Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?

Mr. FRANK of Massachusetts. My point was, and I must say I am again unreassured that these crack intelligence people who are so terrific cannot keep track of the money. I will say, in fairness to them, I do not think this was lousy accounting, I think this was cleverness on their part, knowing that they can build this up and those guys are going to spend it. But the point I want to make is this: The chairman said, ``You came up with a way to prevent this from happening last year, and what happened? It got worse after you presented it.'' So I am saying it is-- --

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?

Mr. FRANK of Massachusetts. I must tell my friend from Texas I am less reassured by that than I might have been, given the fact that after we passed that conference report and it was signed into law, the unobligated, unaccounted for secret surplus went from $2 billion to $4 billion. So this restriction on them did not appear to lay a glove on them because they passed this tough restriction, and then we find out months after they pass the restriction that it was $4 billion instead of $2 billion. Maybe our colleagues should stop trying to restrict them, because they are not doing too well.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Chairman, I am very pleased to be able to yield 3 minutes to the gentleman from Missouri [Mr. Gephardt], the democratic leader and a man who had a lot to do with drafting this amendment.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield 1\1/2\ minutes to the gentlewoman from Oregon [Ms. Furse], one of the cosponsors and a long supporter of this.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield 1 minute to the gentlewoman from Colorado [Mrs. Schroeder], who actually will speak on this amendment.

Mr. FRANK of Massachusetts. Mr. Chairman, how much time is remaining on our side?

Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself the balance of my time. This is a very clear-cut issue. Members have said American troops are not there to defend other countries, they are there to defend us, but the fact is that they are doing both. No one thinks that we have no role in defending other countries. The question is not whether we should pay. We will. Even under this amendment the American taxpayers pay the great bulk of this. What we are talking about is whether or not these other nations should get a free ride. We will spend most of the money. People have said, gee, if we do not put out all the extra money, we will lose out on all our allies. How come we have to constantly bribe them to let us defend them? The way people argue, you would think America was the baby that was so ugly one had to put a lamb chop around its neck so the dog would play with it. Apparently, the notion is that we would be so bereft of helping people, that if we did not bribe people by picking up their defense budgets they would not do it. People say it worked in Japan but not here. The very same people are trying to kill this amendment today voted against us when we imposed it on Japan. They used the same arguments. We are performing a task in the common defense. It is not just for us, it is for them. What is not common is the burden. We are picking up all the tab and they are getting all the benefit for free. What we need to do is to share the burden, and that is what this calls for. We are going to run into, as Members of this House, an increasing crunch if we get to a zero deficit. There will be a terrible crunch on other discretionary spending. This is a chance to say to the beneficiaries of American fighting people on American tax dollars that they can make a reasonable small contribution. We ought to do it. And for people who say we can never accept money under those circumstances, then we owe a lot of people a lot of money for the gulf war. We took money to fight the gulf war in the common interest. We got money from our allies because we were bearing that burden, and it worked very well. The only thing we accomplish by voting ``no'' is to have the American taxpayer continue to pick up the tab for the rest of the world. Mr. Chairman, I yield back the balance of my time.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. It is a pleasure to again be able to address Speaker Foley. Mr. Speaker, I want to talk about a subject in which I plan soon to introduce legislation. It has to do with the practice of large, wealthy entities using a combination of their wealth but also the laws of this country, the securities laws, the tax laws, accounting principles to acquire companies when their intention in acquiring the companies is to shut them down. In particular, I am addressing the situation in New Bedford, MA, where, to my great dismay, the firm of Kohlberg, Jerome Kohlberg and James Kohlberg, bought a company which had a plant in New Bedford, MA, a plant that has been in existence for over 100 years, that is profitable today as it was profitable when they bought it, making various forms of fasteners, shoe eyelets, and they bought it apparently to close it down. They bought it because given the tax advantages that were available to them when they borrowed money for the purchase, given other kinds of accounting questions as to what things are valued at, it enriches them more, because they are very wealthy people--we are not talking about anyone fighting for survival--it enriches them more to close it down. I want to make a distinction because I have had people say to me, ``Well, don't the owners of private property have a right to do things? In some cases closing down a plant that's faltering is the only thing to do.'' Yes; sadly that is the case. But I want to make this important distinction. I am not, in the legislation I will be preparing, seeking to restrict someone who is in business, who has owned a business, who is trying to make a product, who decides that he or she can no longer profitably do that, that his or her capital would produce a better return elsewhere. I am not talking about disturbing the business decisions of long-term owners. That is a different issue. I will address that in another context. I am talking here about the case of Jerome Kohlberg and James Kohlberg acquiring this business for the purpose of shutting it down. If it were a business that was dying because of a lack of profitability, the question would be a different one. If it were a business that were losing its suppliers, that was being even outcompeted by others, the case would be a different one. What I want to do is to examine the tax laws, the corporate laws, the accounting practices in this country that make it profitable for people to buy a company and shut it down. The Kohlbergs, having paid, they tell us, $16 million for this company as they account for it, and I am skeptical of how exactly they got to that number, will not accept bona fide offers that were made for the company. I want to stress that again. We are not talking about forcing someone to keep open an unprofitable enterprise. There are responsible businesspeople in the city of New Bedford. They have worked with the United Electrical Workers Union, which has been very statesmanlike in this regard; they have worked with the mayor of New Bedford and her Economic Development Commission. And people who know the business, people who have made manufacturing work in New Bedford, have come in and said, ``Please sell us this at a reasonable price,'' and they have been refused. Indeed, the Kohlbergs did not want to even entertain offers of a sale. We pressured them so they said they would entertain offers but they did it in so unrealistic a fashion that we had no chance to succeed. What happens? What happens is they use various laws so they can buy up a company just to shut it down. More than 100 people are thrown out of work. Their families will be in distress. Costs will be imposed on the city of New Bedford, on the State of Massachusetts, on banks, on schools, on auto dealers. These are hardworking Americans who suddenly find themselves bereft of an income at a time and a place where it is not going to be easy for them to replace it, so that Jerome Kohlberg and James Kohlberg, who are already quite wealthy, can get wealthier. Again, I want to stress, this is a case where they bought this place to shut it down. People have said, ``Do you want to interfere with private property?'' Well, yes; I do want to reduce the incentive people have to buy a going concern that was in no danger, that we know of, of shutting down just so they can shut it down and get richer. We had in this case people ready to step forward. If the owner wanted to sell, a fair price would have been offered. There were people ready to say, ``Here's your money and we will take over and we will keep this place running.'' We are not talking about confiscating private property. We are not talking about interfering with a legitimate business decision that says, ``This is no longer a profitable enterprise. I'm taking my capital elsewhere.'' We are talking about a set of laws in this country and regulations and accounting practices, and these need to be looked at further, that incentivize someone buying a plant solely for shutting it down. That is something that must be changed.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Indeed, since we have just now been given a copy, I do object but would like to proceed with the reading.

