Jeff Sessions

Mr. SESSIONS

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

Mr. SESSIONS. I thank Senator Kennedy. I know we worked hard on this bill to gain his support. Basically, the language that is in the bill now has been modified to deal with a number of the concerns he raised. The Department of Justice, under the Clinton administration, said: A debtor should not be able to shield abundant resources from creditors, including Federal, State, and local governments, in the form of retirement savings. What is ``abundant resources''? We say, over $1 million. I do not think that is too much to allow somebody to keep when they are not paying their debts. From the Securities and Exchange Commission: We have seen insider traders, who do their trading through IRAs, and fraud participants stash their profits in IRAs. The State law exemptions have not defeated our Federal statutory claims to date, but a new Federal exemption-- Which we could be doing here-- could do so. I am concerned about the grave potential for abuse that the exemption for all retirement assets from bankruptcy estate poses. We have asked--and the Senator from Massachusetts and others voted for an amendment I sponsored--to limit homesteads to $100,000 as the amount you could put in your homestead and not pay your debtors. Yet there is an objection for some reason to saying you can't maintain more than $1 million in your IRA and not pay your debts. This is a reasonable cap. It will not hurt people. It will allow them to have an income of $60,000 or more per year to live on without even touching their principal under this IRA plan. It will, as the Securities Commission says, avoid the dangers of fraud and just the unfairness of not paying your local businesses, not paying your local hospital, not paying your local neighbors what you owe and living high on the hog with multimillions of dollars, perhaps, stuffed in an IRA plan. That is why we are in disagreement on this bill. Vote on Amendment No. 27, As Modified

Mr. SESSIONS. Mr. President, I move to table both the Kennedy and Feinstein amendments. I ask unanimous consent to do that.

Mr. SESSIONS. I will confine my remarks to the other amendment we will be voting on, unless someone else wants to respond to the Feinstein amendment. At 11 o'clock, we will also be voting on the Kennedy amendment that attempts to remove the cap of $1 million on how much a bankrupt can protect in their IRA account. I know Senator Kennedy steadfastly opposed the homestead law under the current bill and I agreed. We made substantial progress in containing the abuse of homestead that is unlimited in a few States. Right now, if you pour millions of dollars into a home, you can protect that home, you can file bankruptcy, and not pay your debtors, and keep the $2 million home. To me, that is not right, so I have supported that change. And we could not get as far as we wanted because a number of States have provisions in their constitutions that protect homesteads. We made a number of steps to curtail that abuse--real steps--but we did not go as far as I wished we could have gone. This is a very similar situation. Why should you not pay individual debtors--why should you not pay your hospital debt and other debts and be able to file bankruptcy and have $2 million in your IRA account? Can't a person live on $1 million at a 6-percent return a year? That is $60,000 a year the rest of your life without touching the principal. So I think this is an abuse by rich people, really, to protect over $1 million in savings.

