Dennis Kucinich

Mr. KUCINICH

Mr. KUCINICH. Mr. Speaker, I rise today in honor of the 216th birthday of the City of Cleveland, Ohio, one of the nation's most storied communities. Cleveland was officially founded on July 22, 1796 by Moses Cleaveland, a surveyor from Connecticut. Cleveland's location along Lake Erie made it an ideal place to build a new city with its convenient transportation routes and abundant natural resources. The city quickly became a major industrial center, most notably for automobile manufacturing and was the original site of John D. Rockefeller's Standard Oil Company. In 1949, Cleveland was named an All-American city for the first time. Today, Cleveland is the home to many landmarks and tourist attractions, such as The Rock and Roll Hall of Fame and the various museums located in University Circle. The city has professional baseball, football, and basketball teams with thousands of fans who enjoy cheering them on year-round. Cleveland has also retained and celebrated a wide range of cultural and ethnic groups that have settled in the area over the years. A celebration is being held on July 22 to recognize the 216-year history of this incredible city. The event will be located at Jacob's Pavilion at Nautica and will feature food truck vendors and the attendance of people from as many as 107 cultural groups. Mr. Speaker and colleagues, please join me in honoring the City of Cleveland as it celebrates 216 years of history, culture, and a bright future.

Mr. KUCINICH

Mr. KUCINICH. Mr. Speaker, I rise today in remembrance of Mr. John C. Fakan, the skipper of the historic USS COD Submarine Memorial. Mr. Fakan was born in Cleveland, Ohio on May 10, 1934. He grew up in Cleveland and attended John Marshal High School. John earned a bachelor's degree in physics from Ohio University, a master's degree in electrical engineering from Colorado State University, and a PhD in systems engineering, also from Colorado State University. Despite his education in the sciences, John had interests in many areas. He served as the president of the Cleveland Philosophical Society and was a trustee of the Great Lakes Historical Society and the Historic Naval Ships Society. John led a life full of accomplishments that ranged from working as an aerospace engineer for NASA's Lewis Research Center in Brook Park, Ohio to founding the Medical Data Systems Corporation, located Northeast Ohio. Throughout his career, John helped develop technology used in moon landings and designed quieter jet engines. He also worked on the Great Lakes Very High Frequency Communications System technology that allowed for radio-telephone communication over the Great Lakes. Most recently, John had been known as the skipper of the USS COD Submarine Memorial, a warship that saw battle in both World War II and the Korean War. In 2011, John was awarded the Casper J. Knight, Jr. Award for his work restoring and maintaining the submarine. I offer my condolences to his wife Helene; children, Stephen, Debra and Sandra; grandchildren, and five siblings. In addition to his family, John will be missed by the many people whose lives he affected in his 78 incredible years. Mr. Speaker and colleagues, please join me in honoring John C. Fakan, a leader and a role model in the Cleveland community.

Mr. KUCINICH

Mr. KUCINICH. Mr. Speaker, I rise today in honor of St. Barbara's Church, one of the 11 Cleveland Catholic Diocese parishes that will be reopening this year. In 2009 it was announced that several of the Cleveland Catholic Diocese's area churches, including St. Barbara's, were to close. However, just months ago, the Vatican overruled this decision and St. Barbara's will be reopening its doors on Sunday, July 22. St. Barbara's Church originally opened in 1906 on top of a hill south of Big Creek in Cleveland. The building burned down in 1913, and a new one was built on the corner of Denison Avenue and West 15th Street, which was much more accessible for parishioners traveling by foot. In 1925, St. Barbara's Elementary School was established along with a new church building, leaving the old church building to be used as a hall for events. The third church building was torn down and replaced with yet another in 1952, and would remain the primary church building. In anticipation of the re-opening, parishioners spent the past several weeks restoring the building to its former condition, cleaning the pews and replacing the statues that had been removed after the closing. Mr. Speaker and colleagues, please join me in recognizing the reopening of St. Barbara's Church, a beloved parish that has returned to the City of Cleveland.

Mr. KUCINICH

Mr. KUCINICH. Mr. Speaker, I rise today in honor of St. Patrick's Church, one of the 11 Cleveland Catholic Diocese parishes that will be reopening this year. In 2009 it was announced that several of the Cleveland Catholic Diocese's area churches, including St. Patrick's, were to close. However, just months ago, the Vatican overruled this decision and St. Patrick's will be reopening its doors on Sunday, July 22. St. Patrick Parish, which was founded on March 17, 1848, is the mother church of 13 parishes on Cleveland's west side. The church was built using sandstone in 1898 and still has its original stained glass windows portraying the saints. The parish grounds also include a Community Center, Rectory, Cemetery, gym, and West Park Catholic Academy's two school buildings. St. Patrick Parish had served more than 1,110 families in Cleveland's West Park neighborhood before being closed. Upon reopening, the parish anticipates that nearly 80 percent of their former parishioners will return to worship. Mr. Speaker and colleagues, please join me in recognizing the reopening of St. Patrick's Church, a beloved parish that has returned to the City of Cleveland.

