Jack Reed

Mr. REED

Mr. REED. Mr. President, I rise today, along with my colleague from Rhode Island, to pay tribute to SGT Dennis Weichel, a Rhode Islander who served in the Rhode Island National Guard. On March 22, Sergeant Weichel was in a convoy with his unit in Laghman Province, Afghanistan. Some children were in the road and Sergeant Weichel and other troops got out to move the children to safety. Most of the children moved out of the way, but one little girl went back to the road. As an MRAP approached, Sergeant Weichel pulled her out of the vehicle's path, but in doing so he was hit by the vehicle. He was medically evacuated to Jalalabad Medical Treatment Facility, where a surgical team worked to stabilize him. But, tragically, he died from his injuries. Because of his heroic actions, the little girl he saved was unharmed in the accident. He will be laid to rest this Monday in Rhode Island, a hero--someone who exemplifies the qualities of the American soldier: selfless sacrifice for others. Sergeant Weichel joined the National Guard in 2001. He was posthumously promoted to sergeant. He previously deployed to Iraq as a member of Detachment 2, Headquarters, Headquarters Company, 3rd Battalion, of the 172nd Infantry, Mountain. In November 2011, he mobilized for deployment to Afghanistan with the 1st Battalion, 143rd Infantry Regiment. Each generation of Americans is called upon to protect and sustain our democracy, and there are no greater heroes than the men and women who have worn the uniform of our Nation and who have sacrificed for our country to keep it safe and to keep it free. It is our duty to protect the freedom they sacrificed their lives for through our service, our citizenship. We must continue to keep their memories alive and honor their heroism, not simply by words but by our deeds as citizens of this country. Today our thoughts are with Sergeant Weichel's mother Linda, his father Dennis, brother Craig, his sisters Christine and Charlene, his children Nicholas and Hope and their mother Amanda, and his fiancee Ashley and their daughter Madison, and all his family and friends and his comrades-in-arms. We join them in commemorating his sacrifice and honoring his example of selfless service, of love, of courage, and of devotion to the soldiers with whom he served and the people of Afghanistan he was trying to help. Sergeant Weichel is one among many Rhode Islanders who have proven their loyalty, their integrity, and their personal courage by giving the last full measure of their lives in service to our country in Afghanistan, in Iraq, and elsewhere around the globe and throughout the years. Today we honor his memory and all those who have served and sacrificed as he did. Sergeant Weichel joins a roll of honor that includes the following Rhode Islanders killed since September 11, 2001: SPC Dennis Poulin, Army National Guard; SGT Michael Paranzino, Army; PFC Kyle Coutu, Marine Corps; LTJG Francis L. Toner, IV, Navy; PO3 Ronald A. Gill, Jr., Coast Guard; SGT Michael R. Weidemann, Army; SGT Moises Jazmin, Army; SSG Dale James Kelly, Jr., Army National Guard; SGT Brian R. St. Germain, Marine Corps; SGT Dennis J. Flanagan, Army; 2LT Matthew S. Coutu, Army; LCPL Holly A. Charette, Marine Corps; SSG Christopher S. Potts, Army National Guard; LCPL John J. Van Gyzen, IV, Marine Corps; CPT Christopher S. Cash, Army; LCPL Matthew K. Serio, Marine Corps; MSG Richard L. Ferguson, Army; SFC Curtis Mancini, Army Reserve; CPT Matthew J. August, Army; CW5 Sharon T. Swartworth, Army; SPC Michael Andrade, Army National Guard; SGT Charles T. Caldwell, Army National Guard; SSG Joseph Camara, Army National Guard; and SGT Gregory A. Belanger, Army Reserve. All of these men and women have given their lives in the last decade in Afghanistan and Iraq. It is a roll of honor. It is a roll that Sergeant Weichel joins. It should be, for us, a roll not just to recognize and remember but to recommit to trying in some small way to match their great sacrifice for this great Nation. With that, Mr. President, I yield the floor.

Mr. REED

Mr. REED. Mr. President, I rise to join many of my colleagues in support of the efforts to stop wasting taxpayer money subsidizing oil executives' huge profits. We need to end these wasteful handouts, reduce the deficit, and develop clean energy solutions. While the oil industry is thriving, making $137 billion--that is billion with a ``b''--in profits last year, Rhode Islanders are paying nearly $3.90 per gallon at the pump. Working families are being are forced to cut back because of high gas prices. In turn, big oil companies should have their wasteful tax subsidies eliminated. We should be working to fuel the U.S. economy, not the oil cartels and big oil companies. That is why I am a proud cosponsor of the Repeal Big Oil Tax Subsidies Act, which would put a stop to these wasteful tax breaks and use the savings to invest in clean energy technologies that will create jobs, save money for middle-class families, and increase America's competitiveness in the global clean energy economy. Addressing gas prices and reducing our dependence on oil requires a smart, balanced, and responsible national energy policy. There are no silver bullets, but there are both short-term and long-term steps we should take. In the near term, we have to be ready to respond to geopolitical events by making it clear that we are prepared to release oil from the Strategic Petroleum Reserve if such a measure is necessary because of geopolitical developments. We need to continue efforts to prevent excessive speculation and speculators from manipulating the market and needlessly inflating energy prices. And I have asked the Commodity Futures Trading Commission--effectively our cop on the beat--to do that and have sought to provide them with the tools and funding to achieve this objective. We also need to continue investments in smart growth policies to promote mass transit in next-generation vehicles and alternative energy. That is why I have fought for things such as better fuel mileage for cars and smart investments in mass transit. Improved energy efficiency and developing clean energy technologies will help cut our oil addiction. Working with President Obama, we successfully persuaded automakers to double the fuel efficiency of cars and light trucks. After staying the same for over 20 years, under the Obama administration the average fuel economy of vehicles will be 35.5 miles per gallon by 2016. And the administration has proposed to further increase the standards to 54.5 miles per gallon by 2025. Combined, by the year 2025, these standards would save 2.2 million barrels of oil a day and save consumers at the pump an estimated $8,000 over the lifetime of a vehicle. These new standards will reduce the impact of future price hikes by weaning us off oil. In addition to protecting their unnecessary subsidies, the oil industry continues to push increased drilling as a solution to reducing gas prices. I support safe and responsible oil production, and the administration's efforts to decrease our reliance on foreign oil. U.S. domestic oil production has reached its highest level since 2003. The number of oil rigs in the United States has more than quadrupled in the last 3 years, and U.S. dependence on foreign oil is at its lowest level in 16 years. Indeed, net imports as a share of total consumption declined from nearly 60 percent in 2005 to 45 percent in 2011. When oil companies tap into resources on Federal property, the taxpayers must be fairly compensated and assured it is done safely and responsibly. Therefore, the oil companies should pay their fair share of drilling royalties and inspection fees to make sure what they do is done right. As chairman of the Interior and Environment Subcommittee of the Appropriations Committee, I worked to secure an increase in the inspection fees for offshore drilling last year, and will push for the same for onshore drilling this year. For all the sloganeering about domestic drilling, we know we can't drill our way out of this problem. Even the oil companies admit that the biggest factor in the price of gasoline is the cost of crude oil, which is set in the world market. It is not pegged to U.S. production. In fact, an Associated Press analysis of 36 years of Energy Information Administration data shows ``no statistical correlation''--their words-- between domestic oil production and gas prices. Again, we need a balanced, well-thought-out national energy policy, one that will help reduce our dependence on oil and the amount paid at the pump. What we should not be doing is continuing to give away billions in corporate welfare to Big Oil while middle-class families see their gas prices rise. It simply is not fair. The oil companies that soak up these subsidies are effectively charging taxpayers twice for the same gallon of gasoline. Mr. President, middle-class families are struggling. Oil companies are not. I urge my colleagues to repeal these oil subsidies, make clean energy investments in America, and take commonsense steps to get our fiscal house in order. I urge passage of this very important piece of legislation. I yield the floor.

Mr. REED

Mr. REED. Mr. President, I ask unanimous consent that Melissa Laine and Michael Johnson, fellows in my office, be granted the privilege of the floor for the remainder of the 112th Congress.

Mr. REED

Mr. REED. Madam President, I ask unanimous consent to speak up to 1 minute.

Mr. REED. Mr. President, this is a critical moment. The Senate is on the verge of adopting legislation that could cost the American people dearly in the future. The House bill with respect to capital formation, which is labeled a jobs bill, but goes more to fundamentally changing security laws, is, in effect, another regulatory race to the bottom. There has not been a normal committee process in terms of weighing this legislation. This is a complicated bill involving the interaction of many different securities laws, interactions which have not been sorted out or analyzed. As a result, we are rushing to justice--or rushing to conclusions. Hasty deregulation has repeatedly been the source of financial crises--including the savings and loans crisis, the Enron-era crisis, the great recession of 2008, and the list goes on. Those who are impacted by those crises--those who lost their savings or dealt with cleaning them up, experts in this field, and many more--have come out in strong opposition to the House proposal: from the Chairman of the Securities and Exchange Commission, Mary Schapiro, the North American Securities Administrators Association, the State officials charged with enforcing securities laws, auditors, financial analysts, pension fund managers, and organizations like AARP, all who have spoken out against this legislation and supported my efforts to protect investors. This capital formation bill is fundamentally flawed, and it should not become law in its present form. It undercuts and dilutes investor protections and has no real requirements to protect American jobs in order to use these new capital raising procedures. That is what is so ironic. We have a jobs bill, but actually I see nothing in this bill that requires creating American jobs in order to earn the benefits of this bill. I think it is, again, misnomered as a jobs bill. In addition to the substitute amendment I offered with Senators Landrieu, Levin, and others that received a majority vote earlier this week, I offered an amendment that we will be voting on later today to clarify the shareholder trigger for Exchange Act reporting so that all companies count their actual shareholders so they cannot avoid periodic reporting requirements. Adoption of this amendment would achieve one of the stated goals of the legislation, which is ostensibly to have more companies into a transparent marketplace, disclosing and/or listing on stock exchanges. That was the whole essence of this IPO onramp idea: encourage more people to go public so they can disclose information to shareholders, so the market can follow them, and so investment advisers can advise investors about purchasing the stocks on the market. This proposed amendment would close one glaring loophole, but, frankly, too many others remain, and I have grave concerns about the impact this underlying bill will have on the middle class. Backers say it is needed because initial public offerings are down since the 1990s. They blame regulation, ignoring evidence that the dot-com bubble bursting--which shook the confidence of many investors through lots of new IPOs coming on the market quickly with huge multiples in their prices and then quickly disappearing and leaving the scene altogether-- and the biggest financial collapse since the Great Depression, beginning in 2008 and lingering with us today, have shaken the confidence and, frankly, shaken the business calculation of many small businesses. These small businesses are looking to expand when they see the demand out there for their products. If the demand is there, they will, even in this environment, go forward with initial public offerings. They also repeatedly blame the lack of IPOs on accounting costs and all other compliance costs brought on by Sarbanes-Oxley and other laws. They conveniently ignore that the single largest cost, by a large multiple, is not the Sarbanes-Oxley audit costs or the attorney costs; they are the investment bankers' fees, and there is nothing in this legislation that will affect those fees whatsoever. In the case of Groupon, for example, the investment bankers were paid 28 times what the auditors were paid. If we ask the shareholders of a company's stock whether they would prefer solid auditing practices going forward to ensure their investment is being wisely used, I think they would say they prefer that to paying large fees to investment bankers. In the case of LinkedIn, the underwriters were paid 18 times what the auditors were. Groupon paid their accountants and auditors $1.5 million, and their investment bankers received $42 million. So the notion that these Sarbanes-Oxley auditing costs and accounting procedures are what is stopping a business person from deciding to go ahead ignores the fact that compared to the investment banking fees which they will still have to pay, these costs are somewhat insignificant in comparison. Theoretically, this bill is supposed to promote the flow of capital to emerging businesses. But in practice it will likely promote and continue to promote the flow of big fees to investment bankers and others to bring these companies public. There is nothing wrong with that, but there is nothing in this underlying legislation that is going to require discounts in the cost of an IPO because of the reductions in accounting costs. There is nothing in this legislation that will change that dynamic. However, this legislation could give insiders more ways to manipulate the market while average investors are left out in the cold. There is a difference between cutting redtape and allowing insiders to cut corners--undoing the commonsense safeguards that protect people who play by the rules. The House bill lowers standards for taking companies public and lowers standards for protecting the public from investment fraud. This so-called IPO onramp desperately needs an offramp, through more careful consideration by the Senate and the House in conference so that we can improve some provisions which have great merit but need improvement. This bill would allow very large companies with up to $1 billion in revenues per year to avoid financial transparency and auditing disclosure designed to ensure they are not manipulating their books while enjoying lighter regulation for up to 5 years after the IPO. If this unbalanced bill becomes, law without these needed improvements, it could weaken oversight of Wall Street--oversight that in the past has provided investors protections that are extremely important. Again, there is merit to the idea of giving small startup companies more financing options, but the devil is in the details, and the way this bill is written and packaged could have the opposite effect and ultimately make it harder to raise capital. It opens the spigot to general solicitation and mass marketing of what have traditionally been private securities offerings, and we could fully expect to have senior citizens and others--through nightly cable advertisements, through billboards, cold calls by brokers, or other individuals telling them about the special opportunities for investing their cash, fall for some of these tactics. Retail investors can be solicited through this bill's reg A process to raise up to $50 million capital for small businesses. They will hear the pitches to make their investment now and get rich. Again, there is potential for expanding the use of regulation A--it is on the books already at the Securities and Exchange Commission--but not without safeguards. For example, as the bill is currently drafted, these solicitations can be made without audited financial statements. I think as a point of departure, if someone is trying to sell a security, they should at least have to provide ordered financials from the company they are soliciting on behalf of. Now, the crowdfunding amendment, I hope, will be improved dramatically by the work of Senator Merkley and Senator Bennet and Senator Brown. We will be voting on that later today too. It is a substantial improvement, but I think even they themselves will admit this is an experiment and perhaps could be improved even further. But I commend them and salute them for what they have done, and I hope our colleagues will accept the amendment and move forward. Over the last few days we have spent a great deal of time talking about the shortcomings in this legislation. With the exception of the proposals before us, many of these shortcomings still exist, and I think they will lead potentially to difficulties and harm to investors. People understand investing is risky. They try to make an informed choice, and they win some and lose some. But most Americans would agree that U.S. financial markets work best when investors have access to timely, comprehensive, and accurate public information that allows people to make solid investment decisions. In fact, one of the principles of the competitive market, if we refer to an economics 101 textbook, is perfect information. That is the assumption for competitive markets: perfect information. Well, there is never perfect information. But there has to be adequate information. Otherwise it is not a market, it is a casino. This legislation undermines some of the decades-long protections we have had in place to provide at least adequate information to investors. By stripping away auditing standards and giving the investing public less information in almost every setting, sophisticated players and investment banks will have all the advantages. The average investor will be operating in much more challenged circumstances. Middle-class America will be particularly affected. As USA Today noted: Banks that manage IPOs will be able to use inside access to past financial results to dominate research on new companies, with incentives to promote their firm's banking clients. The American people want big banks and large companies to play fair and comply with the basic rules and responsibilities that go with being a public company. That is not too much to ask. I believe history will judge this misnamed bill quite harshly. Instead of rushing to pass this bill, we should be working together to protect the interests and economic well-being of the American public. We should be focused on creating jobs and helping working families. In my estimate, this bill does not do that and, indeed, ironically, it could harm our constituents by shattering their faith--and it has been tested quite recently by the financial crisis and other crises--in the market, rather than reinforcing their confidence that they will be protected against fraud and manipulation. I believe we are capable of writing better legislation without sacrificing important investor protections. I hope we can go forward. I am disappointed the substitute amendment, authored by myself and Senator Landrieu and Senator Levin, was not accepted. As such, I would urge, when we get to final passage, people think very seriously about the consequences of the bill. Despite the efforts of Senator Merkley and Senator Bennet, Senator Brown of Massachusetts and others, despite my efforts, I am afraid the final version of this legislation will not protect investors as it should and, therefore, should be rejected. Mr. President, I ask unanimous consent that any time remaining in quorum calls be equally divided between my Republican colleagues and my Democratic colleagues.

