Phil Gramm

Mr. GRAMM

Mr. GRAMM. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. GRAMM. That is all right.

Mr. GRAMM. Mr. President, as always, our colleague has done an excellent job. He begins by telling us that only people who ruin people's lives could be opposed to the amendment. He tells us the amendment has to do with people who won World War II. He tells us the sharks on the street are the subprime lenders who are affected. And then he tells us it is a choice between those who respond to special interests and his choice in defending the individual, people who do not have lobbyists. I think we have heard an excellent speech, but it has no relevance to the amendment that is before us. The amendment before us, paradoxically, would hurt the very people our colleague appears to champion. I wonder how many Members of the Senate are members of families who have received a subprime loan. As I mentioned earlier, when I was a boy, my mama bought a home on Dogwood Avenue in Columbus, GA, for $9,300. She borrowed the money from a subprime lender. She paid 4.5 percent interest. The going market rate was 3 percent. She paid a premium of 50 percent. What incredible exploitation. The problem is, there is another side to that story. She was a practical nurse. She did not have a full-time job. She worked on call. She had three children. Banks did not make loans to people like my mother. As a result of that loan, at a 50-percent premium, so far as I am aware, she was the first person in her family, from Adam and Eve, ever to own her own home. It profoundly affected her life, and it affected my life too. None of her children have ever failed to own their own home. So our colleague would have us believe that because you are paying a premium, because you have no established credit, or because you have troubled credit, that somehow this kind of lending is illegitimate, or in today's terms, it is predatory. The Senator from Illinois's amendment has nothing to do with predatory lending. Is our colleague not aware that Fannie Mae and Freddie Mac are now moving into subprime lending, that the premium that people with no credit ratings or poor credit ratings are paying is declining because of increased competition? Is our colleague suggesting that because every lender in America opposes this amendment, they are, by definition, people who ruin other people's lives? Let me explain this amendment. When you cut through all of the wonderful rhetoric and every horror story ever recorded, where hundreds of laws have been broken and where remedy is available and is being undertaken, in every case that was cited by our colleague the lender violated dozens of Federal statutes that have nothing to do with this amendment. What this amendment says, basically, is the following: If in any material way you violate roughly a dozen provisions of the Truth in Lending Act, the loan is not enforceable and lenders can't collect. Let me give three examples of what constitutes a violation or would be subject to a bankruptcy judge's determination as being a material violation. You are now required under truth in lending to give written notice to a borrower that you are going to give them information over the telephone. If you failed to do that in writing 3 days before you actually gave the information and judged to be in violation, you would not be able to collect on the loan. You are required before a transaction is entered into to give 3 days' notice. What if you gave 2 days' notice? You would be subject to not being able to collect a loan. You are required to provide the notice in a certain typeset. Under the amendment of the Senator from Illinois, if you were judged by a bankruptcy judge to have typeset that was too small, then the loan would be uncollectible. Now what do you think is going to happen if these provisions become law? Thousands of reputable lenders who are making loans to people who otherwise could not own their own home will get out of the mortgage- making business. Millions of people who could have the dream of home ownership would lose it because of this amendment. Our colleague tells us that remedy is needed. It is as if he didn't know we have just undertaken, with every financial regulator, promulgation of new regulations related to so-called predatory lending. One of the areas they are rulemaking on is balloon payments, the very thing about which he talks. Over and over again, basically what we are being asked to do is something that will hurt not the lender--there are plenty of prime loans to be made but the people who do not have established credit or who have marred credit. The net result is that millions of people will not be able to get loans. There is one other problem. There are very strict penalties for violating the provisions of law referred to in this amendment. You can be fined $1 million a day. You can have your bank charter terminated. You can have the directors and officers removed. You can have an injunction. Those are all penalties imposed on the bank. Imagine if we actually had a provision of law which said that if an error is made--and there is nothing about intent in this amendment-- then the loan is forgiven. Can you imagine a situation where we are going to pit the borrower and the lender against each other, where the borrower would have an incentive not to respond, not to send in information, to try to find a way to produce an error so the loan would have to be forgiven? The net result is that while Fannie Mae and Freddie Mac are now getting into subprime lending, these kinds of provisions would drive them out. These provisions would end up driving people who want to own their own home into the hands of the very unscrupulous lenders about which our colleague talks. We have heard a wonderful speech. It talks about horror stories that have existed and do exist. We have legislated over and over to deal with those problems. The idea of saying that because an error was made which was unintentional in areas related to type size, notification in advance of telephone discussions, notification prior to a transaction, that those kinds of changes could render the loan uncollectible would mean thousands of lending institutions that today are making home ownership possible would get out of that kind of lending. That is why every lender in America is opposed to this amendment. I urge my colleagues to let the Federal Reserve and our bank regulators, who are looking right at this moment at predatory lending, come up with regulations that make sense and will help more than they hurt. I am moved, and I know anybody is moved who listened to the speech in advocating this amendment. But I urge my colleagues to get beyond the speech and look at the amendment. Can you imagine putting lenders in a situation where technical errors, unintentionally made, could result in a loan's not being collectible? Banks in cities such as my hometown of College Station would get out of subprime lending under those circumstances in droves. And the cost of the loans that would be made would go up. The problem our colleague talks about is real. The emotion he presents is real and well intended. The remedy he proposes makes all of the problems worse. It drives out not the bad lender but the good lender. It drives out not the loan shark but the legitimate lender who is getting into this area of lending and driving down interest rates and helping people own their own home. I wish we could pass a law that would say that everybody had good credit, that everybody had established patterns of behavior paying back debt, and that somehow that could change behavior. Such a law could not be passed and would not be reasonable. It would violate human nature. To pass a law that basically says you can't collect a loan based on an unintentional error is to assault the whole foundation of the credit system of the United States of America and greatly undercut the ability of moderate- income people, people who have checkered credit ratings, people who have no credit ratings, from ever getting a loan. I urge my colleagues to support tabling this amendment. I yield the remainder of my time to Senator Hatch.

Mr. GRAMM. Point of order. Is the Senator suggesting that Members of the Senate are not voting their conscience on this bill? Is the Senator suggesting that there are Members who are voting for special interests instead of what they believe in? If so, that is a violation of the rules of the Senate.

