Brad Sherman

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume for closing. This bill passed our committee by a 41-to-0 vote. In passing H.R. 2608, Congress is making sure that smaller companies have scaled-down disclosure obligations in all instances rather than just the initial public offering. We apply the same standard to acquisitions and follow- on offerings. This is a commonsense reform. It reduces the burden on small companies and still provides investors with 2 years of audited financial statements. Mr. Speaker, I urge my colleagues to support this bill, and I yield back the balance of my time.

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 2608, sponsored by the gentleman from North Carolina. I want to put this bill in context. The first two bills we considered in this session dealt with private offerings, where there is very limited investor protection and where there are requirements as to who is allowed to invest. We are now focusing on public companies where there is a lot of investor protection and where anyone can invest and anyone who buys can then freely sell it to anyone else. Just as by way of illustration, we are talking about, in this bill, whether there will be 2 or 3 years of audited financial statements for certain public companies. That differs from the private offerings that we considered in the first two bills. Private offerings are not required to have any audited financial statements. A special accommodation has been made to emerging growth companies, known as EGCs, who are obligated to provide 2 years of audited financial statements when they first provide an initial public offering. Other companies, on the other hand, are required to provide 3 years of audited financial statements when they go public. In some situations, however, an EGC must provide 3 years of audited financials, including cases where they acquire another company. This bill would recognize that whatever standards we have when the company first goes public, those standards being for 2 years of audited financials, I think are logically applied in certain other circumstances. One of those is where the company goes to the public a second time for a follow-on offering, and the other is when the company uses its stock to acquire a company. We have a rule that, for the most important gatekeeping requirement, says 2 years of audited financials. This bill would provide that same standard for emerging growth companies in these two other types of situations. This will harmonize the EGC framework, making sure that these smaller reporting companies have a scaled-down obligation but still do provide 2 years of audited financials. Mr. Speaker, I urge my colleagues to vote ``yes'' on this important bill, and I reserve the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 835, the Fair Investment Opportunities for Professional Experts Act sponsored by the gentleman from Arkansas (Mr. Hill). This bill passed the committee by voice vote. I was there. I didn't hear a single ``no'' vote. This bill deals with the overall process of investing in stock being sold by the company to investors to raise money. We see this happen through public offerings, and most of us one way or another or through a pension plan are invested in publicly traded stocks. The process for a company to go public is an expensive one, and so smaller companies also do private offerings. We have a process of restricting investments in these private offerings to those who can afford and understand the risks and those who understand that they can't necessarily sell the security that they have purchased readily. We do need a framework for accredited investors who are allowed to buy in these private offerings. Up until now, our definition of accredited investor has focused too much on wealth or income of the investor and not on the expertise of the investor. This bill, I think, moves us in the right direction as far as allowing those with expertise to invest. I also look forward to narrowing the definition of those or eliminating those from investing solely because they are wealthy. Just because you have a million dollars does not mean that you have understanding or knowledge. The accredited investor framework protects the general public from being sold high-risk, illiquid private securities. This is because private securities do not come with anywhere near the same level of financial or other disclosures to investors that public securities do. Nor do private securities come with the same legal protections for investors and oversight from the SEC and State regulators as compared to public securities. Finally, they don't come with the same level of liquidity and ability to sell or a posted price where you can be assured that there is a big public market, and you know what the fair price is. Both accredited investor bills being considered on suspension today aim to return to this concept of accredited investor but focus on the knowledge of the investor as to the high-risk nature of the private security offering. We all know that just because you have a million dollars does not mean you understand the complexities of the private markets. Conversely, you should not be prohibited from investing in these products if you do have knowledge of the risks involved but don't happen to have a million dollars. This is why it is so important for the SEC to update its definition of accredited investors to protect investors who are not sufficiently informed while creating pathways for those who are or those who make themselves sufficiently knowledgeable. Mr. Hill's bill would allow individuals with certain credentials, such as an MBA or a FINRA certification--that is a certification from the Financial Industry Regulatory Authority that would allow one to actually be a broker-dealer. People who meet those two qualifications would be deemed accredited investors without reference to their income or wealth. I am under no illusion about the riskiness of these products. We will all hear the stories. Every friend I have who goes to Vegas and tells me about it, comes back saying they won everything. I have nine other friends who go to Vegas. They never tell me how well they did. Likewise, we all will hear about somebody who invested in Apple at the beginning, but nobody talks about their investment in pear, tangerine, or kumquat. This is an opportunity to make a lot of money. It is also an opportunity to lose a lot of money. I believe that the reforms to the definition of accredited investors are necessary and fair, and this bill is a reasonable expansion of the definition of people who can be expected to have the requisite knowledge or expertise to make an informed investment about the very risky private securities. I support this bill. Every voice on the committee supports this bill, and I urge my colleagues to vote for it. Mr. Speaker, I reserve the balance of my time.

