[Congressional Record (Bound Edition), Volume 154 (2008), Part 18]
[Senate]
[Pages 24733-24738]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            SILO TAX SHELTER

  Mr. BAUCUS. Madam President, the House bill before us contains a 
provision that causes me great concern. The provision would make the 
U.S. Government an active participant in an abusive tax shelter 
transaction.
  In the past, Congress has voted to shut that tax shelter down. And 
this week, I sought to offer an amendment to strike the provision from 
this bill. But I have been prevented from offering that amendment. That 
this provision will remain in the bill makes this bill a far less 
attractive measure.
  Section 18 of the bill requires the United States to serve as a 
guarantor of obligations incurred by domestic

[[Page 24734]]

subway and other transportation systems. These obligations arise from 
the systems' participation in leasing arrangements called lease in/
lease out, or LILOs, and sale in/lease out, or SILOs.
  LILOs and SILOs are sham transactions. The IRS has designated them as 
``listed'' tax shelters. That means that these tax shelters are among 
the most egregious abuses of the tax law.
  LILOs and SILOs are very complicated deals, designed to look like 
legitimate leasing transactions. But in reality, they are shams.
  In a SILO, a tax-exempt entity nominally ``sells'' an asset, like a 
subway system. The other party to the deal is an investor who is 
subject to taxation and who needs a tax write-off. The investor 
nominally ``buys'' the asset. The investor then nominally ``leases'' 
the asset back to the tax-exempt entity.
  In truth, the benefits and burdens of ownership never shift. And the 
sale and the lease have no economic reality.
  These parties purport to make purchase payments and rent payments. 
But in reality, these payments are just paper entries, facilitated by a 
bank that is in on the deal. The investor pays the tax exempt entity an 
up-front fee in exchange for its willingness to participate in the 
deal. But other than that, no real money changes hands.
  There is little, if any, risk to any party to these transactions. 
That is because the deal is cooked from the beginning. It is planned so 
as to eliminate any risk.
  But there are significant tax benefits to the investor. The investor 
gets interest and depreciation deductions. And those deductions 
generate tax losses. Employing these tax losses, the investor pays less 
tax on income that the investor earns elsewhere.
  This chart illustrates how a SILO transaction works. You do not have 
to understand all the details to see how complicated the transaction 
is.
  As Chairman of the Finance Committee, I have had these deals on my 
radar screen for quite some time. In 2003, the Finance Committee held a 
hearing with a confidential informant. The witness risked his 
professional reputation to tell us how abusive LILO and SILO 
transactions are.
  I pushed for legislation to shut these deals down. The 2004 Jobs Act 
eliminated the tax benefits for most of the investors who had entered 
into these transactions.
  Since 2005, I have worked to shut down the remaining deals that the 
Jobs Act failed to address. Unfortunately, our efforts have met with 
resistance. Some argue that shutting down these transactions would be 
applying law retroactively. But I believe that these transactions 
always violated the law, as they lack any economic substance.
  In the Tax Increase Prevention and Reconciliation Act of 2005, 
Congress imposed excise taxes on tax-exempt entities and their managers 
who entered into tax shelter transactions. That law recognized the role 
that some tax exempt entities, including transit agencies, played as 
``accommodating parties'' to tax shelter deals.
  Since 1999, the IRS has devoted considerable resources to shutting 
down these deals. The IRS has designated both LILOs and SILOs as 
``listed'' tax shelter transactions. The IRS has audited every one of 
these transactions that it could find. The IRS has litigated four 
cases, and won every time. Recently, the IRS announced a settlement 
initiative to shut down the remaining cases and reports an 80-percent 
participation rate.
  We have been trying to stop these tax shelters for years. So how does 
the Government end up guaranteeing this kind of tax shelter? The 
complicated structure of LILOs and SILOs plays a part.
  Under the terms of the agreements, transit agencies are required to 
obtain a guarantee from an insurer. The insurer guarantees that the 
agencies will be able to buy back the subway at the end of the lease 
period. The agreements require that the insurer have a very high credit 
rating.
