Richard Shelby

Mr. SHELBY

Mr. SHELBY. Mr. President, I ask unanimous consent that the following members of the committee staff be granted floor privileges during the pendency of this bill: Dan Gallington, Jim Barnett, Al Cumming, Pete Dorn, Peter Flory, Lorenzo Goco, Ken Johnson, Ken Myers, Linda Taylor, Jim Wolfe; and also Dr. Michael Cieslak on Senator Bingaman's staff.

Mr. SHELBY

Mr. SHELBY. Madam President, I have been listening in my office, before I came to the floor, to Senator Kerrey's comments. While we don't agree on everything, we agree on most things working on the Intelligence Committee. I want to say this about the distinguished Senator from Nebraska who is the vice chairman of the committee. We have tried to work together on very tough issues in the Intelligence Committee and tried to bring them to the floor of the Senate together--not separately. I think it says a lot when we can do this. I certainly have a lot of respect for the Senator from Nebraska and enjoy working with him. One thing about him, he is candid, and that goes a long way on anything. I think we have to devote our time and our effort in the Intelligence Committee and in the Senate to what works, what works best on basic intelligence gathering, as well as counterintelligence, where there is a shortfall. In that spirit, Madam President, I rise in support of the motion to proceed to consideration of H.R. 1555, the Intelligence Authorization Act of Fiscal Year 2000. As chairman of the Senate Select Committee on Intelligence, I am deeply disappointed that certain Members of the minority have decided to oppose this motion. I hope it will be short lived. The intelligence bill, I believe, is a balanced, thoroughly bipartisan piece of legislation that is critical to our national security. Some Senators are objecting to the Kyl-Domenici-Murkowski amendment to restructure the Department of Energy, not the underlying bill. I am a cosponsor of that amendment, as is the distinguished vice chairman of the Intelligence Committee, Senator Kerrey. Basically, this is essentially the same proposal that prompted a filibuster threat when it first was offered to the Defense authorization bill back before the Memorial Day recess. At that time, the argument was, ``it's too soon, it's premature, there haven't been any hearings yet.'' Whatever the merit of those arguments at the time, I believe, they are wholly without merit today. The Intelligence Committee has held two open hearings on the Kyl amendment and DOE security and counterintelligence issues, including a joint hearing with the Energy, Armed Services, and Government Affairs Committees that more than 60 Senators had the opportunity to attend. The Intelligence Committee also held a detailed, closed briefing on the report of the President's Foreign Intelligence Advisory Board, also known as the Rudman report. We heard testimony from Secretary of Energy Richardson twice, from Senator Rudman twice, and from the sponsors of this amendment. I also should point out that, long before the current controversy, the Senate Intelligence Committee, on a bipartisan basis, identified problems in DOE's counterintelligence program and took steps to address those weaknesses. Most importantly, it sought to energize the Department of Energy to allocate the necessary resources, and take the necessary steps, to eliminate these vulnerabilities. Since the Kyl et al amendment was first offered, the sponsors have negotiated extensively, and in good faith, with the Department of Energy in order to address the concerns that Secretary Richardson has expressed, without changing the underlying thrust of the amendment, which is to create a semiautonomous agency for nuclear security within the Department of Energy. Last month, the need for action was dramatically reinforced by the publication of the Rudman report, entitled ``Science at its Best; Security at its Worst: A Report on Security Problems at the U.S. Department of Energy''--a report on security problems at the U.S. Department of Energy. I commend former Senator Rudman and also Dr. Drell, and others, who were so involved in this work. The Rudman report found among other things, that: At the birth of DOE, the brilliant scientific breakthroughs of the nuclear weapons laboratories came with a troubling record of security administration. Twenty years later, virtually every one of its original problems persists. . . . Multiple chains of command and standards of performance negated accountability, resulting in pervasive inefficiency, confusion, and mistrust. . . . In response to these problems, the Department has been the subject of a nearly unbroken history of dire warnings and attempted but aborted reforms. Building on the conclusions of the 1997 Institute for Defense Analyses report and the 1999 Chiles Commission, the Rudman panel concluded that: The Department of Energy is a dysfunctional bureaucracy that has proven it