[Congressional Record (Bound Edition), Volume 155 (2009), Part 1]
[House]
[Pages 269-275]
[From the U.S. Government Publishing Office, www.gpo.gov]




               OUR ECONOMIC SITUATION AND FOREIGN POLICY

  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. I will take much but not all of this hour to speak. 
Roughly, the first half of the presentation will be on our economic 
situation. The second half will focus on foreign policy.
  I know that I have a number of colleagues that may have important 
things to say to this House, and if they come to the floor, I'll be 
happy to yield them a few minutes at a time that is convenient for 
them.
  Even with this long speech, I will not be able to cover all the 
details that I'd like to provide to my colleagues. Therefore, I invite 
all my colleagues to visit the relevant portion of my web page, 
bradsherman.house.gov for more of the details of the matters I'll be 
discussing here.
  In talking about our economy, I will divide my speech first to 
talking about matters relevant to the Financial Services Committee, on 
which I've served for 12 years, and particularly the bill known as 
TARP, or EESA, the Emergency Economic Stabilization Act, best known to 
the public as the $700 billion bailout bill.
  The second part of my economic presentation will deal with the 
stimulus package now being put together, particularly by the Committees 
on Appropriations and Ways and Means.
  Now, I was a critic and twice voted against the $700 billion bailout 
bill, the so-called TARP. The supporters of that bill will have to 
admit that it has not restored our economy as the proponents had 
advertised, and, in fact,

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some of the worst times for the economy were the 2 to 3 weeks following 
its passage.
  On the other hand, those of us who were critics should admit that the 
bill has, frankly, cost the government far less than I had anticipated. 
When I say cost, I don't mean just how much is spent, but from that 
must be subtracted the value of the securities, the bonds and the stock 
certificates received by the Federal Government.
  In this case, Secretary Paulson misled this House and the other body 
by testifying that he would use the $700 billion to buy toxic assets, 
bad bonds. Had he done that, and all of us voting on the bill had every 
reason to believe that he was telling us the truth, had he carried out 
that policy, then he would have bought, for the money he had spent, 
whether it's the 350 billion he has spent so far or the 700 billion 
that I feared he would spend, he would have spent that money in return 
for assets of dubious value. That's why they're called toxic assets.
  In contrast, having misled the House and the other body, Secretary 
Paulson bought preferred stock in the various financial institutions. 
In doing so, he was overly generous to Wall Street as to the terms, 
but, nevertheless, he did secure assets for the Treasury that are of 
substantial value.
  Paulson's shift, frankly, was right along the lines that many of us 
who are critics of the bill had urged him to adopt. And so those who 
supported the bill, those who are critics of it, must both recognize 
that what the Treasury has done so far is far different from what all 
of us believed would, in fact, be the policy.
  Now, we see that $350 billion has been expended by the Treasury, and 
another $350 billion remains unspent. I am pleased that the Secretary 
of the Treasury has not yet taken the procedural actions to release and 
give himself control of the remaining $350 billion.
  It is my understanding that leadership will bring to this House a 
bill that will release the $350 billion to the Treasury and will impose 
additional conditions. And I'd like to take a few minutes to address 
what I think ought to be in that bill.
  First, is the issue of whether any of the funds to be released, any 
of that second $350 billion, will be available to the Bush 
administration. Last month I wrote the chairman of the Financial 
Services Committee saying that we should have limits on the amount that 
could be spent by the Bush administration out of the second $350 
billion. In fact, I proposed that only $10 billion or less be available 
to the Bush administration to deal with whatever exigencies it dealt 
with in its waning days. It is my understanding that the bill that will 
be brought before this House will provide the Bush administration with 
$0 to deal with whatever comes up in its last week or so in office.
  In any case, I think, having seen Paulson in action, the vast 
majority of this House would believe that somewhere between 95 percent 
and 100 percent of the second $350 billion, if it is made available to 
anyone in the executive branch should be made available only to the 
Obama administration.
  I should point out something about process. It would be best if any 
bill dealing with the second $350 billion was actually dealt with in 
regular order.
  Now, I'm not saying necessarily that every committee of possible 
jurisdiction should do a full markup, but as we deal with this economic 
crisis, at least the primary committee as to each bill should have a 
markup so that Members can be heard, and the House can work its will.
  In addition, I would hope that the Rules Committee would allow a 
reasonable number of amendments to be considered on the floor.
  In addition, I would hope that the Financial Services Committee would 
give the same scrutiny to the financial institutions who have received 
and are likely to receive additional bailout monies as we gave to the 
executives of the three automobile makers.
  We need extensive hearings. We need to bring the titans of Wall 
Street down, and we need to have these hearings at both the full 
committee and the subcommittee level.
  We do not want to give further credence to the accusation that 
Congress and the administration have two standards for scrutinizing 
bailout requests, one for those who shower before work and a more 
severe standard for those who must shower after work. We should have at 
least the same amount of scrutiny to an industry that has already 
received the bulk of $350 billion as we provided to an automobile 
industry that is requesting amounts less than 5 percent of that amount.
  Now, what should we provide in the way of restrictions to those who 
obtain bailout funds or retain the bailout funds they have already 
received?
  Federal dollars should be expended to bail out private interests only 
on the toughest terms. Taxpayers should demand the highest yield, the 
largest equity upside, the strictest limits on executive compensation 
and perks. Even when we bail out individual homeowners rather than big 
time executives and shareholders of major companies, the Treasury 
should get a large share of the profit that they earn when they sell 
their homes.
  Why is it so important that we are tough on those who seek bailout 
funds? There are three important reasons. First, being tough will 
increase support for the program. The public is currently focused on 
executive compensation and perks. I think it will soon focus on the 
value of the securities the Treasury is receiving, including warrants 
that represent the upside, the potential profits of a company that is 
receiving bailed out funds.