Mr. SESSIONS. Mr. President, we are now proceeding on our debate and discussion on the bankruptcy bill that is pending. I do hope those who have amendments and want to make statements on them will come down and take advantage of this time. It is an opportunity to discuss the important questions that are before us. As I have noted before, bankruptcy reform is, in fact, a second look at the 1978 bankruptcy law. That law reformed the way bankruptcy courts deal with debt in America. We have had experience now for over 20 years with that reform. We have seen how the law has been manipulated and abused, and it is perfectly appropriate for us to try to create a system that is honest and fair, eliminates abuses, and helps us make sure that what happens in bankruptcy court is rational and defensible and furthers good public policy. That is what we are about. It is not legislation to fix all problems dealing with credit in America. It is what happens when a person files in bankruptcy. As the Members of this body know, we have in this legislation a provision that says if you make above median income in America, and a judge finds you are capable of paying back as much as 25 percent of your debts, and he calculates the current income and what your debts are, if he determines that is possible, instead of wiping out all your debt, you may be moved from chapter 7--in which debt is wiped out in bankruptcy--to chapter 13, in which you would pay back, over a number of years, 25 percent of the debts you owe. It is my view, and I think the view of a majority of Americans, that bankruptcy is a good thing. But if you can pay back your debts, you ought to pay them; that we ought not say a person with a $100,000 income, perfectly capable of paying back a substantial portion of his debts, can just not pay them. In fact, some of these people, over a period of 3 to 5 years, can pay back all of their debts, we have learned. That is the change. I think well over half of the people who file bankruptcy, maybe three-fourths, maybe even more, will be below median income, so they will not be affected by this means testing of bankruptcy. It is just those above median income based on family size and other criteria. I believe we are doing the right thing. I believe it is the right approach, it is fair and just, and we ought to move in that direction. We have also improved the system by eliminating quite a number of abuses by good lawyers. Some people put them down, but I cannot blame a lawyer for advising his client there is an opportunity to not pay something if they do not have to under the current bankruptcy law. They have learned how to advise clients to take advantage of the current law. It is up to us now to fix that. One of the aspects in the bill that I think is of great value is an amendment I offered to encourage credit counseling. A lot of people do not understand credit counseling. I, frankly, did not fully understand it until I spent virtually a day with a good credit counseling agency in Mobile, AL. They are off the main thoroughfare. They had a nice area. People came there to deal with their debts. What they do is negotiate with the creditors of the people who come in to see them for counseling, and they will get them to reduce their interest rates, get them to stretch out their payments, and they will help that family develop a budget by which they can pay off their existing debts. Not only do they get them on a budget, but they save marriages. That is because one of the highest causes of marital breakup is financial discord. They sit the whole family down--children, wife, husband--and go over their income. They go over their expenditures, what they can reduce in their budget expenditures: Do they really need this cell phone? Do they really need the higher level cable TV? They knock it down. Then they get the creditors to see this family is in trouble. If you reduce your interest rate so that payment to the credit card company is reduced, the payment to the furniture store is reduced, the payment to the brother-in-law is reduced, maybe the deficiency on rent is reduced--they work out a budget so the family can work themselves out of this. The beauty of this is that for the first time, many of these families learn how to manage money. Too often they have not been taught that in America today. I think it is a very good thing. I believe that is healthy. Some have complained that our amendment says before you go to bankruptcy, you should go to a credit counseling agency and at least discuss with them the possibility that you could work out a debt repayment plan and come out better doing it that way rather than going straight into bankruptcy without that option. What is happening is there are lawyer mills in the country. You turn on your television; you look at your little flier at the corner market that shows what you buy and sell, automobiles, furniture and things, and you see advertisements by these lawyers about how to wipe out your debts and avoid paying what you owe. People respond. When they go down to the lawyer's office, essentially the lawyer tells them--there is no mystery about this; I don't think I am misstating it--I believe you are entitled to bankruptcy. I believe you can wipe out these debts. It is now January 1, so you will need to pay me $1,000. What I want you to do is live off your credit card and all, but do not pay any of your other debts. Save up until you get the $1,000 and pay me, and I will file the bankruptcy. Then you can wipe out all your debts. That is what they do, and they make money off that. I know an instance where one of these lawyers does at least 1,000 of those cases a year. That is $1 million in income in chapter 7, chapter 13, routine filings. He doesn't even meet his clients. Basically his paralegals do that and pretty much that is what goes on in America. For people who need that, that is fine. For people who are not able, hopelessly in debt for various reasons, that is fine. But if they can pay their way out of it, I think somebody ought to be concerned about helping them figure a way to do so. They will feel better about paying their debt. We don't need a legal system in America that suggests paying your debt isn't important. What does that do for us on a moral basis--that we have a legal bankruptcy system that suggests you have no responsibility to pay your debt if you can pay those debts? I don't think that is good public policy. I suggest at least there be an opportunity for every bankrupt to consider credit counseling. They are in virtually every community in America. If they are not there, the bankruptcy judge can certify that and the person doesn't have to go to credit counseling. But if there is a credit counselling