Floor Statements

Mr. President, I am pleased the Senate will vote on final passage of the FAA Air Transportation Modernization and Safety Improvement Act. This 2-year reauthorization of FAA's programs provides important funding increases and program improvements that will enhance the safety and efficiency of our Nation's aviation system. In so doing, it makes key investments in our Nation's aviation infrastructure and creates jobs with these investments.

Our global economy depends on the smooth and efficient movement of goods, services, and people from city to city and across international borders. A safe and efficient aviation system goes hand in hand with a strong economy. We are fortunate to have the best aviation system in the world, and we must continue to make the necessary investments and upgrades to keep it as such. The FAA reauthorization bill helps us to do this by addressing problems of capacity, congestion, and delays that have emerged to ensure our aviation system can adequately handle the projected growth in airlines passengers.

The FAA reauthorization bill will create much needed jobs by providing the funding and directives for safety improvements at our airports and in the aviation industry. For instance, the FAA is building two new air traffic control towers in Michigan: at Kalamazoo and Traverse City. The FAA is also repaving two runways and various taxiways at Detroit Metropolitan Wayne County Airport. The FAA is also constructing a new terminal building at Kalamazoo/Battle Creek International Airport, and it is designing a new building for aircraft rescue and firefighting and snow removal equipment at Pellston Regional Airport in Emmet County. These are much needed upgrades and will make flying into and around Michigan safer and easier.

A key component of this bill is to modernize our air traffic control system by building the Next Generation Air Transportation System, NextGen, of satellite-based navigation. The NextGen system will be more accurate and more efficient than the current radar based air traffic control system. It will also result in significant fuel efficiencies and time savings by allowing aircraft to fly more direct routes. This is good for the environment, good for air carrier's bottom line, and good for the flying public. This bill accelerates the process and moves the NextGen modernization process forward. The bill also provides flexibility to airports regarding how Airport Improvement Program funds can be utilized as well as studying ways to raise revenue for airport projects through a pilot program.

I will vote in support of the FAA reauthorization bill, and I urge its quick adoption and enactment.

Mr. President, today President Obama signed into law the Hiring Incentives to Restore Employment Act, H.R. 2847, which will help put Americans back to work. More must be done on to help fight the unacceptably high unemployment rate, and I hope we can soon address other factors holding back our recovery, and particularly that we make it easier for businesses to obtain the funds they need to survive and grow.

While we work in Congress to get people back to work, I also want to take a moment to focus on another benefit of today's new law.

The HIRE Act is a significant victory for law-abiding U.S. taxpayers, and a significant blow against those who dodge their responsibilities. The Permanent Subcommittee on Investigations, which I chair, has spent years investigating offshore tax abuses which together cost the federal treasury an estimated $100 billion in lost tax revenues annually. In addition to its provisions designed to help foster economic growth, the HIRE Act contains foreign account tax compliance provisions that represent a major new and positive development in the efforts to stop offshore banks from using secrecy laws to help U.S. taxpayers evade their taxes.

These offshore tax compliance provisions are the culmination of over a year's worth of study, debate, and drafting efforts to protect America's honest taxpayers. The drafting effort involved a host of Members of Congress from both the Senate Finance Committee and the House Ways and Means Committee, and the work drew upon multiple bills, including the Stop Tax Haven Abuse Act, S. 506, which I introduced with Senators McCaskill, Nelson, Whitehouse, Shaheen, and Sanders, and which Congressman Lloyd Doggett introduced in the House with 67 cosponsors. I would like to commend Senator Baucus and Congressman Rangel, in particular, for leading this drafting effort, and for involving us in producing a strong bill that President Obama is signing into law today.

This is a big bill, and its offshore tax provisions are complex. I want to provide some explanation of how this legislation is intended to work, both to guide the development of implementing regulations and to inform the courts of our legislative intent.

Section 501, ``Reporting on Certain Foreign Accounts,'' gives foreign financial institutions a choice. If those financial institutions hold U.S. investments of any variety--from U.S. treasuries to U.S. stocks and bonds to debt and equity interests in U.S. businesses--they must either pay a 30 percent withholding tax on their investment earnings, or disclose any and all accounts held by U.S. persons. The legislative intent behind this choice is to force foreign financial institutions to disclose their U.S. accountholders or pay a steep penalty for nondisclosure. The 30 percent will be withheld by a withholding agent in the United States before the funds are permitted to exit the U.S. financial system.

The reason for this strong approach was seen dramatically in hearings before the Permanent Subcommittee on Investigations. A July 2008 hearing, for example, showed how two foreign banks, UBS AG of Switzerland and LGT Bank of Liechtenstein, used a variety of secrecy tricks to help U.S. clients open foreign bank accounts and hide millions of dollars in assets from U.S. tax authorities. One 2004 UBS document indicated that 52,000 U.S. clients had Swiss accounts that had not been disclosed to the IRS. UBS estimated that those hidden accounts contained a total of about $18 billion in cash, securities, and other assets. In order to defer a criminal prosecution against the bank by the U.S. Department of Justice, UBS admitted that it had participated in a scheme to defraud the United States of tax revenues, paid a $750 million fine, and agreed to stop opening accounts that are not disclosed to the IRS. UBS also agreed to reveal the names of a limited number of U.S. accountholders, although the bulk of the 52,000 still may escape U.S. tax enforcement actions due to Swiss secrecy laws that continue to conceal their identities.

