and there is no time limit. For 
farmers on grain elevators there is a cap, but there is no time limit. 
For child support and alimony there is neither a cap nor a back-time 
limit.
  This amendment is very simple. It just says, if you are a worker, if 
your company goes bankrupt--we leave the $10,000 cap. That is fair. 
That has been raised from $5,000 to $10,000. It was $5,000 under the 
old bill. But it does away with the 180-day time limit. It just takes 
off that time limit and lets workers get in the priority queue to get 
severance pay, vacation pay, sick pay--their back wages--when and if 
the company goes bankrupt.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. HARKIN. Mr. President, if there is no one here seeking to speak 
on the bill, I ask unanimous consent I be allowed to proceed as in 
morning business for up to 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                 Congratulating Governor Schwarzenegger

  Mr. HARKIN. Mr. President, I rise to congratulate the Governor of 
California, Governor Schwarzenegger, who just the other day, the day 
before yesterday, announced his support for a California initiative to 
get junk food out of our schools. I refer here to a newsclip that came 
out on Monday. I will read from it.

       Governor Arnold Schwarzenegger, a longtime advocate of 
     healthier food in schools, said Sunday that all ``junk food'' 
     in vending machines on California campuses should be replaced 
     with nutritious snacks such as fresh vegetables. ``I think we 
     should use our vending machines in the schools--fill them 
     with good food, with fresh vegetables, with milk and products 
     that are really healthy for the body,'' said Schwarzenegger, 
     speaking at the annual fitness exhibition here that bears his 
     name.''

  I say: Bravo Governor Schwarzenegger. Thank you. Thank you for taking 
the lead on this issue. I hope other Governors will follow suit and 
follow his leadership.
  I have been concerned about our kids' eating habits for many years 
now. In the 1996 farm bill, I tried to get vending machines taken out 
of schools. That didn't quite happen, of course. But we are still 
making the effort to try to get fresh fruits and vegetables to kids in 
school for healthier eating. More and more, we see schools making 
agreements with soft drink companies for exclusive contracts. You walk 
down the hallways in schools: Coke, Pepsi, this and that, all over the 
place. Kids are bombarded with this. The fact is, these kids in school 
are creating for themselves bad habits which, when they go into 
adulthood, lead to chronic diseases. So we have to start with our kids 
and start in the schools where vending machines and other sources of 
junk food have a profoundly negative impact on students' nutrition.
  A recent study took a group of students who ate only USDA-approved 
school lunches up through the fourth grade. Then they tracked them into 
the fifth grade, where they gained access to school vending machines, 
snack bars, and other food sources. Up to the fourth grade they had 
only USDA-approved school lunches. In the fifth grade they got to go to 
vending machines and stuff like that. Guess what the study found. As 
fifth graders, they consumed 33 percent less fruit, 42 percent fewer 
vegetables, 35 percent less milk than they did as fourth graders. In 
addition, they ate 68 percent more deep-fried vegetables--French 
fries--and drank 62 percent more soft drinks and other sugary 
beverages. In 1 year, from fourth to fifth grade.
  Our Nation spends a whopping $1.8 trillion on health care, and 75 
percent of that goes to treat chronic diseases. A large share of that 
is preventable. If we are going to turn this situation around, if we 
are going to move from a current sick care system to a genuine health 
care system and emphasize prevention and wellness, then our schools are 
on the front line, and that is why what Governor Schwarzenegger did is 
so vitally important. Kids today face a minefield of nutritional risks 
from the time they get up in the morning to the time they go to sleep 
at night, opportunity after opportunity to eat unhealthy foods.
  Guess what. They are bombarded with ads all day long. Whether it is 
on television, signs in their schools, they are bombarded with ads to 
eat junk food, drink sugary beverages.
  When was the last time you saw an ad for an apple? When was the last 
time you saw an ad to eat fresh vegetables? No. You see ads to eat all 
kinds of junk food every single day. That is what our kids see.
  Ninety-three percent of our teenagers exceed Government guidelines 
for consumption of saturated fat. One-quarter of our kids show 5 to 10 
early warning signs of heart disease.
  This is from the CDC. I am not making this up.
  One-third of today's children will go on to develop diabetes.
  This is from the Centers for Disease Control and Prevention.
  Fifteen percent of America's children and teenagers are overweight. 
That is 3 times what it was 35 years ago. It is higher than any other 
industrialized country in the world.
  We are placing our kids at risk in schools. They are inundated by 
candy, soft drinks, snacks high in sugar, salt, and fat. And to make 
matters even worse, physical education is being squeezed out of 
schools.
  I saw a recent figure that on average in the United States, grade 
school kids get less than 1 hour of physical activity in school. We are 
squeezing physical activities out of school. If they are on the 
football team or the basketball team, or some other varsity, they are 
all right. But if they are not up to that

[[Page S2309]]

standard, what physical activity is there for a kid in school today?
  Lastly, I have worked on a bipartisan basis with members on the 
Senate Agriculture Committee and the Appropriations Committee to 
increase physical activities in school and get funding for fresh fruits 
and vegetables. We started this in the farm bill. It has been a great 
success, giving free fresh fruits and vegetables to kids. We found that 
when you give free fresh fruits and vegetables to kids in school, they 
eat them, it solves the hunger pain, and they study better. Guess what. 
They are not putting their money in the vending machines to buy junk 
food.
  We have had 3 years of experience. We took four States and 100 
schools to test this theory, and every single one of those schools has 
been a resounding success. Now we are up to 9 States and over 200 
schools. It is growing.
  I again commend Governor Schwarzenegger and hope we can get 
California to move ahead on that also. The Governor said they were 
introducing legislation to ban all junk foods in schools. I say, 
Congratulations, Governor Schwarzenegger. Evidently, this is being 
written or introduced in California to rid schools of vending machines 
of sodas, bad foods, and stuff such as that. I again want to 
congratulate the Governor of California.
  He also spoke on Sunday about the ``broader need for parents to pay 
attention to what children eat''--saying ``they shouldn't feed them 
1,000-calorie cheeseburgers just to avoid an argument.''
  Good for you, Governor.
  He said:

       I know it's easy to go in that direction. I know when I 
     come home I don't want to fight at home with my kids about 
     what they should eat. Because there are already fights about 
     their homework and about reading and math.
       You've got to make an effort. What you give a child or what 
     you put in your body is exactly what we become. So the more 
     garbage you put in there, the more you're going to look like 
     a garbage disposal.

  Again, I want to take the time to commend the Governor for his 
leadership on this issue. He is a great example of physical fitness. He 
is also a great example of endurance and of leadership. I hope the 
Governor of California will not confine himself on this issue only to 
California. I hope he will take his message nationwide. I hope the 
other States and other Governors will follow his lead on what he has 
done in California.
  I ask unanimous consent that the articles I read from--one that 
appeared in the Associated Press and also the Los Angeles Times--be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the Associated Press, March 7, 2005]

California Gov. Arnold Schwarzenegger Says He Wants To Ban Junk Food at 
                                Schools

                           (By Erica Werner)

       Columbus, OH.--California Gov. Arnold Schwarzenegger wants 
     to pump up his state's students with vegetables, fresh fruits 
     and milk.
       ``First of all, we in California this year are introducing 
     legislation that would ban all the sale of junk food in the 
     schools,'' Schwarzenegger said during a question-and-answer 
     session with fans on the final day of the Arnold Classic, the 
     annual bodybuilding contest that bears his name. He said junk 
     food would be pulled from school vending machines in favor of 
     healthier foods, including fruits and vegetables.
       After the session Sunday, the governor's aides said 
     Schwarzenegger supports a bill by Democratic state Sen. 
     Martha Escutia that would ban soft drinks at public schools.
       The administration also hopes to develop a more 
     comprehensive legislative package dealing with snack foods 
     later in the year, said Chief of Staff Pat Clarey, although 
     she added it might not eliminate all junk food from schools.
       Topics at the question-and-answer session ranged from 
     fitness to whether Schwarzenegger wants to be president. 
     Several hundred fans at the Columbus Veterans Memorial 
     auditorium were invited to ask the former world bodybuilding 
     champion whatever they wanted.
       With fellow former Mr. Olympia Franco Columbo at his side, 
     Schwarzenegger spent about 50 minutes answering questions.
       Many people asked detailed queries about workout routines. 
     Schwarzenegger talked knowledgeably on how best to improve 
     the deltoid muscles--numerous repetitions, tailored to the 
     three separate deltoid muscle groups, front, middle, and 
     back.
       Schwarzenegger said he still does 30 to 45 minutes of 
     cardio each day and lifts weights about four days a week. He 
     said he misses doing heavy lifting, but doctors banned it 
     after his heart surgery in 1997.
       At one point, Schwarzenegger delivered what amounted to a 
     motivational lecture after a questioner betrayed some 
     discouragement about his own fitness potential. 
     Schwarzenegger told him to visualize his goal, never lose 
     sight of the vision and work toward it.
       ``As you know, I'm a big believer in the mind,'' 
     Schwarzenegger said. ``Just be positive, and kick some 
     butt.''
       At the men's bodybuilding finals the night before, 
     Schwarzenegger had called on bodybuilding to get rid of 
     steroids, which are reportedly rampant in the sport. He got 
     one question on the topic Sunday, from a sixth-grader.
       The girl asked the governor to explain why he's said 
     publicly he doesn't regret his own past steroid use. 
     Schwarzenegger reiterated that at the time he took the drugs 
     they were new to the market and weren't illegal.
       People shouldn't take steroids now--``A, they are harmful 
     for the body, and B, they are illegal,'' he said.
       Schwarzenegger was asked whether he would consider running 
     for president if the Constitution were amended to allow 
     foreign-born citizens to serve in the office. As in the past, 
     he said he's focused on governing California.
       ``I'm not saying no I'm not interested in it, but I'm not 
     concentrating on it,'' he said.

  Mr. HARKIN. Mr. President, I commend the Governor of California. I 
say to him that whatever we can do here on a bipartisan basis to back 
you up, you have our support and our encouragement. Please take your 
message nationwide. Don't just keep it in California.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. BOXER. Mr. President, I ask unanimous consent that the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                            Amendment No. 62

  Mrs. BOXER. Mr. President, I call up my Amendment No. 62.
  The PRESIDING OFFICER. The amendment is pending.
  Mrs. BOXER. Mr. President, is the rule 10 minutes per side?
  The PRESIDING OFFICER. The Senator has 5 minutes.
  Mrs. BOXER. Will my friend tell me when I will have 1 minute 
remaining?
  The PRESIDING OFFICER. Absolutely.
  Mrs. BOXER. Mr. President, in the next 5 minutes I want to describe 
this amendment. I cannot imagine anyone in the Senate voting against 
this amendment. Having said that, I predict that this amendment will 
not be agreed to because there seems to be some type of agreement going 
on that this bill can not change at all, in any way, shape, or form. 
But I want to give the Senate a chance.
  When I was growing up, my mother said, If you ever borrow anything, 
give it back. Try not to borrow money, but if you borrow money, give it 
back as fast as you can.
  I think all of us here understand that to be a responsible person, 
you have to be responsible for your debts. There is no question about 
that. It is not right to borrow money and then turn your back on the 
person who extended that credit to you, whether it is an individual or 
a credit card company or a bank. But in this bill there seems to be 
absolutely no bounds. It seems to be that the person who lent you the 
money has no responsibility whatsoever to be diligent about it, to be 
fair about it, to be reasonable about it, or, frankly, to be smart 
about it. And the credit card companies know they have the perfect bill 
coming toward them. There is absolutely no responsibility placed on 
them.
  I ask anyone listening to this debate to think about how many credit 
card applications you receive in the mail in a week's time, in a 
month's time. Once I started saving it up. Then they started sending 
them to my grandson. He is 9. I was surprised they didn't send it to 
our cat. I suppose they would, if cats could pay interest.
  But let me tell you about this particular egregious situation I am 
trying to fix. I think it would shock Americans to understand this. The 
fastest growing part of the credit card business is the young people in 
this country. The credit card companies entice

[[Page S2310]]

our young people to go into debt, go into debt, and they know the sky 
is the limit as to what they can charge for that debt. Is it 10 
percent? No. That would be low. Is it 20 percent? That would be low. 
There was an amendment here to cap it at 36 percent, and that failed. 
We are talking about taking a young person who doesn't have a clue and 
offering them credit cards.
  If I were to ask you how many cards does the average young person 
have--people between 18 and 24--I would say one or two--the answer is 
six credit cards. This is the fastest growing group.
  That is also why the credit card companies go ahead and give more and 
more credit cards to people who were defaulting the most. Frankly, it 
is because they are still making a mint. Credit card profits have gone 
up in the last 10 years 100 percent.
  When you analyze the stories--I have read them in the Wall Street 
Journal--you find they are getting paid back for sure, but they are not 
getting the full 30-percent interest. But the poor people who are 
caught in this have a real problem.
  Here is what the amendment says. If a credit card company issues a 
seventh credit card to someone below the age of 21 without a 
responsible party cosigning, and if that individual has a job that pays 
less than the poverty level, then in fact if there is a default the 
judge should take into consideration the facts. It is as simple as 
that. Why wouldn't a credit card company ask you that simple question, 
How many cards do you have? And, What is your income? After all, this 
is unsecured debt. It is not secured by anything but the person.

  We are saying, if, in fact, an individual defaults, they are younger 
than 21, they had no cosigner, they earn below the poverty line, they 
already have six cards, if they wind up in bankruptcy court, the judge 
should consider this situation.
  This is about responsibility on the part, yes, of the person who is 
using the card, but also on the part of the credit card companies.
  I yield the floor.


                            AMENDMENT NO. 67

  Mr. DODD. Mr. President, I urge my colleagues to support the 
amendment I offered yesterday. It is an amendment designed principally 
to protect children and families caught in the bankruptcy situation.
  Let me state again at the outset, clearly there is a need to reform 
the bankruptcy laws--none of us disagree with that--but it must require 
a sense of balance. People are moving through the bankruptcy courts, 
but we also need to keep in mind that families, particularly children, 
the innocents in this, are not going to be so disadvantaged by the 
process that we create a more serious problem than the bankruptcy issue 
suggests.
  Under this bill as presently crafted, there are several areas where 
we could do a far better job of seeing to it that children and families 
are going to be protected to the extent possible, while creditors are 
also going to have an ability to reach assets. This bill provides too 
strong a straitjacket for families.
  I offer four different parts in this amendment. The first modifies 
the means test to require greater flexibility and reasonableness in 
calculating a debtor's ability to pay. Under the bill you have $1,500 a 
year as the total amount allowed for educational expenses for children. 
The reality of the 21st century, putting aside parochial school 
education, even for a public school, $1,500 is too low a figure for the 
children to get the proper education they need. Our amendment raises 
that ceiling from $1,500 to $5,000.
  Second, the amendment ensures that support payments, child support 
payments, alimony, if there are any resources coming from the earned 
income tax credit or the child tax credit, specifically money intended 
to support children and their needs, should not go to creditors. Those 
moneys ought to be kept out of the estate. Again, child support, 
alimony, EITC, child tax credits. The bill does not presently allow 
that. We specifically passed that legislation to assist poor families 
and families with children.
  Third, the amendment enables debtors going through bankruptcy to keep 
personal property normally found in and around the home. The bill does 
list some new items that were not in the earlier versions of the bill. 
That is a simple reasonableness test. Rather than having a finite list, 
if these goods have no resale value at all, and they are used for 
children and used for providing for the needs of the household, they 
ought to be excluded. That is the third part of this amendment.
  Fourth, the amendment ensures that debtors are not forced into 
bankruptcy court to seek to prove that food, diapers, school uniforms, 
and other items are luxury items. Under the present law, the bankruptcy 
current law allows $1,225 to be charged within 60 days of filing 
bankruptcy. This bill drops that number to $500 within 90 days. That is 
a totally unrealistic number. Anyone who has young children will tell 
you $500 over 90 days to provide for your children is far too low. We 
tried to offer a compromise, saying any charges amounting to $1,000 
within 70 days. As I say, existing law is $1,225 within 60 days. The 
bill says $500 within 90 days. Our amendment says $1,000 within 70 
days.
  Lastly, as part of this amendment, if the creditors think these are 
luxury items, let them make the allegation in court. This bill requires 
these dependent women, most of them single women raising children, have 
to prove these are not luxury items. The burden ought to be on the 
opposite side of the equation.
  That is what the amendment is designed to do. There are four pieces 
to it. It is specifically designed to offer some relief to the 
innocents, the children and the families who are going through this 
process--not to blame them or put them in an untenable situation.
  This amendment is supported by a long list of organizations across 
the country dealing with women and children. I ask unanimous consent 
that list be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

       ACES, Association for Children for Enforcement of Support, 
     Inc., American Association of University Women, American 
     Medical Women's Association, Business and Professional Women/
     USA, Center for Law and Social Policy, Center for the 
     Advancement of Public Policy, Center for the Child Care 
     Workforce, Children NOW, Children's Defense Fund, Church 
     Women United, Coalition of Labor Union Women (CLUW), Equal 
     Rights Advocates, Feminist Majority, Hadassah, International 
     Women's Insolvency & Restructuring Confederation (``IWIRC''), 
     MANA, A National Latina Organization, National Association 
     for Commissions for Women (NACW), National Black Women's 
     Health Project, National Center for Youth Law, National 
     Council of Jewish Women, National Council of Negro Women, 
     National Organization for Women.

  Mr. DODD. This bill deserves to make some changes. I hope our 
colleagues look closely at what is in the bill and support this 
amendment and see we can provide a sense of balance and relief for 
children and families who need some protection when they go through the 
bankruptcy process.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, how much time remains?
  The PRESIDING OFFICER. The minority time is expired and the majority 
has 5 minutes on each of four amendments.


                            Amendment No. 62

  Mr. HATCH. Mr. President, let me talk about the Boxer amendment for a 
minute or two. The purpose of this amendment is to restrict credit 
availability for young adults.
  Others believe that using credit cards to build a history is a 
laudable objective for young adults. This amendment does not 
distinguish between legitimate uses by young adults from other uses. It 
applies to any person under 21, regardless of his or her financial 
independence or employment situation.
  Also, note that 18-year-olds can serve in the military, get married, 
vote, and in most States serve on juries, all without a cosigner.
  This bill does address the issue of credit card debt and younger 
adults. Title XII of the bill provides for a study regarding the impact 
of the extension of credit to individuals who are claimed as dependents 
for Federal income tax purposes and are in college.
  The same section provides other relevant credit card-related reforms 
that are the result of careful negotiation. These include several 
amendments to

[[Page S2311]]

the Truth in Lending Act which includes creating increased disclosure 
requirements for credit card statements and mandating the credit card 
companies assist borrowers in determining how long it will take to pay 
off their credit card balances; requiring certain additional 
disclosures to borrowers buying and refinancing their homes; require 
additional disclosures regarding credit card so-called introductory 
rates; extending Truth in Lending requirements to Internet-based credit 
card solicitations; adding new disclosures related to the credit card 
late fees; and prohibiting cancellation of credit cards solely due to 
borrowers' failure to incur finance charges.
  These are good changes, in my view, and the view of the majority of 
the Senate. They were all carefully negotiated over the last 8 years. 
We do not need to come in now and make further revision to delicate 
compromises such as this. I urge my colleagues to vote against the 
Boxer amendment. It would do more harm than any good.


                            Amendment No. 67

  I wish to speak against Senator Dodd's amendment 67. This is an 
omnibus amendment. There is nothing else to call it. This late in the 
game, a successful amendment usually targets specific provisions in the 
bill for improvement. And getting agreement on one of these rifleshot 
amendments can be like herding cats.
  Quite frankly, this is a message statement. It asks us to protect 
families. This is a noble goal, but it is not one served by this 
amendment. This amendment alters the carefully negotiated means test to 
permit nearly all filers to avoid a presumption of abuse. In some 
respects, it is redundant.
  For example, it lists as expenses many things that are already 
covered in the IRS standards used in the bill to determine appropriate 
expenses. In other areas, it is excessive. For example, it increases 
the allowable expenditures for private school education from $1,500 to 
$5,000.

  The worst part of this is it created a category of miscellaneous 
expenses. This is not just a loophole. My gosh, you could drive a truck 
through the opening for abuse this amendment puts through the middle of 
the means test, a test that has the purpose of a reduction in abusive 
bankruptcy filings.
  I said it once, and I say it again. This means test is the heart of 
this bill. The means test is fair. The means test has been carefully 
negotiated between Democrats and Republicans over 8 years of time. I 
have to oppose any effort to revise the means test at this late day. I 
urge my colleagues to vote against this amendment.


                           Amendment No. 110

  I rise in opposition also to the Durbin amendment. It takes a broad 
swipe at the means test again. First, the very purpose of the means 
test is to treat genuinely impoverished filers fairly. If you are below 
the State median income, you are not subject to the means test. It is 
as simple as that. This amendment undermines the ability of a court to 
verify a person's income when he or she is filing for bankruptcy.
  This amendment would remove the basic requirement that debtors fill 
out certain forms to verify their income. You have to fill out forms to 
get a driver's license, to get a job, to apply for a retirement plan. 
For example, when an individual applies for food stamps, there is a 
complete application process to verify income and assets before this 
benefit is approved. Is it too much to ask that if the Government is 
going to allow you to liquidate all of your debts, you at least show 
the court definitive proof of your income?
  Instead, this amendment allows a person simply to declare that his 
income is below the State median income. All he has to show are 
``calculations or other information.'' In other words, take their word 
for it. That seems to open the door to the fraud this bill is designed 
to prevent.
  I believe most people are honest, but inevitably there are some 
applicants who will take advantage of the looser requirement. As Ronald 
Reagan said in a different context: Trust but verify.
  I urge my colleagues to vote against the Durbin amendment, as well.


                            Amendment No. 66

  I oppose the Harkin amendment. This was part of a problematic 
Rockefeller amendment we have already voted down. I respect my 
colleagues' dedication to the issue, but I must urge my colleagues to 
vote no.
  I am pleased we invoked cloture yesterday by a vote of 69-31. If that 
is not bipartisan, I do not know what is. This bill has been in the 
works for 8 years now, and I hope we can soon pass it for the fifth and 
final time. My colleague from Wisconsin has 14 amendments pending. I 
also understand there are roughly another six or so Kennedy amendments 
and two Durbin amendments. That is 22 amendments between these 
Senators.
  I wonder if my colleagues know how many other amendments are pending. 
The answer is three: one from the ranking member of the Judiciary 
Committee, one from Senator Akaka, and one from Senator Talent. What 
does this tell you?
  I respect my colleagues from Wisconsin, Massachusetts, and Illinois, 
but why are they dragging out this process? Their amendments constitute 
roughly 88 percent of the remaining omnibus bill. I suspect that even 
if we accepted every one of the amendments, all three would not vote 
for this legislation. So this is important. I respect the right of 
Senators to bring up their germane amendments in postcloture 
situations. If they want to do it that way, they certainly can.

  I oppose every one of those amendments. I think a majority of the 
Senators should oppose those, as well. We need to get this bill done. 
We know we have to keep it intact in order to get the House to take it 
and get it signed by the President. It is time to bring this to an end. 
We have been at it for 8 years and we have worked to accommodate 
everyone we possibly could. It has been a bipartisan vote every time, 
overwhelming bipartisan vote every time. By gosh, it is time to vote on 
this bill.
  How much time remains?
  The PRESIDING OFFICER. There is 13 minutes.
  Mr. HATCH. Is that my time? I am prepared to yield back the remainder 
of my time and proceed to a vote.
  Do we have the yeas and nays on all four amendments?
  The PRESIDING OFFICER. We do not.
  Mr. HATCH. I ask for the yeas and nays on all four amendments.
  The PRESIDING OFFICER. All time is yielded back.
  Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered on all four amendments.
  Mr. HATCH. I ask unanimous consent that after the first 15-minute 
rollcall vote the remaining three votes be 10 minutes each.
  The PRESIDING OFFICER. That order has been entered.
  The question is on agreeing to the amendment of the Senator from 
Illinois, Mr. Durbin.
  The yeas and nays have been ordered.
  The clerk will call the roll.
  The legislative clerk called the roll.
  The PRESIDING OFFICER (Ms. Murkowski). Are there any other Senators 
in the Chamber desiring to vote?
  The result was announced--yeas 42, nays 58, as follows:

                      [Rollcall Vote No. 31 Leg.]

                                YEAS--42

     Akaka
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Byrd
     Cantwell
     Clinton
     Conrad
     Corzine
     Dayton
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Inouye
     Jeffords
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Nelson (FL)
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Stabenow
     Wyden

                                NAYS--58

     Alexander
     Allard
     Allen
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Carper
     Chafee
     Chambliss
     Coburn
     Cochran
     Coleman
     Collins
     Cornyn
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johnson
     Kyl
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner
  The amendment (No. 110) was rejected.


                            Amendment No. 66

  The PRESIDING OFFICER. Under the previous order, there will now be 2

[[Page S2312]]

minutes of debate equally divided on the Harkin amendment No. 66. The 
Senator from Iowa.
  Mr. HARKIN. Mr. President, this amendment basically protects workers 
who are able to take a priority preference in back wages, vacation pay, 
severance pay, and sick pay when a company goes bankrupt.
  Under the bill, there is a limit of $10,000. That is fine; I do not 
touch that. This amendment lifts the 180 days. For example, let's say a 
worker has worked for a company for 10 years and they get $500 a year 
severance pay. The company goes bankrupt. Normally, you get $5,000, but 
because of the 180 days, you only get $250 for which you get a 
priority; otherwise, you get in line with the other creditors.
  What this does is lift the 180 days. There are other examples. If a 
farmer today has a warehouse receipt for grain in an elevator, there is 
no time limit on that. They can go 2, 3, 4 years. For alimony there is 
no time limit. For child support, there is no time limit. There ought 
not be an arbitrary time limit for a worker who has backpay, sick pay, 
or severance pay coming. That is all this amendment does.
  I cannot believe the House will not send this to the President if we 
adopt this amendment. Do not even try to sell that to me.
  The PRESIDING OFFICER. Who yields time?
  Mr. CRAIG. Madam President, I yield back all time and ask for the 
yeas and nays.
  The PRESIDING OFFICER. The yeas and nays have already been ordered.
  The question is on agreeing to amendment No. 66. The clerk will call 
the roll.
  The assistant legislative clerk called the roll.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 48, nays 52, as follows:

                      [Rollcall Vote No. 32 Leg.]

                                YEAS--48

     Akaka
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Byrd
     Cantwell
     Carper
     Clinton
     Collins
     Conrad
     Corzine
     Dayton
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Nelson (FL)
     Nelson (NE)
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Snowe
     Specter
     Stabenow
     Wyden

                                NAYS--52

     Alexander
     Allard
     Allen
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Chafee
     Chambliss
     Coburn
     Cochran
     Coleman
     Cornyn
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Kyl
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner
  The amendment (No. 66) was rejected.


                            Amendment No. 62

  The PRESIDING OFFICER. Under the previous order, there will now be 2 
minutes of debate equally divided on the Boxer amendment, No. 62.
  Will the Chamber please be in order.
  The Senator from California.
  Mrs. BOXER. Here are the facts, my colleagues. The fastest growing 
segment of bankruptcies occurs in Americans who are 25 years and 
younger. The average number of credit cards a college senior has is not 
two, three, or four, but six. The average senior in college has six 
credit cards and credit card companies are marketing to our young 
people at rock concerts, on college campuses. We want responsibility 
but on all sides.
  My amendment puts a modicum of responsibility on the credit card 
companies. It simply says a bankruptcy judge should consider an 
appropriate response if a credit card company has given a card to a 
person who is under the age of 21, has no responsible cosigner, an 
income below the poverty level, and the person already had six credit 
cards.
  My friends, I hope you will not march down and vote ``no'' against 
this amendment. How can you explain at home that a credit card company 
would have no responsibility if they have given a seventh credit card 
to a person below the age of 21 who has income below the poverty level? 
I hope you will support the Boxer amendment.
  The PRESIDING OFFICER. The time of the Senator has expired.
  Who yields time?
  Mr. McCONNELL. I yield back our time.
  The PRESIDING OFFICER. All time has been yielded back. The question 
is on agreeing to the amendment. The yeas and nays have been ordered. 
The clerk will call the roll.
  The legislative clerk called the roll.
  The PRESIDING OFFICER. Are there any Senators in the Chamber wishing 
to vote?
  The result was announced--yeas 40, nays 60, as follows:

                      [Rollcall Vote No. 33 Leg.]

                                YEAS--40

     Akaka
     Biden
     Bingaman
     Boxer
     Byrd
     Cantwell
     Chafee
     Clinton
     Conrad
     Corzine
     Dayton
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Inouye
     Jeffords
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Stabenow
     Wyden

                                NAYS--60

     Alexander
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Carper
     Chambliss
     Coburn
     Cochran
     Coleman
     Collins
     Cornyn
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johnson
     Kyl
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (FL)
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner
  The amendment (No. 62) was rejected.
  Mr. McCONNELL. I move to reconsider the vote and I move to lay that 
motion on the table.
  The motion to lay on the table was agreed to.
  Mr. McCONNELL. I ask unanimous consent the last vote in this series 
in relation to the Dodd amendment occur at 2:45 today; provided further 
that following that vote, the Senate proceed to vote in relation to the 
Kennedy amendment numbered 68; further that no amendments be in order 
to the amendments prior to the vote.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Hawaii.