Mr. REED. Madam President, I ask unanimous consent that the order for the quorum call be rescind.

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

Mr. REED. Madam President, shortly, we will be voting on my amendment, which will maintain the House's increase in the number of shareholders at 2,000 in order to remain private. But what I do is actually ensure that the shareholders are the real shareholders; that there is not an intermediary holding the stock in the name of perhaps literally hundreds of shareholders, but they are the real shareholders. There has been some criticism about the affect it will have on ESOPs, private funds, mutual funds, and others. We have been assured by legal experts it doesn't affect any of these funds or entities. In addition, the SEC has assured us that it, through rulemaking, can clarify that ESOPs, mutual funds, private funds, and other entities similar to these will not be affected. I believe if a company has 2,000 real shareholders, those shareholders should have access to routine information on a regular basis, and that is the thrust of this amendment. Shareholder Threshold

Mr. REED. Madam President, the House bill has some very promising concepts about providing access to capital. What it fails to do is adequately protect investors. We have tried, through our alternative, to protect investors. That alternative has been rejected on a cloture vote by the Senate. We have made some improvements with the Merkley proposal, but we are not quite to the point yet where I think we can be confident that investors will be protected. As such, I think we should vote against this legislation, and that we should in fact try again and get it right. That is why the head of the Securities Exchange Commission opposes this, and the state securities regulators, and former heads of the Securities Exchange Commission, and the Council of Institutional Investors, and many others. We are opening up vast loopholes in our securities laws without adequate disclosure for investors. I think we will regret this vote.

Mr. REED

Mr. REED. Mr. President, I ask unanimous consent that at the conclusion of the remarks of Senator Merkley and Senator Bennet, I be recognized.

Mr. REED. Mr. President, I commend Senator Merkley and Senator Bennet for their extraordinary work, indeed, in collaboration I believe with our colleague Senator Brown from Massachusetts to make significant improvements in the crowdfunding provisions of the House bill. As Senator Bennet and Senator Merkley have indicated, this represents a potentially very productive way to raise capital, and they have provided protections that will ensure investors in this process are not disadvantaged, and I commend them for that. It addresses one of the significant issues in the House bill but, frankly, not all the significant issues. There are some extremely glaring, I think, provisions in the House bill that we attempted to address in the Reed-Landrieu-Levin substitute. That substitute amendment, although it received a majority of votes, did not receive enough to achieve cloture to be the bill we are now considering. We are now considering the House bill. I have an amendment to that House bill that addresses one of several difficulties with the House legislation. Investors, when they buy stock in public companies, expect routine disclosures. They expect to know on a quarterly basis, and in a very real sense on an annual basis, what is the company doing? What are the prospects of the company? All that goes hand in hand with the widely dispersed ownership of a public company. The House legislation would allow many companies with a substantial number of beneficial shareholders, the actual owners, the real owners of the stock, the ones who can vote the stock, the ones who get the dividends, the ones who vote on the proxies or directly for the leadership of the corporation--it would allow them to remain dark. This might be appropriate for some companies that have a relatively small base of real owners, but the way the House has drafted this legislation it could risk allowing a significant number of larger companies to go or remain dark. The Securities Exchange Act of 1934 set up a system of public reporting. Beginning in 1964, the SEC required that companies with at least 500 holders of record--and at least $10 million in assets, to follow the routine reporting requirements under the securities laws. The decision was made that at that point a company does have a size that is adequate and necessary so that they should be disclosing. The issue that is motivating the House is this 500-person requirement. It was adopted, as I said, in 1964. There is a sense that the limit is probably too low. The House version is 2,000. We make no attempt to change the House limit of 2,000 now, the new limit. But what we want to be sure of is that the individuals who are being counted are not the record holders, they are the real owners, the beneficial owners. In fact, many companies are very astute and assiduous in assuring that these record holders fall beneath this 500 level. There are many large companies, well-known companies, as I mentioned in my previously remarks, that have thousands of beneficial owners but still have, on their own records, less than 500 holders of record. The SEC defines record holders as ``each person who is identified as the owner of such securities on records of the security holders maintained by or on behalf of the issuer.'' Holder of record is very direct. It is the shareholders who are recorded as such on the books of the company. This is where the term ``beneficial owner'' comes from. In such instances, the shares are held of record by a third party, usually a broker, on behalf of the shareholder. For example--and this is one of many examples--if you buy shares from Charles Schwab, that discount brokerage firm would likely serve as the record holder and you would be the beneficial owner. It is your money; you paid for it. It is your vote because you are a beneficial owner. It is your right to sell the shares. But as far as the company is concerned, the holder of record is the broker, Charles Schwab. I think we have all been familiar and all received in the mail a big package of proxy materials from our broker. It is not, in many cases, directly from the company. It is from the Wells Fargo Advisors, it is from Schwab Advisors, et cetera, because they are on the records of the company as the ones who are the record holders. They distribute the material to beneficial owners. The consequence is that for companies that may have a very few or relatively few record holders, they have thousands and thousands of beneficial owners. Those are the individuals who will lose out if the company decides, under the House bill, to suddenly go or remain dark, to avoid public reporting. As I have indicated before, most investors today do so through intermediaries--through brokers, through others. As a result, they would not necessarily be counted as a record holder. Record holders-- the brokers, the large entities--are increasingly purely passthroughs. They are agents with no economic interest in the company, no voting rights. Those are held by the beneficial owners. That is why I believe that beneficial ownership should be the test for whether companies have to report under the Securities Exchange Act. It should encompass those who have the power to sell and/or the power to vote the shares. They are the actual shareholders. They are the individuals who management is committed by fiduciary duties to work for. So I think it is appropriate that when we raise this level to 2,000 we also ensure that it is not simply record holders, it is the beneficial owners--the real owners, for want of another term. There also could be, for example, two identical companies with identical numbers of beneficial owners but they might have different numbers of record holders because of the way the shares are held--in trust or by a broker, et cetera. And one company reporting and one not reporting does not seem to be to be a fair or efficient way to do business. Companies already have to obtain numbers of beneficial owners from brokers and banks in order to know how many copies of annual reports and proxy materials they have to print, so every company knows about how many beneficial numbers they have. They have to provide the proxy material through the brokerage or bank to the beneficial owners, so they know very well--in fact, quite precisely--their beneficial ownership, their real shareholders. But using record level as the trigger to remain private, to avoid public reporting, to me again is the wrong approach. My amendment would clarify the definition in this new shareholder threshold section of the underlying bill, and ensure that companies are not avoiding these public reporting requirements by using a threshold of 2,000 record holders if they have 2,000 or fewer beneficial owners. If this is a truly small business that has 1,500 individual shareholders, beneficial owners, and they want to remain dark--that seems to be something that we certainly would countenance, and with my language it would be possible to do so. I think this approach makes it fair for everyone. It also doesn't frustrate the expectations of a person who buys a share of nationally known stock that is publicly reported and gets a 10 Q and every year the 10 K, and suddenly they don't get anything. They wonder what is going on at the company. Maybe the company merges with another company, creates a new company, and now has less than 2000 holders of record. I think that is not an approach we should countenance. I think transparency and accurate information are critical to the success of our capital markets, and I think this legislation will do that. Requiring quarterly reporting of firms with a large number of shareholders--real shareholders, beneficial shareholders--protects investors while at the same time improving overall market transparency and efficiency. From this information, those individual analysts and brokers who follow companies are able to determine their recommendations, are able to advise clients that you should buy this company, it is a good company. When the company goes dark, that information source dries up and it is harder for individuals, brokers, investment advisors to give advice. I think this would not be helpful to the market. In fact, I think it might, ironically, impede capital formation, not facilitate capital formation. There is one important point that has to be stressed, and that is my amendment does not affect the employee exemption in the underlying bill. The House bill has a blanket exemption for counting owners of the company for employees. We have reviewed this exemption in our legislation with eminent experts, including Prof. John Coates at Harvard Law School, and he concurs that employees would not be swept up into being counted because they happen to receive compensation through stock in their company. There are many companies--WaWa, Wegmans--that want to have active employee participation in the company through stock plans but are private companies and want to remain private. This should allow them to do so. Again, my legislation makes no attempt to change the underlying House bill, which gives a very broad blanket exemption for employees, who are exempted from the shareholder threshold. There is another aspect here, too, and that is ESOPs, employee stock option plans, because they do acquire stock on behalf of employees. We specifically asked Professor Coates, one of the preeminent experts in securities law, whether this would inadvertently trigger or inadvertently complicate the beneficial ownership rule. His opinion is that ESOPs typically count as one record holder and one beneficial owner because they do not pass through the votes or the right to direct sales. They do not have the characteristics which are typical of the beneficial owner: the right to vote and the right to sell the stock. They maintain those rights. They do not delegate those to the individual employees who might be part of the pool. So Professor Coates' view is that ESOPs also would be exempt from being counted, if you will, as more than one entity. We have also reached out to the Securities and Exchange Commission and we have received some assurances, from talking to Meredith Cross of the SEC, that, given their rulemaking power, they have within the ambit of their power in implementing this legislation the ability to clarify any of these points. So that not just employees who receive stock through an employee plan, but an ESOP and other entities that hold stock--not on behalf of their investors but have the right as an entity such as a venture capital fund or a private equity fund--have the right at that fund level to vote and to direct the sale of the shares and receive the dividends--that they, too, would be counted as one entity. Professor Coates, as I said, believes this will not affect the venture capital/private equity firm structures, which would typically count as one shareholder, whether of record or beneficially. The VC firm or PE firm does not pass through votes or the right to direct sales to its own investors, and the same might be said with mutual funds, pension funds, et cetera--the primary passthrough which would be counted as brokers and banks, who hold on behalf of beneficial owners. What we have, I think, is legislation that recognizes the need to increase the number adopted in 1964, but also to recognize that the real owners of companies far exceed, in many cases, the holders or record, and that these real owners depend upon the routine reporting that is required under the Securities Exchange Act so they can be informed, so they can follow their stock. Indeed, the analysts who look closely at these companies, who make recommendations to buy and sell, also need this type of information. For this reason I have proposed this amendment. I think it is something that improves the bill. It was included in our substitute which did not receive 60 votes to pass cloture but did receive the majority of votes in this body. I think it is something, again, that will improve this legislation. I would not hesitate to add that many more improvements are necessary, but certainly this would be an improvement. I would note the absence of a quorum.