In order to avoid the 30 percent withholding tax, this new law will require each foreign financial institution to enter into an agreement with the Secretary of the Treasury to obtain and verify information which will make it possible for them to determine which of their accounts belong to U.S. account holders, report key information about those U.S. account holders, and comply with any request by the Treasury Secretary related to those U.S. accounts. The bill is written to end wide spread abuses. There are several issues that must be addressed in implementing this provision.

For instance, it is clearly intended that the definition of foreign ``financial institution'' be applied broadly, to include banks, securities firms, money services businesses, money exchange houses, hedge funds, private equity funds, commodity traders, derivative dealers, and any other type of financial firm that holds, invests, or trades assets on behalf of itself or another person.

The definition of ``account'' will cover not only traditional savings, checking, and securities accounts, but also debt and equity interests in hedge funds, private equity funds, and other types of investment firms.

The definition of ``U.S. person'' will apply to U.S. citizens, U.S. residents, and all types of U.S. businesses.

The purpose of the provision is to have foreign financial institutions look past the nominal owners of their accounts to identify the true beneficial owners. That means accounts which are held in the name of a foreign legal representative, agent, or trustee on behalf of a U.S. person, or in the name of a foreign entity, such as an offshore corporation, partnership, or trust, for the benefit of a U.S. person, must be disclosed to U.S. authorities.

Foreign financial institutions are to make use of all customer identification information about each account to determine whether the beneficial owners of the account are U.S. persons--including using all information gathered as a result of antimoney laundering and anticorruption requirements or efforts. So no foreign bank will be able to automatically determine that all foreign offshore shell corporations are foreign accountholders; they will have to look deeper to identify that corporation's beneficial owners and, if any beneficial owner is a U.S. person, to report that person's identity to the United States.

This approach is intended to remedy past IRS regulations which have allowed banks to treat all foreign corporations as foreign accountholders, no matter who the beneficial owner is. Our purpose here is to impose on foreign financial institutions the duty to identify the beneficial owners of each corporation and report any U.S. beneficial owners to the IRS.

Treasury, in implementing this statute, should develop a standard agreement for foreign financial institutions that lays out these requirements with respect to accounts, U.S. persons, and nominee accountholders. That standard agreement must also be constructed in such a way that foreign financial institutions will provide account information in a standardized electronic format that will enable efficient analysis of the data. Treasury should consult with the IRS and the Justice Department's Tax Division to determine how the collected information should be structured to provide timely and usable data in tax enforcement efforts.

The Treasury will need to construct a withholding regime that will efficiently withhold the 30 percent tax on all U.S. investment earnings held by a noncooperative foreign financial institution. This statute will not be effective unless the 30 percent tax is withheld promptly, reliably, and in a comprehensive way. In devising this withholding regime, it is our purpose to apply the term ``withholdable payment'' broadly to cover all types of payments from sources in the United States, including interest payments, dividends, rents, wages, stock gains, and derivative payments originating in the United States.

Finally, we expect that the Treasury, when exercising authority under the bill to grant exceptions or waivers or deem foreign financial institutions to be in compliance with the law, will exercise that authority narrowly and in a fashion that is consistent with the purposes of the statute and will promote disclosure of foreign accounts with U.S. account holders.

Sections 511 through 521 of the HIRE Act establish stronger disclosure requirements for U.S. taxpayers with foreign financial assets. Section 511 will require full disclosure of assets held outside of the United States, in order to end years of abuses involving the concealment of offshore assets, including disclosure, for example, of interests in foreign accounts, securities, complex financial instruments, debt or equity interests in foreign hedge funds, private equity funds, or other investment vehicles, and derivative contracts and trading arrangements. A new requirement in Section 521 for annual reports filed by shareholders of passive foreign investment companies will provide additional important disclosures of assets held outside of the United States. Tough penalties and a longer statute of limitations will add to the effectiveness of these new disclosure requirements.

Sections 531 through 535 tighten U.S. tax rules for foreign trusts and address a variety of abuses identified in my Permanent Subcommittee in Investigations 2006 hearings exposing how U.S. taxpayers use foreign trusts to evade their U.S. tax obligations. Section 531 ends shenanigans involving U.S. persons who are not officially beneficiaries of a foreign trust, but could be named a beneficiary by the trustee, or who write ``Letters of Intent'' instructing the trustee how to use or distribute trust assets. Section 532 creates a ``Presumption that Foreign Trust Has United States Beneficiary'' if a U.S. person directly or indirectly transfers property to that foreign trust. The presumption is rebuttable, but the onus is placed on the proper party, the person who has access to the information about the foreign trust, to rebut the presumption. Section 533 will stop abuses in which U.S. persons instruct foreign trusts to purchase and lend them property on an uncompensated basis, including jewelry, artwork, and even luxury homes. Section 534 requires U.S. grantors as well as trustees to ensure that trust transactions are properly reported to the IRS. These provisions will help put an end to foreign trust tax abuses that significantly undermine the U.S. Government's ability to collect taxes owed by foreign trusts with U.S. beneficiaries.

Still another section of the bill makes important changes to curb offshore tax abuses involving nonpayment of U.S. taxes on U.S. stock dividends. Section 541 is a direct result of a year-long inquiry by my Permanent Subcommittee on Investigations into this problem. In September 2008, the subcommittee held a hearing and released a report detailing how offshore entities routinely dodge taxes on U.S. stock dividends--S. Hrg. 110-778. As discussed at the hearing, over the last ten years, dividend tax abuse has cost the U.S. treasury and honest taxpayers billions of dollars in lost revenue. The report made four recommendations:

First, end offshore dividend tax abuse. Congress should end offshore dividend tax abuse by enacting legislation to make it clear that non- U.S. persons cannot avoid U.S. dividend taxes by using a swap or stock loan to disguise dividend payments. Section 541 is designed to address this problem by eliminating the different tax rules for U.S. stock dividends, dividend equivalent payments, and substitute dividend payments, and making them all equally taxable as dividends.

