Jeff Merkley

Mr. MERKLEY

Mr. MERKLEY. Mr. President, I rise today to discuss an issue that I and many of my colleagues are very excited about: crowdfunding, which allows startups and small businesses to harness the power of the Internet to pool investments from ordinary Americans intrigued by their ideas. These ideas can range from revolutionary new technologies to simple projects that can improve communities in need. If crowdfunding is going to take off, this new market needs to inspire confidence in both investors and small businesses. That is why in December of 2011, I introduced S. 1970 with Senators Michael Bennet and Mary Landrieu and in March of this year the bipartisan, compromise crowdfunding amendment with Senators Michael Bennet and Scott Brown. That amendment passed the Senate by a vote of 64 to 35 and was included in the JOBS Act, which passed the Senate and the House of Representatives and was signed into law by President Obama in April of this year. In putting this legislation together, I was guided by two goals: 1, enabling this market to work for startups and small businesses and 2, protecting ordinary investors from fraud and deception. Fortunately, in many cases, these goals are aligned. The long-term ability for companies to efficiently raise capital will depend on investors' confidence in the reliability of the marketplace. I believe that the legislation we produced sets the right framework for this marketplace to meet both goals. But, for success to be achieved, this framework must be filled in with smart, effective rules and consistent, conscientious oversight by the Securities and Exchange Commission, SEC, a professional and independent self-regulatory organization, and the State securities regulators. The SEC is currently in the early stages of the rulemaking process required under the law. I seek to offer these comments today to add to the creative thinking going into that process. I explore several ways in which the law is designed to provide a streamlined and simplified crowdfunding process, as well as provide critical investor protections. I will touch on funding portal regulation, national securities association membership, target amounts, disclosures, accountability, aggregate caps, advertising and promotion, the relationship of crowdfunding to other capital raising, the public review period, the role of State securities regulators, and on-going review and adjustment. The law provides two regulatory options for firms seeking to provide crowdfunding services. A crowdfunding company under the ``funding portal'' option benefits from streamlined regulatory treatment but must be a neutral platform towards investors. Alternatively, a firm can register as a broker-dealer, in which case it can, through its website or otherwise, provide a broader range of investment guidance to investors. These two options provide a solid foundation for a crowdfunding marketplace with a range of business models. Because both intermediary vehicles will be repeat players in the crowdfunding marketplace, the rules governing their activities are of paramount importance to the success of the marketplace. Registered broker-dealers are subject to a well-established set of regulations. The registered funding portal structure is, however, a new, streamlined approach. As such, attention should be given to how it can fulfill its promise of a streamlined regulatory approach while also providing the appropriate level of investor protection, as set forth in the law and otherwise. The CROWDFUND Act is designed so that funding portals will be subject to fewer regulatory requirements than broker-dealers because they will do fewer things than broker-dealers. Among other limits, the law prohibits funding portals from engaging in solicitation, making recommendations, and providing investment advice. Relative passivity and neutrality, especially with respect to the investing public, are touchstones of the funding portal streamlined treatment. The SEC will, of course, have to establish boundaries, and I encourage the Commission to consider several points: Provided that funding portals are not subject to financial incentives that would cause them to favor certain companies or otherwise create a conflict of interest, funding portals should be able to exclude prospective issuers from their platform, whether that exclusion is based on the size of the offering, the type of security being offered, the industry of the business, the subjective quality of the issuer, the amount that the issuer would charge for its securities, e.g., the pricing of shares based on an evaluation of the company's potential, or the interest rate on a debt security given a certain risk profile of the issuer as analyzed by the funding portal, or almost any other reason, including at the discretion of the platform. In short, a funding portal should not be forced, directly or indirectly, to conduct a crowdfunding offering of an issuer it does not have faith in or on terms it does not believe should be made available to its customers. Subject to such limits as the SEC determines necessary for the protection of investors and the crowdfunding issuers, funding portals should be able to provide, or make available through service providers, services to assist entrepreneurs utilizing crowdfunding, including, for example, providing basic standardized templates, models, and checklists. Enabling them to help small businesses construct simple, standard deal structures will facilitate quality, low-cost offerings. If necessary, streamlined oversight of these may be appropriate, for example, by the relevant national securities association. Funding portals should be able to highlight for investors, such as through searches, requested email alerts, or profile ``matches,'' issuers according to objective criteria for example, geographic, industry, trending, or not trending, amount an investor wants to pay for a security, or interest rate desired, or randomly. Funding portals should be able to provide relevant factual information from third parties. For example, in the context of the sale of debt securities, this could be information from credit bureaus regarding the creditworthiness of issuers and their backers. It is important to remember that nothing in the CROWDFUND Act prevents or limits a person independent of the funding portal from providing recommendations or investment advice to their clients. For example, Community Development Financial Institutions, CDFIs, with their mission-driven mandate and economic empowerment experience, may offer valuable insight for investors seeking to identify healthy, community-based investments. Some have argued that discretion-based curation, such as highlighting certain companies on a home page for all investors, is important to the success of crowdfunding. However, the activity also comes very close to the line of making recommendations or providing investment advice, which are not permitted owing to the reduced duties that funding portals have compared to broker-dealers. Some of the CROWDFUND Act's streamlining was precisely to enable small companies to successfully raise capital at modest cost, but some of those duties are also important investor protections. The SEC should carefully weigh these concerns and adopt practical, easy-to-manage solutions that facilitate successful crowdfunding for company, investor, and platform. For example, it should be carefully considered whether organizing of the presentation of companies on the homepage facilitates success, especially by less sophisticated users, and so should be permitted. Of course, the funding portal should not match specific investors with specific companies and must not be compensated in a way that would cause them to favor certain companies or otherwise create a conflict of interest. Indeed, some argue that discretion-based curation is essential to prevent fraudsters from gaming an objective system. On the other hand, some vigorously context this point and identify it as creating a serious risk for pump-and-dump schemes. One of the reasons I feel regulatory supervision of this space is so important--and fought for it so vigorously during the CROWDFUND Act debate--is because of the professional expertise regulators bring to addressing difficult technical issues. In short, I urge the SEC and the relevant national securities association to consider competing views like these carefully. It should be remembered that crowdfunding comes with a number of investor protections, including the aggregate cap, and so may provide some space for modest experimentation, especially when done in partnership with investor protection advocates and industry participants acting in good faith, and with adjustments made based on actual performance and measurable data. The SEC is and should feel fully empowered by the law to take actions to protect investors and this is essential, especially at the early stages, when reputational risk to the crowdfunding market is very high. At the same time, I encourage it to approach this marketplace with a spirit of smart, careful experimentation and regular review and adjustment. In addition, I encourage the SEC to move swiftly to address potential concerns about timing for the registration of potential funding portals so that they can be ready to go when crowdfunding goes live. The legislation requires firms offering crowdfunding services to join a national securities association registered with the SEC, also known as a self-regulatory organization, SRO. The vision of the SRO as a genuine regulatory entity owes much to the leadership of SEC Chairman William O. Douglas, the ``sheriff of Wall Street'' during the Great Depression, who believed the SEC had a duty to establish strong regulation in the public interest but that Wall Street itself was well