  The current economic crisis has caused downgrades of insurers' credit 
ratings. That has put the tax-exempt entities into technical default on 
their agreements. Under the agreements, when the tax-exempt entities 
default, the investors have a right to terminate the lease.
  The investors are taking advantage of this legal opportunity. They 
are trying to cash in. The investors are attempting not just to recoup 
the nominal purchase price of the assets. They are also demanding that 
the transit agencies pay over the value of the tax benefits that the 
investor will lose as a result of the premature unwinding of the deal. 
The value of the tax benefits can be many times the putative purchase 
price.
  This chart that I referred to earlier is an exhibit from a lawsuit, 
Hoosier Energy v. John Hancock Life Insurance. In that case, the Monroe 
County Circuit Court in Indiana issued a temporary injunction barring 
John Hancock from collecting on the technical default.
  Transit agencies do not have lots of excess money just sitting 
around. So they have come to the Congress asking for a guarantee from 
the U.S. Government.
  Now I do not want our Nation's subway systems to be at risk. I am 
open to considering ways to help keep them financially sound.
  But I am unwilling to do so at the expense of American taxpayers. The 
bill before us today asks taxpayers to put their tax dollars at risk. 
The bill asks taxpayers to guarantee transit agencies who knowingly and 
willfully entered into deals that had no economic substance and were 
designed for the sole purpose of avoiding taxes.
  The Government has come under much criticism for actions it has taken 
to jump-start our economy. But deliberately involving the U.S. 
Government in a tax shelter scam would add fuel to that fire.
  We must not add legitimacy to an abusive transaction that the 
Congress, the courts, the Treasury, and the IRS have spent years trying 
to shut down.
  We must not undermine the good efforts of the IRS to prosecute these 
cases. We need the IRS to accomplish as much work as it can to 
eliminate these and other scams.
  We must not ask American taxpayers who struggle to pay their taxes to 
underwrite deals set up to help wealthy investors attempting to shelter 
their income.
  The approach in the bill before us today is not a solution. Stepping 
in to guarantee these deals exposes American taxpayers to ongoing risk. 
Some event could trigger a requirement that the Government pay the 
investors. This bill puts taxpayers on the hook for a long time.
  In addition, I understand that this proposal applies to only 80 
percent of the transit agencies that entered into these tax shelter 
deals. What about the other 20 percent of the systems who are not 
covered? What happens to them? We need a fair and balanced approach to 
resolve this issue.
  We would do better to figure out a way to discourage investors from 
acting on the technical default simply because the insurer's credit 
rating has been downgraded. A downgrade does not mean that the insurer 
is not good for the money. I intend to explore options with this goal 
in mind. We need a solution that protects both the transit agencies and 
the American taxpayer.
  Finally, this is an auto bill. We should not forfeit the opportunity 
to bolster our automotive industry by cluttering up the bill with 
unrelated and controversial proposals.
  There is a proper time and place for everything. This is neither the 
time nor the place to divert attention from our immediate task, helping 
our automakers.
  This provision has no business in the auto bill. The Senate should 
take the provision out. And if the Senate does not take the provision 
out, it will only add to the burdens that are weighing this bill down.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. I ask unanimous consent to speak for 15 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Madam President, I come to the floor to back up the 
chairman of the committee, Senator Baucus, who has spoken on the very 
same

[[Page 24735]]

issue. We have had a close working relationship for 8 years as either 
chairman and ranking member, and those changed from time to time. Part 
of our effort of working together has been to close down abusive tax 
shelters. So I am here to support what he said and to say, in my own 
words, my reasons for wanting this provision out of the bill. The 
bottom line of what I am saying is the bottom line of what Senator 
Baucus has already said. This tax provision has no business being in 
this bill.
  There is a provision in this auto bailout bill that deals with a 
number of transit agencies that assisted corporations in tax shelters. 
