Paul Sarbanes

Mr. SARBANES

Mr. SARBANES. Mr. President, we are prepared to continue debate on this measure. Mr. President, that is the last vote today. If there are Members who wish to speak on the bill--earlier I thought there were and I am now not certain--we would be prepared to stay on in order to get that done and thereby help to clear the deck so we can move ahead tomorrow with respect to other amendments and towards final passage of this legislation. I have no one at the moment indicating any desire to speak.

Mr. SARBANES. Mr. President, I move to reconsider the vote.

Mr. SARBANES. I understand exactly what the Senator is referring to. The Presidential set-aside of foreign availability status determination, which is section 212, is designed to encourage the President, in a foreign availability issue, to achieve, if possible, a multilateral agreement through international negotiations. And that is sort of spelled out in there as part of the purpose. You know, we emphasize negotiations, the reports to the Congress, the periodic review of determination, and the expiration of the set-aside at a certain period, although he can renew it for 6 months over three times, for an 18-month period. Over and above that, the President is given an enhanced control authority in section 201(d). That is on page 183, section 201(d). Let me read that because I think it makes it clear that, without being bound up in the process of section 211: Notwithstanding any other provisions of this title, the President may determine that applying the provisions of section 204 or 211-- Section 204 is the parts and components section. ``Incorporated Parts and Components,'' is section 204. Section 211 is, of course, the ``Foreign Availability and Mass-Market Status'' section-- the President may determine that applying the provisions of sections 204 or 211 with respect to an item on the National Security Control List would constitute a significant threat to the national security of the United States and that such item requires enhanced control. If the President determines that enhanced controls should apply to such item, the item may be excluded from the provisions of section 204, section 211, or both until such time as the President shall determine that such enhanced control should no longer apply to such item. The President may not delegate the authority provided for in this section. That is a pretty far-reaching authority. We seek the President's determination on that. Then the only report is, the President shall promptly report any determination described in paragraph 1 along with specific reasons for the determination to the Banking Committee in the Senate and the International Relations Committee in the House.

Mr. SARBANES. Sure.

Mr. SARBANES. Surely 212 defines how the President can carve out from 211 foreign availability, and 213 defines how the President can set aside mass market status determinations, both of which are in section 211. So 211 sets out these things, and then 212 and 213 provide the Presidential carve-out from the requirements of 211. This isn't relevant if the President invokes section 201(d) because 201(d) in effect negates section 211. So there is no reason to go to the carve- outs in 212 or 213. The President doesn't have to invoke 201(d). And he can do the carve-outs according to 212 and 213, depending on whether it is foreign availability or mass market.

Mr. SARBANES. No. I don't want to bring in 201(d) under 212 or 213 because 201(d) is over and above 212 and 213. This is a tremendous authority to give to the President. It is over and above. If you subsumed them under, then you would be creating problems.

Mr. SARBANES. I thank the Senator, and I thank the Senator from North Carolina for his usual courtesy in allowing us to have this exchange.

