Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Madam President, I suggest the absence of a quorum.

Mr. GRASSLEY. Madam President, I make crystal clear when we talk about $2,000 and $10,000 and $30,000, as the Senator from Massachusetts has, it sounds as if we are just clamping down on people who should be getting a fresh start in chapter 7 instead of being chapter 13 with ability to repay. I make very clear the first $1 million is exempted. That causes a problem for the Senator from Massachusetts. I am embarrassed to present a bill to the Senate of the United States that says a millionaire is going to be protected from bankruptcy court if he can pay his bills. Now the Senator from Massachusetts raises a very legitimate point. There could be a catastrophic illness that could eat up a lot of the money, even $1 million, presumably. We have even taken that into consideration; that is, we have an interest of justice exception that would be applicable in this case. So something over $1 million could be exempted. I hope the Senator from Massachusetts realizes we have gone through this last year. We tried to accommodate the Senator from Massachusetts. We had a compromise I was embarrassed to accept in the sense that a $1 million exemption is way too high for my background. But I did it because I thought it was important we move this legislation along. We are talking about just preserving in the bill before the Senate a compromise worked out last year that would be law today except for a pocket veto by President Clinton. Otherwise, this Senator from Massachusetts wants to strike that compromise, and he was part of that compromise. I guess I beg him to stick by his compromise. I yield the floor.

Mr. GRASSLEY. First of all, Mr. President, whether I enthusiastically endorse this or not, the Senator from Massachusetts knows that he can lay his amendment aside and move on to another amendment that he wants adopted since we will not be voting on these amendments until tomorrow. The first thing I want everyone who has questions to know about this legislation is that we want people who have health insurance to maintain their health insurance when they go into bankruptcy because our legislation provides that health expenses, including health insurance, under the IRS guidelines--which are used by the bankruptcy court in deciding the ability to repay debt under our means test--are fully accounted for. Not only are health insurance premiums subtracted, but all health care costs are subtracted out of a person's ability to pay in making a determination whether they go into chapter 7 where they get a completely fresh start, or whether they go into chapter 13 to make a determination of whether or not they have the ability to repay. If they are in chapter 13, then the extent to which they repay the final judgment is that those people in chapter 13 will not get off scot-free. But in making that determination, all health costs are taken into consideration. The reason I take some time to emphasize that point is because we have had several speeches on the floor of the Senate that say and imply we do not want to take into consideration all those health care costs in making that determination. We even had the Time magazine article of last spring in which there were several case studies done by Time magazine with the implication that if this legislation passed, those people would not be able to get into bankruptcy court for fair consideration of whether or not they could repay their bills, and whether or not they get a fresh start. In a lot of those case studies, there was the implication that they were going into bankruptcy court because of high health costs. In every one of those instances, as I have said before on the floor of this Senate, those folks used in that magazine article would have been able to get a fresh start under our legislation. Consequently, we still have this brought up as somehow a problem of our bill because we are not going to take into consideration people who are in bankruptcy being able to maintain their health costs and health insurance. I asked the question last week for those Senators who think we do not give adequate consideration through the IRS guidelines of whether or not somebody should be in chapter 7 or chapter 13: If we don't, do we give credit for 100 percent of health cost? If 100 percent isn't enough, would 101, 102, or 110 percent be enough? Now we get to this situation that Senator Kennedy has brought to our attention. I give the prelude to this by saying our legislation takes into consideration 100 percent of health care costs, including paying health insurance. If the person does not have health insurance before going into bankruptcy court, obviously the person does not have an expense out there to claim in bankruptcy court. It seems to me what Senator Kennedy is trying to do here--because we already allow people who have health insurance to maintain that health insurance as one of those legitimate costs--is raise the possibility that a debtor who did not have health insurance before he went into bankruptcy court ought to be able to carve out a portion of the creditor's claims, and would be able to get a fringe benefit, or a benefit they did not have before they went into court. I think we have a couple of questions to ask. Is there any provision in this amendment that requires the debtor to use this allowance for health insurance? And is there any provision to verify that the money is being used for health insurance if it is allowed? Since the debtor wasn't using the allowance for health insurance before bankruptcy, it seems to me we need some guarantees on how the money will be spent. I have those questions. If the Senator wants to respond to those, he can. If he doesn't, there are questions out there that have to be answered. I yield the floor.