positioned--and should be obligated--to participate in the maintenance of high standards of conduct. Accordingly, any such association must be strictly independent and thoroughly professional, with a strong mandate to operate in the highest forms of public interest and for the protection of investors. The legislation does not foreclose funding portals from developing their own association. After consulting with the SEC and the Financial Industry Regulatory Authority, FINRA, they may indeed decide such an association would better serve their goals of a professional, independent, high-quality SRO. Setting up an SRO is not easy, though, and it may also make practical sense for funding portals to tap into the architecture already present in FINRA. To facilitate that, I encourage FINRA to work with new funding portals to keep bureaucracy, paperwork, and fees to a minimum, and to ensure funding portals can meaningfully participate in FINRA governance. Moreover, I urge FINRA to act quickly and in close coordination with the SEC to address potential timing concerns that may exist with respect to the relationship between registration and membership of funding portals and the effective date of crowdfunding. Prospective funding portals should not be disadvantaged in their ability to compete in the initial stages of the crowdfunding marketplace. The law says companies can only access investor funds once they have raised an amount ``equal to or greater than'' their target amount. The goal of this provision is to ensure that disclosures provided are connected to the target amount--and any higher amount--while also enabling companies which attract more interest than they had expected to obtain the additional funds raised. For example, if an issuer sets its target amount at $50,000 and discloses that it needs the $50,000 for a set of ovens for a vegan bakery, if it only raises $35,000, an investor would have no way of knowing what the company would do with the money--and this is not permitted. However, if the issuer discloses it would buy a small oven if it raised $50,000 and a higher-capacity oven if it raised $70,000, then that would give investors confidence that funds raised and distributed would go to their disclosed use. In short, the disclosures should be tied to the target amounts being raised, and issuers should provide some level of disclosure for how they will use funds above some reasonable percentage beyond their original target. The law puts in place aggregate caps on an individual's crowdfunding investments in a given year. Without aggregate caps, someone could in theory max out a per-company investment in a single company and then repeat that bet ten, a hundred, or a thousand times, perhaps unintentionally wiping out their entire savings. The challenge is that crowdfunding is a new framework to provide small companies, including many start-ups, opportunities to raise capital. The risks that are present in this space are not amenable to ordinary means of mitigation through diversification. Angel and venture capital funds, whose mission is to invest in the start-up sector, tend to invest in perhaps one out of one hundred opportunities presented and assume that ninety-five percent of investments will fail entirely. Their profits commonly emerge out of only a handful of big winners. Even with the investor education mandated under the law, ordinary investors might not fully appreciate these risks. Aggregate caps can help address this problem. Because caps scale up as investors can bear greater risk, an important investor protection is the cap--$2000, to be adjusted for inflation--for persons of lower income. One way to ensure that the investor protection inherent in the scaled approach is meaningfully implemented might be to only require persons seeking to qualify for the higher investment amounts make showing regarding their income, but then make that showing slightly higher than simply ``checking a box.'' This approach could protect less sophisticated investors from opting into the higher limits accidentally or due to potentially misleading promptings from a less scrupulous intermediary, while retaining ease of use for the majority of participants utilizing the default amount of $2000. Some have expressed concern about how to implement the aggregate amounts across platforms. A data sharing regime is one way to do that, but the SEC might also consider whether to pair it with a presumption that ordinary investors that remain within an amount below the default aggregate, for example $500, on any one platform are also presumed compliant across other unaffiliated platforms. This streamlining may be particularly useful for those seeking to make small investments and for those that want to engage in community-based crowdfunding, including those serving the CDFI community. As the market develops, the SEC should carefully evaluate how these caps are working from perspectives of investors, issuers, and intermediaries. The bipartisan Senate approach to crowdfunding provides critical disclosures that should help investors make intelligent investment choices. These include core financial information, basics about the business of the issuer, information about major owners, and other key basics any investor needs to know before investing. Disclosures should be designed specifically for the crowdfunding market, enabling start- ups and small businesses to present basic, accurate information appropriate to the amount of money being put at risk by each investor and raised overall by the issuer. With respect to financial information, the law allows companies raising smaller amounts of money to provide financial information appropriate to the amount of capital being raised--but all companies must provide something. If, for example, an issuer wants to raise $90,000 to develop a prototype project but it is a new company without any previous revenue, that is fine--under the law, it just has to, for example, certify that the company has not yet filed tax returns and provide a CEO-certified set of financial statements displaying the appropriate zeroes. I want this process to work for all kinds of startups and be reasonably tailored to the amount of capital being raised. The law mandates strong disclosures about capital structure and risks of dilution. Crowdfunding is available for both equity and debt securities, but the more complex the security or capital structure is, the greater the need is for strong disclosure. The goal with the strong disclosure mandate in the law to push issuers towards easy-to- understand, investor-friendly approaches, while also permitting more complex approaches if the appropriate disclosures are made. It was envisioned that the SEC might even adopt safe harbors for simple, investor-friendly structures. It may wish to convene an advisory committee specifically designed to evaluate these issues, as well as also to seek input from the Office of the Investor Advocate. The legislation also provides for annual reports by issuers to investors. This should be a similarly streamlined approach that allows startups and small businesses to provide basic information to investors about business performance and future prospects, as well as other basic, relevant information that may be important for investor decision-making--e.g., related party transactions and conflicts of interest. We urge the SEC to consult with the advisory committee noted above, as well as market participants and investors to develop a properly tailored approach. Consumer testing may be a useful tool as well, and the SEC should not be shy about adjusting its approach based on how they work in the marketplace. When selling securities to the public, companies and the key players involved have a special obligation to provide truthful information. When they do not, the law properly holds them accountable. This is an essential civil right that has long been a critical tool ensuring U.S. markets are the deepest and most reliable capital markets in the world. Here too, the law seeks to adopt a fair, practical approach. The CROWDFUND Act sets forth a ``due diligence'' standard for accountability, which is essentially a ``do your homework'' standard. This is a standard that was reached after considerable bipartisan effort as well as consultation with legal experts, and I believe it is and can be workable and effective for this marketplace. The promise of crowdfunding is that centralized platforms and social media can allow the ``wisdom of the crowd'' to help direct capital to deserving start-ups and small businesses in a cost-effective, efficient manner that provides fair returns. Critical to the success of the venture is the reliability of the information and commentary presented. While the Internet can be a tremendous tool for transparency, that is not always the case. The CROWDFUND Act seeks to provide a reliable, transparent marketplace by centralizing information about the offering on a registered intermediary that maintains strong standards. Off-platform advertising is limited to pointing the public to the registered intermediary. Whether on or off the intermediary, persons paid or financially incentivized to promote--including officers, directors, and 20 percent shareholders--must clearly disclose themselves each and every time they engage in a promotional activity. Furthermore, the limitation on off-platform advertising is intended to prohibit issuers--including officers, directors, and 20 percent shareholders--from promoting or paying promoters to express opinions outside the platform that would go beyond pointing the public to the funding portal. Such paid testimonials and manufactured excitement would represent a prohibited form of off-site advertising if those disclosures were not present. Whether on or off the platform, paid advertising must clearly