Marcy Kaptur

Ms. KAPTUR

Ms. KAPTUR. I think everybody in our country knows that we all will have to sacrifice in order to pay down our long-term debt and that when we make public decisions that we help our economy grow. In every business I go into, they say, Marcy, bring me customers, bring me customers. Whether they're out of work and they receive unemployment benefits, which they have earned, or whether it's allowing an individual through a payroll tax holiday to have a few extra dollars of spending money, the advantage of helping the middle class is that it's going to go directly into our economy. It goes to every small business. Whether it's to buy vegetables at the corner stand, whether it's to buy gasoline for your car, whether it's to buy clothing for your children, when you think about where those dollars will go, it's going to go to essentials. It won't be wasted money. All of history shows us, because their incomes have really not gone up, because buying power has gone down for the average family and prices are going up, that the middle class is guarding every penny so much more carefully. I had to go out and buy some throw rugs the other day because of all the rain in the Midwest that had caused water to rise in our basement. I couldn't believe the price of throw rugs. I thought, oh, my goodness, and I went to two or three stores. I don't have time to do that, but I was reacting to the increase in prices. The average family has great difficulty in buying those kinds of items, so those few hundreds of dollars mean everything, and they will use it to improve their homes, for example.

Ms. KAPTUR

Ms. KAPTUR. I thank the Speaker. Let me rephrase this. At the hearing, the Commodity Futures Trading Commission's Jill Sommers' testimony was invaluable to the public. Her testimony places the MF Global collapse in proper perspective, and I'm quoting directly. She said: ``Lehman Brothers and Refco are the two most recent futures commission merchant bankruptcies. While the Lehman Brothers' bankruptcy was monumental in scale and the Refco bankruptcy involved serious fraud at the parent company, commodity customers did not lose their money at either firm. In both instances, commodity customer accounts were wholly intact; that is they contained all open positions and all associated segregated collateral. That being the case, customer accounts were promptly transferred to healthy FCMs''--or futures commission merchants--``with the commodity customers having no further involvement in the bankruptcy proceeding. Unfortunately, that is not what happened at MF Global because customer accounts were not intact.'' The fact that ``customer accounts were not intact,'' as Commissioner Sommers described it, means that someone took other people's money. I believe most of us would call that theft. Even if some of the money is recovered by the bankruptcy process, that does not alter the fact that the process by which customer accounts were violated broke the law. It is an understatement to say that many American families and businesses lost important investments. The mismanagement of this one firm has put hundreds of people's investments in jeopardy. They deserve answers. Congress has lead responsibility to ask hard questions, and here are some questions that demand reply. On transfers of funds from customer accounts, Congress must ask examiners from Chicago Mercantile Exchange Group, who said that transfers at MF Global were made ``in a manner that may have been designed to avoid detection,'' so let us ask: Should the person or persons who attempted to avoid this detection be held accountable, and how should that occur? It seems unlikely Mr. Corzine is not responsible. So which person, or persons, at MF Global made the decision to invade customer accounts? Congress must assure full tracing of those transactions. A second group of questions should revolve around who are the responsible parties. If Mr. Corzine simply cannot recall or does not know what happened at MF Global, as he seemed to claim, who should Congress and investigators speak with at MF Global to ascertain his exact role and those of other top executives? Who's going to probe? That's the role of a congressional investigatory committee. Who, besides Mr. Corzine, was directly responsible for segregating customer account funds from MF Global funds? Over $1 billion did not walk off on its own. Some set of persons at MF Global moved those funds, and it's highly implausible that no one authorized that action. So what set of persons authorized those actions exactly? Another set of questions should revolve around who approved MF Global's risk standards? We know that Michael Roseman, MF Global's former chief risk officer who resigned in March 2011, reportedly assessed that the strategy that MF Global was undertaking was too risky. Any assertion that the strategy was prudent at the time, as Mr. Corzine is arguing, is against the facts of history because MF Global went bankrupt. Congress needs to take whatever steps are necessary to find out exactly who pressured Mr. Roseman to resign for blowing the whistle on the behavior inside that company. Another set of questions can be asked about what other financial partners participated in MF Global's trades. There are allegations that the transfer of $200 million to J.P. Morgan in the final days of MF Global was suspected by J.P. Morgan bankers of utilizing MF client funds. To what extent are these allegations true? At what point can we determine whether wire fraud was committed and, if so, by whom and to what extent? All of this begs the ultimate question of whether or not sufficient protections were exercised for customers to stop wire fraud. Another set of questions can revolve around were any inside players aiding and abetting MF Global's behavior. We know that current Commodity Futures Trading Commission Chairman Mr. Gensler has recused himself from the case. Mr. Gensler actually worked for Mr. Corzine at Goldman Sachs, and they apparently carried on later in the same social and academic circles. The public has a right to know at what point Mr. Gensler had any knowledge or reason to believe that the customer accounts at MF Global might not have been intact; and then, how did he and his agency and his staff respond--day by day, hour by hour, email by email? Finally, according to Reuters, companies like Koch Industries removed billions from MF Global just before it filed bankruptcy. How did that powerful company know when to take their money out and why did my constituents not know when to take their money out? Could, in fact, Koch Industries have gotten the same tip-off that Goldman's CEO Hank Paulson had given Freddie Mac investors and Fannie Mae investors just a few years before? How much of MF Global's money not wired rightfully belongs to the holders of segregated accounts that were inappropriately tapped by MF Global? How do my constituents get full restitution? Yes, there are far too many questions--lots of questions--and far too few complete answers. Yes, this Congress needs to take white collar crime more seriously. Who would accept an explanation, as we heard the other day, that ``I did not intend to steal.'' It could be $100 from the corner gas station, right? How can that be an acceptable answer for taking hundreds of millions and over $1 billion? Rigorous investigation matters. Congress needs more robust hearings. We need more thorough investigations. What should concern all of us is that the financial industry's fraud and imprudence, yes, addictive behavior, is not limited to a case here or there. In the financial services sector, fraud has become systemic. It is endemic. It has harmed our Nation's economy to its vitals and has hurt millions of people across our country and the financial systems of other countries. In 2009, the FBI testified before the House Judiciary Committee that the current financial crisis, and I'm quoting directly, ``has produced one unexpected consequence: it has exposed prevalent fraud schemes that have been thriving in the global financial system. These fraud schemes are not new, but they are hitting the economy hard and the public is hurting as a result of market deterioration.'' What a true statement. Regretfully, this isn't the first time that our country has seen a crime wave in the financial services industry. Indeed, the crimes and addictive behavior seem to be getting bigger, not smaller. In the 1980s, it was the savings and loan crisis. Then the FBI responded with a staff of 1,000 agents and forensic experts based in 27 cities. Do you know how many they had over there when this started? Forty- five. You could count them on your own hands. Perpetrators went to jail back then but, rather, the Congresses at that time ignored the warnings of what had happened, and they gave an even bigger green light during the 1990s to more abuse by removing the rules of the road for banking during the 1990s. Example, the upending of the Glass-Steagall Act in the late 1990s that blew the lid off prudent banking and allowed bankers and speculators to be in the same company. And look what has happened. We need to restore the Glass-Steagall Act, and I have a bill to do that, and there are dozens and dozens of cosponsors on that bill. In 2000, the surreptitious undermining of derivative regulation by this Congress led to Wall Street's bullish plunder that we are now experiencing again, the result of addictive behavior of the 2000s. You know, when you go back to the savings and loan crisis, that was much smaller than what we are enduring today. That is why I have a straightforward bill, H.R. 1350, the Financial Crisis Criminal Investigation Act. It authorizes an additional 1,000 agents and forensic experts for the white collar crime division of the FBI to investigate and prosecute these financial crimes. I encourage all of my colleagues to join me as a cosponsor. The Bureau does not have anywhere near the resources it needs to take on crimes of this magnitude and dimension. Congress has long debated what level of regulation is needed to restrain financial addicts. There should be no debate about the need to uphold the law, to recover innocent people's money, to prosecute the addicted gamblers, to set a strict standard of behavior in the financial sector so it simply never happens again, so that we can restore confidence and regular order, not insider abuse, to America's financial markets. I think this Congress has an awesome responsibility to do its job, and it should not fear anyone. The committees of this House should be working overtime to probe the truth, to find the truth, to get at the truth of those who have harmed America, that have put so many millions of people out of work, where so many homes have been foreclosed that the property values of this country can't even find their footing at this point. It's affecting capital formation; it's affecting the ability of local banks to make loans because they're not sure what's going to happen to valuation on their books. What could be more serious than the committees of this Congress doing their job? I want to commend Congressman Lucas of Oklahoma. I want to commend Congressman Peterson of Minnesota. Wouldn't it be wonderful if they could continue their important work, but that the other committees of this Congress that have responsibility for oversight, Government Oversight and Reform, the Judiciary Committee, the Financial Services Committee, the Energy and Commerce Committee, were actually to do the work that needs to be done to put this country's banking and financial system back in a decent position with prudent rules and to finally quash the addictive behavior that has brought our country to this very dangerous point? [From The New York Times, Dec. 11, 2011] A Romance With Risk That Brought On a Panic (By Azam Ahmeo, Ben Protess and Susanne Craig) Soon after taking the reins of MF Global in 2010, Jon S. Corzine visited the Wall Street firm's Chicago offices for the first time, greeting the brokers, analysts and sales staff there. One broker, Cy Monley, caught Mr. Corzine's eye. Unknown to MF Global's top management in New York, the employee, whose job was to match buyers and sellers in energy derivatives, was also trading a small account on the side, using the firm's capital. ``How are you making money on side bets? What else are you guys doing to make money here?'' Mr. Corzine asked enthusiastically, his eyes widening, the broker recalled. The new chief executive grabbed a seat and spent an hour questioning Mr. Monley as other top executives from New York hovered impatiently nearby. Although Mr. Corzine had been a United States senator, governor of New Jersey, co-head of Goldman Sachs and a confidant of leaders in Washington and Wall Street, he was at heart a trader, willing to gamble for a rich payoff. Dozens of interviews reveal that Mr. Corzine played a much larger, hands-on role in the firm's high-stakes risk-taking than has previously been known. An examination of company documents and interviews with regulators, former employees and others close to MF Global portray a chief executive convinced that he could quickly turn the money-losing firm into a miniature Goldman Sachs. In the final days before filing for bankruptcy, MF Global moved an estimated $1.2 billion of customer funds to other institutions. He pushed through a $6.3 billion bet on European debt--a wager big enough to wipe out the firm five times over if it went bad--despite concerns from other executives and board members. And it is now clear that he personally lobbied regulators and auditors about the strategy. His obsession with trading was apparent to MF Global insiders over his 19-month tenure. Mr. Corzine compulsively traded for the firm on his BlackBerry during meetings, sometimes dashing out to check on the markets. And unusually for a chief executive, he became a core member of the group that traded using the firm's money. His profits and losses appeared on a separate line in documents with his initials:

