Floor Statements

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, is the Senate in morning business?

I ask unanimous consent to speak for up to 30 minutes.

Mr. President, I have often described on the floor the lyrics of Bob Will's and the Texas Playboys' song from the 1930s:

The little bee sucks the blossom and the big bee gets the

honey; the little guy picks the cotton and the big guy gets

the money.

Never is that more true than what we see today with the prospect of unbelievable financial bailouts and the mechanics of what is happening on Wall Street and the wreckage of the financial system. I wish to show my colleagues this about the bailouts by the administration. Everybody is talking about a $700 billion proposed bailout by the Federal Reserve and Treasury Secretary Paulson. In fact, the Federal Reserve previously committed $29 billion so J.P. Morgan could buy Bear Stearns, the investment bank that was failing. In addition, the Fed opened its discount window for direct loans to non-regulated banks for the first time since the Great Depression. We understand that this program and two other Fed loan programs total some $300 billion. There is another $300 billion for the Federal Housing Administration, and about $200 billion for Fannie and Freddie; JPMorgan Chase for Lehman financing, $87 billion; AIG insurance, $85 billion; $50 billion for money market funds that was offered as a guarantee; and now the prospect of $700 billion is pending. That isn't just $700 billion; that totals $1.7 trillion. Even if the Congress decides not to provide the $700 billion bailout that is being requested, there already exists $1 trillion that have been offered to try to stabilize the financial system.

Now, the question is, How did we get into this mess? What caused this wreckage? What do we think we should do about it? I wish to talk for a bit about what caused this. I take no pride in being right 9 years ago as one of eight Senators who voted against the Financial Modernization Act. That act was a bunch of folks who sold to the Congress the proposition that what we put in place for protection in the 1930s, during the Great Depression, to separate banking from more speculative enterprises, such as real estate and securities--the decision was that that is old-fashioned, don't keep doing that; let's allow these companies to merge, to create massive financial holding companies--a kind of financial cafeteria under one roof. Let's bring them together, and you can build firewalls inside the organization. So the Financial Modernization Act was passed.

I said on the floor of the Senate then that within 10 years I believe we will see massive bailouts that will be paid for by the American taxpayer. I regret that I was right. It should not have happened, however. I wish to talk about what has happened as a result of taking down the basic protections. Let me go back to the start of two things-- one I mentioned--the Financial Modernization Act, which took apart the protections. Second, a group of people came to this town boasting that they weren't interested in regulating. People were put into positions where they were supposed to regulate and decided not to regulate. Those two pieces together, taking apart the protections in law and putting in place people who wanted to be willfully blind in deciding not to regulate, steered us right toward the cliff. Here is what began to happen across the country. Most Americans saw this because you could not miss it. You wake in the morning and perhaps you brush your teeth or you shave in front of a mirror and you might have a small television set that you are watching, seeing what is going on, and the advertisements come on--and they are always louder than the programs. The advertisements say: Hey, if you have been bankrupt or if you have bad credit, you can get a loan from us. Do you think you are paying too much for your home loan? Are your house payments too high? Get a loan from us.

This was the biggest mortgage bank in the country, Countrywide. They advertised this:

Do you have less than perfect credit? Do you have late

mortgage payments? Have you been denied by other lenders?

Call us.

America's biggest mortgage bank was saying: Have you got bad credit? Call us. Want a loan? Call us.

Millennia Mortgage said this in their advertisements:

Twelve months, no mortgage payments. That's right, we will

give you the money to make your first 12 payments if you call

in the next 7 days. We pay it for you. Our loan program may

reduce your current monthly payment by as much as 50 percent

and allow you no payments for the first 12 months. Call us

today.

So Millennia Mortgage was saying: Get a mortgage from us. We will pay the first 12 months. They didn't say, of course, that that money you are not paying is going to go on the back end of the loan, with interest, and will substantially increase the cost of your loan.

Zoom Credit, in their advertisement, said this:

Credit approval is just seconds away. Get on the fast track

at Zoom Credit. At the speed of light, Zoom Credit will

preapprove you for a car loan, a home loan, or a credit card.

Even if your credit is in the tank, Zoom Credit is like money

in the bank.

Again, they say that even if your credit is in the tank, Zoom Credit is like money in the bank.

Zoom credit specializes in credit repair and debt

consolidation, too. Bankruptcy, slow credit, no credit--who

cares?

That is what they advertise. I don't know who the president of Zoom Credit was or who the president of Millennia was. I know who the president of Countrywide was. I know he is out of that company. That company is now collapsed and sold. He ended up with somewhere north of $140 million in unbelievable outer-space compensation. I don't know who these company presidents were, but I assume the brokers and CEOs of these companies were wallowing in money. They were all wallowing in money like hogs in a corn crib, grunting and snorting, making out like bandits--billions of dollars. In fact, in the 9 years that have led up to this period, the bonuses on Wall Street were $200 billion. I am not talking about salaries. I am talking about bonuses. In 9 years, it was $200 billion. It was $33 billion last year alone. So everybody is making money. They are advertising to people: got bad credit, bankrupt, slow pay, no pay? Doesn't matter. Come to us and get a mortgage.

So they were writing mortgages in the dim light of these rooms, with brokers who are breathless to get their bonuses and mortgage banks interested in putting the mortgages out there. They are advertising we can give you teaser rates. Want to pay a 1 percent rate? We can do that. Two percent? We can do that. Then they would create a mortgage at a teaser rate, with a reset in 3 years maybe to 9 or 10 percent, which is locked in with a prepayment penalty so you cannot prepay it. It is a reset that the borrower cannot possibly pay. But they say: Don't worry about that; the housing prices are going up, up, up, and all you have to do is get this mortgage from us, and when it resets, it is true that you will not be able to pay it, but you can flip the property in 2 years. That is not a problem. You will make money.

So they put these bad mortgages out there--bad mortgages all around-- and they would combine them with a few good mortgages and put them into a security and splice and dice them and cut them up, like they used to package sawdust in sausage years ago. Then they would sell them upstream, from the mortgage bank to the hedge funds and investment bank. They are all fat and happy because they all know the return embedded in these securities is a very substantial return. The mortgage holder is locked into it because they have prepayment penalties. None of them were smart enough, even as they were collecting massive incomes, to understand that the people who were going to have to make the payments could not possibly make the mortgage payments once they were reset.

So at some point, mortgages began to reset. It is estimated that 2 million American families will sometime over the next year come home and sit around the supper table and discuss the fact that this is their last night in their home because they are losing the home because they cannot pay their mortgage. I am not talking about 2,000 or 20,000 or 200,000 families; I am talking about 2 million American families.

It has caused a precipitous drop in property values around the country. It broke the bubble of the escalating price of housing and then began to collapse it. It has had a profound impact on most American families. The most significant form of equity for most American families was their home equity. Similar to the tent pole being pulled out of a big tent, it collapsed. We have people sitting back and thumbing their suspenders, wondering how this could have happened. It doesn't take a genius to figure it out. Where were the people who were supposed to regulate in this town when they saw this practice of advertising mortgage conditions that you knew the borrowers could not meet? Where were the regulators? They were sitting by with grins on their faces because they were engaged in other things; they weren't regulating. So now we have this unbelievable financial wreckage.

We see major investment firms that have been around since the Civil War going bankrupt. We see runs on some of the funds in the investment banks. On Monday, we saw the most significant drop in the value of the dollar in a single day, and the most significant increase in the price of a barrel of oil in a single day, even as the stock market dropped 500-plus points on the same day.

So the question is: What do you do about this financial wreckage? How do you put this back together? Even as the Treasury Secretary and the Chairman of the Federal Reserve Board are now over before a committee of the House today, describing their plan to put this back together. As I indicated earlier, their plan is to provide $700 billion to take the toxic mortgage-backed securities off the hands of those who invested in them, which, by the way, then adds up to about $1.7 trillion having been committed of American taxpayers' money--even as they are doing that, nobody is talking about how you fix the underlying problem. You can pour something in the top, but if you have not put a stopper in the drain, you are going to pour it right out the bottom.

Let me describe what I discovered today. I went to the Internet today. While the Treasury Secretary and Fed Chairman are over testifying about how you deal with the financial wreckage, and how much you ask the American taxpayer to pay for this malfeasance, I found this. I was just curious how many places on the Internet I could still find the same business practices of advertising to come and get a loan if you have been bankrupt or if you have bad credit. Well, I found 325 cases on the Internet where they would provide you a home loan and promise they would not check your credit. Again, they would not check your credit. Isn't that interesting? Talk about bad business practices. There are 325 companies advertising get a loan from us and we will not check your credit. Most people don't believe it when I say these mortgage companies, who put out these toxic mortgages, were advertising ``no doc'' loans. It doesn't have anything to do with doctors. That means you can get a mortgage from them for your home without having to document your income. You are going to ask them to provide the funding for you to buy a home, and they say you don't have to document your income to us in order to get that loan. That is so far afield and ignorant, in my judgment, of what you would expect in terms of sound business practices that it is even hard to describe.

Here is what is on the Internet this morning. Easy loan for you. It says that you can get your loan, without collateral, in a couple days. Even with bad credit, no credit or bankruptcy, your unsecured loan is completely guaranteed. Think of that. We have people asking over in a House committee today to have the American taxpayers provide $700 billion for a bailout. And on the same day, on the Internet, here is a company that is advertising that they will give you a loan with no collateral. It will take a couple days. Even if you have bad credit, no credit, or bankruptcy, we will guaranteed your unsecured loan. Is somebody going to fix this, I wonder.

Here is what I found on the Internet this morning. SpeedyBadCreditLoans.com. Think of that. Isn't that unbelievable, SpeedyBadCreditLoans.com. I guess there is a dot.com for almost everything, including speedy bad credit. If you have bad credit, type in your characteristics. I have bad credit. Can I get a mortgage? Can I get a loan? Bad credit loans. Bad credit, no problem; no credit, no problem; bankruptcy, no problem. Get a guaranteed bad credit personal loan today.

I am wondering if those we are paying to be regulators in the Federal agencies today who are supposed to deal with predatory lending, deceptive practices, I wonder if they are still asleep at their desks or are they going to the Internet to find out these kinds of business practices exist on the Internet? Probably not.

I found this today as well. I could do this all day because it is all over the Internet. ``Bad credit personal loans, a Christian faith-based service. Fast results in just 60 seconds.'' There is a modicum of responsibility here. It says you have to reside in the United States. That is really helpful, I guess. Bad credit personal loans. If you have bad credit and some Christian faith, if you live in the United States, we have some money for you.

This is an example of a cesspool of greed, and we can't possibly begin addressing these issues, the underlying problems on Wall Street, the financial wreckage that has been caused, without addressing this situation. You are going to decide to bail out whatever, you are going to put up $1.7 trillion and try to stabilize things when you have this sort of thing going on in the country? This is almost unbelievable.

On Monday, there was an analysis of what happened in the marketplace. Why was there a precipitous, larger than ever, 1-day drop in the value of the dollar? Why was there the largest 1-day runup in the price of oil, accompanied by a 300-plus point drop in the market? Most of the analysis was people were concerned about the value of the dollar, throwing massive amounts of credit, the substantial amount of money that is being provided to bail out firms to provide undergirding loans for firms. All of this is added to the Federal debt, by the way, which itself is about $700 billion in trade debt in this year, about $700 billion in fiscal policy debt in this year. That's almost 10 percent of this country's GDP in 1 year. Analysts take a look at that and say: On top of that unbelievable debt and fiscal policy, you have run off the rails in fiscal policy, you are off the

rails in trade policy with unbelievable debt, we will now ante up a substantial amount of money for Federal bailouts, and analysts say: I worry about what that will do to the value of the dollar.

The electronic herd that bets on currency, the currency traders, when they go against a currency, they can destroy an economy and devalue the dollar, meaning people pull their investments and put it in gold and put it in commodities. That is what dramatically can destroy an economy.

It may well be true that might be worse. The destruction of the economy might be worse by dramatically eroding the value of the dollar and having the currency traders run against this dollar than not doing the $700 billion that Secretary Paulson and Mr. Bernanke suggest.

I think it is the case that this Congress has a responsibility to do something. Doing nothing is not something that makes sense. We cannot decide: You know what, whatever is happening is happening; we are oblivious to it; we will decide to take the same tack regulators have taken in the last 7 years and sit around and observe and from time to time grin or just decide that we will be completely ambivalent about what is happening. We cannot do that. We have to take some action.

So the question is, What? First and most important for me is we have to restore the stability and the safety of the banking system. I think that means we should recreate the protections that existed after the Great Depression. It may not be that we recreate explicitly what Glass- Steagall provided, but the protections that it provided must exist going forward. Otherwise, we will not have done anything by bailing out anybody. We will still have the same circumstances existing in our economy, with people advertising on the Internet that we would like to put bad paper out, thereby giving mortgages to people with bad credit, bankruptcy, or other slow-pay problems in their credit history.

It makes no sense to me to ignore what happens when you merge or combine the functions of banking with the functions of investment in real estate and securities. Banking requires not just the reality of safety and soundness but the very perception of safety and soundness. If people perceive a bank is not safe and sound, they will run on the bank and the bank will fail, inevitably, regardless of how much capital it has. It will not have enough capital to withstand a run on the bank. That is why just the perception of the safety and soundness of banking enterprises is imperative. We went far afield in deciding that we will allow the fusing of inherently risky enterprises, investments and securities and real estate, to banking.

I know that some point to as a success allowing, for example, Bank of America to come in and purchase one of the failing investment banks. I don't view that as a success. At the moment, it was able to forestall a failure. But now we have attached a large banking enterprise, whose perception of safety and soundness is critically important, to an investment bank that was failing. I don't see that as success. I think it is moving in exactly the wrong direction.

I want us to find a menu of ways to provide confidence to the American people that we are moving in the right direction. That requires a lot of things. No. 1, straighten out this wildly escalating trade deficit. We cannot have a $60 billion-a-month trade deficit. That is what destroys your currency value. We have to get real on fiscal policy. We cannot continue to spend what we don't have on things we don't need. We have to find a way to create a fiscal policy that has some stability and balance to it. We have to address these business practices with effective regulation. We have to recreate the protections that existed for the banking system.

We have to address the wildly excessive and speculative incomes and salaries on Wall Street which I think incentivized reckless behavior. As I indicated, in the last 3 years on Wall Street, just the bonuses--I am not talking about salaries--just the bonuses were $100 billion. Many of them went to the very people who steered us into this corral. In the old western movies, they used to call this a box canyon: there is only one way in and one way out. The same people who got us there made a massive amount of money putting us where we now are.

