[Congressional Record Volume 155, Number 4 (Friday, January 9, 2009)]
[House]
[Pages H152-H157]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      MIDDLE EAST AND THE ECONOMY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2009, the gentleman from California (Mr. Sherman) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. SHERMAN. Madam Speaker, I plan to use the first two-thirds of my 
time to focus on events in the Middle East and then the final third to 
focus on our economy. I would invite my colleagues who wish to address 
these subjects to come to the floor. I can yield them a few minutes, 
but if I don't have any company, I'm capable of speaking for a full 
hour, as some of my more bored colleagues have already seen proven.

                              {time}  1530

  Now, even in an hour-long presentation, I am not going to be able to 
present all of the facts to support my position, and so I invite my 
colleagues to visit Brad.S[email protected].
  Now, focusing on the Middle East, we all want peace, we all want a 
sustainable cease-fire. But, instead, our televisions show us blood and 
carnage. Who is to blame? What do we do to cause it to stop?
  Now, as to the issue of who is to blame, the press has a remarkably 
silly approach. They take pictures of casualties, and they decide 
whatever side has suffered the most casualties must be in the right. I 
would point out that if this is the standard we use, America has been 
in the wrong in every war we have fought since 1812. It is absolutely 
preposterous to say that whichever side suffers the greater casualties 
has morality on their side.
  Part of this is a misreading of the just war theory that so many 
modern philosophers have put together, and one of its key elements is 
proportionality. The press, skimming rather than reading these 
philosophical texts, comes up with the idea that there must be 
proportionality of one side's casualties to the other side's 
casualties. A true reading of just war theory indicates that the 
proportionality doctrine is that there must be proportionality between 
the objective that the just side is seeking and the casualties which 
are unfortunately borne by both sides.
  Well, what is the objective that Israel is seeking? First and 
foremost, the objective is to end a situation where 1 million Israelis 
every day and every night face daily attempts to kill and maim as many 
of them as possible. By this standard, this is a just effort by the 
Israeli Government to safeguard its people.
  Now, Hamas has sent, since 2005, well over 6,000 rockets and mortars 
into southern Israel. Now, I want to clarify one issue as to the 
number, because often you will hear a figure roughly half of 6,000. 
That is the correct figure for the number of rockets or for the number 
of mortars. But if you add together the rockets and the mortars since 
the year 2005, the number stands well over 6,000.
  Why do we pick 2005? That is because that is the time when Israel 
withdrew completely, unilaterally, without concession, without 
compensation, from the Gaza Strip, leaving behind valuable assets, 
which were trampled on rather than used by Hamas extremists.
  So we see some 6,000 rockets and mortars from a territory that is 
hardly under Israeli occupation. We are told that, well, Hamas should 
be regarded as morally virtuous because so few of these rockets hit 
their target. It is true that the vast majority of these 6,000 
projectiles have failed in their attempts to kill Israeli women and 
children and civilians, but that doesn't mean that Hamas has good 
morality. It simply indicates that Hamas has bad aim or, more 
specifically, that they are using ordnance, which is very difficult for 
them to aim.
  Every one of those rockets and mortars had a single objective, kill 
as many Israeli civilians as possible. Not a single one of them was 
targeted at the Israeli military. So we are told, well, let us count 
only the casualties. Let us ignore the over 6,000 attempts at murder 
from Hamas. We cannot ignore those missiles. From a moral standpoint, 
it is just as wrong to fire a missile that fails to hit its civilian 
target as one that does hit its civilian target.
  Now, earlier today, the House passed H. Res. 34. The vote was 95 
percent in favor, 1 percent against, the remaining percent either voted 
present or wasn't present, 95 percent to 1 percent. Let us review some 
of the provisions of that resolution. I will read some, and then I will 
comment.
  ``Whereas Hamas was founded with the stated goal of destroying the 
State of Israel;
  ``Whereas Hamas has been designated by the United States as a Foreign 
Terrorist Organization;
  ``Whereas Hamas has refused to comply with the Quartet's,'' and here 
we are referring to the United States, European Union, Russia and the 
United Nations, that Quartet's ``requirements that Hamas recognize 
Israel's right to exist.''
  Then it goes on to say that Hamas has launched thousands of rockets 
against Israel's population centers since 2001 and has launched more 
than 6,000 such rockets and mortars into Israel since Israel withdrew 
both its military and civilians from Gaza in 2005.
  The resolution also states that in June, 2006, after that withdrawal, 
Hamas illegally crossed into Israel, attacked Israeli forces, and 
kidnapped Corporal Gilad Shalit, whom they continue to hold today. The 
resolution then points out that Hamas is getting some very substantial 
support from Iran, and I will address that later, and is using innocent 
civilians as human shields.
  Let me give one illustration of that, and that is Nizar Rayyan, 
perhaps one of Hamas' top 5 leaders.