Mr. GRAMM. Mr. President, I wanted to come over this morning and talk about an amendment offered by Senator Durbin. I am opposed to this amendment. I believe, if adopted, this amendment would do great harm to people in America who are trying to borrow money but do not have perfect credit ratings. And, as a result, this amendment would deny access to the American dream for millions of people who are fulfilling that desire today. In addition, I do not believe that the amendment is well intended in that I sense it is really aimed at disrupting the bankruptcy bill. But, beyond that, the amendment is very dangerous. I hope my colleagues and their staffs, as we move toward a vote on this amendment, will listen to what I have to say because it is very important that we understand this amendment in context and the very real harm it would cause. When a major piece of legislation, such as the bankruptcy bill, is before the Senate, there is a natural tendency for those opposed to the bill to just throw things into it, much as somebody would throw rocks at a car or take other action to disrupt things. But the problem is, these kinds of amendments have consequences. No one in the Senate doubts that the bankruptcy bill is going to become law. So I would urge Senators, whether they are for this bankruptcy bill or not, to take a long, hard look at the Durbin amendment to determine whether they want to risk the possibility of such a dangerous provision becoming the law of the land. Finally, before I explain this whole issue in some detail, let me say there are few subjects that are less well understood than subprime lending. In fact, the title ``subprime'' is counterintuitive--it creates the impression that you are borrowing below prime, when subprime means, in fact, you are paying above prime interest rates because you do not qualify for prime lending. So let me begin by talking about the Durbin amendment and what it does. I want to explain why it is dangerous, and then I want to call on my colleagues, whether they are for the bankruptcy bill or not, to join Senator Hatch and others in tabling this amendment. Let me make clear, this amendment is not going to become the law of the land. This amendment is not going to be ultimately in the law books of this country because it will hurt millions of people whom we should not be hurting. First, let me begin by defining subprime lending. Subprime lending is basically lending that is made to people who do not have established credit ratings or who have problem credit ratings. There are people who would like to pass a law, I am sure, to say you cannot lend to people above prime lending rates. If such a law were passed, the net result would be that tens of millions of people would never be able to borrow money through established channels. They would be forced to go into the sort of black market of lending where you borrow from your kin folks when you do not have access to credit. Subprime lending has a bad name, but unjustifiably so, in my opinion. When I was a boy, my mama wanted to buy a home. She borrowed the money from a finance company, and she paid 4.5 percent interest. Gosh, that sounds low today. But in the 1950s, that was 50 percent above prime because banks were lending money at 3 percent. So you might say my mama was exploited by a subprime loan because she was forced to pay 4.5 percent interest whereas other people living in the town where I grew up were able to borrow at 3 percent. But my mama was a single mom. She was a practical nurse who was on call but did not have an established employer. The plain truth is, in that day and time, banks did not lend money to people like my mother. The rest of the story is that by getting this subprime loan, even though she paid 50 percent above prime, my mother became the first person in her family, I guess from Adam and Eve, ever to own the dwelling in which she lived. And I think it is interesting that all of her children have owned their own homes. Some people look at subprime lending and see evil. I look at subprime lending, and I see the American dream in action. My mother lived it as a result of a finance company making a mortgage loan that a bank would not make. We are getting more people involved in subprime lending in America. As a result, the margin between what people with good credit pay and what people with troubled credit or no established credit pay is beginning to narrow. The Durbin amendment would discourage people from getting into subprime lending and would make it more difficult and more expensive for people to borrow. If you read the Durbin amendment--well, gosh, it just looks wonderful. What it says is, if you are borrowing money at a subprime rate and the person making the loan commits a material failure to comply with--and then it lists an alphabet soup of provisions--then the loan will be forgiven. Let me explain what these provisions are. I think when you look at them, you see how dangerous this provision would be. One of the provisions of law--if you fail to comply with it, that would mean, in essence, the loan would be free and you would not have to pay it back--says that if I am going to give you, over the telephone, information about the loan, I have to file, in writing, in advance, that such a communication is going to take place. Do we really want a provision of law that says if I am a lender, and I am lending you money to buy a home, and I fail to file in writing that we are going to be going over some of the terms on the telephone, that you should not have to pay back the loan? Does anybody think that makes sense? Another provision has to do with notification in advance. And under law, you are required to notify people of the terms of the loan 3 days in advance of when the actual transaction is going to occur. Does anybody here believe that if you made a mistake in making the loan, and you notified people 2 days in advance, they should be empowered simply not to pay the loan back? Does anybody think that would be good public policy? And finally, and perhaps most destructively, for the first time, this amendment would give the borrower an incentive to game the system and try to entice the lender into making a mistake. For example, suppose the lender makes an error in complying with any one of the numerous, different provisions of statute--either timing of notification, or notification in writing that telephone communications are going to be made--or the borrower creates, by refusing to send information back or by disrupting the normal process, a confrontation between the borrower and the lender, should the borrower benefit by having the loan forgiven? Does anybody doubt that under these circumstances there would be an incentive for some borrowers to help create noncompliance with these provisions--or look for such noncompliance at a later date? At a time when millions of Americans now have an opportunity to own their first home, buy an automobile, send their children to college, do we really want a provision of law that will pit the borrower and the lender in a gamesmanship situation where, if the lender makes a mistake or can be enticed to do so, the loan is forgiven? Surely, no one could believe this is good public policy, whether you are for the underlying bankruptcy bill or not. Secondly, it is not as if there are not already sufficient penalties for violating all these provisions of law. Let me read the penalties. The penalties for violating these provisions of law that are referred to in the Durbin amendment read as follows: Impose a civil money penalty ranging from $5,500 to more than $1 million for each day of violation. Does $1 million a day sound like a penalty to you? It does to me. One million dollars a day would have a profound impact on every lender in my hometown in College Station. I don't know about New York, but my guess is no one anywhere would like to give up $1 million a day. Termination of a bank's charter; subject a bank to an enforcement agreement which could include restriction on the ability of the bank to expand and grow--those are very severe penalties--subject directors and officers to removal. Finally, there is the penalty of a temporary or permanent injunction against the illegal activities. It is not as if our truth in lending laws are toothless. The plain truth is, these are some of the more severe monetary penalties that exist in the civil laws of this country. I urge my colleagues to reject this amendment. I ask them to reject it for the following reasons: First, it has nothing to do with the bankruptcy bill. It is an amendment aimed at derailing the bankruptcy bill. I understand being opposed to legislation. From time to time, I have been called upon by my constituents and my conscience to try to derail legislation I thought was bad. I understand that, and I respect it. But I urge my colleagues, whether they are for the bankruptcy bill or not, not to vote for a provision which will be very destructive of home mortgage lending for people who find the greatest difficulty in getting a mortgage; that is, people who don't have established credit or who have troubled credit. The biggest problem of all I save for last, and that is, we wouldn't just drive up the cost of lending with this amendment, where every bank or every lending institution has to realize that a technical error--the failure to notify in writing before they talk to somebody on the phone, or the failure to give a 3-day notice, any one of these errors--could mean the loan is uncollectible. What do you think that is going to mean? It is going to mean that thousands of lenders are going to get out of the subprime lending area exactly at the moment in history when more and more lenders are getting into it. When they get into it, rates come down; when they get out of it, rates go up. Anybody who ever took freshman economics could understand that. Thousands of lending institutions in America are going to look at the Durbin amendment and realize that an error--and it is not required that they intended to commit the violation; there is no provision in the amendment that there be intent, but just an error that is somewhat material, such as notifying 2 days ahead of time instead of 3 days ahead of time what is going to be in a closing, for example--makes the loan uncollectible. And when that happens, thousands of lenders who are lending today to people with troubled credit, giving them an opportunity to own a home, clean up their credit record and become part of mainstream America, are going to quit lending. Nobody with good sense can argue otherwise. If I were running a little bank in College Station, and I could have a loan made uncollectible because of an error I made where there was no intention to make the error, I would stop making those kinds of loans. There are plenty of prime loans that can be made to people with good credit. The second thing that is going to happen is, even the financial institutions that can afford to incur these risks are going to charge higher interest rates because the risk has to be incurred. What is the net result of the Durbin amendment, if it were adopted? The net result is fewer institutions will be making subprime loans, fewer Americans with no established credit or with troubled credit will be able to get mortgages, and when they do, there will be higher costs to get those mortgages. That is what this amendment is about. Finally, let me address the vast majority of Members of the Senate who are for the bankruptcy bill. This amendment is not going to become law. If this amendment is adopted, we are going to have a conference, and we are going to have to go through this long process which could end up derailing the bankruptcy bill. I am sure many people who are for this amendment hope that happens. My guess is we can fix it but only after a tremendous amount of work. In addition, we voted on this very amendment when we considered this bill last year, and we rejected it. We have written many provisions into the bill to try to satisfy those who really blame lenders for bankruptcy instead of borrowers, some of which are not good public policy. However, in terms of trying to satisfy people, which is necessary to pass a big bill such as this, as chairman of the Banking Committee, I have tried to reach an accommodation. This amendment, A, is dangerous; B, it would hurt people who want to own their own homes; C, it will mean we will have a lot more bad amendments offered that won't be offered if we reject this amendment. It is my understanding that Senator Hatch or Senator Grassley intends to move to table this amendment. I urge my colleagues to look at this amendment very carefully, look at the points I have made, and reject this amendment. I yield the floor.

