Paul Wellstone

Mr. WELLSTONE

Mr. WELLSTONE. Could I ask my colleague to yield for one second?

Mr. WELLSTONE. I thank the Senator. I have a group of students outside. I would like to follow the Senator. I ask unanimous consent that I be allowed to follow Senator Harkin in morning business.

Mr. WELLSTONE. I thank the Chair. We are each allowed 10 minutes; is that correct?

Mr. WELLSTONE. I have never heard Senator Harkin speak for only 10 minutes. I ask Senator Harkin, can you make your statement in 10 minutes?

Mr. WELLSTONE. I said, I have never heard you be able to make an argument in 10 minutes.

Mr. WELLSTONE

Mr. WELLSTONE. I thank the Senator from Oregon.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, could we have order in the Chamber, please?

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, my colleague from Virginia is here. I have a fairly lengthy statement. I know our colleague from Virginia wants to speak. I wish to take a few minutes. I ask the Chair, are we going to vote tomorrow? Do we have a time limit today or not?

Mr. WELLSTONE. If I take a few minutes now and then come back after the Senator from Virginia speaks, are we going to be in session for a while tonight speaking on this? Will I be able to do that?

Mr. WELLSTONE. I thank the Chair.

Mr. WELLSTONE. I have to leave anyway in a few minutes for a meeting with some farmers. Let me take a few minutes, and I will be done. Then I will be pleased to yield the floor and then come back later. Mr. President, first of all, let me thank the Senator from Iowa for his comments. I think I can be brief because much of what he says I am in such strong agreement with. Mr. President, tomorrow morning, do we have any time for debate before the vote?

Mr. WELLSTONE. Is there a scheduled vote tomorrow at a particular time?

Mr. WELLSTONE. I ask unanimous consent that I may have 20 minutes to speak tomorrow morning.

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

Mr. WELLSTONE. I yield the floor.