is incapable of reforming itself. . . . Reorganization is clearly warranted to resolve the many specific problems . . . in the weapons laboratories, but also to address the lack of accountability that has become endemic throughout the entire Department. The panel is convinced that real and lasting security and counterintelligence reform at the weapons labs is simply unworkable within DOE's current structure and culture. . . . To achieve the kind of protection that these sensitive labs must have, they and their functions must have their own autonomous operational structure free of all the other obligations imposed by DOE management. To provide ``deep and lasting structural change that will give the weapons laboratories the accountability, clear lines of authority, and priority they deserve,'' the Rudman report endorsed two possible solutions: One was the creation of a wholly independent agency, such as NASA, to perform weapons research and nuclear stockpile management functions; or two, placing weapons research and nuclear stockpile management functions in a ``new semiautonomous agency within DOE that has a clear mission, streamlined bureaucracy, and drastically simplified lines of authority and accountability.'' The latter option, or the second approach, is the one contained in the Kyl-Domenici-Murkowski; amendment. Examples of organizations of this type are the National Security Agency and the Defense Advanced Research Projects Agency, DARPA, within the Defense Department. The new semi-autonomous agency, the Agency for Nuclear Stewardship, would be a single agency, within the DOE, with responsibility for all activities of our nuclear weapons complex, including the National Laboratories--nuclear weapons, nonproliferation, and disposition of fissle materials. This agency will be led by an Under Secretary. The Under Secretary will be in charge of, and responsible for, all aspects of the agency's work, who will report--and this is very important--who will report directly and solely to the Secretary of Energy, and who will be subject to the supervision and direction of the Secretary of Energy. The Secretary of Energy will have full authority over all activities of this agency. Thus, for the first time--yes, Madam President the first time--this critical function of our national Government will have the clear chain of command that it requires. As recommended by the Rudman report, the new agency will have its own senior officials responsible for counterintelligence and security matters within the agency. These officials will carry out the counterintelligence and security policies established by the Secretary and will report to the Under Secretary and have direct access to the Secretary. It is very important that this happen. The agency will have a senior official responsible for the analysis and assessment of intelligence within the agency who will also report to the Under Secretary and have direct access to the Secretary. The Rudman report concluded that purely administrative reorganizational changes are inadequate to the challenge at hand: They say: ``To ensure its long-term success, this new agency must be established by statute.'' For if the history of attempts to reform DOE underscores one thing, it is the ability of the DOE and the labs to hunker down and outwait and outlast Secretaries and other would-be agents of change--yes, even Presidents. For example, as documented by Senator Rudman and his colleagues, ``even after President Clinton issued Presidential Decision Directive 61 ordering that the Department make fundamental changes in security procedures, compliance by Department bureaucrats was grudging and belated.'' At the same time, we in the Senate should recognize that our work will not be done even after this amendment is adopted and enacted into law. As the Rudman report warned, ``DOE cannot be fixed by a single legislative act: management must follows mandate. . . . Thus, both Congress and the Executive branch . . . should be prepared to monitor the progress of the Department's reforms for years to come.'' It is an indication of how badly the Department of Energy is broken that it took over 100 studies of counterintelligence, security, and management practices--by the FBI and other intelligence agencies, the GAO, the DOE itself, and others, plus one enormous espionage scandal-- to create the impetus for change. I am encouraged by what appears to be some progress toward getting to this bill. I think we all are seeking--and I hope we are--the same thing: A better and more secure Department of Energy. This nation must have no less. I ask my colleagues: please, do not let the Senate become the lastes obstacle to reform at the Department of Energy. Stop the delay. Vote for cloture tomorrow morning, and let's get on with the business of the people and make our labs safe for our future and our country. I yield the floor. Mr. MURKOWSKI addressed the Chair.