Mr. GRASSLEY. Madam President, the Senator from Massachusetts is digging a hole for himself. No. 1, he talks about the difference between 401(k)s and IRAs. He can mention $2,000, he can mention $10,000, but there is a cap of $1 million. That means up to $1 million is not subject to bankruptcy. Then he mentioned IRAs and 401(k)s. I remind the Senator from Massachusetts that 401(k)s are not covered because he objected to their being covered, and we took them out. They are not part of it, not because that is the way I want it. I think 401(k)s ought to be capped at $1 million as well, if there is a cap at all. Madam President, 401(k)s are different than the individual retirement accounts capped at $1 million, because that is what Senator Kennedy requested we do. The other thing mentioned was about my being chairman of the Senate Finance Committee and tax expenditures. First of all, I do not buy the philosophy of tax expenditures because that implies every penny working men and women in America earn belongs to the Federal Government and we are going to let them keep some of their own money. I start from the premise that the hard-working men and women of America, every penny they earn is their money, and we tax them for part of it. Just in case there is some injustice under present pension laws--I admit there are injustices in present pension laws. The Senator from Florida, Mr. Graham, and I have introduced legislation to correct some of those inequities and particularly to correct some of those inequities to benefit the very low-income wage earners to whom Senator Kennedy is saying we do not give enough credit. Before this Congress is done, hopefully even before the first bill gets to the President of the United States, we will have passed some tax legislation to take care of some of those inequities in the pension laws of the United States, plus the fact that we had legislation out of our committee last year that increased the $2,000 IRA limit to a $5,000 IRA limit. I want to get back to the reason for having this $1 million cap on individual retirement accounts, that anything over that is not protected from the creditors. Let's get it clear: Below $1 million is protected from the creditors in bankruptcy court. I quote from President Clinton's administration in their support of the concept of the cap. This is last year's legislation as we were discussing this issue then. The Department of Justice said: A debtor should not be able to shield abundant resources from creditors, including Federal, State, and local governments, in the form of retirement savings. I quote from the Securities and Exchange Commission: We have seen insider traders do their trading through IRAs and fraud participants stash their profits in their IRAs. The State law exemptions have not defeated our Federal statutory claims to date, but a new Federal exemption could do so. I am concerned about the grave potential abuse that the exemption for all retirement assets from bankruptcy estates poses. That is a letter from Judith R. Starr, assistant chief litigation counsel, Securities and Exchange Commission, to members of my staff. The Department of Labor: A fresh start is not meaningful if it requires a debtor to accept an impoverished retirement. However, a debtor should not be able to inappropriately shield resources from creditors, including Federal, State, and local governments in the forms of retirement savings. That is a letter from the Secretary of Labor to Senator Hatch, April 14, 1999. On the other hand, there are those among my colleagues across the aisle who oppose the $1 million IRA cap that would prevent, to some degree, the rich from shielding wealth from creditors in an IRA. In my view, a wealthy debtor should not be able to shield large amounts of wealth from creditors in an IRA or in a home. The compromise provisions in the bill that we worked out with members of the other party last year make important improvements over current law and should be retained. Accordingly, I urge my colleagues to oppose the effort to strip out the individual retirement account cap. I yield the floor.

