Justice Integrity Act of 2008

Mr. President, I know the Senator from Connecticut has to leave, but before he does leave the floor, I congratulate and commend him on this bill. He has put a huge amount of effort into this issue over the years. This bill reflects that effort. His leadership in this matter will make a huge difference in getting this bill enacted. I thank him for that leadership and thank him for this bill.

Mr. President, the legislation we are introducing today is going to combat credit card abuses that have been hurting American consumers for far too long. With all the economic hardship facing Americans today, from falling home prices to rising gasoline and food costs, it is more important than ever for Congress to act now to stop credit card abuses and protect American families from unfair credit card practices.

Credit card companies regularly use a host of unfair practices. They hike the interest rates of cardholders who pay on time and comply with their credit card agreements. They impose interest rates as high as 32 percent. They charge interest for debt that was paid on time. They apply higher interest rates retroactively to existing credit card debt. They pile on excessive fees and then have the gall to charge interest on those fees. They apply consumer payments first to the debt with the least expensive interest rate, saving the higher interest rate debt to be paid off last. And they engage in a number of other unfair practices that are burying American consumers in a mountain of debt. It is long past time to enact legislation to protect American consumers.

The bill we are introducing today will not only help protect consumers, but it will also help ensure that credit card companies willing to do the right thing are not put at a competitive disadvantage by companies continuing unfair practices.

Some argue that Congress does not need to ban unfair credit card practices. They contend that improved disclosure alone will empower consumers to seek out better deals. Sunlight can be a powerful disinfectant, but credit cards have become such complex financial products that even improved disclosure will not be enough to curb the abuses. Some practices are so confusing that consumers cannot easily understand them. Additionally, better disclosure does not always lead to greater market competition, especially when essentially an entire industry is using and benefiting from practices that unfairly hurt consumers.

Credit card issuers like to say they are engaged in a risky business, lending unsecured debt to millions of consumers. But it is clear they have learned to price credit card products in ways that produce enormous profit. For the last decade, credit card issuers have maintained their position as the most profitable sector in the consumer lending field and reported consistently higher rates of return than commercial banks.

In 2006, Americans used 700 million credit cards to buy about $2 trillion in goods and services. The average American family now has five credit cards. Credit cards are being used to pay for groceries, mortgage payments, and even taxes, and they are saddling U.S. consumers, from college students to seniors, with a mountain of debt. The latest figures show that U.S. credit card debt is now approaching $1 trillion. These consumers are routinely being subjected to unfair practices that squeeze them for ever more money, sinking them further into debt.

While the remaining legislative days in this Congress are dwindling, there is still time to enact strong credit card reform legislation. Too many American families are being hurt by too many unfair credit card practices to delay action any longer.

I commend Senator Dodd for tackling credit card reform. I look forward to Congress taking the steps needed this session to ban unfair practices that are causing so much pain and financial damage to American families today.

Credit card abuse is a topic, as Senator Dodd mentioned, with which I have been deeply involved over the past several years through a number of investigations in the Permanent Subcommittee on Investigations. We held two subcommittee hearings in 2007, and based on our investigative hearings, I introduced legislation called the Stop Unfair Practices in Credit Cards Act, S. 1395, to ban the outrageous credit card abuses that were documented in the hearings. I was pleased that Senators McCaskill, Leahy, Durbin, Bingaman, Cantwell, Whitehouse, Kohl, Brown, Stevens, and Sanders, our Presiding Officer, joined as cosponsors.

This new bill, the Dodd-Levin bill introduced today, as Senator Dodd mentioned, incorporates almost all the provisions of S. 1395, and it adds other important protections as well. It is the strongest credit card bill yet in Congress.

I would like to add to the record more detailing of the provisions of this bill, along with an overview of some of the most prevalent abuses that we uncovered and some of the stories that American consumers shared with us during the course of the inquiries carried out by my Permanent Subcommittee on Investigations.

With regard to excessive fees, the first case history we examined illustrates the fact that major credit card issuers today impose a host of fees on their cardholders, including late fees and over-the-limit fees that are not only substantial in themselves but can contribute to years of debt for families unable to immediately pay them.

Wesley Wannemacher of Lima, OH, testified at our March 2007 hearing. In 2001 and 2002, Mr. Wannemacher used a new credit card to pay for expenses mostly related to his wedding. He charged a total of about $3,200, which exceeded the card's credit limit by $200. He spent the next 6 years trying to pay off the debt, averaging payments of about $1,000 per year. As of February 2007, he had paid about $6,300 on his $3,200 debt, but his billing statement showed he still owed $4,400.

How is it possible that a man pays $6,300 on a $3,200 credit card debt, but still owes $4,400? Here is how. On top of the $3,200 debt, Mr. Wannemacher was charged by the credit card issuer about $4,900 in interest, $1,100 in late fees, and $1,500 in over-the-limit fees. He was hit 47 times with over-limit fees, even though he went over the limit only three times and exceeded the limit by only $200. Altogether, these fees and the interest charges added up to $7,500, which, on top of the original $3,200 credit card debt, produced total charges to him of $10,700.