Mr. FRANK of Massachusetts. Mr. Speaker, this very carefully drawn recommit says, if a majority of your income comes from work, you will get the same cap that welfare recipients get. We will be creating, if we reject this, precisely the disincentive my colleagues said they did not want. Remember, under this recommit there is no floor. If a housing authority does not want to go up to 30 percent, it does not have to. So the gentleman from New York's argument comes down to this: If you tell a housing authority it cannot charge a working person more than 30 percent of income, they will wind up paying more rent than if you tell the housing authority they can charge an unlimited amount of income. That is the difference. We are saying, if you are working, 30 percent is the maximum. There is no minimum. It is whatever the housing authority wants to set. The gentleman from New York says, no, we must protect these working people. Let us let the housing authority charge them whatever they want. What we will get is the people on welfare will be protected by a 30-percent cap, and people who are working will not be protected. Steve Forbes, where are you when we need you to make rational housing policy? Why do my colleagues want to say that working people will be treated not only in dollar amounts more but qualitatively more? This amendment does what the gentleman may have set out to do. And it is true, housing authorities will tell you, no, we need the money. If you vote no, you are voting to let the local bureaucratic people who run the housing authorities get more money out of working people without limit. If they get a shortfall, they will have one place to go. They will be able to raise the rents not on the disabled people, not on the welfare recipients, they will be able to raise the rents on the working people. If they do not want to raise the rents, they will not have to. Nothing in here forces them. The gentleman from New York says trust the local authorities, but apparently he does not trust them because he says, if you put a 30 percent, they are too stupid to know that 30 percent up here does not mean you cannot be below 30 percent. If you really think they cannot tell the difference, then protect these people.

Mr. FRANK of Massachusetts. That is absolutely right. Let me just say, my friend from Minnesota just suggested a point. Under their theory, the way to get the rents lower is to let the authorities charge as much as they want. I guess the way to get people to drive more slowly would be to remove the speed limit altogether. The gentleman from Minnesota is right. I voted to go to 65, but maybe if we took the speed limit off altogether people would go lower. This is the logic of the gentleman from New York. Remember, his amendment says if a person is on welfare and they are making less than 30 percent of the median, they get the protection of the 30-percent cap. He argues again illogically when he says, and I hope he will try to explain this, this is a protection, but if they are working it somehow would become an assault on them. I hope Ed Brooke's original amendment is restored.