                              {time}  1415

  We need public support for the enactment, and there is considerable 
public skepticism. In talking to my colleagues, I find very few who are 
enthusiastic about releasing the second $350 billion to the executive 
branch, and I find, while most of my colleagues believe that we need a 
stimulus package, there is real reluctance to adopt one as large as 
that being recommended by so many prominent economists. We can achieve 
that support in this House and in the public by being tough on those 
who receive bailout funds.
  Second, being tough on those obtaining bailout funds will help to 
limit the number of people seeking to be bailed out. Not even the 
Federal Government can afford to fund all of the bailouts that will be 
demanded if executives see the Federal Government as a source of easy 
and cheap money.
  Third, getting a good deal by tough negotiations with anyone 
receiving a bailout will reduce the amount by which we are increasing 
the Federal deficit. We will be expending hundreds of billions of 
dollars now. I'm just addressing the $700 billion piece that is half 
completed. There will be other expenditures. We need to reassure our 
children, and we need to reassure the international markets that we are 
acting responsibly to minimize the increase in the Federal deficit.
  Now, some of the expenditures being made out of the TARP funds are 
going to be money lost forever. It's going to be buying assets that 
turn out to be worthless or investing in companies that go bankrupt. 
That is why we need a very large upside on those of our investments 
that are successful. Typically, the Federal Government obtains an 
upside by obtaining warrants from the companies it provides bailout 
funds to. These allow the taxpayers to reap the benefits of a company's 
success when it returns to profitability and when that profitability is 
reflected in its stock price.
  I believe that, in the negotiations with Wall Street, Secretary 
Paulson has been far too generous to his friends in the financial 
services industry. Given the tremendous risks the Federal Government is 
assuming, taxpayers should be receiving far more of the upside in 
return for their investments.
  For example, in the recent bailout of Goldman Sachs, the taxpayer 
received half the rate of return and one-sixth the warrants that 
investor Warren Buffett was able to receive on a similar investment 
that he made in Goldman Sachs for his fund.
  The Emergency Economic Stabilization Act gives the Treasury too much

