Rod Grams

Mr. GRAMS

Mr. GRAMS. Mr. President, we are all horrified by the human suffering that we are seeing every day as ethnic Albanians are being forced to flee Kosovo. The scope of this tragedy is overwhelming. Many of the refugees have not only lost their homes and other material possessions--they have been separated from their families and stripped of their identities, as documents were stolen and destroyed. While NATO and the United Nations are trying to manage the refugee crisis, there have been glaring shortcomings in their capacity to help refugees to be reunited with loved ones. I am pleased the United Nations High Commissioner for Refugees (UNHCR) is looking to the private sector for assistance, and that the private sector is generously contributing equipment, funds, and expertise to help ease this horrible situation. UNHCR currently does not have the technological capability to furnish a registration system which could log and issue identification papers to over 400,000 displaced Kosovars who have taken refuge in Albania. So Microsoft, Hewlett-Packard, Compaq, Securit World Ltd, and ScreenCheck B.V., have offered to provide a registration system that will facilitate the distribution of relief supplies and assist in the reunification of family members. Clearly, this effort will make a substantial difference in helping the refugees in Albania to rebuild their lives. While we automatically rely on government agencies to respond to such a crisis, it is encouraging to see companies step up to the plate and volunteer assistance they can provide faster and more efficiently than the public sector. This kind of private sector involvement should serve as an example for other companies to follow.

Mr. GRAMS

Mr. GRAMS. Mr. President, I rise today to honor those police officers who devotedly and selflessly work to protect and serve the public on a daily basis. I also pay special tribute to those men and women who have given their lives in the line of duty. According to the Federal Bureau of Investigation data, 138 law enforcement officers lost their lives while protecting our communities across America in 1998. Of this total, 61 law enforcement officers were slain in the line of duty. Our Capitol community was tragically affected last July when Capitol Police Officer Jacob Chestnut and Special Agent John Gibson were mortally wounded while they upheld their sworn duty to protect visitors, staff and Members of Congress. All Americans should keep alive the memory of these two brave and heroic men, and recognize the contributions of the countless other law enforcement officers who have either been slain or disabled while performing their duties. For these reasons I am a proud cosponsor of S. Res. 22, which designates May 15, 1999, as ``National Peace Officers Memorial Day.'' Mr. President, during this week of poignant ceremonies, Minnesota remembers Corporal Timothy Bowe of the Minnesota State Patrol who was murdered while assisting the Chisago County Sheriff Department on June 7, 1997. Last year, Corporal Bowe's name was added to the National Law Enforcement Officers Memorial. Corporal Bowe was a devoted husband, father, trooper, and friend. More importantly, Corporal Timothy Bowe was a true Minnesota hero. This week, Corporal Bowe's name will be joined on the memorial by 155 other law enforcement officers who were killed in the line of duty. Sadly, in our society today, unless we are personally affected by violence or disorder, we often do not realize the dedication of our law enforcement officers, and the sacrifices they make to keep our communities safe. ``National Police Week'' is an important time for all Americans to recognize the role law enforcement officers play in safeguarding the rights and freedoms we all enjoy daily and give thanks for their countless hours of service. Mr. President, we owe a debt of gratitude not only to the slain officers who served their communities so courageously by preserving law and order, but also to their families, who have lost a spouse, parent or child. Our law enforcement officers are heroes and we must never forget their contributions and sacrifices--during ``National Police Week,'' they are well remembered.