  He stored weapons at his home, sophisticated communications designed 
to act as a communications center for Hamas. So what did Israel do? 
They called him at his home. They told him that in order to avoid 
civilian casualties, they were giving him 10 or 15 minutes notice, 
that's enough time for people to leave the area, but that it was 
important to Israel to destroy those weapons, to destroy that 
communications equipment.
  What did Mr. Rayyan do? Having boasted that he wanted to die as a 
martyr, he not only stayed in the house, but he kept with him several 
of his wives and children. That is the use of innocent human shields at 
its worst, a man doing everything possible to lead to the death or 
cause the death of his four wives, of many of his children, all so he 
could claim that Israel was responsible for the deaths of those 
civilians.
  Let us continue to look at key provisions of the resolution that 
passed the House.
  ``Whereas Israel has facilitated humanitarian aid to Gaza with 
hundreds of trucks carrying humanitarian assistance . . . ''
  Let me provide the specifics. Just today some 89 humanitarian 
shipments went from Israel to Gaza, including 2,227 tons of food, 
medicine, plus 315,000

[[Page H153]]

liters of heavy-duty diesel so that Gaza can operate its power 
generation station and 143 tons of gas for domestic use. That is what 
Israel made sure, at risk to its own people, would reach Gaza just 
today.
  Well, how does that compare with combatants in other wars? Look at 
World War I and World War II.
  In each of those wars, the British Navy used its total mastery of the 
surface of the oceans to blockade Germany. Not a single ship of 
medicine was allowed to pass across the Atlantic to Germany, not a 
single ship of food, and, of course, prior to both World War I and 
World War II, Germany was a major food importer from the western 
hemisphere.
  What did Germany do? They deployed their submarines with the stated 
purpose of starving the British in both World War I and World War II by 
sinking as many ships as possible, laden with food, purchased in the 
new world. So in World War I and in World War II, both combatants from 
the first day of the war did everything possible to stop a single ship 
of humanitarian assistance, to use modern nomenclature, to stop a 
single ship with food or medicine from reaching its destination. 
Compare Israel to both sides in World War II, risking its own soldiers 
and civilians in order to help those trucks get through.
  The resolution continues with a quotation from Secretary Rice where 
she said, on January, 2009, January 6, hundreds of thousands of 
Israelis lived under daily threat of rocket attack and, frankly, no 
country would be willing to tolerate such a circumstance. Moreover, the 
people of Gaza watched as insecurity and lawlessness increased and 
their living conditions grew more dire because of Hamas' actions, which 
began with the illegal coup against the Palestinian Authority in Gaza. 
A cease-fire that returns to those circumstances is unacceptable and 
will not last, will not last.
  The U.N. Security Council, passed a resolution last night calling for 
a sustainable cease-fire. But a cease-fire that returns Hamas to the 
situation that existed in December is, in the words of our own 
Secretary of State, unacceptable, because it will not last. The U.N. 
has called not for a temporary cease-fire, but for a sustainable cease-
fire.
  Now, the resolution goes on in its resolved clauses to make a number 
of points. For example, the resolution, in subparagraph 3, ``encourages 
the Administration to work actively to support a durable and 
sustainable cease-fire in Gaza, as soon as possible, that prevents 
Hamas from retaining or rebuilding its terrorist infrastructure, 
including the capability to launch rockets and mortars against 
Israel.''
  Paragraph 5 ``calls on all nations--
  ``(A) to condemn Hamas for deliberately embedding its fighters, 
leaders, and weapons in private homes, schools, mosques, hospitals, and 
otherwise using Palestinian civilians as human shields, while 
simultaneously targeting Israeli civilians.''
  In paragraph 8, the resolution ``calls for the immediate release of 
the kidnapped Israeli soldier Gilad Shalit, who has been illegally held 
in Gaza since June 2006.'' I would point out that I, at least, believe 
that no cease-fire can be regarded as adequate unless it includes the 
return of Gilad Shalit.
  So these are the provisions, and I haven't had a chance to quote them 
all, but these are what I think are the most important provisions of 
the resolution passed by this House by a vote of 95 percent to 1 
percent. I want to commend Chairman Berman and Speaker Pelosi for 
introducing and writing this resolution, and I was proud to be one of 
its original cosponsors.