                           Amendment No. 105

  Mr. AKAKA. Madam President, I rise today to speak on my pending 
amendment, No. 105.
  Section 106 of the bill does not allow consumers to declare personal 
bankruptcy in either Chapter 7 or Chapter 13, unless they receive a 
briefing from an approved nonprofit credit counseling agency within six 
months of filing. The bill also requires each consumer who receives 
bankruptcy protection to take a credit counseling instructional course. 
The credit counseling instructional course requirement is intended to 
provide financial education to consumers who declare bankruptcy so they 
can attempt to avoid future financial problems.
  Approximately one-third of all credit counseling consumers enter a 
debt management plan. In exchange, creditors can agree to offer 
concessions to consumers to pay off as many of their debts as possible. 
These concessions can include a reduced interest rate on the amount 
they owe and the elimination of fees. However, most credit card 
companies have become increasingly unwilling to significantly reduce 
interest rates for consumers in credit counseling. A study by the 
National Consumer Law Center and the Consumer Federation of America 
revealed that 5 of 13 credit card issuers increased the interest rates 
they offered to consumers in credit counseling between 1999 and 2003.
  The amendment would amend section 502(b) of the bankruptcy code to 
prevent unsecured creditors, primarily credit card issuers, from 
attempting to collect accruing interest and additional fees from 
consumers in credit

[[Page S2313]]

counseling if the creditor does not have a policy of waiving interest 
and fees for debtors who enter a consolidated payment plan at a credit 
counseling agency.
  Since it appears that Congress will require that consumers enter 
credit counseling before filing for bankruptcy, we must ensure that 
credit counseling is truly effective and a viable alternative to 
bankruptcy.
  Credit card issuers, undermining the good intentions of consumers who 
enter into credit counseling, have sharply curtailed the concessions 
they offer to consumers in credit counseling, contributing to increased 
bankruptcy filings. According to a survey by VISA USA, 33 percent of 
consumers who failed to complete a debt management plan in credit 
counseling said they would have stayed on the plan if creditors had 
lowered interest rates or waived fees.
  A large body of research, conducted by such entities as the 
Congressional Budget Office and the Federal Deposit Insurance 
Corporation, shows that aggressive lending practices by credit card 
issuers have contributed to the current high level of bankruptcies in 
this country. Credit card companies have an obligation to ensure that 
effective alternatives are readily available to the consumers they 
aggressively pursue.
  As a show of support for the effectiveness of consumer credit 
counseling, especially as an alternative to bankruptcy, credit card 
issuers should waive the amount owed in interest and fees for consumers 
who enter a consolidated payment plan. Successful completion of a debt 
management plan benefits both creditors and consumers. For many 
consumers paying off their debt is not easy. My amendment will help 
people who are struggling to repay their obligations. I encourage all 
of my colleagues to support this amendment to help consumers enrolled 
in debt management plans to successfully repay their credits, free 
themselves from debt, and avoid bankruptcy.
  My amendment has been endorsed by the Consumer Federation of America, 
U.S. Public Interest Research Group, Consumer Action, and the National 
Consumer Law Center.
  I ask unanimous consent that a letter of support for my amendment be 
included in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                                  Consumers Union,


                               Consumer Federation of America,

                                                    March 7, 2005.
     Re support for Akaka credit counseling and payday loan 
         amendments to bankruptcy bill.

     Hon. Daniel K. Akaka,
     U.S. Senate, Washington, DC.
       Dear Senator Akaka: The undersigned national consumer 
     organizations strongly support your amendments to the 
     bankruptcy bill (S. 256) that would encourage more 
     responsible lending by payday loan companies and keep more 
     consumers in credit counseling and out of bankruptcy.


  making credit counseling a more successful alternative to bankruptcy

       S. 256 requires consumers to seek credit counseling within 
     six months of filing for bankruptcy. However, the credit card 
     companies that created credit counseling have taken steps in 
     recent years that undermine it as a viable alternative to 
     bankruptcy for some consumers. By slashing funding for 
     legitimate credit counseling agencies and charging consumers 
     in credit counseling higher interest rates than in the past, 
     credit card companies are leaving debt choked Americans with 
     few options other than bankruptcy.
       If Congress is going to require that consumers enter credit 
     counseling before filing for bankruptcy, it must ensure that 
     credit counseling is truly an effective and viable 
     alternative to bankruptcy. This amendment would stop a credit 
     card company from attempting to collect on debts in 
     bankruptcy unless the creditor has a policy of waiving 
     interest rates for consumers who enter credit counseling.
       Consumers who enter a credit counseling ``debt management 
     plan'' agree to discontinue credit card use and to make one 
     consolidated payment to the credit counseling agency, which 
     then forwards the funds to the appropriate credit card 
     company. In exchange, creditors agree to offer two key 
     ``concessions'' to help consumers pay off as much of their 
     debts as possible: a reduced interest rate on the amount they 
     owe and the elimination of fees that have accrued.
       Unfortunately, credit card companies in recent years have 
     become increasingly unwilling to reduce interest rates for 
     consumers in credit counseling, which has led to more 
     bankruptcy filings. According to a study by the National 
     Consumer Law Center and Consumer Federation of America, five 
     of 13 major credit card issuers increased the interest rates 
     they offered to consumers in credit counseling between 1999 
     and 2003. Currently, only two major credit card issuers 
     (Wells Fargo and American Express) completely waive all 
     interest for consumers in credit counseling. The majority of 
     other major credit card companies charge interest rates in 
     credit counseling above 9 percent, with issuers like Capital 
     One, General Electric and Discover charging rates of 15 
     percent or more.
       The increasing refusal of creditors to offer low interest 
     rates causes more consumers to drop out of credit counseling 
     and to declare bankruptcy. According to a survey by VISA USA, 
     one-third of consumers who failed to complete a debt 
     management plan in credit counseling said they would have 
     stayed on the plan if creditors had further lowered interest 
     rates or waived fees. Moreover, almost half of those who 
     dropped off the plan had or were going to declare bankruptcy.
       It is ironic that the same creditors whose aggressive and 
     reckless lending practices have contributed to the increase 
     in bankruptcies in this country have weakened credit 
     counseling in recent years. It is hypocritical for the credit 
     card industry to demand that Congress give them bankruptcy 
     relief while closing off credit counseling as an effective 
     alternative for many consumers.


           prohibiting the recovery of predatory payday loans

       This amendment would prohibit payday lenders from having a 
     claim on these loans in bankruptcy. Lenders who entice cash-
     strapped consumers to write checks without money in the bank 
     to cover them as the basis for making ``payday loans'' should 
     not be allowed to use the bankruptcy courts to collect. 
     Payday loans trap borrowers in a cycle of debt when consumers 
     flip loans to keep their checks from bouncing.
       Last year, consumers paid $6 billion to borrow $40 billion 
     in small cash advances from over 22,000 payday loan outlets. 
     These loans of $100 up to $1,000 are secured by personal 
     checks or electronic access to bank accounts and must be 
     repaid in full on the borrower's next payday. Lenders charge 
     annual interest rates on these loans that begin at 390 
     percent, with finance charges of $15 to $30 per $100 
     borrowed.
       Payday lending condones check-kiting as a financial 
     management tool and encourages the unsafe use of bank 
     accounts. Loans phased on check/debit-holding get paid before 
     other obligations, due to the severe adverse consequences of 
     failing to make good on a check. Some lenders threaten 
     criminal prosecution or court martial of military consumers 
     for failure to make good on the check used to get a payday 
     loan. If the consumer files bankruptcy to stop the cycle of 
     debt, some lenders then try to convince the bankruptcy court 
     that the payday loans should not be discharged.
       Consumers need comprehensive small loan protections, 
     reasonably-priced alternatives to payday loans, and sound 
     financial education. In the meantime, Congress should prevent 
     any lender that entices consumers to write checks without 
     funds on deposit or to sign away electronic access to their 
     bank accounts from also using the bankruptcy courts to 
     collect on their usurious loans.
       If this nation is truly going to reduce bankruptcies, 
     lenders must first exercise more responsible lending 
     decisions and be more responsive to consumers who show a 
     genuine interest in resolving their debt problems. We applaud 
     you for moving to make payday and credit card lenders more 
     accountable in their treatment of consumers.
           Sincerely,
     Jean Ann Fox,
       Director of Consumer Protection, Consumer Federation of 
     America.
     Travis B. Plunkett,
        Legislative Director, Consumer Federation of America.
     Susanna Montezemolo,
       Policy Analyst, Consumers Union.
     Linda Sherry
       Editorial Director, Consumer Action.
     Edmund Mierzwinski,
       Consumer Program Director, U.S. Public Interest Research 
     Group.
     John Rao,
       Staff Attorney, National Consumer Law Center.
  Mr. AKAKA. 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. FEINGOLD. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. DeMint). Without objection, it is so 
ordered.
  The Senator from Wisconsin.
  Mr. FEINGOLD. Mr. President, I would like to have the attention of 
the Senate to discuss my remaining amendments to the bankruptcy bill. I 
think my colleagues are aware that I strongly oppose this bill and that 
I am

[[Page S2314]]

very disappointed in the process that has brought us to this point. I 
do not believe the sponsors of this bill and its supporters in the 
other body have dealt fairly with the proposed amendments.
  I understand the Senator from Utah came to the floor earlier in the 
day and was complaining that I had a number of amendments and that I 
did not intend to vote for the bill.
  I have been a legislator for 22 years. This is not an auction. Even 
if you are going to vote against a bill, if you have an amendment you 
believe will make it a better bill, it is still a worthy consideration. 
I was told in the committee, where I wanted to offer many of these 
amendments, that I should not offer them, that I should wait until the 
bill came to the floor to offer the amendments. So in most cases that 
is exactly what I did, being assured there would be a good faith 
response and consideration of the amendments. Well, of course, that is 
not what has happened to date. And I categorically reject the idea that 
simply because you do not think a bill is good, you do not have a 
proper role on the floor of the Senate in trying to improve it.
  This has not been a legislative process worthy of the Senate. Members 
of the Judiciary Committee, as I just said, were implored to save their 
amendments for the floor. Then, when we got here, we were told no 
amendments could be accepted. It was a classic bait and switch. 
Negotiations have been minimal and pro forma. Extremely reasonable 
amendments were rejected supposedly because they were not drafted 
correctly, according to the sponsors, but there was no willingness to 
work on the language of the amendments so they could become acceptable.
  One of the most disheartening examples of this way of dealing with 
good faith amendments was the treatment of the amendment offered by the 
Senator from Florida concerning identity theft. Senator Nelson simply 
wanted to give some special consideration to people who are forced into 
bankruptcy because other people--criminals, in fact--ran up debts in 
their names. It is awfully hard to argue with a straight face and 
pretty hard to claim that victims of identity theft should have to pay 
at least some of their debts if they have a higher than median income. 
The debts are not even theirs. Believe it or not, this bill might 
actually force someone to file for chapter 13 and make payments on 
debts for 5 years that were not even run up by the person filing for 
bankruptcy. I find this to be incredible. Unfortunately, the response 
from one of the bill's cosponsors was: ``well, you have a good point 
here, but your amendment is just too broad.''
  In the Senate I have come to love in my 12 years here, the Senate I 
served in just a few years ago when we last considered the bankruptcy 
bill, Senators and their staffs would have sat down and they would have 
worked out language that was not too broad. There would have been some 
negotiation. In many cases an agreement would be reached. But in this 
debate that kind of legislating is apparently forbidden.
  What is most disheartening is that so many Senators sent here to 
represent their constituents, to exercise their independent judgment 
for the good of their States and the country, have been willing to 
blindly follow instructions from the shadowy coalition of groups that 
are behind this bill--mainly the credit card industry--and vote down 
even the most reasonable of amendments. It is just sad when there is no 
debate on amendments, no discussion, no negotiation, just an edict from 
outside of the Senate, and the ``no'' votes follow every time.
  Last night I offered a very important amendment concerning small 
businesses. I spoke for 10 or 15 minutes about the amendment and 
explained some new data on small business bankruptcies that I think 
shows these provisions are actually very wrongheaded. After what has 
gone on here, I, of course, didn't expect to win the amendment, but I 
did think we might have a debate of sorts. The sponsors of the bill 
didn't even bother to come down and debate. Not one Senator made a 
single response to my arguments. They sent an emissary to deliver the 
message right before the vote that the sponsors expected a ``no'' vote. 
Nonetheless, I have not given up hope that some real legislating can 
still take place in the waning moments of our consideration of this 
bill.
  I have a number of amendments, 14 to be exact, pending before this 
body. They are entitled to receive votes before we vote on final 
passage. They are reasonable and modest amendments. They are not so-
called message amendments. They are not intended to be poison pills or 
bring down the bill by causing a huge disagreement with the House. They 
are intended to improve the bill because this bill is now not an 
academic exercise, as we know. It is going to become law. It is going 
to be the first bankruptcy reform of any great substance since 1978. It 
is going to become law, probably in a matter of weeks, and it will have 
a real impact on real people all over this country.
  Last night my staff was able to have some discussions about these 
amendments with staff for the sponsors. I am hopeful that some of these 
amendments can be accepted or negotiated. I am prepared to entertain 
any reasonable offer. If I feel the sponsors have made a legitimate 
effort to look closely at my amendments and consider them with an open 
mind, and if some number of those amendments are accepted, I will not 
seek votes on all the amendments. No one likes a vote-arama, as it has 
come to be known, when we vote on a bunch of amendments in a row and 
often people don't know what they are voting on. But we will have one 
if the attitude that has been on display for the last week and a half 
continues.
  I know my bargaining position is not strong. But I hope my colleagues 
will look at these amendments and realize that they are modest and 
might actually improve the bill in a way that wouldn't offend anyone in 
this entire body from the point of view of their philosophy about what 
bankruptcy law should be. Writing laws that work is what the Senate is 
supposed to do. Here is an opportunity to do that.
  Let me talk briefly about each of these amendments because I do not 
intend to call each one up individually for debate. Some of them are 
very simple. Let me reiterate that I am open to discussion on any of 
these amendments. If there is something about the drafting that could 
be improved, I urge the sponsors to work with me and help me perfect 
the amendments so they can become part of the bill in a managers' 
package or perhaps even by unanimous consent.
  The first amendment I will discuss is amendment No. 92 which has to 
do with section 106 of the bill on credit counseling and education. The 
bill requires credit counseling and credit education for people who 
file for bankruptcy. Section 106 of the bill requires debtors to obtain 
a credit counseling briefing before filing a bankruptcy case and to 
take a credit education course as a condition of receiving a discharge. 
However, the provisions provide no recourse for debtors who have 
exigent circumstances that would make it actually impossible for them 
to take a credit education course after filing or to get credit 
counseling, even during the 30-day grace period the bill now allows.

  Let me give a few examples. I know these cases may be rare, but they 
are real. There are people in this country who are homebound and do not 
have a telephone or Internet access. I wish there weren't, but there 
are. Are we going to decide in the Senate that these unfortunate 
citizens can never file for bankruptcy because they are in that 
situation? How about people who suffer from dementia caused by 
Alzheimer's or some other disease? They sometimes have to file for 
bankruptcy because of massive medical bills, and they can do so through 
someone who has power of attorney. Do we think anything is to be gained 
by requiring a debtor who is ill with a terrible, incurable disease, 
not even competent to sign legal papers anymore, to take a credit 
education course?
  How about U.S. soldiers fighting in Iraq or Afghanistan or serving 
anywhere overseas? It is a tragedy that some of our young men and women 
serving their country have to file for bankruptcy, but that is actually 
happening right now every day. Yes, there is Internet access in Iraq, 
but do we want to require a soldier to sit down at a computer to take a 
credit counseling or credit education course while they are in Iraq in 
order to protect his or her family back home from financial ruin?

[[Page S2315]]

  By the way, the Servicemembers Civil Relief Act does not address this 
problem. Nothing in that statute would excuse members of the military, 
even those on active duty serving overseas, from the credit counseling 
and education requirements. Our fighting men and women are already 
having to file for bankruptcy despite the protections of that law. My 
amendment creates simply a safety valve to address this problem by 
giving courts discretion--it just gives them discretion--to waive the 
credit counseling and education requirements based on a sworn statement 
filed by the debtor with the court.
  The bill also fails to address the potentially prohibitive cost of 
credit education to some debtors. In contrast, section 111, which 
addresses credit counseling services, requires credit counseling 
organizations to provide counseling without regard to ability to pay 
the fee for such a service. My amendment borrows the same language, 
requiring credit education to be offered for a reasonable fee and 
offered to all persons without regard to ability to pay the fee.
  These changes are essential to ensuring that the bankruptcy system is 
still an option available for those who truly need it. Let's not make 
these counseling and education requirements, which I think have a great 
deal of merit, into some kind of a trap for some unusually situated but 
still good-faith debtors whom the bankruptcy decision is actually 
designed to help. I know this issue is particularly important to 
Senator Sessions. I hope to be able to work with him to reach 
agreement. He and I have worked together well on this and a number of 
other issues in the past with the regard to the bankruptcy bill. I hope 
he will follow suit on this as well.
  The amendment I have just discussed deals with the impact of this 
bill on a very few, unusual, and very hard-luck debtors. The same is 
true of the next amendment I want to discuss concerning current monthly 
income. There are actually two amendments I have filed on this topic, 
amendment No. 96 and amendment No. 97. I am suggesting two alternative 
approaches to deal with the same problem.

  Section 318 requires debtors in chapter 13 whose current monthly 
income is over the median to file a 5-year plan rather than a 3-year 
plan. Requiring debtors to file a 5-year plan means it will take them 
longer to get back on their feet and they will end up paying more money 
to emerge from bankruptcy. Only those with a higher income should be 
subjected to this longer plan. But because of the way the income 
threshold is calculated in the bill, there is a great possibility of 
arbitrary and unfair results.
  Whether this requirement applies depends on the income that debtors 
earn in the 6 months before bankruptcy rather than their actual income 
at the time of filing. In other words, the median income test is based 
on what you used to make, not what you make at the time of bankruptcy. 
To understand this problem, imagine person A has an income of $60,000 
and that the State's median income is $45,000. A month before 
bankruptcy, she loses her job and is forced to take a job that pays 
only $30,000. Under the bill, her current monthly income works out to 
$5,000, even though she only makes $30,000 at the time of the 
bankruptcy and even if she never finds a higher paying job. So she 
would be forced into a 5-year plan, even though her real income is well 
below the threshold the bill's drafters apparently had in mind.
  Imagine person B has an income of $40,000 before and after filing for 
bankruptcy. Because person B's income is below the median, she will be 
allowed to enter a 3-year plan even though she actually makes more than 
person A. So the definition of current monthly income as the average of 
the prior 6 months' income may not make sense in some cases.
  My amendments provide two alternative ways to allow for a different 
and more accurate monthly income to be calculated. In addition, under 
my amendment, if a debtor's income decreases during the bankruptcy case 
to less than the median income, then a debtor who is at that time on a 
5-year plan can seek to have the plan reduced to a 3-year plan.
  Incidentally, the bill already provides a safety valve for 
calculating current monthly income in chapter 7. The court can reduce 
the income used for the means test if special circumstances are 
present. Special circumstances such as job loss or a sharp reduction in 
income from a home business would certainly qualify. I think it is an 
oversight that this was not done for chapter 13. So I hope the sponsors 
will simply fix this problem.
  This change also needs to be made in another section of the bill 
where current monthly income plays a significant role; that is, in 
determining whether a debtor will have to use the restrictive IRS 
standards under the means test to figure out what living expenses will 
be permitted.
  Again, it is unfair to someone filing in chapter 13 to make that 
determination based on past income rather than what the person actually 
makes.
  This is a commonsense fix. We shouldn't import the means test to 
chapter 13 without allowing for special circumstances adjustments to 
income. Either of my amendments would bring chapter 13 in line with 
chapter 7 on this score.
  The next amendment I want to discuss also has to do with chapter 13. 
There is a peculiar problem in this bill. I have often called it a bill 
that is at war with itself. What I mean by that is that the bill's 
overriding purpose--the argument that we have heard over and over on 
the floor in the past week 26 and a half--is to get more people to file 
for bankruptcy under chapter 13, which will require them to pay some of 
their debts over a 3- or 5-year period before getting a discharge of 
their remaining debts. This is what the means test is all about--
getting debtors to pay some of their debts if they are able. That is 
chapter 13. You would think, then, that the bill's sponsors and 
supporters would want to make sure that chapter 13 remains a viable 
option for those debtors. But the bill also includes a number of 
provisions that make it less advantageous to file in chapter 13 and 
harder to complete repayment plans. That is a bill at war with itself, 
and I predict this bill will have very bad consequences if it is 
adopted as it stands. The chapter 13 bankruptcy trustees and judges 
have certainly told us that over and over again for the past 8 years. 
Apparently, no one wants to listen.
  One amendment I have offered to try to undo one of the problems this 
bill creates for chapter 13 amendment No. 95, having to do with 
discharge of back taxes. Current bankruptcy law allows debtors who 
complete chapter 13 payment plans to discharge all taxes that were owed 
more than 3 years before the time of the petition. This allows debtors 
to look forward to someday improving their financial situation without 
facing a lifetime of debt repayment for old taxes. But the bill makes 
it less advantageous to file for bankruptcy under chapter 13 by 
disallowing the discharge of many of these older taxes.
  Under section 707 of the bill, a standard now applicable only to 
chapter 7 would be applied to chapter 13. In chapter 7 cases, debtors 
may only discharge old taxes if they filed a tax return for those taxes 
at least 2 years before filing for bankruptcy. That limitation does not 
currently apply to chapter 13 cases. By the way, under chapter 13 
today, as in chapter 7, taxes owed for the last 3 years must still be 
paid in full as priority debts, which enables the IRS to collect what 
is available from the debtor's disposable income with very low 
collection costs, and older taxes are paid pro rata with other 
creditors for duration of the plan. Society benefits at the completion 
of a debtor's chapter 13 payment plan when the debtor is able to rejoin 
the economic system as a tax-paying wage earner.
  This is an important protection. Typical older tax cases involve 
debtors who have recently gotten back on their feet and found a job 
after years of economic or family displacement. The displacement is 
often the result of serious health or substance abuse problems, 
unstable employment or a marital collapse. These debtors may have 
drifted through many jobs over several years without keeping the W-2 or 
1099 forms needed to file tax returns. Having finally found steady 
employment, debtors are often faced with a wage garnishment for these 
old taxes just at the time they are attempting to get back on level 
financial ground. The debtors may need to file for bankruptcy to stop 
the garnishment so that they will have

[[Page S2316]]

enough money left from take-home pay to pay rent, child support, or 
other financial necessities.
  But if old taxes cannot be discharged through a chapter 13 plan, as 
proposed in this bill, debtors will have no reason to try to pay what 
they can afford to pay through a chapter 13 plan, because they will 
know that at the end of the 3- to 5-year payment plan, they likely will 
again face an IRS garnishment for the older taxes.
  My amendment addresses this problem. I should also point out that the 
amendment retains the bill's prohibition on the discharge of taxes for 
which a fraudulent return was filed. So we are talking about 
discharging of back taxes that are not the result of fraud, just the 
result of nonpayment.
  The next amendment also deals with chapter 13. It is amendment No. 
94, and would correct a serious drafting error in section 102(h) of the 
bill that threatens to unintentionally eviscerate chapter 13. Refusing 
to remedy this error would be disastrous for the very chapter of the 
code that the sponsors of this bill want to encourage people to use.
  In chapter 13 cases, debtors must devote all they can afford--that 
is, their disposable income after living expenses--to payments under 
their plan. These payments go to administrative expenses, secured 
creditors and unsecured creditors. In fact, most chapter 13 cases filed 
under current law are filed in order to deal with secured debts, to 
prevent foreclosure on a home or repossession of a car.
  As written, section 102(h) of this bill would instead require that 
for debtors who are below median income, all disposable income must go 
to unsecured creditors, and none could be used for secured debts or 
administrative expenses. This is an obvious drafting error, since the 
purpose of section 102(h), as I understand it, was simply to require 
debtors with income over the median income to use the IRS standards 
contained in the means test to determine their allowable living 
expenses but to leave the law unchanged for debtors below median 
income.
  If this error is not corrected, the bill will make it impossible for 
debtors below median income to use chapter 13. Now some in this body 
may be under the mistaken impression that people who file for chapter 
13 bankruptcy are well off and they will only choose that chapter if 
they are forced to by this bill. That is obviously not true since 
chapter 13 exists now and millions of people use it voluntarily. The 
large majority of chapter 13 filers are actually below median income. 
In fact, in the 1980s, one study found that about 15 percent of chapter 
13 filers were actually below the poverty line. Very few people file in 
chapter 13 because they have large amounts they can afford to pay to 
unsecured creditors. They do it to protect their homes from foreclosure 
or their cars from repossession. While there certainly are exceptions, 
people who file for bankruptcy are generally poor, whether they choose 
chapter 7 or chapter 13.
  Currently, with no means test in place, about 30 percent of 
bankruptcy debtors voluntarily file under chapter 13. Even the sponsors 
of this bill claim that only another 8-10 percent of those who now file 
under chapter 7 would be switched to chapter 13 if the means test were 
implemented. So even with the means test, the majority of chapter 13 
debtors will almost certainly be below median income. That means the 
drafting error I have discussed is a big deal. We have to fix this 
problem before it becomes law.
  A second problem created by this error has to do with administrative 
expenses in chapter 13 cases. Administrative expenses in bankruptcy 
include the fees of lawyers and trustees who are paid to process the 
case.
  Section 102(h) of the bill would effectively impose a 10 percent cap 
on chapter 13 administrative expenses for debtors with income over the 
median. And it would prohibit any payments at all for administrative 
expenses for debtors below the median. What that means is that there 
will be no lawyers to handle chapter 13 cases at all. Chapter 13 will 
become a nullity.
  This bill has contained a number of antilawyer provisions over the 
years, but I cannot imagine that the drafters of this bill intended to 
effectively prohibit attorney participation on behalf of debtors in 
chapter 13 cases.
  My amendment will correct these drafting problems. It makes clear 
that the means test expense standards will be used for chapter 13 cases 
filed by debtors who make more than the median income. It makes sure 
that below median income debtors can pay their secured creditors. And 
it will allow administrative expenses, including attorneys' fees, to be 
included in the plan payments. I urge my colleagues to support this 
amendment if you don't want this bill to write chapter 13 out of 
existence.
  Another of my amendments deals with a provision that bankruptcy 
lawyers are very concerned about. This is amendment No. 93 on debt 
relief agencies. The amendment is strongly supported by the American 
Bar Association. This amendment would exclude lawyers from the 
provisions dealing with ``debt relief agencies'' in sections 226 to 228 
of the bill. As currently written, the bill would impose a number of 
unnecessary burdens on the attorney/client relationship in bankruptcy 
proceedings. Subjecting attorneys to the ``debt relief agency'' 
provisions will add little substantive protection for consumers, but 
require substantial amounts of extra paperwork and cost.
  Requiring lawyers to call themselves ``debt relief agencies'' will do 
more to confuse the public than to protect it. I think members of the 
public generally understand what the word ``lawyer'' means, but the 
phrase ``debt relief agency'' is vague and unhelpful. It is also 
misleading, because there are significant differences between lawyers 
and nonlawyers, but both would be identifying themselves as debt relief 
agencies under this bill.
  Only lawyers are permitted to give legal advice, to file pleadings, 
or to represent debtors in bankruptcy hearings. Perhaps most 
importantly, only lawyers are bound to confidentiality by the attorney-
client privilege. These distinctions are important to consumers, but 
they would be obscured by the bill as written.
  Furthermore, these provisions would apparently apply to any law firm 
that provides bankruptcy services, even if that law firm were primarily 
providing landlord-tenant advice--even to landlords--criminal defense 
services, or other unrelated services. Large firms with only one 
bankruptcy practitioner may be required to advertise themselves as 
``debt relief agencies.''
  I think this will be immensely confusing to consumers without any 
apparent benefit.
  The substantive provisions on ``debt relief agencies'' would add 
little to the already existing laws and regulations governing attorney 
conduct. Attorneys currently have extensive duties relating to 
disclosures, fees, and ethical obligations. These provisions would 
micromanage that relationship without adding any meaningful substantive 
protection.
  I think the intention of the bill's drafters was to prevent attorneys 
from tricking consumers into bankruptcy by not telling consumers from 
the beginning that they work on bankruptcy issues, and then sort of 
springing the idea of bankruptcy on the consumer. But rather than 
simply prohibiting this sort of unethical behavior, the bill tries to 
micromanage the attorney-client relationship by requiring large amounts 
of additional paperwork and disclosure. Extra paperwork substantially 
burdens the consumer and adds to the cost of bankruptcy. Given that 
attorney conduct is already regulated, I believe these provisions are 
unnecessary as applied to attorneys and provide no clear benefit.
  As I mentioned, the American Bar Association strongly supports this 
amendment. The Federal Bar Association is also strongly in favor of it.
  Mr. President, I ask unanimous consent that a letter from the Federal 
Bar Association be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                          Federal Bar Association,


                                      Office of the President,

                                Cincinatti, OH, February 28, 2005.
     Re Attorney Liability Provisions in S. 256, The Bankruptcy 
         Abuse Prevention and Consumer Protection Act of 2005.

