Floor Statements

I move to lay that motion on the table.

The motion to lay on the table was agreed to.

Mr. President, I ask for the yeas and nays.

Mr. President, in compliance with rule XXVI of the Standing Rules of the Senate, I ask unanimous consent to have printed in the Record a copy of the rules of procedure of the Committee on Armed Services, as approved by the committee on February 26, 2009.

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, 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 rescheduled its February 24th hearing, ``Tax Haven Banks and U.S. Tax Compliance--Obtaining the Names of U.S. Clients with Swiss Accounts,'' to Wednesday, March 4th. This hearing will continue the Subcommittee's examination of financial institutions which are located in offshore tax havens and which use practices that facilitate tax evasion and other misconduct by U.S. clients. One of the banks featured in a July 2008 hearing on this topic is UBS, a major financial institution headquartered in Switzerland. The hearing will examine issues related to a John Doe summons served by the IRS on UBS seeking the names of U.S. clients with UBS Swiss accounts that have not been disclosed to the IRS. In July, UBS representatives estimated that about 19,000 U.S. clients had about $18 billion in assets in such Swiss accounts. The hearing will examine a recent deferred prosecution agreement involving UBS, the status of the John Doe summons, the role of U.S.-Swiss tax and legal assistance treaties, and the effect of Swiss secrecy laws on U.S. information requests. A witness list will be available Friday, February 27, 2009.

The Subcommittee hearing has been rescheduled for March 4, 2009, at 2:30 p.m., in Room 342 of the Dirksen Senate Office Building. For further information, please contact Bob Roach of the Permanent Subcommittee on Investigations at 202-224-9505.

Mr. President, I am pleased to introduce the Weapon Systems Acquisition Reform Act of 2009, with Senator McCain as an original cosponsor. The Department of Defense faces huge problems in its acquisition system today. Every year, the Government Accountability Office publishes a report assessing DOD's purchases of major weapon systems, and every year, the picture seems to get worse.

Since the beginning of 2006, nearly half of DOD's largest acquisition programs have exceeded the so-called ``Nunn-McCurdy'' cost growth standards established by Congress to identify seriously troubled programs. As Secretary Gates pointed out in his testimony before the Armed Services Committee last month, ``The list of big-ticket weapons systems that have experienced contract or program performance problems spans the services: the Air Force tanker, CSAR-X, VH-71, Osprey, Future Combat Systems, Armed Reconnaissance Helicopter, Littoral Combat Ship, Joint Strike Fighter, and so on.''

Overall, DOD's 95 major defense acquisition programs (known as ``MDAPs'') have exceeded their research and development budgets by an average of 40 percent, seen their acquisition costs grow by an average of 26 percent, and experienced an average schedule delay of almost two years. Last summer, GAO reported that cost overruns on DOD's MDAPs now total $295 billion over the original program estimates, even though we have cut unit quantities and reduced performance expectations on many programs in an effort to hold costs down.

These cost overruns happen because of fundamental flaws that are endemic to our acquisition system. We even know what these flaws are: DOD acquisition programs fail because the Department continues to rely on unreasonable cost and schedule estimates, establish unrealistic performance expectations, insist on the use of immature technologies, and adopt costly changes to program requirements, production quantities and funding levels in the middle of ongoing programs.

Particularly at this time, when the federal budget is under immense strain as a result of the economic crisis we simply cannot afford this kind of continued waste and inefficiency. That is why I am introducing this bill with Senator McCain today and why I have scheduled an acquisition reform hearing in the Armed Services Committee next week. The problems in our acquisition system may not be easy to solve, but they are far too big for us not to take whatever steps may be necessary to correct them.

The key to successful acquisition programs is getting things right from the start with sound systems engineering, cost-estimating, and developmental testing early in the program cycle. Programs that are built on a weak initial foundation, including immature technologies, inadequate development and testing, and unrealistic requirements, are likely to have big problems in the long run.

Unfortunately, a number of previous so-called acquisition ``reforms'' have taken the system in the wrong direction by cutting out people, organizations, and processes needed to establish a sound initial foundation for major programs. For example in the mid-1990's, DOD experimented with assigning ``total system performance responsibility'' to contractors, abdicating its role in overseeing and ensuring program performance; beginning in the late 1990's, DOD eliminated organizations and capabilities responsible for providing system engineering and overseeing developmental testing on major weapon systems; beginning in 2003, DOD revised its key guidance for major acquisition programs to make the key early phases of an acquisition program optional, authorizing MDAPs to skip over the concept refinement phase, the technology development phase, and even the system development and demonstration phase of the acquisition process, effectively leaping into production before design considerations were adequately addressed. The result has been excessive cost growth in weapon systems and excessive delays in fielding major defense acquisition programs.

Congress has already taken some steps to address problems that come late in the acquisition process--for example, by establishing certification requirements to ensure that programs meet minimal requirements before they enter system development and by tightening the Nunn-McCurdy requirements that are used to identify underperforming programs.

The bill that we are introducing today is designed to identify and address major problems much earlier in program development--before a Nunn-McCurdy threshold is breached, before a program is formally initiated, and before the program's trajectory has been established. For example, our bill would require the Department of Defense to address problems with unreasonable performance requirements by requiring DOD to reestablish systems engineering organizations and developmental testing capabilities; make trade-offs between cost, schedule and performance early in the program cycle; and conduct preliminary design reviews before giving approval to new acquisition programs; address problems with unreasonable cost and schedule estimates by establishing a new, independent director of cost assessment to ensure that unbiased data is available for senior DOD managers; address problems with the use of immature technologies by requiring the Director of Defense Research and Engineering (DDR&E) to periodically review and assess the maturity of critical technologies and by directing the Department to make greater use of prototypes, including competitive prototypes, to prove that new technologies work before trying to produce them; and address problems with costly changes in the middle of a program by tightening the so-called ``Nunn-McCurdy'' requirements for underperforming programs to provide for the termination of any such program that cannot be justified after undergoing a complete reexamination and revalidation.

Taken together, these provisions will require the Department of Defense to take the steps needed to put major defense acquisition programs on a sound footing from the outset. If they are successfully implemented, they should help these programs avoid future cost overruns, schedule delays, and performance problems.

I look forward to working with Senator McCain and our colleagues to enact these important reforms into law.

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

Mr. President, I am pleased to introduce the Weapon Systems Acquisition Reform Act of 2009, with Senator McCain as an original cosponsor. The Department of Defense faces huge problems in its acquisition system today. Every year, the Government Accountability Office publishes a report assessing DOD's purchases of major weapon systems, and every year, the picture seems to get worse.

Since the beginning of 2006, nearly half of DOD's largest acquisition programs have exceeded the so-called ``Nunn-McCurdy'' cost growth standards established by Congress to identify seriously troubled programs. As Secretary Gates pointed out in his testimony before the Armed Services Committee last month, ``The list of big-ticket weapons systems that have experienced contract or program performance problems spans the services: the Air Force tanker, CSAR-X, VH-71, Osprey, Future Combat Systems, Armed Reconnaissance Helicopter, Littoral Combat Ship, Joint Strike Fighter, and so on.''

Overall, DOD's 95 major defense acquisition programs (known as ``MDAPs'') have exceeded their research and development budgets by an average of 40 percent, seen their acquisition costs grow by an average of 26 percent, and experienced an average schedule delay of almost two years. Last summer, GAO reported that cost overruns on DOD's MDAPs now total $295 billion over the original program estimates, even though we have cut unit quantities and reduced performance expectations on many programs in an effort to hold costs down.

These cost overruns happen because of fundamental flaws that are endemic to our acquisition system. We even know what these flaws are: DOD acquisition programs fail because the Department continues to rely on unreasonable cost and schedule estimates, establish unrealistic performance expectations, insist on the use of immature technologies, and adopt costly changes to program requirements, production quantities and funding levels in the middle of ongoing programs.

Particularly at this time, when the federal budget is under immense strain as a result of the economic crisis we simply cannot afford this kind of continued waste and inefficiency. That is why I am introducing this bill with Senator McCain today and why I have scheduled an acquisition reform hearing in the Armed Services Committee next week. The problems in our acquisition system may not be easy to solve, but they are far too big for us not to take whatever steps may be necessary to correct them.

The key to successful acquisition programs is getting things right from the start with sound systems engineering, cost-estimating, and developmental testing early in the program cycle. Programs that are built on a weak initial foundation, including immature technologies, inadequate development and testing, and unrealistic requirements, are likely to have big problems in the long run.

Unfortunately, a number of previous so-called acquisition ``reforms'' have taken the system in the wrong direction by cutting out people, organizations, and processes needed to establish a sound initial foundation for major programs. For example in the mid-1990's, DOD experimented with assigning ``total system performance responsibility'' to contractors, abdicating its role in overseeing and ensuring program performance; beginning in the late 1990's, DOD eliminated organizations and capabilities responsible for providing system engineering and overseeing developmental testing on major weapon systems; beginning in 2003, DOD revised its key guidance for major acquisition programs to make the key early phases of an acquisition program optional, authorizing MDAPs to skip over the concept refinement phase, the technology development phase, and even the system development and demonstration phase of the acquisition process, effectively leaping into production before design considerations were adequately addressed. The result has been excessive cost growth in weapon systems and excessive delays in fielding major defense acquisition programs.

Congress has already taken some steps to address problems that come late in the acquisition process--for example, by establishing certification requirements to ensure that programs meet minimal requirements before they enter system development and by tightening the Nunn-McCurdy requirements that are used to identify underperforming programs.

The bill that we are introducing today is designed to identify and address major problems much earlier in program development--before a Nunn-McCurdy threshold is breached, before a program is formally initiated, and before the program's trajectory has been established. For example, our bill would require the Department of Defense to address problems with unreasonable performance requirements by requiring DOD to reestablish systems engineering organizations and developmental testing capabilities; make trade-offs between cost, schedule and performance early in the program cycle; and conduct preliminary design reviews before giving approval to new acquisition programs; address problems with unreasonable cost and schedule estimates by establishing a new, independent director of cost assessment to ensure that unbiased data is available for senior DOD managers; address problems with the use of immature technologies by requiring the Director of Defense Research and Engineering (DDR&E) to periodically review and assess the maturity of critical technologies and by directing the Department to make greater use of prototypes, including competitive prototypes, to prove that new technologies work before trying to produce them; and address problems with costly changes in the middle of a program by tightening the so-called ``Nunn-McCurdy'' requirements for underperforming programs to provide for the termination of any such program that cannot be justified after undergoing a complete reexamination and revalidation.

Taken together, these provisions will require the Department of Defense to take the steps needed to put major defense acquisition programs on a sound footing from the outset. If they are successfully implemented, they should help these programs avoid future cost overruns, schedule delays, and performance problems.

I look forward to working with Senator McCain and our colleagues to enact these important reforms into law.