Mr. KUCINICH

Mr. KUCINICH. I would like to include in the record of this debate an article about the Fed's policy model sacrificing its maximum employment mandate and targeting 5 to 6 percent as unemployment. Speech by Janet L. Yellen, Vice Chair, Board of Governors of the Federal Reserve System at the Boston Economic Club Dinner, Boston, Massachusetts June 6, 2012 Perspectives on Monetary Policy Good evening. I'm honored to have the opportunity to address the Boston Economic Club and I'm grateful to Chip Case for inviting me to speak to you tonight. As most of you probably know, Chip was one of the first economists to document worrisome signs of a housing bubble in parts of the United States. After sounding an early alarm in 2003, Chip watched the bubble grow and was prescient in anticipating the very serious toll that its unwinding would impose on the economy. Chip recognized that declining house prices would affect not just residential construction but also consumer spending, the ability of households to borrow, and the health of the financial system. In light of these pervasive linkages, the repeat sales house price index that bears Chip's name is one of the most closely watched of all U.S. economic indicators. Indeed, as I will discuss this evening, prolonged weakness in the housing sector remains one of several serious headwinds facing the U.S. economy. Given these headwinds, I believe that a highly accommodative monetary policy will be needed for quite some time to help the economy mend. Before continuing, let me emphasize that my remarks reflect my own views and not necessarily those of others in the Federal Reserve System. Economic Conditions and the Outlook In my remarks tonight, I will describe my perspective on monetary policy. To begin, however, I'll highlight some of the current conditions and key features of the economic outlook that shape my views. To anticipate the main points, the economy appears to be expanding at a moderate pace. The unemployment rate is almost 1 percentage point lower than it was a year ago, but we are still far from full employment. Looking ahead, I anticipate that significant headwinds will continue to restrain the pace of the recovery so that the remaining employment gap is likely to close only slowly. At the same time, inflation (abstracting from the transitory effects of movements in oil prices) has been running near 2 percent over the past two years, and I expect it to remain at or below the Federal Open Market Committee's (the FOMC's) 2 percent objective for the foreseeable future. As always, considerable uncertainty attends the outlook for both growth and inflation; events could prove either more positive or negative than what I see as the most likely outcome. That said, as I will explain, I consider the balance of risks to be tilted toward a weaker economy. Starting with the labor market, conditions have gradually improved over the past year, albeit at an uneven pace. Average monthly payroll gains picked up from about 145,000 in the second half of 2011 to 225,000 during the first quarter of this year. However, these gains fell back to around 75,000 a month in April and May. The deceleration of payroll employment from the first to the second quarter was probably exacerbated by some combination of seasonal adjustment difficulties and an unusually mild winter that likely boosted employment growth earlier in the year. Payback for that earlier strength probably accounts for some of the weakness we've seen recently. Smoothing through these fluctuations, the average pace of job creation for the year to date, as well as recent unemployment benefit claims data and other indicators, appear to be consistent with an economy expanding at only a moderate rate, close to its potential. Such modest growth would imply little additional progress in the near term in improving labor market conditions, which remain very weak. Currently, the unemployment rate stands around 3 percentage points above where it was at the onset of the recession--a figure that is stark enough as it is, but does not even take account of the millions more who have left the labor force or who would have joined under more normal circumstances in the past four years. All told, only about half of the collapse in private payroll employment in 2008 and 2009 has been reversed. A critical question for monetary policy is the extent to which these numbers reflect a shortfall from full employment versus a rise in structural unemployment. While the magnitude of structural unemployment is uncertain, I read the evidence as suggesting that the bulk of the rise during the recession was cyclical, not structural in nature. Consider figure 1, which presents three indicators of labor market slack. The black solid line is the unemployment gap, defined as the difference between the actual unemployment rate and the Congressional Budget Office (CBO) estimate of the rate consistent with inflation remaining stable over time. The red dashed line is an index of the difficulty households perceive in finding jobs, based on results from a survey conducted by the Conference Board. And the red dotted line is an index of firms' ability to fill jobs, based on a survey conducted by the National Federation of Independent Business. All three measures show similar cyclical movements over the past 20 years, and all now stand at very high levels. This similarity runs counter to claims that the CBO's and other estimates of the unemployment gap overstate the true amount of slack by placing insufficient weight on structural explanations, such as a reduced efficiency of matching workers to jobs, for the rise in unemployment since 2007. If that were the case, why would firms now find it so easy to fill positions? Other evidence also points to the dominant role of cyclical forces in the recent rise in unemployment: job losses have been widespread, rather than being concentrated in the construction and financial sectors, and the co-movement of job vacancies and unemployment over the past few years does not appear to be unusual. As I mentioned, I expect several factors to restrain the pace of the recovery and the corresponding improvement in the labor market going forward. The housing sector remains a source of very significant headwinds. Housing has typically been a driver of economic recoveries, and we have seen some modest improvement recently, but continued uncertainties over the direction of house prices, and very restricted mortgage credit availability for all but the most creditworthy buyers, will likely weigh on housing demand for some time to come. When housing demand does pick up more noticeably, the huge overhang of both unoccupied dwellings and homes in the foreclosure pipeline will likely allow a good deal of that demand to be met for a time without a sizeable expansion in homebuilding. Moreover, the enormous toll on household wealth resulting from the collapse of house prices--almost a 35 percent decline from its 2006 peak, according to the Case- Shiller index--imposes ongoing restraint on consumer spending, and the loss of home equity has impaired many households' ability to borrow. A second headwind that will likely become more important over coming months relates to fiscal policy. At the federal level, stimulus-related policies are scheduled to wind down, while both defense and nondefense purchases are expected to decline in inflation-adjusted terms over the next several years. Toward the end of this year, important decisions regarding the extension of current federal tax and budget policies loom. I will return to the associated uncertainties and their potentially detrimental effects later. A third factor weighing on the outlook is the likely sluggish pace of economic growth abroad. Strains in global financial markets have resurfaced in recent months, reflecting renewed uncertainty about the resolution of the European situation. Risk premiums on sovereign debt and other securities have risen again in many European countries, while European banks continue to face pressure to shrink their balance sheets. Even without a further intensification of stresses, the slowdown in economic activity in Europe will likely hold back U.S. export growth. Moreover, the perceived risks surrounding the European situation are already having a meaningful effect on financial conditions here in the United States, further weighing on the prospects for U.S. growth. Given these formidable challenges, most private sector forecasters expect only gradual improvement in the labor market and I share their view. Figure 2 shows the unemployment rate together with the median forecast from last month's Survey of Professional Forecasters (SPF), the dashed blue line. The figure also shows the central tendency of the unemployment projections that my FOMC colleagues and I made at our April meeting: Those projections reflect our assessments of the economic outlook given our own individual judgements about the appropriate path of monetary policy. Included in the figure as well is the central tendency of FOMC participants' estimates of the longer-run normal unemployment rate, which ranges from 5.2 percent to 6 percent. Like private forecasters, most FOMC participants expect the unemployment rate to remain well above its longer- run normal value over the next several years. Of course, considerable uncertainty attends this outlook: The shaded area provides an estimate of the 70 percent confidence interval for the future path of the unemployment rate based on historical experience and model simulations. Its width suggests that these projections could be quite far off, in either direction. Nevertheless, the figure shows that labor market slack at present is so large that even a very large and favorable forecast error would not change the conclusion that slack will likely remain substantial for quite some time. Turning to inflation, figure 3 summarizes private and FOMC forecasts. Overall consumer price inflation has fluctuated quite a bit in recent years, largely reflecting movements in prices for oil and other commodities. In early 2011 and again earlier this year, prices of crude oil, and thus of gasoline, rose noticeably. Smoothing through these fluctuations, inflation as measured by the price index for personal consumption expenditures (PCE) averaged near 2 percent over the past two years. In recent weeks, however, oil and gasoline prices have moderated and are now showing through to the headline inflation figures. Looking ahead, most FOMC participants at the time of our April meeting expected inflation to be at, or a bit below, our long-run objective of 2 percent through 2014; private forecasters on average also expect inflation to be close to 2 percent. As with unemployment, uncertainty around the inflation projection