Jeff Sessions

Mr. SESSIONS

Mr. SESSIONS. Mr. President, I won't discuss any further the amendment I am going to call up. It was offered by Senator McCaskill and me 2 or 3 weeks ago. We reached as high as 59 votes for it, one short of passage. It is an amendment that would put a statutory limit on spending, making it more difficult to violate the limits we put by requiring a two-thirds vote to break that limit except in time of war and emergency. I ask at this time to call up amendment No. 4173.

Mr. SESSIONS. I now ask unanimous consent to set aside the pending amendment.

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

Mr. SESSIONS. Mr. President, I thank the Acting President pro tempore and yield the floor.

Mr. SESSIONS

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 President, I ask unanimous consent the order for the quorum call be rescinded.

Mr. SESSIONS. Mr. President, I am here to raise a budget point of order. The substitute and the underlying bill came to the floor spending money the Banking Committee did not have in its 302(a) budget allocation. It has exceeded the budget allocation. How much direct spending is in the Dodd-Lincoln substitute as amended? About $21 billion, partially offset by raising revenues resulting in an increase to the deficit by $10.6 billion over the 5-year timeframe--that is the timeframe we are using for budget enforcement--and over the 10-year period, reflected in the baseline, it would increase the deficit by $19.7 billion. So our 10-year deficit outlook--the Obama administration policies will contribute to the debt by running massive deficits for the next 10 years, averaging nearly $1 trillion a year from 2011 through 2020. The projected deficit of 8.9 percent of GDP for 2011 will come at a time when the administration is predicting a return to prerecession economic growth. The total public debt stands at over $13 trillion, with fiscal year 2009's $1.4 trillion deficit having contributed significantly to our Nation's credit card bill. With unsustainable levels like this, the Senate must knowingly, consciously, and with full awareness decide each time a bill comes to the floor to increase our debt burden further. I object and therefore raise a budget point of order under section 302(f) of the Congressional Budget Act, which prohibits consideration of legislation that exceeds an authorizing committee's 302(a) allocation. The substitute, as amended, provides for net increases in direct spending of $21 billion and, if adopted, would cause the underlying bill to exceed the allocation to the Banking Committee over the 2010-2014 period.

Mr. SESSIONS. I raise a point of order under section 302(f) of the Congressional Budget Act, which prohibits the consideration of legislation that exceeds an authorizing committee's 302(a) allocation. The substitute, as amended, provides for net increases in direct spending of $21 billion, and if adopted it would cause the underlying bill to exceed the allocation of the Banking Committee over the 2010- 2014 period.

