Jon Kyl

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from Colorado (Mr. Allard), the Senator from Missouri (Mr. Bond), the Senator from Kentucky (Mr. Bunning), the Senator from North Carolina (Mr. Burr), the Senator from North Carolina (Mrs. Dole), the Senator from South Carolina (Mr. Graham), the Senator from Oklahoma (Mr. Inhofe), the Senator from Georgia (Mr. Isakson), the Senator from Arizona (Mr. McCain), and the Senator from Virginia (Mr. Warner). Further, if present and voting the Senator from Kentucky (Mr. Bunning) would have voted ``nay.''

Mr. KYL

Mr. KYL. Mr. President, in a recent column for the Arizona Republic, ``Rescuing Fannie Mae or Freddie is Nonsense,'' Bob Robb exposed some of the flaws in H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008, specifically, the bailout for Fannie Mae and Freddie Mac. Mr. Robb argues, ``This plan isn't about mitigating today's housing difficulties. Nothing in the plan gets a mortgage paid that wouldn't otherwise be paid. Nor is the rescue really about today's credit crunch, except for the minor effect a doubt about the reliability of Fannie and Freddie guarantees might have on the capital of other financial institutions. Instead, it's about enabling Fannie and Freddie to continue to do even more of the same in the future, and that's a bad idea.'' Mr. Robb calls this plan for what it is--an overreaction to Fannie and Freddie's self-inflicted financial wounds. I ask unanimous consent that his column be reprinted in the Record, and I urge my colleagues to consider his thoughtful views.