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

Mr. President, the American people are counting on us to act to stabilize and revitalize the economy, and passage of the American Recovery and Reinvestment Act is an essential part of that effort. I am encouraged by how promptly the Senate and House have been able to reach a compromise on this critical legislation. I support final passage because it will create jobs and make investments to bolster our economy in both the short and long-term.

The Nation is in a deep recession and the situation is particularly dire in Michigan where the unemployment rate is the highest in the country. The Bush policy, still supported apparently by all but three Republicans, was a failure. It provided repeated tax cuts to the wealthy with the hope that some of it would trickle down to help those who really need it.

The legislation before us will provide tax breaks to our working families. It will provide a tax cut to 3.9 million Michigan workers, and allow over 120,000 Michigan families to benefit from a tax credit to make college more affordable. This legislation will also create or save 3.5 million jobs over the next 2 years, including jobs in health care, clean energy and construction. It will also strengthen the social safety net by increasing unemployment insurance benefits by $100 a month for over 1 million Michigan workers.

That is why it is so important that we take aggressive action now.

Job creation must be our No. 1 priority as we work to turn the economy around, and jobs are the focus of this conference report. Shovel-ready infrastructure projects are the most immediate way to create jobs and get the economy moving quickly. The recovery plan includes $48 billion in funding for ready-to-go road, bridge, rail and other projects to immediately and directly create jobs. This legislation is expected to provide Michigan with approximately $1 billion dollars in highway and transit formula funds, allowing for significant repairs to roads and bridges and purchases of buses for our public transit authorities. There is additional funding which will hopefully result in investments in the Midwest High-Speed Rail corridor, and improvements to Amtrak that can help bring commuter rail to Michigan.

I am hopeful the Army Corps will direct a significant portion of the $4 billion toward the Great Lakes to address the backlog of ready-to-go projects and maintain this vital maritime highway of the Midwest.

I am also hopeful that the EPA will direct a portion of its funds for cleaning up contaminated sediment under the Great Lakes Legacy Program. One report concluded that there is a 2\1/2\ to 1 ratio of return on a Federal investment on restoring the Great Lakes.

The recovery package also contains $6 billion in funding for water infrastructure. These projects immediately create jobs and play a critical role in protecting public health, improving the environment, and creating a sustainable and strong economic climate in which commerce can thrive. Specifically, Michigan is slated to receive more than $150 million to address wastewater projects, and $70 million to upgrade water mains, leaking pipes, and water treatment plants. These job-creating water infrastructure projects will address current needs in Michigan, while investing in upgrades that will prepare us for years to come. In addition, this legislation contains $200 million for environmental infrastructure that the Army Corps would manage. In Michigan, this funding could be used to address combined sewer overflows, which dump harmful pollutants into the Great Lakes.

Additionally, the conference committee legislation contains $750 million for the National Park Service, NPS. The NPS has a significant backlog of deferred maintenance projects that can be started within the next 18 months which will create jobs and help restore and enhance our national treasures. Michigan's four National Park units and the North Country National Scenic Trail have significant funding needs, and a number of projects have been delayed for years. I am hopeful that the NPS will direct a sizable portion of the $750 million included in the package to address the significant needs of Michigan's parks and trails.

I am pleased that the $100 million for brownfields competitive grants can be awarded for both cleanup and site assessment projects. I asked the conferees to expand the flexibility for these grants so that more Michigan communities could benefit from this funding, and I am pleased that the final bill contains this broader language.

The funding in the conference report will create jobs by making smart investments in technology and modernization efforts that will continue to pay dividends by helping us compete in the global economy. I am especially pleased the bill includes $2 billion in grants to encourage companies to invest in the development and production of advanced batteries and battery systems, which will fuel the energy-efficient vehicles of the future and make it more likely they will be produced in U.S. factories. In so doing, the conferees have adopted the Senate approach of focusing exclusively on grant funding rather than loan guarantees, which I believe will go much further in providing American manufacturers the resources and support they need to manufacture these batteries in U.S. facilities. This funding is critical because battery manufacturers and other manufacturers are deciding now where to locate their production facilities, and we cannot afford to lose those facilities and the associated jobs to other countries that are willing to offer greater financial incentives than we are.

I am also pleased that the conference report includes significant measures to

expand the American market for advanced technology vehicles. It will make these vehicles more affordable for consumers by increasing the availability of consumer tax credits for plug-in hybrid vehicles. Instead of making the tax credit available only for a total of 250,000 vehicles as is in current law, the conference report will make these tax credits available to consumers who purchase the first 200,000 plug- in hybrid vehicles sold by each manufacturer. Taking this important step will help America get to the goal set forth by President Obama of putting 1 million plug-in hybrid vehicles on the road by 2015. I am pleased that the conference report also includes some funding for Federal agencies to aggressively lease alternative energy vehicles-- such as hybrid vehicles--to support a wide variety of agency missions. Government leasing of these vehicles will help stimulate production of these vehicles. We cannot just preach about the need to produce these vehicles. We must lead the way in purchasing them, even though their up-front cost is greater.

The conference report also makes a clarification in the Tax Code to prevent an unintended tax consequence that would have hurt auto companies and others receiving TARP funds. This clarification will limit section 382 of the Tax Code in instances where a change in corporate control is the result of restructuring required by the Government pursuant to a TARP agreement. This maintains the clear intent of 382 while preventing unintended results that would have hurt these companies at the very time the Government is stepping in to help.

This legislation also helps those who have lost their jobs by including important measures that will help States modernize their current unemployment insurance programs and includes administrative dollars and funds to incentivize States to do this. For my home State of Michigan this means they will receive more than $90 million straight away. This plan will also provide a further extension of unemployment benefits which will help the more than 400,000 unemployed workers in Michigan who are unable to find a job in these hard economic times and the, on average, 13,000 individuals whose unemployment benefit will expire this month alone. Additionally, it will provide an additional $100 per month in unemployment benefits, pumping money directly into depressed economic areas and exempts the first $2,400 unemployment benefits from income tax, meaning more of these funds can go to recipients and help grow the economy.

The bill provides funding for important job training in new and expanding fields, as well as funding to enhance and expand education initiatives aimed at ensuring that our next generation of Americans is able to meet the challenges of a global economy. Specifically, it includes $53.6 billion for the State Fiscal Stabilization Fund, including $40.6 billion to local school districts using existing funding formulas, which can be used for preventing cutbacks, teacher layoffs, or other purposes; $5 billion to States as bonus grants for meeting key performance measures in education; and $8.8 billion to States for high-priority needs such as public safety and other critical services, which may include modernization, renovation and repairs of public school facilities and institutions of higher education facilities.

The bill includes $3.95 billion for job training including State formula grants for adult, dislocated worker, and youth programs, including $1.2 billion to create up to 1 million summer jobs for youth. The training and employment needs of workers will also be met through dislocated worker national emergency grants, new competitive grants for worker training in high growth and emergency industry sectors, with priority consideration to training for ``green'' jobs, including preparing workers for activities supported by other economic recovery funds, such as retrofitting of buildings, green construction, and the production of renewable electric power.

It includes $13 billion for title 1 to help close the achievement gap and enable disadvantaged students to reach their potential; $12.2 billion for special education/IDEA to improve educational outcomes for disabled children. This level of funding will increase the Federal share of special education services to its highest level since the inception of the program. Finally, the bill provides $15.6 billion to increase the maximum Pell grant by $500, which will help 7 million students pursue postsecondary education. Further, the bill includes $2.1 billion for the Head Start and Early Head Start to allow additional children to participate in this proven program, which provides development, educational, health, nutritional, social and other activities that prepare children to succeed in school.

The tax provisions in this legislation will create a refundable tax credit of $400 for working individuals and $800 for working families, covering 95 percent of working families. Taxpayers can receive this benefit through a reduction in the amount of tax that is withheld from their paychecks, or through claiming the credit on their tax returns. This will mean direct and immediate relief for nearly 4 million Michigan workers and their families. The legislation also expands the child tax credit and the earned-income tax credit to ensure that more low-income families get the full benefit. There is also a new, partially refundable $2,500 tax credit that will help make 4 years of college more affordable for an estimated 121,000 families in Michigan. For many struggling families, these targeted tax cuts will help them make ends meet in these tough times. Putting extra money in families' pockets will offer an immediate boost to the economy.

Together, the provisions in this bill offer significant hope for our Nation's economic future. Still, a comprehensive economic recovery effort is balanced on a three-legged stool consisting of creating jobs, unfreezing credit markets, and addressing the housing crisis, including reduction in the flood of foreclosures.

As the housing crisis worsens, I will continue to urge Treasury to move quickly to implement a loan modification program to help prevent avoidable foreclosures. While much still remains to be done with respect to ending the crisis in our financial sector, the financial stability outline put forth by Treasury Secretary Tim Geithner this week outlined some new approaches so that recipients of the so-called TARP funds will cooperate with mortgage foreclosure mitigation programs and provide reports of how the Federal loans are used and will expand their lending. This is a positive step in the right direction toward resuming the flow of credit, but Congress must continue to exercise stringent oversight of the TARP program and we must work to reform our financial system to restore commonsense regulation of this industry.

This legislation represents a significant and essential step in stabilizing our economy. The infrastructure projects will create Michigan jobs, the tax provisions will help Michigan families and the investments in technology and modernization will pay dividends for years to come. While there are major challenges before us that we must address in order to end this recession, passage of the Economic Recovery and Reinvestment Act will give us some urgently needed momentum.

Mr. President, over the past couple of years energy prices have taken the American people on an unpredictable, expensive, and damaging roller coaster ride. In early 2007, a barrel of crude oil cost about $50. Over the course of the year, the price rose steeply, nearly doubling by the end of the year to almost $100 per barrel. Oil prices continued to soar through the first half of 2008, peaking at nearly $150 per barrel in July. Then, over the next few months, oil prices crashed back down to $35 per barrel, a drop of over $110 per barrel.

These huge price swings can't be explained by simple changes in supply and demand. Even taking into account the recession now plaguing our country and the world economy, many market analysts believe that it was a stampede of speculators into the crude oil futures market that first drove prices far higher than justified by global supply and demand, and now an exodus of those same speculators has driven prices much lower than justified by supply and demand.

Like crude oil, the natural gas, gasoline, and heating oil markets have also seen large price changes. The prices are way up, they're way down, they're unpredictable--making it impossible for many businesses and consumers to plan for and afford energy costs and related goods and services.

Unpredictable energy prices continue to take a tremendous toll on millions of American consumers and businesses. Unless we act to protect our energy markets from excessive speculation and price manipulation, the American economy will continue to be vulnerable to wild price swings affecting the prices of transportation, food, manufacturing and everything in between, endangering the economic security of our people, our businesses, and our nation.

Congress should act now to help tame rampant speculation and reinvigorate supply and demand as market forces.