Mr. SHELBY

Mr. SHELBY. Mr. President, I rise today to pay tribute to Coach Glenn Daniel, a dedicated man and an inspirational leader to the many football teams which he has led. The state of Alabama has been blessed with a very rich football heritage. The thought of the sport conjures images of Bear Bryant leading his famed University of Alabama teams to glory on the gridiron. Between interstate colleges and high school rivalries, there is no argument that the State's roots are firmly entrenched in the game of football. It is from these roots that I pay tribute to the most successful coach in the history of Alabama high school football, Coach Glenn Daniel. With a lifetime record of 302 wins, 167 loses and 16 ties, Coach Daniel has stood the test of time and climbed countless obstacles in his relentless assault on the record books. Coach Daniel's 50-year career, spanning six decades, serves as a inspiration to the young people he coaches and as an example of the internal fortitude and a strength of character which few possess. He is truly the standard bearer for a high school coaching legend and the definition of a man dedicated to the sport of football. Born on December 2, 1925, in Montgomery, Coach Daniel attended Albert G. Parrish High School in rustic Selma, Alabama. He earned a Bachelor's Degree in Education at Livingston University (now the University of West Alabama) and a Master's Degree from the University of Alabama in 1956. It was in 1947 that Glenn Daniel began his coaching career at the rural Alabama school of Pine Hill High. He was able to successfully resuscitate a football program which had been discontinued for several years due to World War II. Within 5 years of beginning his tenure at Pine Hill, he had established a perennial football powerhouse at the school. During this time, Coach Daniel lead his team to an undefeated season, while outscoring opponents 232-32 and receiving a Birmingham News regional championship. Following his tenure at Pine Hill, Coach Daniel moved on to coach at Luverne High School in Luverne, Alabama. While coaching at the school for 38 years, Coach Daniel's teams finished with an astonishing 34 winning seasons. In 11 of his last 12 years, his team earned a spot in the state playoffs, including three semi-finals appearances. His remarkable 1991 team reached the ultimate promise land, winning the state 3A championship, the first in Luverne High School's history. Coach Daniel retired in 1993 and did not coach during the 1993 and 1994 seasons. However, he returned as an assistant coach for the 1995 season as Defensive Coordinator and helped his team earn a state championship in 1997. Coach Daniel was named Alabama's Coach of the Year in 1981, 1987, and 1991 by various major newspapers in the state. In a coach's poll conducted in 1985, he was ranked by his peers as one of the ten best coaches in the state. In addition to these accolades, Coach Daniel served as head coach of the Alabama team in the annual Alabama/ Mississippi All-Star Football Classic in 1992, and was named as Alumni Coach of the Year in 1992 by the University of West Alabama. In a fitting honor to cap his distinguished career, Coach Daniel was chosen as a member of the inaugural class of inductees into the Alabama High School Sports Hall of Fame in 1991. Mr. President, if a coaching career has ever proven deserving of these many distinctions, it is Coach Glenn Daniel.

Mr. SHELBY

Mr. SHELBY. Mr. President, I recently introduced legislation that would amend our estate taxation laws to correct a highly unjust situation that regularly occurs throughout our country. The problem I am referring to is the difficult situation persons who inherit valuable timberland often find themselves. Because the timberland is usually the major estate asset, the estate frequently lacks the liquidity to pay the hefty tax burden. Therefore, many times persons are forced to harvest the timber or even worse, to sell portions of the land, just to be able to meet this large tax liability. Besides essentially invalidating many testamentary gifts, such a tax policy creates numerous economic and ecological problems. As estate taxes are due nine months after a decedent's death, the current law strongly encourages persons to harvest the timber regardless of it's maturity, prevailing price or demand. Encouraging such behavior not only leads to economic waste, but also discourages responsible use of a valued natural resource. The decision of if and when to harvest timberlands should be made by the individual landowner after he has considered the current market, tree maturity and other relevant factors. It certainly should not be based on an uncompromising tax code that completely disregards these critical factors. Mr. President, the decision to sell the land is in no way a viable alternative to premature harvesting. Selling portions of a contiguous tract leads to fragmentation of the land, which in turn can lead to legal disputes and other inefficiencies. Furthermore, wildlife and forestry conservation efforts by earlier landowners are often ignored by new owners who look to exploit the land in order to turn a quick profit. But most importantly, our tax code should never place someone in a position where they must sell a testamentary gift just to be able to pay the taxes on the transfer. Besides being inherently unfair, such a tax tramples upon the property rights of American landowners. Mr. President, we must not allow the tax code to perpetuate these injustices. My bill, the Timberland Conservation and Tax Relief Act of 1999 eliminates these problems by removing mechanical and unthinking tax laws from the decision of when it appropriate to harvest American timberlands. It introduces a flexible deferred payment provision into the estate taxation scheme that will allow timberland owners to exercise their own good judgment in deciding what the most efficient use of their land would be. Furthermore, the Timberland Conservation and Tax Relief Act promotes the responsible use of our environment by no longer placing persons in a position where they must harvest immature or unneeded timber. For these reasons, I strongly urge my colleagues in the Senate to join me in support of this bill. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SHELBY