In other words, the interest charges and fees more than tripled the original $3,200 credit card debt, despite payments by the cardholder averaging $1,000 per year. Unfair? Clearly, I think, but our investigation has shown that sky-high interest charges and fees are not uncommon in the credit card industry. While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by other major credit card issuers.

The week before the March hearing, Chase decided to forgive the remaining

debt on the Wannemacher account, and while that was great news for the Wannemacher family, that decision doesn't begin to resolve the problem of excessive credit card fees and sky-high interest rates that trap too many hard-working families in a downward spiral of debt.

These high fees are made worse by the industry-wide practice of including all fees in a consumer's outstanding balance so that they incur interest charges. It is one thing for a bank to charge interest on funds lent to a consumer; charging interest on penalty fees goes too far.

Another galling practice featured in our March hearing involves the fact that credit card debt that is paid on time routinely accrues interest charges, and credit card bills that are paid on time and in full are routinely inflated with what I call ``trailing interest.'' Every single credit card issuer contacted by the Subcommittee engaged in both of these unfair practices which squeeze additional interest charges from responsible cardholders.

Here is how it works. Suppose a consumer who usually pays his account in full, and owes no money on December 1, makes a lot of purchases in December, and gets a January 1 credit card bill for $5,020. That bill is due January 15. Suppose the consumer pays that bill on time, but pays $5,000 instead of the full amount owed. What do you think the consumer owes on the next bill?

If you thought the bill would be the $20 past due plus interest on the $20, you would be wrong. In fact, under industry practice today, the bill would likely be twice as much. That is because the consumer would have to pay interest, not just on the $20 that wasn't paid on time, but also on the $5,000 that was paid on time. In other words, the consumer would have to pay interest on the entire $5,020 from the first day of the new billing month, January 1, until the day the bill was paid on January 15, compounded daily. So much for a grace period. In addition, the consumer would have to pay the $20 past due, plus interest on the $20 from January 15 to January 31, again compounded daily. In this example, using an interest rate of 17.99 percent, which is the interest rate charged to Mr. Wannamacher, the $20 debt would, in one month, rack up $35 in interest charges and balloon into a debt of $55.21.

You might ask--hold on--why does the consumer have to pay any interest at all on the $5,000 that was paid on time? Why does anyone have to pay interest on the portion of a debt that was paid by the date specified in the bill--in other words, on time? The answer is, because that is how the credit card industry has operated for years, and they have gotten away with it.

There is more. One might think that once the consumer gets gouged in February, paying $55.21 on a $20 debt, and pays that bill on time and in full, without making any new purchases, that would be the end of it. But you would be wrong again. It's not over.

Even though, on February 15, the consumer paid the February bill in full and on time--all $55.21--the next bill has an additional interest charge on it, for what we call ``trailing interest.'' In this case, the trailing interest is the interest that accumulated on the $55.21 from February 1 to 15, which is time period from the day when the bill was sent to the day when it was paid. The total is 38 cents. While some issuers will waive trailing interest if the next month's bill is less than $1, if a consumer makes a new purchase, a common industry practice is to fold the 38 cents into the end-of-month bill reflecting the new purchase.

Now 38 cents isn't much in the big scheme of things. That may be why many consumers don't notice these types of extra interest charges or try to fight them. Even if someone had questions about the amount of interest on a bill, most consumers would be hard pressed to understand how the amount was calculated, much less whether it was incorrect. But by nickel and diming tens of millions of consumer accounts, credit card issuers reap large profits.

I think it is indefensible to make consumers pay interest on debt which they pay on time. It is also just plain wrong to charge trailing interest when a bill is paid on time and in full.

My subcommittee's second hearing focused on another set of unfair credit card practices involving unfair interest rate increases. Cardholders who had years-long records of paying their credit card bills on time, staying below their credit limits, and paying at least the minimum amount due, were nevertheless socked with substantial interest rate increases. Some saw their credit card interest rates double or even triple. At the hearing, three consumers described this experience.

Janet Hard of Freeland, MI, had accrued over $8,000 in debt on her Discover card. Although she made payments on time and paid at least the minimum due for over 2 years, Discover increased her interest rate from 18 percent to 24 percent in 2006. At the same time, Discover applied the 24 percent rate retroactively to her existing credit card debt, increasing her minimum payments and increasing the amount that went to finance charges instead of the principal debt. The result was that, despite making steady payments totaling $2,400 in 12 months and keeping her purchases to less than $100 during that same year, Janet Hard's credit card debt went down by only $350. Sky-high interest charges, inexplicably increased and unfairly applied, ate up most of her payments.