be disclosed as such. In short, the investor deserves a transparent medium for making healthy decisions. These limits will help to ensure that ordinary investors can rely on the information they encounter online and accurately gauge a company's level of public support, while also helping to ensure that honest startups can compete for investors without hiring armies of paid promoters or engaging in manipulative tactics. Another important issue the SEC will need to address is the relationship of crowdfunding to other capital raisings, and in particular to Regulation D offerings. This is a difficult issue, especially as Regulation D's restrictions on general solicitation have been loosened by Title II of the JOBS Act. I believe that careful study and attention needs to be paid to how the two should interact in various contexts, including with respect to integration. Although crowdfunding is a public offering, it is unlike other public offerings, and, absent evidence of problems, most likely should be able to proceed parallel to a Regulation D private offering, provided the appropriate protections are put in place--and the SEC adjusts them as necessary based on their performance in the real world. It is critical, though, that the now-looser solicitation rules for a post-JOBS Act Regulation D offering not be permitted to undermine the centralized transparency protections of crowdfunding's restrictions on advertising. One solution could be to provide a safeharbor from integration rules only where the Regulation D offering followed the pre-JOBS Act approach on Regulation D. Naturally, the Regulation D offering and the crowdfunding offering would have to provide the same information to investors. With respect to subsequent offerings, crowdfunding should be flexible enough to fit into the start-up ecosystem, and the SEC should carefully investigate this question. However, crowdfunding investors will likely face a higher risk of unfair dilution than ordinary angel investors. The disclosures mandated in the CROWDFUND Act should be helpful. But, should issuers seek to engage in private offerings within only a short period after a crowdfunding, which would normally not be permitted under Regulation D, the SEC should consider whether it can be possible for these offerings can proceed if they are especially protective of investors along the lines of how an angel investor might protect himself or herself from unfair dilution or other problems arising from near-term subsequent offerings. This may require the SEC to adopt approaches more substantive than is normally the case. For example, dilution might only be permitted to the same or lesser extent than the directors, officers, and major shareholders, or the crowd would have to be bought out at a profit disclosed in the original offering. Again, for the success of the crowdfunding marketplace, the SEC should ensure that crowdfunding fits into the start-up ecosystem but should do so in a way that ensures crowdfunding investors are treated fairly. Similar issues may arise with respect to other corporate governance matters and relationships with other aspects of securities law, such as managing the large number of investors in a crowdfunded company. In these instances, the SEC should look to find ways to ensure that investors are properly protected--in many instances, by ensuring that they are aligned with the interests of the directors, officers, and major shareholders--while also being practical and ensuring that crowdfunding can function within the start-up ecosystem. Two important investor protections in the CROWDFUND Act are the public review period and withdrawl rights. They are designed to allow investors the chance to carefully consider offerings, permitting the ``wisdom of the crowd'' to develop, rather than perhaps just the ``excitement of the crowd.'' The public review period commences upon the date 21 days prior to when the securities are ``sold'' to any investor. This means that when the offering is made available to the public--``potential investors''-- to consider investing: i.e., it is put up on the platform which is the point at which information is made available to regulators and is also the point when a notice filing is made with the relevant state securities regulator the public has 21 days to review it. At the end of that, the offering can close and the securities can be ``sold'' to investors. The 21-day period does not reset for each and every potential investor who might look at the offering--which is why the language specifically says ``potential investors.'' For example, when a potential investor considers investing on the seventeenth day the offering has been up on the platform, the offering can still close four days later whether that person invests or not. The SEC must also provide appropriate ways for investors to cancel commitments to invest. The law envisions an important role for State securities regulators. The State securities regulators are the ``50 cops on the beat'' that have time and again proven crucial for policing smaller offerings, such as those envisioned under crowdfunding. One way the law has been designed to empower them is through the 21- day public review period for all offerings. When combined with the notice filings to the State securities regulator of the principal place of business of the issuers--and States where more than 50 percent of investors are located--and the anti-fraud authority preserved for them, the 21-day public review period is designed to provide the State securities regulators with practical ability to assist in policing the marketplace. In addition, State securities regulators have examination and enforcement power for funding portals headquartered in their states. Although they will be limited to enforcing federal rules, this oversight authority is an important tool, especially for smaller crowdfunding portals that may emerge in particular states. Of course, oversight should be coordinated with the SEC and the relevant national securities association to the greatest extent possible. I also encourage the SEC and the relevant national securities association to work closely with state regulators in crafting the rules and learning from their on-the-ground experience. We have also heard recently from the CDFI community with ideas about how crowdfunding can support their work bringing growth and job creation to underserved communities. CDFIs are lenders and partners to businesses in underserved communities. They tend to obtain low rates of return on mission-driven investments, and frequently encounter financing gaps that might be filled through mission-driven crowdfunding--much the way such investing occurs in certain segments of the non-security-based crowdfunding universe today. I believe that the overall structure of our bill offers CDFI's powerful tools to support their job-creation work, while protecting ordinary investors from undue risk of fraud and loss. In addition, some in the CDFI community have suggested to us that because of the types of businesses CDFI's work with, the types of low returns that might be derived, and the particular financing gaps that might be filled through crowdfunding, that mission-driven, CDFI-supported crowdfunding may yield better results for investors and positive job creation for communities if the rules reflect the particular work they do. Suggestions include ensuring crowdfunding can fill the financing gap for projects supported by federally-regulated, 501(c)3 CDFIs, a clarification to ensure that CDFIs and issuers can make sure investors understand the mission and charitable aspects of investments, and fast treatment from the SEC and FINRA related to registration and membership. The SEC should be receptive to concepts CDFIs may bring that could aid in accomplishing the job-creating goals of the legislation, while protecting investors. It should consult with CDFI's and the CDFI Fund at the Treasury Department on how best to maximize the social and jobs potential for investing through crowdfunding and CDFI's. Although it was not included in the final legislation for procedural reasons, I would encourage the SEC and the relevant national securities association to engage in regular reviews and reports regarding developments in the crowdfunding marketplace, including thorough coordination and consultation with State securities regulators. Should problems arise, these authorities should act quickly, including use of their full rulemaking and enforcement authorities. Crowdfunding holds great potential, but it is also experimental and presents risks. For it to succeed long-term, it will require careful oversight, especially during the early stages. I also urge the SEC and the relevant national securities association to speed the publication of final rules. Crowdfunding cannot get started until rules fill out the framework to make the law effective. I believe the features outlined above are essential if crowdfunding is going to succeed. Success should be judged both on returns to and satisfaction of investors, and the growth and development of new and exciting companies. I am excited about the potential of this new market, but also cognizant of its risks. It won't be without its hiccups in the short run, but done properly, I believe this framework has the potential over the long run to help millions of new startups get the funding they need to grow their businesses and create jobs, and provide investors with opportunities for meaningful returns and community involvement. I wish to extend my heartfelt thanks to the hard work and cooperation of my fellow senators, especially Michael Bennet, Mary Landrieu, and Scott Brown. I would also like to acknowledge the hard work of our staffs, who did so much to get the original legislative idea into law in strong, responsible form.