Mr. SESSIONS

Mr. SESSIONS. Mr. President, I rise today to address some very important concerns that arise in my mind in the evaluation of the new Strategic Arms Reduction Treaty, START, that was submitted yesterday to the Senate for advice and consent to ratification. I do not believe that the Senate must ratify this treaty, as some of my colleagues suggest. But, rather, I begin with the proposition that a new treaty with Russia is not essential for our national security; may well be a distraction from addressing the real threats of nuclear proliferation by other nations and nuclear terrorism; and to the extent the President puts forth this treaty as a step toward his idea of a world without nuclear weapons, it is a naive and potentially risky strategic approach. Basically, the purpose of arms control is to reduce the risk of war by enhancing strategic stability and security and, if possible, lessen the costs of preparing for war. It is clear that the strategic balance between the United States and Russia is, for the most part, stable, while U.S. and Russian nuclear arsenals are already on a downward slope. Both sides had made a commitment, under the 2002 Moscow Treaty, to reduce deployed nuclear weapons to a range between 2,200 and 1,700 warheads, which was a significant reduction from the START I level of 6,000 warheads. Furthermore, the United States has no plans to increase the size of its nuclear force, and it appears to most informed observers that Russia, for economic reasons, was headed to even lower levels. Quite simply, there is no responsible prospect of an expanding nuclear weapons competition between our two nations. The United States and Russian nuclear arsenals are not the real problem today. Regrettably, the one category of nuclear weapons in which there is a true imbalance--tactical nuclear weapons--is not addressed by the new treaty. I would agree with my colleagues, such as Senator Dick Lugar, that the verification provisions under START I should not have been allowed to expire with the treaty on December 5, but this could have been dealt with through a simple 5-year extension as permitted by the START I treaty. Instead, the administration was committed to a more ambitious approach which it has found to be more challenging than expected, which in turn has led to more U.S. concessions. The President wanted to take a significant, tangible step toward his vision of a more peaceful world without nuclear weapons--a vision I find naive at best and, if achieved, likely to make the world less safe. As nuclear strategist and Nobel laureate Thomas Schelling has recently observed, a world without nuclear weapons would be one in which countries would make plans to rearm in order to preempt other countries from going nuclear first. Schelling writes: ``Every crisis would be a nuclear crisis. The urge to preempt would dominate; whoever gets the first few weapons will coerce or preempt. It would be a nervous world.'' So far, at least, nuclear weapons have imposed restraint on world powers--what will happen to that restraint in the absence of nuclear weapons? What conclusions will the Russians and our allies draw from this vision of nuclear disarmament? Will our allies and partners, who have come to depend on U.S. nuclear security guarantees, pursue their own nuclear arms? Will Russia, which is increasing its dependence on nuclear weapons, interpret this as a sign of weakness and perhaps pursue a more muscular foreign policy directed against the west? Additionally, if we draw our weapon numbers too low, the perverse result may be that smaller nations, or rogue states may believe they could become peer competitors. In addition to the dream of nuclear disarmament, the administration's case for the new treaty rests on three principal arguments: No. 1, that it will improve U.S. and international security by reducing U.S. and Russian strategic nuclear forces; No. 2, that it will transform or ``reset'' relations with Russia, such that Russia will now become a partner with the United States in addressing the true nuclear dangers of proliferation and terrorism; and No. 3, that it will provide the United States the moral credibility and leadership needed to pursue its nonproliferation objectives with the rest of the world. First, the current declining stockpile of U.S. and Russian nuclear weapons is not a factor contributing to international instability, and reducing our current nuclear arsenal to the new START limit of 1,550 warheads will not have any impact on the nuclear or nonproliferation policies of the rest of the world. If reducing U.S. deployed nuclear forces from Cold War highs of over 10,000 nuclear warheads to the current level of some 2,000 has had no impact, why should the reduction of another 500 warheads make a difference? States decide whether to acquire nuclear capabilities not because the United States and Russia have large nuclear arsenals but because those states believe nuclear weapons will enhance their national security, preserve their regimes, enhance their prestige, or further their ambitions. Likewise, states will determine whether to support U.S. nonproliferation efforts on the basis of their national interests, not on how low Russian and American nuclear stockpiles go. As to the claim that a new START treaty with the Russians will improve relations or secure Russia's assistance in addressing other threats to international stability, there is little evidence to suggest this is the case. To the contrary, these negotiations have provided the Russians leverage over missile defense, prompt global strike, and verification issues that have marred the final agreement. Finally, I don't see any significant cooperation from Russia in securing meaningful sanctions against Iran. To be sure, if we had any expectation that the new START treaty would secure Russian assistance in dealing with Iran, we should have drawn a more explicit linkage between the two. In other words: no new START treaty without concrete Russian assistance in obtaining a United Nations Security Council resolution imposing real, crippling sanctions on Iran. This may have been a missed opportunity. Thus far, my remarks suggest I don't see decisive reasons to vote for the new START treaty--but are there reasons to vote against the treaty? The ratification process can help us examine several concerns. As I evaluate the treaty, I will take a broad view that examines not only the implications for U.S. strategic nuclear forces but how this treaty impacts our relationship with allies and other military capabilities important to our national security. I will want to know whether this treaty disadvantages the United States in any way or makes us less safe or constrains our ability to extend nuclear security guarantees to our allies. Finally, my decision whether to support this treaty will depend on the administration's firm commitment to a serious nuclear modernization effort for our weapons, nuclear laboratories, and delivery systems--for as we go to lower numbers of nuclear weapons, it becomes increasingly important that those remaining weapons be safe, secure, and reliable. The central consideration in evaluating this treaty is the impact the proposed numerical limitations will have on U.S. nuclear forces and in particular our ability to extend the nuclear umbrella to our allies and partners. The administration will have to provide additional details regarding the number of ICBMs, SLBMs, and heavy bombers the United States will field under the 700 strategic delivery system limitation--and how it plans to modernize those forces. Last year, we were told by Admiral Mullen and General Cartwright that reductions below 800 delivery systems may be cause for some concern, while former Secretary James Schlesinger, in testifying on the new START treaty before the Senate Foreign Relations Committee, recently noted that the ``numbers specified are adequate, though barely so.'' We need to understand, therefore, the implications of this limitation, which requires a reduction of about 180 in the number of currently deployed U.S. delivery systems. In fact, the reduction in nuclear capability will be larger for the United States since the treaty requires that conventionally-armed--nonnuclear--ballistic missiles, in the case of prompt global strike, be counted against the 700 total. Likewise, we need to understand how the Russians might configure their nuclear forces under the treaty and then conduct a net assessment to appreciate the true implications of the new START treaty for U.S. national security. Perhaps the greatest deficiency of the new START agreement is that it does not address the 10-to-1 disparity between Russia and the United States in the area of tactical nuclear weapons. As Secretary Schlesinger recently testified, ``the significance of tactical nuclear weapons rises steadily as strategic nuclear arms are reduced.'' Russia simply refused to allow these into the negotiations. So the administration has left this for the ``next agreement,'' though I am not sure what leverage the United States will have over a Russia that has become more, not less, dependent on its tactical nuclear weapons. An irony of this is that Russian tactical nuclear weapons, because they are more widely dispersed and greater in number, pose a greater risk of contributing to nuclear proliferation and terrorism which, according to the administration, this treaty is supposed to help us avert. The Strategic Posture Commission estimates Russia may have approximately 3,800 operational tactical nuclear warheads and that the combination of new warhead designs and precision delivery systems ``open up new possibilities for Russian efforts to threaten to use nuclear weapons to influence regional conflicts.'' Likewise, Under Secretary of Defense for Policy Michele Flournoy has observed that the Russians are ``actually increasing their reliance on nuclear weapons and the role of nuclear weapons in their strategy.'' What if you are one of the 31 countries dependent on the United States for nuclear security guarantees? How would you interpret the fact that the United States is going down to 1,550 strategic warheads while the Russians maintain at least twice that number of shorter range nuclear warheads that in most cases are able to reach your country? What impact will this have on the credibility of U.S. nuclear guarantees and upon the incentives other countries may have to acquire their own nuclear capabilities? One final point on this issue: It disturbs me that Russian tactical nuclear weapons were not addressed in this treaty, yet the United States conceded to Russian demands to place limits on conventional prompt global strike capabilities by counting conventional ICBMs under the limits for delivery systems. It is striking, moreover, that the preamble would be ``mindful of the impact of conventionally armed ICBMs and SLBMs on strategic stability,'' yet be silent on the impact of tactical nuclear weapons on this very same strategic stability. What is more destabilizing: conventionally armed ICBMs or thousands of tactical nuclear weapons? Despite being told consistently from the very beginning of negotiations that missile defense will be addressed only in the preamble of the treaty, we now discover that article V contains a direct restriction on U.S. missile defense activities (i.e., cannot convert ICBM or SLBM launchers into launchers for missile defense interceptors). Will this establish a dangerous precedent with respect to including missile defense limitations in future offensive arms control agreements? Why did the U.S. side feel it necessary to concede this point? What raises concern, with respect to article V, are other efforts by the Russians to create a linkage between U.S. missile defense activities and Russian adherence to the new START treaty. When viewed together, the treaty's preamble, the Russian unilateral statement on missile defense, and remarks by senior Russian officials provide the potential for Russia to threaten or blackmail the United States against increasing its missile defense capabilities by threatening to withdraw from the treaty: When the preamble states that ``current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the parties,'' does this not suggest that moving beyond ``current'' systems could provide grounds for withdrawal? When the Russian's note in their unilateral statement that the treaty can operate and be viable only if the United States of America refrains from developing its missile defense capabilities quantitatively or qualitatively, and then links American missile defense capabilities to the treaty's withdrawal clause, should we not read this as an attempt to exert political pressure to forestall continued development and deployment of U.S. missile defenses? Finally, what are we to make of Russian Foreign Minister Lavrov's warning on March 28 that ``the treaty and all the obligations it contains are valid only within the context of the levels which are now present in the sphere of strategic defensive systems''? Does this mean the Russians will pull out of START if we deploy additional ground- based interceptors in Alaska or if we deploy the SM-3 block IIB missile in Europe? Despite the administration's assurances that none of this is legally binding, and that the U.S. unilateral statement counters this by expressing our intent to continue to deploy missile defenses, I can not help but worry that these provisions will have a negative impact on U.S. decisionmaking with respect to missile defense. After all, the administration did abandon plans to deploy ground-based interceptors in Europe--an action most believe was an irritant in United States-Russian relations. There is something fundamentally disturbing about entering into a treaty with the Russians when we have such a divergence in view over a substantial issue like missile defense. To be sure, the Russian side has already expressed displeasure with U.S. plans to deploy missile defenses in Europe and to enhance the capability of the SM-3 missile to intercept long-range missiles launched from the Middle East. Adding to my apprehension is recent testimony before the House Armed Services Committee by a senior Department of Defense official, who stated that the United States has not yet even approached the Russians to determine whether the SM-3 IIB is, will cause them to withdraw from the treaty. They can withdraw for any reason. This likely sets the stage for misunderstanding and confrontation as the United States continues its missile defense activities, particularly in Europe. Clarifying this ambiguity, coupled with affirmation by the administration that it intends to improve the defense of our homeland and go forward with all phases of its planned missile defense deployments in Europe, is a prerequisite for ratification of the new START treaty. Our ability to verify Russian compliance with the new agreement is also important. One could even argue that as we go to lower levels of nuclear weapons, verification becomes more important, as the consequences of cheating become more profound. But the standard should not be whether we can verify Russian compliance with the terms of the treaty per se--though this is important--but whether we maintain sufficient confidence in our national ability to monitor developments in Russian strategic forces that, if gone undetected, could alter the strategic balance. So when the administration argues that ``verification procedures in this Treaty will be simpler and less costly to implement than the old START treaty,'' I am inclined to ask why verification procedures have become less stringent and whether such procedures make it harder for the United States to fully account for Russian strategic forces. Specifically: Will we be able to determine whether the Russians are developing new, more powerful missiles capable of carrying multiple warheads? Are the Russians capable of secretly producing and storing missiles and warheads that could afford them a military advantage? While we may have confidence in the number of missiles deployed by Russia today, can we maintain this confidence over the life of the treaty? Ultimately, it falls upon our intelligence community to monitor Russian strategic force developments. Thus it is important for the Senate, as part of its advice and consent responsibilities, to review carefully the National Intelligence Estimate on our ability to effectively verify the treaty that normally accompanies arms control agreements. I don't believe we have seen that document yet. I have identified just a few important issues the Senate will consider as we move forward, and it is likely there will be others as we continue to examine the treaty text, protocol, and annexes. Particularly troubling at this time is the disparity in tactical nuclear weapons which are not addressed in this treaty, and the constraints on missile defense and conventional prompt global strike in a treaty intended only to limit offensive nuclear weapons. At the very least this is a bad precedent, and I have no doubt Russia is attempting to revive the ABM Treaty regime and forestall U.S. prompt global strike capabilities. This was a treaty that Russia needed more than the United States. Not only were Russian strategic nuclear forces headed to lower numbers for economic reasons, Russia wants an arms control agreement with the United States. Such a binational agreement validates its superpower status. The United States therefore had an opportunity to leverage Russian desire for an agreement to obtain Russian cooperation on a host of issues, starting with Iran. But the administration missed this opportunity because it was so anxious to advance its vision of a world without nuclear weapons that it failed to see how START could help address the more immediate threat of nuclear proliferation.