Ms. KAPTUR

Ms. KAPTUR. Mr. Speaker, I rise today to express my disappointment with the U.S. Department of Agriculture's (USDA) Grain Inspection, Packers & Stockyards Administration's (GIPSA) final rule that was supposed to protect our Nation's farmers and ranchers from abusive practices in the livestock industry. Simply put, the final rule is inadequate and shows the power big corporate packers and processors have in this country. The final rule does not include about half of the protections it did in a previous draft. Congress had to direct USDA in the 2008 farm bill to establish a set of comprehensive protection rules because the department was so slow in responding to the changing marketplace that has become so slanted toward corporate packers and processors that we are losing small farmers at a rapid pace. The average American chicken grower makes 34 cents per bird while the processing corporation makes $3.23 per bird. With a profit margin of 34 cents is it any wonder that we have lost over 460,000 small-scale farms since 1982. USDA claims it is committed to ensuring a fair and transparent marketplace. How can we have a fair and transparent marketplace when we allow corporations to force farmers to sign production contracts where one farmer is paid less than another despite producing the same livestock because there is no way for farmers to determine fair product value since there is no contract disclosure requirement. In addition, how can USDA claim it supports a fair marketplace when it fails to clearly define conduct that is a violation of law? How are farmers supposed to know when they are being taken advantage of when the governmental agency tasked with protecting them does not tell them what types of practices are a violation of the law? This House has not helped our Nation's producers either. We recently passed legislation that withholds funding from USDA to move forward with establishing more comprehensive fairness rules. Ultimately, we set the USDA up to fail and farmers and ranchers will suffer because corporate special interests have a stronger lobby than America's producers. While the final rule will prevent some of the most abusive practices in the poultry industry, it largely fails to protect farmers and ranchers specifically in the pork and beef industry. Nevertheless, I will continue to fight to protect our farmers and ranchers from further corporate abuses and urge the USDA to enforce existing laws designed to regulate corporate packers and processors.

Ms. KAPTUR

Ms. KAPTUR. Mr. Speaker, numerous stories have come out over the last few weeks, all detailing the corruption and outright fraud on Wall Street. First, there was the recent news about former Secretary of the Treasury Hank Paulson's inappropriately tipping off a few key friends from Goldman Sachs and other Wall Street tycoons about the impending collapse of Fannie Mae and Freddie Mac so that those friends could hedge and make money on that insider knowledge. Then a judge in New York threw out one of the orchestrated settlements between Citigroup, which was a bank at the center of the wrongdoing, and the Securities and Exchange Commission, which allowed that bank to walk away from cases of fraud without admitting any wrongdoing. This past weekend, ``60 Minutes'' interviewed a former executive vice president at Countrywide Financial, a giant and duplicitous player in the U.S. mortgage business. This woman was in charge of fraud investigations at the company before the financial crisis. According to her, ``Countrywide loan officers were forging and manipulating borrowers' income and asset statements to help them get loans they weren't qualified for and couldn't afford.'' She went on to say that all of the recycle bins, wherever they looked in that company, were full of signatures that had been cut off of one document and put onto another and then photocopied or faxed. According to her, the fraud she witnessed was systemic, taking place in Boston, Chicago, Miami, Detroit, Las Vegas, Phoenix, and elsewhere. She was fired before she could speak to government regulators about the extent of fraud she had documented. What is most troubling is that these stories are not isolated. The FBI testified before Congress as early as 2004 that they were seeing an epidemic in white collar crime. They stated the FBI did not have anywhere near enough agents to investigate major white collar crime like the financial crisis. There are moments when I do wonder if the FBI has the will to prosecute; but still, today, the FBI has nowhere near enough special agents or forensic experts to properly investigate the level of corruption that we know occurred. Frankly, the Congress has shorted the FBI--some might say purposely-- of the resources it needs to do the job. I have a bill, which I invite my colleagues to support, H.R. 3050, the Financial Crisis Criminal Investigation Act, authorizing an additional 1,000 FBI agents to aggressively investigate the kind of fraud that has destroyed the economic future of millions of our people and that has upset the global financial system. Back when we had the S&L crisis in the 1990s, we had 1,000 agents. Do you know how many were working when this financial crisis started? Forty-five. The others had all been reassigned to terrorism. We're only up a little over 200 agents now investigating white collar crime. Think about that, America. Why do you think these financial wrongdoers aren't in jail? Frankly, this Congress has not taken its responsibility to investigate seriously. Despite the robust public reporting of misdeeds on Wall Street, it has not been until the MF Global case, one of the top 10 bankruptcies in this country, that Congress has shown some mild interest in the magnitude of the inquiry required. In November, we got an inside look into the stunning misdeeds--and let's be blunt--outright thievery that occurred at MF Global in the days before it declared bankruptcy. The total amount missing from private accounts has fluctuated over the weeks. As much as $1.2 billion could be missing from private customer accounts. Congress is finally having hearings on this subject tomorrow, and we'll see how seriously an investigation is pursued. Let me say that the public has a right to know on what specific dates throughout 2011 money from customer accounts was wire-transferred in order to meet MF Global's margin calls. This is the key question. Members should ask, probe, and exact the truth. The public has a right to know on what specific dates through 2011 was money from private customer accounts at MF wire-transferred in order to meet MF's global margin calls. If Mr. Corzine authorized the taking of those funds, then this body should remind him that no one is above the law, not even someone who was a former Goldman Sachs CEO, former Governor and U.S. Senator. Whichever friends and associates aided his actions in that company should be brought into full sunlight, as well as other companies that were likely involved in those wire transfers. The fact that hundreds of millions of dollars, if not over a billion dollars, can simply be stolen from a major banking institution from the inside requires full investigation, not just by the Congress, but by the FBI. I'm reminded of that book, written by Professor William Black, ``The Best Way To Rob a Bank is To Own One.'' Well, I wonder how much of that applies in this case. It's time that Wall Street, white collar crimes, be prosecuted seriously, that this Congress do its job. Let's provide the FBI the resources it needs to fully investigate and prosecute, and the committees of this Chamber use their full authority to do no less. We surely owe this to the American people and the cause of justice toward all.

Ms. KAPTUR

Ms. KAPTUR. If I could say, Congressman Garamendi, with those seniors, I know the first place they're going to spend those extra dollars, after they pay for food, will be on their grandchildren. And all I hope is that they don't buy Chinese toys this Christmas. I hope they find a way to buy little outfits that are made at your local craft fair, or they find ways to find candy that's made by a local firm, they find ways to spend those dollars wisely, because if we do that, if we spend every dollar as wisely as we can, we really lift the economy of this country, and we put those dollars back into businesses that actually are conducting business on our shores.

Ms. KAPTUR. I was just going to say, very quickly, that sounds to me very life-giving, Congressman Garamendi. It doesn't sound like there are death panels. It doesn't sound anything like some of the opponents were saying when that bill was first passed. In fact, seniors have a greater chance to live now because they can get the medicine they need and they can get the checkups they need, and to me, that's very life- affirming. I just wanted to put that on the record.

