Scott Garrett

Mr. GARRETT

Mr. GARRETT. Mr. Chair, I yield 1 minute to the gentleman from South Carolina (Mr. Duncan), who does not believe it's a social experiment to do what all families have to do: live within our means.

Mr. GARRETT. Mr. Chairman, I yield 1 minute to the gentleman from Indiana (Mr. Rokita).

Mr. GARRETT. Mr. Chairman, I have an amendment at the desk.

Mr. GARRETT. Mr. Chairman, I demand a recorded vote.

Mr. GARRETT. Mr. Chairman, I yield 1 minute to the gentleman from Ohio (Mr. Jordan), the chairman of the Republican Study Committee.

Mr. GARRETT. Mr. Chairman, I yield 1 minute to the gentleman from California (Mr. McClintock), who has no amnesia but recognizes the fact that we do no favor for this generation by putting the burden for future constraints on our children and our grandchildren.

Mr. GARRETT. Mr. Chairman, I yield myself 1 minute. Mr. Chairman, I rise today in support of the Republican Study Committee's substitute that is now on the floor. This substitute amends and builds upon the great work of Chairman Ryan and the entire House Budget Committee. And while I do come to the floor and support Chairman Ryan's proposal, the RSC wanted to put forth a proposal on the floor today that went even a step further. We named our budget today the Honest Solutions budget because we know that what we are proposing will not be easy. Why? Because real solutions are not necessarily easy solutions. But given the dangerous conditions of our Nation's fiscal situation, we must recognize that tough choices must be made and must be made now. The RSC believes that we can do better than any of the budgets on the floor today. So we have a budget that will, first of all, ensure that our Nation spends responsibly by freezing total discretionary spending at 2008 levels. The RSC budget further ensures that our Nation's security will be met by meeting Defense Secretary Gates's defense request. The RSC budget puts nondefense discretionary spending on a sustainable path. In addition, the RSC budget strengthens Medicare's long-term finances. And most importantly, our budget, unlike any other budget on the floor today, will balance within our lifetime.