Mr. KYL. Mr. President, many homeowners in my State of Arizona and across the Nation are having a hard time making their mortgage payments, but the legislation Congress is considering is not aimed at helping them. Rather, it is designed to help mortgage lenders and the two big Government enterprises ``Freddie Mac'' and ``Fannie Mae.'' In fact, the bill we are considering will place an immense financial burden on every American taxpayer for a long time and waste billions of dollars in misguided efforts to help lenders deemed ``too big to fail.'' Therefore, I will vote against H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008. One of the few provisions in the bill that I support is the much needed reform of the government-sponsored enterprises, GSEs, that establishes an independent regulator to ensure that Fannie Mae and Freddie Mac are properly managed and financially sound. The reason they are in trouble is that they have taken too many risks, something I have been warning about for 3 years. These two GSEs hold more than $5 trillion in liabilities composed of mortgage-backed securities and other debt that enjoy an implicit guarantee by the Federal Government. This legislation makes that guarantee explicit for the first time. Fannie Mae and Freddie Mac's role is to promote liquidity in the mortgage industry, but due to the downturn in the housing market, poor oversight, and reckless portfolios, Fannie and Freddie have incurred losses of more than $5 billion in the past year, the first loss for these two GSEs in 25 years. Fannie and Freddie have also seen their stocks sink more than 80 percent in value over the past year. Congress should have passed this much needed reform years ago to avert the erosion of Fannie and Freddie's portfolios, and it should be stronger now, given their resistance to reform. Because Fannie and Freddie enjoy this Federal Government guarantee of its debts, both the Treasury Department and the Federal Reserve recently proposed various administrative and statutory actions to stabilize the GSEs. The actions included in this bill would allow the Federal Reserve to grant both Fannie and Freddie access to its discount window, temporarily remove the $2.25 billion cap on Fannie and Freddie's lines of credit at the Treasury Department, thereby allowing them to borrow an unlimited amount of taxpayer money if needed, temporarily permit Treasury to purchase equity in the institutions to ensure that the two GSEs have access to sufficient capital, and provide the Federal Reserve authority to gain access to information and perform a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards that this bill mandates. The Congressional Budget Office, CBO, estimates that the proposal could cost American taxpayers $25 billion over fiscal years 2009 and 2010; however, there is a chance that a further deterioration of Fannie and Freddie's finances could require an infusion of $100 billion or more. We simply do not know how much this proposal will cost--a gamble with taxpayers' money that I am not comfortable making. In addition to the possible costs of the proposal to help Fannie and Freddie, the provisions of H.R. 3221 intended to deal with foreclosures would cost taxpayers billions and do little to help struggling homeowners. For instance, a key component of the bill is the HOPE for Homeowners Program, which would allow subprime mortgage holders to refinance their mortgages into Federal Housing Administration backed loans if the lender agrees to write down the value of the mortgage. This represents a huge risk to American taxpayers. The program would allow lenders to cherry pick up to $300 billion of their worst loans and refinance them into FHA guaranteed loans. The Congressional Budget Office estimates that a third of the mortgages refinanced under the HOPE for Homeowners Program will enter into default. But even more troubling to me is the burden this program will place on the FHA considering its current financial woes. The New York Times reported in April that the FHA will face a deficit for the first time in its 74-year history; the deficit is largely blamed on the risky mortgages that the FHA already holds in its mortgage portfolio. I don't see the rationale for expanding FHA's liability with this $300 billion program when the agency cannot sustain its current portfolio and when American taxpayers will bear any losses that the FHA incurs because of the HOPE for Homeowners Program. This bill also includes a new tax on the GSEs--estimates range up to $600 million a year--to pay for the HOPE for Homeowners Program for 3 years, and thereafter, for a new affordable housing trust fund. It simply does not make sense for Congress to impose a new tax on Fannie and Freddie at the same time that the Federal Government thinks it must bail them out by infusing cash and equity into the institutions. It is also likely that Fannie and Freddie will simply pass along the cost of this new tax to consumers, which obviously would not help lure buyers back into the housing market. Not only do I oppose taxing the GSEs' profits, but I also question the efficacy of the affordable housing trust fund that would be funded by the GSEs. The bill would direct 65 percent of the money it taps from the GSEs to the Secretary of the Department of Housing and Urban Development, HUD. Under vague guidelines in the bill, the Secretary of HUD would then have the discretion to establish grant criteria that could favor certain States. Once the money is allocated by the Secretary, State and local politicians would be able to disburse the money to favored organizations and for-profit groups that share their political agendas. The remaining 35 percent of the money that the bill takes from the GSEs would be distributed to nonprofit groups selected by the Secretary of the Department of the Treasury. This, too, could allow the politicians in power to divert Federal dollars to their favorite housing causes. I cannot support a bill that essentially creates a slush fund for politicians. I also oppose the nearly $4 billion in funding the bill allocates to the Community Development Block Grant, CDBG Program because the funding would go to local officials to buy foreclosed property from the lender that is holding the property. Not only does this create a scenario ripe for political favoritism, it would also bail out the very lenders who offered mortgages their customers couldn't afford. And, again, it does nothing to help the former homeowner. Moreover, the CDBG Program is fraught with inefficiencies and mismanagement. According to a February 2008 report from the White House budget office, the CDBG Program was labeled as ``ineffective,'' and only received a score of 27 out of 100- point scale of achieving results. I cannot vote for a