Millard Glasshof of Milwaukee, WI, a retired senior citizen on a fixed income, incurred a debt of about $5,000 on his Chase credit card, closed the account, and faithfully paid down his debt with a regular monthly payment of $119 for years. In December 2006, Chase increased his interest rate from 15 percent to 17 percent, and in February 2007, hiked it again to 27 percent. Retroactive application of the 27 percent rate to Mr. Glasshof's existing debt meant that, out of his $119 payment, about $114 went to pay finance charges and only $5 went to reducing his principal debt. Despite his making payments totaling $1,300 over 12 months, Mr. Glasshof found that, due to high interest rates and excessive fees, his credit card debt did not go down at all. Later, after the Subcommittee asked about his account, Chase suddenly lowered the interest rate to 6 percent. That meant, over a one year period, Chase had applied four different interest rates to his closed credit card account: 15 percent, 17 percent, 27 percent, and 6 percent, which shows how arbitrary those rates are.

Then there is Bonnie Rushing of Naples, FL. For years, she had paid her Bank of America credit card on time, providing at least the minimum amount specified on her bills. Despite her record of on-time payments, in 2007, Bank of America nearly tripled her interest rate from 8 to 23 percent. The bank said that it took this sudden action because Ms. Rushing's FICO credit score had dropped. When we looked into why it had dropped, it was apparently because she had opened Macy's and J.Jill credit cards to get discounts on purchases. Despite paying both bills on time, the automated FICO system had lowered her credit rating, and Bank of America had followed suit by raising her interest rate by a factor of three. Ms. Rushing closed her account and complained to the Florida attorney general, my subcommittee, and her card sponsor, the American Automobile Association. Bank of America eventually restored the 8 percent rate on her closed account.

In addition to these three consumers who testified at the hearing, the subcommittee presented case histories for five other consumers who experienced substantial interest rate increases despite complying with their credit card agreements.

I would also like to note that, in each of these cases, the credit card issuer told our subcommittee that the cardholder had been given a chance to opt out of the increased interest rate by closing their account and paying off their debt at the prior rate. But each of these cardholders denied receiving an opt-out notice, and when several tried to close their account and pay their debt at the prior rate, they were told they had missed the opt-out deadline and had no choice but to pay the higher rate. Our subcommittee examined copies of the opt-out notices and found that some were filled with legal jargon, were hard to understand, and contained procedures that were hard to follow. When we asked the major credit card issuers what percentage of persons offered an opt-out actually took it, they told the Subcommittee that 90 percent did not opt out of the higher interest

rate--a percentage that is contrary to all logic and strong evidence that current opt-out procedures do not work.

The case histories presented at our hearings illustrate only a small portion of the abusive credit card practices going on today. Since early 2007, the subcommittee has received letters and e-mails from thousands of credit card cardholders describing unfair credit card practices and asking for help to stop them, more complaints than I have received in any investigation I have conducted in more than 25 years in Congress. The complaints stretch across all income levels, all ages, and all areas of the country.

The bottom line is that these abuses have gone on for too long. In fact, these practices have been around for so many years that they have, in many cases, become the industry norm, and our investigation has shown that many of the practices are too entrenched, too profitable, and too immune to consumer pressure for the companies to change them on their own.

Mr. President, in summary, this is what our bill contains:

No interest on debt paid on time.

The bill prohibits interest charges on any portion of credit card debt which the credit card holder paid on time during the grace period.

The bill prohibits credit card issuers from increasing interest rates on cardholders who are in good standing for reasons unrelated to the cardholder's behavior with respect to that card.

The bill requires increased interest rates to apply only to future debt and not to debt incurred prior to the increase.

The bill prohibits the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.

The bill prohibits the charging of repeated over-the-limit fees for a single instance of exceeding a credit card limit.

The bill requires payments to be applied first to the credit card balance with the highest rate of interest and to minimize finance charges.

The bill requires the credit card issuers must offer consumers the option of operating under a fixed credit card limit that cannot be exceeded.

The bill prohibits charging a fee to allow a credit card holder to make a payment on credit card debt, whether that payment is by mail, telephone, electronic transfer, or otherwise. Believe it or not, many credit card companies actually charge you a fee to make your payment.

The bill contains some of the following provisions as well:

It requires issuers to lower penalty rates that have been imposed on a cardholder after 6 months if the cardholder commits no further violations.

The bill gives each Federal banking agency the authority to prescribe regulations governing unfair or deceptive practices by banks and savings and loan institutions.

The bill requires issuers to provide individual consumer account information and disclose the total period of time and interest it will take to pay off the credit card balance if only minimum monthly payments are made.

And, as the Senator from Connecticut said, the bill contains a number of protections for young consumers from credit card solicitations.

Again, I commend Senator Dodd for taking the leadership on this issue. As chairman of the Senate Banking Committee, his leadership will make a huge difference. It gives us a real chance of passing reform legislation relative to credit card abuses this session of the Congress.

Mr. President, my friend and colleague from Michigan is here, as well, who has been deeply involved in the issue of credit cards and the problems that are occurring.

I rise with my colleague Senator Levin to introduce legislation that would reform and prohibit credit card practices that harm rather than help American consumers and their families. The legislation is called the Credit Card Accountability, Responsibility and Disclosure Act, or the Credit CARD Act. It will, in my view, help bring an end to industry practices that candidly cost American families billions of dollars each and every year.

