Don Nickles

Mr. NICKLES

Mr. NICKLES. Mr. President, I ask unanimous consent, notwithstanding rule XXII, that immediately following the 12:15 vote, Senator Dodd be recognized to speak relative to the State Department authorization for up to 15 minutes. I further ask unanimous consent that following his remarks the Senate stand in recess until 2:15 for the policy conferences. I also ask unanimous consent that at 2:15 today there be 5 minutes equally divided for debate on the Feingold amendment, and following that debate, the Senate proceed to a vote on the Feingold amendment, No. 692. I ask unanimous consent that following that vote, Senator Helms be recognized in order to offer the managers' amendment and it be considered and agreed to. Finally, I ask unanimous consent that there be 5 minutes equally divided between the chairman and the ranking member for closing remarks, the bill be read a third time, the Senate proceed to vote on passage of the bill, with no intervening action or debate; further, that Senator Harkin be recognized after the vote to speak for 20 minutes regarding the State Department reauthorization bill.

Mr. NICKLES. Mr. President, I ask unanimous consent to speak on leader time.

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) is necessarily absent.

Mr. NICKLES

Mr. NICKLES. Mr. President, I urge my colleagues to vote against this bill. I compliment the sponsors of it, Senator Byrd and Senator Domenici. They are very persistent. I expect they will be successful today, but I hope that this bill doesn't pass either today in the Senate or in the conference. I urge our colleagues to vote against it. The reason is because I think it is a mistake. It is not that I don't want to help the steel industry or that I don't want to help the oil and gas industry. I want to help both. I do not think the Federal Government guaranteeing loans is the right thing to do. We have tried it. We have been there. It did not work. We did it in 1978 and 1979. The Federal Government had a loan guarantee program for the steel industry--$290 million worth of steel loans were made, guaranteed by the Federal Government. The Federal Government loaned $222 million on which the steel industry defaulted. That is a 77 percent default rate. Basically, the people who ran the program at the time or later said, well, really, it was replacing the marketplace with politicians making those decisions, saying that we don't think that the marketplace should be making capital decisions; we are going to have those decisions being made by Government. I think that was a serious mistake. We have urged other countries not to go into this industrial policy; let the marketplace work. And now we are trying to come back and do it. We have done it before. It did not work before. I want to help the oil and gas industry. It is really hurting in my State. But I do not think that having the Federal Government guaranteeing loans is the right solution. As a matter of fact, I do not think it will help anybody. I do not think it will even help the steel industry. It might help them reshuffle some debt, but I do not think it makes sense. I urge my colleagues to vote no on this bill today. Mr. President, I ask for the yeas and nays on the bill.

Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) is necessarily absent.

Mr. NICKLES

Mr. NICKLES. To respond to the question of my friend and colleague--I think it is an excellent question--we didn't fix that problem. The Senator is exactly right. This bill still leaves it open where you can have a bad loan, or basically you are going to have that refinanced with the Government guaranteed loan; i.e., a steel company would have a $100 million loan. Maybe they are paying a high interest rate--maybe 12 percent. Maybe that loan is in jeopardy. Maybe they are having a hard time making payments on it. We haven't fixed that yet. That is an amendment some of us have been talking about. It wasn't in this package we just agreed to.