Second, take enforcement action. The IRS should complete its review of dividend-related transactions and take civil enforcement action against taxpayers and U.S. financial institutions that knowingly participated in abusive transactions aimed at dodging U.S. taxes on stock dividends. The IRS has recently designated ending dividend tax dodging as a Tier I enforcement issue, and section 541 will provide the IRS with new tools in that enforcement effort. Section 541 requires exactly that.

Third, strengthen regulation on equity swaps. To stop misuse of equity swap transactions to dodge U.S. dividend taxes, the IRS should issue a new regulation to make dividend equivalent payments under equity swap transactions taxable to the same extent as U.S. stock dividends.

Fourth, strengthen stock loan regulation. To stop misuse of stock loan transactions to dodge U.S. dividend taxes, we recommended that the IRS immediately meet its 1997 commitment to issue a new regulation on the tax treatment of substitute dividend payments between foreign parties to make clear that inserting an offshore entity into a stock loan transaction does not eliminate U.S. tax withholding obligations. After waiting over 18 months for Treasury and the IRS to act, section 541 now provides them with a clear legislative mandate to issue stronger regulation of swaps and stock loans.

Section 541 makes a number of key changes in the law. First, section 541 calls for ``dividend equivalents'' to be treated as a U.S. sourced dividend and therefore subject to withholding tax beginning 180 days from enactment. ``Dividend equivalent'' is defined to include ``any substitute dividend made pursuant to a securities lending or a sale- repurchase agreement that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States.'' Once this becomes effective, all payments made based on, or by reference to, a dividend from a U.S. source under a securities lending or sale-repurchase transaction will be treated as a dividend from a U.S. source.

Treating dividend equivalents as U.S. sourced income sets an important precedent. Before this provision was enacted into law, the source of a dividend equivalent payment--often carried out through a swap arrangement--was determined according to who received the payment. But it makes no sense and turns the English language on its head to say the recipient of a payment is the ``source'' of that payment. The source of a payment will to be determined according to the person who initiated the payment, not according to its recipient, and section 541 makes that clear.

``Dividend equivalent'' is also defined to include ``any payment made pursuant to a specified notional principal contract that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States.''

``Specified notional principal contract'' is defined differently depending upon whether the payment is made before or after 2 years from the Act's enactment. For the first year-and-a-half after the act's effective date, payments made pursuant to notional principal contracts that are made based on, or by reference to, a dividend from a U.S. source are treated as a dividend from a U.S. source if they meet any of the criteria specified in newly enacted 26 U.S.C. 871(l)(3)(A)(i)-(iv) or ``such contract identified by the Secretary.'' The four specific criteria define the worst of the abusive notional principal contracts that the subcommittee uncovered.

However, as established in the subcommittee report and hearing on this matter, many financial institutions have moved away from the blatantly abusive practices that are addressed in subsections (3)(A)(i)-(iv) and now use more subtle methods of ensuring a riskless transfer between holding U.S. securities and engaging in notional principal contracts. It is the legislative intent of the authors of this provision that the Secretary will use the authority granted in (3)(A)(v) to identify and extend coverage of this statue to stop the more subtle abusive practices as well, and I encourage Treasury to act quickly to do so.

Two years from the date of enactment, any payment made pursuant to a notional principal contract that is based on, or by reference to, a dividend from a U.S. source is treated as a dividend from a U.S. source, ``unless the Secretary determines that such a contract is of a type which does not have the potential for tax avoidance.'' Again, it is the intent of this language that the Secretary uses this exception authority very sparingly, that only narrow types of contracts be excepted, and that such exceptions be fashioned only after conducting a thorough analysis to ensure that the contracts under consideration cannot be exploited for tax avoidance. As the language states, an exception is available only after the Secretary determines that the type of contract is not being used for tax avoidance, and does not have the potential for tax avoidance. That is intentionally a very high standard.

In addition to substitute dividends and payments made pursuant to notional principal contracts, ``dividend equivalent'' is also defined to include

``any other payment determined by the Secretary to be substantially similar'' to substitute dividends and payments made pursuant to notional principal contracts. Treasury is intended to utilize this explicit legislative directive to aggressively enforce dividend tax collection on substantially similar payments and transactions. For example, as explained in the Joint Committee on Taxation's ``Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the `Hiring Incentives to Restore Employment Act,' Under Consideration by the Senate'' (JCX-4-10), ``the Secretary may conclude that payments under certain forward contracts or other financial contracts that reference stock of U.S. corporations are dividend equivalents.'' The point of the ``substantially similar'' language is to provide Treasury and the IRS with broad authority and the flexibility needed to prevent misuse of other financial instruments or trading activities to evade U.S. dividend taxes.

Finally, section 541 contains an important provision on the ``prevention of over-withholding.'' As the language states, the Secretary may reduce the tax on dividends only ``to the extent that the taxpayer can establish that such tax has been paid with respect to another dividend equivalent in such chain, or is not otherwise due, or as the Secretary determines is appropriate to address the role of financial intermediaries in such chain.'' The burden of proof placed on the taxpayer is intentionally high due to the numerous abuses that have occurred over the years in which taxpayers have designed elaborate chains of transactions to escape all taxation of U.S. stock dividends. This provision provides an equitable way to address the potential problem of over-withholding, while setting an intentionally high burden of proof to avoid abusive over-withholding claims.