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. WELLSTONE. Mr. President, about the only chance we ever have to discuss interest rates and monetary policy in this body is when Alan Greenspan gets renominated to the Federal Reserve Board, which admittedly seems to happen on a fairly regular basis. That is a shame, because there aren't many issues we debate in the Senate that have a bigger impact on the average American family. Why are interest rates so important? Well, for one thing, the decision to raise or lower interest rates directly affects pretty much every single American, in one way or another. Small businesses and farmers who need to take out loans. Families who want to buy a home or a car. Parents who need a loan to send their children to college. The economic future of all these people may hinge on the decisions of the Federal Reserve Board. More importantly, the decision to raise or lower interest rates has a direct effect on anybody who has or wants a job. Interest rates have got to be the single most important factor determining the rate of unemployment. They're also tremendously important in determining how fast our economy grows. If the Fed slams the brakes on the economy, consumer demand falters, inventories pile up, employers lay workers off, and millions of lives are disrupted. The health and vitality of every community in every corner of every state depends to some extent on monetary policy decisions made by the Federal Reserve Board in Washington. The importance of monetary policy has only grown over time. As former Labor Secretary Bob Reich likes to point out, we used to have two accelerator pedals for the economy. One was cutting interest rates. The other was government stimulus. But now that we're locked into running surpluses for as far as the eye can see, fiscal policy is pretty much dead. Interest rates are the main policy tool we have left for influencing the economy. Indeed, interest rates have a greater impact on most American families than the budgets we pass and most of the legislation we consider. Yet for some reason monetary policy has fallen off the political radar screen. At one time, of course, it was a front-burner political issue. Certainly in the late 19th century, there were few issues that inspired more heated debate among farmers in the Midwest than the gold standard and monetary policy. And for decades after the Great Depression, one of our most pressing national political issues was full employment, which was--and is--integrally connected to interest rates. While interest rates and monetary policy have become the most important instruments of U.S. economic policy, they have also been virtually walled off from democratic decisionmaking and debate. In this as in so many other areas, there seems to be an inverse relationship between an issue's importance to the American people and the amount of time we spend debating it here on the floor of the U.S. Senate. I don't think that's the way it ought to be. That's not the way a democratic government should operate. These are vitally important issues, and they deserve a full and open debate involving broad public participation. We did have something of a debate on monetary policy the last time Mr. Greenspan was renominated to the Board. Looking back on that discussion, I'm proud to say it was a substantive one. It focused not on personal criticisms, but on the important issues of monetary policy that affect all of our constituents. I also think the arguments raised in the 1996 debate can serve as a useful starting point for today's deliberations. We have a record from that debate, and we have four years of economic experience to compare it against. And based on that record and that experience, we can draw certain conclusions. The conclusions I draw are as follows. I think monetary policy over the past 4 years has been a pleasant surprise for some of us, in ways that I'll discuss in a moment. Nevertheless, it seems to me that the premise of the current movement toward higher interest rates is not only unfounded--but also contradicted by our experience of the last four years. In other words, I'm less troubled by where we've been than by where I see us heading in the near future. The past four years have been a tremendously successful experiment in monetary policy. I would hope we could all draw the right lessons from that success. During this entire period, we have had relatively low levels of unemployment and strong economic growth. Yet throughout that time, we have also heard repeated demands from various quarters for the Fed to raise its rates. We all know what these appeals sound like, but let me just give a couple examples. In January 1997, soon after the conclusion of our last debate, the Bond Buyer quoted an analyst from Merrill Lynch as saying, If we see further employment gains that are above the equilibrium level, it looks like wage acceleration will get worse and that will be about as bad a news as we could have for the markets. In the January 1997 American Banker, an analyst from Chase Manhattan issued a very similar warning: The labor market is growing progressively tighter because of job growth, unemployment is near 20-year lows and there is an unambiguous acceleration in wage rates when you get beyond the volatility. At some point the Fed is going to have to raise interest rates. Another banker quoted in the January 1997 American Banker said, The Fed is going to have to do something to slow the economy down. If you want to have an impact and want to slow the economy down, you hit it with the big stick first. And so on and so forth. There is nothing unusual about these appeals from inflation hawks. We hear them all the time, no matter what economic conditions may be. The Fed hears them all the time from the Reserve Banks. In fact, Chairman Greenspan makes the same argument himself from time to time. This is more or less the same argument he made last month in his speech before the Economic Club of New York. The difference is that back is 1997 and 1998, Mr. Greenspan and the Federal Reserve ignored those repeated and urgent appeals for higher rates to put a lid on wage growth. For its wise and dovish stance on interest rates in 1997 and 1998, I think the Fed deserves a great deal of credit. The important thing for us to realize is that this unexpected experiment in monetary policy worked. The Fed's unusual deviation from tight money orthodoxy was clearly successful. Yesterday the President was handling out kudos for the longest economic expansion in our history. He did praise Chairman Greenspan, but I think we need to be more specific in our praise. The key policy choice we should be focusing on is the Fed's reluctance to raise rates during a critical period in the mid to late 1990's. The results of that policy choice have been much-discussed elsewhere, so I don't need to go into all the details here. But there is one thing I want to emphasize: the importance of sustained low unemployment for people on the lower end of the income scale. Finally, in the last couple years we are beginning to see wage gains for lower-income workers--for the first time since the 1970's. Unemployment for workers who haven't completed high school was only 6 percent in December, an historical low. And low unemployment is especially important for minorities, who traditionally experience higher rates of joblessness. Black male joblessness has fallen to its lowest level in 30 years, through it's still about twice the rate for whites. The benefits of low unemployment and strong economic growth extend beyond the people who found jobs or are starting to see higher wages for the first time in a long time. We all benefit. The principal reason why the federal budget went into surplus four years ahead of schedule-- in 1998 rather than 2002--was because of higher-than-expected economic growth. That wouldn't have been possible had the Fed slammed on the brakes. Higher economic growth also extended the life of the Social Security Trust Funds, demonstrating how probably the best thing we can do to protect Social Security is to ensure strong economic growth in the future. Because of lower unemployment and higher growth, crime rates declined, as many people who would otherwise have no hope were able to obtain stable employment. And finally, it goes without saying that the consequences of welfare reform would have been much more devastating had the Fed followed the advice of those inflation hawks and raised interest rates. There is one other milestone decision by the Fed that deserves to be singled out for praise. In September 1998, I and several other senators spoke on the floor about the need for interest rate reductions to address the instability in the global economy in the wake of the Asian Crisis and the collapse of the Russian economy. The Fed acted quickly and decisively. It not only resisted calls to raise rates in 1998; it actually lowered them by \3/4\ of a percentage point between September and November. I'm convinced that those rate reductions made a decisive contribution towards stabilizing global financial markets. So much for my sweet talk about the Federal Reserve. Today I also want to express my deep concern about where the Fed appears to be headed in the next few months. I'm troubled that the Board may be unlearning the lessons of its successful recent experiment in monetary policy and reverting to its old ways. Already in June, August, and November of last year, the Fed raised rates by \1/4\ of a percentage point. These hikes effectively restored rates to where they were before the Russian crisis of 1998. In his speech last month, Chairman Greenspan announced that he is once again worried about wage-induced inflation. Virtually everyone understood those remarks as another signal that the Fed will raise rates soon. The Federal Open Markets Committee (FOMC) has been meeting yesterday and today, and today announced another increase of \1/4\ percent. Some economists believe there could be a total of four rate increases by the end of June. To panic over inflation in the present economic circumstances strikes me as something close to irrational paranoia. Inflation is the true ``Phantom Menace.'' First of all, the core inflation rate last year fell to 1.9 percent in 1999, the lowest it's been since 1965. Let me repeat that: core inflation is the lowest it's been since 1965. It's true that consumer prices rose faster than that last year, but this was due to sharply higher energy prices, which should not lead to higher rates. Most commodity prices are still at record lows. In his speech last month, Chairman Greenspan spelled out his concerns. He underscored the danger that rising wages could cause inflation to spiral out of control. I find this argument very troubling. It seems to disregard our experience since 1996, for which the Fed deserves, as I said, a great deal of credit. Just a moment ago I was praising the Federal Reserve for rejecting this very same argument in 1997 and 1998. Simply put, I do not believe there is any credible indication that labor costs are about to send inflation spinning out of control. Wage growth actually slowed in the last year, despite persistently low unemployment. In the fourth quarter of 1999, average hourly wages increased at an annual rate of 3.3 percent. That's less than the 4 percent they increased from 1997 to mid-1999. Measured a different way, wage growth fell from 4.1 percent in 1999 to 3.6 percent in 1998. Wage growth could not have been slowing down over the past couple years if labor markets were operating as Chairman Greenspan describes. As Chairman Greenspan and the President have both pointed out, a remarkable feature of the current recovery is that workers' wage demands have been lower than their historical levels. Yesterday the President claimed the reason why American workers have not made ``enormous wage demands'' is that they have become ``very sophisticated about the way the world economy works.'' That's an interesting comment. He seems to be suggesting that the way the world economy works is to depress wages. In his now-famous testimony before the Senate Budget Committee in January 1997, Mr. Greenspan had a slightly less upbeat explanation for slackening wage demands. He pointed to job insecurity. ``Heightened job insecurity explains a significant part of the restraint on