Mr. MERKLEY

Mr. MERKLEY. Mr. President, I ask unanimous consent that Steven Kirby, a member of my staff who is serving as an intern this summer, be granted the privilege of the floor for the balance of today.

Mr. MERKLEY

Mr. MERKLEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. MERKLEY. Mr. President, I come to the floor today to address several issues. First, I would like to talk a little bit about the DISCLOSE Act. Earlier this week we had two votes on whether to end debate on whether to debate the DISCLOSE Act. The DISCLOSE Act is a very simple concept, and it is that folks who make very large donations to the political system disclose who they are so the citizens of America can know where that money is coming from. Is it coming from this particular sector or that particular sector? Is the group that is posing as Blue Skies for a Healthier America actually working to create dirty skies for a less healthy America? Is the group that says it is for clean streams actually a group that is trying to weaken the pollution control standards and put more pollution into the streams? Citizens have a right to know where the money is coming from in a public discourse, especially very large contributions, because right now what we have are folks who are putting in millions of dollars. I ask you, how many Americans can put $1 million into a campaign? In the world I live in, $100 is a lot of money. People can't connect that there are folks out there who are saying they are going to put in $1 million, and they certainly can't connect with the folks out there who are saying: I am going to put $100 million in. I think the Koch brothers have been bragging across this country about how they are going to buy the elections so they can control where this country heads. That is perhaps the most ill-conceived notion there is, but at least they are willing to stand in public and say what their plan is. At least they are willing to say: We are not going to hide and do it secretly. They are going to tell us they are putting in their money. Now, where they put their money and whom that money is used to attack we may not know, so even in their case we need the DISCLOSE Act. It is confounding that so many Members of this body argued for the fact that disclosure is the disinfectant, so many Members of this body argued that citizens have a right to know, so many Members of this body said this is fundamental to fair debate in a democracy, and then when the time came to decide whether this would happen, they said: Oops. I am benefiting from this a lot. I guess I will set that principle aside and not argue for disclosure after all. So we had two votes this week in which the outcome did not reach a supermajority because we had individuals in this body who objected to a simple majority vote to get to the bill. So we had to have a supermajority under the arcane rules of this body, and we didn't get that supermajority because we didn't have bipartisan support for debating this issue. I must say to my colleagues who voted against it, if they believe in the debate in this society, they should at least say, yes, let's debate the bill. Maybe they do not like the bill at the end, maybe they want to filibuster the bill at the end, but at least we should be discussing it. It is such a huge factor in this Nation. There was a time not so long ago when we had the muckraker era, and there were a series of articles that were written about how Senators in this body--I believe it was 20 articles over 20 months--were owned by different companies around this land. Those articles helped the American public understand what was going on in this body, in this very Chamber. The result was a constitutional amendment, a constitutional amendment that shifted from indirect election of Senators to direct election, to try to free the system in favor of ``We the people.'' When we came to this country, when our ancestors came to this country from overseas, they came from a system where wealth and power made all the decisions. They did not have a voice. They came to America, and they said we want to do it differently. We want to have a voice. The first three words of the Constitution captured that, ``We the people''--not we the rich and powerful who write the rules but ``We the people'' will decide how we are governed. The Citizens United decision of the Supreme Court, which allows unlimited secret oceans of money being spent with no identification, goes completely against ``We the people.'' It is going to be up to this Chamber to wrestle with this idea. That is why we should be on the DISCLOSE Act right now. We should be debating the impact. We should be debating the history of Montana. One hundred years ago, folks in Montana said our State is ruled by the copper kings and we are tired of we the rich and powerful setting rules and we are going to take it back because we believe in ``We the people,'' we believe in our Constitution. So they changed the rules in their State and our supreme court just a couple weeks ago gave them a 100th anniversary present, which was to strike down ``We the people'' in Montana, with no debate. The supreme court, five justices, said we don't want to have any information about how Montana politics were corrupted by vast pools of money. We don't want to know that history. We do not want to know how the people of that State, exercising their power as a State, reclaimed their democracy for the ordinary person. They put their hands over their eyes, they put their hands over their ears, and they said: We summarily decide against this case, against Montana, taking no evidence. That is a dark moment for our supreme court. It follows on from the dramatically terrible decision of Citizens United. We must debate those issues on the floor of this Senate. There are folks here who like to say in the tradition that the Senate is the world's greatest deliberative body. Then let's deliberate. Let's not vote against even having a conversation about some of the most monumental issues of our age. This is a conversation that must continue. We must wrestle with how to honor the very premise at the heart of our Constitution, at the heart of our Republic, and not have ``We the people'' crossed off, out of the Constitution. I turn to another issue; that is, the bill that is on the floor right now, the Bring Jobs Home Act. We have a manufacturing sector in crisis in America. Since the year 2000, America has lost about 5 million manufacturing jobs, according to the Bureau of Labor Statistics, and more than 42,000 factories. Today, America has only about the same number of workers employed in manufacturing as we did in 1941, more than 70 years ago. My home State of Oregon has been hit particularly hard. This trend, the loss of manufacturing jobs, strikes at the heart of the middle class because these are often living-wage jobs. These are