Mr. REED. I thank the Chair.

Mr. REED. Mr. President, I rise, along with so many colleagues, to pay tribute to Senator Barbara Mikulski, an extraordinary woman and Senator, someone who has become the longest serving woman in the history of the Senate, indeed, in the history of the Congress. She surpassed, on January 5, 2011, the record of Republican Senator Margaret Chase Smith as the longest serving Senator. Just this Saturday, she became the longest serving woman in the history of the Congress, surpassing the tenure of Edith Nourse Rogers, a Republican Congresswoman from Massachusetts, who served in the House from 1925 to 1960. Senator Mikulski is the first female Democrat to be elected to the Senate in her own right in 1986. She is a woman of many firsts. She is indeed the dean of the Senate women--I would actually say a dean of the Senate, with her great energy, her great eloquence, and her great passion, particularly for those who are often overlooked in our society. She comes at it honestly. She was a social worker in Baltimore, helping at-risk children and educating seniors about Medicare before being elected to the House of Representatives. She has taken that concern for the vulnerable and a particular passion for the State of Maryland forward every day she has served in the House and Senate. She has served on numerous committees. She is a subcommittee chairperson on the Appropriations Committee--Commerce- Justice-Science. She has devoted herself to those issues, and many more. She serves on the Select Committee on Intelligence and has been a key member of the Senate Health, Education, Labor, and Pensions Committee. She has left her mark on a broad range of programs that touch each and every American family. She has been particularly active in women's health, ensuring that women were included in NIH clinical trials, where in the past they were ignored. Since one cannot ignore Barbara Mikulski--which is virtually impossible--she made it a reality that they cannot ignore women in NIH clinical trials, requiring Federal standards for mammographies, ensuring uninsured women have access to screenings and treatment for breast and cervical cancer. She increased research dollars for Alzheimer's and enhanced the Older Americans Act. She has been, since her first days in the House of Representatives, at the forefront in advocating for better health care and education particularly for the most vulnerable among us. She has been a champion of national service, understanding that in a great country one has to contribute as well as benefit. She said one of the things she is most proud of--in her words-- ``strengthening the safety net for seniors by passing the Spousal Anti- Impoverishment Act. This important legislation helps keep seniors from going bankrupt while paying for a spouse's nursing home care.'' That is a fitting and representative example of her service. Throughout her service, she has maintained national priorities but has never taken her eye off Maryland. She commutes every evening back to Baltimore. She works hard to ensure that the people in Maryland benefit because of her activities. I also thank her for the kindness and help she has given me personally--her concern, for example, with the fishing community in Rhode Island, which is under her jurisdiction on the Appropriations Committee, and in other ways. She has been terribly important and kind to us. She was instrumental in helping us to secure funding for the HOPE VI project in Newport, RI, which has created extraordinary beneficial housing for a mix of incomes in Newport. It is one of the most attractive as well as one of the most stable communities I think anyplace in the Nation. She has been there to help us constantly. I could go on and on, as my colleagues have said. I simply want to say at this special moment in Senator Mikulski's career, we thank her, admire her, respect her, and she has set a great example for us. In the days ahead, she will not only continue to inspire and sustain us, she will continue to sustain and lead in her State. I yield the floor.

Mr. REED

Mr. REED. Mr. President, I rise again today to discuss H.R. 3606, the so-called JOBS Act. As chair of the Subcommittee on Securities, Insurance, and Investment, I want all of my colleagues to know that this legislation, as it is currently drafted, is fundamentally flawed. We need to stop, slow down, carefully amend this legislation, and send something to the President that will not only encourage capital formation, but also protect investors. I am not alone in my analysis. Some of the most sophisticated security analysts, experts, and commentators in the country are telling the Senate to slow down and work to improve it. We have received letters or testimony or comments from SEC Chairman Mary Schapiro; SEC Commissioner Luis Aguilar; the North American Securities Administrators Association; former SEC Chairman Arthur Levitt; former SEC Chief Accountant Lynn Turner; AARP; Americans for Financial Reform; the Consumer Federation of America; the Council of Institutional Investors; the National Association of Consumer Advocates; Public Citizen; U.S. PIRG; the AFL CIO; AFSCME; the National Education Association; the American Institute of CPAs; the CFA Institute; and the Main Street Alliance, just to name a few of the broad spectrum of experts who feel this bill is, as they say, not ready for prime time. In an op-ed in the Washington Post on March 14, two Harvard securities professors, John Coates and Robert Pozen, stated: [T]his bill does more than trim regulatory fat; parts of it cut into muscle. Small businesses will have a harder time raising capital if investors do not receive sufficient disclosures or other legal protections. In his ``Motley Fool'' column on March 19, Ilan Moscovitz states that there are four really problematic things about the JOBS Act. And, as we all recognize, ``Motley Fool'' is one of the most perceptive in its columns about the securities markets, analyzing the securities markets from many different perspectives. They point out some of the fairly significant faults in the House bill. In sum, they say the legislation as currently written would exempt 90 percent of current IPOs from important corporate governance and accounting requirements because it defines ``small companies'' as anything valued below $700 million and earning less than $1 billion in annual revenues. Those aren't exactly small companies, and those companies can in fact and should in fact be following the procedures we have laid out in order for a company to go public. Our amendment recognizes the need to provide more streamlined processes for smaller IPOs, but we restrict these streamlined procedures to companies with less than $350 million in annual revenues, much closer to the notion of a small company beginning the process of becoming a publicly held entity. There is also a problem in this legislation with accounting. When investors lose faith in accounting standards, they are less willing to buy stocks. In fact, one of the great strengths of our security markets is the feeling that your money is well protected. It is scrutinized; there are accountants; there are audits. If we lose that, then the investing public worldwide will say the United States is not the place to put their money. Our amendment does not interfere with independent accounting standards, and limits the number of companies that get exempted from accounting rules. There is another big issue in the House bill. It contains a provision that would increase the number of investors who could own shares in private companies, and excludes employees from the count. That has some merit. But by counting shareholders of record instead of the beneficial shareholders--there is a legal owner on the books of the company, but that legal owner may represent thousands of actual owners. The beneficial owners are the ones who get the dividends, the ones who get the right to vote on the shares--if we preserve this loophole going forward, this could potentially create a situation where an unlimited number of investors could be involved in a company and that company would still be able to remain private and not have to provide periodic reports under the Exchange Act. Last year, for example, Goldman Sachs planned to create a special- purpose vehicle, basically a fund that could pool money from its clients, that would count as only one holder of record in Facebook. You can see how this could clearly circumvent the notion of how necessary it is to provide the reporting requirements for large companies, companies with a large shareholder basis. Our bill eliminates this loophole by clarifying that recordholders must be beneficial owners, while at the same time raising the shareholder cap from 500 to 750, to make it more contemporaneous. But we exempt employees from this recordholder trigger for public registration, and that will allow private companies that want to remain private, but want to reward their employees with shares to stock, the ability to do so without triggering the public reporting requirements. Finally, the House bill sets up a new mechanism for crowdfunding. This is a very interesting concept. My colleagues Senator Merkley, Senator Bennet, and Senator Brown of Massachusetts have worked very hard in developing a crowdfunding bill much superior to what is included in the House version. In fact, the House version has been described by a noted securities expert as ``the boiler room legalization act'' for its very lax approach to crowdfunding. Our amendment requires crowdfunding to be conducted through regulated intermediaries, and provides for basic disclosure requirements, aggregate caps, and other protections to ensure market integrity, and prevent abuse. The House bill also removes important prohibitions against general solicitation and advertising in regard to private placements that have been on the books for decades. Recognizing that in a world of Internet and Twitter, even private communications with accredited investors about private offerings can be inadvertently broadly disseminated, our bill takes a much more targeted approach to this issue. In our amendment, we allow for limited public solicitation and advertising through ways and means approved by the SEC, so they have a chance to update mechanisms for communicating with investors in this age of Twitter, Internet, and other new media. We believe this amendment gives the SEC the tools it needs to formulate limited exemptions to the general solicitation and advertising rules, allowing private offerings to still remain private. There is another section of the House bill that deals with the reg A exemption. Reg A has been on the books of the Securities Exchange Commission, again, for decades. It currently allows an exemption for certain registration requirements for mini-offerings of $5 million or less. The House bill proposes to raise the ceiling for this exemption to $50 million, but they do so in a way that could open it up to abuse, allowing companies to avoid rules and reporting requirements for public companies. We limit companies to raising no more than this $50 million amount every 3 years, truly aiming our provisions at the small companies that are trying to raise capital without triggering all of the requirements of a publicly held company. We also require that a basic set of audited financial statements be filed with the offering statement and require periodic disclosures of material information to investors. Let me stress what the House bill is proposing. They are proposing to legalize the solicitation of $50 million a year from retail investors-- in fact, it could be $50 million every year--without requiring audited financial statements be provided to potential investors. If you go to a bank to get a loan for your business, they are going to require audited financials. I think, at a minimum, you need to provide audited financial statements if you are soliciting $50 million a year from the public and, in fact, that $50 million could be for successive years. Finally, this whole discussion about the House bill has been cast in terms of jobs. There is not a lot in the House bill that talks about jobs, particularly jobs in America. There is no requirement that any of these relaxations of the securities laws be correlated with job increases. There is no requirement in the House bill that these jobs be in the United States. We have just come through a series of enforcement actions in which the SEC had to crack down on reverse mergers by Chinese companies that were taking over American shell companies, putting their money in, and then going ahead and using the benefits of access to our stock markets. Most of those companies' jobs were not here, nor was the intention to create those jobs here. Those are the types of risks we run in the House bill. Our bill includes reauthorization of the Export-Import Bank, which is something that has already demonstrated its ability to support American jobs. We have also included provisions that Senator Snowe and Senator Landrieu have included from the Small Business Committee that will increase the SBA's ability to assist American companies--small American businesses. They have done this successfully. With these provisions, they can do more. Our bill actually does help with jobs--jobs here in the United States. One of the premises behind this House legislation is if we deregulate, the jobs will come right back. Where have we heard that before? All through the 2000s: Just deregulate. Those investment banks such as Lehman don't need regulations. Just give them a lot of leverage and let them run. And they ran--right off the cliff. We don't want to repeat that again. We don't want to repeat the mistakes of the 1990s and 2000s, where we allowed analysts of securities to recommend securities sold by their own investment banking firm. Those provisions are included in the House bill. That is going to undermine the markets. We should learn from the facts. I urge all of my colleagues to support the Reed-Landrieu-Levin amendment as a base text. We can make improvements on that. We can send a bill--we hope very quickly in collaboration with the House--to the President that not only stimulates capital formation but also protects investors. We can send a bill that learns from the lessons of the last 20 years where, in the guise of deregulation, in the hope for job creation, we saw the greatest financial crisis since the Great Depression. We don't want to see this happen again. Mr. President, I yield the floor.

