Richard Lugar

Mr. LUGAR

Mr. LUGAR. Mr. President, I rise today to introduce the Rural America Prosperity Act of 2000. I am pleased that Senator Roberts, Senator Santorum, and Senator Burns have joined as cosponsors of this bill. A Republican controlled Congress in 1996 produced a sweeping reform of farm programs. Farmers were no longer told by the government what crops they had to plant. Farmers were no longer forced by the government to idle part of their land. That farm bill disentangled farmers from government controls and enabled them to make production decisions based on market signals. Freeing farmers from excessive, and often counterproductive, government controls is an important step, but we should do more to give farmers the tools they need to succeed. Specifically, we need to work to open foreign markets for our agricultural commodities and products, ease the tax and regulatory burden, and provide new risk management tools for farmers. There are three tax provisions in this legislation that I have long advocated as crucial to the financial health of farmers. First is the repeal of the estate tax. A repeal of this tax, which has prevented some farms from being passed from one generation to the next, is essential. We are proposing the same 10-year phase-out of the estate tax which Congress just passed, and the President has promised to veto. Excluding capital gains from the sale of farmland would put production agriculture on the same footing as homeowners who benefit from a capital gains exclusion for their home. The deduction of health care insurance costs is needed for farmers and others who are self-employed. Recently Congress provided over $8 billion to improve the federal crop insurance program. While crop insurance is an important risk management tool, today we offer two other risk management tools for farmers--income averaging and FARRM accounts. Two years ago Congress made income averaging a permanent risk management tool for farmers when calculating taxes. Unfortunately, the interaction between income averaging and the alternative minimum tax has prevented many farmers from receiving the benefit of income averaging. This bill fixes that problem. Under this bill, farmers will be able to contribute up to 20 percent of annual farm income into a FAARM account and deduct this amount from their taxes. This is an excellent tool for managing financial volatility associated with farming. We also address regulatory reform in our bill. We are seeking a review of existing and proposed regulations to determine the cost of compliance for farmers, ranchers and foresters. We want to determine if there are more cost-effective ways for farmers, ranchers and foresters to achieve the objectives of these regulations. Finally, we must do more to help develop new markets abroad for our farm commodities and agricultural products. Opportunity lies in developing countries where growing wealth allows for increased demand for meat and processed commodities. Authorizing fast-track authority for the President to negotiate international trade agreements may be the single most important thing we can do to facilitate exports. We also need to address sanctions. Sanctions that prohibit the export of U.S. agricultural products into the sanctioned country are often morally indefensible because they deny necessities to people, not the offending government. Such sanctions also deny markets for U.S. agricultural products which are then captured by our competitors. This legislation represents what I believe is necessary to further the historic reforms initiated in the farm bill 4 years ago. I urge my colleagues to cosponsor this bill. I will continue to encourage my colleagues and the Administration to work to enact these proposals.

Mr. LUGAR

Mr. LUGAR. Mr. President, our colleagues have spoken so well about Paul Coverdell as a gentleman, as a person who was thoughtful and persuasive. As Senator Domenici said, he worked the aisles indefatigably with the ideals that he held. First of all, it is fundamental that Paul Coverdell was elected to the Senate. It was a very difficult contest--one not decided on election day, the day of his first election. He was an extraordinarily experienced politician and statesman in the State of Georgia, with remarkable legislative experience as a leader throughout much of his tenure. But those from our party in Georgia have a very difficult time with that, and that was the case for Paul. It was a very close contest. He won graciously, came to the Senate, and had a difficult reelection contest for which he began to prepare early and in which he asked many of us to participate. But he did it all so gracefully, so thoughtfully, so constructively, that we rarely think of Paul Coverdell as a very tough political competitor and someone who was in a difficult arena. It took great courage to make those races to begin with and remarkable tenacity to follow through to success. My own first impressions of Paul Coverdell came during the often commented period in which he served as head of the Peace Corps. Paul Coverdell was in Latin America and various other places where some of us tried to work for democracy in those days. They were remarkable days--the 1980s--in which all of the countries of our hemisphere finally landed on their feet with democratic institutions. That was true of countries in Asia and countries elsewhere around the world. Paul Coverdell's tenure in the Peace Corps is distinguished by the fact that the Peace Corps had matured, literally. Many members of the Corps were now very mature individuals, not young persons out of college, or in some type of transition before they went into another professional career. As a matter of fact, under Paul's tenure, the Peace Corps evolved into a group of teachers, environmentalists, and farm experts, in addition to, still, a very strong component of young idealistic people. It was this combination of people that gave sustenance to democracy, helped the economy, helped the pushing forward of intellectual pursuits, and likewise forged an increasing friendship and reverence for the United States and for our traditions. Therefore, it was with great excitement that I welcomed Paul Coverdell to the Foreign Relations Committee. That is a committee on which he belonged. He made huge contributions on that committee. We focused frequently on Latin America, Central America, South America, and the Caribbean--areas with which he was well acquainted from previous times when he had really been there in the beginning of the evolution of many democratic propositions. I sat next to him in the committee through the markups, through the hearings. He was always cheerful. He was always thoughtful in exchanging views in a very forthright way. I admired and I listened to Paul. He made a very strong contribution day by day in the work of the committee. But my close association with Paul came in the Agriculture Committee. I will mention that Paul was chairman of the Senate Agriculture Committee, Subcommittee on Marketing, Inspection, and Product Promotion. He did a great job. We have just four subcommittees in the Agriculture Committee. These are committees that have opportunities to hold hearings independently, or to contribute to the body as a whole as they may wish. Paul Coverdell had a broad philosophical view of agriculture that included freedom--freedom for the farmers whom he represented to make decisions with regard to management of their land and their crops and their livestock, and the prospects for their communities. He championed that idea without apology. But he also was very much in tune with the very specific problems of Georgia farmers. They included an interest in peanuts. Paul and I had disagreements about the peanut program. In fact, it has either been my fate or privilege for many years to suggest reform. Paul always feared that those reforms would come during his time, and he tried to dissuade me and, having failed in that respect, to at least bring me up to date on what the actual problems of peanut farmers were, how they could be helped, and how the legislation I was suggesting could be brought before the committee and modified, and ways to be helpful to the overall policy and to the constituents whom he saw very much in need of his support. Mr. President, he prevailed in that area. We made reforms. But I think they were reforms that were very heavily influenced by the hand of Paul Coverdell. Due to the fact that he did his homework, he was persuasive, and he knew the farmers. He spoke for them. In addition to the peanut situation, which was always with him, in recent years, severe drought--and this is one of those years in Georgia--occupied much of Paul Coverdell's time, working with specific landowners and communities, with much of his State in the throes of a very difficult predicament. As I looked at the weather map just last week, I saw how the drought problem has shifted just in a very few weeks in our country from patches that covered much of the area of the United States to very isolated situations. Unfortunately, Georgia is one of those situations. It is especially cruel because the rains have come to the Midwest and to many of the plains States with isolated problems still--in some parts of Nebraska, Iowa, and the Dakotas. But Paul, in his own way, always made certain we knew about Georgia and the very specific problems there. So when we had the large debates that we were privileged to have on the floor, dealing with risk management, dealing with payments to farmers to supplement their income in a very difficult year, and with specific emergencies, Paul was very active in that debate. He was successful in that debate. As Senator Domenici pointed out in his beautiful statement, Paul Coverdell was always one who thanked everybody involved and made certain that they knew of his care and attention and appreciation. It was my privilege to receive one of those notes after the debate which we had here. It is very difficult to try to think about the representation of that State without thinking of Paul Coverdell. He was so good, so faithful and, really, so effective and articulate. He was such a good friend. We will miss him. Our thoughts are with him and with Nancy. I yield the floor.