Mr. GARRETT

Mr. GARRETT. I thank the gentleman from Indiana. Thank you, first of all, first and foremost, for leading this caucus tonight and leading this Special Order tonight as we speak about federalism as a safeguard of a limited government. So we come here tonight to discuss that and think about it in the larger sense, to discuss basically the revolutionary principles that federalism is and its critical role in our system of government that makes individual liberties possible in this country. As the founder of the Constitutional Caucus, I welcome a public discussion on federalism tonight. It is such a crucial discussion, a discussion of federalism, a discussion of the role of government in our lives. And it lies at the heart of the American social contract between the government and the people. You see, it's federalism that keeps the Federal Government basically within its proper boundaries. So it is crucial to an understanding of the American commitment to liberty and to freedom and how well it will safeguard this generation and future generations as well. When we think about these topics, it's often easy to take for granted our Federal system of government and the freedoms that it affords all of us. But such a system was, by no means, preordained. And if you go back some 200-plus years, ordinary colonists, armed with a desire to be free, rebelled against the world's mightiest empire to achieve our independence from an obtrusive, overcentralized and a faraway government. And what was in its place? Well, in its place our Founders established for the first time in history a national government of defined and enumerated powers that is basically prohibited from overstepping its confined jurisdictions. So the Federal Government's powers were to be truly national in scope, and the Founders believed that because States and local governments operated closest to the citizens, elected officials who were at that lower level, or the local level, would be the ones who were most competent to make the laws that would govern daily lives. Now, this was a message espoused by James Madison in Federalist No. 45. You know, Madison wrote back then: ``The powers delegated by the proposed Constitution to the Federal Government are few and they are defined. Those which are to remain in the State governments are numerous and indefinite.'' So, you see, you have established this dual sovereignty, the sovereignty of Federal and State governments. And it's underscored then how basically in our Bill of Rights, as the 10th Amendment reads, as the gentleman from Indiana already said: ``The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectfully, or to the people.'' The beauty of the 10th Amendment is not at first easily recognizable, as some would say, on first blush that the 10th Amendment is almost redundant. Some would say it offers nothing new from what has already been written into the confines, or four corners, if you will, of the Constitution. And so it is the limited powers of the Federal Government that are articulated throughout the three sections of the Constitution. In fact, however, the Founders, looking at the Bill of Rights, initially believed that they were really not necessary and, actually, that they could be seen as potentially dangerous. Why was this? Well, both the Federalists and the anti-Federalists understood that the Bill of Rights limited the powers of government. But the perceived danger here of the Bill of Rights lay where? At the potential for misunderstanding by future generations. This misunderstanding basically comes about by this, by forbidding the Federal Government from acting in certain areas, which is what the Bill of Rights would do. It was argued then, what, that the Constitution implied that the Federal Government could do what? It could act in all other areas that were not expressly prohibited from engaging in. But let's be clear, the 10th Amendment makes clear that the Constitution provides no implied powers to the Federal Government. And so it is here that we see Federalism for what it basically is. It is the cornerstone, if you will, of the Constitution and the most effective tool for the preservation of this, our liberty. So the 10th Amendment inclusion as the final amendment in the Bill of Rights is, therefore, no accident. It is, rather, as one might say, the culmination of the Founders' vision of American democracy. It reaffirms a commitment to a government strictly defined and with those limited powers. It is this institutionalization of armor, if you will, of liberty and the perpetual struggle against this tyrannical government. This amendment is, in short, the realization of the principles of the American revolution. And as we come to the floor tonight and every day here in this Congress, we are heirs to that revolution. Unfortunately, today America seems to have surrendered some of its birthright. The scope and reach of the Federal Government is growing at a disturbing pace. The incessant expansion of government has led to the bailout of the banking industry and the auto industry, sweeping financial regulation, and the proposal of cap-and-trade systems that would demand that rationing of American economic prosperity and productivity. The tentacles, if you will, of the Federal Government are tightly wrapped around housing, education, transportation, unemployment policy--you name it--in almost every aspect of our lives. The American people, when you think about it, are controlled by the Federal Government in almost every single aspect of their lives, from morning to evening, from what light bulbs we are allowed to buy to the health insurance we have to buy. It is all required under regulations by the Federal Government. Now, as I come to the floor, today is the 268th birthday of Thomas Jefferson. If he were alive today, I doubt that he would recognize the Federal Government as one that has remained true to the revolutionary Founders of this country. Rather, I would imagine that he would see a centralized and bureaucratic form of government that resembles the one that he and the rest of the Founding Fathers rebelled against. That is exactly what the Constitution and the amendments to it and the principles of Federalism were meant to prevent. Out-of-control spending may be the clearest sign now of where we are today in having neglected these principles of Federalism. It is the Federal meddling into the lives of the American people. What it has done is resulted in the unprecedented and also, I would add, the unsustainable level of funding that jeopardizes the very economic well- being of the United States. Our current path, therefore, threatens the American standard of living and our prosperity, the American Dream and the American status as a superpower. You see, by nationalizing every issue, what we do there is we deprive the American people of the benefits that Federalism would normally bring. The Founders intended the States to serve as, as has often been called, the laboratories of democracy, which would compel the States to compete against each other to attract individuals and businesses, if you will. This competition would result in innovations and innovative solutions, the greater accountability and transparency of public servants and the diffusion of power that limits the reach of the national government. Federalism, it's the constitutional guarantee of that good government. So we come here tonight, and we must renew our commitment to Federalism, to the Constitution. By allowing this, our Constitution to be interpreted, though, by the whims of the judicial and executive branches, we have undermined the structural integrity of this document as well as the safeguards that a limited government describes. To conclude, at the beginning of this year, Members of this body take an oath--to do what?--basically, to support and defend this Constitution of the United States. We owe it to the people we represent to remain true to that oath. Restoring adherence to Federalism must begin where? Well, right here in this Chamber. I hope that my colleagues will join me, as the Members are here with me tonight, in re-embracing this idea and this notion and this practice of Federalism, one of the great pillars of the American founding principles.

Mr. GARRETT

Mr. GARRETT. I yield 2 minutes to the gentleman from New York (Mr. Engel).

Mr. GARRETT. Mr. Chairman, I demand a recorded vote.

Mr. GARRETT. I yield 1\1/2\ minutes to the gentleman from Connecticut (Mr. Himes).

Mr. GARRETT. Just to conclude then, Mr. Chairman, the FAA's airspace redesign plan has not been responsive, as referred to on the floor, to the concerns of our constituents, and it's not been comprehensive. Secondly, redesigning airspace would have little effect on delays while alternatives are considered. Finally, I ask the consideration of this bipartisan support to conduct a study on alternative designs. I encourage support for this amendment. I yield back the balance of my time.

Mr. GARRETT. I have an amendment at the desk.

Mr. GARRETT. Mr. Chair, I urge my colleagues to support the Garrett- Himes-Andrews-Engel amendment. In it, the FAA's New York/New Jersey/ Philadelphia airspace redesign plan would redirect thousands of flights per year over the houses of many of my constituents and, actually, the constituents of the other sponsors of the bill as well. In looking at this, we realize this has a very real and negative impact on the region, including a possible decrease in home values. The new flight patterns, which would be considered here, over the region should not be implemented until a thorough study of alternatives is actually presented to Congress. This amendment prohibits the FAA from continuing implementation of the airspace redesign until it has conducted a study on alternative designs to reduce delays at the four airports considered in the redesign. Finally, it is imperative that the FAA consider the concerns of the people that are and have been afflicted by this action. I urge my colleagues to vote ``yes'' on this amendment. I reserve the balance of my time.