Mr. GRASSLEY. Mr. President, I take this opportunity to tell my colleagues why the amendment offered by the Senator from Massachusetts is a very bad amendment. First, I want to make clear that this amendment applies just to IRAs; it does not apply to pensions. In addition, I would like to have people reflect on the position of the Senator from Massachusetts on this amendment and the position on the previous amendment. It seems to me the Senator from Massachusetts is very much in character with his amendment on making sure there is a preservation for the ability of people in bankruptcy to keep health insurance. That, for a long time, has been a concern of his for people who have needed health insurance, maybe couldn't afford it--how to be able to get it to the people. Of course, when bankruptcy steps in, it is very appropriate for him to offer an amendment that would preserve health insurance for people. That would most often fall into the category of his protecting those people who have lesser incomes. So it is quite out of character for me to respond to the Senator from Massachusetts about an amendment about a provision in this bill where we have a $1 million cap that protects retirement accounts and that you would have to have resources over that $1 million in determining the ability to repay. As the author of this legislation, I am very embarrassed that I would have in my own legislation a $1 million cap that would say people could protect $1 million from their creditors as they went into bankruptcy. That $1 million cap is in here because I didn't want any cap whatsoever. I had to make an arrangement with Senator Kennedy last year to reach compromise on this matter, and we compromised on $1 million. In addition, for the Senator from Massachusetts, who never is very often found defending the economic needs of those over $1 million a year in savings and wanting to protect that $1 million from bankruptcy, it seems to me somewhat out of character for him. It makes it a lot easier for me to oppose his amendment that would eliminate the cap on IRA savings. He argues that the $1 million cap would be difficult to administer because 401(k)s and other retirement rollovers are excepted from this cap. He argues that the cap will be an administrative hassle with no benefit to creditors. I argue that the bankruptcy bill is all about having people who can repay their debts do just that--in other words, pay their debts. How many times have you heard me say the purpose of this bankruptcy legislation is, for those who are gaming the system, those who are using the bankruptcy laws for financial planning, that if you have the ability to repay, you are no longer going to get off scot-free. People who have the ability to repay their debts should not be protected just because they have stashed away an IRA account. That is why we have this $1 million cap. I don't even think the cap should be there, but it was part of the compromise last year. We need to have a cap on these savings so that people who can pay will be required to pay a portion of their debts. I don't think the super-rich should have additional protections just because they can squirrel away their money in a retirement account. The $1 million cap is consistent with our policy of encouraging people to put away money for retirement, but we also need to balance this with a policy that people who buy goods and other merchandise should pay for them if they can. We can't allow deadbeats to get away with stiffing creditors. That is why our bankruptcy bill is here. That is what it is all about: Imposing some responsibility on people who can pay their debts. I would like to give you an example about abuse of the system. This is from a press report. Dr. Neil Solomon declared bankruptcy after three female patients sued him for sexual misconduct and sought $160 million in damages. Dr. Solomon paid these women less than $100,000, while keeping a home in Baltimore, MD, valued at $323,000, a Mercedes Benz, valued at $42,000, and $2.2 million in a retirement savings account. Congress should place reasonable limits on the ability of highly compensated persons, such as Dr. Solomon, to shield millions of dollars from creditors simply because the assets are deposited in retirement accounts. Clearly, Congress never intended for savings in retirement accounts to become safe havens for the wealthy who seek to avoid paying their bills by declaring bankruptcy. I also point out to my friend from Massachusetts his position is much contrary to his position in regard to the homestead exemption. He says people who can pay their debts should not be able to shelter their assets in a million-dollar homestead. But at the same time, he seems to be saying that people should be able to shelter their assets in $1 million IRA accounts. That is what he is doing right now by lifting that $1 million cap. Moreover, I don't think the provision in our bill will impose an administrative burden, particularly because the amount of the cap is so high. I don't think it is unworkable, and I doubt that the administrative burden charge will ever materialize. In addition, I remind my colleagues this is an agreement that was agreed to in the compromise pension bill last year. I didn't want this cap in here, but I took it in the process of doing what I could to alleviate some fears so this legislation could get passed. In other words, we cut a deal, and I hope we stick by this deal. We need to retain the hard limit of $1 million on the amount of IRA money that any person who declares bankruptcy can shield from his or her creditors. Just because it is a retirement account does not mean you can get away from paying your debts with it. This is just plain wrong because this is anti fraud and abuse reform, and it is badly needed. I strongly urge my colleagues to reject the amendment. I wish to point out that we put the exclusion of rollovers in the bill at the request of the Senator from Massachusetts. So if the Senator is concerned about administrative burdens, we would be happy to take out the exclusion of rollovers. But my point to the Senator from Massachusetts is that we cannot have this both ways. I also suggest that I was lobbied against any restriction. I was lobbied on the protection of pensions and IRAs from being a source of repayment to creditors--not by individuals going into bankruptcy or people who had strongly felt views as individuals that this money should be protected from the creditors. The source of interest in this legislation came from the pension and insurance industries of my State who felt they did not want to be bothered by the bankruptcy courts, so they wanted to retain protection for pensions and for IRAs. They tried to make this historical claim that it had always been this way. It is one thing to work on the floor of the Senate to protect the interests of the little guy who is going into bankruptcy; it is also OK to work on the Senate floor to make sure we do preserve the ability of people to retire with dignity. It is quite another thing to protect the interests of those who want to retain a high lifestyle after they have gone into bankruptcy and, at the same time, be in retirement. But it is quite another thing to protect the interests of all the big business companies of America that are writing this business and don't somehow want to deal with the bankruptcy courts. I ask my colleagues to oppose the amendment by the Senator from Massachusetts. I yield the floor.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRASSLEY. Reserving the right to object, and I will not object, before we go on to his next amendment and lay this one aside, I hope I can continue a dialog between the staff of the Senator from Massachusetts and my staff to see if we can make arrangements, so that we know the money that is set aside is used for health insurance, that it is verifiable, that it would not be used for some sort of Cadillac insurance policy that maybe the person would not otherwise have had in their place of employment, and things of that nature. If we could talk about that, we might be able to work something out.