Mr. LUGAR

Mr. LUGAR. Mr. President, I rise today to introduce the Rural America Prosperity Act of 2000. I am pleased that Senator Roberts, Senator Santorum, and Senator Burns have joined as cosponsors of this bill. A Republican controlled Congress in 1996 produced a sweeping reform of farm programs. Farmers were no longer told by the government what crops they had to plant. Farmers were no longer forced by the government to idle part of their land. That farm bill disentangled farmers from government controls and enabled them to make production decisions based on market signals. Freeing farmers from excessive, and often counterproductive, government controls is an important step, but we should do more to give farmers the tools they need to succeed. Specifically, we need to work to open foreign markets for our agricultural commodities and products, ease the tax and regulatory burden, and provide new risk management tools for farmers. There are three tax provisions in this legislation that I have long advocated as crucial to the financial health of farmers. First is the repeal of the estate tax. A repeal of this tax, which has prevented some farms from being passed from one generation to the next, is essential. We are proposing the same 10-year phase-out of the estate tax which Congress just passed, and the President has promised to veto. Excluding capital gains from the sale of farmland would put production agriculture on the same footing as homeowners who benefit from a capital gains exclusion for their home. The deduction of health care insurance costs is needed for farmers and others who are self-employed. Recently Congress provided over $8 billion to improve the federal crop insurance program. While crop insurance is an important risk management tool, today we offer two other risk management tools for farmers--income averaging and FARRM accounts. Two years ago Congress made income averaging a permanent risk management tool for farmers when calculating taxes. Unfortunately, the interaction between income averaging and the alternative minimum tax has prevented many farmers from receiving the benefit of income averaging. This bill fixes that problem. Under this bill, farmers will be able to contribute up to 20 percent of annual farm income into a FAARM account and deduct this amount from their taxes. This is an excellent tool for managing financial volatility associated with farming. We also address regulatory reform in our bill. We are seeking a review of existing and proposed regulations to determine the cost of compliance for farmers, ranchers and foresters. We want to determine if there are more cost-effective ways for farmers, ranchers and foresters to achieve the objectives of these regulations. Finally, we must do more to help develop new markets abroad for our farm commodities and agricultural products. Opportunity lies in developing countries where growing wealth allows for increased demand for meat and processed commodities. Authorizing fast-track authority for the President to negotiate international trade agreements may be the single most important thing we can do to facilitate exports. We also need to address sanctions. Sanctions that prohibit the export of U.S. agricultural products into the sanctioned country are often morally indefensible because they deny necessities to people, not the offending government. Such sanctions also deny markets for U.S. agricultural products which are then captured by our competitors. This legislation represents what I believe is necessary to further the historic reforms initiated in the farm bill 4 years ago. I urge my colleagues to cosponsor this bill. I will continue to encourage my colleagues and the Administration to work to enact these proposals.

Mr. LUGAR

Mr. LUGAR. Mr. President, I would like to announce that the Committee on Agriculture, Nutrition, and Forestry will meet on July 27, 2000 in SR-328a at 9:00 a.m. The purpose of this hearing will be to review proposals to establish an international school lunch program. committee on agriculture, nutrition, and forestry

Mr. LUGAR. Mr. President, I would like to announce that the Committee on Agriculture, Nutrition, and Forestry subcommittee on Production and Price Competitiveness will meet on July 18, 2000 in SR-328a at 2:30 p.m. The purpose of this hearing will be to review proposals to examine the future of U.S. agricultural export programs.