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discretion as to what to demand in the way of warrants. While the 
Treasury is required to obtain warrants when it injects capital into 
financial institutions, it can accept as few warrants as it likes.
  The Treasury has adopted a one-size-fits-all approach, which provides 
the Federal Government with warrants equal to 20 percent of its 
investment when it buys preferred stock in a financial institution. Not 
even this 20 percent is required by the statute, and this 20 percent is 
often way too low because those healthiest banks on Wall Street were 
willing to give us 20 percent. Clearly, the riskier banks on Wall 
Street that got bailout funds were not adequately compensating the 
American taxpayer for the risk we are taking because they only provided 
20 percent warrants, a figure that might be appropriate for those 
financial institutions that are low risk.
  The question is: What can we do in a statute? Clearly, we hope that 
the next Secretary of the Treasury will drive a tough bargain whenever 
investing our taxpayer dollars in private firms, but we can do 
something in the statute.
  At a minimum, we should include language that was in an early version 
of the House bill dealing with the automobile relief that requires 
warrants of at least 20 percent, and we should make it clear that this 
20 percent is a floor, not a ceiling. We should direct the Secretary of 
the Treasury to demand warrants that fully compensate the taxpayer for 
the risks being taken in any particular deal.
  Then we turn to the issue of executive compensation and perks. These 
are very important to taxpayers and are important in deterring those 
companies that don't need a bailout from coming to Washington in their 
private jets, hats in hand.
  Now, the bill, as interpreted by the Bush administration, has allowed 
multimillion dollar salaries to continue to be paid to the very 
executives who drove their companies into the ditch, and the Bush 
administration has chosen to impose no limits on perks. In particular, 
the Bush administration has ignored section 111(b) of the EESA, also 
known as the TARP bill.
  That section states: Where the Secretary determines that the purposes 
of the act are best met through direct purchases of troubled assets, 
the Secretary shall require that the financial institution meet 
appropriate standards for executive compensation and corporate 
governance.
  Virtually all of the $350 billion that the Secretary of the Treasury 
has expended has been pursuant to his determination that we could best 
be served through direct purchases of troubled assets. He has not done 
an auction, which was the main part of the bill he was trying to sell 
to us. Instead, he has simply made direct purchases of assets from 
companies, negotiated one at a time. In those circumstances, the law 
requires that he shall require that the financial institution meet 
appropriate standards for executive compensation and corporate 
governance.
  What has Secretary Paulson done?
  He has allowed multimillion dollar bonuses to be paid to the 
executives of AIG. He has allowed million-dollar-a-month salaries to 
continue to be paid to executives of bailed-out Wall Street firms. He 
has allowed all of those entities to continue to operate fleets of 
private jets. Despite getting our money, Goldman Sachs spent almost a 
quarter million dollars a year to provide a limo for one executive. 
This does not constitute appropriate standards for executive 
compensation and corporate governance, nor should Congress simply punt 
to the executive branch what those appropriate standards should be.
  Instead, we should provide by law that, if a company gets a Federal 
bailout, the firm must limit its total compensation package to any 
executive to no more than $1 million per year for as long as the firm 
is holding our money. The limits should apply to the whole package of 
compensation--salaries, bonuses, pension plan contributions, and stock 
options. In particular, a huge grant of stock options to an executive 
at this time could be a bonanza--and an unjustified one--because right 
now all the stock prices of Wall Street firms are at depressed levels, 
and an option given to an executive to buy shares of stock for $1 or $2 
a share could turn out to be more valuable than a ton of winning 
lottery tickets.
  To the extent any existing contract provides for executive 
compensation in excess of that which is allowed under statute, I 
suggest that the bill provide that that contract is void as against 
public policy.
  Now, let us turn to perks. We should limit luxury perks like 
corporate jets and chauffeured limousines. We should prevent these 
while any firm is holding taxpayers' money. I'll point out there are 
firms on Wall Street that got money from Paulson that said, ``Hey, we 
signed up for the money. We never knew you were going to get tough with 
us.'' Fine. You don't like the new rules? Give us back our money; but 
if you retain taxpayer money, then you should not, as Goldman Sachs has 
done, be paying a quarter million dollars in a year for a chauffeured 
limousine service for one executive. If the firm's executives don't 
want to take off their belts and their shoes and go through airport 
security like the public does, then that firm should not receive and 
should not retain a bailout, and it probably doesn't need one.
  For as long as those bailout funds are outstanding, we should 
prohibit firms from owning, leasing or chartering luxury jets or from 
maintaining a fleet of chauffeured limousines. We should provide 
exceptions for chartering planes to travel to remote areas, areas 
remote from scheduled air service, and we should allow some sort of 
driver and auto to be provided to those executives who face severe 
physical challenges.
  We may also want to provide limits on how much the company reimburses 
its executives per night for any hotel room--a maximum amount of $500 
comes to mind--or per meal for any meal. Perhaps it should be $100 per 
meal. I hate to get down to this level of specificity, but Wall Street 
has proven that they will squander the money taxpayers provide their 
firms on lavish parties and fancy travel if we are not specific.
  It is possible that the auto bailout bill that passed this House will 
be used as a model for limiting executive compensation and perks. If 
that's the case, we had better strengthen it first. We had better make 
clear that the limits on bonuses apply not just to cash bonuses but 
also to grants of stock options. We should limit the total compensation 
to $1 million a year, and we should limit the use not just of leased or 
of purchased luxury aircraft but also of chartered luxury aircraft. 
Finally, we should have appropriate limits on limousines.
  Let me point out that some of my colleagues have noticed that I was 
tough on the auto executives who used their private jets to come to us 
the first time.
  One of those companies has told me very explicitly: ``Sherman, the 
law may say that we can't own the jets; the law may say we can't lease 
the jets, but the law, as passed by the House, says we can still 
charter the jets, and our CEO is never going to fly commercial.''
  That's fine unless that firm receives bailout money. Once it does, we 
have to limit it. We can't play a shell game with the American people. 
Oh, we'll limit the luxury travel, and then just have the company 
charter the jet instead of lease the jet. That would be a fraud on the 
American people.
  There is one other important improvement that we need to make to the 
TARP bill. You see, after that bill passed, the Treasury adopted, as I 
mentioned before, a plan to buy preferred stock, in particular, of 
financial institutions. The next administration will probably use a 
good chunk of the money to go back to the original plan, which was to 
buy bad bonds--toxic assets--from the financial institutions. Then we 
have to be worried. If we're buying bad bonds, at least we should buy 
bad bonds owned by American investors. It is not the purpose of this 
bill to bail out banks in London and in Riyadh and in Shanghai.
  I want to make a technical distinction. I have no objection to our 
treating as American companies such firms as Hancock Insurance and 
Fireman's