Mr. SHELBY. Mr. President, I recently introduced legislation that would amend our estate taxation laws to correct a highly unjust situation that regularly occurs throughout our country. The problem I am referring to is the difficult situation persons who inherit valuable timberland often find themselves. Because the timberland is usually the major estate asset, the estate frequently lacks the liquidity to pay the hefty tax burden. Therefore, many times persons are forced to harvest the timber or even worse, to sell portions of the land, just to be able to meet this large tax liability. Besides essentially invalidating many testamentary gifts, such a tax policy creates numerous economic and ecological problems. As estate taxes are due nine months after a decedent's death, the current law strongly encourages persons to harvest the timber regardless of it's maturity, prevailing price or demand. Encouraging such behavior not only leads to economic waste, but also discourages responsible use of a valued natural resource. The decision of if and when to harvest timberlands should be made by the individual landowner after he has considered the current market, tree maturity and other relevant factors. It certainly should not be based on an uncompromising tax code that completely disregards these critical factors. Mr. President, the decision to sell the land is in no way a viable alternative to premature harvesting. Selling portions of a contiguous tract leads to fragmentation of the land, which in turn can lead to legal disputes and other inefficiencies. Furthermore, wildlife and forestry conservation efforts by earlier landowners are often ignored by new owners who look to exploit the land in order to turn a quick profit. But most importantly, our tax code should never place someone in a position where they must sell a testamentary gift just to be able to pay the taxes on the transfer. Besides being inherently unfair, such a tax tramples upon the property rights of American landowners. Mr. President, we must not allow the tax code to perpetuate these injustices. My bill, the Timberland Conservation and Tax Relief Act of 1999 eliminates these problems by removing mechanical and unthinking tax laws from the decision of when it appropriate to harvest American timberlands. It introduces a flexible deferred payment provision into the estate taxation scheme that will allow timberland owners to exercise their own good judgment in deciding what the most efficient use of their land would be. Furthermore, the Timberland Conservation and Tax Relief Act promotes the responsible use of our environment by no longer placing persons in a position where they must harvest immature or unneeded timber. For these reasons, I strongly urge my colleagues in the Senate to join me in support of this bill. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SHELBY

Mr. SHELBY. Mr. President, I suggest the absence of a quorum.

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

Mr. SHELBY. Mr. President, I think we need to make a couple of things clear today about the bill before us and why it is so important to so many people. First, I am a strong supporter of free trade, trade that is free and fair. I believe this bill is completely consistent with those basic principles. But while we engage in free and fair trade, many countries in the rest of the world do not abide by those same principles. We have trade laws to address this, but, as the distinguished Chair knows, they are slow to address the kind of serious economic injury that faces many companies and communities in America. We can't afford to lose more industries to illegal trade practices, particularly the two we propose to offer short-term support to today: oil and gas and steel. Second, I believe this is a reasonable response to a terrible crisis that threatens more than just companies but whole communities across America. This bill does not propose quotas. Indeed, it is GATT legal, and it is intended to provide only a short-term loan guarantee. This is not some radical idea. Federal loan guarantees are used every day in the farm industry, the housing industry, the small business community, and for foreign countries. So let's be clear about how anathema this is to our free trade principles, because we do this all the time. Third, this program is not a Federal handout or Federal grant or Federal award or Federal subsidy which Congress provides daily and, I might add, to millions of companies and organizations and industries in this country. It is a short-term loan guarantee program that provides that every dime--yes, every dime--is paid back. Contrary to some representations, the risk of the default is not that great, according to the Congressional Budget Office. Based on these calculations of cost, however, the program has also been completely offset. Finally, I think it needs to be reemphasized that this program is not going to solve long-term problems that may face some companies in this industry. That is not what this is about. It is about trying to minimize the serious economic side effects that illegal trade practices have exacted on several companies in the steel industries. If this program helps one company get through this tough time until our trade laws address these illegal practices, and if it saves one community in America, it will be worth it. Mr. President, I believe Americans deserve to be treated fairly--and not inordinately suffer the consequences of our inability to minimize and protect against continuous and systematic illegal trade practices of other countries. I urge my colleagues to support this short-term loan guarantee program, and I thank the Senators from West Virginia and New Mexico for their leadership in this area. I yield the floor. Mr. SESSIONS addressed the Chair.

Mr. SHELBY

Mr. SHELBY. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SHELBY

Mr. SHELBY. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SHELBY

Mr. SHELBY. Mr. President, how much time do I have?