As I said, we need a system of regulation that gives us some accountability that laws are going to be followed, that we are going to regulate the deceptive practices, predator lending, and so on.

Then I think, as well, we need to have some period of forbearance on mortgages where people who can continue to make payments even under the original interest rate can make those payments for a period of time and continue to stay in those homes. That is the only way we will begin to put some strength under the value of homes. Otherwise, we will continue to see a collapsing of home values. As I said, 2 million families will lose their homes this year unless we find a way to take some action.

Finally, we should create a taxpayer protection task force. No matter what else we do, we need to investigate and claw back ill-gotten gains in which people have gotten away with billions of dollars by shady business practices.

Whatever this Congress decides to do or must do, the American taxpayer ought to have a share in the increased values of the investments that are made in their name.

There is one point that unites everybody in this Chamber, perhaps in this Congress, perhaps in the entire country. I don't think anybody knows what the right answer is. We certainly can take a look at this situation and understand now what caused much of this, but I don't know that anybody has a magic bullet that says you do this and we immediately provide stability, we move this country toward higher ground, we have stopped some of the volatility. I don't know that anybody knows that. But I think the American taxpayers are plenty worried about what I think is a stampede in the wrong direction.

On Friday, we were told by the same people who have reassured us in recent months that things are OK, things are stable, don't worry. We were then told by the very same people that in the next several days, the American taxpayers need to ante up a $700 billion bailout plan, following a substantial amount of money that has already been provided by the American taxpayers to bail out and to provide support for investment banks that were failing. And we are told: Here is a 3- page piece of legislation, one provision of which is that one person will decide where the $700 billion goes, and that person's decision will not be reviewable by the courts or by the Congress. In my judgment, that is a nonstarter. Congress is not going to do that, should not do that.

The question is, What do we do in the coming couple of days to provide some assurance and stability? I think it makes some sense to go back to the fundamentals, and the fundamentals are, you start fixing that which caused this problem. You connect the protections that used to exist. If you start fixing, at the foundation, some of the issues that caused this problem, you will begin to engineer some confidence in this country.

Finally, I used to teach some economics briefly in college. I talked a lot about the supply-and-demand curves, and all of the things we know are in the books that describe the way the economy works. But no one really knows much about how the economy works. We all think we do. Economics is a little bit of psychology pumped up with helium. It is a lot of discussion about what we think might or might not happen.

The most important thing to understand about this economy is the American economy expands when people are confident about the future. If people think the future is going to be better for them and their family--they have a job, feel good, feel secure--they do things that manifest that security. They buy a home, buy a car, take a trip. They do things that manifest people's confidence in the future, and that creates economic expansion. If, on the other hand, people are not confident about the future and concerned about the future, concerned about their job, concerned about job security, then they do exactly the opposite. They decide not to buy that car. They decide not to take that trip. They defer the purchase they were going to make. And then we have economic contraction.

This is not about an engine room of a ship of state with a lot of levers and

gears and dials and gauges that you can get just right to make this economy work. This is a lot about consumer confidence, how do you provide confidence in the future. That is how we begin to expand this economy.

How can people have confidence in the future when they see these unbelievable wild gyrations that are occurring on Wall Street? How can they have confidence in the future when they know what the root of it is? People have been advertising to them that if you are bankrupt, if you have slow credit or no credit, come here, we will give you a loan. How can that engender confidence? And how can people have confidence in an economy where we have a President who says: You know what, we are going to go fight a war and not pay for it; I insist we not pay a penny; I insist that while we fight this war, we are going to charge every single cent, and if you in Congress want to pay for it, I will veto the bill that raises the funds. Is that going to give people confidence? I don't think so.

People have a right to be concerned about an economy that is deep in debt and getting deeper every day and a trade policy that ships our jobs overseas and ends up with a $700 billion trade deficit every year that will have to be repaid with a lower standard of living in our country. People have a right to be concerned about that.

If you go back to the fundamentals and start putting some of this back together--a fiscal policy that makes sense, a trade policy that stands up for this country's economic interests, and firing the regulators who won't regulate, and put in place new regulations and new regulators who will do the job they are paid to do, and then restore the laws that provided protection so we don't fuse risk with banking-- if you start doing those kinds of things and telling the American people we are going to bring back some of those ill-gotten gains, and we are going to stop these outer space incomes of hundreds of millions of dollars a year. In fact, the highest income earner last year was $3.6 billion. That is a $300-million-a-month paycheck. Does that seem a little out of line to you? It does to me.

I have covered a lot of ground, and my sense is that we have work to do to give the American people the comfort and the assurance that we are dealing with the fundamentals that will put this country back on better footing. We won't do that by deciding to write a check and offering up a bunch of money. It won't happen. I mean, that is not what is going to provide confidence to the American people. What will provide confidence is effective leadership, leadership that says here are the six or eight things that are wrong, we know they are wrong, we have known for some while, and now we are going to make them right. If we can we can work on those issues together, I think the American people finally will decide there is some leadership that will give us the opportunity for a better future.

Mr. President, I yield the floor, and I suggest the absence of a quorum.

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

Mr. President, I ask unanimous consent that the HELP Committee be discharged from further consideration of H.R. 1343, and that the Senate proceed to its immediate consideration.

Mr. President, I ask unanimous consent that a substitute amendment, which is at the desk, be agreed to; the bill, as amended, be read a third time and passed; the motions to reconsider be laid upon the table, with no intervening action or debate; and any statements related to the bill be printed in the Record.

Mr. President, I suggest the absence of a quorum.

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

Mr. President, this afternoon we will vote on energy tax extenders or tax incentives for renewable energy. I wanted to make a comment about the importance of this legislation. I believe this will be our tenth vote to try to extend the tax incentives for renewable energy. It has been previously blocked nine times, which is almost unbelievable to me.

But at a time when we face a very severe energy problem in this country, and when we need to incentivize and begin developing additional renewable sources of energy to make us less dependant on Saudi Arabia and Kuwait, Venezuela, Iraq, at a time when we need to be less dependent and produce other kinds of energy, we have been blocked in extending these energy tax credits. It makes no sense at all to me.

If you are going to address the energy problem in this country, we need to do a lot of things. We need to conserve more. Yes, we need to drill more, and we need much greater energy efficiency. We need to do a whole lot of things, but this country needs to move ahead with respect to renewable energy on a much more aggressive path.

A substantial amount of energy comes every day from the Sun, and we use precious little of it. A substantial amount of energy is available from the wind, and we use too little of it.

How does this compare to other energy resources? Now, here is what we have done in the past for those who look for oil and gas. In 1916 this country said: If you are searching for oil and gas, we are going to give you a big fat set of tax breaks, because we want you to find oil and gas. That has existed for nearly 100 years, those tax incentives for those who search for oil and gas. Contrast that with what we have done for those who want to proceed with renewable energy such as wind and solar.

In 1992, we put in place the production tax credit. These were short- term and rather shallow tax incentives. They have been extended short term five times. They have been allowed to expire three times. We have seen projects to put up new wind turbines and new solar projects put on the shelf because these tax incentives have been in a start-stop, stutter step approach. It makes no sense. It is a pathetic, anemic response.

This country should be saying: Here is where we are headed for the next decade. For the next decade you can

count on this. We are going to develop wind resources and solar energy all across the country that will make us less dependent on Saudi Arabia, Kuwait, and others. That is what this country should do.

We have had great difficulty getting a 1-year extension from these production tax credit for wind energy, as an example until December 31 next year. I am going to celebrate today, if we pass this legislation. I believe we will. It is an achievement, but it is not a giant step forward. It is a baby step in the right direction because we have been blocked nine times by the minority from passing this legislation during this Congress. My hope is that today, finally, we will get it done and get this finally sent back to the House and to the President for signature.

We have had a lot of time on the floor of the Senate in recent weeks, a lot of wringing of hands, mopping of brows and gnashing of teeth about energy. This country's economy runs on energy. Sixty-five percent of the oil we use comes from overseas. We are unbelievably dependent on foreign sources of energy. How do we overcome that dependence to make us less vulnerable? We can do that by producing more here, which means drilling and by substantial amounts of conservation. We are prodigious users of energy, and we waste a lot. So while we produce more, we need to conserve more too. In everything we use every single day, from the time we turn the light switch on in the morning, to all of our appliances like refrigerators, air-conditioners, dishwashers, and more, we must make them more efficient. Many of these machines are more efficient now than they were in terms of all appliances. But we can impose even greater standards and create greater efficiency. So production, conservation, and efficiency--all are elements of an important national energy program.

I believe most important is the decision to pursue renewable energy. We do it with ethanol by taking alcohol from corn and extending our energy supply. We do it with biodiesel too. We do it with a range of areas. Especially in the area of biomass, wind, solar, and geothermal energy, there is such great potential. We have had so much difficulty providing certainty about where America is going to head with renewable energy.

I have introduced legislation saying we ought to do this for a full decade. We ought to say to the world, to investors and businessmen and women: Here is where America is headed. You can count on it. We will produce a lot of energy from renewable sources. We will maximize the opportunity to receive energy from the Sun. We have some projects that are interesting, but we have fallen far behind on solar energy. We are not anywhere near where we ought to be in producing solar energy. We are not near where we can be in producing energy from the wind. We have unbelievable turbines now that are much more powerful. They can take energy from the wind and use that energy to extend America's energy supply.

This is a very important vote, but it is only a small step forward in the right direction. It needs to be followed by a much larger step that tells the world where America is going. Yes, we will drill, conserve, all those things, but this country needs to decide that we want substantial amounts of additional renewable energy to make this economy less dependent on Saudi Arabia, Kuwait, Iraq and Venezuela. They provide us energy that comes from off our shores. Using more renewable energy and using this energy wisely are very important elements to sustain our country's economic strength and opportunity in the future.

I yield the floor.

Mr. President, I would like to announce that the Committee on Indian Affairs will meet on Tuesday, September 23, at 10 a.m. in room 628 of the Dirksen Senate Office Building to conduct a business meeting to consider pending legislative issues.

Those wishing additional information may contact the Indian Affairs Committee at 202-224-2251.

Committee on Indian Affairs

Mr. President, I would like to announce that the Committee on Indian Affairs will meet on Thursday, September 25, at 2:15 p.m. in room 628 of the Dirksen Senate Office Building to conduct a hearing on (1) H.R. 1294, Thomasina E. Jordan Indian Tribes of Virginia Federal Recognition Act of 2007; (2) S. 514, Muscogee Nation of Florida Federal Recognition Act; (3) S. 724, Little Shell Tribe of Chippewa Indians Restoration Act of 2007; and (4) S. 1058, Grand River Bands of Ottawa Indians of Michigan Referral Act.

Those wishing additional information may contact the Indian Affairs Committee at 202-224-2251.

Mr. President, it is now Wednesday of a week that began with a 504-point collapse in the stock market on Monday. The American economy, I think most people would understand, is in serious trouble. These are not ordinary times for our country. We have been the economic engine of the world. We have built an economic engine that is unparalleled. It has been an unbelievable economy, and created great jobs. Yet we now run into some very significant problems.

The financial wreckage that has occurred in recent months in this country is almost staggering. Very large investment banks that have been around for a long while are gone. Bear Stearns, Lehman Brothers, Merrill Lynch, venerable old investment firms. Bear Stearns, a 158-year firm, survived the Civil War, the Great Depression, but it could not survive today.

What has happened? What is causing all this? We understand in the months of this year up to $1 trillion of taxpayers' money has been offered in support--loan guarantees and various things--to try to contain the growing financial difficulty in this country.

I am not going to second-guess those who are working day and night trying to figure out how we stem the damage. I don't know the figures. I am not in the engine room to know all of the dials, gauges, and knobs that they are working on to try to figure out how we stem the damage. So I am not going to be critical today of guarantees and takeovers and so on.

I am going to say to the American people that they should not worry about their bank account in an insured bank. I don't think anybody should be concerned or run down and try to take their deposits out of their local banks where their deposits are insured by the FDIC. Those are sound, and those deposits are not in jeopardy.

Even in the middle of a financial storm of the type we are experiencing, I think it is reasonable for the American people, when midnight meetings are proposing tens of billions, $30 billion or $85 billion of taxpayers' money to try to shore up institutions and deal with this spreading problem, to ask the question: How on Earth did this happen, and why did it happen?

There are two reasons, and it is important to talk about them even in the middle of the storm. One is greed, unbelievable greed; and the second is, in my judgment, deliberate neglect. I will talk about each.

The reason I want to talk about them is because we have to make sure we understand what has caused this problem in order to fix it and to make sure it doesn't happen again. It is not as if this country hasn't seen banks collapse. We saw banks collapse in the 1930s in the Great Depression. Franklin Delano Roosevelt put together the New Deal and put together very specific, very stringent provisions dealing with banking and the safety and soundness of banks. Not just the safety and soundness in numbers but the safety and soundness with respect to perception of that safety and soundness.

They said we learned a lesson in the 1920s, and that lesson is we ought not merge and fuse together inherently risky items such as securities, real estate, insurance, and other things with banking, whose entire existence depends on the perception of safety and soundness.

Glass-Steagall and other legislative provisions were created that separated traditional banking from the more risky enterprises. That existed for many decades until about 9 years ago when the Financial Modernization Act, as it was inappropriately named and led by Senator Gramm from Texas, was passed by the Congress. I was one of eight Senators to vote against it because it repealed the elements of the Glass-Steagall Act and created the opportunities for large financial holding companies to once again fuse and merge together banking with inherently risky enterprises of securities, real estate, and others.

I know they said: No, no, we are building firewalls. The firewalls, it turns out, are not very thick. We learned a lesson and forgot it.

Let me describe what happened. Once all of this happened, at the root in this country that deals with greed, we had investment banks, mortgage brokers, hedge funds, and mortgage banks, all of them up to their neck in cash, barrels full of cash they were making. Let me describe how they were doing it, and most people will understand this wreckage is not a surprise at all.

Here is what they were doing in this country: As the housing bubble was building, caused in part by easy money advertised to people who had bad credit, we saw bad loans put out there in what was called then--the new lexicon--subprime lending. Here is what Countrywide, the largest mortgage banker said:

Do you have less than perfect credit? Do you have late

mortgage payments? Have you been denied by other lenders?

Call us . . .

Isn't that unbelievable? Countrywide doesn't exist anymore because it was bought by another firm before it went belly up.