Mr. GRAMS

Mr. GRAMS. Mr. President, as we wrap up this work day here in the Senate, I want to take a little time to talk about a subject that is near and dear to everybody's heart, and, of course, that is taxes. Most Americans believe they pay too much in taxes. And you know, they are right. One of the biggest and best indicators of how exhausting the tax burden has become is the annual arrival of what we call Tax Freedom Day, and that is the day on which Americans stop working just to pay their State, Federal, and local taxes and actually begin working and keeping their earnings for themselves and their families. This year, Americans had to wait until today, May 11, before Tax Freedom Day actually arrived. At least 132 days into the year, this is the latest arrival of Tax Freedom Day ever. As a sign of just how far and fast taxes have come, in 1950, Americans marked Tax Freedom Day on April 3. For residents in my home State of Minnesota, the situation is even more troubling because this year's Tax Freedom Day has been pushed forward to May 21, nearly 2 weeks later than the rest of the country. That ranks Minnesota third in the Nation; only in New York and Connecticut do taxpayers have to wait even longer to begin keeping their own money. Tax Freedom Day, as calculated by the nonpartisan Tax Foundation, reveals an ever-increasing tax burden over the past 25 years. And the single most potent explanation for America's late Tax Freedom Day is our seriously flawed tax system. Our tax system is unfair, it is complicated, and it is designed to squeeze more money out of the wallets of working Americans to expand Government. Since 1993, for instance, Federal taxes have increased by 54 percent. Can you imagine that? Since 1993, Federal taxes have increased 54 percent, which for the average taxpayer translates into a $2,000 per year increase in the amount of taxes they pay to the Federal Government. That is $2,000 a year more today than just 6 years ago was paid to the Federal Government by the average taxpayer. As a result, Americans today have the largest tax burden ever in history, including World War II, and it is still growing. Federal taxes now consume on average about 21 percent of our national income, compared to just over 18 percent in 1992. So again, 3 percent more of this country's GDP goes to taxes than it did just 6 years ago. On average, every American--each and every American--is paying $10,298 this year in Federal, State and local taxes. On average, each American is paying $10,298 this year to support Government. A typical family now pays more of its income in total taxes than it spends on food, clothing, transportation, and housing combined. More and more middle income families are being pushed into higher tax brackets every year. Here is an example of the devastating ``middle class tax squeeze.'' There are more than 20 million American workers today with annual earnings between $30,000 and $50,000. Before 1993, they paid income taxes at the 15 percent tax rate. But most of them have now been pushed into the 28 percent tax bracket, and that is due to inflation and economic growth. Worse still, they have to pay the 28 percent federal income tax rate on top of a 15.3 percent payroll tax. This adds up, for average Americans making between $30,000 and $50,000, to a tax rate of 43 percent to the Federal Government, and that is without counting State, local, and other taxes. So for many Americans, making between $30,000 and $50,000 a year, they are paying about 50 percent of their income to support Government. So any gains the taxpayers might have made in wages have been snatched away by Washington in the form of a bigger tax bite. This is the most important reason for the late arrival of Tax Freedom Day. People today work hard and then are penalized for their work. With punitive taxes, Washington makes the American dream of working hard for a better life more difficult, and even for some, it makes it impossible. The only way we can effectively stop this and push back Tax Freedom Day is to terminate the Tax Code and replace it with one that promotes freedom and economic opportunity. We must repeal the 16th amendment and abolish the IRS. We must create a new tax system that is fair, simple, and friendly to the taxpayers--when they no longer need to file a tax return with the IRS, and when their families' finances aren't revealed to Government bureaucrats, and when they are no longer penalized for getting or staying married--or for dying, for that matter--when everyone pays the same tax rate without any loopholes for any special interest groups, and when hidden taxes are eliminated and everyone can easily understand the tax laws. And finally, there will be no more IRS audits and abuse-- because, again, we need to pull out the IRS by the roots to abolish the IRS entirely. Pending fundamental tax reforms, Congress must provide meaningful tax relief to help alleviate the tax burden on working Americans. That is why the recently-passed budget resolution reserves nearly $800 billion of the non-Social Security surplus over the next 10 years earmarking it for tax relief. This proves that this Congress is committed to providing meaningful tax relief in 1999, while protecting Social Security and Medicare, reducing the national debt, and funding important national priorities. This year's budget also includes my amendment calling on the Congress to place a priority on middle income tax relief by returning tax overpayments to those from whom it was taken. It includes options for tax relief, such as a broad-based tax cut, marriage penalty relief, retirement savings incentives, death tax relief, health care-related tax relief, and education-related tax relief. If enacted, this will be the largest tax relief since the Reagan tax cuts of the 1980s. Americans are frustrated by the late arrival of Tax Freedom Day. They are worried about their future economic security. And they also want the opportunity to put their dollars to work supporting their families, not supporting the Government. We owe it to the American taxpayer to work together to fix the system through fundamental tax reform. We can do this through turning Tax Freedom Day from a day of disappointment into a day finally worth celebrating. I thank the Chair, and I yield the floor.

Mr. GRAMS

Mr. GRAMS. Mr. President, I proudly rise today to honor and celebrate my home State of Minnesota's 141st year of statehood. On this date in 1858, Congress admitted Minnesota into the Union as the thirty- second State. Let me begin by saying that the name ``Minnesota'' comes from two Sioux Indian words meaning sky-tinted waters. Now Mr. President, if you have ever been to Minnesota you will agree that my State was properly named. These ``sky-tinted waters'' are representative of Minnesota's many lakes (in excess of 12,000) and the numerous rivers and streams which run throughout the State. In fact, Minnesota has more shoreline than California, Florida and Hawaii combined! Several million Minnesotans and out-of-state visitors take advantage of these waters every year to swim, water ski, boat, canoe, or fish. This Saturday, May 15, represents one of my home State's most treasured yearly experiences, the fishing opener. I have always been impressed with the spirit the opener brings out and the way it joins our State and visitors in a common interest. Out on the lake, people aren't too concerned with the difficulties of everyday life. Once a fishing rod is nestled tightly in hand, Minnesotans tend to forget the phone, the fax, or the other annoyances that consume so much of our lives today. The experience re-connects us to a much simpler time. In addition to Minnesota's water resources, one-third of the State is covered with forests. Aspen, balsam fir, pine, spruce, and white birch grow in the northern part of the State, whereas groves of ash, black walnut, elm, maple and oak grow in the south. These forests form the centerpiece of 66 State parks, 55 State forests, one national park, and two national forests, all of which provide outdoor enthusiasts with scenic hiking, camping, and other outdoor activities on a year-round basis. Mr. President, in addition to our beautiful lakes, streams, forests, and parks, Minnesota has much more to offer. My State produces 75 percent of the nation's iron ore which covers a section of northern Minnesota rightly known as the ``Iron Range.'' There are also large deposits of granite found near St. Cloud and along the upper Mississippi River. I am proud to say that over 6,000 tons of Minnesota granite was used to make the walls and floor for the Franklin Delano Roosevelt memorial here in Washington, D.C. The fertile soil has been key to Minnesota's overall economy, providing suitable farmland that covers a little more than half the State. Agriculture is Minnesota's largest industry, generating over $22 billion in goods and services per year. One of every four Minnesota jobs is tied in some way to agriculture, and 25 percent of our overall economy is dependent upon farmers and agri-business. Today Minnesota has approximately 87,000 family farms. Even though times are difficult for many of these family farmers, Minnesota depends upon their successful recovery. Furthermore, Minnesota is home to some of the world's leading job providers--including 3M, Pillsbury, Honeywell, and Cargill, to name a few. Minnesota is also known for its achievements in the area of health care. It is a leader in the medical device industry and home to one of the world's premier health care facilities, the Mayo Clinic in Rochester. Minnesota is also the birthplace of many great innovations which have become part of our American culture, such as Cellophane Transparent Tape, Post-it Notes, and the world's first enclosed mall located at Southdale Shopping Center in Edina. Today we have the Mall of America in Bloomington which is one of the world's largest enclosed malls and most popular tourist destinations. Among other notable Minnesota facts, we are the source of the Mississippi River, home to the busiest freshwater port in North America (which also happens to be the farthest inland ocean port in the United States), and Minnesota reaches the furthest north of the 48-continental States. Mr. President, I hope I have managed to convey the pride I have for my state and its people, and in doing so, have perhaps encouraged others to visit. As a U.S. Senator from Minnesota, I wanted to express the honor I feel in representing the people of my State, which I believe is one of the premier States in the greatest country on Earth.