Mr. SHELBY. Mr. President, I oppose the Graham amendment as the chairman of the Senate Intelligence Committee. We should, as an institution, oppose all efforts to devolve the authority and the responsibility of any congressional committee to an outside group, such as this commission, when there is no compelling reason to do so, and there is certainly no compelling reason to do so in this instance at this time. As my colleagues probably know, the Intelligence Committee is already aware of the state of our counterintelligence capabilities. I have worked with the vice chairman, Senator Kerrey, and other Members on both sides of the aisle, in dealing with our counterintelligence capabilities because we are engaged in the committee now in an ongoing legislative oversight of the intelligence community's approach to counterintelligence activities and espionage investigations. That is an ongoing, very much alive investigation. We have a tremendous staff, I believe--and I believe the Senator from Nebraska, the vice chairman, joins me in saying this --a very able staff on the Senate Intelligence Committee that is deeply involved in a bipartisan way in this investigation. The committee has recommended, and will continue to recommend as our investigation unfolds, substantive changes in this area. We are working with the majority leader, with the minority leader, and their staffs in this regard. I believe the Intelligence Committee is completely capable--and I believe the vice chairman has already indicated this--of addressing this relatively small but very, very critical area within the National Foreign Intelligence Program. Most important, though, this legislation presumes the failure of congressional oversight, and that did not happen. It did not happen in this instance, and the Senator from Nebraska, who has just come back on the floor, was very involved as the vice chairman of this committee in pushing for more money for counterintelligence. That goes without saying. The failure of congressional oversight, as far as the Intel Committee is concerned, did not happen. For nearly 10 years, the Intelligence Committee has repeatedly directed the intelligence community to improve its counterintelligence capabilities communitywide and specifically at the Department of Energy where our most precious Labs, our most important Labs are located. I believe this is really a case of the executive branch failing to heed congressional warnings, and I think we will see more and more of this as the investigation unfolds. Finally, counterintelligence has been a specific priority of the Intelligence Committee in the Senate and will continue to be a high priority, as it should, as long as I am chairman and as long as I am involved. This amendment ignores the past and ongoing work of the Intelligence Committee in the Senate. I urge my colleagues to oppose it.

Mr. SHELBY

Mr. SHELBY. Mr. President, I ask unanimous consent to have printed in the Record a letter to the Honorable Trent Lott dated May 17, 1999, signed by myself and Senator Kerrey.

Mr. SHELBY

Mr. SHELBY. How much time do I have?

Mr. SHELBY. Mr. President, I yield such time as the Senator may consume to the distinguished Senator from Rhode Island, Mr. Reed.

Mr. SHELBY. How much time do I have?

Mr. SHELBY. How much time does the Senator from Texas have?

Mr. SHELBY. I yield 5 minutes to the distinguished Senator from Minnesota.

Mr. SHELBY. I will be glad to yield 1 minute.

Mr. SHELBY. Mr. President, how much time do I have left?

Mr. SHELBY. Mr. President, I will be brief. First, I point to the fifth paragraph of the Greenspan letter to Chairman Gramm. It says, basically, that foreign bank-owned section 20 companies have substantially underperformed U.S.-owned section 20 companies. He goes on to say, ``The subsidy does not travel well.'' Are you suggesting the subsidy travels from New York to London but not London to New York? In other words, not from foreign banks to the United States? The Federal Reserve's own letter says the subsidy is nontransferrable. Safety and soundness? In Chairman Greenspan's own words, he says: My concerns are not about safety and soundness. It is the issue of creating subsidies for individual institutions which their competitors do not have. It is a level playing field issue. Nonbank holding companies or other institutions do not have access to that subsidy, and it creates an unlevel playing field. It is not a safety and soundness issue. That is Chairman Greenspan's own words. Lastly, is this a power grab? This legislation makes the Federal Reserve the monopoly umbrella regulator. I do not have to educate the distinguished chairman, who is a smart Ph.D. economist, on the abuses of a federally sanctioned monopoly. He has talked about it since I have known him, and he is right on that. My amendment would allow for competition for banks to choose their regulator. It does not mandate that any bank in the United States must conduct such activities in an operating subsidiary. It allows the bank to choose. I am sure a free market economist like Senator Gramm understands more than I do the benefits of market discipline. Competition among regulators will not allow a national bank regulator to run amok. Does Chairman Greenspan support the bill? Of course. We are granting him a monopoly. We are granting his successor a monopoly, whoever that is. I can't believe that Chairman Gramm, a distinguished economist in his own right, is advocating a monopoly. This amendment I am offering will promote competition. It promotes choice. I hope my colleagues will support it. I yield back the remainder of my time.