Ms. KAPTUR. I want to thank you so much for bringing this family's plight to light here in the Congress on behalf of all of America's families who are suffering at this holiday season. Isn't it an indictment on the legislative branch of this country at the national level that when people need unemployment benefits, we have to run out the clock right to the bitter end, right to the bitter end for benefits that have been earned--earned. In church on Sunday, a couple came up to me and the husband asked: Congresswoman, if you know of any other jobs, please let me know. What's going to happen with unemployment benefits? This was a family that obviously needed help, a family that had spent their entire life, the man and wife, both working. He didn't want to ask about the unemployment benefits; but he knew that for that family, maybe it was all that would be there in the near term. I'll give you a couple of figures I would like to put on the record this evening. One, I called the head of one of our major railroads the other day because I was trying to get the word out across my region--not everybody is plugged into the Internet--that there were 4,000 jobs that CSX was offering around the country. I wanted to make sure that people in our region knew that they were available. The chief executive officer of the company said, Well, you know, we've had 500,000 applications for 4,000 jobs. The American people want to work. It is not that they do not want to work, as some of our friends on the other side infer. No, no. They're looking every day. They're just not finding the jobs that existed in past generations. And we know that those jobs have been displaced by imports from places like China. And company after company that used to be located in our neighborhoods aren't there anymore. So it's harder to find jobs. We have to create new jobs. But the new ones aren't coming on stream fast enough. The level of desire to work in our country is so much higher. Millions more people want to work than there are jobs available right now. And so for many families, unemployment insurance is all that's left for them. Again, this Congress is just waiting to the bitter moment rather than acting responsibly to help families who have literally built this country and who have a very good work ethic and want to work. So I want to thank the gentlelady from Texas (Ms. Jackson Lee) for bringing this subject up and putting a human face on what this unemployment really looks like out in the country. If anyone has any doubt, come to Ohio. Come meet these families who want to work and are looking every day. Of course, the way it works, you can't go into a company. They tell you, Well, we might have a hundred jobs but apply to us through the Internet. It's like you go into this faceless system where you can't really find a human being. They're trying out there in the country. All the economic figures show us--and the last thing I will say here for this segment--Mark Zandi from Moody's has classified every single expenditure that one can make that gives the economy more than a dollar for every dollar expended. Would you believe that if one looks at things like unemployment insurance and payments to the unemployed, that produces the biggest bang to the economy? Well over $1.35 for every dollar invested as opposed to, let's say, tax credits or something like that, these arcane tax provisions, where less than 30 cents is actually reinvested in the economy. So unemployment insurance extensions also make sense for economic growth at this very tender time because the people who receive those benefits spend them on essentials that drive the economy. I yield to the gentlelady.

Ms. KAPTUR. That is right. Mr. Speaker, I yield back the balance of my time.

Ms. KAPTUR. I really have enjoyed sharing this hour with Congressman Tonko of New York and Congressman Garamendi of California, speaking out for 100 percent--the 99 percent that are often forgotten, the 1 percent that we don't forget but know that your patriotism really will come to shine in this holiday season--and to urge our colleagues in the House and Senate to do what's right, to make the decisions on extending the payroll tax holiday for the middle class, making sure we extend unemployment benefits which are earned benefits, and that we stand up for all of America because we're all in this together. I thank my colleagues very much, the listening audience, and those who are out there helping us to move the ship of state in a direction so that we create jobs in this country and we keep this economy on an upward roll.

Ms. KAPTUR. For the 99 percent as well.

Ms. KAPTUR. I want to thank the gentlelady for those very profound comments tonight and just place on the record that just in our church last weekend the priest informed us that compared to last year he was asking for people to dig deeper because the number of baskets and the number of ``asks'' was up well over 125. I think just for our church it's over 360 now for this year. For a small congregation, that's a bit of a struggle. That's just one place, just one corner in America, repeated in 50 States, in every hamlet. I appreciate what the gentlelady said about the spirit of this particular season of light and of giving and that the people who are out of work have earned these benefits. They're not asking for any handout. They're asking for the insurance that they earned as a condition of work in order to help have a merry Christmas and a happy Chanukah and very Eid greeting season. They're not asking for anything they haven't earned. I thank the gentlelady for coming down tonight. Our leader, Congressman John Garamendi of California, is with us tonight. We thank him so much for reserving this Special Order and for the incredible leadership that he has exhibited each and every week that we have been in session. Just a powerful and sustaining voice on Making It in America and creating jobs here.

Ms. KAPTUR. I am going to yield the time to you, Congressman Garamendi, but I did want to say for the listening audience that this is a coast-to-coast operation. I'm looking at you from California, Congressman Tonko from New York, Congresswoman Jackson Lee from Texas, and myself from the heartland. That's a pretty broad variety of opinion from across our country, from very significant States.

Ms. KAPTUR. If the gentleman would just yield, I'd like to add that I agree with you completely. Every small business that I walk into tells me, Marcy, bring me customers. Customers are a function of having spendable income. There are no more important decisions we could make as a country, right now, as we finish the month of December, than to make sure that middle class families have spendable income by not raising their taxes; middle class families, who've been holding the line here without real additional spending power over the last decade, and to make sure that we extend unemployment benefits to those who've earned those benefits because that has the maximum bang inside the economy when people spend those dollars on basics, on essentials. Those are two practical decisions from an economic standpoint no rational human being would disagree with. And they contribute to economic growth. They contribute to keeping us on an upward path as we move forward here in our country after coming out of this deep, deep, deep recession.

Ms. KAPTUR. I thank you very much, Madam Speaker. I am very pleased to join my colleagues this evening, including John Garamendi of California, to talk a little bit about the standoff that appears to be happening in discussions between the Senate and the House and the seemingly irresolvable issue of whether or not average American families are going to be able to maintain a tax benefit on their payroll tax deduction relating to Social Security contributions for the average family, which is about $1,000 a year; or whether that money is going to be taken away from them and, instead, tax breaks given to multimillionaires and billionaires in our country. It appears that the Republican Party is quite averse to having everybody in this country pay their fair share, so I just want to go on record as saying, at this point in our economic recovery, nothing could be more important than keeping that tax benefit in the hands and pockets of America's families. They're the ones who actually take those dollars every month and buy essentials, not extravagant purchases. They make their car payments if they're fortunate enough to have cars; they buy enough food for their families; they buy clothing; my golly, during the holiday season, they might even be able to buy a little bit extra-- something special--for their holiday dinners; and they pay down some of the debt their kids have in trying to pay their college or after-high school training bills. It's really amazing to me that in the richest and most powerful country in the world that we continue to have this tremendous friction here in the Congress to do something that is so reasonable--that is just so eminently reasonable--and would contribute to economic growth. We know that consumer spending is the most powerful instrument to help lift this economy out of its doldrums. We see the automotive industry recover, this industry that the Obama administration and certain Members of this Congress worked so hard to fight for the recovery of; and we got more signs of that today in Ohio with a wonderful announcement by Ford that it is moving its truck line from Mexico back up to Avon Lake, Ohio, and that it's making over a $128 million investment there. We see car sales increasing, and that's because people have spendable income. So why at this point in our history would you want to allow those who have the most not to pay their fair share and take away $1,000 a year, on average, from middle class families who would spend those dollars in helping to propel economic growth? I can guarantee you that at firms that I represent, like Chrysler, Jeep, Fiat, that the Wrangler, that the Cherokee, that the Liberty are selling very well and that General Motors' Cruze vehicle, which is largely a northern Ohio-made car, is selling like hotcakes because people are able to make those monthly payments. So that particular part of the discussion here in Washington makes such eminent sense. Why in the world would you want to penalize middle class families because you want to just take care of the top 1 percent? It simply isn't fair. It simply isn't fair. It would seem to me, in the holiday spirit, that the tax-writing committees of both Chambers should get together and figure out a solution that is fair to all families. It's pretty clear to me what that is, and it's pretty clear to me that with corporate profits at all-time highs and with those who run these corporations and sit on their boards that they have been doing quite well, thank you, and it's time for them to do something for the Republic. It's not that big a deal. Who is going to miss an eighth home or a seventh yacht? But the average family is having trouble meeting its credit card debt, paying its children's bills, having enough, as prices go up, to pay for food on the table, and taking care of elderly relatives sometimes who need extra medications. So I would urge those in both Chambers who are on these budget and tax-writing committees to spend the time that's necessary and not burden the American people with unnecessary delay. Instead, give the economy the boost that it needs by maintaining the middle class payroll tax cut and by making those in the top 1 percent pay their fair share. Many, many years ago, they paid a lot more percentage-wise than they do today, and we had lots of job creation in this country. It simply eludes me why those at the very top of the income scale, who have taken most of the benefit of growth in the last 20 years and who are doing so well, are so averse to helping our country and to making sure that everyone has a chance to prosper because, when everyone prospers, so does the top 1 percent. That's where this consumer spending injection from the middle class payroll tax cut plays such a significant role in the economy. Now, as we buy for the holiday season, nothing could be more important than buying ``made in the USA'' goods. Why is that important? It's important because, when you see that label, ``made in the USA,'' you know that those dollars flow back to that company and to those workers and that you actually help build wealth in this country. Last weekend, when we were doing some shopping for the holidays, we went in one store. I kept looking at labels, and it was China, China, China; and I'd put them back on the shelf. It was actually staggering what percentage of those goods--a majority of the goods on the shelves--were actually made someplace else. I made a point of going to a craft fair in our region and was able to buy several Christmas gifts that were handmade. I felt really good about that because I knew that those were people who had taken their artistic abilities and that they had created tableware, table linens and other items. There was jewelry that was handmade. I knew the profits would benefit those families and that they would go to the communities that they came from. It shouldn't be so hard to find ``made in the USA'' goods on the shelves of our major retailers. So I would just urge our citizens--and I know sometimes it's hard--as you're doing your holiday shopping to really try to look for that label ``made in the USA'' and to help your own community. Find small businesses and find products in your community that are made here so that those dollars recirculate over and over and over again and so they help to build the real wealth of our Nation that made America great. I would urge you to look at candy-makers in your region, at those who are making cookies, at those who are small entrepreneurs of different kinds, making scarves. I was able to go to one potter in our region, and I ordered several items for this holiday season. That's a local artist who has her own shop and makes her own goods right there. She exports out of that shop, and I know that that's going to help our region grow. So we can do a lot in our own lives and in the way that we spend those precious dollars to really help job creation in our regions, in our country, at a time when we really need it. I see that some of our other colleagues have joined us here on the floor. I want to thank Congressman Paul Tonko of the great State of New York for joining us this evening. He is such an outstanding and really relentless voice on job creation and economic recovery in our country.