Mr. GRASSLEY. Madam President, would the Senator tell us the content of the amendment, or is there a copy we can have?

Mr. GRASSLEY. Will the Senator yield for a question?

Mr. GRASSLEY. I apologize. We have a copy.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, for the information of all Senators, the Senate will convene at 9:30 a.m. and will resume consideration of the bankruptcy legislation at 10 a.m. Two votes have been ordered to occur at 11 a.m. on the Kennedy amendment and the Feinstein amendment, as modified. Following the policy luncheons at 2:15 p.m., there will be 30 minutes for debate on the Conrad and Sessions amendments with votes ordered to occur at 2:45 tomorrow afternoon.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, if there is no further business to come before the Senate, I now ask unanimous consent that the Senate stand in adjournment under the previous order.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, cloture was filed on the bill during today's session. Therefore, I ask unanimous consent that notwithstanding the recess of the Senate, all first-degree amendments must be filed by 1 p.m.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I further ask unanimous consent that at 10 a.m., the Senate resume consideration of S. 420, the bankruptcy reform bill, with Senator Hollings being immediately recognized for up to 20 minutes for discussion of the lockbox issue, notwithstanding the previous order.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that when the Senate completes its business today, it adjourn until the hour of 9:30 a.m. on Tuesday, March 13. I further ask unanimous consent that on Tuesday, immediately following the prayer, the Journal of proceedings be approved to date, the morning hour be deemed expired, the time for the two leaders be reserved for their use later in the day, and the Senate then begin a period of morning business until 10 a.m., with Senators speaking for up to 5 minutes each, with the following exceptions: Senator Durbin, or his designee, 9:30 a.m. to 9:45 a.m., and Senator Allen, 9:45 a.m. to 10 a.m.

Mr. GRASSLEY. Mr. President, I also ask unanimous consent that the Senate stand in recess from the hours of 12:30 p.m. to 2:15 p.m. for the weekly policy conferences to meet.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the resolution be agreed to and the motion to reconsider be laid upon the table.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Senate now proceed to the immediate consideration of S. Res. 58, submitted earlier by Senator McConnell.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that at 11 a.m. on Tuesday, as under the order, the Senate proceed to a vote in relation to the following amendments, and further, no amendments be ordered to the amendments prior to the votes: the Feinstein amendment No. 27, as modified, and the Kennedy amendment No. 39.

Mr. GRASSLEY. Mr. President, I have some unanimous consent requests that the leader has asked me to make.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRASSLEY

Mr. GRASSLEY. I wonder if the Senator will provide copies of the amendments. We want to know with what we are working.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Senate now be in a period for morning business, with Senators permitted to speak for up to 10 minutes each.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that a copy of the Rules of Procedure, adopted by the Committee on Finance for the 107th Congress be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. The point is we can assure the Senator from New York the yeas and nays on his amendment. We can't assure the Senator from New York when we are going to vote on the amendment.