Mr. GARRETT

Mr. GARRETT. I thank the gentleman from Indiana for being here tonight as we talk about the Constitution. And who was it that said that the Constitution, it may not be perfect, but it's better than what we have now? As we talk about kicking off tonight's Special Order, this series here in the 112th Congress, I am pleased to be here with my colleague from Indiana and my colleague also behind me, the gentleman from Utah (Mr. Bishop), to talk about these most important issues, the foundation of the Constitution. Back at the very beginning, back in 2004, 2005, there really were not that many Americans talking about the proper role of the Constitution and the limitations that it does place both on the size and also on the scope of the Federal Government. But as the years went by, over the last several years at least, interest in the Constitution has grown as new government programs have whittled away basically at the protections in the Constitution that guarantee to us certain liberties to the people and authorities to the States. So, as we come here tonight, and as we have pointed out in the past, we will continue to highlight until Congress' recent course is reversed. This body has drifted away from the principles of limited government enshrined in this, the Constitution. This document, the finely crafted sections and verses that are in it, the guidelines and the limitations that we see in it of the powers of government it was written to impose, does not have the same personal meaning and importance to Americans it seems it had during the times of the federalist and anti-federalist debates. Is that because it is a different time, and now we're in a different age where we have long since forgotten what it is like to live under tyrannical rule? It may be, Mr. Speaker, because of that, or perhaps otherwise, it could also be because we don't simply cherish and study the Constitution like our forefathers once did. So we come to the floor tonight, through these Constitution hours, if you will, and we hope to, by them, increase the knowledge not only of this body but also of the American public as well. And we do so, taking a look at the intricacies and the nuances of this, the Constitution. Also, I think, we also help to shed some light on the circumstances and the times that inspired the Founding Fathers to write our country's founding document. Tonight, we specifically want to spend some time talking about limited government and its role in protecting human dignity. ``Liberty to all,'' President Lincoln once wrote, back in 1861, ``is the summation of the Declaration of Independence.'' He said further, ``the principles which have proved an apple of gold to all of us.'' Yet the mere assertion of those principles for him was not enough. As Lincoln later pointed out, for liberty to have real meaning, it must be enshrined, and it must be enshrined in law. The Constitution, as he put it, is the picture of silver subsequently framed around. Then he went on to say that the picture was made not to conceal or to destroy that apple as it was framed, but rather to adorn and to preserve it. This, Lincoln said, drawing upon the book of Proverbs, is ``a word fitly spoken.'' So to understand America, you must understand our founding principles. To understand the Constitution and why government should be limited, you must then, therefore, understand also the Declaration of Independence. So, the structure of the Constitution follows the principles and the arguments of the Declaration, where it says, of course, all men are created equal; they are endowed by their Creator with certain unalienable rights. This great statement, that we are hopefully all familiar with, at the outset of the Declaration, a truly revolutionary claim at the time, is followed by a list of complaints lodged against the king at that time, King George III. To just spend a moment or two to go into this in a little bit more detail and to delve down into it, these then can be divided into three categories, corresponding with the legislative, executive, and judicial foundations of government. So to step back for a moment, the list takes up over half of the Declaration, and the complaints there specify exactly where their King had failed. And so, too, why government by consent is therefore necessary. Now he refused to enact necessary laws, they said. Harmful ones took their places, they said. Judges entirely dependent upon the King's will were rendered mere puppets at the time; and when the King did act, he flooded American shores with soldiers and bureaucrats. Their complaints there were specific. The King suspended representative Houses for opposing with manly firmness invasions on the rights of the people, he wrote. He went on to say, he has obstructed the administration of justice. How? By refusing his assent of laws for establishing judiciary powers. He went on to say he was also guilty of imposing taxes on us without our consent and also suspending our very own legislatures and declaring themselves vested with powers to legislate for us in all cases whatsoever. Yet another complaint alleged against the King was that he ``erected a multitude of new offices and thereby sent hither swarms of officers to harass the people and eat out their substance.'' So, when all power is taken from the hands of the people and accumulated in the hands of a single person, or single head, if you will, it breeds a similar power grab by who else? The bureaucrats, who have no job but to consume the productivity and resources of the people, of the populace. So the overweening Federal Government today is guilty of the same offenses of liberty as back then as well. Americans who are desperately trying to figure out and file their own income tax returns right now know this all too well, I think. And so the Declaration anticipates what we have here, the necessity of separation of powers and just society. So its message is clear: No single person or political force can rightfully possess all the powers of the one government. Only the Divine, only the Divine who is named in the Declaration of Independence as the Author of the laws of nature, also named as the Creator, also named as the Supreme Judge of the entire world, and finally also named as Divine Providence, only the Divine justly exerts complete power. But in the hands of a human being, such power is, as it's stated there, absolute despotism. Our Founding Fathers did not believe that human beings could be perfected. We were not divine. We were capable of both good and evil. James Madison later wrote in defense of the Constitution: ``As there is a degree of depravity in mankind which requires a certain degree of circumspection and distrust: So there are other qualities in human nature which justify a certain portion of esteem and of confidence.'' So to assume that man's goodness will always direct his actions is to ignore reality. People, therefore, are imperfect and cannot be perfected. And so no edict of government will change that fundamental fact. To step back again, what, then, is the role of government? Calling government the greatest of all reflections of human nature, James Madison said that the government must start where? Well, with the understanding that men are not angels, as the gentleman from Indiana stated before. And as he said, were they perfect or angelic, no government would be necessary. Jefferson, Madison's friend, implicitly argued the same thing in the Declaration. So, today, when we speak of ``the government,'' we often think of an impersonal force, somehow out there and above everything, above human nature, if you will. But what is government? Government is composed of what you see here. It is composed of human beings, all of whom are imperfect. And so to be in the public sector or to be elected to office does not automatically, by any means, transform a human being into that angel. And so for that very same reason, that very same reason that human beings are not perfect, government therefore must be limited and its duties therefore must be delineated. Going back to what President Lincoln once said, he further elaborated on the importance of human dignity, which is our discussion tonight, back in 1861 where he said a couple of things, and I will close on this: ``Without the Constitution and the Union, we could not have attained the result; but even these are not the primary cause of our great prosperity. There is something back of these, entwining itself more closely about the human heart.'' And what is that? ``That something is the principle of 'liberty to all'--the principle that clears the path for all--gives hope to all--and, by consequence, enterprise and industry to all.'' Over the course of this 112th Congress, this caucus and my colleagues, hopefully, on both sides of the aisle will continue to sponsor these discussions, these Constitution hours, if you will, to expand upon our understanding of these core principles of limited government enshrined in our Constitution. Mr. Speaker, I appreciate this opportunity to speak tonight on this very important topic, and I yield back to the gentleman from Indiana.

