Floor Statements

I thank the Chair and I thank the gentleman from Texas as well.

I also rise to express support for the JOBS Act today.

I strongly believe that the JOBS Act will ease the burden of capital formation on the entrepreneurial growth companies that have traditionally served as the U.S. economy's primary job creators and provide a larger pool of investors with access to information and investment options on these companies that currently doesn't exist.

With venture capital fundraising basically stagnant and the IPO market largely closed off, innovative start-up companies who can't have access to the capital market they need have been forced literally to delay research on promising medical and scientific and technological breakthroughs, and that has hurt our economy and our global competitiveness because emerging companies need capital. Developing medical cures to help people live longer and healthier and more productive lives needs capital; developing technology to improve the speed of communication needs capital; and developing alternative energy technologies to reduce our dependence on foreign sources requires capital.

With the passage of this bill, we will provide those companies with the innovation and creativity needed in the marketplace which is essential to keeping American companies competitive with a cost- effective means to access that capital and keep this country at the forefront of medical, scientific, and technological breakthroughs.

Economic growth occurs when companies go public. Just recently I met with the New Jersey Technology Council, and they stressed the importance of removing the regulatory burdens of bringing companies they invest in to market. And the JOBS bill does that. It restores that innovation for early-stage investors to provide the capital that America's entrepreneurs need.

So we do this by chipping away at the albatross of regulations that have strangled and held back the IPO market since the passage of the Sarbanes-Oxley law. This bill provides America's entrepreneurs with access to the capital that they need to basically go after and seek their dreams. It provides the venture capital investors with the exit strategy they need to help make their dreams a reality and create a welcoming environment.

With that, I believe the JOBS Act is a commonsense bill, and I will support the legislation before us.

I thank the chairman.

As we indicate, the President supports the underlying legislation and the gentleman indicated that he may be looking for some amendments to the bill, but I would assume quite candidly he would not be looking for this amendment.

As the gentleman from Arizona aptly points out, what we're trying to do is to facilitate the expansion and growth by the small companies. How do we do that? As the gentleman from Arizona says rightfully so, by the expansion of information. This information can and should get out there; but at the end of the day, we want to make sure that the liability that is imposed on the dissemination of information is not so grave and dangerous to it that you would basically supplement with an overarching desire to destroy that overall purpose of the legislation. You do that unfortunately with this amendment.

Why so? At the end of the day, you will get the same protections that you're looking for here, I think, in the sense that there will be strict liability imposed. Where? On the prospectus. So if you are the investor in this instance and you're trying to decide whether you're going to go and invest in this new company or not, the information that you'll be looking for will be where? In the prospectus. And the strict liability standard will be imposed at that period of time.

You do not want to impose that liability as you lead up to the situation with the other information that is going out by outside research analysts. With that, I will respectfully oppose the amendment.

So the premise of the legislation is what? As we said before, to try to encourage the smaller growth companies to be able to development their businesses and go on and to eventually to go public. In light of the last conversation we had on the last amendment, we said how do we facilitate doing that? We do that by exchanging information out to the public to be able to share information from research analysts and the like.

Eventually, as was pointed out in the last amendment, we said that eventually at the end of the day you'd get to a prospectus where strict liability would incur and so that the investor would have the adequate information to do so, and they would also have the liability protection afforded to them that you would have with a prospective. All well and good.

Now we come to this amendment, and I have to scratch my head to understand exactly what the proponent of the legislation is trying to do here. Her last comment was that we want to protect who? Well, the less sophisticated investor. Okay, well, let's take a look at that. What are we dealing with here? What we're dealing with here would strike the language that would allow an emerging growth company to underwrite and communicate----

To deal with institutions that are accredited investors. Who is it that sets the standards for accredited investors? The SEC. So if your concern is that the level of accredited investors is not sophisticated enough to deal with the purchase of these investments, then your complaint is not with this underlying legislation. Your concern should be directed to who? The entity that sets the standards for that--the SEC.

This legislation basically says that these people who should be involved here are accredited, set by the SEC. They, therefore, by definition are sophisticated investors. That is why we oppose the amendment.