I cannot think of a better time to introduce this much needed legislation. This Chamber will, in very short order this evening, or as late as tomorrow, pass legislation to address the most important issue confronting our Nation's economy and the financial stability of our citizens--the collapse of the subprime housing market and the credit crisis it has brought about.

Unfortunately, far too many American families who are already being squeezed by the rising cost of food, oil, and gas, now find themselves forced to rely on short-term, high-interest credit card debt to finance life's daily necessities--including their mortgage payments--because of the ongoing credit crisis and a weak economy.

That growing reliance was highlighted in a report released last week by the Federal Reserve. The Fed's study reported that in May, revolving consumer debt, which is primarily credit card debt, reached an all-time record high of slightly over $961 billion. That is a 7-percent increase in the last month alone, which is on top of a 7-percent increase last year, and a 6-percent increase in 2006. At this rate, revolving consumer debt in our country, which is again primarily credit card debt, will

reach $1 trillion by the Christmas season of this year.

When I assumed the gavel of the Senate Banking Committee last January, one of the very first hearings I held was on the issue of credit card practices. At that hearing, I challenged card issuers, banks, and associations to stop engaging in practices that they were not prepared to defend before the committee.

It was my hope that the hearing and that warning would encourage the credit card industry to go through a period of intense self- examination. I had hoped the industry would scrutinize its practices and policies to ensure that credit was extended in the fairest and most transparent of terms to credit card customers. To be fair, some in the industry heeded that call. I applaud them and thank them for their efforts. Over the past year, a few credit card companies have voluntarily made changes to the way they do business, and many Americans have benefitted from those improvements.

Regrettably, however, far too few embraced this call. Even more regrettably, some that have made voluntary changes are reconsidering those steps in the face of mounting pressure to find new streams of revenue and capital, and to compete in a market where other industry participants are not engaging in these reforms, as their subprime mortgage market-related losses continue to rise. The temptation to go back to older practices to increase revenue streams is there. Unfortunately, the use of confusing, misleading, and very predatory practices, in some cases, appears likely to remain the standard operating procedure for many in the credit card industry for the foreseeable future if we fail to act. The list of these troubling practices is lengthy: Charging predatory rates and fees; engaging in deceptive marketing to young people; practices such as universal default; double-cycle billing; retroactive interest rate increases; ``any time, any reason'' repricing; and billings shenanigans--like shortening the period consumers have to pay their bills, or charging fees for payment by telephone--are just a few of the practices that could merit induction into a fairly crowded industry ``hall of shame.''

Even the financial regulators, whom I have been openly critical of for lack of appropriate oversight and response throughout the subprime mortgage market crisis, have recognized the harm these sinister practices pose not only to credit card customers but to our economy as well. In May of this year, the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration proposed rules aimed at curbing some of the very practices I have identified. In my view, this joint rulemaking is an important step in providing needed consumer protections in some areas, including a ban on retroactive interest rates and rules on payment allocation. But the proposed rules fall far short in other important areas--failing to address issues including universal default, ``any time, any reason'' repricing, multiple over-limit fees, and youth marketing.

These shortcomings underscore the need for the legislation Senator Levin and I will be talking about this evening.

I want to make it very clear--and I know my colleague feels the same way--that we are not opposed to credit cards. They are very valuable, very useful tools for consumers. So this bill is not designed in any way to deprive consumers of the use of credit cards. That is not the issue. When provided on fair terms, and used wisely and responsibly, credit cards are a valuable financial tool for millions of our fellow citizens. They can help an individual to build his or her credit history and to better pursue his or her financial goal.

But like many credit products, credit cards pose the potential to harm consumers as well as help consumers. Card companies have been far too apt to exploit the needs of consumers who are increasingly becoming ``hooked on plastic.'' That potential to harm consumers has grown in recent years as credit card usage has risen. Let me share some numbers with you to give you some idea of what has happened in this explosion of credit card usage by Americans.

Today, nearly 75 percent of American households have a credit card or a debit card, and 700 million credit cards are used to purchase in excess of $2.4 trillion in goods and services from over 7 million locations in the United States annually. In 1970, only about 16 percent of U.S. households used credit cards, and fewer than a million businesses accepted them.

As Americans have become increasingly reliant on credit cards, credit card companies have become more and more innovative in finding ways to access their customers. Over $17 billion in credit card penalty fees have been charged to the American people--new fees--in the last 2 years, since 2006. That is a tenfold increase from what was charged 10 years ago. That is $17 billion in new penalties and fees since 2006. Credit card companies are turning to innovative ways to profit-- including at the gasoline pump. They are laying on fees to gas station owners for each credit card transaction made at the pump. At the very time they are watching the price of gasoline skyrocket, the credit card companies are gouging the people struggling to meet those fees. Again, card companies are laying on fees to gas station owners for each credit card transaction made at the pump--a charge that those owners immediately pass on to customers, increasing the cost of gas for drivers. In some places, these fees can add an average of 3 percent for each gasoline transaction.