is substantial. In the view of some observers; the stability of inflation in the face of high unemployment in recent years constitutes evidence that much of the remaining unemployment is structural and not cyclical. They reason that if there were truly substantial slack in the labor market, simple accelerationist ``Phillips curve'' models would predict more noticeable downward pressure on inflation. However, substantial cross-country evidence suggests that, in low-inflation environments, inflation is notably less responsive to downward pressure from labor market slack than it is when inflation is elevated. In other words, the short-run Phillips curve may flatten out. One important reason for this non-linearity, in my view, is downward nominal wage rigidity--that is, the reluctance or inability of many firms to cut nominal wages. The solid blue bars in figure 4 present a snapshot of the distribution of nominal wage changes for individual jobs during the depth of the current labor market slump, based on data collected by the Bureau of Labor Statistics. For comparison, the dashed red line presents a hypothetical distribution of wage changes, using a normal distribution that approximates the actual distribution of wage changes greater than zero. The distribution of actual wage changes shows that a relatively high percentage of workers saw no change in their nominal wage, and relatively few experienced modest wage cuts. This pile-up phenomenon at zero suggests that, even when the unemployment rate was around 10 percent, many firms were reluctant to cut nominal wage rates. In the absence of this barrier, nominal gains in wages and unit labor costs would have likely been even more subdued given the severity of the economic downturn, with the result that inflation would probably now be running at a lower rate. Anchored inflation expectations are another reason why inflation has remained close to 2 percent in the face of very low resource utilization. As shown in figure 5, survey measures of longer-horizon inflation expectations have remained nearly constant since the mid-1990s even as actual inflation has fluctuated. As a result, the current slump has not generated the downward spiral of falling expected and actual inflation that a simple accelerationist model of inflation might have predicted. Indeed, keeping inflation expectations from declining has been an important success of monetary policy over the past few years. At the same time, the fact that longer-term inflation expectations have not risen above 2 percent has also proved extremely valuable, for it has freed the FOMC to take strong actions to support the economic recovery without greatly worrying that higher energy and commodity prices would become ingrained in inflation and inflation expectations, as they did in the 1970s. While my modal outlook calls for only a gradual reduction in labor market slack and a stable pace of inflation near the FOMC's longer-run objective of 2 percent, I see substantial risks to this outlook, particularly to the downside. As I mentioned before, even without any political gridlock, fiscal policy is bound to become substantially less accommodative from early 2013 on. However, federal fiscal policy could turn even more restrictive if the Congress does not reach agreement on several important tax and budget policy issues before the end of this year; in fact, the CBO recently warned that the potential hit to gross domestic product (GDP) growth could be sufficient to push the economy into recession in 2013. The deterioration of financial conditions in Europe of late, coupled with notable declines in global equity markets, also serve as a reminder that highly destabilizing outcomes cannot be ruled out. Finally, besides these clearly identifiable sources of risk, there remains the broader issue that economic forecasters have repeatedly overestimated the strength of the recovery and so still may be too optimistic about the prospects that growth will strengthen. Although I view the bulk of the increase in unemployment since 2007 as cyclical, I am concerned that it could become a permanent problem if the recovery were to stall. In this economic downturn, the fraction of the workforce unemployed for six months or more has climbed much more than in previous recessions, and remains at a remarkably high level. Continued high unemployment could wreak long-term damage by eroding the skills and labor force attachment of workers suffering long- term unemployment, thereby turning what was initially cyclical into structural unemployment. This risk provides another important reason to support the recovery by maintaining a highly accommodative stance of monetary policy. The Conduct of Policy with Unconventional Tools Now turning to monetary policy, I will begin by discussing the FOMC's reliance on unconventional tools to address the disappointing pace of recovery. I will then elaborate my rationale for supporting a highly accommodative policy stance. As you know, since late 2008, the FOMC's standard policy tool, the target federal funds rate, has been maintained at the zero lower bound. To provide further accommodation, we have employed two unconventional tools to support the recovery--extended forward guidance about the future path of the federal funds rate, and large-scale asset purchases and other balance sheet actions that have greatly increased the size and duration of the Federal Reserve's portfolio. These two tools have become increasingly important because the recovery from the recession has turned out to be persistently slower than either the FOMC or private forecasters anticipated. Figure 6 illustrates the magnitude of the disappointment by comparing Blue Chip forecasts for real GDP growth made two years ago with ones made earlier this year. As shown by the dashed blue line, private forecasters in early 2010 anticipated that real GDP would expand at an average annual rate of just over 3 percent from 2010 through 2014. However, actual growth in 2011 and early 2012 has turned out to be much weaker than expected, and, as indicated by the dotted red line, private forecasters now anticipate only a modest acceleration in real activity over the next few years. In response to the evolving outlook, the FOMC has progressively added policy accommodation using both of its unconventional tools. For example, since the federal funds rate target was brought down to a range of 0 to \1/4\ percent in December 2008, the FOMC has gradually adjusted its forward guidance about the anticipated future path of the federal funds rate. In each meeting statement from March 2009 through June 2011, the Committee indicated its expectation that economic conditions ``are likely to warrant exceptionally low levels of the federal funds rate for an extended period.'' At the August 2011 meeting, the Committee decided to provide more specific information about the likely time horizon by substituting the phrase ``at least through mid-2013'' for the phrase ``for an extended period''; at the January 2012 meeting, this horizon was extended to ``at least through late 2014.'' Has this guidance worked? Figure 7 illustrates how dramatically forecasters' expectations of future short-term interest rates have changed. As the dashed blue line indicates, the Blue Chip consensus forecast made in early 2010 anticipated that the Treasury-bill rate would now stand at close to 3\1/2\ percent; today, in contrast, private forecasters expect short-term interest rates to remain very low in 2014. Of course, much of this revision in interest rate projections would likely have occurred in the absence of explicit forward guidance; given the deterioration in projections of real activity due to the unanticipated persistence of headwinds, and the continued subdued outlook for inflation, forecasters would naturally have anticipated a greater need for the FOMC to provide continued monetary accommodation. However, I believe the changes over time in the language of the FOMC statement, coupled with information provided by Chairman Bernanke and others in speeches and congressional testimony, helped the public understand better the Committee's likely policy response given the slower-than- expected economic recovery. As a result, forecasters and market participants appear to have marked down their expectations for future short-term interest rates by more than they otherwise would have, thereby putting additional downward pressure on long-term interest rates, improving broader financial conditions, and lending support to aggregate demand. The FOMC has also provided further monetary accommodation over time by altering the size and composition of the Federal Reserve's securities holdings, shown in figure 8. The expansion in the volume of securities held by the Federal Reserve is shown in the left panel of the figure. During 2009 and early 2010, the Federal Reserve purchased about $1.4 trillion in agency mortgage-backed securities and agency debt securities and about $300 billion in longer-term Treasury securities. In November 2010, the Committee initiated an additional $600 billion in purchases of longer-term Treasury securities, which were completed at the end of June of last year. Last September, the FOMC decided to implement the ``Maturity Extension Program,'' which affected the maturity composition of our Treasury holdings as shown in the right panel. Through this program, the FOMC is extending the average maturity of its securities holdings by selling $400 billion of Treasury securities with remaining maturities of 3 years or less and purchasing an equivalent amount of Treasury securities with remaining maturities of 6 to 30 years. These transactions are currently scheduled to be completed at the end of this month. Research by Federal Reserve staff and others suggests that our balance sheet operations have had substantial effects on longer-term Treasury yields, principally by reducing term premiums on longer-dated Treasury securities. Figure 9 provides an estimate, based on Federal Reserve Board staff calculations, of the cumulative reduction of the term premium on 10-year Treasury securities from the three balance sheet programs. These results suggest that our portfolio actions are currently keeping 10-year Treasury yields roughly 60 basis points lower than they otherwise would be. Other evidence suggests that this downward pressure has had favorable spillover effects on other financial markets, leading to lower long-term borrowing costs for households and firms, higher equity valuations, and other improvements in financial conditions that in turn have supported consumption, investment, and net exports. Because the term premium effect depends on both the Federal Reserve's current and expected future asset holdings, most of this effect--without further