It wasn't just Countrywide. Here is an ad I pulled off the Internet. It was running on television and radio. Millennia Mortgage:

12 months, no mortgage payment. That's right. We will give

you the money to make your first 12 months' payments if you

call in the next 7 days. We pay it for you. Our loan program

may reduce your current monthly payments by 50 percent and

allow you no payments for the first 12 months.

Isn't that unbelievable? That is nothing compared to these kinds of advertisements, and most of us have heard them.

Zoom Credit, here is what it said:

Credit approval is just seconds away. Get on the fast track

at Zoom Credit. At the speed of light, Zoom Credit will

preapprove you for a car loan, a home loan, or a credit card.

Even if your credit's in the tank. Zoom Credit's like money

in the bank. Zoom Credit specializes in credit repair and

debt consolidation, too. Bankruptcy, slow credit, no credit--

who cares?

Is this business? No, this is insanity. This is not business. Zoom Credit: Your credit is in the tank, there is money in the bank for you.

On top of that, in addition to putting mortgages out to people who had bad credit, here is what they advertised: You want to get a loan with no documentation so you don't even have to document your income, that is no problem. We will give you a no-doc loan. You don't have to document your loan. We will give you low-doc loan so you do minimum documentation of your income. By the way, you don't have to make any payments the first 12 months, or you can make payments the first 12 months and pay no principal or you can pay no principal and only partial interest. Unbelievable. All of these companies, shame on them. Unbelievable, unfettered greed making money by the barrel, leaving the rest of us with the financial wreckage that occurred.

Here is what happened. They put out all these bad mortgages, called subprime mortgages. They mixed them with good mortgages and securitized them because these days they securitize everything. They discovered these new exotic financial instruments and put them all together like sawdust and sausage, as they used to do, and put bad loans in with good loans. With all these loans, they put in prepayment penalties saying: We are going to stick you with a reset with a much higher interest rate despite the fact we did a teaser rate at the front end. And when the higher interest rate happens 3 months from now, you may not be able to pay it, but it doesn't matter. You can flip your property because you will make money. Home prices are going up.

So they put in prepayment penalties, and the prepayment penalties made these little securities seem like this was a sure thing and big money. The broker got the mortgage, got a big bonus, went to the mortgage companies--Countrywide and others. They securitized them and set them up in a hedge fund and moved them around the world.

Now they sit with these pieces of security, and they don't have the foggiest idea what is in them. All of a sudden, they go belly up. Mr. President, $1 billion, $10 billion, $100 billion, $1 trillion, and the carnage spreads across this country's economy.

Greed, unbelievable greed. This is all about making big money in a manner that defies good business sense, and even more, deliberate neglect by regulators in this town. This is no time for politics, but let me say this. At the start of this administration, regulators came to this town and served notice: It's a business-friendly place. Don't worry, be happy. We don't intend to regulate. One regulator in one agency said: It's a new day here, a new sheriff in town. This is a business-friendly place.

When the regulators decide they are not going to regulate, it is like taking the cop off the beat. Regulators represent the referee or the cop. I have used the referee analogy--a striped shirt and whistle, and they call the fouls. There have been no fouls here. When you have a mortgage company that says: You have bad credit, you have been bankrupt. You can't pay

your bills? Come to us. The regulator should say: What are you doing? They say: We want to give you a mortgage that has an unbelievably low rate, 1\1/4\ percent and resets at 10 percent and you don't have to document your loan. We will make the first 12 payments for you. Unbelievable, in my judgment.

Regulators sat by and watched, and it has cost this country $1 trillion as a result of the unfettered greed that moved across this country.

The fact is, Senator McCain recently said the economy is fundamentally sound. It is not. What has happened here is the erosion of economic strength as a result of unbelievable greed with the subprime mortgage that has spread all over the country.

By the way, I mentioned that what took away Financial Modernization Act Glass-Steagall and the protections we put in place was Financial Modernization Act, also known as the Gramm-Leach-Bliley Act. That is Senator Phil Gramm who led the fight here to do that. I didn't vote with him. He is out still advising Senator McCain on the economy.

Again, this is not about politics, but it is about what happened, how it happened, why it happened, and what we ought to do to make sure it doesn't happen again. We need effective regulators who decide they are going to do, in the interest of the American taxpayers, what they should do. We ought to go back and plug the loophole that was opened by Senator Gramm and others who said: You know what. Let's forget the lessons of the past. Let's let big holding companies gather up big financial enterprises and put them into one big sack, and they will run just fine.

They are not running just fine. They are undermining this country's economic strength.

Mr. President, how much time have I consumed?

Mr. President, I will say again, as I said when I started, this is no ordinary time. Our economy is in peril. We will recover. I hope the kinds of things that are being done by good people who are working 24 hours a day to try to deal with this wreckage will help our economy recover. We are a very strong country, and we have had some people who have undermined this country's economic strength, but I believe we will overcome it. But we won't overcome it unless we understand what happened, how it happened, and why it happened.

I say again, as I said yesterday on the floor of the Senate, this is not some mysterious illness for which we don't have a cure. It is pretty obvious what happened, and it is pretty obvious what we have to do to fix it.

I have been on the floor of the Senate talking for some years about this issue, about the unbelievable amount of leverage and the exotic financial instruments. Does anybody out there know that we have some $40 trillion in notional derivative values of credit default swaps? Most people who have them don't even know what they are. Most people didn't understand what kind of infection existed deep in these securitized issues that were being sold back and forth and everybody making money. They had no idea what was in them that was going to blow up at some point. And it has blown up with a significant force at this point that, so far, has cost the American people, by my calculation, up to $1 trillion.

This ought to be an indelible lesson learned for this institution and for the American people. Greed must be constrained.

The market system is a wonderful system, but you must have a traffic cop on the beat. You must have regulators who regulate. When you begin to take apart things that were protecting this country, such as the Glass-Steagall Act, and promising all kinds of nirvana for tomorrow, when it comes apart, you need to go back and do it over again and do it right.

Mr. President, as I said, these are difficult days, and I want to end as I started. I don't want people who listen to this discussion to believe they should run to the bank and take their deposits out. Insured deposits in American banks are sound, and the American people should understand and not worry about that. That is very important. What we should worry about are the political calculations that led us to take apart the protections, such as Glass-Steagall and others, and second, the unfettered greed that was going on under the noses of regulators who came to this town in 2001 and who decided they didn't have any interest in regulating anything. Those are lessons we need to learn and learn well.

Mr. President, I yield the floor.

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

I ask unanimous consent to speak as in morning business for 20 minutes.

Mr. President, today the stock market is down over 400 points. Yesterday it was pretty mixed. The day before it was down over 500 points. It is pretty clear that, judging by what is happening on Wall Street and judging what is happening to the economy--the news this morning on the front page of the paper: Loan guarantee offered to one of the largest insurance companies of America; the bankruptcy of an institution, Lehman Brothers, which has been around since the late 1800s; it survived the Civil War and the Great Depression--all these together demonstrate a very serious problem for this country's economy. This economy is in some peril, and I think we should not underestimate the difficulties that face it.

Our Treasury Secretary and the head of the Federal Reserve Board are taking midnight action, working 24 hours a day, apparently, convening meetings here and there, but they share something in common with us. None of us have ever been here before. No one quite understands where we are and what we do to deal with this very serious economic challenge to our country.

This is a great country. It is the only country like it on this planet. It has a very strong economy and has had for a long while. It has lifted a lot of people out of poverty and dramatically expanded the middle class. It has provided opportunity over the last century that has been almost unparalleled. Yet we now face some very difficult times, and it requires all of us to think together and work together to put together some plans to deal with this issue and this challenge. However, you cannot fix a problem you have not diagnosed.

I wish to talk a little about what got us here and a bit about what I think we ought to do about it. Two things: a subprime mortgage scandal decimated part of the foundation of this country's economy. I wish to talk about what it means. It sounds like a foreign language: Subprime loan scandal. Then, at the same time this economy was weakening because of an unbelievable subprime loan scandal, the price of oil was going up like a Roman candle, up to $147 a barrel. It has come down some now; back up I think $4 or $5 a barrel today. But that had a huge impact on this economy as well. In some ways, these problems have the same roots: Unbridled speculation, regulators who didn't regulate, those who were supposed to regulate were willing to be willfully blind.

Let me talk about these things for a moment. Let me talk first about the situation with the price of oil. I held a hearing yesterday for almost 3 hours on the subject of speculation that I believe drove the price of oil to $147 a barrel. At a time when our economy was reeling from the subprime scandal, running oil up to $147 a barrel was a huge burden and had a huge impact in weakening this economy. I am somebody who believes it was speculation that drove this up, right under the nose of regulators who didn't care about regulating.

Let me tell my colleagues what happened yesterday. We have had all kinds of testimony about this. One of the witnesses who was at the Energy Committee yesterday was from J.P. Morgan, a venerable investment bank in this country, and Lawrence Eagles delivered testimony yesterday from J.P. Morgan. He is the head of commodity research, and here is what Mr. Eagles said:

We believe that high energy prices are fundamentally the

result of supply and demand. We fundamentally believe that

high energy prices are a result of supply and demand, not

excessive speculation.

This from a man from the J.P. Morgan company, the global head of commodity research. But an e-mail we obtained today that was sent late last evening to the clients of J.P. Morgan by a Michael Zimbalist, who is the global chief investment officer for J.P. Morgan--the same company--said this--what we have been saying:

There was an enormous amount of speculation pent up in

energy markets; example, an eight-fold increase in bank OTC

oil derivatives exposure in the last three years and it

wasn't just the supply-demand equation. Oil will rise again

and we need solutions to energy supplies, but $140 in July

2008 was ridiculous.

Let me say that again. An executive with J.P. Morgan testified yesterday before our committee and said: We believe high energy prices are the result of supply and demand, not excessive speculation.

Last evening, an e-mail was sent from J.P. Morgan by their global chief investment officer and it says what we have been saying: There was an enormous amount of speculation pent up in energy markets.

I am trying to understand--and this is not to focus just on this company--J.P. Morgan. They testified they were an investment bank. We have had meetings with a lot of interest about this subject of excess speculation. I am trying to understand whether we are getting the straight story from people. What was the straight story here, the man they sent to testify or one of the top folks in J.P. Morgan who sent an e-mail to clients last evening? They directly contradict each other.

We have a whole lot of folks who are making a living these days saying: Well, the price of oil went to $147 a barrel because of supply and demand, and I say to them: It doubled in a year. From July to July, the price of oil doubled. I defy anyone to tell me what happened to supply and demand in that year that justified the doubling of the price of oil. There isn't anyone in this Chamber and there is no one who has testified before my committees who can make that case. Why? Because the case is not valid. It isn't valid.

I have sent a letter to Mr. Jamie Dimon, the chief executive officer of J.P. Morgan, asking him to reconcile this. The company was willing to testify and they were one of the witnesses yesterday. I invited witnesses who had made the case that speculation was a significant part of this problem, of the runup of oil; others had invited those who believed that speculation was not. This testimony from J.P. Morgan was part of testimony invited by those who believe there is not a speculative component. But we have a right as a committee, it seems to me, to understand how does this happen. The company sends a representative to tell us there is no speculation and then sends an e- mail to clients the same day and says speculation is a significant part.

The reason I mention this is oil is a part of what is happening in this country today with our economy. The runup in the price of oil significantly weakened this economy. I am expecting a response from J.P. Morgan to try to tell me why the contradiction. Who is talking straight here? When do we get straight answers? If we are going to fix what is wrong, we have to know what happened and what caused it.

Now, I mentioned the subprime loan scandal. The subprime loan scandal. I described what I thought was going to happen 9 years ago on the floor of the Senate. We had a bill that came to us from Senator Gramm called Gramm-Leach-Bliley. Senator Gramm spent a career here trying to get rid of all regulation: Deregulate. Deregulate, he claimed. Financial modernization, he

called it. The Financial Modernization Act. That was a fancy way of saying: Let's take apart the protections that existed after the banks failed in the 1930s and the Great Depression, let's take apart the protections we put in place to make sure it didn't happen again. We put in place the Glass-Steagall Act that said you have to keep separate banks and real estate and securities. Why? Because real estate and securities can be very speculative, and banks need to stay away from speculation. It needs to not only be safe and sound, it needs people to think they are safe and sound.

So what was put in place in the 1930s--the Glass-Steagall Act and other provisions to separate inherently risky enterprises from banking--worked for a long time. Then to the floor of the Senate comes the Financial Modernization Act in 1999. I voted against it. Let me read what I said on the floor on May 6, 1999, on the floor of the Senate:

This bill will also, in my judgment, raise the likelihood

of future massive taxpayer bailouts. It will fuel the

consolidation and mergers in the banking and financial

industry at the expense of customers, farm businesses, family farmers, and others. In some instances I think it inappropriately limits the ability of the banking and thrift regulators from monitoring activities between such institutions and their insurance or securities subsidiaries, raising significant safety and soundness consumer protection concerns.

Let me say that again: This bill will also, in my judgment, raise the likelihood of future massive taxpayer bailouts.

No, I am not a soothsayer. I didn't have a crystal ball. But I knew if you don't have good regulation and you are going to create the homogenization of big financial industries and put banking and everything together, even if you claim you are going to build firewalls, I knew exactly what was going to happen.

On November 4, 1999, on the conference report--I was one of eight Senators to vote against it--I said:

Fusing together the idea of banking--which requires not

just the safety and soundness to be successful but the

perception of safety and soundness--with other inherently

risky speculative activities is, in my judgment, unwise.

Then I said:

We will, in 10 years' time, look back and say we should not

have done that because we forgot the lessons of the past.

Those are my statements from 1999. It is now 9 years later, not 10. What we see are massive bailouts, massive taxpayer bailouts, and the lessons we apparently forgot. I voted against all of that. The fact is they sold it. They sold it like medicine from the back of a wagon in the old West, snake oil, solve everything. Allow all these big institutions to get married; fall in love, get married and become bigger and do a little of everything. That way you get one-stop shopping. Go ahead and buy your securities, buy your insurance, buy your real estate, and then make a deposit, if you will, and maybe get a check book if you want to still write some checks if you don't want to do it electronically; just one-stop shopping at all of your financial institutions and there will be no problem.

Guess what happened. In 2001, we had regulators come to town, hired by a new President, who said: You know what. It is a new day. Regulation is a four-letter word and we think four-letter words are dirty and we don't intend to regulate. Yes, we are going to get paid. We are going to run these regulatory agencies, but we don't intend to do anything. We intend to take an 8-year sleep, and they did. They dozed off immediately and they have not yet awakened.