                              {time}  1545

  So let us try to review some of the elements that we see on the 
ground in the Middle East.
  Hamas claims to be beleaguered, but it has rejected the U.N. Security 
Council cease-fire resolution passed last night. Hamas has done 
everything to increase civilian casualties, including the actions of 
Mr. Rayyan and including the use of human shields.
  Yet in spite of all of Hamas' efforts to increase civilian casualties 
on both sides, U.N. estimates state that over two-thirds of the 
Palestinian casualties have been gun-toting militant terrorists, and 
other estimates put that number at well over three-quarters. It is a 
testament to everything Israel has done, risking the lives of its own 
soldiers in order to minimize Palestinian civilian casualties, that 
well over half, well over two-thirds of the Palestinian casualties, are 
indeed the militants, not the civilians.
  When Hamas launches rockets from a neighborhood, an Israeli sergeant 
has seconds to decide whether to return fire. Now, there is always a 
comfortable pundit talking head on television in an air-conditioned 
studio ready to vilify that decision. But the decision has to be made 
in seconds by an Israeli sergeant under fire. The moral culpability for 
civilian casualties cannot be put at the feet of any sergeant. Moral 
culpability for the horrors of war lies with politicians who seek 
extreme and unjust ends through violent means.
  While Israel seeks to live in peace alongside a Palestinian state, 
Hamas and its political leaders have as their clearly stated objective 
to kill or expel every Jew from the Middle East. Hamas proudly waives 
the banner of genocide and ethnic cleansing. So where do we lay the 
blame for the casualties that continue? I believe it is not at the feet 
of the sergeant who is under fire, but rather it is at the feet of the 
political leaders who insist upon continuing to seek such unjust and 
extreme ends through violent means.
  Now, I have discussed this conflict as if it is a conflict between 
just Israel and Hamas. It is in fact a conflict of wider significance, 
a conflict between the government of Iran and the people and allies of 
the United States.
  The fighting in Gaza has demonstrated Iran's ability and desire to 
wage war on America and its allies. Hamas is a terrorist organization 
seeking the destruction of Israel in favor of an Islamic Palestinian 
state, but it is also a proxy for the Iranian Government. As such, what 
we see in the Middle East is part of a regional war being waged by the 
Iranian regime against the United States and its allies.
  Many of Hamas' weapons are made in Iran. Many top Hamas military 
leaders and experts who launched the missiles into Israel were trained 
in Iran. Iran provides the lion's share of Hamas' funding. It is 
unlikely that Hamas would be able to achieve its status as the premier 
Palestinian terrorist organization without backing from Iran.
  Iran backed Hamas like Iran backed Hezbollah. It shoots rockets at 
Israel's civilians from deep inside their own densely populated 
civilian areas, knowing that any Israeli attempt to defend itself will 
kill or at least endanger Palestinian civilians. Through Hamas and 
Hezbollah and through its operatives in Iraq, Iran and its government 
are able to stir up crises in the Middle East, thus injuring American 
prestige while helping to achieve Iran's own aims.
  We know that Iran is working hard to possess a nuclear bomb. With all 
that Iran is doing now, with all that it has done as far from its own 
country as blowing up the Jewish center in the city of Buenos Aires, 
what will Iran be like if it has nuclear weapons? It will act with 
impunity. We will go from crisis to crisis between the U.S. and its 
allies and Iran, and each time we will be staring at a hostile nuclear 
power.
  Now, it is true that the last time we went eyeball-to-eyeball with a 
hostile nuclear power, namely the Soviet Union, best exemplified by the 
Cuban missile crisis, we lived to tell about it. But imagine going 
eyeball-to-eyeball with a regime that is considerably less sane than 
Mr. Khrushchev, and not having one Cuban missile crisis, but a crisis 
every time Iran decides to test us, every time it engages in 
international terrorism? This is a risk Americans should not take.
  Finally, what happens if, as so many of us pray, this regime in 
Tehran feels that it is going to be swept out of power? They may decide 
to nuke Tel Aviv in an effort to regain popularity among those on the 
street in Iran, or they may decide to smuggle a weapon into the United 
States, feeling that if they are going to go out, they would just as 
soon go out with a bang. So it is unacceptable for America to sleep 
while the centrifuges spin at Natanz.
  Now, preventing an Iranian nuclear weapon is still possible if the 
new administration reorients our foreign policy to make that its chief 
objective. The good news is that the tools we have available, the 
diplomatic tools, the economic tools to isolate the government in 
Tehran, have only been