I appreciate the attention that the Senate Finance and House Ways and Means Committees gave to the tax dodging problems identified in the Subcommittee's investigation. We also appreciate the technical guidance and cooperation provided by the Treasury Department, Internal Revenue Service, and the Joint Committee on Taxation in this Section.

I hope these remarks help shine a light on how this piece of legislation will begin to curb the $100 billion in offshore tax abuses now robbing honest taxpayers of needed government resources each year.

Mr. President, the Senate has an opportunity today to take another step toward restoring job growth and opportunity for American workers. Others have discussed the importance of this bill's provisions to help put Americans back to work, and I agree: This bill marks important progress in lowering unacceptable levels of unemployment.

But sending the Hiring Incentives to Restore Employment Act to the President's desk would also mark a significant victory for law-abiding U.S. taxpayers. Right now, thousands of U.S. tax dodgers conceal billions of dollars in assets within secrecy-shrouded foreign banks, dodging taxes and penalizing those of us who pay the taxes we owe. The Permanent Subcommittee on Investigations, which I chair, has estimated that these tax-dodging schemes cost the Federal Treasury $100 billion a year.

But under this legislation, for the first time, foreign banks will be required to disclose their U.S. account holders to the U.S. Government or face significant penalties. This provision will make it far more difficult for tax dodgers to conceal assets and income in foreign banks. As more banks set up systems to disclose U.S. account holders, bank secrecy will become increasingly difficult to maintain. With increased transparency will come less tax evasion, less money laundering, and less crime.

Certainly this legislation will not end tax avoidance or money laundering. Its provisions do not take effect for several years, and its impact will depend in large part on the willingness of regulators at the Treasury Department and elsewhere to write strict regulations and enforce them vigorously. It also will not affect banks willing to continue to conceal their U.S. account holders despite the penalties that carries a significant loophole for tax dodgers and the foreign banks that assist them. So this legislation is not a silver bullet. In fact, I believe our tax enforcement regime could be strengthened by provisions of the Stop Tax

Haven Abuse Act, S. 506, which I introduced with Senators McCaskill, Nelson, Whitehouse, Shaheen, and Sanders. For example, Treasury should have authority to prohibit U.S. banks from participating in wire transfers with or honoring credit cards from overseas banks that impede U.S. tax enforcement.

I will continue to press for enactment of S. 506 and to build the growing momentum against overseas tax abuses. Make no mistake, today marks an important milestone. For the first time in years, we are poised to approve legislation with a real chance to pull back the curtain of bank secrecy, expose offshore accounts, and ensure that those who owe taxes pay them. Amid the growing concern over our budget deficit and American families' concerns about making ends meet, we can no longer afford to allow tax dodgers to hide behind this curtain, avoiding their obligations and leaving their rightful tax burden for honest taxpayers to carry. I urge my colleagues to approve the HIRE Act, in the interest of America's workers and America's honest taxpayers.

Mr. President, 25 years ago, an article appeared in the Detroit Free Press sports section headlined, ``Give Me a Sporting Chance, And I'll Give It Right Back.'' It was the debut column from a young writer just arrived from Florida, and he admitted to some nerves about writing for his new audience. ``Starting tomorrow, I ask your attention, your reaction, your letters, your laughter and, once in a while, the benefit of the doubt,'' he wrote.

I doubt many Free Press readers knew that morning that they held the beginning of a journalistic legend in their hands. And the writer himself surely didn't know what he was starting. But thousands of columns, millions of laughs, more than a few tears, 28 million books, and dozens of awards later, Free Press sports columnist Mitch Albom has become a Detroit institution right alongside the beloved athletes he has covered.

Recently, it was announced that Mitch Albom will receive the ultimate award for a sportswriter, the Red Smith Award from the Associated Press Sports Editors. Smith, the legendary New York writer, once said his demanding craft was really simple: ``All you do is sit down at a typewriter and open a vein.'' And Mitch Albom is a worthy successor to that legacy of writing with heart and emotion as well as style and precision. In thrilling victories and painful losses, fans of Michigan's sports teams have seen 25 years of sports history through Albom's observant eyes. They have gotten to know the State's towering sports figures--be they heroic, tragic, or both--through Albom's perceptive character sketches.

That careful attention to the human element of sports allowed Albom to branch out into other areas. His ``Tuesdays with Morrie'' is one of the 100 best-selling books of all time. He is one of Michigan's most listened-to radio hosts, and a regular on ESPN television. And as his success has grown, so have his contributions to his community. His charitable endeavors include efforts to help disadvantaged students study the arts, get health care to homeless families, and gather volunteers for worthy local service projects. Recently, he labored mightily and successfully to get aid to earthquake victims in Haiti.

In winning the Red Smith Award, Albom joins a list of the most honored names in sports journalism. The award speaks forcefully to the respect of his professional peers. For Michigan readers, however, Albom's ongoing legacy is his remarkable writing on the games and athletes who are so much a part of our State's identity and DNA and his contributions to improving his community. I congratulate him on this latest honor, and I thank him for 25 years of great journalism. The readers of Michigan and the Nation look forward to many, many years more.

Mr. President, it is a truism, a belief espoused by those of all political parties and persuasions, that the functioning of our democracy depends on an informed citizenry to make wise decisions at the ballot box and hold elected officials accountable.

That means our system depends on careful, thoughtful, impartial journalists, those who bring to their work as much passion for knowledge and understanding as we bring to our advocacy for policies we support. In that difficult and necessary work, few Michigan journalists have succeeded more than Ron Dzwonkowski of the Detroit Free Press, which is why the recent announcement of his selection to the Michigan Journalism Hall of Fame is so well-deserved.