actions--will likely wane over the next few years as the effect depends less and less on the current elevated level of the balance sheet and increasingly on the level of holdings during and after the normalization of our portfolio. The Rationale for Highly Accommodative Policy I have already noted that, in my view, an extended period of highly accommodative policy is necessary to combat the persistent headwinds to recovery. I will next explain how I've reached this policy judgment. In evaluating the stance of policy, I find the prescriptions from simple policy rules a logical starting point. A wide range of such rules has been examined in the academic literature, the most famous of which is that proposed by John Taylor in his 1993 study. Rules of the general sort proposed by Taylor (1993) capture well our statutory mandate to promote maximum employment and price stability by prescribing that the federal funds rate should respond to the deviation of inflation from its longer-run goal and to the output gap, given that the economy should be at or close to full employment when the output gap--the difference between actual GDP and an estimate of potential output--is closed. Moreover, research suggests that such simple rules can be reasonably robust to uncertainty about the true structure of the economy, as they perform well in a variety of models. Today, I will consider the prescriptions of two such benchmark rules--Taylor's 1993 rule, and a variant that is twice as responsive to economic slack. In my view, this latter rule is more consistent with the FOMC's commitment to follow a balanced approach to promoting our dual mandate, and so I will refer to it as the ``balanced- approach'' rule. To show the prescriptions these rules would have called for at the April FOMC meeting, I start with an illustrative baseline outlook constructed using the projections for unemployment, inflation, and the federal funds rate that FOMC participants reported in April. I then employ the dynamics of one of the Federal Reserve's economic models, the FRB/US model, to solve for the joint paths of these three variables if the short-term interest rate had instead been set according to the Taylor (1993) rule or the balanced-approach rule, subject, in both cases, to the zero lower bound constraint on the federal funds rate. The dashed red line in figure 10 shows the resulting path for the federal funds rate under Taylor (1993) and the solid blue line with open circles illustrates the corresponding path using the balanced- approach rule. In both simulations, the private sector fully understands that monetary policy follows the particular rule in force. Figure 10 shows that the Taylor rule calls for monetary policy to tighten immediately, while the balanced- approach rule prescribes raising the federal funds rate in the fourth quarter of 2014--the earliest date consistent with the FOMC's current forward guidance of ``exceptionally low levels for the federal funds rate at least through late 2014.'' Although simple rules provide a useful starting point in determining appropriate policy, they by no means deserve the ``last word''--especially in current circumstances. An alternative approach, also illustrated in figure 10, is to compute an ``optimal control'' path for the federal funds rate using an economic model--FRB/US, in this case. Such a path is chosen to minimize the value of a specific ``loss function'' conditional on a baseline forecast of economic conditions. The loss function attempts to quantify the social costs resulting from deviations of inflation from the Committee's longer-run goal and from deviations of unemployment from its longer-run normal rate. The solid green line with dots in figure 10 shows the ``optimal control'' path for the federal funds rate, again conditioned on the illustrative baseline outlook. This policy involves keeping the federal funds rate close to zero until late 2015, four quarters longer than the balanced-approach rule prescription and several years longer than the Taylor rule. Importantly, optimal control calls for a later lift-off date even though this benchmark--unlike the simple policy rules--implicitly takes full account of the additional stimulus to real activity and inflation being provided over time by the Federal Reserve's other policy tool, the past and projected changes to the size and maturity of its securities holdings. Figure 11 shows that, by keeping the federal funds rate at its current level for longer, monetary policy under the balanced-approach rule achieves a more rapid reduction of the unemployment rate than monetary policy under the Taylor (1993) rule does, while nonetheless keeping inflation near 2 percent. But the improvement in labor market conditions is even more notable under the optimal control path, even as inflation remains close to the FOMC's long-run inflation objective. As I noted, simple rules have the advantage of delivering good policy outcomes across a broad range of models, and are thereby relatively robust to our limited understanding of the precise working of the economy--in contrast to optimal- control policies, whose prescriptions are sensitive to the specification of the particular model used in the analysis. However, simple rules also have their shortcomings, leading them to significantly understate the case for keeping policy persistently accommodative in current circumstances. One of these shortcomings is that the rules do not adjust for the constraints that the zero lower bound has placed on conventional monetary policy since late 2008. A second is that they do not fully take account of the protracted nature of the forces that have been restraining aggregate demand in the aftermath of the housing bust. As I've emphasized, the pace of the current recovery has turned out to be persistently slower than most observers expected, and forecasters expect it to remain quite moderate by historical standards. The headwinds that explain this disappointing performance represent a substantial departure from normal cyclical dynamics. As a result, the economy's equilibrium real federal funds rate--that is, the rate that would be consistent with full employment over the medium run--is probably well below its historical average, which the intercept of simple policy rules is supposed to approximate. By failing to fully adjust for this decline, the prescriptions of simple policy rules--which provide a useful benchmark under normal circumstances--could be significantly too restrictive now and could remain so for some time to come. In this regard, I think it is informative that the Blue Chip consensus forecast released in March showed the real three-month Treasury bill rate settling down at only 1\1/4\ percent late in the decade, down 120 basis points from the long-run projections made prior to the recession. Looking Ahead Recent labor market reports and financial developments serve as a reminder that the economy remains vulnerable to setbacks. Indeed, the simulations I described above did not take into account this new information. In our policy deliberations at the upcoming FOMC meeting we will assess the effects of these developments on the economic forecast. If the Committee were to judge that the recovery is unlikely to proceed at a satisfactory pace (for example, that the forecast entails little or no improvement in the labor market over the next few years), or that the downside risks to the outlook had become sufficiently great, or that inflation appeared to be in danger of declining notably below its 2 percent objective, I am convinced that scope remains for the FOMC to provide further policy accommodation either through its forward guidance or through additional balance-sheet actions. In taking these decisions, however, we would need to balance two considerations. On the one hand, our unconventional tools have some limitations and costs. For example, the effects of forward guidance are likely to be weaker the longer the horizon of the guidance, implying that it may be difficult to provide much more stimulus through this channel. As for our balance sheet operations, although we have now acquired some experience with this tool, there is still considerable uncertainty about its likely economic effects. Moreover, some have expressed concern that a substantial further expansion of the balance sheet could interfere with the Fed's ability to execute a smooth exit from its accommodative policies at the appropriate time. I disagree with this view: The FOMC has tested a variety of tools to ensure that we will be able to raise short-term interest rates when needed while gradually returning the portfolio to a more normal size and composition. But even if unjustified, such concerns could in theory reduce confidence in the Federal Reserve and so lead to an undesired increase in inflation expectations. On the other hand, risk management considerations arising from today's unusual circumstances strengthen the case for additional accommodation beyond that called for by simple policy rules and optimal control under the modal outlook. In particular, as I have noted, there are a number of significant downside risks to the economic outlook, and hence it may well be appropriate to insure against adverse shocks that could push the economy into territory where a self- reinforcing downward spiral of economic weakness would be difficult to arrest. Conclusion In my remarks this evening I have sought to explain why, in my view, a highly accommodative monetary policy will remain appropriate for some time to come. My views concerning the stance of monetary policy reflect the FOMC's firm commitment to the goals of maximum employment and stable prices, my appraisal of the medium term outlook (which is importantly shaped by the persistent legacy of the housing bust and ensuing financial crisis), and by my assessment of the balance of risks facing the economy. Of course, as I've emphasized, the outlook is uncertain and the Committee will need to adjust policy as appropriate as actual conditions unfold. For this reason, the FOMC's forward guidance is explicitly conditioned on its anticipation of ``low rates of resource utilization and a subdued outlook for inflation over the medium run.'' If the recovery were to proceed faster than expected or if inflation pressures were to pick up materially, the FOMC could adjust policy by bringing forward the expected date of tightening. In contrast, if the Committee judges that the recovery is proceeding at an insufficient pace, we could undertake portfolio actions such as additional asset purchases or a further maturity extension program. It is for this reason that the FOMC emphasized, in its statement following the April meeting, that it would ``regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.''