This provision in the auto bailout bill has nothing to do with 
automakers. It would prop up a tax shelter that Senator Baucus and I 
shut down in the year 2004. Shutting down that tax shelter saved 
American taxpayers $26.56 billion, according to the nonpartisan Joint 
Committee on Taxation. That is real money. So we should be very 
protective of making sure money that by subterfuge was not going to 
come into the Federal Treasury comes back to the Federal Treasury and 
is not used in the future. This tax shelter is commonly referred to as 
sale-in, lease-out, or by the acronym SILO, or another program lease-
in, lease-out that we refer to by the acronym LILO. This tax shelter 
bailout within the automaker bailout bill would have the Federal 
Government guarantee obligations that public transit agencies now face 
because they entered into shady deals with corporations, including 
foreign corporations, where they sold things such as the transit 
agencies' own train cars and then magically leased them back from these 
corporations to do what they were doing all the time anyway, hauling 
people.
  This was not done to change the way the transit agency operated but, 
instead, to collect a fee for assisting the tax shelter, where the 
corporations could take advantage of the tax deduction for depreciation 
of things such as these train cars.
  As chairman of the Senate Finance Committee in 2004, I worked hard to 
shut down these tax shelters as a matter of tax fairness, and Senator 
Baucus was there working closely with me to do that. The Internal 
Revenue Service has been working to recover money from these deals. If 
this tax shelter bailout were to pass, it would interfere with the 
working of the IRS in these efforts to collect money that should never 
have been deducted in the first place.
  This tax shelter bailout can change the cost-benefit analysis for 
those tax shelter corporations that are considering settling their 
disputes with the IRS over the SILO/LILO tax shelters. It is wrong for 
the auto bailout bill to bail out transit agencies from participating 
in these shady tax shelters. The Federal Government should not 
guarantee the transit agencies' obligations to corporations, including 
foreign corporations, when doing so allows the tax shelter to continue 
as it did before 2004, and these corporations, including foreign 
corporations, to continue taking tax shelter deductions for things such 
as transit agencies' train cars.
  If the Federal Government is called upon to pay the guarantees of the 
transit agencies' obligations to these tax shelter corporations, 
including foreign tax shelter corporations, then the hardworking U.S. 
taxpayer will be sending money directly to these foreign corporations 
and others. I don't know how many, but we know foreign corporations are 
very much involved.
  These tax shelters were, in fact, set up so corporations were able to 
take large depreciation deductions. However, the tax shelter needed a 
nontaxpaying entity that had large amounts of assets that could be 
depreciated. So that is where the transit agencies come in. The transit 
agencies were paid millions of dollars to do nothing, simply sign 
papers and go about business as usual of transiting people within 
cities or between cities, as they were doing before this tax shelter 
was ever thought up. The transit agencies are called accommodation 
parties in tax shelter lingo. They are called this because, in exchange 
for their fee, they helped make tax shelters work for corporations that 
were bilking the U.S. taxpayers out of billions of dollars, and those 
billions of dollars were lost revenue to the Federal Treasury.
  This auto bailout bill proposes to bail out the transit agencies from 
the consequences of their bad judgment of entering into tax shelters. I 
say ``bad judgment'' because they ought to know this doesn't make 
sense. Some lawyer might tell you: We can get by with this because we 
found this loophole in the tax laws. But, in fact, lawyers can find 
anything. The English language is not so perfect that we write perfect 
pieces of legislation that somebody who is wise can't find a way 
around. That is what happened prior to 2004, before Senator Baucus and 
I shut it down.
  As the transit agencies have found out--and that is why they are 
coming to the bailout bill for some help--when you lie down with dogs, 
you get fleas. Now that the transit agencies have fleas due to their 
participation in this tax shelter scheme, they want the Federal 
Government to be their flea remover. If this provision is enacted and 
if the Federal Government guarantees the transit agencies' tax shelter 
obligations, it will actually help these shady tax shelter deals stay 
alive longer and, who knows, encourage more of this in the future. We 
are trying to shut down a business I consider illicit, people going 
through the Tax Code and seeing where they can find a tax loophole and 
writing a program and go out and sell it. They go out and sell it to 
somebody else, then flee to the woods, and some corporation or 
individual has to defend it themselves, and they can't. They get stuck 
with the tax bill from the IRS. We want to shut down the tax shelter-
writing business.