Mr. SESSIONS

Mr. SESSIONS. I have no objection.

Mr. SESSIONS. Mr. President, I ask unanimous consent--I think this has been discussed on both sides--that we have up to 30 minutes equally divided on this amendment before the vote.

Mr. SESSIONS. Mr. President, I appreciate the efforts of those who have worked on this financial responsibility bill. I wish to say, however, that I do not believe they have reached a successful conclusion, one that is principled and lawful in describing and mandating how a company that cannot pay the bills should be dissolved. Throughout America, hundreds of thousands of businesses every day that are unable to pay their bills seek protection, as they often call it, in bankruptcy. All the claims against the company are stayed. A bankruptcy judge, skilled in these matters, in an open, public hearing, with witnesses under oath, determines whether the company has a realistic chance to survive and help structure the bankruptcy reorganization so it can survive, or it determines that the company is unable to survive, that it is unlikely they could pay off their creditors and most likely would only add to the debt, and they close the company down. This is and has been the law in America since virtually the founding of the Republic. It is something that is principled, well settled as to how it occurs. This legislation is the exact opposite, in a sense, it institutionalizes the TARP process. Only now, they will not have to come to Congress, as they did this last time, over how to dissolve some big company. They will have too much power, in my view, in a sealed proceeding--not public, not under oath--too much like the last time when the Secretary of the Treasury meets in private meetings with bankers and doles out billions and billions of dollars, puts $100 billion, $80 billion in an insurance company, AIG, all without any accountability, all without any oversight, all without the kind of integrity that is the essence of the American legal system. I am concerned about it. My amendment would make bankruptcy more usable for large, complex cases that have derivatives in it. It would allow the cases to be brought in large bankruptcy court areas so that there is sufficient expertise and personnel to handle it, and it would deal with the problem of derivatives that some have raised and gives the courts more flexibility to do that. I think it is the better approach. It is our historic, fair approach. The American people will know the same judgment that falls on them and their small businesses will fall on the big boys. I appreciate the opportunity to make these brief remarks. I see Senator Corker and Senator Kyl are here, and I will yield.

Mr. SESSIONS. Mr. President, how much time remains on this side?

Mr. SESSIONS. Mr. President, I wish to share a few things briefly before we move into the vote. William Kristol today raised a fundamental question in a blog site regarding the way this bill is written when he said: This is a giant power grab for the FDIC and Treasury, who could use their new powers to tug the strings of our country's largest financial institutions like a puppeteer. I would also refer to a letter of April 12, from the Judicial Conference of the United States. This is a thoughtful letter in response to an inquiry from Patrick Leahy, the Judiciary Committee chairman, in which they express grave concerns about the legislation. Among other things, the Judicial Conference says: The legislation does not envision objection, participation, or input from the bankruptcy creditors (whose rights will be affected) in the course of appointing the FDIC as receiver. Indeed, the legislation proposes to deal with this petition in a sealed manner, only the Secretary and the affected financial firm would be noticed and given the opportunity of a hearing. I think that is insufficient. Finally, I received a letter today from a number of superb and well- known economists, legal scholars and leaders--Darrell Duffie, Dean Witter Distinguished Professor at the Graduate School of Business, Stanford University; Tom Jackson, Distinguished University Professor, University of Rochester; Kenneth Scott, Parsons Professor Emeritus of Law and Business, Stanford Law School, George P. Shultz, Distinguished Fellow, Hoover Institution, David Skeel, Professor of Corporate Law, University of Pennsylvania and John B. Taylor, Professor of Economics, Stanford University.

Mr. SESSIONS. I ask unanimous consent for 30 additional seconds.

Mr. SESSIONS. Mr. President, these individuals put forth in detail their concerns about this procedure, and they point out why bankruptcy is necessary, because the rule of law applies and the process is more defined in this appropriate way. They tell us, with much care, why my amendment would be the best way to solve this problem. They say, in part, the following: Despite the best intentions by the sponsors of Title II, our view is that it will increase rather than decrease the likelihood of financial crises . . . It might be preferable for the Congress [to] wait until the Financial Crisis Inquiry Commission completes its report . . . In the meantime, however, proposed amendment No. 3832, which has been filed by Ranking Member Sessions of the Senate Judiciary Committee, takes a bankruptcy route . . . Amending Title II along these lines would be a big step toward the bankruptcy approach we favor, and we urge you to move in this direction. Mr. President, I ask unanimous consent to have printed in the Record the three items I have just quoted from.

Mr. SESSIONS. I thank the Chair, and I yield the floor.

Mr. SESSIONS

Mr. SESSIONS. Mr. President, I wish to call up amendment No. 3832 and ask for its immediate consideration.