compensation,'' he testified. Of course, Chairman Greenspan raised this issue because he was concerned the situation could not continue forever: ``At some point in the future,'' he said, ``the trade-off of subdued wage growth for job security has to come to an end.'' There are several reasons why workers would be more insecure in today's economy, but it's hard for me to consider any of them good news. An unprecedented wave of mergers and corporate restructurings has led to layoffs for many senior employees. Labor unions have lost a great deal of its bargaining power, for various reasons. These include deregulation, a trade deficit that destroys unionized manufacturing jobs, and competition from low-wage imports. But even if wage growth really were picking up steam, it would not necessarily lead to inflation. I think pretty much every economist would agree that wages can increase at least as fast as productivity growth--without causing a rise in prices. That's because when there's more wealth to go around due to greater efficiencies, more of that wealth can be shared with workers without asking consumers to pay more. And that's exactly what's been happening. Ever since 1996, productivity has been rising at about 1 percent above the expected trend line. For the past couple of years productivity has been rising at about 2 percent, though real wages rose only 1.5 percent last year. Unit labor costs have fallen since 1996, meaning that wages have not been keeping up with productivity. Moreover, productivity growth is expected to remain strong in the future. There is plenty of room for more wage growth. One of the lessons of this recovery is that low unemployment can actually lead to higher productivity. It makes sense. For one thing, when labor markets are tight, businesses have to make more efficient use of their workers. That leads to higher efficiency and more wealth that can then be shared with workers. It's a virtuous cycle. In fact, this recovery has taught us several lessons which don't seem to be reflected in the Fed's recent shift toward higher rates. First and foremost, the theory that there is a natural rate of unemployment-- around 5.5 or 6 percent--below which inflation will spiral out of control appears to be thoroughly discredited. In June 1996, when we were debating Mr. Greenspan's previous renomination, I came to the floor to take issue with this theory, which is called the NAIRU (Non-Accelerating Inflation Rate of Unemployment). At that time, unemployment was 5.6 percent. I was arguing that unemployment could go lower without sending wages--and therefore prices--into an upward spiral. Let's look at the record since 1996. Unemployment has been below 6 percent the entire time, with no inflationary spiral in sight. Unemployment has been 4.1 percent for four months now. It's been below 5 percent for 30 months. It's been below 4.5 percent for 14 months. Not only is inflation not spiraling out of control, it's pretty hard to detect any sign of inflation at all. Core inflation is the lowest it's been since 1965. In the most recent issue of the American Prospect, the economist James K. Galbraith writes, Faced with such embarrassing facts, only a handful of economists continue to defend the natural rate idea. And yet, the natural rate movement still influences policy. Some of its survivors vote on the Federal Reserve's Open Market Committee. They are presently driving interest rates upward on precisely the pretext that low unemployment must otherwise soon bring rising inflation. It is a notion for which no evidence exists. And except for the damage that higher interest rates will do, it would be hard not to laugh. The case for raising interest rates is also exceedingly weak. In fact, the very arguments made recently by Chairman Greenspan and various Wall Street analysts should actually persuade us to keep rates where they are. Yes, sustained low unemployment is having some effect on wages, especially at the lower end. It's not sending inflation spiraling out of control, but it is having an effect. But this is a positive phenomenon that we should be attempting to prolong, for all the reasons I listed before in praising the Fed's performance in 1997 and 1998. The price of raising rates now is all the benefits we've seen flowing from lower unemployment and faster growth. After all, many working people are only now beginning to feel the effects of this recovery. Only in the last two years have wage increases given workers back some of what they had lost over the past two decades. During most of the recovery of the 1990s, the median wage actually fell. Wages for low and middle-income workers dropped sharply in the early 1990's, due in part to an unnecessarily tight monetary policy by the Federal Reserve. This trend didn't start to reverse itself until 1996--thanks to a looser monetary policy from the Federal Reserve, as well as an increase in the minimum wage. It wasn't until 1999 that median wages regained their peak level from 1989, before the last recession. That's where most workers are today: about where they were before the last recession. This is no time to actively dampen wage growth--precisely at the moment when workers are starting to benefit from this recovery. The policies that brought about these much-delayed benefits for working people are precisely the ones that the Federal Reserve is now poised to reverse. I think we have an obligation to make sure all Americans, not just corporate CEOs and those at the top of the income ladder, can benefit from this recovery. Just recently, the Center on Budget and Policy Priorities and the Economic Policy Institute released a report on income inequality in America. This is what they found. Despite strong economic growth, income disparities were significantly greater in the late 1990's than they were in the 1980's. In two-thirds of all states, income inequality between the top 20 percent and the bottom 20 percent increased. The earnings of the poorest fifth of American families rose less than 1 percent between 1988 and 1998, but the earning of the richest fifth jumped 15 percent. The income gap significantly narrowed in only three states--Alaska, Louisiana, and Tennessee. Even my friend John McCain has noted the widening gap between the haves and the have-nots in America, and that message seemed to go over pretty well in New Hampshire. Raising interest rates now could also have an indirect effect on inequality--by raising the value of the dollar and therefore contributing to the problems of our trade deficit. In the last 4 years, our trade deficit has grown from less than 1.0 percent of GDP to almost 3.5 percent of GDP in the fourth quarter of 1999. This is unprecedented. The burgeoning trade deficit has contributed to inequality by resulting in the loss of manufacturing jobs. We lost 248,000 manufacturing jobs in 1999, and 520,000 since March 1998. Because of low unemployment, those job losses are generally made up by job creation elsewhere. But the new jobs tend to be nonunionized, with lower pay and fewer benefits. In the last two years, job growth has occurred exclusively in the service industries, where wages and benefits are often much lower. A second problem with the trade deficit is that it casts a pall over this recovery. We are now the world's largest debtor nation. We have accumulated over $2 trillion in trade deficits over the last couple decades. Yesterday, even President Clinton said he worried that if foreign investors lost confidence in our economy and pulled out their money, they could do major damage to the economy. We have to consider the danger that unmanageable trade deficits or unnecessary monetary tightening could not only erase wage gains for lower-income workers, but could actually send the economy into a tailspin. This recovery has been kept alive by Americans who have been spending more than they earn, partly due to the ``wealth effect'' of soaring stock prices. Lowering growth with higher interest rates could cause investors to reassess their rosy assumption about future growth and puncture the speculative bubble on Wall Street. In fact, in his speech last month in New York, Chairman Greenspan also mentioned the danger of a stock market correction. If the goal is to curb ``irrational exuberance'' on Wall Street, there are much better ways of doing that. In the 1950's and 1960's, Fed Chairman William McChesney Martin, Jr., repeatedly raised margin requirements, but Mr. Greenspan has refused to take that step. Given the sizable dangers involved--both in terms of the damage it would do to lower-wage workers and to the overall economy--I think raising interest rates at this time would be extremely unwise. If an inflationary situation actually materializes and turns out not to be a figment of bankers' collective imaginations, the Fed can always deal with that problem if and when it arises. Recent evidence suggests that interest rate moves no longer operate with a lag due to the increased openness of the Fed. We have made a tremendous advance in the four years since we last debated this issue. We have discovered that the three-decade-old mystery over falling wages and rising inequality turns out to be not so mysterious after all. The fact is, we know how to raise wages and reduce inequality. We do not have to reinvent the wheel. Among other things, we need to maintain low unemployment over a sustained period. We've done this before and we can do it again. It would be a tragedy if an unjustified fear of rising wages or an economic downturn kept us from continuing that progress. I think Chairman Greenspan's performance at the Fed has been very helpful in drawing out these lessons over the past 4 years. It would be a tragedy--both for our country and especially for workers at the lower end of the income scale--if he were to ignore those lessons to once again focus on putting a stop to rising wages. Mr. President, it is kind of ironic that about the only time relevant to really discuss monetary policy or have a debate about monetary policy is when Alan Greenspan gets renominated to the Federal Reserve Board. It is a shame because there is probably not an issue that has greater impact on people's lives. People just do not know that much about monetary policy. But the fact is, when you look at the real interest rates, you are talking about a policy that dramatically affects small business people, dramatically affects family farmers, dramatically affects the industrial base of our country, dramatically affects low- and moderate-income people, and it is critically important to policy. There was a time in the history of our country, in the late 1800s, when there was a tremendous emphasis on monetary policy and the need to keep real interest rates down. There was a time post-Depression when there was a real focus on employment policy and the need to move toward full employment, and the whole question of what the tradeoff was between having high interest rates that would choke off economic growth, and then people would not be able to find jobs at decent wages. I think in 1996 we had a very good debate. I don't think the debate was so much about Alan Greenspan--I voted against Alan Greenspan's nomination then--but it had more to do with the debate about monetary policy. What was going on during that debate is that many of us were saying we were very concerned about the Federal Reserve policy. We were concerned about the focus on raising interest rates, and what we argued was all this discussion about NAIRU, all this discussion that you could not have low levels of officially defined unemployment without at the same time setting off an inflationary cycle, was simply wrong. What we were saying is it is extremely important to have a public policy which puts as our first priority that people should be able to obtain jobs at decent wages and that this was critically important when you looked at monetary policy. That is because when interest rates go up, then in fact it is very difficult to sustain this kind of growth. I am pleased to say tonight--I think this is the irony--I was right about the policy and wrong about Alan Greenspan. I think I was right to say that the Fed is not accountable to citizens in this country. There is no democratic accountability, with a small ``d.'' These are critically important decisions that are sort of walled off from any kind