For nearly three decades, Dzwonkowski has served the Free Press as an editor, editorialist, and columnist. His professional peers have awarded him a host of awards, including a Pulitzer Prize and a National Headliner Award for work to which he has contributed. As an editor and writer for the Free Press's editorial pages, he has shown a remarkable commitment to accuracy, but just as important, a remarkable passion for solving the problems of our city and State.

Whether he is praising an elected official or criticizing one, his writing is grounded in a thorough understanding of the facts and a commitment to looking out, above all, for the interests of Michigan's citizens. His reporting, writing, and editing have made a significant and lasting difference in the lives of the readers he serves, and his selection to the State's hall of fame for journalists is a much- deserved reward for a career of distinguished service, one I hope will continue for many, many years to come.

Mr. President, I would like to announce for the information of the Senate and the public that the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs has scheduled a hearing entitled, ``Wall Street and the Financial Crisis: The Role of High Risk Home Loans'' This hearing will be the first in a series of Subcommittee hearings examining some of the causes and consequences of the recent financial crisis. This first hearing will focus on the role of high risk home loans in the financial crisis, using as a case history high risk home loans originated, sold, and securitized by Washington Mutual Bank. A witness list will be available Monday, March 22, 2010.

The Subcommittee hearing has been scheduled for Thursday, March 25, 2010, at 9:30 a.m., in Room 216 of the Hart Senate Office Building. For further information, please contact Elise Bean of the Permanent Subcommittee on Investigations at 224-9505.

Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Records on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar that these nominations lie at the Secretary's desk for the information of Senators.

Mr. President, the Senate can take an important step today in alleviating the incredible strains this continuing economic crisis is having on thousands of families in my State, and millions of families across America. In approving the American Workers, State, and Business Relief Act of 2010, we can end what has been an agonizing procession of will-we-or-won't-we votes on extending unemployment benefits and COBRA insurance subsidies for those who have lost their jobs. And we can ensure that, by extending enhanced Federal payments to State Medicaid programs, crucial health coverage and other vital State services are not cut.

Those who doubt the wisdom of extending unemployment and COBRA benefits until the end of this year should hear the phone calls and read the letters that have come into my office over the past few weeks. As the Congress has debated, and delayed, on the question of whether to pass another short-term extension, these Americans, left jobless by a crisis not of their own making, wondered if the economic lifeline that keeps food on their tables and shelter over their heads would be severed. By approving this legislation, we will ensure that these families are not left in limbo by delays in Congress. Giving them some measure of certainty, at a time when the economic crisis has turned so much upside-down, is the right thing to do. What's more, continuing these benefits is one of the most important steps we can take to nurture the fragile recovery of our economy. These payments benefit not just families coping with unemployment, but provide an immediate stimulus to local economies that have been devastated by the recession.

Likewise, the decision to extend enhanced Federal Medicaid assistance percentages, or FMAP, funding to States, boosts the entire economy while helping those in the greatest need. Michigan and other States have made clear that without this extension, we would leave giant holes in their budget. In the absence of enhanced funding, the steps the States would have to take balance their budgets could mean devastating cuts to vital programs that serve the victims of this crisis. Such cuts would also dampen the recovery, removing a pillar that has kept economic activity from collapsing during the crisis. Extending these payments gives States, and the citizens they serve, much-needed certainty.

This legislation also would continue tax provisions that can provide additional support to economic recovery and job creation. In extending the research and development tax credit and other measures, we give our businesses another tool they can use as they seek to regain ground, begin growing again and start putting people back to work. I urge my colleagues to join me in voting for this important legislation.

I ask for the yeas and nays.

Mr. President, I would like to relay a story that says a great deal about how the worst financial crisis since the Great Depression came to be.

In 2006, a bond trader at Lehman Brothers struck up a conversation with one of the firm's college interns. When the trader asked this intern, who had not yet begun his senior year, what he was doing on his winter vacation, the young man replied that he would be trading derivatives for Lehman. That was a surprise, but the shock came when the intern said the firm had given him $150 million of its own money for this college student to bet on risky derivatives.

Now, one college junior and his $150 million trading account did not bring the entire financial system close to collapse. But it is just this brand of recklessness that led to the need for multibillion-dollar bailouts and to the worst recession in decades, one that has left millions of Americans without a job.

The losses that Lehman and other large financial firms racked up, trading on their own account and not on the behalf of investors, helped build the bonfire that nearly engulfed our entire financial system.

That is why I have joined Senators Merkley, Kaufman, Sherrod Brown, and Shaheen to introduce the Protect our Recovery Through Oversight of Proprietary Trading Act, or PROP Trading Act. With this legislation, we attempt to rein in some of the reckless practices that led to economic catastrophe, the proprietary trading and hedge-fund operations that lost billions of dollars, caused the collapse of some of our biggest financial institutions, and pushed other major financial firms to the brink of collapse.

This legislation would accomplish several important goals to ensure that the abuses of recent years don't lead to another crisis. It would ban taxpayer insured banks, and their affiliates and subsidiaries, from engaging in proprietary trading that is, trading on their own behalf and not that of their customers. It would ban taxpayer insured banks from investing in or sponsoring hedge funds or private equity funds. Nonbank institutions that are critically important to the systemic health of the financial system, i.e., those that have been deemed ``too big to fail,'' would be subject to new capital requirements and limits on their ability to trade on their own behalf or invest in hedge funds or private equity funds. Federal regulators would set those requirements and limits. And our legislation would prohibit underwriters of asset-backed securities from engaging in transactions that create a conflict of interest with respect to the securities they package and sell.