Mr. GRAMM. I think I can do it in 10 minutes.

Mr. GRAMM. Could we divide the time so the Senator would have his time and I would have mine? I sense that the Senator is somewhat caught up in this and would like to speak. And I want to be sure I get the opportunity.

Mr. GRAMM

Mr. GRAMM. Mr. President, in accordance with Rule XXVI.2. of the Standing Rules of the Senate, I submit for publication in the Record the rules of the Committee on Banking, Housing, and Urban Affairs, as unanimously adopted the committee this morning. I present these rules, as well as the text of a Memorandum of Understanding entered into by Senator Sarbanes, the ranking member of the committee, and myself, for inclusion in the Record. While the Memorandum of Understanding is not a part of the committee rules, it is a mutual statement of the manner in which the committee will conduct its affairs for the best interests of all of the members of the committee and of the Senate. I ask unanimous consent that the text of the committee rules and of the Memorandum of Understanding be printed in the Record.

Mr. GRAMM

Mr. GRAMM. Mr. President, I am honored to be an original cosponsor of legislation to memorialize our friend, Senator Paul Coverdell. Paul served the citizens of the State of Georgia and the United States for over three decades as a State legislator, Peace Corps director, and U.S. Senator. I believe that this bill is a fitting and appropriate way to memorialize Paul and his work. This legislation has three components. The bill names the Washington headquarters of the Peace Corps after Paul Coverdell. The legislation reaffirms language approved at the end of last year to ensue that the Peace Corps' World Wise Schools program will carry his name as well. Paul created the program during his tenure as Peace Corps director. The World Wise Schools initiative links Peace Corps volunteers serving around the globe with classrooms here in the United States. Paul correctly saw that such an effort would promote cultural awareness and foster an appreciation for global connections. Finally, the legislation authorizes an appropriation of $10 million, to be augmented by $30 million of state and private funds, to construct the Paul D. Coverdell Building for Biomedical and Health Sciences at the University of Georgia. Paul Coverdell was a tireless supporter of education in Georgia, and this building will be a living memorial to him and an unparalleled resource for the students, researchers, and educators of his State and our Nation. The legislation consists of measures agreed upon by a bipartisan group of Senators assigned by Senator Lott and Daschle to review the many worthy ideas proposed to honor Paul. After considering many suggestions, Senators Harry Reid, Zell Miller, Mike DeWine, and I agreed on the three provisions included in the legislation which has today been introduced by the majority leader and passed by the Senate. I believe that there can be no more fitting tribute to Paul and to all he achieved for the people of Georgia and the country that he loved and served until the day he died.

Mr. GRAMM

Mr. GRAMM. I yield that time to my dear colleague.

Mr. GRAMM. Mr. President, I have to say that as I listen to this organized campaign against John Ashcroft, I sometimes wonder if there is not an effort to make the love of traditional values a hate crime in America. Fifty years ago, a person who set out to engage in public service might unfairly be criticized for not being a member of a church or not professing religion, but who would have thought 50 years later that a man would be mocked for holding a deeply held faith? Who would have thought 50 years later that calling on the Almighty to help you fulfill trusts that were given to you by your State and your Nation would be held up to ridicule? The plain truth is, we may have ``In God We Trust'' on our coins, but we do not have it in our heart. As I have looked at this caricature that has been created, that his opponents claim is John Ashcroft, this is not the man I know. This is not the man with whom I have worked for 6 years. This is not the man whose son attended college with my son. This is not the man who, in public or private in 6 years, I never heard say a mean word against anyone. This is not the man who, remarkably, in my opinion, can express himself without ever using profanity. I hear him criticized for opposing judges with no good reason, and yet in the case of Judge White he was opposed by 77 sheriffs in the State. He was opposed by both Senators, and he was opposed and rejected by the Senate on an up-or-down vote. In short, when I look at all of these criticisms, and when I weigh them against the bottom line facts, there is no basis for them at all. I thank Jon Kyl and I thank Jeff Sessions for the excellent job they have done in putting out the facts. A person who fits the ugly caricature that has been presented here in the Senate and around the country could not be the John Ashcroft I know. A person who fit that ugly caricature could not have been elected Attorney General twice in the State of Missouri. A person fitting that caricature would not have been chosen by his fellow attorneys general to be the president of the National Association of Attorneys General. A person who fit the ugly caricature presented here could not have been elected Governor of Missouri twice, and would not and could not have been chosen by his 49 fellow Governors to head the National Governors' Association. I know George Bush. I have a pretty good idea what is in his mind and in his heart. And a person who met this ugly caricature that we hear could not and would not have been nominated by George Bush. The plain truth is that John Ashcroft is probably the most qualified person ever to be appointed Attorney General. I want to conclude with this thought. I am beginning to wonder if this was all an effort to smear and defeat John Ashcroft or whether this was an effort to cow John Ashcroft; whether this is an effort by those who lost the election, who hold views that are alien to the views of most Americans, to try, through smearing John Ashcroft, to cow him in office, and in the process prevent him from carrying out George Bush's agenda. I want to say I vote for John Ashcroft with the happy knowledge that that effort will fail. I yield the floor.