of public accountability. I think that is a profound mistake. This is a decisionmaking body with enormous power that crucially defines the quality or lack of quality of people's lives. But what we were saying, some of us, was that we took exception to the Fed's policy of always seeing inflation right around the corner when it did not exist, a kind of phantom inflation, and raising interest rates and having as its conscious policy: We are going to raise interest rates because unemployment is falling too low and we have to do something because surely there will be inflation. Therefore, many people still do not get jobs or the jobs they get are jobs at fairly low wages. And, when real interest rates go up, it has a draconian effect, again, on small businesspeople, a horrible effect on farmers and producers in my State, and a very harsh effect on low- and moderate-income people, a harsh effect on home buyers, a harsh effect on people who do not have a lot of money who are trying to buy a car. I give Alan Greenspan credit. What has happened in 1997 and 1998 is that Alan Greenspan did a superb job of being a dove. He was a dove. He did not raise the interest rates. There were many people in the Banking Committee, many people in the financial community, who kept saying he needed to raise those interest rates. He did not do so. I think his stewardship has been very important. As a result of that, this is what has happened. As a result of not raising these interest rates up until this past year, as a result of not accepting this orthodoxy, what have we been able to accomplish? Record low levels of unemployment--that is very important to communities of color; very important to people who are traditionally the ones who are most affected by high levels of unemployment. It is very important to the basic idea of economic opportunity in America because the key to economic opportunity is to be able to find a job, even more a job at a decent wage, even more a job at a decent wage under civilized working conditions. What else has been accomplished? Because we have had low levels of unemployment, finally we have seen the lowest wage workers be able to bid up their wages because this is a good market for them. We are beginning to see some closing of the gap. It is closing very little, but up until the past couple of years, or this past year, we had not seen much improvement at all in terms of real wages. We have seen some improvement. What have we been able to accomplish? Record surpluses. What have we been able to accomplish? The Social Security trust fund appears much stronger than it did because of economic performance. What have we been able to accomplish? High levels of productivity. By the way, if your productivity is ahead of your wage increases, I do not believe you are ever going to have to be concerned about an inflationary cycle. So I come to the floor of the Senate to say it was important we had this debate about monetary policy in 1996. I think those of us who took exception to the Fed's policy of continuing to raise interest rates were correct. Those of us who did not accept NAIRU and this whole argument that below a certain level of unemployment you could not go any further, I think we were correct. Those of us who argued it was important to keep interest rates down for economic growth and economic recovery and jobs at decent wages, that it was important to keep interest rates down for the sake of our producers, for the sake of the manufacturing sector, for the sake of small businesses, for the sake of moderate- and middle-income households were right. I was wrong about Alan Greenspan because, as it turns out, under his guidance, the Fed has what I think is a pretty darned good record. Therefore, I now come to part three. I am perplexed that now, again today, we saw an increase. The Fed is now raising interest rates, this past year I think three or four times. Yet inflation is at a record low level, and the only sector of the economy where we see inflation is energy costs, which has a whole lot to do with the OPEC cartel and does not have anything to do with ordinary families in the United States of America. So it seems to me, for reasons I cannot explain, Mr. Greenspan and the Fed are ignoring the very success that they have had. I do worry because I think if we continue to raise the interest rates, not only is it going to undercut our economic growth, not only will it have a disproportionate negative effect on those Americans who struggle the most, much less middle-income families, not only is it going to add to our already serious trade imbalance which plays havoc--which is both a result of and plays havoc with our industrial sector--but I think if it is going to continue to raise these interest rates, it threatens this unbelievable economic performance we have seen. One final point I make tonight is that during this period of economic growth we have not all grown together. To a certain extent we have grown apart. Actually, the gap between the richest 20 percent and poorest 20 percent grows wider and wider. Why, given the success of the Federal Reserve, why, given the success of this economic performance while keeping interest rates down, why, given some improvement for the lowest wage workers, why, given the surpluses, why, given the Social Security trust fund looking better because people are working, because people are making better wages, why at this point in time does Mr. Greenspan and the Federal Reserve seem to be going down the path of raising interest rates in direct contradiction to a policy that has been successful? That is the question. I wanted to come to the floor to speak because I find it, as a teacher, much less a Senator, to be just an interesting and, to a certain extent, perplexing irony. In 1996, we had a debate about monetary policy. It only comes up when the Greenspan nomination comes up. I think we should be debating monetary policy more. Once upon a time it was a front burner issue. But then Alan Greenspan has surprised me and kept real interest rates down. I want to give him all the credit in the world for that, and I think it has been very important and tied to our economic performance. It is very important to the people with the least amount of economic clout in our country who do not do as well financially. But now it looks as if Alan Greenspan and the Federal Reserve have been going in the exact opposite direction of what has been a successful economic policy. That I fear, that I worry about, that I dissent from, and that I wanted to speak about as a Senator.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, I just finished speaking with our Sergeant at Arms on the Senate side, Jim Ziglar. He is in full accord with what I am about to say. Many of us, perhaps all of us, attended the services for Officer Chestnut and Agent Gibson. I think one of the things we all agreed on is there were many ways we were going to honor these officers. One of them was to make sure we provided the utmost support and security for them, much less security for the Congress and the citizens who visit the House and the Senate. What I have noticed is that we have still been having single posts, where you have one officer at a very busy post with many people streaming in. I have raised this question for quite a few months now. I have never spoken about it on the floor of the Senate, but I am intending to try to put some pressure on as a Senator because we have to do something about this. I know the Senate Sergeant at Arms feels strongly about this. I have talked to many police officers whom I think all of us respect, and we owe them a real debt of gratitude for their service. Frankly, this is no way to say thank you to the Capitol Police--to have one officer at a station where you have all sorts of people coming in, it is an impossible security situation. It is impossible. I have seen this with my own eyes. I have had police officers come up to me and say, ``This is just intolerable. We thought there was going to be a change.'' I want to say on the floor of the Senate--and I have waited month after month to do this, but again I see it with my own eyes, and police officers come to me about this--I believe there has to be change. I don't think there can be any possible excuse for not living up to our commitment that at least two police officers be at every one of these posts. One example: One officer was at a post where during his shift 700 people came in--one officer. This is unacceptable, absolutely unacceptable. I think we have to do much better. I am not going to be a know-it-all, I am not going to tell you that I know how much additional money needs to be spent, or whether this is a systems or management issue, or whether there is some slowness on the House side. I don't know what is going on. I just know there is no excuse for it. We did a supplemental appropriation after these two officers were slain, murdered, of a little over a million dollars, about $50 million each year. That was for weapons, vests, for security enhancement, and for overtime staffing up in ways that we need to staff up. I don't know what has happened with this appropriation, whether we need more money, more authorization, or something. The only thing I know is we have a situation right now--after two officers were murdered--where we have at some of these posts just one officer. There should be two officers at every post. I believe that is a commitment we have made. I speak on the floor of the Senate to say that we have to do better for these police officers, and the sooner we do, the better. I say to my colleague from Virginia, I think I will come back every day and speak to this situation that exists. I will defer to my colleague from Virginia and I say to the Chair that I hope to come back this evening.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, China's terrible treatment of ethnic minority Uighurs, a Muslim community in the northwestern province of Xinjiang, has not received the same level of international attention as that of the Tibetans. The Uighurs are also subject to ongoing repression and violations of their internationally recognized rights of free expression, association and belief. The Chinese government is cracking down on a separatist movement in Xinjiang as part of its overall strategy of maintaining ``stability'' at all costs. According to human rights organizations such as Amnesty International and Human Rights Watch, over the past year China has used draconian measures including public sentencing rallies, long prison terms, and-- alarmingly--a rising number of executions of suspected ``splittists.'' In an apparent attempt to stop the flow of information overseas about this crackdown, Chinese security officials arbitrarily detained a prominent Uighur businesswoman, Ms. Rebiya Kadeer, this past August in Urumqi, the capital of Xinjiang. Her husband is a U.S. resident who broadcasts on Radio Free Asia and the Voice of America, championing the cause of his people. For years, Ms. Kadeer has been praised by the Chinese government for her efforts to promote development in Xinjiang, including a project helping Uighur women develop their own businesses. She has also been praised in the Wall Street Journal for her business savvy. She owns a department store in Urumqi as well as a profitable trading company. But now she has been put out of business, is being held in prison awaiting trial, charged last September with ``illegally offering state secrets across the border.'' Even worse, her son and her secretary were also detained and have already been sent to a labor camp. If Ms. Kadeer is convicted, she could be sent to prison for many years. Ms. Kadeer's case demonstrates that even business people in China are not safe from the arbitrary use of state power. As China tries to become a member of the World Trade Organization, this reality is crucial to bear in mind--both for Chinese and foreign investors. I urge my colleagues to call on the President to seek the immediate, unconditional release of Ms. Kadeer, her son, and secretary. Today I offer a sense of the Senate resolution urging their release, and hope it can be considered quickly and adopted unanimously by this body.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, we are talking about tabling the amendments this afternoon; is that right--not now?