Mr. REED

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

Mr. REED

Mr. REED. Mr. President, I thank the majority leader. I rise because in a moment we will be voting on the Reed-Landrieu-Levin substitute amendment. This legislation corrects glaring defects in the House- proposed bill on a so-called jobs bill. It protects investors. It allows capital formation, but it does not do that at the expense of investors. We have taken all the major provisions of the House bill with respect to the IPO onramp. We have not deleted them, we have improved them. We have lowered the threshold in terms of the size of the business so these IPO onramps can be designed for small businesses, not for businesses of $1 billion in annual revenue. We have gone ahead and looked at the aspects of regulation A in the House, and we agree there should be an increase in the limit from $5 million to $50 million. But we have made improvements. For example, the House bill will allow people to solicit these securities under regulation A without audited financials. I think at a minimum the investing public should have some audited financials to rely upon. We have taken provisions with respect to the ability to go dark--the ability to stop reporting if you have 2,000 or less record owners--and we have raised the limit from the existing 1 to 750 beneficial owners. But we haven't opened it broadly so that large well-known companies could suddenly stop reporting their financial information on a routine basis. We have looked at the reg D offerings in terms of a private offering versus a public offering, and we have given the Securities and Exchange Commission the ability, in this age of the Internet and of Twitter, to make adjustments so that a private offering under reg D would not be compromised because it gets into the media through Twitter, et cetera. But we haven't opened it to general solicitation, as the House bill does. By the way, our bill actually tries to create jobs, not just opportunities to raise funds through Wall Street. With Senator Landrieu's help, we have strong small business provisions in there. We include the Ex-Im Bank provisions of Senator Cantwell. We worked very closely with Senators Merkley, Bennet, and Brown of Massachusetts to include a crowdfunding provision which is much superior. If we do not achieve cloture, we will see, by default, a bad House bill on its way to becoming law.

Mr. REED

Mr. REED. Mr. President, I ask unanimous consent to speak for up to 45 minutes in morning business, and I will be prepared to yield back such time as I do not use.