Mr. GRAMM

Mr. GRAMM. Mr. President, today I am joined by Senator Schumer, together with Senators Hagel, Enzi, Bennett, Bunning, Bond, Torricelli, Allard, and Crapo in introducing the Competitive Market Supervision Act of 2001. This important legislation will reduce the excess fees collected by the Securities and Exchange Commission (SEC). At the same time, the legislation will guarantee that the SEC is fully funded by fee collections, allowing fee adjustments to meet appropriated amounts. This legislation, moreover, will level unaffected the funds available for appropriations purposes by walling off the offsetting fee collections that are expected under current law. Under current budget estimates, this legislation will result in a reduction of fee collections by more than $1 billion in the first year and by about $8 billion over the next 5 years. A second key element of the bill is that it will extend to the SEC the same salary authority for its employees as is exercised by the Federal banking agencies. A similar bill, S. 2107, which included the identical provisions of the bill I am introducing today, was approved by the Senate Banking, Housing, and Urban Affairs Committee last year. reduction of securities user fees The original objective of the user fees collected by the Commission was to provide a funding source for the agency's operations. However, increases in stock market volume and valuation have spawned revenues that far surpass what is needed to operate the agency. In fiscal year 2000, to fund a budget of $375 million, the SEC collected $2.27 billion. According to the most recent Congressional Budget Office (CBO) projections, the savings to investors and issuers from this legislation will be approximately $8 billion over 5 years, and nearly $14 billion over ten years, without reducing funds available for the SEC or for necessary appropriations. Rather than user fees, these revenues have become taxes on savings and investment, taxes that lower the returns of every investor who buys stock, owns a mutual fund, or plans to use Individual Retirement Accounts, 401(k) plans, or pensions to fund retirement. Furthermore, excess Section 6(b) fees are particularly harmful since these taxes are imposed at the beginning of the investment cycle, subtracting from the economy monies that could be leveraged into several times their value to finance efforts to create jobs, develop new products, and build America. Section 2 of the bill amends Section 6(b) of the Securities Act of 1933 to lower registration fee rates. In addition, this section eliminates the general revenue portion of the registration fee. The offsetting collection rate is set at $67 per $1 million of securities registered for FY 2002-06, and at $33 per $1 million for FY 2007 and thereafter. Section 3 reduces merger and tender fee rates in Section 13(e)(3) and Section 14(g) of the Securities Exchange Act of 1934 from one fiftieth percent under current law to $67 per $1 million of securities involved for the period FY 2002-06, and reduces rates further to $33 per $1 million for FY 2007 and thereafter, and all fees are also reclassified from general revenues to offsetting collections. It is important to harmonize the fee registration, and merger and tender fee rates so as to provide no distortions or inject any unintended incentives into the managerial decision as to when a merger should occur. Under Section 4, all transactions included in Section 31 of the Securities Exchange Act of 1934 are consolidated, with the same fee rate applied to each as an offsetting collection. Transaction fees in any particular fiscal year will be set in appropriations acts at a rate estimated to collect the target dollar amount set in Section 4 for that year. The target dollar amount is calculated to approximate the amount of transaction fees required so that, when combined with anticipated registration and merger/tender fees, total offsetting collections will approximately equal the offsetting collections anticipated under current law. If the most recent projections prove accurate, this will reduce transaction fee rates by as much as two-thirds. I would note that the fee targets established under Section 4 are based upon the most recent budget estimates available. It is my intention to adjust those targets prior to Committee action on the bill as new budget estimates become available in the next few weeks. authority of sec to adjust to fee rates Given the difficulty in predicting fee revenues, it is also important to provide a framework that ensures full funding for the SEC. Therefore, Section 5 of this legislation provides the Commission with the authority to adjust fee rates to ensure that the agency is fully funded in the event that reductions in market valuations or volume produce revenues below the legislated targets. In addition, Section 5 requires the agency to lower fee rates when fees are projected to bring in revenues that are in excess of the cap on fee collections laid out in the bill. To provide a safeguard against misuse of the authority granted in Section 5, the legislation requires the agency to report to Congress before it exercises any authority to adjust fees. sec pay comparability Section 6 of the bill amends the Securities Exchange Act of 1934 to extend to the SEC the same authority provided to the federal bank regulators to adjust base rates of compensation for all of its employees. Under existing law, the Commission may do this only for its economists. The provisions allow parity among the Commission and Federal banking agency compensation programs. This change is particularly timely since under the terms of the Gramm-Leach-Bliley Act, in many institutions, examiners from the SEC will be working along side examiners from the federal banking regulators. Without this pay comparability, we could witness a drain of talent from the SEC toward the other examiners. An amendment also is made to the Federal Deposit Insurance Act to bring the SEC within the consultation and information- sharing requirements of other agencies mentioned at 12 U.S.C. 1833b with respect to rates of employee compensation. A further technical amendment to section 1833b deletes references to entities that have been abolished. The legislation assures that reductions, if any, in the base pay of a Commission employee represented by a labor organization with exclusive recognition in accordance with Chapter 71 of Title 5 of the United States Code, result from negotiations between such organization and Commission management, rather than by reason of the enactment of this amendment. Mr. President, I look forward to early and favorable consideration of the Competitive Market Supervision Act of 2001. I ask that a summary of the provisions of the bill and bill text be included in the Record.

Mr. GRAMM

Mr. GRAMM. Mr. President, trade has been very good for America and her people. Trade is our game, and we excel at it. In 1999, Americans exported a record $956 billion in goods and services. No other country even came close. Trade has brought untold benefits to our people not the least of which are high-paying jobs, increased consumer choice, increased economic competitiveness. When Pericles spoke of Athens in his Funeral Oration, he might well have been speaking of us: ``The magnitude of our city draws the produce of the world into our harbor, so that to the Athenian the fruits of other countries are as familiar a luxury as those of his own.'' Those who peddle defeatism as they clamor for protectionist measures are subverting our best means of growth. As President Reagan warmed in 1988, ``protectionism is destructionism.'' Let me point out to my colleagues that it is not just the United States that profits. The whole world has benefitted from the expansion of trade among nations. Trade has been a wealth-generating machine the likes of which the world has never seen. By committing ourselves to an open world trade system, the US and its partners unleashed increasing economic growth and prosperity and brought hope and freedom to more people than any victory in any war in history. It is no wonder that the world trading system we know of as the WTO--formerly the GATT--has gone from a handful of nations in 1948 to some 140 nations today. My fervent goal has been to keep world trade expanding so that more people in more nations can enjoy what Pericles aptly called the ``fruits'' of trade. We in America have been at the vanguard of trade liberalization efforts, both globally and regionally. We must continue that trend. Unfortunately, over recent years this nation has slid into an unwise hiatus in moving new global or regional trade liberalization initiatives. But this year, with a new President, committed to trade, we have a new opportunity before us. Now is the time for us to reassert our leadership, to set the pace for trade expansion throughout our hemisphere and throughout the world. Today I am introducing four pieces of legislation intended to get us started. The first bill, the Fast-Track Trade Negotiating Authority Act, would provide the President with much-needed fast track authority, so that he may expand trade by entering into trade agreements with our partners around the world. Fast track is key to unleashing the wealth- generating machine of trade still further, to all corners of the world. It is long past time to reauthorize this critical provision. The second measure, the Americas Free Trade Act, would lead to the extension of free trade from Alaska to Cape Horn in our own hemisphere. It would provide the President with fast track authority for implementation of free trade agreements with any or all of the 33 other nations of the Western Hemisphere, for the benefit of its more than 800 million residents. According to the 1994 agreement among the leaders of the Western Hemisphere, the Free Trade Agreement of the Americas should be concluded by 2005. Having fast track authority in hand will give our President the ability to move the FTAA talks forward dramatically and successfully. Both the third bill, the Chile NAFTA Accession Act, and the fourth bill, the United Kingdom NAFTA Accession Act, seek to build bridges with key trading partners in order to spur larger trade liberalization efforts. Chile is a critical trading partner in South America who has been knocking at the NAFTA door for some time. The United Kingdom is a key partner in Western Europe who by joining NAFTA can help keep Europe from erecting protectionist walls against the rest of the world. Agreements with these two important nations can keep trade liberalization moving forward. Mr. President, my commitment to this cause is longstanding. In 1986 I introduced legislation to begin negotiations for a free trade agreement with Mexico. In 1987, I introduced a bill that laid out a framework for negotiating a North American free trade area--a bill which later served as the basis for an amendment I offered to the 1988 trade bill and adopted by the Senate that authorized the negotiation of the NAFTA. In 1989, I once again introduced trade legislation and called for a free agreement encompassing the entire Western Hemisphere. I have introduced similar legislation in each Congress since then. It is my hope that the bills I am introducing today will serve as the basis for successful trade legislation in the 107th Congress. I ask unanimous consent that the text of the Fast Track Trade Negotiating Authority Act, the Americas Free Trade Act, the Chile NAFTA Accession Act, and the United Kingdom NAFTA Accession Act, together with a summary of these bills, be printed in the Record.