     Hon. Arlen Specter,
     Chairman, Committee on the Judiciary, U.S. Senate, 
         Washington, DC.
     Hon. Patrick Leahy,
     Ranking Minority Member, Committee on the Judiciary U.S. 
         Senate, Washington, DC.
       Dear Chairman Specter and Senator Leahy: As the Senate 
     prepares to consider the ``Bankruptcy Abuse Prevention and 
     Consumer Protection Act of 2005'' (S. 256), I

[[Page S2317]]

     write to express the opposition of the Federal Bar 
     Association to several provisions in the proposed legislation 
     that would in our opinion inappropriately increase the 
     potential liability and administrative burdens of bankruptcy 
     attorneys under the Bankruptcy Code. Those provisions would 
     require attorneys to: certify the accuracy of factual 
     allegations in the debtor's bankruptcy petition and schedules 
     under penalty of court sanctions (section 102); certify the 
     ability of the debtor to make payments under a reaffirmation 
     agreement (section 203(a)); identify and advertise themselves 
     as ``debt relief agencies'' subject to a variety of 
     regulations (sections 227-229).
       The Federal Bar Association, with over 16,000 members 
     throughout the country, is the only national association 
     composed exclusively of attorneys in the private sector and 
     government who practice within or before the federal courts 
     and agencies. Our mission is to serve our nation's federal 
     legal system. In our view, the above-referenced provisions of 
     the proposed legislation pose a serious threat to the 
     efficient operation of the bankruptcy laws and the bankruptcy 
     courts. We are joined in this opinion by many state and 
     national bar associations and bankruptcy practitioners.
       The cumulative potential liability and additional 
     administrative burden imposed upon debtor attorneys by the 
     legislation may be expected to generate a substantial 
     negative impact on the availability of quality legal counsel 
     in the bankruptcy system. The above-referenced provisions 
     will discourage many attorneys from agreeing to represent 
     debtors and significantly increase the fees and expenses of 
     clients. The requirement that a bankruptcy attorney certify 
     the accuracy of factual allegations in the debtor's 
     bankruptcy petition and schedules, for example, will 
     essentially require the attorney to become a guarantor of the 
     petitioner's statements. The effect of these draconian 
     changes may be to drive many consumer bankruptcy 
     practitioners out of this area of practice, depriving 
     individuals of adequate legal representation and forcing them 
     to seek less responsible alternatives such as unlicensed 
     bankruptcy petition preparers or to file their petitions 
     themselves. They may not even receive adequate advice 
     regarding the necessity or advisability of filing for 
     bankruptcy. Therefore, the attorney liability and ``debt 
     relief agency'' provisions contained in the proposed 
     bankruptcy legislation may have an adverse effect on debtors, 
     creditors and the bankruptcy system itself. While these 
     changes may not be intended by the advocates of the 
     legislation, they are foreseeable.
       The spirit of the above-referenced provisions can be better 
     satisfied by the imposition of non-dischargeability sanctions 
     upon debtors who falsify their bankruptcy schedules and 
     tougher action by bankruptcy courts and the United States 
     Trustee to enforce Bankruptcy Rule 9011 when misconduct by a 
     party exists. These reforms would reduce bankruptcy fraud and 
     abuse without unfairly harming honest debtors or the 
     bankruptcy system.
       We call upon you to support amendments that may be offered 
     on the Senate floor that would remove the inappropriate and 
     unnecessary sanctions and burdens described above from the 
     proposed bankruptcy legislation.
       Thank you for considering these views. If you would like 
     more information on the PBA's views, your staff may contact 
     our counsel for government relations, Bruce Moyer, at (301) 
     270-8115.
           Very truly yours,
                                                 Thomas R. Schuck,
                                               National President.

  Mr. FEINGOLD. Mr. President, another amendment I have pending is 
really concerned with making the bankruptcy system work better for both 
creditors and debtors. It is amendment No. 90, dealing with notice.
  The bill contains three separate notice requirements which seem to 
create significantly differing procedures for notice.
  The first provision requires debtors to send notice to the creditor 
at whatever preferred address the creditor has specified in 
correspondence with the debtor shortly before bankruptcy.
  The second provision says that debtors and the court must send notice 
to the creditor at an address the creditor files in each individual 
case.
  And the third provision says the court must send notice to an address 
the creditor files for all cases, with an exception if a different 
address is filed for an individual case.
  The first requirement, that debtors send notice that bankruptcy has 
been filed to creditors at the creditors' preferred address, is 
actually unworkable and unfair and serves no apparent purpose. Debtors 
often do not receive correspondence within the last 90 days prior to 
filing for bankruptcy, and even when they do, they may not know that 
the correspondence is significant. Essentially, debtors might end up 
having their cars repossessed despite the fact that they filed for 
bankruptcy and repossession should be prevented by the automatic stay 
because they threw away what appeared to be junk mail from the 
creditor. And bankruptcy lawyers are forced to search through their 
clients' correspondence for an address or a change of address.
  I think we can come up with a much more streamlined notice provision 
that will satisfy the interests of both creditors and debtors.
  My amendment will eliminate the first notice provision of the bill 
and instead establish a central national registry for creditors' 
correspondence addresses. The registry would be available to debtor's 
counsel and the court on the Internet, as is already done for 
government creditors under the Federal Rules of Bankruptcy Procedure. 
The same address could be used for all notices, except when a creditor 
files and serves a different address for an individual case.
  The bill generally provides for such a registry, and the courts are 
moving in that direction anyway, but the bill has two significant 
flaws. First, the bill is vague about whether a registry is to be 
maintained by each court or in a central national database, and it does 
not provide that the registry will be made available to the public.
  Second, the bill's current language is unworkable because counsel 
will have to constantly check court records in every case to see if a 
new address was filed with the court. My amendment requires parties to 
use any address that has been filed more than 120 days previously with 
the registry. Within that 4-month period, the addresses should be 
updated in various software programs that bankruptcy attorneys use to 
find addresses, or they can recheck the registry to find if addresses 
have changed.
  The exception to sanctions for a violation of an automatic-stay 
violation must also be amended so it does not include creditors who 
have clear actual notice of a stay. As it stands now, the bill creates 
a loophole that will encourage rampant abuse. For example, a debtor who 
filed for bankruptcy the previous week might return home from work to 
find her car being repossessed. The creditor might claim the debtor did 
not provide proper notice of the bankruptcy because notice was not sent 
to the correct address and therefore the creditor can proceed with the 
repossession, even if the debtor has her time-stamped bankruptcy 
petition in her hand and shows it to the repo man. It would not even 
work in that circumstance, which is an absurd result.

  Finally, the language of the bill should be clarified so that actual 
notice reasonably calculated to come to the attention of a creditor or 
its agent is sufficient to allow sanctions for violation of the stay.
  Correcting the notice provisions will protect the interest of debtors 
and creditors. Do we really want to leave in place a provision that is 
so obviously contradictory and unworkable and that could lead to a 
result as unjust as the example I just described? I hope not.
  I also believe that creditor as well as debtor attorneys will 
appreciate the streamlined notice provision in my amendment and the 
establishment of a national registry available on the Internet.
  It is my understanding the Administrative Office of the Courts does 
not favor the current language of the bill because it has essentially 
been overtaken by events. The courts are moving to electronic filing 
and notice registries. Keep in mind, this bill started about 8 years 
ago. An awful lot has happened in that time to make this much more 
feasible and, frankly, much more helpful to whoever is working on this, 
whether it be creditor representatives or debtor representatives.
  My amendment is consistent with that movement. The bill is not.
  One of my amendments is just a clarification of the effect of my bill 
and should not be controversial at all. It is amendment No. 100 on 
reaffirmation.
  Section 524(1) allows creditors to accept payments made ``before and 
after filing'' of a reaffirmation agreement with the court. It also 
provides that a creditor may accept payments from a debtor under an 
agreement that the creditor believes in good faith to be effective.
  I am concerned that these provisions could allow creditors to accept 
and retain payments where the reaffirmation agreement is ultimately 
held to be invalid.
  In the late 1990s, in a celebrated case, the retailer Sears was 
required to disgorge literally hundreds of millions of dollars in 
payments made by debtors

[[Page S2318]]

pursuant to reaffirmation agreements that were invalid because they 
were never filed with the court. This bill would permit acceptance of 
payments before a reaffirmation agreement is filed. This will leave an 
ambiguity that would potentially require courts to allow a creditor 
such as Sears to retain all those payments.
  The current language in section 203 of the bill suggests that if 
Sears in good faith believes those invalid agreements to be legitimate, 
it could have retained the payments. This would undermine the integrity 
of the bankruptcy system, and I can see no policy justification at all 
for allowing creditors to retain payments made pursuant to invalid 
reaffirmation agreements.
  This amendment would clarify that courts have the option to order the 
disgorgement of payments made pursuant to invalid reaffirmation 
agreements or to order other appropriate remedies. Again, it is simply 
a logical correction to an ambiguity in the bill. If it is not 
necessary, I would appreciate the sponsors saying so on the record so 
that the legislative history on this point is clear.

  Finally, I hope the sponsors will consider agreeing to amendment No. 
87 on inflation adjustments. As a result of the efforts of Senator 
Grassley and my efforts, one of the provisions in this bill is a long 
overdue inflation adjustment to the dollar amounts in chapter 12, the 
chapter covering farm bankruptcies. Those dollar amounts were 
originally set in 1986. We increase the farm bankruptcy amounts to 
account for inflation since 1986 and then index them for future 
inflation.
  Inflation has severely limited the usefulness of chapter 12 to family 
farmers, and I am pleased that this bill addresses that problem as well 
as others with chapter 12.
  Virtually all the dollar amounts in the Bankruptcy Code are now 
subject to section 104, which provides for their adjustment every 3 
years in accordance with the cost of living. But not all of them are. 
The reason that the family farm amounts needed to be increased so much 
in this bill is because they were not previously adjustable under 
section 104.
  This bill adds a number of new sections or subsections with dollar 
amounts that are not indexed, including the family fisherman provision, 
household goods, educational savings limits, certain venue thresholds, 
and the applicability in chapter 13 of the additional monthly allowance 
for individuals over a family of four.
  Again, this is just a commonsense technical issue. Almost all of the 
dollar values in the current bill should be added to section 104 and 
adjusted for inflation, just as the family farm values are, and the 
homestead exemption, and many others. I implore my colleagues: Do not 
make the same mistake that was made with respect to family farms back 
in the mid-1980s.
  Do not set up a situation where 10 or 20 years from now some 
provision is clearly too low, but it cannot be fixed for 7 years while 
Congress works on another big revision to the Code.
  I do hope the sponsors can accept this amendment. If there is an 
amount they have a real argument about that should not be indexed, I am 
willing to consider that. I removed one provision in this amendment 
having to do with the definition of financial participant when I heard 
from the Bond Market Association that that one should not be indexed. 
So I am willing to be reasonable, and I hope my colleagues who have 
worked so hard and long on this bill over the past 8 years will be 
reasonable as well, as this moves to final passage.
  I have taken some time in going through these amendments, and perhaps 
people watching would say: Why is this Senator waiting until the last 
minute to raise these issues?
  Of course, that is not the case at all. I waited patiently in the 
Judiciary Committee, provided these amendments well in advance in 
almost every case for everybody to review. I started to offer the 
amendments in committee and make my arguments. We received no 
substantive response at all in the committee on almost every amendment.
  When one Senator actually could not take it anymore on the other side 
and offered a substantive response to my amendment, he said, I 
apologize to the chairman for making an argument, basically because 
apparently they had been instructed not to talk about these amendments.
  He asked: Senator, why are you doing this? We need to get this out of 
committee. Why do you not wait until the floor to offer these 
commonsense amendments, and then we in good faith will work together to 
try to solve these problems?
  Well, that is not what is happening. This is just a slam dunk. There 
is no danger anymore about considering these amendments. They got 
cloture. There are plenty of votes. What is the harm of fixing the 
bill? What is the harm of doing the right thing? What is the harm of 
doing our job as legislators and making sure we do not stick the entire 
bankruptcy community with these provisions that do not make any sense? 
Come on, we can do this now. It is safe to go back in the water. This 
is going to become law, and not a single one of my provisions will do 
any damage whatsoever to the fundamental intent or goals of this bill.
  I do thank my colleagues for their attention in this presentation. 
These are highly technical issues. Some may seem minor, and some may 
actually be minor. I do not want to take the Senate's time on these 
amendments, which is why I attempted to get them considered in 
committee and have tried to make myself available at every instance to 
discuss them over the past week and a half.
  I look forward to discussions over the next few hours with the 
managers of the bill. Perhaps we can still reach agreement that will 
make some of these votes unnecessary.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. BINGAMAN. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                            Amendment No. 51

  Mr. BINGAMAN. Mr. President, I call up amendment No. 51 to the 
bankruptcy bill.
  The PRESIDING OFFICER. Is there objection?
  Without objection the pending amendments are set aside.
  The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from New Mexico [Mr. Bingaman] proposes an 
     amendment numbered 51.

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

  (Purpose: To amend certain provisions regarding attorney actions on 
               behalf of debtors, and for other purposes)

        On page 14, strike line 2 and all that follows through 
     line 4 and insert the following: ``tion of a party in 
     interest, may order the''.
       On page 14, line 7, insert ``and reasonable trustee fees 
     based upon the trustee's time in prosecuting the motion,'' 
     after ``fees,''.
       Beginning on page 14, strike line 10 and all that follows 
     through page 15, line 17, and insert the following:
       ``(ii) the court grants such motion.
       ``(B) Any costs and fees awarded under subparagraph (A) 
     shall have the administrative priority described in section 
     507(a)(2) of this title, and such costs and fees shall be 
     excepted from the discharge described in section 727 of this 
     title in the current or any successor cases filed under this 
     title.
       On page 16, strike line 8 and all that follows through line 
     10 and insert the following: ``the''.
       On page 28, between lines 17 and 18, insert the following:
       (l) Additional Ground of Nondischargeability.--Section 
     523(a) of title 11, United States Code, is amended by 
     inserting after paragraph (18) the following:
       ``(18A) for costs or fees imposed by a bankruptcy court 
     under section 707(b)(4) of this title, whether imposed in the 
     current case or a prior case filed under this title.''.
       On page 28, line 18, strike ``(k)'' and insert ``(m)''.
       On page 59, strike lines 16 and 17 and insert the 
     following:
       ``(5) The declaration shall consist of the following 
     certification:
       On page 60, strike line 4 and all that follows through line 
     10.
       On page 182, line 4, strike ``EXPANSION'' and insert 
     ``ENFORCEMENT''.
       On page 182, line 7, insert `` fraud and abuse exist in the 
     bankruptcy system and that in order to curb this fraud and 
     abuse, Federal bankruptcy courts should vigorously enforce'' 
     after ``that''.
       On page 182, line 8, strike ``App.)'' and insert ``App.).''

[[Page S2319]]

       On page 182, strike line 9 and all that follows through 
     line 19.
       On page 459, lines 24 and 25, strike ``, even if such 
     amount has been discharged in a prior case under this 
     title''.

  Mr. BINGAMAN. Mr. President, this amendment would help to ensure that 
legal representation remains affordable and accessible to lower income 
Americans who are forced into bankruptcy.
  As currently written, the bill contains provisions that would 
significantly increase attorney's fees and expenses related to the 
filing of a bankruptcy petition. Under existing law, attorneys can rely 
on information that a client provides regarding the extent and the 
value of their assets, such as the worth of a car, household furniture, 
and that sort of item.
  In an effort to combat the perceived abuse of the bankruptcy system, 
this proposed bill requires an attorney to certify that the attorney 
has made an inquiry into the client's assertions, and it subjects the 
lawyers to personal liability for inaccuracies in a debtor's list of 
assets. Although the proponents of this provision may argue that the 
change will prevent abuse, I believe it is an unnecessary change that 
will have significant unintended consequences.
  Under existing law, attorneys are already required to certify that 
pleadings, motions, and other materials have factual support pursuant 
to bankruptcy rule 9011. Attorneys are also prohibited from knowingly 
making any legal or factual misrepresentation to the court or assisting 
a client in any abuse. If we want to address misconduct by attorneys, 
what we need is better enforcement of those existing rules. If we want 
to address abuse by debtors in submitting their lists of assets, we 
should seek to hold those individuals responsible. My amendment would 
do that by making specific debts nondischargeable if the debtor lied 
about them in their bankruptcy schedule.
  With regard to the unintended consequences of these changes, in order 
to protect themselves from harsh sanctions, attorneys would be forced 
to conduct a costly investigation into the value and the actual 
existence of the client's claimed assets. This would not only directly 
increase the attorney's expenses, it would also likely raise very 
significantly other costs such as malpractice insurance. The Attorneys' 
Liability Protections Society, Inc., which is a malpractice carrier 
that insures 15,000 lawyers in 27 jurisdictions around the country, has 
estimated that the impact of this provision could result in the 
immediate increase of insurance premiums for bankruptcy lawyers from 10 
to 20 percent.
  The bankruptcy bill contains another provision with regard to 
reaffirmation agreements that will also likely result in higher 
attorney's fees and costs.
  Current law provides that debtors can reaffirm a debt and therefore 
keep a specific asset, as long as the attorney certifies the decision 
to do so is voluntary and will not create undue hardship for the 
debtor.
  As drafted, S. 256 would require attorneys, where there is a 
presumption of hardship, to certify that debtors would be able to make 
future payments under the agreement. Attorneys are not accountants and 
would have to conduct extensive audits of their client's finances in 
order to determine if that client would be able to afford specific 
payments. Of course, that would drive up attorneys' fees as well.
  These additional costs would negatively impact on the accessibility 
of legal representation and court administration in two primary ways. 
First, they would reduce the ability of lawyers to take on pro bono 
cases and would make these legal services unavailable to many indigent 
debtors. In my own State, the law clinic at the University of New 
Mexico Law School has said if the bill passes in its current form, it 
would likely have to stop doing bankruptcy work for indigent clients 
due to the additional cost and concerns related to the attorney 
sanction provision. Second, these costs would place additional 
administrative burdens on the Nation's courts by increasing the number 
of individuals who would be representing themselves in the court 
proceeding due to their inability to afford an attorney. According to 
the Chief Bankruptcy Judge for the District of New Mexico, cases 
involving pro se debtors, debtors who are representing themselves, can 
take up to 10 times as much time to process as cases where debtors are 
represented by counsel. As such, even a small increase in the number of 
cases being processed without counsel could create substantial 
administrative burdens on our bankruptcy courts.
  So the amendment I have called up would do three things. First, it 
would replace the attorney liability language in section 102 of the 
bill with new language that would impose nondischargeable sanctions on 
debtors who lie on their bankruptcy schedules. Second, it would urge 
bankruptcy courts to more vigorously enforce existing rules regarding 
the sanctioning of attorneys where misconduct has been demonstrated. 
These changes would properly address abuse in the bankruptcy system by 
holding debtors responsible for intentional misrepresentations in 
listing the worth of their assets and holding attorneys responsible if 
they assist in any such abuse. Last, the amendment would maintain 
existing law with regard to the certification of reaffirmation 
agreements by attorneys.
  I understand the need to punish attorneys for abuse of the bankruptcy 
process but there are ways to do this without unnecessarily driving up 
the cost of legal representation. This, in my view, is an amendment 
that is reasonable. The American Bar Association has endorsed it. I 
urge my colleagues to support it as well.
  I have talked to various of my colleagues in the Senate. I have 
watched the amendments being defeated in the Senate for the last 
several days. I believe I am correct that every single amendment that 
has been offered to this bill has been defeated, many of them on pretty 
much a party-line vote. So it is clear to me that offering this 
amendment and actually requiring a vote on it will not be productive.
  I do believe it is a significant issue. It is an issue that should be 
addressed before this bill is completed and goes to the President for 
signature. I hope my colleagues will consider the need to address this 
issue and make changes in the bill. But, because of the lack of 
support, at this point I will not ask for a vote on the amendment.


                       AMENDMENT NO. 51 WITHDRAWN

  I ask unanimous consent to withdraw the amendment.
  The PRESIDING OFFICER. Without objection, the amendment is withdrawn.
  Mr. BINGAMAN. 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. DORGAN. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DORGAN. Mr. President, the business here in the Senate is the 
bankruptcy bill. I want to talk about an amendment I had offered to 
this legislation that does not get a vote now as a result of cloture 
being invoked.
  The amendment I offered on behalf of myself and Senator Durbin was 
offered on a timely basis and the majority decided they did not want to 
have a vote on the amendment. So when cloture prevailed--and I voted 
against cloture--this amendment fell also. As a result of that, I do 
not intend to vote for the underlying bill. The Senate should have 
voted on my amendment. It was in order. Admittedly it was nongermane to 
the underlying bill, but still, under the rules, it was in order for me 
to offer it.
  The amendment was an amendment that would create a special committee 
to investigate contracting waste, fraud, and abuse in the country of 
Iraq.
  We have had almost no oversight hearings here in the authorizing 
committees of the Senate on how money is being spent with respect to 
contracting in Iraq. But we have held some Democratic Policy Committee 
hearings and have heard from a good many whistleblowers and others 
about what is happening to American taxpayers' money in the country of 
Iraq. Let me describe some of the testimony we have heard.
  This picture is perhaps the best description. At the last hearing I 
chaired, this person--his face is not seen in this picture, but this 
person standing here holding some of this money brought this photograph 
with him. This is $2 million. This $2 million wrapped in Saran wrap in 
$100 bills was provided to

[[Page S2320]]

a contractor. The contractor was doing business in Iraq with our 
Government and the Coalition Provisional Authority, which was our 
Government as well. Our witness, who worked for the Coalition 
Provisional Authority, said that people were told when they needed to 
get paid on their contracts: Bring a bag. Just bring the bag and you 
get loaded with cash.
  The witness said he heard there was a vault with billions of dollars 
in cash. At any rate, on the day this picture was taken a contractor 
showed up and collected $2 million in cash in a bag.
  Let me describe this contractor, by the way, because there is some 
legal action with respect to this contractor. I will not use names, but 
the names were part of the hearing. It was on C-SPAN. This contractor 
was a firm started by two individuals, formerly in one of the branches 
of our service, retired, who showed up in Iraq and wanted to be a 
contractor. They didn't have any money. One of them, I guess, had $450, 
according to news reports, and they wanted to go into business. So they 
proposed to get a contract to provide security at an airport in Iraq.
  They got the contract. They got $2 million in cash delivered to them. 
That is how they started the business. But their business was not 
necessarily on the level. A couple of their employees decided to become 
whistleblowers because they were so sickened by what they saw 
happening. The whistleblowers allege that this company was taking 
forklift trucks off the airport property, painting them blue, and then 
selling them back to the Coalition Provisional Authority--which, by the 
way, was us: Ambassador Bremer and us, the American taxpayer.
  So this company, these two fellows running this company, were taking 
forklift trucks, sending them off to a warehouse to paint them, and 
shipping them back and reselling them to us, the American taxpayer.
  The people who blew the whistle on this received death threats, they 
said, and were quite scared. But despite all the obvious problems, this 
company was given $100 million in contracts in Iraq.
  Listening to the witnesses at our DPC hearings describe what was 
going on in Iraq, it was unbelievable. There were brand new $85,000 
trucks used by contractors in Iraq. When they get a flat tire, what do 
they do with the truck? They leave it on the road to be torched; brand 
new $85,000 trucks. If something plugs up the fuel pump, they leave it; 
just abandon it. How about a company that decides to buy hand towels 
for soldiers ordered by the U.S. Army, small hand towels. The company 
that gets the contract to do it decided to nearly double the price of 
the hand towels because they wanted to put their company logo on the 
hand towels used by American soldiers. Or the company that orders 25 
tons--yes, 50,000 pounds--of nails to be sent to Iraq for construction. 
The nails were the wrong size. They ordered the wrong size, and 50,000 
pounds of nails are sitting on the sands of Iraq paid for by the 
American taxpayer.
  The contractor that gets the contract to put in air conditioning 
units in buildings in Iraq paid for by the American taxpayer goes to a 
subcontractor, who goes to another neighborhood crew, and they pass all 
this money along, and pretty soon what was to have been air 
conditioners is just a couple of fans in a room, while the American 
taxpayer pays for air conditioners.
  It is unbelievable what is happening with respect to waste, fraud, 
and abuse, and nobody cares. It is the American taxpayers that are 
taking a bath.
  You can't get oversight hearings in this Senate. Do you know why? 
Because it would be embarrassing to the administration.
  A couple of the contracts I just talked about involve Halliburton. 
People say when you talk about Halliburton you are going after the Vice 
President. Not at all. When you talk about Halliburton you are talking 
after the company that got giant no-bid contracts, and there is no 
accountability for the way the money is spent. Halliburton was charging 
the taxpayers for 42,000 meals a day served to U.S. soldiers. The 
problem is they were only feeding 14,000 soldiers a day. They were 
overcharging the American taxpayer by 28,000 meals a day.
  Where is the accountability? Who cares about that? When is this 
Congress going to decide it matters?
  We passed a nearly $20 billion reconstruction bill. I didn't support 
it. I offered the amendment to strip the $20 billion for reconstruction 
in Iraq. But the majority voted to authorize that spending. The reason 
I didn't support the funding was Iraq has the second largest reserves 
of oil in the world. A soldier told me they were standing in a 
depression in the sand one day and the soles of their shoes got black 
from oil. This is a country with the second largest reserves of oil in 
the world. It could easily securitize future oil that will be pumped 
from under the sands of Iraq and use that money to reconstruct Iraq. 
That ought not be the American taxpayers' job.
  But this Senate and this Congress crafted legislation which was 
signed by this President that says we are going to actually send over 
nearly $18 billion. Twenty-billion dollars was the request. Senator 
Wyden and I got an amendment passed that cut wasteful spending by $1.8 
billion. But there is still over $18 billion in the spending pipeline, 
$15 billion of which has not yet been spent.
  I talked to this fellow holding this wad of cash which he was about 
to put in a bag for the people who have allegedly cheated the American 
taxpayers. You talk to these folks, and they will tell you that passing 
around there is like passing an ice cube around. Pass it to three or 
four hands, and pretty soon you have a lot less. It melts away.
  That is what is happening to the American taxpayers' money with 
respect to reconstruction in Iraq.
  These are some of the headlines about Halliburton and those contracts 
with the Department of Defense: ``Uncle Sam Looks into Meal Bills; 
Halliburton Refunds $27 million,'' February 3, 2004. On February 4, 
2004, ``Halliburton Faces Criminal Investigation; Pentagon Proving 
Alleged Overcharges for Iraq Fuel.''

  By the way, the recently retired person in the Pentagon who purchased 
fuel--it was his job to purchase fuel in the world and deliver it in 
war zones; he did it for over 30 years--testified that American 
taxpayers are being overcharged by a dollar a gallon in Iraq. A buck a 
gallon, adding up to tens of millions of dollars. The American 
taxpayers got hosed here. Nobody seems to care.
  The question is, what do we do about all of that?
  In 1941, on the eve of the Second World War, there was a Democratic 
Senator here in this Chamber. While there was a Democrat in the White 
House, that Democratic Senator got in a car and drove around the 
country to military bases and said there is massive waste and abuse 
going on, and we ought to get to the bottom of it. He convinced the 
Congress to create a special committee. The Senator was Harry S Truman, 
and the committee was eventually called the Truman Committee. They 
saved an estimated $15 billion by exposing waste. That was a Democratic 
Senator with a Democrat in the White House.
  But the fact is, you can't get hearings now because we have one party 
that controls the White House, the House, and the Senate, and nobody 
wants to embarrass anybody.
  It is not my intent to embarrass anybody. It is my intent to provide 
accountability and get to the bottom of how this money is being spent.
  Remember the company that got the money shown in this picture, the 
one where whistleblowers had their lives threatened? The whistleblowers 
filed suit under the False Claims Act alleging that this company is 
defrauding the American taxpayer. But the United States Justice 
Department decided they would not intervene. Do you want to know why? 
The United States Justice Department said, Well, if they were 
defrauding something, it was the Coalition Provisional Authority in 
Iraq, and the Coalition Provisional Authority is not the same as the 
United States government. The Justice Department's position, according 
to an assistant U.S. Attorney, was that defrauding the United States is 
not the same as defrauding the United States taxpayer. The Coalition 
Provisional Authority in Iraq was created by an executive order, in a 
very specific document. To have the U.S. Justice Department take the 
position that defrauding the Coalition Provisional Authority--

[[Page S2321]]

which is us--is not the same as defrauding the American taxpayer is 
Byzantine.
  The question is, why do we not allow a vote on an amendment to create 
a special committee of the U.S. Senate? This would be a committee with 
four members selected by the majority party and three members by the 
minority party, with subpoena power to have the kind of investigation 
and the kind of oversight that the American taxpayers ought to expect 
of this Congress. Why don't we have a vote on that?
  I offered the amendment on time, and the majority party did not wish 
to have a vote on it.
  Perhaps if we had oversight hearings we would hear more about that 
which I have already heard, the American taxpayers paying $45 for cases 
of what I call ``pop'' back home, Coca-Cola or Pepsi-Cola, $45 a case; 
or renting SUVs for $7,500 a month; $2.65 a gallon for fuel delivered 
in Iraq when the just retired head of the Defense Energy Support Center 
testified they could have supplied it for half that price; $18.6 
million of U.S. equipment missing that a company was given to manage, 
and now they can't find it, don't know where it is, and don't know what 
happened to it.
  The question is, does anybody here care? If so, why would we not vote 
on an amendment to set up the kind of committee I would suggest?
  As all of us know, we are rushing headlong to have a vote on 
bankruptcy. We will have that vote. But there is apparently no interest 
in trying to get to the bottom of these questions I asked. According to 
the Inspector General of the Coalition Provisional Authority, there was 
one Iraqi ministry that had 8,206 guards on the payroll, which was the 
responsibility of the CPA. The problem is there are only 602 working 
there; 8,206 were being paid for by the CPA, but only 602 were working. 
The Coalition Provisional Authority actually had possession of nearly 
$9 billion in funds that actually came from Iraqi oil that belonged to 
the Iraqi people. The inspector general says that money cannot be 
accounted for. Where did it go? What happened to it? When will someone 
start caring about those things?