The combination of the growing needs for revolving debt and hidden fees charged by card companies is contributing to the avalanche of debt under which American consumers increasingly find themselves buried. Listen to this number, because this is the one that is stunning. To give you an idea of what has happened to the average family in this country with credit card balances, today the average household that carries a credit card balance owes close to $10,000 in revolving debt on their credit cards. The average family has a balance of $10,000 in revolving debt on their credit cards.

That is a millstone around the neck of the average American and their families--families that are already struggling to make ends meet and are under pressure from rising gas prices, food prices, skyrocketing health care costs, and a mortgage crisis that has robbed many families of their home equity or, worse yet, their homes.

That is why we are introducing the Credit CARD Act. This bill will help reform credit card practices that drag so many American families further and further into debt. It strengthens regulation and oversight of the credit card industry and prohibits the unfair and deceptive practices that in far too many instances work to harm, not help, a consumer's efforts to move up the economic ladder.

Specifically, the CARD Act would prohibit the worst of the industry's practices, including imposition of excessive fees; retroactive rate increases; universal default; ``any time, any reason'' changes to credit card agreements; and unfair payment allocation.

The bill also, importantly, contains a number of provisions aimed at protecting young consumers.

This legislation builds on legislation I have introduced in previous Congresses. It also incorporates several key concepts included in the legislative proposals put forth by some of my colleagues, notably my colleague from Michigan, Senator Levin, and Senators Menendez, McCaskill, and Obama. Each is an important cosponsor of this legislation, as are Senators Reed of Rhode Island, Akaka, Tester, Clinton, Kerry, Sanders, Whitehouse, and Casey.

This bill also has the support of a wide array of consumer advocates and labor organizations, including the Consumer Federation of America, Consumers Union, National Consumer Law Center, the National Council of La Raza, Service Employees International Union, the Center for Responsible Lending, U.S. PRIG, Consumer Action, Demos, Connecticut PRIG, and the National Association of Consumer Advocates.

As policymakers, we should expect consumers will act responsibly when it comes to using credit cards, and that should be an important point to make. But we also expect no less when it comes to companies that issue these cards. They need to act responsibly, and they are not, in my view. The Credit CARD Act will help strike the

correct balance of responsibility between credit card users and the card issuers. And by striking that balance, it will help provide American consumers with a fair chance to secure economic security for them and their families.

I thank Senator Levin and others--especially Senator Levin who already held hearings on this issue. We have talked about this at length over the years. We tried in other Congresses with very modest proposals to deal with some of these problems. We have always lost those battles. But I think the American consumers, regardless of their income, regardless of their social or economic status, feel very angry about what is happening to them. As a result, I think there is a growing opportunity for us to get something done on this issue.

So while our focus today has been on foreclosure issues, the credit card problem in this country that so many Americans are facing is one that I think is ripe for congressional action. Our hope and intention is to bring a bill to the floor of this Chamber before we adjourn for the year to give our colleagues a chance to express themselves on this issue.

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

I thank my colleague.

Mr. President, I would like to talk about the strong concerns I am hearing back home about gas and diesel prices and about a bill I am introducing today in response to those concerns.

We all know that over the past 12 months, the price of a gallon of gas has risen over a dollar, from around $3 last year to over $4 today. Diesel has increased from $2.91 a year ago to $4.72 per gallon today.

At the listening sessions I hold in every county of my State each year, Wisconsinites are, of course, talking about how those soaring oil prices are hurting their pocketbooks. And it is not just at the pump. They are feeling the pain also at the grocery store, on the farm, and at the ticket counter. Those high fuel prices are having a rippling effect throughout our entire economy. Wisconsinites, like Americans all around the country, are feeling squeezed. With no relief in sight, the anxiety and tension keep building. Americans are emotionally, physically, and financially drained. My colleague from Minnesota, Senator Klobuchar, had it right when she stated that Americans are running on empty.

Here is what I am hearing from Wisconsinites. One constituent told me:

I have done everything I can to use as little gas as

possible, even before prices got so high. My two-parent

family (with two children) has only one car. I ride my

bicycle or walk to work and use the car as little as

possible. However, the rising cost of fuel is causing higher

prices for food and other necessities which are becoming more

difficult for my family and others.

From another parent:

I have an adorable child I am trying to raise on a budget

that no longer reaches from paycheck to paycheck. I currently

work an hour away from where I live as the jobs are not

available in [my] area. Between the rising price of gas,

electric/heat and food, my husband and I can barely pay our

mortgage.

I have heard from many others who are struggling as they care for elderly parents. One lady has a mother in a nursing home, and she used to visit her three times a week. However, with the nursing home 20 miles away and high fuel prices, now she can only afford to visit her mother once a week. That, to me, is a very poignant example--one of so many examples--of the real human impact these gas prices have.