Mr. WELLSTONE. Mr. President, first of all, I remind my colleagues of what I said last week about this legislation which I think, with all due respect to my colleague--I do have a lot of admiration for Senator Hatch--is still fundamentally flawed legislation. It contains numerous provisions which are unbelievably harsh toward those citizens who are most vulnerable in our society, and that troubles this Senator. I think the entire concept of the bill is wrong. It addresses a crisis that appears to be self-directed. It rewards predatory and reckless lending by banks and credit card companies which fed the crisis in the first place, and it does nothing to actually prevent bankruptcy by closing economic security to working families. I reject the notion the Senate should assume that there are problems with the bankruptcy code because more people are going bankrupt. Real bankruptcy reform would address the root causes of bankruptcy. It would address the concentration of financial markets which are increasing the clout and power of big banks and credit card companies to unprecedented levels. It would make working families more financially secure. It would address skyrocketing medical expenses. It would confront the economic balkanization in this country, the increasing schism between the wealthy and the rest of America. This bill does none of these things. It imposes harsh penalties on families who, by and large, file for bankruptcy in good faith because it is the only option they have. The two amendments I have offered to this bill--the payday loan amendment, which would curb a form of predatory lending which targets low- and moderate-income working families, and also the low-cost basic banking amendment, which would require big banks with more than $200 million in assets to offer low-cost banking services to their customers if they wish to be able to make claims against debtors in bankruptcy proceedings--would go a long way toward making this bill more fair and more balanced. When I spoke last week, I said the bankruptcy crisis is over and it ended without Congress passing legislation. I cited the fact that bankruptcy proceedings actually fell last year--fell last year, I repeat--by 112,000 cases. My good friend from Alabama came to the floor and said something that, actually, I think is true: This bill doesn't have anything to do with the number of bankruptcies. I think he was more right than probably any of us want to seem to admit. But the decrease in bankruptcy filings is significant, and let me explain why. Ironically, the bankruptcy crisis probably ended because Congress has not passed a bill. The bean counters in the consumer credit industry realized that all of these bankruptcies were not good for profits, so they started lending less money. They were more careful about to whom they lent the money. In fact, overall consumer debt actually declined in 1998. And guess what. There were fewer bankruptcies. But if S. 625 becomes law, bankruptcy protection will be harshly rolled back. It will even be more profitable to overburden folks with debt, and the banks and credit card companies will fall over themselves trying to do it. But this time, America's working families are going to pay even more of a price. This argument isn't purely historical or theoretical. Empirical data backs it up. I want to take my colleagues through a little bit of history. I want to read from an article published in the August 13, 1984, issue of Business Week. The article was entitled: ``Consumer Lenders Love the New Bankruptcy Laws.'' It was written in the aftermath of Congress' last tightening of the bankruptcy code in 1984. Here is how the article goes: It doesn't take much to get a laugh out of Finn Casperson these days. Just ask him the outlook for Beneficial Corp. now that the U.S. has a tough new bankruptcy law. ``It looks a lot rosier,'' says the chairman of the consumer finance company, punctuating the assessment with a hearty chuckle. The article then explains what the banks and credit card industries got back in 1984: But when someone seems to be abusing the revised law, a judge can, on his or her own, throw a case out of Chapter 7, leaving the debtor to file under Chapter 13. And in Chapter 13, where an individual works out a repayment plan under court supervision, lenders now can get a court order assigning all of a borrower's income for three years to repaying debts . . . Anyway, it goes on to say that the lender does not have to worry any longer and they can have these predatory practices and they can target people and they do not have to worry if there is no protection for people. But there is protection for them. Does this sound familiar to my colleagues? These ``reforms" --and I put ``reforms'' in quotes--are substantially similar to what the industry says are desperately needed now--that means to curb abusive filings. That is exactly what the Congress gave the credit card industry in 1984. But the question is, After we passed that bill in 1984, how did lenders behave after the ``strengthening'' of the bankruptcy code? That story will help us answer the question: If we give them this new, stricter, lopsided law in 2000, what will they do with it? From the same 1984 Business Week article: Lenders say they will make more unsecured loans from now on, trying to lure back the generally younger and lower- income borrowers recently turned away. Why not? We are giving them all the protection in the world. They can go about with all kinds of unscrupulous practices that I am going to talk about: Target poor people, target single parents, target young people, and not have to worry. But that is exactly the problem. The consumer finance industry went after these folks with a vengeance post 1984. Lenders felt so protected by the new bankruptcy law that they eventually threw caution to the wind and began using the same aggressive, borderline deceptive and abusive tactics that are now common in the industry. That is exactly what we are going to do with this law--give them a blank check to continue with this deception. In a 1999 Harvard Business School study entitled, ``The Rise of Consumer Bankruptcy: Evolution, Revolution, or Both?'' David Moss of the Harvard Business School and Gibbs Johnson, an attorney, lay out the case. They say--colleagues and staff listening to this debate, I think this is an important piece: It is conceivable, therefore, that the pro-creditor reforms of 1984 actually contributed to the growth of consumer (bankruptcy) filings. This could have occurred if the reforms exerted a larger impact in encouraging lenders to lend--and to lend more deeply into the income distribution--than they did in deterring borrowers from borrowing and filing. Mark Zandi, in the January 1997 edition of the Regional Financial Review, writes: While forcing more households into a Chapter 13 filing, though an income test would raise the amount that lenders would ultimately recover from bankrupt borrowers, it would not significantly lower the net cost of bankruptcies. I emphasize: Tougher bankruptcy laws will simply induce lenders to ease their standards further. That is exactly what we are doing with this bill. Again, we know this is exactly what happened. Credit card companies sent out over 3.5 billion solicitations last year. They use aggressive tactics to sign up borrowers. Is there anything in this ``reform'' legislation that holds them accountable? No. Once again, the big givers and heavy hitters and well-connected dominate. But when it comes to the poor, when it comes to single-parent families, when it comes to senior citizens, when it comes to the people who are most vulnerable, we have unbelievable harshness in this legislation. These credit card companies use aggressive tactics to sign up borrowers--and to keep you in debt once they get you. They also go after low-income individuals, even though they might not be good credit risks. Why? Because they are desperate for credit. They have a captive audience. Poor people can be charged exorbitant interest rates and fees. Despite the fact that there are hundreds of credit card firms targeting low-income borrowers, interest rates and terms on these cards have not been driven down by the supposed ``competition.'' For these borrowers, for low-income people, the market is failing. In a June 3, 1999, interview in USA Today, Joe Lee, a respected bankruptcy judge for over 37 years in the Eastern District of Kentucky, placed the blame for the current high number of bankruptcies squarely on the backs of the banks and the credit card companies. There is not a word in this legislation holding them at all accountable for their unscrupulous practices; they all target people who are desperate for credit and have no other choice but to receive loans on horrible terms, the poor and the vulnerable. When asked if he had seen many people file for bankruptcy who could afford to pay most of their debts, he said--because that is the premise of this legislation, that you have all this abuse-- No. It's simply not true. Most of them are very poor, drowning in debt. The target (of bankruptcy reform) should be the consumer credit [card] industry and the laws governing extension of consumer credit. Instead they're robbing the poor to enrich the rich. That is exactly what this legislation does. But these poor people are invisible. They have no clout. They have no power. They have no lobbyists. They are not the heavy hitters. They are not the big givers. They are left out. USA Today also asked Judge Lee if he thought there was less stigma attached to bankruptcy than there used to be. He said: I've been on the bench now for 37 years, working on 38. I never have seen this business about debtors being cavalier about bankruptcy. Look at it from the point of view of the debtor. They have mothers and fathers. They go to church. They have neighbors. They have to walk into the office after filing for bankruptcy and explain it to other employees, and this is not easy to do. There's the additional stigma that bankruptcy remains on your credit report for 10 years. You have trouble getting credit other than at high interest rates. You have difficulty buying a home. You have lots of problems. What Judge Lee is saying is borne out by the facts. Remember, as I stated last year, the vast majority of families who file for bankruptcy are not trying to beat the system. They file for a fresh start. That is what bankruptcy provides for them. It is the only way they can get out from crushing medical bills or other debts brought on by unforeseen circumstances. Only a very small percentage--perhaps 3 percent--of those who file for bankruptcy file abusively, according to the American Bankruptcy Institute. The American Bankruptcy Institute says about 3 percent of the people abuse this system. The Justice Department goes higher. For that, we have this wide, broad net that punishes the poor and the most vulnerable. A constituent from Crystal, MN, wrote to my office in July to tell me about her experience with bankruptcy: What I want you to know specifically is that this one credit card company would not offer any reductions in the interest rate, demanded over one quarter of my entire monthly income, did not care if I could not meet my payments for the most basic requirements of human existence, suggested that I use a food shelf, and they refused to acknowledge that my child was suicidal and that their harassing phone calls to my house nearly caused her to overdose on the only nonprescription pain relievers that I could have for myself. What was the reason for that? Her life was like ours. Actually, we make a lot more money than she made. She was a worker. She had a factory job. An injury forced her to leave the job. For all I know, it could have been a ruptured disk. I know what a ruptured disk is like. She worked multiple minimum-wage jobs for several years. Her marriage fell apart, and her daughter fell into deep clinical depression. No fault of hers; no fault of her daughter's. In the meantime, she enrolled in computer school so she could pursue a career that would give her some income and would also help her help her daughter. She purchased a computer on credit so she could spend more time working at home. In time the payments on the computer, her mortgage, and her daughter's medical bills became too much, and she fell behind on debt payments. When the creditors approached her, she tried to work out a repayment schedule she could meet, and then the quote I read is what happened to her. So she filed for bankruptcy. She has begun to rebuild her life. She ended her letter by saying this: Please do not vote for Senate Bill 625 or any other bill that makes bankruptcy harder for people who find themselves caught in the unforeseen predicaments of life for which they have no control. It is not fair to pass a bill that helps the credit card companies by hurting people like me without forcing them to look at what they are doing and how they respond. They have many options that could be used without creating the emotional trauma that forces hard working people to choose the relief of bankruptcy. I ask my colleagues, is there one thing in this piece of legislation that could have helped this woman head off bankruptcy, a Minnesotan? Absolutely not. This bill would simply have made it harder for her to get the relief necessary for her to take care of herself and her daughter. Why aren't we talking about what could have kept this woman out of bankruptcy? What does this bill have to do with helping a woman or a man educate themselves so they can do better for their family? The answer: Nothing. What does this bill do to help ordinary people who are overwhelmed by medical expenses? The answer is: Absolutely nothing. What does this bill do to promote economic stability for working families? Absolutely nothing. I believe if my colleagues wanted to reduce the number of bankruptcies, they would focus more on providing a helping hand rather than removing a safety net. If my colleagues wanted to tackle bankruptcy, they would take on the credit card companies and their abusive tactics. No, we don't want to take on those interests. Unfortunately, my constituent's story, a woman from Minnesota, single parent, is becoming increasingly typical. All too often overburdened families, the vast majority of them single-wage-earner families headed by a woman, have to deal with these circumstances all the time. This year more than a half million women-headed households filed for bankruptcy. Women-headed households are the poorest group of families in America. They are the largest group who have to file for bankruptcy. Ironically, the credit card industry has run advertisements--I cannot believe this--during debate on this bill talking about how friendly this piece of legislation is toward women and children. They have no shame. This is ridiculous. I will read from a letter signed by approximately 70 scholars at our Nation's law schools who are opposed to this legislation. I ask unanimous consent that this letter, along with a list of a variety of consumer, women, and union organizations be printed in the Record.