The reaction of Wall Street has been swift. Proprietary trading, they tell us, was not a large factor in creating the financial crisis. And restrictions on proprietary trading would have no effect in preventing the next crisis.

On both points, they are wrong. Here is why.

While Wall Street claims that proprietary trading was a tiny part of its operations before the crisis, their financial reports during the boom years tell a different story. Firms such as Goldman Sachs and Lehman Brothers earned as much as half their revenue on proprietary trades when markets were booming. Bank of America reported in a 2008 regulatory filing that losses in ``large proprietary trading and investment positions'' had ``a direct and large negative impact on our earnings.'' JP Morgan Chase warned in its 10K filing for 2008 that it held large ``positions in securities in markets that lack pricing transparency or liquidity,'' presumably proprietary positions. Likewise, Goldman Sachs told regulators that the collapse of proprietary asset values ``have had a direct and large negative impact'' on its earnings.

What these firms are saying in the dry, lawyerly language of SEC filings is that they had been betting big, and losing big, and those failed bets had done them serious harm.

How much harm? By August of 2008, according to one estimate, the nation's largest financial firms had suffered $230 billion in losses from proprietary trading. Only a Wall Street trader could dismiss such losses as immaterial; in fact, that total is about one-third the size of the Wall Street rescue package we were forced to approve. Nearly every major financial institution suffered major losses in proprietary trades. Lehman Brothers, whose bankruptcy was a major contributor to the financial crisis, in 2006 derived more than half its revenue from proprietary trades. By 2007, its proprietary holdings totaled $313 billion. But the firm lost $32 billion on such trades in 2007 and 2008, nearly double the value of the firm's common equity. Bear Stearns collapsed and was bought by JP Morgan Chase with federal aid in large part because of the collapse of its hedge funds. Morgan Stanley, JP Morgan Chase, Merrill Lynch, Goldman Sachs, each suffered major losses as a result of the risky bets they placed on securities that plummeted in value.

There also is a need to prevent financial institutions that create asset-backed securities from engaging in transactions connected to those securities that present a conflict of interest. As has been widely reported, some institutions at the height of the boom in asset- backed securities were creating these securities, selling them to investors, and then placing bets that their product would fail. Phil Angelides, the chairman of the Financial Crisis Inquiry Commission, has likened this practice to selling customers a car with faulty brakes, and then buying life insurance on the driver. It is an abusive practice, it should stop, and our legislation would stop it.

It would be irresponsible of us to allow such risk and abuse to remain present in our financial system, lying dormant until the day we are once again on the brink of financial catastrophe, and once again the need to rescue financial firms who refuse to prudently manage their risks. This legislation is urgently important, and I urge my colleagues to carefully consider the consequences of failing to act.

Mr. President, I would like to relay a story that says a great deal about how the worst financial crisis since the Great Depression came to be.

In 2006, a bond trader at Lehman Brothers struck up a conversation with one of the firm's college interns. When the trader asked this intern, who had not yet begun his senior year, what he was doing on his winter vacation, the young man replied that he would be trading derivatives for Lehman. That was a surprise, but the shock came when the intern said the firm had given him $150 million of its own money for this college student to bet on risky derivatives.

Now, one college junior and his $150 million trading account did not bring the entire financial system close to collapse. But it is just this brand of recklessness that led to the need for multibillion-dollar bailouts and to the worst recession in decades, one that has left millions of Americans without a job.

The losses that Lehman and other large financial firms racked up, trading on their own account and not on the behalf of investors, helped build the bonfire that nearly engulfed our entire financial system.

That is why I have joined Senators Merkley, Kaufman, Sherrod Brown, and Shaheen to introduce the Protect our Recovery Through Oversight of Proprietary Trading Act, or PROP Trading Act. With this legislation, we attempt to rein in some of the reckless practices that led to economic catastrophe, the proprietary trading and hedge-fund operations that lost billions of dollars, caused the collapse of some of our biggest financial institutions, and pushed other major financial firms to the brink of collapse.

This legislation would accomplish several important goals to ensure that the abuses of recent years don't lead to another crisis. It would ban taxpayer insured banks, and their affiliates and subsidiaries, from engaging in proprietary trading that is, trading on their own behalf and not that of their customers. It would ban taxpayer insured banks from investing in or sponsoring hedge funds or private equity funds. Nonbank institutions that are critically important to the systemic health of the financial system, i.e., those that have been deemed ``too big to fail,'' would be subject to new capital requirements and limits on their ability to trade on their own behalf or invest in hedge funds or private equity funds. Federal regulators would set those requirements and limits. And our legislation would prohibit underwriters of asset-backed securities from engaging in transactions that create a conflict of interest with respect to the securities they package and sell.

The reaction of Wall Street has been swift. Proprietary trading, they tell us, was not a large factor in creating the financial crisis. And restrictions on proprietary trading would have no effect in preventing the next crisis.

On both points, they are wrong. Here is why.

While Wall Street claims that proprietary trading was a tiny part of its operations before the crisis, their financial reports during the boom years tell a different story. Firms such as Goldman Sachs and Lehman Brothers earned as much as half their revenue on proprietary trades when markets were booming. Bank of America reported in a 2008 regulatory filing that losses in ``large proprietary trading and investment positions'' had ``a direct and large negative impact on our earnings.'' JP Morgan Chase warned in its 10K filing for 2008 that it held large ``positions in securities in markets that lack pricing transparency or liquidity,'' presumably proprietary positions. Likewise, Goldman Sachs told regulators that the collapse of proprietary asset values ``have had a direct and large negative impact'' on its earnings.