Mr. LUGAR. Mr. President, I would like to announce that the Committee on Agriculture, Nutrition, and Forestry will meet on July 26, 2000 in SR-328a at 9:00 a.m. The purpose of this hearing will be to review the federal sugar program. committee on agriculture, nutrition, and forestry

Mr. LUGAR. Mr. President, I would like to announce that the Committee on Agriculture, Nutrition, and Forestry will meet on July 20, 2000 in SD-106 at 9:00 a.m. The purpose of this meeting will be to examine the implications of high energy prices on U.S. agriculture. committee on agriculture, nutrition, and forestry subcommittee on production and price competitiveness

Mr. LUGAR

Mr. LUGAR. Mr. President, I rise in strong support of this amendment aimed at providing tax relief to America's farmers. I want to highlight and share my strong enthusiasm for one provision contained as part of this amendment aimed at encouraging farmers, ranchers and other small businesses to donate food to hunger relief organizations. This language is taken from bipartisan legislation I introduced earlier this year--S. 2084, the Hunger Relief Tax Incentive Act. Current law provides corporations with a special deduction for donations to food banks, but it excludes farmers, ranchers and restaurant owners from donating food under the same tax incentive. This language would address this inequity by extending the deduction to all business taxpayers and by increasing the deduction to the fair market value of the donation. While recently visiting food banks in Indiana, I met a Hoosier apple farmer who donates several hundred bushels of apples annually, despite the lack of a tax deduction for his actions. Because of labor and transportation costs, it would have been more cost effective to throw the food away. This should not be the case. Our tax laws should reward charitable giving, not discourage it. Citizens have moved off of welfare, but not out of poverty. A December 1999 study by the U.S. Conference of Mayors found that requests for emergency food assistance increased by an average of 18 percent in American cities over the previous year and that 21 percent of emergency food requests could not be met. I can personally attest to this increased need after recently visiting the Tri-State Food Bank in Evansville, Gleaners Food Bank in Indianapolis, and Community Harvest Food Bank in Ft. Wayne. This language, which enjoys broad support in the Senate, would be an effective private sector approach to addressing hunger. It has the endorsement of several hunger relief, food, and agricultural organizations, including the American Farm Bureau, the National Farmers Union, the National Restaurant Association, America's Second Harvest Food Banks, and the Salvation Army. I encourage my colleagues on both sides of the aisle to vote in support of this amendment that benefits our farmers and our food banks.

Mr. LUGAR

Mr. LUGAR. Success for All is an exemplary research-based reform program. I have spent time with Dr. Slavin, who developed this program at Johns Hopkins, and I have been visiting Success for All schools in Indiana. The results in these schools are so promising that I have written to every superintendent in Indiana urging them to take a look at the program. The discipline and accountability of Success for All greatly reduce the possibility that students will fail. By teaching children to read in the early grades, our schools can avoid holding students back, promoting them with insufficient ability or transferring them out of the normal curriculum to special education courses. Referrals to special education in Success for All schools have been shown to decrease by approximately 50 percent. In schools where Success for All is taught, students learn to read by the end of the third grade. By the fifth grade, students in these schools are often testing a full grade level ahead of students in other schools.

Mr. LUGAR. I agree that few areas of our education funding can have a more positive impact on education in America than the CSRD. This program is a key tool for helping struggling schools adopt important reforms. Good reform programs are a bargain for our schools and our children when we compare their costs to that of retention, special education and illiteracy. In fact, I filed an amendment to S. 2, legislation crafted to reauthorize the Elementary and Secondary Education Act, that would have more than doubled funding for this important program. Unfortunately, this bill has been set aside.

Mr. LUGAR

Mr. LUGAR. Mr. President, I would like to announce that the Committee on Agriculture, Nutrition, and Forestry will meet on June 29, 2000 in SR-328A at 10 a.m. The purpose of this meeting will be to mark up new legislation.

Mr. LUGAR

Mr. LUGAR. Mr. President, today I rise to introduce the Grain Standards Improvement Act of 2000. I am pleased that the ranking minority member of the Senate Agriculture Committee, Senator Harkin, has joined me as a cosponsor. The United States Grain Standards Act was enacted in 1916 as a means of eliminating confusion resulting from the use of many different sets of grain standards applied by different grain inspection organizations operating without national coordination and supervision. Created by this Act and operating within the United States Department of Agriculture (USDA), the Federal Grain Inspection Service (FGIS) sets and administers official grain standards and conducts grain inspection services. The Act authorizes FGIS to establish standards of ``kind, class, quality and condition for corn, wheat, rye, oats, barley, flax seed, sorghum, soybeans, mixed grain and such other grains as in the administrator's judgment the usages of the trade may warrant and permit.'' The FGIS administrator is authorized to develop standards or procedures for accurate weighing and weight certification and controls for grain shipped in interstate or foreign commerce. The Act also established certain performance requirements for grain inspection and weighing equipment. The certainty of these standards and the credibility and integrity of the inspection system has allowed our domestic and international markets to flourish as a result. But improvements are necessary to keep up with the changing markets. The legislation that I am introducing today is based on legislation proposed by the Administration earlier this year. The Gain Standards Improvement Act of 2000 will reauthorize the collection of fees, the FGIS Advisory Committee, and funding for FGIS until September 30, 2005. In order to keep up with advances in technology, FGIS needs flexibility in the way that commodity samples can be obtained. Grain marketing patterns, quality attributes, and quality testing methods are changing rapidly. New quality traits developed through biotechnology have increased the speed of change. This Act will provide flexibility needed by FGIS to continue to maintain an efficient sampling system. In general, under current law, only one official federal inspection agency can operate within geographic boundaries. The 1993 amendments to the Grain Standards Act provided for a pilot program that allowed for more than one official inspection agency within a single geographic area at interior locations. These programs were successful in facilitating the marketing of grain without jeopardizing the integrity of the system. This bill will permanently authorize this policy. This legislation is supported by the National Association of State Departments of Agriculture, the Association of American Warehouse Control Officials, the National Grain and Feed Association, the American Farm Bureau Federation, the National Farmers Union and other agricultural commodity organizations. The credibility and integrity of the United States grain inspection must be maintained to allow U.S. producers to continue to feed the world through our marketing system. The Grain Standards Improvement Act of 2000 will help FGIS to continue these high standards and increase the economic efficiency of the U.S. grain marketing system. Mr. President, I ask unanimous consent that the bill and a section- by-section summary be printed in the Record following my statement.