bill that has such a poorly run program as one of its centerpieces. Finally, I disagree with certain parts of the tax title contained in this bill. When the tax title was initially drafted, I successfully added a provision designed to protect taxpayers from having property tax relief provided in the bill completely offset by rising taxes at the State and local levels of government. However, when the legislation reached the House of Representatives my language protecting taxpayers from tax increases was dropped. Homeowners and average Americans are struggling to pay their mortgages, higher gas prices, and more expensive grocery bills. State and local governments should not add to these burdens by raising their own taxes and certainly should not try to divert Federal tax reductions intended to help individuals contending with today's economic challenges into their own coffers. One must understand that the Federal Government already provides a tremendous amount of financial assistance to State and local governments. According to the Office of Management and Budget, OMB, the Federal Government will provide $476.1 billion to State and local governments in 2009, an increase of roughly $10 billion from 2008 and 67 percent more than in 2000. Almost 50 percent of Federal financial assistance is spent on health care. Spending on income security, education, and transportation roughly accounts for the remainder. In determining the total amount of assistance the Federal Government provides to State and local governments, one must also factor in the foregone revenue that results from tax expenditures which benefit State and local governments. The two largest tax expenditures are the deduction for State and local tax payments and the interest exclusion on public purpose State and local government debt. Combined, these provisions reduce Federal revenue by nearly $60 billion in 2009. Interestingly, if the Federal Government did not provide State and local governments with assistance, the budget would run persistent surpluses. There would have only been 16 budget deficits over the last 50 years. U.S. debt would have been substantially lower. I also oppose the $16.8 billion of tax increases included in the bill used to offset the cost of the new spending. In particular, one provision would require the payment card industry to design and build a new computer system so that it can collect merchants' transaction information and provide it to the IRS. It would also require payment card companies to withhold 28 percent of a merchant's reimbursement if it cannot verify the company's taxpayer identification number, TIN. No hearings have been held on this proposal and now Congress is rushing through an incomplete payment card reporting proposal that has not been adequately vetted. Once implemented, the provision would require the industry to spend hundreds of millions of dollars to redesign their information systems to comply with the new information reporting regime. The payment card industry's current computer records do not contain merchant TINs and other information that the proposal would require to be reported. If payment card companies do not currently have a system in place to ensure valid TIN information on all existing merchants, errors in TIN matching will subject merchants to withholding, even where merchants have provided TIN information. Withholding 28 percent of a merchant's gross reimbursements would severely disrupt a business's operations and impair its cash flows. There are programs currently operating that provide responsible relief to struggling homeowners at no cost to American taxpayers. HUD has organized an assistance program, called HOPE NOW, for homeowners in distress to rework their mortgages if both the borrower and lender decide that renegotiation of their mortgages is in their mutual interest. This voluntary program has helped over a million Americans having trouble paying their mortgages, and I fully support these efforts. In less than a year, HOPE NOW has assisted nearly 17,000 Arizonans negotiate repayment plans with their lenders. Additionally, over 6,000 Arizonans have received loan modifications. The HOPE NOW Program was just recently expanded to help even more struggling homeowners in Arizona and nationwide. I oppose H.R. 3221 because I do not think the benefits of the bill outweigh the numerous liabilities that could be passed to American taxpayers. Congress should not pass a bill just to show it is ``doing something'' to help homeowners who cannot make their mortgage payments or write a blank check to Fannie and Freddie. This bill passes more burden to American taxpayers. payment card and third party networking

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from Colorado (Mr. Allard), the Senator from Oklahoma (Mr. Coburn), the Senator from South Carolina (Mr. Graham), the Senator from Arizona (Mr. McCain), and the Senator from Alaska (Mr. Stevens). Further, if present and voting, the Senator from South Carolina (Mr. Graham) would have voted ``nay.''

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from Colorado (Mr. Allard), the Senator from Oklahoma (Mr. Coburn), the Senator from South Carolina (Mr. Graham), the Senator from Arizona (Mr. McCain), and the Senator from Alaska (Mr. Stevens).

Mr. KYL

Mr. KYL. Mr. President, I wonder if my colleague would yield for two questions.

Mr. KYL. I thank the Senator. Mr. President, I believe at least twice the majority leader has made a comment about my colleague from Arizona, John McCain, and I wanted to see if the Republican leader's understanding is the same as mine. The majority leader said: ``McCain says drilling is only psychological and won't make a difference.'' I have checked the actual record of what Senator McCain said. It was a discussion of offshore drilling, which Senator McCain strongly supports on the Outer Continental Shelf, and the question was whether there would be short-term relief. Here is precisely what Senator McCain said in response: I don't see an immediate relief, but I do see that exploitation of existing reserves that may exist--and in view of many experts that do exist off our coasts--is also a way that we need to provide relief. Even though it may take some years, the fact that we are exploiting those reserves would have psychological impact that I think is beneficial. Now, I ask the leader: Is it correct, in your view, that what Senator McCain was saying is that while the benefits of production would take some years to achieve, there could be an immediate psychological benefit simply from the decision that we were going to do this, such as the $20 reduction in the price of a barrel of oil following shortly after the President's announcement that he was going to lift the moratorium on offshore drilling?