Ms. KAPTUR. Congressman Tonko, I want to thank you so much for coming to the floor tonight to again express your deep and abiding passion for jobs in our country. And I wanted to follow on something you said. This is actually a chart which shows our trade deficit with China. Like your community, our communities are just loaded with goods that are coming in here from China. And if we just look back at the last decade, the enormous rise in those goods on our shelves, when you really put the math of it on a chart, it looks like an avalanche. It is just crowding all this money--in 2010, over $273 billion of hard-earned American money was actually used to purchase Chinese goods, and that money then went back to, not the United States, but to China. And you think about the displacement of production in this country, for everything from tableware to sometimes food products now, and I had an experience over the weekend because I like to work with small businesses, and I ran into a woman who was blending coffee, she's called a master roaster, and her product is called Bea's Blends, Bea's Blends from Toledo, Ohio. And she was asking me, I want to expand my company but I need a very small loan, and I don't want to go into debt and, oh, gosh, what should I do next? And I told her I would try to put her in touch with the Small Business Administration. But it was really, when you said the optimism that you have, I'm meeting companies all the time that are inventing new products-- incidentally very good products--and trying to counter this trend of more imports versus our exports. And her product is a product that can be sold locally, it can be sold interstate, and ultimately it can be sold internationally because it's vacuum packed. And I was thinking about the creativity of this individual American trying to make it in a very tough economy. And then a couple of days later I was over at a coffee shop in Lakewood, Ohio, and I happened to tell the owner of that shop--also a woman--that I had met this master roaster. And she said to me, well, you know, Congresswoman, it's interesting you should say that. I'm trying to bring together all these master roasters across the coast. I said, gosh, we have coastal roasters or roaster coastals? But the point was people were thinking, they were creative, they were bringing something new to the market, beautifully labeled, an excellent product, and trying to counter these trends. And because small business is located in our communities, it's interesting to look at the last several years as well, which conform to the rise of Chinese imports and other imports into our country. And look at the distribution of income of people in our country. And what's happening is what the American people obviously know, which is why we need to maintain the payroll tax holiday and to make those in the top 1 percent pay their fair share. The divergence between people who are in the lower income spectrum and the upper has just exploded. It is just that before, those who had much and those who had just enough and those who had little were not so far apart. But the gap has just widened to a level where the American people know something is fundamentally wrong, and that the ship of State is very out of balance, and that somehow we have to begin to make sure that all boats are lifted in this society and not just some boats get lifted. And we know that job creation, business growth, business startups, business expansion of American-made products are essential; products that can be exported, that can help to close the trade gap but also then begin to narrow the income gap that we see as we allow more income to be earned by those who are in the middle class and who are in some of the categories of income where they're stretching just to make it every day, every week, to put enough food on the table. This is really almost un-American. This looks more like an old, stratified society from times past that was very, very undemocratic, places where we wouldn't want to live, the kinds of places that our relatives fled because they couldn't get enough to eat, because they didn't have a chance to earn a fair day's wage. We are joined this evening by Congresswoman Sheila Jackson Lee from the great State of Texas, such a hardworking and able Member who is such a voice for citizens across our country and our world every day. We thank you so much for joining us this evening.

Ms. KAPTUR

Ms. KAPTUR. Mr. Speaker, it's no secret that Wall Street is rampant with cases of outright fraud, backroom deals and very, very special political access. Meanwhile, Main Street is pushing back hard against this tide by investing in our communities and struggling to create jobs so our economy can grow. A steady series of probing news stories have begun to expose the depth of corruption that precipitated the Wall Street meltdown and why it is so hard for Main Street to recover. Bloomberg just released a story detailing how the former Secretary of the Treasury, Hank Paulson, provided special insider information to well connected Wall Street executives in July of 2008, just before the meltdown. According to Bloomberg, on the very same day the former Secretary told The New York Times that he expected the examinations of the Federal Reserve and the Office of the Comptroller of the Currency into Fannie Mae and Freddie Mac would ``give a signal of confidence to the markets,'' he informed a select group of his friends on Wall Street later in the day that in reality, there was a plan for placing ``Fannie and Freddie into conservatorship,'' which amounts to a government seizure. Those firms got insider information, and one can ask, did they then place bets to protect their interests? I bet they did. One of the fund managers in that meeting said ``he was shocked that Paulson would furnish such specific information, leaving little doubt that the Treasury Department would carry out that plan.'' In the words of William Black, law expert at the University of Missouri, ``There was no legitimate reason for these disclosures.'' The Secretary of Treasury is supposed to be a public steward of our Nation's financial well-being. But when he told the public one story and then shared the inside track with his friends and colleagues from Goldman Sachs and other large firms, he broke that trust. To be blunt, this is self-serving crony capitalism at its worst. This is hardly the only case of special treatment of Wall Street insiders by Washington, insiders like Paulson, who was the former head of Goldman Sachs. Earlier this week, we saw a U.S. District Court throw out a settlement between the Securities & Exchange Commission and Citigroup. In 2008, Citigroup reportedly created, marketed, and sold a fund to investors. What Citigroup did not disclose is that the bank itself was actually betting against their own fund. This fraudulent deal made Citigroup $160 million while costing the fund's investors $700 million in losses, and counting. The SEC's response to this fraud was a $285 million settlement, slightly more than a third of the reported losses incurred by the victims of this fraud. Citigroup was not even required to admit any wrongdoing. The federal judge was absolutely correct to throw this case out. The SEC's policy of allowing large Wall Street firms to walk away from fraud cases without so much as admitting any wrongdoing is completely inappropriate and invites more corruption. Growing reports of fraud are staggering, and they underlie the Wall Street dealing that has so harmed our Nation. Throughout November, we saw headline after headline of how MF Global took money from its own private customer accounts as it tried to stay afloat in the days before it filed one of the largest bankruptcies in American history. There may be as much as $1.2 billion unaccounted for. We used to call that stealing. The fact is our Justice Department has only a handful of FBI agents to properly investigate the volume of corruption infecting our markets. After reviewing the FBI's own testimonies, I introduced H.R. 1350, the Financial Crisis Criminal Investigation Act, to authorize an additional 1,000 FBI agents and forensic experts to prosecute white collar crime, especially Wall Street. Back in the 1990s when we had the S&L crisis, we had a thousand agents. When this crisis started, there were but a handful because they had all been switched to terrorism investigations. When you look at these cases, what is astounding is just how well connected so many of these institutions on Wall Street are to the corridors of power in Washington. It now appears even former Speaker Newt Gingrich was paid millions of dollars by Freddie Mac before it went bankrupt. At a minimum, our Nation needs an independent commission to investigate what actions led to the eventual collapse of Fannie Mae and Freddie Mac by which Wall Street turned over all of its toxic mortgage paper to the taxpayers of the United States for the next three generations. I have a bill to do just that, H.R. 2093. I ask other Members of the House to sponsor the Fannie Mae and Freddie Mac Criminal Investigative Commission Act. So while real justice for Wall Street languishes in places from Cleveland to Toledo, Main Street America is trying to create jobs. It's over time for Washington to get its House in order to restore accountability to Wall Street so that full confidence can be restored to our economy. Exacting justice for Wall Street wrongdoing is long overdue. That task remains fundamental to economic recovery and job growth. [From the Bloomberg Markets Margazine, Nov. 29, 2011] How Paulson Gave Hedge Funds Advance Word of Fannie Mae Rescue (By Richard Teitelbaum) Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan. It was July 21, 2008, and market fears were mounting. Four months earlier, Bear Stearns Cos. had sold itself for just $10 a share to JPMorgan Chase & Co. (JPM). Now, amid tumbling home prices and near-record foreclosures, attention was focused on a new source of contagion: Fannie Mae (FNMA) and Freddie Mac, which together had more than $5 trillion in mortgage-backed securities and other debt outstanding, Bloomberg Markets reports in its January issue. Paulson had been pushing a plan in Congress to open lines of credit to the two struggling firms and to grant authority for the Treasury Department to buy equity in them. Yet he had told reporters on July 13 that the firms must remain shareholder owned and had testified at a Senate hearing two days later that giving the government new power to intervene made actual intervention improbable. ``If you have a bazooka, and people know you have it, you're not likely to take it out,'' he said. On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie's books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets. A Different Message At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure. Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives--at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC. After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into ``conservatorship''--a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets. . . . shares rally At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals-- and the GSEs' shares were rallying, with Fannie Mae's nearly doubling in four days. William Black, associate professor of economics and law at the University of Missouri-Kansas City, can't understand why Paulson felt impelled to share the Treasury Department's plan with the fund managers. ``You just never ever do that as a government regulator-- transmit nonpublic market information to market participants,'' says Black, who's a former general counsel at the Federal Home Loan Bank of San Francisco. ``There were no legitimate reasons for those disclosures.'' Janet Tavakoli, founder of Chicago-based financial consulting firm Tavakoli Structured Finance Inc., says the meeting fits a pattern. ``What is this but crony capitalism?'' she asks. ``Most people have had their fill of it.'' A Lawyer's Advice The fund manager who described the meeting left after coffee and called his lawyer. The attorney's quick conclusion: Paulson's talk was material nonpublic information, and his client should immediately stop trading the shares of Washington-based Fannie and McLean, Virginia- based Freddie. . . . Goldman Alums One other Goldman Sachs alumnus was at the meeting: Frank Brosens, founder and principal of Taconic Capital Advisors LP, who worked at Goldman as an arbitrageur and who was a protege of Robert Rubin, who went on to become Treasury secretary. Non-Goldman Sachs alumni who attended included short seller James Chanos of Kynikos Associates Ltd., who helped uncover the Enron Corp. accounting fraud; GS. Capital Partners LP co- founder Bennett Goodman, who sold his firm to Blackstone Group LP (BX) in early 2008; Roger Altman, chairman and founder of New York investment bank Evercore Partners Inc. (EVR); and Steven Rattner, a co-founder of private-equity firm Quadrangle roup LLC, who went on to serve as head of the U.S. government's Automotive Task Force. . . .