Mr. KUCINICH. I would also like to include in the record of this debate an article from Bloomberg News that talks about how secret Fed loans gave banks billions that were undisclosed to Congress. [From: Bloomberg Markets Magazine, Nov. 27, 2011] Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress (By Bob Ivry, Bradley Keoun, and Phi Kuntz) The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing. The Fed didn't tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn't mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed's below-market rates, Bloomberg Markets magazine reports in its January issue. Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse. A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger. ``Change Their Votes'' ``When you see the dollars the banks got, it's hard to make the case these were successful institutions,'' says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. ``This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.'' The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open. The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma--investors and counterparties would shun firms that used the central bank as lender of last resort--and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg's lawsuit up to the U.S. Supreme Court, which declined to hear the banks' appeal in March 2011. $7.77 Trillion The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he ``wasn't aware of the magnitude.'' It dwarfed the Treasury Department's better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year. ``TARP at least had some strings attached,'' says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program's executive-pay ceiling. ``With the Fed programs, there was nothing.'' Bankers didn't disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed ``one of the strongest and most stable major banks in the world.'' He didn't say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day. ``Motivate Others'' JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed's Term Auction Facility ``at the request of the Federal Reserve to help motivate others to use the system.'' He didn't say that the New York-based bank's total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program's creation. Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon's statement or the company's Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment. The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded ii lending facilities catering to banks, securities firms and corporations that couldn't get short-term loans from their usual sources. ``Core Function'' ``Supporting financial-market stability in times of extreme market stress is a core function of central banks,'' says William B. English, director of the Fed's Division of Monetary Affairs. ``Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.'' The Fed has said that all loans were backed by appropriate collateral. That the central bank didn't lose money should ``lead to praise of the Fed, that they took this extraordinary step and they got it right,'' says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland. The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view. The secrecy extended even to members of President George W. Bush's administration who managed TARP. Top aides to Paulson weren't privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren't authorized to speak. Big Six The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn't respond to a request for comment. The six--JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley--accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry's assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds. Bank Supervision While the emergency response prevented financial collapse, the Fed shouldn't have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the ``supervision of the banks prior to the crisis was far worse than we had imagined,'' Rosner says. Bernanke in an April 2009 speech said that the Fed provided emergency loans only to ``sound institutions,'' even though its internal assessments described at least one of the biggest borrowers, Citigroup, as ``marginal.'' On Jan. 14, 2009, six days before the company's central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup's financial strength to be ``superficial,'' bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis. ``Need Transparency'' Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup. ``I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,'' says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee. Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark. ``We didn't know the specifics,'' says Gregg, who's now an adviser to Goldman Sachs. ``We were aware emergency efforts were going on,'' Frank says. ``We didn't know the specifics.'' Disclose Lending Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial- industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival. It would have been ``totally appropriate'' to disclose the lending data by mid- 2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank. ``The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we're dealing with a democracy,'' Jones says. ``Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.'' The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag. Protecting TARP TARP and the Fed lending programs went ``hand in hand,'' says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed's willingness to supply seemingly unlimited financing to the banks assured they wouldn't collapse, protecting the Treasury's TARP investments, he says. ``Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,'' Shaffer says. Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion. No Clue Lawmakers knew none of this. They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country's delinquent mortgages. The firm's peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only ``healthy institutions'' were eligible. Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs. Had lawmakers known, it ``could have changed the whole approach to reform legislation,'' says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size. Moral Hazard Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won't let them go under. The perceived safety net creates what economists call moral hazard--the belief that bankers will take greater risks because they'll enjoy any profits while shifting losses to taxpayers. If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks. Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking. ``Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,'' says Dorgan, who retired in January. Getting Bigger Instead, the Fed and its secret financing helped America's biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble. Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data. For so few banks to hold so many assets is ``un-American,'' says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. ``All of these gargantuan institutions are too big to regulate. I'm in favor of breaking them up and slimming them down.'' Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That's up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts. ``Wanted to Pretend'' ``The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn't been bailed out,'' says Anil Kashyap, a former Fed economist who's now a professor of economics at the University of Chicago Booth School of Business. ``They shouldn't be surprised that a lot of people find some of the stuff that happened totally outrageous.'' Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America's loans had reached $25 billion and Merrill Lynch's had exceeded $60 billion, helping both firms keep the deal on track. Prevent Collapse Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase. ``These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,'' says Ancel Martinez, a spokesman for Wells Fargo. JPMorgan absorbed the country's largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who's now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms. ``Regulatory Discretion'' ``Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,'' says John Deane, a former speechwriter at the New York Fed who's now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world's biggest financial firms. ``The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.'' The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms. ``When a few banks have advantages, the little guys get squeezed,'' Brown says. ``That, to me, is not what capitalism should be.'' Kaufman says he's passionate about curbing too-big-to-fail banks because he fears another crisis. ``Can We Survive?'' ``The amount of pain that people, through no fault of their own, had to endure--and the prospect of putting them through it again--is appalling,'' Kaufman says. ``The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?'' Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up--a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported. Lobbyists argued the virtues of bigger banks. They're more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause ``long-term damage to the U.S. economy,'' according to a Nov. 13, 2009, letter to members of Congress from the FSF. The group's website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies. ``Serious Burden'' In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks. ``The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,'' Williamson says. ``The big banks have incentives to take risks they wouldn't take if they didn't have government support. It's a serious burden on the rest of the economy.'' Deane says his group didn't mean to imply that Williamson endorsed big banks. Top officials in President Barack Obama's administration sided with the FSF in arguing against legislative curbs on the size of banks. Geithner, Kaufman On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank's lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street's financial condition. Geithner was copied on these reports, based on a sampling of e-mails released by the Financial Crisis Inquiry Commission. At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman. Anthony Coley, a spokesman for Geithner, declined to comment. ``Punishing Success'' Lobbyists for the big banks made the winning case that forcing them to break up was ``punishing success,'' Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says. The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn't take a position on whether large banks should be dismantled before they get into trouble. Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner. ``Dodd-Frank does not solve the problem of too big to fail,'' says Shelby, the Alabama Republican. ``Moral hazard and taxpayer exposure still very much exist.'' Below Market Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks ``were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter--getting loans at below-market rates during a financial crisis--is quite a gift.'' The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money- market rates tracked by Bloomberg. The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks' books, earning interest. Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans. Added Income The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show. The six biggest U.S. banks' share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion. ``The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,'' says Gerald A. Hanweck, a former Fed economist who's now a finance professor at George Mason University in Fairfax, Virginia. While the method isn't perfect, it's impossible to state the banks' exact profits or savings from their Fed loans because the numbers aren't disclosed and there isn't enough publicly available data to figure it out. Opinsky, the JPMorgan spokesman, says he doesn't think the calculation is fair because ``in all likelihood, such funds were likely invested in very short-term investments,'' which typically bring lower returns. Standing Access Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank's money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed. ``Banks don't give lines of credit to corporations for free,'' he says. ``Why should all these government guarantees and liquidity facilities be for free?'' In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, ``unemployment would rise--to 8 or 9 percent from the prevailing 6.1 percent,'' Paulson wrote in ``On the Brink'' (Business Plus, 2010). Occupy Wall Street The U.S. jobless rate hasn't dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California. The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor. ``The lack of transparency is not just frustrating; it really blocked accountability,'' Barofsky says. ``When people don't know the details, they fill in the blanks. They believe in conspiracies.'' In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world's largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries. They take full effect in 2019. Meanwhile, Kaufman says, ``we're absolutely, totally, 100 percent not prepared for another financial crisis.'' This is all about disclosure and accountability. You know, the Fed's not some kind of hocus-pocus, black box operation. The Fed essentially supplants the constitutional mandate in article I, section 8 that belongs to the Congress of the United States. Let's look at some recent history here: 2008, subprime meltdown, collateralized debt obligations go back to mortgage-backed securities. Neighborhoods in Cleveland melting down, people losing their homes. The Fed looked the other way. And we're saying, don't go into the Fed; it will be political. Yes, it's political. We have unemployment because of politics. We have people losing their homes because of politics. We have banks getting uncalculated amounts of money from the Federal Reserve, and we don't even know about it. Meanwhile, people can't get a loan to keep their home or keep their business. Audit the Fed? You bet we should audit the Fed. We have to have accountability. It's time the Congress stood up for its constitutional role. Article I, section 8: power to coin and create money. It's time that we stood up for America's 99 percent. It's time that we stood up to the Federal Reserve that right now acts like it's some kind of high, exalted priesthood, unaccountable in a democracy. Let's change that by voting for the Paul bill.