Mr. KYL. Secondly, Mr. President, the second question. The Republican leader said a moment ago that speculators were betting on scarcity and the majority is doing everything to prove them right. With respect to a decision to begin production off our shores on the Outer Continental Shelf, is it the Senator's opinion that this would have a beneficial effect on drawing down the price of futures in the oil market because the decision would be seen as a commitment to produce more?

Mr. KYL. I thank the leader.

Mr. KYL

Mr. KYL. Mr. President, might I clarify? There was no objection to the assistant leader speaking as part of the Democratic time as it is now allocated; is that right?

Mr. KYL. Mr. President, I am happy to respond. I was not only clarifying his position but ensuring people understood what the majority leader said about his position was incorrect. Senator McCain does not support drilling in ANWR, but he does support drilling off our coastal shores and the Outer Continental Shelf.

Mr. KYL

Mr. KYL. Madam President, I associate myself with the remarks of my colleague from Alabama a moment ago. I will speak to the reliance of the United States on other countries around the world for too much of our petroleum and natural gas supplies and what that does to the United States to make us dependent, to cost us more money, to reduce our flexibility and actions around the world, and also the point that every time they want to rattle their sabers to create instability in the world, what that does to the markets is to reflect that instability in higher prices. So these very countries that we would like not to make so much money off their oil supplies, if they want to make more, all they have to do is create a little trouble in the world, and it raises the price because the markets go higher for a while. I will talk about that in a moment. I have reflected on a comment a friend of mine made some time ago. I don't mean disrespect to my friends on the other side. But he said: You know, Democrats have three approaches to every problem: Taxation, litigation, and regulation. Sometimes we like to laugh about that because it is, unfortunately, too true. But I thought how does this apply to energy. Sure enough, it does. They, of course, tried taxation and failed, trying to raise taxes on oil companies, under the notion it would never be reflected in consumer prices we pay. But that is exactly what would happen. They tried litigation against OPEC. There is no way you can sue the OPEC countries. We ought to produce more of what we have, not tell them they have to produce more. They are pretty strained, in terms of where they are in production right now, in any event, and we are not, as the King of Saudi Arabia reminded President Bush not too long ago. Then, the third thing has to do with regulation. It is the bill that is pending before us right now. This is the Democratic approach: Let's regulate the people who buy and sell the contracts for oil and natural gas and the like. Of course, we already have regulators--it is called the CFTC--and today we have some news that demonstrates that this body is doing its job and can do its job. To the extent that there is illegal manipulation in the market, the CFTC can stop it. They announced that, after a year of investigation, they had stopped a company that was allegedly illegally manipulating the market, and they are going to take legal action against them. The Department of Justice may be looking at it from a criminal aspect, as well. Both Democrats and Republicans have agreed that one of the things we need to do is ensure that the CFTC has all the money it needs and the personnel it needs to continue to do the job we have given it to do, to make sure people are not abusing the process. That is the good part of regulation. The bad part would be to begin defining--as the Democratic legislation does--who good traders are and who bad traders are and not let the bad traders trade--something that was debunked yesterday in an interagency study concluded by the CFTC, which concluded that speculation wasn't the problem; that the reason for the price increases at the pump is the law of supply and demand--not enough supply for the demand that exists out there. Today, another diversion was created. I wish to reiterate this. It involves a friend of mine, my colleague, John McCain. He was grossly misquoted this morning by Senator Reid and others, who have tried to suggest he is not for offshore drilling. I think everybody knows John McCain supports more offshore drilling. As a matter of fact, on this chart, I will quote one of many things I could refer to from his Web site. I have a great deal of information in which he makes it clear he is for more offshore production. Among other things, in June, he said this: Opponents of domestic production cling to their position, even as the price of foreign oil has doubled, and doubled again . . . every year, we are sending hundreds of billions of dollars out of the country for oil imports, much of it from OPEC, while trillions of dollars of oil reserves in America go unused. He has also said the current Federal moratorium on drilling on the Outer Continental Shelf stands in the way of energy exploration and production. John McCain believes it is time for the Federal Government to lift these restrictions and put our own reserves to use, and on and on. He obviously supports offshore production. So why did some of my colleagues take a quotation of his, leave part of it out, and try to create the impression that he did not support it and he did not think it would do any good? He was responding to a question earlier about whether more of this offshore production would produce immediate results. All he did was to tell the truth. Here is what he said: I don't see an immediate relief, but I do see that exploitation of existing reserves, that may exist, and that-- in view of many experts--that do exist off our coasts, is also a way that we need to provide relief, even though it may take some years. The fact that we are exploiting those reserves would have a psychological impact that I think is beneficial. I totally agree with him. My colleagues read this to suggest that he believes offshore production would have no benefit except a psychological benefit. As we can see, that is not what he said. But his point is also valid--``is also a way we need to provide relief,'' it will provide a psychological boost to the markets just as, in fact, President Bush's lifting of the moratorium a week or so ago on some offshore drilling caused prices to drop. Many analysts believe the drop of about $25 per barrel was much because of the President's announcement and the fact that Congress was taking up this subject with the idea that perhaps we would actually get something done. What the speculators are doing is simply placing a bet into the future that there is either going to be enough oil to meet demand or there is not. If there is not, then they are betting the price will go up. What Senator McCain is saying is the mere fact we would pass legislation saying we are going to produce more oil offshore would immediately have the impact on the markets to bring the prices down because they would know in the future we would have enough supply to meet our demands. John McCain was exactly correct on this, and I think it serves no purpose to misquote him and suggest otherwise. I also note that in the House of Representatives today, legislation was defeated, as it was last week, by the Democratic majority there that is very similar to, if not identical to, legislation that was introduced by Democrats in the Senate. For example, last week the House of Representatives defeated a provision that says where leases have been let to oil producers, if they do not drill on those leases after a period of time, then the leases come back to the Federal Government. As you probably know, that is already the law. The bottom line is you get primarily 10-year leases. Some are shorter. You cannot obviously immediately go out and drill on every one of several hundred thousand acres, but what you do is try to figure out where it is most likely you are going to get oil and you start drilling there first and keep going until you drill in all the areas where you think there is potential. It is obviously not going to be on every acre. Whatever you haven't done in 10 years goes back to the Government. That bill failed because it is already law. Today another bill failed that is to drain the Strategic Petroleum Reserve. This is our national security reserve of oil, in case of an emergency, for our military primarily. We need reserve so the tanks can drive, planes can fly, and the ships can sail. You don't want to reduce that to affect very briefly the price of gas in the country. They would reduce it by 10 percent. What would that do in terms of the oil supply in the country? It would reduce the oil supply by 3\1/2\ days--3\1/2\ days. If it drove the prices down at all, which I doubt would happen, it would be very temporary because everybody would know it is not a permanent solution. So it is no wonder that failed in the House. Again, to the extent that is part of the Democratic bill, it is obviously not a solution to the problem. I mentioned I would talk briefly about what Senator Sessions was talking about, and that is the unintended consequences of not producing our own energy, even though we have it in our country, and relying on other countries to do it instead. More than 60 percent of every dollar spent at the pump--I filled up my tank last week, and it cost me over $70, and my tank wasn't even empty when I filled it. More than 60 cents out of every dollar I paid went to a foreign country. We could keep that money in the United States if we produced our own energy. I conclude by saying we can do ourselves a whole lot of good to take advantage of the resources that exist right here in the United States of America, reduce the cost of gasoline at the pump, and ensure our future energy security. I hope during the course of the next several days we will have an opportunity to do that as we debate this important legislation.