Mr. LUGAR

Mr. LUGAR. Mr. President, I rise before you today to recognize the Belles of Indiana who are celebrating their 45th Reunion this summer. The Belles of Indiana, a choral group comprised of Indiana University students, were the first singing group to perform overseas with the United Service Organizations (USO). The Belles entertained soldiers stationed in Japan and Korea, performing 75 shows in 77 days during the summer of 1955. Their voices and energy brought great joy to all those who heard them perform. These singers displayed strong patriotism for their country and acted as outstanding ambassadors from Indiana. I am pleased to submit their names for the Congressional Record because of their great contributions to our soldiers and country. I would like to commend the following members on their participation: Doris Day Block, Robert Bluemle, Vera Scammon Broughton, Dennis Escol, Roberta Ratliff Graham, Sondra Gauthier Harroff, Sally Graham Johnson, Helen Rapp Nefkens, Sandra Pawol Overack, Carolyn Hill Pain, Joyce Harrod Sakakini, Nancy Speed Schultz, Sue Ann Steeves, Cynthia Findley Stewart, Annabelle Baldridge Menguy, Sharlie Shull Stuart, Linda Foncannon Tucker, Ellen Dallas Wiggins, Mary Musgrave Wirts, Joyce Lancaster Voit, and Barbara Lockard Zimmerman. I would also like to recognize those members of the Belles of Indiana who are no longer with us: Eugene and Keitha Bayless, (Choral Director and his wife), Mary Mauer, Irma Batley Corcoran, Mary Sinclair Baron, and Joan Drew Irwin. I am pleased to pay tribute to these great Americans whose positive attitude and high energy boosted morale for our overseas troops. The history of America is replete with stories of its sons and daughters being summoned and responding to their nation's call to duty. It is a proud history of accomplishment, honor, and victory. The Belles of Indiana answered their nation's call to duty and diligently persevered to be emissaries for the families and friends of servicemen who were far away from home. I extend my congratulations to the Belles of Indiana for being the first entertainment group to travel and perform with the United Service Organization. I ask my colleagues to join me today in honoring these courageous women and men for their valiant service to our country.