Mr. KUCINICH

Mr. KUCINICH. Mr. Speaker, I rise today to honor George McGovern who is celebrating his 90th birthday and to thank him for his many years of service and dedication to social justice. McGovern was a steadfast student at Dakota Wesleyan University, where he was elected school president twice. Following his service during WWII, McGovern enrolled at Northwestern University where he earned M.A. and Ph.D. degrees in government and American history. In 1956, McGovern was elected to the U.S. House of Representatives where he spent two terms as an advocate to the American farmer. Continuing on his mission of social justice McGovern was named Director of the Food for Peace Program by President John F. Kennedy, leading efforts to donate food to developing countries. As a U.S. Senator from South Dakota, McGovern made an immediate impact by challenging the U.S. military involvement in Vietnam, and by being named Chairman of the Senate Select Committee on Nutrition and Human Needs. He held office for three terms during which time he continued challenging the Vietnam War. After leaving the Senate and after his bids for president, McGovern served as the 6th United States Ambassador to the United Nations Agencies for Food and Agriculture during the Clinton Administration. In 2001, McGovern was appointed as the first UN Global Ambassador on World Hunger and continues to be a leading advocate in the fight against hunger around the world. Throughout his storied career both in Congress and as a leading voice against world hunger, McGovern has been honored countless times. He has received more than ten honorary degrees and is the recipient of a Presidential Medal of Freedom, a Gandhi Peace Award and a National Peacemaker Award from the National Conflict Resolution Center. Mr. Speaker and colleagues, please join me in honoring a long time friend, George McGovern, on the occasion of this 90th birthday.