Mr. GRAMS

Mr. GRAMS. Thank you very much, Mr. President. I rise in strong support of the Shelby amendment and urge the Senate to approve this amendment today. I say this with utmost respect for my committee chairman, Senator Phil Gramm. As you know, I support Phil Gramm and we agree on so many issues across the board, but this is one time when I have to disagree with my chairman. As I say, even his lovely wife Wendy disagrees with Senator Phil Gramm on a few issues. I hope he realizes the respect I have for him and his arguments on this amendment, but I feel that I have to support this. As a Senator who worked on a bipartisan basis last year with Senator Reed of Rhode Island to draft a compromise operating subsidiary amendment, I have invested a great deal of time studying the pluses and minuses of this option. I have come to the conclusion that it is appropriate for national banks to conduct full financial activities, with the exception of insurance underwriting and real estate development in the operating subsidiary. This amendment preserves corporate flexibility by allowing subsidiaries of well-capitalized and well-managed national banks to conduct many of the same activities--such as securities underwriting and merchant banking--as bank holding companies and foreign bank subsidiaries. I would like to note that insurance underwriting and real estate development are not permitted in the subsidiary. Although some have claimed that the subsidiary approach could lead to a competitive advantage for banks, the amendment prevents competitive advantages by imposing the same prerequisites for conducting new financial activities on national banks as are placed on bank holding companies. The subsidiary also is safer for national banks. First, the amendment includes a number of appropriate safety and soundness ``firewalls'' to ensure that the subsidiary remains an asset to--and not a liability of--the bank. These firewalls include: one, requiring that capital invested in the subsidiary be deducted from the capital of the bank and that the bank remains well-capitalized after the deduction; two, prohibiting the consolidation of assets of the subsidiary and the bank; three, limiting the investment the bank may make in the subsidiary to the same amount that the bank could ``upstream'' to holding company affiliates by way of dividends; four, requiring the bank to maintain procedures for identifying and managing financial and operational risks posed by the subsidiary; five, requiring the bank to maintain--and regulators to ensure--a separate corporate identity and separate legal status from the subsidiary; and six, imposing the lending restrictions found in Sections 23A and 23B of the Federal Reserve Act on extensions of credit from the bank to the subsidiary--total extensions of credit to any one subsidiary may not exceed 10 percent of the bank's capital and total extensions of credit to all subsidiaries may not exceed 20 percent of the bank's capital. The operating subsidiary approach adds another safety and soundness element because the subsidiary could be used as an asset to protect the taxpayer if the bank runs into trouble. FDIC Chairman Donna Tanoue--the Federal Government's point person protecting the taxpayer against claims on the deposit insurance fund-- testified that: From a safety and soundness perspective, both the bank operating subsidiary and the holding company affiliate structure can provide adequate protection to the insured depository institution from the direct or indirect effects of losses in nonbank subsidiaries or affiliation. Indeed, from the standpoint of benefits that accrue to the insured depository institution, or to the deposit insurer in the case of a bank failure, there are advantages to a direct subsidiary relationship with the bank. When it is the bank that is financially troubled and the affiliate/subsidiary is sound, the value of the subsidiary serves to directly reduce the exposure of the FDIC. If the firm is a nonbank subsidiary of the parent holding company, none of these values is available to insured bank subsidiaries, or to the FDIC if the bank should fail. Thus, the subsidiary structure can provide superior safety and soundness protection. The last point made by FDIC Chairman Tanoue actually argues against the purported subsidy argument point put forward by some. Take for example two identical banks--Bank A and Bank B. Bank A conducts its nonbank activities in a subsidiary and Bank B conducts its nonbank activities in the holding company. In this case, the FDIC's exposure in Bank A is less than in Bank B because the amount of capital which could be raised either from the sub's assets or from the sale of the sub would actually reduce the losses of Bank A. Thus, the FDIC's exposure in Bank B is higher because, as proven in the Bank of New England case, the sale of the affiliate cannot be counted on to reduce the banks losses. Since both banks are identical and thus, have paid identical FDIC insurance premiums, Bank B receives a higher subsidy from deposit insurance because their return on FDIC insurance premiums paid is higher than Bank A, whose losses were lessened by the amount of capital raised by the sub. Therefore, the operating subsidiary structure is safer from a safety and soundness perspective. The amendment also removes the arbitrary $1 billion cap which is contained in the underlying bill. FDIC Chairman Donna Tanoue testified before the Senate Banking Committee that ``There is no valid reason to threat national banks differently on the basis of size or holding company affiliation.'' Another benefit of this amendment is that it provides competition among regulators. And that is so important. A recent conversation I had with a banking lawyer convinced me that this amendment is prudent public policy. The attorney shared with me that in his dealings with the Federal Reserve Board and the Office of the Comptroller of the Currency, one of the agencies had been cooperative in helping his client work through issues and find creative ways to deal with their problems while the other had done nothing to help. If we were to eliminate the competition, regulators would have no incentive to be responsible to the institutions they regulate and American banks would have nowhere to turn if they are unhappy with their treatment. In closing, I think this amendment should not be portrayed as a killer amendment. And I hope and I urge the chairman and the majority leader to accept the will of the Senate and to allow the vote. Whether the amendment passes or fails, I pledge to vote for the bill--no matter how the amendment turns out. Thank you, Mr. President.