Mr. SARBANES. Mr. President, I rise in very strong support of S. 149, the Export Administration Act of 2001. Earlier this year, I was pleased to join with my colleagues, Senator Enzi, Senator Johnson, and Senator Gramm, in introducing this legislation. This legislation was reported out of the Senate Banking, Housing, and Urban Affairs Committee by a vote of 19-1. It was a bipartisan vote, obviously, of 19-1. The legislation has been very strongly endorsed by the administration. That was in early April of this year. The Export Administration Act provides for the President to control exports for reasons of national security and foreign policy. Let me begin by saying I believe there is a very strong national interest in reauthorizing the Export Administration Act. I think that is a view held by a clear majority of the Congress. It is important to understand a bit about the historical situation as we consider this legislation. Regrettably, the Export Administration Act has not been reauthorized since 1990, except for three temporary extensions in 1993, in 1994, and again last year. At the end of the last Congress, we passed a temporary extension of the Export Administration Act that expired on August 20 of this year, just a few weeks ago. Prior to this most recent temporary extension and since the EAA expired on August 20, the authority of the President to impose export controls has been exercised pursuant to the International Economic Emergency Powers Act, the so-called IEEPA. This is generally how we have been functioning throughout this decade with respect to export controls. I believe strongly that Congress should put in place a permanent statutory framework for the imposition of export controls. They should not be imposed pursuant to an emergency economic authority of the President. It can be done that way. It has been done that way. That is the currently existing situation. But I don't think that is the most desirable way to proceed. It doesn't give you the most substantial statutory framework, obviously. It doesn't introduce an element of stability and permanency into the arrangements. In fact, I believe strongly that this legislation provides greater protection for national security and foreign policy concerns than is provided under IEEPA or provided under the previous Export Administration Act. Just one example: The penalties that can be imposed under IEEPA for violation of export controls are significantly less than the penalties that are provided for in the legislation that is before us. Let me repeat that. Under the current arrangement in which the export control regime has been put in place by the President's invoking of his economic emergency powers, the penalties for violation are substantially less than the penalties which we provide in this legislation. This legislation is a carefully balanced effort to provide the President authority to control exports for reasons of national security and foreign policy while also responding to the need of U.S. exporters to compete in the global marketplace. I point out that effective competition by U.S. exporters in the global marketplace, which will strengthen their economic position--that is, the economic position of U.S. exporters--and thereby strengthen the economic position of the United States in the global marketplace, also has important national security and foreign policy implications for the United States. In the end, our national security and foreign policy strength rests in part on our economic strength. I think we need to keep that in mind as we consider this legislation. In preparation for acting on this legislation, the Banking Committee this year held two hearings with representatives of industry groups and former Defense Department officials. I might note that the committee held extensive hearings in the prior Congress with respect to this issue. So there has been a continual period now, over a number of years, of very careful examination of export controls and how to address this matter. Extensive consultation took place with representatives of the new administration, including the Commerce Department, the Defense Department, the State Department, the intelligence agencies, and the National Security Council. Prior to the markup of the legislation in the Banking Committee earlier this year, Dr. Rice, the Assistant to the President for National Security Affairs, sent a letter to the committee dated March 21 of this year, which I quote: The Administration has carefully reviewed the current version of S. 149, the Export Administration Act of 2001, which provides authority for controlling exports of dual-use goods and technologies. As a result of its review, the Administration has proposed a number of changes to S. 149. The Secretary of State, Secretary of Defense, Secretary of Commerce, and I agree that these changes will strengthen the President's national security and foreign policy authorities to control dual-use exports in a balanced manner, which will permit U.S. companies to compete more effectively in the global market place. With these changes, S. 149 represents a positive step towards the reform of the U.S. export control system supported by the President. If the Committee incorporates these changes into S. 149, the Administration will support the bill. Mr. President, a major effort was made to work through the list of proposals by the administration. That resulted in those proposals being incorporated into the bill during the Banking Committee's markup. As a consequence, in effect we met the standard that the administration set for us. They were incorporated in the markup. The administration is supportive of this bill. It has expressed that support on more than one occasion. They have been in constant communication with us about this matter. We are obviously proceeding not only in accordance with our own judgment, but it also represents the judgment of the administration as well. In fact, in late March President Bush, in speaking to high-tech leaders in the White House, urged quick passage of the bill by the Senate. He reiterated that support in May in a speech he gave in Washington. In April, the Office of Management and Budget submitted to the Congress a statement of administration policy on S. 149, which said in part: The Administration supports S. 149, as reported by the Senate Banking Committee. The bill provides authority for controlling exports of dual-use goods and technologies. The Administration believes that S. 149 would allow the United States to successfully meet its national security and foreign policy objectives without impairing the ability of U.S. companies to compete effectively in the global marketplace. As reported, S. 149 includes a number of changes that the administration sought to strengthen the President's national security and foreign policy authorities to control dual-use exports. Let me underscore: changes they sought to strengthen the President's national security and foreign policy authorities to control dual-use exports. The Administration will continue to work with Congress to ensure that our national security needs are incorporated into a rational export control system. Mr. President, I ask unanimous consent that the Statement of Administration Policy submitted by the Office of Management and Budget with respect to S. 149 be printed in the Record.