Mr. GARRETT. Again, I thank the gentleman from Indiana for hosting tonight's Special Order dealing with the Constitution. More specifically tonight, we are spending a little time talking about, as the previous gentleman just did, unlimited government and its role in protecting human dignity. Now, the gentleman from Texas was just referencing the issue with regard to the unsustainable projection and trajectory of spending at the Federal level, and with regard to the burden, therefore, that we place on untold generations that follow after ours. You have to then ask: What sort of respect does this generation have for the human dignity of future generations who encompass their lives with the specter of having limitations on their abilities to make fundamental choices for themselves because of the obligations that have been placed upon them by this generation? Earlier, I spoke about the Divine, and I think you need to do so when you're asking the fundamental question, as we're doing tonight, with regard to the issue of human dignity. I was quoting, not from myself, but from Lincoln and also from our founding documents, which speak of the Divine and name the Declaration as the Laws of Nature by the Creator--the Supreme Judge of the world, the Divine Providence. All areas of this, as is set forth in our documents, talk about human dignity coming not from man, himself, but from the Creator, from the Divine. Then it's the imperfect--man, human beings--who distort that in some way. Government, as I said before, being not perfect and not capable of being perfected, has the obligation to protect human dignity as best it can, but it obviously does so in an imperfect manner. The gentleman from Utah talked about its not just occurring over the recent decades but over the last generations--probably going back over 100 years, he said. Actually, if you think about it, it was probably to the beginning of--what?--the Progressive Movement, I guess you would say here in this country, where there began this distortion of the understanding of the Constitution. The Progressive Movement elaborated upon the powers of the Federal Government to expand in areas that never were envisioned by our Founders. As a matter of fact, as I talk about the Progressive Movement, we have the Progressive Caucus here on the other side of the aisle, I guess, which speaks about these things all the time but in a much more favorable light than we talk about it from this side of the aisle. So, if you go back about 80, 90, 100 years, to the Progressive Movement, it began to crimp upon the human being and the rights of man--basically, therefore, what we're talking about tonight, human dignity--in some very profound and fundamental ways. What are some of the basic issues that a man is able to decide about himself? What he is able to eat and what he is able to grow to eat. It was the Progressive Movement. It was during the time of Roosevelt, who finally said the Federal Government knows better when it comes to what man can eat and what he can grow for himself, and he put a limitation on an individual farmer as to what he could grow in his own backyard to sustain himself and his family. The Federal Government said, No, we are going to have the long arm of the powers of the Federal Government reach into that farmer's backyard and dictate to him that, no, he cannot grow those particular crops even though he was not selling them, and they were not in the stream of commerce, and he was not transporting them across State lines, and interstate commerce was not involved whatsoever. Rather, the Government said: We, the Federal Government here in Washington, can constrict him as to the very food that he provides for his own family. Now fast-forward to this generation and to this past Congress, and you'll see that the same sort of thing goes on here. It's not only food but all the regulations that entwine in that area, which have grown into a multitude of regulations over the years--from food to water. Washington now dictates your very own water use, and we're all familiar with that infamous decision with regard to the toilets that you have in your own house and with regard to the water consumption that you have. These are not even things that you can decide for yourselves. The Government steps in. How about the lights that you turn on? How are you going to illuminate your home so you can have a light to read your book in the evening? Now the Federal Government says that is not the province of man. That is the province of the Federal Government's to dictate as well. So, in each area, we take one more chip away at individual human dignity--in deciding how you're going to control and live your own life. Washington is now the arbiter in those things. We rise now to, perhaps, one of the most fundamentals after food and water and light--and that's health care. Of course we saw what happened in the last session of Congress here when the Federal Government said that we here--the bureaucrats, the elected officials, the politicians-- know better than you as to just what sort of health care you need, as to just what sort of doctor you should see, how often you should go, and all the other myriad of decisions that were wrapped up in that semblance of: How do I take care of my own human body? How do I take care of my own health decisions? Now we have passed a bill, under our objection, of course, on this side of the aisle, but with the complete support on the other side of the aisle and with the White House as well, saying, No. Washington can now dictate those areas to a point that we have never seen before in the history of this Government and in the history of this country, which is that the price of citizenship is the purchase of a particular product that the Federal Government bureaucrats dictate. The price of citizenship, the price of freedom, the price of liberty--the price of being an American--is now dictated to you by the Federal Government and by bureaucrats here in Washington. They will dictate and control your health care just as the previous Progressive Era politicians said they would dictate with regard to the food that you grow, with regard to the water that you use, with regard to the lights that you light--and now in the area of health care as well. So where do we then end up going from all this? What is the next step? As I said before, government is not perfect, and man cannot be perfected, so we should not look to the government, as we said before, as the angelic beings who are going to give us all the right rules and regulations in this area. We should not look to the government to provide for us in these respective areas. Rather, that we are individuals made by our Creator, and we have our own worth and our own human dignity, and Washington should not take that away from us. So I will close where I began some time ago. We will look then not to the imperfect bureaucrats or to the imperfect politicians but, rather, to the people who inherently have the power to send us here or to return us, those people who have the power to create governments or not: the population of this country, the citizens of this country, from which all power truly emanates originally, for them to speak up loudly, to have their voices heard as they did in this past election in November, to make sure that their human dignity is protected, that it is not eroded upon anymore, and that, rather, it can grow and prosper and expand as our Founding Fathers intended and why these rights and limitations on powers were rather limited in the founding documents that we cherish so greatly. And that is why, as I said at the beginning, I appreciate so much the gentleman from Indiana for your working in bringing this message here to the floor, the Members that are here, the Members that are listening, and to the American public. I look forward to further work from you and the rest of the caucus and other the members of this conference to expound upon these areas, not only of human dignity but also of our issues of federalism and protected rights to the States and the individuals as well. I look forward to those discussions on the floor in the future.