Mr. Speaker, I rise today to recognize the 65th commemoration of Taiwan's ``2 28 Massacre.''

On February 28, 1947, the brutal arrest of a female civilian in Taipei led to large-scale protests by the native Taiwanese against the repression of Chiang Kai-shek's Chinese Nationalists, who occupied Taiwan on behalf of the Allied Forces after Japan's defeat in 1945.

During the following days, Chiang's government sent troops from mainland China to the island. The Chinese soldiers began capturing and executing leading Taiwanese lawyers, doctors, students, and other citizens.

It is estimated that at least 18,000 people lost their lives during the turmoil. During the following four decades, the Chinese Nationalists continued to rule Taiwan under a martial law system that lasted until 1987.

The 2 28 Massacre has had far-reaching implications. Over the next half-century, the Taiwanese democracy movement that grew out of the incident helped pave the way for Taiwan's momentous transformation from a dictatorship under the Chinese Nationalists to a thriving and pluralistic democracy.

I urge other Members to join me in commemorating this important historical event.

Mr. Speaker, today I recognize Hardyston Township, New Jersey, in beautiful Sussex County, upon the momentous occasion of the Township's 250th anniversary.

In late October, 1761, a ship traveling from Europe ended its trans- Atlantic voyage in New York. On that ship was Josiah Hardy, eldest son of Sir Charles Hardy and his wife, Elizabeth Burchett, and brother to five siblings. Just a few months earlier, Josiah had been ``appointed Captain General and Governor in Chief of His Majesty's Province of New Jersey. . . .'' Hardy would hold this position for fewer than two years, yielding his title to William Franklin in February 1763 and setting sail for England in September of that same year. While Governor Hardy's tenure was brief, it saw the formation by Royal Charter of Hardyston Township in 1762.

Today, little is known of Josiah Hardy, but his name and legacy live on in the Township of Hardyston.

Throughout its history, Hardyston has played a central role not only in the story of Sussex County but also in the story of America. During the Revolutionary War, General George Washington and the Continental Army camped in Hardyston. And in the Township's earliest days, the work of farmers, millers, and blacksmiths signaled the building of the nascent nation.

Today, Hardyston Township residents contribute in areas ranging from finance, education, and construction to health care, entertainment, and retail services, to name just a few. The Township offers diverse recreational opportunities and is home to scenes of pristine beauty that undoubtedly mirror the beauty of

Hardyston's earliest days. Additionally, Hardyston holds the distinction of being the discovery place of Hardystonite, a fluorescent mineral discovered in 1899 in the Franklin Furnace Mine.

Two hundred fifty years after its formation, Hardyston Township continues to be a vibrant community that invites residents and visitors alike to enjoy all that it offers and to become a part of its ongoing history.

As Hardyston Township Celebrates its 250th Anniversary, I offer my congratulations and my heartfelt wish for a future for Hardyston Township that is as bright as--and even brighter than--its rich and notable past.

Madam Chair, I yield myself such time as I may consume.

At the start, I would like to thank Chairman Ryan and the Budget Committee staff for their hard work with regard to H.R. 3581, the Budget and Accounting Transparency Act. Unless you've been living someplace else other than here for the last several years, you will not be surprised to hear that this country is broke. And it should not surprise you that the true extent of our country's debt crisis is a lot worse than anyone in Washington is letting on to. How much worse? Well, that's something that people really don't know, and we'll never know unless we reform the broken budget process here in Washington, D.C. Many have talked before about the fact that our process is broken. Simply put, we need to make the budget process more transparent and accountable.

Fortunately, today we are taking a step in the right direction with this bill. The bill before us today, the Budget and Accounting Transparency Act, is, as I say, a commonsense approach to introduce more sunshine and common sense into the budget-making process.

So what would the bill do? First of all, specifically, the bill recognizes the budgetary impact of the GSEs, Fannie and Freddie, by bringing back onto budget and closes that black hole that's out there and brings them out of the shadow and into the light.

This bill also requires that the Federal Government apply the very same credit accounting standards as the private sector is doing right now when guaranteeing loans.