  I will not help the transit agencies avoid the consequences of their 
participation in these tax shelters. I do not want to put U.S. taxpayer 
money on the line to support tax shelters that have been stealing from 
these same taxpayers.
  I am aware that as early as February 2000, we had a Federal 
initiative from the executive branch. In the year 2000, the Federal 
Transit Administration, under the Clinton administration, used to 
advocate these tax shelter deals to transit agencies as innovative 
financing. The Federal Transit Administration's promotion of these tax 
shelters was shameful, and it gave a legitimacy to it. I suppose it 
even encouraged further tax shelter people to write. But in 2004, 
Senator Baucus and I said: Enough is enough. That is why the 
legislation was passed in 2004, shutting down these and saving the 
taxpayers that $25 billion the Joint Committee on Taxation said could 
be saved; in other words, paid into the Federal Treasury, instead of 
some sharp lawyer finding a way to keep it out of the Federal Treasury.
  Going back to when these were first being instituted by the Federal 
agency or encouraged by the Federal agency, we did have the IRS 
responding to that. So you had one agency promoting something. You had 
the IRS issue a revenue ruling that came out against these tax 
shelters. But between that 1999 March 1 date and the time Senator 
Baucus and I finally concluded this needed to stop in 2004, we still 
had a bunch of these deals consummated. Even if the transit agencies 
were not aware of the IRS's position, the transit agencies should have 
realized that getting money for essentially doing nothing ought to be 
too good to be true. If it sounds too good to be true, it probably is 
not the right thing to do. That is common advocacy to any consumer in 
America met by some snake oil salesman who comes along to sell a 
product. If it sounds too good to be true, you ought to raise questions 
about it.
  We even have a situation where every court that has considered these 
transactions has ruled they are abusive tax shelters and has not 
allowed the tax breaks claimed by the corporation that engaged in the 
tax shelters. Three of these court cases are BB&T Corporation, the 
Fifth Third Bancorp, and AWG Leasing Trust. In a recent court opinion 
involving John Hancock Life Insurance Company, Chief Judge David 
Hamilton of the U.S. District Court for the Southern District of 
Indiana wrote that the SILO deal at issue was ``pure,

[[Page 24736]]

abusive tax shelter,'' was ``rotten to the core'' and was ``a sham 
without economic substance.''
  Additionally, in February 2004, Senator Baucus and this Senator sent 
letters to Washington, DC, New York City, and Chicago transit agencies 
asking for their assistance in an investigation of these abusive tax 
shelters.
  I ask unanimous consent that these three letters be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                February 12, 2004.
     Richard A. White,
     CEO, Washington Metropolitan Area Transit Authority, 600 
         Fifth Street, NW., Washington, DC.
       Dear Mr. White: We are writing to enlist the assistance of 
     the Washington Metropolitan Area Transit Authority in our 
     ongoing investigation of abusive tax shelters. On October 21, 
     2003, the Committee on Finance held a hearing regarding the 
     continuing proliferation of abusive tax shelters. During that 
     hearing, we learned that shelter promoters are engaging in 
     transactions with U.S. municipalities and other state and 
     local governmental units, which allow major U.S. corporations 
     to depreciate state and local infrastructure assets, such as 
     railways, subways, dams, water lines, and air traffic control 
     systems. Our subsequent investigations have disclosed that 
     federal agencies have endorsed these transactions, even 
     though the Department of the Treasury had classified them as 
     abusive tax shelters.