Even those who have managed their money well and have saved are struggling. One constituent commented that he had planned to put extra money toward retirement and pay down debt. With the high fuel prices, he does not have any extra money and is worried that he will end up on government assistance at the age of 57.

There are more letters and more e-mails and more phone calls. The high cost of driving affects all kinds of people and livelihoods. It affects kids whose parents cannot drive them across town to a friend's house or to soccer practice because they have to conserve gas to get to work. It affects young students and senior citizens who are on fixed incomes. Small businesses are finding they need to increase prices to cover increased transportation costs. Farmers are, of course, feeling the pinch in one way or another, whether it be fertilizer or fuel or transportation or feed for livestock and dairy farmers.

All over the country, people have resorted to alternative forms of transportation in an effort to escape these costs. There is a range of positive proposals to improve systems in Wisconsin from the Kenosha- Racine-Milwaukee commuter rail, extending Amtrak to Madison, or just adding buses or routes. While I strongly support long-term plans to invest in mass transit, I also recognize that at least for the time being in many parts of Wisconsin and in this country, it is unrealistic for many to rely on mass transportation. Commuting to work, be it across a large city or between two towns, is a gas- and dollar-guzzling task that many people cannot avoid or, increasingly, afford.

For the large number of Americans living in predominantly rural areas, this is especially challenging due to the typically longer trips and fewer transportation options. So Wisconsinites want to know: When is the Federal Government going to provide some relief?

With my support, Congress has made some progress. Last December we enacted energy legislation, H.R. 6, that

raises corporate average fuel economy standards for vehicles while protecting American jobs. It also increases the requirement for alternative fuels from 8.5 billion gallons in 2008 to 36 billion gallons in 2022. I also recently cosponsored an amendment to make the Federal Government stop filling the Strategic Petroleum Reserve, which is 97 percent full. Fortunately, Congress passed this legislation, and the administration finally agreed to stop taking oil off the market to store it underground. The bill, H.R. 6022, was signed into law in May.

We also made some progress in preventing market manipulation. I cosponsored the Oil and Gas Traders Oversight Act, S. 577, which would help ensure that the previously unregulated trading commodities are subject to greater Federal oversight by requiring the reporting of trades, and then a similar provision was included in the final version of the farm bill which was recently enacted.

These are positive steps, but much more needs to be done. So today I am introducing legislation that seeks to answer a question more and more Americans are asking, which is: Why aren't the oil companies developing 66 million acres of land that they are already leasing from the U.S. Government? Those same companies, and some of my colleagues, say we need to open more Federal lands to drilling. Well, I guess I would like to know then why the oil companies are not producing on most of the Federal lands they already have under lease.

At a recent Senate Judiciary Committee hearing, I actually had the chance to ask the top five oil executives in the country just that question, and it was incredible. They couldn't come up with any good explanation at all. In fact, one of the executives told me they have the manpower and the infrastructure to put all of their existing leases of Federal lands into oil production.

I find this troubling. No one is talking about pulling oil out of a hat, but with 75 percent of currently leased Federal lands and waters not producing oil and gas, Congress needs to insist on some accountability on this point. This is why today I am introducing the Responsible Federal Oil and Gas Lease Act. This bill says if oil and gas companies want to lease additional lands, they must either be producing or diligently developing their existing Federal leases, or they have to give up those leases. This way, if a company makes the business decision to terminate or not pursue exploration, then the lease will be made available to other companies who might actually drill or figure out a way to get some oil out of this land. This is a responsible way to increase production and keep the private sector accountable for production.

So with over 100 billion barrels of oil under Federal lands and waters that are being leased or are available for leasing, Congress must properly encourage their development, and oil companies should use the land they already have before coming to Congress, hat in hand, asking for more land.

This bill is similar to legislation introduced by Representative Rahall which the House considered last month. I will work to make sure the Senate follows their lead. I am also cosponsoring a bill introduced by my colleague who is on the Senate floor, my good friend Senator Dodd, that encourages oil companies to utilize the land they have been granted by making them pay fees on land under lease but not in production.

There are a number of other steps Congress should take, including addressing the role of excess speculation in the energy futures market and clamping down on OPEC's price fixing. I am a cosponsor of S. 879, which would authorize the Justice Department and the FTC to sue foreign countries under U.S. antitrust law for limiting the supply or fixing the price of oil. Also, of course, we need to aggressively pursue alternative fuels, efficiency, and renewable energy because the facts show that even if we drilled every corner of the country, and offshore too, that wouldn't solve our energy problems.

In the long term, the Government's Energy Information Administration reports that opening more Outer Continental Shelf regions to drilling ``would not have a significant impact on domestic crude and natural oil gas production or prices before 2030,'' nor will it significantly affect prices after 2030, the agency reports, ``because oil prices are determined on the international market.'' In short, the facts are telling us that we simply cannot just drill our way out of this, and more drilling does not necessarily mean lower prices at the pump.

