A joint resolution proposing an amendment to the Constitution of the United States relative to the election of Senators.

Mr. President, our founding fathers did a remarkable job in drafting the United States Constitution and the Bill of Rights. Their work was so superb that in the 217 years since the ratification of the Bill of Rights, the Constitution has only been amended 17 times. But every so often, a situation arises that so clearly exposes a flaw in our constitutional structure that it requires a constitutional remedy.

Over the past several months, our country has witnessed multiple controversies surrounding appointments to vacant Senate seats by governors. The vacancies in Illinois and New York have made for riveting political theater, but lost in the seemingly endless string of press conferences and surprise revelations is the basic fact that the citizens of these states have had no say in who should represent them in the Senate. The same is true of the recent selections in Delaware and Colorado. That is why I will introduce today a constitutional amendment to end gubernatorial appointments to the U.S. Senate and require special elections to fill these vacancies, as is currently required for House vacancies. I am pleased that the recently elected Senator from Alaska, Senator Begich, and the distinguished senior Senator from Arizona, Senator McCain, have agreed to be original cosponsors of the amendment.

I do not make this proposal lightly. In fact, I have opposed dozens of constitutional amendments during my time in the Senate, particularly those that would have interfered with the Bill of Rights. The Constitution should not be treated like a rough draft. Constitutional amendments should be considered only when a statutory remedy to a problem is not available, and when the impact of the issue at hand on the structure of our government, the safety, welfare, or freedoms of our citizens, or the survival of our democratic republic is so significant that an amendment is warranted. I believe this is such a case.

In 1913, the citizens of this country, acting through their elected state legislatures, ratified the 17th Amendment to the Constitution. Our esteemed colleague Senator Byrd, in Chapter 21 of his remarkable history of the United

States Senate, lays out in fascinating detail the lengthy struggle to obtain for the citizens of this country the right to elect their Senators. The original Constitution, as we all know, gave state legislatures the right to choose the Senators for their states. While the first proposal to amend the Constitution to require the direct election of Senators was introduced in the House in 1826, the effort only really picked up steam after the Civil War.

As Senator Byrd recounts: ``In the post-Civil War period, state legislatures became increasingly subject to intimidation and bribery in the selection of Senators.'' Nine cases of bribery came before the Senate between 1866 and 1906. And between 1891 and 1905, the state legislatures from 20 different states deadlocked 45 times when trying to pick a Senator. At one point, a Senate seat from Delaware remained vacant for 4 years because of deadlocks.

The political theater occasioned by these Senate appointment fights dwarfs even the extraordinary events we have witnessed in recent months. Senator Byrd quotes from an account by the historian George Haynes about efforts to select a Senator in Missouri in 1905:

Lest the hour of adjournment should come before an election

was secured, an attempt was made to stop the clock upon the

wall of the assembly chamber. Democrats tried to prevent its

being tempered with; and when certain Republicans brought

forward a ladder, it was seized and thrown out of the window.

A fist-fight followed, in which many were involved. Desks

were torn from the floor and a fusillade of books began. The

glass of the clock-front was broken, but the pendulum still

persisted in swinging until, in the midst of a yelling mob,

one member began throwing ink bottles at the clock, and

finally succeeded in breaking the pendulum. On a motion to

adjourn, arose the wildest disorder. The presiding officers

of both houses mounted the speaker's desk, and, by shouting

and waving their arms, tried to quiet the mob. Finally, they

succeeded in securing some semblance of order.

Popular sentiment for direct election of Senators slowly grew in response to events like these. Some states held popular referenda on who should be Senator and attempted to require their legislatures to select the winners of those votes. More and more Senators were chosen in such processes, leading to more support in the Senate for a constitutional amendment. Congress finally acted in 1911 and 1912. There was high drama in the Senate as Vice President James Schoolcraft Sherman broke a tie on a crucial substitute amendment offered by Senator Joseph Bristow of Kansas during Senate consideration of the joint resolution. A few days of parliamentary wrangling ensued over whether the Vice President's tie breaking role in the Senate extends to such situations, and that precedent still stands today. In May 1912, an impasse of almost a year was broken and the House receded to the Senate version of the amendment, allowing it to be sent to the States for ratification. Less than a year later, on April 8, 1913, Connecticut became the 36th State to ratify the amendment, and it became the 17th Amendment to the Constitution.

I recount this summary of the history of the 17th Amendment, and again, I commend to my colleagues Senator Byrd's chapter on the subject, first to make the point that even though it seems obvious to us that the Senate should be elected by the people, the struggle for that right was not easy or fast. But the cause was just and in the end the call for direct elections was too strong to be ignored. I believe the same result will occur here. It may take time, but in the end, I am confident that the principle that people must elect their representatives will prevail.

Second, this history shows that the public's disgust with the corruption, bribery, and political chicanery that resulted from having Senators chosen by state legislatures was a big motivation for passing the amendment. Gubernatorial appointments pose the same dangers, and demand the same solution--direct elections.

Finally, the history indicates that the proviso in the 17th amendment permitting gubernatorial appointments to fill temporary vacancies was not the subject of extensive debate in the Congress. The proviso originated in the substitute amendment offered by Senator Bristow. The Bristow substitute was designed, its sponsor explained, to ``make[] the least possible change in the Constitution to accomplish the purposes desired; that is the election of Senators by popular vote.'' Most significantly, it deleted a provision in the resolution as originally introduced that year that would have amended Article I, section 4 of the Constitution to remove Congress's supervisory authority to make or alter regulations concerning the time and manner of Senate elections.