Mr. KUCINICH

Mr. KUCINICH. Mr. Speaker, last week the House voted on an amendment by Mr. Moran which prohibits U.S. funds from being used to purchase Russian-made Mi-17 helicopters for the Afghan National Security Forces (ANSF). After more than 10 years at war, we recently reached the grim milestone of losing our 2,000th service member in this war. It has been clear for a long time that more of our blood and our money will not help us ``win'' Afghanistan. Yet long after the last member of our Armed Forces leaves Afghanistan, U.S. taxpayers will be footing the bill for more than half of the $4 billion per year it will take to support the ANSF over the next decade. This financial support includes military equipment, training and uniforms. The underlying bill includes a total of $238.7 billion to continue operations in Iraq and Afghanistan, on top of the $1.3 trillion we have already spent. It is time for the U.S. to end its nation-building exercise in Afghanistan, stop funding military spending there and bring the troops home safely and responsibly.

Mr. KUCINICH

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

Mr. KUCINICH. Just so you know, and I want the chairman and the ranking member to know, in offering this amendment, it's not my intention to wipe out military recruiting. It's very important for people to be able to serve our country. It's an honorable profession. It's essential to America. What this amendment is about really is about upholding the right of parents to be able to determine whether or not their young person should have to take a test that would be given to them under the auspices of the Armed Services Vocational Aptitude Test. This is a test that is administered annually to 1 million military applicants, high school and postsecondary students. But it's more than just a test. Here's the kind of information that students who take this test divulge: Social Security number, gender, race, ethnicity, birth date, statement of future plans, and most significantly, their aptitude on a battery of subcritical tests. Now, if you ever wanted to make a case for the danger of Big Government being able to reach into schools, think about this. You've got the largest organization in the government administering tests to high school kids and basically getting all the information they want about these young people, and without their parents' consent. I have a problem with that, and we all should have a problem with that. Now, if someone can tell me that you'll fix this and provide for an opt-in or opt-out, or tell me that, you know, Dennis, you're right; any young person who could end up in military service, their parents ought to consent to whether or not they should be able to take the test and/ or whether the results of the test should be released. This is about privacy. It's about parental rights, and it's also about not letting Big Government become Big Brother, gathering information about our children at a very early age in order to have some higher purpose. It might be very altruistic here. We've got to be very careful about this system we've set up. This Armed Services Vocational Aptitude Test is administered in recruiting centers. That's true. Fine. But it's also offered to high schools and postsecondary students. And according to the Pentagon, the Career Exploration Program is designed to help students explore civilian and military careers. But the rise of this test in high schools has led countless students and parents to feel that they're being unfairly, potentially illegally, and oftentimes unknowingly recruited. The Department of Defense claims it's just a tool to screen students' enlistment eligibility and determine their interests and skills for nonmilitary careers, but Mr. Chairman, more than 90 percent of the scores being sent are sent directly to military recruiters. So it's obvious this is a recruiting tool. Fine. How about letting the parents know about it? How about giving parents a choice, because most of the times you're talking about somebody that's under 18 years old? So I don't oppose military recruitment. I want that understood. But I am concerned that this test is being administered to kids in our public schools in a way that circumvents parental consent. The vast majority of students think they're taking the test and that it's required by their high school. Parents aren't informed that children are given the test. Why? Because their consent isn't required. Let's get the parents in on this. Now, my dad encouraged me to be in the military. I had a heart murmur. I couldn't serve. All my brothers and my sister did. But you know what? We had some feedback with our parents about this. You give a kid a test, that puts that child on a track to military service, parents don't know about it? Are you kidding me? Parents have a right here, and we have to restrain the impulse of a big government organization to gather information about these kids that ordinarily the government would never be entitled to. So I want to make sure that my friends in the majority and my friend, who's the ranking member, understand that my amendment in no way stops consenting adults from pursuing a career in the military or from taking the test at a recruiting station or processing station. It doesn't prohibit military recruiter presence in our schools. We dealt with that in No Child Left Behind. I was on the other side on that, but my amendment doesn't stop that. But it stops the administration of this test in schools, so it can't be used as a recruiting tool disguised as a test that targets children who are legally too young, too young to consent to a career in the Armed Forces. I yield back the balance of my time.

Mr. KUCINICH. I move to strike the last word.

Mr. KUCINICH. I rise in support of the amendment. There's a news report out today that suggests that very soon the United States will have over 1,000 bases of various kinds around the world, and it raises the question as to whether or not we're overextending. As the budget keeps growing, the tendency is to keep overextending. We already know that our basic force is being taxed with an overextension of duty. So if you introduce a notion of fiscal discipline here that will not in any way undermine the Air Force, the Army, the Navy, but fiscal discipline that will send a message to this administration: Don't go overextending. We know what our core mission is. We know that we have the ability to defend this country. Be careful you don't overextend. This amendment, which has bipartisan support, is something that is an important moment for this House because, on one hand, the budget that is being prepared through DOD appropriations is sufficient enough for a strong defense, and, on the other hand, we're saying part of a strong defense is fiscal accountability. The two actually go hand in hand. I yield back the balance of my time.

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

Mr. KUCINICH. My amendment is simple. It says, if you seek to be a Department of Defense contractor and you have previously defrauded the Federal Government, you shouldn't be able to receive a contract from the DOD. According to the Congressional Research Service, in fiscal 2010, the Department of Defense obligated $366 billion to contracts, which is 54 percent, more than half of the total of Department of Defense obligations. There are rules and regulations in place that prevent Federal contracts from going to entities that have broken the law. Under the Federal acquisitions regulation, Federal agencies are required to award contracts only to responsible sources. And Federal acquisition regulation subpart 9104-1 states that a satisfactory record of integrity and business ethics is one of the general standards of responsibility. But the term ``responsible'' is not explicitly defined anywhere in the law, and I know that we cannot try to define new terms using the amendment process, and that's not what we're trying to do here. The fact is that someone could commit fraud against the government and still get a contract with the Department of Defense, and that's wrong. We have to make clear that companies who've defrauded the taxpayers should not be able to get more DOD contracts. I'd like to point out that the underlying bill being debated here contains a specific prohibition against the use of Department of Defense funds in contracts with anyone who has an unpaid tax liability. Again, a party bidding on government contracts is supposed to affirm that they have no unpaid tax liability. So the point of this amendment is to make it absolutely clear that contract fraud against the American taxpayer will not be tolerated. According to groups like the Project on Government Oversight, which is only able to track the number of known and disclosed settlements, there have been dozens of instances of contractors committing government contract fraud since 1995. And of those dozens that are known to have committed this fraud, a total of $544 million in fines was paid. That's a tiny amount, really, when you're talking about in terms of fines, compared to the billions appropriated for Department of Defense contracts in the last decade. Bottom line, if you defraud the taxpayer, you should lose your privilege to receive more taxpayer money. So I would urge the adoption of this amendment. I yield back the balance of my time.