Unfortunately, a minority of Senators have repeatedly blocked efforts to expand renewables and address price gouging and excess energy market speculation. I sincerely hope we can get beyond this partisan bickering. My constituents don't want finger-pointing or name calling; they want some relief, and they deserve it. They also deserve to know that we are pressing forward on plans that embrace a new energy future.

Thirty years ago, our Nation was rattled by our reliance on oil. If I am still here in 30 years, for the sake of my constituents, I hope we will have succeeded at diversifying our energy uses and oil does not still have a stranglehold over our citizens and the economy.

Mr. President, today I am introducing legislation, the Commodity Speculation Reform Act of 2008, with my colleague Senator Collins, the ranking minority member of our Homeland Security and Governmental Affairs Committee. The legislation is designed to wring out of the commodity markets the excessive speculation--and I stress the word ``excessive''--that we believe has helped lead to the sudden and soaring spikes in the prices Americans pay for food and energy.

We are going to do this by returning the commodity markets to what they

were meant to be--a place where producers and consumers of specific commodities can enter into futures contracts that help hedge the risks of price fluctuations common to their industries.

These commodity market traders--farmers, airlines, refineries-- actually intend to produce or take delivery of specific commodities as part of doing business.

On the other hand, financial speculators, including pension funds, university endowments, and other large institutional investors, have poured billions and billions of dollars into these markets over the past 5 years betting on rising prices--and let's make it clear, that these are bets--without ever intending to actually own a barrel of oil or a bushel of corn. They are looking for nothing more than paper profits.

In a series of hearings held by our Homeland Security and Governmental Affairs Committee, we heard testimony that this kind of excessive speculation in the commodity markets may have added as much as $40 to $60 to the cost of a barrel of oil.

Some say these figures are too high. But I would say that even a single dollar increase due to excessive speculation is a dollar too much because of the inflationary effect it can have not only on the U.S. economy, but around the world.

Consider this: according to the Air Transport Association, every $1 increase in the price of a barrel of crude oil adds $470 million a year in jet fuel costs--almost half a billion dollars--to the U.S. airline industry. These costs are passed on to consumers in the forms of higher ticket prices and other surcharges that are now keeping potential passengers on the ground and has the industry reeling.

These increases directly hit consumers in the global economy through higher gas and food prices. Moreover, the negative effects of commodity price inflation ripple through the economy as the high cost of energy and raw materials weakens our manufacturing base, and the high cost associated with transporting goods impedes international trade.

The profits made by the speculators do not produce one new barrel of oil, put one new acre of farmland into production, put one new mine into operation, or add one new gallon of refinery capacity.

If speculators really want to invest in commodities, they can buy stock in an energy company or an agricultural firm. They can purchase the royalty rights to land. Any of these options would benefit from market trends related to commodity prices and would also bring needed investment into means of production that would increase supplies and eventually contribute to lower commodity prices.

Unfortunately, the Commodity Futures Trading Commission has ignored the urgent task of providing our front line defense against rampant and unmanaged speculation. To this day, the Commission has yet to recognize that speculation affects commodity prices.

Instead, the Commission has delegated much of its regulatory authority to the for-profit exchanges. Moreover, in contradiction with Congress's original legislative intent, the Commission views its mission as confined to a single purpose--preventing market manipulation. On the contrary, Congress fully intended the Commission to regulate market manipulation AND excessive speculation.

Our bill effectively closes the door to excessive speculation, but in a rational and reasonable way by, in effect, perfecting current law. First, it requires the CFTC to consider the overall effect of speculation when it sets the position limits that restrict the amount that any one investor can invest in a commodity. This is a critical and necessary change--if the Commission does not acknowledge and embrace its obligation to prevent excessive speculation, all of our efforts will be in vain.

Second, it extends the existing rules that apply to the regulated exchanges to currently unregulated over-the-counter and foreign markets. Over the last 10 years, over-the-counter trading in commodities has exploded. The over-the-counter investment vehicles are simply economic substitutes for futures contracts. There is no rational reason that they should not be subject to the same laws and regulations that apply to futures contracts.

This change also eliminates the ``swaps loophole'' that allows pension funds and other large investors to invest in index funds that circumvent the position limits. From 2003 to 2008, investment in commodity index funds has swelled from $13 billion to $260 billion and has, in effect, chased up prices and taken control of the commodity markets away from the industries and producers that must use them as a means of doing business.

Other important provisions would direct that the speculative position limits must be set by the CFTC, not the futures exchanges, and repeal the CFTC's authority to substitute meaningless reporting requirements for actual speculative position limits.

In the course of our Committee hearings and in later deliberations we looked at a number of legislative options, including banning certain large investors, such as pension funds, from the commodity markets altogether.

But we feel the approach we've come up with in this bill is a reasonable, commonsense approach that will help bring order back to the commodity markets while preserving the liquidity it needs to function properly.

Some have suggested that Congressional action will simply push investors to foreign markets. Our bill actually discourages flight from the major exchanges because it puts all trading platforms under the same regulatory umbrella. Speculators are subject to the same position limits regardless of whether they invest in New York, London, Dubai, or over-the-counter.