What these firms are saying in the dry, lawyerly language of SEC filings is that they had been betting big, and losing big, and those failed bets had done them serious harm.

How much harm? By August of 2008, according to one estimate, the nation's largest financial firms had suffered $230 billion in losses from proprietary trading. Only a Wall Street trader could dismiss such losses as immaterial; in fact, that total is about one-third the size of the Wall Street rescue package we were forced to approve. Nearly every major financial institution suffered major losses in proprietary trades. Lehman Brothers, whose bankruptcy was a major contributor to the financial crisis, in 2006 derived more than half its revenue from proprietary trades. By 2007, its proprietary holdings totaled $313 billion. But the firm lost $32 billion on such trades in 2007 and 2008, nearly double the value of the firm's common equity. Bear Stearns collapsed and was bought by JP Morgan Chase with federal aid in large part because of the collapse of its hedge funds. Morgan Stanley, JP Morgan Chase, Merrill Lynch, Goldman Sachs, each suffered major losses as a result of the risky bets they placed on securities that plummeted in value.

There also is a need to prevent financial institutions that create asset-backed securities from engaging in transactions connected to those securities that present a conflict of interest. As has been widely reported, some institutions at the height of the boom in asset- backed securities were creating these securities, selling them to investors, and then placing bets that their product would fail. Phil Angelides, the chairman of the Financial Crisis Inquiry Commission, has likened this practice to selling customers a car with faulty brakes, and then buying life insurance on the driver. It is an abusive practice, it should stop, and our legislation would stop it.

It would be irresponsible of us to allow such risk and abuse to remain present in our financial system, lying dormant until the day we are once again on the brink of financial catastrophe, and once again the need to rescue financial firms who refuse to prudently manage their risks. This legislation is urgently important, and I urge my colleagues to carefully consider the consequences of failing to act.

Mr. President, I am a cosponsor of a bill introduced by Senators Feingold and Brownback, the Lord's Resistance Army Disarmament and Northern Uganda Recovery Act. I am one of the 62 cosponsors of this legislation, and I believe this broad bipartisan support speaks to both the urgency of this issue and the importance of this legislation.

On a continent plagued by man-made tragedy, the Lord's Resistance Army stands out as a manufacturer of that tragedy. The U.S. State Department describes the LRA as ``vicious and cult-like.'' Formed in the 1980s to overthrow the Ugandan government, the LRA engaged in such widespread violence that at one time, about 2 million Ugandans were displaced from their homes. The LRA massacred, mutilated and abducted civilians, and forced many into sexual servitude. An estimated 66,000 Ugandan youths were forced to fight for the group.

The good news is that the Ugandan government has now largely pushed the LRA out of Uganda. The bad news is that the scars it has left behind are raw and real for Ugandans; and that meanwhile, the LRA has moved into parts of Sudan, the Democratic Republic of Congo, and the Central African Republic, continuing to spread violence and terror. Between September of 2008 and July of 2009, the United Nations estimates that LRA violence claimed 1,300 civilian lives, that the LRA abducted another 1,400 civilians, and that more than 300,000 were forced from their homes.

This legislation, which 63 Senators support, would take a number of steps to address both the aftermath of the LRA's rampage in Northern Uganda and its continuing violence in Uganda's neighbor nations. The Act would require that within six months, the United States develop a comprehensive strategy for dealing with the LRA, including an outline of steps to protect the civilian population against LRA violence. The act would authorize funding under the Foreign Assistance Act of 1961 to provide humanitarian assistance in areas affected by LRA. And it would provide assistance for reconstruction and for promotion of justice and reconciliation in areas of Uganda recovering from the LRA's depredations.

It is unfortunate that despite the broad and bipartisan support for this legislation, apparently only one Member of the Senate objects to it and is able to block its consideration. As with so many measures before the Senate, there is little doubt that this bill would win overwhelming passage were it allowed to come to the floor.

But the innocent victims of LRA violence, past and present, need our help. The objection of one Senator should not be allowed to thwart us responding to that need.

Mr. President, I would like to congratulate all of the athletes who competed in the 2010 Winter Olympic Games in Vancouver, British Columbia. The Olympics was a spectacular and awe-inspiring event that captured the attention and imagination of people across the globe. While the athletes often come from very different backgrounds and cultures, they share a bond that will last forever: each has earned the title of Olympian. Indeed, it was heartwarming to watch these athletes come together to showcase their talents in peaceful competition over a two week span.

The United States was represented by an extraordinary group of athletes. As a team, these talented and determined competitors brought home 37 medals, the most medals ever for the United States in the Winter Games. There were many breathtaking moments and several firsts for the U.S. team. Michigan was well represented with close to two dozen athletes competing in a range of sports. I am proud of each person that represented the United States, and I am particularly proud of those with ties to Michigan. In fact, leading the parade of American athletes and holding the American Flag during the opening ceremonies was Michigan's own Mark Grimmette, a luger who competed in his fifth and last Olympic Games.

Michigan continued its long tradition of hosting and facilitating the training of world-class athletes for the Winter Games. More than three dozen athletes sharpen their skills at the Olympic Education Center, OEC, at Northern Michigan University in Marquette. In fact, the entire U.S. short track speed skating team trained at some point at the OEC leading up to the Games. This wonderful facility has provided for the training of athletes in a number of Olympic disciplines and has been an integral part of the success of many Olympic athletes since its inception in 1985.