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. The accredited investor framework is in need of improvement. Today, millions of families can be targeted to invest in high-risk, illiquid, nontransparent financial products solely because of the inflated value of their assets, putting at risk their ability to live comfortably in retirement. At the same time, others who are knowledgeable are prevented from investing. When the accredited investor framework was first established by the SEC in 1982, less than 2 percent of our population could be solicited by broker-dealers or companies raising capital on the basis of their income or on the basis of their assets. Today, that has risen to 20 percent. That is not because investors are more knowledgeable and it is really not because there are more investors who can afford to take major losses. It is simply because we have had a lot of inflation since 1982, and so you can meet the asset requirements with real estate and your retirement nest egg. To be clear, no one thinks that the amount you need for your retirement in 2023 is the amount you needed in 1982. That is why the SEC needs to revise the thresholds to better protect working families. That said, Mr. Hill's bill is sensible. It would return to the original concept of the accredited investor, focusing on investors who are knowledgeable about the risks of private securities. I would also point out that while we are protecting investors, another function of our securities laws is to help companies raise capital and, obviously, this bill will help many companies to raise the capital they need to expand; so I believe that is a balanced bill. I look forward to other steps to change the accredited investor framework. I urge my colleagues to support this bill, and I yield back the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I rise in support of H.R. 1579, and I yield myself such time as I may consume. The Accredited Investor Definition Review Act is, of course, sponsored by the gentleman from Michigan. The accredited investor definition is out of date and needs changing. A lot of these comments relate to the comments I made on the previous bill. The current definition is based on wealth, which is not really a proxy for an individual's knowledge or experience. It may, in part, be a proxy for their ability to absorb losses; but the wealth standard was established in 1982 and hasn't been revised, so it was either wrong then or it is wrong now. Further, the amount of wealth required to meet the accredited investor threshold, of course, has been eroded and, as I said speaking of the prior bill, has gone from 2 percent of our Nation to 20 percent of our Nation. So we need to define who Wall Street can sell risky and illiquid products to, and not those who have created a nest egg, which is so much smaller than the nest egg in terms of purchasing value that we required when these standards were developed. The SEC may establish a definition to protect working families from these high-risk products, while allowing those who are knowledgeable to make the investment. Mr. Huizenga's Accredited Investor Definition Review Act reaffirms the authority of the SEC to review the credentials that will qualify an accredited investor and update the list of credentials. This ensures that the definition is not stagnant and changes with the times. As a result, more investors will have access to private markets while ensuring that they have the adequate knowledge base to understand the risks involved. I would add that perhaps wealth shouldn't be an entryway to investments. It should be exclusively based on one's knowledge. If we did that, we would want to look not only at the knowledge of the investor, but the knowledge of their advisers, but only if those advisers were truly independent, because an investor being advised by someone who earns a commission or someone who gets referrals from the promoter is not a truly independent adviser. So this bill moves us forward to doing something that should have been done many years ago. We are stuck with rules drafted in 1982. This bill requires the SEC to begin the process of revising those rules. I urge my colleagues to vote ``yes'' on this important bill. Mr. Speaker, I reserve the balance of my time.

Mr. SHERMAN. Mr. Speaker, I have no further speakers and I am prepared to close. I yield myself the balance of my time. I want to respond to the comments from the gentleman from Michigan to some degree. I think I speak for the majority of the Democratic Caucus that we have a balanced view. We want investor protection, and we want investments to be made in private offerings by those who understand the risk and understand the company they are investing in. The idea that we would open the door to every investment and allow an unlimited number of people with no particular expertise or meeting other standards would mean that we wouldn't have any initial public offerings. Every company would become a public company. We wouldn't have an SEC. That is not where we want to go. This bill is consistent with that balanced view. The gentleman from Michigan also says he thinks the SEC is being distracted and is not carrying out its core mission. Just today, they went after a crypto exchange, and I can't think of anything more essential to their core mission. Another controversy is whether investors in public companies will be given information about the environmental and carbon effects of the company. Many investors want that information, and giving investors information that many of them want is a core definition of the SEC. Finally, the gentleman from Michigan puts forward a very inaccurate view of our current law. It is not true that you can't invest in your brother-in-law's pizzeria unless you have a million dollars in net worth. If that were true, I couldn't get a pizza on Ventura Boulevard. The fact is that we do allow up to 35 unaccredited investors in private offerings, and the vast majority of what we think of as the really small businesses, the ones up and down Ventura Boulevard--the pizzeria, the restaurant, whatever--fit into that category. We do have a securities law system that works pretty well. We can improve it. This bill does that. The SEC should amend its accredited investor definition to better protect investors and retirees from being solicited for high-risk, unsustainable products just because they meet an asset threshold that hasn't been revised in 40 years. I urge the SEC to review that asset threshold as part of the periodic review required by this bill. Mr. Speaker, I urge my colleagues to support this bill and to support a balanced investor protection regime, and I yield back the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I do have a question for the chairwoman of our subcommittee. We are taking these bills in a different order than I was told. We are now dealing with H.R. 2593. Will we then return to H.R. 2608 and H.R. 2610?