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

Mr. SESSIONS. Mr. President, they say the proof is in the pudding. The proof is an ultimate test of an idea or an evaluation. It literally means you can show us a wonderful recipe and tell us about the fine ingredients, but we want to know what it tastes like in the end. The actual result is what is important. So I think the American people know that in the bill we are dealing with today, we are still too involved in the maneuvering of the dissolution of companies that fail. We create special procedures for larger companies than we do for routine companies throughout the country. The pudding tastes bad. My colleagues tell us this bill has the right ingredients, but the ultimate result, I think, is to provide government-funded bailouts in some way or another, through another name, actually now called orderly liquidation authority. I understand the provisions are better perhaps than they were when the discussions began and are more rigorous in some ways. I still feel more needs to be done to create the kind of integrity and the consistency and the principled approach to dissolution of a failed corporation that good law requires. The legislation before us provides the government with vast, sweeping regulatory authority. I know a lot of people in the country--and I respect my good friend, Senator Dodd. He is such a fabulous Senator and so knowledgeable about these areas. But I talked to my car dealers and they have to meet with State regulatory loan officers and they have always had to deal with State legislation and control and certain Federal rules apply. But what this legislation does is, it is one more example of an expansive mentality as far as fixing a discrete problem, which started out to be fixing Wall Street, too big to fail, and now we have a historic alteration of the respect we get for State and local government to manage lending matters. We have the Federal Government now doing that under this consumer title. I am not sure we have fully thought that through. I don't think it is necessary, frankly. Some of the regulatory authority that was involved in controlling financial institutions that were part of the financial crisis we faced, I think, was because this regulatory authority caused or failed to prevent the crisis. It may have even made it worse. Instead of ending too big to fail, this legislation, I am afraid, institutionalizes it. Professor John Taylor, the author of the Taylor rule, which, because it was violated, probably helped precipitate this crisis. If his rule had been followed carefully by the Federal Reserve, I think we would have had a far less serious problem than we had. He is a professor of economics at Stanford University. He is well respected. He made this point clear in a recent editorial in the Wall Street Journal. This is what John B. Taylor, the Taylor rule author, observed: The financial crisis of 2008 demonstrates why it is dangerous for the orderly liquidation section of the Dodd bill to institutionalize such a process by giving the government even more discretion and power to take over businesses. He goes on to say: The proposed liquidation process would have the unintended consequence of increasing the incentive for creditors and other counterparties to run whenever there is a rumor that the government official is thinking about intervening. He goes on to describe other reasons why he thinks the language as we have it is unwise. Peter Wallison, former general counsel to the Treasury Department, voiced his strong opposition to the proposed legislation saying: Not only does the Dodd bill establish too big to fail as a national policy, but it makes the idea real by creating a system for bailing out large financial companies if they get into trouble. Of course, ``bailing out'' is not the phrase used in the bill; the preferred language there is ``orderly liquidation.'' So Mr. Wallison makes clear--I will not go on and quote all of his remarks, but he makes clear why he believes this is a dangerous institutionalization of special privileges for large companies. I think the Dodd amendment signals to creditors they will get a better deal if they lend to the big regulated firms, and this is what Mr. Wallison says: They believe they will get a better deal if they lend to the big regulated firms rather than lending to the small competitors. The bill does this by making it possible for creditors to be fully paid when a too-big-to-fail financial firm is liquidated, even though this would not happen in bankruptcy. Mr. Wallison hits the nail on the head, I am afraid. Select creditors--those with good lobbyists or those otherwise deemed too big to fail--will definitely get a better deal under the backroom process of orderly liquidation than they would in bankruptcy. Let me be clear. The unhealthy government connection to Wall Street can only be eliminated, I think, through the legitimate utilization of historic bankruptcy process. ``Orderly liquidation,'' as defined here, will not achieve the result. When the legislation was first introduced, Senator Leahy wrote the Judicial Conference of the United States--that is the Chief Justice and his Judicial Conference group of judges there--and asked him for their views on the legislation. The Judicial Conference responded that the bill failed the ultimate test. They said: This is a substantial change to bankruptcy law because it would create a new structure within the bankruptcy courts and remove a class of cases from the jurisdiction of the Bankruptcy Code. The legislation, by assigning to the FDIC the responsibility for resolving the affairs of an insolvent firm, appears to provide a substitute for a bankruptcy proceeding. That is a significant statement. This is the Supreme Court, the Judicial Conference, giving us their insight into this. The letter goes on to say: This could be especially problematic if creditors have changed position based on rulings in the course of the bankruptcy proceeding. The legislation does not envision-- Let me continue to quote this: The legislation does not envision objection, participation, or input from the bankruptcy creditors whose rights will be affected in the course of appointing the FDIC as a receiver. In other words, the normal process by which creditors and others can participate, object, cross-examine, is cut short. The letter goes on to say: Indeed, the legislation proposes to deal with this petition in a sealed manner-- Not in a public, open manner, where lawyers cross-examine witnesses under oath, but in a sealed manner, the Judicial Conference says. It goes on to say: Only the Secretary and the affected financial firm would be noticed and given the opportunity of a hearing. The financial position of affected creditors may have been changed within the context of the firm's bankruptcy case in such a way that the creditors' rights may have been changed dramatically. They go on to say this could raise constitutional questions. They said: Any resulting due process challenges-- They are talking about the due process clause of the U.S. Constitution-- would impose a significant burden on the courts to resolve novel issues. In addition, they go on to say this: We note that petitions under this title involving financial firms would be filed in a single judicial district. Delaware. The Judicial Conference favors distribution of cases in other courts. Well, I think the Judicial Conference is making clear one thing in its correspondence. Bankruptcy, with its rules and procedures, not orderly liquidation authority, is the best way to approach dissolving a financial institution. We are not talking about banks. Banks would be still contained within the FDIC. They have a long history of being able to resolve banks in financial trouble. But I think--I can only say I share the opinion of the Judicial Conference. I think it is shared by a number of presidents of the Federal Reserve banks. In recent testimony on a panel before the Joint Economic Committee, Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, stated the following: I believe the most credible way to do this would be to amend the bankruptcy code to deal with nonbank financial firms and bank holding companies. Expanding the bank resolution process established under the FDIC Improvement Act as the current Senate bill does would give regulators and policymakers the opportunity to exercise a great deal of discretion in a liquidation or restructuring to reward some creditors and not others. A bankruptcy proceeding would follow the rule of law and thus would be less susceptible to manipulation by private parties or the political process. So that is the opinion of the president of the Federal Reserve Bank of Philadelphia. Does anybody think that dissolution of GM and other companies and all the things they have gone through was not politically manipulated? Anybody who has closely followed it does, and that is one of the things that outraged Americans. They are angry that big companies got special procedures for their failure to pay their debts, where the average small company, mid-sized company, even large company in America would be subject to the rigors and the fairness and the order of established bankruptcy law. So the president of the Federal Reserve of Philadelphia said it would be less susceptible to manipulation by private parties for the political process. Amen. That is true. You get a bankruptcy judge, he has a 14-year term. They are used to handling these cases, and they can handle them. Mr. Plosser goes on to say, limiting government choices and leaving resolutions to the rule of law and the court system, in my view, is the best way to end bailouts--limit unhealthy risk taking and extinguish the notion that some institutions are too big to fail. That is what the president of a Federal Reserve bank said. I could not agree more. That is why I have introduced the Bankruptcy Integrity and Accountability Act, which I believe we will be able to vote on tomorrow. There is no greater legal system than the one we have in America. It is a system that is admired not only because it is efficient, in most instances, but because it is fundamentally fair. You know when you walk into a courtroom that you are going to get the same treatment as other parties, whether you are a mom-and-pop organization or big AIG. The amendment I have offered would provide that same type of security. One issue that has been raised by a number of experts is a lack of confidence in the FDIC to adequately handle these kinds of dissolutions. I share those concerns. Professor Wallison stated: The absence of any expertise in resolving failed nonbank financial institutions anywhere in the Federal Government is one strong reason for relying on bankruptcy for most failures. If there is likely to be expertise anywhere in resolving failed financial institutions, it would be in the bankruptcy courts. I agree. Bankruptcy as the first choice for disposing of a failed nonbank financial institution would avoid a number of problems. These are problems that are associated with creating a government resolution authority. Governments are, by nature, political. It would assure that the prebankruptcy creditors take losses of some kind, avoiding the moral hazard and maintaining market discipline. In other words, if you don't feel like and don't have to take a loss by an improvident investment, it encourages you to make more risky investments, creating danger of more improvident financial activities in the future. The rules will be known in advance under bankruptcy. So creditors will be aware of their rights as well as the risks. Creditors will decide whether they believe a company has prospects to repay them, and it would outweigh the risk of throwing good money after bad in helping maintain the company in bankruptcy. Bankruptcy judges look forward and try to save companies. They stop litigation that can shut down a company. They give the company a chance to reorganize and succeed and pay all their creditors. That is always their goal. But good bankruptcy judges know from history that many companies can't be saved. The best thing to do is shut them down before they lose anymore money and distribute the remaining assets equally and fairly according to established rules of priority as part of the bankruptcy process. That is what bankruptcy is. In the amendment I have offered, we make sure the