Mr. GRAMS

Mr. GRAMS. I understand the concern, and I know those numbers have been raised in the questions. I also know, if you look at the other side of the story, I have talked to some of these small bankers who say they live in a town or work in a town of 300 people. And if you look out in the rural parts of the country today, most of the population in these small towns is growing in age. So his concern was, although we make all these loans available, there are not many home mortgages being sought. There are not many automobiles being bought. There are not many washers and dryers for which loans are being asked. There isn't the demand for the loan. You have to expect that these bankers are going to have to put the money to some use, if there is nobody out there asking for the loan. The question I have for the Senator is, how many of those loans have been asked for and then denied? The story I have--and I don't have this information in front of me-- is that he said it is awfully hard to loan money to my community when there is no request for loans. What do I do, let the money sit in the safe overnight? No, he has to invest it, maybe in some of these other government or other financial institutions or financial mechanisms. I think there are two sides of that story. It is not that these banks are turning down loans. In many cases, in these small communities in rural parts of the country, there is no demand for these loans. The bank is a good, safe place to keep it, but not always to be able to use the bank's facilities.

Mr. GRAMS. I will yield to the Senator.

Mr. GRAMS. Mr. President, by putting a face on the businesspeople working day in and day out trying to help America's rural communities strive and survive, I hope we can eliminate the vilification which is cast upon them. We are talking about banks under $100 million. As the gentleman from Sebeka said: 680 people is not a major financial center, and we have done the best we can to meet the requirements. We would not be in existence and would not be able to survive in our community if we didn't reinvest and if we had turned down these loans. There is a commonsense way to look at it. According to the stories we have heard and the bankers we have talked to, a lot of times these are banks with three or four employees. Many times they are asked to have a full-time employee just to work on government regulations, which takes a lot of money that could be used for loans, et cetera, out of the bank, and, as one banker said, it does absolutely nothing for his community. That is where we have to look at some of this. This is common sense. By using their words to show that they are meeting their communities' needs, not because Washington tells them to do so or says they have to, but, again, because it is in their best interest and it is in the best interest of their community and their town, it proves the need for the small bank exemption. The Committee also included a provision which has mistakenly been deemed a ``safe harbor.'' Unlike a safe harbor, which gives an institution a free ride, the rebuttable presumption included in S. 900 simply gives meaning to the work of the regulators during CRA exams. CRA's stated purpose is to require each appropriate federal banking regulator to use its authority when examining financial institutions to encourage such institutions to help meet the credit needs of the local communities. By providing a rebuttable presumption, the bill gives the regulator the benefit of the doubt that they are meeting the requirements of CRA by encouraging action by the institution during the exam. However, the bill provides a safety that if someone feels that the regulator has not properly assessed the institution, provided the individual can prove the regulators failure, it can still protest an action. Thus, this amendment simply protects federal banking regulators against harassment by individuals who simply want to criticize their work. Finally, Mr. President, I regret to have to include a negative comment in this statement about an otherwise outstanding bill. However, I believe that the operating subsidiary provisions included in S. 900 are inadequate and should be amended. As the Senator who worked on a bipartisan basis last year with Senator Reed of Rhode Island to draft a compromise operating subsidiary amendment, I have vested a great deal of time studying the pluses and minuses of this option. I have come to the conclusion that it is appropriate for national banks to conduct full financial activities, with the exception of insurance underwriting and real estate development. I enthusiastically support the op sub amendment of Senator Shelby which will be offered to this bill. It is identical to the amendment I authored last year and again this year in Committee. The amendment provides adequate safeguards to ensure that the sub poses no greater risk to the bank than a holding company affiliate. Another benefit of this amendment is to provide competition among regulators. A recent conversation I had with a banking lawyer convinced me that this amendment is prudent public policy. The attorney shared with me that in his dealings with the Federal Reserve Board and the Office of the Comptroller of the Currency, one of the agencies have been cooperative in helping his client work through issues and find creative ways to deal with their problems while the other has done nothing to help. If we were to eliminate the competition, regulators would have no incentive to be responsive to the institutions they regulate and American banks would have no where to turn if they are unhappy with their treatment. Mr. President, in closing I again urge my colleagues to support this important legislation so that we can move the bill through conference and to the President for his signature. I yield the floor.