  I have asked a lot of questions. We have held hearings in the 
Democratic Policy Committee on these subjects, because the authorizing 
committees will not hold hearings on these subjects. I have offered an 
amendment in the Senate on a timely basis. Because cloture was invoked, 
the majority party knew they would not require Senators to vote on this 
amendment to this bill. But obviously, this amendment will come back. I 
will have the opportunity to offer it again, will offer it again, and 
we will vote in the Senate, provided there is any appetite at all about 
what is happening to the American taxpayers' money.
  I have previously supported bankruptcy legislation. I had hoped to 
support it this time. But because I was precluded from getting a vote 
on an amendment that I offered on a timely basis, and because of other 
concerns I have with the bill, I don't intend to vote to advance this 
legislation. I say to my colleagues, we will vote on this amendment at 
another time because I will offer it again. We will find a way to force 
a vote in the Senate on creating a special committee to investigate 
this waste, fraud, and abuse.
  It is unthinkable at a time when we have massive Federal budget 
deficits, a fiscal policy that is far off track at the same time we 
have massive trade deficits, the combination of which is well over $1 
trillion a year, that no one seems to care much about waste. If ever I 
have seen an example of waste, fraud, and abuse that is sickening and 
disgusting, it is in this area. This Senate owes it to the American 
people to create a committee to investigate, if the authorizing 
committees in the Senate will not do their job and hold oversight 
hearings.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. KENNEDY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                            Amendment No. 68

  Mr. KENNEDY. Mr. President, I call up amendment 68.
  The PRESIDING OFFICER. The amendment is pending.
  Mr. KENNEDY. Mr. President, the most disturbing thing about this 
supposed bankruptcy reform is the utter lack of fairness and balance in 
the legislation. It gets tough on working families facing financial 
hardship due to a health crisis, job loss caused by a plant closing or 
offshoring of a job, or a military callup to active duty. The laws of 
bankruptcy are being changed to wrest every last dollar out of these 
unfortunate families in order to further enrich the credit card 
companies.
  However, the authors of this legislation look the other way when it 
comes to closing millionaires' loopholes and ending corporate abuse. 
The legislation fails to address the real crisis in corporate 
bankruptcy where reorganization plans often benefit the very insiders 
whose greed and mismanagement brought down the company at the expense 
of the workers, the retirees, and the creditors, and it fails to 
address the shocking abuse of millionaires hiding their assets in so-
called asset protection trusts, placing them completely beyond the 
reach of creditors.
  This bill also fails to deal effectively with the unlimited homestead 
exemptions in a few States which allow the rich to hold on to their 
multimillion-dollar mansions while middle-class families in other 
States lose their modest homes. We truly cannot allow this bill to pass 
without closing the millionaires' homestead loophole once and for all. 
It has become a national embarrassment. Millionaire deadbeats buy a 
huge mansion in Florida and Texas to shield their wealth from 
creditors. The harsh rules of bankruptcy being established by this bill 
will trap hard-working middle-class families, but the unlimited 
homestead exemption will allow rich debtors to escape.
  Existing bankruptcy laws allow those in bankruptcy to protect from 
their creditors certain assets, the nature of which is largely 
determined by State law. Most States make some allowance for homes or 
homesteads people live in, but the allowance is a modest one, too 
modest, in many States, for elderly people with large equity in the 
homes they have lived in for most of their lives.
  However, five States--the most notorious of which are Texas and 
Florida--have unlimited homestead exemptions. This means debtors in 
those States can stash away millions, even tens of millions of dollars 
in the States and leave their creditors with nothing.
  S. 256 leaves this gaping loophole wide open. It will allow the real 
abusers of the bankruptcy system to file for bankruptcy and to still 
keep their fortunes and properties intact while leaving their creditors 
with nothing. S. 256 has created some minor exceptions to the homestead 
exemption, none of which would be applicable in many of the most 
egregious cases. The bill fails to deal with the problem head on of 
multimillionaires who abuse bankruptcy by stashing away wealth while 
they declare bankruptcy.
  My amendment caps the amount allowed for the homestead exemption at 
$300,000. This is an adequate allowance for most people. The average 
home in the United States is $240,000, a great deal higher in many of 
the regions of the country and lower in some parts of the country. This 
$300,000 is an adequate allowance for most people and would end the 
exploitation of the homestead exemption to hide assets from creditors. 
It would add some measure of fairness and balance to a bill that sorely 
needs some fairness and balance.
  Some of the most egregious abuses we have currently and that this 
legislation fails to deal with are the kinds of abuses that we have in 
the case of Ken Lay, the former chairman of Enron, who owns a $7 
million penthouse condominium. Mr. Lay made over $200 million from 
Enron stock and $19 million in bonuses. Other executives received 
bonuses as high as $5 million. Over 5,000 employees lost their jobs, 
and 20,000 lost an estimated $1 billion in retirement savings. Now, Ken 
Lay has been able to put some $7 million in a penthouse condominium in 
Houston's exclusive River Oaks neighborhood with 12 rooms covering 
12,800 square feet.
  We are going to find there have been hard-working men and women who 
have had health insurance--half of all of the bankruptcies are the 
result of dramatic health bills. Seventy-five percent of those 
individuals had health insurance. And, as we have pointed out during 
the course of this debate, if your family is touched by cancer, you, by 
definition, are going to have $35,000 to $40,000, at a minimum, out-of-
pocket expenses. And that, in many situations, is enough to drive a 
family into bankruptcy.

[[Page S2322]]

  If you have another serious health need, it will do the same. If you 
have important needs for children, such as spina bifida, autism, or 
other kinds of significant and important children's diseases, it will 
run into tens of thousands of dollars.
  What we have seen in our study of these bankruptcies is half of the 
bankruptcies are caused by these medical disasters. Yet, we are 
unprepared to give any kind of consideration to these hard-working 
people who have taken out health insurance to try to provide for their 
families and, through no fault of their own, have been caught up in 
these dramatic health care bills. They are struggling and try to avoid 
bankruptcy and meet their responsibilities. But once they get caught in 
this net that is included in the bill, they will be punished--and I say 
``punished''--by the provisions in this bill which are unduly harsh and 
I believe unduly unfair.
  But not Ken Lay. Not Ken Lay. Here it is: He will be out there in his 
$7 million penthouse condominium in Houston's River Oaks neighborhood, 
with 12 rooms and covering 12,800 square feet.
  Or Andrew Fastow, the former chief financial officer of Enron, who 
recently built a large house in River Oaks valued in the millions, his 
home will not be taken. He will be able to go home every night to that 
home and be able to live there while we are seeing the homes taken from 
working families whose only problem was that their family was hit by 
cancer or another serious illness. We are seeing their homes taken, 
when we see individuals who have basically violated the trust of their 
company and of the workers get a free ride in the form of millions of 
dollars.
  You call that fair? You call that fair? All this amendment says is, 
we will have a uniform standard. We have a uniform standard in this 
amendment. We are going to have a uniform standard with regard to the 
equity in the house. We are not going to let these individuals go off 
and be able to shield all of their income.
  We find Jeffrey Skilling, Enron's former president and chief 
executive officer, lives in a 15-room house in River Oaks valued at 
over $4 million.
  WorldCom's chief financial officer, Scott Sullivan, who was charged 
with falsifying the books by more than $3.8 billion, recently built a 
4-acre, $15 million estate in Boca Raton, FL, with an 18-seat movie 
theater, art gallery, and lagoon.
  You are telling me we are going to protect those individuals in their 
homes when we have single mothers who cannot get the child support or 
alimony, through no fault of their own, and they are thrown into 
bankruptcy and in danger of losing their homes? And the cruelty is the 
innocent individual, more often the wife, who is not getting the 
alimony or child support, has a very good chance of losing her home--
but not these individuals, not Dennis Kozlowski, the former CEO of Tyco 
International, who is said to have used $19 million from a no-interest 
loan from his company to pay part of the cost of a $30 million compound 
in Boca Raton, FL, called, ironically, Sanctuary. So $30 million he has 
been able to put away there.
  There are hundreds of thousands of workers who have lost their jobs, 
lost their savings, lost their health care, lost their pensions--but he 
is going to be protected by this legislation. Where is the fairness in 
this legislation when it comes to this issue in terms of homes?

  We have a law firm in hock for $100 million. Former Baseball 
Commissioner Bowie Kuhn moved to a mansion in Ponte Vedra Beach, FL, 
and immediately sought protection from the creditors. And the list goes 
on and on and on.
  What is the current situation with regard to the homes and 
homesteads? Well, if you get caught up with a claim against you, and 
you live in any of these States--in New Jersey, in Pennsylvania, or 
Maryland--there is no homestead exemption. Your home, if you have the 
blessings to have a home, is thrown right in there, sold right off, put 
right on the market, and out you go.
  In the State of Michigan, it is $3,500 in value. In Kentucky, it is 
$5,000 of value; Georgia, $5,000; South Carolina, $5,000; Ohio, $5,000; 
Alabama, $5,000; Virginia, $5,000, plus $500 per dependent; Tennessee, 
$5,000 in value, and $7,500 with your home if you are a married couple; 
Indiana, $7,500; Illinois, $7,500; Missouri, $8,000.
  But there is no limitation for the Ken Lays, the Jeffrey Skillings, 
the Dennis Kozlowskis putting aside tens of millions of dollars that is 
going to be protected.
  These families will have that amount of equity that will be 
protected. You can go into some other States: New York, $10,000; North 
Carolina, $10,000; and Wyoming, $10,000. And some States go on up to 
$75,000--Connecticut. In Montana it is $100,000. In my State of 
Massachusetts, it is $300,000. But there is no limit at all, no dollar 
limit--some acreage amount--in Texas. In Texas, it is 10 acres in an 
urban area. It can be in downtown Dallas or downtown Houston. Or it can 
be 200 acres in a rural area. You are protected. If you have a home on 
10 acres, wherever it is in an urban area--or 200 acres in a rural 
area--you are not touched by this legislation. And that is true in 
varying degrees for the six States.
  So we have to ask ourselves, why treat these six States separately 
and differently from all of the other States, and particularly where, 
in the other States, when people fall into bankruptcy, one of the first 
assets they are going to lose is their home.
  So at the appropriate time we will have an opportunity to vote on my 
amendment. As I say, this amendment closes that homestead loophole but 
permits, notwithstanding any other provision, the maximum amount of 
homestead exemption that may be provided under State law shall be 
$300,000.
  If you get a judgment against you for $400,000, they sell your home, 
but at least that $300,000 is enough that you may be able to get 
something, particularly if you are an elderly person living on an 
income of $1,200 or $1,500 a month, you might be able to survive.
  But the idea outside of that is that you are effectively taking away 
the homes and putting them at risk for 44 States and permitting 6 
States to effectively circumvent this legislation in a very important 
way. It is wrong. I hope our colleagues and friends can support our 
measure.


                            Amendment No. 70

  Mr. President, I would ask that amendment be temporarily set aside, 
and I call up amendment No. 70.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
amendment No. 70 is already pending.
  Mr. KENNEDY. I thank the Chair.
  Mr. President, this amendment is designed to protect single mothers 
and their children, who are forced into bankruptcy because they did not 
receive the child and spousal support they were entitled to, from the 
harsh provisions of this bankruptcy bill. Single mothers are 50 percent 
more likely than married people to go bankrupt and three times more 
likely than childless people to go bankrupt. That statistic tells a 
great deal about the reality of why people are in bankruptcy.
  The proponents of this bill argue that people file for bankruptcy 
because they are spendthrifts looking to escape their financial 
obligations. But this stereotype is terribly wrong. The bankruptcy 
courts are filled with the cases of hard-working people who were pushed 
over the financial brink because of a family health crisis, a lost job, 
or a failure to receive child support. These are the people this bill 
would turn the screws on, looking to squeeze out a few more dollars for 
the credit card companies.
  The amendment focuses on this last group, on single parents trying to 
raise their children without the financial support they were supposed 
to receive from the absent parent. It would exempt from the onerous 
means test a single parent who failed to receive child support or 
spousal support that she was entitled to receive pursuant to a valid 
court order totaling more than 35 percent of her household income 
within a 12-month period. No wonder such a person ended up in 
bankruptcy. She was never paid more than a third of the income she 
expected over an entire year to help raise her children, to provide for 
their basic needs and well-being. Under those circumstances, she had no 
choice but to fall back on borrowing to support her family. She was not 
irresponsible. What she did was unavoidable.
  Few people realize the magnitude of this problem. In 2004, $95 
billion in child support--$95 billion--was uncollected. Failure to 
receive that child

[[Page S2323]]

support put millions of single-parent families in a deep financial hole 
through no fault of their own, and it is the children who suffer the 
most in these situations. Why on earth would we want to make things 
even more difficult for these families? Most single moms have to 
struggle to make ends meet. They are working in low-wage jobs without 
good benefits. Over three quarters, 78 percent, of them are 
concentrated in four typically low-wage occupational categories. When 
the economy is tough, they are often the first ones let go.
  The poverty rate for single moms is nearly 40 percent as compared to 
19 percent for single fathers. It is no wonder that single mothers are 
now more likely to go bankrupt than any other demographic group--more 
than the elderly, more than divorced men or married couples, more than 
minorities or people living in poor neighborhoods. Yet this legislation 
would deny traditional bankruptcy relief to many single-parent families 
who never received the child support they were owed. Instead, they 
would have to keep paying those credit card bills for another 5 years. 
Is that fair? I can't believe that a majority of my Senate colleagues 
think it is.
  I am asking them to extend a little compassion to these single 
mothers struggling to raise their children.
  The following women's and children's organizations continue to oppose 
this bill: The National Women's Law Center, the National Partnership 
for Women and Families, National Organization for Women, Parents for 
Children, YWCA, Business and Professional Women, the Children's Defense 
Fund, Voices for America's Children. They do so because of the 
particularly harsh provisions of this bankruptcy bill and the heavy 
weight it puts upon women generally and most particularly on innocent 
women who are being denied child support and alimony and because they, 
through no fault of their own, run into this kind of a financial 
crisis. This legislation will impose harsh provisions upon them, and 
they will be treated not just in bankruptcy but they will be treated 
with the harsh provisions that will effectively put them in indentured 
servitude for the next 5 years.

  The National Women's Law Center, in writing to urge opposition to S. 
256, says it is harsh on economically vulnerable women and their 
families. They point out that the bill would inflict additional 
hardship on over 1 million economically vulnerable women and families 
who are affected by the bankruptcy system each year--1 million women, 
the majority of whose only problem is that their husbands have failed 
to provide alimony and child support. And we are going to wrap them in 
with the spendthrifts who run amok with their credit. These are 
innocent individuals. We are saying that the harsher provisions of this 
bankruptcy law--that is going to indenture these women for 5 years; 
they can get judgments against them for 5 years--will exist for these 
families, women forced into bankruptcy because of family breakups, 
factors which account for 9 out of the 10 filings of women who are owed 
child and spousal support by men who file for bankruptcy.
  It is going to be more difficult for the women to even get the 
alimony from their husbands who may be in bankruptcy but needing to owe 
alimony to their wives, because the husbands are going to be subjected 
to the provisions in this legislation and that is going to make the 
wife compete with the credit card companies. So that is going to be 
another burden which these individuals are going to have to face.
  I hope we can find some support for this amendment because we are 
talking about perhaps among the most innocent group of people who will 
be caught in this. We have talked about single moms. We have talked 
about the National Guard and Reserve. We have talked about those who 
have been hit by the medical bankruptcy. All, through really no fault 
of their own or very little fault of their own, are going to be facing 
a very harsh future.
  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. KENNEDY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                            Amendment No. 69

  Mr. KENNEDY. Mr. President, next I will address amendment No. 69, 
which I believe is pending.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. KENNEDY. Mr. President, one of the extraordinary phenomenons we 
are facing at this time is the outsourcing of American jobs, the 
movement of American manufacturing jobs out of this country--by and 
large to the Far East but to other countries--and the growth of what we 
call ``temps''--companies that provide temporary workers. Those 
temporary workers have few, if any, benefits. So, obviously, when they 
run into challenging health crises and more limited incomes, they are 
facing the dangers of bankruptcy.
  That is why I am offering this amendment--to ensure that workers who 
have lost their jobs or who have an illness or injury that prevents 
them from working are not unfairly thrown into the harsh means test 
created by this bill. This means test puts additional burdens on the 
debtors already trying to get their lives and finances back together 
after a difficult period.
  The means test applies to those debtors whose average income for the 
6-month period prior to filing bankruptcy is above the median income. 
Some debtors forced to file for bankruptcy because they lost their jobs 
are already exempt because they had no income in the last 6 months, but 
those who lose their jobs within 6 months before the filing for 
bankruptcy can be fairly included in the means test based on income 
they are no longer earning. My amendment would correct this problem. It 
provides that income from any job in which the debtor is no longer 
employed and income from any activity in which he can no longer engage 
due to a medical disability will be excluded from this calculation.
  Mr. President, if we look at what has been happening in the economy, 
particularly to those individuals who are unemployed, many of them have 
been looking for employment for some period of time. If we look at the 
numbers of unemployed workers in January 2001, it was 6 million. In 
February 2005, it is 8 million. We are in a period where those who are 
unemployed are unemployed for a longer period than at any time in 
recent history.
  This chart shows what happens in recoveries. The recoveries before 
1991--the increase in terms of the employment and recoveries beginning 
in 1991 are here, and our current recovery shows that it is very light 
in terms of the total number of jobs that are created.
  This is one of the important charts, Mr. President. This has 8 
million Americans competing for 3.4 million jobs. That is the economic 
condition for workers in this country: 8 million people are looking for 
3.4 million jobs. Obviously, there are going to be many millions of 
Americans who are not going to be able to get those jobs. When they 
can't get the jobs, they don't have the unemployment compensation, and 
they are unable to provide for their families, what happens? They end 
up in bankruptcy.
  We are trying to say that for those individuals--by and large 
individuals who have lost their jobs because of outsourcing--the best 
projection is that we are going to lose 3.4 million jobs; 3.4 million 
jobs are at risk of being shipped overseas. 540,000 jobs in 2004; 
830,000 in 2005; 1.7 million in 2010; and 3.4 million in 2015. 
Basically, when the manufacturing jobs go overseas, individuals lose 
their income, or if they are able to get some income, it is as a part-
time worker with no health coverage. Their income goes down 
dramatically. What happens to those individuals? They end up in 
bankruptcy through no fault of their own. These are Americans who want 
to work.
  From 2001, we have seen 2.8 million manufacturing jobs lost; 2.8 
million jobs were lost. These are the jobs with good benefits, good 
wages, the jobs that are the backbone of America. When you take 2.8 
million of these jobs out of the market and you have 8 million people 
chasing 3.4 million jobs, we know there are going to be millions of 
American workers who are going to find increasing pressure in providing 
for their families. That is what is happening today.

[[Page S2324]]

  What we are saying is, if these workers are going to be forced into 
bankruptcy because they have lost their jobs, they are not going to 
have to fall into the cruelest part of the bankruptcy. That is all we 
are saying. We have done this. I have been here when we had our trade 
adjustment assistance. We said some industries were adversely affected 
because of imports. We provided some consideration for those workers. 
We are finding out now that we are losing hundreds of thousands and 
millions of jobs that are being moved overseas. The result is that many 
of these individuals are unable to have the kind of income they need, 
and they are forced into bankruptcy. When they are forced into 
bankruptcy, we are saying that they don't go into chapter 13; they go 
in and meet their responsibilities and get a fresh start. They don't go 
into a chapter 13, which will force them to continue to pay for 5 
years.
  If you look at this chart, you will see that 49 of the 50 States have 
lost manufacturing jobs. So this reaches the whole dimension of this 
legislation because this legislation is national. This particular 
challenge is national. There is obviously a great deal more focus on 
this in the industrial heartland, in New York, Pennsylvania, Ohio, 
Indiana, Illinois, Michigan, Wisconsin, and many of those States, and 
even in Massachusetts we have lost 83,000 manufacturing jobs. There are 
plenty of other jobs, such as in North Carolina where they lost 163,000 
jobs.
  So we have to ask ourselves, what happens to these individuals? We 
know what happens to them. We know that if they can get a job, they are 
going to be paid a good deal less. If they cannot, they will run out of 
unemployment compensation. We are not providing extended unemployment 
compensation, and we know that the final catch is that in this economy, 
the health insurance is up, college tuition is up, housing is up, and 
gas is up. It is forcing these individuals into bankruptcy.
  All we are saying for those individuals who have lost their jobs--
jobs that have gone overseas, lost manufacturing jobs--and are unable 
to get those jobs and are forced into bankruptcy, that they will not 
have the harshest provisions of bankruptcy directed upon them. We ought 
to show some consideration to them. These are not spendthrifts, Mr. 
President. These are hard-working Americans who, 5 years ago, would not 
be facing this particular challenge, and now they are. We ought to at 
least give them some consideration.
  Mr. President, I think I have until 2:45.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. KENNEDY. Mr. President, we in the Senate were elected to serve 
the people. It is our solemn duty to fight for the American people 
every single day, for the values they share and the priorities they 
care about most. Above all else, the American people expect us to stand 
for fairness, freedom, and opportunity. Those values are the 
cornerstone of the American dream. We believe that if you live right 
and work hard, you should be able to care for your family. You should 
be able to afford a comfortable home in a safe neighborhood. You should 
be able to put your children through school and in college. You should 
have time to spend with your family, practice your faith, and 
contribute to your community.
  We also believe that when life throws you an unexpected setback, you 
can count on your neighbors to pitch in. If you lose your job or you 
fall seriously ill, we all want to help out. You should be given a 
second chance to pick yourself up, dust yourself off, work hard, and 
reclaim the American dream for you and your family. That is the 
American way. That is the American spirit. That is what our bankruptcy 
courts should be about: giving average Americans who have lived 
responsibly a second chance.
  This bill before us turns the American dream into the American 
nightmare. This bankruptcy bill turns its back on our most basic values 
as Americans. It is not a bill of the people, by the people, or for the 
people. It is a bill of the credit card companies, written by the 
credit card companies, and for the credit card companies, and it has no 
place in America.
  This bill is about greed. It is about the most profitable 
corporations in America--the credit card companies--using the Senate to 
enhance their profits, even more by shaking down hard-pressed Americans 
in bankruptcy court. It stacks the deck in favor of the credit card 
companies and against American families who do everything right but 
find themselves in bankruptcy because they lose a job, fall ill with 
cancer, or get divorced.
  I am reminded of the words of Leviticus in the 25th chapter. It 
reads:

       If one of your brethren becomes poor, and falls into 
     poverty among you, then you shall help him, like a stranger 
     or sojourner, that he may live with you. Take no usury or 
     interest from him; but fear your God, that your brother may 
     live with you.
       You shall not lend him your money for usury, nor lend him 
     your food at a profit.

  But this bill ignores those words. It allows the credit card 
companies that charge outrageous interest rates, exorbitant fees, and 
force you into bankruptcy to still win back almost every dime in 
bankruptcy court against Americans who have fallen on hard times. This 
pillaging of the middle class must come to an end.
  Today we will pass a bankruptcy bill that rewards the credit card 
companies at the expense of average Americans. Last month, we passed a 
class action bill that makes it harder for average Americans to hold 
big corporations accountable, and we have a President who wants to give 
your Social Security away to Wall Street.
  Credit card companies, big corporations, Wall Street--when is this 
President and this Republican Congress finally going to give the 
American people just 1 minute to debate their issues? When are we going 
to make their health care more affordable so they do not have to worry 
every night if one of their children gets sick? When are we going to 
make college more affordable so parents can proudly send their children 
to college to build their own futures? When are we going to fight for 
clean water and clean air so we can raise our families in health? When 
are we going to compete for good jobs, not by lowering the pay but by 
raising our skills in the global economy? When are we going to fight 
for a secure retirement for Americans who have lived responsibly and 
worked hard all of their lives? When is the Senate finally going to 
stand up and fight for the American people?
  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. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. CLINTON. Mr. President, I rise to encourage my colleagues to 
support two amendments that seek to provide some protections to 
families who face the devastation of medical bankruptcy.
  I thank Senator Kennedy for offering these amendments that I am proud 
to be a cosponsor of. The first would exempt from the means test 
debtors whose severe medical expenses have caused their financial 
hardship and forced them to file for bankruptcy, and the second would 
provide a homestead exemption to medically distressed debtors of 
$150,000 in equity in their primary residence.
  These amendments are critical and will help ensure that families do 
not have to declare bankruptcy and lose their homes just because they 
get sick.
  Medical bankruptcy has skyrocketed in recent decades. In 1981, only 8 
percent of personal bankruptcy filings were due to a serious medical 
problem. In contrast, a recent study by researchers from Harvard Law 
School and Harvard Medical School found that half of personal 
bankruptcies filed in this country are now due to medical expenses. And 
what is most astonishing about this is that three-quarters of the 
medically-bankrupt had health insurance at the onset of their illness.
  This means that each year, 2 million families endure the double 
disaster of illness and bankruptcy. In my State of New York, more than 
38,000 of the almost 77,000 personal bankruptcies in 2004 were caused 
by medical expenses, impacting more than 100,000 New Yorkers.
  On average, those bankrupted by medical expenses are middle-class

[[Page S2325]]

Americans with children who owned their own homes, held jobs, and have 
completed some college education. Medical debtors are typical Americans 
who got sick. Their out-of-pocket costs, starting from the onset of 
illness, averaged almost $12,000, and in the year leading up to 
bankruptcy their out-of-pocket expenses averaged more than $3,500.
  These are families who desperately tried to avoid bankruptcy: more 
than 20 percent reported going without food; more than 30 percent had a 
utility shut off, more than 50 percent reported skipping needed doctor 
visits; and more than 40 percent failed to fill prescriptions in the 2 
years leading up to their A bankruptcy filing.
  The Harvard study also found that those driven into bankruptcy by 
medical expenses differ in an important way from other filers: they 
were more likely to have experienced a lapse in health coverage leading 
up to their bankruptcy filing. In fact, a lapse in health coverage at 
some point in the 2 years before filing was a strong predictor of 
bankruptcy, with almost 40 percent of medical debtors experiencing a 
lapse in coverage, compared to 27 percent of other filers.
  For those bankrupt by medical costs, illness caused financial 
hardship not just because of medical expenses, but also because the 
illness forced them to work less or lose their employment entirely. In 
fact, 35 percent had to work less because of illness, and in many cases 
to care for someone else. And it is likely reduced work and even the 
loss of a job because of medical problems that resulted in a lapse in 
healthcare coverage.
  It's easy to see how the face of medical bankruptcy is the typical 
American worker. An unexpected illness or accident leaves you unable to 
work or unable to maintain your job full-time, which in turn leaves you 
with less income to pay your medical expenses. Over time your access to 
care is diminished because you can't afford the cost-sharing, are not 
seeking needed care to avoid expenses, or have lost coverage because of 
reduced work hours or job loss, and ultimately your health insurance 
coverage lapses. Now you have no assistance with medical expenses and 
little or no income to pay the bills. It's a vicious cycle. And all 
because you or a member of your family got sick.
  Unfortunately, rapidly rising health care costs will only exacerbate 
this problem going forward. The number of Americans spending more than 
a quarter of their income on medical costs climbed from 11.6 million in 
2000 to 14.3 million in 2004. And the pressure on employers to reduce 
benefits and increase cost-sharing as a result of rising health costs 
is no less.
  The solution to this problem is not to punish hard working men and 
women who on a different day, with different luck, wouldn't be just a 
typical American who got sick. These Americans are already confronting 
difficulties because of circumstances beyond their control. Let's not 
make their situations even worse. We need to adopt these amendments and 
begin the hard work of addressing the causes of medical bankruptcy and 
the serious problems that face this nation's health care system.
  Again, I thank Senator Kennedy for his work on these amendments and 
urge their adoption.


                            Amendment No. 67

  Mr. DODD. Mr. President, this amendment was going to be voted on, 
actually, earlier this morning, but there was a reason to delay it 
until this afternoon. I ask unanimous consent to have 1 minute to 
explain the amendment.
  The PRESIDING OFFICER. Under the previous order, the question will be 
on amendment No. 67, offered by the Senator from Connecticut, Mr. Dodd. 
Without objection, the Senator will be recognized for 1 minute.
  Mr. DODD. Mr. President, this amendment is simple and 
straightforward. More than 1 million women in the coming year will file 
bankruptcy. The overwhelming majority of these women are mothers of 
young children. This amendment is designed to see to it that the needs 
of children will be met as persons go through the bankruptcy act. The 
credit card companies certainly have a right to receive what resources 
are due them, but they should not be able to trump the needs of 
children.
  Too often in this bill, in a variety of places, that is exactly what 
happens. My colleague from Utah said this bill has been 8 years in the 
making. It would only take a couple of minutes here to try to redress 
some of the inequities that exist when it comes to questions of 
providing for the basic needs of children--educational needs, utilizing 
child support, the earned-income tax credit, the child tax credit, and 
alimony to support the needs of children.
  For over 100 years, since 1903, women and children have come first in 
our Nation's bankruptcy laws. This will be the very first time, without 
this amendment being adopted, that children and families will take a 
backseat to the credit card industry. That is a wrong priority for our 
Nation.
  Every major child advocacy group in this country supports this 
amendment. I urge my colleagues to support it. This is one exception we 
ought to make to get right the balance in this bill of the needs of the 
credit card companies with the needs of America's children and 
families. I urge adoption of the amendment.
  The PRESIDING OFFICER. The question is on agreeing to amendment No. 
67, offered by the Senator from Connecticut, Mr. Dodd, on which the 
yeas and nays have been ordered. The clerk will call the roll.
  The assistant journal clerk called the roll.
  The PRESIDING OFFICER (Mr. Martinez). Are there any other Senators in 
the Chamber desiring to vote?
  The result was announced--yeas 42, nays 58, as follows:

                      [Rollcall Vote No. 34 Leg.]

                                YEAS--42

     Akaka
     Baucus
     Bayh
     Bingaman
     Boxer
     Byrd
     Cantwell
     Clinton
     Conrad
     Corzine
     Dayton
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Nelson (FL)
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Stabenow
     Wyden

                                NAYS--58

     Alexander
     Allard
     Allen
     Bennett
     Biden
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Carper
     Chafee
     Chambliss
     Coburn
     Cochran
     Coleman
     Collins
     Cornyn
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Kyl
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner
  The amendment (No. 67) was rejected.