Mr. SHERMAN. Mr. Speaker, I yield to the gentlewoman from Missouri.

Mr. SHERMAN. Mr. Speaker, the one person that may be most surprised by us going out of order is the author of this bill, Mr. Gottheimer. I know he is on his way now to this floor, so in order for him to get here before he would have expected to be needed, I will speak very slowly. Mr. Speaker, I rise slowly in support of H.R. 2593, the Senior Security Act sponsored by the gentleman from New Jersey, who is on his way to this floor right now. Scams targeting seniors, which can include harassing robocalls and phone calls impersonating the government, cost older Americans more than $36 billion a year, according to the National Council on Aging. According to AARP, these kinds of senior scams have more than doubled just since 2020. Financial scams can leave a devastating and lasting impact on our seniors, causing significant financial loss. Recovering lost funds is a very challenging process, and in many cases, the money is simply not retrieved. Scams also lead to significant emotional distress, resulting in feelings of embarrassment, guilt, shame, and a diminished sense of self-worth. The emotional impact can exacerbate health conditions or lead to depression and anxiety. Once scammed, seniors might lose trust in people, which can lead to further isolation and reluctance to seek help. Mr. Gottheimer's bill takes key steps to help protect older Americans nationwide from getting scammed out of their hard-earned money by establishing a senior investor task force within the SEC. This task force must report on topics relating to investors over the age of 65 and make recommendations for actions to address problems encountered by senior investors. I will also point out that this is important for our capital markets and for companies trying to raise money because every time a senior is subject to one of these scams, others become less interested in investing, and we need Americans to feel that they are protected and not cheated when they invest in stocks, bonds, and our capital markets. Mr. Speaker, I urge my colleagues to support this bill. I am pleased that the gentleman from New Jersey has arrived, and I reserve the balance of my time.

Mr. SHERMAN. Mr. Speaker, I yield such time as he may consume to the gentleman from New Jersey (Mr. Gottheimer), the author of this bill.

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, this bill passed in committee 49-0. Our seniors are particularly vulnerable to financial scams. As Members of Congress, we must work to find effective ways to protect seniors from scamsters and fraudsters. Mr. Gottheimer's bill, a bill I commend him for drafting and one that, once again, got 49 votes to 0 in our committee--I commend him for crafting this legislation. Mr. Speaker, I urge my colleagues to support the bill, and I yield back the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 2610, sponsored by the gentleman from North Carolina, the chairman of the Financial Services Committee. Mr. Speaker, both this bill and the last bill we considered are seeking to reduce the obligations of emerging growth companies, or EGCs. H.R. 2608 would allow an EGC to provide only 2 years of audited financial statements in the case of an acquisition or a follow-on offering. We just passed that bill on this floor by a voice vote. We are now considering H.R. 2610, which takes that concept one step further and allows an EGC to provide only 2 years of audited financial statements in the case of a spinoff. Logically, if we are going to adopt that bill, we should adopt this bill. A spinoff transaction is one where one company creates a new independent company by selling new shares of its existing business. Both H.R. 2608, which we just passed, and this bill, H.R. 2610, reduce the obligations for EGCs by saying that they need to provide not 3 years of audited financial statements but 2 years of audited statements. We should keep in line what is required for EGCs, whether they are going public, whether they are acquiring, whether they are doing an initial public offering, or, as this bill does, whether they are doing a spinoff. Mr. Speaker, I urge my colleagues to support this bill, and I reserve the balance of my time.