Ms. KAPTUR

Ms. KAPTUR. Thank you very much, Congressman Garamendi, for your leadership in bringing us together so often. You are absolutely unrelenting, and that's the spirit that is America, so we thank you for your time tonight. And Congressman Tonko of New York, your steadfast service here in representing a State that has some similar situations to Ohio's in the industrial and agricultural heartland of our country. It's really a special privilege to be here tonight with both of you. This morning, one of my first visits was with a company in Avon Lake, Ohio, PolyOne. This is a company that makes products in America. Yes, it's a global player, but its innovation center is in Ohio. Hundreds and hundreds and hundreds and hundreds of jobs are associated with its plastic products, made both out of traditional petroleum-based inputs as well as the new carbohydrate economy that you can see developing, and it was really quite exciting. We know that real wealth is created in our country when we make goods in America, when we make it in America. I think the problem over the last several years has been that if you travel to any city in America and you look at the tallest building, what are they? Are they the firms making things or are they merely, as I saw in Michigan recently, a gigantic bank whose headquarters is on Wall Street, a bank that just got bailed out by the American people? I stopped my car and I looked at that building, and then I looked at the devastation of the communities around that particular part of Michigan, and I thought, what's wrong with this picture? Basically, this institution has sucked up the wealth of neighborhood after neighborhood and left rubble in its way. They're not being held accountable. Yet I see companies like PolyOne trying to make it in a global economy with a very unfair set of trade practices--closed markets around the world, currency manipulation, intellectual property theft. I look at what's happening with competitors, with competition to U.S. industry, and you have to say to those patriots who are making goods in America, we stand with you. We should be rewarding those companies. We should be making more goods in our country. I wanted to just add a word about the automotive industry. There were those in this Chamber that voted against the refinancing of the automotive industry. Without that industry, this country would not have a defense base, and we would not be a great industrial power. And now I see in our region of the country--I was just at Chrysler Fiat. They announced billions of dollars of investment. There's going to be over a thousand more people hired at their main production facility in Toledo, Ohio. Chrysler Jeep makes the Wrangler and the Liberty and likely vehicles that will follow on. The feeling inside that plant of people who have given their lives to keeping America competitive and to manufacturing a label that is known throughout the world, it was a wonderful day to be there. And I was reminded, and I said very frankly, You know, there were 170 Members of Congress that didn't think you should be here and didn't think that this company should be here. And the company has paid back the loan that was made, and now we're going to have good jobs by making goods in America. So I wanted to share those experiences. I feel bad that we have a country where certain financial firms that have, totally speculative, have brought us to this point. But I stand with those who have weathered the storm and who are now hiring and trying to move this economy back where we know it can be. I was very proud to be a Member, as are those who are here with us tonight, to vote for that refinancing of the automotive industry and with its procurement from suppliers--whether it's plastics, whether it's glass, whether it's fibre, whether it's textiles, whatever, that's helping to lift this economy to where last week, on the day after Thanksgiving, retail sales in our country went up about 16.7 percent, I guess. It shows that people have more spending power. That's what we should be doing. We should be using our power here to lift those industries that can really make goods in our country and help recreate a strengthened middle class.

Ms. KAPTUR. Thank you so much, Congressman Garamendi and Congressman Tonko. I just wanted to say on Social Security and Medicare, I'm proud to stand with my Democratic colleagues. Social Security is an earned benefit, and it's one that belongs to the American people. We all know its power, not just to allow seniors to live a decent life in their retirement years. But also it's power to lift the economy because seniors spend, mainly on their grandchildren. And they move those dollars into the economy. You watch with that cost-of-living increase, which I'm very happy about, next year, and the fact that the Medicare offset will not be so great that seniors will have extra buying power and they will watch every penny. I am just so proud to be a part of a tradition of the Democratic Party that has fought for Social Security and has fought for Medicare, not just for the few but for all. And we have made the country a better country as a result. So I think it's fair to say that, yes, it is true the Republican Party has fought Social Security. Can't they find something else? I don't know what the problem is when the vast majority of the American people, I think like 99.99 percent of the American people, agree with this. I don't know what their problem is. Maybe they're not living in reality most of the time. I am just very proud to be a part of this tradition along with my colleagues and to say to our senior citizens that next year will be a better year than this year. My hat's off to Franklin Roosevelt and Frances Perkins and all of the people that fought back in the 1930s to make this program part of the American way of life.

Ms. KAPTUR. America has always been a Nation of great promise, a Nation of great hope; and I like to quote in my speeches the last four letters of the word ``American'' are ``I can.'' It's positive energy. It's promise that we all work toward, and the American people know it. It's great to be a part of a party of hope and promise for the American people. I say what a pleasure it has been to join my colleagues here this evening.

Ms. KAPTUR

Ms. KAPTUR. Mr. Speaker, with Thanksgiving approaching, let us think about our fellow Americans and ask ourselves the question, what can we do to serve them this coming week and into the future? Average incomes for Americans, for the average family, have gone down about 6.7 percent, and we know poverty rates have risen 15 percent. For all of those listening today as we look across our country, think about what you can do this week and every week to help our food banks that are short on supplies across our country. Every class, every religious organization, every person can do something extra to help this week to give every American a good Thanksgiving. Think about how you can help a local feeding kitchen. Think about how you might challenge your sports team to go glean in the fields and to collect, if you live in a part of the country where agriculture exists, the extra cabbage, the extra apples that are there and will be plowed under if you don't pick them. Across our country this is a year when Americans can say to one another, Happy Thanksgiving, we believe in you, we want to help you through these difficult times. It reaches the true heart of the American people, the people full of goodness who know what's right to do. And let's give every American a happy Thanksgiving every day. God bless America.

Ms. KAPTUR

Ms. KAPTUR. I thank the ranking member, Congresswoman Slaughter, for her incredible work and rise today, Mr. Speaker, to support the rule for fiscal year 2012 appropriations for agriculture, transportation, training and justice. Technically--or maybe untechnically--this bill is called the ``mini-bus.'' I completely commend the conferees for including language based on legislation we introduced directing additional resources for the Federal Bureau of Investigation's White- Collar Crime Division for Wall Street financial crime prosecution. Moreover, with the Federal deficit requiring our rigor, this mini bill makes difficult cuts, but also provides support for those most hurt by the current recession. Let me state for the record that the trillions of dollars of deficit being racked up in this country come from some pretty clear sources: first of all, two wars--the longest wars in American history, lasting over a decade now; also, the cost of unemployment to this economy caused by Wall Street malfeasance; and, finally, looking back, the tax cuts for the rich enacted during the last Bush administration that continue to rack up mounting deficits every year. It's very clear what's happening to cause the deficits. And then with the rising deficit, the cost of added interest is included in the debt total. This bill meets the spending caps set in the Budget Control Act compromise and includes a clean continuing resolution to prevent a government shutdown, which would only further hurt our economy. With over 15 percent of Americans living in poverty now, our moral responsibility as a Congress must be to help our fellow citizens weather this storm--which they didn't create. Thus this bill maintains funding for key programs, such as for food for needy children and poor women who are pregnant, for food commodities for food banks across this country that are strapped with rising need, and for food sustainment for the unemployed. In particular, this bill includes language, based on legislation I authored, to allow the FBI to hire hundreds of new agents to fully investigate white-collar crime in the financial services sector. People across Ohio, from Toledo to Cleveland, are hurting because of the recklessness of Wall Street. Those who broke the law in order to get rich at the expense of everybody else should be prosecuted to the fullest extent of the law. I commend the conferees for including my language to help provide the FBI with the necessary resources to investigate those who are responsible. I urge my colleagues to support the rule and the underlying bill, which is quite balanced despite the very difficult choices that they had to make.