Mr. GRAMS. I thank the Chair. Mr. President, I want to take time today to first outline my support for the bill overall, and then also to talk a little bit about the current pending business, and that is the question concerning CRA. As a member of the Senate Banking Committee, I rise in strong support of S. 900, the Financial Services Modernization Act of 1999, and urge my colleagues to take the committee's recommendation to pass this very important piece of legislation. The Glass-Steagall Act--which prohibits commercial banks from affiliating with companies predominantly engaged in the securities busines--was passed at a different point in time and in a dramatically different economy. In response to the numerous commercial bank failures during the depression, the Glass-Steagall Act was enacted as part of President Roosevelt's economic recovery package. One premise leading to the law which has since been proven incorrect, by the way--was that commercial banks which were involved in securities underwriting failed at a higher rate than other banks due to losses in their securities business when Wall Street collapsed. Subsequent studies have proven that these very same banks actually fared better than other banks which had not diversified by offering broad securities products. Unfortunately, as with most of the flawed legislation on our books, the law was not sunset and has hindered America's financial institutions-- banks and securities firms alike--since its enactment in the 1930s. Although commercial banks in recent years have been able to conduct limited securities underwriting activities through Section 20 affiliates, S. 900 appropriately repeals the Glass-Steagall prohibitions on common ownership of commercial banks and securities firms and will allow these activities to be conducted without the arbitrary restrictions which govern these activities currently. The Bank Holding Company Act also includes similar restrictions in Section 4(c)(8) which have prevented safe, sound, and well managed commercial banks from affiliating with insurance companies. Although insurance is unquestionably a financial product, banks have been prohibited from underwriting insurance, and insurance companies have been restricted from fully entering the business of banking. This bill removes the Bank Holding Company Act restrictions and it preempts State laws which prohibit these affiliations. Although there always seems to be broad agreement that the time for reform is now, every recent effort has failed because the devil has been in the details of how to regulate the new entities. S. 900 successfully incorporates a wide array of negotiated agreements between the interested industries to provide functional regulation--meaning regulation by product and not by the entity offering it. Under the bill's regulatory structure, banking products will be regulated by bank regulators, securities activities will be regulated by the Securities and Exchange Commission, and insurance will continue to be regulated by State insurance commissioners. This system will ensure that the experts in each area will oversee the activities to protect the consumer and to ensure that all parties are playing on a level playing field. As part of this system of functional regulation, the bill retains the current system of State regulation of insurance. While I strongly support State regulation of insurance, I believe there is a role for some Federal oversight. I believe that because Congress delegates the authority to regulate the insurance activities of national banks, it also has the responsibility to ensure that State regulation does not result in bloated, burdensome, and unresponsive regulation. Also, I will be holding hearings this year in the Securities Subcommittee to explore where any flaws exist and will work hard to address them with all of the interested parties. Another major area of functional regulation contained in S. 900 is the regulation of securities activities. The bill provides a workable compromise which eliminates the bank's existing broker-dealer exemption and substitutes a system of targeted exemptions which protect traditional banking products while requiring other securities activities to be offered by a broker-dealer. Also, the bill requires the SEC and the Federal Reserve Board to work together to determine how future products will be regulated. There has been some talk around Washington that an amendment may be offered to delete these bank exemptions and give the SEC complete authority to determine how future products will be regulated. Let me be clear that if this amendment is offered, it is done so for only one reason--and that would be to kill the bill. If the bank exemptions are eliminated and traditional activities, such as trust activities, are not statutorily protected, the entire banking industry will unite against this bill. Again, I urge my colleagues to oppose any amendments which significantly alter the bill's securities provisions. When repealing current law affiliation restrictions, the question is also raised about what activities the new broader bank holding companies will be able to conduct. The bill contains a standard-- financial in nature--by which all activities of a bank holding company must comply. This provision maintains the current separation of banking and commercial activities, while providing appropriate flexibility, again, subject to Federal Reserve Board oversight. Some have criticized even the narrow flexibility which is provided in this bill. However, without this flexibility many financial companies will not be able to take advantage of the new structure contained in the bill and will continue to expand their activities outside of the bank holding company model and, thus, outside the oversight that the structure would ensure. Also, while on the topic of banking and commerce, I want to briefly touch on the unitary thrift holding company. There are three thrift related provisions either in S. 900 or which are expected to be considered as floor amendments. First, as reported by the Committee, the bill prevents the formation of any new unitary thrift holding companies after February 28, 1999. This provision will protect any applications which were ``in the pipeline'' at that time, on the date the bill was unveiled but will prevent any new unitary charters, thus providing a finite universe of unitary charters. Mr. President, another provision which is included in the base text of the bill extends the assessment differential between banks and thrifts on the payment of interest on bonds that were issued by the Financing Corporation as part of the savings and loan crisis. In 1996, Congress enacted legislation requiring thrifts to make a one-time assessment into the Saving Association Insurance Fund or better known as SAIF, to fully capitalize the then-undercapitalized fund. This assessment was included predominantly because it was scored as a revenue gain under budget rules, and it could be used as the offset that Congress needed to grant the President added spending that he was demanding in return for his support of the balanced budget plan. In order to lighten the blow to thrifts and to ensure that the FICO bond interests payments were made in a timely and also in a dependable manner, Congress for the first time spread the assessment for FICO interest to the commercial banks. Under that legislation, banks were to be assessed at a rate one-fifth of that which thrifts are assessed until January 1, 2000, at which time all institutions would be assessed at the same rate. The bill before us today extends for 3 years the period during which there will be an assessment differential. Not surprisingly, the thrift industry adamantly opposed this provision. It is expected that Senator Johnson will be offering an amendment, which I intend to support, which strikes the FICO assessment extension and eliminates the thrifts' ability to affiliate with nonfinancial firms. Although this amendment presents an unpopular choice for thrifts, I believe that it is in the best interest of the thrifts in my State because it will positively impact their bottom line while only slightly impacting their ability to affiliate. I should note that if the Johnson amendment were approved outside of the underlying modernization bill, it would be much more burdensome, because thrifts would then be limited to selling only to banks or to other thrifts. However, the bill's expansion of the ability of bank holding companies to affiliate with insurance companies and securities firms passes through to thrifts and will now permit nonunitary thrifts to also sell to banks, sell to securities firms, or insurance companies. Now I want to take a moment to discuss the issue which will likely be the most contentious during the debate on this bill. That is the Community Reinvestment Act or CRA. During consideration of this bill, the Banking Committee approved two balanced amendments designed to bring rationality to a law which has ventured far from what I believe was its original purpose. CRA was enacted in 1977 to encourage financial institutions to help meet the credit needs of the local communities in which they were chartered. Although noble sounding, CRA has drifted far afield from that original purpose. S. 900 includes a small bank exemption, approved on a bipartisan vote of the committee, which exempts banks with assets of under $100 million and which are outside of a metropolitan statistical area for the CRA. Although I have received a number of calls of opposition from constituents in urban areas in my State, which will not be affected by this exemption, I do think it is important to listen to what some of the bankers in rural Minnesota are also saying. I am sure this is true not only in Minnesota but in rural banks across the country. Although these bankers are often vilified, I believe that they play a very crucial role in ensuring that affordable financial services are widely available in the rural America. Just take, for example, the comments of John Schmid of the Security State Bank in Sebeka, MN. John writes: We are a small rural Minnesota bank with assets of $21 million--$21 million, this is not a large money center bank-- and our town population is 680 souls. We could not exist if we did not support and reinvest as much as we could in our town and surrounding area. Gregory Morgan of First National Bank of Montgomery, MN, also tells a similar story. He writes: Our bank is 36 years old, founded on the idea of serving the entire community of Montgomery and as such, we have been successful. Our efforts of living and breathing community reinvestment are not driven by having to be in compliance with some law written in Washington but rather by listening and serving our friends and neighbors throughout the Montgomery area. Yet another constituent committed to his hometown is Romane Dold, of Currie State Bank. Romane writes: We are a small community bank located in a town of 300 people. Our assets are $17 million. Our bank has always adhered to the regulations of CRA and, in fact, received an ``Outstanding'' rating in our most recent exam. The problem that we have with the regulations is that it just is not necessary. Our bank has been in this town since 1931 and quite honestly, if we hadn't been reinvesting in this community for over 60 years we wouldn't be here. CRA has just been another ``little burden'' that we have to contend with to appease some regulator. Finally, the message Kieth Eitreim of Jasper State Bank in Jasper, MN, shared also proved that CRA is a bottom-line issue, costing small rural communities precious dollars, a lot of money. His bank is . . .an $18 million bank located in a town of 600 people in southwestern Minnesota. CRA is a requirement that does absolutely nothing to protect the people of my community except to cost them money. The last exam we had lasted 3 days and proved what we already knew. We service our community. If we did not, we would not be in business.