Mr. GRAMM

Mr. GRAMM. Mr. President, trade has been very good for America and her people. Trade is our game, and we excel at it. In 1999, Americans exported a record $956 billion in goods and services. No other country even came close. Trade has brought untold benefits to our people not the least of which are high-paying jobs, increased consumer choice, increased economic competitiveness. When Pericles spoke of Athens in his Funeral Oration, he might well have been speaking of us: ``The magnitude of our city draws the produce of the world into our harbor, so that to the Athenian the fruits of other countries are as familiar a luxury as those of his own.'' Those who peddle defeatism as they clamor for protectionist measures are subverting our best means of growth. As President Reagan warmed in 1988, ``protectionism is destructionism.'' Let me point out to my colleagues that it is not just the United States that profits. The whole world has benefitted from the expansion of trade among nations. Trade has been a wealth-generating machine the likes of which the world has never seen. By committing ourselves to an open world trade system, the US and its partners unleashed increasing economic growth and prosperity and brought hope and freedom to more people than any victory in any war in history. It is no wonder that the world trading system we know of as the WTO--formerly the GATT--has gone from a handful of nations in 1948 to some 140 nations today. My fervent goal has been to keep world trade expanding so that more people in more nations can enjoy what Pericles aptly called the ``fruits'' of trade. We in America have been at the vanguard of trade liberalization efforts, both globally and regionally. We must continue that trend. Unfortunately, over recent years this nation has slid into an unwise hiatus in moving new global or regional trade liberalization initiatives. But this year, with a new President, committed to trade, we have a new opportunity before us. Now is the time for us to reassert our leadership, to set the pace for trade expansion throughout our hemisphere and throughout the world. Today I am introducing four pieces of legislation intended to get us started. The first bill, the Fast-Track Trade Negotiating Authority Act, would provide the President with much-needed fast track authority, so that he may expand trade by entering into trade agreements with our partners around the world. Fast track is key to unleashing the wealth- generating machine of trade still further, to all corners of the world. It is long past time to reauthorize this critical provision. The second measure, the Americas Free Trade Act, would lead to the extension of free trade from Alaska to Cape Horn in our own hemisphere. It would provide the President with fast track authority for implementation of free trade agreements with any or all of the 33 other nations of the Western Hemisphere, for the benefit of its more than 800 million residents. According to the 1994 agreement among the leaders of the Western Hemisphere, the Free Trade Agreement of the Americas should be concluded by 2005. Having fast track authority in hand will give our President the ability to move the FTAA talks forward dramatically and successfully. Both the third bill, the Chile NAFTA Accession Act, and the fourth bill, the United Kingdom NAFTA Accession Act, seek to build bridges with key trading partners in order to spur larger trade liberalization efforts. Chile is a critical trading partner in South America who has been knocking at the NAFTA door for some time. The United Kingdom is a key partner in Western Europe who by joining NAFTA can help keep Europe from erecting protectionist walls against the rest of the world. Agreements with these two important nations can keep trade liberalization moving forward. Mr. President, my commitment to this cause is longstanding. In 1986 I introduced legislation to begin negotiations for a free trade agreement with Mexico. In 1987, I introduced a bill that laid out a framework for negotiating a North American free trade area--a bill which later served as the basis for an amendment I offered to the 1988 trade bill and adopted by the Senate that authorized the negotiation of the NAFTA. In 1989, I once again introduced trade legislation and called for a free agreement encompassing the entire Western Hemisphere. I have introduced similar legislation in each Congress since then. It is my hope that the bills I am introducing today will serve as the basis for successful trade legislation in the 107th Congress. I ask unanimous consent that the text of the Fast Track Trade Negotiating Authority Act, the Americas Free Trade Act, the Chile NAFTA Accession Act, and the United Kingdom NAFTA Accession Act, together with a summary of these bills, be printed in the Record.

Mr. GRAMM. Mr. President, today I am joined by Senator Schumer, together with Senators Hagel, Enzi, Bennett, Bunning, Bond, Torricelli, Allard, and Crapo in introducing the Competitive Market Supervision Act of 2001. This important legislation will reduce the excess fees collected by the Securities and Exchange Commission (SEC). At the same time, the legislation will guarantee that the SEC is fully funded by fee collections, allowing fee adjustments to meet appropriated amounts. This legislation, moreover, will level unaffected the funds available for appropriations purposes by walling off the offsetting fee collections that are expected under current law. Under current budget estimates, this legislation will result in a reduction of fee collections by more than $1 billion in the first year and by about $8 billion over the next 5 years. A second key element of the bill is that it will extend to the SEC the same salary authority for its employees as is exercised by the Federal banking agencies. A similar bill, S. 2107, which included the identical provisions of the bill I am introducing today, was approved by the Senate Banking, Housing, and Urban Affairs Committee last year. reduction of securities user fees The original objective of the user fees collected by the Commission was to provide a funding source for the agency's operations. However, increases in stock market volume and valuation have spawned revenues that far surpass what is needed to operate the agency. In fiscal year 2000, to fund a budget of $375 million, the SEC collected $2.27 billion. According to the most recent Congressional Budget Office (CBO) projections, the savings to investors and issuers from this legislation will be approximately $8 billion over 5 years, and nearly $14 billion over ten years, without reducing funds available for the SEC or for necessary appropriations. Rather than user fees, these revenues have become taxes on savings and investment, taxes that lower the returns of every investor who buys stock, owns a mutual fund, or plans to use Individual Retirement Accounts, 401(k) plans, or pensions to fund retirement. Furthermore, excess Section 6(b) fees are particularly harmful since these taxes are imposed at the beginning of the investment cycle, subtracting from the economy monies that could be leveraged into several times their value to finance efforts to create jobs, develop new products, and build America. Section 2 of the bill amends Section 6(b) of the Securities Act of 1933 to lower registration fee rates. In addition, this section eliminates the general revenue portion of the registration fee. The offsetting collection rate is set at $67 per $1 million of securities registered for FY 2002-06, and at $33 per $1 million for FY 2007 and thereafter. Section 3 reduces merger and tender fee rates in Section 13(e)(3) and Section 14(g) of the Securities Exchange Act of 1934 from one fiftieth percent under current law to $67 per $1 million of securities involved for the period FY 2002-06, and reduces rates further to $33 per $1 million for FY 2007 and thereafter, and all fees are also reclassified from general revenues to offsetting collections. It is important to harmonize the fee registration, and merger and tender fee rates so as to provide no distortions or inject any unintended incentives into the managerial decision as to when a merger should occur. Under Section 4, all transactions included in Section 31 of the Securities Exchange Act of 1934 are consolidated, with the same fee rate applied to each as an offsetting collection. Transaction fees in any particular fiscal year will be set in appropriations acts at a rate estimated to collect the target dollar amount set in Section 4 for that year. The target dollar amount is calculated to approximate the amount of transaction fees required so that, when combined with anticipated registration and merger/tender fees, total offsetting collections will approximately equal the offsetting collections anticipated under current law. If the most recent projections prove accurate, this will reduce transaction fee rates by as much as two-thirds. I would note that the fee targets established under Section 4 are based upon the most recent budget estimates available. It is my intention to adjust those targets prior to Committee action on the bill as new budget estimates become available in the next few weeks. authority of sec to adjust to fee rates Given the difficulty in predicting fee revenues, it is also important to provide a framework that ensures full funding for the SEC. Therefore, Section 5 of this legislation provides the Commission with the authority to adjust fee rates to ensure that the agency is fully funded in the event that reductions in market valuations or volume produce revenues below the legislated targets. In addition, Section 5 requires the agency to lower fee rates when fees are projected to bring in revenues that are in excess of the cap on fee collections laid out in the bill. To provide a safeguard against misuse of the authority granted in Section 5, the legislation requires the agency to report to Congress before it exercises any authority to adjust fees. sec pay comparability Section 6 of the bill amends the Securities Exchange Act of 1934 to extend to the SEC the same authority provided to the federal bank regulators to adjust base rates of compensation for all of its employees. Under existing law, the Commission may do this only for its economists. The provisions allow parity among the Commission and Federal banking agency compensation programs. This change is particularly timely since under the terms of the Gramm-Leach-Bliley Act, in many institutions, examiners from the SEC will be working along side examiners from the federal banking regulators. Without this pay comparability, we could witness a drain of talent from the SEC toward the other examiners. An amendment also is made to the Federal Deposit Insurance Act to bring the SEC within the consultation and information- sharing requirements of other agencies mentioned at 12 U.S.C. 1833b with respect to rates of employee compensation. A further technical amendment to section 1833b deletes references to entities that have been abolished. The legislation assures that reductions, if any, in the base pay of a Commission employee represented by a labor organization with exclusive recognition in accordance with Chapter 71 of Title 5 of the United States Code, result from negotiations between such organization and Commission management, rather than by reason of the enactment of this amendment. Mr. President, I look forward to early and favorable consideration of the Competitive Market Supervision Act of 2001. I ask that a summary of the provisions of the bill and bill text be included in the Record.