Shani Davis, who became the first African-American speed skater to win gold in an individual event in the Winter Games in 2006, displayed the skill and speed that has become his hallmark. This Northern Michigan University Alumnus secured gold in the 1,000 meters, setting yet another milestone by becoming the first person to win this event in back to back Olympic Games. Travis Jayner from Midland earned bronze as part of the U.S. 5,000 meter relay team at the Games. Long track speed skater Ryan Bedford from Midland also had a solid performance, placing 12th in the 10,000 meter race in his first Olympic appearance. Jilleanne Rookard, a speed skater from Woodhaven, competed in three individual and one team event. Her best finish was fourth in the team pursuit. Competing in her second Winter Games, Kimberly Derrick, a graduate of Northern Michigan University, competed in the 1,500 meter individual race.

The United States men's hockey team won silver in Vancouver, a remarkable performance that captivated Americans, whether they were dedicated hockey fans or newcomers to the sport. The men's journey to the gold medal game was buoyed by goaltender Ryan Miller from East Lansing, MI. Miller, a Michigan State University alumnus, earned Most Valuable Player honors for his phenomenal play throughout, which enabled the young American team to make a run for the gold. There were several members of the men's team with ties to Michigan that contributed to the hockey team's success, including Tim Thomas from Flint, Tim Gleason from Clawson, Jack Johnson from Ann Arbor, Ryan Kesler from Livonia and Brian Rafalski from Dearborn, who now plays for the Detroit Red Wings of the NHL. In fact, 14 of the 25 member U.S. roster are either from Michigan or played organized hockey at some point in Michigan.

The men's gold medal game was one of the great hockey games I have seen--and I have seen a lot. The U.S. hockey team tied the score in the final, hectic seconds of regulation to send this thrilling game into overtime. While the team ultimately lost in overtime, the heart they displayed was forever etched in our minds.

A number of Red Wings players represented their home countries at the Winter Games, including Mike Babcock, head coach of the Canadian team; Pavel Datsyuk of Russia; Valtteri Filppula of Finland; and Johan Franzen, Niklas Kronwall, Nicklas Lidstrom, and Henrik Zetterberg of Sweden.

The U.S. women's hockey team matched the men's success by securing silver in Vancouver. Their dominating performance throughout the Olympics culminated in a fierce battle against Canada in the gold-medal game. The lone Michiganian on the team, Angela Ruggiero from Harper Woods, played well throughout, scoring three goals and an assist in the tournament. In a demonstration of the respect this four-time Olympian has earned, her fellow athletes from around the world selected Ruggiero to serve as one of the athletes' representatives to the International Olympic Committee.

In Ice Dancing, Meryl Davis and Charlie White from West Bloomfield and Dearborn, respectively, skated with grace and precision to secure the silver medal. Their performance was truly stunning. Joining them on the medal podium were Scott Moir and Tessa Virtue of Canada. Both teams train in Canton, MI, at the Arctic Figure Skating Club. Emily Samuelson and Evan Bates, who train at the Ann Arbor Figure Skating Club, skated beautifully and finished 11th overall. All three pairs were a joy to watch, and to have three teams that train in Michigan perform so well is a tribute to Michigan's commitment to the sport. Along with being a part of the 2010 Olympic Team, Meryl, Charlie, Emily, and Evan also are students at the University of Michigan. Tanith Belbin and Ben Agosto, the 2006 Torino silver medalists who formerly trained in Canton, MI, also skated well and placed fourth. The two-time United States Men's Champion Jeremy Abbott from the Detroit Skating Club in Bloomfield Hills placed 9th in the tough and spirited men's individual figure skating contest.

There were many other dramatic moments and personal triumphs by Olympians from Michigan during the 2010 Winter Games. Bobsledder Michelle Rzepka from Novi, a graduate of Michigan State University, put forth a strong effort and finished sixth overall. Nick Baumgartner from Iron River competed with style and abundant flair in Snowboardcross in Vancouver. Caitlin Compton, a Northern Michigan University graduate, displayed great endurance and perseverance in competing in three cross country events, with a top finish of sixth in the team sprint free.

I know I speak for all Michiganians in expressing appreciation and congratulations to all of the athletes, coaches, and administrators who took part in the 2010 Winter Olympic Games. It is with particular pride that I salute the athletes from Michigan. The commitment, drive, and competitive spirit of these athletes were on full display for the world to witness. The feats of these gifted and determined athletes have inspired us all.

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

Madam President, I ask unanimous consent that the Senate now proceed to executive session to consider the following nominations on the Executive Calendar: Calendar No. 560, the nomination of Terry Yonkers to be an Assistant Secretary of the Air Force; Calendar No. 563, the nomination of Frank Kendall to be Principal Deputy Under Secretary of Defense; Calendar No. 564, the nomination of Erin Conaton to be Under Secretary of the Air Force; Calendar No. 663, the nomination of Paul Oostburg Sanz to be General Counsel of the Department of the Navy; Calendar No. 664, the nomination of Malcolm O'Neill to be an Assistant Secretary of the Army; Calendar No. 665, the nomination of Jackalyne Pfannenstiel to be an Assistant Secretary of the Navy; that the nominations be confirmed en bloc, the motions to reconsider be laid upon the table en bloc, any statements relating to the nominations be printed in the Record, the President be immediately notified of the Senate's action, and the Senate resume legislative session.

Madam President, I thank the Presiding Officer.

I thank my colleagues and the leaders who have been involved in facilitating this. It is long overdue, but I want to thank my colleagues for at least helping to make this happen this afternoon. This will be good news for the Defense Department, good news for our troops. Again, I thank all who have been helpful in this regard.

I yield the floor.

I suggest the absence of a quorum.