necessary expertise for dissolving these institutions is available. We allow the Federal Stability Oversight Council, the proper functional regulator, the Federal Reserve, and the Department of Treasury to file legal briefs in the court if they need to to make sure their voice is heard concerning relevant issues. This would allow the court to gain valuable information and insight. We also concentrate Federal bankruptcy expertise by limiting venue in the cases to the 12 districts with the Federal Reserve Banks. This is something we vetted with professors and bankruptcy experts. Harvey Miller, the renowned bankruptcy expert, looked at this provision and told us he believes it is properly tailored to provide the necessary expertise to address these types of cases. I believe it is something the Judicial Conference of the United States would agree is better than limiting it to just one court--a situation they raised as problematic. On substance, I think we can't overemphasize how the resolution authority fails the ultimate test. Professor David Skeel wrote an opinion piece in the Wall Street Journal with Mr. Wallison on April 7 of this year, in which they asked this question: Which system is more likely to eliminate the moral hazard of too big to fail? They concluded that bankruptcy was the answer. They posit: In a bankruptcy, as in the Lehman case, the creditors learned when they lend to weak companies, they have to be careful. The Dodd bill would teach the opposite lesson. Let me highlight for my colleagues what I believe this amendment does and why I think it is necessary. First, the amendment protects against systemic risk by eliminating the moral hazard that arises when financial companies and their investors think the government will bail them out. Under the Dodd approach, the approach of this legislation, financial company management and shareholders could have an incentive to seek resolution authority, thus gaining access to taxpayer bailouts. Under the Bankruptcy Integrity and Accountability Act, which I have offered, the only option for insolvent companies would be through the bankruptcy process, and they can survive bankruptcy. But if they are not able to survive it, they should not survive it. That process would be either reorganization or liquidation. There is a process for that to be established. Under this system, all costs of reorganizing or liquidating a company are paid by the private sector, by the failing company, and those who chose to do business with the failing company. Thus, unlike under the Dodd bill, there will be no federally administered resolution authority with access to bailout funds, or borrowed money from the Treasury, Federal debt guarantees, or any other kinds of tool that politicians might access to bail out some politically empowered private company, and to avoid the day of reckoning that rightly should fall upon companies who can no longer operate effectively. Under this bill, there will be no Federal Reserve section 13(3) authority with which the Fed can pump taxpayer money into firms to rescue them from insolvency. The second way this amendment would reduce systemic risk is by protecting against the threat that derivatives contracts will cause one company's failure to cascade through the financial sector like falling dominoes. Under the current Bankruptcy Code, derivatives contracts are exempt from the automatic stay that prohibits the collection of debts outside the bankruptcy court. Virtually all other debts are stayed when the bankruptcy process occurs. As a result of this event, derivatives counterparties can demand collateral and satisfaction of the debt, and it can create a run on a failing companies' assets as more and more derivative counterparties demand their collateral. Because of the interconnectedness of financial firms and the derivatives holdings, a run on the failing firm's assets can cause failure to cascade through the financial system as party after party becomes exposed to succeeding demands on collateral. This is a problem that has been raised. This amendment would stop that danger by allowing debtors, with the consent of a new Federal Stability Oversight Council, to invoke the automatic bankruptcy stay against derivatives obligations when the facts show that the debtor's failure could genuinely trigger cascading systemic risk. This would alter bankruptcy law to deal with these large financial institutions, where derivatives can play a complicating factor, and this would give the kind of discretion I think would help avoid that. Finally, the Bankruptcy Integrity and Accountability Act would reduce systemic risk because a new chapter 14 bankruptcy procedure will apply to all nonbank financial institutions regardless of the size. Under the act, everyone will get the same protection. Nobody will have access to special Washington favors. This, too, protects against systemic risk. Under the approach of the Dodd legislation, there will be special rules for those companies that are wealthy and powerful enough to be determined too big to fail. Those special rules will include a publicly funded and government-administered resolution authority that affords the financial firms the right to fail without facing under oath their creditors and without bearing the costs of the proceedings. Also included will be the right to access taxpayer funds for the payment of certain private debts of the firm. This special system, created by the bill before us, would create incentives for smaller companies to consolidate until they, too, are too big to fail. As a result, risk would be concentrated even more so in a few hands that the failure of one company can threaten to bring down the entire financial system. In place of this created system under the Dodd legislation, a system that protects large companies more than all others, our amendment would create a fair and equal system for the failure of all financial institutions, regardless of their size. As a result, financial institutions would have no incentives to become larger, and thereby increasing the risk that one company's failure will cause the failure of the entire financial sector. There is one critical aspect of the bankruptcy process that we can't overlook and cannot be overstated. When people loan money to or buy stock or buy bonds in a corporation, or otherwise provide credit, they have an expectation that if that company fails to prosper and is unable to pay all the debts the company owes, that the company at least will be hauled into bankruptcy court, and they will have an opportunity to present their claims and to receive whatever fair proportion of the money that is still left in the company as their payment. It may be 10 cents on a dollar, or it may be 90 cents. They understand that bankruptcy judges have the authority to allow the company to continue to operate, to stay or stop people from filing lawsuits against the company to collect debts, to allow the company a period of time to operate, to evaluate whether they can pay off more debtors by continuing to operate than shutting the company down. If a bankruptcy court sees the company is so badly in financial crisis that it is going to collapse anyway, the court can shut it down immediately before they can waste assets and rip off even more people. That is what a bankruptcy court does every day. The Judicial Conference letter I referred to earlier notes that under the resolution process, some other problems might arise. They note this: The legislation does not envision objection, participation, or input from the bankruptcy creditors (whose rights will be affected) in the course of appointing the FDIC receiver. It does this in a way unlike the classical way that company officials have to respond when their companies fail. What happens? The creditors all gather. The bankruptcy petition is filed, voluntarily or involuntarily, by the creditors. They are hauled in by a Federal bankruptcy judge who has a 14-year term and specializes in bankruptcy matters. They are required to produce records and documents of the financial condition of the company. The CEO is called in to testify under oath. The bondholders, the stockholders, the creditors, secured and unsecured, the employees, and the workers all get to have lawyers, and they examine the witnesses who can be called. They can call their own witnesses and, in the result, you create a factual record that helps set the groundwork for the orderly priority setting of who is entitled to payment of the limited amount of money in the corporation. This is what they do every day. This is what ought to happen. Executives prefer not to have to do that. They prefer, like AIG, to go over there and meet with the Federal Reserve, or with the Secretary of the Treasury, and sit down and wheel and deal and get $70 billion. And nobody is under oath, that I can see. None of this is done publicly, as it is in a bankruptcy proceeding. They get to continue to operate and have their fat salaries, when any other company would be out of there and would cease to exist. This is the problem that upsets the American people, and they are right to be upset. We do not need to provide special treatment for the people who created the financial crisis that has damaged this country for the next decade probably, and set off ramifications worldwide. I know a lot of this was systemic irresponsibility by a lot of people, but I have to say, the failure of these executives to manage their companies correctly--there are letters to this. They do not need to be provided a sweetheart process by which they can get money from the Treasury and keep their companies going and not be subjected to the same examination, the same requirement to produce documents and records to justify their existence that average corporations do. They need bankruptcy. I believe America would be better if we do that. I believe our economy will be stronger and that there will be more certainty in the process. If they fail, they fail. If they loan money to a company that fails, they may lose some or all of it. That is just the way it is. It happens every day. But some people on Wall Street convinced themselves and they convinced politicians and government officials that they were too big to fail. They were so large and were so important that they could not be treated like everybody else; they needed to be bailed out. The people who regulated them and the Secretary of the Treasury, a Wall Street maven himself, a Goldman Sachs guy, and others, met in secret and plotted this thing out and got us to pass legislation in Congress that said--my wife corrects me. She said: Quit saying ``got us'' when you voted against it. I voted against the legislation. Congress passed legislation to allow the Secretary of the Treasury to buy toxic mortgages and assets from bad banks that were in trouble--in a state of panic, if you want to know the truth. What did they do? Ten days later they bought an insurance company, AIG. They put $70 billion in it, totally contrary to what we were told just a few days before and without the slightest hint of embarrassment. The legislation we passed, the $700 billion TARP bailout, was the greatest abdication of congressional responsibility in the history of this Republic. We have never given one man--the Secretary of the Treasury--the power to deal with his friends and have $700 billion to deal with. It is an outrage really. That is why people are upset, and they have a right to be upset. I am upset. All I am saying is, we have a regular process for dissolution of companies that get in trouble. If they cannot pay their bills, they ought to fail like any other company, and the big guys on Wall Street should not be given special treatment. This legislation will end bailouts and will put them in the same process that any corporation in America would be in if they failed to pay their debts in a responsible manner. I urge my colleagues to consider the amendment. Remember that bankruptcy is a favored process by the Federal Reserve people, that the Judicial Conference of the United States Federal courts has raised questions about this legislation as it presently exists. I think the principled and appropriate way to deal with the dissolution of failed companies is through the bankruptcy process. Unlike orderly liquidation, bankruptcy passes the ultimate test. I urge my colleagues to support the amendment. I yield the floor.