                            amendment no. 68

  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Mr. President, do we have an minute on each side?
  The PRESIDING OFFICER. Further time requires unanimous consent.
  Mr. KENNEDY. I ask unanimous consent for a minute on each side.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. KENNEDY. First of all, I want to pay tribute to my friend and 
colleague, Senator Kohl, who has worked on this issue for many, many 
years. This amendment closes one of the gaping loopholes in this bill, 
but it is a loophole millions of dollars wide and millions of dollars 
deep.
  Right now, because a few States have no limit on homestead, the Ken 
Lays, the Jeff Schillings, and the Dennis Kozlowskis in this world can 
hide millions of dollars or tens of millions of dollars of their assets 
from their creditors even after they go into bankruptcy. There isn't 
much fairness or balance in the bill so far, but this amendment will 
put a very small measure of balance in the bill by limiting the 
homestead exemption nationwide to $300,000.
  I ask my colleagues to vote for balance and fairness, and agree to 
this amendment.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. GRASSLEY. Mr. President, this bill is all about fairness and 
balance. This bill, as I introduced it minus the

[[Page S2326]]

Schumer amendment, is exactly the bill that Democratic leaders of the 
Judiciary Committee signed off on in the summer of 2002 when they 
controlled the U.S. Senate. I don't know how much more compromise you 
can get than that. But this amendment would gut one of the major 
compromises of this legislation that has evolved over that period of 
time going back to August 2002.
  The bill's homestead compromise that we have would create a Federal 
cap of $125,000 on the homestead exemption, but would allow those 
States with higher or unlimited exemptions to take advantage of them as 
long as they comply with the 2-year residency requirements and a 10-
year fraud reachback provision.
  The bill's compromise is a good one that all parties have signed off 
on. The Kennedy amendment would gut it.
  I ask you to kill this amendment.
  I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second? There is a 
sufficient second.
  The question is on agreeing to the amendment, and the clerk will call 
the roll.
  The assistant legislative clerk called the roll.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 47, nays 53, as follows:

                      [Rollcall Vote No. 35 Leg.]

                                YEAS--47

     Akaka
     Bayh
     Biden
     Bingaman
     Boxer
     Byrd
     Cantwell
     Carper
     Chafee
     Clinton
     Collins
     Conrad
     Corzine
     Dayton
     DeWine
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Snowe
     Specter
     Stabenow
     Wyden

                                NAYS--53

     Alexander
     Allard
     Allen
     Baucus
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Chambliss
     Coburn
     Cochran
     Coleman
     Cornyn
     Craig
     Crapo
     DeMint
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Kyl
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (FL)
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner
  The amendment (No. 68) was rejected.
  Mr. GRASSLEY. Mr. President, I move to reconsider the vote and to lay 
that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. GRASSLEY. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DURBIN. 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. DURBIN. Mr. President, this bankruptcy reform bill before the 
Senate, S. 256, is a 500-page bill, which has been the dream of the 
credit card industry, banks, and financial institutions across America 
for almost 10 years. What they are trying to do in this bill is make it 
more difficult for someone to have their debts discharged in 
bankruptcy.
  Now, of course, everyone understands our legal and moral obligation 
to pay our debts. But we recognized a long time ago that some people 
get into a situation where they are swamped with debt and cannot get 
out from under it. In the old days, they were relegated to debtors' 
prisons; they literally imprisoned them. In more civilized times, the 
decision was made to have a civil court procedure, where you could go 
in and have your debts released, surrendering virtually all of your 
assets to start over. That is happening in America today. About 1.3 
million Americans go into bankruptcy court for personal bankruptcies.
  The credit card industry and the banks say too many people are 
getting their debts discharged. So we are going to set up a new process 
in the bankruptcy court where we are going to ask more questions than 
ever and try to determine whether the person filing for bankruptcy 
could conceivably pay back, over the next 10 years, $165 a month. And 
if they can pay back $165 a month, we will not discharge their debts. 
They will end up walking out of court with the same debt they carried 
in, in most cases.
  Now, for a lot of people, you would say, if you can pay back 
something, you ought to pay it back. But for many people, it means the 
debts they have incurred that they cannot pay back will be dogging them 
and burdening them for the rest of their natural lives. So many of us 
have said when you take a look at this bill, at least be sensitive to 
some people who go into bankruptcy court through no fault of their own.
  Senator Kennedy talked about people with medical bills, because of a 
medical crisis in their family. A woman goes to the doctor with a lump 
on her breast, and a mammogram shows it is breast cancer. She goes 
through extensive radiation, chemotherapy, all sorts of recovery time; 
she cannot go back to work, and the bills mount up sky high and 
complications ensue. That is nothing that she has done wrong. There is 
no moral failure there. If her health insurance is not good, she is 
left in a position where she can never, ever pay back the bills. That 
is not a person who should be put through a more rigorous procedure in 
a bankruptcy court.
  Senator Kennedy said that if you don't do anything else for that poor 
woman and her family, at least say at the end of the bankruptcy court 
hearing she will still have a home, a roof over her head. So we asked 
for a $150,000 homestead exemption so that a person could at least have 
a modest home to return to after bankruptcy from a medical illness. 
That amendment was rejected. Everybody on the other side of the aisle 
voted against it.
  I offered an amendment and said, what about the men and women in 
uniform today, the Guard and Reserve who are being activated. They 
joined thinking: once a year I may have to serve my State, my country 
for a month or so. Now we are calling them into battle for a year, a 
year and a half, and no end is in sight.
  What if you were a member of the Guard? You have sworn to protect 
this Nation. You are called into combat and leave behind your family 
and your business. And what if the business fails because you are gone? 
What if you are forced into bankruptcy? Could we not at least include 
language in this bill to give special consideration to the men and 
women in uniform who are answering their Nation's call and may face 
bankruptcy? I lost that amendment 58 to 38. Not a single Republican 
would vote in favor of that amendment.
  The last amendment I am going to offer, much to the relief of my 
Republican colleagues, is one which asks my friends on the other side 
to take one last look at this issue. Instead of applying that special 
treatment or giving some help to all soldiers, guardsmen, and 
reservists who serve and may lose a business or go into family 
bankruptcy because they are overseas for America, I ask my colleagues 
on the other side of the aisle to consider this: How about disabled 
veterans whose indebtedness occurred primarily while they were serving 
America?
  I have met some of these veterans at Walter Reed Hospital. They have 
lost limbs. They face terrible injuries. If they face a bankruptcy that 
occurred because of debts that happened while they were in service to 
our country, should we not give these disabled veterans a fighting 
chance in bankruptcy court? Should we not spare them the hurdles, 
obstacles, paperwork, and legal bills that the credit card industry is 
demanding for people who go to bankruptcy court? This exemption will 
especially help recently disabled veterans who, in addition to their 
physical loss, have terrible financial difficulties.
  The bankruptcy bill makes petitions for debt relief under chapter 7 
subject to a means test. I had a chart before. It is a long chart. Not 
only do you have to file all the documents to go into bankruptcy court, 
but this new 500-page bill lays it on you again and makes you file 
another ton of documents to see if maybe you could pay back $150 or 
$175 a month over the next 10 years.
  So I am giving relief to disabled veterans. I am not going to 
apologize for that. A lot of us get up on the floor and praise them for 
what they have done.

[[Page S2327]]

We should. For goodness' sake, they are protecting us, our families, 
and our homes. Is it too much to ask that we give them a break in this 
harsh bankruptcy bill from the worst part?
  The amendment specifies the exemption applies only if ``the debtor is 
a disabled veteran and the indebtedness occurred primarily'' while they 
were on active duty. To qualify for this exemption, a disabled veteran 
must have incurred most of their indebtedness--more than 50 percent of 
their indebtedness--while on duty.
  The Disabled Veterans of America estimates there are 2.3 million 
disabled veterans. According to the Department of Veterans Affairs' 
annual report, the average disabled veteran receives only $7,861 in 
disability compensation each year. That is not a lot on which to live. 
Sadly, this amount varies widely. Veterans in some States do much 
better than veterans in others. Unfortunately, my home State falls into 
the ``others.'' We receive less than half on average of disability 
payments paid in other States.
  In considering whether to support this amendment, I invite my 
colleagues to reflect for a moment on the physical and financial 
situations some of our disabled veterans face. Their hardships today, 
combined with their earlier service, make them twice heroes, in my 
book. If any group of people deserves some relief from this burdensome 
process, it is America's disabled veterans who suffered physical and 
financial devastation while they were wearing a military uniform and 
risking their lives for America.
  I invite all my colleagues from both sides of the aisle to join me in 
cosponsoring this amendment and make this rather small but I think 
deeply worthwhile adjustment to the bankruptcy bill.
  It is my understanding that Senator Leahy will be coming to the floor 
momentarily, unless Senator Grassley seeks recognition at this point.
  The PRESIDING OFFICER (Mr. Coburn). The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, this would be a good opportunity for us 
to consider the general environment and the reason for this 
legislation.
  First of all, there has not been any major rewrite of the bankruptcy 
legislation for more than 25 years. During that period of time, there 
has been a dramatic change in the economy, particularly the 
globalization of the economy. It has brought about reasons for changing 
parts of the Bankruptcy Code.
  We have gone from around 300,000 bankruptcies a year to a high of 1.6 
million or 1.7 million bankruptcies a year. So there has been an 
explosion of bankruptcies. Even in the best of times there has been an 
explosion of bankruptcies. It has become an economic problem where the 
average person in America is paying an additional $550 for goods and 
services because somebody else did not pay their bills.
  All of these things have brought about reasons for changing the 
Bankruptcy Code. This legislation that is 500 pages that has been 
referred to is not something that just has been dropped on the Congress 
of the United States.
  First of all, at least 10 years ago, the Judiciary Committee set up a 
commission of experts in bankruptcy, not made up of Members of 
Congress, a commission of people from the private sector and from 
academia to study what needed to be done with the bankruptcy laws to 
bring them up to date with the global economy, to bring them up to date 
with the changes in our domestic economy, and to look at the problem of 
so many people filing for bankruptcy.
  This commission worked several months--more than a year--to produce a 
product. That was the basis for the introduction of legislation in 
1997. In that period of time, this bill has passed the Senate in 
several different Congresses and has passed the House in several 
different Congresses, has been worked out in conference, an agreement 
between the House and Senate in several different Congresses, one of 
those even reaching President Clinton for his signature. But it was the 
end of the year, and he pocket-vetoed it. We did not have a chance to 
reconsider that veto.
  The legislation before us, as I have introduced it, and basically the 
legislation that is before the Senate is legislation that has been so 
compromised, except for the Schumer amendment--and I will not go into 
what the Schumer amendment is--but except for that amendment, the bill 
we introduced and maybe four or five technical changes that were 
accepted in the Judiciary Committee is the legislation that was signed 
off on by Democrats who had a majority in the conference committee in 
the year 2002 when the Democrats controlled the Senate.
  Is that exactly the way that I would write this legislation? No, it 
is not. There are a lot of provisions in this bill I would like to be 
different. But in the Congress of the United States as a whole--and 
particularly in the Senate where there is no limit on debate, where 
filibusters are possible, where the minority has rights they should 
have, and the only place minority rights are protected--you have to 
reach compromises.
  I know no better compromise that I could put before the Senate than 
the wording of a compromise that was worked out between a Republican 
House and a Democratic-controlled Senate in the year 2002. That is what 
we have before us.
  There are probably a lot of people who do not want any bankruptcy 
reform, but they will probably end up voting for it because this bill 
in different Congresses has passed by a margin of 97 to 1 on one 
occasion. The last time it passed the Senate, I think the vote was 85 
to 12.
  I think all of this is evidence of a bipartisan agreement that the 
bankruptcy laws need to be reformed. I do not know what more evidence I 
can give the American people of the way our political system works, the 
way the Congress works, to arrive at compromise, than the compromise 
that I lay before the Senate.
  We recently heard from my good friend, the Senator from Illinois, the 
Democratic whip, that there have been many opportunities to help this 
group of people or that group of people or another group of people. We 
refer to that sort of helping this group or that group or another group 
as a carve-out.
  My colleagues have seen amendment after amendment that was introduced 
to do that. We defeated that, because there ought to be uniformity of 
application of law across the United States, not separating something 
special for this group or that group or another group when it comes to 
justice in the bankruptcy courts. And if we added all of that up, we 
might not have a lot of people left who are going to be affected by 
what a bankruptcy judge is supposed to decide, which is justice between 
creditors and debtors.
  In this legislation, we preserve one of the main goals of bankruptcy 
for the last 100 or more years, and that is the principle of a fresh 
start, where somebody is going to bankruptcy because they have problems 
that they cannot deal with, financial problems, natural disaster, 
divorce, medical, whatever it takes to get into financial trouble, that 
might not be any fault of one's own.
  To make it clear that we are not after people who do not have an 
opportunity--when people are below the median income of their State, 
they are practically guaranteed a fresh start under this legislation, 
and if people are above the median income for their State, there is a 
simple process called a means test, where one puts down all of their 
income and assets and what they owe and through that makes a 
determination of whether they have the ability to repay some of their 
debt.
  My friend from Illinois mentioned the figure of $150 or $175 that 
maybe over the next 10 years one would have to pay. If people have the 
ability to repay some of their debt, should they not have to repay some 
of their debt? It seems to me to be fair to those people to whom they 
do pay their debt.
  So we preserve the principle of a fresh start, but we also establish 
a principle that if one has the ability to repay some their debt, they 
are not going to get off scot-free.
  It is just not those two principles that ought to be looked at to 
understand whether Congress might be doing the right thing. I am not 
saying just an overwhelming vote in support of legislation is the only 
way that one ought to judge whether that legislation is justified, but 
surely the extent to which things are more bipartisan in the way they 
are done in this body

[[Page S2328]]

ought to be some justification that certain tests of justice and 
fairness are being done or they would not get that kind of support, 
because I do not know a single Senator who for the most part is not 
concerned about doing right for the people of his State.
  So that is the sort of consideration I hope the people of this 
country will give to this legislation, the need for it, the 
justification for it, the fairness of it, and most importantly those 
two principles of a fresh start for those who deserve it and the 
principle that if one has the ability to repay some of their debt that 
they are not going to get off scot-free.
  The PRESIDING OFFICER. The Senator from Vermont.


                            AMENDMENT NO. 83

  Mr. LEAHY. Mr. President, am I correct that amendment No. 83 is 
pending?
  The PRESIDING OFFICER. That is correct.
  Mr. LEAHY. Mr. President, I ask unanimous consent that Senator 
Warner, the senior Senator from Virginia, be added as a cosponsor to 
amendment No. 83.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEAHY. Mr. President, I am joined by friends and colleagues, the 
senior Senator from Maryland, Mr. Sarbanes, and the senior Senator from 
Virginia, Mr. Warner, in offering a bipartisan amendment that will 
moderately preserve the current conflict-of-interest standards for 
investment banks. We are doing this to safeguard the integrity of the 
bankruptcy process.
  Section 414 of the underlying bill would severely weaken the 
disinterested persons rule. That was an important conflict-of-interest 
standard. It has actually been part of the Bankruptcy Code since 1938. 
It has been there before I was born. We believe that the standard 
embodied in current law is critical to protecting the interests of 
investors and the public.
  So our bipartisan amendment is a modest compromise. It limits the 
conflict-of-interest prohibition, not a total exclusion but just 5 
years prior to the filing of the bankruptcy petition. In other words, a 
prohibition which has been the bankruptcy law forever would now be cut 
back just to apply in the 5 years immediately preceding the bankruptcy. 
I think it is a reasonable compromise.
  The current disinterested persons standards are intended to ensure 
that professionals who advise a company in bankruptcy have no conflicts 
of interest, are neutral, and when we consider how huge some of these 
bankruptcy have been, Enron and others, we want somebody without a 
conflict of interest; we want somebody who can be neutral.
  Since bankruptcy proceedings involve reexamining prior transactions, 
an investment bank that underwrote those prior transactions could not 
be expected to act as a neutral, disinterested party. It is almost like 
saying, I wrote these transactions when you went into this multimillion 
or multibillion-dollar bankruptcy but do not worry, I will now be the 
disinterested party to advise you where we go now.
  I think the reason we have the current standard, the reason it has 
worked well for nearly 7 decades, is because it has helped maintain 
public confidence in the bankruptcy system.
  Section 414 of the bill before us eliminates the current conflict-of-
interest standard. It is a standard that prohibits investment banks 
that have had a close financial relationship with the debtor from 
playing a major role in the bankruptcy process.
  I have talked to a lot of people who are far more knowledgeable on 
this than I, and they tell me you cannot expect that an investment bank 
that served as an underwriter of a bankrupt company's securities would 
then provide an independent assessment of that underwriting as an 
adviser in the bankruptcy of the company. In other words, you want to 
find somebody who can give you an independent, neutral assessment in 
bankruptcy of the underwriting. You don't go to the person who did the 
underwriting. Of course, they are going to say: Great job. Man, that 
person did a great job, whoever it was--oh, that was me? Boy, I did a 
great job.

  The investors, especially in these huge bankruptcies, the pensioners 
who have suffered financial damage through the bankruptcy, deserve 
neutrality. They don't deserve somebody where it looks as if it is such 
a cozy deal there is no way they are going to recover.
  If the bill is passed in its current form, the investment banks that 
advised or underwrote securities for companies such as Enron or 
WorldCom prior to bankruptcy, having advised or underwritten those 
securities, could then be hired to represent the interests of the 
defrauded creditors during the bankruptcy proceeding. Just think of 
this. The people who were involved in putting the creditors and the 
investors and the people whose pension money was in there, the people 
who were involved putting all their money at risk, can now be hired to 
represent their interest.
  There is a blatant conflict of interest and that is why it has been 
forbidden for seven decades. Firms that had a part in those companies 
could then end up staying on the payroll in bankruptcy and they could 
make huge profits, sometimes from their own fraud.
  What kind of message are we sending to those everyday Americans who 
invested for their kids' college or their own pensions, who suffered as 
a result of corporate misdeeds, if we then say that is OK, now we are 
going to give a whole lot of money to the people who set this mistake 
up in the first place?
  We talked to the National Bankruptcy Review Commission. They strongly 
recommended that Congress keep the current conflict-of-interest 
standards in place. Actually, in their report they concluded:

       Strict disinterestedness standards are necessary because of 
     the unique pressures inherent in the bankruptcy process.

  These are the people who understand this better than anybody in this 
Chamber.
  Supporters of the underlying bill have voiced their opposition to the 
inclusion of section 414. I wish they would listen to what a member of 
the Fifth Circuit Court of Appeals said, Judge Edith Jones. She is a 
member of the commission. She asked us to remove section 414. She said:

       If professionals who have previously been associated with 
     the debtor continue to work for the debtor during a 
     bankruptcy case, they will often be subject to conflicting 
     loyalties that undermine their foremost fiduciary duty to the 
     creditors. . . .
       Section 414, in removing investment bankers from a rigorous 
     standard of disinterestedness, is out of character with the 
     rest of this important legislation and . . . it should be 
     eliminated.

  Again, if you have a bankruptcy of a WorldCom, an Enron, something 
like that, and you have all these people with the pension money in it, 
the kids' college funds in there, their business in there, their own 
retirement in there, you cannot then turn around and say we are going 
to let the same people decide what happens to you in bankruptcy as the 
people who did the things that put us into bankruptcy in the first 
place.
  William Donaldson is the Chairman of the Securities and Exchange 
Commission. He wrote to us to express the opposition of the SEC to 
section 414 of the bill. He said:

       [We] believe that it would be a mistake to eliminate the 
     exclusion in a similar one-size-fits-all manner at a time 
     when investor confidence is fragile.

  Keep that in mind. It does something further. Not only do we end up 
hurting the people who have to rely on the bankruptcy court being 
honestly run, but he also wants to keep up investor confidence. He was 
joined in that position by his predecessor Arthur Levitt, and by a 
number of nationally renowned experts. National consumer organizations 
have written to us to warn of the danger of weakening conflict-of-
interest controls, as this bill would allow:

       If the participants in Enron's earlier financial dealings 
     had managed the investigation, it is quite legitimate to 
     wonder how many of these financial misdeeds would have come 
     to light in the first place. Without existing conflict-of-
     interest prohibitions in place, it is possible that some of 
     the same firms that have come under investigation by the SEC 
     for illegal activities in the current corporate scandals 
     might very well have been allowed to serve as ``objective'' 
     advisers in this and other bankruptcy proceedings.

  I ask unanimous consent a letter from the Consumer Federation of 
America, the Consumers Union, Consumer Action, U.S. Public Interest 
Research Group, and the National Consumer Law Center be printed in the 
Record.

[[Page S2329]]

       There being no objection, the material was ordered to be 
     printed in the Record, as follows:
                                                    March 3, 2005.
     Hon. Patrick J. Leahy
     Ranking Member, Senate Judiciary Committee, Washington, DC.
     Hon. Paul S. Sarbanes
     Ranking Member, Senate Banking, Housing and Urban Affairs 
         Committee, Washington, DC.
       Dear Senators Leahy and Sarbanes: The undersigned national 
     consumer organizations strongly support your amendment to 
     strike a little noticed provision of pending bankruptcy 
     legislation (S. 256) that would weaken current conflict-of-
     interest standards in the bankruptcy code. This provision 
     would, for the first time, allow investment bankers to offer 
     advice in bankruptcy restructuring cases about companies with 
     which they have had a close financial relationship prior to 
     bankruptcy. As advocates for small investors, we applaud you 
     for moving to eliminate this significant threat to the 
     interests of investors, employees and pensioners.
       Section 414 of pending bankruptcy legislation would loosen 
     the current standard for ``disinterested'' parties that are 
     allowed to advise bankruptcy management or trustees as they 
     attempt to restructure debtor companies in a manner that is 
     fair to investors and other creditors. Of the several parties 
     that are automatically banned from offering advice because of 
     obvious conflicts of interest, Section 414 removes only one: 
     investment banking firms. This means that the same firms that 
     underwrote and sold stocks and bonds for a bankrupt company--
     firms that in some cases may have participated in structured 
     finance deals with the company or otherwise played a 
     significant role in financial decisions that helped to land 
     the company in bankruptcy--could now be allowed to offer 
     restructuring advice to the management or trustee responsible 
     for maintaining impartiality and representing the interests 
     of creditors.
       Corporate bankruptcy experts tell us that reexamining the 
     financial transactions that led to bankruptcy is one of the 
     most significant responsibilities of the post-bankruptcy 
     management (often called debtor-in-possession, or DIP, 
     charged with the duties of a trustee to protect all creditors 
     and investors.) This review includes determining what role, 
     if any, that outside advisers and financial partners played 
     in bringing about a company's downfall. Another of DIP 
     management's most important responsibilities is determining 
     the best source of financing for any restructuring. An 
     investment banking firm has obvious conflicts in both roles 
     and is very unlikely to be an advocate for review of its own 
     previous work or the deals in which it participated. It is 
     quite possible, for example, that an investment banker would 
     discourage bankruptcy management or trustees from pursuing 
     legal claims against the banking firm for illegal activities 
     of that firm that contributed to the bankruptcy. The landmark 
     settlement with the leading investment banks over their stock 
     research practices shows just how poorly these firms have 
     handled comparable conflicts in the past.
       Imagine how the public would have reacted if the investment 
     banks that were later found to have profited enormously from 
     structured finance deals with Enron had been hired to offer 
     advice in the Enron bankruptcy. Indeed, if the participants 
     in Enron's earlier financial dealings had managed the 
     investigation, it is quite legitimate to wonder how many of 
     these financial misdeeds would have come to light in the 
     first place. Without existing conflict-of-interest 
     prohibitions in place, it is possible that some of the same 
     firms that have come under investigation by the SEC for 
     illegal activities in the current corporate scandals might 
     very well have been allowed to serve as ``objective'' 
     advisors in this and other bankruptcy proceedings. This 
     scenario is possible because, as you know, it often takes 
     months or longer to unravel the role of investment banking 
     firms in such cases, particularly cases that do not receive 
     the media and congressional scrutiny of an Enron or Worldcom 
     collapse.
       In response to these conflict-of-interest concerns, 
     investment banking interests offer a familiar refrain. We can 
     offer better advice, they say, because we are intimately 
     aware of the distressed company's financial situation. This 
     response is eerily similar to that offered by the accounting 
     industry, as it loudly insisted that a conflict did not exist 
     when accountants served as both internal and external 
     auditors or received lucrative consulting contracts from the 
     same companies that they audited. But, if there is one lesson 
     we should have learned from the recent corporate crime wave, 
     it is that conflicts of interest matter. Investors paid 
     dearly to learn that lesson. And the markets have paid 
     through the loss of investor confidence.
       Representatives of the securities industry have also 
     contended that this provision will merely provide bankruptcy 
     officials with the discretion to make a judgment about 
     whether a particular investment firm should be involved in a 
     bankruptcy case. But what if the details of an investment 
     firm's involvement with a bankrupt firm do not come to light 
     for months or longer, as was true in the Enron case? By that 
     time, a lot of damage could already have been done to 
     investor interests, and the credibility of the process would 
     have been hopelessly undermined.
       For example, the Wall Street Journal reported on May 14, 
     2003 that investment firm UBS Warburg, ``was far more 
     involved in the inner workings of HealthSouth than previously 
     disclosed and maintained an unusually close relationship with 
     HealthSouth's embattled founder, Richard Scrushy.'' Yet, if 
     Section 414 of the bankruptcy bill had been law, it is 
     entirely possible that UBS Warburg could have been allowed to 
     serve as ``objective'' advisors in the HealthSouth bankruptcy 
     case.
       Congress and the SEC have devoted considerable time and 
     energy over the past few years to eliminating just these kind 
     of conflicts in an effort to restore investor confidence. The 
     SEC has made important strides, for example, in implementing 
     the Sarbanes-Oxley corporate reform law and in cracking down 
     on Wall Street conflicts of interest. More recently, the 
     National Association of Securities Dealers (NASD) has been 
     considering whether to place new limits on investment banking 
     firms' ability to write fairness opinions for deals in which 
     they are involved, since these firms could benefit 
     financially if a merger or acquisition is approved. By 
     allowing new financial conflicts, section 414 of S.256 runs 
     completely contrary to this trend.
       Investment firms that have previously advised a bankrupt 
     company have a prima fascia conflict of interest and should 
     continue to be automatically prohibited from offering advice 
     in a bankruptcy restructuring case. We commend you for moving 
     to eliminate the conflicts-of-interest that this bill would 
     allow.
           Sincerely,
     Barbara Roper,
       Director of Investor Protection, Consumer Federation of 
     America.
     Travis B. Plunkett,
       Legislative Director, Consumer Federation of America.
     Susanna Montezemolo,
       Policy Analyst, Consumers Union.
     Linda Sherry,
       Editorial Director, Consumer Action.
     Edmund Mierzwinski,
       Consumer Program Director, U.S. Public Interest Research 
     Group.
     John Rao,
       Staff Attorney, National Consumer Law Center.

  Mr. LEAHY. This is not the time to weaken conflict-of-interest 
standards. If we are doing anything, we ought to be strengthening 
conflict-of-interest standards. The provisions Senators Sarbanes and 
Warner and I seek to modify are fundamentally at odds with the work of 
the Congress and the SEC, fundamentally at odds with the work to 
restore public confidence in financial and corporate transactions. I 
thank them for offering this with me.
  All we want to do is to make sure we increase the confidence and 
accountability in our public markets for millions of Americans whose 
economic security is threatened by corporate greed and not have the 
Senate put an imprimatur on the use of people with enormous conflicts 
of interest, especially when consumers are hurting so badly.
  I see the senior Senator from Maryland. He is far more familiar with 
how these things have worked in these major corporations. He is the 
author of the Sarbanes-Oxley bill. I yield the floor to the Senator 
from Maryland.
  The PRESIDING OFFICER. The Senator from Maryland is recognized.
  Mr. SARBANES. Mr. President, I thank the very able Senator from 
Vermont, the ranking member of the Judiciary Committee. I am pleased to 
join with him in offering an amendment to the Bankruptcy Act. This 
amendment addresses a provision in the bill that would drastically 
weaken the conflict-of-interest protections of the Bankruptcy Code in 
regard to investment banks.
  Section 414 of this bill makes sweeping changes in the conflict-of-
interest requirements of the bankruptcy process in regard to investment 
banks. These changes are opposed by the Securities and Exchange 
Commission, by such legal experts as Judge Edith Jones of the U.S. 
Court of Appeals for the Fifth Circuit, Dean Nancy Rapoport of the 
University of Houston Law Center. They were rejected by the National 
Bankruptcy Review Commission of 1997.
  In my view, section 414, if allowed to stay in the legislation as it 
is now written, would significantly raise the risk of abuse and 
therefore I think it is imperative that we undertake to modify the 
provision in the legislation. I am pleased to join with my colleague in 
seeking to do so.
  I ask unanimous consent to have printed in the Record the entire 
letter

[[Page S2330]]

from Chairman Donaldson, writing on behalf of the Securities and 
Exchange Commission to Senator Leahy and myself in response to our 
letter asking for the views of the Commission.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                           Securities and Exchange


                                                   Commission,

                                     Washington, DC, May 22, 2003.
     Hon. Patrick J. Leahy,
     U.S. Senate,
     Russell Senate Office Building,
     Washington, DC.
     Hon. Paul S. Sarbanes,
     U.S. Senate,
     Hart Senate Office Building,
     Washington, DC.
       Dear Senators Leahy and Sarbanes: Thank you for requesting 
     the Commission's views on Section 414 of H.R. 975, which 
     would amend the ``disinterested person'' definition in the 
     conflict of interest standards of the Bankruptcy Code to 
     remove the specific provisions covering investment bankers. 
     On May 7, in response to a question from Senator Sarbanes at 
     a hearing of the Senate Committee on Banking Housing and 
     Urban Affairs on the Impact of the Global Settlement, I 
     expressed my personal views about this amendment. Now I am 
     pleased to convey the view of the Commission, which is that, 
     while it may be possible to draft language that would address 
     some of the concerns of the proponents of the amendment, 
     Congress should proceed very cautiously before loosening any 
     conflicts of interest restriction. While we recognize that 
     this one-size-fits-all statutory exclusion is controversial, 
     we believe that it would be a mistake to eliminate the 
     exclusion in a similar one-size-fits-all manner at a time 
     when investor confidence is fragile.
       The current ``disinterested person'' requirement was 
     adopted at least in part in response to a 1938 study by the 
     Securities and Exchange Commission that provided extensive 
     documentation and analysis of abuses in corporate 
     reorganizations. The study concluded that a firm that served 
     as underwriter for a company's securities should not advise 
     the company about distributions to those security holders in 
     a reorganization plan. It further found that such a firm 
     should not advise the company about potential claims against 
     those involved with the company prior to the bankruptcy, 
     since this often would involve an assessment of transactions 
     in which the firm participated. However, we should note that 
     in the 65 years since the 1938 study was issued, bankruptcy 
     practices and procedures have improved significantly with the 
     addition of a dedicated bankruptcy judicial system, the 
     establishment of the U.S. Trustee's office, and the 
     strengthening of active creditors' committees.
       We are aware of the arguments of proponents of the 
     amendment that the current statutory exclusion is too broad 
     because it covers firms that participated in any underwriting 
     of the debtor, even if it was years ago and the firm has had 
     no further involvement with the debtor. However, if the 
     exclusion is eliminated entirely, we are concerned that the 
     general protection in the statute--which relies on the judge, 
     at the outset of the proceedings, to forbid those with 
     materially adverse interests to the estate, its creditors, or 
     its equity security holders from advising a company in 
     bankruptcy--may well be insufficient.
       We appreciate the opportunity to comment on this proposed 
     amendment. If you or your staff need any further information, 
     please contact my office.
           Sincerely,
                                             William H. Donaldson,
                                                         Chairman.