We had a regulator at one of the very important agencies say: In fact, there is a new sheriff in town and this is a new business- friendly environment. We now see what that means. Willful blindness by people we paid to regulate, who came to town hostile to the basic notion of regulation.

Now, they saw what I saw. I have a tiny little television set, and so in the morning when I shave and brush my teeth, I have that television set on and I hear the advertisements on television. Countrywide, the biggest mortgage bank in America, here is what they said:

Do you have less than perfect credit? Do you have late

mortgage payments? Have you been denied by other lenders?

Call us.

What they were saying, essentially, is: Hey, are you a bad risk? Give us a call if you want a mortgage. Do you need a loan? This is the biggest mortgage bank in the country saying: If you can't pay your bills, for gosh sakes, call us. We want to give you a loan.

It wasn't just Countrywide. Here is a company called Millennium Mortgage and here is what they said. This was seductive. They said: Twelve months, no mortgage payment. That is right. We will give you the money to make your first 12 payments if you call in 7 days. We pay it for you. Our loan program may reduce your current monthly payment by as much as 50 percent and allow you no payments for the first 12 months. That is a pretty good deal. We will make your first 12 months payments. Of course, they will put that on the back of the loan and it will incur interest and you will end up paying a lot more.

This is Zoom Credit. You all saw these advertisements:

Credit approval is just seconds away. Get on the fast track

at Zoom Credit. At the speed of light, Zoom Credit will

preapprove you for a car loan, a home loan, or a credit card.

It says:

If your credit is in the tank, Zoom Credit is like money in

the bank.

Zoom Credit specializes in credit repair and debt

consolidation, too. Bankruptcy, slow credit, no credit--who

cares.

These were the advertisements being run on television and on the radio across the country by the shysters trying to place bad mortgages out there that people could not make payments on, and then they run the paper up through securities, hedge funds, and investment banks, run them all over the world. Then it goes sour and people cannot make payments, and you have all these bad loans out there and things collapse. It is called the subprime loan scandal, and here is the origin: companies that said: If you have bad credit or you cannot make your payments, come to us, we will give you a loan.

So you start with the first baby step of bad business practices-- because everybody was making money. The folks who were selling the loans, cold-calling people, were making big bonuses; and the mortgage banks, such as Zoom and Countrywide--the biggest--were making lots of money slicing these mortgages, the subprime mortgages, up into securities, securitizing them all.

By the way, they also said this: If you have bad credit and cannot make your payments and have been bankrupt, you know something, we also have no-doc loans. That means you don't ever have to document your income. They said: We will give you a loan, and you don't have to make the first 12 months of payments--we will make them for you--and you don't have to document your income. You could do that if you have been bankrupt and have been unable to pay your bills. Isn't that unbelievable? Guess what. They were all over the country like hogs in a corn crib snorting and making money, hauling it to the bank, saying: We are making big money by putting out bad paper.

Then what happens? All of a sudden, these mortgages, which in most cases had a 3-year reset of interest rates and were offered with teaser rates--sometimes 1 percent or 1.25 percent--these mortgages, 3 years later, had the interest rates reset, and they were now paying 10 percent. And then deep in the mortgage was the provision of a prepayment penalty so that you could not prepay the mortgage even though you were now stuck at 10 percent and could not pay the bill. These companies and the brokers said that it didn't matter; just line this up, and between now and 3 years, you can flip the property; the housing bubble is going up and you are going to make money anyway. And then the whole thing collapses.

So hedge funds are making money hand over fist, and investment banks are buying securities that are loaded, like sausage packed with sawdust, with good mortgages and bad mortgages, and things go sour, and all of a sudden, in these big, homogenized financial institutions, you have massive timebombs exploding inside their balance sheets. Then, guess what. We wake up and discover that Bear Stearns cannot make it and Lehman Brothers is going belly-up. They bail out Bear Stearns by allowing somebody else to buy them with $30 billion from the Federal Reserve Board, securitized

by, in many cases, bad securities. This morning, the papers said $85 billion. It is pretty unbelievable what is going on. It all starts here.

Now, did somebody see this? Did somebody watch television in the morning or read the newspaper or listen to the radio and hear the advertisements about the seductive new mortgages you could get and how the brokers and bankers and all these folks are making all this money? If the American people didn't see it, should the regulators have seen it? Weren't there people in this town whom we paid to regulate? How about Alan Greenspan, who is now treating us with a book and appearances on the Sunday shows and giving us a current diagnosis? Where was Mr. Greenspan when this was happening? What happened at the Fed that persuaded them not to interrupt essentially bad business that would injure the foundation of this country's economy, or the many other regulatory agencies where people at the head of them decided to be willfully blind and do nothing?

If ever there were a time for the people of this country to question whether the term ``regulation'' is a four-letter word, it is now. I believe the free market is a wonderful thing. I used to teach economics. I believe the free market is one of the best allocators of goods and services known to mankind. I also know it needs effective regulation--a regulator--because occasionally it becomes perverted. Occasionally, it is broken by certain interests.

As I said earlier, I wish I had been wrong when I said, on the floor of the Senate on May 16, 1999, in opposing the Financial Modernization Act, which took apart the basic protections we had and that we had learned were needed from the bank failures of the 1930s:

This bill will also, in my judgment, raise the likelihood

of future massive taxpayer bailouts. It will fuel the

consolidation and mergers in the banking and financial

services industry at the expense of customers, farm

businesses, family farmers, and others. . . .

Fusing together the idea of banking . . . with other

inherently risky speculative activity is, in my judgment,

unwise.

That is what I said 9 years ago. I wish I had been wrong, but I was not.

We come now to this intersection with the American economy in peril. I know we have people at the Fed and at the Treasury Department working full time to try to put this back together. Again, I say you cannot fix something if you don't know what went wrong. It is why I describe two things today--one, the unbelievable bubble of speculation that moved oil to $147 a barrel, which put an enormous burden on this country's economy at exactly the time when we could not afford it, as the economy was already suffering the unbelievable effects of the subprime loan scandal. Now we have seen an almost perfect economic storm.

One doesn't have to be an economist to understand what is happening now in this economy. But it seems to me that all Americans are hoping all of us pull together to find ways to put this country back on track, insist that regulators finally begin to regulate on behalf of the interests of the American people--insist that Congress do what it needs to do, and there are a number of things we need to do to set this right.

It is not with joy that I come to the floor of the Senate describing the conditions that, in my judgment, have caused the most significant economic collapse we have seen in a long time. But we must face the truth, and the truth is that we have been through a very difficult period and we need our Government to behave in a way that stands up to protect the interests of all Americans, not just a few. I am going to have more to say tomorrow about this subject.

I ask unanimous consent to have printed in the Record a letter that I had referred to that I have written to the head of J.P. Morgan, as well as an attachment with that letter.

Mr. President, the wreckage all of us observed yesterday and the consequences of a 504 point drop in the stock market and the concern in this country about its economic future can be traced to a lot of things. I wish to talk about some of them for a few minutes. I want to show a couple charts that describe some of the origin of what has weakened this economy, and then I will talk about how this all happened.

Almost everyone in this country in recent years has seen ads like this from Countrywide, the biggest mortgage banker in the country. Countrywide had an advertisement that said: Do you have less than perfect credit? Do you have late mortgage payments? Have you been denied by other lenders? Call us.

Countrywide Bank, the biggest bank of its type in America, saying, essentially: You have bad credit? You need money? Call us. Most people would probably hear that, as I did over the years, and think: How can they do that? How does that work. You advertise that if people have bad credit, they ought to come to you.

Here is Millenia Mortgage. They said:

Twelve months, no mortgage payment. That's right. We will

give you the money to make your first 12 payments if you call

in the next 7 days. We pay it for you. Our loan program may

reduce your current monthly payment by as much as 50 percent

and allow you no payments for the first 12 months. Call us

today.

Here is a mortgage company saying: Come on over here, get a mortgage from us. We will give you a home mortgage. You don't even have to make the first 12 months' payment. We will make it for you. They don't, of course, say here that what they will do is stick that on the back of the mortgage and add interest to it. But that is what they are advertising.

Here is Zoom Credit. All of these are television, radio ads. They said:

Credit approval is just seconds away. Get on the fast track

at Zoom Credit. At the speed of light, Zoom Credit will

preapprove you for a car loan, a home loan or a credit card.

Even if your credit's in the tank, Zoom Credit's like money

in the bank. Zoom Credit specializes in credit repair and

debt consolidation too. Bankruptcy, slow credit, no credit--

who cares?

That is what Zoom Credit was saying to customers. You got bad credit, you have been bankrupt, who cares? Come and get a loan from us. They say: We don't care if you have bad credit.

In fact, here is what they also say: Get a loan from us. We will give you what is called a ``low doc'' loan or a ``no doc'' loan. If you have bad credit, we will give you a ``low doc,'' which means we will give you a home mortgage and you don't even have to document your income for us. You don't have to prove your income to us. That is called no documentation. Bad credit, come and get a loan from us. No documentation, that is OK. It is unbelievable and unbelievably ignorant.

I pulled this off the Internet. Perfect credit not required. No- income-verification loans. Pretty interesting, isn't it? Come and get a mortgage from this company. You don't have to verify your income, and you don't need perfect credit. Here is a company on the Internet that wants to give you a home loan. It says: You can get 5 years' fixed payments with a 1.25-percent interest rate. That is interesting, isn't it? Of course, it is a sham, the 1.25-percent interest rate you get to pay. Again, bad credit? Come to us, we will give you a mortgage. You don't want to document your income, that is OK. Bad credit and no documentation. And by the way, we will give you a 1.25-percent interest rate.

All of us, when we were kids, went to western movies from time to time. In virtually every movie, they had the guy who came into town with a couple old mules driving a slow wagon. He wore a silk shirt and striped pants, and he was selling snake oil. It cured everything from hiccups to the gout. He was selling snake oil from the back of his

wagon. This is not in an old western. These are companies on the Internet, on television, on radio.

I go back to Countrywide, the largest mortgage broker. Do you have less than perfect credit? Come to us. We want to invite you, get a mortgage from us. That is what happened.

Now the stock market collapses on Monday. What is the relationship? The relationship is that our economy is reeling from the wreckage of the subprime loan scandal. What does that mean, subprime loans? All of this starts with some brokers out there who are selling mortgages. Then they sell to it a mortgage bank, and then the mortgage bank securitizes it and sells it up to a hedge fund, and the hedge fund probably sells to it an investment bank. What they do is, they loan money to people with bad credit and provide no documentation or they loan money to people with good credit and give them teaser rates with resets and prepayment penalties that the people can't possibly pay 3 years later and set them up for failure and then sell these loans in a security. As they used to pack sawdust in sausage, they pack bad loans with good loans. They slice them and dice them and sell them up the stream.

So now you have loans, a cold call to a person who had a home by a broker saying: You are paying 6 percent interest rate on your home mortgage? We will give you one for 1.25 percent. We will dramatically reduce your home mortgage monthly payment. And by the way, we are not going to emphasize this--in fact, we may just mention it in a whisper-- ultimately, it is going to reset, and it will be 10 percent in 3 years. And by the way, you don't have to document your income. At any rate, you can't pay with your income at a 10-percent rate in 3 years, but it doesn't matter, you can sell that home and flip it between now and then. Don't worry about it. That is the kind of thing that was going on with an unbelievable amount of greed--with the brokers, with the mortgage companies, with the hedge funds, the investment banks, all grunting and snorting and shoving in the hog trough here. They were making massive amounts of money, and the whole thing collapsed, just collapsed.

Now, how does it happen that it helps cause a bankruptcy in France or a bankruptcy in Italy or a 504-point drop of the stock market here in the United States on Monday and so many other failures? Bear Stearns doesn't exist anymore, Lehman Brothers is going bankrupt. I could go through them all. How is it that all of this is happening, all of this carnage and wreckage as a result of this greed?

Let me go back just a bit. Two things, it seems to me. No. 1, there are a bunch of folks who were fast talkers who decided they were going to sell Congress on financial modernization. We have learned this lesson. This lesson existed in the 1930s. In the Roaring Twenties, it was ``Katy, bar the door,'' anything goes, and the economy collapsed into a Great Depression. Franklin Delano Roosevelt, with the New Deal, said: This isn't going to happen again. Banks were failing. Banks were closing. Depositors couldn't get their money. Franklin Delano Roosevelt and the New Deal repaired that economy by saying: We are going to separate commercial banking institutions from other risky enterprises. We are not going to let banks get engaged in real estate and securities and insurance. We are not going to do that because this is the very perception of safety and soundness. Safety and soundness determines whether a bank is safe and sound. If you injure that perception by fusing risky enterprises--real estate, for example, and securities underwriting--with traditional banking issues, you do a great disservice to this country's economy. So they were separated with the Glass-Steagall Act, for example.

In 1999, the Financial Modernization Act was passed. I was one of eight Members of the U.S. Senate to vote against it because it repealed the Glass-Steagall Act. Oh, they all promised firewalls. It didn't mean a thing. I warned then, and I warn again now: These are the significant consequences of forgetting the lessons of the 1930s which are going to haunt us, and they are haunting us.

So what happens is they not only passed a Financial Modernization Act which repeals Glass-Steagall and the very things we put in place to protect against this sort of thing--the mingling of risky enterprises with banking--they not only do that, but George W. Bush wins the Presidency and he comes to town and he appoints regulators--i.e., Harvey Pitt to run the Securities and Exchange Commission, just as an example. What is the first thing he says when he gets to town? He says: You know something, you should understand that the Securities and Exchange Commission is a business-friendly place now. Right. Well, that is what happened in virtually every area of regulation. People were appointed who didn't have the foggiest interest in regulating. The whole mantra was to deregulate everything: Don't look, don't watch, don't care. As a result, in virtually every single area, we saw this kind of greed and unbelievable activity develop across this country.

So now we went through this period with a housing bubble built up with these subprime mortgages, and then we saw the whole thing go sour and people wonder why. It is not surprising at all that it went sour. What is surprising to me is how so many interests got sucked in by this and how unbelievably damaging it has been to the American economy.

How could they have missed what was going to happen here? We had some of the biggest investment banks in the world that were buying securities that had bad value mixed in with securities, and they didn't know it, they say. Where is the due diligence? How on Earth could that have happened?