Mr. SARBANES. Madam President, I say very briefly to my distinguished colleague from Arizona, this is quite a broad sweeping power we are providing to the executive branch. I think it is reasonable to expect the decision will be made by the President. That does not mean the President has to staff his own decision. It will obviously be staffed for him. But the determination to provide the enhanced controls ought to be a Presidential determination. We do not expect that is going to be before him very often, but when that sort of issue arises, it seems to us it is reasonable that the President should make that judgment. One of the difficulties we have been experiencing all along is the way the export control regime gets bound up down the line and the decisions never go to the top to be made in those instances in which there are differences of opinion. In most instances, you have unanimity below either for the license or against the license. That is over and done with. But in those instances in which that is not the case and the President is going to exercise his sweeping authority, we do not think it is unreasonable to expect a determination to be the President's. I am very frank to say, I do not know to whom you would otherwise delegate it, since he represents the ultimate arbiter amongst the departments and agencies, and I do not see any way you can give that role to anybody else because anybody else would be out of one or another, presumably out of one or another of the departments or agencies. You are not, as it were, above it making this separate and independent determination which the President will make. The other point I want to note is that the President and his team support this legislation, so they obviously do not see in it the kind of extended practical problems which the Senator has--presumably they do not see that in the bill; otherwise, they not only would not have supported it, but they have been very strong in their support. It is fair to say that their support is anything but pro forma. It is very active and very vital, and they have gone over this legislation very carefully over an extended period of time and reached the judgment they are very much behind it. That is, of course, what they urged on the Senate, including, of course, the receipt this morning--I do not know if the Senator has yet had an opportunity to see it--a letter from Secretary Powell, Secretary Rumsfeld, and Secretary Evans in very strong support of the legislation.

Mr. SARBANES. It is 212.

Mr. SARBANES. Yes. The President could do that. Generally speaking, the President would use 212 and 213 in addressing foreign availability and mass marketing, because that is the process, as I spelled out, that has certain benefits that flow from its use. But he would not have to do that. He could invoke 201(d). That is why I said earlier in my opening statement that I thought this legislation gave very significant authorities to the President to make these judgments about national security and foreign policy interests, and it is one of the reasons that I think the administration, after very careful review of this legislation, is so supportive of it.

Mr. SARBANES. Mr. President, as we move forward in the debate, I presumably will have a chance to examine in greater detail the provisions of the legislation. I read through this legislation again over the weekend, from start to finish. I must say to you, on this issue I have always been sensitive to the national security and foreign policy arguments. In the past, in considering this legislation, I have never been one who sort of willy-nilly wanted to remove export controls. I think they have a very important role to play. I think this legislation substantially strengthens the ability of the President and the administration to exercise export controls on behalf of national security and foreign policy interests. So I very much hope my colleagues will be supportive of this legislation as we move ahead. Mr. President, I yield the floor.