  Mr. SARBANES. The Chairman writes:

       Now I am pleased to convey the view of the Commission, 
     which is that, while it may be possible to draft language 
     that would address some of the concerns of the proponents of 
     the amendment, Congress should proceed very cautiously before 
     loosening any conflict of interest restriction.

  Chairman Donaldson, of course, noted the fragility of investor 
confidence and the need to be very careful in easing these conflict-of-
interest provisions.
  The existing provision in the law:

       . . . was adopted at least in part in response to a 1938 
     study by the Securities and Exchange Commission that provided 
     extensive documentation and analysis of abuses in corporate 
     reorganizations.
       The study concluded that a firm that served as underwriter 
     for a company's securities should not advise the company 
     about distributions to those security holders in a 
     reorganization plan. It further found that such a firm should 
     not advise the company about potential claims against those 
     involved with the company prior to the bankruptcy, since this 
     often would involve an assessment of transactions in which 
     the firm participated.

  We have strengthened, of course, bankruptcy practices and procedures 
over the years. We now have a dedicated bankruptcy judicial system, the 
establishment of a U.S. Trustees Office, and strengthening of active 
creditors committees. But, nevertheless, I think we continue to have a 
very real conflict-of-interest problem here.
  My colleague has pointed out the letter of Judge Edith Jones of the 
U.S. Court of Appeals for the Fifth Circuit, a very distinguished 
member of the 1997 National Bankruptcy Review Commission. She pointed 
out that they had been asked to modify the disinterestedness standard 
in order to accommodate the geographic growth and increasing 
sophistication of professional firms of all kinds involved in Chapter 
11 bankruptcy. She said they rejected that in the Commission by a 
lopsided majority.
  These were expert people on bankruptcy law. It was the wise and 
prudent way to proceed when we are considering making important changes 
of this sort. They noted that in order to protect the integrity of the 
bankruptcy process, it was important to maintain this disinterestedness 
standard, so you don't have conflicting loyalties that may undermine 
the fiduciary duties of the creditors.
  Furthermore, it was noted--I think this is an important point--that a 
standard of disinterestedness is necessary to maintain public 
confidence in the integrity of the bankruptcy system.
  We ought not to have a situation in which allegations can be made 
that the conflict-of-interest situation is preventing a fair, reasoned, 
and objective judgment as to what ought to be done, and then they end 
up imputing hidden motives to the actors in the case.
  It has been noted by Dean Rapoport, the Dean of the University of 
Houston Law Center, that one of the duties of the debtor in a 
bankruptcy case is to take a good, hard look at the pre-petition 
behavior of those who dealt with or ran the debtor to see whether that 
behavior contributed to the downfall of the debtor. Another duty is to 
see how the debtor can raise new post-petition funds in order to 
finance an effective reorganization. But those are two very important 
duties or responsibilities of the debtor in the bankruptcy case. Dean 
Rapoport goes on to state that both of these duties--taking a good, 
hard look at the pre-petition behavior of those who dealt with the 
debtor and also a good, hard look at how the debtor can raise new post-
petition funds in order to help finance an effective reorganization--
both of these duties would be compromised if the same investment 
bankers that were involved with the pre-petition debtor were allowed to 
serve as the ``objective, post-petition investment bankers.''
  Stop and think about that for a moment. Clearly, it highlights a 
potential conflict of a very significant dimension.
  There is an argument made that the bankruptcy court would still have 
to review this and could make a factual finding that there was not 
disinterestedness present. But she noted, and I quote, ``the current 
standard saves the bankruptcy court from having to make time-consuming, 
factual findings regarding the disinterestedness of those categories 
which by their very nature are rife with conflicts of interest. 
Removing investment bankers from the exclusion list will increase the 
time, cost and attorneys fees for every bankruptcy case without 
increasing the benefits to the estate as a whole.''
  The final report of the National Bankruptcy Review Commission pointed 
out the strict disinterestedness standards are necessary because of the 
unique pressures in the bankruptcy process. The trustee and his 
professionals are required to act as a fiduciary to the estate, its 
creditors, and other parties in interest, and the court. The 
disinterestedness standard is designed to ensure that all issues 
relevant to the administration of the estate are properly raised and 
vented before the court. Therefore, we are trying to avoid a situation 
in which there could be a perception or an allegation of favoritism to 
favor one party over another, the charge that they are taking it easy 
on one group or group of creditors, or to refuse to pursue possible 
claims or avenues of inquiries because of any indirect or direct 
pressures.

  The proponents of the provision that is in the legislation which we 
are seeking to modify by this amendment argue

[[Page S2331]]

we should simply give the discretion to the bankruptcy judge to allow 
investment banks to serve as advisers even if those banks underwrote 
securities with companies that subsequently filed for bankruptcy, 
leaving it to him to make a determination in that regard.
  The SEC in its letter to us on that point said:

       If the exclusion is eliminated entirely--

  Which is what this legislation does----

     we are concerned that the general protection in the statute 
     which relies on the judge, at the outset of the proceedings, 
     to forbid those with materially adverse interests to the 
     estate, its creditors, or its equity security holders from 
     advising a company in bankruptcy--may well be insufficient.

  Dean Rapoport of the University of Houston Law Center pointed out 
that the current disinterestedness standard saves the bankruptcy court 
from having to make time-consuming, factual findings regarding the 
disinterestedness of those categories which by their very nature are 
rife with conflicts of interest. Removing investment bankers from the 
exclusion list will increase the time, cost and attorney fees for every 
bankruptcy case without increasing the benefits to the estate as a 
whole.
  The amendment seeks to address one of the arguments that has been 
raised by the proponents of section 414, which is that the current per 
se prohibition on investment banks that have underwritten securities of 
a company in bankruptcy remains in effect as long as those securities 
remain outstanding, no matter how many years ago it may have taken 
place. It may well have been many years prior to the bankruptcy and the 
investment bank involved might no longer have a close connection to the 
bankrupt company.
  Senator Leahy and I have modified the original amendment which we 
planned to offer which would simply go back to the current law 
prohibition, and instead in this amendment we are offering a 
prohibition on investment banks that have underwritten securities of a 
company within 5 years prior to the filing of the bankruptcy petition.
  Mr. LEAHY. If the Senator will yield for a question without losing 
his right to the floor, I ask the Senator from Maryland, if the bill 
was passed in its current form, could investment banks that advised or 
underwrote securities for companies such as Enron or WorldCom that 
filed bankruptcy, which ended up defrauding investors, could they then 
be hired to represent the interests of the same defrauded creditors 
during the bankruptcy proceeding?
  The way the bill is now written, without our amendment, could they 
then be hired to represent the interests of the defrauded creditors?
  Mr. SARBANES. I was going to say that is absurd, but as far reaching 
as that sounds, the answer to the question is yes. That is one of the 
reasons the potential that results from this legislation is so far 
reaching.
  Gretchen Morgenson, on April 6, 2003, had an article in the New York 
Times headlined ``Advisers May Get Second Chance To Fail.'' She starts 
the article as follows:

       Do you think Salomon Smith Barney, the brokerage firm that 
     bankrolled WorldCom and advised it on a business and 
     financial strategy that failed rather spectacularly, should 
     be allowed to represent the interests of the company's 
     employees, bondholders and other creditors while WorldCom is 
     in bankruptcy?

  She goes on to say:

       If you answered no, you win a gold star for common sense 
     and for knowing right from wrong.

  We are just trying to get a ``no'' answer put into section 414 of 
this bill.
  We have tried to make a reasonable and balanced modification that 
essentially preserves the basic conflict of interest protection but 
does allow this greater flexibility for investment banks that have not 
recently underwritten securities for the company to serve as advisers 
in the bankruptcy. But to simply remove the existing provision in the 
law altogether is to open up the possibility for abuses of major 
dimensions. Therefore, I very strongly support the amendment being 
sponsored by Senator Leahy and by Senator Warner.
  There is no public purpose that will be served by allowing section 
414 to remain in this legislation as it is currently written. In fact, 
to the contrary, it runs very counter to important public purposes.
  Other articles of note include one by Alan Sloan in the Washington 
Post: ``Proposed Changes In Bankruptcy Law Twist Meaning Of `Reform' 
Beyond Recognition.'' He goes on to point out the potential 
implications of this change.
  There is also an article by Michael Krauss in the Washington Times 
headed, ``Bankruptcy Reform . . . With a Thorn.'' He goes on to say 
that he supports bankruptcy reform legislation but does not support 
section 414 of the bill because it removes from the excluded list of 
people not allowed to be employed in the bankruptcy the investment 
bankers who have had a connection with the company.
  The amendment before the Senate is a reasoned and balanced proposal. 
We have tried to listen to the arguments being made on the other side 
and respond to those that we think have some merit to them without 
completely doing away with the ``disinterestedness'' standard. You have 
to have confidence in the integrity of the bankruptcy system. The total 
elimination of the investment bankers in terms of being precluded 
because they have a conflict of interest situation is not going to 
bolster consumer and creditor confidence.
  I urge my colleagues to support this amendment. It is a fair and 
balanced amendment. It is badly needed. To fail to enact it will carry 
with it a tremendous risk in terms of how our bankruptcy process 
functions.
  The PRESIDING OFFICER. The chairman of the committee, the Senator 
from Pennsylvania, is recognized.
  Mr. SPECTER. I have secured the agreement of the managers to speak 
very briefly about another matter. It involves the Coal Act, which has 
provided benefit for many miners in Pennsylvania and throughout the 
country.
  The Coal Act of 1992 mandated coal operators to fulfill their promise 
to provide their employees and families with health benefits, and those 
obligations could not be modified. As an original cosponsor of this 
legislation, along with the Senators from West Virginia, Senator 
Rockefeller, and Senator Byrd, I am very closely aware of the effect on 
14,000 retired coal miners and their dependents in Pennsylvania. 
Nationally, this act affects over 60,000 individuals, including every 
State except for Hawaii. These health benefits form a central 
underpinning for the medical care structure of the coalfield community.
  It is a tough job being a coal miner. I have, in the course of my 
representation of the coal miners, gone 30-stories-deep underground, 
ridden in a cable car, crunched over like a corkscrew to avoid being 
hit by the ceiling as the cars moved in on the long wall to perform the 
mining operation.
  The issue came forcefully home to me when I visited several hundred 
of the coal miners in Washington County, PA, more than a decade ago 
along with Richard Trumka, distinguished Pennsylvanian who had been 
president of the United Mine Workers and is now secretary-treasurer of 
the AFL-CIO. We went to court to verify this program, which is vital 
for the health care of these miners.
  I was very surprised to see a Federal judge enter an order which said 
that the bankruptcy proceeding in a case captioned Horizon Natural 
Resources trumped the Coal Act. It is a surprise to me that that would 
happen under the existing law.
  I know we are operating under a unanimous consent agreement where 
there has been a series of amendments set aside and we are in 
postcloture. Senator Rockefeller earlier made comments about this 
amendment and was unable to secure agreement. In working through this 
bankruptcy bill we are laboring under a great many complications, a 
complication that if there are amendments unacceptable to the House, 
there will be a conference, and a conference resulted in the defeat of 
this bankruptcy bill several years ago.
  This amendment is technically precluded at this time, but I wanted to 
take the floor. And I have discussed it with the distinguished chairing 
officer, Senator Grassley, the principal proponent of the bankruptcy 
bill. In my capacity as chairman of the Judiciary Committee, I yielded 
to him because he

[[Page S2332]]

is the principal author. We have talked about it.
  I understand we are not going to be able to get this amendment 
through at this time for technical reasons, but I wanted the 14,000 
Pennsylvania coal miners and the 60,000 coal miners nationally to know 
of the concern of Senator Rockefeller, Senator Byrd, and others. I have 
not had a chance to catch Senator Santorum on the floor, but he has 
been very solicitous and very concerned about coal miners' 
interests. But until I speak to him specifically, I would make only the 
generalized comment about his concern for the coal miners.

  So what I intend to do at this time, recognizing there will be a 
successful objection, is to send this amendment to the desk and offer 
this amendment to the pending bill.
  The PRESIDING OFFICER. Is there objection to laying aside the pending 
amendments?
  Mr. GRASSLEY. Mr. President, reserving the right to object, and I 
will object, but I would like to take just 30 seconds to explain that 
there are problems with the Coal Act. They are within the jurisdiction 
of the Senate Finance Committee, and we ought to look at all these 
issues in the context of a comprehensive review and a comprehensive 
solution.
  So I would see a piecemeal approach, as is being done now through the 
bankruptcy bill, as, first of all, intervening in the jurisdiction of 
the Finance Committee, which as chairman I should protect, and, 
secondly, making more difficult the comprehensive solutions that we 
ought to find. So I object.
  The PRESIDING OFFICER. Objection is heard.
  Mr. SPECTER. Mr. President, first, I thank my colleague from Iowa, 
with whom I have served since January 3, 1981. We came to the Senate at 
the same time, the sole survivors of 16 Republican Senators. I 
appreciate what he has said about taking a look at it.
  I will be filing legislation to correct this, and I will be looking 
forward to the opportunity for a hearing in the Finance Committee. And 
I think other Senators will be joining me as well.
  I understand the reasons we cannot have it in now, but let the 60,000 
coal miners nationwide take heart, and the 14,000 Pennsylvania coal 
miners, that this is an issue which we will pursue and I think prevail 
on. We will ultimately win this, although not today.
  Again, I thank my colleagues for letting me intervene.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Idaho.


                            Amendment No. 83

  Mr. CRAPO. Mr. President, I stand to speak in opposition to the 
pending amendment. The pending amendment has been discussed as if it 
were seeking to stop investment banking interests who are involved in 
working with companies that face bankruptcy from continuing some kind 
of fraud or inappropriate conduct that helped to lead to the bankruptcy 
by prohibiting them from serving as investment bankers or investment 
advisers following the bankruptcy proceedings or during the pendency of 
the bankruptcy proceedings.
  The fact is, however, section 414 of the bankruptcy bill and of the 
bankruptcy law does not eliminate the disinterested test for investment 
banks. Let me explain the way the law works at this point.
  For whatever reason, when our current bankruptcy laws were put into 
place, a complete bar was put in place, so when a company goes into 
bankruptcy, its investment bankers cannot then function on behalf of 
the company. They cannot be appointed by the judge to continue to work 
as the company that works out its bankruptcy difficulties, whether it 
be in some kind of an ongoing bankruptcy proceeding or in a chapter 7 
proceeding. Therefore, the disinterested test simply never applied 
because there was never any opportunity for an investment bank to serve 
in this role if it had had any relationship whatsoever to the company 
going into bankruptcy.
  That posed a couple very serious problems. The first one is that 
investment banks that have no current relationship with the company and 
are possibly best suited to help them through their financial 
difficulties are conflicted due to having some minor role in the 
underwriting or some underwriting relating to the company years and 
years and years ago. That is under current law. What this bankruptcy 
reform we are trying to put through is seeking to do is to address that 
problem.

  Similarly, investment banks that are most familiar with the issues 
facing a distressed company and are actually working with that company 
in an attempt to avoid bankruptcy are then compelled to walk away from 
their clients in their biggest hour of need if bankruptcy becomes 
necessary and the company has to make the bankruptcy filings. That is 
what this legislation that is being proposed is seeking to address.
  The amendment would strike that and, instead of having a perpetual 
ban, would have a 5-year ban. Now, admittedly, the 5-year ban would 
solve one problem because it would make it so a company that 20, 30, 
40, 50 years ago was involved in an underwriting would not be 
disqualified, but it still leaves disqualified all of the investment 
banks that may have been involved even in a bundled underwriting or in 
some effort to help this company in its financial dealings over the 
last 5 years prior to bankruptcy. It eliminates those investment banks, 
their expertise, and their knowledge of the failing company, from 
consideration in helping that company as it seeks to work through a 
bankruptcy.
  Let me make it very clear: The proposed change in the statute does 
not eliminate the disinterested test. In other words, a question was 
posed a moment ago on the floor as to whether, in the case of Enron, an 
investment bank that had been involved in an underwriting for Enron 
could then have been appointed by the court, under the change in the 
law proposed here, to continue working with Enron after it went into 
bankruptcy proceedings. And the answer that was given on the floor was, 
yes, that is a possibility.
  Well, first of all, the question assumes that any investment bank 
that had been involved with Enron was somehow involved in fraud because 
Enron was involved in fraud. We do not necessarily know that. But that 
gets to the point of what the bill we are proposing is seeking to do.
  The bill maintains current bankruptcy law requirements that if an 
investment bank is to be appointed by the court to work with the 
bankrupt company, the court must make a determination that this 
investment bank is disinterested, that it passes the disinterested 
test. I would presume that if there were a participant in fraud, the 
court would not consider that to pass the disinterested test.
  But the key point here is that what the proposal in the underlying 
bill seeks to accomplish is to have a judge take evidence, evaluate the 
issue, and make the determination of which investment bank is the best 
suited, passing a disinterested test, to help this company as it seeks 
to work through the bankruptcy issues. And there will be many cases 
when the best suited financial advisers are those who have a history of 
working with the company, of knowing the company's business, and of 
knowing the company's financial dealings, and being able to work with 
them.
  In fact, in many cases, I would assume it might be a financial 
adviser, an investment bank that has been working with the company for 
the last 3 or 4 years to help them try to work through their problems, 
and for some reason, with what I consider to be a cookie-cutter 
solution being proposed by this amendment, they would be disqualified 
simply because they tried to help or were hired to help beforehand.
  In fact, what we see here in this amendment is a chilling impact on 
companies going out and seeking investment bank advice before 
bankruptcy, if they know that bankruptcy is a possible outcome they may 
face, because they have a choice: Do we seek the best competent 
investment banking advice we can get before the bankruptcy, knowing 
that the bankruptcy law will prohibit us from ever having that advice 
if we do end up having to file or do they say: ``We may have to file 
and, therefore, we will seek less competent advice or our second 
alternative so we can have our first alternative when we file 
bankruptcy''? Why put companies into that kind of a complex problem?
  Section 414 would subject investment banks to the same disinterested 
test as

[[Page S2333]]

other professionals. This is important to know. A company's legal 
advisers are not subjected to an automatic ban; they are subjected to a 
disinterested test. A company's accounting advisers are not subjected 
to an automatic ban; they are subjected to a disinterested test. And 
yet the effort here seems to say that for some reason we do not want to 
let the investment bank advisers be subjected to the same disinterested 
test. Instead, we want to presume that they are guilty of some 
inappropriate conduct because the company has not financially made it, 
and ban them from being able to work with the company once a bankruptcy 
filing takes place.
  It is another one of those one-size-fits-all cookie cutter solutions 
that is coming from Washington, DC that is telling every bankruptcy 
judge across the country that they have no alternative in terms of 
their choice of who can be the investment bank advisers and supporters 
for a company that goes into bankruptcy, if there is any connection in 
the last 5 years between that investment bank and the company that had 
to file.
  Bankruptcy courts currently review disinterestedness for all 
professionals, and 414 would allow judges the same discretion with 
investment banks as they have for attorneys and accountants. The 
current law has created a market, frankly, in which a small club of 
restructuring boutiques dominates the market for restructuring services 
in bankruptcy. In other words, they realize that if they even get close 
to a company before bankruptcy, then they won't be able to serve as a 
part of the restructuring effort for that company coming out of 
bankruptcy. So this sort of boutique business has developed where the 
only alternatives the judge has to turn to are those companies that 
specifically don't help until after the bankruptcy filing.
  That is the issue we need to address. Do we want to create a system 
of investment bank advice for companies that are facing financial 
difficulties in which those companies have to make a choice as to who 
they will contact for support before the bankruptcy filing, knowing 
that whoever they choose to help them in their investment banking will 
be automatically prohibited from helping them if they do end up having 
to go into a bankruptcy?
  Professionals are required to perform a firmwide review and disclose 
all actual and potential conflicts in their application to the court to 
be retained by the debtor. All parties in interest, including 
debtholders and shareholders, have the opportunity to make their 
position known before the judge.
  Another important point is, somewhere in the debate that has been 
going on today, we heard: The judge may not know; the judge may make a 
mistake; the judge may not be aware of all the facts; it is going to be 
very expensive for the judge to have to go through and look at these 
investment banks to be sure that he knows whether they are culpable or 
whether they are simply competent investment advisors.
  The fact is, the costs that are being put onto the system now by 
these blanket bans on investment banks are generating more costs to the 
restructuring process than any cost that could be generated by having 
the judge make a disinterested analysis. But even if the judge somehow 
made a mistake, even if we want to hypothesize that judges are going to 
make mistakes and bad actors might be allowed to be an investment bank 
adviser or participant in a bankruptcy, any time information becomes 
available to make it evident that the disinterested test was not 
satisfied, the judge can change that ruling and terminate the 
professional's engagement.
  It seems to me what we need to do in our bankruptcy laws is to 
promote more flexibility. We need to give opportunities for all 
investment banks to participate with those companies in our economy, 
whether they be strong or facing financial difficulties, and help them 
to the maximum of their abilities. And if it turns out some of those 
companies end up having to make a bankruptcy filing, then it is 
important that we protect the flexibility for the bankruptcy judge to 
select the most qualified investment bank support to work out that 
bankruptcy circumstance.

  That is what is in the best interest of our shareholders, in the best 
interest of our economy, and in the best interest of the debtor and the 
creditors. We must make certain that we don't allow one more very rigid 
Federal standard to continue to create this kind of difficulty in the 
bankruptcy process.
  Two other points. First, all Senators have received a copy of this 
letter. There is a letter that was sent out which was signed by those 
in the industry who are involved in this, who very strongly indicate 
that the reform and the flexibility this bankruptcy proposal promotes 
should be supported. That includes the American Bankers Association, 
the Bond Market Association, the Financial Services Roundtable, the 
Futures Industry Association, and the Securities Industry Association.
  Frankly, although I know Chairman Donaldson has been quoted here, I 
am not aware that the SEC itself has ever taken a position on this 
issue. If that is the case, I stand corrected.
  Mr. SARBANES. Will the Senator yield on that?
  Mr. CRAPO. I will yield.
  Mr. SARBANES. The letter we submitted reflected the opinion of the 
commission. Chairman Donaldson had indicated a personal view in a 
hearing, and then I sent a letter asking him for the commission's view.
  Mr. CRAPO. And he responded on behalf of the commission?
  Mr. SARBANES. It begins: ``Thank you for requesting the Commission's 
views on section 414 of H.R. 975.''
  Mr. CRAPO. I stand corrected on that.
  Mr. SARBANES. In response to a question from me, he expressed his 
personal views. He writes:

       Now I am pleased to convey the view of the Commission . . .

  Mr. CRAPO. Reclaiming my time, I stand corrected on that.
  This will not be the first time, even in recent months, that I have 
disagreed with the SEC. Although I understand that your letter does 
speak for the SEC, the fact is, there is one other point I want to 
make. That is, as is the case with a number of the amendments we have 
dealt with in debate over the bankruptcy bill, which we have been 
trying to move forward for 8-plus years, we face a situation in which 
we are trying to keep this bankruptcy bill clean and not have 
amendments that are objectionable to the House included in it so that 
we again run into the problem of not being able to move the 
legislation. This is one of those amendments. I am confident and I have 
an understanding that this is one of the amendments the House would not 
allow and would cause us to then have to go into conference and bring 
down the bill.
  The bottom line is, it is bad policy. We have bad policy in current 
law. The bill seeks to create the flexibility that will allow a 
judicial determination as to the best and most highly qualified and 
disinterested investment bank advice for companies involved in 
bankruptcy. We should not change the underlying bill by substituting a 
rigid 5-year ban prohibiting many companies that are in the best 
position possible to do the best good for the company that needs their 
help at this point from being able to serve.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. LEAHY. Mr. President, I ask for the yeas and nays on the 
amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Senator from Maryland is recognized.
  Mr. SARBANES. Mr. President, I want to take a moment to respond to 
the Senator from Idaho. I think this is important.
  Elizabeth Warren, who is a distinguished professor at Harvard Law 
School and an expert on bankruptcy, has said there is a reason why the 
professionals who have worked for a business that collapses in a 
bankruptcy are not permitted to stay on. The company must go back after 
bankruptcy and reexamine its old transactions. Having the same 
professionals review their own work is not likely to yield the most 
searching inquiry.
  She goes on to say about the provision in the bill: It is not a 
provision to ensure investor confidence or to enhance protection for 
employees, pensioners, or creditors of failing companies.