Mr. GARRETT

Mr. GARRETT. Mr. Speaker, I rise today to observe the 64th commemoration of Taiwan's ``2-28'' Massacre. The massacre was an anti- government uprising in Taiwan that began on February 28, 1947 and was violently suppressed by the Chinese Nationalist government over the following weeks. Estimates of the number of deaths vary from ten thousand to thirty thousand. The massacre began when Taiwanese citizens confronted Chinese Nationalist troops that had beaten and arrested an elderly woman. In the weeks that followed, the Republic of China sent soldiers to capture and execute unarmed civilians--innocent doctors, lawyers, and students that were guilty of only wanting a more free and independent government. Over the following four decades, the Chinese Nationalists continued to rule Taiwan with an iron fist under Martial Law that was not lifted until 1987. However, through this daunting experience, a bigger and brighter Taiwan is beginning to emerge. In the over half-century since these events, we have seen a Taiwan that struggled for independence under an authoritarian regime, now have a thriving and pluralistic democracy. While they are still fighting for sovereignty from China, since 2000 the Taiwanese have made strides to control their own destiny, and have transitioned between ruling parties based on the will of its citizens on multiple occasions. Mr. Speaker, I urge other Members to join me today in commemorating this important historical event.

Mr. GARRETT

Mr. GARRETT. Mr. Chairman, just earlier we heard the former Speaker come to the floor just moments ago and say that she has now read the bill. Uh-hmm. Of course we heard her famously saying before that we had to pass the legislation in order for her to find out what was in the bill. We can tell you who has read the bill, and that is the courts of this great country. And the most recent Federal courts said they have read it, and they have found that the bill is unconstitutional. For this is the first time in the history of this country that the price of citizenship, this is the first time in the history of this country that the price of freedom, this is the first time in the history of this country that the price of being an American is that you have to buy a particular product that some unknown, faceless bureaucrat here in Washington ordains that you have to buy. We have come to the time that liberty is being taken away from us, that the strong hand of a Big Brother is reaching out and telling us you have to do this and you have to do that as the price of freedom and the price of liberty. Yes, to answer your questions. Yes, we will legislate; yes, we will address health care; yes, we will address the American people's interests in this area. And I commend the gentleman from Iowa on this amendment.