Mr. GRAMM. Mr. President, on behalf of Senators Hutchison, Bingaman, Domenici, Kyl, McCain, and Boxer, I am introducing legislation today which will authorize the United States Customs Service to acquire the necessary personnel and technology to reduce delays at our border crossings with Mexico and Canada to no more than 20 minutes, while strengthening our commitment to interdict illegal narcotics and other contraband. This bill represents the progress that we made in this regard in the last Congress, and it builds on efforts that we first initiated in the 105th Congress. This legislation passed the Senate unanimously on August 5, 1999, and a similar bill passed the House of Representatives on May 25, 1999, by a vote of 410-2. In addition to the resources dedicated to our nation's land borders, this bill also incorporates the efforts of Senators Grassley and Graham in adding resources for interdiction efforts in the air and along our coastline, provisions that were passed by the Senate in last year's bill. I am very concerned about the impact of narcotics trafficking on Texas and the nation and have worked closely with federal and state law enforcement officials to identify and secure the necessary resources to battle the onslaught of illegal drugs. At the same time, however, our current enforcement strategy is burdened by insufficient staffing, a gross underuse of vital interdiction technology, and is effectively closing the door to legitimate trade. At a time when NAFTA and the expanding world marketplace are making it possible for us to create more commerce, freedom and opportunity for people on both sides of the border, it is important that we eliminate the border crossing delays that are stifling these goals. In order for all Americans to fully enjoy the benefits of growing trade with Mexico and Canada, we must ensure that the Customs Service has the resources necessary to accomplish its mission. Customs inspections should not be obstacles to legitimate trade and commerce. Customs staffing needs to be increased significantly to facilitate the flow of substantially increased traffic on both the Southwestern and Northern borders, and these additional personnel need the modern technology that will allow them to inspect more cargo, more efficiently. The practical effect of these increases will be to open all the existing primary inspection lanes where congestion is a problem during peak hours and to enhance investigative capabilities on the Southwest border. Long traffic lines at our international crossings are counterproductive to improving our trade relationship with Mexico and Canada. This bill is designed to shorten those lines and promote legitimate commerce, while providing the customs Service with the means necessary to tackle the drug trafficking operations that are now rampant along the 1,200-mile border that my State shares with Mexico. I will be speaking further to my colleagues about this initiative and urge their support for this bill.

Mr. GRAMM. Mr. President, along with Senator Kay Bailey Hutchison, I am introducing legislation today which will ensure that active duty military personnel and their dependents will never lose their right to vote in Federal, State, and local elections. The Military Voting Rights Act of 2001 will guarantee that those men and women who protect our freedom are not denied one of the basic rights upon which that freedom is based. I initially introduced this legislation in response to an outrageous case in my home state of Texas in which a federal district court, in a suit brought under federal law and supported by federal tax dollars, threw out 800 absentee ballots cast by military personnel in two closely-contested local elections in Val Verde County. While a state court ultimately restored the military votes, the case clearly demonstrated that military personnel who are away from their legal residence on official orders are at risk of losing their right to vote. In fact, based upon current statistics compiled by the Congressional Research Service and the Department of Defense, over 40 percent of our troops on active duty are residents of states that have no specific legislative provisions protecting their fundamental right to vote in state and local elections. As the Val Verde County case demonstrates, absent specific legislative protection, valid absentee votes cast by military personnel will be ripe targets for attack by those seeking to overturn the results of close elections. I find it unconscionable that American military personnel, who stand ready to fight and die for our nation, risk losing their right to vote as a consequence of their military service. To protect our military personnel from any such injustice, I again introduce this legislation in the Senate and ask my colleagues to support its immediate passage. Those Americans who volunteer to protect our freedom by serving in our Armed Forces should not be denied the right to vote in any election. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAMM

Mr. GRAMM. Mr. President, along with Senator Kay Bailey Hutchison, I am introducing legislation today which will ensure that active duty military personnel and their dependents will never lose their right to vote in Federal, State, and local elections. The Military Voting Rights Act of 2001 will guarantee that those men and women who protect our freedom are not denied one of the basic rights upon which that freedom is based. I initially introduced this legislation in response to an outrageous case in my home state of Texas in which a federal district court, in a suit brought under federal law and supported by federal tax dollars, threw out 800 absentee ballots cast by military personnel in two closely-contested local elections in Val Verde County. While a state court ultimately restored the military votes, the case clearly demonstrated that military personnel who are away from their legal residence on official orders are at risk of losing their right to vote. In fact, based upon current statistics compiled by the Congressional Research Service and the Department of Defense, over 40 percent of our troops on active duty are residents of states that have no specific legislative provisions protecting their fundamental right to vote in state and local elections. As the Val Verde County case demonstrates, absent specific legislative protection, valid absentee votes cast by military personnel will be ripe targets for attack by those seeking to overturn the results of close elections. I find it unconscionable that American military personnel, who stand ready to fight and die for our nation, risk losing their right to vote as a consequence of their military service. To protect our military personnel from any such injustice, I again introduce this legislation in the Senate and ask my colleagues to support its immediate passage. Those Americans who volunteer to protect our freedom by serving in our Armed Forces should not be denied the right to vote in any election. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAMM

Mr. GRAMM. Mr. President, on behalf of Senators Hutchison, Bingaman, Domenici, Kyl, McCain, and Boxer, I am introducing legislation today which will authorize the United States Customs Service to acquire the necessary personnel and technology to reduce delays at our border crossings with Mexico and Canada to no more than 20 minutes, while strengthening our commitment to interdict illegal narcotics and other contraband. This bill represents the progress that we made in this regard in the last Congress, and it builds on efforts that we first initiated in the 105th Congress. This legislation passed the Senate unanimously on August 5, 1999, and a similar bill passed the House of Representatives on May 25, 1999, by a vote of 410-2. In addition to the resources dedicated to our nation's land borders, this bill also incorporates the efforts of Senators Grassley and Graham in adding resources for interdiction efforts in the air and along our coastline, provisions that were passed by the Senate in last year's bill. I am very concerned about the impact of narcotics trafficking on Texas and the nation and have worked closely with federal and state law enforcement officials to identify and secure the necessary resources to battle the onslaught of illegal drugs. At the same time, however, our current enforcement strategy is burdened by insufficient staffing, a gross underuse of vital interdiction technology, and is effectively closing the door to legitimate trade. At a time when NAFTA and the expanding world marketplace are making it possible for us to create more commerce, freedom and opportunity for people on both sides of the border, it is important that we eliminate the border crossing delays that are stifling these goals. In order for all Americans to fully enjoy the benefits of growing trade with Mexico and Canada, we must ensure that the Customs Service has the resources necessary to accomplish its mission. Customs inspections should not be obstacles to legitimate trade and commerce. Customs staffing needs to be increased significantly to facilitate the flow of substantially increased traffic on both the Southwestern and Northern borders, and these additional personnel need the modern technology that will allow them to inspect more cargo, more efficiently. The practical effect of these increases will be to open all the existing primary inspection lanes where congestion is a problem during peak hours and to enhance investigative capabilities on the Southwest border. Long traffic lines at our international crossings are counterproductive to improving our trade relationship with Mexico and Canada. This bill is designed to shorten those lines and promote legitimate commerce, while providing the customs Service with the means necessary to tackle the drug trafficking operations that are now rampant along the 1,200-mile border that my State shares with Mexico. I will be speaking further to my colleagues about this initiative and urge their support for this bill.

Mr. GRAMM

Mr. GRAMM. That was the deciding vote.

Mr. GRAMM

Mr. GRAMM. Ten.