Mr. SHELBY. Mr. President, I rise today to offer this amendment, entitled the American Bank Fairness Amendment, to S. 900, the pending bill. This amendment, which, as I have said, is cosponsored by Senator Daschle, the minority leader, and Senators Grams, Reed, Bennett, Edwards, Hagel, and Landrieu, would permit national banks to conduct equity securities underwriting and merchant banking activities in an operating subsidiary, much as their foreign bank competitors that are allowed to conduct such activities in the United States today. I note that six of the seven sponsors of this amendment are members of the Banking Committee. We are talking this afternoon about defining a fair and an efficient framework to allow all--yes, all--financial institutions to better provide service to their customers in America. This country needs financial modernization. I support national modernization. I have great respect for the chairman, the Senator from Texas, Mr. Gramm, and I supported the chairman in the committee. He helped to get this bill to the floor. Unfortunately, this bill does more for the institutions in the top world financial centers--New York, Hong Kong, London--than it does for the average bank that serves the average person in America. That is the issue at hand. I know many of my colleagues have made up their mind on this issue. Besides, in all honesty, the chairman of the Federal Reserve, Alan Greenspan, may not even be the Chairman of the Federal Reserve after next year, although I wish that he would continue. It is often reported in the press that Laura Tyson, Alice Rivlin, or even Catherine Bessant will be the next person President Clinton nominates to the Federal Reserve Board. Therefore, I do not believe it is fair for the issues of this debate to revolve around any one individual, although it is an individual I hold in great respect. The truth is, we are here today to write the laws that will determine the future of the American financial system for the next 60 years. We are talking about the issues of banking law, corporate law, industrial organization. Senators Grams, Reed, and Bennett have been the lead proponents of the operating subsidiary for several years and they should be commended for their deep understanding of the issue and the banking expertise they bring to the Senate Banking Committee. Let me say from the very beginning, this debate is not about Chairman Alan Greenspan. It should never be. As I said, I have a deep respect for Chairman Greenspan. I hold him in very high regard. He is a tremendous central banker. I am not here to dispute that in any way. The operating subsidiary amendment is not about monetary policy. Let me repeat, the operating subsidiary amendment is not about monetary policy. It is not about inflation, the money supply, or even the unemployment rate. I plead with Senators to listen to the facts. The key banking committee Senators supporting this amendment are not from big cities. They are not doing this for Citigroup or Merrill Lynch, Dean Witter, or Chase Manhattan Bank. The truth is, the large financial institutions want a bill so badly, they have forced their associations to oppose this amendment based on press reports that this bill will be pulled if it passes. We all know it is the multibillion-dollar financial institutions that control the associations, and they are the ones pushing this bill. I just do not believe that, in passing a financial modernization bill, we should forget about the smaller, midsized, and regional banks that serve our local communities and our States. Those banks--the smaller, midsized, and regional banks--are the ones that are not being heard on this issue. They are being shut out and they have been discounted. I am sorry, but I do not believe financial modernization should be only for the folks on Wall Street. I do not understand why this body would knowingly pass a financial modernization bill that would intentionally discriminate against domestic banks in favor of foreign banks. If you want to talk about competition, free markets, and fair and equal treatment under the law, Senators should seriously consider the amendment that is before the Senate. The Shelby-Daschle and others amendment would provide more fair and equitable treatment of our national banks in comparison with our foreign competitors. The American Bank Fairness Amendment, as we called it, would ensure that foreign banks receive no competitive advantage over our banks here in America. S. 900, at the moment, as it is written, discriminates against domestic banks. Ask yourself, Why are we even here in the first place? Why are we even considering financial modernization, if it is to be globally competitive? Is it to ensure that our banks can compete on an international scale? I received a letter from John Reed and Sanford Weill, cochairmen of Citigroup, this morning. They wrote to inform me that passage of financial modernization is imperative. They said, As our financial services firms contort to comply with the current legal and regulatory structure, we become much less competitive with our non-U.S. counterparts. Our country's competitive position as the world's leader in financial services is at risk of being lost if we don't act now. So, according to our friends at Citigroup, it appears we have become less competitive with our foreign competitors, and that our position as a world leader is at risk. I received a similar letter from Phil Purcell, chairman of Morgan Stanley Dean Witter & Co. He said that Congress needs to pass this bill because: Financial modernization legislation is critical to the maintenance of the preeminence of American financial firms in global markets. American preeminence, Mr. President? Is that the reason we are considering this legislation? If these are, indeed, the reasons, I must confess I am really confused. The reason for my confusion is S. 900, the bill we are debating today actually discriminates against domestic banks in favor of foreign banks. Simply put, national banks are not allowed to conduct merchant banking activities or equity