full-time jobs. These are jobs with benefits. They provide a foundation for our families to succeed, a foundation for families to raise their children so the children will have opportunity and promise. Put simply, if we do not make products in America, we will not have the middle class in America. We can see the middle class shrinking year by year, right now, as we lose our manufacturing base. These jobs are not disappearing into thin air. Yes, some factories shut down because of the consolidation and some jobs are limited due to automation streamlining. But in most cases, those jobs are still there; they are just not in America, not in Oregon. Indeed, those jobs have gone overseas. China has a four-tier industrial policy that says we are going to put people to work here even if we violate the WTO agreement we have with the United States of America. That is a huge problem that we should, in a bipartisan effort, fully address. Today, I would like share a couple letters from people who are in the frontline of the disappearance of manufacturing jobs. Virginia, from the city of Hillsboro in my State, wrote: In February 2010, my department at my company was advised we would be laid off after transitioning our job duties to a replacement staff in India. It felt like quite a blow. I had been there the shortest time at 10 years, the longest person there was 35 years. Half of our department was laid off within a few months, the rest of us sweated every Friday wondering when we would receive our lay off dates. We were finally all let go on March 11th, 2011. Four months after my layoff, my husband was advised the rest of his department is being laid off after their job duties were transitioned to an off-shore site. My daughter, myself, and my husband are all looking for work. We have four generations living in our home--I have no idea what will happen to all of us if none of us can find work. My husband served his time in the Army and he and I have always worked full-time, steady jobs, it feels like we're being punished for spending our lives working to take care of our family and keep a roof over our heads. Americans need jobs! We want to work and need to work! We are not lazy, instead we are innovators and always have been! We need to regain our pride in our country, help each other and quit focusing on greed. My mother reminded me that just 25 short years ago, it would have been considered un-American to take a job from an American and send it to a person in another country. People would stop doing business with any company who did choose to do so. I'm mentioning this to state there's been a definite change of the way businesses are run, which isn't all bad. Technology and business processes change. The problem is, the bottom line has become more important than the health of America and its citizens and that, I believe, is the cause of our current woes. I love my country and want it back!!! I'll admit I'm tired of giving our money, resources, and jobs to other countries while American's lose their jobs, their homes, and their security. Please help. Duwayne writes from St. Helens: I worked at an Oregon high-tech company for 15 years, until I was laid off during the middle of the Bush depression. When I joined, the company had over 18,000 employees--most of them in Oregon. These were high-paid professionals and assembly workers with family-wage jobs. When I was laid off the company employed only about 4,500 people--still mostly in the US, and mostly in Oregon. But today the company has moved virtually all its manufacturing to China, and their software engineering to India. Even though the company payroll is growing, the number of employees in the US continues to shrink. Almost all the new jobs are in foreign countries. You want to know where all the jobs went? I'll tell you. They went to Mexico and China. That's because our government policies are aimed at helping corporations, and have little to no regard for American workers. Companies like these need to be harshly penalized for moving their jobs overseas--but instead they are rewarded, and American workers pay the price. The policies we are talking about on the floor are all about the issues Virginia and Duwayne are talking about. The bill ends rewards for outsourcing jobs overseas. Currently, a company can deduct the moving expenses of offshoring and actually save money on their tax that way. That would end. If a company wants to move a factory overseas, we cannot stop them, but we should not give them tax breaks to do so. I would love to be in a forum of hundreds of people and I would ask this question: Do any of you love the idea that under the Bush administration, we started subsidizing the shipment of jobs overseas? I can tell you virtually no one would say they love that policy because the jobs in America mean so much to our families. The second thing this bill does is it creates new tax credits to reward businesses that bring jobs home. If a company wants to take a production line from overseas and move it back to the United States, let's help them pay for the moving expenses. This spring I went on a tour called ``Made In Oregon,'' a tour of manufacturing in my home State. It was spectacular to see how many cool things were being made. In Bend, OR, AE Solar Energy is building inverters for solar energy on roofs and putting that power into the electric grid. Bike Friday in Eugene is doing specialty, made-to-order, the best folding bikes. Ordering over the Internet, they are shipping their best folding bikes all over our globe. Kinro West RV Windows in Pendleton and Pendleton Woolen Mills had two very different types of manufacturing: Woolen mills, they go back a century, and then an RV window manufacturer that is playing a key role in our recreational business and providing these windows to manufacturers throughout the RV world, the recreational vehicle world. Then there is Oregon Iron Works. Oregon Iron Works is building trolley cars. We are building streetcars in America again so cities putting in streetcars can buy an American-made product. They are building a prototype of a wave buoy that will generate energy as it bobs up and down in the waves off the Oregon coast. That is going to go down the river and be installed later this year, and perhaps it will lead the way for a new source of clean, renewable energy. Vigor Industrial is building barges. Greenbrier is building railroad cars. These are the jobs, the companies that are the heart of living-wage jobs and making products in America. We must do all we can to support them. Let's end the subsidies for shipping jobs overseas. Let's instead provide incentives and support for moving jobs back to the United States, to the benefit of our economy and the benefit of our families. I strongly urge my colleagues to support this bill and help bring jobs back to Oregon and back to America.