[[Page 272]]

Fund that happen to be owned by a foreign parent. We should look at 
what company is on American soil, and we should provide appropriate 
bailouts to the companies on American soil, but what we should not do 
is start bailing out banks in Shanghai, London and Riyadh.
  Under the bill as we passed it from this House, the Bank of China can 
sell a portfolio of toxic assets to any U.S.-headquartered entity 
whether it owns that entity or not. It could be a small branch that it 
owns in my State of California or it could be some big bank on Wall 
Street that it does not own, but the Bank of China can sell a portfolio 
of bad bonds to a U.S.-headquartered entity on Monday, and under the 
bill we passed, that entity can sell those same bonds to the Treasury 
on Tuesday. I call this the China two-step. It is a mechanism by which 
we will end up bailing out the bad business investments, not of U.S.-
based companies, but bad bonds which are held in safes in Shanghai and 
in London.
  Our new legislation should provide that the Treasury can only buy 
assets--bad bonds, mortgages--proven to be held by a U.S. entity--
whether it's a foreign-owned entity or not, an on-the-ground, in-the-
United States entity--on September 20, 2008.

                              {time}  1430

  We should only be buying the bad bonds that were in safes located in 
America on September 20, which is the day that Paulson went public with 
the need for a bailout bill.
  Now, I look forward not only to reforming the TARP bill but also 
using that reform as an opportunity to pass other legislation within 
the jurisdiction of the Financial Services Committee that can help deal 
with this economic crisis. And I want to point out, first, things that 
we can do that won't cost the treasury a penny, because before we start 
spending trillions of dollars, we should say, ``What can we do to get 
out of this mess that doesn't cost us anything?''
  There are a couple of opportunities.
  First, we can increase the amount of business lending that can be 
made by credit unions. Right now, we limit credit unions severely as to 
how much business lending they can do. We could, for the duration of 
this crisis, allow those credit unions to make those business loans to 
small business: $100,000 loans, $150,000 loans. I'm only talking here 
about smaller loans to small businesses that need them. We need to 
allow businesses in all of our districts to get that $100,000 loan that 
they need to expand or even to stay in business. And it is just folly 
for us to take one of the healthy groups of financial institutions in 
this country namely, the credit unions, and tell them they can't make 
the $100,000 loan that is desperately needed by the small businesses in 
our respective districts.
  Second, we need to increase the conforming loan limit. The conforming 
loan limit is the size of the loan that can be purchased by Fannie Mae 
and Freddie Mac. Those are basically the only loans that are being made 
today. And the cost of housing differs tremendously from one region of 
the country to another, even in these tough times when of course in 
most regions prices have gone down.
  Last year, we raised the conforming loan limit to $729,750 for high 
cost areas, but we allowed that increase to expire effective on the 
first day of this year. We need to restore that at 730, perhaps raise 
it to 750. Now, this will not cause the Federal Government to lose a 
penny because Fannie and Freddie actually make a profit on the larger 
loans. They suffer losses or have suffered losses on the smaller loans.
  One way we can help replenish the money that Fannie and Freddie have 
lost is to allow them in high cost areas to do loans at the $750,000 
level. That can be so critical for some of our big cities where 
declines in house prices have so badly affected local economies.
  Now let me turn my attention to the stimulus bill, the bill that will 
basically be crafted by the Appropriations and Ways and Means 
Committees.
  First, I want to approach the general principles that should be 
covered under that bill, and then I want to comment on specific ideas 
that are being put forward in light of those principles.
  Mr. Speaker, this country faces the specter of depression. A 
deflationary cycle threatens a long period of economic contraction. We 
need an enormous immediate economic stimulus. But unless that stimulus 
is well designed, it may not pass Congress. Unless it is well designed, 
it may not achieve its objectives. And unless it is well designed, it 
may sow the seeds of a future disastrous decline in the value of the 
dollar.
  So we have to make sure that the stimulus bill is big and fast but 
also tough, temporary, and self-reversing.
  What do I mean by ``tough''? As I have said, Federal dollars should 
be extended to private interests only on the toughest terms. And I have 
indicated there are three reasons for that.
  First, we've got to discourage everyone from seeking a bailout or 
from believing that they're suckers for not seeking a bailout.
  Second, we need to increase public support for what will be a highly 
contentious and difficult-to-pass stimulus bill. It will be much easier 
for Members to vote for such a bill if it provides the toughest terms 
to those who are receiving extraordinary Federal largess.
  And finally, as I pointed out, by getting warrants, by getting other 
securities that give us a share of the upside, we will be in a position 
to decrease the increase in the deficit occasioned by the stimulus 
package.
  Now let's talk about why the bill must contain provisions so that the 
stimulus is temporary and reversible. Self-reversing, in fact.
  Keynesian economics offers a simple prescription for the difficult 
times we're facing now. That is to say, easy money now and fiscal and 
monetary austerity after the economy improves.
  How in good conscience can we vote for a massive economic stimulus 
now if we believe that it is unlikely that Congress will adopt 
austerity later? We in Congress love handing out money. We know that. 
We love tax cuts, and tax rebates, and tax holidays, and tax fiestas, 
and benefit expansions, and subsidies, and bailouts, and infrastructure 
projects, and aid to States, and aid to cities and Rite Aid, Kool-Aid. 
We like spending money.
  Can we count on future Congresses to discontinue and then reverse the 
fiscal expansion that is necessary today? What I fear is going to 
happen is that the advocates of fiscal responsibility--and I count 
myself among them--may prevent Congress from giving us the full level 
of economic stimulus that we need now. I fear that the stimulus will 
not be as big and fast as we need now. And simultaneously, I fear that 
the advocates of tax cuts and the advocates of free spending will 
prevent us from turning off the spigot later.
  To avoid this outcome, the stimulus package should be both temporary 
and self-reversing. The same statute which provides a huge amount of 
stimulus should also provide particular identified tax increases and 
expenditure cuts that will go into effect automatically in the year 
2013. The statute could and should provide that those automatic 
provisions would be delayed if we failed to achieve 3 percent economic 
growth in the year 2012.
  Now, of course I can't know today what is the best budgetary policy 
for this country in 2013. We would have to fine tune or change anything 
that we write today as 2013 approaches. But we need to give the upper 
hand to those who would advocate fiscal responsibility after economic 
growth has resumed.
  If austerity in 2013 is mandated by a statute that goes into effect, 
then the advocates of fiscal responsibility will have that upper hand 
and can negotiate with our colleagues to make sure that we get the kind 
of austerity that should follow the fiscal expansion that we need now. 
Only if an economic stimulus proposal is tough, temporary, and self-
reversing can we generate the political will necessary to adopt a 
proposal that's big enough and fast enough. Only if stimulus measures 
are temporary and self-reversing can we make sure that the actions we 
take this month do not eventually lead to inflation, higher interest 
rates, a declining dollar, and an enormous and

[[Page 273]]