That is why I am re-introducing legislation today that is nearly identical to the legislation I and others introduced near the end of the last Congress that provides strong and workable measures to prevent excessive speculation and price manipulation in U.S. energy and agricultural markets. It will close the loopholes in our commodities laws that now impede the policing of U.S. energy trades on foreign exchanges and in the unregulated over-the-counter market. It will ensure that large commodity traders cannot use these markets to hide from CFTC oversight or avoid limits on speculation. It will strengthen disclosure, oversight, and enforcement in U.S. energy markets, restoring the financial oversight that is crucial to protect American consumers, American businesses, and the U.S. economy from further energy shocks.

This legislation, which addresses commodity markets, is one important piece of the broader reform effort needed to repair our financial regulatory system, stop abusive practices, and put the cop back on the beat in all of our markets.

Specifically, this particular legislation would make four sets of changes.

First, it would require the CFTC to set limits on the holdings of traders in all of the energy futures contracts traded on regulated exchanges to prevent traders from engaging in excessive speculation or price manipulation. Since we closed the Enron loophole last year all futures contracts must be traded in regulated markets.

Second, it would close the ``London loophole'' by giving the CFTC the same authority to police traders in the United States who trade U.S. futures contracts on a foreign exchange and by requiring foreign exchanges that want to install trading terminals in the United States to impose comparable limits on speculative trading as the CFTC imposes on domestic exchanges to prevent excessive speculation and price manipulation.

Third, it would close the ``swaps loophole'' by requiring traders in the over-the-counter energy markets to report large trades to the CFTC, and it would authorize the CFTC to set limits on trading in the presently unregulated over-the-counter markets to prevent excessive speculation and price manipulation.

Finally, it would require the CFTC to revise the standards that allow traders who use futures markets to hedge their holdings to exceed the speculation limits that apply to everyone else.

My Permanent Subcommittee on Investigations has shown that one key factor in price spikes of energy is increased speculation in the energy markets. Traders are now trading millions of contracts for future delivery of oil, creating a demand for paper contracts that gets translated into increases in prices and increasing price volatility.

Much of this increase in trading of futures has been due to speculators who are not in the oil business but who are buying and selling oil futures contracts in the hope of making a profit from changing prices. According to the CFTC's data, the number of futures and options contracts held by speculators grew from around 100,000 contracts in 2001, which was 20 percent of the total number of outstanding contracts, to almost 1.2 million contracts last fall, representing almost 40 percent of the outstanding futures and options contracts in oil on NYMEX. Even these statistics understate the increase in speculation, since the CFTC data classifies futures trading involving index funds as commercial trading rather than speculation, and the CFTC classifies all traders in commercial firms as commercial traders, regardless of whether any particular trader in that firm may, in fact, be speculating.

Basic economic theory tells us that the greater the demand there is to buy futures contracts for the delivery of a commodity, the higher the price will be for those futures contracts.

Not surprisingly, therefore, massive speculation that the price of oil will increase, together with massive purchases of futures contracts in pursuit of that belief, have, in fact, helped increase the price of oil to a level far above the price justified by the traditional forces of supply and demand.

In June 2006, I released a Subcommittee report, The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put a Cop on the Beat. This report found that the traditional forces of supply and demand didn't account for sustained price increases and price volatility in the oil and gasoline markets. The report concluded that, in 2006, a growing number of trades of contracts for future delivery of oil occurred without regulatory oversight and that market speculation had contributed to rising oil and gasoline prices, perhaps accounting for $20 out of a then-priced $70 barrel of oil.

Oil industry executives and experts arrived at similar conclusions. As oil prices neared $100 in late 2007, the President and CEO of Marathon Oil said, ``$100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this.'' At about the same time, Mr. Fadel Gheit, oil analyst for Oppenheimer and Company described the oil market as ``a farce.'' ``The speculators have seized control and it's basically a free-for- all, a global gambling hall, and it won't shut down unless and until responsible governments step in.'' In January of 2008, when oil first hit $100 per barrel, Mr. Tim Evans, oil analyst for Citigroup, wrote: ``[T]he larger supply and demand fundamentals do not support a further rise and are, in fact, more consistent with lower price levels.'' At a joint hearing on the effects of speculation my Subcommittee held in late 2007, Dr. Edward Krapels, a financial market analyst, testified: ``Of course financial trading, speculation affects the price of oil because it affects the price of everything we trade. . . . It would be amazing if oil somehow escaped this effect.'' Dr. Krapels added that as a result of this speculation ``there is a bubble in oil prices.''

Last summer, the Presidents and CEOs of major U.S. airlines described the disastrous effects of rampant speculation on the airline industry. The CEOs stated: ``normal market forces are being dangerously amplified by poorly regulated market speculation.'' The CEOs wrote: ``For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities.''

To rein in this rampant speculation, the first step to take is to put a cop back on the beat in all our energy markets to prevent excessive speculation, price manipulation, and trading abuses.

With respect to the commodity futures markets, the legislation we are introducing today requires the CFTC to establish limits on the amount of futures contracts any trader can hold. Currently, the CFTC allows the futures exchanges themselves to set these limits. This bill would require the CFTC to set those limits to prevent excessive speculation and price manipulation. It would preserve, however, the exchanges' obligation and ability to police their traders to ensure they remain below these limits.

This legislation would also require the CFTC to conduct a rulemaking to review and revise the criteria for allowing traders who are using the futures market to hedge their risks in a commodity to acquire holdings in excess of the limits on holdings for speculators.

Another step is to give the CFTC authority to prevent excessive speculation in the over-the-counter markets. In 2007, my Subcommittee issued a report on the effects of speculation in the energy markets entitled, Excessive Speculation in the Natural Gas Market. This investigation showed that speculation by a single hedge fund named Amaranth distorted natural gas prices during the summer of 2006 and drove up prices for average consumers. The report demonstrated how Amaranth had shifted its speculative activity to unregulated markets, under the ``Enron loophole,'' to avoid the restrictions and oversight in the regulated markets, and how Amaranth's trading in the unregulated markets contributed to price increases.

Following this investigation, I introduced a bill, S. 2058, to close the Enron loophole and regulate the un-regulated electronic energy markets. Working with Senators Feinstein and Snowe, and with the members of the Agriculture Committee in a bipartisan effort, we included an amendment to close the Enron loophole in the farm bill, which Congress passed last year.

The legislation to close the Enron loophole placed over-the-counter, OTC, electronic exchanges under CFTC regulation. However, this legislation did not address the separate issue of trading in the rest of the OTC market, which includes bilateral trades through voice brokers, swap dealers, and direct party-to-party negotiations. In order to ensure there is a cop on the beat in all of the energy commodity markets, we need to address the rest of the OTC market as well.

A large portion of this OTC market consists of the trading of swaps relating to the price of a commodity. Generally, commodity swaps are contracts between two parties where one party pays a fixed price to another party in return for some type of payment at a future time depending on the price of a commodity. Because some of these swap instruments look very much like futures contracts--except that they do not call for the actual delivery of the commodity--there is concern that the price of these swaps that are traded in the unregulated OTC market could affect the price of the very similar futures contracts traded on the regulated futures markets. We don't yet know for sure that this is the case, or that it is not, because we don't have any access to comprehensive data or reporting on the trading of these swaps in the OTC market.

The legislation introduced today includes provisions to give the CFTC oversight authority to stop excessive speculation in the over-the- counter market. These provisions represent a practical, workable approach that will enable the CFTC to obtain key information about the OTC market to enable it to prevent excessive speculation and price manipulation.

Under these provisions, the CFTC will have the authority to ensure that traders cannot avoid the CFTC reporting requirements by trading swaps in the unregulated OTC market instead of regulated exchanges. It will enable the CFTC to act, such as by requiring reductions in holdings of futures contracts or swaps, against traders with large positions in order to prevent excessive speculation or price manipulation regardless of whether the trader's position is on an exchange or in the OTC market.

This bill also gives the CFTC the authority to establish position limits in the over-the-counter market for energy and agricultural commodities in order to prevent excessive speculation and price manipulation. The CFTC needs this authority to ensure that large traders are not using the over-the-counter markets to evade the position limits in the futures markets.

The ``London loophole'' allowed crude oil traders in the U.S. to avoid the position limits that apply to trading on U.S. futures exchanges by directing their trades onto the ICE Futures Exchange in London.

In the last Congress, after I and others introduced legislation to close the London loophole that is similar to the legislation we are now introducing, the CFTC imposed more stringent requirements upon the ICE Futures Exchange's operations in the United States--for the first time requiring the London exchange to impose and enforce comparable position limits in order to be allowed to keep its trading terminals in the United States. This is the very action our legislation called for. However, the current CFTC position limits apply only to the nearest futures contract. Our legislation will ensure that foreign exchanges with trading terminals in the U.S. will apply position limits to other futures contracts once the CFTC establishes those limits for U.S. exchanges.

Although the CFTC has taken these important steps that will go a long way towards closing the London loophole, Congress should still pass this legislation to make sure the London loophole stays closed. The legislation would put the conditions the CFTC has imposed upon the London exchange into statute, and ensure that the CFTC has clear authority to take action against any U.S. trader who is manipulating the price of a commodity or excessively speculating through the London exchange, including requiring that trader to reduce positions.

The legislation also provides authorization for the CFTC to hire an additional 100 employees to oversee the commodity markets it regulates. The CFTC has been understaffed and underfunded for years. This authorization is a necessary first step to reinvigorate the agency's oversight and enforcement capabilities.

In summary, the legislation I am introducing today will give the CFTC ability to police all of our energy commodity markets to prevent excessive speculation and price manipulation. This legislation is necessary to close the loopholes in current law that permit speculators in commodity markets to avoid trading limits designed to prevent the type of excessive speculation that has been contributing to high energy and other commodity prices. I hope my colleagues will support this legislation.

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

Mr. President, over the past couple of years energy prices have taken the American people on an unpredictable, expensive, and damaging roller coaster ride. In early 2007, a barrel of crude oil cost about $50. Over the course of the year, the price rose steeply, nearly doubling by the end of the year to almost $100 per barrel. Oil prices continued to soar through the first half of 2008, peaking at nearly $150 per barrel in July. Then, over the next few months, oil prices crashed back down to $35 per barrel, a drop of over $110 per barrel.

These huge price swings can't be explained by simple changes in supply and demand. Even taking into account the recession now plaguing our country and the world economy, many market analysts believe that it was a stampede of speculators into the crude oil futures market that first drove prices far higher than justified by global supply and demand, and now an exodus of those same speculators has driven prices much lower than justified by supply and demand.

Like crude oil, the natural gas, gasoline, and heating oil markets have also seen large price changes. The prices are way up, they're way down, they're unpredictable--making it impossible for many businesses and consumers to plan for and afford energy costs and related goods and services.