agency, this bill would say to a bankrupt who is thinking about bankruptcy to go to them and talk to them. It is fundamentally an interview. They do not have to fill out forms or do anything at the credit counseling agency. They just have to certify that they have been there and they have considered that option because it is not being provided to them in the lawyer's office. Trust me. I believe for a certain number they are going to conclude that credit counseling--a matter they have never considered before--is better for them than going into bankruptcy. And the family will be better for it, and the legal system will be better for it. That is what we are about today. Many people are in debt for many different reasons. Some say: Well, it is credit card debt. Some college students are filing, but their numbers are not exceedingly high. The reason college students primarily are filing bankruptcy and the reason many of them are deeply in debt is paying for their tuition and fees--not on their credit card. It is their loan payment which has put them in debt very deeply. And at some point they end up running up credit card bills too, perhaps. But the biggest amount of debt for college students is a student loan and the money on which they have to borrow to live. Whatever the reason, we are not certain. We know hospital bills are a big factor in tipping people into bankruptcy. That is a legitimate reason. We know many people are in bankruptcy because they have a compulsion to spend; one or more family members just cannot discipline themselves. I do not know if it is an illness or what it is, but they cannot discipline themselves and are unable to work their way out of adverse financial circumstances as other family members are able to do. Other family members every day in America are sitting down and deciding when they can buy a new suit of clothes, or whether or not they can take a vacation this year, or whether or not they can go on a school trip, or buy a new car. What are they asking themselves? How can we pay the money we owe and buy something new? Maybe we can't afford to do both this year. Maybe we need to pay down our debt. We don't want to create a system that makes the honest, disciplined, frugal family look like a chump or look like they are silly by working hard to pay off unexpected debt and rewarding those who do not make the effort. This is a fundamental question to me. This bill provides all the protections for median income and below that are in the previous legislation, and it provides other benefits also. It places women and children at the highest possible level of protection. They get the first money out of a bankruptcy estate today under the new legislation instead of being seventh or eighth under the current bill in who gets paid from what is left in the bankruptcy. It provides priority to pay alimony and child support in a way that we have never done before. It provides many other good provisions that help our country socially and economically do the right thing. We are excited about that possibility. Just because you move from chapter 7 to chapter 13, if you are above median income--in fact, it isn't all bad that you have been damaged dramatically. I saw an article recently where someone was talking to a bankruptcy lawyer. He said one person he was talking to had a $70,000-a-year income and wanted to rush out and file his bankruptcy bill under current law because under the new law he might have to go into chapter 13 and pay back some of his debts. I ask you why a person who makes $70,000 a year shouldn't pay back some of his debt. They say: Well, it is medical bills. Maybe it is an unexpected medical bill. If he is making $70,000, why didn't he have insurance? If he is making below median income, or a low income, maybe I could be sympathetic because they didn't take out insurance. But if he is making $70,000, he ought to be able to provide some medical insurance. Maybe he shouldn't have such medical debts, No. 1. But, No. 2, why should we take the view that if you are able to pay back to your hospital some of the costs of the service that hospital provided you, why shouldn't you pay them? I visited 20 hospitals in Alabama this year. I have talked to administrators, nurses, and doctors. They are in trouble. It is difficult for hospitals to make a living. They have a factor of uncollected debt. They do not abuse people. But they are not being paid a lot. If a person cannot pay the hospital, and they are making below median income in America, I don't want them to have to worry about it. Wipe out the debt and go forward under this bill. But if they are making above median income and they owe the hospital $10,000 and over 5 years they can pay them $2,500, why shouldn't they? They got a benefit from the hospital. Somebody else is going to pay for it, if they don't. Who else is going to pay it? People are going to be paying for it through their taxes and other payments, and they will be making below median income. Why should a person who is honest and frugal making below median income pay for the hospital bill for somebody making $70,000 who can pay a portion of his hospital bill? Answer that. That is not justice. We have a bill that takes a step toward achieving justice. They say: Well, you are just out defending big corporations, banks, and these collection agencies, and you are oppressing the poor. There is no change for the poor. There is no change in this bill for the 75 or 80 percent of the people who file bankruptcy who already make below median income. There is no change in that. It is only if you make above median income that a judge can order you to pay some of your debt. I think that is right. I don't apologize for that. I do not believe in this class warfare argument we are hearing time and time again that it is oppression of the poor. Those are the same arguments we have heard today. It seems that the hospital providing good care to an individual and does not get paid for it is oppressing the person who is making above median income by asking them to pay for it; if a credit card company has loaned money, or a bank has loaned money to somebody to go out and buy a house, buy a car, buy things a family needs, they are oppressing them by giving them the money and asking them to pay it back when the time comes to pay your debts back. Most Americans pay their debts. I think credit cards are great. We have had serious complaints in this body--and rightly so--that banks and credit companies are not fairly making credit available to poor people. We have a bill called redlining that prohibits banks from opposing and refusing to allow people with marginal incomes to borrow money because they might think it is risky.