The proviso, explained Senator Bristow, ``is practically the same provision which now exists in the case of such a vacancy. The governor of the State may appoint a Senator until the legislature elects.'' Although significant debate over other provisions in the Bristow amendment is found in the Record before the climactic tie vote, which was broken by the Vice President, there seems to have been no further discussion of the proviso.

Thus, it appears that the proviso was simply derived from the original constitutional provision in Article I, Section 3, which gave the power to choose Senators to the state legislatures, but allowed governors to appoint temporary replacements when the legislatures were not in session. It was unremarkable at the time of the 17th Amendment to allow governors to have the same temporary replacement power once direct elections were required. That would explain the apparent lack of debate on the question. The long and contentious debate over the amendment was dominated by much more basic issues, such as whether the people should elect their Senators at all, and whether Congress should also amend the ``time, place, or manner clause'' of Article I, section 4.

Nearly 100 years later, that proviso has allowed a total of 184 Senators to be appointed by governors, and we have a situation in today's Senate where the people of four states, comprising over 12 percent of the entire population of the country, will be represented for the next two years by someone they did not elect. It is very hard to imagine that the Congress that passed the 17th Amendment and the states that ratified it would have been comfortable with such an outcome. Indeed, some argue that the intent of the 17th Amendment was that temporary appointments to fill early vacancies should last only until a special election can be scheduled, rather than for an entire two-year Congress until the next general election. A number of states have adopted that approach, but many have not.

That is not to say that the people appointed to Senate seats are not capable of serving, or will not do so honorably. I have no reason to question the fitness for office of any of the most recent appointees, and I look forward to working with them. But those who want to be a U.S. Senator should have to make their case to the people whom they want to represent, not just the occupant of the governor's mansion. And the voters should choose them in the time-honored way that they choose the rest of the Congress of the United States.

I want to make it clear that this proposal is not simply a response to these latest cases that have been in the news over the past few months. These cases have simply confirmed my longstanding view that Senate appointments by state governors are an unfortunate relic of the pre-17th Amendment era, when state legislatures elected U.S. Senators. Direct election of Senators was championed by the great progressive Bob La Follette, who served as Wisconsin's Governor and a U.S. Senator. Indeed, my State of Wisconsin is now one of only 4 States, Oregon, Massachusetts, and Alaska are the others, that clearly require a special election to fill a Senate vacancy in all circumstances.

The vast majority of states still rely on the appointment system, while retaining the right to require direct elections, as the Massachusetts legislature and the voters of Alaska have done in recent years. But changing this system state by state would be a long and difficult process, even more difficult than the ratification of a constitutional amendment, particularly since Governors have the power to veto state statutes that would take this power away from them. Furthermore, the burden should not be on Americans to pass legislation in their states protecting their fundamental voting rights--the right to elect one's representatives is a bedrock principle and

should be reaffirmed in the nation's ruling charter.

We need to finish the job started by La Follette and other reformers nearly a century ago. Nobody can represent the people in the House of Representatives without the approval of the voters. The same should be true for the Senate.

In the several days since I announced my intention to introduce this amendment, I have heard a number of arguments raised against it. I would like to briefly address them. First of all, some suggest this amendment is an overreaction to the headlines of the day. But there are several precedents for amending the provisions of the Constitution that relate to the structure of government based on specific events. The 22nd Amendment, limiting the presidency to two terms, passed in 1951 in response to President Franklin D. Roosevelt's four-term presidency. The 25th Amendment, revising presidential succession, was passed in 1967 in response to confusion that occurred after the assassination of President Kennedy. If events demonstrate that there is a problem with our government structure, sooner or later we must take steps to address those problems. There is no better time to do that than when the effects of the structural flaw are most evident and most prominently part of the public debate.

Another objection I have heard to this proposal is the potential financial burden on the states that must pay for special elections. As someone with a reputation for fiscal discipline, I always consider a proposal's impact on the taxpayer. But the cost to our democracy of continuing the anachronism of gubernatorial Senate appointments is far greater than the cost of infrequent special elections. And weighing the costs associated with the most basic tenet of our democracy--the election of the government by the governed--sets us on a dangerous path. Besides, the Constitution already requires special elections when a House seat becomes vacant, a far more frequent occurrence since there are so many more Representatives than Senators. I find the cost argument wholly unconvincing.

Another argument I have heard is that special elections garner very low turnouts, or favor wealthy or well known candidates. They are not particularly democratic, the argument goes. And that may very well be true. But they are a whole lot more democratic than the election held inside the mind of one decisionmaker--the governor. Special elections may not be ideal, but they are elections, and every voter has the opportunity to participate. As Winston Churchill said, ``It has been said that democracy is the worst form of government except all the others that have been tried.''

I have also heard the argument that the candidates for the special election will be selected by party bosses because there won't be time for a primary. That is simply not true. Under this amendment, each state can decide how to set up its special elections. My home State of Wisconsin provides for a special election within about 10 weeks of the vacancy, with a primary one month earlier. It's a compressed schedule to be sure, because the state doesn't want to be without representation for too long. But it can be done. I would hope that most states would want to hold primaries, but the point of this amendment is to make clear that only Senators who have been elected by the people can serve, not to micromanage how the states want to implement that requirement.