Unpredictable energy prices continue to take a tremendous toll on millions of American consumers and businesses. Unless we act to protect our energy markets from excessive speculation and price manipulation, the American economy will continue to be vulnerable to wild price swings affecting the prices of transportation, food, manufacturing and everything in between, endangering the economic security of our people, our businesses, and our nation.

Congress should act now to help tame rampant speculation and reinvigorate supply and demand as market forces.

That is why I am re-introducing legislation today that is nearly identical to the legislation I and others introduced near the end of the last Congress that provides strong and workable measures to prevent excessive speculation and price manipulation in U.S. energy and agricultural markets. It will close the loopholes in our commodities laws that now impede the policing of U.S. energy trades on foreign exchanges and in the unregulated over-the-counter market. It will ensure that large commodity traders cannot use these markets to hide from CFTC oversight or avoid limits on speculation. It will strengthen disclosure, oversight, and enforcement in U.S. energy markets, restoring the financial oversight that is crucial to protect American consumers, American businesses, and the U.S. economy from further energy shocks.

This legislation, which addresses commodity markets, is one important piece of the broader reform effort needed to repair our financial regulatory system, stop abusive practices, and put the cop back on the beat in all of our markets.

Specifically, this particular legislation would make four sets of changes.

First, it would require the CFTC to set limits on the holdings of traders in all of the energy futures contracts traded on regulated exchanges to prevent traders from engaging in excessive speculation or price manipulation. Since we closed the Enron loophole last year all futures contracts must be traded in regulated markets.

Second, it would close the ``London loophole'' by giving the CFTC the same authority to police traders in the United States who trade U.S. futures contracts on a foreign exchange and by requiring foreign exchanges that want to install trading terminals in the United States to impose comparable limits on speculative trading as the CFTC imposes on domestic exchanges to prevent excessive speculation and price manipulation.

Third, it would close the ``swaps loophole'' by requiring traders in the over-the-counter energy markets to report large trades to the CFTC, and it would authorize the CFTC to set limits on trading in the presently unregulated over-the-counter markets to prevent excessive speculation and price manipulation.

Finally, it would require the CFTC to revise the standards that allow traders who use futures markets to hedge their holdings to exceed the speculation limits that apply to everyone else.

My Permanent Subcommittee on Investigations has shown that one key factor in price spikes of energy is increased speculation in the energy markets. Traders are now trading millions of contracts for future delivery of oil, creating a demand for paper contracts that gets translated into increases in prices and increasing price volatility.

Much of this increase in trading of futures has been due to speculators who are not in the oil business but who are buying and selling oil futures contracts in the hope of making a profit from changing prices. According to the CFTC's data, the number of futures and options contracts held by speculators grew from around 100,000 contracts in 2001, which was 20 percent of the total number of outstanding contracts, to almost 1.2 million contracts last fall, representing almost 40 percent of the outstanding futures and options contracts in oil on NYMEX. Even these statistics understate the increase in speculation, since the CFTC data classifies futures trading involving index funds as commercial trading rather than speculation, and the CFTC classifies all traders in commercial firms as commercial traders, regardless of whether any particular trader in that firm may, in fact, be speculating.

Basic economic theory tells us that the greater the demand there is to buy futures contracts for the delivery of a commodity, the higher the price will be for those futures contracts.

Not surprisingly, therefore, massive speculation that the price of oil will increase, together with massive purchases of futures contracts in pursuit of that belief, have, in fact, helped increase the price of oil to a level far above the price justified by the traditional forces of supply and demand.

In June 2006, I released a Subcommittee report, The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put a Cop on the Beat. This report found that the traditional forces of supply and demand didn't account for sustained price increases and price volatility in the oil and gasoline markets. The report concluded that, in 2006, a growing number of trades of contracts for future delivery of oil occurred without regulatory oversight and that market speculation had contributed to rising oil and gasoline prices, perhaps accounting for $20 out of a then-priced $70 barrel of oil.

Oil industry executives and experts arrived at similar conclusions. As oil prices neared $100 in late 2007, the President and CEO of Marathon Oil said, ``$100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this.'' At about the same time, Mr. Fadel Gheit, oil analyst for Oppenheimer and Company described the oil market as ``a farce.'' ``The speculators have seized control and it's basically a free-for- all, a global gambling hall, and it won't shut down unless and until responsible governments step in.'' In January of 2008, when oil first hit $100 per barrel, Mr. Tim Evans, oil analyst for Citigroup, wrote: ``[T]he larger supply and demand fundamentals do not support a further rise and are, in fact, more consistent with lower price levels.'' At a joint hearing on the effects of speculation my Subcommittee held in late 2007, Dr. Edward Krapels, a financial market analyst, testified: ``Of course financial trading, speculation affects the price of oil because it affects the price of everything we trade. . . . It would be amazing if oil somehow escaped this effect.'' Dr. Krapels added that as a result of this speculation ``there is a bubble in oil prices.''

Last summer, the Presidents and CEOs of major U.S. airlines described the disastrous effects of rampant speculation on the airline industry. The CEOs stated: ``normal market forces are being dangerously amplified by poorly regulated market speculation.'' The CEOs wrote: ``For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities.''

To rein in this rampant speculation, the first step to take is to put a cop back on the beat in all our energy markets to prevent excessive speculation, price manipulation, and trading abuses.

With respect to the commodity futures markets, the legislation we are introducing today requires the CFTC to establish limits on the amount of futures contracts any trader can hold. Currently, the CFTC allows the futures exchanges themselves to set these limits. This bill would require the CFTC to set those limits to prevent excessive speculation and price manipulation. It would preserve, however, the exchanges' obligation and ability to police their traders to ensure they remain below these limits.

This legislation would also require the CFTC to conduct a rulemaking to review and revise the criteria for allowing traders who are using the futures market to hedge their risks in a commodity to acquire holdings in excess of the limits on holdings for speculators.

Another step is to give the CFTC authority to prevent excessive speculation in the over-the-counter markets. In 2007, my Subcommittee issued a report on the effects of speculation in the energy markets entitled, Excessive Speculation in the Natural Gas Market. This investigation showed that speculation by a single hedge fund named Amaranth distorted natural gas prices during the summer of 2006 and drove up prices for average consumers. The report demonstrated how Amaranth had shifted its speculative activity to unregulated markets, under the ``Enron loophole,'' to avoid the restrictions and oversight in the regulated markets, and how Amaranth's trading in the unregulated markets contributed to price increases.

Following this investigation, I introduced a bill, S. 2058, to close the Enron loophole and regulate the un-regulated electronic energy markets. Working with Senators Feinstein and Snowe, and with the members of the Agriculture Committee in a bipartisan effort, we included an amendment to close the Enron loophole in the farm bill, which Congress passed last year.

The legislation to close the Enron loophole placed over-the-counter, OTC, electronic exchanges under CFTC regulation. However, this legislation did not address the separate issue of trading in the rest of the OTC market, which includes bilateral trades through voice brokers, swap dealers, and direct party-to-party negotiations. In order to ensure there is a cop on the beat in all of the energy commodity markets, we need to address the rest of the OTC market as well.

A large portion of this OTC market consists of the trading of swaps relating to the price of a commodity. Generally, commodity swaps are contracts between two parties where one party pays a fixed price to another party in return for some type of payment at a future time depending on the price of a commodity. Because some of these swap instruments look very much like futures contracts--except that they do not call for the actual delivery of the commodity--there is concern that the price of these swaps that are traded in the unregulated OTC market could affect the price of the very similar futures contracts traded on the regulated futures markets. We don't yet know for sure that this is the case, or that it is not, because we don't have any access to comprehensive data or reporting on the trading of these swaps in the OTC market.

The legislation introduced today includes provisions to give the CFTC oversight authority to stop excessive speculation in the over-the- counter market. These provisions represent a practical, workable approach that will enable the CFTC to obtain key information about the OTC market to enable it to prevent excessive speculation and price manipulation.

Under these provisions, the CFTC will have the authority to ensure that traders cannot avoid the CFTC reporting requirements by trading swaps in the unregulated OTC market instead of regulated exchanges. It will enable the CFTC to act, such as by requiring reductions in holdings of futures contracts or swaps, against traders with large positions in order to prevent excessive speculation or price manipulation regardless of whether the trader's position is on an exchange or in the OTC market.

This bill also gives the CFTC the authority to establish position limits in the over-the-counter market for energy and agricultural commodities in order to prevent excessive speculation and price manipulation. The CFTC needs this authority to ensure that large traders are not using the over-the-counter markets to evade the position limits in the futures markets.

The ``London loophole'' allowed crude oil traders in the U.S. to avoid the position limits that apply to trading on U.S. futures exchanges by directing their trades onto the ICE Futures Exchange in London.

In the last Congress, after I and others introduced legislation to close the London loophole that is similar to the legislation we are now introducing, the CFTC imposed more stringent requirements upon the ICE Futures Exchange's operations in the United States--for the first time requiring the London exchange to impose and enforce comparable position limits in order to be allowed to keep its trading terminals in the United States. This is the very action our legislation called for. However, the current CFTC position limits apply only to the nearest futures contract. Our legislation will ensure that foreign exchanges with trading terminals in the U.S. will apply position limits to other futures contracts once the CFTC establishes those limits for U.S. exchanges.

Although the CFTC has taken these important steps that will go a long way towards closing the London loophole, Congress should still pass this legislation to make sure the London loophole stays closed. The legislation would put the conditions the CFTC has imposed upon the London exchange into statute, and ensure that the CFTC has clear authority to take action against any U.S. trader who is manipulating the price of a commodity or excessively speculating through the London exchange, including requiring that trader to reduce positions.

The legislation also provides authorization for the CFTC to hire an additional 100 employees to oversee the commodity markets it regulates. The CFTC has been understaffed and underfunded for years. This authorization is a necessary first step to reinvigorate the agency's oversight and enforcement capabilities.

In summary, the legislation I am introducing today will give the CFTC ability to police all of our energy commodity markets to prevent excessive speculation and price manipulation. This legislation is necessary to close the loopholes in current law that permit speculators in commodity markets to avoid trading limits designed to prevent the type of excessive speculation that has been contributing to high energy and other commodity prices. I hope my colleagues will support this legislation.

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

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 will hold a hearing entitled, ``Tax Haven Banks and U.S. Tax Compliance--Obtaining the Names of U.S. Clients with Swiss Accounts.'' This hearing will continue the Subcommittee's examination of financial institutions which are located in offshore tax havens and which use practices that facilitate tax evasion and other misconduct by U.S. clients. One of the banks featured in a July 2008 hearing on this topic is UBS, a major financial institution headquartered in Switzerland. The hearing will examine issues related to a John Doe summons served by the IRS on UBS seeking the names of U.S. clients with UBS Swiss accounts that have not been disclosed to the IRS. In July, UBS representatives estimated that about 19,000 U.S. clients had about $18 billion in assets in such Swiss accounts. UBS stated at the July 2008 hearing that it would cooperate with the IRS summons, but to date virtually none of the requested information has been provided to either the IRS or the U.S. Department of Justice which is also examining the matter. The hearing will examine the status of the information exchange, the role of U.S.-Swiss tax and legal assistance treaties, and the effect of Swiss secrecy laws on the information requests. A witness list will be available Friday, February 20, 2009.