Mr. SARBANES. Aside from the issue that the Export Administration Act is better than IEEPA, which I think is clear, let me address the assertions that S. 149 would weaken the national security protections in the previous Export Administration Act. I believe quite strongly that just the opposite is the case, as witnessed by the support the administration and the national security community have extended to this legislation. We have already talked about the increased civil and criminal penalties for violations of the EAA. The penalties are stronger in this legislation, not only with respect to the existing ones in IEEPA but also with respect to the penalties in the previously existing Export Administration Act. Let me mention some other provisions that significantly expand the President's authority to impose export controls on dual-use goods and technology in regard to the EAA. Section 201(c) of this legislation states: Notwithstanding any other provision of this title, controls may be imposed, based on the end use or end user, on the export of any item, that could contribute to the proliferation of weapons of mass destruction or the means to deliver them. This authority did not exist in the EAA. It is the so-called enhanced proliferation control initiative which until now has been implemented through an executive order. This provision would give the President broad statutory authority to impose controls on any export that could contribute to proliferation or delivery of weapons of mass destruction, if there was a concern about the end use or the end user of the export. Section 201(d) of this legislation, the so-called enhanced controls provision, provides: Notwithstanding any other provision of this title, the President may determine that applying the provisions of section 204 or 211 with respect to an item on the National Security Control List would constitute a significant threat to the national security of the United States and that such item requires enhanced control. It goes on to say: If the President determines that enhanced control should apply to such item, the item may be excluded from the provisions of section 204, section 211, or both, until such time as the President shall determine that such enhanced control should no longer apply to such item. Section 204 is a section on containing parts and components that says you can't put on controls if the parts and components are less than 25 percent of the total value of the export. But the President will be given the power, in effect, to ignore that restriction and impose the controls. Under the previous EAA, the President did not have the authority to set aside the parts and components or the foreign availability provisions, which is what 211 requires refers to. So this represents a very significant expansion of the President's export control authority. We have had a lot of discussions about foreign availability, mass market provisions and the President's standards to set aside this authority. It should be clear that this broad setaside power, separate and apart from the powers the President has in the foreign availability and mass market provisions themselves, is a very important addition to Presidential authority and one that was important to the national security community. Furthermore, the legislation provides that notwithstanding any other provisions of the act setting forth limitations on the authority to control exports, the President may impose controls listed on a control list of a multilateral export control regime. This is a very broad authority for the President to set aside all the requirements of the EAA and impose controls on any export that is on a control list pursuant to an international agreement. This is an important provision because export controls are most effective when they are implemented in concert with the controls of other supplier nations. One of the things we seek to do in this legislation is encourage the development of such multilateral export control regimes. Actually, the majority of items today subject to export controls in the U.S. are controlled by most of the other supplier nations through four multilateral export control regimes: the Waasenaar agreement, which relates to arms and dual-use items useful for conventional arms purposes; the nuclear suppliers group; the missile technology control regime; and the Australia group, which relates to items useful for chemical and biological weapons. These four regimes form the multilateral basis for export controls, and they are obviously an important element for effective nonproliferation. One of our objectives here, of course, is to work closely with others in further developing multilateral cooperation and strengthening the contribution of these regimes to the nonproliferation objectives. Let me point out, we are constantly encouraging other countries to put in place a thoroughly considered, rational export control regime. We go to other countries and say: We need you to put this in place. We want you to join the multilateral regimes, and we want you to establish your own bilateral control systems so we can get a handle on this problem worldwide. I am very supportive of those efforts. What position does it put our interlocutors and our negotiators in when they go to these countries and then they say, ``You don't seem to have established your own regimes''? What is the U.S. regime? It is another argument for putting this legislation into place so that the U.S. has a fully developed, rational, comprehensive framework dealing with export controls, and then we, in a sense, try to pull other countries towards it or in that direction in order to enhance the multilateral controls that exist worldwide. Now one other point I want to underscore is, of course, the regime is designed to prevent exporters from moving out, moving overseas, exports with dual-use technology. When we make the judgment and go through this process, it has a negative effect on our national security or foreign policy interests, and of course you are going to have people trying to get around this all the time--some few people. We have enforcement provisions now that are much tougher. One of the things in this bill is a significant increase in the authorization levels for the Department of Commerce in a whole host of areas in order to try to tighten up the enforcement of this regime. In fact, we have a number of various provisions that are designed to strengthen our various export controls and to ensure that the resources the Department needs are available to it in order to carry out the provisions of the legislation. Now most exporters want to comply with the regime. They are not out to try to send abroad technology that can be abused to the harm of American interests. A number of them invest significant amounts of money in trying to comply with the regime's reporting and recording requirements. So it is important to the export community to have a comprehensive, rational statutory framework. They know, then, what the rules of the game are. I think it encourages compliance; it draws, in a sense, on the business community to help implement this matter. So I think that also represents an important step. Let me draw to a conclusion by once again saying this is a balanced effort to address a complex area of national security concerns that also impact U.S. trade interests. We received just this morning a letter sent to Senator Daschle, the majority leader of the Senate, signed by Secretary of State Powell, Secretary of Defense Rumsfeld, and Secretary of Commerce Evans. Mr. President, I think this letter is of sufficient import that I am going ask unanimous consent it be printed in the Record.