       Under this scheme, municipalities are paid an up-front cash 
     fee to enter into a long-term lease of their infrastructure 
     to the tax shelter promoters. The cash received by the 
     municipality, however, pales in comparison to the federal tax 
     benefits received by the corporations, which will be able to 
     depreciate taxpayer-funded bridges, subways, and rail systems 
     as a result of the lease. As part of the same agreement, the 
     promoters will agree to simultaneously lease the assets back 
     to the municipality. The obligations of the promoters and 
     municipalities are prepaid through ``phantom'' debt, and 
     neither the tax promoters nor the municipality assumes any 
     credit or ownership risk. At the end of the lease term, the 
     infrastructure assets revert back to the municipality. In 
     reality, nothing changes regarding the ownership or use of 
     the infrastructure. One municipal manager described these 
     transactions as ``People giving him money which he never had 
     to pay back, for doing something that he was already doing.''
       In March 1999, the Department of the Treasury under the 
     Clinton Administration initiated enforcement actions against 
     these transactions, which are called LILOs--an abbreviation 
     of their industry name ``lease-in-lease-out'' transactions. 
     We have further learned that these transactions have 
     continued, albeit in a different form, and that other federal 
     agencies may be approving these transactions. The LILO 
     transactions have now been replicated through service 
     agreement contracts and transactions called SILOs--``sales-
     in-lease-out.'' Other variations on these transactions have 
     involved qualified technology equipment (QTEs).
       We are certain that you share my concern that subway 
     systems, water lines, waste treatment plants, and air traffic 
     control systems constructed with taxpayer dollars are being 
     used by big corporations to shelter billions of dollars in 
     taxes through bogus depreciation deductions. In order to 
     assist us in assessing the scope and scale of this problem, I 
     request that the Washington Metropolitan Transit Authority 
     submit to the Committee on Finance copies of all LILOs, 
     SILOS, QTEs, and similar transactions that have been 
     approved, funded, or otherwise reviewed by the Washington 
     Metropolitan Area Transit Authority from the year 1995 to 
     present. If you have any questions regarding this request, 
     please contact Ed McClellan or Matt Genasci of the Senate 
     Finance Committee at (202) 224-4515.
       We appreciate your cooperation in our ongoing efforts to 
     combat abusive tax shelters, and look forward to receiving 
     these materials as soon as possible.
           With best personal regards,
     Charles E. Grassley,
       Chairman.
     Max Baucus,
       Ranking Member.
                                  ____

                                                February 12, 2004.
     Lawrence G. Reuter,
     President, New York City Transit,
     Jay Street, Brooklyn, NY.
       Dear Mr. Reuter: We are writing to enlist the assistance of 
     New York City Transit in our ongoing investigation of abusive 
     tax shelters. On October 21, 2003, the Committee on Finance 
     held a hearing regarding the continuing proliferation of 
     abusive tax shelters. During that hearing, we learned that 
     shelter promoters are engaging in transactions with U.S. 
     municipalities and other state and local governmental units, 
     which allow major U.S. corporations to depreciate state and 
     local infrastructure assets, such as railways, subways, dams, 
     water lines, and air traffic control systems. Our subsequent 
     investigations have disclosed that federal agencies have 
     endorsed these transactions, even though the Department of 
     the Treasury had classified them as abusive tax shelters.
       Under this scheme, municipalities are paid an up-front cash 
     fee to enter into a long-term lease of their infrastructure 
     to the tax shelter promoters. The cash received by the 
     municipality, however, pales in comparison to the federal tax 
     benefits received by the corporations, which will be able to 
     depreciate taxpayer-funded bridges, subways, and rail systems 
     as a result of the lease. As part of the same agreement, the 
     promoters will agree to simultaneously lease the assets back 
     to the municipality. The obligations of the promoters and 
     municipalities are prepaid through ``phantom'' debt, and 
     neither the tax promoters nor the municipality assumes any 
     credit or ownership risk. At the end of the lease term, the 
     infrastructure assets revert back to the municipality. In 
     reality, nothing changes regarding the ownership or use of 
     the infrastructure. One municipal manager described these 
     transactions as ``People giving him money which he never had 
     to pay back, for doing something that he was already doing.''
       In March 1999, the Department of the Treasury under the 
     Clinton Administration initiated enforcement actions against 
     these transactions, which are called LILOs--an abbreviation 
     of their industry name ``lease-in-lease-out'' transactions. 