The Subcommittee hearing is scheduled for Tuesday, February 24, 2009, at 10:00 a.m., in room 342 of the Dirksen Senate Office Building. For further information, please contact Elise Bean of the Permanent Subcommittee on Investigations at 202-224-9505.

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

Mr. President, I ask unanimous consent now that the Senate proceed to executive session to consider Calendar No. 14, the nomination of William Lynn to be Deputy Secretary of Defense; that there be 3 hours of debate with respect to the nomination, with 1 hour each under the control of Senator Grassley and Senator McCain or his designee, 1 hour under my control or my designee's, and that upon the use or yielding back of time, the Senate proceed to vote on confirmation of the nomination; that upon confirmation, the motion to reconsider be laid upon the table, no further motions be in order, that the President then be immediately notified of the Senate's action and the Senate resume legislative session.

Mr. President, I yield myself as much time as I utilize.

Mr. President, I urge my colleagues to join me in supporting the nomination of Bill Lynn to be Deputy Secretary of Defense. This nomination was reported to the Senate by the Armed Services Committee by voice vote on February 5, without objection or dissenting vote.

Since the time that he received his law degree from Cornell Law School and his master's degree in public affairs from the Woodrow Wilson School more than 25 years ago, Mr. Lynn has devoted his life to public service and the national defense. For 6 years, Mr. Lynn worked as the military legislative assistant and legislative counsel to Senator Ted Kennedy. In 1993, he moved to the Department of Defense, where he served first as director of program analysis and evaluation, and then as comptroller until 2001. Over the years, he has also served as a senior fellow at the National Defense University, on the professional staff at the Institute for Defense Analyses, and as an executive director of the Defense Organization Project at the Center for Strategic and International Studies.

At the end of the Clinton administration, Mr. Lynn went to the private sector for the first time, working first for DFI international and then for Raytheon Corporation, where he has served as senior vice president of government operations and strategy, overseeing the company's strategic planning and government relations. As a result of the senior positions he has held with Raytheon, Mr. Lynn has vested and unvested stock in the company, as well as salary, bonus, and retirement payments that are due now and in the future

Mr. Lynn's situation is of course not unique. Numerous nominees to senior positions in prior administrations--including nominees to serve as Secretary of Defense, Deputy Secretary of Defense, Under Secretary of Defense for Acquisition, Technology and Logistics, Secretaries of the Military Departments, and Service Acquisition Executives--have served in similar industry positions and held similar financial interests at the time of their nominations.

Over the years, the Senate Armed Services Committee has developed a strict set of ethics guidelines to address potential conflicts of interest, and the appearance of conflicts of interest, arising out of such nominations. These guidelines are tougher and more comprehensive than the rules historically imposed by the executive branch or by other congressional committees. When I say ``These guidelines'' are tougher and more comprehensive, I am referring here to the guidelines that the Senate Armed Services Committee has developed.

For example, under generally applicable executive branch ethics rules, a nominee could address actual or potential conflicts without divesting stock or other financial interests by recusing himself from matters involving his former employer--subject to a waiver by DOD ethics officials. However, the Armed Services Committee of the Senate takes a stricter approach. We require that nominees to Senate-confirmed positions divest themselves of stock, stock options, and other financial interests in companies that do business with the Department of Defense. In the case of stock options that have not yet vested, and will not vest within 90 days after confirmation, the committee insists that the nominee renounce the options--in other words, forfeiting the entire value of the stock options.

The committee's strict divestiture requirements are added to the requirements of statutory and regulatory ethics rules applicable to all executive branch officials. Our rules require senior executive branch officials to recuse themselves from decisions impacting their former employers for a period of 1 year, even if they have already divested all financial interest. When I said ``our rules'' I was referring here to the executive branch rules. As a result, nominees to senior DOD positions are subject to both divestiture and recusal requirements.

These ethics requirements have been effective. Over the 12 years that I have served as chairman or ranking member of the Armed Services Committee, I am not aware of a single instance in which a Senate- confirmed defense official who previously served in industry has even been alleged to have taken an action favoring his former employer. We may agree or disagree with some of the decisions that these senior officials have made, but conflict of interest does not appear to have been alleged in any of those disagreements.

Mr. Lynn has complied with all of the committee's requirements. In accordance with our ethics guidelines, Mr. Lynn has agreed to divest his financial interest in his former employer within 90 days of his confirmation. In order to accomplish this purpose, he has agreed to forfeit restricted stock. By the way, this stock has a value between $250,000 and $500,000. But that stock does not vest until late in 2009 or 2010. In short, Mr. Lynn has agreed to forfeit that restricted stock and thereby make a significant financial sacrifice in order to return to Government service.

In addition, Mr. Lynn will be subject to the statutory and regulatory recusal requirements that I have already discussed. These recusal requirements are subject to waiver by the senior ethics official in the Department of Defense. However, Mr. Lynn has taken an additional step by agreeing not to seek any waiver of the recusal requirements during his first year in office with regard to any matter on which he personally lobbied either Congress or the executive branch. This commitment on Mr. Lynn's part goes beyond the steps taken by previous nominees to senior positions at the Department of Defense.

The bottom line is this. Mr. Lynn, if confirmed, will be subject to ethics restrictions that are stricter than those historically imposed by the executive branch, stricter than those applied by other congressional committees, and stricter even than those applied by the Armed Services Committee to previous nominees with similar backgrounds.

On January 21, 2009, President Obama issued an Executive order on ethics commitments by executive branch personnel. This Executive order includes a provision that would, for the first time, preclude registered lobbyists from seeking or accepting employment with an agency that they had lobbied within the previous 2 years. Because Mr. Lynn was a registered lobbyist for Raytheon, he could not have been appointed Deputy Secretary of Defense without a waiver of this prohibition.

On January 23, 2009, the Director of the Office of Management and Budget approved a waiver to two paragraphs of the executive order, clearing the way for Mr. Lynn to serve.

Mr. Lynn will still be subject to the tough new postemployment restrictions in the executive order. Those would preclude him from lobbying any DOD official for 2 years after leaving office, and from lobbying any political appointee in the Obama administration for the duration of the administration, should he leave his position before the end of the administration.

This waiver was appropriate: Mr. Lynn is a career public servant whose recent history in the private sector was more of an exile than a calling. He didn't leave the Department of Defense 8 years ago because he wanted to cash in on inside connections or information, but because the Clinton administration came to an end. When Mr. Lynn hopefully passes through the doors of the Pentagon as Deputy Secretary of Defense, he will return to his roots as a public servant, put his relationships in industry behind him, and recognize that his sole duty and obligation is to his country and the national defense.

Today, the Department of Defense faces huge management challenges. The Government Accountability Office reported last year that the cost overruns on the Department's 95 largest acquisition programs alone now total almost $300 billion over the original program estimate, even though the Department has cut unit quantities and reduced performance expectations on many programs in an effort to hold down costs.

The Department's financial system remains incapable of producing timely, accurate information on which sound business decisions can be based. The Department's civilian workforce has been decimated by decades of freezes and cuts, leaving us dependent on contractors who perform many functions

that should be performed by Government personnel.

Mr. Lynn's background in senior management positions in the Department of Defense and in industry over the last two decades gives him the kind of knowledge and experience that will be useful to address these challenges. In the course of the committee's consideration of Mr. Lynn's nomination, I have spoken to him about the challenges facing the Department of Defense. I have been impressed by his grasp of the problems the Department faces and his ideas for addressing them.

Under these circumstances, and those are the circumstances I have outlined about cost overruns, we cannot afford a Deputy Secretary who is either disengaged or ineffectual. We need someone with the kind of experience and background Mr. Lynn will bring to the job. His nomination, again, was approved by the Senate Armed Services Committee without a single dissenting vote. I hope our colleagues will support this nomination.

I yield the floor.

I wanted to thank Senator McCain for his support. It is exceedingly important, and his very thoughtful statement makes a real contribution to the debate.

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

Mr. President, I yield myself 10 minutes.

Let me, first, thank Senator Grassley for his dedication to trying to change the climate around here. He has been on the forefront. I happen to disagree with him on the conclusion he has reached--or apparently reached--relative to Mr. Lynn for reasons I will go into. Nonetheless, he has been an advocate of reform and he continues to do that. I will explain why I think, in this instance, his concerns do not fit the situation.

In the first instance, when he suggested the President is changing the rules as we go along by providing a waiver to Mr. Lynn as part of the new Executive order, that is part of the Executive order.

Let's not change the rules during the game. That is part of the rule President Obama has adopted in the new Executive order. It has some very stringent requirements. Part of them are waived by the President's Office of Management and Budget--in this case, for reasons they gave. Part of the new rule is not waived, the critical postemployment prohibition that applies to Mr. Lynn. I think that for the reasons given by President Obama's Budget Director, the waiver is a legitimate one, central in this case for the reasons given.

By the way, when we talk about waivers, this is not at all unique. Mr. Lynn's situation is not in the least bit unique. Waivers have been given and provided in previous cases because senior officers have had experience in the private sector. Secretary Gates was subject to the same rule, subject to the same waiver requirement. Secretary Rumsfeld was subject to the same waiver and the same waiver requirement, as were Deputy Secretary England and Secretary Wolfowitz. This has been a common practice. I don't think anybody in those cases, or in any other case we know about, where either a waiver has been required or the waiver provision has been applicable--we know of no situation where there was a conflict of interest.

What President Obama has done is tighten the requirement. He also provided for the possibility of a waiver for part or all of the new requirement. Part of the new requirement has been waived by the new President, but to suggest that he simply has waived his new requirement is not accurate because part of it was not waived. The critical part not waived is that the new officeholder, if confirmed--Deputy Secretary Lynn--will be subject to the prohibition that he may not lobby anybody in the Government if he leaves before the administration finishes, nor may he lobby anybody in the Department of Defense for a year after he leaves. These are very strict, new requirements that are not waived in the case of Secretary Lynn. What has been waived by the administration is the other part of the Executive order. That is No. 1.

Senator Grassley has gone into a lot of technical arguments relative to Mr. Lynn when he previously served. I want to deal with that the best we can.

These events took place 7 to 10 years ago, but they don't involve ethics issues at all. They involve what Mr. Lynn said in letters relative to certain accounting practices at the Department of Defense at that time. I have reviewed these answers, and the questions were very appropriate questions asked by Senator Grassley. I commend him for asking the questions.