underwriting activities in an operating subsidiary. Foreign banks, however, can conduct those activities today, and will actually expand their range of activities to include insurance underwriting, if this bill becomes law. I actually have some charts to share with you to help demonstrate the blatant discriminatory treatment of our own national banks versus those of foreign banks' operating subsidiaries in America. Under current law, national bank subsidiaries are not permitted to conduct merchant banking activities. Merchant banking basically means that banks are permitted to make investments in a company subject to conditions designed to maintain the separation between banking and commerce. Foreign subsidiaries operating today in America can, however. Under current law, national bank subsidiaries are not permitted to underwrite any deal in equity securities. However, foreign bank subsidiaries can. The last row under the ``current law'' is blank. That is, neither foreign bank subsidiaries nor national bank subsidiaries may underwrite noncredit-related insurance. Let's look at a chart of permitted subsidiary activities that I have here if this financial modernization bill were enacted into law. Please notice that under the first column, here, national bank subsidiaries still will not enjoy the ability to conduct merchant banking activities or conduct equity securities underwriting. Foreign bank subsidiaries will not only be allowed to conduct those activities--merchant banking, underwriting and dealing in equity securities and insurance underwriting, as shown on the chart--but S. 900, as currently written, will actually expand their permissible activities to include noncredit- related insurance underwriting. This completely undermines the whole rationale for the bill. That is the major flaw with this bill. How can the supporters of this bill say this will help our national banks compete when they are clearly put at a disadvantage by their own Federal Government? How can we in good conscience support a bill that discriminates against our own national banks? Senator Gramm and Chairman Greenspan say if national banks are allowed to conduct such activities in an operating subsidiary, these banks would have a funding advantage over their competitors because of an alleged ``subsidy.'' However, neither Senator Gramm nor Chairman Greenspan can reconcile this argument with the competitive advantage of foreign bank subsidiaries. Since 1990, the Federal Reserve Board has issued approvals for 18 foreign banks to own subsidiaries that engage in securities underwriting activities in the United States. In fact, the size of these subsidiaries exceeds $450 billion in assets. The Federal Reserve admits that foreign banks may enjoy a ``home country'' subsidy. In approving the section 20 subsidiary application for the Canadian Imperial Bank of Commerce in 1990, the Federal Reserve noted: Although as banks, applicants [that is foreign banks] are not supported to any significant extent by the U.S. federal safety net, they have access to any benefits that are associated with their respective home country safety nets, from which they may derive some competitive advantage over U.S. bank holding companies operating under the section 20 framework or other U.S. securities firms. Not only does the board basically admit there may be home country advantages, they also admit: . . . a foreign bank may establish and fund a section 20 subsidiary, while a U.S. bank may not. Further, in their 1992 joint report on foreign bank operations entitled ``Subsidiary Requirements Study,'' the Federal Reserve Board and the Department of Treasury agreed that, ``. . . subject to prudential considerations, the guiding policy for foreign bank operations should be the principle of investor choice. The right of a foreign bank to determine whether to establish a branch or a subsidiary is consistent with competitive equity, national treatment and equality of competitive opportunity.'' Why is investor choice the guiding principle for foreign banks but not for our domestic banks? Why do foreign banks have the right to choose their own corporate structure but domestic banks do not? The Federal Reserve Board stated that while a subsidy for foreign banks may exist: [T]he Board believes that any advantage would not be significant in light of the effect on them of the overall section 20 framework and the circumstances of these cases, and should not preclude foreign bank ownership of section 20 subsidiaries. Basically, that means the rules and the regulations that apply to foreign section 20 subsidiaries should contain any possible subsidy. Why do the rules and regulations in place contain any possible subsidy for foreign banks but not domestic banks, our banks? Why should any alleged subsidy preclude operating subsidiaries for U.S. banks but not for foreign subsidiaries? Fundamental fairness would suggest that foreign banks not be allowed to have a competitive advantage over domestic banks. It just makes no sense. Fundamental fairness suggests domestic banks should also have the choice of an operating subsidiary that our foreign banks have. Critics of the operating subsidiary have voiced concerns about safety and soundness. But this is a red herring, I believe, and really no issue at all. Even Chairman Greenspan testified that safety and soundness is really not the issue with regard to operating subsidiaries, when asked by Congressman Bentsen in the House. I will quote the chairman: My concerns are not about safety and soundness. It is the issue of creating subsidies for individual institutions which their competitors do not have. It is a level playing field issue. Non-bank holding companies or other institutions do not have access to that subsidy, and it creates an unlevel playing field. It is not a safety and soundness issue. The amendment before us, the operating subsidiary proposal, includes the same safety and soundness protections and lending restrictions as the Federal Reserve imposes on section 20 subsidiaries. But to further address any safety and soundness