I believe the core issue here is whether we are going to have a government that is as representative of and responsive to the people as possible. The time to require special elections to fill Senate vacancies has come. Congress should act quickly on this proposal, and send it to the states for ratification.

Mr. President, our founding fathers did a remarkable job in drafting the United States Constitution and the Bill of Rights. Their work was so superb that in the 217 years since the ratification of the Bill of Rights, the Constitution has only been amended 17 times. But every so often, a situation arises that so clearly exposes a flaw in our constitutional structure that it requires a constitutional remedy.

Over the past several months, our country has witnessed multiple controversies surrounding appointments to vacant Senate seats by governors. The vacancies in Illinois and New York have made for riveting political theater, but lost in the seemingly endless string of press conferences and surprise revelations is the basic fact that the citizens of these states have had no say in who should represent them in the Senate. The same is true of the recent selections in Delaware and Colorado. That is why I will introduce today a constitutional amendment to end gubernatorial appointments to the U.S. Senate and require special elections to fill these vacancies, as is currently required for House vacancies. I am pleased that the recently elected Senator from Alaska, Senator Begich, and the distinguished senior Senator from Arizona, Senator McCain, have agreed to be original cosponsors of the amendment.

I do not make this proposal lightly. In fact, I have opposed dozens of constitutional amendments during my time in the Senate, particularly those that would have interfered with the Bill of Rights. The Constitution should not be treated like a rough draft. Constitutional amendments should be considered only when a statutory remedy to a problem is not available, and when the impact of the issue at hand on the structure of our government, the safety, welfare, or freedoms of our citizens, or the survival of our democratic republic is so significant that an amendment is warranted. I believe this is such a case.

In 1913, the citizens of this country, acting through their elected state legislatures, ratified the 17th Amendment to the Constitution. Our esteemed colleague Senator Byrd, in Chapter 21 of his remarkable history of the United

States Senate, lays out in fascinating detail the lengthy struggle to obtain for the citizens of this country the right to elect their Senators. The original Constitution, as we all know, gave state legislatures the right to choose the Senators for their states. While the first proposal to amend the Constitution to require the direct election of Senators was introduced in the House in 1826, the effort only really picked up steam after the Civil War.

As Senator Byrd recounts: ``In the post-Civil War period, state legislatures became increasingly subject to intimidation and bribery in the selection of Senators.'' Nine cases of bribery came before the Senate between 1866 and 1906. And between 1891 and 1905, the state legislatures from 20 different states deadlocked 45 times when trying to pick a Senator. At one point, a Senate seat from Delaware remained vacant for 4 years because of deadlocks.

The political theater occasioned by these Senate appointment fights dwarfs even the extraordinary events we have witnessed in recent months. Senator Byrd quotes from an account by the historian George Haynes about efforts to select a Senator in Missouri in 1905:

Lest the hour of adjournment should come before an election

was secured, an attempt was made to stop the clock upon the

wall of the assembly chamber. Democrats tried to prevent its

being tempered with; and when certain Republicans brought

forward a ladder, it was seized and thrown out of the window.

A fist-fight followed, in which many were involved. Desks

were torn from the floor and a fusillade of books began. The

glass of the clock-front was broken, but the pendulum still

persisted in swinging until, in the midst of a yelling mob,

one member began throwing ink bottles at the clock, and

finally succeeded in breaking the pendulum. On a motion to

adjourn, arose the wildest disorder. The presiding officers

of both houses mounted the speaker's desk, and, by shouting

and waving their arms, tried to quiet the mob. Finally, they

succeeded in securing some semblance of order.

Popular sentiment for direct election of Senators slowly grew in response to events like these. Some states held popular referenda on who should be Senator and attempted to require their legislatures to select the winners of those votes. More and more Senators were chosen in such processes, leading to more support in the Senate for a constitutional amendment. Congress finally acted in 1911 and 1912. There was high drama in the Senate as Vice President James Schoolcraft Sherman broke a tie on a crucial substitute amendment offered by Senator Joseph Bristow of Kansas during Senate consideration of the joint resolution. A few days of parliamentary wrangling ensued over whether the Vice President's tie breaking role in the Senate extends to such situations, and that precedent still stands today. In May 1912, an impasse of almost a year was broken and the House receded to the Senate version of the amendment, allowing it to be sent to the States for ratification. Less than a year later, on April 8, 1913, Connecticut became the 36th State to ratify the amendment, and it became the 17th Amendment to the Constitution.

I recount this summary of the history of the 17th Amendment, and again, I commend to my colleagues Senator Byrd's chapter on the subject, first to make the point that even though it seems obvious to us that the Senate should be elected by the people, the struggle for that right was not easy or fast. But the cause was just and in the end the call for direct elections was too strong to be ignored. I believe the same result will occur here. It may take time, but in the end, I am confident that the principle that people must elect their representatives will prevail.

Second, this history shows that the public's disgust with the corruption, bribery, and political chicanery that resulted from having Senators chosen by state legislatures was a big motivation for passing the amendment. Gubernatorial appointments pose the same dangers, and demand the same solution--direct elections.