Ms. KAPTUR

Ms. KAPTUR. I thank my able colleague from Florida, Congressman Hastings, for yielding and rise in support of Congressman Critz's effort here to focus attention on this whole issue of Chinese currency manipulation. When Congress passed permanent most-favored-nation status with China over my objection, we were told by supporters of the agreement that trade with China would create jobs, more economic opportunity and trade surpluses for our country. Well, if you look at the numbers, you'll see since that was passed what's happened is we've got more and more and more and more trade deficits every year, totaling in 2010 over $273 billion. With Chinese currency manipulation, that's almost an inflated number because it would be cut in half, it would be cut substantially if goods were marked to their true value, not their inflated value. China has never opened up its market. That's why we get these huge trade deficits. And they aggressively use government intervention through currency manipulation to rig the markets. We know they're the largest intellectual property thief, they counterfeit their goods, and they use industrial policy to promote and protect Chinese industries at the expense of American jobs and factories. Some call these tactics market Leninism because we see state-managed capitalism in China locking down on industry after industry. Regions like the one I represent in northern Ohio have been especially hard-hit as production shifted from the coasts of the Great Lakes to the shores of China. We can see this draining of wealth from the United States. Last year, our trade deficit again was over a half- trillion dollars globally, and with China, they had over half of that trade deficit. If you look at the trade data, we're on track to send at least as many jobs to China this year. You can see the jobs being shipped to China in every community in this country. Even scrap metal is being sent over there, for heaven's sake. Economists tell us that every trillion dollars in trade deficit translates into 14,000 lost American jobs. If we could get the currency manipulation issue solved, we could bring some of those jobs back to this country. It's time for China to play on a level playing field.

Ms. KAPTUR

Ms. KAPTUR. Mr. Speaker, I rise to reluctantly support the Fiscal Year 2012 Appropriations Minibus. Given current budgetary constraints primarily caused by unnecessary tax cuts for the rich, this bill generally reduces spending but provides additional resources for certain programs that will help create jobs. For example, the Federal Highway Administration estimates that a $1 Billion expenditure on highway construction supports 30,000 jobs. The underlying bill provides nearly $40 Billion for highway construction. However, the legislation also includes unnecessary riders that will allow corporate packers and processors to continue to manipulate the livestock market to the detriment of our farmers and ranchers. Funding is withheld from USDA in this bill from implementing a set of Rules that would restore balance and fairness to the livestock marketplace. Is it fair that the average chicken grower makes 34 cents per bird while the processing corporation makes $3.23 per bird and this Congress prevents the agency tasked with protecting farmers from doing its job? It is my sincere hope that USDA implements what remains of the fairness Rule as soon as possible and enforces existing laws to protect farmers and ranchers from corporate abuses. I urge my colleagues to support the Appropriations Minibus.