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, the House, just a few minutes ago, adopted on a voice vote, H.R. 2608. That bill had passed the committee by a vote of 41-0. This bill is extremely similar, except it passed the committee with a vote of 42-0. H.R. 2610 will ensure that there is uniformity regarding EGCs' financial disclosure obligations, in this case, in the event that an EGC conducts a spinoff. Mr. Speaker, I urge my colleagues to support this bill, and I yield back the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 2793, the Encouraging Public Offerings Act of 2023, sponsored by the gentlewoman from Missouri. I think the gentlewoman has laid it out clearly. We are talking here about the process by which a company goes public, and this allows the company to do two things before they go public. One of those is to confer with prospective investors, and the other is to get a nonpublic review by the SEC staff of their registration statement. This process of allowing these things to happen has been tried with ESG companies. The SEC has now adopted it as a policy for other companies, and now this bill would codify that decision. I should point out this bill came before our committee, and the vote was 39-1. This bill codifies the recent SEC rule that allows any issuer, not just an ESG, to submit a confidential draft of their registration statement for nonpublic review. This bill also allows the issuers to confer with prospective investors; in effect, testing the waters about whether a public offering makes sense. By freeing all issuers to use these two methods and codifying the SEC's administrative action, we can provide all companies with the assurance that these tools will be available to them. This bill codifies, as I have said, the 2019 SEC rulemaking that allows issuers to test the waters before going public. This allows the issuer to gauge interest in their public offering by talking to certain institutional investors without first needing to file a registration statement. Given the cost of going through the entire process, it only makes sense to allow companies to talk to institutional investors before they decide to go public and commit themselves to that large cost. Overall, this makes it easier for companies to access our capital markets to get the capital they need to grow their businesses. Mr. Speaker, this bill is one that should be adopted. The vote in committee was 39-1. I urge my colleagues to support it. Mr. Speaker, I yield back the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 2812, the middle market IPO underwriting study act, sponsored by the gentleman from Connecticut (Mr. Himes), and I commend him for his work in bringing this bill to the floor and authoring it. This bill passed our committee by a voice vote. I don't think there was a dissenting voice in the room. As the gentlewoman from Missouri points out, the process of going public and filing a registration statement is expensive. Due to that expense, companies may choose not to go public and not raise the money they need to expand their businesses and provide additional employment to aid our economy. Therefore, it is in all of our interests to see whether that cost can be reduced. Companies in this process usually engage an underwriter or broker- dealer to help them sell the shares to prospective investors. Underwriters are typically compensated for their services through fees such as underwriting spreads and underwriting fees. The underwriting spread is the difference between the price at which the underwriter buys the security from the issuer and the price at which those securities are sold to the public in the public offering. The underwriting fee, which often constitutes the largest share of the cost of doing an IPO, or initial public offering, is typically a percentage of the gross proceeds of the sale of the securities. The exact amount varies and can be negotiated between the issuer and the underwriter. Large companies have, in recent years, been able to negotiate lower percentages for this process, which reduces their overall fee. At the same time, smaller companies have continued to pay the same historic percentage for this service, which is often 7 percent of the transaction. Higher underwriting fees essentially increase the cost of raising capital, allowing middlemen to pocket profits that would otherwise be available to grow the company. Despite technological advancements, such as digital platforms which now allow for a quicker and wider distribution of securities, underwriting costs for small-and medium-sized companies have remained stagnant and uncompetitive. The gentleman from Connecticut (Mr. Himes) has brought forward a bill to direct a study of this problem and offer concrete solutions. It will focus on the underwriting fee. It will also look at the auditing fee, as well. I support this bill, which will shed light on how much small- and medium-sized companies are paying chiefly for underwriting services when they go public. I hope this will get the SEC to address this behavior on Wall Street. Mr. Speaker, I urge my colleagues to support the bill, and I reserve the balance of my time.

Mr. SHERMAN. Mr. Speaker, I yield such time as he may consume to the gentleman from Connecticut (Mr. Himes), the author of this bill.