There were 4 separate letters to Mr. Lynn, with 30 detailed questions about practices for validating vendor payments in certain parts of the Department of Defense more than 10 years ago. Mr. Lynn has responded to every one of the letters Senator Grassley very appropriately wrote, and to each of his questions. It is my view, after reading all of the questions and the answers, that while the vendor payments that were described by Senator Grassley are real, No. 1, it is not fair to attribute those problems to Mr. Lynn. Secondly, the problems as described by Mr. Lynn and the responses he gave were accurate.

First, the description was of the pay-and-chase--the way of paying vendors. That system was illegal. You cannot pay a vendor without checking that invoice against the contract or against the receipt of the goods. That was the

problem with the pay-and-chase system. There was a failure to check the invoice that came in, the document that the goods were received and that they were proper under the contract. That system ended. It had to end; it was illegal. A new system was put into place where the vendor's bill was checked against the receipt of the goods and against the contract. That is a very different deal. It is a legal system. Unlike so-called pay-and-chase, which preceded it, which was illegal, what Senator Grassley and others have described as a straight pay system was legal. The problem is that it was a confusing name because it implied that the previous system of not checking an invoice against the receipt of the goods or the contract continued, when it did not continue. It was dramatically changed from something that was illegal to something that was legal.

For instance, Senator Grassley, when he wrote Mr. Lynn back on January 29, 2009, said:

Straight pay allowed the technician to ignore the warning

signals and make payments up to half a million dollars

without checking documentation.

That is not accurate. They had to check documentation. There were some things they could not check because the systems are deficient at the Department of Defense, including what is the original source of the money in the Defense Department's budget. Does it come from R&D or does it come from acquisition? That part, they still cannot check. Those systems have been deficient, and continue to be, but with the help of this body and hopefully real energy in the DOD, that can be corrected. We all need that.

Senator Grassley has been in the forefront of trying to get these kinds of controls in place. I commend him for that. But it is not accurate to say that straight pay, so-called, which was the followup system, allowed these payments without checking documentation. That is what Mr. Lynn disagrees with. When you look at his answers, that is the disagreement between Mr. Lynn's answers and what Senator Grassley describes as being accurate.

Part of the problem here, by the way, that Senator Grassley had is not with Mr. Lynn, it is with Secretary Cohen. Repeatedly and accurately, Senator Grassley points to the action of then-Secretary of Defense Cohen, saying he didn't do this, and Mr. Lynn didn't change it, or Secretary Cohen didn't do something, and Mr. Lynn did not disagree. The problem was with the Secretary of Defense, which is outlined by Senator Grassley, to the extent that it exists.

It is hard for me to believe Secretary Cohen would not be eligible to be Secretary of Defense again or would not be confirmed unanimously by this body. Yet the mistakes attributed to Mr. Lynn are also attributed to then-Secretary Cohen, for whom Mr. Lynn worked. But does anyone seriously suggest that if Secretary Cohen were reappointed as Secretary of Defense, we would not confirm Bill Cohen by a vote of 100 to 0?

So, Mr. President, without getting into a lot more detail--and these are incredibly complicated and detailed issues--let me summarize by saying that the difference here has been described--there is a difference over the description of a system of payment and the way in which Mr. Lynn describes it. When you look at his complete answers, it seems to me, there is a fair description of what the problem was.

Mr. President, I yield the floor.

Mr. President, I ask unanimous consent that the vote on the confirmation of the nomination of William J. Lynn occur at 5 p.m. today, with the other provisions of the previous order remaining in effect.

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

Mr. President, I thank the Senator from Alabama for his statement. It is a very important and

valuable statement. He is a highly valued member of the Armed Services Committee and comments coming from him will have an impact on this body. I am grateful.

I suggest the absence of a quorum.

Mr. President, have the yeas and nays been ordered?

I ask for the yeas and nays.

Mr. President, today Congressman John Dingell of Michigan becomes the longest serving member in the history of the United States House of Representatives. As we observe this notable milestone in time, however, John Dingell's longevity is really a footnote that does not even begin to tell the full story of John and his wonderful partner Debbie.

Fifty-four years from now, or 154 years from now, when historians look back for models of public service, John Dingell will stand among the best America has to offer. His commitment to the public good, his sense of fiduciary duty as a public servant and most of all the spirit, the passion, and the motivation that John brings to his work day in and day out, year after year, are nothing short of remarkable.

Before John Dingell became a Member of the House, he was a son and a student of the House. His father, Congressman John Dingell Sr., was a New

Dealer and a passionate advocate of FDR's agenda.

As a House page in the late 1930s and early 1940s, John learned the intricacies of House procedure. He got to know his way around, and developed a profound respect for leaders like Sam Rayburn.

Even in his youth, John was anything but a passive observer. When Japan attacked Pearl Harbor and FDR came to Congress and declared it a ``date which will live in infamy,'' John was in the Chamber. In fact, John saw to it that one audio recorder continued to run even after FDR's speech ended, so thanks to him we have a fascinating record of the deliberations afterward that quickly led to the declaration of war on Japan.

When he was 18, John enlisted in the Army. After the war he returned to Washington, and, ever a student of the House, he worked as an elevator operator here in the Capitol while attending Georgetown, where he received undergraduate and law degrees. As a young lawyer, John served as a clerk for Sandy's and my uncle, Theodore Levin, a Federal judge in Michigan who, along with our Dad, had actually campaigned for John's Dad in the 1930s.

A few years later, when his father passed away, John Jr. won the special election to fill the vacant seat. The son and student became a Member of the institution that he had studied so closely and that he respected so deeply. And over the years, the Member would become the Chairman, and the Chairman would become the Dean--the most senior member of the House of Representatives.

While that alone is a significant achievement, the true mark of John Dingell is his devotion to public service that connects him to the great men and women of America's storied past whose statues grace this Capitol, and the legislation he has influenced that has so improved the lives of our people. He contributed to the creation of Medicaid and Medicare, to the Civil Rights bills, to the Endangered Species Act and the Clean Air Act. He fought to protect Social Security--which his father helped create.

Like all great fighters, when John Dingell is knocked down, he picks himself up. For example, he has helped keep the fight for universal health care alive by introducing legislation to achieve it in each new Congress, just as his father did.

John can be tough, running procedural circles around even the most skilled legislative adversaries. And he can be gruff, for instance comparing a proposal he thinks is foolish or unnecessary to ``side pockets on a cow'' or ``feathers on a fish.''

But this tough and gruff Congressman has a softer side. His wife Debbie is personable and glowing and brings extraordinary energy to everything she touches. John and Debbie are each powerhouses in their own right, and their relationship is a perfect synergy.

While Debbie is everywhere, raising funds for great causes, creating personal relationships that enrich so many lives, John is only where he needs to be--focusing like a laser on legislative and policy goals.

There is a common thread in the Dingells' legislative maneuvers, charitable endeavors and even John's unique use of language: they are all devoted to the goal of helping working people. People back home love ``Big John'' because they know he is on their side--fighting for their jobs, their health, their children.

That is why, as much evidence as there is of John's influence and respect in the House of Representatives, the best way to really understand John's impact on the people he represents is to make a visit to ``Dingell Country.'' In John's district, people have placed John's name on a road, a bridge, a park and a library not just to honor him but to inspire others. Just talk to a few of John's fellow veterans at the VA Medical Center in Detroit. Those vets feel a little better and a little stronger knowing that they live in the John Dingell VA Medical Center. Or stop by the UAW Region 1a headquarters in Taylor, Michigan, and tell them you've stood shoulder to shoulder with John Dingell fighting for American workers--and you won't get a warmer welcome anywhere in America.

John is beloved in his district, and he has been a role model to me and to my older brother Sandy since we arrived in Congress. He has also been a wonderful mentor to us and to the entire Michigan delegation.

John has been a son of the House, a student of the House, a Member and a Chairman in the House he loves so much. On behalf of Michigan, I offer thanks to the now all-time Dean of the House of Representatives, John Dingell, a great institution within a great institution, for his devotion to public service and to the people of Michigan and the Nation.

Mr. President, I am pleased today to join my friend and colleague Senator Dodd in reintroducing comprehensive legislation to combat credit card abuses that have been hurting American consumers for far too long. Our bill, which is supported and cosponsored by other Senate colleagues as well, is called the Credit Card Accountability Responsibility and Disclosure Act, or CARD Act of 2009. With the economic hardships facing Americans today, from falling home prices to rising unemployment, it is more important than ever for Congress to act now to stop credit card abuses and protect American families and businesses from unfair credit card practices.

Every day the taxpayer is being asked to foot the bill for our biggest banks' irresponsible lending decisions. America's banking giants can't be allowed to dig themselves out of the hole they are in by loading up American families with unfair fees and interest charges. Even as the prime rate has plummeted, some credit card companies are hiking interest rates on millions of customers who play by the rules. In other words, the banks are punishing the very taxpayers that they have come to, hat in hand, for financial rescue. It can't be allowed to continue.

Credit card companies regularly use a host of unfair practices. They hike the interest rates of cardholders who pay on time and comply with their credit card agreements. They impose interest rates as high as 32 percent, charge interest for debt that was paid on time, and, in some cases, apply higher interest rates retroactively to existing credit card debt. They pile on excessive fees and then charge interest on those fees. And they engage in a number of other unfair practices that are burying American consumers in a mountain of debt. It's long past time to enact legislation to protect American consumers.

In December, the Federal Reserve and other bank regulators finally issued a regulation to stop some of the most egregiously unfair practices. For example, the new credit card regulation stops banks from retroactively raising interest rates on cardholders who meet their obligations, requires banks to mail credit card bills at least 21 days before the payment due date, and forces banks to more fairly apply consumer payments. It is a good first step, and long overdue. But the regulation regrettably leaves in place many blatantly unfair credit card practices that mire families in debt. It fails to stop, for example, abuses such as charging interest on debt that was paid on time, charging folks a fee simply to pay their bills, and hiking interest rates on a credit card because of a misstep on another, unrelated debt, a practice known as universal default. Legislation is needed not only to end those abusive practices--which are not prohibited by the Federal Reserve regulation--but also to provide a statutory foundation for that new regulation so that it cannot be weakened in the future.

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

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

In 2006, Americans used 700 million credit cards to buy about $2 trillion in

goods and services. The average family now has 5 credit cards. Credit cards are being used to pay for groceries, mortgage payments, even taxes. And they are saddling U.S. consumers, from college students to seniors, with a mountain of debt. The latest figures show that U.S. credit card debt is now approaching $1 trillion. These consumers are routinely being subjected to unfair practices that squeeze them for ever more money, sinking them further and further into debt.

Congress acted boldly and quickly to bail out the banks; now is time to do something for the consumer. Too many American families are being hurt by too many unfair credit card practices to delay action any longer. I commend Senator Dodd, Chairman of the Senate Banking Committee, for tackling credit card reform, and look forward to Congress promptly and urgently taking the steps needed to ban unfair practices that are causing so much pain and financial damage to American families.