Mr. SARBANES. Certainly.

Mr. SARBANES. Mr. President, I commend Senator Gramm, who was actually chairman of the committee at the time that we brought the legislation forward. And I commend Senator Enzi and Senator Johnson. Senator Enzi and Senator Johnson, respectively, were the chairman and ranking member of the Subcommittee on International Trade and Finance of the Banking Committee in the last Congress. They carried forward their strong interest in this legislation in this Congress and have played an instrumental role in helping to shape the legislation. I thank them for their very dedicated efforts, and the efforts of their staff which contributed so much to developing a bipartisan consensus on this legislation. Also, I acknowledge the significant contributions made by Senator Bayh and by Senator Hagel, who are the chairman and ranking member of the International Trade and Finance Subcommittee in this Congress, for their contributions in moving the legislation forward this year. The legislation generally tracks the authorities provided the President under the Export Administration Act which expired in 1990. However, a significant effort was made, with the assistance of the legislative counsel's office, to provide these authorities in a more clear and straightforward manner. We believe this will make the statute both easier for the executive branch agencies to administer and for exporters to comply with. The bill also makes a number of significant improvements to the EAA. I would like to mention a few. The legislation provides, for the first time, a statutory basis for the resolution of interagency disputes over export license applications. The intent is to provide an orderly process for the timely resolution of disputes while allowing all interested agencies a full opportunity to express their views. This was an issue of significant concern to the administration, to the national security community, and to industry. And I believe we have reached a reasonable resolution of this issue in the bill. One of the things that industry was seeking was a process whereby they would get an ultimate decision. This bill sets out a process of interagency consultation that provides for moving it up to the next level, if there is not agreement, so that it keeps moving forth. In the end, it can reach the President for decision. But at least it works within a framework in which the industry knows that at the end they will get a decision; it will not simply disappear into the great void with no decision of any sort forthcoming. We think this is a very reasonable way to structure the situation. I simply note that it is still reserved to the President, in the end, the ultimate authority to rule on the matter with respect to export controls. As I mentioned earlier, the bill significantly increases both criminal and civil penalties for violations of the Export Administration Act, reflecting the seriousness of such violations. The bill provides new authority to the President to determine that a good has mass market status in the United States. And because it has mass market status--in other words, there is a set of criteria, but essentially generally available in the marketplace--it should be controlled. But the President retains authority to set aside a mass market determination if he determines that it would constitute a serious threat to national security and that continued export controls would be likely to advance the national security interests of the United States. We have tried to recognize changes that are taking place in the marketplace, to factor them into the thinking, but even so in the last analysis reserving to the President the authority to set aside a mass market determination. I think this is, again, another example of the concern of those of us who have helped to shape this legislation to make sure that we are able to protect national security and foreign policy interests. We are trying to, in effect, accommodate the market changes and the needs of our exporters in terms of participating effectively and competitively in the global marketplace but, at the same time, making sure the President retains the power and the authority that might be necessary, under certain circumstances, to protect our national security interests and our foreign policy interests. At the urging of Senator Enzi, who has been a very thoughtful and dedicated exponent of this legislation--and in my perception has bent over backwards to try to accommodate concerns in shaping this legislation--the bill contains a provision that would require the President to establish a system of tiers to which countries would be assigned based on their perceived threat to U.S. national security. The legislation requires that there be at least three such tiers. The intent is to provide exporters a clear guide as to the licensing requirements of the export of a particular item to a particular country. The bill would also require that any foreign company that declined a U.S. request for a postshipment verification of an export would be denied licenses for future exports. The President would have authority to deny licenses to affiliates of the company and to the country in which the company is located as well. Overall, I believe this bill is a very balanced piece of work. As I mentioned at the outset, it commanded overwhelming bipartisan support in the committee. It has the strong support of the administration. It is my belief it will receive broad bipartisan support in the full Senate. In criticizing this bill when it was brought up in this Chamber in April--it was up for 1 day; we had 1 day of debate on the legislation-- some of my colleagues registered objections. They thought that the bill tipped the balance towards meeting commercial needs versus national security needs, that it placed an emphasis on export decontrol without an adequate assessment of the national security implications of that decontrol. Others said that the bill's restriction on Presidential authorities to regulate national security-related exports, the liberalization of exports of all goods, poses a problem and needs to be resolved. And we had other comments in that vein. I want to take a moment to respond to these assertions because I respectfully disagree with them. First of all, it is very important to note that the alternative to reauthorizing the Export Administration Act is the International Emergency Economic Powers Act. As we indicated earlier, that is really not a satisfactory framework under which to operate. This was made clear in letters that Dr. Rice, Assistant to the President for National Security Affairs, sent to Senator Gramm and myself on August 2. In the course of that letter she stated: I am pleased that the Senate plans to take up S. 149. Because the current Export Administration Act (EAA) will expire on August 20, 2001, the President is prepared to use the authorities provided to him under the International Emergency Economic Powers Act (IEEPA) to extend the existing dual-use export control programs. As you know, IEEPA authority has previously been used to administer our export control programs. Since a new EAA will provide us the strongest authority to administer dual-use export controls, particularly as related to enforcement, penalties for export control violations, and the protection of business proprietary information, we support swift enactment of S. 149. Mr. President, I ask unanimous consent to print the full text of the letter in the Record.