Now, there is a kind of a no-fault capitalism and no-fault politics going on around here. No-fault capitalism--all of those folks who said: Get Government off my back. We want to run these big enterprises the way we want to run them. Then they run them into the ground, and they need to have the Federal Reserve Board open--for the first time in their history--a window for direct lending to investment banks just as they do to regulated banks. Why? Because they were worried they were too big to fail. If an enterprise such as that is too big to fail, why is it too small to regulate? Why is it that all of the regulators sat on the sidelines while something that most people don't even know about--$40 trillion in value of credit default swaps were out there, and much of it is as a result of dramatic borrowing and leverage. It is a house of cards with a big wind coming, and that wind can play havoc with this financial house of cards.

So the no-fault capitalism portion of it is that they do what they want to do--make a lot of money. We all know what the compensation has been: unbelievable money for those at the top who are running these organizations. Then it takes a nosedive, and a bunch of our bankers and others convene in New York and they just say: All right, who are we going to save, who are we going to prop up, or who are we going to give a direct loan to? That is no-fault capitalism. No-fault politics: It is all of those who were running around here thumbing their suspenders saying: Well, we have to deregulate, we have to do this and that. Let's ignore the lessons of the 1930s. Let's get rid of Glass-Steagall. Let's let commercial banks get engaged in securities underwriting and other risky activities. All of those folks are now saying: Well, that is not what caused this problem. In fact, they are still strutting their stuff saying the economy is strong.

The economy is not strong. The economy is dramatically weakened as a result of what these folks did to the economy and as a result of this administration's decision that regulation is a four-letter word. I have news for them: Regulation has more letters than four, and regulation is essential to the functioning of this kind of Government.

I think free markets are very important. I believe in capitalism and the free market system. I don't know of a better allocator of goods and services than the marketplace, but I also understand the marketplace needs a regulator. There need to be regulators who make certain that when the marketplace gets out of whack, somebody calls it back in. Regulators are like referees, except these regulators in this administration had no striped shirts and no whistles to call fouls because they didn't think anything represented a foul. It was ``let the buyer beware.''

Now, what happens next? Well, regrettably, none of us know. We don't

know what will happen after yesterday. We don't know what will happen the rest of the week. We don't know what else is there. Some say the biggest reset of mortgages will occur in the fourth quarter of this year, which is very soon now. We don't know the consequences of all of this because this was a spectacular, unbelievable trail of greed that, in my judgment, has dramatically injured this country.

What is important now is for us to try to create some sort of a net to catch this economy and then put it back on track with really effective regulation--and decide that we are going to have sound business principles and we are going to relearn the lessons of the past. We shouldn't have to relearn them, but we will. We understood the lesson from the 1930s. We taught it in our colleges, about the fundamentally unsafe condition of merging risk with banks. Yet, I can recall when it was sold to the Congress as financial modernization. It was the big shots getting their way, and we all pay a dramatic penalty for it.

``The economy is strong,'' my colleagues have said. Senator McCain-- and I wouldn't normally mention him on the floor of the Senate. He is out there running for the Presidency. But since Senator McCain grabbed pictures of me and several others and put them in television commercials to suggest, here is what is wrong, perhaps maybe it is OK for us to say what is wrong are those who were such cheerleaders for taking apart that which was to protect this country in the first place--Glass-Steagall and others. They knew better--should have known better--and what is wrong is those who aided and abetted and carried the wood in the last 7 years to say to regulators: Don't bother regulating. Get your paycheck. We will give you a paycheck. Just be friendly. Don't regulate. Don't look. Those who did that did a great disservice to this country, in my judgment.

Now, I recognize this is not a political system in which one side is always all right and one side is always all wrong. That is not the case. It just is not. Both political parties for a long time have contributed much to this country. But I would say this: We have been through a period that I think is devastating to this country's economic future. A lot hangs in the balance.

I think if the American people want more of the same, then they can sign up for that. They can say: Well, we kind of like what is going on here. We like the notion that regulators were told not to regulate and complied aggressively. We like the notion that we have nearly 700,000 people who have lost their jobs just since the first of this year. We think that has gone really well. We like the fact that the price of oil doubled from July of last year to July of this year. We think that is just fine. If people really believe that--we like all of these things-- there is certainly a way to continue that, and that is just to say to all those who are running in support of President Bush's policies: Boy, let's just keep doing it. But it seems to me--the old law says when you are in a hole, stop digging. It seems to me the American people understand that very well.

It is time now--long past the time--for this country to get back to fundamentals and for the American people to insist from their Government the kind of responsibility that Government should manifest in terms of its responsibility to protect the marketplace, to protect the American taxpayer, to try to do things that help all Americans, help lift up all Americans.

My colleague described a bit ago the circumstance in this economy where the wealthy have gotten very wealthy--much wealthier--and then the folks in the rest of the population are struggling to figure out: How on Earth can I keep my job. We have all of these folks sending these jobs to Asia. How do I keep my job? Or if I keep my job, why is it that they withdraw my health insurance and no longer provide health insurance? Why do I not have a retirement program anymore? That is what working people face every single day. They get out of bed, many of them work two jobs, they work hard, trying to do the right thing, and they discover the folks at the very top are getting by with really huge incomes.

By the way, last year the top income from a hedge fund manager was $3.6 billion--$3.6 billion--and they pay a 15-percent top income tax rate. Isn't that unbelievable? By the way, they don't even pay that, in most cases, because they try to run their carried interests, as they call it, through tax-haven countries in a circumstance where they can defer compensation and avoid paying even the small 15 percent income tax rate. So when somebody comes home making $3.6 billion and the spouse says: How did you do today, honey? Well, pretty well. This month, I made $250 million. That is a far cry from what most American working people would understand or accept, in my judgment. When you see what is happening at the top compared to what is happening to the rest, there is something wrong with this economy.

Now, I have just described in some detail what happened to cause this subprime collapse. To most people--it is a term that is almost foreign--subprime lending. Yet much of it is at the root of the dramatic problems we now have: the failure of investments, the difficulty of all kinds of institutions that loaded up with this. Why did they load up? Because the people who sold these subprime mortgages put prepayment penalties in them. They loaded them with very low interest rates at the front end and then a reset to very high interest rates on the back end--in most cases, 3 years--and then put prepayment penalties in so you couldn't get out of it. So when they securitized it and sold the security upstream to the hedge funds and the investment banks, they looked at that and said: This is really good. We have a huge, built-in, high income from these mortgages, and the borrower can't get out of it because there is a prepayment penalty. That is why they paid premiums for it. That is why they all thought they were getting rich. It was unfettered greed. They all made money in the short term, and the American economy takes a giant hit in the longer term.

Finally, let me just say I don't think this is a case that is like all other cases. We are challenged in lots of ways on many different days here in the Congress. This is a different challenge. This country's economic future hangs in the balance, and the question is, Will we have the leadership? Will we exhibit the leadership to do this?

Mr. President, the answer has to be yes. We cannot decide no, maybe, maybe not. The answer has to be that this requires new, aggressive leadership. We have a Presidential campaign going on now, and I happen to support Senator Obama. I think it is critically important to look at the history and the record of the candidates to find out who is going to support the kinds of things that are necessary to get this country back on track.

I have talked previously a couple times about John Adams' description of trying to put a new country together when he would write to Abigail. He traveled a lot and was in Europe as they were trying to put this new country together. He would write to his wife Abigail and say plaintively in letters: Who will provide the leadership for this new country of ours? Where will the leadership come from? Who will be the leaders? Then in another one he would lament that there is only us--me, George Washington, Ben Franklin, Mason, Madison, and Jefferson.

In the rearview mirror of history, that was some of the greatest human talent ever assembled, and this country was given leadership. Every generation asks, where will the leadership come from? If ever there was needed new leadership to step forward and say we need a new way, not the old way, we need to put America back on track, to get our grip and our traction, it is now.

I think our economy is in significant peril. I know what happened to it. The question is, how do we fix this mess? How do we deal with the wreckage? I hope the debate we have--let me just say in this discussion about running for President, I have seen so much dishonesty with respect to the television commercials that have been run and the making of issues and about the phrases that are used. It is unbelievable to me. The one thing I will say I admire is that Barack Obama--whom I have campaigned with in this country--is talking about the future, about issues, and he is talking about raising up this country, which I think is so important at this point. We need that leadership now.

Mr. President, with that, I am going to speak later this week on some other issues. I wanted to talk today about the issue of the two points that I think have dramatically weakened this country: One, the salesmanship of the Financial Modernization Act. Eight of us--myself included--voted against that in the Senate, believing that it would damage this country, and indeed it has. Second, the arrival of George W. Bush, who decided he didn't believe in Government regulation. We now see the carnage and wreckage that has resulted from that. This country deserves better and will get better, in my judgment.

Mr. President, I would like to announce that the Committee on Indian Affairs will meet on Thursday, September 18 at 9:30 a.m. in room 562 of the Dirksen Senate Office Building to conduct a hearing to examine Federal declinations to prosecute crimes in Indian Country.

Those wishing additional information may contact the Indian Affairs Committee at (202) 224-2251.

Mr. President, I suggest the absence of a quorum.

Mr. President, we are on the Defense authorization bill, so I wanted to make a couple of comments, not about an amendment, but about two issues that I hope those at the Pentagon will take note of. Sometimes things don't change very quickly and sometimes they don't change at all with respect to the way things are done at the Pentagon.

When I came to Congress, I joined a military reform caucus to try to reform the way things are done at the Pentagon, but some folks there still believe there is an inexhaustible amount of money in pursuit of their desires. An example of that is the unmanned aerial vehicles, or UAVs--airplanes without pilots. It is a growing part of a number of services. But what is happening in both the Army and the Air Force is that both services are building and buying unmanned aerial vehicles in what I think are duplicative programs. One calls their airplane the Predator. The other calls it the Warrior. The folks over at the Pentagon can't determine who should be the executive agency that oversees the unmanned aerial vehicles. So you have two services doing essentially the same thing.

Who wants to fly at 12,000 or 20,000 feet above the battlefield with an unmanned aerial vehicle? Well, the Air Force does, but the Army would like to as well. So one builds a plane called the Predator and one builds a plane called the Warrior. They both have missions that appear to me to be duplicative. You have duplicate spending on research and development, duplicate spending on the airplanes themselves, duplicate spending on the missions inside the Pentagon. Who pays the cost? The American taxpayer. This is not new, but the competition inside the Pentagon shouldn't cause the American taxpayer to have to pay for inefficiency and duplication.

We have had discussions about this at hearings. It appears nothing is happening to describe what ought to happen. In this case it ought to be the Air Force who has the executive agency for UAVs. Former chief of the Air Force, Buzz Moseley, who I think was an extraordinary Air Force chief of staff, tried to resolve this and could not because he ran into the competition inside the Pentagon on this issue. My hope is the American taxpayer will not have to continue to pay for duplication of effort inside the Pentagon.

We all support this mission because it greatly helps our soldiers, but I don't support the kind of spending that unnecessarily duplicates efforts between the services. That certainly has been the case with respect to unmanned aerial vehicles.

I understand the Army wants to have--and should have--unmanned aerial vehicles above the battlefield at 1,000 feet to 2,000 feet. But if they are flying unmanned aerial vehicles at 12,000 and 20,000 feet with sensors, it seems to me that this is an Air Force mission. Yet we now have two branches of the service duplicating the effort and the American taxpayer pays the bill. I hope they will get this straight at the Pentagon so that we begin to avoid some of these duplicative costs.

One other issue I might mention is the issue of privatizing housing on our military bases. This started in the Clinton administration and continues through the Bush administration. The proposition is to take housing inside a military base that already exists and turn it over to a private contractor and say to the private contractor: We will give you this free of charge. You can own all of this housing. You sign a contract with us saying that you will maintain these houses for 50 years. Then we will pay soldiers a monthly housing allowance, they in turn will pay that to the private contractor, and everybody is happy.

The question is: What does this cost the American taxpayer? The military says: Well, it gets housing built more quickly because they will not only turn over existing housing stock free of charge to a contractor, but they will have the contractor build new housing and then fund it through the monthly housing allowances that soldiers hand over to the independent contractor.

It is interesting to me that we now have some foreign companies that own military housing on American military bases, and they get it by signing a contract saying we promise to maintain this housing for 50 years. Two of North Dakota's bases are now in a contract that presumably may get done next year.

I have raised a lot of questions about it because the way the Pentagon has calculated this, they say it is better for the Pentagon. What about the taxpayer? Is it better for the American taxpayer? How is it that we decide to turn over housing stock--much of which is almost brand-new--free of charge with a contract to a private company in exchange for a signature that they will maintain it for the next 50 years? It seems to me as though there are a lot of questions that have been unanswered, going back to the Clinton administration and through the Bush administration, that the American taxpayers ought to have answered. There ought to be a fundamental review of what is the total cost here, including depreciation taken by the private contractor and others. What is the total cost of this privatization of housing on our military bases? What is the total cost to the taxpayer?

I wanted to mention that in the context of the Defense authorization bill, because I think these are a couple of things that ought to be considered.

The Economy

Mr. President, the presentation the Presiding Officer just gave on the floor of the Senate reminded me that--I believe it was yesterday, or perhaps the day before--when it was announced that our trade deficit for the month was, I think, $62 billion, and nearly $25 billion of that was with the country of China. My colleague who just spoke is from Ohio. I was thinking about the continued growth of exports from China into our country, building up a very large trade deficit that we have with the rest of the world and especially with China. The State of Ohio has been especially hard hit. That is where they used to make Huffy bicycles and don't anymore because all of those Huffy bicycles are now made in China. All the Ohio workers were fired because they made $11 an hour plus benefits and that is way too much money, the company thought, to pay people working in a factory to make bicycles. So they all got fired. These bicycles are now made in China by people who work 12 hours a day, 7 days a week, for 30 cents, 40 cents an hour. By the way, I have described many times for my colleagues the last day of work with those Ohio workers after they were fired. On their last day of work they put a pair of shoes in the parking space where their car used to sit. So as they drove away, all that was left was a pair of shoes, and it was their plaintive way to say to that company: You can move our jobs to China, but you are not going to fill our shoes.

Many workers across this country are discovering the same fate. I have described--I won't today--but Fig Newton cookies. Apparently it costs too much to have people shovel fig paste in

New Jersey, so now when you buy them, you are buying Mexican food because it is made in Monterey, Mexico. Why? You can hire people for a whole lot less money in Mexico than you have to pay for workers in New Jersey. The list goes on and on and on. The unbelievable part of this is we actually, as a country--and this Congress, yes, provided a tax break to a company that says: I am going to fire my American workers and move the jobs overseas.