Mr. GRAMS

Mr. GRAMS. Mr. President, as a strong critic of the Administration's policy in the Balkans, I am uncomfortable expressing my reservations now that we are in a state of war. The U.S. forces conducting air strikes against Serbia have my full support as they go into battle even though I do not support what I believe to be an ill-defined mission. Mr. President, I opposed the resolution authorizing the President to bomb Serbia, because I did not see how bombing Serbia would end the atrocities being committed, bring about stability in the region, or lead to greater political autonomy for Kosovo. And I am going to oppose this resolution as well. The Senate should not be moving to authorize the President ``to use all necessary force''--when the President has not asked us for that authority--and when the President has given every indication that he has no intention of moving in that direction. I know that the authors of this resolution have the best intentions, but I do not think that it is prudent to push the Commander-in-Chief towards putting U.S. troops on the ground. If the President believes that ground troops are necessary, the President should come to the Congress, clearly explain his objectives and how the use of force can achieve those specific goals. Then, and only then, should the President ask Congress for authorization to use ground troops. That is the way to proceed. Mr. President, the only lasting solution to this conflict in the Balkans is a negotiated agreement where both sides agree to live with the results. It is inevitable that Russia, and other traditional Serb allies, will play a role in this process. But given the record of the UN in Bosnia, the peacekeeping force would be more credible if it was under a different organization's control. OSCE member nations who did not participate in the NATO bombing campaign could provide a credible force. The conflict between the Serbs and the Kosovars will not end with a NATO defeat of the Serbs, just as it didn't end with the defeat of the Serbs by the Turks in Kosovo in 1389. The conflict will continue to flare unless a political solution is found to this intractable problem, so I urge the Administration to actively engage in finding a negotiated settlement to this conflict which will lead to a sustainable peace in the Balkan region.

Mr. GRAMS

Mr. GRAMS. I thank the Chair.

Mr. GRAMS

Mr. GRAMS. Mr. President, today the Senate will immediately begin 1 hour of debate relating to the cloture motion to the McCain amendment to the Y2K legislation. At approximately 10:30 a.m., following that debate, the Senate will proceed to a cloture vote on the pending McCain amendment. As a reminder, by a previous agreement, second-degree amendments to the McCain amendment must be filed by 10 a.m. today. Following the cloture vote, the Senate may continue debate on the Y2K bill, the lockbox issue, or any other legislative or executive items cleared for action. Also, as a further reminder, a cloture motion was filed on Wednesday to the pending amendment to S. 557 regarding the Social Security lockbox legislation. That vote will take place on Friday at a time to be determined by the two leaders. For the remainder of the week, it is possible that the Senate may begin debate on the situation in Kosovo. Mr. President, I yield the floor.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the Special Committee on the Year 2000 Technology Problem be permitted to meet on April 29, 1999, at 9:30 a.m. for the purpose of conducting a hearing.

Mr. GRAMS. Mr. President, I ask unanimous consent that the Committee on Health, Education, Labor, and Pensions be authorized to meet in executive session during the session of the Senate on Thursday, April 29, 1999, at 4 p.m.

Mr. GRAMS. Mr. President, I ask unanimous consent that the Governmental Affairs Committee be permitted to meet on Thursday, April 29, 1999, at 10 a.m. for a hearing on the nominations of Myrta ``Chris'' Sale to be Controller of the Office of Federal Financial Management at the Office of Management and Budget and John Spotila to be Administrator of the Office of Information and Regulatory Affairs at the Office of Management and Budget.

Mr. GRAMS. Mr. President, I ask unanimous consent that the Committee on Health, Education, Labor, and Pensions be authorized to meet for a hearing on ``ESEA Reauthorization'' during the session of the Senate on Thursday, April 29, 1999, at 10 a.m.

Mr. GRAMS. Mr. President, I ask unanimous consent that the Committee on the Judiciary be authorized to hold an Executive Business Meeting during the session of the Senate on Thursday, April 29, 1999, at 10 a.m. in room 226 of the Senate Dirksen Office Building.

Mr. GRAMS. Mr. President, I ask unanimous consent that the Select Committee on Intelligence be authorized to meet during the session of the Senate on Thursday, April 29, 1999, at 10 a.m. to hold a closed hearing on intelligence matters.

Mr. GRAMS. Mr. President, the Finance Committee requests unanimous consent to conduct a hearing on Thursday, April 29, 1999, beginning at 10 a.m. in room 215 Dirksen.

Mr. GRAMS. Mr. President, I ask unanimous consent that the Subcommittee on Housing and Transportation of the Committee on Banking, Housing, and Urban Affairs be authorized to meet during the session of the Senate on Thursday, April 29, 1999, to conduct a hearing on ``Oversight of HUD's Grants Management System.''