Mr. MERKLEY

Mr. MERKLEY. Madam President, perhaps the most important three words in our constitution are ``We the people.'' But the whole notion of ``We the people'' is threatened by oceans of dark secret cash, oceans of cash used as a threat on the front end and as an election hammer on the back end. It is simply destructive to our democracy. Tonight is the night for some profiles in courage to stand for the American system, for democracy, and for the people.

Mr. MERKLEY. I ask the Senator, when the company gets involved in that manner or a billionaire gets involved in that manner and their motive is largely to advance their financial interests, do they use that to fund ads that are an accurate representation of the facts?

Mr. MERKLEY. To the Senator's point about the distinction between a corporate forum and an individual justice, John Paul Stevens addressed this in his dissent. He said: In the context of elections to public office, the distinction between corporate and human speakers is significant. Although they make enormous contributions to our society, corporations are not actually members of it. They cannot vote or run for office because they may be managed or controlled by nonresidents. Their interests may conflict in fundamental respects with the interests of eligible voters. The financial research, legal structure, and instrumental orientation of corporations raise legitimate concerns about their role in the electoral process. Our lawmakers have a compelling constitutional basis, if not also a democratic duty, to take measures designed to guard against potentially deleterious effects of corporate spending in local and national races. So here is the esteemed Justice saying not only--not only is there a compelling constitutional basis but probably a democratic duty. And what is he talking about? He is talking about ``We the People,'' the first three words of our Constitution--the vision that we have a democracy, that we have a representative form of government, we have a republic, and that it is centered around, as President Lincoln so aptly described, ``a government of the people, by the people, and for the people.'' We have a duty to protect that. Montana had a duty to protect that 100 years ago. Earlier this evening, Senator Tester was here on the floor, and he was speaking about the 100-year present the Supreme Court delivered. Montana said 100 years ago that companies, through a variety of means, have taken over our State, that it is no longer a government by the people, and so we are going to take it back. We are going to exclude corporations from the electoral process. And they have done that for 100 years with the direct purpose of people, not companies, controlling their State. That is the democratic duty Justice John Paul Stevens was speaking to. So the people of Montana were very upset about Citizens United. Some folks said: Well, Citizens United is a case. Surely Montana can't continue to keep companies or corporations out of their electoral process, so we will challenge that. And that challenge went all the way to the Supreme Court, and the Supreme Court basically issued a summary judgment--a judgment in which they said: We are not going to look at the facts from Montana. We are not going to look at the 100-year history of why the people of Montana chose to fight for ``We the People.'' We are not going to consider any information at all. We are just going to summarily decide that this case will not stand, and we are going to throw out the Montana law. Well, that was some gift to the people of Montana who are fighting for ``We the People.'' And this is why I thought I might summarize Citizens United in the following way: In Citizens United, five Justices of the Supreme Court have taken the first three words of the Constitution and they have X'd out ``people'' and have written in ``powerful,'' so it is now ``We the Powerful.'' That is what Citizens United is all about. Now, I am deeply disturbed that our Supreme Court made a finding of fact in Citizens United that unlimited secret money--not just dark pools of unregulated cash but vast oceans of unregulated, undisclosed secret money--can be utilized in the electoral process without the people having any right to know. That is what the Supreme Court said is just fine, and that is what attacks ``We the People'' in favor of ``We the Powerful.'' Now, not a single member of the Supreme Court has run for office, to my knowledge. Not a single member of the Supreme Court has served in elected office, to my knowledge. I am happy to stand corrected if any of my colleagues know otherwise. So perhaps they didn't have the personal experience to understand the types of things my colleague from Rhode Island was speaking about, that folks who can wield huge sums in elections not only can affect the outcome of elections, but they can use it as a lever to corrupt the very process we are in tonight--the debate and voting on bills. So one would think, at a minimum, the nine Justices, knowing they may not have the personal experience but who need to make a finding in order to proceed, would want to hear all the evidence. But instead what the five Justices did in summarily dismissing the case from Montana was to cover their ears, cover their eyes, and say that facts don't matter, corruption doesn't matter, the corrosive influence, the vast oceans of secret money--none of it matters. And that is simply wrong. I must say, when I think about what we are doing here on this floor, fighting to have a Senate and a House that are all about what President Lincoln described as ``of the people, by the people, and for the people,'' and across the street we have a Supreme Court determined to tear down the fundamental heart of our Constitution, it is completely wrong, and yet they won't even listen to the facts in order to understand the issue they are addressing. It is so important for Americans across this Nation on the right and on the left to understand that this is an attack on their power as citizens to chart the course of their community, their State, and our Nation. I think I will conclude my remarks. I have a lot of facts and history here that I thought about presenting tonight, but I think the discussion we have been having is really at the heart of this; that is, as we wrestle with the fundamental challenges facing our Nation--a shrinking middle class because we are losing manufacturing jobs--and we need to understand why that is happening and how we can create living- wage jobs in this Nation, where health care is becoming more and more expensive and an enormous challenge for families, where for the first time in the history of our country we are becoming the first group of parents whose children are getting less education than we got--as parents, we are seeing our children get less education--those problems, as we tackle them, are not served by vast oceans of secret money weighing in on elections because that money does not come from the point of view of fighting for the health and welfare of the citizens of our Nation. Our forefathers and foremothers talked about, in order to create a more perfect union and enable citizens to pursue happiness and provide for the general defense, and none of these fundamental things were the point or the goal of these entities with vast pools of money. That in itself shows how corrosive and corrupting that money is. So I say to my colleagues across the aisle, each of us came here and we swore an oath to this constitution. And at the heart of this Constitution is not ``We the Powerful.'' At the heart of our Constitution is ``We the People.'' So before we vote a second time on whether to proceed to this bill, I ask my colleagues to examine their hearts and their responsibility to their citizens, their responsibility to the Constitution, their responsibility to ``We the People,'' and to find that we do have a responsibility to debate this bill in this Chamber, and for that reason to vote yes when we again vote on whether to proceed. I thank the Chair.