Mr. GARRETT

Mr. GARRETT. Mr. Speaker, late in the 111th Congress, I introduced, with co-sponsors, Mr. King of New York and Ms. Ros-Lehtinen of Florida, the Equitable Treatment of Investors Act (H.R. 6531). This bill reaffirmed and clarified the key protections for securities investors intended by Congress in the 1970 enactment of the Securities Investor Protection Act (SIPA) and major amendments to that Act in 1978. Today I reintroduce that legislation with clarifying amendments. The central purpose of the legislation is to reaffirm the original Congressional intent on two key aspects of the administration of SIPA in the liquidation of a bankrupt broker-dealer firm. First, as a general matter, the determination of customer ``net equity'' shall rely on the final account statement received from the debtor prior to closing, plus any additional supporting documents, such as trade confirmations. Second, and again as a general matter, avoidance actions, or ``clawbacks'', to recover property transferred to the customer prior to closing shall be prohibited. While I emphasize these clarifications simply reaffirm current law, the actions and interpretations of SIPA being made by the Securities Investor Protection Corporation (SIPC) and the Trustee appointed for the Bernard L. Madoff Investment Securities LLC (BLMIS) liquidation proceeding make the passage of this legislation important and necessary. In this legislation, there are important exceptions to those two general customer protections that deny that beneficial treatment to any customer who knew of or was complicit in the fraudulent activity of the debtor and to any customer who, as a registered professional in the securities markets, with the requisite knowledge of these matters, knew or should have known of the debtor's fraudulent activities and failed to notify appropriate regulatory authorities. This portion of the bill's language is meant to assure that SIPC and the receivership Trustee have fully adequate legal powers to act against customers undeserving of SIPA's investor protections. While this clarifying legislation is intended to have general application to all broker-dealer bankruptcies involving debtor fraud, introduction at this time is directly related to the failure of SIPC and its Trustee to fairly and adequately act to provide statutorily mandated and intended SIPA protections to the several thousand innocent customers defrauded by Bernard Madoff in the operations of his investment advisory and broker-dealer firm, BLMIS. Compounding the grievous shortcomings of SIPC to respond promptly and usefully to these customers' financial plight is the well-documented failures by the SEC and FINRA, the regulatory overseers of BLMIS, to detect and end the Madoff fraud over a period of 25 or more years. Given the colossal regulatory oversight failure and SIPC neglect in assessing broker-dealer firms at a level commensurate with the dramatic growth of the securities markets and the participating broker-dealer firms, it would be reasonable to expect that SIPC and the SEC would have made exceptional efforts to make a rapid and comprehensive response to the financial needs of the Madoff victims. That has not been the case. Quite the contrary, in fact, has occurred. SIPC has denied protection to over half the accounts at closing, in direct violation of the legal mandates of SIPA as currently in affect; provided full protection to only 25% of accounts; taken nearly two years to pay advances to the limited group deemed eligible; and threatened to claw back funds from roughly 1000 innocent customers. So that my colleagues may judge for themselves the urgent need for this Congressional intervention, let me highlight key factors supporting this need for action. The legislative record surrounding the enactments of the 1970 Act and the 1978 amendments is replete with statements from the legislative floor managers, active supporters, committee reports, the Treasury, the SEC, and securities industry spokespeople likening the intended SIPC protection to the bank customer protection offered by the FDIC. Likewise, the legislative history emphasizes protection of all innocent customers from brokerage failure, with particular mention of small, unsophisticated customers, and the need for prompt action by SIPC in payment of advances for relief of individuals, understandably devastated by the sudden loss of key financial assets. Critically, Congress recognized the need for restoring investor confidence in the financial markets at a time when the financial industry was under tremendous duress and overwhelmed by the paperwork crunch caused by the processing of physical securities. Theft and misplacement of securities, failures of trade executions, and insolvencies were commonplace. Amidst the backdrop of several popular Ponzi schemes and brokerage failures was SIPC born. For the customer of a bankrupt broker-dealer firm to qualify for SIPC protection, it is necessary for the customer's account at closing to have a positive ``net equity'' determined by subtracting any outstanding obligation of the customer to the firm from the amount the firm ``owed'' the customer. For the forty years of SIPC's existence, it has been the standard practice in making that simple calculation to use the firm's most recent account statement to the customer, usually supported by trade confirmations, if any, relevant to the final statement's presentation of holdings and values. Not surprisingly, this is the outcome required by law. Under the legal regime governing the relationship between brokers and customers, it is indisputable that the broker owes the customer the amount reflected on the customer's account statement. Indeed, in a world where customers and, generally speaking, brokers do not hold physical securities, it could not be any other way. Given the move away from the possession and trading ownership of actual securities to a ``book entry'' system based on the essential trust of validity of those account statements, no customer would, therefore, have any reason to believe they would not be protected based upon their account statements and confirmations. In the SIPC receivership for the Madoff firm, however, the practices have been inconsistent with the law and quite different and contrary to the repeated assertions of SIPC and its Trustee, never to the ultimate benefit of the innocent individual customer. Rather than using the customer's final account statement--consistent with ``reasonable expectations'' of a customer--the SIPC Trustee has ignored the statutory requirement of SIPA and has devised a ``cash-in/ cash-out'' formulation (CICO) to determine a customer's ``net equity''. To suggest that the Securities Investor Protection Act would have the effect of denying customers their legal right to rely on their account statement is counterintuitive. This formulation was developed from a position of hindsight once the Trustee, his lawyers, and forensic accountants were inside the Madoff firm and learned that no trades