Mr. SHERMAN. Mr. Speaker, I think the gentleman from Connecticut said it well: Costs should be coming down because technology is available, yet they seem exactly stuck at a noncompetitive 7 percent. Our investors in companies need more robust competition and fairer underwriting practices. This bill would shed light on these practices and help us strengthen competition in underwriting services for our smaller and medium-sized companies. Mr. Speaker, I urge my colleagues to support this bill, which passed, I believe, on a voice vote in our committee. I know of no opposition. Mr. Speaker, I yield back the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I will address an issue that will not affect us until the second half of this century, an issue that I first addressed 23 years ago; the first year of this century. It is the issue of engineered intelligence. The race that the engineers don't know that they are in. A race between the bioengineers and DNA and the computer engineers and artificial intelligence, AI, to create a new level of intelligence on this planet; in effect, to develop our successor species. AI will have dramatic effects in the short-term. It will have benefits because it is a powerful tool. It will be used by evil men and women because it is a powerful tool. They will use it to accomplish their goals, and sometimes they will make mistakes. They will invade privacy. They will deny loans to people who should get them for wrongful reasons. These are issues that we have faced in the last hundred years wherein this or that technology has invaded our privacy or discriminated against people in this or that financial transaction. My focus is the second half of this century when we will face issues far beyond that. As to artificial intelligence, Elon Musk and Steve Wozniak and others have asked for a 6-month delay, but we will not see a 6-month delay in our research. Frankly, a 6-month delay wouldn't accomplish much because the issues surrounding AI are intractable, and we have squandered at least 23 years in failing to deal with them. Another 6 months will do us little good. I commend the Speaker of the House of Representatives, and I don't commend Kevin McCarthy all that often, for bringing the entire House together 2 days ago to focus on the artificial intelligence issue and to hear from Professors Torralba and Madry of MIT. The professors showed us that AI clearly has met the Turing Test. The Turing Test was set forward by Professor Turing many, many decades ago. Professor Turing was the subject of the Imitation Game, one of the most brilliant computer professors we have ever had, that the western world has ever had. That test was that you would have a text chat with a computer and not be able to tell whether you were talking to a human or to a computer. At that point, computers would have reached human levels of intelligence. Well, we have clearly gotten to that level. We call it ChatGPT. Chat is right in the name. Today's computers cheat on the Turing Test. It is no longer a valid test because today's computers have something Professor Turing from the 1940s and 1950s could not have imagined, and that is the internet. They are able to mimic a human response just by looking at every other human response to a similar statement or question by looking at the entire internet. As the MIT professors pointed out, it is kind of like a parrot; able to say something that under some circumstances might be the right response without understanding the words. AI will not, therefore, probably be intelligent the way I would view it for decades. We will need a new test, not the Turing Test. For now, AI is a tool. It is a great tool, as was writing and fire and jet travel and the internet. We will be able to deal with that tool. The second half of this century will see an AI that is intelligent, that has--or might very well see this. It may very well be self-aware, aware that it exists and that it exists on a planet that can be affected things outside of its own existence. AI may have volition; will. It may have ambition, the desire to survive, perhaps the desire to propagate, and in any case, the desire to affect the world so as to achieve its own survival. AI is a powerful tool. China is not going to stop developing it for the next 6 months. American corporations see big profits. They are not going to stop developing it. The private sector isn't going to spend much of its money making sure that AI is trustworthy. They are going to try to make sure that AI is profitable. We need to be concerned about an AI that is self-aware and ambitious. Such an AI will have risks that are beyond the apocalypse to the human race. Therefore, I propose that 10 percent of all the money we spend on AI research be used to prevent and monitor for self-awareness, volition, and ambition. Perhaps also to monitor for AI's awareness that we are monitoring it for those purposes. If someone, some futurist is describing what the second half of this century will look like, and they paint a picture that seems to be a science fiction movie, they might be wrong. They might be right. If a futurist paints a picture of the future that doesn't look like a science fiction movie, you know they are wrong. Our children will be living in a science fiction movie; we just don't know which one. Let us not build Skynet. If you remember the Terminator movies, you will remember that Skynet destroyed most of the human race just seconds before it thought correctly that it was going to be unplugged. Terminator was a great movie to watch, a terrible movie to live in, and I don't know if we can count on Sarah Connor. There are two advantages that the human race has in preventing self- aware and ambitious AI. First, we are designing the AI, and we may understand what we are doing while we are doing it. We might. Second, the machines are inherently, from our experience, not volitional, not ambitious. Go to the largest computer and say to the computer, I am planning to unplug you, break you up, and sell you for parts, and that computer will help you calculate how much money you can get for the parts. Now let's look at genetic engineering, bioengineering. While the largest computer seems fine with being unplugged, the smallest insect does not. Try stepping on a cockroach and see whether it is okay with being unplugged. The DNA, which didn't care whether it survived, didn't care to propagate, didn't, and isn't with us. We may see genetic engineers, DNA engineers, start with human DNA and create a 1,000-pound mammal with a 100-pound brain that is going to beat your kids on the law school admissions test. That mammal, like every other mammal, will probably have a survival instinct. Today's big headlines are about ChatGPT and artificial intelligence. Last year's big headline was about CRISPR, a new technology for the DNA engineers to use, and those headlines may turn out to be more important. It will be hard to limit genetic engineering because initially, it will help deal with human tragedy. We will use genetic engineering to help cure disease. Genetic engineering will help the impaired human, will help to decrease disease or syndromes. First, we will see us create the non- impaired human, the repaired human, and only then will we go forward to the transhuman. There is a second issue, kind of something off to the side, and that is some world leaders--and I am looking at you Kim Jong-un--will seek to create submissive or subservient humans genetically. Third, also off to the side, there are animal rights advocates who have argued that animals have reached a point where they deserve constitutional rights. Well, when genetic engineers create a pet dog or a working dog with near human intelligence, those animal rights advocates may have a point. Let us return to the great race to create transhuman intelligence that is self-aware and ambitious. We need rules regarding genetic engineering that make it plain that while it is okay to seek to prevent intellectual disability, it is not okay to use genetic engineering to create intelligence beyond that of the average human. Of course, we need to prevent the use of genetic engineering to create animals of greater intelligence than that animal species or humans of impaired will or impaired intelligence. We do know one thing: Intelligence is the most powerful thing on the planet. It is intelligence that gave us fire. It is intelligence that gave us nuclear fusion. It is intelligence that gives us an unending supply of cat videos on our phone. The last time a new level of intelligence arose on this planet it was when our ancestors said hello to a Neanderthal. It didn't work out for the Neanderthal. There is a race between the computer engineers and AI and the bioengineers and DNA to develop the next level of intelligence, perhaps to create our successor species. Will the next dominant species on this planet be carbon-based or silicon-based, the product of genetic engineering or the product of computer engineering? Artificial intelligence is in the lead, creating an incredible level of intelligence that is useful to us now and is progressing at the speed of computing. Genetic engineering starts with the raw material that has a survival instinct and ambition. I don't know who will win this race. I am old-fashioned. I am rooting for team human, which may not even be in the race. Recent Events in Pakistan