I have tried, I believe, four times on the floor of the Senate to offer amendments and get votes on amendments that would shut down the tax break for shipping jobs overseas. On each occasion, we have lost that vote. It is unbelievable to me. I mean, it is not as if I have colleagues who will stand up and say: Count me in for wanting to ship American jobs overseas, but that is exactly their position when they vote to continue tax incentives for companies who fire their American workers and go in search of 10-cent-an-hour labor. And yes, that exists. Yes, it exists, that workers in Ohio and elsewhere are told: If you can't compete with 12-year-olds who work 12 hours a day and get 12 cents an hour, tough luck, you are out of a job.

This country has not yet come to grips with the question of whether that is what we spent 100 years creating a competitive, international environment to compete with. Does that make sense, that we should ask American workers to compete with that standard? I don't think so. But I was reminded of it by my colleague from Ohio discussing what is happening.

Just this week, again, we see the unbelievable trade deficit for one single month, over $60 billion again, and that is money that has to be repaid. That is money that has to be repaid from our country and our taxpayers to a foreign government. It is one part of a whole series of things that reflect a very urgent situation for this economy.

You wake up this morning and you see another major investment bank is going to be sold. The prices for its stock have collapsed. You wake up last weekend and you hear the Treasury Secretary is preparing to take over, effectively, Freddie Mac and Fannie Mae. A couple of weeks ago, Bear Stearns goes belly up. The largest mortgage banks go belly up. We see the largest trade deficits in history, the largest budget deficits in history, and a fiscal policy that is completely off the rail. We have a Presidential campaign, and we wake up every single day and we see these unbelievable attacks: Lipstick on a pig. Who are you offending? It is unbelievable to me.

Ours is a country that I think is being threatened to lose its dominance in the world on critical issues, including trade, fiscal policy, energy, and a whole series of issues. Yet, somehow, if you want to speak seriously about policy, you get interrupted by a bunch of shysters who have decided that they want to hijack the political system to talk about irrelevancies. It is unbelievable to me.

I came from a forum that we are holding on energy. Energy is a very important issue, and it appears to me the tipping point was finally $4 a gallon for a gallon of gasoline. It ran up double in a year, from July to July. The price of oil and gas doubled in a year. There is no visible way for anyone to take a look at the numbers on supply and demand and say: Oh, that was justified. We understand why the price doubled in a year. That evidence doesn't exist, by the way. There is no one who can come to the floor of the Senate and say: Well, I know why the price of oil doubled in a year and the price of gasoline doubled in a year; because nothing happened in that year with respect to supply and demand that justified it.

What I think happened is what has happened in so many years of our Government. Regulators who are brain dead, flat out asleep like Rip Van Winkle, while everything is happening around them, decided we are not going to watch, so speculators took over the oil market and drove it straight up. Recently it has come back down because some of that same speculative money, just like a hurricane, came right back out of it.

It is not only in this area. It is in the subprime mortgage area. Regulators--again, completely brain dead--and I am sure they watched television in the morning, perhaps while they ate some Grape Nuts at the kitchen table, and they saw some advertisements by the mortgage bankers and others that said: Hey, have you been bankrupt? Do you have bad credit? You can't pay your bills? Come to us, we have a mortgage for you. We have all seen those ads over and over and over again. Guess what. Those ads were a reflection of what was going on in an industry, right under the noses of regulators who didn't seem to care, in which they built an unbelievable system of bad mortgages and paired them with some decent mortgages, slicing them up into securities. It is like when they used to pack sawdust into sausage and then sliced and diced them, and then, by the way, because they had this carnival going on, they securitize all of these mortgages, move them up the line into hedge funds all over the world, and then somebody decided one day: You know what? These are bad mortgages. We don't even know who has them. We don't know where they are in these securities.

Why were they bad mortgages? Well, because regulators didn't seem to care and there were advertised mortgages that said: If you have bad credit, come to us. By the way, here is the mortgage we will give you. We will give you a mortgage where you don't have to pay any principal for a long time; just pay interest only. You may not want that. We will give you a better mortgage than that. We will give you a mortgage where you don't have to pay any principal and you don't have to pay all of the interest. You can put the principal and some of the interest on the back side of your loan. In fact, if that doesn't satisfy you, to get a mortgage from us at a teaser rate where you don't have to pay any principal and you don't have to pay all of the interest, we have even a better deal for you. You can get what we call a no documentation loan. We won't require that you document income. Or, you can get a partial doc--no doc, partial doc--no interest, no principal. In fact, one company said: You know what? You don't have to pay any principal or any interest. We will make the first 12 payments for you.

Now, is it surprising that an industry that was built on a foundation of greed, by brokers making big fees, putting mortgages in the hands of people with teaser rates who could not possibly afford to make the payments 3 years later when the interest rates were reset--is it surprising that the tent collapsed when mortgages began to reset and people couldn't possibly afford to make the payments? We have people walking around here scratching their head in this town wondering what on Earth happened. Where were the smartest guys in the room on Wall Street? Where were the smartest guys in the room who were securitizing these securities and sending them up the road so everybody could make money on the way, understanding that even as they locked in these mortgages with no documentation, no principal payments, perhaps no interest payments, or at least only partial interest payments, the little key on the bottom of the contract was: Prepayment penalties. Sign this line and you can't get out of it. Then, when the interest rates reset to triple or quadruple what they were and you can't make the payment, we are sorry, you can't get out of it.

That is what allowed the big shots to price these mortgages with respect to their expectation of future income in the way they did. But is it a surprise that this whole thing collapsed? That is just one more example, and it has happened in energy with speculation and in virtually every area with regulators who decided they have no interest in regulating. Now we bear the cost of an economy that almost seems, to some, in free fall.

We have massive problems with a trade policy that doesn't work. It continues to ship jobs overseas and to load the American people with massive quantities of debt that must be repaid. We have a fiscal policy that the President says is only about $400 billion, $450 billion offtrack. But, of course, that is not true. He knows that.

The question is, How much do you have to borrow in the coming fiscal year? That is closer to $700 billion. So you have a total of over 10 percent of the country's GDP that represents red ink for this year alone, trade and fiscal policy debt. We can add to that the massive problem in energy. I will talk about that for a moment.

I have talked about speculation and the role of the speculators and of the regulators who didn't want to watch. Now we are having summit meetings and substantial angst about what we do to put this back on track. My interest is in doing a lot of everything. In my judgment, we should drill, and drill more. I have had a bill introduced for a year and a half that opens the eastern gulf to drilling. In fact, all the gangs and the folks who are talking about these things on the Senate floor don't want to open that. As you can see on this chart, this is water off of Cuba that will be leased. There are 500,000 barrels of oil a day in this water off Cuba that is being leased. The Canadians are leasing, Spain is leasing, and we cannot lease because our oil companies cannot do anything in this area because of the embargo against Cuba.

That is absolutely absurd. We ought to drill. We ought to conserve. We ought to take everything we use every day--appliances and lights-- and we ought to make them all efficient. We are moving quickly in that area.

Finally, we have to move dramatically in the area of renewable energy. Every 15 years, it ought not be a surprise that we huff and puff and thumb our suspenders and bloviate about what we are going to do next, about where we are going to drill next. How about something that is game changing? How about we change it so in 15 years from now we are not saying the same things and that we are moving toward hydrogen fuel cell vehicles? Seventy percent of the oil we use is in our vehicles. It is a huge part of our consumption of oil.

To back up just a moment, we suck 85 million barrels a day out of this planet, and one-fourth of it is used in the United States. We have an appetite for one-fourth of the oil produced every day. Sixty-five percent of the oil comes from off of our shores, from Saudi Arabia, Kuwait, Venezuela, Iraq, and elsewhere. The fact is, we have to find a way to be less dependent upon foreign oil. We are always going to use oil and coal. We have to use it differently, in my judgment.

But the question for us is, what do we do that is truly game changing? How about hydrogen fuel cell vehicles, and before that perhaps electric drive vehicles. Hydrogen is everywhere. You can take energy from the wind and produce electricity and use electricity in the process of electrolysis and generate hydrogen from water and use hydrogen for vehicle fuel. You will get twice the effective power to wheel and put water vapor out of the tailpipe. Wouldn't that be wonderful?

We are not going to have game-changing strategies if every 15 years the next effort on energy is to figure out where we drill next. Let's drill next, but let's do something that makes us less dependent on the need for this oil, particularly oil coming from outside of our country.

It is, I expect, pretty depressing for the American people who have the miracle in our Constitution of every second year, every even- numbered year, being able to grab the American steering wheel and decide which way to nudge America.

All the power in this country is in the power of one--one person casting one vote on one day. It must be pretty disappointing to them to take a look at the quality of the debate in our political system at a time when the economy of this country is at risk, when there is so much to do and an urgent need to make strong, good decisions, and see the irrelevancy come out every single morning, particularly from one campaign. This country deserves much better.

I hope between now and this election we will begin to see the attack dogs that we saw at work in 2000 and 2004, which defined a new low in American politics. In 2004, one of our colleagues who earned three Purple Hearts in Vietnam, went to Vietnam and served his country, was defined by the attack dogs as someone who was less than patriotic. That was unbelievable. But that same effort is at work in this campaign. This country deserves a political system and campaigns that give them answers. Where would you take America? Where would you want to lead this country?

I must say we only have less than 2 months remaining, and the long- term future of this country depends on us making good, right decisions about energy, fiscal policy, health care, and education, and about so many different issues, including trade policy, which is the discussion I started with.

Mr. President, I started by speaking of Ohio and trade policy because my colleague, Senator Brown from Ohio, has written a book about trade, and we talked a great bit about it. It is but one of a series of very serious challenges that he, I, and others should expect will be discussed in some detail in this campaign. So I hope in the next 60 days we will begin to see some of that.

I suggest the absence of a quorum.

Would the Senator from Oregon yield?

Mr. President, I ask unanimous consent that I be recognized following the presentation from the Senator from Oregon.

I ask unanimous consent that the order for the quorum call be rescinded.

Yes.

I would expect to be about 15 minutes. Is there some intervening business the Senator wishes to conduct?

I thank Senators Levin and Warner for their leadership on the Defense authorization bill and the Armed Services Committee which brings to us the Defense authorization bill. They held a hearing on the subject of Iraq contracting at one point in their committee, and I went to testify before that hearing. It is interesting that at that hearing my testimony about a range of issues with respect to subcontractors doing contracting in Iraq was contradicted by an Army general. That Army general is now under investigation because it is anticipated that Army general did not provide truthful testimony to the committee. One of the things I wanted to talk about today was about the issue of profound waste of money with respect to Iraq contracting. But then I want to talk about how much money we have committed and how much we have appropriated and, for that matter, authorized to Iraq at a time when the special inspector general for Iraq tells us that that country is pumping out about 2 million barrels of oil a day, selling it on the open market, amassing substantial cash for their own country, and the Iraqi treasury is now expected to have a surplus of around $50 billion. The Government of Iraq is accumulating a surplus of about $50 billion currently, and it is estimated to be $79, perhaps $79 billion by the end of the year.

Contrast that with this country. Iraq is pumping oil, 2 million barrels a day, selling oil. We go up to the gas pump and put gas in our cars and pay money that ends up in Iraqi banks. In fact, that Iraqi money is in the Federal Reserve Bank in the United States. Meanwhile, Americans are paying high prices for oil, part of which ends up in Iraqi coffers, and Iraq has about $50 billion, while we are up to our neck in debt. It is unbelievable. We have a fiscal policy that is wildly out of control. We are going to borrow $600 to $700 billion this year. We are spending money for reconstruction in Iraq.

Let me show a picture of something called the Whale. The Whale is a facility that has been built in Iraq, and it is a facility called the Kahn Bani Sa'ad prison. If we take a look at this picture, we see bricks falling all over, an unbelievable mess. This doesn't look like a building. It looks like a construction site that is under substantial disrepair.

Let me tell the story about the Kahn Bani Sa'ad prison. Our Government told them that they had to build this prison. We are going to build this with American money. The Iraqi said: We don't need this prison. We won't use this prison. If you are going to build it, it is built in the wrong location, but we don't want this built.

The American Government said: We are going to build this prison. They contracted with Parsons Corporation for $30 million. My understanding is that after spending $30 million, they actually got rid of that contractor and brought another contractor in and spent another $10 million. Here it sits. They call it the Whale. It sits on the sands of Iraq, paid for with American taxpayer money, never used, will never be used. It is shoddy construction,

bricks are falling apart. It is unbelievable. It is a hood ornament on incompetence in my judgment, the Whale.

How much more of this should we do? I have spent a career on the Senate floor talking about how miserable the oversight has been with respect to these contractors. Here is one small but illustrative example. A contractor was supposed to be buying towels for the troops, little hand towels, Kellogg, Brown & Root, a subsidiary of Halliburton, buying hand towels for the troops. Henry Bunting, a purchasing employee, is told: Buy hand towels for the Army. So he orders some white hand towels.

His supervisor said: You cannot do that. You have to buy hand towels with ``KBR'' embroidered on them, the name of the company.

He said: That will triple or quadruple the price of these towels.

His supervisor said: That doesn't matter. This is a cost-plus contract. The taxpayers will pay for that.

So the towels ordered for American troops were towels with ``KBR'' embroidered on them--Kellogg Brown & Root--at triple or quadruple the cost to the American taxpayer.

There were $85,000 trucks left behind to be torched--brandnew $85,000 trucks left beside the road in Iraq to be torched--because they had a flat tire, they did not have a wrench to fix it, or had a plugged fuel pump and they did not have the tools to fix it. These weren't dangerous areas where there was a concern about being attacked. These were pacified areas where a repair could have been made. But the decision was to just have the truck torched, because taxpayers could just buy new ones.

You think these are stories that are wild? No. That is just the beginning. I have held 17 hearings on it.

I say to Senator Warner, he will recall the day I came to the committee and testified about this issue. He will recall a General Johnson who testified just after me and said: Senator Dorgan is wrong about this. Then he told you what he thought the truth was. It turns out he deceived the committee.

That General Johnson is now under investigation by the Secretary of Defense. I asked the Inspector General to look into the testimony--my testimony and his. Several weeks before General Johnson came before the Armed Services Committee, the Inspector General had furnished a report, an interim report, to the military saying exactly the opposite of what General Johnson told the Armed Services Committee.