Mr. NICKLES. Mr. President, I thank my colleagues and, in particular, Senator Byrd, Senator Domenici, and Senator Stevens, for working with Senator Gramm, myself, and others to try to make this a better bill. Senator Domenici mentioned one, we strike the emergency provision. That basically means there is $270 million estimated cost by CBO of this bill, and it was declared emergency. We are striking that. That means we won't be raising the caps. I think that is important; I don't think we should be calling everything an emergency, as I stated, and busting the budget. I appreciate the cooperation in striking that section. We did a couple of other things. The bill originally said that the loan guarantees would be made up to 100 percent. We limited that now to a maximum loan guarantee of 85 percent. The lending organization, or bank, is going to have to put up 15 percent, with some risk. It may be 25 or 30 percent, but they will have to put up at least 15 percent. I think that is a good amendment. We changed the composition of the board. Originally, the lending board was comprised of the Labor Secretary, the Treasury Secretary, and the Commerce Secretary. We changed that. We said, well, we will keep the Secretary of Commerce on, but we will change it and add the Chairman of the Federal Reserve Board and the head of the SEC--I think, again, trying to take politics out of it, trying to put people on the board that are more interested in economics and making good financial decisions, and not have it be so political. We also have another amendment that would strike out the lower loan limits. The bill originally said in steel the loan range would be from $25 million to $250 million. We dropped the $25 million lower limit. In other words, now a steel company can get a $5 million loan, or a $10 million loan, or a $1 million loan; it won't have to be at least $25 million. We did the same thing for ore, which had a $6 million minimum loan level. Now that can be smaller. For oil and gas, I believe, there was a $250,000 minimum. We struck that minimum as well. I think the combination of amendments we have had make this a better bill. I appreciate the fact that leaders who are promoting this bill have agreed to these amendments. I think it improves it. I am still going to vote no on final passage. I really do not think the Federal Government should be in the loan guarantee business for steel, or for oil and gas, and for the iron ore companies. But I do appreciate their consideration of these amendments. I urge my colleagues to support them. Several Senators addressed the Chair.

Mr. NICKLES. I announce that the Senator from Pennsylvania, Mr. Santorum, is necessarily absent.

Mr. NICKLES. I thank my friend and colleague from Minnesota, and I yield the floor.

Mr. NICKLES. I appreciate the Senator's comment. I was not aware of the article. I am aware of the fact the steel industry as a whole is not doing all that bad. I mentioned, I believe, in my comments that 12 out of 16 of the larger companies are all profitable. Not all companies, but several companies are profitable. The Senator mentioned seven new plants. I was not aware of that. That is an excellent point. I do not think they are clamoring for Washington, DC, to give them a loan guarantee. I have not had them knocking on my door saying give us a loan guarantee. If they do, I certainly would not want to be an investor. If somebody in the steel industry is knocking on the door saying, we need the Government to give us a loan guarantee, that is a bad sign, poor management, and they are in serious trouble.

Mr. NICKLES. I announce that the Senator from Pennsylvania, Mr. Santorum and the Senator from Arizona, Mr. McCain, are necessarily absent.

Mr. NICKLES. I think, again, my colleague from Illinois is pointing out a shortcoming that is in the bill. It has not been fixed by the amendments that were offered. Quite possibly, maybe the Senator from Illinois will have an amendment, and maybe the principals that are engaged in this might support it. I will be happy to work with the Senator to see if we can't correct that problem. But we haven't stopped anybody from refinancing a bad loan, or maybe a self-interest loan, as the Senator discussed. I personally think those mistakes should be corrected. We have taken four good steps to make it better. But we need some additional amendments to solve that problem.

Mr. NICKLES. Good point.

Mr. NICKLES. I did not mention that in my statement. The Senator is exactly right. Under the iron ore loan guarantee, the minimum loan is $6 million, a maximum loan of $30 million.

Mr. NICKLES. That is correct.

Mr. NICKLES. I will be happy to yield.