Mr. KYL

Mr. KYL. Mr. President, I also have a question for the minority leader.

Mr. KYL. I am trying to understand basically the differences between the proposals that have been put forth by the majority leader and by the minority leader in terms of unanimous consent requests. As I understand it, they basically boil down to the following, and I wonder if the Senator could confirm this for me. What the majority leader has said is there could be either one amendment--or possibly two, I am not clear--but that they would pit the two sides against each other; that is, a Democratic proposal and a Republican proposal. What I believe the minority leader has suggested is that we engage in what Senators call the regular order, which is a process of debate and proposals for amendments which would try to build a bill with amendments that could actually be adopted by both sides--or by Members on either side, let me put it that way--rather than simply having two party positions, neither of which could win 60 votes, would fail, and therefore we would end up with nothing. What the minority leader is suggesting is a process by which both Democrats and Republicans could offer ideas--pieces of the puzzle, as it were--that could appeal to Members on both sides in such a way that a bill could eventually be built and passed to actually do something about this energy crisis and the high cost of oil; is that correct?

Mr. KYL

Mr. KYL. Mr. President, I think Senator Dole's idea of the kitchen sink approach is right on target. Maybe we will even find a way for the kitchen sink to somehow help us out here, but at least it is everything but the kitchen sink that Republicans are suggesting is the answer to our oil crisis. There isn't just one answer. That is why we don't agree with the Democratic bill, which is simply to deal with speculators and speculation. I am going to talk about that in a moment. First, to reiterate what Senator Dole said, Republicans support a broad-based, balanced approach to this problem that recognizes there isn't one silver bullet, but through a combination of things such as conservation, such as renewable energy, such as producing a lot more oil and gas which this country has. Also, if we will simply lift the moratoria that currently preclude us from exploring for more energy, deal with speculation to the extent it exists, as well as certainly nuclear power--all of these things together can help us work our way out of the crisis. Part of it is short term, part of it is medium term, part of it takes long term. We have to look at this as a long-term problem. I shake my head at those who say: Well, that particular solution doesn't do anything for 3 to 7 years. My answer is, of course, I have never completed a journey I didn't start. If we had completed some of the things we started years ago, we wouldn't be in the crisis we are in right now. However, we are stuck right now with one bill on the floor. Unfortunately, it is not the Republican approach, which is a balanced, broad-based approach, and includes new production, but simply the limited approach of dealing with so-called speculators. I wish to talk a little bit about why only focusing on speculation isn't going to produce one more drop of oil, it is not going to reduce the price at the pump, it is not going to solve the problem and, in the long term, could actually hurt, and I will try to explain why. It is propitious that yesterday a report came out that supports what I am now saying. We didn't have anything to do with the timing, but I say it is propitious because it helps to answer questions that people have been asking. For over 3 months now the regulatory body of our Government that looks at speculation, called the Commodity Futures Trading Commission, has been testifying, and despite enormous pressure from the other side to point the finger at speculators, they have consistently said they don't think it is speculators. We believe it is the law of supply and demand, the fact that there is much more demand for oil than we are producing that is creating a problem. Well, an interagency task force led by the CFTC and composed of staff from the Departments of Agriculture, Energy, Treasury, the Federal Reserve, the Securities and Exchange Commission, and the Federal Trade Commission all reaffirmed yesterday that: Current oil prices and the increase in prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors. Furthermore, the report--and again I am quoting: suggests that changes in futures market participation by speculators have not systemically preceded price changes. On the contrary, most speculative traders typically alter their positions following price changes, suggesting that they are responding to new information--just as one would expect in an efficiently operating market. The other side has ignored this CFTC analysis for a long time. I hope the new report will not be ignored, because what it illustrates is you are not going to solve this problem by trying to figure out a way to somehow regulate speculators. You have to deal with the law of supply and demand. I tried to explain this to a younger person who was wondering what all of this debate was about, and this is the example I came up with-- or the analogy: These are investors, these so-called speculators, and what they are trying to do is to predict into the future what the price of something is going to be. Now, if they guess right, they can make money. If they guess wrong, they may lose money. They are researchers and they are looking at the best evidence they can. One of the things they look at is will there be more supply or more demand. Obviously, if there is more demand, then the price is going to go up. It is a little bit like the weatherman predicting the weather. The weatherman is a professional too and he looks at all of the research and he concludes that by this weekend we are going to have some rain. Now, he may be right, he may be wrong, but that is his job, to try to predict, and more often than not, he can predict it fairly accurately. What if we don't want rain next weekend? What if we don't think rain is a good idea? Are we going to muzzle or fire the weatherman and say: We don't want you to report this because we don't want the rain? Is that going to do any good? It doesn't do any good at all. If it is going to rain, it rains. If not, it won't. If the prices are going to go up because Iran is rattling its sabers in the Persian Gulf, the prices are going to go up. If they don't, and the prices don't go up, it is not the speculators who make the price go up or down. The speculators are reporters. They are people who are trying to figure out what the price is going to be. They don't make it what it is; they are trying to figure out what it is going to be. That is why the CFTC said they typically alter their position following price changes, reacting to new information. Again, it would be like trying to shut the weatherman up because we don't like the weather he is predicting. That is the role these speculators have. They are trying to predict the future and they actually help the market by setting a price that is useful to those who are trading in the market. I appreciate that there are colleagues on the other side who are skeptical about this, but let me explain why I think it is unlikely that commodity traders actually push up the price of oil. Here is the explanation. They can only do this and drive up prices if they actually took physical possession of the product and then hoarded that, withheld it from the market. But between 2003 and May of 2008, only about 2 percent of oil futures contracts actually resulted in physical delivery. Those are the utilities, airlines--folks like that. If commodity index fund investors were, in fact, hoarding actual physical inventories to raise prices, one estimate suggests that they would need to fill storage tanks with more than 40 times the amount of oil currently held in the inventory at the Cushing oil terminal in Oklahoma where the West Texas intermediate oil contract is valued. Since we have not seen all of this frenzied new construction of oil storage tanks and facilities equivalent to 40 Cushing oil terminals, it is very clear that there is no hoarding occurring. What is actually happening to supply today? Total oil stocks in the developed countries have been static. In other words, we have not been increasing the supply. A year ago, including strategic reserves, they amounted to about 4.1 billion barrels and today are at about the same level. Global demand, on the other hand, was 86 million barrels a day in 2007, while supply totaled 85.5 million barrels, creating a deficit of half a million barrels a day. As one would expect, prices are rising to reflect the fact that there is not as much supply as there is demand for the product. I also think it is interesting that when you talk about speculators, you know the price has been going down in the last few days. I haven't heard anybody complaining that the price of oil is going down. If they are to blame for the price going up, maybe we ought to pat the speculators on the back for driving the prices down. Of course, they don't have that effect; I am being facetious. But who are these nefarious investors? If you have a relative who is retired or a friend or someone who has a pension, you probably know a speculator. That is who is primarily investing in these kinds of funds. All investors want to diversify their portfolios to protect themselves against risk. You do that by purchasing as many different kinds of assets as you can, by investing in commodities. Pension funds and other institutional investors can protect beneficiaries like retirees from market downturns. In the current market, commodities are one of the few investments that have been actually generating positive returns. Under the legislation before us, if you declare these people bad investors or illegitimate speculators, you are going to be hurting regular investors in the market. I don't think we want to do that. Interestingly, one of the pieces of legislation the Republicans have sponsored--the legislation called the Gas Price Reduction Act--is very similar to a bill introduced by my colleague from Illinois, Senator Durbin, who I think takes a thoughtful approach to speculation in the energy markets. Like our bill, his focuses primarily on increasing the resources available to the CFTC so it can continue to do its job and even do a better job of ensuring there is enough transparency in the system to enable it to continue to investigate and take action, if need be. With just a few modifications, I think the Durbin bill would be a good approach, as is the Gas Price Reduction Act, which Republicans have introduced, which strengthens the CFTC and makes sure it has the assets it needs to do the job we asked it to do. In conclusion, I think everybody agrees that a stronger CFTC and additional transparency are good. I think we can all support that. It is part of that kitchen sink approach we heard talked about earlier, but it is only one small part of this. In no way are we going to see that approach drive down the price at the pump. As I said, it is little bit like the weatherman, these speculators. They find out what the price is and they, in effect, report it by their purchases or sales-- either one. But you don't improve anything by killing the messenger-- the speculator--any more than you improve the weather by shooting the weatherman. As we proceed with the debate, I hope my colleagues will agree that while there may be a lot of good ideas--and one may be to strengthen the CFTC somewhat--that is not the answer to the crisis we face. It doesn't produce one more drop of oil or gas. At the end of the day, we are not going to be successful unless we find a consensus to enable us to produce more so that, along with using less, we can drive down the price of gas at the pump.

Mr. KYL

Mr. KYL. Madam President, might I just ask the minority leader to yield for a question?

Mr. KYL. Madam President, just to clarify one thing the majority leader said, your unanimous consent request dealt with seven specific subjects that you would like to address by amendment. The majority leader indicated that all seven of those were part of a bill that 44 Republicans had cosponsored. I would ask the minority leader, is that correct? Specifically, did that bill that Republicans have cosponsored include LIHEAP, which is one of the amendments, a nuclear amendment, which is another amendment, or an amendment dealing with the production in Alaska, specifically ANWR?

Mr. KYL

Mr. KYL. The following Senators are necessarily absent: the Senator from Tennessee (Mr. Alexander), the Senator from Nebraska (Mr. Hagel), and the Senator from Arizona (Mr. McCain). Further, if present and voting, the Senator from Tennessee (Mr. Alexander) would have voted ``yea.''

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent that at the conclusion of my remarks, the Senator from New Mexico be recognized.