I appreciate the fact that Senator Warner held that hearing, and I also appreciate the fact that Secretary Gates is now investigating because, if anything, we desperately need people who come to this Congress to testify to tell the truth and not deceive the Congress. That particular issue was a water issue that was providing water--this was Halliburton and Kellogg Brown & Root providing water--to the military bases in Iraq. The allegation has been since sustained, by the way, by the inspector general's report.

I say to the Senator, you were the chair of the hearing

Mr. President, that particular issue was the provision of water to the military bases in Iraq. We discovered the nonpotable water that was sent to the bases for showering, shaving, brushing their teeth was twice as contaminated as raw water from the Euphrates River because the contractor was not doing its job and not testing the water.

Well, I will not go on. I could go on at great length talking about the unbelievable waste. But what I do want to say is this: In recent months, what we have discovered is that in the county of Iraq they are amassing a very substantial amount of money. At the moment, we believe it is $50 billion and expected to grow to $79 billion in budget surplus in their bank accounts by the end of this year.

It seems to me from an infrastructure standpoint it is time--long past the time, in fact--for Iraqis, who have money in the bank--and a lot of it--to begin providing their own needs and infrastructure and investment. It is interesting to me and somewhat depressing, I would say, that in this year we are building somewhere close to 950 water projects in the country of Iraq. Let me say that again: about 950 water projects in the country of Iraq--with American taxpayers' money at the same time the President has recommended that we cut $1 billion out of water project investment in this country. It does not make much sense to me.

Now, here is what I propose. There are three accounts for which we have appropriated American taxpayers' dollars in which a substantial amount of that is as yet unspent and, in fact, a substantial amount unobligated. I believe when we have some billions of dollars that have previously been appropriated but are unobligated, that at this point-- given the fact that Iraq has substantial surpluses and we have substantial deficits, given the fact that we have spent somewhere now over two-thirds of a trillion dollars in the pursuit of the war in Iraq and Afghanistan, and so much of it has been infrastructure investment in addition to replenishment of the military accounts--I believe it is time for us to take at least a baby step and say: Do you know what. With respect to that which has been appropriated but is yet unobligated, it is time to ask the Iraqis to pay for the cost of this with their surplus that sits in a Federal Reserve bank.

Now, let me provide some evidence of all of this.

The New York Times of August 6, that is last month:

Soaring oil prices will leave the Iraqi government with a

cumulative budget surplus of as much as $79 billion by year's

end, according to an American federal oversight agency. But

Iraq has spent only a minute fraction of that on

reconstruction costs, which are now largely borne by the

United States.

Does this make sense? Does anybody think this makes sense? We are deep in debt. They have massive cash reserves they are building every single day by pulling up 2 million barrels of oil and selling it on the market, and we are told we should keep paying for these costs? It does not make much sense to me.

A Government Accountability Office report to Congress from last month:

[From 2005 to 2007], the Iraqi government was unable to

spend all the funds it budgeted, especially for investment

activities.

I am not talking about the surplus now. The surplus is that which is over the amount of money the Iraqi Government was going to spend. They could not spend the amount of money they decided to spend, and yet they have accumulated large surpluses beyond that.

Significant amounts of unspent money from the 2006 and 2007

Iraqi budgets remain available for further infrastructure

investment by the Government of Iraq.

That is from the Special Inspector General for Iraq Reconstruction Report to us dated July 30.

Iraq Deputy Prime Minister Salih said, as noted in the special inspector general's report to Congress on July 30:

Iraq does not need financial assistance.

``Iraq does not need financial assistance.''

This is just another example of that which I have held 17 hearings on. This is an April 30, 2006, article:

A $243 million program led by the United States Army Corps

of Engineers to build 150 health care clinics in Iraq has in

some cases produced little more than empty shells of

crumbling concrete and shattered bricks cemented together

into uneven walls. . . .

This is a picture of a man named Judge Al Radhi. Judge Al Radhi was selected by us, by the Coalition Provisional Authority, by Mr. Bremer, to be the Commissioner of Public Integrity in Iraq. He found $18 billion of graft and corruption. He found examples where we appropriated money for Iraq to buy airplanes, warships, and tanks, and there are no airplanes, warships, and tanks purchased with that money. The money is gone, but the equipment does not exist. By the way, one of the Ministers from the Government is now living in a plush place overseas, and the money apparently is in a Swiss bank. This man, by the way, was not even supported by our own State Department. Eventually, the Iraqi Government wanted to get rid of him, and they did. A substantial number of the people who worked for him were assassinated. They tried to kill him a couple of times. He came. He had the courage to come and testify before a committee

hearing that I requested before the Senate Appropriations Committee.

He said $18 billion was taken--most of it American money. He talked about the Ministers who took it and where they are now and the tanks and ships and planes that were supposed to have been purchased with our money that did not exist. The money is gone. The equipment does not exist.

Well, Mr. President, that is a long way of saying that, obviously, I am impatient about all of these issues, having held a lot of hearings on all this. My colleague, Senator Levin, has spoken of this issue often, recently, and going back some long while on the subject of who should bear these costs.

If the Iraqi Government has substantial amounts of money in bank accounts in surplus--$50 billion now and $75, $79 billion by the end of the year--should they not bear the cost of some of their own reconstruction rather than continue to ask--after 5 long years--the United States, which is deep in debt, to have to bear this cost and bear the burden? The answer clearly is yes. We ought to ask Iraq to do more.

Now, I am going to offer an amendment. I am not asking us to take a giant step. But let's at least take a baby step in the right direction, a reasonable step toward common sense, to say: Do you know what. We are off-track in fiscal policy. We have an unbelievable mess, and it is time to start taking a look at some of this spending and using a deep reservoir of common sense on this issue. At this point in time it is reasonable for us to say if the county of Iraq is selling 2 million barrels of oil a day, amassing very large amounts of surplus in their treasury, we ought to be relieved of the burden of using American money to build infrastructure in Iraq that could easily, and should be, built with Iraqi money.

It is not the case of us abandoning the Iraqi Government. But it is the case of saying we ought to expect them to do for their own, which they can. Again, I just refer to the comment that was made by the Deputy Prime Minister of Iraq, who said:

Iraq does not need financial assistance.

That ought to be an invitation, finally, at long last, for us to use some common sense in the way we begin to address these issues.

There are appropriated funds that are as yet unspent and unobligated. It seems to me appropriate for us at this point to begin to look at finding ways to decide that those funds, rather than being spent and burdening the American taxpayer, should be covered by the surpluses that exist in bank accounts with the name of the county of Iraq on the account.

Mr. President, I intend to work with my colleagues on the amendment I will offer. But I did want to describe the reason for it today. I appreciate very much the time offered to me by the chairman and ranking member.

Mr. President, if I might just make an observation, let me also thank Senator Warner from Virginia for his work on this, and the Senator from Michigan, and say that this publication--and I know the two of you have been very supportive of it--by the special inspector general for Iraq--this is dated July 30, so it is 2 months ago, a month and a half old. This publication has some unbelievable information in it about what is necessary, what kinds of expenditures exist in the major reconstruction accounts. There is at the moment $7 billion in the three reconstruction accounts that is unspent and unobligated.

As I move this amendment, I wish to work with both of you to see if we can construct the amendment in a manner that meets your needs and my needs because I believe this will make real progress.

Again, I thank both the chairman and the ranking member for their work on these issues. I am well aware of the letter they wrote some months ago.

Mr. President, if the Senator will yield for a question or comment, I think the special inspector general, Stuart Bowen, has done a terrific job. I would commend all of my colleagues to take a look at the reports the special inspector general has issued. They are unbelievably valuable to us.

The Senator is correct. There were some who were pushing very hard to eliminate the special inspector general, and it was the fight waged by Senator Levin and Senator Warner to say that would not make sense at all. So I appreciate the work of Inspector General Bowen, and I appreciate the work of my colleagues.

Exhibit 1

U.S. Senate,

Committee on Armed Services,

Washington, DC, March 6, 2008.

Hon. David M. Walker,

Comptroller General of the United States,

Washington, DC.

Dear Mr. Walker: Nearly five years ago, on March 27, 2003,

then Deputy Secretary of Defense Paul Wolfowitz, in testimony

before the Defense Subcommittee of the House Appropriations

Committee, was asked whom he expected would pay for the

rebuilding of Iraq. He answered that ``there's a lot of money

to pay for this. It doesn't have to be U.S. taxpayer money.

And it starts with the

assets of the Iraqi people . . . the oil revenues of that

country could bring between 50 and 100 billion dollars over

the course of the next two or three years. . . . We are

dealing with a country that can really finance its own

reconstruction and relatively soon.''

In fact, we believe that it has been overwhelmingly U.S.

taxpayer money that has funded Iraq reconstruction over the

last five years, despite Iraq earning billions of dollars in

oil revenue over that time period that have ended up in non-

Iraqi banks. At the same time, our conversations with both

Iraqis and Americans during our frequent visits to Iraq, as

well as official government and unofficial media reports,

have convinced us that the Iraqi Government is not doing

nearly enough to provide essential services and improve the

quality of life of its citizens.

According to the U.S. Department of State's Iraq Weekly

Status Report for February 27, 2008, the Iraq Oil Ministry

goal for 2008 is to produce 2.2 million barrels per day

(MBPD). To date through the 24th of February, the 2008 weekly

averages have ranged from a low of 2.1 MBPD to a high of 2.51

MBPD, missing that goal for one week only. Exports are over

1.9 MBPD, with revenues estimated at $41.0 billion in 2007

and $9.4 billion in 2008 year to date.

Extrapolating the $9.4 billion of oil revenues for the

first two months of 2008 yields an estimate of $56.4 billion

for all of 2008. And that figure will probably be low given

the predictions for oil prices to continue to rise over the

coming year. In essence, we believe that Iraq will accrue at

least $100.0 billion in oil revenues in 2007 and 2008.

We request you look into this matter and provide answers to

the following questions:

What are the estimated Iraqi oil revenues each year from

2003-2007?

How much has Iraq and the United States, respectively,

spent annually during that time period on training, equipping

and supporting Iraqi security forces, and on Iraq

reconstruction, governance, and economic development?

What are the projections for oil revenue and spending for

2008?

What is the estimate of the total Iraqi oil revenue that

has accumulated unspent from 2003-2007, and the expected

estimate at the end of 2008?

How much money does the Iraqi Government have deposited, in

which banks, and in what countries?

Why has the Iraqi Government not spent more of its oil

revenue on reconstruction, economic development and providing

essential services for the Iraqi people?

Your assistance in this matter would be appreciated.

Sincerely,

John Warner,

Member.

Carl Levin,

Chairman.

Madam President, the bill on the floor of the Senate is the Defense authorization bill. It has much to do about the security of this country, talking about ``defense.'' Tomorrow will be the seventh anniversary of the attacks on September 11, 2001.

I was sitting here thinking that on that morning at 9 o'clock, I was part a regular Tuesday morning meeting of the Democratic leadership here in the Capitol Building. We saw on television what happened to the trade towers in New York. We heard the television reports, and then we saw the plume of smoke come from the Pentagon. Then someone from security rushed into the room and indicated they felt there was an incoming plane to strike the Capitol Building, and we were very quickly evacuated. That was 7 years ago tomorrow.

Standing in the beautiful morning sun that day looking up into the sky and seeing F-16 fighter planes flying air cover over the Capitol of the United States was a pretty remarkable sight, knowing our country had been attacked. Then in very short order we discovered who attacked our country that day, who attacked the World Trade Towers, who attacked the Pentagon, who brought down the plane in Pennsylvania. We discovered it was a group called al-Qaida and a leader named Osama bin Laden who not only plotted the attack but boasted and took credit for the attack. That was 7 years ago tomorrow.

Because we are talking about national security in the Defense authorization bill, I wanted to call my colleagues' attention to the fact that on August 12, 2008, a speech was given here in Washington, DC, by the National Intelligence Officer for Transnational Threats. He addressed the Washington Institute Special Policy Forum. What he said in many ways tracks with what we heard last summer from the National Intelligence Estimate.

Let me put up a chart with some words from the National Intelligence Estimate because it is relevant to what we are talking about here on the Defense authorization bill, that is, defending our country, keeping America free. Here is what last year's July 2007 National Intelligence Estimate says. This is the declassified version of what had previously been and what was a classified intelligence estimate:

Al-Qaida is and will remain the most serious terrorist

threat to the homeland . . . we assess the group has

protected or regenerated key elements of its homeland attack

capability, including: A safe haven in the Pakistan Federally

Administered Tribal Areas, operational lieutenants, and its

top leadership.

Think of that. In July 2007, 6 years after America was attacked by Osama bin Laden, and our National Intelligence Estimate was telling us that organization has regenerated its leadership, has developed new training camps, has, in fact, a secure hideaway. This says ``safe haven.'' Can you imagine? Now it is 7 years after the attack, and our intelligence community still says those who boasted of murdering thousands of innocent Americans have a ``safe haven.'' There ought not be an acre of ground on this planet that is safe for those who murdered those innocent Americans 7 years ago tomorrow.

Let me read what was said by Mr. Ted Gistaro, who is the National Intelligence Officer for Transnational Threats. Here is what he said in August:

Al-Qaida remains the most serious terrorist threat to the

United States. We assess that al-Qaida's intent to attack the

U.S. homeland remains undiminished. Attack planning

continues. In spite of successful U.S.-allied operations

against al-Qaida, the group has maintained or strengthened

key elements of its capability to attack the United States in

the past year.

This from our intelligence community.

Finally:

Al-Qaida has replenished its bench of skilled midlevel

lieutenants capable of directing global operations. It now

has many of the operational and organizational advantages it

once enjoyed across the border in Afghanistan. Al-Qaida is

identifying, training, and positioning operatives for attacks

in the west, likely including in the United States.

All of this from top intelligence officials in our country. Seven years after we were attacked by those who boasted about engineering and planning the attack to murder innocent Americans, those who have promised to do it again, we are told by our national intelligence folks that they have regenerated their capability, they have resurrected their training camps, they are recruiting new recruits to al-Qaida, and that the most significant threat to the United States is al-Qaida, the most serious terrorist threat to our homeland.

Now, I don't understand. We are, of course, bogged down in a lengthy war in the country of Iraq. Iraq did not attack our country on 9/11/ 2001; al-Qaida did. We are bogged down in a war in Iraq. We see Afghanistan slipping through our fingers with the resurrection of the Taliban. And even more important, we are told that the most serious threat to our country--we are told by intelligence estimates--is al- Qaida, which is growing in strength. So here we go again.

In August of 2001, the Presidential daily brief said that Osama bin Laden wanted to:

Bring the fight to America; wanted to conduct terrorist

attacks in the U.S.; wanted to retaliate in Washington;

wanted to hijack a U.S. aircraft.