had been made by the firm for customers. Even though customers had regularly received monthly account statements showing trades and holdings in ``real securities'' (often blue chips in the Dow 100) that were supported periodically by trade confirmations in those stocks, the Trustee declared that all transactions were ``fictitious'' and that statutory words such as ``owed'' and ``positions'' had no meaning. He further has asserted that in a Ponzi scheme the customer has no basis for ``reasonable expectation''--a public utterance which will destroy the public's confidence in our securities markets at odds with SIPA's primary policy objective. To execute the Trustee's CICO formulation it is necessary to examine every customer account over the entire term of the relationship (for many spanning 20 to 30 years) to sum up total deposits and total withdrawals (without providing any return on investment--even a standard rate). If deposits exceed withdrawals the customer has a ``net equity'' and qualifies for SIPC protection under CICO. If withdrawals exceed deposits over the life of the relationship, the customer is declared ineligible for SIPC relief and may be targeted for ``clawback'' of the net withdrawals. How, you may ask, could the Trustee ignore the SIPA definition of ``net equity'' and proceed to institute ``clawback'' actions? The answer lies in SIPA's incorporation by reference of provisions and powers under the Federal Bankruptcy Code. However, the Bankruptcy Code does not permit ``clawbacks'' of amounts paid by a broker to a customer to satisfy the broker's legal obligations to the customer--our securities system could not work any other way. Again, SIPC and the Trustee are disregarding the clear body of law to further harm the Madoff victims. Let us now examine the results of this receivership to date to determine just how equitable its performance has been. At closing, the approximately 4900 accounts of BLMIS that have filed claims for relief with SIPC had aggregate final statement values of roughly $57 Billion. Of that 4900, well less than half of those accounts (2053) have been determined eligible for SIPA protection under the Trustee's CICO formulation. Only 1207 of those eligible accounts will receive full SIPA relief benefits--advance payment of $500,000 and a priority status to the distribution of recovered ``customer funds'' up to the remaining balance of the CICO-approved claim. 846 of the approved claims will receive advance payments averaging $200,000; and because the advances fully satisfy the CICO claim these accounts have no priority status with respect to customer funds. 2728 accounts receive no relief (advances or priority status) under SIPA. These numbers, derived from SIPC responses to the House Financial Services Subcommittee on Capital Markets, portray an outcome distressingly out of step with Congress' intent for SIPA protection. The overall record of performance in providing investment protection in this case is even worse. The bulk of advance payments to eligible accountholders were distributed in the last quarter of 2010, fully two years after the closing of BLMIS. There is absolutely no way to square that performance with the clear mandate in Section 9(a) of SIPA for ``prompt payment'' of advances--a mandate which recognized that most customers, victimized by bankruptcy of their broker-dealer, will be in dire need of urgent financial relief. Now let us turn our attention to the ``clawback'' suits against innocent customers who over the course of their investment relationship withdrew what they rightly believed to be earnings for normal real life purposes--income to support retirement, payment of Federal, State, and local taxes, helping a child with a home purchase, assisting a grandchild with college costs etc.--only now to find the Trustee demanding a return of some of those disbursements. What the Trustee now suggests as relief for all the Madoff victims, those who have received no SIPA financial protection (over half) and those receiving inadequate and dilatory relief, is the opportunity to file fraud claims against the ``general'' bankruptcy estate, when and if assets are assigned to it. For most of the innocent customers, now in desperate financial condition and fraught with daily anxiety, such relief is temporally distant with challenging prospects for success. In a general bankruptcy proceeding these individuals, many of them aged, will be competing with claimants (financial institutions and the like) with far greater resources and top-line legal representation. To his credit, the Trustee, with aid provided by the U.S. Attorney's office, has assembled some significant assets from parties complicit with the debtor. The innocent customers of Madoff should without question have the first and priority claim for relief in the distribution of those assets. That is the clear intent of SIPA in establishing claims to ``customer funds'' before assets move into the general bankruptcy estate. Had the Trustee, at the outset of this receivership, followed historic SIPC practices using customer final statements to determine ``net equity'', then all of these innocent customers would now be eligible for the distribution of ``customer funds'' under some equitable plan devised by the Trustee with the approval of the Bankruptcy Court. Moreover, they would be protected and assisted in their distress by full advances from the SIPC Fund, which has the resources to provide such relief. Two additional matters need to be understood by my colleagues. Because the use of the CICO methodology reduced dramatically the number of customers qualifying for advances from the SIPC Fund (an entity funded by the broker-dealer community and expressly established for the early relief of customers), that Fund has benefited by a savings of over $1 billion. To make this outcome more unacceptable, the failure to distribute those funds means that customer refund claims to the IRS for ``theft losses'' will be increased by some $300 million. Thus the broker-dealer community's responsibility gets passed on to the American taxpayer. The conduct of this receivership has been pitifully inadequate in fulfilling the protections of the Madoff victims contemplated by Congress in 1970 and 1978. The processes employed by the Trustee, from the standpoint of the typical customer, have been needlessly time consuming and remarkably expensive. In its most recent response to the Capital Markets Subcommittee, SIPC advises that the Trustee, his law firm, and other consultants have been paid some $288 million over two years and contemplate billing for another $1 billion over the next four years. All the while, many Madoff victims are scrambling to exist. It is my earnest hope that an overwhelming majority of my colleagues will join me in supporting this legislation, which is so important, not only for the protection of many innocent investors, but also for encouraging investment going forward, which is critical to the economic renewal our country needs.