Mr. SESSIONS

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

Mr. SESSIONS

Mr. SESSIONS. Mr. President, I wish to make a few remarks about the financial regulation bill, the Restoring American Financial Stability Act. Certainly, we need to take some steps to deal with the catastrophe we have gone through--the damage and destruction, and the financial mismanagement that has been wreaked on us and from which people are still suffering today. This crisis exploded in the fall of 2007. It was centered in the housing market and home loans. The question people ask and should ask is: How did it happen? Did Congress know about it? Why didn't Congress do something about it? There is a false myth out there--many have heard it--that somehow this crisis was a product of Ronald Reagan and his disciple George Bush because they did not believe in regulations, they opposed regulations, deregulation is what caused this and more regulations would have prevented it. And so to the rescue, this myth says, come Democratic colleagues and President Obama with more new regulations that are going to fix the problem. I believe good regulations can be helpful. Anybody who has lived in the world and been in businesses and governments knows there are bad regulations that drive people crazy every day, that drive up the cost of products, that costs jobs in America, and that should not be on the books. The question is: How do we have a good regulation or a bad regulation? Let me focus for a second on a critical component of the fundamental problem, which was the housing market, and how our government-sponsored entities, Fannie Mae and Freddie Mac, came to be responsible for half of the housing loans in America--50 percent of the housing market. How did they get involved in that, and how was this the big factor in the economic destruction we suffer? Fannie Mae, Freddie Mac, the Federal Housing Administration, and the Veterans Administration backed 96.5 percent of home loans in the first quarter of 2010. It used to be you went to your bank and they loaned you the money. If they did not think you were creditworthy, you did not get the money. Some people would complain, but a lot of times people were saved from very unwise decisions because their banker correctly intuited they were not going to be able to make these payments, there was too much risk because they had a better perspective on who could be successful in paying off the loans. Before Freddie and Fannie collapsed in 2008, they owned or guaranteed $5.2 trillion in mortgages and mortgage-backed securities, almost half of their $12 trillion market. Prior to that, Freddie and Fannie were leveraged at twice the rate at Bear Stearns which failed. In other words, they had half the real capital for the loans they made, as did Bear Stearns, which failed. Because of this improvident policy, Freddie and Fannie have cost the taxpayers $126 billion. That is an incredible sum of money. Fannie Mae reported a $72 billion loss for 2009; Freddie Mac reported a $22 billion for 2009; and it came in last week asking for another $10 billion. CBO, our Congressional Budget Office which analyzes these costs, projects Fannie and Freddie will ultimately cost the taxpayers $389 billion. But that amount is not on the government's books. Because of the way our books are managed, these two institutions are supposed to be somehow quasi-private and thus not affecting the government Treasury. But they did affect the government Treasury. I asked the question at the beginning: How did it happen? What did Congress know and did not know, and why did Congress not act? These are good questions. I am pushing back a little bit. I am not going to continue to have all this talk that somehow Ronald Reagan is responsible for this crisis. Let me read a letter. I do not think a lot of people paid much attention to it at the time, but it was very real. I remember reading from it in debate during that time. It is a letter to my colleague from Alabama, Senator Richard Shelby, who was chairman of the Banking Committee. It is dated March 31, 2008, from the Board of Governors of the Federal Reserve System, signed by none other than Alan Greenspan, Chairman of the Federal Reserve. Remember, at this time, Senator Shelby and Republicans had become concerned about the health of Freddie and Fannie. They realized they were overleveraged and presented great risk. This was 2004, about 3 years before the collapse occurred. Senator Shelby felt something should be done about it. My Republican colleague offered legislation to do something about it. This is what Alan Greenspan wrote: Thank you for requesting the views of the Federal Reserve Board on the legislation you have proposed to improve the supervision and regulation of government-sponsored enterprises. That is GSEs, that is Freddie and Fannie. As I stated in my testimony of February 24, the Congress needs to create a GSE regulator with authority on a par with banking regulators, with a free hand to set appropriate capital standards, and with a clear process sanctioned by the Congress for placing a GSE in receivership. It had begun to dawn on them that these GSEs could go into receivership. They were so overleveraged. They were on the verge of collapse. That is what he wrote to Senator Shelby in early 2004. He goes on to say, and this language is dramatic: To fend off possible future systemic difficulties, which we assess as likely if current trends continue unabated, preventive actions are required sooner rather than later. Isn't that a dramatic statement, ``To fend off possible systemic difficulties''? Did we not have the whole system go into a spin and we are still suffering from it and may for years to come? Then he goes on to say: The Board believes your proposed legislation makes substantial progress toward meeting these objectives. With regard to the receivership issue, the Board continues to believe that the Congress needs to clarify the circumstances under which a GSE can become insolvent and, in particular, the resulting position--both during and after insolvency--of the investors that hold GSE debt. The process must be clear before it is needed. Leaving the matter unresolved, as it is under current law, only heightens the prospect that a crisis would result in an explicit guaranteeing of GSE debt. In this area, too, your proposal makes substantial strides. It is basically an endorsement of Senator Shelby's efforts. Not basically, it is a flat out endorsement. He goes on to say: With regard to capital, the Board continues to believe that determining the suitable amount of capital for GSEs is a difficult and technical process, and, that a regulator should have a free hand in determining both the minimum and risk-based capital standards for these institutions. Your proposal, which gives the new regulator more discretion in these areas, is an important improvement in this respect. This was an endorsement by the Federal Reserve Board of Senator Shelby's efforts to reform. What happened? Senator Shelby brought it up in the Banking Committee, and it passed the committee on a straight party-line vote. All Republicans voted for increased regulations, increased accountability, increased capitalization of Freddie and Fannie, and every Democrat on the committee voted against it. When it got to the floor, it was subject to a 60-vote filibuster. It was clear the Democrats had sent word they were not going to support it, and there was no prospect of passing the bill. Although he bill passed in committee, it never actually passed the Senate floor. I want to say the idea that the only greed, the only mismanagement was with private bankers is not accurate. There was plenty of that. I have no grief to bear for the big guys on Wall Street. They rolled the dice. I voted against their bailout and I do not believe they should have been bailed out at all. They should have suffered the consequences. We would probably be better off today economically because we would have taken the hit and gotten it out of our system. We can dispute that. All I can say is there are other areas of greed and mismanagement. But currently, 96 percent of home loans are backed by government institutions--Fannie, Freddie, VA, the Housing Administration. Who is to say they are always perfect? We know, as Senator McCain has pointed out in his amendment to this legislation that is before us today, that we can still do more about it. Since 96 percent of housing mortgages are now backed by government institutions, why does this legislation not deal with it? Why does it not? It completely sidesteps the issue. Why? Because we would have to deal with how to score and add to our debt another $400 billion. Is that one reason? Is another reason because Freddie and Fannie have been so powerful politically that they have been able to fend off the oversight they should have been subjected to from the beginning? Is it a belief somehow because they are quasi-government institutions that they can do no wrong, that only private industries and institutions can do wrong? I don't know exactly why all of this is so, but it is not dealt with, and it should be dealt with. Senator McCain's legislation will deal with it. He made a speech Thursday in which he delineated the history of how this all occurred. I thought it was very valuable insight. Americans should know about this. When the government comes in and allows politics and governmental policy to override financial reality, then we can get in trouble. If you order agencies or agencies are willing to make bad loans because they think that somehow it is good policy, do people think nobody is going to have to pick up the tab some day in the future? I am afraid they are. The situation we are in arose from the fact that richly paid GSE executives and their political supporters had no skin in the game on the loans they were making. They were getting their salaries, and they kept getting their salaries even when it became clear the firms were mismanaged and heading for disaster and were going to be bailed out by the American taxpayers. They operated recklessly and they, I believe it is fair to say, were the precipitating cause, frankly, of the collapse of the financial markets; if not the cause, one of the primary causes of it. It is unbelievable and improper that when we propose legislation to restore America's financial stability, we don't fix the Freddie and Fannie problem.