Mr. SHERMAN. Mr. Speaker, I would like to address recent events in Pakistan. In evaluating those events, some would say that America should root for whichever political leader styles themselves as more pro-American and has been easier for us to deal with on this or that bilateral issue. I would say--and I think the State Department agrees--that what comes first is our dedication to democracy and the rule of law. Imran Khan was difficult for us to deal with; Prime Minister Sharif is somewhat easier. The question is democracy and the rule of law. The Supreme Court of Pakistan has ruled that there should be provincial elections in Punjab and later on in another province. That is the rule of law. I believe that supreme court has ruled that its initial ruling is final and unappealable, and the supreme court has ordered that the funds be released as are necessary to hold those provincial elections. America stands not with this policy or that policy or a government that will agree with us on this issue or that issue. America stands for democracy and the rule of law. America also stands for human rights and the right of free speech and the right to express one's opinions. I, of course, have been concerned about some of the terrible disappearances, some of the abuses of human rights, some of the substantial evidence of torture. We need human rights and democracy in Pakistan. We need the rule of law. America stands not with its short-term bilateral concerns but with our dedication to democracy and human rights. Most important of all, Pakistan has national elections set forth in October, and nothing is more important for Pakistan than that those elections be timely, legitimate, fair, and that whoever wins the elections be allowed to govern. War in Ethiopia, Tigray

Mr. SHERMAN. Mr. Speaker, I will turn my attention to an issue that too many in Washington didn't pay attention to, as over 600,000 people died, and now some are not paying attention to the theory that the problem is over. I speak of northern Ethiopia, Tigray. While the Cessation of Hostilities Agreement was signed in November, the Tigrayan people continue to face ethnic violence and discrimination. Earlier this month, the AP reported that Amhara forces have renewed their campaign of ethnic cleansing against Tigrayan civilians and have uprooted roughly 47,000 Tigrayans from areas in southern Tigray just since March. The Amhara forces are carrying out this campaign of ethnic cleansing through forced evictions, harassment, and murder. Throughout all history, ethnic cleansing and genocide have gone together. This is not a standalone event, but rather, follows a horrific campaign of ethnic cleansing of Tigrayan civilians by Amhara regional forces that began in the year 2020. Last year, Secretary Blinken publicly recognized that ``Members of the Amhara forces also committed the crime against humanity of deportation or forcible transfer and committed ethnic cleansing in western Tigray,'' in addition to ``war crimes'' and ``crimes against humanity, including murder, rape and other forms of sexual violence and persecution.'' This is on top of the involvement of Eritrean forces in Tigray. Eritrea is a separate country. It has no business having its troops anywhere in Ethiopia. The determination made by our State Department on what is happening in Tigray follows extensive reporting by Human Rights Watch and Amnesty International in April of 2022, which documented: `` . . . Ethiopian federal forces, systematically expelled several hundred thousand Tigrayan civilians from their homes using threats, unlawful killings, sexual violence, mass arbitrary detention, pillage, forcible transfer, and the denial of humanitarian assistance.'' We have many things going on in the world. I know that most of our foreign policy or a very large chunk of it is focused on events in Eastern Europe and Ukraine, but Washington cannot turn away from this issue, nor can we assume that the Cessation of Hostilities Agreement solves the problem. The people of Tigray deserve our attention and the engagement of the United States and the entire international community. Our leaders in Washington need to focus on what has been the most deadly event of the last several years. Mr. Speaker, I yield to the gentleman from Texas (Mr. Arrington). Celebrating the 100th Anniversary of Texas Tech