Mr. GRAMM. Mr. President, I begin by congratulating our two leaders. I personally have deep concerns about this agreement and its workability, but I begin my statement today by saying I intend to support it. I intend to do everything in my power to make it work. I want to make a pledge to myself and my colleagues that I hope others will make, at least to themselves. If it fails, it won't be because of me. I will try to explain my concerns in the few minutes that I have. First of all, when it became clear that we had the extraordinary result of an equal number of Members in both parties, I sought direction from the ultimate source of direction in the American democracy by turning to the Constitution. As Senator Lott has already pointed out, the founders so long ago, in a world so different than our own, not only thought about this potential but they wrote it into article I, section 3 of the Constitution. In fact, they didn't wait very long in writing the Constitution to put it in. In section 1 of article I they give exclusive legislative powers to Congress. In section 2, they establish the House of Representatives. In section 3, they establish the Senate. Then they turn to exactly this question: ``The Vice President of the United States shall be President of the Senate''--the only responsibility given to the Vice President in the Constitution of the United States. Then they give him his only delegated power other than the power of succession in the event of death. That power is, ``but shall have no Vote, unless they be equally divided.'' My basic response in following the Constitution as a guide is that we have reached exactly the situation that the founders recognized in writing the Constitution. We do not have 50 Members of the Senate who are Democrats and 50 who are Republicans. We have reached section 3 of article I of the Constitution in terms of American history, and the Vice President of the United States, with the Senate equally divided, casts the deciding vote. My reaction, in looking at this provision of the Constitution, was that we have a Republican majority, that we have 51 Republicans and 50 Democrats. It is awfully easy to say it when the new Vice President is a Republican, but let me make it clear: If the new Vice President were a Democrat, I would expect the Democrats to be the majority in the Senate. I personally would have never contemplated that they would not have a majority on each of the committees because they would have the responsibility under the Constitution for governing. We have made a decision to go in the other direction. I have said that I will support it and I will do my part in making it work. But let me tell you what my concern is about it. If there is anything that we learn as we live and have experience, it is that the old adage about never giving someone responsibility without giving them authority is a valid adage. That is my concern about this agreement, even though I hope it does represent a reaching across the aisle, I hope it does bring in an era of bipartisanship. I am sure people back home do not understand why it is not so easy for us to get together. I have disagreements with Senator Byrd, not because I don't love Senator Byrd, not because I don't admire Senator Byrd, and not because Senator Byrd is a Democrat and I am a Republican. I have differences with Senator Byrd from time to time because we have a different vision of what we want America to be. We have a different conception of the problems we face. Jefferson said: Good men with the same facts are prone to disagree. My concern is that we may very well, in this process, be guaranteeing gridlock by giving just the responsibility to one party which clearly, under the Constitution, Republicans now have. Come the 20th, our leader will be called ``majority leader.'' I will be the chairman of the Banking Committee. Senator Domenici will be the chairman of the Budget Committee. My concern is that we should not separate responsibility from authority. I am reminded, in concluding my remarks, of the Biblical story, as Senator Byrd and I am sure everyone will remember, about the two ladies who brought a baby before Solomon and contested about whose baby it was. Now, Solomon could have decided: The solution here is an equal division. He could have cut the baby in half. But Solomon decided that was not right to divide the baby and fortunately, with his great wisdom, he figured out how to determine who was the real mother by feigning to cut the real baby in half in which case the real mother said: No, let her have it. Solomon, with his great wisdom, having determined the real mother, gave her the child. I hope that by separating responsibility and authority we have not cut the baby in half here today. I hope we can make this work. I think it is in the interests of the Nation that it work. Bipartisanship is a wonderful thing, and we have had it on many issues. Senator Byrd and I worked together on the highway bill, and every time I ride on one of our new highways in Texas, I rejoice that we got together and made the Federal Government stop stealing money out of the highway trust fund, and we spent the money building new highways in America so when people pay gasoline taxes, sure enough, the money goes for the purpose they are told it goes. There have been many great bipartisan actions taken by Congress. But there are times when there are differences, not because one party is good and the other party is bad or one party is right and one party is wrong--but because there are fundamental differences. When those occasions arise, we are going to have to work very hard to make this system work. I intend to try to make it work. I think we can make it work. I believe we are going to pass the President's tax bill, for example. I think it is going to get an overwhelming vote in the end. But I would say that under this system it is going to be a lot harder to make the Senate work. So in this joy from bipartisanship, I hope we are all committed to rolling up our sleeves and engaging in the extra effort that this is going to take. I commit today that I am, and I yield the floor.

Mr. GRAMM

Mr. GRAMM. Mr. President, today I join with Senator Lugar, Chairman of the Senate Agriculture Committee, and several others of our colleagues to introduce the Commodity Futures Modernization Act of 2000. The formal purpose of this legislation is to reauthorize the Commodity Exchange Act, the legal authority for the Commodity Futures Trading Commission. As important as that is, this legislation does far more. This is a landmark bill that addresses the two major purposes that Senator Lugar and I set out to achieve when we first began discussing this legislation. First of all, this bill would repeal the so-called Shad-Johnson Accord, the 18-year-old temporary prohibition on the trading of futures based on individual stocks. Second, the bill eliminates the legal uncertainty that today hangs as an ominous cloud over the $60 trillion financial swaps markets. We are introducing the bill today as the finished product of years of work involving half a dozen committees in both Houses of Congress, and as many agencies of the Federal government. This bill is identical to, and is the Senate companion to, H.R. 5660, introduced yesterday in the House and which will be approved by the House and the Senate today. We introduce this bill in the Senate to demonstrate the bicameral authorship and support for this important legislation. For legislative history, I would direct my colleagues to statements made elsewhere in the Record in connection with House and Senate action on the House companion, part of the package of legislation approved together with the Labor HHS appropriations bill for fiscal year 2001. I would take this opportunity to thank Chairman Lugar and all who had a hand in forming this important legislation. All who had a hand in it deserve to be proud of this product.