Mr. GRAMS. Mr. President, I ask unanimous consent that the Subcommittee on International Economic Policy, Export and Trade Promotion of the Committee on Foreign Relations be authorized to meet during the session of the Senate on Thursday, April 29, 1999, at 10 a.m. to hold a hearing.

Mr. GRAMS

Mr. GRAMS. Mr. President, I yield the floor and suggest the absence of a quorum.

Mr. GRAMS. Mr. President, I ask unanimous consent that I be allowed to speak for up to 10 minutes as in morning business.

Mr. GRAMS

Mr. GRAMS. Mr. President, I rise today in order to call attention to one of the most onerous barriers currently facing American agriculture. It is a regional price-fixing cartel, which benefits only those producers within its own boundaries, at the direct expense of consumers. It is a patently unfair, unabashed attempt to distort basic principles of market forces. It is the Northeast Interstate Dairy Compact, which has been in effect in New England States since July 1997. Today, Senator Russ Feingold of Wisconsin and I introduce the Dairy Fairness Act, which would repeal the Northeast Interstate Dairy Compact. As many southeastern States are passing enabling legislation to lay the groundwork in forming their own compacts, we feel it is necessary to once again review the notorious history of the Northeast Interstate Dairy Compact, and its negative impact on consumers and on all dairy farmers--with the notable exception, of course, of the largest dairy industries within the compact region. The 1996 FAIR Act included significant reforms for diary policy. It set the stage for greater market orientation in dairy, including reform of the archaic Federal milk marketing orders. Yet despite a strong vote by the Senate to strip the Northeast Interstate Dairy Compact from its version of the FAIR Act, and the deliberate exclusion of any compact language from the House version of the bill, a Northeast Interstate Dairy Compact provision was slipped into the conference report. This language called for the termination of the compact upon the completion of the Federal milk marketing order process. That would have been in April of 1999. Well, through last year's appropriations process, the implementation of USDA's Federal Milk Marketing Order reforms have been delayed by 6 months. Of course, this was not at the request of the USDA. With the delay came an automatic extension of this compact. This political maneuvering is outrageous, and it comes with a high price tag attached--a high price tag to be paid by milk drinkers, and the rest of the Nation's dairy farmers. The goals of the Northeast Dairy Compact have been clear since its inception. That was--to increase the profits of producers within the compact region, but at the expense of everyone outside of the compact. And by now, the obvious ramifications have been realized--higher milk prices within the compact region. This, not surprisingly, has led to a decrease in milk consumption. According to data from the Northeast Dairy Compact Commission, the compact, since it has been in effect, has added $46.5 million to the cost of milk in New England. As the fluid milk prices which consumers pay rise, the burden falls disproportionately on low-income families, particularly those with small children. Low-income families spend a greater percentage of their income on food. They are harmed as a direct result of this compact. The compact is having other dramatic effects as well. The increase in prices which producers receive for their milk has led to surplus production, which has had a negative effect on other producers around the country. Conversion of this surplus milk into cheese, butter, and powder drives down prices for these products in other non-compact regions. Take milk powder, for instance. Some of the compact's excess supply has been converted into nonfat milk powder. Between October 1997 and March 1998, New England produced 11 million more pounds of powder, 60 percent more than it did in the same period of the preceding year. During that time, nonfat powder production in the U.S. increased by only 2 percent. Furthermore, between October 1, 1997 and March 31, 1998, the nonfat milk powder glut in the U.S. drove prices so low that USDA had to spend nearly $41 million to buy surplus milk powder from dairy processors. Dairy producers outside of the compact region clearly are harmed as a direct result of the compact. In fact, the only real winners have been the largest industrial dairies of the Northeast. It is really no surprise. Just consider it: if the compact pays a premium per hundredweight of milk, and large industrial dairies are able to produce, for example, 15 to 20 times more than the ``typical'' traditional dairy farm that the compact was supposedly going to protect, who do you think the big winners are? It certainly isn't the traditional dairy farm. They are also put at a competitive disadvantage, and thanks again to regional politics. And so are dairies outside the compact region. We must keep sight of the fact that a dairy compact, or any sort of compact for that matter, is essentially a price-fixing scheme, which so abuses interstate commerce that it requires a special authorization of Congress. Otherwise it would violate Federal antitrust laws. We have come to the point where we must ask ourselves, as a nation, in which direction will we proceed concerning dairy policy. USDA has just presented its recommendations for Federal Milk Marketing Order reforms. It is not a great step in the way of reform, but at least it represents a rational attempt to decrease Federal interference in the dairy business and to treat producers all over the country a little more fairly. A national patchwork of compacts would render the Federal Milk Marketing Order reforms meaningless. It would essentially kill any hope for the beginning of real Federal reform. Interstate commerce in the milk industry would be so confusing it would be a confusing maze that harms consumers. While dairy was not included in the farm bill, it was always envisioned that a later dairy solution would conform to the free market concept of that farm bill. We all know that it is difficult in Washington to have the courage to bypass any of those quick-fix issues in favor of a long-range view which would produce better and sound dairy policies. But that is exactly what we need today. That is where real leadership comes into play. So let's be advocates for the traditional dairy farmers, not just the mega-dairies. What is required now is a complete overhaul of this backward-looking and just plain unfair compact legislation. Senator Feingold and I will continue to fight the Northeast Interstate Dairy Compact, and any other dairy compact that may be proposed. And we urge our colleagues to give all dairy farmers, in all areas of our country, the ability to compete on a level playing field. To this end, and in order to underscore the need for significant reform, Senator Feingold and I today also introduce the Dairy Reform Act, which would equalize the minimum adjustments to prices for fluid milk marketing orders at $1.80 per hundredweight of milk. This legislation, again, represents real reform, and a level playing field that will allow farmers to compete fairly and not have the Federal Government stand on the neck of dairy farmers in one area of the country while supporting those in others. It would allow producers to compete in a system where efficiencies--efficiencies--would be rewarded and they would be important according to market principles. The current system is so weighted against the Upper Midwest that our dairy farmers have to be twice as good just to be able to break even. The Dairy Reform Act proposes a marketing system which would truly be fair.