The August 2001 intelligence briefing to President Bush talked of ``Patterns of suspicious activity in this country consistent with preparations for hijackings or other types of attack.'' It said that ``The FBI is conducting approximately 70 full field investigations throughout the United States that it considers bin Laden related.''

That was August of 2001. Seven years later, the greatest threat to our country is al-Qaida and its leadership. That is unbelievable to me. And we see, beginning last year--and I have shown my colleagues this before--beginning last year, September 11:

Al-Qaida's Return. The Terrorists Have a Sanctuary Once

Again.

October 3 last year:

Pakistan seen losing the fight against the Taliban and al-

Qaida. Military officials say the insurgents have enhanced

their ability to threaten not only Pakistan, but the United

States and Europe as well.

The same article says:

Pakistan's government is losing its war against emboldened

and insurgent forces, giving al-Qaida and the Taliban more

territory in which to operate and allowing the groups to plot

increasingly ambitious attacks.

CIA Director Hayden, on ``Meet the Press'' this year, just months ago, said this:

It is very clear to us that al-Qaida has been able, over

the past 18 months or so, to establish a safe haven along the

Afghanistan-Pakistan border area that they have not enjoyed

before; that they are bringing operatives into that region

for training.

I have flown over that area in an airplane. You can't see a border. I understand you can't distinguish between Afghanistan and Pakistan. You look down and see mountains and you see rugged terrain. You don't see any kind of border. I understand how difficult it might be to deal with al-Qaida in that region. What I don't understand is why it has not been the singular priority of our country to bring to justice those who planned the attacks against our country on 9/11/2001. And if someone says it has been a priority, show me the evidence. Seven years later and we have ``safe havens'' or ``secure areas,'' both terms used by our intelligence to describe areas of the ground on this planet where it is safe and secure for al-Qaida to recruit new soldiers, to train new soldiers, to plan new attacks against our country. That is unbelievable.

In my judgment, it must be a priority for us to deal with the most serious threat to our homeland. That is

not my assessment, that is the assessment of the CIA Director and it is the assessment of the National Intelligence Estimate. That simply must be a priority.

In August 2001 the intelligence community said ``Bin Laden is determined to strike U.S.'' That is what we knew. That is what U.S. leaders we were told in the intelligence briefings. In July 2007 the intelligence community told us: ``Al-Qaida better positioned to strike the west.'' One would have hoped, with the hundreds and hundreds of billions of dollars we have spent in defense of this country and in this country's national security interests, that one of the major priorities would have been to bring to justice those who plotted the attack of 9/11/2001. Regrettably, that has not been the case.

I hope very much, as we pass this legislation, that things will change. We have very big challenges. A terrorist threat exists. It is serious. It is relentless. It seems to me we will best be served not by moving--as we have now for 5 years--our money, our effort, our treasury, and the lives of our soldiers to continue the war in Iraq but, rather, by addressing the worsening condition in Afghanistan and addressing the question of why we have not brought to justice Osama bin Laden and the al-Qaida leadership that is in a safe or secure sanctuary in the Pakistan border area.

Now, Madam President, this country has a lot at stake, and the fight against terrorism is a real fight. We have made a lot of very serious mistakes in the last years. Mistakes aren't Republican or Democratic, they are just mistakes our country has made. We are bogged down in a long, difficult war in Iraq. We have spent $20 billion training Iraqi soldiers and police forces. We have trained half a million people in the country of Iraq. We have spent $20 billion doing it. We have spent two-thirds of a trillion dollars in that war, and yet we are told we must remain in Iraq because the Iraqi people aren't capable of providing for their own security. We have trained half a million of them. If able-bodied Iraqis don't have the will to provide for security in Iraq, this country can't do that forever. It is their country, not ours. It is their responsibility, not ours.

This country was diverted to Iraq when, in fact, this country should have been in a position where, 7 years after the 9/11 attack of 2001, we wouldn't be describing Osama bin Laden and al-Qaida as the greatest threat to the homeland. But that is what has happened. We can't change what has happened, but it seems to me what we can change is what we are determined to do about it in the future.

It is my hope, as we discuss in some detail our national security and defense, the authorization of Defense expenditures, that we will decide this is not Osama bin Forgotten; this is Osama bin Laden, who threatens this country, who is the most significant threat to our homeland, and who is resurrecting training camps and recruiting new soldiers for al- Qaida. It is our responsibility as a country to address that and to address it now.

Madam President, I yield the floor.

The Senator from Florida.

Department of Interior IG Report

Madam President, I ask unanimous consent that Jon Cary, a military fellow from my office, be granted the privilege of the floor during consideration of the Defense authorization bill.

Mr. President, I have been listening with great interest to my colleague from Arizona. I might say, before he leaves the floor, my hope is that after trying eight times and failing to pass a bill to extend the tax incentives for renewable energy, we will get a little cooperation from the other side in the coming weeks to begin the first step of what we ought to have been doing easily, and that is pass the tax extenders to encourage renewable energy.

One of the reasons they have opposed it is because we actually pay for it. One of the ways we pay for it is to say to hedge fund managers, who are only paying a 15-percent income tax rate anyway, that they cannot be running their income through foreign tax-haven countries as deferred compensation to avoid paying U.S. taxes. Because the other side is upset with that as a pay-for the tax extenders for renewable energy, eight times they have blocked our ability to extend renewable energy tax credits, which is a way of substantially expanding our country's homegrown energy.

It is interesting for people to comment on the floor and say we need more cooperation, when eight times we have tried to extend these tax incentives for renewable energy, and eight times we have been blocked by those who are concerned about protecting the ability of wealthy hedge fund managers to avoid paying Federal income taxes. Enough about that.

With respect to drilling, I was one of four Senators--two Republicans, two Democrats--who opened the 8.3 million acres called lease 181 in the Gulf of Mexico. I have other legislation I have had in for a year and a half to increase substantial drilling. It is a canard for a number of them to come to the Senate floor to say Democrats don't support drilling. It is simply factually wrong. That is a debate perhaps for tomorrow or another day.

(The remarks of Mr. Dorgan pertaining to the introduction of S. 3454 and S. 3455 are printed in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')

Mr. President, since the Congress left in early August, much more has been written and much more explored with respect to the role of speculation in the oil futures market and what it has done to this country. The price of oil has come down some, which is good--from $147 a barrel down to $106 a barrel yesterday. It is still very high. Clearly, the role of speculators in running this price up in a year needs more investigation.

There are some who say: Well, there is no speculation. We have people who come to the floor of the Senate and say there is no speculation here. Well, of course, what has happened from July to July, last year to this year, is the price of oil and gasoline doubled in this country. And there is nothing that has happened with respect to the supply and demand for oil and gas that justifies the doubling of the price.

A Washington Post story by David Cho says: Financial firms speculating for their clients or for themselves account for about 81 percent of all the oil contracts on NYMEX. A few speculators are dominating the vast market for oil trading.

Wall Street Journal: Speculator in oil market is key player in real sector.

We are now beginning to understand what has been happening in that market. The Commodity Futures Trading Commission, which is supposed to be the regulatory body on behalf of the public interest, has been steadfastly proclaiming now for over a year that there is no speculation here, or at least speculation is minimal. Nothing is happening that is untoward. Don't worry, be happy. In my judgment, this is the work of a regulatory body that has decided it doesn't wish to regulate. Regulators are supposed to be referees. Let the market work, but when there is a foul, call the foul. The Commodity Futures Trading Commission not only doesn't wear a striped shirt, it doesn't have a whistle and it is not even at the game. It isn't even interested. They say: Well, there is no problem. Yet the evidence is all around us that there is a problem.

The investigative reports by the Washington Post and the Wall Street Journal confirm that a vast majority of the trading in the oil futures market is done by profiteering speculators with the market power to drive up oil and gas prices. These aren't people who want to ever have any oil. They don't want to buy a quart of oil or a 30-gallon drum of oil. All they want to do is trade paper and make money on oil futures contracts. As a result, I believe intense speculation has driven up the price of oil, double in a year, in a manner that was not at all justified.

In July, the Commodity Futures Trading Commission reclassified a very large trading firm from commercial to non-commercial. This fact was hidden deep inside the bowels of the Commodity Futures Trading Commission Web site. But for a couple of enterprising reporters, the American public would still be unaware of that. They reclassified a very large trader. My understanding is that trader, I believe, had somewhere in the neighborhood of 300 million barrels of oil in its contracts. The same trader on June 6 reportedly held oil futures contracts that were triple the amount of oil that consumers in this country use every day. By the end of July, 4 swaps dealers held one- third of the speculative oil futures contracts traded on NYMEX.

This information confirms what many of us already knew--that the CFTC was dead wrong--has been repeatedly dead wrong--when it was telling Congress this past year that supply and demand, not excess speculation in the oil futures market, was driving up oil and gasoline prices to record highs.

Now, in light of this, I believe Congress has a responsibility to address speculation. I know there are various groups forming around here to bring forth certain kinds of energy proposals, and I commend them all. I think they make a lot of sense. I think we ought to do all of or most of that which is being discussed--drill more, conserve more, produce much more in renewables, and address speculation. But there are some who are putting together proposals that decidedly leave out the issue of speculation. They leave it out. Why? Because they are getting pressure from the same special interests that have been speculating. The same big interests that helped drive up the price of oil and gas double in a year have prevailed upon some in this Congress not to touch them. Don't do anything.

We have a responsibility when we consider energy policy next week and beyond to talk about position limits that would wring the excess speculation out of these markets. The oil futures market is an important market. It is important for legitimate hedging of a physical product between producers and consumers. I fully understand that. But it is a broken market. It has been broken by excess, relentless speculation by those who are not hedging risk of a physical product. And we have a responsibility, I believe, to understand that the regulators, the Commodity Futures Trading Commission, and the assurances by these regulators have been discredited.

I think the conclusions trumpeted by the head of the CFTC, Mr. Lukken, that the wild increases in energy prices we have seen this past year are solely based on supply and demand is not the case. A study by an MIT economist this summer rebuts the claims of the CFTC that it is world demand, including demand by China and India, driving up prices. That is not true.

Since 2005, the rates of growth in world demand and Chinese demand have dropped some. Richard Eckaus, MIT Professor of Economics Emeritus, found in his study, which was published in June of this year, that the growth rate for world demand is less than 2 percent annually. He suggests the assertion by some that the drop in value of the U.S. dollar has played a big role in skyrocketing price is simply wrong. I believe the drop in the value of the dollar has played a role, but it is not a big role, and the MIT study demonstrates that.

Another study to be released this week looks at the flow of money into and out of the S&P Goldman Sachs commodity index in recent months, and that study has interesting conclusions. It finds that WTI crude oil future prices have risen and fallen almost directly related to the flow of investment money in and out of the energy futures market. When institutional investors poured more than $60 billion into the commodities market in January to May, the WTI price, West Texas Intermediate crude price, increased by $33 a barrel. When $39 billion was taken out by these investors, starting on July 15 through the end of August, the price began to drop. When speculators invest, the WTI price goes up; when they take money out, the price goes down.

One of the interesting things I wish to understand is where are the substantial losses from these speculators? Mr. Lukken, the head of the CFTC, suggests speculation isn't happening, against all the evidence that has now been published. But we know there is a dramatic amount of speculation. This chart shows the oil futures market taken over by speculators. In 2000, speculators accounted for just thirty-seven percent of the trades in the oil futures market, and now we are told it is 81 percent today 2008. The CFTC still says oil excess speculation isn't a problem.

My point this morning is simple: We should have, and will have, a debate on energy. The debate can be about yesterday or tomorrow. Those who say you can drill your way out of this, well, I think we ought to drill. I am all for drilling. But I think that is yesterday forever. If every 10 or 15 or 20 years we have folks around here in their loafers and suspenders bloviating about where we drill next, there is not much of a future in that, in my judgment.

What we need to do is change the whole game on energy and make us far less dependent on foreign sources of energy. Why should this country, with the strongest and best economy in the world, have its economic opportunity in the future dependent on whether Saudi Arabia, Kuwait, Iraq, Venezuela, or others will give us, or sell us oil? Sixty-five percent of the oil we need to run this economy comes from off our shores. That makes us unbelievably dependent. So, yes, let's drill here, but we are not going to drill our way out of this. T. Boone Pickens, who has been in the oil business for 40 years, says we are not going to drill our way out of this problem. I agree with that. But let me end where I started. He talks about solar and wind. I think we ought to do all those things. I think solar and wind have the capability to provide a substantial amount of additional energy

for this country. In order to do that we have to continue with the tax incentives for solar and wind. But we have had eight votes on it, and eight times the other side has blocked us in providing the incentives to provide dramatic new approaches for renewable energy. It makes no sense to me.

We said in 1916 that we want you to go looking for oil, and in fact we want you to look for oil and gas sufficiently that we will give you big tax breaks as you look and find oil and gas. So we put tax incentives in place. I wasn't here, of course, but we put tax policies in place nearly a century ago to say look for oil and gas and we will give you big tax breaks. Now, let's look at what we did for renewable energy. We put in place in 1992, 16 years ago, tax incentives for wind and solar and other renewable energy. They were short-term, fairly shallow tax incentives. They have been extended, short term, five times, and they have been allowed to expire three times. It is a pathetic response.

Even now, the current incentives die at the end of this year. They expire. We tried eight times to renew them and so far we have been blocked. Why? Because some of our colleagues are upset that one of the ways we pay for those is to shut down the tax scam being used by hedge fund managers to move their income through tax haven countries in something called deferred compensation to avoid paying even the minimal compensation to the Federal Government in taxes that they now pay. They get to pay already some of the lowest tax rates in America, at 15 percent, which I think makes no sense. But even so, many of them are trying to avoid U.S. taxes by using deferred compensation techniques to run it through offshore tax havens.

Our colleagues on the other side are so protective of that and believe, apparently, they should be able to continue doing that. They appear willing to shut down our ability to extend the tax credits for renewable energy in the long term for this country.

The plea for a little cooperation runs both ways around here. When I took the floor this morning, we had several colleagues talking about an interest in cooperation. I think there ought to be a lot of cooperation on everything. Let's start first with something that is going to shut down on December 31 of this year, and that is the incentives to continue and be more aggressive on developing renewable, homegrown energy, which reduces our need for foreign oil. Let us at least start to do that.

Mr. President, I believe my colleague is here to take the remaining portion of our time, so let me at this point yield the floor.