Mr. WELLSTONE. The letter begins: In a letter to you, dated September 7, 82 professors of bankruptcy law from across this country expressed their grave concerns about some of the provisions of S. 625. In a public letter dated September 16, two professors took the opposing view. One of the principal concerns of the 82 law professors was that S. 625 may adversely affect women and children. Proponents of the bill--namely, the consumer credit industry--have responded to the concerns raised about the effects of the bill on women and children with a media blitz. . . . They have the money for a media blitz. These women and children don't have the money for that. . . . trumpeting the view that ``Bankruptcy reform helps women and children.'' A September 14 letter from the consumer credit issuers proclaims that ``S. 625 vastly improves the position of women and children who depend on family support payments from an absent parent who has filed for bankruptcy.'' A full-page advertisement also dated September 14 asserts, ``The truth is that bankruptcy reform gives much- needed help to single parents and their children who are dependent on family support payments.'' The advertisement cautions in large type: ``Distorting the facts about reform helps no one.'' The undersigned professors agree that ``distorting the facts about reform helps no one.'' The real distortion is the assertion that S. 625 would benefit women and children. You can pass this legislation but I am not going to let you get by with that claim. The truth is that notwithstanding the pleas of the bill's proponents, this legislation does not help women and children. Thirty-one organizations devoted exclusively to promoting the best interests of women and children continue to oppose this pending bankruptcy bill. The concerns expressed in the professors' letter of September 7 regarding how S. 625 would hurt women and children have not been resolved--they have not even been addressed. Reading from one other section of the letter: We also express our concerns on behalf of the more than half a million women heads of household who will file for bankruptcy this year alone. As the heads of the economically most vulnerable families, they have a special stake in the pending legislation. Women heads of households are now the largest demographic group in bankruptcy and according to the credit industry's own data, they are the poorest. The provisions in this bill, particularly the provisions that apply without regard to income, will fall hardest on them. A single mother with dependent children who is hopelessly insolvent and whose income is far below the national median income still would have her bankruptcy case dismissed if she does not present copies of income tax returns for the past three years--even if those returns are in the possession of her ex-husband. A single mother who hoped to work through a chapter 13 payment plan would be forced to pay every penny of the entire debt owed on almost worthless items of collateral, such as used furniture or children's clothes, even if it meant that successful completion of the repayment plan was impossible. I don't think the choice could be framed any more starkly. Here is the core question: Will Senators be on the side of these women who are struggling to raise their families or do they see these women as the banks and the credit card companies do--as an economic opportunity, ripe for exploitation? Mr. President, I hope my colleagues will recognize as they take a second look at this legislation that a vote for this bill is a vote against consumers; it is against women, it is against children, and it is against working families. I believe our country and our society and this Senate should be judged by how we treat our society's most vulnerable members. By this standard, this is an exceptionally harsh piece of legislation. All the consumer groups oppose this bill; 31 organizations that are devoted to women and children's issues oppose this bill. The two amendments I will speak to after I have given them context are my payday loan amendment, which would curb a form of predatory lending that targets low- and moderate-income and working families, and the low-cost, basic banking amendment, which would require big banks with more than $200 million in assets to offer low-cost, basic banking services to customers if they wish to be able to make claims against the debtors in bankruptcy proceedings. I think that would make the legislation at least a little bit more fair and balanced. First, let me speak to my payday loan amendment. This is one that should have the vote of 100 Senators. This amendment would prevent claims in bankruptcy on high-cost transactions in which the annual rate exceeds 100 percent. That is what I am going to ask Senators to vote on. We would prevent claims in bankruptcy on transactions in which the annual rate exceeds 100 percent--such as payday loans and car title pawns. Now, these loans are marketed as giving the borrower a ``little extra until payday.'' Do you know what happens with these loans? It is incredible. You have hard-pressed people, poor people, senior citizens, women, people of color, people who live in our rural and urban areas, and they can't get the credit any other way, so they get a loan for $100, which will hold them over until they get their paycheck. They get charged these huge fees--15 percent or more. These credit companies, unscrupulous companies, can put a lien on their car and even require that they give them the key to the car, and then when they can't pay it back--which is often the case--they just keep rolling the loan over and over and over again. For example, a $15 fee on a 2-week loan of $100 ends up being an annual rate of about 391 percent because people ask for the loans over and over again. Rates can be actually as high as 2,000 percent per year, or they take title to the car. This is absolutely incredible. Someone can take out a $100 loan, and the car might be worth $2,000, and these companies that we don't do a darn thing about--I know some of the national media has had some exposure, thank God. I just hope the Senate is sensitive to this question. They are hard-pressed people with nowhere to go for a $100 loan. Maybe there has been an illness in the family or the car broke down, or whatever the case is. They end up getting charged 300, 400, 500, 600 percent. Then they get harassed and they say: We have the check you made out to us. We are going to cash the check and you will be charged with writing a bad check and you can go to prison. These are unscrupulous practices. If the car is worth $2,000, they can basically repossess the car, sell the car, and in a lot of States they don't even have to give back to the owner anything that they make over what the owner owed them. Can you imagine that that goes on in this country? Why in this ``bankruptcy reform'' legislation have we not at least paid a little bit more attention to how we can protect some of our consumers? Now, nobody needs to charge this type of interest rate for a loan. Indeed, this industry is grossly profitable as a result. Stephens Incorporated, one of our investors, says they can expect a return of 48 percent in 9 months to a year and can expect profit margins in excess of 30 percent. Stevens Incorporated reported that there were 6,000 storefronts making payday loans in 1999 across the country but estimates the potential ``mature'' market as being 24,000 stores nationwide generating $6 billion in fees. With these kinds of profits, only your conscience will keep you out of this business. With these kinds of profits, only your conscience will keep you out of this business. It is amazing. You make these loans, you say you are going to help people, you charge them high fees, and you roll it over and over again. You end up charging way above 100 percent per year. You repossess their car. You sell the car. You don't even give them back the additional money you make beyond what they owed you. You do all this with impunity, and these are the poorest people, most vulnerable people who are targeted, and we don't have anything in this legislation to protect them. Let me tell you, Senators, if you want to protect them, you will and you should vote for this amendment. I say to my colleagues that these sleazy debt merchants, expanding their tentacles into our cities and towns, are the mirror image of the retreat of our Main Street and mainstream financial institutions from the same communities. Some of my colleagues on the floor know this. When we had our community banks and smaller banks, they cared. They helped small businesses out and helped out hard-pressed people. They were willing to help out. But now that we have moved to these branch banks and all of this consolidation, they don't. So people have to rely on these kinds of loans. According to an analysis by the brokerage firm Piper Jaffrey, as reported in the Washington Post, ``established customers'' of one payday lender engaged in 11 transactions a year and could end up paying $165 to $330 for a $100 loan. This vote is going to be watched. This is one I think national media will pay attention to because we have had some horror stories. We know about what has happened to people. The question is, Whose side are we on? Are we on the side of vulnerable people or on the side of single- parent households headed by women, on the side of children, or are we on the side of these unscrupulous credit card companies? The following June 18 New York Times piece is typical of the horror stories associated with payday lending: Shari Harris, who earns around $25,000 a year as an information security analyst, was managing money well enough until the father of her two children, 10 and 4, stopped paying $1,200 in child support. ``And then,'' Ms. Harris said, ``I learned about the payday loan places.'' She qualified immediately for a two-week $150 loan at Check Into Cash, handing it a check for $183 to include the $33 fee. ``I started maneuvering my way around until I was with seven of them,'' she said. In six months, she owed $1,900 and was paying fees at a rate of $6,000 a year. ``That's the sickness of it,'' Ms. Harris said. ``I was in a hole worse than when I started. I had to figure out a way to get out of it.'' Mr. President, here is where we are. If you have desperate customers--the most vulnerable--and these are the kinds of loans they are dependent upon, where the terms are outrageous--only somebody with no alternative would seek to borrow money at such scandalous rates. The Consumer Federation of America noted in a September 1999 report entitled ``Safe harbor for Usury'' that, quote: Consumers who are desperate enough for credit to pay triple digit interest rates for two week loans have very little market power to bring rates down. The real costs of payday loans made in small sums for very short periods of time may not be clear to unsophisticated consumers. When lenders deny that their cash advances are `loans' and fail to comply with Truth and Lending Act disclosures of Annual Percentage Rates, consumers do not have the key price tag needed to comparison shop for credit. If, as the industry claims, payday loan customers have nowhere else to go for small loans, rate regulation is necessary to prevent abuse of a captive market. That is what is going on. The industry is saying to Senators: Oh, no, you can't do anything about this because these people are desperate and they come to us for loans and we perform a vital service. But does that justify scandalous fees? On the contrary, it justifies stringent regulation to protect the most vulnerable citizens. What are we about if we cannot at least extend this kind of protection? If it is poor credit which drives a borrower to a payday lender, the borrower is likely to find himself in still deeper water after taking one of these high interest loans. For example, in Tennessee--the state with the highest bankruptcy rate in the country--payday lending is becoming an increasing problem for the bankruptcy system. As one Chapter 13 bankruptcy trustee, as quoted in the March 18th edition of The Tennessean put it, quote: I see them (payday lenders) as the last straw. I would certainly say they are compounding the problem. We are dealing with a bankruptcy filing rate that's through the roof. You are looking at one of the basic causes: lending to people who are not credit worthy and extracting exorbitant interest rates from them. Why aren't we doing something about this? This amendment says if you have a 100-percent interest charge over a year, you are not at the table when it comes to bankruptcy, and the collections of these payday loans can be coercive. For example, in September, the Cook County, Illinois State's Attorney filed suit against Nationwide Budget Finance, a St. Louis based payday lender, alleging multiple violations of Illinois Consumer Installment Loan Act and Consumer Fraud Act, charging that Nationwide threatened consumers with criminal charges and lawsuits when it had no intention of taking such action. The State's attorney stated, quote: ``Apparently, pay day loan businesses are so lucrative that it is more cost-effective to write off bad debts rather than to try and collect them, even though they harass and intimidate their customers.'' Additionally, the company required