Abusive credit card practices are a concern that I have been tracking over the past several years through the Permanent Subcommittee on Investigations, which I chair. The Subcommittee held two investigative hearings in 2007, exposing those practices, and based on those hearings, I introduced legislation--the Stop Unfair Practices in Credit Cards Act, S. 1395--to ban the outrageous credit card abuses we documented. I am pleased that Senators McCaskill, Leahy, Durbin, Bingaman, Cantwell, Whitehouse, Kohl, Brown, Kennedy, and Sanders joined as cosponsors. The Dodd-Levin bill we are introducing today incorporates almost all of S. 1395, and adds other important protections as well. It is the strongest credit card bill yet.

The Dodd-Levin bill includes, for example, the following provisions that also appeared in the bill I introduced with Senator McCaskill and others. It would:

No Interest on Debt Paid on Time. Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.

Prohibition on Universal Default. Prohibit credit card issuers from increasing interest rates on cardholders in good standing for reasons unrelated to the cardholder's behavior with respect to that card.

Apply Interest Rate Increases Only to Future Debt. Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.

No Interest on Fees. Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.

Restrictions on Over-Limit Fees. Prohibit the charging of repeated over-limit fees for a single instance of exceeding a credit card limit.

Prompt and Fair Crediting of Card Holder Payments. Require payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges.

Fixed Credit Limits. Require card issuers to offer consumers the option of operating under a fixed credit limit that cannot be exceeded.

No Pay-to-Pay Fees. Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.

The Dodd-Levin bill also includes important additional protections. It would:

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

Enhance protection against unfair and deceptive practices by giving each federal banking agency the authority to prescribe regulations governing unfair or deceptive practices by banks or savings and loan institutions.

Improve disclosure requirements by, for example, requiring issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made.

Protect young consumers from credit card solicitations.

To understand why these protections are needed, I would like to provide a brief overview of some of the most prevalent credit card abuses we uncovered and some of the stories that American consumers shared with us during the course of the inquiries carried out by my Permanent Subcommittee on Investigations.

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

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

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

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

The week before our March hearing, Chase decided to forgive the remaining debt on the Wannemacher account, and while that was great news for the Wannemacher family, that decision didn't begin to resolve the problem of excessive credit card fees and sky-high interest rates that trap too many hard-working families in a downward spiral of debt.

These high fees are made worse by the industry-wide practice of including all fees in a consumer's outstanding balance so that they also incur interest charges. Those interest charges magnify the cost of the fees and can quickly drive a family's credit card debt far beyond the cost of their initial purchases. It is one thing for a bank to charge interest on funds lent to a consumer; charging interest on penalty fees goes too far.

A second troubling case history involves Charles McClune, a 51-year- old Michigan resident who is married with one child. Mr. McClune has a credit card account which he closed in 1998, and has been trying to pay off for more than 10 years. Due to excessive fees and interest rates, and despite paying more than four times his original credit card debt of less than $4,000, Mr. McClune still owes thousands on his credit card, with no end in sight.

Mr. McClune first opened his credit card account while in college, in 1986, at Michigan National Bank through a student-targeted credit promotion. After leaving college, the credit limit on his card was increased to $4,000. By 1993, although he had not exceeded the credit limit through purchases, Mr. McClune had missed some payments and was assessed interest and fees that pushed his balance over the $4,000 limit. From 1993 to 1996, he exceeded his limit again, on several occasions, due to interest and fee charges. He stopped making purchases on the credit card in 1995.

In 1996, Mr. McClune's credit card account was purchased by Chase Bank. In 1998, Mr. McClune asked Chase to close the account, and Chase did so. Although he never made a single purchase on his credit card while the account was with Chase, Chase repeatedly increased the interest rate on his account, including after the account was closed. In 2002, for example, his interest rate was about 21 percent; by October 2005, it had climbed to 29.99 percent where it remained for more than two years until March 2008; it then

dropped slightly to 29.24 percent. The higher interest rates were applied retroactively to Mr. McClune's closed account balance, increasing the size of his minimum payments and his overall debt.

Chase also assessed Mr. McClune repeated over-the-limit and late fees, which began at $29 and increased over time to $39 per fee. Chase cannot locate statements for Mr. McClune's account prior to February 2001, so there is no record of all the fees he has paid. The records in existence show that, since February 2001, he has paid 64 over-the-limit fees totaling $2,200. Those fees stopped after the March 2007 hearing before my Subcommittee, in which Chase promised to stop charging more than three over-the-limit fees for a single violation of a credit card limit. In addition to the 64 over-the-limit fees, since February 2001, Chase has charged Mr. McClune nearly $2,000 in late fees.

The records also show that since 2001, Mr. McClune was contacted by telephone on several occasions by Chase representatives seeking payment on his account. If he agreed to make a payment over the telephone, Chase charged him--without notifying him at the time--a fee of $12 to $15 per telephone payment. When asked about these fees, Chase told the Subcommittee that the fees were imposed, because on each occasion Mr. McClune had spoken with a ``live advisor.'' Since 2001, he has paid a total of $160 in these pay-to-pay fees.

Altogether, since 2001, Mr. McClune has paid nearly $4,400 in fees on a debt of less than $4,000. If the more than four years of missing credit card bills were available from 1996 to 2000, this fee total would be even higher. In addition, each fee was added to Mr. McClune's outstanding credit card balance, and Chase charged him interest on the fee amounts, thereby increasing his debt by thousands of additional dollars.

In February 2001, Chase records show that Mr. McClune's credit card debt totaled nearly $5,200. For the next 7 years, although he did not pay every month, Mr. McClune paid nearly $2,000 per year toward his credit card debt, but was unable to pay it off. At one time, he paid $150 every two weeks for several weeks. Those payments did not bring his debt under the $4,000 credit limit, or reduce his interest rate.

In January 2007, Mr. McClune received a letter from Chase stating that if he made his next payment on time, he would receive a $50 credit on his debt. Mr. McClune cashed out his IRA and paid $4,000 on his credit card debt. Because he made this payment in February, however, he did not receive the $50 credit for an on-time payment. Instead, he was assessed a $39 late fee, a $39 over-the-limit fee, and a $14.95 payment fee for making the $4,000 payment over the telephone.

Mr. McClune was never offered a payment plan or a reduced interest rate by Chase to help him pay down his debt. His credit card bills show that from February 2001 to June 2008, he paid Chase a total of $15,800. If the four years of missing credit card bills from 1996 to 2000 were available, his total payments would likely exceed $20,000. In June 2008, his credit card bill showed he was charged 29 percent interest and a $39 late fee on a balance of $3,300.

How could Mr. McClune pay $15,000 to $20,000 on credit card purchases of less than $4,000, and still owe $3,300? His credit card statements since 2001 show that he was socked with over $9,700 in interest charges, $2,200 in over-the-limit fees, $2,000 in late fees, and $160 in pay-to-pay fees. All of these interest charges and fees were assessed by Chase while the account was closed and without a single purchase having been made since 1995. Despite his lack of purchases and payments totaling $15,800, Chase records show that, from February 2001 until June 2008, Mr. McClune was able to reduce his credit card balance by only about $1,850.

Mr. McClune is not trying to avoid his debt. He has made years of payments on a closed credit card account that he has not used to make a purchase in 13 years. He has paid thousands and thousands of dollars-- four and possibly five times what he originally owed--in an attempt to pay off his credit card account. He is still paying. But his thousands of dollars in payments are not enough for his credit card issuer which is squeezing him for every cent it can, fair or not, for years on end.

Tragically, Mr. McClune and Mr. Wannemacher have a lot of company in their credit card experiences. The many case histories investigated by the Subcommittee show that responsible cardholders across the country are being squeezed by unfair credit card lending practices involving excessive fee and interest charges. The current regulatory regime--even with the new Federal Reserve regulation--is insufficient to prevent these ongoing credit card abuses. Legislation is badly needed.

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

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

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

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

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

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

Now 38 cents isn't much in the big scheme of things. That may be why many consumers don't notice these types of extra interest charges or try to fight them. Even if someone had questions about the amount of interest on a bill, most consumers would be hard pressed to understand how the amount was calculated, much less whether it was incorrect. But by nickel and diming tens of millions of consumer accounts, credit card issuers reap large profits. I think it is indefensible to make consumers pay interest on debt which they pay on time. It is also just plain wrong to charge trailing interest when a bill is paid on time and in full.

My Subcommittee's second hearing focused on another set of unfair credit card practices involving unfair interest

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

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

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

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

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

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

The case histories presented at our hearings illustrate only a small portion of the abusive credit card practices going on today. Since early 2007, the Subcommittee has received letters and emails from thousands of credit card cardholders describing unfair credit card practices and asking for help to stop them, more complaints than I have received in any investigation I've conducted in more than 25 years in Congress. The complaints stretch across all income levels, all ages, and all areas of the country. The bottom line is that these abuses have gone on for too long. In fact, these practices have been around for so many years that they have in many cases become the industry norm, and our investigation has shown that many of the practices are too entrenched, too profitable, and too immune to consumer pressure for the companies to change them on their own.

For these reasons, I urge my colleagues to support enactment of the Dodd-Levin Credit CARD Act this year. Congress has already gone to bat for the banks that engage in abusive credit card practices; it's time we go to bat for the American family.

Mr. President, I am pleased today to join my friend and colleague Senator Dodd in reintroducing comprehensive legislation to combat credit card abuses that have been hurting American consumers for far too long. Our bill, which is supported and cosponsored by other Senate colleagues as well, is called the Credit Card Accountability Responsibility and Disclosure Act, or CARD Act of 2009. With the economic hardships facing Americans today, from falling home prices to rising unemployment, it is more important than ever for Congress to act now to stop credit card abuses and protect American families and businesses from unfair credit card practices.

Every day the taxpayer is being asked to foot the bill for our biggest banks' irresponsible lending decisions. America's banking giants can't be allowed to dig themselves out of the hole they are in by loading up American families with unfair fees and interest charges. Even as the prime rate has plummeted, some credit card companies are hiking interest rates on millions of customers who play by the rules. In other words, the banks are punishing the very taxpayers that they have come to, hat in hand, for financial rescue. It can't be allowed to continue.

Credit card companies regularly use a host of unfair practices. They hike the interest rates of cardholders who pay on time and comply with their credit card agreements. They impose interest rates as high as 32 percent, charge interest for debt that was paid on time, and, in some cases, apply higher interest rates retroactively to existing credit card debt. They pile on excessive fees and then charge interest on those fees. And they engage in a number of other unfair practices that are burying American consumers in a mountain of debt. It's long past time to enact legislation to protect American consumers.