Finally, the history indicates that the proviso in the 17th amendment permitting gubernatorial appointments to fill temporary vacancies was not the subject of extensive debate in the Congress. The proviso originated in the substitute amendment offered by Senator Bristow. The Bristow substitute was designed, its sponsor explained, to ``make[] the least possible change in the Constitution to accomplish the purposes desired; that is the election of Senators by popular vote.'' Most significantly, it deleted a provision in the resolution as originally introduced that year that would have amended Article I, section 4 of the Constitution to remove Congress's supervisory authority to make or alter regulations concerning the time and manner of Senate elections.

The proviso, explained Senator Bristow, ``is practically the same provision which now exists in the case of such a vacancy. The governor of the State may appoint a Senator until the legislature elects.'' Although significant debate over other provisions in the Bristow amendment is found in the Record before the climactic tie vote, which was broken by the Vice President, there seems to have been no further discussion of the proviso.

Thus, it appears that the proviso was simply derived from the original constitutional provision in Article I, Section 3, which gave the power to choose Senators to the state legislatures, but allowed governors to appoint temporary replacements when the legislatures were not in session. It was unremarkable at the time of the 17th Amendment to allow governors to have the same temporary replacement power once direct elections were required. That would explain the apparent lack of debate on the question. The long and contentious debate over the amendment was dominated by much more basic issues, such as whether the people should elect their Senators at all, and whether Congress should also amend the ``time, place, or manner clause'' of Article I, section 4.

Nearly 100 years later, that proviso has allowed a total of 184 Senators to be appointed by governors, and we have a situation in today's Senate where the people of four states, comprising over 12 percent of the entire population of the country, will be represented for the next two years by someone they did not elect. It is very hard to imagine that the Congress that passed the 17th Amendment and the states that ratified it would have been comfortable with such an outcome. Indeed, some argue that the intent of the 17th Amendment was that temporary appointments to fill early vacancies should last only until a special election can be scheduled, rather than for an entire two-year Congress until the next general election. A number of states have adopted that approach, but many have not.

That is not to say that the people appointed to Senate seats are not capable of serving, or will not do so honorably. I have no reason to question the fitness for office of any of the most recent appointees, and I look forward to working with them. But those who want to be a U.S. Senator should have to make their case to the people whom they want to represent, not just the occupant of the governor's mansion. And the voters should choose them in the time-honored way that they choose the rest of the Congress of the United States.

I want to make it clear that this proposal is not simply a response to these latest cases that have been in the news over the past few months. These cases have simply confirmed my longstanding view that Senate appointments by state governors are an unfortunate relic of the pre-17th Amendment era, when state legislatures elected U.S. Senators. Direct election of Senators was championed by the great progressive Bob La Follette, who served as Wisconsin's Governor and a U.S. Senator. Indeed, my State of Wisconsin is now one of only 4 States, Oregon, Massachusetts, and Alaska are the others, that clearly require a special election to fill a Senate vacancy in all circumstances.

The vast majority of states still rely on the appointment system, while retaining the right to require direct elections, as the Massachusetts legislature and the voters of Alaska have done in recent years. But changing this system state by state would be a long and difficult process, even more difficult than the ratification of a constitutional amendment, particularly since Governors have the power to veto state statutes that would take this power away from them. Furthermore, the burden should not be on Americans to pass legislation in their states protecting their fundamental voting rights--the right to elect one's representatives is a bedrock principle and

should be reaffirmed in the nation's ruling charter.

We need to finish the job started by La Follette and other reformers nearly a century ago. Nobody can represent the people in the House of Representatives without the approval of the voters. The same should be true for the Senate.

In the several days since I announced my intention to introduce this amendment, I have heard a number of arguments raised against it. I would like to briefly address them. First of all, some suggest this amendment is an overreaction to the headlines of the day. But there are several precedents for amending the provisions of the Constitution that relate to the structure of government based on specific events. The 22nd Amendment, limiting the presidency to two terms, passed in 1951 in response to President Franklin D. Roosevelt's four-term presidency. The 25th Amendment, revising presidential succession, was passed in 1967 in response to confusion that occurred after the assassination of President Kennedy. If events demonstrate that there is a problem with our government structure, sooner or later we must take steps to address those problems. There is no better time to do that than when the effects of the structural flaw are most evident and most prominently part of the public debate.

Another objection I have heard to this proposal is the potential financial burden on the states that must pay for special elections. As someone with a reputation for fiscal discipline, I always consider a proposal's impact on the taxpayer. But the cost to our democracy of continuing the anachronism of gubernatorial Senate appointments is far greater than the cost of infrequent special elections. And weighing the costs associated with the most basic tenet of our democracy--the election of the government by the governed--sets us on a dangerous path. Besides, the Constitution already requires special elections when a House seat becomes vacant, a far more frequent occurrence since there are so many more Representatives than Senators. I find the cost argument wholly unconvincing.

Another argument I have heard is that special elections garner very low turnouts, or favor wealthy or well known candidates. They are not particularly democratic, the argument goes. And that may very well be true. But they are a whole lot more democratic than the election held inside the mind of one decisionmaker--the governor. Special elections may not be ideal, but they are elections, and every voter has the opportunity to participate. As Winston Churchill said, ``It has been said that democracy is the worst form of government except all the others that have been tried.''