[[Page S2334]]

  Let me make one other point which needs to be understood. To the 
extent an investment bank--and it needs to be understood that an 
investment bank has been viewed as integrally related to the financial 
arrangements of the company, similar to creditors, security holders, 
and insiders--advised on the creation of a company's capital structure 
before a bankruptcy filing, it may itself be exposed to potential 
liability. As it works out the deal that permits the company to emerge 
from bankruptcy, it may be tempted to prefer the creditors who have a 
potential claim against the investment bank.
  Now, that is the very sort of conflict that we simply ought not to 
permit. We address one point made by the Senator about a connection a 
long time ago that is no longer relevant in the 5-year provision, and 
the amendment takes care of that.
  Beyond that, I think we would be making a grave mistake to allow this 
radical change to take place. I very much hope my colleagues will 
support the amendment offered by Senator Leahy, Senator Warner, and 
myself.
  I yield the floor.
  Mr. LEAHY. Mr. President, we have had a good debate. I mentioned to 
the Senator from Iowa, I don't know if other people wish to speak, but 
I am perfectly willing to go ahead and have a vote. I know the 
leadership is trying to move things along and get things going. I am 
willing to have a vote.
  Mr. GRASSLEY. I would like to speak for a short time.
  Mr. President, under current law, investment banks are not allowed to 
compete on the same playing field as other professionals. Right now, 
investment banks are precluded per se, in many circumstances, from 
representing a debtor in a business bankruptcy if the investment bank 
acted as the investment banker for the company before it filed for 
court protection.
  I think this is a draconian rule. The bill would give the bankruptcy 
judge the ability to determine whether an investment banker is 
disinterested, just as the judge determines whether other professionals 
are disinterested. The provision in the bill, it seems to me, is not 
only fair, but it will also safeguard the proceedings from any conflict 
of interest. Do we trust our Federal judges, or don't we, to make this 
determination? After all, the environment for this is in the 
judiciary--before judges. We happen to trust them for all other 
professionals involved in the bankruptcy proceedings, whether there is 
any conflict of interest for anyone involved. So then the question 
becomes, why should it be different for investment banks?
  I think the provision in the bill is fine as it is. It is part of the 
compromise. We should allow a judge to make this determination and, 
thus, protect the integrity of the bankruptcy process. So I ask my 
colleagues to oppose this amendment.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEAHY. Mr. President, since we have the list of cosponsors of the 
pending amendment, I ask unanimous consent that the Senator from 
Virginia, Mr. Warner, be removed as a cosponsor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEAHY. 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. BIDEN. 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. BIDEN. Mr. President, I checked with the majority staff and they 
have no objection to my seeking to be recognized for up to 10 minutes 
as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                     Indictment of Ramush Haradinaj

  Mr. BIDEN. Mr. President, yesterday the International Criminal 
Tribunal for the former Yugoslavia at the Hague, known by the acronym 
ICTY, indicted a fellow that I met several years ago, a guy who was 
very much involved in the carnage that took place at the time of the 
war in Kosovo. His name is Ramush Haradinaj. This is a young man who 
looks like he could lift an ox out of a ditch. A very hard, tough guy.
  Until yesterday he happened to be the Prime Minister of Kosovo. He 
was indicted for war crimes in Kosovo during the period of 1998 and 
1999. Mr. Haradinaj declared himself entirely innocent but resigned as 
Prime Minister, surrendered voluntarily, and flew to the Netherlands 
today to turn himself in. He also did something highly unusual in the 
Balkans. He issued a statement calling for calm in Kosovo.
  From the creation of the Hague Tribunal a decade ago, I have 
supported its vitally important work. Beginning with Judge Goldstone, 
my staff and I have met with its chief prosecutors over the past 
decade. I have great respect for Carla Del Ponte, the current chief 
prosecutor and for the court's judges.
  I am confident that Haradinaj will receive a fair trial. Without 
presuming to pass judgment on his innocence or guilt, though, I would 
like to comment--this is the first time I have ever done this--on my 
personal impressions of him and also to put his arrest in a larger 
context relating to the entire territory of the former Yugoslavia.
  Let me begin with my meeting with him in Pristina in January of 2001. 
We discussed Kosovo's future, and he seemed genuinely to recognize that 
the only way forward was for the rights of the Kosovo Serbs, and of 
other non-Albanian minorities to be guaranteed. During that trip, I 
flew by helicopter to western Kosovo where I visited the Serbian 
Orthodox Visoki Decani Monastery, a 14th century architectural 
masterpiece which last year was named a UNESCO World Heritage site.
  During the fighting in 1999, the Serbian Orthodox monks of this 
monastery had saved Kosovar Albanians from persecution by Serb forces. 
Again, these were Serbian Orthodox monks saving Kosovar Albanians most 
of them Muslims--from persecution by Serb forces.
  Nevertheless, when I visited the Visoki Decani Monastery nearly 2 
years later, Father Sava and other monks told me that they were in 
great danger. In fact, Italian KFOR armored personnel carriers were 
lined up in the snow just outside the monastery's stone walls as a 
deterrent.
  Knowing that the territory around Decani is Mr. Haradinaj's political 
base, I sent him a confidential letter after I returned to Washington. 
In it I wrote that I was counting on him to personally guarantee and 
protect the Serbian Orthodox monastery I had just visited.
  In March of 2004, serious riots against Serbs and other non-Albanian 
minorities broke out across Kosovo. Hundreds of homes were destroyed, 
and many medieval Serbian Orthodox churches and monasteries were burned 
to the ground. KFOR proved unable or unwilling to prevent this 
destruction. In fact, in several cases, the outrages occurred while 
European KFOR troops stood by. One of the few venerable monasteries 
that remained untouched was Visoki Decani. Mr. Haradinaj had kept his 
promise.
  During the 1998-1999 war, Haradinaj was a leading commander of the 
Kosovo Liberation Army, the KLA. Hence, his election as Prime Minister 
last year was greeted with considerable skepticism. From all reports, 
however, in his brief tenure, he has earned nearly unanimous praise, 
including from the head of the U.N. mission in Kosovo, for his 
constructive and effective leadership. I am told that even Serbian 
leaders in Belgrade privately acknowledge that of all of the Kosovar 
political leaders, it is Haradinaj with whom they could potentially 
negotiate with the greatest degree of confidence.
  Mr. Haradinaj's call for calm, which so far has been heeded, was 
based upon a realization that a repeat of the violence of March 2004 
would deal a fatal blow to the Kosovars' hope that the process toward 
negotiations on the final status of Kosovo can begin later this year.
  I have said repeatedly that self-determination by the people of 
Kosovo is ultimately the only realistic solution to

[[Page S2335]]

the problem. Since more than 90 percent of the population is ethnic 
Albanian, as is Mr. Haradinaj, with a collective memory of extreme 
persecution by the Serbian government of Slobodan Milosevic, I can't 
imagine they would ever vote for a return to being governed by 
Belgrade.
  On the other hand, I have coupled my advocacy of self-determination 
for Kosovo with the precondition that the personal safety and freedom 
of movement of all Kosovo Serbs, Roma, Ashkali, Egyptians, Turks, 
Bosniaks, Gorani, and other non-Albanian minorities are being provided 
and are guaranteed for the future. As yet, unfortunately, this has not 
occurred. Mr. Haradinaj's statesman-like actions are intended to keep 
Kosovo on the path toward Final Status negotiations.
  In the overall post-Yugoslav context, Mr. Haradinaj's willingness 
after his indictment to surrender voluntarily and go to The Hague is 
striking. It stands in glaring contrast to the behavior of the three 
most infamous individuals indicted by The Hague, all of whom are still 
fugitives, resisting arrest: former Bosnian Serb General Ratko Mladic, 
former Bosnian Serb leader Radovan Karadzic, and former Croation 
General Ante Gotovina.
  By their evasion of ICTY's indictments, all three are blocking their 
countries' progress toward entering Euro-Atlantic institutions, a 
necessary precondition for stabilizing the Western Balkans. The 
surrender of Mladic, who is thought to be in Serbia, is necessary for 
Serbia's joining NATO's Partnership for Peace and for eventual NATO and 
EU membership.
  Karadzic's unwillingness to give himself up is blocking Partnership 
for Peace membership for Bosnia and Herzegovina.
  Gotovina's fugitive status is holding up Croatia's promising 
candidacy for EU membership.
  Whatever the eventual adjudication of his indictment, Ramush 
Haradinaj by his dignified departure and public statement has proven 
himself to be a patriot. The same cannot be said of Mladic, Karadzic, 
and Gotovina, whose selfish actions are standing in the way of much 
needed progress for Serbia, Bosnia and Herzegovina, and Croatia.
  Whatever Mr. Haradinaj's fate, I want to publicly salute him for his 
personal courage, for the statesmanship he has demonstrated over the 
last two days, and for having kept his word by doing exactly what he 
told me he would do with regard to the monastery. I wish him well. I 
hope justice is served, and I applaud him for his wise decision to 
cooperate with the Hague Tribunal.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. STEVENS. 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. STEVENS. Mr. President, I ask unanimous consent that I be excused 
from voting for the remainder of the day.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. STEVENS. 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. KENNEDY. 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. KENNEDY. Mr. President, those Americans who have been watching 
this debate on bankruptcy reform for the last 8 days must wonder what 
in the world is happening in the Senate this evening where we have had 
these prolonged quorum calls. We have had a series of votes over the 
course of the day. We had tentatively planned to have another series of 
votes on amendments at 5 o'clock this evening.
  But then because of the concern of our Republican colleagues on one 
particular amendment, an amendment that would have addressed the 
provisions in the underlying legislation that repeals the conflict-of-
interest provision for major banks, suddenly the quorum call goes in 
and there is no further action on the issue of bankruptcy.
  This is absolutely amazing. Many of us have pointed out how this is 
special interest legislation. It was written by the credit card 
companies for the credit card companies. They are the principal 
beneficiary.
  The argument for this legislation, according to the proponents, was: 
Look, we have a number of spendthrifts in the United States. People 
ought to act responsibly. This legislation will deal with it.
  That was their argument. And that is an argument that those of us who 
have differed with this legislation would gladly accept. The percentage 
of spendthrifts, so to speak, is anywhere from 5 to 7 percent of the 
total number of people who go into bankruptcy. Those of us who have 
been battling this legislation for the past several days all agree, we 
would join up with our colleagues in a bipartisan way to address that 
issue. But that isn't what this bill is about.
  This bill is about encumbering working families, primarily, who fall 
on difficult times, as we have pointed out during the debate. We have 
offered a series of amendments. A number of my colleagues have offered 
amendments. Every one of them has been defeated by our Republican 
colleagues.
  Now in the final hours of consideration of this legislation, because 
one particular amendment is going to touch the banking industry and 
they are unsure of the votes, they effectively call off all the votes 
for this evening. That is what is going on here in the Senate.
  If you want to put your finger on special interests, look what is 
happening in the Senate at this moment. We have the Sarbanes-Leahy-
Warner amendment, the authors of which were prepared to vote on. But 
no, the Republicans say, no, we are not going to let the Senate vote on 
that, because they are not sure of the votes.
  They are not sure of the votes. They are not sure that they have the 
votes to defeat that particular provision that would override a 
provision that is in the banking bill that repeals some conflict of 
interest for banking interests. Isn't that something? Doesn't that 
really show what this legislation is all about? Sure it does.
  Why not call the roll? Why not call the roll? We have been listening 
about let's move the banking legislation along; let's move it along. 
Why do you have to take time when you are talking about what the impact 
of this legislation is going to be on the members of the National Guard 
and Reserves, who go overseas--the 20,000 that would be bankrupt this 
year and subject to the harsh provisions of this legislation.
  And then we had a phony amendment that was accepted here that will do 
virtually nothing to protect them. What about the homestead exemption, 
which says that those who exist in five States are going to be able to 
squirrel tens of millions of dollars away so that if they go into 
bankruptcy they would be able to protect their million dollar homes? 
Why not have fairness across the country? Oh, no, we cannot do that 
because we have a delicate compromise. What is that delicate compromise 
they are talking about? I thought this legislation was going after 
spendthrifts. We agree to go after them, but when we know half of the 
people going into bankruptcy are going there because of health care 
bills that are run up, with 75 percent of those individuals covered 
with health insurance, but because they have a heart attack in their 
family or because they have a stroke in their family, or because they 
have a child who has spina bifida in their family, they are subject to 
the harsh provisions of this legislation that will virtually make them 
an indentured servant of the credit card companies for the next 5 
years. That is what is in this bill. We have pointed that out. No, we 
will vote that down. We will vote down any consideration for the 
National Guard and any consideration for the Reserve if they happen to 
be individuals who may be running a family business, one or two working 
in a particular employment or a mom-and-pop store, and they go overseas 
and they are going to serve for many months, and the store bellies up, 
then they are subject to the harsh provisions of this. No, we are not 
going to give consideration to those veterans. What about those 
individuals? It could happen to any family--except Members of the 
Senate, who have very good health care. It would not happen to us. But 
we cannot get health care for the rest of

[[Page S2336]]

Americans. No, that is just too bad, that they have a heart attack in 
their family, or a stroke, or that they have a sick child, they are 
going into bankruptcy, and they are going through the harsh provisions 
of bankruptcy that are going to make them pay for the next 5 years to 
10 years $15 or $20 a week, and continue to bleed them. That is what is 
in this bill.
  The American people are beginning to understand it. We talked about 
all the single women who go into bankruptcy because their ex-husbands 
do not pay them money for child support. Do you think we could have 
some understanding or some sensitivity to their particular problem? 
Absolutely not. No way. Let's take those spendthrifts and put it right 
to them. That is what this bill does. No, we cannot deal with that. 
What's your next amendment? Let's go on, it is getting late. Let's have 
time. Time, they say. What has happened here for the last 3 hours? The 
clock has run and they cannot figure out whether they have the votes to 
protect the banking industry. That is what is going on. The Republicans 
are trying to find out whether they have the votes to protect the 
banking industry, and they get all worked up when we call this special 
interest legislation. You have not seen special interest legislation 
until you see this bill.
  We used to, around here, look at a piece of legislation and say, who 
benefits and who suffers with this? Well, it is very easy to find out 
here who benefits. It is the credit card companies. They are the ones 
who are going to be put in the catbird's seat. Their estimate in the 
passing of this bill--listen to me--this legislation makes the 
bankruptcy courts of the United States the collection agencies for the 
credit card industry of America. Who do you think pays for the 
bankruptcy courts? You do, Mr. America. Ordinary Americans pay for 
those bankruptcy judges and the bankruptcy courts, and they are going 
to be out there as a collecting agency for the credit card companies. 
That is what this is about.

  It has been difficult to get anyone on the Republican side to 
understand that. Well, we voted on this some years ago. We have a 
changed condition from some years ago. Sure, we have the problems of 
bankruptcy. What about Enron and WorldCom? What about Polaroid in my 
own State? When they went belly up, the people not only lost their 
health insurance and pensions, they also lost their investments in what 
was called an ESOP--their requirement to invest in the companies. They 
all lost out on it. We are sure of one thing: Ken Lay and all of the 
people at Enron have big houses all sheltered away in places like River 
Oaks in Houston, TX. They have all those protected, tens of millions of 
dollars. What happened to the other people?
  So we do have a problem, but this bill doesn't address it. It does 
nothing about WorldCom or Enron or about Polaroid and what happened to 
those workers. Zero. Zip. Nothing. And then, when we found out that 
there is another loophole where, when wealthier people know they are 
going into bankruptcy, they can get a clever lawyer and put their money 
in trust and be free from the reaches of the bankruptcy court, that was 
addressed. No, we are not going to change this legislation. We are 
concerned about these spendthrifts--whoever they are. I have been on 
the floor for most of the time in this debate, and I still have not 
heard who they are. All I heard is that we passed this several years 
ago, and we have to pass it again.
  Well, there have been many changes since the last time we addressed 
this bankruptcy bill, and the major companies and corporations have 
basically done in the workers with their pensions, with their health 
insurance, with their life insurance; they have done them in, but this 
bill doesn't do anything about that. And then we have the issue of the 
use of these trusts to protect the assets of these wealthy debtors who 
are going into bankruptcy. But this bill doesn't do anything about 
that. We have the inequities where people in at least 20 or 25 States 
across the country, their investment in their homes will be protected 
up to $5,000 or $7,000, but not in Texas or Florida, where you can have 
tens of millions. Fair? Equitable? No, we are not going to do anything 
about that. No, we have not done anything about any of these issues.
  What we are basically saying is that those people who have worked 
hard, have health insurance, and had a serious health challenge or need 
in their family--just enough to tip them over--is that we are not going 
to show them any mercy. Absolutely, no, put the wood to them. Veterans, 
put the wood to them. Single moms who are not getting their payments of 
child support and alimony, put the wood to them.
  If you happen to fall below the median line, so you are outside--you 
would think that if you could show that your total certified income was 
below the median income of your State, you are supposed to be free from 
repaying. That is what you heard on the floor of the Senate. Yet when 
amendments are offered to make sure that all the other punitive 
provisions that are added to that--you have to go out there and enlist 
in some course on credit. Find a course on credit counseling. These are 
people who average $12,000 to $15,000 a year in terms of income--you 
are going to require them to take a credit course? They have to 
demonstrate that they graduate from that course; otherwise they will be 
subject to the $5 or $10 a week in terms of payment.
  This bill is all about $5 billion dollars in additional profits to 
the credit card companies. That is what this bill is all about. Where 
do you think it comes from? People who have gone into bankruptcy. Who 
are those people? They are the people that have the heart attacks. They 
are the men and women whose jobs have been outsourced.
  They are the mothers, single moms who are not getting paid alimony 
and child support. Those are the people who are being hurt, and those 
are the people who are hard-working Americans and who are going to have 
their final drops of blood drawn out of them with payments. That is 
this bill.
  We have been saying this is a special interest bill; tonight 
reaffirms it. The Republicans will not vote to restore a provision in 
this bill that was existing law that dealt with conflicts of interest 
for banks. They do not want to risk a vote in the Senate tonight. Why 
don't they explain it? Where is their shame? Why don't they explain it 
to the American people? Where are they? Where are all these proponents 
of this wonderful bill to explain why it is so difficult for them to 
decide tonight? This is just seamy, just a terrible way to legislate.
  We have seen these votes, as I mentioned, over time. We have seen who 
the vulnerable people are. We have seen who the beneficiaries are. We 
have pointed out what has been happening in America, across the 
landscape, over the last 4 or 5 years with the loss of jobs, the loss 
of extending unemployment compensation to people who paid into the 
unemployment compensation fund for a long time. The jobs are not out 
there. We have 8 million people who are unemployed, and there are 3.4 
million jobs out there. There are going to be people who cannot work, 
cannot find work.
  Mr. REID. Will my friend yield for a parliamentary inquiry?
  Mr. KENNEDY. Yes.
  Mr. REID. Would the Senator from Massachusetts want an hour of my 
time?
  Mr. KENNEDY. I thank the Senator very much. I appreciate it.
  Mr. REID. I yield the Senator from Massachusetts an hour of my time.
  Mr. KENNEDY. Mr. President, I thank the Senator.
  What has happened out there? We have seen the economic challenge for 
workers as a result of outsourcing, the mergers that have taken place, 
a number of them in my own State that are having a direct impact.
  There are two important industries that are the fastest growing 
industries in America. One is the collection industry. That is right, 
the collection industry, the people who spend their time dialing people 
who owe money on credit cards. They keep dialing--talk to the 
principal, talk to their children, talk to them at 3 o'clock in the 
afternoon when the children come back from school. That industry is 
growing.
  The second industry is part-time workers. That is what is happening. 
We find with part-time workers that they do not have coverage. People 
are ready to work. They want to work. They want these benefits. They 
have fought for these benefits over their lifetimes, the primary 
benefit being health insurance.

[[Page S2337]]

  We find out that what has happened in the United States today is the 
collapse of the pension system. What we are finding today is the lowest 
rate of savings in 40 years. And what does this administration want to 
do? They want to give Social Security to Wall Street. They want to give 
Wall Street Social Security and privatization. They took care of the 
major companies with the class action bill just a week ago, and now 
they are ready to take care of the credit card companies. But they 
cannot quite make up their mind whether the vote in the Senate that 
would restore existing conflict-of-interest provisions, which are 
existing law and which, I might point out, the Securities and Exchange 
Commission supports--not what is in this bill, but the amendment of 
Senators Sarbanes, Leahy, and Warner. They support that position. The 
SEC supports it because of conflict of interest. But not our Republican 
friends. No, they cannot make up their mind. If they add that to it, 
the power of the banking industry would be so strong over in the House 
of Representatives, they will have a stalemate, and then they will not 
get their goodies. They will not get their goodies. This is what has 
been happening.

  Look at the profits of the industry that is going to benefit, the 
credit card industry. In 1990, 6.4; 1995, 12.9, 2000, 20; 2004, look at 
this, $30 billion, between 2000 and 2004. Find an industry like that in 
America, except maybe the Guaranteed Student Loan Program, where we 
have a loan guaranteed by the Federal Government and lenders make 9% on 
some student loans. Parents wonder why the cost of going to school at 
the universities are so high, because the government is padding the 
pockets of student loan providers with tax payer dollars. These are the 
profits.
  Who are the people affected, as I mentioned before, during the course 
of this debate? We have 1.5 million bankruptcies annually and half of 
them are as a result of illness. Nonmedical causes, 54 percent; medical 
causes, 46 percent. But we are not going to show those. This bill was 
supposed to go after the spendthrifts. We can get the spendthrifts. We 
do not have to put these people through the mill. That is what this is 
really about.
  We are here this evening waiting until the clock moves down. We are 
at our offices constantly wondering when we are going to start the 
votes. Two votes were supposed to be at 5 o'clock--one to deal with 
single women who are in bankruptcy because they are not being paid 
their alimony and child support. That was dismissed out of hand; you 
will have to take that to a vote. We are prepared to take it to a vote, 
and we will certainly continue to take it to a vote. If we are not 
successful on this, anyone who thinks we are going to let these issues 
go away just does not understand those of us who are opposed to this 
particular program.
  We are also going to have an opportunity to vote on what has happened 
to so many of our American families as a result of outsourcing and how 
they have faced the economic challenges over recent weeks and months. 
More than 450,000 jobs have been outsourced. Over the next 10 years, we 
are expecting close to 3.4 million jobs to be outsourced, going outside 
the country.
  We have seen what is happening in manufacturing all across this 
country. We all know that manufacturing jobs are the ones that have the 
higher pay. That has been part of the phenomenon. Do you think that 
concept is of any importance to the proponents of this legislation? 
Absolutely not. No way.
  Health care prices have gone through the roof by 59 percent and the 
cost of prescription drugs 65 percent, and the fact we are an aging 
population with our parents, children, almost a third disabled who need 
those prescription drugs, and the prices are going up through the 
roof--are we giving them any consideration? Absolutely not. We do not 
care about the workers who have gotten shortchanged. We do not care 
about those who have needed prescription drugs and have been bankrupted 
in paying the prices.
  This is the same Republican Senate that would not permit the 
Secretary of HHS to negotiate prices downward--do you hear me--like we 
do in the Veterans Administration. Here we have hundreds of thousands 
of people who are going bankrupt because of increases in the cost of 
health care and prescription drugs, and we--most of us on this side--
who are opposed to these harsh provisions tried to make some difference 
several months ago to permit the Secretary of HHS to negotiate prices 
downward, as they do in the Veterans Administration. But, no, we are 
not going to let you do that. So that was defeated. You cannot import 
cheaper drugs from outside the country. You cannot get cheaper prices 
here. And what happens? You end up going into bankruptcy and end up 
with the harsh provisions of this legislation.

  This legislation is not fair, it is not just, and tonight we have 
seen what this is all about.
  The bankruptcy bill as written contains a provision, section 414, 
which would repeal the provision in current law on investment banks 
which underwrote a security of the company in bankruptcy from now 
serving as adviser to the bankruptcy. This is a basic conflict-of-
interest prevention in current law, which this bill would repeal. It is 
one of the many shameful special interest provisions in this bill.
  To their credit, Senators Leahy and Sarbanes offered an amendment to 
remove this provision and maintain the current law against conflicts of 
interest by the investment banks. It appears that it may have the votes 
to pass, so to protect the investment banks the Republicans have 
effectively shut down the process. There should be no doubt, when 
people finally vote tomorrow, what this bill is all about, who it was 
for. When it is a fight for the real people, then we hear from the 
other side saying, no, no. But when it is their friends in the banks 
who are threatened, it shuts down debate in the Senate.
  Clearly, there is no room in the Republican agenda for the real needs 
of the real people, the veterans, the workers, the mothers, the 
children, and the widows.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I will have a little bit to say about what 
the distinguished Senator from Massachusetts has been talking about, 
but I rise in opposition to the Kennedy amendment to S. 256, the 
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
  Now, it is important that colleagues on both sides of the aisle fully 
understand what this amendment does to our bankruptcy laws and what it 
does to the prospects for reform. Before I start, I will take a few 
minutes to remind everyone what this bill is all about. The short 
answer is fairness. Those who can pay their bills should pay their 
bills. That is the American way.
  All law-abiding, bill-paying consumers pay when some do not repay 
their obligations. You and I and every citizen of this country is going 
to pay if we allow people who can pay to escape their obligations, and 
this bill stops the gaming.
  This is not too revolutionary an idea, but to listen to some of the 
opponents of this legislation on the floor these last few days, one 
would think we are trying to square a circle.
  I have been down on this floor quite a bit over the last few days and 
I have heard many of the arguments from the few Senators against this 
bill, and I emphasize the ``few Senators against this bill.'' It sounds 
pretty familiar. I have been around this place for a long time and I 
only know one thing for sure. At the end of the day, some on the losing 
side will think that the underlying bill is without any merits at all 
and that their concerns have not been treated with the seriousness they 
feel they deserve.
  The principal substantive argument we have heard is that this bill 
goes too far and too fast; we have to take it slow; we have to rethink 
this; this bill is too extreme, they say. For some of my colleagues 
across the aisle, this is the same old song we have heard now for 8 
solid years that we have tried to put this bill together and it has 
always had huge bipartisan support. That is bipartisan support, 
Democrat and Republican support.
  I am a bit confused by some of the arguments that have been used on 
some of the same old amendments and against the bill itself. Sure, 
there are places we could have done better in this bill, as in every 
other legislation. There are always things we could do better. But the 
votes we have gotten on this bill, on its amendments in committee, and 
in previous Congresses are

[[Page S2338]]

as good an indication as we can ever have of the underlying 
reasonableness of these proposals.
  As a long-time supporter of the bankruptcy bill, I was extremely 
pleased by the strong bipartisan vote we had on cloture yesterday, 69 
to 31. That is not just Republicans; there are a lot of Democrats who 
know this bill is the answer to a lot of the problems we have in 
bankruptcy in our society, and who have been working with us for 8 
solid years in a bipartisan fashion. But to hear some of our critics, 
one would think that everybody concerned, all 69 of us, are nutcakes 
who do not know what is going on in our society or do not care for the 
poor, or for the weak, or for the worker, or for the union man. Give me 
a break.
  I am one of the few people in this body who ever held a union card. I 
worked for 10 years in the building construction trade unions, earned 
my journeyman's card as a wood, wire, and metal lather, now a carpenter 
today, and I am darned proud of that. I think a lot about people who 
are not as fortunate as we are in the Senate.

  As a long-time supporter of the bankruptcy bill, I was extremely 
pleased by the strong bipartisan vote, 69 to 31, on cloture. That was a 
big bipartisan vote by any measure. This vote is in keeping with the 
long record of bipartisan support for this bill over the life of the 
legislation.
  I will briefly review this history: We held our first meeting on this 
in a Judiciary subcommittee in 1998. I want to make sure everyone heard 
that right: 1998. Early on, the good-faith compromises began. To give 
everybody an idea, these are some of the amendments we accepted in 
committee over the last 7 years. We modified the homestead exemption. 
We modified the means test. We allowed for sanctioning of attorneys who 
file abusive claims. We made privacy concessions for filers. We 
prevented creditors from demanding repayment for debts incurred through 
predatory lending practices, something that has long been overdue for 
the poor, the weak, and the unfortunate. All of these were amendments 
from my Democratic colleagues. I could go through dozens of others.
  Two weeks ago, the Judiciary Committee held another markup on the 
bankruptcy legislation. We adopted five more amendments proposed by our 
Democratic colleagues. If some of the amendments that have been 
proposed on the floor sound similar to the matters I listed, that is 
because they are. Taken in a vacuum, as it might sound to anyone who 
randomly tunes in on C-SPAN, these amendments might sound reasonable. 
Yet in proper context of past history and compromises, many of these 
amendments should be understood for what they are: more of the same.
  Many of the amendments address issues we have already negotiated 
previously. Frequently, these amendments make this a better bill. But 
now after so many years of hearing the same complaints, even after we 
attempted to address concerns by accepting or modifying amendments, 
including, I repeat, five in their latest and hopefully last markup of 
bankruptcy reform in the Judiciary Committee, it is less than clear 
that some of these remaining amendments will improve this already fully 
vetted bill.
  The five amendments adopted in the markup ran the gamut. One was a 
technical fix that created a more restrictive inflation adjustment 
plan. We decided to prevent corporate executives--that is corporate 
executives, by the way--from declaring bankruptcy to avoid paying fines 
for securities fraud. That does not sound like something that hurts the 
little guy. We are trying to stop this type of fraud.
  We accepted three amendments from the senior Senator from 
Massachusetts, Mr. Kennedy. We clarified the means test, even in an 
instance where we sincerely believed that the means test was already 
more than clear, to explain that without any debt, health and 
disability expenses will not be included against a filing for 
bankruptcy. We allowed for a trustee in cases of fraud involving 
persons representing the debtor. In an amendment that many think we 
went too far on, we even accepted a compromise version of an amendment 
that restricted payments to executives and businesses going through a 
bankruptcy. Unfortunately, this amendment may discourage senior 
officials from taking on the task of seeing a company through a 
difficult financial reorganization. The unintended consequences of this 
might be to further limit the ability of damaged companies to emerge 
from bankruptcy and to keep thousands of employees on the job. They may 
lose those employees. Those employees may lose their jobs if we cannot 
keep good, competent executives there. I think this issue deserves more 
attention. But we agreed to it.

  I am hopeful. I have been chatting with my good friend from 
Massachusetts and he has indicated he thinks we might be able to 
resolve that problem so people will not lose their jobs. But it depends 
upon what he thinks, not on what I think, because I accepted the 
amendment in committee, as the person who was in charge of the 
committee at that time.
  Fairness demands that we work with our colleagues in the minority but 
this is a two-way street. Fairness also demands that large bipartisan 
majorities, after they have done all they can to reach agreements with 
the other side, be allowed to move on. That is why we invoked cloture, 
so we can move on.
  This bill is a case study in such accommodation. I could go through 
dozens and dozens more accommodations we made to the other side, and to 
people on this side as well. This bill first passed all the way back in 
the 105th Congress. Let me refer to this chart. In the 105th Congress 
we passed this bill 97 to 1. I don't think everybody who voted for this 
was an idiot, who did not care for the poor and the weak and the infirm 
and the downtrodden. No. We are trying to solve some of their problems. 
This bill passed the Senate by a 97 to 1 vote. You cannot get much more 
support than that. There is no denying the bipartisanship of that vote.
  When we came back to the issue in the 106th Congress, we again had 
massive bipartisan support for this bill. The Senate passed H.R. 833 on 
February 2, 2000, 83 to 14. I think that was a pretty good bipartisan 
vote. It is virtually the same bill. Then the conference report came 
back and on December 7, same year, 2000, we passed this same bill 70 to 
28. That was a big bipartisan vote--which was right. That bipartisan 
conference report was supported by Democrats and Republicans. That was 
vetoed with a pocket veto by President Clinton. He had a right to do 
that, but he pocket-vetoed it because it didn't have an abortion 
amendment on it.
  What about the 107th Congress? Did we give up hope? I can tell you 
that I did not. I just could not believe, I still cannot believe that a 
bill with such wide support could repeatedly fail to become law. So 
what did we do in the 107th Congress? Let me refer to this chart. In 
the 107th Congress, on March 15, 2001, this bill passed again, 83 to 
15, and then passed again, 82 to 16. Those are bipartisan votes. I 
don't think the Democrats who voted with us are idiots or did not care 
for the poor. I don't think they failed to acknowledge that we have to 
take care of those who are unfortunate in our society. They did 
acknowledge that it cost every family in America $400 extra because of 
what is going on in this system.
  All in all, the full Senate has voted favorably on bankruptcy reform 
legislation five times. Five times, all sweeping bipartisan votes, and 
the bill is not yet signed into law.
  If we adopt any of these amendments from people who will never vote 
for this bill no matter what we do--they would rather criticize it than 
vote for it. I can criticize aspects of this bill myself, I believe. 
But it is a classic working together in the best methodology that we 
have, to bring everybody together and get legislation done that will do 
a lot of good. It will cause people, who can afford to, to pay their 
bills, or at least pay some of their bills.
  It seems to me that is the American way. We want to teach our 
children, our young people, that it is important to pay your bills. It 
is important to live up to your responsibilities.
  We do a lot to make sure corporate America lives up to their 
responsibilities in this bill as well. The bill is not signed into law 
yet, but we hope we can get it through--apparently not tonight, but by 
tomorrow. If not tomorrow, then Friday. If not Friday, Saturday. As far 
as I am concerned, whatever it takes to get it done.
  These reform-minded votes are not just coming from the Senate. Here 
is

[[Page S2339]]

how the House voted over the years, just so everybody knows. There are 
535 Members of the House. Here is how they voted: 300 to 125; 313 to 
108; 306 to 108. Overwhelming bipartisan votes, because this bill is 
the best we can do. It will do a lot of good, to make things right in 
our society. With all due respect, these are not even close calls. They 
are consistent, bipartisan blow-outs. But, to listen to the opposition, 
you would think this legislation is supported by only a small minority 
of Representatives in the House of Representatives or in the Senate. 
Nothing could be further from the truth.
  I really do not know what else we can do. We have compromised when it 
was reasonable to do so. As a matter of fact, in our very first 
subcommittee debate on this issue we accepted an amendment from my 
distinguished colleague, the Senator from Illinois, that adjusted the 
requirements for being subject to the means test. That amendment 
created a safety valve for those who fall below the national median 
income.