Mr. SESSIONS. I ask unanimous consent for 30 additional seconds.

Mr. SESSIONS. The Wall Street Journal wrote that ``reforming the financial system without fixing Freddie and Fannie is like declaring a war on terror and ignoring al-Qaida.'' Fannie and Freddie were at the center of it. They were a cause of it. They need to be reformed, and I am disappointed that the one thing this government should be doing, which is fixing these quasi-government agencies, is not occurring. I thank the Chair, and I yield the floor.

Mr. SESSIONS

Mr. SESSIONS. Mr. President, I wish to share a few remarks about the recent arrest of the Faisal Shahzad, the individual who allegedly attempted to detonate a car bomb in Times Square in a plot to kill a lot of Americans. I have been asked about that incident several times over the last several days, and I think I was incorrect in making comments to reporters and even to friends about the precise legal situation in which we are involved. Let me briefly summarize what I think the current state of the law is, and all of us will then be better able to respond to the questions we may be asked. The Christmas Day bombing suspect, Umar Farouk Abdulmutallab, as was established pretty quickly, is an unprivileged enemy belligerent and is thus eligible to be tried for his offenses and detained as a person at war against the United States. Mr. Abdulmutallab is an individual who could be held as a prisoner of war, if the military so chooses, for so long as the hostilities continue, just as we did in World War II and every war the United States has been part of. Also, the military would be entitled to try Mr. Abdulmutallab, the Christmas Day bomber, by military commission. That is what we would normally do, and that is what was done in World War II when we caught Nazi saboteurs plotting to blow up targets in the U.S. I believed the administration made a mistake when they treated Mr. Abdulmutallab as a civilian criminal and provided him Miranda rights and appointed him a lawyer, which we have to do if we are going to treat somebody as a criminal rather than an unprivileged enemy belligerent. I believe firmly that was an error, and the normal procedure should be for these types of individuals to be tried or detained by the military because they are not criminals, they are warriors. Yesterday's arrest of the Times Square bombing suspect, Faisal Shahzad, raises similar questions. My initial thought was that the Supreme Court has clearly held that a U.S. citizen who has joined the enemy to fight against this country can be designated as an unlawful enemy belligerent and could be detained for the duration of hostilities. That is a fact Abraham Lincoln never had any doubt about when he took people prisoners. I guess George Washington, when there was the Whiskey Rebellion, he never had any doubt he had the ability to attack, destroy, or arrest people when they were at war with the United States. Fortunately, he did not have to go so far, but that is the kind of thing the Supreme Court reaffirmed in Hamdi v. Rumsfeld. In the Hamdi case, Justice Sandra Day O'Connor, who wrote the opinion, made clear that a citizen who has taken up arms in hostilities against the United States can be designated as an unlawful enemy combatant--``unlawful enemy belligerent'' is the phrase she used--and she wrote the opinion which said: There is no bar to this Nation's holding one of its own citizens as an enemy combatant. . . . A citizen, no less than an alien, can be ``part of or supporting forces hostile to the United States or coalition partners'' and ``engaged in an armed conflict against the United States''; such a citizen, if released, would pose the same threat to returning to the front during the ongoing conflict. That is perfectly sound and perfectly reasonable. She concluded that Mr. Hamdi, who was captured alongside the Taliban in Afghanistan but who was an American citizen, could be detained for the duration of the hostilities authorized by the Authorization for the Use of Military Force that Congress passed, authorizing military force against him in order to keep him from rejoining the enemy. We have had quite a number of people who have been released from Guantanamo, who have been captured in the process, who have returned to the combat and attacked us. So it is clear that under Hamdi, the administration has the authority to detain the Times Square terror suspect as an unprivileged enemy combatant if he can be linked to our terrorist enemies within the definitions of the Military Commission's Act. But I want to be clear. There is a distinction: this suspect, unlike the Christmas Day bomber and the 9/11 plotters, cannot be tried via military commission under current law. He can be detained by the military, but not tried by military commission. In previous conflicts, military commissions were used to try civilians who took up arms against the United States in ways that violated the rules of war. For example, Herbert Haupt was one of the Nazi saboteurs who was prosecuted via military commission after plotting to blow up targets within the United States in the early months of World War II. He was a naturalized U.S. citizen, and the U.S. Supreme Court, in the landmark case of ex parte Quirin, allowed the commission to go forward with his trial, and I think he was executed. A number of the people involved in that case-- most of those who sneaked into the country by submarine, as I recall, off our coast, to blow up our cities and infrastructure and kill civilians--were tried for being in violation of the rules of law, very much unlike a German soldier who was captured on the battlefield during the Battle of the Bulge. They were detained as prisoners of war throughout the war. Because these people had violated the rules of war they could be tried by a military commission. But what happened in the Haupt case ex parte Quirin is no longer law. Since 2006, the Military Commissions Act that Congress passed required and made it clear that the military commission trials are only available for alien unprivileged enemy belligerents. Accordingly, the Times Square bombing suspect who appears to be a citizen must be prosecuted, if he is prosecuted and tried at all, in Federal court--if the reports are accurate that he is a citizen. I want to be sure. I think we have this matter straight. I believe an alien unlawful belligerent who is captured should not be treated like a criminal. They should not be appointed a lawyer that day to tell them don't say anything. They should not be advised of their rights because they are prisoners of war. If their actions amount to a violation of the rules of war, an alien unlawful enemy belligerent can be tried in civilian court, if we choose, or tried by a military commission. But if they are a citizen and they are caught under these circumstances, they can be detained in military custody, but they can't be tried by a military commission. They can only be tried by the civilian courts in civilian trials. With regard to the matter of Miranda warnings, Miranda is not a constitutional requirement. It was never part of American law until recently--40 years ago, 50 years ago. No nation in the world I think-- except perhaps one, I forget which one--provides that you have to warn people they have a right to remain silent. We can ask them questions. They can remain silent. We can't force them to talk, but we don't have to read them the Constitution before we ask them questions. But we do. So, to me, it makes no sense that we would provide this extra constitutional right to unlawful enemy alien combatants like a Christmas Day bomber. They should be detained by military custody. If they need to be tried, the choice should be made between whether to be tried in civilian courts or military courts. The ability to obtain good intelligence about the operation is more enhanced, in my view, without any doubt--even though sometimes people who are given the Miranda rights talk--but there is no doubt we will have less people talking if they are appointed lawyers and read Miranda rights than if we don't. Since war is won or lost so often on the question of who has the best intelligence, we should not provide lawyers to individuals who are at war with us and seek to destroy our country and kill innocent men, women, and children. I think that is the basic state of the law today. I have been a bit confused myself, and I am glad my staff has helped me get correct. I yield the floor.