Mr. LUGAR

Mr. LUGAR. Mr. President, I rise today with Senator Gramm, distinguished Chairman of the Senate Banking Committee, and Senator Fitzgerald, distinguished Chairman of the Subcommittee on Research, Nutrition and General Legislation of the Senate Agriculture Committee, to introduce legislation to reauthorize the Commodity Exchange Act (CEA), which lapses on September 30th of this year. The Commodity Futures Modernization Act of 2000 would reauthorize the Commodity Exchange Act (CEA) for five additional years and would reform the Commodity Exchange Act in three primary ways. First, it would incorporate the unanimous recommendations of the President's Working Group (PWG) on the proper legal and regulatory treatment of over-the-counter (OTC) derivatives. Second, it would codify the regulatory relief proposal of the Commodity Futures Trading Commission (CFTC) to ensure that futures exchanges are appropriately regulated and remain competitive. Lastly, this legislation would reform the Shad-Johnson jurisdictional accord, which banned single stock futures 18 years ago. Derivative instruments, both exchange-traded and over-the-counter (OTC), have played a significant role in our economy's current expansion due to their innovative nature and their risk-transferring attributes. According to the International Swaps and Derivatives Association, the global derivatives market has a notional value that exceeds $58 trillion and it has grown at a rate exceeding 20 percent since 1990. Identified by Alan Greenspan as the ``most significant event in finance of the past decade,'' the development of the derivatives market has substantially added to the productivity and wealth of our nation. Derivatives enable companies to unbundle and transfer risk to those entities who are willing and able to accept it. By doing so, efficiency is enhanced as firms are able to concentrate on their core business objective. A farmer can purchase a futures contract, one type of derivative, in order to lock in a price for his crop at harvest. Automobile manufacturers, whose profits earned overseas can fluctuate with changes in currency values, can minimize this uncertainty through derivatives, allowing them to focus on the business of building cars. Banks significantly lessen their exposure to interest rate movements by entering into derivatives contracts known as swaps, which enable these institutions to hedge their risk by exchanging variable and fixed rates of interests. Signed into law in 1974, the Commodity Exchange Act requires that futures contracts be traded on a regulated exchange. As a result, a futures contract that is traded off an exchange is illegal and unenforceable. When Congress enacted the CEA and the Commodity Futures Trading Commission (CFTC) to enforce it, this was not a concern. The meanings of `futures' and `exchange' were relatively apparent. Furthermore, the over-the-counter derivatives business was in its infancy. However, in the 26 years since the statute's creation, the OTC swaps and derivatives market, sparked by innovation and technology, has significantly outpaced the exchange-traded futures markets. And along with this expansion, the definitions of a swap and a future began to blur. In 1998, the CFTC released a concept release on OTC derivatives, which was perceived by many as a precursor to regulating these instruments as futures. Just the threat of reaching this conclusion could have had considerable ramifications, given the size and importance of the OTC market. The legal uncertainty interjected by this dispute jeopardized the entirety of the OTC market and threatened to move significant portions of the business overseas. If we were to lose this market, most likely to London, it would take years to bring it back to U.S. soil. The resulting loss of business and jobs would be immeasurable. This threat led the Treasury Department, the Federal Reserve, and the SEC to oppose the concept release and request that Congress enact a moratorium on the CFTC's ability to regulate these instruments until after the President's Working Group (PWG) could complete a study on the issue. As a result, Congress passed a six-month moratorium on the CFTC's ability to regulate over-the-counter derivatives. Despite reservations, I supported this moratorium because it brought legal assurance to this skittish market and it allowed the President's Working Group time to develop recommendations on the most appropriate legal treatment of OTC derivatives. In November 1999, the President's Working Group completed its unanimous recommendations on OTC derivatives and presented Congress with these findings. This legislation adopts much of the recommendations of the PWG report. Our bill contains three mechanisms for ensuring that legal certainty is attained and that certain transactions remain outside the Commodity Exchange Act. The first, the electronic trading facility exclusion, would exclude transactions in financial and energy commodities from the Act if conducted: (1) on a principal to principal basis; (2) between institutions or sophisticated persons with high net worth; and (3) on an electronic trading facility. The second would exclude these transactions if (1) they are conducted between institutions or sophisticated persons with high net worth; and (2) they are not on a trading facility. The third exclusion clarifies the Treasury Amendment language already contained in the CEA. It would exclude all transactions in foreign currency and government securities from the Act unless those transactions are futures contracts and traded on an organized exchange. As recommended by the PWG, the bill would give the CFTC jurisdiction over non-regulated off-exchange retail futures transactions in foreign currency. Another important recommendation of the PWG was to authorize futures clearing facilities to clear OTC derivatives in an effort to lessen systemic risk and this bill incorporates this finding. As part of this legal certainty section, our legislation also addresses the concern that excluding OTC derivatives from the futures laws will invite the SEC to regulate these products as securities. With Senator Gramm's leadership, this legislation would adopt language that would ensure that these products maintain their current regulatory status and remain healthy and competitive. The second major section of this legislation addresses regulatory relief. In February of this year, the CFTC issued a regulatory relief proposal that would provide relief to futures exchanges and their customers. Instead of listing specific requirements for complying with the CEA, the proposal would require exchanges to meet internationally agreed-upon core principals. The CFTC proposal creates tiers of regulation for exchanges based on whether the underlying commodities being traded are susceptible to manipulation or whether the users of the exchange are limited to institutional customers. The legislation incorporates this framework. A board of trade that is designated as a contract market would receive the highest level of regulation due to the fact that these products are susceptible to manipulation or are offered to retail customers. Futures on agricultural commodities would fall into this category. This bill also sets out that in lieu of contract market designation, a board of trade may register as a Derivatives Transaction Execution Facility (DTEF) if the products being offered are not susceptible to manipulation and are traded among institutional customers or retail customers who use large Futures Commission Merchants (FCMs) who are members of a clearing facility. Lastly, a board of trade may choose to be an Exempt Board of Trade (XBOT) and not be subject to the Act (except for the CFTC's anti- manipulation authority) if the products being offered are traded among institutional customers only (absolutely no retail) and the instruments are not susceptible to manipulation. Our bill would allow a board of trade that is a DTEF or an XBOT to opt to trade derivatives that are otherwise excluded from the Act on these facilities and to the extent that these products are traded on these facilities, the CFTC would have exclusive jurisdiction over them. With this provision, the intent is to provide these facilities that trade derivatives with a choice--if regulation is beneficial, the facility may choose to be regulated. If not, the facility may choose to be excluded or exempted from the Act. The bill's last section addresses the Shad-Johnson jurisdictional accord. In 1982, SEC Chairman John Shad and CFTC Chairman Phil Johnson reached an agreement on dividing jurisdiction between the agencies for those products that had characteristics of both securities and futures. Known as the Shad-Johnson Accord, this agreement prohibited single stock futures and delineated jurisdiction between the SEC and the CFTC on stock index futures and other options. Meant as a temporary agreement, many have suggested that the Shad- Johnson accord should be repealed. The President's Working Group unanimously agreed that the Accord can be repealed if regulatory disparities are resolved between the regulation of futures and securities. Recently, the General Accounting Office (GAO) released a report that found that there is no legitimate policy reasons for maintaining the ban on single stock futures since they are being traded in foreign markets, in the OTC market, and synthetically in the options markets. Senator Gramm, chairman of the Senate Banking Committee, and I sent a letter in December requesting the CFTC and the SEC to make recommendations on reforming the Shad-Johnson. On March 2, the SEC and CFTC responded that, although progress had been made, the agencies could not resolve these issues before October. Disappointment with this answer led Senator Gramm and I to once again ask SEC Chairman Arthur Levitt and CFTC Chairman Bill Rainer to attempt to resolve the problems surrounding lifting the ban. Unfortunately, the agencies were not able to reach an agreement within our time-frame. This legislation would repeal the prohibition on single stock futures and narrow-based stock index futures. It would allow these products, termed designated futures on securities, to trade on either a CFTC- regulated contract market or a SEC-regulated national securities exchange or association. The SEC would maintain its insider trading and antifraud enforcement authority over these products traded on a contract market and the CFTC would maintain its anti-manipulation authority, including large trader reporting, over these products traded on a national securities exchange or association. Margin levels on these products would be harmonized with the options markets. The bill would provide the regulators with one year after enactment to resolve any remaining issues. The goal of this legislation is to ensure that the United States remains a global leader in the derivatives marketplace and that these markets are appropriately and effectively regulated. Due to the shortened legislative calendar in this election year, it will be difficult to pass this bill without momentum and a strong base of support. If Congress fails to enact a bill, we will begin the debate again next year. However, in this technology-driven economy, a one year delay is an eternity. Legal uncertainty for OTC derivatives will remain and our futures markets will continue to lose market share due in part to an outdated regulatory structure. For this reason, it is imperative that Congress enact thoughtful legislation this year when it has a golden opportunity to do so. I ask unanimous consent that a section by section analysis of this bill be included in the Record immediately after my statement.