Mr. MERKLEY. Even the corporation itself doesn't know what it is doing; that is, the corporation might have 10,000 shareholders and they are the cooperation. The corporation is a legal fiction, as our colleague says, that allows a board of directors to make decisions on behalf of those thousands of people who own stock. So they are not spending their own money, they are spending money that belongs to the stockholders. But those stockholders have no idea how that money is being spent under Citizens United. So it is not just corporations spending money that is secret from the rest of us, it is the officers spending it secretly from the corporation itself, and that is the stockholders.

Mr. MERKLEY. Just a moment ago our colleague from Louisiana was noting that we have important work to do to shore up the American family. Families have lost--the number is, on average, $100,000 of equity in their house per family. That is a phenomenal amount. If we look at the equity held by our Hispanic families, our African-American families, they have been virtually wiped out by a system of deregulation, predatory mortgage, leading to a housing bubble. We have a desperate need for jobs. I think what I hear the Senator saying is that in the face of these needs, allowing unlimited spending by the most powerful interests in the country to pursue the interest of the most powerful is not going to help us create those living-wage jobs Americans so desperately need. It is not going to help us fund those health care clinics that are the front door for folks who do not have the big salaries and the big benefit packages. It is not going to help put food on the table for those out of work and hungry, and in that sense this process of us working by and for the people is being corrupted by these vast pools of secret spending?

Mr. MERKLEY. To my colleague from Rhode Island, I ask this: How is it possible for 5 members of the Supreme Court to look at this issue of unlimited, secret spending and knowing that can be used to intimidate and corrupt the electoral process and corrupt the debate by the threat of future activities, future secret activities, secret negative, lying activity, and not see the corruptive or corrosive effect on the American democracy?

Mr. MERKLEY. It was 85 percent deceptive and 15 percent accurate. To the other point, this is taking one of the contests between Gingrich and Romney. You can see the red bar, the negative ads, benefiting Romney for attacks on Gingrich. Positive ads for Romney was zero. Over here, Gingrich didn't have very much super PAC money in this race and so it kind of was wiped out completely. So what we see is not just a flood of money on behalf of the powerful special interests, but it is being spent to attack people--the negative side--and through lying. Can this in any possible way be healthy for a democracy?

Mr. MERKLEY. While the Senator is on that topic, I have the Annenberg chart here, I believe.

Mr. MERKLEY. I was thinking back to a book that a friend gave me to read. It was called ``Treason of the Senate.'' When I first heard him speak about it over the phone, I think he was saying he had a book about the reason of the Senate. It turned out to be not the reason, but the treason. It was a series of articles, I believe about 20, that were written during the muckraker period. It was each month taking a different Senator, how they had basically been put in office through a particular company in a different State-- different powerful interest. This set of articles apparently was one of the things that led to a constitutional amendment because it helped the public mobilize against the indirect election of Senators and pushed for the direct election. So here was the public saying: You know, we the people have this system, and it has been violated. So we have to try to change the system so we can reclaim it. I think that is maybe some evidence of the role of excessive power and money and its corrupting influence or its corrosive influence on the electoral process.

Mr. MERKLEY. I think back to the period when our forefathers and foremothers came here and said: We are going to set up a new set of colonies, a new set of rules. One of the things at the very heart of that was the notion that we the people, we the settlers, we are colonists. We are going to decide how things run rather than having kings and queens or other very strong folks handing down the laws from now on. That was a powerful concept that got integrated into the first three words of our Constitution, ``We the people.'' Does the Senator have any sense whether this flood of secret, this massive flood of secret money coming from powerful individuals, billionaires and companies, does damage to this concept of ``we the people''?

Mr. MERKLEY. Mr. President, I thank my colleague from Louisiana for her remarks. Would the Senator be able to engage in a question or two?

Mr. MERKLEY

Mr. MERKLEY. Mr. President, today I wish to commemorate the one hundred and twenty fifth anniversary of the Bridal Veil Post Office. Since July 7th, 1887, the Bridal Veil Post Office has delivered letters and packages to the community in a timely and efficient manner. The post office, all 100 square feet of it, manages to keep up with the thousands of brides that flood to this town every year, seeking the coveted Bridal Veil postmark on their wedding invitations. While the town of Bridal Veil may have decreased in size since its days as a bustling mill-town, the dedication and service of this post office has certainly remained. The Bridal Veil Post Office also serves as a testament to a time in Oregon's past that is too often forgotten; a time that the Bridal Veil Historical Preservation Society and its supporters have fought to preserve. Even in the face of post office closures and modernizations, this post office has endured. The efforts of those that have fought to maintain this structure, especially the Historical Preservation Society, serve as a testament to its importance not only to this community, but to the state of Oregon as well. To President and Postmaster Geri Canzler, the citizens of Bridal Veil, and all those that have fought to preserve this historic site: thank you and congratulations on 125 years and counting.

Mr. MERKLEY

Mr. MERKLEY. Madam President, this bill is about holding USDA accountable. Organic farmers, when they get crop insurance, pay a 5- percent premium upfront. The whole concept was that on the back end they would be compensated at the value of their organic crop should they need to utilize their insurance. However, to establish the price of the organic crop, USDA has to do a study. We instructed them to do this study 4 years ago, and they have been dragging their feet. They have done four crops out of the many dozens. Our organic farmers are left in the most untenable position of paying the premiums upfront but not getting the fair organic prices on the back end. This amendment says to get the studies done, which you were told to do 4 years ago, so the equation is fair to our farmers. I am pleased that Senator Olympia Snowe is a cosponsor. I yield the floor and reserve the remainder of my time.