Mr. KUCINICH

Mr. KUCINICH. I yield to the gentleman from Florida.

Mr. KUCINICH. Madam Chair, today I, along with my colleague Bob Filner, am offering an amendment to restore an overall loss of $10 million in research funding dedicated to finding a cure for gulf war illness, an illness that directly affects over one-fourth of veterans from the first gulf war. This amendment has the support of the Veterans of Foreign Wars. It has the support of the Vietnam Veterans of America, and the support of the National Vietnam and Gulf War Veterans Coalition. According to the Congressional Budget Office, it will reduce total outlays by $7 million. Veterans of the first Gulf War suffer from persistent symptoms, including chronic headache, widespread pain, cognitive difficulties, debilitating fatigue, gastrointestinal problems, respiratory symptoms, and other abnormalities that are not explained by traditional medicines or psychiatric diagnosis. Research shows that as these brave veterans age, they're at double the risk for ALS, or Lou Gehrig's disease, as their non-deployed peers. There may also be connections to multiple sclerosis and Parkinson's disease. Sadly, there are no known treatments for the lifelong pain these veterans endure. Gulf War Illness research was slated to receive a total of $25 million in fiscal year '12: $15 million at the VA and $10 million at the DOD's Gulf War Illness Research Program. We've learned that the VA cut $10 million from its FY '13 program, which more or less supports allegations that VA officials, whose views on Gulf War illness have been discredited by the Institute of Medicine and the scientific community, are obstructing the research. The veterans of the first Gulf War who remain without a cure should not have to pay the price for this controversy. That's why this amendment would restore $10 million into a research program that has proven itself: The Defense Department's Gulf War Illness Research Program. Last year, researchers funded by this program completed the first successful pilot study of a medication to treat one of the major symptoms of Gulf War Illness. The critical increase in funding from this amendment was built on progress that's already been made, including a followup clinical trial, as well as other promising studies which have been waiting for funding. The offset for this amendment comes from the $32 billion Operations and Maintenance Defense-Wide Account in title II. Congress has a responsibility to ensure that these Gulf War veterans who put it all on the line and who are paying with a lifetime of pain and a potentially shortened life--it's our responsibility to make sure they're not left behind. I urge my colleagues to support this amendment to fully fund research into Gulf War Veterans Illness. I yield back the balance of my time.

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

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

Mr. KUCINICH. Can I ask the chairman of the full committee if he would enter into a colloquy for this? First of all, I want to acknowledge my friend from Washington for his commitment. This isn't the first time you and I have talked about this long commitment to address this suicide prevention. I would ask the chairman of the full committee, would you be willing to support such an endeavor to plus-up the funds for suicide prevention in the conference?

Mr. KUCINICH. I want to thank the chairman. I also want to let the chairman of the full committee and the ranking member know that I appreciate their support for the Gulf War veterans in the previous amendment. I also submit that this particular amendment addresses another area that is receiving attention in the media but needs some money behind it to make sure that it receives attention from the Department. This amendment to the Defense appropriations bill will increase funding for suicide prevention among our soldiers by $6 million. Now I happen to know there are members on this committee who are very concerned about the increased level of suicide among those who serve. And it's a bipartisan concern. We know the heartbreak that's out there when someone who serves this country finds that the conditions that they're in either during service or just afterwards are so horrendous that they take their own life. Far too many troops coming home from war have sustained numerous mental insults, including post-traumatic stress order and traumatic brain injury. The mental anguish for them is so unbearable that they're stripped of hope and they just feel that they have to take their own lives. And sometimes they take not only their lives but the lives of loved ones as well. There was a New York Times article in June of 2012, which said: The suicide rate among the Nation's active duty military personnel has spiked this year, eclipsing the number of troops dying in battle and on pace to set a record annual high since the start of the wars in Iraq and Afghanistan more than a decade ago. There's almost one troop suicide per day. Women face additional difficulties and have a higher rate of attempted suicide. Being a victim of sexual assault, for example, is a known risk factor for suicide. The disincentives to simply reporting such an assault are many and strong, which means getting help is even harder. The epidemic of veteran or active duty military suicides is not only a reason to increase funding for prevention of suicides, it's a reason to end the wars. It's one of the hundreds of reasons that are independently sufficient to end the wars. But until we end these wars, the very least we can do is to summon a good faith effort to do everything we can to prevent soldier suicides. The amendment's offsets come from the Pentagon Channel.

Mr. KUCINICH. I yield to the gentleman.

Mr. KUCINICH. The short answer is yes.

Mr. KUCINICH. Will the gentleman yield?

Mr. KUCINICH. I have confidence in the good faith of the chairman and the ranking member. I know that you're both concerned about this, you've said so now, but I also know that you've demonstrated this at other times. So what I would ask is that we could work together to look at the amount that is in there programatically right now, find a way to plus it up so that we can make sure that the people on Active Duty and those that just left Active Duty know about programs, have access to programs, and have access to the kind of treatment that would be necessary to cut down the number of suicides. In view of this colloquy, I will withdraw the amendment. Again, I thank both gentlemen.

Mr. KUCINICH

Mr. KUCINICH. Mr. Speaker, I rise today in recognition of the 100th anniversary of West Tech High School. West Tech opened its doors to 224 students on February 15, 1912. In 1931, with an enrollment of 4,000 students, West Tech was distinguished as the largest school in all of Ohio. West Tech graduated more than 40,000 students between 1912 and 1995, when it closed as an operational high school. West Tech is known for offering the first driver's education classes and the first auto mechanics, aircraft radio operations and repair metallurgy classes in the nation. Its newspaper, The Tatler, became a nationally and internationally recognized student publication. The high school closed its doors to students in 1995, and the facility re-opened in 2004 as a 189-unit apartment building, named the West Tech Lofts. To celebrate the 100th anniversary, West Tech will be opening up the public school for the first time since its conversion to the lofts. A week of celebratory events will be hosted between July 17th and the 21st and will feature memorabilia and special exhibits as well as tours and alumni speakers. Mr. Speaker and colleagues, please join me in recognizing the 100th anniversary of West Tech High School.