Mr. KYL. Mr. President, I wish to go back to the discussion about the subject we want to devote a lot of attention to this week, and that is gas prices. Senator Bond spoke to that issue a little earlier. We are going to be going to that issue tomorrow. It is critical that we address this problem before the August recess in a couple of weeks. Forty-four Republicans have cosponsored the Gas Price Reduction Act, about which Senator Bond spoke. It is a balanced approach to our energy crisis. It recognizes the need for additional production, as well as dealing with the demand side. In other words, use less, find more, and to do so here at home, to use American energy to solve this American crisis. That way we can have more control over our own destiny, a point I will be making in a moment. The other side, though, has decided to approach this problem with a very narrow and limited approach dealing with so-called speculators. Speculators are people who trade in crude oil. There is a view that speculators actually affect the price when they buy it or sell it. The first point I wish to make is the opposition always talks about driving up the price when speculators buy, but they never bother to mention that every time you buy, somebody else sells. So it is a little hard to see how speculators are responsible only for the increase. As a matter of fact, last week was the largest drop in oil prices ever in our history, at least in the last couple of decades, over $20. I don't think anybody blamed the speculators for the decline, or maybe I should say they didn't cheer the speculators for the decline or drop in oil prices. So it is a little odd every time the price goes up, it is the speculators' fault, but when the price goes down, well, maybe that is the market forces taking control. The reality is that for every purchase, you have to have someone who is selling. I did think it was interesting that the majority leader was here earlier and he actually attributed that decline to the fact that we were talking about legislation dealing with speculators. I see no evidence to support that claim and, in fact, I will cite some evidence quite to the contrary in a moment. But it reminds me of a great fable writer by the name of Stephen Leecock who tells the story about the two fleas on the back of the Roman chariot. They look back and say: My, what a fine cloud of dust we are creating. It seems to me that is pretty similar to contending this speculation bill caused the drop in prices. I think we all know what it was. When President Bush announced the end of the Executive moratorium on drilling, that is when the prices went down. As a matter of fact, Joseph Trevisani, who is the chief market analyst for a company called FX Solutions, said a few days ago: President Bush lifted the executive ban on offshore drilling on Monday and by Friday crude prices had completed their sharpest fall in percentage terms since 2004. He went on to say: Oil traders are betting that this Congressional ban on drilling which covers 85 percent of U.S. Continental waters will not stand. That is the point. When we start seriously talking about eliminating the ban on production, that is when prices will go down. Why is that? Speculators are actually very smart researchers who are trying to figure out whether demand will exceed supply or supply will exceed demand some time in the future--16 months out, 18 months, 2 years, 5 years, whatever it might be. They do a lot of research to try to figure this out. It doesn't take a genius to figure out that if you have a legal ban on more production and you lift that ban, obviously you are going to potentially produce a lot more crude oil. That increase in supply will obviously affect the price because it will then exceed the demand or at least it will keep pace with demand. That is simple market economics. That is what happened last week. It illustrates the fact that while there are those who say if we increase our production, it is going to take 3 to 7 years before we will see any of that production, the mere fact that we are getting serious about doing it was enough to reduce prices. I suspect if we actually pass a law that does it, the prices will decline even further and will continue to decline as progress is made toward increased production. The reality is that prices rise and fall depending on a lot of events that are outside our control, and we need to bring more of those decisions within our control. There is a hurricane in the gulf. Iran is rattling its sword in the Middle East. Those kinds of things cause the prices to go up because there is a suggestion that the supply may be interrupted in the future. Then by the same token, we react to good news, as occurred last week. When the President says we are going to remove the moratorium that by Executive order has been placed on production and Congress says we are considering legislation to remove the congressional moratoria as well, speculators react to that as well. The other side, which says it is all the speculators who are to blame for the rising prices, might as well blame the weatherman for bad weather. His job is to do the research and predict what the weather is going to be. Muzzling him and saying he cannot talk about the weather is not going to create sunny days next week. Those days are going to come because of weather factors, not because the expert in the field is predicting it one way or the other. It is the same thing with these so- called speculators who are in the business of buying, whether it is for an airline or a pension fund or for whomever. Their job is to try to determine what the market price should be at any given time. I talked about trying to gain more control of it ourselves. Unfortunately, there are a lot of producers in the world that have an interest in increasing the price of oil and have the means of doing so by simply acting badly. I am speaking of countries such as Russia, Iran, and Venezuela. In Iran, we know they have rattled their sword in the past, and that not only advances their national policy goals, but it also has a tendency to cause panic in the market and, therefore, the prices go up because there is a view there may not be an adequate supply for the demand we have. For example, I note the fact that all of the oil through the gulf--it is not just Iranian oil; it is from the Emirates, Saudi Arabia, Iraq, and other countries. About two-fifths of all globally traded oil goes through the Strait of Hormuz, and Iran is on one side of the Strait of Hormuz. They have their ships in the area. At one time or another they have tried to interfere with the shipping traffic lanes through the Strait of Hormuz. For example, in June 2006, the threat of Iran obtaining a nuclear weapon created quite a stir among New York traders, and that drove the price of oil up to nearly $80 a barrel. In 2007, five armed Iranian boats approached three U.S. Navy warships in international waters, taking aggressive actions. The Pentagon described it as ``reckless and dangerous.'' The incident only lasted about 20 minutes. As a result, there was a brief spike in oil prices as soon as that was reported on CNN. The reality is that a country such as Iran can have an effect on the price of oil. What we need to do is get away from that kind of situation. The same thing is true of Russia. I talked about this the other day. Russia has a tendency when it wants--by the way, it is the second largest producer ahead of Saudi Arabia--when it wants to affect the price of oil or national policy, it can cut off the supply of oil or natural gas, and that can result not only in shivers running through the countries of Europe, particularly Eastern Europe which relies on this natural gas and oil, but also affects the world price. I note that Gazprom, which is Russia's natural gas monopoly, controls a lot of other things as well. Its former chairman is Dmitry Medvedev, the new President of Russia. It alone accounts for 25 percent of the country's tax revenues. So this is a major deal. Russia has used Gazprom as a political tool in more than one situation when it affected Ukraine after that nation allegedly failed to pay debts to Russia, or other European countries, such as the Czech Republic when it said it would cooperate with the United States in missile defense. Let me conclude with Venezuela. President Chavez of Venezuela has repeatedly threatened to cut off oil from that country. A 2006 GAO report stated this cutoff could amount to increased oil prices of $11 per barrel and would cut American GDP by $23 billion. The point here is that the United States needs to gain more control over its own destiny. We are the third largest producer in the world. We have vast resources of natural gas and crude oil, as well as other resources, such as coal, uranium, and others, but we have an aversion to produce in this country because of the not-in-my-back-yard problem associated with wherever that production might be. As a result, Republicans have proposed legislation that would remove the moratoria that currently preclude production and provide incentives to States to permit offshore. Even though it is far off of their State limits, in Federal waters, it would at least provide an incentive for them to agree to production offshore, thus enhancing American production and more control over our own destiny. That is the point I want to conclude with. It is time to gain control of our own destiny. It will enable us to affect the prices ourselves by producing more and, thus, reducing prices, not relying so much upon other countries, which can adversely affect the price by withholding production or creating conflict in the world. It will enable us to develop the resources safely in an environmental way, because we know how to do that. We know we can't conserve our way out of the problem. We know the so-called renewables can only meet a small fraction of our needs. And we further know that regulating speculators is not going to produce one additional drop of oil. So that is why Republicans have focused on more energy production--American energy for American consumers--as a way to become less energy dependent and affect the price in a meaningful way, a way which could permit us, as we saw last week, to drastically reduce the price of oil almost overnight if Congress were to pass this legislation. I urge my colleagues, when we take this matter up, as Senator Bond said, to permit a full and free debate, and amendments that we have to offer here, so at the end of the day Congress can complete our work over the next couple of weeks by passing meaningful legislation to reduce the cost of oil and, therefore, importantly for American consumers, the price we pay at the pump.