In December, the Federal Reserve and other bank regulators finally issued a regulation to stop some of the most egregiously unfair practices. For example, the new credit card regulation stops banks from retroactively raising interest rates on cardholders who meet their obligations, requires banks to mail credit card bills at least 21 days before the payment due date, and forces banks to more fairly apply consumer payments. It is a good first step, and long overdue. But the regulation regrettably leaves in place many blatantly unfair credit card practices that mire families in debt. It fails to stop, for example, abuses such as charging interest on debt that was paid on time, charging folks a fee simply to pay their bills, and hiking interest rates on a credit card because of a misstep on another, unrelated debt, a practice known as universal default. Legislation is needed not only to end those abusive practices--which are not prohibited by the Federal Reserve regulation--but also to provide a statutory foundation for that new regulation so that it cannot be weakened in the future.

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

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

In 2006, Americans used 700 million credit cards to buy about $2 trillion in

goods and services. The average family now has 5 credit cards. Credit cards are being used to pay for groceries, mortgage payments, even taxes. And they are saddling U.S. consumers, from college students to seniors, with a mountain of debt. The latest figures show that U.S. credit card debt is now approaching $1 trillion. These consumers are routinely being subjected to unfair practices that squeeze them for ever more money, sinking them further and further into debt.

Congress acted boldly and quickly to bail out the banks; now is time to do something for the consumer. Too many American families are being hurt by too many unfair credit card practices to delay action any longer. I commend Senator Dodd, Chairman of the Senate Banking Committee, for tackling credit card reform, and look forward to Congress promptly and urgently taking the steps needed to ban unfair practices that are causing so much pain and financial damage to American families.

Abusive credit card practices are a concern that I have been tracking over the past several years through the Permanent Subcommittee on Investigations, which I chair. The Subcommittee held two investigative hearings in 2007, exposing those practices, and based on those hearings, I introduced legislation--the Stop Unfair Practices in Credit Cards Act, S. 1395--to ban the outrageous credit card abuses we documented. I am pleased that Senators McCaskill, Leahy, Durbin, Bingaman, Cantwell, Whitehouse, Kohl, Brown, Kennedy, and Sanders joined as cosponsors. The Dodd-Levin bill we are introducing today incorporates almost all of S. 1395, and adds other important protections as well. It is the strongest credit card bill yet.

The Dodd-Levin bill includes, for example, the following provisions that also appeared in the bill I introduced with Senator McCaskill and others. It would:

No Interest on Debt Paid on Time. Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.

Prohibition on Universal Default. Prohibit credit card issuers from increasing interest rates on cardholders in good standing for reasons unrelated to the cardholder's behavior with respect to that card.

Apply Interest Rate Increases Only to Future Debt. Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.

No Interest on Fees. Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.

Restrictions on Over-Limit Fees. Prohibit the charging of repeated over-limit fees for a single instance of exceeding a credit card limit.

Prompt and Fair Crediting of Card Holder Payments. Require payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges.

Fixed Credit Limits. Require card issuers to offer consumers the option of operating under a fixed credit limit that cannot be exceeded.

No Pay-to-Pay Fees. Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.

The Dodd-Levin bill also includes important additional protections. It would:

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

Enhance protection against unfair and deceptive practices by giving each federal banking agency the authority to prescribe regulations governing unfair or deceptive practices by banks or savings and loan institutions.

Improve disclosure requirements by, for example, requiring issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made.

Protect young consumers from credit card solicitations.

To understand why these protections are needed, I would like to provide a brief overview of some of the most prevalent credit card abuses we uncovered and some of the stories that American consumers shared with us during the course of the inquiries carried out by my Permanent Subcommittee on Investigations.

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

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

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

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

The week before our March hearing, Chase decided to forgive the remaining debt on the Wannemacher account, and while that was great news for the Wannemacher family, that decision didn't begin to resolve the problem of excessive credit card fees and sky-high interest rates that trap too many hard-working families in a downward spiral of debt.

These high fees are made worse by the industry-wide practice of including all fees in a consumer's outstanding balance so that they also incur interest charges. Those interest charges magnify the cost of the fees and can quickly drive a family's credit card debt far beyond the cost of their initial purchases. It is one thing for a bank to charge interest on funds lent to a consumer; charging interest on penalty fees goes too far.

A second troubling case history involves Charles McClune, a 51-year- old Michigan resident who is married with one child. Mr. McClune has a credit card account which he closed in 1998, and has been trying to pay off for more than 10 years. Due to excessive fees and interest rates, and despite paying more than four times his original credit card debt of less than $4,000, Mr. McClune still owes thousands on his credit card, with no end in sight.

Mr. McClune first opened his credit card account while in college, in 1986, at Michigan National Bank through a student-targeted credit promotion. After leaving college, the credit limit on his card was increased to $4,000. By 1993, although he had not exceeded the credit limit through purchases, Mr. McClune had missed some payments and was assessed interest and fees that pushed his balance over the $4,000 limit. From 1993 to 1996, he exceeded his limit again, on several occasions, due to interest and fee charges. He stopped making purchases on the credit card in 1995.

In 1996, Mr. McClune's credit card account was purchased by Chase Bank. In 1998, Mr. McClune asked Chase to close the account, and Chase did so. Although he never made a single purchase on his credit card while the account was with Chase, Chase repeatedly increased the interest rate on his account, including after the account was closed. In 2002, for example, his interest rate was about 21 percent; by October 2005, it had climbed to 29.99 percent where it remained for more than two years until March 2008; it then

dropped slightly to 29.24 percent. The higher interest rates were applied retroactively to Mr. McClune's closed account balance, increasing the size of his minimum payments and his overall debt.

Chase also assessed Mr. McClune repeated over-the-limit and late fees, which began at $29 and increased over time to $39 per fee. Chase cannot locate statements for Mr. McClune's account prior to February 2001, so there is no record of all the fees he has paid. The records in existence show that, since February 2001, he has paid 64 over-the-limit fees totaling $2,200. Those fees stopped after the March 2007 hearing before my Subcommittee, in which Chase promised to stop charging more than three over-the-limit fees for a single violation of a credit card limit. In addition to the 64 over-the-limit fees, since February 2001, Chase has charged Mr. McClune nearly $2,000 in late fees.

The records also show that since 2001, Mr. McClune was contacted by telephone on several occasions by Chase representatives seeking payment on his account. If he agreed to make a payment over the telephone, Chase charged him--without notifying him at the time--a fee of $12 to $15 per telephone payment. When asked about these fees, Chase told the Subcommittee that the fees were imposed, because on each occasion Mr. McClune had spoken with a ``live advisor.'' Since 2001, he has paid a total of $160 in these pay-to-pay fees.

Altogether, since 2001, Mr. McClune has paid nearly $4,400 in fees on a debt of less than $4,000. If the more than four years of missing credit card bills were available from 1996 to 2000, this fee total would be even higher. In addition, each fee was added to Mr. McClune's outstanding credit card balance, and Chase charged him interest on the fee amounts, thereby increasing his debt by thousands of additional dollars.

In February 2001, Chase records show that Mr. McClune's credit card debt totaled nearly $5,200. For the next 7 years, although he did not pay every month, Mr. McClune paid nearly $2,000 per year toward his credit card debt, but was unable to pay it off. At one time, he paid $150 every two weeks for several weeks. Those payments did not bring his debt under the $4,000 credit limit, or reduce his interest rate.

In January 2007, Mr. McClune received a letter from Chase stating that if he made his next payment on time, he would receive a $50 credit on his debt. Mr. McClune cashed out his IRA and paid $4,000 on his credit card debt. Because he made this payment in February, however, he did not receive the $50 credit for an on-time payment. Instead, he was assessed a $39 late fee, a $39 over-the-limit fee, and a $14.95 payment fee for making the $4,000 payment over the telephone.

Mr. McClune was never offered a payment plan or a reduced interest rate by Chase to help him pay down his debt. His credit card bills show that from February 2001 to June 2008, he paid Chase a total of $15,800. If the four years of missing credit card bills from 1996 to 2000 were available, his total payments would likely exceed $20,000. In June 2008, his credit card bill showed he was charged 29 percent interest and a $39 late fee on a balance of $3,300.

How could Mr. McClune pay $15,000 to $20,000 on credit card purchases of less than $4,000, and still owe $3,300? His credit card statements since 2001 show that he was socked with over $9,700 in interest charges, $2,200 in over-the-limit fees, $2,000 in late fees, and $160 in pay-to-pay fees. All of these interest charges and fees were assessed by Chase while the account was closed and without a single purchase having been made since 1995. Despite his lack of purchases and payments totaling $15,800, Chase records show that, from February 2001 until June 2008, Mr. McClune was able to reduce his credit card balance by only about $1,850.

Mr. McClune is not trying to avoid his debt. He has made years of payments on a closed credit card account that he has not used to make a purchase in 13 years. He has paid thousands and thousands of dollars-- four and possibly five times what he originally owed--in an attempt to pay off his credit card account. He is still paying. But his thousands of dollars in payments are not enough for his credit card issuer which is squeezing him for every cent it can, fair or not, for years on end.

Tragically, Mr. McClune and Mr. Wannemacher have a lot of company in their credit card experiences. The many case histories investigated by the Subcommittee show that responsible cardholders across the country are being squeezed by unfair credit card lending practices involving excessive fee and interest charges. The current regulatory regime--even with the new Federal Reserve regulation--is insufficient to prevent these ongoing credit card abuses. Legislation is badly needed.

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

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

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

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

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

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

Now 38 cents isn't much in the big scheme of things. That may be why many consumers don't notice these types of extra interest charges or try to fight them. Even if someone had questions about the amount of interest on a bill, most consumers would be hard pressed to understand how the amount was calculated, much less whether it was incorrect. But by nickel and diming tens of millions of consumer accounts, credit card issuers reap large profits. I think it is indefensible to make consumers pay interest on debt which they pay on time. It is also just plain wrong to charge trailing interest when a bill is paid on time and in full.

My Subcommittee's second hearing focused on another set of unfair credit card practices involving unfair interest

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

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

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

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

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

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

The case histories presented at our hearings illustrate only a small portion of the abusive credit card practices going on today. Since early 2007, the Subcommittee has received letters and emails from thousands of credit card cardholders describing unfair credit card practices and asking for help to stop them, more complaints than I have received in any investigation I've conducted in more than 25 years in Congress. The complaints stretch across all income levels, all ages, and all areas of the country. The bottom line is that these abuses have gone on for too long. In fact, these practices have been around for so many years that they have in many cases become the industry norm, and our investigation has shown that many of the practices are too entrenched, too profitable, and too immune to consumer pressure for the companies to change them on their own.

For these reasons, I urge my colleagues to support enactment of the Dodd-Levin Credit CARD Act this year. Congress has already gone to bat for the banks that engage in abusive credit card practices; it's time we go to bat for the American family.