Mr. SARBANES. Mr. President, I want to take advantage of these few minutes to address a couple of the points the Senator from Arizona raised. First of all, in fiscal year 2000, the data indicates that the average time for the review of a license by the Department of Defense was 13 days. The Department of Energy averaged 22 days. The State Department averaged 9 days. The 30-day time period that is in the bill is identical to the current practice under the Executive order. The amendment would add an additional 60 days in each of two separate circumstances. Of course, one of the things we were trying to do here was to set up a process whereby applicants could get a definitive decision within a defined timeframe. Now there are provisions in the bill to stop the running of a clock, a couple of which directly go to the end user issue which the Senator from Arizona raised, as requiring further time to ascertain the end user issue. There are these exceptions that stop the clock, as it were, on the time period. That involves the identity and reliability of the end user in one instance and additional time to secure the government-to- government assurances regarding end item use. So the very concern that the Senator raised is actually addressed in the legislation in terms of stopping the clock and providing extra time. I think it is important to underscore that one of the things we were trying to provide to the exporters, which we think is important, was that they could get an answer within a defined period of time. Often they are more concerned in some instances in getting an answer. They need to know, yes or no. They are often competing in an environment in which they have to find out whether they can move forward or not. A department having difficulty with the application can simply say: We think it should be denied. Of course, if they say that, you can then start the interagency appeal process working. But of course that extends over a sustained period of time. So we think the framework that is in the legislation really adequately addresses these concerns. It does represent a balance, and, as I indicated earlier, we are giving quite extensive powers to the executive branch in here. One of the things the business community was concerned to get was a framework with some discipline in it into which they could get an answer. If you are left hanging, you don't know what to do. So given the provisions for stopping the clock that are in there, we think to add another 60 days on top of this period would extend the process to such an extent that the exporters really could not function in the real world. Now if the time period was taking a lot longer to get agency response, we could be sensitive to that argument. But that is not the case. In any event, the very people who are concerned with making this work, upon whom the burden would fall, have indicated that they find the time periods that are in the bill quite acceptable and, in fact, are in opposition to the proposed amendment. They are the very ones who would have to make the process work. So I think that is also an important consideration to take into account.