Mr. REED

Mr. REED. Mr. President, today I rise to discuss H.R. 3606, the so- called JOBS Act. As chairman of the Subcommittee on Securities, Insurance, and Investment of the Senate Banking Committee, I wish all of my colleagues to know this legislation, as it is currently drafted, is not ready to become law--and if it does, it could have unintended consequences that will hurt investors, seniors, and average American families. One of the supposed premises behind this legislation is that if we just deregulate the securities market, then more companies will choose to issue public stock. The only reason they have been deterred from going to the public markets, according to this view, is the excessive regulatory burdens placed upon them. The Banking Committee has been holding a series of hearings on different provisions in this legislation, and the reason we have discovered there have been fewer IPOs does not appear to be connected to regulatory burdens in any real way, but it appears to be more connected to economic and geographic factors. That being said, many of us hear on a daily basis, despite the recent financial crisis, about how the American regulatory system is making us less competitive, especially in the context of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In fact, in testimony before the Senate Banking Committee, Lynn Turner, a former SEC chief accountant, states that the data says otherwise. In his words: The reason IPOs track the economy is that investors invest to earn a return. When the economy is growing, companies can grow. . . . However, when the economy has stalled or is declining, and companies are not growing, investors simply cannot achieve the types of return they need to justify making an investment. . . . As a result of the downturns in the economy that occurred during much of the 1970s brought on in part by withdrawal from Vietnam, the recession brought on by inflation at the beginning of the 1980s, the dot com bubble and the corporate scandals, and the most recent great recession, investors became concerned about returns that could be earned in the markets and IPOs declined. As the economy and employment have recovered after each of these downturns, so has the IPO market. Mr. Turner went on to state when he served on a Colorado commission that was exploring why so many small companies were failing in Colorado, he said: [W]e found that access to capital was not the primary cause of failure. Rather it was lack of sufficient expertise and management within the company including in such areas as marketing and operations. While access to sufficient capital for any company is important, I have found that those emerging companies with better management teams and proven products, or products with great growth potential are able to obtain it. Those are the types of companies VCs and private equities seek out. VCs are venture capital companies. As another securities expert, Professor Mercer Bullard, the Jessie D. Puckett, Jr. Lecturer and Associate Professor of Law at the University of Mississippi School of Law, wrote to me in a letter dated March 15 of this year: The exemption for emerging growth companies would exempt so many companies from key investor protection provisions that the world-leading brand that is the ``U.S. public company'' would be substantially weakened. So how do we find the balance between facilitating capital formation while maintaining fair, orderly, and efficient markets and protecting investors? As chair of the Subcommittee on Securities, Insurance and Investment, I want all of my colleagues to know this legislation, as it is currently drafted, does not have that right balance. We are getting inundated with letters and phone calls from securities experts from around the country saying: Please slow down and let this legislation be improved and amended. On Friday, Commissioner Luis Aguilar of the Securities and Exchange Commission stated: It is clear to me that H.R. 3606 in its current form weakens or eliminated many regulations designed to safeguard investors. I must voice my concerns because as an SEC Commissioner, I cannot sit idly by when I see potential legislation that could harm investors. This bill seems to impose tremendous costs and potential harm on investors with little or no corresponding benefit. The Chairman of the Securities and Exchange Commission, Mary Schapiro, wrote in a letter dated March 13, 2012: While I recognize that H.R. 3606 is the product of a bipartisan effort designed to facilitate capital formation and includes certain promising approaches, I believe there are provisions that should be added or modified to improve investor protections that are worthy of Senate consideration. In a Banking Committee hearing we held on March 6, 2012, Professor Jay Ritter, the Cordell Professor of Finance of the University of Florida, also testified that we should be careful because some of these bills could actually decrease capital formation and discourage job growth. He stated: It is possible that by making it easier to raise money privately, creating some liquidity without being public, restricting information that stockholders have access to . . . restricting the ability of public market shareholders to constrain managers after investors contribute capital, and driving out independent research, the net effects of these bills might be to reduce capital formation and/or the number of small IPOs. In a hearing before the Securities, Insurance, and Investment Subcommittee in December, Professor John Coates, the John F. Cogan Professor of Law and Economics at Harvard Law School told us some of the proposals in the House bill actually have the potential to harm job growth. He stated: Whether the proposals will in fact increase job growth depends on how intensively they will lower offer costs, how extensively new offerings will take advantage of the new means of raising capital, how much more fraud can be expected to occur as a result of the changes, how serious the fraud will be, and how much the reduction in information verifiability will be as a result of these changes. . . . Thus, the proposals could not only generate front-page scandals, but reduce the very thing they are being promoted to increase: Job growth. In other words, if these bills don't protect investors enough more fraud will occur, and it will actually decrease access to capital for smaller companies. We have also heard from respected business commentators about the shortcomings of the House bill. Steve Pearlstein, the noted business columnist for the Washington Post, wrote: What we know from painful experience--from the mortgage and credit bubble, from Enron, WorldCom and the tech and telecom boom, from the savings and loan crisis and the junk bond scandal and generations of penny-stock scandals--is that financial markets are incapable of self-regulation. In fact, they are prone to just about every type of market failure listed in economic textbooks. Pearlstein points out the characteristics of markets that can lead to failures. First, there is the prevailing problem of asymmetric information. Insiders typically know, or should know, a lot about their company. If key information is withheld, investors are denied critical information to make informed judgments. The House bill would, under the guise of ``streamlining,'' undercut necessary disclosures which are essential to protect investors. He further notes the misalignment of incentives between promoters of securities and investors. Once the sale is complete, the promoter typically moves on to other targets. The investor depends on the performance of the company to validate the investment, and that usually takes time. Indeed, in many respects, it is the issue of the short run versus the long run that distinguishes sound investments from get-rich-quick schemes. The disclosures inherent in the securities laws have, over 80 years, attempted to strike a balance--to provide investors with the information to make sound long- term investments and to thwart the ``fast-buck'' promoters in for a quick kill. The House bill seriously undermines these disclosures. The editors of Bloomberg have also weighed in with telling criticism of the House bill. They point out: Supporters of the [House] bill point to the falloff in initial public offerings as evidence that regulatory costs are dissuading entrepreneurs from creating businesses or taking them public. And they say rescinding the analyst research restrictions would benefit small companies, which Wall Street otherwise ignores. That sounds great in theory, but the reality offers a different picture. It's true the number of initial offerings has declined, but evidence suggests that has less to do with regulation and more to do with global economic trends. That is according to the Bloomberg editors. They go on to point out the conclusions of Professor Jay Ritter, whom I have already cited. Again according to Bloomberg, Professor Ritter ``has documented, the decline in IPOs is related to declining profitability of small business. Many are opting to merge with larger companies to quickly get bigger and more profitable, rather than go public.'' The Bloomberg editors further point out: Many of the rules the [House] bill seeks to upend have helped companies, including the internal controls rule. An SEC study, for example, found that such audits helped companies avoid financial restatements, which are costly exercises that often drive down share prices. They conclude: It shouldn't be necessary to gut investor safeguards to promote job creation. If investors lose confidence because of worries about fraud, they will demand a higher return on their money, raising the cost of capital for all. Floyd Norris, the respected financial writer for the New York Times, struck similar themes and criticisms in an article last week. He asked: Do you remember the scandals of the dot-com era? Then Wall Street firms got business by promising companies that they would write positive research reports if the company would only hire them to underwrite an initial public offering of stock. Companies went public at a feverish pitch, often rising to amazing heights without much in the way of sales, let alone profits. Then it all came crashing down. In the aftermath, the brokers were forced by the Securities and Exchange Commission, as well as the New York attorney general, to mend their ways. No longer would analysts be allowed to go on such IPO sales calls. Norris goes on: This bill would end that rule for all but the biggest new offerings--those that involved companies with sales of over $1 billion. And it would go much further. As the law stands now, to keep underwriters from making sales pitches that go beyond what companies are allowed to say, the underwriters are prohibited from publishing research on a company while its initial public offering is under way. This bill would allow such research, and would say that the company bore no responsibility for what was said in it. Effectively, there would be a second prospectus--one largely immune to securities laws and free to hype the offering by making forecasts not otherwise allowed. He goes on: Why is this needed? Advocates point to the fact that there are fewer initial public offerings now than there were during the Internet bubble. That most of those offerings were horrible investments is conveniently ignored. Nor is any consideration given to the idea that once-burned investors might be more wary. The explanation must be excessive and unreasonably expensive regulation. Norris went on further to remind his readers of the relentless ingenuity of promoters trying to circumvent the disclosure laws under the securities acts. He recalled the recent activities of Chinese companies to gain access to American investors without full disclosure through the process of reverse mergers. He pointed out: Last year, the SEC, worried about a spate of frauds, required Chinese companies to follow the same rules that American ones do, with prospectuses made public as soon as they were filed. Since last summer, there have been no new Chinese initial public offerings in the United States. That tightening of regulation would be reversed by this bill. He went on to quote Paul Gillis, a former auditor for PricewaterhouseCoopers in China who is now a visiting professor of accounting at Peking University. Mr. Gillis's words: If you like those e-mails from Nigerian scammers, wait until you see the new round about to come from shady Chinese companies looking for investment--and they will be legal. In an interview, Mr. Gillis praised section 404, the part of the Sarbanes-Oxley Act of 2002 that requires companies going public to have effective internal controls and for auditors to certify them. He said: When companies list, they hire consultants to help them design internal control systems to provide integrity in their reports. These control systems are new to these countries. They have helped significantly. . . . The second premise behind this legislation is that access to capital, whether through crowdfunding, mini-offerings, advertising private offerings, or more IPOs, will lead to more jobs. In actuality, in this case it is unclear whether more access to capital will temporarily create jobs and then destroy them or have a minimal effect. Most of the experts we have talked to suggest the effects will be minimal. In effect, it could create a bubble like the ones we have seen with mortgages, the ones we have seen with dot-coms. If this legislation remains unbalanced, then it is likely to result in more unsuccessful investments for investors. Recent history has shown this will result in investors ultimately pulling out of the market, reducing business access to capital and costing families and others money much needed for education and retirement. Like many of my colleagues on both sides of the aisle, I do believe there are some innovative proposals in the House bill, and I believe the amendment I am proposing along with Senator Landrieu and Senator Levin--the substitute amendment--includes many of these ideas in a way that better balances market transparency and investor protection with improving small business's access to capital. One of these ideas with merit is the creation of a financial framework that allows entrepreneurs and small businesses to raise capital through crowdfunding--relatively small investments from many individuals through online platforms. There is a lot of energy around this concept of crowdfunding. However, this proposal needs to be done very carefully. It is critically important to ensure appropriate regulatory oversight for crowdfunding and make sure there is a strong balance between investor protection and improving small business's access to capital. In our bill, this is the place where we envision the smallest entrepreneurs could obtain much needed seed capital for their good ideas. I recently visited a company in Rhode Island called Betaspring. Instead of being an incubator for small businesses, Betaspring considers itself to be a ``boot camp'' for entrepreneurs. Betaspring is constantly trying to help entrepreneurs to access capital, but sometimes it is difficult to find enough friends and family who can help out. But my colleagues, Senators Jeff Merkley, Michael Bennet, and Scott Brown, have worked long and hard on structuring a bill in this area, which we have included in the Reed-Landrieu-Levin substitute amendment. I will let them talk to you about this part of our amendment in more detail. However, I believe their crowdfunding language is a vast improvement over the House bill, which would permit investors to invest up to the greater of $10,000 or 10 percent of their annual income without having to meet any minimum wealth or financial sophistication standards. Not only are issuers exempt from registration from securities offerings for up to $2 million in the House bill, it would also exempt the intermediaries who seek to profit from the operation of crowdfunding markets. I think these House provisions are corrected by the approach taken by my colleagues, Senator Merkley, Senator Brown, and Senator Bennet. I believe the Senate bill they propose addresses many of the concerns expressed by Professor John Coffee of the Columbia University School of Law when he called such crowdfunding provisions the ``Boiler Room Legalization Act''--a reference to the bad old days when people gathered in what were called boiler rooms and made cold calls to try to elicit unwary investors into dubious schemes. There is another section of our bill which will help small and medium-sized companies access larger amounts of money--up to $50 million--to infuse their businesses with much needed capital. We have proposed a few but very important improvements to the work of Senators Tester and Toomey in their legislation and to similar language in the House bill. Let me talk about the improvements to the so-called regulation A or mini-offering section of the bill to achieve a better balance between investor protections and access to capital. Like the House bill, our bill raises the amount of money that can be raised in a mini-offering process. However, four improvements are made in the Reed-Landrieu-Levin amendment. We require that audited financial statements be filed with the mini- offering statement so that investors truly know what the financial situation of the company is before they invest. Let me make a point here. The House proposal would not require audited financials be filed with the offering documents. I would think as a basic premise, if you are making an offering for up to $50 million, investors deserve to have financial statements signed off on by a third party auditor. Our legislation requires it. We require periodic disclosures of material information to investors. For example, perhaps the investor of a certain high-tech product the company is making leaves the company or passes away or something else happens. Investors deserve to know about that type of information. We limit the amount that can be raised through the mini-offering process to $50 million every 3 years. The House bill would allow investors to raise $50 million every 12 months, potentially allowing many companies to avoid going fully public and evading more rigorous public reporting requirements. Finally, we require a study and report on the new mini-offering exemption from Securities Act registration. This study is to be conducted by the SEC, in consultation with the State securities administrators, and submitted to Congress no later than 5 years after the date of enactment, so that we consider whether any changes need to be made to the mini-offering concept created in this legislation. Although this is still an experiment--to allow general solicitation and advertising to retail investors for what are bound to be risky offerings--I believe the protections we have built in will make it a safer experiment. We also worked to make some improvements to the initial public offering or IPO on-ramp section of the bill. The essence of this proposal in the House is to phase in certain securities laws and regulations for, in their terms, ``emerging growth companies'' so they can grow more slowly into becoming a public company, with all of its benefits and responsibilities. There are companies that have or will outgrow either the reg D private placement method of raising capital or the new reg A mini- offering method of raising capital. But the key issue here is what we think the definition of an ``emerging growth company'' should be. The way the House bill is written, it would exempt virtually all new public companies from nonbinding shareholder votes on say on pay and executive compensation pay in connection with a merger acquisition; the relationship between executive compensation and the performance of the issuer; the requirement under Securities Act section 7 that more than 2 years of audited financial statements be provided for an IPO; and a requirement that the company's auditor attest to the effectiveness of the company's financial systems or internal controls under section 404(b). After discussions with many experts, it is clear that a company with $1 billion in annual revenue is not what most of them consider to be an emerging growth company. But that is the level the House has chosen, $1 billion in annual revenues. In fact, under this definition, the House bill would have exempted more than 80 percent of current IPOs from registration requirements which, as I mentioned earlier, are requirements that only recently appear to be difficult to manage. As a result, Senators Landrieu, Levin, and I decided this definition needed to be much more targeted toward smaller IPO companies with less than $350 million in annual revenue. Even the House bill would have allowed Enron and WorldCom to be subject to this phase-in, in terms of reporting and auditing requirements. In addition to focusing this provision on smaller firms, we also took out the provisions in the House bill that were eliminating corporate governance improvement made in the Dodd-Frank bill, such as say on pay and requirements that the company demonstrate the connection between executive performance and company performance. We need to give these provisions more than a year to see how well they are working. The Reed-Landrieu-Levin amendment also eliminates the provision in the House bill that interferes with independent accounting standards, and would have set up two different sets of rules, one for emerging growth companies and one for other public companies. We agreed with the Chamber of Commerce that these provisions should be taken out. The chamber stated in a letter dated February 15, 2012 that: The opt-out for new accounting and auditing standards would create a bifurcated financial reporting system with less certainty and comparability for investors, while creating increased liability risk for boards of directors, audit committees and Chief Financial Officers. We also dramatically narrow the provisions in the House bill that would have eviscerated the settlement between all of the securities regulators and 10 Wall Street investment banks regarding the undue influence of the investment banking unit of a firm on the securities research unit affiliated with the same brokerage firm. We learned at a significant cost through the 1980s and the 1990s the value of independent analysis of markets and securities. Jeff Madrick, a respected journalist, discussed this issue in his book. In his words: A measure of this practice was the increase in the number of buy recommendations. At the end of the 1980s, after a long run-up in stocks, buy recommendations exceeded sell recommendations by a large and suspect margin of four to one. By the early 1990s, buy recommendations exceeded sells by eight to one. By the late 1990s, only 1 percent of analysts' recommendations urged an outright sale. The low percentage remained unchanged even when stock prices were falling and the investment community was pessimistic. After the stock market collapsed in the early 2000s, securities analysts started to admit what was happening inside these firms. Ronald Glantz, a veteran respected analyst from Paine Webber, testified before Congress in 2001 as follows: Now the job of analysts is to bring in investment banking clients, not provide good investment advice. This began in the mid-1980s. The prostitution of security analysts was completed during the high-tech mania of the last few years. For example, in 1997 a major investment banking firm offered to triple my pay. They had no interest in the quality of my recommendations. I was shown a list with 15 names and asked, ``How quickly can you issue buy recommendations on these potential clients?'' We believe that the wall between a financial institution's research and brokerage units needs to be maintained. Our substitute amendment would allow a research report to be provided by a firm subject to SEC restrictions, disclosure, and filing requirements. In particular, the research cannot contain any recommendation to purchase or sell such security. In addition, any written communications provided to potential investors must be filed with the SEC so that they can take a look at it. These written communications will become part of the issuer's prospectus, which should give investors some added protections. This too is a bit of an experiment, given the massive fraud committed on investors that led to the global research analyst settlement in 2003. But we have dramatically narrowed the scope of the experiment from the one in the House version. Finally, we allow companies to opt out of the emerging growth company designation and fully comply with all public company regulatory requirements, which very well may improve the price of their stock, since investors will have more information regarding the company. As I said earlier, if these changes in exemptions go too far, some believe we are doing more harm than good by weakening the value of the public company brand in the United States and actually harming our competitiveness in world markets. That is why we have tried to narrow, appropriately, the proposals in the House legislation. Next, I want to talk about the most important changes in our bill from the House bill. The House bill effectively eliminated SEC prohibitions against soliciting or advertising about private offerings of securities. Most private placements are offered under SEC rules known as regulation D. These securities are sold without an IPO or registration statement being filed with the SEC, usually to a small number of chosen accredited investors. In the United States, for an individual to be considered an accredited investor, he or she must have a net worth of at least $1 million, not including the value of the person's primary residence, or have made at least $200,000 each year for the last 2 years, or $300,000 together with his or her spouse, if married, and have the expectation to make the same amount in the current year. The current net worth and income triggers were adopted 30 years ago. They have never been changed. The share of U.S. households that met the test in 1982 was 1.6 percent. It is now at least four times that share. The largest share of accredited investor households is retirees, many of whom struggled for decades to save their nest egg. Because accredited investors are eligible for private placement, they can be targeted with slick sales pitches without any SEC review or mandatory disclosure. The House bill removes current prohibitions against general solicitation or advertising for these private offerings, which most securities experts believe will have serious consequences. Under the current regulatory framework, if the SEC sees unregistered offerings being advertised, they can immediately close down the issuer, since they are breaking the law by publicly advertising or soliciting. Under the House bill, there will be a lot more solicitation of all investors, perhaps on late-night cable or the Internet, with the only protection being after the fact under antifraud principles or ex post inspections of sales records to see if the issuers appropriately sold only to accredited investors. SEC Commissioner Aguilar stated in his statement on March 16, 2012, that this provision may be a ``boon to boiler room operators, Ponzi schemers, bucket shops, and garden variety fraudsters, by enabling them to cast a wider net, and make securities enforcement more difficult.'' Realizing in a world of the Internet and Twitter that even private communications to accredited investors can be broadly disseminated, our bill takes a much more targeted approach to this issue. In our amendment, we allow for limited public solicitation and advertising that is done only in ways and through methods approved by the SEC. We are sympathetic to the fact that in a world of new media, it is increasingly difficult for issuers to control their outreach efforts to accredited investors. We believe our amendment gives the SEC the tools it needs to formulate a limited exemption to the general solicitation and advertising rules allowing private offerings to still be private. None of us wants this legislation to be a boon to boiler room operators and Ponzi schemers targeting our Nation's retirees or anyone else. Finally, I want to talk about the shareholder cap issue. What has become clear to me as a result of the capital formation hearings in the Banking Committee is that this issue of the appropriate number of shareholders to trigger routine reporting through the SEC is something that requires very careful consideration. The present 500 recordholder threshold was originally introduced to address complaints of fraudulent activity in the over-the-counter market for securities. Since firms with fewer than the threshold number of investors were not required to routinely disclose their financial information, outside buyers were not able to make fully informed decisions regarding their investments. The exchange act mandates that investors in over-the- counter securities be provided with equivalent information to that provided to investors trading stocks on the major exchanges if the company has 500 holders of record and at least $10 million in assets. Many believe this threshold needs to be updated. But the House bill dramatically increased the threshold from 500 to 2,000. Others believe raising this threshold to 2,000 would impair capital allocation and market efficiency, reducing public information about widely traded companies and denying investors appropriate information about companies. First, we believe the House bill risks allowing large companies with less than 2,000 recordholders--and listen to some of these companies: Hyatt, Hertz, Chiquita Brands, Adobe Systems, HCA Holdings--Hospital Corporation of America--Kaiser Aluminum, Royal Caribbean Cruises, Towers Watson, Ralph Lauren, and Accenture--and these are just some of them--to delist and go dark without disclosure or regulatory oversight. I think that would frustrate the expectations of many of their investors. As a result, we decided to take a more prudent approach in our amendment and raise the level from 500 to 750. At the same time, we believe the holder of record actually needs to be the beneficial owner of the security. This means he or she has power to vote the share or dispose of the share. Through our hearings on this matter, it is clear that many big firms are getting around this requirement by pooling shares in a street name, such as an investment company like JP Morgan. These big firms have many thousands or hundreds of beneficial owners that can sell and dispose of their shares and have the right to the dividends. But on the books of the company, it is just one recordholder. Our amendment eliminates this work-around and requires the holder of record to actually be the beneficial owner. We are also sympathetic to the fact that many more companies are starting to give their employees stock as part of their compensation plan. We are sympathetic to their desire not to have this prematurely trigger the Securities Exchange Act. Companies such as WaWa and Wegmans testified before the Banking Committee that they want to give their employees shares without forcing their company to have to go public. As a result, our amendment exempts employees for the recordholder account, which should allow firms to give as many shares as they want to their employees without forcing them to go public before they are ready. We think our provision achieves a better balance between market transparency through disclosures and investor protections and the needs of some of our most successful family-owned or privately held firms to reward their employees and maintain their private status. As we debate H.R. 3606, which could dramatically weaken the world leading brand that is the American public company, we should realize that we are undertaking a dramatic and perhaps unfounded experiment. We should also understand that deregulating our securities markets may have no effect whatsoever on the number of IPOs. Companies are desperate for funding since we just went through the biggest financial crisis since the Depression and lending is down. Deregulating our capital markets could temporarily infuse our markets with more cash, but at what cost? The cost could be quite great. As Jessie Eisinger stated in his ProPublica column on March 14: It's been about a year now since Chinese reverse-merger companies collapsed. In that scandal, dozens of those small Chinese companies went public in the United States without having to run the gauntlet of the Securities and Exchange Commission's registration rules. After they blew up by the boatload, the SEC cracked down and tightened its rules. Since then, short-sellers' pickings have been slim. By allowing new public small companies to not disclose financial information for years, the bill will provide new targets for short- selling hedge funds. Like Mr. Eisinger, I believe the House bill as currently drafted basically makes markets less transparent and more subject to manipulation. What the House bill clearly does not do is address the needs that I hear about from employers in my State. The economy consists of a lot of moving pieces. Economic recovery on its own will do more to reverse the decline in business activity than any provision in the House bill. Moreover, the House bill doesn't include provisions that I am hearing from Rhode Island employers would actually be helpful to creating jobs, such as Small Business Administration loans and export assistance. As a result, our amendment actually includes a number of already tried and true, tested job- creating measures. It is estimated, for example, that by reauthorizing the Export-Import Bank, our amendment would support an estimated 288,000 American jobs at more than 3,600 U.S. companies in more than 2,000 communities. Other provisions in our amendment would expand the Small Business Investment Company Program, supporting more small business startups in communities across the United States. Finally, we continue a modification to the Small Business Administration 504 Loan Program to allow for the refinancing for short- term commercial real estate debt. This provision has proved essential for many small businesses with short-term debt. As we have been looking at the House bill more closely, I think we have all been learning that it is not doing what it was advertised as doing, which is creating more jobs. We need to slow down and go through an appropriate amendment process in the Senate. As Barbara Roper, director of investor protection for the Consumer Federation of America, recently stated in a March 11, 2012, San Francisco Chronicle article, the House bill as currently drafted is ``completely bipolar.'' On one hand, we are trying to make it easier and less expensive for companies to go public. On the other hand, by increasing the shareholder threshold in the legislation, the House is actually encouraging and letting companies stay private or go private and avoid an IPO. I urge all my colleagues on both sides of the aisle to take up the Reed-Landrieu-Levin amendment as the base text of the legislation and engage in both a robust debate and amendment process. Our securities markets deserve just as much attention as our Nation's transportation system, and we spent several weeks dealing with the Transportation bill on the Senate floor. The Reed-Landrieu-Levin amendment is a much better place to start this debate on how to improve access to capital in our securities markets without opening them up to unnecessary fraud and manipulation. With that, I yield the floor and suggest the absence of a quorum.