Mr. GRAMM

Mr. GRAMM. Mr. President, today I am proud to add my voice in support of the Commodity Futures Modernization Act of 2000. This legislation represents the end product of work that began in S. 2697, which Senator Lugar and I introduced on June 8. The Commodity Futures Modernization Act of 2000 completes the work of last year's financial services modernization law, bringing our financial regulation in line with the rapid pace of developments in the global marketplace. The Commodity Futures Modernization Act of 2000 will now allow new and important financial products--single stock futures--to be sold in America. It protects financial institutions from over-regulation, and provides legal certainty for the $60 trillion market in swaps. Significant portions of this legislation, particularly in Titles II, III and IV of the Act, concern issues within the jurisdiction of the Committee on Banking, Housing, and Urban Affairs. Title II establishes the authority and framework for the offering of single stock futures, removing the ban embodied in the so-called Shad- Johnson Accord. I would like to take this opportunity to echo the views expressed by my colleague, Congressman Bliley, Chairman of the Committee on Commerce of the House of Representatives, at the time of House adoption of this bill. It is my understanding that nothing in Title II of H.R. 5660 would (i) authorize any bank or similar institution to engage in any activity or transaction, or hold any asset, that the institution is not authorized to engage in or hold under its chartering or authorizing statute; (ii) authorize depository institutions either to take delivery of equity securities under a single stock future or under any other circumstance, or otherwise to invest in any equity security otherwise prohibited for depository institutions; or (iii) allow a depository institution to use single stock futures to circumvent restrictions in the law on ownership of equity securities under its chartering or authorizing statute. Under Title III of the bill, the SEC is granted new authority to undertake certain enforcement actions in connection with security-based swap agreements. It is important to emphasize that nothing in the title should be read to imply that swap agreements are either securities or futures contracts. To emphasize that point, the definition of a ``swap agreement'' is placed in a neutral statute, the Gramm-Leach-Bliley Act, that is, legislation that is not specifically part of a banking, securities, or commodities law. However, drawing upon the SEC's enforcement experience, the SEC is permitted, on a case-by-case basis, with respect to security-based swap agreements (as defined in the legislation) to take action against fraud, manipulation, and insider trading abuses. Title III makes it clear that the SEC is not to impose regulations on such instruments as prophylactic measures. Banks are already heavily regulated institutions. Further regulatory burden, rather than discouraging wrongdoing, would be more likely to discourage development and innovation, during business overseas instead. The SEC is directed to focus on the wrong doers rather than provide new paperwork burden and regulatory costs on the law abiding investors and financial services providers. For example, the SEC is directed not to require the registration of security-based swap agreements. If a registration statement is submitted to the SEC and accepted by the SEC, the agency is required promptly to notify the registrant of the error, and the registration statement will be null and void. Insider trading provisions of the Securities Exchange Act will be applied to single stock futures transactions as well. Title IV of the Commodity Futures Modernization Act of 2000 contains the Legal Certainty for Bank Products Act of 2000. This title is a free standing provision of law, part of neither the banking statutes not the commodities statutes. The provisions of this title clarify the jurisdictional line between the regulation of banking products and futures products. Under section 403 of Title IV, no provision of the Commodity Exchange Act (CEA) may apply to, and the CFTC is prohibited from exercising regulatory authority with respect to, an ``identified banking product'' if: (1) an appropriate banking agency certifies that the product has been commonly offered, entered into, or provided in the United States by any bank on or before December 5, 2000, and (2) the product was not prohibited by the CEA and was not in fact regulated by the CFTC as a contract of sale of a commodity for future delivery (or an option on such a contract or on a commodity) on or before December 5, 2000. This provision is intended to provide legal certainty for existing banking products so that they can continue to be offered, entered into, or provided by banks without being subject to CFTC regulation. An existing banking product is one that is certified by the appropriate banking regulator as being a product is ``commonly'' offered, entered into, or provided, on or before December 5, 2000, in the U.S. by any bank. To rely upon that test a particular bank would not need to have certified that the particular bank had offered the product. The certification would apply if it or any other bank had offered such a product on or before December 5, 2000. The term ``commonly offered'' means, in effect, that the product was not obscure, or offered only briefly. It is not to be construed to mean that the product must be of a type that is appropriate or suitable for any and all users, since many common bank products are tailored for specific customers, small business loans or low cost checking accounts for seniors being two such examples. New banking products not excluded from the CFTC's jurisdiction under Title IV will be, if indexed to a commodity, subject to a test to determine whether they are predominantly banking products, in which case, the CFTC is precluded from exercising regulatory authority over them. The predominance test is a self test. Banks themselves may apply the factors of the predominance test with respect to the development of new products, without making prior application to any regulator. The predominance test as contained in the law is intended to replace regulatory provisions under the Commodity Exchange Act concerning the application of a predominance test with respect to hybrid instruments. Under the predominance test, a hybrid instrument will be considered to be predominantly a banking product if (1) the issuer of the instrument receives payment in full of the purchase price of the instrument substantially contemporaneously with its delivery, (2) the purchaser or holder of the hybrid is not required to make any payment to the issuer in addition to the purchase price during the life of the instrument or at maturity, (3) the issuer is not subject to mark-to- market margining requirements, and (4) the hybrid is not marketed as a contract of sale of a commodity for future delivery or an option subject to the CEA. If a bank, having applied the predominance test to a new product, determines that the product is predominantly a banking product not subject to CFTC regulation, and the CFTC later challenges the bank's conclusion, the CFTC is still prohibited from exercising regulatory authority over the product unless the Commission obtains the concurrence of the Board of Governors of the Federal Reserve Board (Board). If the Board does not concur in the CFTC's decision, the Board may submit the controversy for determination by the United States Court of Appeals for the District of Columbia Circuit. The CFTC is expected to be circumspect in applying the predominance test. For example, it does not necessarily follow that a hybrid instrument not satisfying the predominance test is inevitably a futures contract subject to CFTC regulation. The CFTC must not interpret normal or traditional banking practices and activities, or prudent actions taken by a bank to maintain safety and soundness, to be hybrid instruments that the CFTC may regulate. For example, a loan made by a bank is an identified banking product under section 206(a)(3) of the Gramm-Leach-Bliley Act. Some may argue that a new loan product offered after December 5, 2000, may be interpreted to be covered by the definition of a hybrid instrument if it has one or payments indexed to the value of, or provides for the delivery of, one or more commodities. However, there would be little justification for the CFTC to construe the pledging of a commodity as collateral for a loan, or that providing that a commodity may be offered as part or full satisfaction of a loan, to be representative of a futures contract over which the CFTC may exert jurisdiction. No such result is contemplated under this legislation. Moreover, the fact that a loan may be renegotiated or sold, or that a loan or other identified banking product may not be held until maturity, is not a violation of the predominance test. These are merely examples of the reasonable interpretations that the CFTC must adhere to when it applies the predominance test for purposes of the statute. The Commodity Futures Modernization Act of 2000 excludes from its coverage agreements, contracts or transactions in an excluded commodity entered into on an electronic trading facility provided that such agreements, contracts or transactions are entered into only by eligible contract participants on a principal-to-principal basis trading for their own accounts. In some cases, a party may enter into an agreement, contact or transaction on an electronic trading facility that mirrors another agreement, contract or transaction entered into at about the same time with a customer. The risk of one transaction may be largely or completely offset by the other; and that may be the purpose for entering into both transactions. But the party entering into both transactions remains liable to each of its counterparties throughout the life of the transaction. That party is similarly exposed to the credit risk of each of its counterparties. The fact that a party has entered into back-to-back transactions as described above does not alter the principal-to-principal nature of each of the transactions and must not be construed to affect the eligibility of either transaction for the electronic trading facility exclusion. Mr. President, enactment of the Commodity Futures Modernization Act of 2000 will be noted as a major achievement by the 106th Congress. Taken together with the Gramm-Leach-Bliley Act, the work of this Congress will be seen as a watershed, where we turned away from the outmoded, Depression-era approach to financial regulation and adopted a framework that will position our financial services industries to be world leaders into the new century.

Mr. GRAMM

Mr. GRAMM. Mr. President, today I join with Senator Lugar, Chairman of the Senate Agriculture Committee, and several others of our colleagues to introduce the Commodity Futures Modernization Act of 2000. The formal purpose of this legislation is to reauthorize the Commodity Exchange Act, the legal authority for the Commodity Futures Trading Commission. As important as that is, this legislation does far more. This is a landmark bill that addresses the two major purposes that Senator Lugar and I set out to achieve when we first began discussing this legislation. First of all, this bill would repeal the so-called Shad-Johnson Accord, the 18-year-old temporary prohibition on the trading of futures based on individual stocks. Second, the bill eliminates the legal uncertainty that today hangs as an ominous cloud over the $60 trillion financial swaps markets. We are introducing the bill today as the finished product of years of work involving half a dozen committees in both Houses of Congress, and as many agencies of the Federal government. This bill is identical to, and is the Senate companion to, H.R. 5660, introduced yesterday in the House and which will be approved by the House and the Senate today. We introduce this bill in the Senate to demonstrate the bicameral authorship and support for this important legislation. For legislative history, I would direct my colleagues to statements made elsewhere in the Record in connection with House and Senate action on the House companion, part of the package of legislation approved together with the Labor HHS appropriations bill for fiscal year 2001. I would take this opportunity to thank Chairman Lugar and all who had a hand in forming this important legislation. All who had a hand in it deserve to be proud of this product.