[[Page H154]]

used to the extent of 1 or 2 percent. We still have a lot of tools in 
the tool box. The bad news is for this entire administration, even 
after 9/11, even after it was revealed by an Iranian dissident group 
all the details proving that Iran was making considerable progress to a 
nuclear bomb, even after all that, this administration has left most of 
the tools in the tool box.
  I will detail some of those tools in the time that remains to me, and 
the rest, of course, are available for my colleagues to view at 
Bradsherman.house.gov.
  First, we can begin the effort at economic isolation. I think 
incoming President-elect Obama has a strong record. He voted for the 
Lautenberg amendment in 2005, which unfortunately didn't pass because a 
majority of Senators voted against it. That amendment would simply have 
prevented U.S. oil companies from doing business with Iran through 
their foreign subsidiaries. Furthermore, then Senator Obama authored 
the bill in the last Congress which would have encouraged divestment 
from firms doing business with Iran. I hope very much that in its first 
days, the Obama administration comes to Congress and urges us to pass 
these two pieces of legislation that were so strongly supported by 
Senator Obama.
  We then need to ask the administration, and it is an odd 
constitutional circumstance where we have to ask that laws be enforced, 
but we should ask the administration to begin enforcing the Iran 
Sanctions Act as the current administration and even the prior 
administration refused to do.
  We need at the diplomatic level to demand that the World Bank stop 
disbursing funds to Iran in the form of concessionary loans. We 
basically acquiesced in the decisions of the World Bank to make those 
loans. Fortunately, only half the funds have been disbursed, and we 
must make it clear to the World Bank that our continued participation 
in that organization requires the immediate cessation of disbursements 
from the World Bank to the government of Iran.
  We need to deny Nuclear Cooperation Agreements to countries that 
provide technologies to Iran, and by ``technologies'' I mean those 
technologies that help Iran develop nuclear weapons.
  And we need to organize the world to hit one of Iran's Achilles 
heels, and that is the fact that it needs to import gasoline, because 
although Iran is oil rich, it does not have refinery capacity. Almost 
half of its gasoline needs to be imported.
  As to this effort, I have the opportunity to report to the House that 
we have had some success. It has been reported that a major Indian 
refinery, RIL, has agreed to stop sending refined petroleum products to 
Iran. This is a success for the U.S. Government, and particularly for 
the Congress of the United States. Why? Because this very refinery in 
India was seeking funding from the U.S. Export-Import Bank, one of our 
major funding institutions, to fund the construction of infrastructure 
around the world, and we do that chiefly because it is U.S. products 
being used in that infrastructure. So RIL was seeking a U.S. Export-
Import Bank loan or loan guarantee, and several Members of Congress 
joined with me in sending a letter to that institution saying that Ex-
Im Bank should not provide such financing unless the refinery stopped 
shipping gasoline to Iran.
  So I look forward to using these and other tools to convince the 
Iranian people and Iranian elites that their policy, the policy of 
their government in supporting terrorism and building nuclear weapons, 
is going to lead to their economic and diplomatic isolation.
  I think we also owe a special debt of gratitude to the mullahs who 
run the Iranian Government, because their incredible corruption and 
inefficiency has left the Iranian economy very susceptible to these 
pressures, very fragile. This economy in Iran was fragile even when oil 
was selling for roughly $150 a barrel, and they are far more fragile 
now that oil is selling between $40 and $50 a barrel.