Mr. SHERMAN. Mr. Speaker, seeing no one else who wishes me to yield them time, I yield back the balance of my time.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, we seem to have escaped the critical stage of this bank meltdown. We have not escaped without cost. The FDIC announced today that they--and this is a vague estimate-- will have to spend $20 billion with regard to Silicon Valley Bank. That money will then be collected by fees that are on banks--basically, on depositors--in coming years. More importantly, our economy has faced a huge shock. Business loans that would have been made were not made in the last month and probably will not be made in months to come. The only silver lining there is the Fed was looking to slow down the economy, but this is one hell of a way to do it. We have a fundamentally undemocratic system for regulating banks. First, for the regional banks, the district Reserve banks, their Boards of Governors are not selected through a process of democracy. Elections are supposed to have consequences, but neither Congress nor the President has any role in selecting most of these directors. Instead, they are selected by the banks. In what way should we have governmental power vested that way? Then, we have the Financial Accounting Standards Board, which claims not to even be part of the government and, therefore, doesn't claim to be responsible to the voters of this country. Yet, it collects taxes and writes, in effect, accounting laws. Finally, we have a forum-shopping system that allows a bank to have a holding company, not have a holding company, be State regulated, be Federal regulated, and pit one regulatory group up against another. Many countries have had, for long periods of their history, zombie banks, where the government thinks it is best to hide the losses of the bank, and somehow, the economy can go on. It works for a while some of the time. Unfortunately, we have a similar system here. We have a system where losses on bonds are not recognized by the bank and often not even looked at adequately by the regulators, but losses on Main Street loans are recognized before they occur, even if they do not occur, on an anticipated basis. A bank whose bonds have gone up in value can classify those bonds as available for sale and recognize a profit. If the bonds have gone down in value, they just classify them as not available for sale but to be held to maturity, a mere bookkeeping entry, and they don't have to recognize the losses. Our banking system has $600 billion, at least, of unrecognized losses where we are hiding the losses in the footnotes. Our regulators don't regularly look at this. We have had stress tests where they looked for a number of stresses, but not the stress that interest rates will go up and bonds will go down in market value. That is like having a stress test on a building where you test it for a flood and don't bother to test it for an earthquake. We need stress tests that look at the most obvious stress that banks will always have. Interest rates can go up; interest rates can go down. Regulators know that. They have chosen to hide it from themselves. The FDIC insures deposits only up to $250,000. That is a major increase from where it was 15 years ago. We might want to go higher, but if we do, we should limit that additional insurance to non- interest-bearing accounts. When businesses are using the bank as a payment system, as a utility, when businesses instead want to invest $1 million, $2 million, $3 million of their money, they have a responsibility for finding an investment vehicle, whether it be a bank or otherwise, that is sound. We have to prohibit the exclusive banking relationships where companies were told by Silicon Valley Bank: ``You must have all your spare cash in our bank, which means we, the bank, take a risk on you, but you have to bet your whole company that our bank will survive.'' We need companies to diversify their deposits. Finally, cryptocurrency should not be listed on the balance sheets of any bank. It is simply way too speculative. I look forward to working for a better banking system. My fear is that, like the losses on bonds, we will simply put under the carpet the losses and problems, go on saying we will patch it together, and not tell the American people that there are fundamental problems that should be addressed.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, China says it reserves the right to retaliate against America for the temerity of shooting down their spy balloon over our territory. This arrogance should not surprise us. It is the fruit of decades of China successfully pushing us around and getting away with murder. The balloon is just the latest, and I think the smallest, invasion of our sovereignty. China denies access to American companies to its market, thus creating the most lopsided trading relationship in the history of trading relationships, with all the macroeconomic effects that has. But it also has an effect on our sovereignty, because it then allows access to their markets to selected American companies, handing out that access like dog training treats. And lo and behold, our corporations, they roll over, they sit down, they play dead. Morgan Stanley has to tell its American customers to invest--advises them to invest 15 percent of their money in China; and if it fails to do so, Morgan Stanley won't be able to do business in China. God forbid anybody from the NBA mentions Hong Kong or the Uyghurs. They are bounced out of the league. And Hollywood is told they can only get 40 movies into China every year, which means if they make a movie about Tibet, it will not be shown in China. Hell, if they make a movie about Tibet, none of their movies will ever be shown in China. As a result, we are not going to see a movie about Tibet or the Uyghurs. China controls what we see on our screens. And then a little problem with COVID, where China's obfuscation and lack of cooperation led to hundreds of thousands of deaths around the world. But most significantly are the millions of jobs that we have lost as we have seen our industry hollowed out. The result is a decline in real wages over the last 30 years of Americans without college degrees and the fentanyl crisis as well. All of these offenses deserve a major response, and we cannot limit that response to just this balloon. Like a balloon, we cannot allow this to all blow over. I have five modest proposals. First, we should sell identified weapon systems to Taiwan, including the helicopters. Second, we should provide that China automatically loses its most- favored-nation status if they invade or blockade Taiwan. Third, all major American corporations should report to their shareholders how they would be affected by a rupture in the U.S.