I have also heard the argument that the candidates for the special election will be selected by party bosses because there won't be time for a primary. That is simply not true. Under this amendment, each state can decide how to set up its special elections. My home State of Wisconsin provides for a special election within about 10 weeks of the vacancy, with a primary one month earlier. It's a compressed schedule to be sure, because the state doesn't want to be without representation for too long. But it can be done. I would hope that most states would want to hold primaries, but the point of this amendment is to make clear that only Senators who have been elected by the people can serve, not to micromanage how the states want to implement that requirement.

I believe the core issue here is whether we are going to have a government that is as representative of and responsive to the people as possible. The time to require special elections to fill Senate vacancies has come. Congress should act quickly on this proposal, and send it to the states for ratification.

Mr. President, history has proven time and time again that the markets are not self-policing. Today's financial crisis is due in part to the Government's failure to regulate key market participants, including hedge funds that have become unregulated financial heavyweights in the U.S. economy. So I am joining today with my colleague Senator Grassley of Iowa to introduce the Hedge Fund Transparency Act, and I thank Senator Grassley for his leadership on this and in so many other areas involving oversight of our financial institutions.

Hedge funds sound complicated, but they are simply private investment funds in which investors have agreed to pool their money under the control of an investment manager. What distinguishes them from other investment funds is that hedge funds are typically open only to ``qualified purchasers,'' an SEC term referring to institutional investors such as pension funds and wealthy individuals with assets over a

specified minimum amount. In addition, most hedge funds have 100 or fewer beneficial owners. By limiting the number of their beneficial owners and accepting funds only from investors of means, hedge funds have been able to qualify for the statutory exclusions provided in the Investment Company Act and avoid the obligation to comply with that law's statutory and regulatory requirements. In short, hedge funds have been able to operate outside of the reach of the Securities and Exchange Commission.

The primary argument for allowing these funds to operate outside SEC regulation and oversight is that because their investors are generally more experienced than the general public, they need fewer government protections and their investment funds should be permitted to take greater risks than investment funds open to the investing public which need greater SEC protection. Indeed, the ability of hedge funds to take on more risk is the very reason that many individuals and institutions choose to invest in them. These investors accept more risk because that might lead to bigger rewards.

The compensation system employed by most hedge funds encourages that risk taking. Typically, investors agree to pay hedge fund investment managers a management fee of 2 percent of the fund's total assets, plus 20 percent of the fund's profits. The hedge fund managers profit enormously if a fund does well, but due to the guaranteed management fee, get a hefty payment even when the fund underperforms or fails. The analysis up to now has been that if wealthy people want to take big risks with their money, all else being equal, they should be allowed to do so without the safeguards normally required for the general public.

So what is the problem with allowing their investment funds to operate outside of Federal regulation and oversight? The problem is that hedge funds have gotten so big and are so entrenched in U.S. financial markets that their actions can now significantly impact market prices, damage other market participants, and can even endanger the U.S. financial system and the economy as a whole.

The systemic risks posed by hedge funds first became obvious 10 years ago. Back then, Long-Term Capital Management--or LTCM--was a hedge fund that, at its peak, had more than $125 billion in assets under management and, due to massive borrowing, a total market position of $1.3 trillion. When it began to falter, the Federal Reserve worried that it might unload its assets in a rush, drive down prices, and end up damaging not only other firms but U.S. markets as a whole. To prevent a financial meltdown, the Federal Reserve worked with the private sector to engineer a rescue package.

That was just over a decade ago. Since then, according to a recent report issued by the Congressional Research Service, the hedge fund industry has expanded roughly tenfold. In 2006, the SEC testified that hedge funds represented 5 percent of all U.S. assets under management and 30 percent of all equity trading volume in the United States. By 2007, an estimated 8,000 hedge funds were managing assets totaling roughly $1.5 trillion. The most current estimate is that 10,000 hedge funds are managing approximately $1.8 trillion in assets, after suffering losses over the last year of over $1 trillion.

In addition, over the last 10 years, billions of dollars being managed by hedge funds have been provided by pension plans. A 2007 report by the U.S. Government Accountability Office found that the amount of money that defined benefit pension plans have invested in hedge funds has risen from about $3.2 billion in 2000 to more than $50 billion in the year 2006. That total is probably much higher now. And while most individual pension funds invest only a small slice of their money in hedge funds, a few go farther. For example, according to the GAO report, as of September 2006, the Missouri State Employees Retirement System had invested over 30 percent of its assets in hedge funds. Universities and charities have also directed significant assets to hedge funds. The result is that hedge fund losses threaten every economic sector in America, from the wealthy to the working class relying on pensions, to our institutions of higher learning, to our nonprofit charities.

A third key developed is that over the last 10 years, some of the largest U.S. banks and security firms have set up their own hedge funds and used them to invest not only client funds but also their own cash. In some cases, these hedge funds have commingled client and institutional funds and linked the fate of both to high-risk investment strategies. These hedge fund affiliates are typically owned by the same holding companies that own federally insured banks or federally regulated broker-dealers. Because of their ownership, their size and reach, their clientele, and the high-risk nature of their investments, the failure of hedge funds today can imperil not only their direct investors, but also the financial institutions that own them, that lent them money, or did business with them. From there, the effects can ripple through the markets and impact the entire economy.

It is time for Congress to step into the breach and establish clear authority for Federal regulation and oversight of hedge funds. That is the backdrop for the introduction of the Grassley-Levin Hedge Fund Transparency Act.