                              {time}  1600

  Let me review just a few of the other things that this government and 
this Congress can do in order to get the message across to Iranian 
elites and the Iranian people that they face economic and diplomatic 
isolation if they continue to support terrorism and develop nuclear 
weapons.
  The first of these is to urge Americans to divest from ownership of 
stock in companies that are investing in the Iranian oil sector. How 
can we do this?
  First, we need to make it clear, and this is legislation that passed 
the House, unfortunately, I believe it did not--I know it did not make 
it through the Senate, to simply tell pension plans and other trustees 
that they are free to divest without the risk of lawsuits from some 
crazy investor or beneficiary who somehow would claim that the fund 
could make more money if it did invest in companies doing business in 
Iran. We've got to make it plain that no one has a fiduciary duty to 
invest in terrorism.
  Second, we would want to change our tax laws so that those selling 
stock in a company, usually a foreign oil company that is investing in 
the Iranian oil sector and investing in the stock of a different 
company, that those who engage in such a transaction are not 
immediately taxed. Rather, they should get to what tax professionals 
call a carry-over basis, and then, when they divest, when they sell the 
stock of the new company, the company that's doing good things, that 
would be the time when they would recognize their capital gain, because 
divestiture of companies doing business with Iran in a way so as to 
bolster its energy sector, divestment should not result in lawsuits. It 
should not result in taxation. It should result in accolades and thanks 
from this Congress to see that American pension plans, both public and 
private, and American individuals, are willing to step forward and put 
some economic pressure on the Iranian government.
  In addition, I think that we have to examine our relationship with 
Russia and China with a lens of looking at how Russia and China deal 
with Iran. Too often these two super powers or former super powers, or 
future super powers, whatever term you would use for Russia and China, 
these two powerful countries use their seat at the U.N. Security 
Council to defend Iran from any meaningful sanctions.
  Why do they do this?
  First and foremost, they do it because they can, knowing full well 
that our policy toward China or Russia on the issues they care about 
will not be affected by what they choose to do on Iran. This failure of 
linkage needs to end with the end of this administration. We need a 
State Department and a President and a foreign policy that makes it 
plain to Russia that when we look at Georgia, when we look at Trans-
Dniester Moldova, when we look at disputes involving the pricing of 
natural gas, when we look at whether we're putting missile defense in 
Poland and the Czech Republic, when we're looking at any issue 
important to Moscow, our first question will be what has Russia done to 
hinder or help the Iranian nuclear program.
  Nothing illustrates this better than our plan to put missile defense 
in the Czech Republic and Poland, justified by the current 
administration on the theory that we need that because Iran may have 
nuclear ICBMs.
  Now, how crazy is this?
  We anger Russia by putting the missile defense in the Czech Republic 
and Poland. What instead we should do is agree not to build that 
missile defense if Russia will help us prevent Iran from having nuclear 
weapons, which was the theoretical reason we needed the missile 
defense.
  Keep in mind that missile defense is not going to safeguard Poland or 
the Czech Republic from Iranian nuclear weapons. First, it probably 
won't work. But even if it did, Iranian missiles are not aimed at 
Krakow or Prague. Iranian missiles would probably not be the mechanism 
that Iran would use to deliver nuclear weapons. You see, to develop an 
ICBM you have to be a damn good rocket scientist or actually have a 
bunch of damn good rocket scientists. But you do not have to be a 
rocket scientist to get a nuclear weapon into an American city.
  A nuclear weapon is about the size of a person, and of course those 
sizes vary, as do nuclear weapons. But it is not that hard to smuggle 
something the size of a person into the United States. In fact, our 
efforts along the U.S./Mexican border have raised the price that 
smugglers charge for that

[[Page H155]]

very activity from $1,000 dollars up to $1,500. That may deter some who 
would cross the border illegally for economic reasons. That may deter 
poor people from Latin America, but it obviously isn't going to deter 
any country with nuclear weapons.
  Likewise, I could point out that we do not have a single border 
officer on the entire Alaska/Canadian border, not one. So if you think 
that oh, well, we're going to defend Los Angeles and Chicago because we 
have this incredible border effort, we have zero on that border. And so 
Iran could easily, could smuggle a weapon into Anchorage, even more 
easily than to smuggle one into Los Angeles or Washington or New York.
  So why are we building missile defense in the Czech Republic and 
Poland and by doing so, angering Moscow and making it more difficult 
for us to pass appropriate resolutions sanctioning Iran through the 
United Nations Security Council?
  First, myopia has marked so much of the foreign policy of the current 
administration.
  And second, a peculiar belief that by building missile defense in the 
Czech Republic and Poland, we are somehow tying those two countries to 
us and continuing the Cold War against Russia.
  We should be building missile defense only if we think it will work. 
It will not work against Iran.
  And there's a second reason. Iran will choose to smuggle nuclear 
weapons, rather than use Intercontinental Ballistic Missiles because 
they will have more confidence in their ability to smuggle. Even if 
they have an ICBM, they're not sure it works. They're certainly not 
sure that it hits the target within 5 miles or within half a mile of 
what they're trying to achieve. They know they can smuggle a nuclear 
weapon to precisely the location they want right outside the security 
perimeter of this Capitol, right outside the front gate of the White 
House.
  And, in addition, Iran would prefer to have plausible deniability. 
Why should they make it so clear that the bomb came from the Iranian 
government? If, instead, it is delivered by a terrorist they can always 
say, oh, you dare not retaliate; it wasn't our fault. So Iran would 
prefer plausible deniability, just as bin Ladin denied then admitted 
then denied responsibility for 9/11.
  So we are building missile defense in the Czech Republic and Poland 
for no reason that enhances American security and at great cost to our 
effort to prevent Iran from developing nuclear weapons.
  Likewise, we have made it all too clear to Beijing that our attitudes 
toward their currency manipulation will not be affected in the 
slightest by what they do with regard to Iran, particularly at the 
United Nations. Why would we take the Number 1 threat to our national 
security and tell the Chinese, we won't link it to anything you care 
about?
  Again, this has been an ineffective foreign policy of the outgoing 
administration. So I look forward to a diplomatic policy that gives the 
highest priority to putting U.N. sanctions on Iran as long as it 
develops nuclear weapons and supports terror. I look forward to using 
all of the economic sanctions available to us. And I look forward to 
being able to use our broadcasting resources to inform the Iranian 
government and people that they face true isolation, economically and 
diplomatically, if they continue down the same path.