Mr. NICKLES. Mr. President, I compliment my friend and colleague from Texas. I hope his speech is one that all Members of the Senate have listened to. I happen to agree with him, I think this bill is a mistake. I spoke on this bill. We only had 5 minutes before we voted on this. The first debate we had on this was actually 10 minutes for the proponents, 10 minutes for the opponents. That was the only debate we have had on the floor of the Senate. That was on a motion of cloture. For people who don't know what that is, it is a motion to proceed to debate the bill. I told the proponents of the bill, Senator Byrd and Senator Domenici, I will object to the bill; I will debate against it; I will offer amendments against it. However, I will not filibuster it. If they get cloture, they get cloture. They got cloture. I lost. I happen to think I was right on the issue. I will follow through. I said I would amend it. I told Senator Byrd I would not offer a bunch of dilatory amendments. I will not go into extraneous matters. I will try to make a bad bill better. I don't think this is a good bill. I don't think it should pass. I don't think it should become law. I will work to see that it doesn't. This is one step in the process. Let me say why I think this is a bad bill. I have great respect for Senator Byrd and Senator Domenici. They are very effective legislators. They have convinced a lot of people we should move forward. My compliments to them. I don't happen to think they are right on this bill. Looking back at loan guarantees, the last time we did this we actually ended up having net loan guarantees of $290 million and defaulted on $222 million. That is a default rate of 77 percent. That means taxpayers had to write a check for $222 million out of a total loan guarantee of $290 million. That is a terrible, terrible failure. I will mention a couple of things. That is a failure by my words, but it is a failure according to Members of previous administrations. I will just give you a couple of comments: Less than a decade later, all 5 loans [talking about steel loans] are in default. And the Commerce Department's Economic Development Administration, in an internal memorandum notes: By any measurement, EDA's steel loan program would have to be considered a failure. The program is an excellent example of the folly inherent in industrial policy programs. They are exactly right. Other countries do not do this. They believe in the private sector. We believe in it. We believe in developing private capitalism. Let bankers take risks, have investments, have the right to succeed and the right to fail. Now we are on the floor of the Senate and we say, wait a minute, not in steel or not in oil and gas; those are two vital industries. I agree these are vital industries, but I do not think this bill will help them one iota. It did not help in 1978 and 1979. It cost taxpayers millions of dollars; it was a boondoggle, it was a failure. Why should we repeat it? We know better. I am sympathetic when people say we have lost jobs and these are really tough times. I will tell you, it is a lot tougher in the oil patch than it is in the steel industry, and I think that is the reason Senator Domenici offered his amendment. The oil patch lost 50,000 jobs; the steel industry lost 10,000. But I do not think this is the right solution to help the oil patch. If I did, I would support it. I have been pretty supportive of the oil patch in my tenure in the Senate, but Government loan guarantees is not the solution. I have talked to our producers. I have talked to the people. They do not want it, they do not need it, and it will not help to have a Government loan guarantee. It will not help. That is not the solution. Not everybody in the oil patch and not everybody in the steel industry is losing money. There are 16 big steel companies, 12 of which are profitable. A lot of them do not even want it. A lot of them do not need it. What will they do, if one company gets a loan guarantee and gets a subsidized low-interest loan, say, at 6 percent and they are paying 9 percent? They will say: Wait a minute, we are in a competitive field. How in the world can we allow this company, a competitor, to go out and borrow money with the Government guaranteeing it? They get a lot better interest rate. We are competing with them. When they are doing it, we had better do it. So we are, in effect, going to give U.S. Steel or Bethlehem Steel a loan guarantee? Those are companies that are probably doing fine, and they probably do not want this. I doubt they do. I hope they do not. Are they going to let their competitors go in and get a competitive advantage? So maybe there will be a race to grab some of this money. We should not be exposing taxpayers to that kind of risk. We should not be circumventing the marketplace. We know the Secretary of Labor, Alexis Herman, is a great lady. I have great respect for her. But I don't think she knows better than bankers in the United States whether a loan should be made or not; or, for that matter, the Secretary of Commerce or the Secretary of the Treasury. This bill says they know better, frankly, than all the bankers, all the capitalists in this country. The Secretary of Labor, the Secretary of Commerce, and the Secretary of the Treasury would be making the loans for a billion and a half dollars. They are going to guarantee, the Federal Government, we will back that loan up. If it fails, we will write a check. That is what this bill does. You cannot say the bill is without cost. It has been estimated the bill could cost taxpayers $270 million. That is not an insignificant amount of money. That is a guess. That is an absolute guess. If we have default rates like we had 20 years ago, it will be over a billion dollars Uncle Sam will be writing a check for. I do not have a great deal of confidence the Secretary of Labor or the Secretary of Commerce can make the right decisions. This bill has a provision that allows the Government to guarantee basically 100 percent of the loan. That doesn't make any sense. When you get into a loan guarantee, most of our Federal programs guarantee 70 percent, 75 percent, 80 percent, in some cases 90 percent. Almost all small business loans are guaranteed at 90 percent or less. This bill says there can be 100 percent. What sense does that make? I mentioned that we are going to offer some amendments to make some changes. I am hopeful the sponsors of this legislation will support us in an effort to adopt those changes. Let me just go over some of the amendments I think will make a bad bill less bad. It still will not make it, in my opinion, worthy of passage, but as I told the sponsors, I am not going to filibuster the bill indefinitely. I am going to offer some germane amendments. One will be to change the composition of the board. Instead of having the Labor Secretary and the Commerce Secretary and Treasury Secretary make these decisions, the Treasury Secretary would be a member of the board, and he would serve as chairman--in addition the Chairman of the Board of Governors of the Federal Reserve System and the Chairman of the Securities and Exchange Commission would serve. They would replace the Secretary of Labor and the Secretary of Commerce. It does a couple of things. It gets politics out of it for a lot of purposes. The SEC and the Fed are not as politically in tune as a Cabinet-level Secretary. I think it offers a little more balanced business perspective. I think it would complement the board and make it a better board. So that would be one amendment. Hopefully, it will be passed. Another amendment would be to establish an 80-percent maximum loan guarantee. Instead of having a 100-percent loan guarantee, the maximum