Mr. SESSIONS

Mr. SESSIONS. Madam President, we are talking about financial reform. There is a lot of attention and a lot of the Members of the Senate are trying to keep up with it and trying to make sure we create a reform package that effectively deals with corporations that have so mismanaged their business that they need to be dissolved or broken up or liquidated, as is normally the case when a company in America cannot pay its bills. This happens every day for smaller companies. It becomes a bit more complicated, sometimes a great deal more complicated, when the corporations get bigger and bigger and bigger. The way our corporations are normally dissolved, if they are financially insolvent and cannot operate, has always been bankruptcy court. There are bankruptcy judges all over America. It is a Federal court system. Bankruptcy is referred to in the U.S. Constitution. It has worked very well. I guess what I am concerned about is, some of the provisions that are in the proposed legislation that is floating about would alter that traditional idea in ways that may be unwise. Senator Leahy, the chairman of the Judiciary Committee, I am the ranking Republican on that committee, and I have talked about this a little bit. It is getting to a point where we need to figure out what is happening here. The matter is highlighted by a letter from the Judicial Conference of the United States--Mr. James Duff, the Presiding Secretary, of the Judicial Conference of the United States. Chairman Leahy asked them their opinions on some of the proposals for dissolution of companies, the orderly liquidation of companies. The Judicial Conference responded in a letter that was received by Senator Leahy, and I do believe it raises important questions. I truly do. I am a person who spent a lot of time practicing law, both as U.S. attorney and in private practice in Federal court, and have some appreciation for how bankruptcy courts operate. I would say, we ought to pay attention to what the Judicial Conference says to us. It is a kind of correspondence they take seriously. They do not lightly send off letters to the Senate. This was in response to a question. So this is what Mr. Duff replies on behalf of the Judicial Conference, in reply to Senator Leahy: As you noted, Title II would create an ``Orderly Liquidation Authority Panel'' within the Bankruptcy Court for the District of Delaware for the limited purpose of ruling on petitions from the Secretary of the Treasury for authorization to appoint the Federal Deposit Insurance Corporation (FDIC) as the receiver for a failed financial firm. Then it goes on to say: This is a substantial change to the bankruptcy law because it would create a new structure within the bankruptcy courts and remove a class of cases from the jurisdiction of the Bankruptcy Code. The legislation, by assigning to the FDIC the responsibility for resolving the affairs of an insolvent firm, appears to provide a substitute for a bankruptcy proceeding. You see, when people loan money to a corporation, people buy stock in a corporation, they buy bonds of a corporation or otherwise loan them money, they have an expectation that if that company fails to prosper and pay what they owe, that company at least will be hauled into bankruptcy court and they will have an opportunity to present their claims and to receive whatever fair proportion of the money that is still left in the company as their payment. It may be 10 cents on a dollar, it may be 90 cents on a dollar or whatever you get. They understand that bankruptcy judges have the authority to try to allow the company to continue to operate, to stay or stop people from filing lawsuits against the company and collecting debts, to allow the company a while to see if they cannot pay off more debtors by continuing to operate than shutting them down. But if they see the company is so badly in financial crisis that it is going to collapse anyway, they come in and shut it down before they can rip off more people. So that is what bankruptcy courts do every day. So this letter indicates that by assigning the FDIC responsibility for resolving these affairs, it provides a substitute for bankruptcy, which is denying the lawful expectations of people who loan money to or bought stock in these corporations. They go on to say: We note, however, that the legislation will result in the transition of at least some bankruptcy cases to FDIC receivership in situations where a firm is already in bankruptcy, either voluntarily or involuntarily. In other words, it appears that legislation would allow a case to be taken out of bankruptcy that was already in the bankruptcy court. It goes on to say: The legislation does not envision objection, participation, or input from the bankruptcy creditors (whose rights will be affected) in the course of appointing the FDIC as receiver. Indeed, the legislation deals in a sealed manner; [secret manner, apparently] only the Secretary and the affected financial firm would be noticed and given the opportunity of a hearing. That will have major impacts on a stockholder or bondholder or a creditor of a corporation. The FDIC is going to meet with this big company, this big bank, and work out a deal and not even tell the people who loaned the corporation money in good faith and have certain legal rights, at least they always had previously. These rights, somehow, will be extinguished or cut off. It goes on to say: The financial position of affected creditors may have been changed within the context of the firm's bankruptcy case in such a way that the creditors' rights might have changed dramatically. Any resulting due process challenges would impose significant burdens on the courts to resolve novel issues for which the bill provides no guidance. They go on to say: In addition, we note that petitions under this title involving financial firms would be filed in a single judicial district. The Judicial Conference favors distribution of cases to ensure that court facilities are readily accessible to litigants and other participants in the judicial process. Under the current proposal all of these cases are going to be tried in Delaware. I do not know if we have enough judges in Delaware. They go on to say this: With respect to the limited review [that means appellate] to be conducted by the panel created in section 202, [of the proposed legislation] we note that the authority may exceed what is constitutionally permitted to a non-Article III entity. What does that mean? That means some of these powers are judicial powers given only to Federal district courts presided over by senatorially confirmed, presidentially-appointed, lifetime Federal judges. We can't just give them off to somebody else to decide. It is just not constitutional. We don't have the powers in the Congress, or the President doesn't have the powers to take over judicial roles. They continue: A previous statute was held unconstitutional because it conferred on the bankruptcy courts the authority to decide matters reserved for Article III courts. It goes on to talk about that. Let me tell my colleagues what CEOs don't like. Do we want to be tough on CEOs? I will give some suggestions. If they can't run their companies and they can't pay their bondholders, can't pay their debtors, their stock has become worthless. People invested in their companies believing they were legitimate, believing the representations of their financial condition, and it turned out to be false. They do not want to be in a court where they raise their hands and have to give testimony under oath. They don't want to be in that position. The way the law has been thought of and is worked out to handle these cases is to have a Federal bankruptcy judge preside over this process. There are bankruptcy rules about what the judge can and cannot do. Each entity that has an interest in the matter can have lawyers. The stockholders can have lawyers. The bondholders can have lawyers. The creditors can have lawyers. The workers can have lawyers. The employees can have lawyers. The guys have to come in under oath. They have to bring their financial statements. If they lie, they go to jail for perjury. This is a powerful thing. A lot of these big wheels don't want to subject themselves to it. I would say, if we want to be tough on these companies, don't create some FDIC buddy group that has been supervising them and sees their role as trying to work with them. Have a real judge. We can create a system where we select experienced judges, create some special procedures for larger bankruptcy cases. We should consider that. My one comment before I wrap up is, we should listen to the Judicial Conference and recognize there is a danger to the rule of law to legitimate expectations of creditors and stockholders by this new change, this unexpected change in the law. We should allow classical procedures to work. If we need to improve them and make some special provisions for dissolution of corporations to help bankruptcy judges do the job better, I would certainly favor that. That would allow us to function in a lawful way, a principled way, and not allow people to meet in private and secret, as we have seen happened recently, and dissolve their cases in a matter that is not open and free to the entire public, as would happen in bankruptcy court. I ask unanimous consent to have printed in the Record the letter from the Judicial Conference.