permanent increase in the Federal debt.
  So these are the principles that I think should guide us with regard 
to particular elements of the stimulus bill.
  Now let us look at particular proposals. Are they efficient? Do they 
get money into circulation quickly? Does every dollar we spend or 
forego get into the economy and get in quickly?
  Second, is the money spent for a good purpose?
  Third, does the money stay in the United States, or are we going to 
be spending money at the Federal level that goes to simply finance our 
trade deficit?
  And finally, are the provisions temporary and self-reversing?
  First, let us talk about aid to States. This is, I think, the most 
important element of the program because what could be worse for an 
economy facing contraction than to see our police officers and teachers 
being laid off by State and local governments just when we need to keep 
people employed.
  If we provide aid to States, what about the efficiency? I think every 
State government is going to spend that money effectively. Those States 
that don't need it may choose to save it for the future, but there are 
very few of those. Will the money be put to good use? Yes, to keep 
teachers and firefighters and police officers on the payroll and all on 
the job. Will the money stay in the United States? One hundred percent 
of it stays in the United States.
  And, of course, this would be temporary. If we wanted, we could even 
make it self-reversing. Most States are not allowed to borrow money 
from the Federal Government by their own constitutions, but what we 
could do is change the reimbursement formulas so that we take a bigger 
share of the Medicaid budget than we do now and let the States save 
money on that with the understanding that come 2013, not only does that 
formula go back to where it was, but it may even swing in the other 
direction and be adverse to the States.
  They could plan for this. This would be a way to make the proposal of 
State aid even self-reversing. But if it's not self-reversing, it will 
be temporary. It will be efficient. It will be a good use of money, and 
the dollars will stay in the United States.
  Second is the possibility of tax rebates to consumers. This is money 
that will be well spent by America's families who need it. But we 
cannot be sure that they will spend it. It may be saved, and we have to 
expect that of the portion of it that will be spent, much of it will be 
spent on foreign-made goods. So it may be important to provide these 
rebates to consumers in our society. It will help keep the retail 
economy going, keep our shopping centers from going bankrupt, et 
cetera. But let us remember that a chunk of that money is going to go 
overseas.
  A third element is business tax breaks, and here we have to draw a 
distinction between those business tax breaks, which we in the tax 
world call ``timing differences,'' and those that are permanent tax 
reductions.
  What are the timing differences? Timing difference is when you give 
somebody a deduction today that they would otherwise get tomorrow 
anyway. You have simply changed the year in which they get the tax 
reduction.
  There are two proposals on the table from the Obama transition team 
that fit this bill. One of those is changing the rules with regard to 
investments up to, I believe it's a quarter million dollars, to let 
smaller businesses write this money off in the year in which they spend 
the money. In the absence of a special provision, they would have to 
capitalize that money and write it off as the asset they purchased is 
used up, as the machinery wears out.
  Well, we want to encourage businesses to invest now, and ultimately 
it costs us little or nothing. Yes, we give them the deduction right 
now this year, otherwise they would take it over a period usually of 5 
years. Why not give them the deduction now? The ultimate increase in 
the deficit over 5 years is very small.

                              {time}  1445

  Now, it is true that there's a time value of money. Not getting tax 
dollars today and getting them instead several years from now, that 
used to be thought of as a cost to the Treasury because you have to pay 
interest on the money the Federal Government borrows. But today the 
Federal Government is borrowing money for amazingly low interest rates, 
some at the rate of zero, and so the fact that we will get the tax 
dollars collected from businesses 2 or 3 years from right now, rather 
than immediately, scarcely increases the Federal deficit.
  Another issue is net operating loss carryforwards and carrybacks. 
These are companies that made money during the last 5 years. Now 
they're losing money in 2008 or they're going to lose money in 2009. 
Current tax law allows them to write off those losses chiefly against 
money they make in 2011, 2012, future years. We should allow these 
companies to carry it back, to use these net operating loss deductions 
now to offset the taxes they paid in prior years.
  First, I regard this as fair. Any accounting theorist will tell you 
that the use of the 1-year accounting period is arbitrary, that 
companies make and lose money in cycles. Business cycles often last 
many years, and so you cannot say that it is anything but artificial to 
say, well, you made money in 2007, you lost money in 2008. No, you made 
and lost money over a period of years that we have artificially divided 
into 12-month periods. So saying that you have to pay money on the 
taxes you made in 2007 but cannot get an immediate refund of those 
taxes when you discover that really over the 2-year period you've lost 
money is not consistent with good accounting theory. We should allow 
net operating loss carryback.
  The other thing is these net operating loss deductions. They're going 
to be taken at some point. We might as well let them be taken now, and 
the ultimate increase in the deficit is very small.
  So those are two provisions that I think will encourage business and 
will provide a lot more money in expenditures today than an ultimate 
increase in the deficit over a 5-year period.
  So I look forward to working with my colleagues on economic policy. I 
will have more details of what I've talked about on the Web page, 
bradsherman.house.gov. This is the beginning of a dialogue on how to 
deal with the greatest economic crisis that we have faced in the 
lifetimes of all but the oldest Members of this body.