Mr. LUGAR

Mr. LUGAR. Mr. President, I rise today with Senator Gramm, distinguished Chairman of the Senate Banking Committee, and Senator Fitzgerald, distinguished Chairman of the Subcommittee on Research, Nutrition and General Legislation of the Senate Agriculture Committee, to introduce legislation to reauthorize the Commodity Exchange Act (CEA), which lapses on September 30th of this year. The Commodity Futures Modernization Act of 2000 would reauthorize the Commodity Exchange Act (CEA) for five additional years and would reform the Commodity Exchange Act in three primary ways. First, it would incorporate the unanimous recommendations of the President's Working Group (PWG) on the proper legal and regulatory treatment of over-the-counter (OTC) derivatives. Second, it would codify the regulatory relief proposal of the Commodity Futures Trading Commission (CFTC) to ensure that futures exchanges are appropriately regulated and remain competitive. Lastly, this legislation would reform the Shad-Johnson jurisdictional accord, which banned single stock futures 18 years ago. Derivative instruments, both exchange-traded and over-the-counter (OTC), have played a significant role in our economy's current expansion due to their innovative nature and their risk-transferring attributes. According to the International Swaps and Derivatives Association, the global derivatives market has a notional value that exceeds $58 trillion and it has grown at a rate exceeding 20 percent since 1990. Identified by Alan Greenspan as the ``most significant event in finance of the past decade,'' the development of the derivatives market has substantially added to the productivity and wealth of our nation. Derivatives enable companies to unbundle and transfer risk to those entities who are willing and able to accept it. By doing so, efficiency is enhanced as firms are able to concentrate on their core business objective. A farmer can purchase a futures contract, one type of derivative, in order to lock in a price for his crop at harvest. Automobile manufacturers, whose profits earned overseas can fluctuate with changes in currency values, can minimize this uncertainty through derivatives, allowing them to focus on the business of building cars. Banks significantly lessen their exposure to interest rate movements by entering into derivatives contracts known as swaps, which enable these institutions to hedge their risk by exchanging variable and fixed rates of interests. Signed into law in 1974, the Commodity Exchange Act requires that futures contracts be traded on a regulated exchange. As a result, a futures contract that is traded off an exchange is illegal and unenforceable. When Congress enacted the CEA and the Commodity Futures Trading Commission (CFTC) to enforce it, this was not a concern. The meanings of `futures' and `exchange' were relatively apparent. Furthermore, the over-the-counter derivatives business was in its infancy. However, in the 26 years since the statute's creation, the OTC swaps and derivatives market, sparked by innovation and technology, has significantly outpaced the exchange-traded futures markets. And along with this expansion, the definitions of a swap and a future began to blur. In 1998, the CFTC released a concept release on OTC derivatives, which was perceived by many as a precursor to regulating these instruments as futures. Just the threat of reaching this conclusion could have had considerable ramifications, given the size and importance of the OTC market. The legal uncertainty interjected by this dispute jeopardized the entirety of the OTC market and threatened to move significant portions of the business overseas. If we were to lose this market, most likely to London, it would take years to bring it back to U.S. soil. The resulting loss of business and jobs would be immeasurable. This threat led the Treasury Department, the Federal Reserve, and the SEC to oppose the concept release and request that Congress enact a moratorium on the CFTC's ability to regulate these instruments until after the President's Working Group (PWG) could complete a study on the issue. As a result, Congress passed a six-month moratorium on the CFTC's ability to regulate over-the-counter derivatives. Despite reservations, I supported this moratorium because it brought legal assurance to this skittish market and it allowed the President's Working Group time to develop recommendations on the most appropriate legal treatment of OTC derivatives. In November 1999, the President's Working Group completed its unanimous recommendations on OTC derivatives and presented Congress with these findings. This legislation adopts much of the recommendations of the PWG report. Our bill contains three mechanisms for ensuring that legal certainty is attained and that certain transactions remain outside the Commodity Exchange Act. The first, the electronic trading facility exclusion, would exclude transactions in financial and energy commodities from the Act if conducted: (1) on a principal to principal basis; (2) between institutions or sophisticated persons with high net worth; and (3) on an electronic trading facility. The second would exclude these transactions if (1) they are conducted between institutions or sophisticated persons with high net worth; and (2) they are not on a trading facility. The third exclusion clarifies the Treasury Amendment language already contained in the CEA. It would exclude all transactions in foreign currency and government securities from the Act unless those transactions are futures contracts and traded on an organized exchange. As recommended by the PWG, the bill would give the CFTC jurisdiction over non-regulated off-exchange retail futures transactions in foreign currency. Another important recommendation of the PWG was to authorize futures clearing facilities to clear OTC derivatives in an effort to lessen systemic risk