     We have further learned that these transactions have 
     continued, albeit in a different form, and that other federal 
     agencies may be approving these transactions. The LILO 
     transactions have now been replicated through service 
     agreement contracts and transactions called SILOs--``sales-
     in-lease-out.'' Other variations on these transactions have 
     involved qualified technology equipment (QTEs).
       We are certain that you share my concern that subway 
     systems, water lines, waste treatment plants, and air traffic 
     control systems constructed with taxpayer dollars are being 
     used by big corporations to shelter billions of dollars in 
     taxes through bogus depreciation deductions. In order to 
     assist us in assessing the scope and scale of this problem, I 
     request that New York City Transit submit to the Committee on 
     Finance copies of all LILOs, SILOs, QTEs, and similar 
     transactions that have been approved, funded, or otherwise 
     reviewed by New York City Transit from the year 1995 to 
     present. If you have any questions regarding this request, 
     please contact Ed McClellan or Matt Genasci of the Senate 
     Finance Committee at (202) 224-4515.
       We appreciate your cooperation in our ongoing efforts to 
     combat abusive tax shelters, and look forward to receiving 
     these materials as soon as possible.
           With best personal regards,
     Charles E. Grassley,
       Chairman,
     Max Baucus,
       Ranking Member.
                                  ____

                                                February 12, 2004.
     Frank Kruesi,
     President, Chicago Transit Authority, Merchandise Mart Plaza, 
         Post Office Box 3555, Chicago, IL.
       Dear Mr. Kruesi: We are writing to enlist the assistance of 
     the Chicago Transit Authority in our ongoing investigation of 
     abusive tax shelters. On October 21, 2003, the Committee on 
     Finance held a hearing regarding the continuing proliferation 
     of abusive tax shelters. During that hearing, we learned that 
     shelter promoters are engaging in transactions with U.S. 
     municipalities and other state and local governmental units, 
     which allow major U.S. corporations to depreciate state and 
     local infrastructure assets, such as railways, subways, dams, 
     water lines, and air traffic control systems. Our subsequent 
     investigations have disclosed that federal agencies have 
     endorsed these transactions, even though the Department of 
     the Treasury had classified them as abusive tax shelters.
       Under this scheme, municipalities are paid an up-front cash 
     fee to enter into a long-term lease of their infrastructure 
     to the tax shelter promoters. The cash received by the 
     municipality, however, pales in comparison to the federal tax 
     benefits received by the corporations, which will be able to 
     depreciate taxpayer-funded bridges, subways, and rail systems 
     as a result of the lease. As part of the same agreement, the 
     promoters will agree to simultaneously lease the assets back 
     to the municipality. The obligations of the promoters and 
     municipalities are prepaid through ``phantom'' debt, and 
     neither the tax promoters nor the municipality assumes any 
     credit or ownership risk. At the end of the lease term, the 
     infrastructure assets revert back to the municipality. In 
     reality, nothing changes regarding the ownership or use of 
     the infrastructure. One municipal manager described these 
     transactions as ``People giving him money which he never had 
     to pay back, for doing something that he was already doing.''
       In March 1999, the Department of the Treasury under the 
     Clinton Administration initiated enforcement actions against 
     these transactions, which are called LILOs--an abbreviation 
     of their industry name ``lease-in-lease-out'' transactions. 
     We have further learned that these transactions have 
     continued, albeit in a different form, and that other federal 
     agencies may be approving

[[Page 24737]]

     these transactions. The LILO transactions have now been 
     replicated through service agreement contracts and 
     transactions called SILOs--``sales-in-lease-out.'' Other 
     variations on these transactions have involved qualified 
     technology equipment (QTEs).