Mr. SESSIONS. Mr. President, I move to table the Feinstein amendment and ask for the yeas and nays.

Mr. SESSIONS

Mr. SESSIONS. Mr. President, if the Senator will yield for a second. We have not received all amendments, I say to Senator Durbin. It would be more appropriate for people to file their amendments so we can study them and be better prepared.

Mr. SESSIONS. Mr. President, I ask unanimous consent that amendment No. 29 be modified to be considered a first-degree amendment and laid aside. I further ask consent that it now be in order for Senator Sessions to offer an amendment relating to lockbox, and that following the reporting by the clerk, Senator Conrad be recognized, and following his remarks, Senator Domenici, or his designee be recognized. I further ask consent that no amendments be in order to either amendment, and that following Monday's debate the amendments be laid aside until the hour of 2:15 p.m. on Tuesday, and there be 30 minutes for closing remarks on the issue to be equally divided in the usual form on Tuesday. I further ask consent that the Senate proceed to a vote in relation to amendment No. 29, to be followed by a vote in relation to the second lockbox amendment, beginning at 2:45 p.m. Tuesday.

Mr. SESSIONS. If we can get an overall agreement, which we have been seeking, an agreed-upon list of amendments, which has not yet been forthcoming, which is critical to final disposition of this bill.

Mr. SESSIONS. I thank the Senator. I do believe we need to move toward that eventuality. I thank him for his leadership.

Mr. SESSIONS. I would be delighted to yield to him, Mr. President, because he will be speaking on a pending bankruptcy amendment.

Mr. SESSIONS. Mr. President, I thank the Senator for his concern about energy policy in America. I share that. Those of us who worked for 4 years on the bankruptcy bill know that we need to remain focused on this bill. I hope there is some way we can avoid having an energy debate delay our ability to bring to a conclusion the bill that is before us today, the bankruptcy legislation. To date, we have been pretty good about that. People are bringing their amendments down. They have been relevant amendments for the most part. Some have not been very relevant but at least arguably relevant. I think this one is particularly nongermane to the matter before us. I want to say with regard to energy policy, it has been obvious to me for some time that this Nation has been operating within a rosy scenario. We have blithely gone along, even though we have so much more superior technology today and are so much more capable of producing energy without any environmental damage, virtually no environmental damage, and at the same time we have been declaring time and time again that we will not allow energy reserves to be produced. One of the reasons is there is a group in this country that favors high energy prices. This is a no-growth group that is not in the mainstream. But every time there is an opportunity to bring on a new supply of energy, they object. It is their joy when prices go up because they think somehow that will cause people to burn less fuel and emit less pollutants. They are not concerned the average family in Alabama 2\1/2\ years ago maybe spending $100 a month for their gasoline bill for their automobile and now spending $150 is because we allowed ourselves to become increasingly dependent on foreign oil. Those OPEC nations got together and politically jacked up the price by withholding supplies. They are not concerned we can't bring nuclear power on line. That has been blocked in any number of different ways leaving us now totally dependent for new electricity generation on natural gas which places electric generation in competition with homeowners. And we are seeing huge increases in natural gas prices in my State. I see the Senator from Maryland. Is he prepared to speak on the bankruptcy bill?

Mr. SESSIONS. Will the Senator yield?

Mr. SESSIONS. I think I understand the goal. And I am sympathetic to that. I guess we are wrestling with the question, Would it simply come down to the fact that you are telling the borrowers who have been abused that if they are not able to make their claim, before or while the case is in bankruptcy, against that bankrupt estate, under current law it is lost, but under your law they could make their claim against whoever bought or purchased the loan? We can talk about it later. We don't want to make assets unsalable.

Mr. SESSIONS. Does the amendment make any difference between a reorganization and a liquidation circumstance?

Mr. SESSIONS. Is the Senator aware of how this could affect Fannie Mae or any of those type loans?

Mr. SESSIONS. Mr. President, I object.

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

Mr. SESSIONS. Mr. President, we talked a good bit about credit cards, and the companies have been beaten up. They do make an awful lot of mistakes. As the Senator understands, if a credit card is offered to a person who is a minor and they were to even use it and buy goods with it, they could not be forced to pay the debt because it would be an invalid debt, but it does indicate some concern that people have about receiving solicitations for credit cards. You could also see they are offering competitive choices in credit cards. Actually, for the first time in recent years, it seems to me credit card companies are beginning to compete against one another in offering better opportunities. I am not sure we ought to say that is a particularly evil thing that low-income people are offered an opportunity to have a credit card that will allow them to replace the tire on their car when they may not have the cash in their pocket, and then pay for it over the next month. It is not a particularly bad thing. The Banking Committee has jurisdiction over these issues. That is ultimately where they should be decided. The bankruptcy bill is here to create a system of bankruptcy courts in America, Federal courts, in how they conduct their business. Those issues are not, in my view, the issues that ought to be debated here but in a consideration of banking questions. I yield to the Senator from New Jersey.

Mr. SESSIONS. I object. We want to see a copy before we change the order of business.

Mr. SESSIONS. I object.

Mr. SESSIONS. I think I am beginning to comprehend it. I know there are very delicate issues involved in these matters. It may well be the Senator has an amendment that would benefit us. I will be glad to look at it.

Mr. SESSIONS. They would be less valuable as an asset to sell.

Mr. SESSIONS. I know the Senator is a distinguished member of the Banking Committee and understands these matters far better than I. But this deals with a situation in which a lending institution violated the law in making certain loans and was subject to lawsuit; is that right?

Mr. SESSIONS. I know Senator Gramm is interested in your amendment. He has not arrived yet. We will talk with him as soon as he arrives and he can discuss that question.