The purpose of this bill is to institute a reasonable and practical regulatory regime for hedge funds. The bill contains four basic requirements to make hedge funds subject to SEC regulation and oversight.

It requires them to register with the SEC, to file an annual disclosure form with basic information that will be made publicly available, to maintain books and records required by the SEC, and to cooperate with any SEC information request or examination.

In addition, the bill directs Treasury to issue a final rule requiring hedge funds to establish anti-money laundering programs and, in particular, to guard against allowing suspect offshore funds into the U.S. financial system. The Bush Administration issued a proposed anti-money laundering rule for hedge funds seven years ago, in 2002, but never finalized it. A 2006 investigation by the Permanent Subcommittee on Investigations, which I chair, showed how two hedge funds brought millions of dollars in suspect funds into the United States, without any U.S. controls or reporting obligations, and called on a bipartisan basis for the proposed hedge fund anti-money laundering regulations to be finalized, but no action was taken. Hedge funds are the last major U.S. financial players without anti-money laundering obligations, and it is time for this unacceptable regulatory gap to be eliminated.

Our bill imposes a set of basic disclosure obligations on hedge funds and makes it clear they are subject to full SEC oversight while, at the same time, exempting them from many of the obligations that the Investment Company Act imposes on other types of investment companies, such as mutual funds that are open for investment by all members of the public. The bill imposes a more limited set of obligations on hedge funds in recognition of the fact that hedge funds do not open their doors to all members of the public, but limit themselves to investors of means. The bill also, however, gives the SEC the authority it needs to impose additional regulatory obligations and exercise the level of oversight it sees fit over hedge funds to protect investors, other financial institutions, and the U.S. financial system as a whole.

The bill imposes these requirements on all entities that rely on Sections 80a-3(c)(1) or (7) to avoid compliance with the full set of the Investment Company Act requirements. A wide variety of entities invoke those sections to avoid those requirements and SEC oversight, and they refer to themselves by a wide variety of terms--hedge funds, private equity funds, venture capitalists, small investment banks, and so forth. Rather than attempt a futile exercise of trying to define the specific set of companies covered by the bill and thereby invite future claims by parties that they are outside the definitions and thus outside the SEC's authority, the bill applies to any investment company that has at least $50 million in assets or assets under its management and relies on Sections 80a-3(1) or (7) to avoid compliance with the full set of Investment Company Act requirements. Instead, those companies under the bill have to comply with a reduced set of obligations, which include filing an annual public disclosure

form, maintaining books and records specified by the SEC, and cooperating with any SEC information request or examination.

Finally, our bill makes an important technical change. It moves paragraphs (c)(1) and (7)--the two paragraphs that hedge companies use to avoid complying with the full set of Investment Act Company requirements--from Section 80a-3 to Section 80a-6 of the Investment Company Act. While our bill preserves both paragraphs and makes no substantive changes to them, it moves them from the part of the bill that defines ``investment company'' to the part of the bill that exempts certain investment companies from the Investment Company Act's full set of requirements.

The bill makes this technical change to make it clear that hedge funds really are investment companies, and they are not excluded from the coverage of the Investment Company Act. Instead, they are being given an exemption from many of that law's requirements, because they are investment companies which voluntarily limited themselves to one hundred or fewer beneficial owner accepting funds only from investors of means. Under current law, the two paragraphs allow hedge funds to claim they are excluded from the Investment Company Act--they are not investment companies at all and are outside the SEC's reach. Under our bill, the hedge funds would qualify as investment companies--which they plainly are--but would qualify for exemptions from many of the Act's requirements by meeting certain criteria.

It is time to bring hedge funds under the federal regulatory umbrella. With their massive investments, entanglements with U.S. banks, securities firms, pension funds, and other large investors, and their potential impact on market equilibrium, we cannot afford to allow these financial heavyweights to continue to operate free of government regulation and oversight.

When asked at a recent hearing of the Senate Homeland Security and Government Affairs Committee whether hedge funds should be regulated, two expert witnesses gave the exact same one-word answer: ``Yes.'' One law professor, after noting that disclosure requirements don't apply to hedge funds, told the Committee: ``If you asked a regulator what . . . role did hedge funds play in the current financial crisis, I think they would look at you like a deer in the headlights, because we just don't know.'' It is essential that federal financial regulators know what hedge funds are doing and that they have the authority to prevent missteps and misconduct.

The Hedge Fund Transparency Act will protect investors, and it will help protect our financial system. I hope our colleagues will join us in support of this bill and its inclusion in the regulatory reform efforts that Congress will be undertaking later this year.

Mr. President, I rise to introduce the Tropical Forest and Coral Conservation Act of 2009, a bill to protect outstanding tropical forests and coral reefs in developing countries through Debt for Nature Swaps that then-Senator Biden and myself first passed more than ten years ago.

This bill reauthorizes a proven program which enjoys the ardent support of the Treasury Department and State Department for the third time since 1998. It will help developing countries reduce foreign debt and provide comprehensive environmental preservation programs to protect tropical forests and endangered marine habitats around the world. This bill will also serve as an important diplomatic tool to provide for our national security.