       We are certain that you share my concern that water lines, 
     waste treatment plants, and air traffic control systems 
     constructed with taxpayer dollars are being used by big 
     corporations to shelter billions of dollars in taxes through 
     bogus depreciation deductions. In order to assist us in 
     assessing the scope and scale of this problem, I request that 
     the Chicago Transit Authority submit to the Committee on 
     Finance copies of all LILOs, SILOs, QTEs, and similar 
     transactions that have been approved, funded, or otherwise 
     reviewed by the Chicago Transit Authority from the year 1995 
     to present. If you have any questions regarding this request, 
     please contact Ed McClellan or Matt Genasci of the Senate 
     Finance Committee at (202) 224-4515.
       We appreciate your cooperation in our ongoing efforts to 
     combat abusive tax shelters, and look forward to receiving 
     these materials as soon as possible.
           With best personal regards,
     Charles E. Grassley,
       Chairman.
     Max Baucus,
       Ranking Member.

  Mr. GRASSLEY. I have been fighting against SILO/LILO tax shelters for 
a long time, as has Senator Baucus. In October 2003, the Finance 
Committee held hearings on the status of abusive tax shelter 
activities. During that hearing, we received anonymous testimony from a 
leasing industry executive that used the name Mr. Janet. He described 
how U.S. corporations were able to take tax deductions for such things 
as the Paris, France, sewer lines and the New York subway system. Major 
corporations were claiming tax deductions on taxpayer-funded 
infrastructure located in the United States and overseas.
  Imagine our surprise when we learned that U.S. taxpayers were 
subsidizing the cost of electric transmission lines in the Australian 
outback. I find it hard to believe that a corporation was actually 
taking a tax deduction for the New York City transit car pictured here. 
However, that is exactly what greedy corporations were doing. Just like 
the greedy tax shelter promoters who were handing out U.S. taxpayer 
money to greedy corporations by selling these shady tax shelters to 
them, the House voted last night to put U.S. taxpayer dollars on the 
line to bail out tax shelter participants and perpetuate these abusive 
tax shelters.
  If we look at all the key congressional players on this deal, we will 
find that, perhaps not by coincidence, nearly all of them represent 
areas where these transit shelter deals were done. These tend to be the 
biggest cities. They tend to be the areas where the shops that hired 
the sharpies that manufacture these tax shelters do business. Most of 
these key congressional players for years, especially when Republicans 
were in the majority, railed against tax shelters. Now we find that for 
these key congressional players, the imperatives of the transit lobby 
decisively outweigh the importance of cracking down on a tax shelter 
that a Federal judge rightly described as ``rotten to the core.''
  This reminds me of the Joker from the 1989 version of ``Batman,'' who 
says: ``I'm giving out free money.'' You know the Joker, as shown on 
this chart. You have seen him. ``I'm giving out free money.'' As we all 
know, money is not free. Unfortunately, the joke here has been--and 
will again be if we do not do something about it--on the American 
taxpayer. Literally, the guarantee continues the cruel tax shelter joke 
on the American taxpayers' dime.
  I urge my colleagues in the Senate to not allow this cruel joke to be 
played on the American taxpayers. I have fought against these tax 
shelters in the past, and I will continue to fight against them in the 
future. This provision puts taxpayers' dollars on the line and 
perpetuates an abusive tax shelter. In fact, it puts the U.S. 
Government in the position of guaranteeing tax benefits that 
corporations, including foreign corporations--again, I want to 
emphasize--hope to reap from engaging in these tax shelters. So as 
Senator Baucus has just done--and I thank him for his leadership--I 
urge my colleagues to vote against this bill which contains a bailout 
for tax shelter participants.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Whitehouse). The Senator from Kentucky.
  Mr. BUNNING. Mr. President, are we as in morning business?
  The PRESIDING OFFICER. We are in morning business, Senator.
  Mr. BUNNING. Thank you.
  Mr. President, I rise to speak on the auto bailout proposal before 
the Senate. But before talking about any legislation, I wish to say 
that I am very concerned, as everybody in the United States is, about 
the state of the auto industry, not only in Detroit but other States 
that have a great deal of auto workers and related industries.
  As I said at the first Banking Committee hearing on this issue, I am 
not concerned about any sense of American pride or because of the great 
history of the American auto industry. What concerns me is the 
workers--the men and women who assemble our cars and trucks, who sell 
and service the vehicles, and those who work for the suppliers who keep 
the industry running.