Mr. MERKLEY. Madam President, I call up my amendment No. 2382.

Mr. MERKLEY

Mr. MERKLEY. Mr. President, today I wish to commemorate the 100-year anniversary of the founding of the Royal Rosarians. The Royal Rosarians serve as Portland's official greeters and ambassadors by charter from the mayor's office. They also serve as ambassadors of goodwill for the Portland Rose Festival. For the last century, the Royal Rosarians have represented the city of Portland at events around the world. They have planted roses in Buckingham Palace and knighted mayors of major international cities. Founded by Portland business and civic leaders, their official dress is white suits and straw hats, same as it was 100 years ago. To Prime Minister Robert H. Hungerford and all Rosarians, past and present, thank you for your service to the city of Portland. You continue a proud tradition.

Mr. MERKLEY

Mr. MERKLEY. Madam President, I ask for the yeas and nays.

Mr. MERKLEY

Mr. MERKLEY. I thank my colleague from Rhode Island very much for championing this bill and for what he has done helping folks to understand this issue. I will make a few comments on this issue. My friend from Vermont is standing by and, I think, wants to make some remarks as well. I wanted to have the key words we are talking about put up before us. This is a picture of the Constitution, or at least the top of the front page, if you will. I was always struck that our Founders saw fit to start this document that lays out the framework for our Nation, the framework for our system of government, with three simple words, ``we the people.'' They got to it right from the very beginning. They did not put in three paragraphs of polite this and that and then get to the heart of it. They started with the heart: ``We the people.'' They did not put it in small print, they put it in super-sized print. We can see it is written in a font that is probably 10 times the size of the rest of the Constitution. They deliberately said this is the premise on which our Nation will operate. This is the foundation on which we stand. These words are not ``we the powerful.'' There is a huge distinction between ``we the people'' and ``we the powerful.'' But the Supreme Court, in Citizens United, attacked the very heart of our Constitution--by saying the most powerful companies with vast sums of money can flood our political system, can buy up the airwaves, and completely dominate the conversation. Free speech wasn't about one side buying up the airwaves. Airwaves didn't exist then. It wasn't about one side buying up the airwaves. It was about all ideas being able to compete in the marketplace of ideas so citizens could hear the pros and cons and decide who they wished to elect and how they wished to vote based on their understanding of what would work best for ``we the people.'' The Supreme Court did not benefit from seeing the Republican primaries of this year in operation. They didn't see how a super PAC would sweep into a State, buy up the airwaves, dominate the conversation, and determine the outcome. No, they had some other vision. My colleague has referred to the fact that none of the members of the Supreme Court had the political experience to understand the impact of this flood of money. You may be thinking to yourself: Well, how much money can we be talking about? Well, money beyond an amount that a working man or woman could ever envision. If it were in dollar bills and stacked in a room in your house, it would fill the room in your house, plus. All of those dollar bills would not fit into a room. We are talking about such an enormous amount of money that it completely controls the sound in the airwaves. Let me give you an example. In 2008, if one of the rather well-off companies in America--I will use one as an example. ExxonMobil made a lot of money that year. If they had spent just $3 out of $100 of their net profits on the Presidential race, they would have spent as much as the rest of America put together. That is the type of flood of money we are talking about washing across the cities and the countryside of America, buying up the newspapers, buying up the airwaves, and dominating the debate. That is not a competition of ideas envisioned in our Constitution. That is the power. That is not ``we the people.'' It is my hope that the members of the Supreme Court will stand back and realize their findings of fact were wrong, and their findings of fact that there was no corruption from this flood of money were wrong, their argument that they didn't attack the heart of the Constitution was wrong, the fact that they didn't consider the precensorship this type of flood of money creates was in error, and that they will change their decision. But we can't be sure this activist rightwing Court will consider the facts and reach a finding consistent with the very heart of the Constitution. We can't be sure of that. We have to do what we can in this Chamber, and that is the DISCLOSE Act, the DISCLOSE Act that at least says at a minimum this huge flood of money will be identified by the donor, and it will be identified promptly so citizens will be able to find out where it came from; also that the advertisements purchased by this money will have disclaimers that will say who the major contributors are so the citizens can see it in real time, so when that group says they are the group for America's green forests and blue skies, and it is really by a very powerful group against blue skies and green forests, we can find out who it is. That is the heart of this. Citizens United is a dagger poised at the heart of the American Constitution. We must reverse it, and we must use every tool at our disposal to make that happen. I encourage citizens to summon their full instincts about what they value in our democracy and make their voices heard. Let's get this DISCLOSE Act passed and let's go further to reverse Citizens United. Thank you very much. I yield the floor to my colleague.

Mr. MERKLEY. Most of our campaigns for the Senate involve millions of dollars--some are $2 million, some are $20 million, some more. There are super PACs that have that much money and can bring that much money to bear in a single race. Did the Supreme Court wrestle with the type of intimidation, that precensorship, the precensorship impact on this body when somebody thinks about what should I say? Do I want to offend someone who has, not just $1 million but millions and millions of dollars to bring to bear? Did they wrestle with the impact on corrupting the debate and dialog and decisionmaking of this body?

Mr. MERKLEY. So Citizens United goes right against the very heart of our Constitution. How is it possible that the Supreme Court found, in this 5-to-4 decision, that this has no corrupting impact on our electoral process?

Mr. MERKLEY. So I think if any three words would summarize the heart of our Constitution, it would be those three words. It would be ``we the people.'' Yet we have a Supreme Court decision, Citizens United, that essentially unleashes a flood of special interest money. Is that fundamentally in conflict with the notion of ``we the people''?

Mr. MERKLEY. Mr. President, I was very engaged by the comments Senator Whitehouse was making a short time ago. I was very struck, as I have been all along, by the substantial challenge posed by Citizens United. My colleague was speaking to the impact on our constitutional system. When I think about this, I often think about those first three words of our Constitution, ``we the people.'' Is it the Senator's sense that this phrase, ``we the people,'' that starts out the Constitution is more than simple window dressing? Does it go to the heart of who and what we are as a society, as a nation?