Mr. REED

Mr. REED. Mr. President, the House of Representatives has just passed H.R. 3606, which is styled as a capital formation bill, but it is fundamentally flawed. As more and more people have looked closely at the bill, they have found more and more problems with it--problems that could roll back key consumer protections and dramatically decrease the transparency of our capital markets. One of the fundamental misconceptions in this bill is that we can have robust capital formation without good investor protections. My view is we can't have one without the other; that the strength of our market is the reliance investors have that they will have the right information and know enough about the entity they are investing in to make judicious, sound economic judgments. The Cantor bill would roll back many investor protections, would deny investors critical information that is essential to making sound judgments, and would ultimately not lead to the proposed goal of the bill--providing more access to capital, particularly for small, emerging companies. Serious concerns have been raised about the Cantor bill by current and former regulators in the last 2 weeks: Mary Shapiro, Chairman of the Securities and Exchange Commission; the North American Securities Administrators Association; Arthur Levitt, former Chairman of the SEC and head of AMEX; and Lynn Turner, former chief economist of the SEC. Some of the largest pension plans in the entire country have been weighing in through the Council of Institutional Investors, and these are the entities most people want to have invest in their companies as long-term investors. They have real concerns about the House action. We have been getting phone calls and letters from a diverse array of consumer groups, such as the AARP, the Consumer Federation of America, the AFL CIO, and SAFER, the Economists' Committee for Stable, Accountable, Fair, and Efficient Financial Reform. Academic experts, such as Professor John Coffee of Columbia University School of Law, for one, have called the Cantor bill the ``Boiler Room Preservation Act'' because it will mean more pump-and- dump schemes, where people are pressured to invest in highly risky firms and products. Two other noted securities experts from Harvard University Law School and Business School, respectively, John Coates and Robert Pozen, have said the bill does more than, in their words, ``trim regulatory fat; parts of it cut into muscle.'' We need to slow down this process and get it right. H.R. 3606 can be improved and should be improved. That is why I--together with Senators Mary Landrieu, Carl Levin, Sherrod Brown, Jeff Merkley, Daniel Akaka, Sheldon Whitehouse, Al Franken, Tom Harkin, and Dick Durbin--am introducing a substitute amendment to this bill today. We hope our legislation can serve as a base bill for the Senate to discuss and amend as we move forward. What are some of the most serious flaws we are trying to address in the Cantor bill? First and foremost, this bill is unlikely to create jobs, despite the title the House has bestowed upon it. In fact, it may actually have the opposite effect. By weakening investor confidence, it could actually decrease the number of IPOs and lead to fewer investments in our capital markets. Currently, our markets are considered the most transparent and liquid in the world, which has been one of its great strengths--the confidence that when an investor puts money into an American financial product and American market, he or she has detailed information about the current status and the prospects of that investment. Under the Cantor bill, our markets would become less transparent and more opaque. Fewer protections will be provided to investors. This could actually lead to fewer investors investing in the United States, since we are in a global economy or increasing competition with capital markets in London, Paris, Hong Kong, and Singapore--to name just a few. Again, one of the great hallmarks of our markets, starting in 1933 with the securities legislation of the New Deal, was the feeling that investors would be protected, that there would be standards in place, information would be made available to them, and they could have confidence--as much confidence as they could get--in their investments. If we undermine that confidence, eventually we will undermine both our appetite and capacity to invest. The Cantor bill has more problems. It tries to create a way that crowdfunding can be used to raise money for small enterprises, but it does this with very few protections for investors and would allow unregulated Web sites to peddle stock to ordinary investors without any meaningful oversight or liability. Crowdfunding is a very interesting new approach to raising capital. Our colleagues, Senators Merkley and Bennet have spent a lot of time developing very positive legislation which balances improving small business access to capital, by tapping into social networks and small investors but, at the same time, gives those investors adequate protections. The House has not taken this approach. They have legislation that could, indeed, create a situation where crowdfunding is plagued by fraud, by manipulation, and by people who simply want to make a quick buck and move on, hoping they will just disappear into the Internet. The Craigslist or eBay model may work to enable people to sell unwanted clothing, bikes, and other goods, but it certainly doesn't work for a financial security that requires a much more careful analysis than simply kicking the tires. People with more credit card debt than savings will be tempted to put their money into these mass- marketed, get rich schemes--money which they can't afford, in many cases. As the economy continues to grow, stocks will rise--we have seen some interesting and very positive developments on Wall Street over the last several weeks--but this ride up could be accompanied by bubbles with these types of crowdfunding schemes, where people are putting money in for a quick return based on, perhaps, the success of one or two companies but not having the information, not having the appropriate controls on the intermediaries so they can make a sound, valid investment. There is another aspect of the House legislation, in addition to this crowdfunding approach, which is the House IPO on-ramp provisions. An IPO, of course, is an initial public offering. This approach, to try to streamline access to the public markets for emerging companies, has great merit. But once again, what has happened in the House bill is they have done this at the expense of necessary protections for investors. Relaxing standards for very large, new public companies, when no evidence supports the idea those standards stand in the way of these IPOs and much evidence suggests the standards prevent serious accounting problems, is not the way to go. The basic essence of their approach--this on-ramp approach--is a very large company, with up to $1 billion in revenue, for a period of 5 years or so, can avoid some of the now standard requirements for public companies. This is not an targeted approach for small companies. Companies with $1 billion of revenue are substantial economic enterprises. The protections that have been put in place over the years not only protect the investors but also ensure appropriate audit procedures are in place. Ensuring appropriate managerial behavior for a company of that size should not be indefinitely waived or waived for a period of 5 years. We could literally roll back the clock to pre-Enron, pre-WorldCom, where because of creative accounting, because of the lack of adequate audit procedures within the company, real abuses occurred. The result was Enron collapsed and their shareholders were left with virtually nothing. One of the more tragic ironies is that many of their shareholders were their employees who had their entire pensions invested in the company, particularly in the case of Enron. Ultimately, the pain to these people, caused by the lack of good standards--which have since been put in place--was significant. If we proceed on this, we might, once again, have a situation where we are repeating industry--and a history we have seen already. Again, as the economy rebounds, as stocks rise, I think there will be a variable increase in new public offerings--IPOs. If we look at the data, the number of IPOs goes up and down. But the most significant factor is simply economic activity. As economic activity goes up, new companies have opportunities, IPOs go up. In this boom, there could be the temptation for these companies, given these new, very relaxed standards, to ignore the problem because they do not have to disclose them adequately or to deliberately mislead investors because there is no real check on what is being said. The relaxed standards in the House bill could allow companies to engage in deception, to raise and waste more investment money more quickly. There is a way we can dial back this excessive legislation in a way that will provide capital formation but will also provide protections for investors, and I hope we can proceed in that manner. Increasing IPOs is a valuable goal, but it should be done much more cautiously, in my estimation, with reforms focused on much smaller companies than those with $1 billion in annual revenue, as is indicated in the Cantor bill. During the course of three hearings in the Senate Banking Committee on these issues, it has become even more clear there are problems with the way shareholders are being counted. This is another aspect of the House bill that is problematic. They have indicated they would like to move beyond a number--500--which requires a company register under the 1934 Securities and Exchange Act with the SEC. This trigger is something that should be considered in terms of present-day standards. The House bill raises this trigger point to 2,000 very quickly, without dealing with the so-called beneficial owners problem. If the provision in the House bill was in force in the past, two-thirds of current public companies would not have been required to register under the 1934 Act. Let me say that again. If you reach a certain number of shareholders, you are required to register and begin to give those shareholders required information on a quarterly basis. You are required to file other forms. You are required to be subject to other rules and regulations of the SEC. If this new House standard of 2,000 shareholders was in place, two- thirds of current public companies would not have to register with the '34 Act. They would be operating in the dark. They would be operating with whatever minimal information they might be required to divulge to their shareholders under State corporate law or, in some cases, State securities law. That is an astounding number of companies. Most investors take for granted that when you reach a critical size in the number of shareholders, et cetera, that you will begin to report. Again, these reports are the lifeblood of the investing community because they rely upon them for their information about what is going on in the company, and they rely upon them for the standards that company has to follow. Over time, most investors as a result of registration under the '34 Act are entitled to receive regular disclosures. Again, these provisions raising up the level to 2,000 shareholders would undermine the other stated goal of the Cantor bill, to make it easier for companies to go public and easier to disclose information. In fact, some would describe this as sort of a bipolar piece of legislation. On the one hand, they want to relax the standards for going public, and on the other hand they want to relax the standards and allow more companies to go private. I think we have to be careful in each instance to ensure that investors are protected, as well as capital formation is enhanced. The House bill will eliminate an SEC rule on general solicitation, allowing companies to advertise risky, less regulated, unregistered private offerings to the public using, for example, billboards along highways, cold calls to senior living centers, or other mass marketing methods. It also will tear down protections that were put in place after the late 1990s Internet stock bubble burst that prevented conflicts of interest from tainting the quality of research about companies. What we found in the wake of the dot-com bubble--with many protections in place that would be taken out by this legislation--was there were analysts who were touting companies at the same time other parts of their business were trying to sell those companies' shares. This conflict of interest with someone you hope is giving an objective opinion would be encouraged, not discouraged, under the House bill. The Cantor bill would allow extremely large corporations to avoid SEC oversight. It also would allow banks, with even hundreds of billions of dollars in assets, to deregister and stop being subject to SEC oversight and critical investor protections. Finally, the Cantor bill actually doesn't include provisions that are more likely to create jobs for Americans. For example, the House bill does not include reauthorization of the Ex-Im Bank. Time is of the essence, by the way, to get this Ex-Im Bank reauthorized. The bank's temporary extension expires at the end of May and is close to exceeding its operating level of $100 million by the end of this month. Renewing the Ex-Im Bank's charter with increased lending authority is practically the only way of countering the predatory financing practices of other trading nations. We spend a lot of time on this floor pointing the finger at companies that are using their sovereign institutions to undermine American jobs, to get them overseas. Yet one of the major institutions in our country that helps American products to be sold overseas is literally in danger of going out of business. That is something that will, in fact, enhance job creations, and it is not in the House bill. In fact, it has been suggested that Ex-Im Bank activities supports almost 300,000 jobs in the United States each year. It also doesn't include two other programs that would result in the creation of more jobs, and these two programs are particularly the result of the hard and aggressive and thoughtful work of Senators Landrieu and Snowe. One program expands the capacity of the Small Business Investment Company program, SBIC. They have proposed legislation that would allow another $1 billion in equity-like financing for smaller, fast-growing firms. The other program would extend for 1 year the SBA's 504 refi loan program to help firms refinance commercial real estate into long-term, fixed-rate loans. These modifications have created and saved hundreds of thousands of American jobs at no cost to the taxpayers. These are tried and true ways to increase jobs in America without running the risk of undermining the information that investors need to make sound choices about where to invest their dollars. It is very tempting to suggest we simply have to cut a couple of regulations and jobs will expand. That was the theme that was rampant here during the Bush administration and, for a while, frankly, it looked like it was working. But then, with the sudden and colossal collapse, we knew that was not the path to long-term sustained job creation. Sound investment based on adequate information in companies that produce jobs in the United States is the way to proceed. We need to listen to those individuals charged with the supervision of our capital markets, the SEC, and now we have both the current chairman and a former chairman saying the legislation the House proposed is a threat to all investors in this country. The stakes are high if we get some of these things wrong. We have been trying to focus on these issues intensely for the last few months to bring legislation to the floor that will balance capital formation with investor protections. You can't get one at the expense of the other. You have to have both. So I encourage all my colleagues to take a close look at the Reed- Landrieu-Levin substitute. I believe it is a substantial improvement to the House bill. My colleague from Louisiana will speak and, once again, I must commend her passion for protecting investors, particularly small investors, and her passion for creating jobs through the SBA and other organizations as remarkable, commendable, and indeed exceptional. Madam President, I yield the floor.