As one of the most successful U.S. conservation assistance programs, the agreements concluded under the Tropical Forest Conservation Act so far will together generate over $188 million to help conserve over 50 million acres of tropical forests in Asia, the Caribbean, Central and South America. In addition, private donors, including the Nature Conservancy, the World Wildlife Fund, the Wildlife Conservation Society, and Conservation International, have contributed more than $12 million to TFCA swaps, leveraging U.S. Government funds. This is an effective use of scarce Federal conservation dollars. But the rate of deforestation continues to accelerate across the globe.

This bill is an example of how we can use economic incentives and opportunities to change behavior and to influence personal and societal choices. Clearly, there are economic opportunities in clean energy sources, solar, wind and biofuels, and carbon sequestration and storage technologies. But improvements in farming and forestry practices may be among the lowest hanging fruit in the quest to deal with climate change.

During the global climate change discussions in the late 1990s in Kyoto, the concept of carbon sinks provided by forestry and agriculture was taken off the table. Last year during the Bali discussions, the topic of carbon sequestration through forestry and agricultural practices was revived. This is an important development, and it should be embraced by the United States.

Also alarming is the rapid rate of coral reef and coastal exploitation. The burden of foreign debt falls especially hard on nations with few natural resources that often resort to harvesting or otherwise exploiting coral reefs and other marine habitats to earn hard currency to service foreign debt. According to the National Oceanic and Atmospheric Administration, NOAA, 61 percent of the world's coral reefs may be destroyed by the year 2050 if the present rate of destruction continues.

The Tropical Forest and Coral Conservation Act expands the current tropical forest conservation programs to include the protection and conservation of these vital coral ecosystems. This legislation will make available resources for environmental stewardship that would otherwise be of the lowest priority in a developing country. It will reduce debt by investing locally in programs that will strengthen indigenous economies by creating long-term management policies that will preserve the natural resources upon which local commerce is based.

Both Indonesia and Brazil have been declared eligible for Tropical Forest Conservation Act funds. Brazil is the second most populous nation in our hemisphere. It wields enormous influence over neighboring states in South America and has expressed interest in a leading global role. It would be a diplomatic mistake to hinder our outreach to a nation on an issue--conservation--where we have mutual goals. Similarly, we should not encumber conservation cooperation with one the largest democracies in the world, Indonesia. The United States cannot afford to squander diplomatic opportunities that allow us to establish working relationships with key agencies in such strategically important nations.

This legislation has enormous consequences for the existence of critical ecosystems, the health of our planet, the livelihoods of millions of people across the globe, and even the security of Americans here at home.

I would like to provide additional information about activities under this act.

Fourteen TFCA agreements have been concluded to date in Bangladesh, El Salvador, Belize, Peru, the Philippines, Panama, Guatemala, Colombia, Paraguay, Botswana, Costa Rica, and Jamaica. With the reauthorization of TFCA, the U.S. Government will be able to pursue agreements to conserve threatened coral reefs along with tropical forests.

The Tropical Forest and Coral Reef Conservation Act of 2009 authorizes appropriations for debt reduction for eligible countries at $25,000,000 in fiscal year 2009; $30,000,000 in fiscal year 2010; $30,000,000 in fiscal year 2011; and $30,000,000 in fiscal year 2012 subject to appropriations.

First, the bill authorizes a Debt Swap option under which a third party may purchase the debt of a TFCA-eligible country in exchange for the creation of a fund to support tropical forest or coral reef conservation. The terms of the agreement are negotiated with the country, the third party and the U.S. Government.

Under this option, there may be no cost to the United States Government

because the financial assistance involved would come from nongovernmental or private entities. Third-party funding may be leveraged, in part, with U.S. Government appropriated funds.

Second, the bill authorizes a debt reduction option in which principal and interest payments due to the U.S. Government may be wholly or partially reduced. In return, the country accepts a new obligation to make payments to a conservation fund to be administered by a tropical forest or coral reef board within that country.

The bill authorizes appropriations to compensate the United States Treasury for the reduction in the revenues caused by TFCA debt treatment. However, these funds would be effectively leveraged because the amounts placed by an eligible country in its conservation fund would exceed the cost of debt reduction to the United States Treasury.

Third, under the Buy Back option, an eligible country is able to buy back its debt at its asset value in exchange for its willingness to place an additional amount based on the purchase price in local currency in a tropical forest fund.

Under this third option, there would be no cost to the United States Government since the debt is being bought back at its value as determined under the Federal Credit Reform Act of 1990.

The Tropical Forest Conservation and Coral Act applies to concessional loans made under the Foreign Assistance Act of 1961 and credits granted under the Agricultural Trade and Assistance Act of 1954. It is consistent with established Treasury Department debt reduction practices as well as with the Federal Credit Reform Act of 1990.

Within each developing country, the conservation fund would be administered by a commission representing a majority of local nongovernmental, community development and scientific and academic organizations, representatives of the host government and a representative of the United States Government.

The conservation fund could be used to provide grants for the following purposes: to preserve, maintain or restore the tropical forest or coral reef of the beneficiary country through establishing parks and reserves; to develop and implement scientifically sound systems of natural resource management; to provide training programs to strengthen the scientific, technical and managerial capacities of individuals and organizations involved in conservation; to provide for restoration, protection and sustainable use of diverse animal and plant species; to provide research and identification of medicinal uses of tropical forest plant life to treat human diseases, illnesses, and health-related concerns; to develop and support individuals living in or near a tropical forest or coral reef, including the cultures of such individuals.