would be 80 percent. So the Federal Government, if this board says okay to a steel company or an oil company, we are going to lend up to $100 million, the maximum exposure of the Federal Government on that $100 million loan will be $80 million. That means a private financial institution which is lending the other $20 million has something at risk, and if it fails, they will lose a little bit of money too. It will make people a little more prudent when they start applying this idea of using Government money or Government guarantees. So, hopefully, that will pass. We have another amendment that would strike the minimum loan levels. Some people say: Why did you have the board set up? We did not pass this bill. It passed the Senate one time but not with a direct vote. It never went through any authorizing committee. It did not go through the Banking Committee in the House or the Senate. No one has looked at it. Basically, this has been crafted and it really has not been scrutinized. I think we are pulling out some of the deficiencies of the bill. One of the deficiencies in the underlying bill says we will have minimum loan levels. In steel, the lowest, smallest loan they could make would be $25 million. Small steel companies, don't apply. This is for big steel. In other words, the loan levels in this package--as drafted, would have to be between $25 million and a maximum of $250 million. That is what the Federal Government guarantees. It would not guarantee a $10 million loan or a $5 million loan. We want to strike the minimum levels for both steel and oil and gas. It says, for iron ore, the minimum level was $6 million; oil and gas, the minimum level loan guarantee would be $250,000. I probably have more small producers in my State than any State, with the possible exception of Texas, and why in the world would we have a Federal loan guarantee program? But, oh, if you can't borrow at least a quarter of a million dollars, don't apply. Does that make any sense? We have thousands of producers in our State. Frankly, most of our wells produce about 2 barrels a day, 2.5 barrels a day. If we are going to help people, are we really going to say, you have to be pretty big before we are going to help you? I don't think that makes sense. So we are going to have an amendment to strike the minimum loan levels. I think that would be important. One other amendment I hope and expect we will be successful in passing, would be to strike the emergency spending designations in the bill or make a point of order that emergency spending does not lie. I hope, if anybody in this body is going to make statements such as ``we want to protect Social Security, and we don't want to spend those Social Security revenues,'' they better support this amendment. Because I want to make sure everybody understands, when we are talking about striking the emergency section, what it means. If you have the emergency section in there, it means the budget doesn't apply. It means we are going to add that amount of money to the caps. It means you are going to be taking that money out of the surplus and, in this case, 100 percent of that money is the Social Security surplus. So you are raiding the Social Security surplus, raiding the Social Security funds in order to be giving loan guarantees to steel and oil and gas. I do not know if that sells in Minnesota, but it doesn't sell in Oklahoma. It is ludicrous to say we are going to have an emergency designation on this. An emergency basically means the budget does not apply. Maybe some people do not want to have a budget. We just passed a big bill for Kosovo. We declared it an emergency. It was a net of $13 billion. We said it was an emergency; the budget cap doesn't apply. Some people say that was wartime, it is understandable, and so on, even though we increased the numbers rather significantly. That is one thing. Are we going to do it 2 weeks later and say that now we have an emergency steel loan program; we are going to have to declare that an emergency? Are we going to have to do that every 2 weeks? How many times are we going to declare an emergency? If we are going to do it every 2 weeks, let's just stop the charade and don't even have a budget. Just forget having a budget. It is not necessary. We can just appropriate whatever money we want to spend and see how much it is at the end of the year. That, in effect, is what we are doing when we repeatedly declare something an emergency. We are going to make a point of order on the emergency provision, and I hope we will be successful. I am going to venture to say on all four amendments, we will be successful. I expect we will be. I appreciate the fact that Senator Domenici has communicated to us already he is willing to see if we can work something out on these amendments. It is vitally important we do so. We do not really believe in this concept of industrial policy where the Federal Government is going to supersede the private sector and make financial decisions. Some countries try that. Communist countries try it. Socialistic countries try it. Frankly, it does not work very well. Look at third world growth rate and see how many jobs they create. They do not work well. Why would we start doing it? We tried it 20 years ago, and it was a dismal failure, a total, complete failure. Basically what they are saying is we want to replace the marketplace with political wisdom. It is a serious mistake. Again, my State has had percentagewise as big a job loss as any, and I still think it would be a serious mistake. Finally, obviously, big steel has a lot of clout. We are considering this bill, and there is another bill which just went through the Finance Committee dealing with section 301. Then there is a bill that the House has already passed dealing with steel quotas. I believe the majority leader said we are going to be voting on that next week. There will be a cloture vote on whether we should take it up. I urge my colleagues to vote no on cloture and defeat the steel quota bill. Today I asked Mr. Summers, who is the nominee for Secretary of the Treasury, what his position is on the bill. In the past, we heard the President was against it. He said his advisers will be recommending the President veto it. That is the right position. They should veto it. One has to ask a couple of questions: Do you believe in GATT, the General Agreement on Tariffs and Trade, which has made it possible for us to have a greater economic activity worldwide? If you believe in it, the steel quota bill is totally, completely inconsistent with GATT. Totally. Our trading partners would retaliate. If you think if we pass this steel quotas bill, that it is going to protect steel jobs, it will not, because there will be retaliation. The retaliation in many cases will be: We are not going to buy some of your other products. You may think we are saving a few steel jobs, but the net result is we are going to lose a lot more jobs throughout the economy--not a few, a lot more--and maybe even start a real trade war. That is a serious mistake. We should not do that. I urge my colleagues, if you believe in free trade, if you believe in GATT, if you believe in negotiations--that does not mean we cannot take retaliatory action if somebody is dumping. The administration has already imposed antidumping tariffs on Brazil and Japan. There are proper avenues to do that. A steel quota is not one, and loan guarantees is not one. I urge my colleagues to support the amendments that Senator Gramm and myself, and I believe Senator McCain, will be offering shortly this afternoon. Maybe we can have them agreed to. If not, I hope we will have votes and they will be adopted. I urge my colleagues to vote no on final passage on this bill.