Ms. KAPTUR

Ms. KAPTUR. Mr. Speaker, thank goodness some Americans continue to analyze the real causes of job loss and turmoil in our economy. While all eyes are on Europe, the problem just isn't in Greece. On October 31, U.S.-based MF Global Holdings, Limited filed for chapter 11. It reportedly is the eighth largest bankruptcy in U.S. history. Its failure, like the crash in 2008, revolves around the actions of money traders using slick instruments called ``credit derivatives.'' As analysts try to piece together what happened at MF Global, one word seems to keep popping up: fraud. I would like to include in the Record a few recent articles on the Wall Street perpetrators of this crisis. [From Reuters, Nov. 7, 2011] Frustration Mounts for MF Global Clients (By Lauren Tara LaCapra) The sudden collapse of MF Global Holdings Ltd is leaving some small and independent futures traders angry and frustrated. Customers of the bankrupt firm are starting to complain about getting checks that bounced, having requests to transfer funds denied and receiving inaccurate account statements. The growing litany of woes is adding to the tasks for the receiver assigned to liquidate MF Global and causing some investors to voice concern about the basic plumbing of the financial services system. Steve Meyers, an independent futures trader in Florida, said he asked for $500,000 from his MF Global account to be wired back to him on October 28 because he was concerned about the firm filing for bankruptcy. The money never was wired. Instead, on November 2, Meyers received several checks from MF Global that were dated October 28. By the time he went to deposit the checks, MF Global had filed for bankruptcy on October 31 and the checks were not honored for payment. Between himself and several clients he manages money for, Meyers said he has several millions of dollars still tied up with MF Global. ``I am sitting with hundreds of thousands of dollars in returned checks,'' said Meyers. ``I just think the industry has suffered irreparable damage from this.'' Other clients of the firm led by former New Jersey Governor Jon Corzine are telling similar stories. Chris Ries, who co-manages a commodities brokerage and grain dealer in Iowa that cleared trades through MF Global, said several clients had checks bounce even though they deposited them before MF Global's bankruptcy on October 31. The situation has been made worse, he said, because customers' account balances appear as though they received the cash even though the checks did not clear. ``Eventually it may all get cleared up,'' said Ries, ``but for now, accounts with bounced checks don't reflect the balance that they should.'' Missing $600 Million Some clients' checks were drawn on an MF Global account held at a Harris Bank branch in Illinois. Harris Bank is a subsidiary of Bank of Montreal. Jim Kappel, a spokesman for Harris, said the bank began denying payment and returning checks on November 1, at the direction of the bankruptcy trustee. While some checks might have been dated before October 31, he said, they were likely debited at a later date. Clients' issues with bounced checks come as MF Global and its regulators continue to hunt for $600 million in client money that has gone missing. It is not clear if some of the bounced checks are part of the unaccounted money. It appears MF Global began issuing checks to customers seeking funds--instead of wiring the money--as a way to buy some time for the firm, which was hoping to arrange a last- minute sale to Interactive Brokers, some of the customers say. The deal fell apart last Monday when the issue of the missing customer money arose. A week later, regulators have yet to provide an answer on what became of the missing $600 million, although some money has been located in an account with JPMorgan Chase. Brokers who cleared through MF Global say they have been allowed to move some of their money to new firms, but not all of it. They have been waiting for guidance from the trustee or regulators on when they will get access to all of their funds. Frustration MF Global's trustee, James Giddens, had frozen 150,000 accounts when the firm filed for bankruptcy protection. On Monday, Giddens said $1.5 billion worth of client money had been transferred to other firms. But the trustee and CME Group Inc, which regulates futures exchanges, have held back some $1 billion in customer funds as they search for the missing money, angering clients who can trade again but are still frozen out of their excess collateral and cash. ``We can understand the frustration of customers,'' Kent Jarrell, a spokesman for the trustee, told Reuters. ``That is why we are working around the clock to facilitate the transfer and return of customer assets. Unfortunately, this will take time as we conduct our independent and thorough investigation and maximize the estate for all stakeholders in a fair process.'' Some traders who tried to move their money from MF Global to other clearing firms or banks even before the company went belly-up have also been left in the lurch. One independent options trader in Chicago said he placed a wire request on the morning of October 28 to transfer $1.25 million from MF Global to JPMorgan Chase. The transfer never occurred. An MF Global representative said JPMorgan rejected the transfer because of errors in the account number, the trader said, but upon double-checking the wire request form he found no mistakes. The funds have remained frozen at MF Global since its bankruptcy, he said. ``We pretty much have zero clarity,'' said the trader, who did not want to be identified. ``I have a feeling the wire instructions probably just got lost in the turmoil.'' In a recent posting, attorney William Black describes the failure of our justice system to investigate ``accounting control fraud as a systemic risk that underlies the damage still being done.'' The collapse of MF Global has garnered massive attention, partly because Jon Corzine sat at its helm. Mr. Corzine is a former chief executive officer of infamous Goldman Sachs. He is also a former U.S. Senator and former Governor of New Jersey. Mr. Corzine's firm even held a special status as a primary dealer at the New York Federal Reserve. That's like the Good Housekeeping stamp of approval. Mr. Corzine isn't the only former government leader whose cozy relationship with the financial services industry is being publicly questioned. Former Speaker of this House Newt Gingrich appears to have had a significant financial relationship with Freddie Mac, one of the mortgage industry giants led by its management into financial ruin. Freddie Mac played a key role in the financial meltdown. As countless American families have lost their homes, Freddie Mac assumed the toxic assets that were handed to it from the banks. And it is now under conservatorship of the Federal Government, living off the taxpayer dime. Mr. Gingrich is apparently $1.8 million richer, though he claims he isn't sure how much Freddie paid him. I now see why Congress has consistently failed to investigate what happened at Freddie Mac along with Fannie Mae to determine exactly what decisions, by whom--by whom and when led to this financial ruin. I have a bill to do just that. H.R. 2093, the Fannie Mae and Freddie Mac Commission Act. It's well past time to pass it, and I invite Members to join me in this effort. The allegations against MF Global are serious. Mr. Corzine's firm had essentially placed a $6.3 billion bet on the sovereign debt of several European governments. After its most recent quarterly returns showed almost $200 million in losses, MF Global's stock lost 67 percent of its value. But this is not just a case of an investment firm being lured by the higher returns of riskier bonds. CME Group, Inc., who audited MF Global's accounts, found that Mr. Corzine's company violated key requirements to keep its accounts separate from its clients'. The details are still being sorted out, but as much as $600 million appears to be missing from customer accounts. The financial press is reporting a staggering amount of malfeasance in the days before MF Global filed for bankruptcy. In an apparent effort to buy themselves time, MF Global sent checks instead of wiring money. The checks turned out to be bogus. There are stories of requests to transfer funds being denied and even inaccurate account statements being issued. Even more egregious are accounts of people receiving bounced checks, going back and finding that their accounts were also altered inappropriately. If this isn't fraud, what is? What should concern all of us is the knowledge that fraud is not limited to a case here or there. In the financial services sector, fraud has become systemic. In 2009, the FBI testified before the House Judiciary Committee, ``The current financial crisis has produced one unexpected consequence: It has exposed prevalent fraud schemes that have been thriving in the global financial system. These fraud schemes are not new, but they are coming to light as a result of market deterioration.'' This isn't the first time our country has seen a massive crime wave in the financial services industry. In the 1980s, it was the savings and loan crisis, and the FBI responded with a staff of 1,000 agents and forensic experts based in 27 cities. That crisis was much smaller than what we are seeing today, yet today the FBI only has a couple hundred agents able to investigate. I have a bill, H.R. 1350, that asks that number to be increased by 1,000. I ask my colleagues to help cosponsor it, and let's bring some reason and prudence back to the financial markets of our country and let's exact real justice for the American people. The Virgin Crisis: Systematically Ignoring Fraud as a Systemic Risk (By William K. Black) One of the most revealing things about this crisis is the unwillingness to investigate whether ``accounting control fraud'' was a major contributor to the crisis. The refusal to even consider a major role for fraud is facially bizarre. The banking expert James Pierce found that fraud by senior insiders was, historically, the leading cause of major bank failures in the United States. The national commission that investigated the cause of the S&L debacle found: ``The typical large failure [grew] at an extremely rapid rate, achieving high concentrations of assets in risky ventures. . . . [E]very accounting trick available was used. . . . Evidence of fraud was invariably present as was the ability of the operators to ``milk'' the organization.'' (NCFIRRE 1993) Two of the nation's top economists'' study of the S&L debacle led them to conclude that the S&L regulators were correct--financial deregulation could be dangerously criminogenic. That understanding would allow us to avoid similar future crises. ``Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting. Nor, unaware of the concept, could they have known how serious it would be. Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better. If we learn from experience, history need not repeat itself' (George Akerlof & Paul Romer. ``Looting: the Economic Underworld of Bankruptcy for Profit.'' 1993: 60). The epidemic of accounting control fraud that drove the second phase of the S&L debacle (the first phase was caused by interest rate risk) was followed by an epidemic of accounting control fraud that produced the Enron era frauds. The FBI warned in September 2004 that there was an ``epidemic'' of mortgage fraud and predicted that it would cause a financial ``crisis'' if it were not contained. The mortgage banking industry's own anti-fraud experts reported in writing to nearly every mortgage lender in 2006 that: ``Stated income and reduced documentation loans speed up the approval process, but they are open invitations to fraudsters.'' ``When the stated incomes were compared to the IRS figures: [90%] of the stated incomes were exaggerated by 5% or more. [A]lmost 60% were exaggerated by more than 50%. [T]he stated income loan deserves the nickname used by many in the industry, the `liar's loan' '' (MARI 2006). We know that accounting control fraud is itself criminogenic--fraud begets fraud. The fraudulent CEOs deliberately create the perverse incentives that that suborn inside and outside employees and professionals. We have known for four decades how these perverse incentives produce endemic fraud by generating a ``Gresham's'' dynamic in which bad ethics drives good ethics out of the marketplace. ``[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.'' George Akerlof (1970). Akerlof noted this dynamic in his seminal article on markets for ``lemons,'' which led to the award of the Nobel Prize in Economics in 2001. It is the giants of economics who have confirmed what the S&L regulators and criminologists observed when we systematically ``autopsied'' each S&L failure to investigate its causes. Modern executive compensation has made accounting control fraud vastly more criminogenic than it once was as investigators of the current crisis have confirmed. ``Over the last several years, the subprime market has created a race to the bottom in which unethical actors have been handsomely rewarded for their misdeeds and ethical actors have lost market share. . . . The market incentives rewarded irresponsible lending and made it more difficult for responsible lenders to compete.'' Miller, T. J. (August 14, 2007). Iowa AG. Liar's loans offer what we call a superb ``natural experiment.'' No honest mortgage lender would make a liar's loan because such loans have a sharply negative expected value. Not underwriting creates intense ``adverse selection.'' We know that it was overwhelmingly the lenders and their agents that put the lies in liar's loans and the lenders created the perverse compensation incentives that led their agents to lie about the borrowers' income and to inflate appraisals. We know that appraisal fraud was endemic and only agents and their lenders can commit widespread appraisal fraud. Iowa Attorney General Miller's investigations found: ``[Many originators invent] non-existent occupations or income sources, or simply inflat[e] income totals to support loan applications. Importantly, our investigations have found that most stated income fraud occurs at the suggestion and direction of the loan originator, not the consumer.'' New York Attorney General (now Governor) Cuomo's investigations revealed that Washington Mutual (one of the leaders in making liar's loans) developed a blacklist of appraisers--who refused to inflate appraisals. No honest mortgage lender would ever inflate an appraisal or permit widespread appraisal inflation by its agents. Surveys of appraisers confirm that there was widespread pressure by nonprime lenders and their agents to inflate appraisals. We also know that the firms that made and purchased liar's loans followed the respective accounting control fraud ``recipes'' that maximize fictional short-term reported income, executive compensation, and (real) losses. Those recipes have four ingredients: 1. Grow like crazy 2. By making (or purchasing) poor quality loans at a premium yield 3. While employing extreme leverage, and 4. Providing only grossly inadequate allowances for loan and lease losses (ALLL) against the losses inherent in making or purchasing liars loans Firms that follow these recipes are not ``gamblers'' and they are not taking ``risks.'' Akerlof & Romer, the S&L regulators, and criminologists recognize that this recipe provides a ``sure thing.'' The exceptional (albeit fictional) income, real bonuses, and real losses are all sure things for accounting control frauds. Liar's loans are superb ``ammunition'' for accounting control frauds because they (and appraisal fraud) allow the fraudulent mortgage lenders and their agents to attain the unholy fraud trinity: (1) the lender can charge a substantial premium yield, (2) on a loan that appears to relatively lower risk because the lender has inflated the borrowers' income and the appraisal, while (3) eliminating the incriminating evidence of fraud that real underwriting of the borrowers' income and salary would normally place in the loan files. The government did not require any entity to make or purchase liar's loans (and that includes Fannie and Freddie). The states and the federal government frequently criticized liar's loans. Fannie and Freddie purchased liar's loans for the same reasons that Merrill, Lehman, Bear Stearns, etc. acquired liar's loans--they were accounting control frauds and liar's loans (and CDOs backed by liar's loans) were the best available ammunition for maximizing their fictional reported income and real bonuses. Liar's loans were large enough to hyper-inflate the bubble and drive the crisis. They increased massively from 2003- 2007. ``[B]etween 2003 and 2006 . . . subprime and Alt-A [loans grew] 94 and 340 percent, respectively. The higher levels of originations after 2003 were largely sustained by the growth of the nonprime (both the subprime and Alt-A) segment of the mortgage market.'' ``Alt-A: The Forgotten Segment of the Mortgage Market'' (Federal Reserve Bank of St. Louis 2010). The growth of liar's loans was actually far greater than the extraordinary rate that the St. Louis Fed study indicated. Their error was assuming that ``subprime'' and ``alt-a'' (one of the many misleading euphemisms for liar's loans) were dichotomous. Credit Suisse's early 2007 study of nonprime lending reported that roughly half of all loans called ``subprime'' were also ``liar's'' loans and that roughly one-third of home loans made in 2006 were liar's loans. That fact has four critical implications for this subject. The growth of liar's loans was dramatically larger than the already extraordinary 340% in three years reported by the St. Louis Fed because, by 2006, half of the loans the study labeled as ``subprime'' were also liar's loans. Because loans the study classified as ``subprime'' started out the period studied (2003) as a much larger category than liar's loans the actual percentage increase in liar's loans from 2003-2006 is over 500%. The first critical implication is that it was the tremendous growth in liar's loans that caused the bubble to hyper-inflate and delayed its collapse. The role of accounting control fraud epidemics in causing bubbles to hyper-inflate and persist is another reason that accounting control fraud is often criminogenic. When such frauds cluster they are likely to drive serious bubbles. Inflating bubbles optimize the fraud recipes for borrowers and purchasers of the bad loans by greatly delaying the onset of loss recognition. The saying in the trade is that ``a rolling loan gathers no loss.'' One can simply refinance the bad loans to delay the loss recognition and book new fee and interest ``income.'' When entry is easy (and entry into becoming a mortgage broker was exceptionally easy), an industry becomes even more criminogenic. Second, liar's loans (and CDOs ``backed'' by liar's loans) were large enough to cause extreme losses. Millions of liar's loans were made and those loans caused catastrophic losses because they hyper-inflated the bubble, because they were endemically fraudulent, because the borrower was typically induced by the lenders' frauds to acquire a home they could not afford to purchase, and because the appraisals were frequently inflated. Do the math: roughly one-third of home loans made in 2006 were liar's loans and the incidence of fraud in such loans was 90%. We are talking about an annual fraud rate of over one million mortgage loans from 2005 until the market for liar's loans collapsed in mid-2007. Third, the industry massively increased its origination and purchase of liar's loans after the FBI warned of the developing fraud ``epidemic'' and predicted it would cause a crisis and then massively increased its origination and purchase of liar's loans after the industry's own anti-fraud experts warned that such loans were endemically fraudulent and would cause severe losses. Again, this provides a natural experiment to evaluate why Fannie, Freddie, et alia, originated and purchased these loans. It wasn't because ``the government'' compelled them to do so. They did so because they were accounting control frauds. Fourth, the industry increasingly made the worst conceivable loans that maximized fictional short-term income and real compensation and losses. Making (or purchasing) liar's loans that are also subprime loans means that the originator is making (or the purchaser is buying) a loan that is endemically fraudulent to a borrower who has known, serious credit problems. It's actually worse than that because lenders also increasingly added ``layered'' risks (no downpayments and negative amortization) in order to optimize accounting fraud. Negative amortization reduces the borrowers' short-term interest rates, delaying delinquencies and defaults (but producing far greater losses). Again, this strategy maximizes fictional income and real losses. Honest home lenders and purchasers of home loans would not act in this fashion because the loans must cause catastrophic losses. To sum it up, the known facts of this crisis refute the rival theories that the lenders/purchasers originated/bought endemically fraudulent liar's loans because (a) ``the government'' made them (or Fannie and Freddie) do so, or (b) because they were trying to maximize profits by taking ``extreme tail'' (i.e., an exceptionally unlikely risk). The risk that a liar's home loan will default is exceptionally high, not exceptionally low. The known facts of the crisis are consistent with accounting control frauds using liar's loans (in the United States) as their ``ammunition of choice'' in accordance with the conventional fraud ``recipe'' used that caused prior U.S. crises. It is bizarre that in such circumstances the automatic assumption of the Bush and Obama administrations has been that fraud isn't even worth investigating or considering in connection with the crisis. It is as if millions of liar's loans purchased and resold as CDOs largely by systemically dangerous institutions are an inconvenient distraction from campaign fundraising efforts. Instead, we have the myth of the virgin crisis unsullied by accounting control fraud. Indeed, contrary to theory, experience, and reality, the Department of Justice has invented the faith-based fiction that looting cannot occur. Benjamin Wagner, a U.S. Attorney who is actively prosecuting mortgage fraud cases in Sacramento, Calif., points out that banks lose money when a loan turns out to be fraudulent. ``It doesn't make any sense to me that they would be deliberately defrauding themselves,'' Wagner said. Wagner's statement is embarrassing. He conflates ``they'' (referring to the CEO) and ``themselves'' (referring to the bank). It makes perfect sense for the CEO to loot the bank. Looting is a ``sure thing'' guaranteed to make the CEO wealthy. ``Looting'' destroys the bank (that's the ``bankruptcy'' part of Akerlof & Romer's title) but it produces the ``profit'' for the CEO. It is the deliberate making of masses of bad loans at premium yields that allows the CEO to profit by looting the bank. When the top prosecutor in an epicenter of accounting control fraud defines the most destructive form of financial crime out of existence he allows elite fraud to occur with impunity. As embarrassing as Wagner's statement is, however, it cannot compete on this dimension with that of his boss, Attorney General Holder. I was appalled when I reviewed his testimony before the Financial Crisis Inquiry Commission (FCIC). Chairman Angelides asked Holder to explain the actions the Department of Justice (DOJ) took in response to the FBI's warning in September 2004 that mortgage fraud was ``epidemic'' and its prediction that if the fraud epidemic were not contained it would cause a financial ``crisis.'' Holder testified: ``I'm not familiar myself with that [FBI] statement.'' The DOJ's (the FBI is part of DOJ) preeminent contribution with respect to this crisis was the FBI's 2004 warning to the nation (in open House testimony picked up by the national media. For none of Holder's senior staffers who prepped him for his testimony to know about the FBI testimony requires that they know nothing about the department's most important and (potentially) useful act. That depth of ignorance could not exist if his senior aides cared the least about the financial crisis and made it even a minor priority to understand, investigate, and prosecute the frauds that drove the crisis. Because Holder was testifying in January 14, 2010, the failure of anyone from Holder on down in his prep team to know about the FBI's warnings also requires that all of them failed to read any of the relevant criminology literature or even the media and blogosphere. In addition to claiming that the DOJ's response to the developing crisis under President Bush was superb, Holder implicitly took the position that (without any investigation or analysis) fraud could not and did not pose any systemic economic risk. Implicitly, he claimed that only economists had the expertise to contribute to understanding the causes of the crisis. If you don't investigate; you don't find. If you don't understand ``accounting control fraud'' you cannot understand why we have recurrent, intensifying financial crises. If Holder thinks we should take our policy advice from Larry Summers and Bob Rubin, leading authors of the crisis, then he has abdicated his responsibilities to the source of the problem. ``Now let me state at the outset what role the Department plays and does not play in addressing these challenges'' [record fraud in investment banking and securities]. ``The Department of Justice investigates and prosecutes federal crimes. . . .'' ``As a general matter we do not have the expertise nor is it part of our mission to opine on the systemic causes of the financial crisis. Rather the Justice Department's resources are focused on investigating and prosecuting crime. It is within this context that I am pleased to offer my testimony and to contribute to your vital review.'' Two aspects of Holder's testimony were preposterous, dishonest, and dangerous. ``I'm proud that we have put in place a law enforcement response to the financial crisis that is and will continue to be is aggressive, comprehensive, and well-coordinated.'' DOJ has obtained ten convictions of senior insiders of mortgage lenders (all from one obscure mortgage bank) v. over 1000 felony convictions in the S&L debacle. DOJ has not conducted an investigation worthy of the name of any of the largest accounting control frauds. DOJ is actively opposing investigating the systemically dangerous institutions (SDIs). Holder's most disingenuous and dangerous sentence, however, was this one: ``Our efforts to fight economic crime are a vital component of our broader strategy, a strategy that seeks to foster confidence in our financial system, integrity in our markets, and prosperity for the American people.'' Yes, the ``confidence fairy'' ruled at DOJ. It is the rationale now for DOJ's disgraceful efforts to achieve immunity for the SDIs' endemic frauds. The confidence fairy trumped and traduced ``integrity in our markets'' and ``prosperity for the American people.'' Prosperity is reserved for the SDIs and their senior managers--the one percent.