  At this point, I want to move from foreign policy to our economic 
situation. Next week, this Congress will consider a bill amending the 
TARP program. TARP is the program that is known as the $700 billion 
bailout bill. $350 billion has been spent by this administration. The 
other $350 billion remains available to the next administration.
  Now, that second $350 billion will not be available to the new 
administration until the administration makes a request and until we 
have a chance in a privileged resolution to vote on a resolution of 
disapproval. But I should point out that it would be virtually 
impossible for this Congress to prevent any administration making such 
a formal request from getting the second $350 billion. That is because 
any resolution of disapproval would have to pass both Houses of 
Congress, then sustain a presidential veto, and both Houses would have 
to override that veto. So the second $350 billion is likely to become 
available to the Executive Branch.
  Before that we should strengthen the requirements for expenditure of 
the second $350 billion. Now, there are a variety of ways to strengthen 
the requirements. There are three that I have focused on most directly. 
Chairman Frank has focused on quite a number of other ways to 
strengthen the TARP program, and I agree with most of what he will be 
trying to do.
  I should point out that I'm speaking on the basis of the outline 
posted on the Speaker's web page and I believe on the web page of the 
Financial Services Committee as well.
  We do not yet have the bill's text. But from that outline, we see one 
major improvement focusing on one of the three issues that I have 
focused on, and that is a requirement that when we invest in a 
financial institution, we receive at least a minimum number of 
warrants. Now, frankly, we should be getting a lot more warrants than 
the minimum that would be established by Chairman Frank's legislation. 
But the current TARP bill has no minimum at all. So if we can raise 
that to a 15 percent minimum and make it plain to the Department of the 
Treasury that the minimum is a floor, not a ceiling, and that the 
taxpayers of this country deserve warrants commensurate with the risk 
that we are taking, then we will be in a much stronger position, 
because, let's face it, we're investing in the preferred stock of quite 
a number of these banks of different sizes, and some of those 
investments will fail. So if we don't make a profit on the good ones, 
our kids are going to be paying for an enormous increase in the Federal 
deficit as a result of the bad investments we have made.
  The way to do this is to set 15 percent as the floor, but to expect 
that where substantial risks are taken, that we get warrants worth 20, 
30, 40, 50, or 80 percent of the amount that the Federal Government is 
investing.
  There is a second area that I have focused on in all of the TARP 
discussions, and that is my concern that we will be bailing out foreign 
entities, not just American entities; that this would take the form of 
buying bad bonds that were invested in and owned, not by U.S. entities, 
but by big banks in Shanghai and Riyadh and London.
  Now, up until now, contrary to the plan that Secretary Paulson 
presented to this House, he has not spent a single penny buying bad 
bonds from anybody.