Mr. KYL

Mr. KYL. Yes. I guess I would say that was then, this is now. But in addition to the ABA rating, I note that Judge Conrad in particular meets the other three criteria that Chairman Leahy has stated are his standards for quick confirmation.

Mr. KYL. The answer is yes. Chairman Leahy has said--and I think all of us would agree--that judicial emergencies should be addressed quickly. In fact, in a press release in January of last year, he stated: There are several outstanding judicial emergencies. . . . I hope to expeditiously address some of these emergency vacancies in the Judiciary Committee.

Mr. KYL. Mr. President, might I inquire of my colleague further on that precise point? With regard to the filling of the circuit court for the District of Columbia, we had testimony by Mr. Roscoe Howard, very recently in the Senate Republican caucus forum on judicial confirmations--this was just last Monday--that the numbers the majority relies on for that argument that the Senator identified are outdated. He noted that the Judicial Conference recently issued statistics indicating that in recent years the DC Circuit Court's docket has increased and that it has been processing appeals more slowly because of additional workload, and this has corresponded with an increase in the median wait time between the notice of appeal and disposition of a case, which, in fact, he notes is the longest since 1995.

Mr. KYL. Mr. President, I wonder if my colleague would yield for a question. I would like to ask our distinguished ranking member of the committee, aren't there several well-qualified judicial nominees currently pending in the Judiciary Committee who have been denied fair up-and-down votes? For example, Mr. Peter Keisler, the former Acting Attorney General, has been rated unanimously ``well qualified'' by the American Bar Association and has earned bipartisan praise from attorneys, professors, and even editorial pages. I know the Washington Post and the L.A. Times have praised his nomination, calling him a ``moderate conservative'' and a ``highly qualified nominee'' who ``certainly warrants confirmation.'' Notwithstanding those outstanding qualifications, tomorrow, I believe, will mark 750 days that Mr. Keisler has been waiting for a committee vote.