Mr. FRANK of Massachusetts. Yes. And under the amendment of the gentleman from New York, what he says is this. He said it in his argument: If we limit the housing authority to 30 percent we are saying, ``Take any factors you want into consideration, geography, whatever, but do not go above 30 percent.'' They will charge the tenant more rent that if we say to them, ``Set the rent on whatever basis you want but there is no cap.'' I have never before heard that imposing a limit in fact required people to go higher than if there was no limit. Mr. Chairman, I yield to the gentlewoman again.

Mr. FRANK of Massachusetts. I yield to the gentlewoman from California.

Mr. FRANK of Massachusetts. Mr. Chairman, I am glad the gentleman from New York brought out his chart; it was his chart, and he picked 1982, not as a random number but because that is the point at which he believes the Brooke amendment began to have a negative effect. Interestingly, that is the year the Brooke amendment was changed. The Brooke amendment began as a limit on the overall amount that could be charged. It never argued for income-based rent in every case. It simply said no matter what your basis is, housing authority, this high and no higher. In 1981, as part of the Republican program of Ronald Reagan passed by a Republican conservative Democratic coalition, that was changed and it became both the ceiling and a floor. At that point, yes, it did have some unintended negative consequences. The theory was in Gramm-Latta that they did not want to appropriate that much more Federal money, so the reason they did that in 1981 was to force the housing authorities to take more money in than they otherwise would, and that was wrong. The amendment we are offering today restores the original Brooke amendment, the pre-1981 amendment. It says there will be an overall limit, and that is all it says. In fact, no one has shown any negative effect during that period. We are restoring the Brooke amendment to what it was in the 1960's and the 1970's. In other words, this argument that the gentleman is making about a work disincentive is dead wrong. As a matter of fact, under the proposal of the gentleman from New York we get a work disincentive, because under his amendment there is a 30-percent cap on income for people who are on welfare, 30 percent of the median or below. Under his amendment, if a person gets off welfare and goes to work, then their rent can go up by more than their income. He has the disincentive. Why so illogical? Partly to try to get the votes, but partly because again this is an effort to say if we do not appropriate the money, we are going to get it out of the tenants. Do the housing authorities have any strong objection to raising the rents on the tenants? Surprisingly, not. But I do not believe that that should direct our policy. So we would simply return to the days of the Brooke amendment before it had any negative consequences. This is a ceiling. It is not a floor. It had no work disincentives in the 1960's and 1970's. It would have none again.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself the balance of my time.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to the gentlewoman from California [Ms. Millender-McDonald], our newest colleague.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to the gentleman from Massachusetts [Mr. Kennedy].

Mr. FRANK of Massachusetts. Mr. Chairman, I want to try to reach some agreement here. The point is this: By the gentleman's own chart he is acknowledging, by his choice of a date, that when the Brooke amendment was simply a cap and not a floor, it did not have that negative effect. His own chart starts there. I am talking about returning it to what the gentleman regards from his chart as the good old days. The gentleman should read his own chart.

Mr. FRANK of Massachusetts. I yield to the gentleman from New York.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 1 minute, and we can continue this debate. Mr. Chairman, I would say the gentleman from New York has a key point, but I think it makes our argument. Remember, the Brooke amendment has had two forms. As originally proposed by Senator Brooke and adopted, it was simply a cap and not a floor. It was changed in 1981 to be both a cap and a floor. Interestingly, the gentleman's chart begins with 1982, after the change. He is showing a decline. In fact, the amendment we are offering would restore the Brooke amendment to what it was before his. The point is, by the gentleman's own point on the chart, the Brooke amendment, before Gramm-Latta, did not have that effect. That is where he starts his chart. He characterizes the negative effect of the amendment to the Brooke amendment. But what we put forward leaves that out and restores it to the pre-1982 pre-chart days.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield 90 seconds to the gentleman from Minnesota [Mr. Vento], one of the senior members of the committee, a great housing advocate. (Mr. VENTO asked and was given permission to revise and extend his remarks.)

Mr. FRANK of Massachusetts. Mr. Chairman, may we know how much time is remaining and on what amendment?

Mr. FRANK of Massachusetts. Mr. Chairman, I have a parliamentary inquiry.