Ms. KAPTUR

Ms. KAPTUR. I want to thank Congresswoman Marcia Fudge, a leadership Congresswoman from Ohio, for bringing us together this evening on the important question of voter suppression. And I would like to say for the record that the stability of each of our communities and our Nation rests on the fragile reed of trust, trust of the people, that trust enshrined in our right to vote, and our obligation to do so. Today, in fact, we passed a resolution that is stated over the Speaker's rostrum: ``In God We Trust.'' Yes, trust. And John F. Kennedy reminded us that here on Earth God's work must truly be our own. Trying to prevent voter suppression is our work. In Ohio, we see new forms of voter suppression in the works as we watch the redistricting process unfold, the districts in which we will run as Members of the House and Senate in Ohio, whether it's for Congress or our legislature, Ohio, a home-rule State that values community, that values where people live. We call it a home-rule State. Where we live matters. And yet we see in the redistricting what's happened in Ohio, a State losing population. The population hasn't grown as fast as other States. Of 88 counties in Ohio, 62 county lines completely violated. What does that do? It moves people around in a district that has no bearing to their community. Hundreds and hundreds of precincts cracked. You go in to vote, as Congressman Davis said, you think you're in one precinct, well, gosh, you might even be in the wrong school. Who's going to let you know, especially if you've lost your job and you aren't living where you were before? We see entire towns in Ohio's redistricting that's proposed by the Republican Party of Ohio hacked apart for no reason, for no sensible reason. Canton, Ohio, is a shadow of its former self. Akron, Ohio; Toledo Ohio--the list goes on. Let me say that voter suppression discourages voters, especially during this time of economic recession when so many foreclosures have made it more difficult for people to have a home base. So I would say to the congresswoman, thank you so much this evening for giving us this time to prepare us for the elections of 2012 so that we can in fact prepare to avoid voter suppression in every form that it existed before and in every new form that is being created today. Thank you, Congresswoman Fudge, for your leadership on this important issue of giving every American their full rights so we can restore trust in the government of the United States.