Oversight of this program would continue through multiple mechanisms including the following: funds for this program are subject to periodic formal evaluations and annual fund evaluations recently required as part of OMB's Program Assessment Rating Tool, PART. TFCA Evaluation Scorecard is completed each year on each TFCA Fund. The Evaluation Scorecard was developed to provide for consistent, on-going evaluation and reporting across local TFCA programs.

Local TFCA funds are subject to regular audits. In addition, the local board or oversight committee monitors performance under each grant agreement to make sure that time schedules and other performance goals are being achieved. Grant agreements include budgets, timelines, and provisions requiring periodic progress reports from the grantee to the board.

In addition, the U.S. Government uses the annual management budget provided by Congress to fund evaluations of local TFCA programs. Evaluations undertaken with these funds include local site visits to determine that activities are being carried out consistent with the terms of the TFCA agreement.

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

Mr. President, today, along with Senators Whitehouse, Murray, Cardin and Dodd, I am introducing a bill to triple the number of Foreign Service officers working with USAID.

As we take stock of America's image in the world, it's clear that we need to do more to help countries stabilize their society and their economy.

Our own security depends on the stability of far-flung places beyond our borders.

America's generosity and ability to help other countries is becoming more important to the effectiveness of our foreign policy.

In the U.S., the responsibility for development falls largely to the U.S. Agency for International Development, or USAID.

USAID was founded by the Kennedy administration in 1961. It became the first U.S. foreign assistance organization with the primary goal of long term economic and social development efforts overseas.

During its first decade, it had more than 5,000 Foreign Service Officers serving all over the world, often in the most difficult of conditions.

Today--at a time when the U.S. needs to show its leadership overseas more than ever--USAID operates with just 1,000 Foreign Service Officers.

With so few people to deploy, our hands are tied and we're missing opportunities to build bridges and foster diplomacy.

For example, more than seven years after U.S. took military action in Afghanistan, the Taliban and al Qaeda continue to undermine progress toward a more stable state.

Our military has done a heroic job in Afghanistan. But success in Afghanistan also depends on improving the lives of the Afghan people-- jobs, agriculture, stability, and a functional government.

We have not done enough to win the hearts and minds of the Afghan people. And the military cannot bear this burden alone.

The last time I went to Afghanistan there were only six American agricultural experts for the entire country--I think today there are only slightly more.

For a nation with an agricultural economy and record poppy harvest, we have been able to lend just a handful of agricultural development experts.

Secretary of Defense Robert Gates understands this critical need to partner our military efforts with civilian development expertise. Last month he said:

The problem is that the civil side of our government--the

Foreign Service and foreign-policy side, including our aid

for international development--[has] been systematically

starved of resources for a quarter of a century or more . . .

We have not provided the resources necessary, first of all,

for our diplomacy around the world; and second, for

communicating to the rest of the world what we are about and

who we are as a people.

Many people on both sides of the aisle agree that USAID is no longer equipped to do its job effectively. We simply are not meeting the international development goals of the United States.

USAID has been shortchanged--and America's efforts abroad have suffered as a result.

Now we have a lot of needs here at home, to be sure. But one important lesson of the last few years is that America must be engaged if we are to remain a leader in world affairs.

The Increasing America's Global Development Capacity Act of 2009 would take the first step toward putting the Agency for International Development on firmer footing. As Secretary Clinton said in her remarks to USAID employees last week, it is ironic that that our very best young military leaders are given unfettered resources to spend as they see fit to build a school, to open a health clinic, to pave a road, and our diplomats and development experts have to go through miles of paperwork to spend ten cents. Secretary Clinton said, and I agree, that this is not a sensible approach.

The bill would authorize USAID to hire an additional 700 Foreign Service Officers this year. This would basically double the current number of development officers available to work in targeted countries.

This is fundamental to rebuilding the agency's capacity.

Senator Leahy, Chair of the Foreign Operations Appropriations Subcommittee, shares a commitment to rebuilding USAID. I am heartened by the Subcommittee's recommended increase in funding for USAID's operating expenses for fiscal year 2009. This was a priority for me in the bill, and Chairman Leahy has been very supportive.

My bill also would establish a goal of hiring an additional 1,300 Foreign Service Officers by 2012.

After three years, USAID would have more than 3,000 talented, committed Americans serving in the world's most difficult locations helping to improve the lives of others. It won't be the 5,000 experts of the 1960s, but it will be a big improvement from today.

With a stronger development work force, we can send talented public servants to help improve child and maternal health, treat people with AIDS, TB and malaria, provide clean water and sanitation, help farmers and women start or improve their business, and assist reformers and civic leaders to build stronger democratic institutions.

We all recall the renewed interest in public service that emerged after 9/11--many of those people have answered the call, and I bet there are as many more who would welcome an opportunity to serve.

Foreign development assistance is as important a foreign policy tool as diplomacy and defense.

Secretary of Defense Robert Gates is perhaps the most persuasive advocate for rebuilding our civilian development capacity. He argues that we need to engage in non-military ways to pursue global development goals.

The civilian instruments of national security--diplomacy, development assistance, sharing expertise on civil society--are becoming more and more important.

Secretary Gates argues that these tools are good for the world's poor, our national security, and our country.

I agree.

Let us take one concrete step to rebuild that important civilian capacity, which would help improve our ability to help the world's poorest countries and people.

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