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Rhode Island (Mr. Chafee) is necessarily absent.

Mr. NICKLES. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. NICKLES. We have tried it. It didn't work before. I am afraid it won't work again, because it is basically saying we don't believe the marketplace can make loans; we want the Federal Government to do it. We want to set up a board of politicians that will make loan guarantees, and not only guarantee 70 or 80 percent of the loan but the bill that is before us says they can guarantee 100 percent of the loan. I find that to be very irresponsible. We are saying the Secretaries of Labor and Commerce and Treasury have better wisdom on whether or not to be making loans than bankers throughout the country. I think that is a serious mistake. I also have objections because of the way this bill is drafted. It says this is an emergency. We just voted on lockbox. We are going to vote on lockbox again later this week. We do not want to spend any of the surplus of Social Security money on anything but Social Security. This bill takes a bunch of that money, up to $270 million estimated by CBO, and says: Let's spend that on loan guarantees. Let's spend Social Security money. Let's move the caps. Let's adjust the caps. We are violating the so-called lockbox which we say we do not want to spend. As a matter of fact, President Clinton said it in the State of the Union Address 2 years ago: We won't spend one dime of this Social Security money on anything else. This bill would say, let's spend $270 million of it. I think that is a mistake. I urge my colleagues, we shouldn't be declaring an emergency this week. We just did it 2 weeks ago. We did it 2 weeks ago as Kosovo money, $13 billion net for Kosovo. We declared that an emergency. We are declaring this an emergency; that is a $270 million cost. That shouldn't be counted. Even though it may have offsets on budget authority, it is not offset in outlays. It does move the caps up. It does violate the budget. I think it would be a serious mistake. What about dumping? The Commerce Department has already taken action against Japan and against Brazil to stop illegal dumping. That is the proper avenue to be moving if there is illegal dumping. It is not to have the Federal Government come in and say: Let's make loan guarantees. Let's have the Federal Government underwrite it. Politicians know best. We don't think the marketplace can work. We think bureaucrats in three Departments should be making these loans. I urge my colleagues to vote no on the cloture vote.