Mr. GARRETT

Mr. GARRETT. I thank the Chair and I thank the gentlelady from California on her opening comment with regard to accepting responsibility. I think that's all that this side of the aisle has ever been asking for when it comes to the SEC, to accept the responsibility of their past poor performance in so many different ways.

Mr. GARRETT. I did not yield, but I appreciate the gentleman's comment. In any other realm of life, personal life, business life or whatever, when you have a failed business, what have you, when you have failed portions of that company and they fail in their performance, is the response, well, the solution to that problem is more people, more authority and more money? That seems to be only the case here in Washington, D.C., in our Nation's capital when you can have a failed entity like the SEC where they failed in so many areas; where they failed, as we've already discussed, with regard to Ponzi schemes like the Madoff situation, the Stanford Ponzi scheme; where they failed in the area of operating a failed investment bank supervising program as well; where there was a lack of supervision over in the money market fund which led to for the first time, I guess, in history the breaking of the buck with the reserve primary money market fund account. They failed in all of these areas. And what is Washington's response or at least what is the response from the other side of the aisle? Let's give them more money. The irony here is that the gentleman from Massachusetts comes to the floor today to enhance their funding, but, if I remember correctly, the Democrats controlled this House from 2007 through 2010. They had all that time to go in and do a complete audit of these agencies. They had all those 4 years to look at them to see where they were making mistakes, how to fix them, improve them, and then increase their resources. But they failed to do that during the last 4 years. And now in this CR they say this is the time to do so. The gentlelady talked about punishing the agencies. Well, they are punishing people. They're punishing the enforcement folks over at the GSA. They're punishing the folks in enforcement over at the IRS. And I would question the gentleman from Massachusetts before he put in this language, did you contact any one of those agencies to see what the implications would be on those agencies for cutting to the extent that you are here?

Mr. GARRETT. Mr. Chairman, I move to strike the last word.

Mr. GARRETT. Will the gentleman yield?

Mr. GARRETT. It is a simple question to ask, that when you come to the floor with an amendment to say that we're going to take money and yank money out of one agency that has a primary responsibility to the members of the public of this country, to first go to those agencies and ask, well, what impact will they have? It's not a matter whether other amendments are coming down that will have a larger or more de minimis impact. It's incumbent upon the gentleman from Massachusetts to do his research before he comes to the floor with his amendment. I'm sorry to see that he did not. Finally, as well, he comes to the floor with this amendment saying, well, we need to do this action now. Don't look back at their past poor performance. Let's take this action now. I remind the gentleman as the author of the Dodd-Frank reform legislation that his very own legislation mandated a study, it was in section 967, to reform the operation of the SEC and asked to do a study in that to see how their reform has occurred. Why don't we wait for the studies to come out, for the information to come out, to see whether or not the SEC has changed its performance. Even after they've lost their majority, we see the conduct of the SEC and it still continues to fail. Even now we see that they are under investigation by the Inspector General. Why? For allegedly leasing more space before receiving funds to do so. So they've had a poor track record in the past. Unfortunately in some areas today, I'm sorry to say, they still have a poor track record right now with regard to their finances. And who knows where they will be in the future. Now is not the time to say, let's just throw out more money to them. And when we talk about throwing out more money, I just harken back to a comment that the gentleman from Massachusetts made just earlier this week. We were looking at the actions of the SEC and we were looking at the actions of the CFTC in a hearing just the other day. And whereas our side of the aisle, Republicans, were looking at this issue and saying, what can we do to honestly reform and make the rule-making process and the rules that come out more consistent and proper and be able to perform better in the regulatory climate. Their side of the aisle was doing the same thing this week as they are on the floor right now, saying the answer to everything is, what? More money. He said it in committee. He's saying it on the floor right now. The answer to every single problem, I must tell the Chair--and the American people know as well--is not paying more money for programs. It's making sure that those agencies perform correctly, and that's what this side of the aisle is all about.

Mr. GARRETT. So you see the importance of having both of those issues and how there's not a hard dividing line between the two is what you're saying?