Mr. SARBANES. Does the Senator from Tennessee have a total list of amendments he is thinking of offering so we can put these amendments in context? That helps to make a judgment as to whether we are simply unraveling carpet step by step or whether there is a finite picture we can look at to make some determination.

Mr. SARBANES. A number of Members have gotten in touch with us and have indicated they wish to do so. I just wanted to set out the procedure.

Mr. SARBANES. Why do you have it at all? It is a reasonable question. Here is the answer as I perceive it. You are trying to set up a framework and a regime in the way of proceeding. As a general proposition, for the sake of transparency, for rationality, for understanding in the export community what is being done, the sort of standard way of proceeding, so to speak, on both foreign availability and mass marketing would be to follow the procedures in 212 and 213 which have been worked out and are designed, as I said, certainly in the case of foreign availability, to accomplish the objective of trying to develop multilateral negotiations. So this is the process you set out to be followed. Conceivably, that is the process which, generally speaking, the executive branch would pursue. But in a sense, in an abundance of caution, with respect to national security and foreign policy interests, we give the enhanced control power to the President contained in 201(d). There he doesn't have to go through these notices. He doesn't have to go through these procedures. He is not bound into a timeframe. But you don't simply do that. If you just did that and nothing else, you would have, in a sense, sort of a process without any sort of standards or review. We have a process of standards and review. But then we go on to say, as I said, with an abundance of caution, that in any event the President can exercise the 201(d) authority. That is essentially to take care of the argument--actually, I think the Senator used the phrase earlier in his statement about unintended consequences. This is really to foreclose any unintended consequences in sections 212 and 213 by giving the President this broad authority contained in 201(d) on enhanced controls.

Mr. SARBANES. It is not 211?

Mr. SARBANES. Earlier in the day when I first spoke on this bill, I don't think the Senator was in the Chamber. I was very careful to make the point that I supported this bill on the basis of my own judgment about its contents. I then went on to add the point that the administration was supportive of this bill, and obviously one finds some comfort in that since much of what is in the bill involves the executive branch making it work. So particularly on a bill such as this, if they were against it, that would give one pause for thought. I simply say to my colleague, it is a very interesting challenge he puts forward. Without anticipating that he would make such a challenge, I was very careful in my opening statement to make the point that my support for the bill was based on my own judgment about its provisions having worked through it very carefully. Over and above that judgment, I also, of course, alluded to the fact that the administration was very supportive of it.

Mr. SARBANES. Right.

Mr. SARBANES. Will the Senator yield?