-China trade relationship, because that is a genuine risk factor. It might happen. But that will encourage the companies to disengage from China and to build resiliency to compete for capital by showing shareholders that they are ready and that they have disengaged. And if our companies are resilient, our economy is resilient. Fourth, we need a fund to compensate American companies that choose not to bow down to China and, therefore, suffer losses. This needs to be funded from a tariff on Chinese goods. And, fifth, we need tough responses to China in tariffs if they retaliate for any of the four things I just identified. We have a lot to do. This balloon has woken up the American people, and it should wake us up to the far greater things that China has done. In the meantime, let's pass this resolution.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, the Chinese Communist Party obviously believes that they can invade America's airspace deliberately, notoriously, and without serious consequences. They even believe--and this shows their hubris and their gall--that they can announce that they reserve the right to retaliate against America for shooting down their spy balloon. Do you know what, Madam Speaker? After 26 years in this House, I would say that the Chinese Communist Party is probably right. They did it. They hit us, and they can probably get away with it because the two parties will compete about who can scream the greatest invective toward Beijing, and then the two parties will attack each other saying: Well, what did President Trump do? And what did President Biden do? In the end, we will have nothing but bruised, partisan vocal cords. I have seen for 26 years the Beijing-Wall Street axis control our policy toward China. Now this is just a balloon, but it is on top of two enormous problems with China. One is the lopsided trade relationship where they prohibit us from exporting to them and impose higher tariffs on us than we impose on them. The second was the obfuscation and lack of cooperation of China when COVID arose on their territory. But we probably will not have meaningful retaliation for those great harms and the most recent one because Wall Street has been in control of this House since the day in the year 2000 when we granted most- favored-nation status to Beijing and let them into the World Trade Organization. Before that, China was an annoyance and a slumbering giant. Since then, the Chinese Communist Party has done untold damage to our people, to their people, and, of course, to our economy and national security. There are two things Wall Street will not let us do and two things China would actually try to avoid, and that is dealing with Taiwan and trade. So I have three proposals. I will look forward to working with anyone on either side of the aisle to turn this into good legislation. First, Congress should provide that we automatically allow Taiwan to buy certain defense items and that we act expeditiously at the congressional level without waiting for the administration to allow the Seahawk helicopters and other necessary defense items to go to Taiwan. Second--and this arises from my years as chairman of the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee--we need to require all major corporations to disclose, as a risk factor to their investors, how they would be affected by an end of the U.S.-China economic relationship or major impediment to it. Investors deserve the information, and we need corporations to compete for capital by showing that they have made themselves more resilient. If our companies are more resilient, then our economy is more resilient. Third, we need to provide that we immediately end most-favored-nation status to China if they blockade or invade Taiwan. This has to be immediate, certain, and known in Beijing before they launch their invasion, and it is not immediate and it is certain unless we provide no executive branch waiver. Finally, a fourth proposal, and that is we need to provide an immediate 20 percent tariff on all Chinese goods if they retaliate against us for implementing any of those first three proposals. If they retaliate against that retaliation, then we have to be ready to go beyond that. We can act. We can act with regard to Taiwan, we can act with regard to trade, and we can act with regard to a country that has built the most lopsided trading relationship in the history of international trade and whose actions have turned the industrial Midwest into what we now refer to as the Rust Belt which has led to a decline in real wages for those without a college education for over 25 years leading to fentanyl and a host of other problems. So we can act. The question is: Can we overcome the Wall Street-Beijing axis? Can we deal with the partisanship here, or will this balloon just go over our heads and lead, once again, to partisan vituperation?

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, they are intent on using the debt limit to attack Social Security, which was attacked by Republicans as socialist at the time, the 1930s, and by Paul Ryan, more recently. They are here to attack Medicare as socialist as was done by Ronald Reagan on a whole LP album denouncing Medicare as socialism. They are here with this resolution to say that any social program can be equated with the greatest mass murderers in history. This resolution is not just a waste of time. It is a pernicious attack on the programs that American people support.