borrowers to list four references on the loan application. But the references weren't used for the loan approval, instead Nationwide would place harassing to the people listed if the borrower defaulted. That is why this amendment amends the Fair Debt Collection Practices Act to prohibit coercive collecting tactics in lending transactions where deferred cashing of a check is involved. I should also point out that, at the very minimum, if we are going to be talking about accountability and responsibility, why don't we make it a little more lenient with this piece of legislation? It takes two to tango. These unscrupulous credit card companies have something to do with bankruptcy. Such loans are patently abusive. They should not be protected by the bankruptcy system. And because they are so expensive, they should be completely dischargeable in bankruptcy so that debtors can get a true fresh start, and so that more responsible lenders' claims are not ``crowded out'' by these shifty operators. Consider that. Why should we penalize some of our good companies that are responsible lenders by letting these unscrupulous loan sharks be at the table? Why should unscrupulous lenders have equal standing in bankruptcy court with a community banker or a credit union that tries to do right by their customers? And lenders should not be able to take advantage of their customers' vulnerability through harassment and coercion. That is what this amendment is about. Mr. President, my amendment simply says: if you charge over 100% annual interest on a loan, and the borrower goes bankrupt, you cannot make a claim on that loan or the fees from the loan. Colleagues, you have such a clear choice. There is no reason in the world that you should not vote for this amendment. I grant you that I come to the floor today to speak for some people who haven't been included in the system. They are just poor and they are vulnerable, and therefore they are fair game for these companies. I have just said to you that my amendment says if you charge over 100 percent as an interest rate and the borrower goes bankrupt, you cannot make a claim on that loan or on the fees on the loan. Why don't we make the legislation just a teeny bit fairer? Why don't we have just a little bit more balance? Why don't we go after these unscrupulous operators? The second amendment I've offered on this bill is my low cost, basic banking amendment. This important consumer amendment would require big banks with more that $200 million in assets to offer low-cost basic banking services to their customers if they wish to be able to make claims against debtors in bankruptcy proceedings. We have been talking about responsibility. What about the responsibility of the banks and the lending institutions to offer inexpensive means to conduct financial transactions and to save money for low-income people? Right now, the minimum balance that people are supposed to have in their accounts and the high fees mean that for about 12 million Americans, they can't afford to open up an account; they can't afford to have a checking account. What happens when people can't afford to open up a checking account? They are forced to complete their financial transactions either through costly check-cashing operations or they carry around whatever sums of money they have when they go out to purchase groceries or to pay their rent. These are risks that people should not have to take. For example, ACE Cash Express, a national check-cashing company, charges between 3 and 6 percent of a check's value to convert the check into cash. That is what poor people are forced to do. There would be a charge of between $15 and $30 on a paycheck of $500. While that may not seem to be much money to many of my colleagues, to many low- and moderate-income families who live paycheck to paycheck, that $30 could be a meal; that $30 could be a piece of clothing they could buy for their child; that $30 could mean they could go visit a doctor. We have been passing legislation that has driven these small banks out, that has led to all of these mergers and acquisitions, with these huge branch banks making billions and billions of dollars. All I am saying is, why can't we at least say to them: You have some community responsibility; you ought to at least give people low-cost basic bank services. If you do not, then you are not at the table in bankruptcy proceedings against such a bank. This amendment focuses on banks with more than $200 million. I want to be crystal clear that I am not talking about the smaller banks because the smaller banks have done a good job. Much of my work is in rural America. The smaller banks and the community banks have done a good job. They go out of their way to help. But the problem is that these small community banks that have been connected to Main Street have been connected by these huge financial conglomerates that are much more connected to Wall Street. They don't really know the people. They don't know them at all. They sure as heck don't go out of their way to help them. Would this amendment present an unfair burden to these larger banks, as some of my colleagues may argue? Not according to a survey of the Consumer Bankers Association. According to the CBA, 70 percent of the institutions found that offering a basic bank account did not result in a financial loss for their bank or impose a burden on their operation. What in the world is going to happen to seniors? What is going to happen to low-income elderly people? As the U.S. Government begins to make the shift to electronic distribution of benefits, pensions, and wages, consumers must have access to banking services. Now more than ever, the 6.5 million recipients of Social Security and SSI, the Supplemental Security Income program, who do not have a checking account, will face even a steeper uphill battle in their attempts to access these funds. They currently cannot afford the monthly fees, nor do they have the money to keep the minimum balance in their checking accounts necessary to complete these financial transactions. What are we saying to senior citizens who in the future will need a bank simply to get their electronically transferred Social Security check? Let's not forget that it is not just the financial giants that are affected by this process of modernization. It is everyone. We should not try to close the door to low-income consumers who desperately need access to basic banking services. If we provide wider access to bank accounts, we will reduce bankruptcy, we will promote financial literacy, and we will reduce low- and moderate-income families' reliance on high-cost check cashers and payday lenders. Why should bankers who are unwilling to promote the general good be given the same standing in bankruptcy court as those who do? I am tired of seeing the folks in the private sector who do the right thing being put at a competitive disadvantage because their competitors will not. I will conclude by characterizing the debate this way: Over the past several decades, our economy has become more and more balkanized. We have, indeed, seen an economy that is booming. But I come from a State where we have had an economic convulsion in agriculture and our family farmers and our rural citizens are falling behind. The U.S. economy is becoming more and more balkanized. More wealth and more economic power is concentrated among a few. What we have been doing in the Senate over the past several years is passing legislation which provides the lion's share of benefits for those at the top of the heap, those with the big bucks. The two amendments I have introduced give us an opportunity, in a small way, to reverse this trend. This bill is already an enormous giveaway to the financial services industry. It basically rewards lenders for their aggressive, irresponsible lending habits. I went over that already. So I say to colleagues, since we seem to be on our way to changing the rules for America's working families with this legislation, since we seem to be about to ratify the scandalous lending practices of the banking industry, let the Senate adopt several amendments that balances this legislation. Both of these amendments test whether we are serious about curbing bankruptcy. These two amendments, the payday loan amendment and the lifeline banking amendment, are antibankruptcy amendments. A vote for either of these amendments is a vote to promote responsible financial habits among consumers and responsible lending from the credit card companies--responsible lending from the credit card companies. A vote against these amendments sanctions the abandonment by big banks of poor people and, increasingly, the middle class, and ratifies the stranglehold that unscrupulous lenders have on low-income and moderate-income and working families. There is no doubt in my mind this is a flawed piece of legislation. It punishes the vulnerable and rewards the big banks and credit card companies for their own poor practices. Earlier I used the word ``injustice'' to describe this legislation. That is exactly right. It will be a bitter irony if the creditors are able to use a crisis, largely of their own making, to convince Congress to reduce borrowers' access to bankruptcy relief. That is exactly what is going on. I said at the beginning of my statement that real bankruptcy reform would address the concentration of financial markets, which are increasing the power and clout of the big banks and credit card companies to unprecedented levels. It would make working families more secure. It would deal with the crisis in agriculture and what is happening in rural America. It would address skyrocketing medical expenses. It would confront the economic balkanization of the country. It would confront the increasing chasm between the wealthy and the rest of America. But instead of lifting up low-income and moderate-income and working- income families, this bill punishes them. I hope my colleagues reject this legislation. I strongly urge the Senate to at least provide some balance to this legislation and to accept my amendments. I have also a document from the Department of Labor, written by an officer, Capt. Robert W. ``Andy'' Andersen, and I believe this was written to Senator Lieberman. In this letter, he is talking about these payday loans. What he is saying is we have this problem in the military. We have our military people who are underpaid--we know all about this--so they end up having to rely on these payday loans, and the same thing happens to them, to men and women in the Armed Forces. We do not pay them enough, we don't reward their work, we don't provide them the salaries they and their families deserve--just like other low- and moderate-income people--and then they rely on these payday loans. They are desperate. They take out a loan for $100 which then gets rolled over and over and over again or have liens put on their car, they lose that car, they get charged interest rates of 300, 400, 500 or 600 percent a year, and it is a living hell for their families, because of the same practices by unscrupulous lenders who are making billions of dollars. I think we ought to be on the side of these men and women in our military who are confronted with this. But you know what, I am not going to use this as the big emotional argument in this debate. It is not just the military. It is low- and moderate-income people. It is men and women in the Armed Forces. It is a lot of single-parent families, I am sorry to say most of them headed by women. It is some of our senior citizens. Contrary to the stereotype, the income profile of elderly Minnesotans and elderly people in Utah and around the country is not very high. It is basically the most vulnerable citizens in our country. I will speak to this payday loan. I would like to know why in the world there would be opposition to this amendment. We are saying if you are charging over 100 percent interest a year, you are not going to be at the table. I thought we were on the side of consumers when it comes to people being charged exorbitant fees and interest rates. It says you cannot use these coercive practices that the State of Illinois is going after these consumers on wherein they threaten people and tell them they are going to cash their checks and then they are going to end up going to prison. I believe the vote on these amendments--and I am going to focus on the payday amendment--is a test case. This is a test case vote. Whatever you think about the overall bill--I have laid out my case against it--on this amendment this is a test case as to whether or not we can at least provide some protection to the most vulnerable citizens, whether or not we are on the side of the most vulnerable people, women and children, whether we are on the side of low- and moderate-income, working-income families, whether we are on the side of hard-pressed people, whether we are on the side of regular people, whether we are on the side of ordinary citizens, or whether we are on the side of unscrupulous loan shark companies that have no conscience and no soul and exploit people. I urge my colleagues to support this amendment, and I yield the floor.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, I wonder whether I could ask unanimous consent that the vote be first on the payday amendment.