Mr. GRAMS

Mr. GRAMS. Mr. President, I rise today in order to call attention to one of the most onerous barriers currently facing American agriculture. It is a regional price-fixing cartel, which benefits only those producers within its own boundaries, at the direct expense of consumers. It is a patently unfair, unabashed attempt to distort basic principles of market forces. It is the Northeast Interstate Dairy Compact, which has been in effect in New England States since July 1997. Today, Senator Russ Feingold of Wisconsin and I introduce the Dairy Fairness Act, which would repeal the Northeast Interstate Dairy Compact. As many southeastern States are passing enabling legislation to lay the groundwork in forming their own compacts, we feel it is necessary to once again review the notorious history of the Northeast Interstate Dairy Compact, and its negative impact on consumers and on all dairy farmers--with the notable exception, of course, of the largest dairy industries within the compact region. The 1996 FAIR Act included significant reforms for diary policy. It set the stage for greater market orientation in dairy, including reform of the archaic Federal milk marketing orders. Yet despite a strong vote by the Senate to strip the Northeast Interstate Dairy Compact from its version of the FAIR Act, and the deliberate exclusion of any compact language from the House version of the bill, a Northeast Interstate Dairy Compact provision was slipped into the conference report. This language called for the termination of the compact upon the completion of the Federal milk marketing order process. That would have been in April of 1999. Well, through last year's appropriations process, the implementation of USDA's Federal Milk Marketing Order reforms have been delayed by 6 months. Of course, this was not at the request of the USDA. With the delay came an automatic extension of this compact. This political maneuvering is outrageous, and it comes with a high price tag attached--a high price tag to be paid by milk drinkers, and the rest of the Nation's dairy farmers. The goals of the Northeast Dairy Compact have been clear since its inception. That was--to increase the profits of producers within the compact region, but at the expense of everyone outside of the compact. And by now, the obvious ramifications have been realized--higher milk prices within the compact region. This, not surprisingly, has led to a decrease in milk consumption. According to data from the Northeast Dairy Compact Commission, the compact, since it has been in effect, has added $46.5 million to the cost of milk in New England. As the fluid milk prices which consumers pay rise, the burden falls disproportionately on low-income families, particularly those with small children. Low-income families spend a greater percentage of their income on food. They are harmed as a direct result of this compact. The compact is having other dramatic effects as well. The increase in prices which producers receive for their milk has led to surplus production, which has had a negative effect on other producers around the country. Conversion of this surplus milk into cheese, butter, and powder drives down prices for these products in other non-compact regions. Take milk powder, for instance. Some of the compact's excess supply has been converted into nonfat milk powder. Between October 1997 and March 1998, New England produced 11 million more pounds of powder, 60 percent more than it did in the same period of the preceding year. During that time, nonfat powder production in the U.S. increased by only 2 percent. Furthermore, between October 1, 1997 and March 31, 1998, the nonfat milk powder glut in the U.S. drove prices so low that USDA had to spend nearly $41 million to buy surplus milk powder from dairy processors. Dairy producers outside of the compact region clearly are harmed as a direct result of the compact. In fact, the only real winners have been the largest industrial dairies of the Northeast. It is really no surprise. Just consider it: if the compact pays a premium per hundredweight of milk, and large industrial dairies are able to produce, for example, 15 to 20 times more than the ``typical'' traditional dairy farm that the compact was supposedly going to protect, who do you think the big winners are? It certainly isn't the traditional dairy farm. They are also put at a competitive disadvantage, and thanks again to regional politics. And so are dairies outside the compact region. We must keep sight of the fact that a dairy compact, or any sort of compact for that matter, is essentially a price-fixing scheme, which so abuses interstate commerce that it requires a special authorization of Congress. Otherwise it would violate Federal antitrust laws. We have come to the point where we must ask ourselves, as a nation, in which direction will we proceed concerning dairy policy. USDA has just presented its recommendations for Federal Milk Marketing Order reforms. It is not a great step in the way of reform, but at least it represents a rational attempt to decrease Federal interference in the dairy business and to treat producers all over the country a little more fairly. A national patchwork of compacts would render the Federal Milk Marketing Order reforms meaningless. It would essentially kill any hope for the beginning of real Federal reform. Interstate commerce in the milk industry would be so confusing it would be a confusing maze that harms consumers. While dairy was not included in the farm bill, it was always envisioned that a later dairy solution would conform to the free market concept of that farm bill. We all know that it is difficult in Washington to have the courage to bypass any of those quick-fix issues in favor of a long-range view which would produce better and sound dairy policies. But that is exactly what we need today. That is where real leadership comes into play. So let's be advocates for the traditional dairy farmers, not just the mega-dairies. What is required now is a complete overhaul of this backward-looking and just plain unfair compact legislation. Senator Feingold and I will continue to fight the Northeast Interstate Dairy Compact, and any other dairy compact that may be proposed. And we urge our colleagues to give all dairy farmers, in all areas of our country, the ability to compete on a level playing field. To this end, and in order to underscore the need for significant reform, Senator Feingold and I today also introduce the Dairy Reform Act, which would equalize the minimum adjustments to prices for fluid milk marketing orders at $1.80 per hundredweight of milk. This legislation, again, represents real reform, and a level playing field that will allow farmers to compete fairly and not have the Federal Government stand on the neck of dairy farmers in one area of the country while supporting those in others. It would allow producers to compete in a system where efficiencies--efficiencies--would be rewarded and they would be important according to market principles. The current system is so weighted against the Upper Midwest that our dairy farmers have to be twice as good just to be able to break even. The Dairy Reform Act proposes a marketing system which would truly be fair.