  Auto manufacturing is the largest manufacturing sector in my 
Commonwealth. That is the Commonwealth of Kentucky. I know Detroit's 
pain is felt in many towns and cities in Kentucky. In many counties, 
jobs supplying parts to GM, Ford, or Toyota are some of the best jobs 
anywhere in Kentucky. Those jobs are in danger, and I am concerned for 
the workers and their families.
  The question facing Congress is what, if anything, we can and should 
do about the industry's current problems. As I understand it, one of 
the two bills that is going to come before the Senate--as soon as this 
afternoon--one is the bill passed by the House, and the other is a 
similar Senate proposal. Unfortunately, much like the other bailouts we 
have passed, those bills rely on hopes and promises of future actions 
and do not require serious concessions. Those bills do not address the 
immediate problems facing the industry, which is a lack of funding for 
car loans and dealer floor plans, and many other related issues.
  While the Detroit manufacturers were forced by the economic crisis to 
come to Congress for aid at this time, their problems are not just the 
result of problems in our current financial markets. The companies are 
simply uncompetitive in today's marketplace because of decades of bad 
business decisions by both the corporate management and the labor 
unions. What is needed is a serious restructuring of the companies that 
brings their costs in line with the costs of cars made by manufacturers 
such as Honda and Toyota and their capacity in line with the true 
demand for new cars, not the artificially inflated demand of the last 
few years.
  Neither the House bill nor the Senate bill forces these companies and 
their stakeholders to make the changes necessary to force 
restructuring. The so-called car czar has no real power to make the 
companies and stakeholders reach an agreement accomplishing the cost 
and capacity changes that must be made. Because the companies would not 
survive in the long term without those changes, they would be back 
before Congress next year asking for more money to get them through the 
next few months, and back again and again. That is an irresponsible use 
of taxpayer dollars and would ultimately lead to the death of the 
companies and many thousands and thousands of jobs permanently being 
lost. Because I care too much about the workers, I cannot support 
either of these bills as they are currently written.
  I have previously said I would support Federal assistance for 
companies if they undertake a chapter 11 bankruptcy restructuring. 
Federal financing and warranty guarantees would enable the companies to 
emerge from that restructuring successfully and more quickly than they 
would otherwise. Senator Shelby and Senator Ensign have an amendment to 
do just that, and I will be supporting their amendment if they are 
allowed to have a vote on it on the floor of the Senate.
  However, chapter 11 bankruptcy is not the ideal solution, and I know 
just the word ``bankruptcy'' causes many people whose jobs, retirement, 
and health care depend on the companies to

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shudder. A similar restructuring that accomplishes significant changes 
outside of bankruptcy would work as well. Senator Corker has an 
amendment that would require those significant changes as a condition 
of Federal assistance provided in the majority's bill. If the majority 
allows a vote on Senator Corker's amendment, I will support it. If the 
amendment is adopted to the Senate version of the bill, I will support 
passage. If the majority blocks any minority amendments, as they have 
done for nearly the entire Congress, I will oppose the bill and any 
cloture motions.
  I will go ahead and state for the record that if the Corker amendment 
passes and the bill becomes law, I will oppose any and all attempts to 
weaken its requirements. Now, I say that knowing full well that I am 
very concerned that come January 20, the majority might try to rewrite 
the requirements so that the companies are not forced to make painful 
changes that are necessary for them to survive in the long term. I hope 
that will not be the case.
  For these companies to survive and thrive, there must be painful 
changes made, and we all know some jobs will be lost. However, with a 
successful restructuring, the Corker amendment being included, more 
jobs will be preserved for the long term than if we just prop up the 
companies with taxpayers' dollars for a few short months and hope for 
the best.
  Mr. President, I yield the floor.
  Mr. President, since no one else is in the Chamber, 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. GRASSLEY. 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. GRASSLEY. Mr. President, I would like to speak for less than 10 
minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. I thank the Chair.

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