                              {time}  1615

  Of course, he told us that was the only thing he was going to use the 
money for. He changed his mind by the moment he passed the bill, but 
the new administration may, indeed, decide to buy troubled assets/bad 
bonds from those who invested in them. If this is the case, they should 
only buy such bonds if they were held by an American entity on 
September 20, 2008, which is the day that all of this bubbled up to the 
surface, the day of Secretary Paulson's original proposal.
  When I say an ``American investor,'' I include as American investors 
those entities incorporated in the United States, or doing business in 
the United States, even if they are owned by foreign entities. So, if 
Fireman's Fund happens to be owned by an entity outside the United 
States, they are still very much a part of the business activity here 
in the United States, and if the bond was actually owned by the U.S. 
entity, it should be eligible for purchase under TARP. But it is a very 
different thing to allow what I call the China two-step.
  The China two-step works like this: The Bank of Shanghai made some 
bad investments. You know, everybody around the world bought our bad 
bonds or mortgage-backed securities, whatever you want to call them. 
They bought some really bad bonds. Shanghai transfers those to some 
U.S. entity on Monday, and then the Treasury buys them on Tuesday. The 
China two-step.
  We need to put into the statute that, before any bond is purchased, 
before any troubled asset is purchased, we know that it was owned by a 
U.S. investor, including those entities that may have foreign parents, 
but was owned by a U.S. investor on September 20.
  The third issue that I'm concerned about and that now, I think, all 
of my

[[Page H156]]

colleagues or our colleagues are concerned about is the issue of 
executive compensation and perks. Now, the outline--and I'm only 
working from the outline that's posted on the Web page--does say that 
those who receive bailout moneys cannot own or lease private jets, but 
it leaves it clear that they can charter the private jets. Better we 
should take the private jet provision out of the law entirely than we 
commit a fraud on the American people and say that the executives at 
companies which needed a bailout are not going to have private jets, 
and lo and behold, instead of owning jets, they charter them.
  We should make it clear that chartered luxury aircraft cannot be used 
by those who receive bailouts, and we should provide an exception. We 
should provide an exception where the destination is a place very far 
from scheduled air service. We should focus not only on perks, but on 
the total compensation package.
  Now, the automobile bailout bill that passed this House, but did not 
pass the Senate, did provide limits on bonuses paid to the executives 
of the bailed-out firm. What we need to make clear is that any grant of 
a stock option is covered whether or not called a ``bonus,'' because 
the creativity of the corporate world is enormous.
  AIG said, when they paid millions of dollars to executives just last 
month, those weren't bonuses; those were retention payments. So, given 
the ability of some in the corporate world to say it's not a bonus just 
because it quacks like a bonus or walks like a bonus, you can be sure 
that there are those in the corporate world who think that granting a 
stock option is not a bonus.
  Why are stock options so important? Because the stock prices of the 
bailed-out entities are currently trading very low. That's why they 
need a bailout. So, if you give an executive the right to buy thousands 
and thousands of shares of his company and to buy each share for 
today's $1 or $2 price, you are, perhaps, providing that executive with 
tens of millions or with hundreds of millions of dollars worth of 
options. It is, therefore, important that we not allow stock options to 
be granted or allow stock to be granted--either one--to executives at 
firms that receive a bailout.
  Some will ask: What about those companies that took money from 
Paulson and didn't know that there would be tough restrictions? The 
answer is simple: Give us back the money. No firm should be required to 
live under these tough provisions if it no longer wants to hold 
taxpayers' money, but if they've got taxpayer money, they ought to 
either live under the restrictions or return it to us.
  In addition to bonuses and stock options, in addition to chartered 
aircraft, I should point out that Goldman Sachs, one of the companies 
that is holding our bailout money, paid a quarter of a million dollars 
last year for a luxury limo for just one executive. So there are some 
other perks for us to limit. But in addition to perks and bonuses, we 
ought to look at salaries because some of these executives are getting 
$1 million-a-month salaries.
  I think, if a company is receiving TARP funds, they should limit the 
total compensation package of every executive to a mere $1 million, and 
when I say total compensation package, that has got to count 
everything. That counts the salary, the bonus, the pension plan 
contributions, and the stock options.