                             foreign policy

  At this point, Mr. Chairman, I'd like to focus on foreign policy and 
particularly the Middle East. Again, I would point out that if there 
are colleagues that would like me to yield them a few minutes and they 
happen to be on the floor, they need only get my attention.
  Now, I want to commend the Bush administration for its support of 
Israel during this difficult period. Now, the press, as is often the 
case, is beating up Israel due to its lack of understanding of what is 
happening and how to interpret it.
  First, let us remember that over the last several years Hamas has 
sent nearly 7,000 rockets into Israel. That's 7,000 times they have 
attempted murder. But the press would have you believe that those 
attempts at murder don't count because most of them were unsuccessful. 
This is absurd. The malice is demonstrated by the attempted murder, and 
I use the term ``murder'' explicitly here because every one of those 
rockets was fired with only one intention: kill Israeli civilians. Not 
a single one of those rockets was targeted at anything military. The 
fact that they haven't killed 7,000 Israelis does not reflect well on 
their morality. It may reflect poorly on their aim.
  Second, and this is under-covered by the press, the United Nations 
has stated that roughly three-quarters of the casualties in Gaza are of 
terrorists-military, gun-toting, Hamas terrorists. This is a true 
tribute to the tactics used by Israel because Israel has done 
everything possible to avoid civilian casualties. Hamas has done 
everything possible to increase civilian casualties. Again and again, 
they fire rockets from the middle of schools, from the middle

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of hospitals, from the middle of residential neighborhoods.
  I mean, these people live very close to each other. Israel actually 
has the Gaza phonebook. They will call a house and say, We know 
military supplies are being stored there, we're going to hit this 
house, you've got 10, 20 minutes to leave. And what happens? Hamas 
forces civilians up to the rooftops.
  Perhaps one of the best-known examples is the highest level Hamas 
individual to be killed by Israel. At his home he stored rockets and 
Israel knew it. He announced publicly that he wanted to be a martyr and 
that he, himself, would be at his home. And Israel called that home and 
said we want to avoid civilian casualties. We have to hit that home 
because we know that rockets are being stored there, you have time to 
leave. What did this Hamas leader do? He forced and brought together 
his four wives and their many children and insisted that he be allowed 
to die as a martyr and that as many of his family members would die as 
possible in order to increase civilian casualties.
  Now, it is well-known that Israel is allowing trucks of supplies to 
get into Gaza. This is usually known by press critics who say Israel 
didn't allow a resupply truck in at this particular hour; they made the 
truck wait a couple of hours. Let us compare this to the wars we are 
most familiar with: World War I and World War II.
  During each of those wars, Britain used its entire navy to cut off 
every German civilian from food imports and any other kind of import. 
And Germany deployed its submarines with the sole effort of depriving 
the British of the food imports they needed from chiefly the New World.
  So, in the wars we're most familiar with, both the good and the bad 
side did everything possible to stop civilian supplies from getting 
into Germany or Britain. Compare that to an Israel that protects the 
trucks as they go in.
  With that, I'd like to yield to the gentleman from Georgia (Mr. 
Broun).
  Mr. BROUN of Georgia. I thank the gentleman for yielding. I 
appreciate my Democratic colleague for bringing this very important 
issue to the forefront, and I support your effort to do so, and I trust 
that we across the aisle can continue to support Israel.
  In the Torah, in the Old Testament of the Bible, we read: Blessed is 
the Nation that blesses Israel, and cursed is the Nation that curses 
Israel. We as a Nation have been extremely blessed by our creator, by 