Mr. SARBANES

Mr. SARBANES. Madam President, on August 1, 2001, the Committee on Banking, Housing and Urban Affairs took up the Mark-to-Market Extension Act of 2001. I introduced the Mark-to-Market Extension Act of 2001 along with Senators Reed and Allard, the chair and ranking member of the Housing and Transportation Subcommittee. The bill passed the committee by a 21- 0 vote with an amendment offered by Senator Allard. The amendment would require the GAO, through a series of reports, to update Congress on the performance of the mark-to-market program. The bill makes some modest changes in the program, which was originally passed in 1997 on a bipartisan basis. The changes incorporate almost all of the suggestions made by HUD's Office of Multifamily Housing Assistance Restructuring (OHMAR) as well as a number provided by other stakeholders at our June 19 hearing, including the General Accounting Office (GAO). The GAO's thorough review of the program has proven invaluable, and we will look to them to continue to work with us to keep things on track. As my colleagues know, we passed the original Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRAA) in order to bring down the rising costs of project-based section 8 rental assistance contracts. In many markets these section 8 contract rents were higher than the real market rent in the neighborhood in which the project was located. In order to save money on these contracts, the committee and the Congress chose to reset those contract rents at the lower market levels. However, in many cases, these new, lower rents were inadequate to pay the federally insured mortgages. So the committee also created a number of tools that allow the mortgages to be restructured proportionately. The restructuring process includes a thorough review of the physical condition of the building, provides that it be adequately rehabilitated and that adequate reserves be built in as part of the building's new underwriting. This is important because, as part of the deal, the owner makes a long-term commitment to continue to serve low income families. After getting off to a slow start, the GAO and most other stakeholders agree that the program has finally gotten moving, and a much larger number of deals are being restructured. HUD reports that the program has saved the federal government about $500 million on a present value basis to date. The legislation we have before us includes a series of purposes designed to reiterate Congress' emphasis on adequate rehabilitation and reserves in order to meet ongoing affordability commitments. Similarly, we want to make sure that expenses are properly calculated, so that rents and mortgages can be set correctly. This is included in the bill because of concerns raised by a number of stakeholders, including both residents and owners, that these important goals have been shortchanged. We chose not to burden the program with an overly prescriptive set of directives regarding these matters. Nonetheless, we expect HUD and the Office to bear these purposes very much in mind as they administer the program. The bill reauthorizes grants to tenant and non-profit groups to help residents participate in the Mark-to-Market process. It calls for independent rent calculations to determine whether a property should go through the restructuring process, a simple rent reduction, or a straightforward contract renewal. This independent assessment will be used to set rents for vouchers, should the owner choose to opt out of the program. Owners will continue to have the right to appeal the rent set by the independent review. The bill also expands the flexibility of the Department to approve market rent exceptions where necessary. The bill gives the Secretary flexibility to reduce the 25 percent owner rehabilitation contribution for the cost of significant additions to a project that are required by HUD. This was done in response to a reasonable equity argument made by the owners. Finally, in consultation with HUD and a number of owners, we include changes that will expedite refinancing of the old mortgages and lengthen the term of the new first mortgages. We also make adjustments that will allow the size of the second mortgages to be larger, thereby reducing the potential for cancellation of indebtedness income rulings by the IRS with their attendant tax penalties. Taken together, these changes will allow the underwriting to provide for more rehabilitation, reduce the amount of claims taken against the FHA fund, and increase the collection of the second mortgages, thereby saving the taxpayer additional funds on top of the rent savings. We take HUD's suggestion and put the Director of OMHAR under the authority of the FHA Commissioner, as did the House Financial Services Committee. We keep the provision in current law that establishes higher compensation for OMHAR employees because we want to retain the highly skilled staff. A significant part of the reason we are moving this legislation so expeditiously is that we want to signal that staff that it is our intention to keep them on board and on the job. The legislation extends the life of both the program and the Office for 5 years. I understand that HUD requested a 3 year extension only. However, data from the GAO indicates that there will still be a significant, if declining, stream of expiring contracts after the third year of the reauthorization. Frankly, I see no reason to revisit this issue a third time. I would strongly prefer to make sure this is the last time we have to act on this issue. Of course, as we move forward, I would expect to continue to discuss these and other matters, both with the administration and with the House. In closing, this legislation has broad bipartisan support. My colleagues and I tried to be responsive to the administration and other stakeholders, while ensuring that we maintain a highly skilled staff at the Department. I am hopeful that we can move this legislation quickly through the process.

Mr. SARBANES

Mr. SARBANES. Mr. President, I ask unanimous consent that the Senate go into a period of morning business with Senators allowed to speak therein for up to 10 minutes.