and this bill incorporates this finding. As part of this legal certainty section, our legislation also addresses the concern that excluding OTC derivatives from the futures laws will invite the SEC to regulate these products as securities. With Senator Gramm's leadership, this legislation would adopt language that would ensure that these products maintain their current regulatory status and remain healthy and competitive. The second major section of this legislation addresses regulatory relief. In February of this year, the CFTC issued a regulatory relief proposal that would provide relief to futures exchanges and their customers. Instead of listing specific requirements for complying with the CEA, the proposal would require exchanges to meet internationally agreed-upon core principals. The CFTC proposal creates tiers of regulation for exchanges based on whether the underlying commodities being traded are susceptible to manipulation or whether the users of the exchange are limited to institutional customers. The legislation incorporates this framework. A board of trade that is designated as a contract market would receive the highest level of regulation due to the fact that these products are susceptible to manipulation or are offered to retail customers. Futures on agricultural commodities would fall into this category. This bill also sets out that in lieu of contract market designation, a board of trade may register as a Derivatives Transaction Execution Facility (DTEF) if the products being offered are not susceptible to manipulation and are traded among institutional customers or retail customers who use large Futures Commission Merchants (FCMs) who are members of a clearing facility. Lastly, a board of trade may choose to be an Exempt Board of Trade (XBOT) and not be subject to the Act (except for the CFTC's anti- manipulation authority) if the products being offered are traded among institutional customers only (absolutely no retail) and the instruments are not susceptible to manipulation. Our bill would allow a board of trade that is a DTEF or an XBOT to opt to trade derivatives that are otherwise excluded from the Act on these facilities and to the extent that these products are traded on these facilities, the CFTC would have exclusive jurisdiction over them. With this provision, the intent is to provide these facilities that trade derivatives with a choice--if regulation is beneficial, the facility may choose to be regulated. If not, the facility may choose to be excluded or exempted from the Act. The bill's last section addresses the Shad-Johnson jurisdictional accord. In 1982, SEC Chairman John Shad and CFTC Chairman Phil Johnson reached an agreement on dividing jurisdiction between the agencies for those products that had characteristics of both securities and futures. Known as the Shad-Johnson Accord, this agreement prohibited single stock futures and delineated jurisdiction between the SEC and the CFTC on stock index futures and other options. Meant as a temporary agreement, many have suggested that the Shad- Johnson accord should be repealed. The President's Working Group unanimously agreed that the Accord can be repealed if regulatory disparities are resolved between the regulation of futures and securities. Recently, the General Accounting Office (GAO) released a report that found that there is no legitimate policy reasons for maintaining the ban on single stock futures since they are being traded in foreign markets, in the OTC market, and synthetically in the options markets. Senator Gramm, chairman of the Senate Banking Committee, and I sent a letter in December requesting the CFTC and the SEC to make recommendations on reforming the Shad-Johnson. On March 2, the SEC and CFTC responded that, although progress had been made, the agencies could not resolve these issues before October. Disappointment with this answer led Senator Gramm and I to once again ask SEC Chairman Arthur Levitt and CFTC Chairman Bill Rainer to attempt to resolve the problems surrounding lifting the ban. Unfortunately, the agencies were not able to reach an agreement within our time-frame. This legislation would repeal the prohibition on single stock futures and narrow-based stock index futures. It would allow these products, termed designated futures on securities, to trade on either a CFTC- regulated contract market or a SEC-regulated national securities exchange or association. The SEC would maintain its insider trading and antifraud enforcement authority over these products traded on a contract market and the CFTC would maintain its anti-manipulation authority, including large trader reporting, over these products traded on a national securities exchange or association. Margin levels on these products would be harmonized with the options markets. The bill would provide the regulators with one year after enactment to resolve any remaining issues. The goal of this legislation is to ensure that the United States remains a global leader in the derivatives marketplace and that these markets are appropriately and effectively regulated. Due to the shortened legislative calendar in this election year, it will be difficult to pass this bill without momentum and a strong base of support. If Congress fails to enact a bill, we will begin the debate again next year. However, in this technology-driven economy, a one year delay is an eternity. Legal uncertainty for OTC derivatives will remain and our futures markets will continue to lose market share due in part to an outdated regulatory structure. For this reason, it is imperative that Congress enact thoughtful legislation this year when it has a golden opportunity to do so. I ask unanimous consent that a section by section analysis of this bill be included in the Record immediately after my statement.

Mr. LUGAR

Mr. LUGAR. I yield to myself such time as I may require.

Mr. LUGAR. I yield.