God, and I believe a big part of that, a huge part of that is because 
we have blessed Israel and supported Israel. These people are under 
attack by terrorists who consider Jewish people dogs, less than human, 
and we need to support Israel.
  I highly congratulate my Democratic colleague for bringing this 
forward, and I encourage our colleagues to continue to support Israel, 
to continue to do what we can to make sure that the Israeli citizens 
remain safe against these heinous attacks by Hamas, by Hezbollah, by 
the Iranian people who are funding both organizations. So we need to 
absolutely continue to support Israel so that God will continue to 
support America, and I congratulate my colleague for bringing this 
forward, and I look forward to working with you to continue to support 
Israel.
  Thank you.
  Mr. SHERMAN. I look forward to working with the gentleman from 
Georgia and thank him for his remarks.
  Any discussion of the morality of war sometimes gets off on what I 
think is a sidelight. People always want to criticize this or that 
sergeant, this or that gunner; oh, you shouldn't have responded this 
way to rocks being thrown; oh, your attempt to return fire to a Hamas 
rocket site was off by 10 yards or 20 yards in the direction of a 
civilian location.
  We have to remember, the moral responsibility for war and for the 
deaths of war cannot be placed at the feet of this or that sergeant 
making this or that decision under life-threatening conditions. The 
moral responsibility for war and for its casualties must be placed on 
politicians who seek extreme and unjust objectives through violent 
means.
  Here's a case where Hamas has earned its designation as a terrorist 
organization. Not only does it use terrorist means, but what are its 
objectives? They are stated very clearly. They are for the death or 
expulsion of every Jew from the Middle East. They refuse any change in 
that policy. So whether it is genocide or ethnic cleansing or more 
likely a combination of the two, these are the objectives of Hamas, 
being pursued by violent means. It is obviously the fault of the 
politicians of Hamas who seek these objectives that must be held 
responsible for the resulting carnage.
  We need a sustainable, permanent cease-fire, not a 2-day resupply 
truce to allow Hamas to bring in more rockets.
  Now, I think it's clear that this is not just a conflict between 
Israel and Hamas. It is a conflict between the Government of Iran and 
the people of the United States. The fighting in Gaza has demonstrated 
again that the ultimate adversary of the United States and its allies 
in the Middle East is the Government of Iran. Hamas is a terrorist 
organization seeking the destruction of Israel in favor of an Islamic 
Palestinian State, but it is also an Iranian proxy. As such, it is part 
of a regional war waged by the Iranian regime against the United States 
and its allies.
  Many Hamas weapons are made in Iran, and many top Hamas military 
leaders and the experts who launch the missiles into Israel were 
trained in Iran. Iran also provides the group with significant funding. 
It is unlikely that Hamas would have been able to achieve its status as 
the premier Palestinian terrorist organization and thus provoke this 
crisis without Iranian backing.
  Iran-backed Hamas, like Iran-backed Hezbollah, shoots rockets at 
Israeli civilians from deep inside their own densely populated civilian 
population, knowing that when Israel acts to defend itself innocent 
Palestinians will be among the victims.
  Through Hamas, Hezbollah and 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 that government's own aims.
  We know that Iran is working hard toward the possession of a nuclear 
bomb. This would allow Iran to act with impunity in the future. A 
nuclear Iran would go from provoking this crisis to that crisis, and we 
would have to go face-to-face with a nuclear power, each time hoping, 
hoping for the same results we saw in the Cuban missile crisis--that is 
to say, going eyeball-to-eyeball with a hostile nuclear power hoping we 
always have the same result, namely, some peaceful resolution.