Mr. REED

Mr. REED. Mr. President, I introduce the Project Rebuild Act today, and I thank Senators Durbin, Schumer, Leahy, Akaka, Sherrod Brown, Whitehouse, Merkley, Begich, Franken, and Blumenthal for joining me as original cosponsors of this bill. Rhode Island, like America, is facing a foreclosure crisis. The bill we are introducing offers an opportunity to address this crisis-- tackling foreclosures and affordable rental housing at the same time. Building upon the successful, proven, and bipartisan Neighborhood Stabilization Plan, NSP, which has helped put Americans back to work stabilizing neighborhoods, the Project Rebuild Act could provide $43 million for Rhode Island to help create jobs and overhaul distressed neighborhoods and commercial properties. Nationwide, about $10 billion would be directed to States and local governments through a formula modeled after NSP, and $5 billion would be distributed through new competitive grants. We are facing a challenging budget environment, but this is the right time to make smart investments in strengthening our communities, putting more construction workers back to work, and bolstering the economy. This initiative will provide a flexible source of funding to help local communities leverage federal dollars to effectively address vacant and blighted properties. In communities across Rhode Island and the country, we have seen how the foreclosure crisis has affected not just those who have lost their homes, but also how it has impacted entire neighborhoods. I helped ensure that Rhode Island would receive additional NSP funding to assist communities hit hardest by the foreclosure crisis. Based on my visits to many NSP sites in Rhode Island, the State's NSP allotment of $26 million is making a difference in neighborhoods all over the State. This crucial investment in Rhode Island has not only begun to help reverse the fallout from foreclosures, but has also provided families with affordable rental housing. But more needs to be done. According to the Department of Housing and Urban Development, despite three rounds of NSP funding, ``there is unaddressed high need in more than 76 percent of high need census tracts across the country.'' According to the Federal Reserve's recent housing white paper, the number of new homes that will have completed the foreclosure process could be as high as 1 million properties per year in 2012 and 2013. We need to act to gain traction in our housing market so that we can firmly anchor a sustainable economic recovery that actually reaches and touches all Americans. The Project Rebuild Act takes us in the right direction towards gaining this needed traction by making important enhancements to NSP, such as broadening eligible uses to include commercial vacancies. It would offer new grants for fixing up vacant commercial properties, complementing the abilities of private developers. It would also increase support for ``land banking.'' Land banks work with communities to buy, hold, and redevelop distressed properties as part of a long-term redevelopment strategy. Our bill would help more communities utilize successful land bank models and provide additional resources for Rhode Island Housing's Land Bank. The U.S. Department of Housing and Urban Development, HUD, estimates Project Rebuild could create over 190,000 jobs and renovate 150,000 properties nationwide. Just as NSP was supported on a bipartisan basis, I hope we can build bipartisan support for this effort to help revitalize neighborhoods, create jobs, and accelerate economic growth. I urge my colleagues to join us in supporting this bill and other efforts to address foreclosures and bolster our nation's recovery.

Mr. REED

Mr. REED. Mr. President, I introduce the Project Rebuild Act today, and I thank Senators Durbin, Schumer, Leahy, Akaka, Sherrod Brown, Whitehouse, Merkley, Begich, Franken, and Blumenthal for joining me as original cosponsors of this bill. Rhode Island, like America, is facing a foreclosure crisis. The bill we are introducing offers an opportunity to address this crisis-- tackling foreclosures and affordable rental housing at the same time. Building upon the successful, proven, and bipartisan Neighborhood Stabilization Plan, NSP, which has helped put Americans back to work stabilizing neighborhoods, the Project Rebuild Act could provide $43 million for Rhode Island to help create jobs and overhaul distressed neighborhoods and commercial properties. Nationwide, about $10 billion would be directed to States and local governments through a formula modeled after NSP, and $5 billion would be distributed through new competitive grants. We are facing a challenging budget environment, but this is the right time to make smart investments in strengthening our communities, putting more construction workers back to work, and bolstering the economy. This initiative will provide a flexible source of funding to help local communities leverage federal dollars to effectively address vacant and blighted properties. In communities across Rhode Island and the country, we have seen how the foreclosure crisis has affected not just those who have lost their homes, but also how it has impacted entire neighborhoods. I helped ensure that Rhode Island would receive additional NSP funding to assist communities hit hardest by the foreclosure crisis. Based on my visits to many NSP sites in Rhode Island, the State's NSP allotment of $26 million is making a difference in neighborhoods all over the State. This crucial investment in Rhode Island has not only begun to help reverse the fallout from foreclosures, but has also provided families with affordable rental housing. But more needs to be done. According to the Department of Housing and Urban Development, despite three rounds of NSP funding, ``there is unaddressed high need in more than 76 percent of high need census tracts across the country.'' According to the Federal Reserve's recent housing white paper, the number of new homes that will have completed the foreclosure process could be as high as 1 million properties per year in 2012 and 2013. We need to act to gain traction in our housing market so that we can firmly anchor a sustainable economic recovery that actually reaches and touches all Americans. The Project Rebuild Act takes us in the right direction towards gaining this needed traction by making important enhancements to NSP, such as broadening eligible uses to include commercial vacancies. It would offer new grants for fixing up vacant commercial properties, complementing the abilities of private developers. It would also increase support for ``land banking.'' Land banks work with communities to buy, hold, and redevelop distressed properties as part of a long-term redevelopment strategy. Our bill would help more communities utilize successful land bank models and provide additional resources for Rhode Island Housing's Land Bank. The U.S. Department of Housing and Urban Development, HUD, estimates Project Rebuild could create over 190,000 jobs and renovate 150,000 properties nationwide. Just as NSP was supported on a bipartisan basis, I hope we can build bipartisan support for this effort to help revitalize neighborhoods, create jobs, and accelerate economic growth. I urge my colleagues to join us in supporting this bill and other efforts to address foreclosures and bolster our nation's recovery.

Mr. REED

Mr. REED. Mr. President, the average Rhode Islander remains worried about the economy and their future. There are some signs that offer hope in the economy, but for too many, good news still eludes them. Congress has the ability and the obligation to reinvigorate the recovery, boost demand, and create jobs. Unfortunately, because of Republican obstructionism, Congress has not been able to act and produce the kind of results the American people and Rhode Islanders are asking for, mainly more jobs. In fact, Republicans have manufactured crises. Last summer they jeopardized the full faith and credit of the United States by refusing to raise the debt ceiling, and in December, they threatened to cut off jobless benefits to millions of out-of-work Americans looking for a job and raised taxes on the middle class by not extending the payroll tax cut. Fortunately, this conference report avoids last-minute threats of financial calamity or economic ruin. This compromise will continue the payroll tax cut for 160 million working Americans and jobless benefits for millions of unemployed individuals looking for work all through 2012. What I find most disconcerting in the debate preceding this conference report and the deal that we struck with Republicans is their view of the reasons why Americans are out of work. As economists have shown, Americans are out of work because of the weak economy and the unwillingness by many in this body to do something about it. Republicans believe that slashing the duration of unemployment benefits will yield jobs. This is a view that is harmful to many in my State. Republicans in the House would have cut benefits immediately from its current maximum of 99 weeks, targeted towards the hardest hit States, to 59 weeks. This would have hurt families and the economy. The relatively small weekly UI benefit can be the difference between paying rent and putting food on the table and ensuring the survival of local businesses. The White House, as part of a broad jobs plan, which was designed to appreciably reduce the unemployment rate, also proposed to reduce the maximum amount of jobless benefits from 99 to 79 weeks. This proposal made sense as part of a broad package that would help Americans get back to work. However, Republicans blocked that jobs package and cherry-picked the 79 weeks from the President's proposal and presented that as the Democratic starting point. I and my fellow Democrats during negotiations stressed that existing law is 99 weeks; and, in fact, under this conference report 99 weeks will continue for many States through April and May. Democrats were able to ensure that the ultimate reduction to 73 at the end of the year was gradual and that the maximum aid continued flowing to the highest unemployment States. Senate and House Democrats were also successful in including important and commonsense reforms to the unemployment insurance system that will bolster reemployment services for the unemployed. There is also a key provision to help prevent the loss of jobs in the first place. My work sharing legislation that was included in this bill will provide $500 million to enhance and expand the use of a proven initiative to help keep Americans on the job and provide employers with a practical alternative to layoffs that is good for business. This voluntary program has been very successful in Rhode Island, saving over 10,000 jobs. Economist Mark Zandi estimates that temporary financing of work share offers a very high ``bang for the buck'' of $1.69. Work sharing allows businesses to retain skilled workers, temporarily cut costs, and maintain employee morale. It keeps people working while receiving a share of unemployment benefits to make up for lost wages and retaining health insurance and retirement benefits. This means workers can continue to pay their mortgages and bills, provide for their families, and support businesses in their local communities. More than 20 States have adopted work-sharing initiatives. By including this provision in the conference report, we are encouraging States with existing layoff prevention systems to utilize them more frequently and incentivizing States without work sharing to create them. This compromise also improves work search requirements and helps States recover benefit overpayments. Importantly, we prevented Republican UI proposals that would have required a GED to collect UI benefits; this proposal would have disproportionately and unfairly harmed older workers. And, it could have led to the denial of benefits, despite the efforts of the unemployed worker, because access to a GED program was unavailable. Republican efforts to cut adult education funding have and will continue to limit access to these education services. In addition, this conference report includes an agreement that will create a critically needed nationwide wireless communications network for public safety, while also allowing the Federal Government to auction off portions of the wireless spectrum that it no longer needs. I fought against language in the House bill that the Department of Defense stated would be damaging to our Nation's defense capabilities by forcing the Department to withdraw from certain portions of the wireless spectrum that it currently uses. I am pleased that the conference report does not include this language. The compromise also ensures approximately 181,000 Rhode Islanders on Medicare will continue to have access to health care services by preventing a 27-percent cut in Medicare payments to doctors. And it provides over $7 million for Rhode Island to help an estimated 4,000 parents and children every month through December retain their Medicaid coverage as they transition to employment and increase their earnings. While I am pleased that I helped prevent any benefit cuts to seniors on Medicare and other low-income individuals and families to pay for the extension of these health care programs, included in the proposal offered by Republicans in the House, I am disappointed that the compromise includes reductions in Medicare payments to hospitals, nursing facilities, and clinical laboratories. There was a better way to pay for this legislation. Congress could have closed egregious corporate subsidies and made our tax system fairer. Unfortunately, Republicans refused. But overall, this compromise continues important policies that help the middle class. But Congress still has much work to do to create jobs and restore economic opportunity and fairness. I will continue to press for passage of innovative job creation strategies to accelerate our economic recovery.