Is excessive speculation the sole cause of rising prices? Of course not. Global economic growth, particularly in emerging nations like China and India, has put tremendous upward pressure on the prices of energy, food and raw materials.

But there is little doubt--even among most skeptics of our legislation--that excessive speculation has had an effect on rising prices. Our bill will end that and help create a more orderly market for the industries and producers who must deal in commodities as a matter of business.

The father of modern capitalism, Adam Smith, overall wanted to limit the role of government in free markets. In fact, in ``The Wealth of Nations'' Smith said speculators served many useful functions in a free market and many of his observations are still true today.

But Smith knew there had to be limits, writing: ``those exertions of the natural liberty of a few individuals, which may endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments.''

With this bill we seek that kind of restraint so that the few don't gain exorbitant profits at the expense of the average American reeling under spiraling prices for food and fuel.

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

Mr. President, I come before the Senate today to discuss a critically important issue to the livestock industry in South Dakota and across the United States, that being the United States Department of Agriculture's, USDA, proposal to regionalize Argentina for Foot-and- Mouth Disease, or FMD. FMD is a highly contagious and airborne disease affecting ruminants and swine. The disease is so destructive that FMD is considered to be the most economically devastating of all livestock diseases, according to the American Veterinary Medical Association. An outbreak in Great Britain in 2001, for example, cost the economy nearly $20 billion and led to the slaughter of over 6 million animals. It is with concern for the health and viability of our domestic cattle, sheep, and swine farmers and ranchers that Senator Enzi joins me today in introducing legislation to stop this fundamentally flawed proposal.

This legislation enjoys significant organizational support from our livestock sector, including the American Sheep Industry Association, the South Dakota Cattlemen's Association, R-CALF, the South Dakota Stockgrowers Association, the U.S. Cattlemen's Association, the National Farmers Union, the Western Organization of Resource Councils, and Dakota Rural Action. As a highly credible scientific and veterinary entity, a poll was take within the National Assembly of State Animal Health Officials, NASAHO, and an overwhelming majority of respondents are opposed to regionalization of Argentina for FMB. Our South Dakota State Veterinarian and the President of NASAHO, Dr, Sam Holland, has been invaluable during this process and I thank him for his guidance and extensive expertise on this issue. The majority of veterinarians within NASAHO oppose regionalizing for FMD for a variety of reasons, and Dr. Holland relayed the following causes of concern from State veterinarians for USDA's proposed rule: Economic benefits do not justify the tremendous risk. Inability to effectively monitor risk. Resources, biosecurity, and experience in monitoring freedom are inadequate. Regionalization for one of the world's most highly contagious virus disease, FMD, is much more complicated than regionalization for tuberculosis, brucellosis and many other diseases. FMD virus is not only arguably the most contagious virus known for animals, but also is particularly resilient in the environment and may persist in fomites and be transmitted by such through aerosol or contact. Argentina has not experienced an extended timeframe of several years of FMD freedom.

This bill would prohibit the importation of ruminants and swine and fresh or frozen ruminant and pork products from any region of Argentina until the United States Department of Agriculture can certify to Congress that Argentina is free of Foot and Mouth Disease without vaccination. While regionalization may be a viable option for other livestock diseases, the extremely contagious nature and significant economic impact of FMD dictates that we must treat countries as a whole, and that a country must demonstrate its ability to remain free of FMD. While the USDA is moving to set a precedent with this rule regarding its protocol for FMD, this bill is a common sense response that USDA's proposal is simply not good policy for American ranchers and farmers and for our domestic livestock herds.

My friend from Wyoming raises an excellent question and I'm pleased to answer it. It is not our intention or the effect of this bill to disrupt the status quo, and our legislation would leave the current state of trade intact. Our Code of Federal Regulations allows for the importation of certain dried, cured or cooked product from countries with a known presence of FMD. This bill will only prohibit product that poses a risk for disease transmission, including fresh, chilled or frozen, product or live animals.

The Johnson-Enzi bill mandates that Argentina's FMD-free status must be achieved without vaccination. This is the acceptable standard for trade and also ensures that the disease is truly eradicated from the herd, and not suppressed or hidden. While this one region in Argentina is thought to be FMD free, this one region within Argentina and Argentina as a whole is surrounded by the presence of FMD, while the United States has been free of FMD since 1929 and is free of FMD without vaccination. Additionally, the United States shares borders with our FMD-free neighbors, who are certified as free without vaccination.

As discussed by NASAHO, Argentina has, quite simply, failed to remain free of FMD for any length of time, which is a basic component to proving the continuity and adequacy of Argentina's infrastructure. As recently as 2001, Argentina experienced an FMD outbreak that it failed to report for months. This raises serious questions about Argentina's approach to communication about this disease in the future, and I don't feel that these questions have been adequately answered at this time.

I thank Senator Enzi and the organizations who have dedicated their time and support for this measure, and I will continue to work with my colleague from Wyoming in the best interest of our American farmers and ranchers.