  Now, I'm not certain that everything I'm suggesting here will be in 
the bill we consider next week. My fear is that the bill will prohibit 
bonuses but will be a little unclear about stock options, that it will 
prohibit leasing the corporate jets, but will allow the companies to 
charter the corporate jets, and that it will put limits on bonuses but 
no limits on salaries.
  The question then is a difficult one for those of us who were 
skeptical about the initial bill. Do we vote to put in some additional 
restrictions knowing that they are insufficient or do we vote against 
it? I will be analyzing that issue carefully, but I will say this:
  If we pass a bill next week that imposes additional restrictions, I 
hope we do so to a bill that is considered under regular order. Let us 
mark up the bill in the Financial Services Committee, and if the 
amendments that I've alluded to here fail to pass the committee or the 
House, I'll be happy to vote for the bill knowing that these issues 
have at least been discussed, but if we are confronted with a bill that 
is a step forward but is not considered in regular order, as to which 
there is no markup in committee, and we are not allowed to consider 
amendments, substantive amendments on this floor, then it will be more 
difficult to support a bill even if that bill is a step forward.
  If we pass a bill that strengthens the TARP program but 
insufficiently, I will then introduce legislation to deal with the 
issues that I've brought up in this speech, and we will hopefully, one 
way or another, pass even stronger restrictions than those that are 
currently outlined on the Web page of the Financial Services Committee, 
hopefully as part of the one bill we will consider next week, possibly 
as part of other legislation that will be considered before the day 
when we authorize or when we vote on whether to disapprove the 
disbursement of the second $350 billion. So I look forward to improving 
the TARP bill.
  I think, of course, the greatest improvement is that I am far less 
skeptical of the incoming administration than I am of the outgoing 
administration, and that high skepticism of the current administration 
is justified by the fact that not one penny has been spent yet by 
Paulson to do anything that he told us that he would spend all of the 
money on. So a certain degree of skepticism of the current Treasury 
Secretary has been borne out by his remarkable departure from that 
which he was very clear was his promise to this House, right up until 
the minute when we passed the bill that he wanted.
  Finally, let's take a look at the stimulus bill. I just want to 
comment on a few of the tax provisions. One of those that is being put 
forward by the administration that, I think, a number of those, 
including Senator Kerry, have some concerns with is the idea of 
providing employers with a $3,000-per-hire tax credit for each new 
person they hire. Let me illustrate the concern I have with this 
proposal.
  Imagine two restaurants. One has been there for years and is 
desperately trying to hold on, is desperately trying to keep its 25 
staff members employed. Then somebody else opens a new restaurant right 
across the street. It's going to hire 25 new people. Well, under the 
provision as I understand it--and there is no legislative language yet 
available; although the bill will probably be voted on within a few 
weeks--the new restaurant gets a huge credit. It receives $3,000 for 
every one of its 25 employees, thereby putting it in a position to put 
out of business the existing restaurant across the street.
  Now, there are some tax provisions being suggested by the Transition 
Team that, I think, make a lot of sense. These involve giving 
businesses tax deductions in 2009 that they were otherwise going to 
reap in 2011 or in 2012 or in 2013 anyway.
  The chief reason I support these provisions is they give us a lot of 
bang for the buck. They put a lot of money in the hands of businesses 
today, but when you look at the Federal deficit over the next 10 years, 
they increase that Federal deficit only a little bit. Why is that? 
Because the money we're giving these businesses today is money they're 
going to owe us in future years. So we're not giving them new tax 
deductions. We're simply letting them take the tax deductions sooner. 
Two provisions particularly meet this standard.
  One is allowing operating loss carry-backs for 5 years rather than 
for 2 years by allowing those with operating loss deductions to be used 
now. We give money to the companies now, but we deprive the companies 
of those deductions in future years.
  Second, what is called ``accelerated,'' sometimes called ``bonus 
depreciation'' where we allow small companies to write off up to 
$250,000 of new investment immediately rather than taking depreciation 
deductions over a number of years.
  Another element that ought to be part of the stimulus package is aid 
to States and localities. There is nothing worse to do in the middle of 
a deep recession than to fire a bunch of police officers and a bunch of 
teachers.
  First, that means their work is not being done; our kids aren't being 
educated, and at the worst possible time, our neighborhoods are less 
safe. Second, it has an immediate negative effect on employment and on 
the cash

[[Page H157]]

available to consumers. So we ought to be providing enough aid to all 
of the States to make sure that they can, if anything, increase 
employment on those areas of public employment that are truly useful to 
their citizens.
  What we may need to do also is provide some formula by which we can 
provide the money to local governments rather than just to the State 
governments. I would suggest payments to each school district based on 
the number of full-time students and payments to whichever entity of 
local government provides police protection based on the number of 
residents they are protecting.
  I want to thank this House for giving me an hour of time to express 
these views. Even with all of this time, as I've said, I have not 
presented all of the evidence in support of these positions. That's why 
I hope my colleagues will visit Bradsherman.house.gov to look at the 
additional arguments in favor of these positions.
  I yield back to the Chair.

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