Mr. NICKLES. Mr. President, I compliment my friend from West Virginia, because he is tenacious. He is a very good legislator. I am afraid he is going to win on this vote on the motion to proceed. I hope he does not, because I think we are making a serious mistake if we vote for this, but I compliment him for his persistence in pushing this proposal. I am opposed to it. This proposal is a $1.5 billion loan guarantee, $1 billion for steel, $500 million for oil and gas. Senator Domenici added the oil and gas provision, because the oil and gas industry is probably going through a greater economic crisis than even the steel industry. The Senator from West Virginia said steel has lost 10,000 jobs. The oil and gas industry probably lost 40,000 jobs, and I will tell you, a good percentage of those are in my State. So I am sympathetic with the objectives they are trying to accomplish. I just disagree with the idea of having the Federal Government come in and make Federal loan guarantees. We tried it before. The Carter administration did this in 1978. In 1978, they came up with a loan guarantee proposal for steel. They ended up making 290 million dollars' worth of loans, net contingent liability. The steel industry defaulted on $222 million. That is a 77- percent default rate. I will read a couple of comments that were made in the CRS report, dated March 17, 1994. Although only five loan guarantees were obligated to steel companies. . .77 percent of the dollar value of these guarantees were defaulted. Although the sample size is very small, hindsight suggests that as a group, steel loans represented a very high level of risk, which may account for the lack of interest in the private markets to take these debt obligations without a guarantee. I also will read for the Record from a Washington Post article dated February 28, 1988, just a couple of comments talking about the loan guarantees. Less than a decade later, all five loans are in default, and the Commerce Department's Economic Development Administration, in an internal memorandum, notes that ``by any measurement, EDA's steel loan program would have to be considered a failure. The program is an excellent example of the folly inherent in industrial policy programs,'' the memo added. The companies that received the guaranteed loans are either in bankruptcy, out of business or no longer own the facility in which the money was invested. This is a news report that analyzed the loan guarantee program that was initiated in the Carter administration back in 1978-1979. I ask unanimous consent to have printed in the Record the article from which I just quoted.

Mr. NICKLES

Mr. NICKLES. I will make a couple comments. The leader said we would be happy to vote on the Democrat bill, and we would be happy to vote on our bill. We made that offer last year, I might mention. We asked unanimous consent to do that on two or three occasions last year. We also made a unanimous consent request last year a couple of times to have a limited number of amendments. That was not agreed upon. I will inform my colleagues, I did discuss this last Wednesday with Senator Daschle and Senator Kennedy. They expressed a desire to bring it forward. I said I think we have to have some kind of time constraints and limit on amendments. I did request that. They said they would be forthcoming in giving me that list. We have yet to receive it. Our staff requested it from them as late as Friday. We have yet to receive that list. Once we receive that list, we will try to see if we cannot negotiate some reasonable time agreement to get this thing resolved.

Mr. NICKLES. Will the leader yield?

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Rhode Island (Mr. Chafee) is necessarily absent.

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Rhode Island (Mr. Chafee) is necessarily absent.