  This was an important amendment. This bill does not track it exactly, 
but our exclusion of those who fall below the State median income takes 
this original amendment as a guide. It materially limited the reach of 
the means test. It allowed a fresh start to those poor people who are 
drowning in a sea of debt with no way to pay it back.
  I said many times during this debate and I will say it again: 80 
percent of bankruptcy filers will be excluded from the means test--80 
percent. They will be permitted to file chapter 11, which will 
completely wipe out their debts. The supposed draconian means test has 
results in only one half of the mere 20 percent that it even applies 
to. It allows those with incomes that remain above the State median 
income, after numerous health and education and other exceptions, to 
pay back some of their debt over the course of 3 or 5 years. It gives 
them even a break there.
  When all is said and done, the means test in this bill will only 
result in about 1 in 10 individuals who file bankruptcy from ever 
having to pay some of their past debts with future earnings. So 10 
percent of 100 percent will have to do some payback because they can 
afford to do it. It is only right. They should not saddle all America 
with their debts when they can afford to pay them back. But in the 
first markup, the man who is now the minority whip, my friend from 
Illinois, proposed the amendment that remains at the heart of the means 
test in this bill, and we accepted it.
  What is amazing to me is that when my colleagues want to raise taxes 
they are always talking about how great the means test is. But when we 
want to make sure that people who can pay can pay, suddenly the means 
test is not a good test. You can't have it both ways. It is amazing to 
me. It is almost hypocrisy.
  I am pleased that cloture has been invoked, giving us the opportunity 
to once again pass this bill. It is getting to the point where some 
might even forget why we initiated this legislation. We have been at it 
for 8 years now. Some of those who oppose the bill and are offering 
final postcloture amendments are flying in the face of years and years 
of hard work and bipartisan compromise. By the way, the ones who bring 
up the amendments will never vote for this bill no matter what you do, 
unless it is a complete cave-in, so we cannot solve the problems that 
are eating our country alive in bankruptcy. And they do it under the 
guise that they are trying to protect the weak and the infirm and those 
who really cannot help themselves.
  Give me a break. We over here get so tired of those populist 
arguments. We hear them over and over and sometimes I think they think 
the more they yell and scream the more people must think their 
arguments are serious. I hope people are listening because, my gosh, 
after 8 years of compromising and working and bringing people together 
and listening to both sides and doing everything we can to accommodate, 
why do we have to go through all the same amendments over and over 
again; they have been defeated time and time again because they deserve 
being defeated. Yet it happens every time--they get up and act like the 
world is coming to an end because their populist rhetoric is not being 
listened to. Unfortunately, there are people out there who really 
believe this stuff when somebody starts yelling, screaming, and 
shouting on the Senate floor.

  The fact is that many of these final amendments being proposed during 
this debate are just further adjustments of adjustments to adjustments 
that were already made during this process. We have made further 
adjustments and refinements when we found broad consensus. These 
amendments have been brought up postcloture.
  You would think there would be a time when you admit that you have 
had your shot, you have had 8 years of your shot; you have had 
amendment after amendment, the same thing over and over again, and the 
amendments have been defeated. You would think sooner or later they 
would come to the conclusion to stop holding up the Senate and the 
people's business and let this bill go; we lost this bill even though 
we as liberals don't like it. But there are liberals who do like it 
because they know it is right. They know what we are trying to do here 
will work to the betterment of the bankruptcy laws of the country.
  I would like to add that during the course of the floor debate over 
the last week and a half we accepted more amendments that will improve 
this bill.
  The Senate agreed to the Sessions amendment that makes clear that 
bankruptcy judges must consider military and veteran status and health 
care costs when determining whether a portion of future income must be 
used to pay past debt.
  The Sessions amendment addressed many of the issues presented by 
Senator Durbin with respect to military personnel and veterans, and 
Senator Kennedy with respect to health care costs.
  We accepted the Specter amendment that made clear how bankruptcy 
judges will be paid through increased filing fees. This important 
amendment stands for responsible government and eliminates any 
objection to the legislation based on a budget point of order.
  In addition, we adopted an important amendment by Senator Leahy that 
corrects some potential problems that relate to privacy of certain 
personal information, including Social Security numbers.
  In short, we have improved this bill on the floor in a number of 
important aspects. We have been open to our colleagues. We have tried 
to accommodate them where we can. But there are areas where we can't 
and have this bill became law.
  I think that the cloture vote we just took is evidence of those 
changes to this already moderate legislation. I understand some 
Senators do not think they have had an adequate hearing. At the 
beginning of this process, I gave them my word to at least consider 
amendments from all sides, and I believe we have done so. This 
institution is rather unwieldy, though. I think anybody who watches it 
or thinks about it has to admit that. That is probably putting it 
mildly. Unfortunately, even decent arguments, if they come at the wrong 
time, are going to have an uphill climb.
  As I said earlier, since I was first elected I have tried my best to 
reach out to the other side as a good-faith actor. That is no less true 
with this bankruptcy bill. I have listened to more proposals and voted 
on more amendments that I can recall, and so has Senator Grassley and 
Senator Sessions and others who have worked so hard on this issue. My 
hope is that as we move forward the opposition remembers the bigger 
picture. Even those few Senators who will not vote for final passage 
know that this bill was made better because we have accepted their 
amendments over the years.
  At this late date, though, it is difficult to accept many more for 
procedural reasons. I oppose the amendment offered by the distinguished 
Senator from Massachusetts for all of these substantive reasons.
  Let me give a couple more substantive reasons. I accept Senator 
Kennedy's argument that health care costs are the key factor in 
bankruptcy. I have heard that for days around here; that most people go 
into bankruptcy because of health care costs. Much of his argument 
stems from the so-called Warren study. Let me talk about the Warren 
study cited by Senator Kennedy and give a response to it by the

[[Page S2340]]

Department of Justice. Here is what the Department of Justice said. I 
would suggest that the Warren study has been greatly overplayed here on 
the floor.
  They said:

       Professor Warren, a long-time opponent of bankruptcy 
     reform, and her so-called ``studies,'' should be approached 
     with skepticism.
       Though Ms. Warren's study claims that more than half of 
     consumer bankruptcies are medically related, the DOJ has told 
     us that only ``the conclusion that almost 50 percent of 
     consumer bankruptcies are `medical related' requires a broad 
     definition and is generally not substantiated by the official 
     documents filed by debtors.''

  In other words, this claim that 50 percent of the bankruptcies are 
caused by medical expenses is pure bull.
  The means test doesn't apply to the poor or anyone without the 
ability to re-pay.
  Anyone under the median income for their State is automatically 
exempt from the means test.
  They can go right into chapter 7 and have every one of their debts 
removed; that is, the poor.
  To the extent that ``above median'' families have ongoing medical 
expenses, they are permitted to use those expenses as a reason to not 
pay their debts. These are people above the median income level.
  GAO's 1999 analysis of the expenses allowed under the means test 
clearly shows that the means test permits all debtors to account for 
health care expenses.
  For people with repayment capacity and financial resources, the 
bankruptcy legislation prevents abuse by requiring some of their bills 
to repaid in exchange for not having to pay the full amount.
  This is fair. If they can pay some, they ought to pay some. We 
shouldn't just stick the hospitals and the doctors and everybody in 
medical care with these unpaid debts.
  I was talking to one of the large hospital chains the other day. I 
asked them how much uncompensated debt they had every year; in other 
words, medical care that you have given that you receive no 
compensation for. It was almost $1 billion a year that they have given 
in free medical care for the poor and for some who game the system. 
Guess who pays for that. You and I, and everybody else in the final 
analysis because it is going to have to come back in most cases to 
Medicaid and Medicare. These are Federal programs that wind up with 
those debts. By the way, we pay for them for a variety of reasons. We 
don't pay almost $1 billion to those hospitals. They don't get anything 
in most cases. That uncompensated debt means they are not getting paid. 
They are giving emergency care. That is why some hospitals are now 
doing away with emergency care facilities, because they can't keep 
doing it. People who do not pay their bills raise the cost of 
everything for all of us. That is OK when they can't pay their bills 
when they are poor. But when they can, and when they think they can 
just escape them by going into bankruptcy and they are capable of 
paying some or all of their bills, they ought to help to do it.
  For people with repayment capacity and financial resources, the 
legislation prevents abuse by requiring some of the bills to be repaid 
in exchange for not having to pay the full amount.
  If someone can't pay health care debts, the bill does not force them 
to. This bill will not force them to. If they can pay health care 
debts, they should repay those debts and those bills just like 
everybody else has.
  The Sessions amendment we adopted last week addresses this 
problem. It simply addresses the problem.

  Let me close by addressing the investment banker provision my 
colleague from Massachusetts has strenuously commented upon. I am not 
sure if strenuous is quite the word, but I will use that word here 
tonight. It seemed to me a little more than strenuous.
  Companies in financial distress need the ability to retain good help. 
They need to be able to keep people on who know the company best and 
who will enable that company to emerge from reorganization a more 
healthy outfit that can continue providing for its employees and 
contribute to the economy.
  Under current law, investment bankers alone among professionals in 
the business world were deemed, per se, interested persons who could 
not work for a company after filing for bankruptcy if they had served 
as banker for any outstanding security of the corporation. This bill 
simply extends the test, one of the materially adverse interests that 
applies to lawyers, accountants, and other professionals to investment 
bankers.
  This amendment makes sense. It continues to provide the courts with 
discretion to exclude bankers from participation in a reorganization 
while giving companies more flexibility as they attempt to reorganize 
and save themselves.
  The amendment under consideration would undo this flexibility by 
imposing a strict 5-year exclusion on participation by investment 
bankers. This makes little sense. I will be voting against the 
amendment. I urge my colleagues to do the same. I especially make the 
case that this is not special interest legislation, as my colleague 
says it is. This is a classic message amendment. The message we should 
send tomorrow is to vote ``no'' on this amendment. When we talk about 
message amendments, these are amendments that our colleagues know we 
cannot take for very good reasons, but they are trying to score 
political points with the Nation. Anyone who looks at these matters 
carefully and understands the law would say, let's not let these 
message amendments take over a good bill that can do so much good for 
our society. We then should vote ``yes'' on final passage because this 
is a good, balanced, bipartisan, bicameral bill.
  What gets me down is I have heard these arguments for 8 solid years. 
Most of them do not make sense. Most of them are message arguments for 
political reasons by people who will never vote for this bill, 
basically have not helped bring this bill about, who have not 
cooperated in trying to bring both Houses together, who are not part of 
the huge bipartisan consensus on this bill, and who are trying to score 
political points, hoping we will never come on the floor and refute 
them.
  I could not sit back and not come to the Senate tonight because we 
have to quit making political points. We ought to pass this bill so we 
can help this country and its people go forward in ways it should.
  People who can pay their debts ought to. Companies that are doing 
wrong ought to pay for that. Where there is fraud, this bill will 
attack it.
  We can go through so many good aspects of this bill. Could it be 
better? I have never seen a bill pass here of any magnitude that could 
not be improved. But we have had 8 years of improvements and this is 
the bill that will pass if we do not amend it. We should pass it. We 
should move forward from here.
  Having said that, that does not mean we should not immediately start 
work on the next bankruptcy bill to see if there are ways we can 
improve even this. As this bill becomes law, we will find ways that it 
may not work as well as we contemplated and we ought to continually 
oversee this and make sure this bill works in the best interests of all 
Americans, that it works in the best interests of the poor, and the 
working people, our union men and women, people who have to make a 
living all over this country, and for investors and everybody else in 
our society. We ought to make sure we do the best we can. I assure you 
we will continue to try and work to continue to improve our laws in 
this country. That is what this body is all about.
  I will briefly mention an important issue that arose from the 
amendment at the markup. This amendment offered by my friend from 
Massachusetts, Senator Kennedy, seeks to prevent unfair and unnecessary 
retention bonuses to insiders in chapter 11 companies. The goal here is 
certainly laudable and I agree with the desire to try to do that, but 
it has come to light since our markup that this amendment may act to 
effectively prohibit responsible companies undergoing reorganization--
in other words, trying to save themselves--from keeping key employees 
who may best be able to steer the company back into solvency.
  I have a letter from the Association of Insolvency and Restructuring 
Advisors enumerating these concerns in further detail and I ask 
unanimous consent it be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


[[Page S2341]]


                                     Association of Insolvency and


                                       Restructuring Advisors,

                                                    March 1, 2005.
     Sen. Arlen Specter,
     Chairman, Committee on the Judiciary, U.S. Senate, 
         Washington, DC.
       Dear Mr. Chairman: The undersigned are financial and legal 
     professionals who serve as the Board of Directors of the 
     Association of Insolvency and Restructuring Advisors (AIRA). 
     As board members we work to further the AIRA's goal of 
     increasing industry awareness of the organization as an 
     important educational and technical resource for 
     professionals in business turnaround, restructuring, and 
     bankruptcy practice, and of the Certified Insolvency and 
     Restructuring Advisor (ClRA) designation as an assurance of 
     expertise in this area.
       We write to make you aware of serious concerns we have 
     regarding a provision contained in S. 256, the ``Bankruptcy 
     Abuse Prevention and Consumer Protection Act of 2005.'' The 
     provision in question effectively prohibits the use of key 
     employee retention plans in Chapter 11 reorganizations. It 
     was added during the Judiciary Committee mark-up of the bill 
     and elicited little attention at the time. However, we 
     believe this provision will cause considerable harm to a 
     number of companies that will become subject to bankruptcy 
     proceedings, and, most importantly, to their employees, 
     customers, and creditors.
       When a company is operating in Chapter 11, a primary 
     responsibility of management is to maintain and grow the 
     company's value for the benefit of all of its stakeholders. A 
     company that is well-managed through its restructuring 
     benefits its creditors, employees, retirees, unions and the 
     local communities of which the company is a part. Companies 
     that fail to successfully reorganize in Chapter 11 are 
     liquidated. Creditors receive pennies on the dollar and 
     employees see their jobs and retirement savings destroyed.
       When companies enter Chapter 11, it is critical that they 
     attract and retain top management talent. But Chapter 11 is 
     also the most difficult time to attract and retain such 
     talent. Managers of Chapter 11 companies are faced with 
     intense scrutiny, stress, insecurity, and an enormously 
     complex process. Compensation and incentive tools used by 
     non-bankrupt companies such as equity compensation programs 
     are not available to assist with attracting and retaining the 
     type of management talent necessary to bring the company 
     successfully through the Chapter 11 process--this is because 
     the pre-petition equity is almost always without value. Key 
     employee retention plans (``KERPs'') have become common 
     practice since the early 1990's and have been viewed by 
     courts, debtors, and creditors alike as an important and 
     useful way to help reorganization by retaining key employees.
       Bankruptcy courts have agreed with this reasoning, and many 
     judges have used their judicial discretion to approve KERPs. 
     For a court to approve a KERP under existing law, however, a 
     debtor must use proper business judgment in formulating the 
     program, and the court must find the program to be reasonable 
     and fair. Creditors have the right to object to proposed 
     KERPs, and judges are presented with a full evidentiary 
     record upon which to make a determination. If a KERP is 
     not appropriate or if it is not in the best interest of 
     the company's creditors, the judge can refuse to approve 
     it.
       In the last few years, there has been a trend, with which 
     we agree, towards stricter judicial scrutiny of proposed 
     KERPs by bankruptcy judges. Such a trend seems appropriate in 
     the wake of numerous high profile bankruptcy filings where 
     management's misconduct or mismanagement has led to the 
     Chapter 11 filing. Judges have discretion to deny KERPs in 
     these circumstances, and they do so when the facts and 
     circumstances warrant.
       Unfortunately, S. 256 as reported by the Senate Judiciary 
     Committee includes an amendment authored by Senator Edward M. 
     Kennedy (the Kennedy amendment) that places significant 
     limits on retention bonuses and severance payments to 
     employees of companies in Chapter 11. It would prohibit a 
     bankruptcy judge from approving retention bonuses in every 
     Chapter 11 case unless he or she finds that the company in 
     question has proven that the employee has a bona fide job 
     offer at the same or greater rate of compensation; was 
     prepared to accept the job offer; and the services of that 
     employee are ``essential to the survival of the business''. 
     The amendment also places significant caps on the amount of 
     such bonus and payments.
       The Kennedy amendment appears to be motivated by a desire 
     to combat KERPs in Chapter 11 cases where employee-related 
     fraud substantially contributed to the bankruptcy of the 
     company. Yet, by painting with such a broad brush, the 
     Kennedy amendment will, if enacted, effectively eliminate all 
     companies' ability to ever receive court approval for a KERP. 
     Federal bankruptcy judges would have little or no discretion 
     to approve KERPs. In turn, bankrupt companies would have less 
     flexibility in trying to retain or attract necessary 
     employees. This result will cause considerable harm to 
     companies in bankruptcy, their employees, and their 
     creditors.
       It is apparent that the Kennedy amendment is designed to 
     prevent abuses of the system, where creditors' employees' and 
     retirees' monies are unnecessarily expended for the 
     enrichment of management. Whether there currently is or is 
     not sufficient judicial scrutiny of KERPs is a valid 
     question, insofar as the overall bankruptcy system allows 
     debtors a fair amount of flexibility in exercising reasonable 
     judgment--but there must be an approach better than 
     handcuffing the judiciary and stakeholders in bankruptcy 
     cases by essentially precluding all use of KERPs. The proper 
     use of KERPs requires an analysis of all facts and 
     circumstances of the case, and not what is essentially a 
     blanket proscription of these tools.
       Senator Kennedy has advanced an important public policy 
     discussion with his amendment. Managers who have had 
     responsibility for driving a company into bankruptcy should 
     not be paid a bonus to remain. Similarly, if the retention of 
     an employee would not enhance a company's value for its 
     stakeholders, they should not be paid a bonus to stay. 
     Current law provides bankruptcy judges with the discretion 
     necessary to deny a KERP in such circumstances and bankruptcy 
     judges do deny KERP payments in these circumstances. Still, 
     if the Congress wishes to improve the operation of current 
     law while still safeguarding the ability of the courts to 
     approve legitimate KERPs, we would welcome a discussion on 
     how best to achieve that end. Unfortunately, S. 256, as 
     reported by the Committee, goes too far and should be amended 
     so as not to unnecessarily limit the bankruptcy court's 
     ability to determine what is in the best interest of each 
     individual bankruptcy estate.
       Mr. Chairman, we thank you for considering our views on 
     this important matter. We would be pleased to address any 
     questions you or other members of the Committee on the 
     Judiciary may have.
           Sincerely,
       The members of the board and management of the Association 
     of Insolvency and Restructuring Advisors.
         Soneet R. Kapila, CIRA, Kapila & Company; President, 
           AIRA; James M. Lukenda, CIRA, Huron Consulting Group; 
           Chairman, AIRA; Grant Newton, CIRA, Executive Director, 
           AIRA; Daniel Armel, CIRA, Baymark Strategies LLC; 
           Dennis Bean, CIRA, Dennis Bean & Company; Francis G. 
           Conrad, CIRA, ARG Capital Partners LLP; Stephen Darr, 
           CIRA, Mesirow Financial Consulting LLC; Louis DeArias, 
           CIRA, PricewaterhouseCoopers LLP.
         James Decker, CIRA, Houlihan Lokey Howard & Zukin; 
           Mitchell Drucker, CIT Business Credit; Howard 
           Fielstein, CIRA, Margolin Winer & Evens LLP; Philip 
           Gund, CIR, Marotta Gund Budd & Dzera LLC; Gina Gutzeit, 
           FTI Palladium Partners; Alan Holtz, CIRA, Giuliani 
           Capital Advisors LLC; Margaret Hunter, CIRA, Protiviti 
           Inc; Alan Jacobs, CIRA, AMJ Advisors LLC.
         David Judd, Neilson Elggren LLP; Bernard Katz, CIRA J H 
           Cohn LLP; Farley Lee, CIRA, Deloitte. Kenneth Lefoldt, 
           CIRA, Lefoldt & Company; William Lenhart, CIRA, BDO 
           Seidman LLP; Kenneth Malek, CIRA, Navigant Consulting 
           Inc; J. Robert Medlin, CIRA, FTI Consulting Inc; Thomas 
           Morrow, CIRA, AlixPartners LLC.
         Michael Murphy, Mesirow Financial Consulting; LLC; Steven 
           Panagos, CIRA, Kroll Zolfo Cooper LLC; David Payne, 
           ClRA, D R Payne & Associates Inc; David Ringer, CIRA, 
           Eisner LLP; Anthony Sasso, CIRA, Deloitte. Matthew 
           Schwartz, CIRA, Bederson & Company LLP; Keith Shapiro, 
           Esq. Greenberg Traurig LLP; Grant Stein, Esq., Alston & 
           Bird LLP; Peter Stenger, CIRA, Stout Risius Ross Inc; 
           Michael Straneva, CIRA, Ernst & Young LLP.

  Mr. HATCH. We have language in this issue which would mitigate what I 
believe are unintended effects of this amendment. Under this modified 
language, all payments where ``misconduct, fraud, or mismanagement'' is 
present are prohibited. This language also keeps the burden on chapter 
11 companies to prove that retention bonuses are ``necessary, fair and 
reasonable,'' and ``likely to enhance a successful reorganization.''
  This seems like a reasonable fix to me and I hope we include this 
language in the bill. I appreciate any help my friend from 
Massachusetts would give on that particular issue because if we are 
interested in doing what is right, this will do what is right.
  Mr. KOHL. Mr. President, I am in support of the Kennedy-Kohl 
amendment. It would eliminate the most flagrant abuse of the bankruptcy 
system under current law--the unlimited homestead exemption. This 
exemption allows debtors in five states to purchase expensive homes and 
shield millions of dollars from their creditors. All too often, 
millionaire debtors take advantage of this loophole by buying mansions 
in states with unlimited exemptions like Florida and Texas, and 
declaring bankruptcy and yet continue to live like kings. Our measure 
will generously cap the homestead exemption at $300,000--that is: it 
permits a debtor to keep $300,000 of equity in his or her home after 
declaring bankruptcy.
  This amendment, with even lower threshold amounts, has been adopted

[[Page S2342]]

twice by the Senate by wide margins in the course of considering 
previous bankruptcy bills, in both the 106th and 107th Congresses. As a 
result of my efforts in the past bankruptcy debates, the underlying 
bill that we are debating already contains a provision on the homestead 
amendment that gets at the worst abusers of this loophole, including 
felons. In fact, it will be the first Federal law ever on the homestead 
exemption.
  The provision included in the bill, however, while obviously better 
than the current law's allowance of an unlimited homestead exemption, 
is still not a comprehensive solution to the current abuses of the law. 
It would allow those who establish their residence in an unlimited 
homestead state more than 3 years and 4 months before a bankruptcy 
filing to shelter an unlimited amount of money in their residences. All 
it would take for a greedy or unscrupulous individual to take advantage 
of this provision to defraud his or her creditors is some planning and 
foresight. And it does nothing to stop lifelong residents of these 
states from taking advantage of the unlimited homestead exemption to 
protect their assets from creditors.
  A review of a few examples in recent years show how willing 
disreputable debtors are to engage in such planning to hide their 
assets. Let me give you just a few of the many examples:

       John Porter, WorldCom's cofounder and former Chairman, 
     bought a 10,000 square-foot ocean front estate in Palm Beach, 
     Florida in 1998, a home featured on the cover of the November 
     2004 issue of Luxury Homes magazine, and now worth nearly $17 
     million. The IRS says he owes more than $25 million for back 
     taxes, and he is the defendant in several multi-million 
     dollar securities fraud lawsuits resulting from the failure 
     of WorldCom. Porter filed for bankruptcy in May 2004. 
     Florida's homestead exemption allows Porter to keep most of 
     the value of the house.
       The former Executive Vice President of Conseco has sought 
     to avoid repaying $65 million in loans from Conseco by 
     selling 90% of her and her husband's assets and buying a $10 
     million home on Sunset Island in Miami Beach, FL.
       In 2001, Paul Bilzerian--a convicted felon--tried to wipe 
     out $140 million in debts and all the while holding on to his 
     37,000 square foot Florida mansion worth over $5 million--
     with its 10 bedrooms, two libraries, double gourmet kitchen, 
     racquetball court, indoor basketball court, movie theater, 
     full weight and exercise rooms, and swimming pool.
       The owner of a failed Ohio Savings and Loan, who was 
     convicted of securities fraud, wrote off most of $300 million 
     in debts, but still held on to the multi-million dollar ranch 
     he bought in Florida.
       Movie star Burt Reynolds wrote off over $8 million in debt 
     through bankruptcy, but still held onto his $2.5 million 
     Florida estate.

  Sadly, those examples are just the tip of the iceberg. Several years 
ago, we asked the GAO to study this problem. At that time, they 
estimated that 400 homeowners in Florida and Texas--all with over 
$100,000 in home equity--profited from this unlimited exemption each 
year. And while they continued to live in luxury, they wrote off an 
estimated $120 million owed to honest creditors. This is not only 
wrong; it is unacceptable.

  In stark contrast, in most States debtors may keep only a reasonable 
amount of the equity they have in their homes. For example, in my home 
State of Wisconsin, when a person declares bankruptcy, he or she may 
keep only $40,000 of the value of their home. This permits creditors 
access to any additional funds that could be used to repay outstanding 
loans, yet allows the debtor to preserve $40,000 which is more than 
enough for a fresh start. Most States reasonably cap their homestead 
exemptions at $40,000 or less.
  The bankruptcy reform bill is intended to wipe out abuse by debtors 
who run up large bills and then use the bankruptcy laws as a method of 
financial planning. Our amendment does exactly that.
  Unlike the compromise version currently in S. 256, this amendment 
completely closes this inexcusable loophole that allows too many 
debtors to keep their luxury homes, while their legitimate creditors--
like kids owed child support, ex-spouses owed alimony, state 
governments, small businesses and banks--get left out in the cold.
  While the unlimited homestead exemption may not be the most common 
abuse of the bankruptcy system, it is clearly the most egregious. If we 
really want to restore the stigma attached to bankruptcy, these high 
profile cases are the best place to start.
  In both the 106th and 107th Congresses, an overwhelming number of our 
colleagues agreed with us and voted to cap the homestead exemption by 
wide margins. In the 106th Congress, this proposal was adopted in the 
Senate by a vote of 76-22. In the 107th Congress, a motion to table 
this proposal was defeated in the Senate by a vote of 60 to 39, and 
this amendment was then adopted by voice vote. The vote this year is 
exactly the same as the one in the 106th and 107th Congresses. If you 
were against rich debtors avoiding their creditors the last two times, 
then you should be against rich debtors avoiding their creditors this 
time.
  The simple hard cap that we propose with this amendment is not only 
the best policy; it also sends the best message: bankruptcy is a tool 
of last resort, not financial planning. Even though I would prefer that 
this amendment include an exemption for family farmers, it does address 
the need to go after the worst abusers, no matter how wealthy.
  In closing, we should remember that one of the central principles of 
the bankruptcy bill is that people who can pay part of their debts 
should be required to do so. But the call to reform rings hollow when 
the bill creates an elaborate, taxpayer funded system to squeeze an 
extra $100 a month out of middle class debtors and yet allows people 
like Burt Reynolds to declare bankruptcy, wipe out $8 million in debt, 
and still hold on to a $2.5 million Florida mansion. I urge my 
colleagues to support this amendment.
  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. FRIST. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FRIST. Mr. President, I ask unanimous consent that all time be 
considered as expired under rule XXII with respect to the pending bill; 
I further ask consent that at 11 a.m. tomorrow the Senate proceed to a 
series of votes in relation to the following amendments; I further ask 
consent there be 2 minutes equally divided for debate prior to all 
votes in the series: Kennedy, No. 70; Kennedy, No. 69; Akaka, No. 105.
  I further ask consent that on Thursday, at a time determined by the 
majority leader after consultation with the Democratic leader, the 
Senate proceed to votes in relation to the following amendments: Leahy 
83; Durbin 112; Feingold 90; Feingold 92; Feingold 93; Feingold 95; 
Feingold 96; Schumer second-degree amendment numbered 129; Talent No. 
121.

  I further ask unanimous consent that amendments Nos. 87 and 91 be 
agreed to en bloc with the motion to reconsider laid upon the table; 
provided further that all other pending amendments--Nos. 45, 50, 52, 
53, 72, 71, 88, 94, 97, 98, 99, 100, 101, and 119--be withdrawn and no 
further amendments be in order other than the possibility of a further 
Talent second degree which has been filed and a managers' amendment 
which has been cleared by both leaders.
  I finally ask unanimous consent that following the disposition of the 
above amendments, the bill be read a third time and the Senate proceed 
to a vote on passage of the bill, with no further intervening action or 
debate.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________