Mr. WELLSTONE. I thank my colleagues. I thank Senator Grassley from Iowa. Amendment No. 2538

Mr. WELLSTONE. I thank the Chair. Mr. President and colleagues, I was on the floor earlier talking about this whole problem of payday amendments, payday loans, and car title pawns. To make a long story short, it is a very unscrupulous practice. You have targets of low-income, you have targets of women, you have targets of seniors who basically get a loan because of something that happened in the family--medical emergency, you name it, for $100, $200. It is rolled over and over again. They can end up being charged 300, 400, or 500 percent a year--or a lien can be put on their car. The car can be repossessed and sold. There isn't a requirement in many States that these families at least get back what they no longer owe to these creditors. I don't know why, when it comes to bankruptcy, those lenders who in good faith have provided loan money to people should be crowded out. This amendment simply says if you are charging over 100 percent in annual interest on a loan and the borrower goes bankrupt, you cannot make a claim on that loan or the fees from that loan. This is all about whether we are on the side of a lot of vulnerable citizens--on the side of single parents, families, women, on the side of moderate-income citizens--or on the side of these loan sharks. This amendment, I believe, should get a huge vote. Every consumer organization is for this amendment, and many other organizations representing women and labor and low- and moderate-income people are for this amendment. I certainly hope the Senate will vote for this amendment.