                              {time}  1500

  It only takes one crisis with a nuclear power that goes in the wrong 
direction to destroy an entire city or an entire country.
  Furthermore, we should recognize that if the regime in Tehran ever 
finds itself on the verge of collapse--and many of us pray for that 
day--its leaders may decide to go out with a bang.
  Preventing Iranian nuclear possession is critical to world peace, and 
we can still succeed in accomplishing that goal, but we have to act 
quickly. The good news is we have used only 1 percent of the tools that 
are available to us, and therefore we can do a lot more. The bad news 
is we've used only about 1 percent of the tools available to us. We 
have demonstrated a lack of political will to use the methods that we 
have to use to put pressure on the Iranian regime.
  Now, President-elect Obama has a strong record of working to put 
pressure on the Iranian regime. He voted for the Lautenberg amendment, 
which would have prevented U.S. oil companies from doing business with 
Iran through their foreign subsidiaries. And he authored a bill that 
would have encouraged divestment from firms--chiefly oil companies--
doing business with Iran.
  He will have the ability, when he takes office, to go a long way 
toward

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increasing the price the Iranian Government pays for its stance on the 
nuclear issue and its support for terrorism. First, he can stop U.S. 
oil companies from using their overseas subsidiaries from doing 
business with Iran. We should also do that by legislation.
  The administration can start enforcing the Iran Sanctions Act. We can 
demand that the World Bank stop dispersing funds to Iran in the form of 
concessionary loans which have not been effectively opposed by the 
current administration. We can deny nuclear cooperation agreements to 
countries that provide technologies to Iran. We can deny insurance to 
ships that carry cargo to Iran. And we can put economic pressure on 
American foreign companies seeking to build liquefied natural gas 
plants in Iran and those that sell refined petroleum--chiefly 
gasoline--to Iran.
  Now, while Iran is oil rich, it needs to import nearly half its 
gasoline because it lacks refinery capacity. I'm here to bring to the 
House's attention one recent success. The Indian press is reporting 
that as a result of pressure that was initiated in the Congress, a 
major Indian petroleum refinery is halting its business dealings with 
Iran. I want to thank the several of my colleagues who joined with me 
in sending a letter to the U.S. Import-Export Bank to demand that EX-IM 
not provide loans to this particular Indian refinery as long as the 
Indian refinery was supporting Iran and providing it with the gasoline 
it needs.
  I look forward to being able to convince Iranian elites that they 
face other economic and diplomatic isolation if they continue their 
nuclear program and continue their support for terror, and there are 
many other ways that we can achieve that objective. I invite my 
colleagues again to see more details at bradsherman.house.gov.

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