Mr. LUGAR. Mr. President, I rise to speak about the Agricultural Risk Protection Act of 2000. I am very pleased this legislation is before the Senate today for final consideration after a great deal of work by Senators of both parties and both sides of this Capitol. I am here to testify that there is proud bipartisan support for this legislation, highlighted by the fact that all members of the conference committee for this legislation signed the conference report after our meeting yesterday. This conference report contains several titles. Title I pertains to crop insurance important to so many agriculture producers throughout the country. The fiscal year 2001 budget resolution provided $8 billion over 5 years for crop insurance legislation. This conference report increases premium subsidies to make crop insurance more affordable. The bill also tightens program integrity provisions to limit abuse. It also helps producers of non-insured crops, predominantly specialty crops, by making the non-insured assistance program more readily available to them. Finally, the legislation encourages farmers to adopt a broad array of risk management activities beyond crop insurance alone. Title II of this conference report provides $7.14 billion in economic assistance to farmers as provided in the fiscal year 2001 budget resolution. Included in this conference report is $5.466 for a market loss payment for farmers in this fiscal year based on last year's AMTA payment rate. Five hundred million dollars is provided for oilseed producers. Funds are also provided for specialty crops including funding for purchases of crops that have experienced low prices in 1998 or 1999 and loans for apple producers who are suffering economic and income loss. Finally, funding is provided for purchases of commodities for the school lunch program which benefits school children as well as farmers. Title III of the conference report contains the Biomass Research and Development Act, a bill which I originally introduced in the Senate last year. This legislation establishes a focused, integrated, and innovation-driven research effort to develop technologies for the production of biobased industrial products. The bill also authorizes a biomass research and development initiative to competitively award grants to carry out research and development of low cost and sustainable biobased industrial products. Title IV and V of the conference report consolidates and streamlines existing statutory authorities for plant protection and authorizes civil penalties for harming or interfering with animals used for USDA inspections. Senator Craig had originally introduced this legislation in the Senate. I thank Senator Harkin, the ranking minority member of the committee, and Senator Roberts and Senator Kerrey for their hard work and that of their staff in finalizing the crop insurance legislation. All members of the conference committee and their staff are thanked for their important contributions to the process. Finally, I also want to thank Congressman Combest, the chair of the House Agriculture Committee, and Ranking Minority Member Stenholm and their staff for their hard work in the past few weeks on this legislation. I am pleased to report the House of Representatives took action on this conference report this morning and passed it unanimously. I am hopeful that we may have a result similar, if not exactly the same as that, this afternoon in this body. Let me simply add that this legislation is of enormous importance to American agriculture. I have tried to summarize as succinctly as possible these five titles. But the consequences of this bill are very substantial. The dollars involved I have outlined. But the confidence, the hope that comes to producers who have had great discouragement in terms of low prices, in terms of export markets that have been withheld due to economic conditions in Asia, biotechnology disputes now in Europe, very great problems in negotiating trade agreements, whether it be the Seattle scene or the Washington scene more recently--this has been a very tough time. The Chair comes from the State adjacent to my own, a State which, like Indiana, must export half of the soybeans we produce and about a third of the corn we produce. There can be no prosperity in American agriculture without vigorous negotiations to knock down these trade barriers and to open up prospects for our farmers to realize the benefits of having the best--the best in terms of quality, the best in terms of price. These economic circumstances do not pertain if there are barriers to exports. But in this interim period, it is appropriate that Congress has understood these unusual international problems and understood we are in transition to more market-oriented farming. The crop insurance title in particular recognizes the possibility of farmers becoming much better marketers, much better business people, which all of us will have to become if we are, in fact, to succeed over the coming generation. I know many Senators will want to speak on this issue. I yield the floor.

Mr. LUGAR. Mr. President, I want to take just 1 minute to thank the staffs who have made this event possible. From my own staff: The chief of staff Keith Luse, Dave Johnson, Terry Nintemann, Andy Morton, Michael Knipe, Carol Dubard, Bob White, Danny Spellacy, Jeff Burnam, Marcia Asquith, and Bob Sturm; From Senator Harkin's staff, who worked with us so well: Mark Halverson and Stephanie Mercier; From Senator Roberts' staff: Mike Seyfert; From Senator Cochran's staff: Hunt Shipman; From Senator Helms' staff: George Holding and Brian Meyers; From Senator Coverdell's staff: Richard Gupton and Alex Albert; From Senator Kerrey's staff: Bev Paul; From Senator Leahy's staff: Ed Barron and Melody Burkins; From Senator Conrad's staff: Scott Carlson; From the Legislative Counsel's staff: Gary Endicott and Greg Kostka; And from the House Agriculture staffs, who worked for 3 weeks continuously with our Senate staff: Bill O'Conner, chief of that staff; Tom Sell; Vernie Hubert; and Chip Conley. I thank again the distinguished ranking member. I earlier mentioned especially Senator Roberts and Senator Kerrey as authors of an excellent crop insurance legislation bill, and Senator Craig who has offered titles IV and V. I thank the majority leader, Senator Lott, and minority leader, Senator Daschle, for expediting our having this opportunity. Finally, I thank all Senators for a decisive vote on what I believe is significant legislation for America's farmers.

Mr. LUGAR. I thank the Senator.

Mr. LUGAR. Yes.

Mr. LUGAR. We have been trying to accommodate our side. They were aware we might have another hour of debate, but in the event that the distinguished Senator from Iowa and the Senator from Minnesota are prepared to yield back all time, I would be prepared to do that.

Mr. LUGAR. Mr. President, I yield back the time yielded to me.

Mr. LUGAR. Mr. President, I submit a report of the committee of conference on the bill (H.R. 2559) to amend the Federal Crop Insurance Act to strengthen the safety net for agricultural producers by providing greater access to more affordable risk management tools and improved protection from production and income loss, to improve the efficiency and integrity of the Federal crop insurance programs and for other purposes and ask for its immediate consideration.

Mr. LUGAR

Mr. LUGAR. Mr. President, on behalf of our majority leader, Senator Lott, I ask unanimous consent that the Senate proceed to a period for morning business, with Senators permitted to speak for up to 10 minutes each.