Mr. KYL

Mr. KYL. Mr. President, let me say on the point my friend from Illinois made, while there may well be room for dealing with speculation as part of the overall approach to our energy crisis today, it is clear that speculation cannot be the only or even a major piece of it. Without new production, we are destined to continue to rely on foreign sources for our oil and very high oil prices. We will be interested in getting into the debates about the relative merits of different approaches to speculation. But let me talk about a little different angle to this than has been discussed so far, and that is not only the fact that people, when they go to the gas pump, find themselves paying very high prices for oil, which hurts their family budgets and, in many cases, businesses that have to rely on fuel, but also that it is a national security problem for the United States because of our undue reliance on these other countries. The point I want to make today is this: A lot of these countries have the ability to actually increase the price because of the instability they can create around the world. I think of the Iranians, for example. Everyone knows that we get a great deal of our oil from the Persian Gulf region, that the Strait of Hormuz is the very narrow area through which about 40 percent of all the oil has to go. Forty percent of the world's oil tankers have to exit the Strait of Hormuz as they are picking up their oil from the Emirates, Saudi Arabia, Iraq, Iran, and so forth. That creates an opportunity for mischief, and the Iranians have been very good at exploiting that. Whenever they rattle their saber, whenever they engage in a naval exercise in that area, or when, recently, they shoot off missiles to show everybody they can be tough guys and throw their weight around in the world, that gives the markets a lot of jitters, and we saw what happened: The price of oil shoots up. Ironically, countries that are no friends of the United States would create great mischief if they could have an additional reason for this belligerent behavior. It drives up the cost of oil, which is where they make all their money. So they literally have the ability to help dictate the price of the commodity that sustains their economy. Iran is not the only country. Russia actually produces more than Saudi Arabia. The United States is third. But Russia, as the world's largest oil producer--about 9.84 million barrels per day--has produced about a fourth of the non-OPEC crude oil since 2007. At today's prices, that would be about $1.4 billion per day--think about that--and over $500 billion for the year; almost $1.5 billion a day into Russia's Treasury. As a result, Russia has been able to do some things that are not in the interests of the United States. They are rearming their military with oil dollars. That is how they are able to afford all of the new things they are doing in terms of their nuclear program, their missile program, and all of the other things they are doing that are antithetical to United States national security interests. Moreover, they have shown no reluctance to use their oil and natural gas production as a weapon as well. When countries next to them or even far away that rely on Russian natural gas or oil do something the Russians do not like, they simply cut off the supply. And they have done this numerous times. It has much of Europe, which relies on Russian natural gas, very jittery because if you make the Russian bear mad, he cuts off your source of natural gas and, in some cases, oil. This creates a very unstable and very difficult situation for these countries, and also has the effect of driving up the price of oil and natural gas. Because both of these products are fungible; that is to say, they can be produced all around the world and everybody around the world buys them, there is a world market for them. So even though the jitters are in the Persian Gulf or in Europe, for example, the price is reflected all around the world, and the United States ends up having to pay more at the gas pump because these countries can affect the price of the commodity they rely on to fund their government. Recently, it happened to be that Russia shut off oil to the Czech Republic. They have shut off oil or natural gas to other countries in Eastern Europe, especially when they did not agree with the Russian position on something. They have shut off natural gas supplies during the dead of winter to countries in Eastern Europe that wanted to join NATO. Russia says: We don't like that so we will shut you off. The Czech Republic decided it wanted to help the United States and itself to be protected against missiles. So they are helping to establish a missile defense base in the Czech Republic. Russia doesn't like it, so half of what is sent from Russia to the Czech Republic is cut off. This is the problem of relying on other countries, not to mention a country such as Venezuela. The United States gets a good deal of its oil from Venezuela. We all know the head of Venezuela, Hugo Chavez, has done everything he can to undermine United States influence in Central and South America and does everything he can to get in the face of the United States. If he wants to affect the price of oil, all he has to do is rattle his saber as well. In each of these cases, we have a situation where the price of the product and the availability of the product is dependent upon positions over which we not only have no control but countries that have interests very inimical to ours, and the end result is it costs more for people in the United States for a very necessary product, namely, the oil and natural gas product we use to fuel our economy. This is one of the reasons why I say it is a national security issue as well as affecting the price at the pump. It is one of the reasons why the United States has to begin to rely less on the oil produced in foreign countries and more on oil we can produce right here in the United States. It is not well known, but the United States is the third largest producer of oil in the world, after Russia and Saudi Arabia. We have huge reserves here of which we are not taking advantage. This is one of the reasons why Republicans are insisting that any legislation that comes to the floor dealing with this energy crisis include taking advantage of the resources we have. Let's free up these resources. We have them. They can be obtained in a very environmentally sensitive way, and they can help not only to reduce the cost of gas in the United States or natural gas but also to reduce the ability of other countries around the world to influence behavior in a bad way, such as shutting off the oil or natural gas for customers of theirs or driving up the cost of oil for everybody else. I got to thinking about this in terms of the taming of the West. One of the reasons the United States became such a great country so rapidly was that we bought land with the Louisiana Purchase. We explored the West. We took advantage of natural resources that were in this country, and we quickly became a very strong power economically. We had natural gas, we had oil, we had minerals--copper and gold and all of the rest. We took advantage of the resources that we had to become a wealthy and powerful country. One hundred years ago, we didn't mine in a very environmentally safe way, but no one can deny that the way we produce our wealth today is with great environmental sensitivity. Everyone agrees with that. It is not any longer hurting the environment. All of this production can be done, for example, offshore or in the deep waters of the gulf in a very environmentally sensitive way. We are hoping the same thing can be done with oil shale. So when our friends say we need to be able to deal with the commodity markets here and that is going to make a big difference, the answer is, there is a lot of dispute as to whether it will make any difference at all. But we do know something that will make a difference but it will not make a difference just in the long run, it will make an immediate difference. The decision to explore and produce right here in the United States where we know we have the resources, where we are not dependent on other people, where they cannot drive up the price because they can rattle their sabers in the Strait of Hormuz or cutting off oil and natural gas supplies as Russia has done, we can stop all of that by simply producing more in the United States where we know we have it and we can produce it safely and in an environmentally sound way. It is like the settlement of the West, as I said, in taking advantage of our natural resources. We have always been a can-do nation. We have always said we can take care of ourselves. We don't want to be dependent on others. What we have learned today is that for depending on others, we pay a very high price, and I don't mean just a high price at the gas pump but a high price in terms of our national security as well. That is the reason we are insisting on removing some of these moratoria, strictly illegal moratoria. It is a moratorium from being able to explore for energy off our coasts or in the deep waters in the gulf or on Federal lands. There is a big up side to the Federal Government in terms of revenue royalties, as well as to States as a result of this action. So instead of paying money to foreign countries, we can be gaining some of that wealth right here in the United States. Bear in mind that other countries are the recipients of the payments for oil around the world, not oil companies as is the case primarily in the West. We send more than $1 billion a day, not to some oil company abroad but to foreign governments. They control the oil in Russia, in Iran, in Iraq, and so on. Let's get off of sending our money to foreign governments that are working against our interests and that can affect the price of the commodity simply by their bad actions and rely more on the resources we have in the United States, that we know we can extract in an environmentally sensitive way, that can reduce the price immediately. That is the last point I wanted to make. Martin Feldstein had an interesting piece in the Wall Street Journal about 2 weeks ago in which he made the point that there will be an immediate downward effect on oil prices if we simply announce that we are going to go after these resources in the United States. As a result, I urge my colleagues, when the opportunity arises and we debate this issue over the next week or so, that we support increased production in the United States for the benefit of American citizens.