Mr. REED

Mr. REED. Mr. President, I rise today to join with my colleague and friend from Rhode Island to pay tribute to former Rhode Island Governor J. Joseph Garrahy, who passed away last week at the age of 81. Joe Garrahy loved Rhode Island, and in turn the people of Rhode Island loved Joe Garrahy. His intelligence, his instinct, and his integrity led our State with compassion and courage. He believed in the people of Rhode Island and in the virtue of public service. More than three decades after he left public office, Joe Garrahy remains one of our most respected and beloved leaders. A man of the people, the Governor of Rhode Island, Joe Garrahy, is a Rhode Island icon who will be held in high esteem for generations to come. Rhode Islanders lost a friend. We all lost a good friend. John Joseph Garrahy was born in humble circumstances in Providence, Rhode Island, on November 26, 1930, the son of Irish immigrants. He graduated from La Salle Academy in Providence and attended the University of Buffalo and the University of Rhode Island. The Governor began his political career in 1962 when he was elected to represent Smith Hill in the Rhode Island General Assembly. He served as Rhode Island's Lieutenant Governor from 1969 to 1976, and then was elected Governor and served from 1977 to 1985. After his retirement from public life, Governor Garrahy was a business consultant who championed new economic development projects and helped existing businesses that have always been the backbone of our economy in Rhode Island. He never stopped looking for and finding new ways to promote his beloved State of Rhode Island. As Governor, Joe Garrahy had vision, initiative, and an incredibly strong work ethic. He possessed the unique ability to bring people together to address their needs at the most basic level, while at the same time tackling the most pressing public policy issues of his time. He was also particularly gifted in bringing together opposing sides and would often invite diverse interests into the room to discuss issues and matters of conflict. Because of his integrity, his decency, and his sincerity, he was more than an honest broker; he was someone people trusted. His leadership and his example led Rhode Island with special distinction. He brought people together because they innately trusted this kind and wise gentleman. They knew he always had the interests of the State at heart, not his personal ambition, not his personal progress, but the welfare of the people of Rhode Island. His list of achievements is long. His many good works have made a lasting impression on our State. He believed government could and must do all it can to improve the lives of its citizens. He was elected Governor after the Navy decided to close Quonset Point--which was a premier naval air station in Rhode Island, a major employer and a major source of economic activity--and reduced its presence in Newport. This was a shock to the economy of Rhode Island. In spite of double-digit unemployment and the challenging economy that was worsened by this departure, he set a new course to redirect resources and make government work for the people. He fought for the rights of the disabled and led in the deinstitutionalization of the mentally disabled citizens of Rhode Island. He closed the Ladd School, which was our residential center, and he literally ended the practice of warehousing the disabled at the Institute of Mental Health. He reformed Rhode Island's prison system, which was plagued with unrest and violence, transforming it to a national model. Following the energy crisis in the 1970s, the Governor provided resources to a much needed energy office to look for innovative ways to deal with a problem that still challenges the State and the Nation. He also forged creative partnerships with neighboring States throughout the Northeast and with leaders in Canada. Governor Garrahy was a man of great passion, great decency, and he had a special affection for the elderly and the children of Rhode Island. Under his tenure he created the Department of Elderly Affairs and Children, Youth and Families, he said, to focus the attention of the State and make the delivery of services to these seniors and children more efficient and more effective. That was Joe Garrahy-- thinking not about himself but, in particular, thinking about the most vulnerable people in our society. He was always a great cheerleader for Rhode Island. He led the way for the Rhode Island Heritage Commission to flourish and to publicize and popularize our State's unique contributions to American history and its rich cultural heritage--a rich ethnic heritage which he was awfully proud of. He was always a staunch supporter of our tourism industry. He also had a profound respect and regard for the environment and worked diligently to clean up pollution in Narragansett Bay and preserve our open spaces. He helped establish the Narragansett Bay Commission, which is one of the leading agencies in the State that treats our waste products and makes sure they are not discarded untreated into the bay. In fact, his efforts--with foresight years ago--paved the way for one of the largest projects ever completed in the State of Rhode Island, which now prevents sewage from flowing into our bay unabated. But this was just one of the extraordinary commitments he made to our environment. He was always looking to bring businesses to Rhode Island--high-tech businesses, along with businesses that would provide people the chance for employment, the chance to own a home, and the chance to provide for a better life for their children. He worked to revitalize, particularly, the downtown Providence area through his work with the Capital Center Commission, which did landmark work in literally reshaping the face of Providence, making it one of the most attractive and most compelling cities in our country. Throughout his administration, he always worked for public transportation facilities, and everything that would complement our economic growth. He did it with great passion, great diligence and, again and again and again, extraordinary decency. In his final days in office he launched The Greenhouse Compact, which was a bold economic revitalization plan. He proposed to create 60,000 high-paying jobs and lay the foundation to combat the dying manufacturing industries of the State of Rhode Island at that time. And although the compact was not approved by the voters--there were concerns about how it would be paid for--many of its proposals have come to fruition; a tribute again to his foresight, to his vision, to his courageous leadership, and to his confidence, that bringing these issues to the people would eventually lead to their adoption. And they have. Joe Garrahy was the person you wanted leading you in difficult times, and there was no more difficult time than in 1978, when the great blizzard descended upon Rhode Island. Literally, Rhode Island was paralyzed. You couldn't move. People were without communication, without electricity. But there was one constant beacon of hope and stability and strength, and that was Governor Joe Garrahy. He was the voice who quelled the anxiety--the fear, frankly--that this natural disaster would overwhelm us. In time of great turmoil, he was there. He assured us that help was on the way. And in what has become a famous historic relic in the State of Rhode Island, he did it all wearing the same plaid shirt, it seemed. That plaid shirt was a symbol of him: Nothing fancy; someone you could trust; someone you could depend upon; someone who rolled up his sleeves to get the job done for the people of Rhode Island to literally, in some cases, save people in a very demanding natural disaster through his leadership. He was, as I say again and again, one of the most decent individuals I have ever met. He was so kind to me, so understanding, so tolerant. And I am not alone. I recall something that was said about another great American, Franklin D. Roosevelt. He was in his final position; the cortege was going down Pennsylvania Avenue. There was an individual by the side of the road who was weeping, literally. A reporter went up to him and said, Well, you must have known the President; you are so upset. And he said, No, no; I didn't know him, never met him. But he knew me. Joe Garrahy knew the people of Rhode Island. He was a man of innate decency and goodness. He believed that every situation had some merit, a silver lining, something he could do to bring forth good out of bad, progress out of adversity. He was a man of deep faith, who worked hard, and remained optimistic and compassionate in every moment. He was a noble public servant. That word is used often, but no more accurately than with respect to Joe Garrahy, a man of nobility--a nobility born not of privilege or wealth but of character, conscience, and concern. He had an extraordinary winning personality. He was one of those people you wanted to bump into because he made you feel better. His warm, embracing personality, his humor, his friendliness, his caring, his sincerity, all those things transmitted this sense of knowing you and caring for you--which was unique and will never, I think, in my mind, be replicated by any of us in Rhode Island. Whenever you were with the Governor, you always felt a little bit better about where you were, about the future, and about the world. He was fond of people, and that fondness was repaid by a deep sense of gratitude for what he has done and profound respect for a wonderful man. But above all this, he loved his family the most. He was a devoted husband, father and, as he was described by his grandchildren, their Poppy. We remember him now, and we also remember his family because they have lost a great man. But he did so much for all of us to make us bigger and better that we can withstand this great loss. I want to join with my fellow Rhode Islanders in offering my heartfelt sympathy to his wonderful wife Margherite and his wonderful family, Colleen and Michael Mahoney, their children Ryan and Michaela; John and Barbara Cottam Garrahy, their daughters Katherine and Elizabeth; Maribeth and Robert Hardman and their son Wesley; Sheila and Gregory Mitchell and their children, CJ, Todd, and Chad; and Seana and Michael Edwards and their children Drew, Brayden, and Ellie Rose. We will miss him. But his legacy and his personal example of kindness and good will continue to sustain and inspire us. Today, we celebrate his life, and in the days and weeks and years to come we will remember him fondly as one of Rhode Island's greatest Governors. We are all the better for having Joe Garrahy in our Biggest Little State.

Mr. REED

Mr. REED. Mr. President, today I introduce with my colleagues Senators Whitehouse, Sanders, Stabenow, and Franken legislation to stop the student loan interest rate from doubling on July 1 of this year. This is an issue that weighs heavily on many of Rhode Island's students and families who rely on student loans to finance college. Rhode Island's college graduates have the ninth highest student debt total in the Nation, according to a recent study by the Project on Student Debt. In Rhode Island, 67 percent of students graduating from four-year colleges and universities in the 2010 school year had debt averaging over $26,300. Nationwide, the Department of Education estimates that more than 10 million students will borrow subsidized Stafford Loans in fiscal year 2012. Unless we act soon, they will see their interest rates double for the upcoming academic year. In 2007, Congress made a historic investment in higher education by passing the College Cost Reduction and Access Act. Included in this law was a provision that reduced the fixed interest rate on Stafford Loans for undergraduate students from 6.8 percent to 3.4 percent over a 4 year period, easing the financial burden on millions of students and their families. This was the right investment to make for our future. Today, education, particularly higher education, is even more essential than ever. In 1980, the gap between the lifetime earnings of a college graduate and a high school graduate was 40 percent. In 2010, it was 74 percent. By 2025, it is projected to be 96 percent. Since at least the 1980s, we have not been producing a sufficient number of college- educated workers to meet the demand of a more sophisticated and challenging economy driven by global competition. Indeed, our country lags behind in college education, ranking 14 in international comparisons of college graduates. For young adults, ages 25 to 34, we rank 16. This is no time to make financing a college education more expensive for middle class families. Yet, absent enacting this legislation, that is what will happen. According to an analysis by U.S. PIRG, allowing the interest rate to double could cost borrowers who take out the maximum $23,000 in subsidized student loans approximately $5,000 more over a 10-year repayment period. The subsidized student loan program for undergraduates is highly targeted to low- and middle-income families. Approximately 37 percent of the dependent borrowers in this program come from families with annual incomes of less than $40,000. An additional 21.6 percent of students receiving subsidized students loans come from families with incomes between $40,000 and 60,000 per year. These students receive very little, if any, benefit from the Pell grant program but still have significant financial need. The subsidized student loan program is our main vehicle for addressing that need. Tax loopholes and giveaways that let the biggest companies ship jobs overseas cost roughly $37 billion over ten years. Loopholes like this one should be ended, with those savings used to prevent an increase in college costs, which are already a crushing burden on families. Indeed, those savings are more than enough to extend the student loan interest rate at least through the next reauthorization of the Higher Education Act, expected in 2014. I would that my colleagues on both sides of the aisle will support helping millions of middle class families finance a college education over continuing to provide incentives for companies to take jobs and their investments overseas. In his State of the Union Address, President Obama called on Congress to prevent this doubling of student loan rates. As families continue to struggle with the rising cost of college and newly minted graduates face one of the toughest job markets since the Great Depression, it is vital that we protect middle class families and their children from higher student loan rates.

Mr. REED

Mr. REED. Mr. President, today I introduce with my colleagues Senators Whitehouse, Sanders, Stabenow, and Franken legislation to stop the student loan interest rate from doubling on July 1 of this year. This is an issue that weighs heavily on many of Rhode Island's students and families who rely on student loans to finance college. Rhode Island's college graduates have the ninth highest student debt total in the Nation, according to a recent study by the Project on Student Debt. In Rhode Island, 67 percent of students graduating from four-year colleges and universities in the 2010 school year had debt averaging over $26,300. Nationwide, the Department of Education estimates that more than 10 million students will borrow subsidized Stafford Loans in fiscal year 2012. Unless we act soon, they will see their interest rates double for the upcoming academic year. In 2007, Congress made a historic investment in higher education by passing the College Cost Reduction and Access Act. Included in this law was a provision that reduced the fixed interest rate on Stafford Loans for undergraduate students from 6.8 percent to 3.4 percent over a 4 year period, easing the financial burden on millions of students and their families. This was the right investment to make for our future. Today, education, particularly higher education, is even more essential than ever. In 1980, the gap between the lifetime earnings of a college graduate and a high school graduate was 40 percent. In 2010, it was 74 percent. By 2025, it is projected to be 96 percent. Since at least the 1980s, we have not been producing a sufficient number of college- educated workers to meet the demand of a more sophisticated and challenging economy driven by global competition. Indeed, our country lags behind in college education, ranking 14 in international comparisons of college graduates. For young adults, ages 25 to 34, we rank 16. This is no time to make financing a college education more expensive for middle class families. Yet, absent enacting this legislation, that is what will happen. According to an analysis by U.S. PIRG, allowing the interest rate to double could cost borrowers who take out the maximum $23,000 in subsidized student loans approximately $5,000 more over a 10-year repayment period. The subsidized student loan program for undergraduates is highly targeted to low- and middle-income families. Approximately 37 percent of the dependent borrowers in this program come from families with annual incomes of less than $40,000. An additional 21.6 percent of students receiving subsidized students loans come from families with incomes between $40,000 and 60,000 per year. These students receive very little, if any, benefit from the Pell grant program but still have significant financial need. The subsidized student loan program is our main vehicle for addressing that need. Tax loopholes and giveaways that let the biggest companies ship jobs overseas cost roughly $37 billion over ten years. Loopholes like this one should be ended, with those savings used to prevent an increase in college costs, which are already a crushing burden on families. Indeed, those savings are more than enough to extend the student loan interest rate at least through the next reauthorization of the Higher Education Act, expected in 2014. I would that my colleagues on both sides of the aisle will support helping millions of middle class families finance a college education over continuing to provide incentives for companies to take jobs and their investments overseas. In his State of the Union Address, President Obama called on Congress to prevent this doubling of student loan rates. As families continue to struggle with the rising cost of college and newly minted graduates face one of the toughest job markets since the Great Depression, it is vital that we protect middle class families and their children from higher student loan rates.