concerns, the amendment would also require that the parent bank deduct--yes, deduct--its entire equity investment in the subsidiary from its own capital and still remain well capitalized. Furthermore, under the operating subsidiary, any alleged ``subsidy'' transferred to the subsidiary would be identical to that transferred to an affiliate because investments in the subsidiary would be limited to that which the bank could transfer to holding company affiliates in the form of dividends. Lastly, the current Chairman of the Federal Deposit Insurance Corporation and three former chairmen--two Democrats, two Republicans-- have stated that the operating subsidiary is more safe and more sound than the affiliate structure. The FDIC chairmen argue that forcing activities in an affiliate actually exposes insured banks to greater risks than that of an operating subsidiary. I want to respond to a letter Chairman Alan Greenspan wrote to Chairman Gramm on May 4 in response to my ``Dear Colleague'' dated May 3. I believe this is a great letter in support of the operating subsidiary. In Chairman Greenspan's effort to explain why foreign bank subsidiaries do not have a competitive advantage and are justified, he actually makes the case for an operating subsidiary and confirms everything proponents have been saying all along. In paragraph 2, Chairman Greenspan says that the International Banking Act requires foreign banks be allowed to operate in this country through operating subsidiaries. His major point is that it is not his choice, but that the law makes him do it, and this is due to the national treatment principles to which he refers in paragraph 3. I understand the national treatment principles. However, those principles are not and should not be interpreted to mean that foreign banks be given advantages over U.S. banks. In both the International Banking Act and the Bank Holding Company Act, the Federal Reserve Board is mandated to deny an application by a foreign bank to establish a U.S.-subsidiary if the Board finds that the proposal will result in ``decreased or unfair competition, conflicts or interests, or unsound banking practices.'' This is a very important point, I submit to my colleagues. By law, the Federal Reserve must have determined that foreign bank subsidiaries conducting securities underwriting and equity underwriting does not result in unsound banking practices. Otherwise, the Federal Reserve would be in violation of the International Banking Act and the Bank Holding Company Act. That very fact supports our argument that conducting such activities in an operating subsidiary is both safe and sound. In the third paragraph, Chairman Greenspan says: In the absence of any evidence that foreign banks are using their government subsidy to an unfair competitive advantage in the United States, there does not seem to be any compelling reason to abandon the current approach to foreign bank participation in this country. Chairman Greenspan once again admits there is a government subsidy for foreign banks. He confirms what I shared with everyone in my ``Dear Colleague'' letter in the Senate. He then changes the subject to say there is no reason to abandon foreign banks subsidiaries. I never suggested such a thing in my ``Dear Colleague'' letter. In only asked that if it is appropriate for foreign banks, why isn't it appropriate for national banks? The fifth paragraph of the letter states that, ``foreign banks have not been able to exploit their home country subsidy . . .'' and that foreign bank subsidiaries ``have substantially underperformed U.S. owned section 20 companies.'' He actually admits that ``the subsidy does not travel well.'' In other words, foreign banks have not been successful transferring their home country subsidy to their subsidiary in the U.S. But wait a minute. You cannot have it both ways. I do not care who you are. Chairman Greenspan just presented evidence to us in the fifth paragraph that foreign bank subsidiaries, which in the third paragraph he admits receive a home country subsidy, underperform their American competitors. Thus, if there is a subsidy, it must either be (1) insignificant, and not enough to affect market performance or (2) contained in the section 20 regulatory framework and therefore not an issue. In either case, the Chairman has just confirmed the arguments that proponents of operating subsidiaries have made. To sum up, Chairman Greenspan, just 2 days ago, confirmed that: foreign bank subsidiaries receive home country subsidies; conducting such activities in a subsidiary does not result in unsound banking practices, otherwise the Fed is violating the law with regard to foreign bank subsidiaries; and the subsidiary does not ``travel well,'' that is, it is not easily transferred from the bank to the sub. The logic and the evidence presented by Chairman Greenspan in defense of foreign bank subsidiaries is the exact same logic and evidence that supports the Shelby-Daschle operating subsidiary amendment. To be honest, I am quite surprised at the Chairman's uncompromising position on the issue. As a student of Public Choice economics, I am sure he is aware of the benefits of competition among regulators. I am surprised he supports making the Federal Reserve the monopoly umbrella regulator. Monopolies restrict output and increase prices. There is no doubt in my mind that making the Federal Reserve the monopoly regulator will create even more bottlenecks in bank applications thereby increasing the regulatory cost of banks doing business with the Federal Reserve. For the sake of competition, for the sake of free markets, for the sake of choice, I respectfully request that you support the Shelby amendment. Mr. GRAMM addressed the Chair.

Mr. SHELBY. Mr. President, I ask unanimous consent reading of the amendment be dispensed with.

Mr. SHELBY. Mr. President, I send an amendment to the desk on behalf of myself, Senator Daschle, Senator Grams, Senator Reed, Senator Bennett, Senator Edwards, Senator Hagel, and Senator Landrieu.

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