You know, back in September of 2008 as the country was reeling from the fallout of the financial collapse, the GSEs, Fannie and Freddie, were placed into conservatorship by the FHA. Under this agreement, FHA took control of the two companies and the Treasury Department risked literally hundreds of billions of dollars, taxpayer dollars, to bail them out. Today, the American taxpayer has sunk over $183 billion and counting into those failed institutions. As if this weren't enough, they've added $1.2 trillion in debt and $5.3 trillion in mortgage- backed securities.

Because Fannie and Freddie have become the explicit financial responsibility of all of us via the Federal Government, it only makes sense, don't you think, that we treat them the same way that we'd treat any other obligation of the Federal Government, by formally bringing them onto the budget. The CBO even says this. They took a step several years ago by the Office of Management and Budget, but they resisted the change, preferring to obscure the total Federal exposure of Fannie and Freddie. It's time that the Obama administration does the same thing.

So bringing Fannie and Freddie exposes some of the ugly--and maybe we'll call them inconvenient--truths; but I know that the American people did not send us here to play a shell game, but did send us here to bring out the facts.

The combined debt obligation of Fannie and Freddie isn't the only black cloud hanging over us. There's inaccuracies and lack of transparency in budgeting for Federal credit programs across the field. We can talk about the Solyndra situation that makes the news. That fiasco was an example of a loan guarantee gone sour. Federal loan guarantees are contractual obligations between the taxpayer, the private creditor, and the borrower. In that case, it went south. But, unfortunately, under current law when the government issues a loan guarantee, the inherent risk is not reflected in the loan or loan guarantee cost. In fact, the CBO estimates that our current Federal obligations under these accounting rules today understate the cost of credit programs by some $55 billion a year.

Because the rules do not account for market risk, that is why we need to change it. And with that, Madam Chair, I reserve the balance of my time only to say that this does three important things: provides the clarity, the transparency, and the accountability that we are looking for in these and other aspects of the Federal Government programs.

Madam Chair, just as we recognize that the American taxpayer has already been squeezed by such expenditures as $527 million for the failed loans to Solyndra, we recognize that they must put these on the record so we understand what they truly cost. And the gentleman who has been a leader in this regard from the very beginning in his time in Congress, a leader in the area of budget transparency and in fixing the American budget and here in Congress, is the gentleman from Texas (Mr. Hensarling). I yield 2 minutes to the gentleman from Texas.

Madam Chair, I yield myself such time as I may consume.

I thank the lady for commending us for raising these issues. But actually, we're doing something more than just simply raising the issue. We're addressing it and solving this problem as well.

I appreciate the fact that the gentlelady raises the fact about a list of experts who have questions about this. Well, I have experts too, but I actually have the name. A former CBO Director, Doug Holtz- Eakin, now with American Action Forum, writes us here to express support of H.R. 3581.

The gentlelady may also know, since she serves on the committee, when it comes to this issue that we had this issue up in committee recently, and we asked the current CBO Director does he support with regard to moving towards fair value. And he said that is the more appropriate basis of evaluating the obligations of the Federal Government. So we have the experts.

American Action Forum,

January 30, 2012.

Hon. Paul Ryan,

Longworth House Office Building,

Washington, DC.

Dear Chairman Ryan: I am writing to express my support for

H.R. 3581, ``The Budget and Accounting Transparency Act of

2011,'' in particular those provisions that would incorporate

fair value accounting (FVA) into the federal budget process.

As you are well aware, a core objective in federal budgeting

is to accurately display the scale and timing of the

expenditure of taxpayer resources. Since sovereign tax and

borrowing powers should always be used judiciously, there is

a premium on doing so as accurately as possible.

In some cases this is straightforward. Consider, for

example, a discretionary appropriation. The scale of the

overall commitment is clear and in some cases it is

straightforward to budget the timing of the ultimate outlays

as well. Federal credit programs, however, present particular

difficulties. The timing of budgetary cash flows differs

dramatically between direct loans and federal loan

guarantees--even in cases when the ultimate economic impact

is identical. The Federal Credit Reform Act of 1990 (FCRA)

took an important step forward by equalizing the timing of

their budgetary treatment Direct loans and loan guarantees

are both recorded in the budget during the year in which the

commitment is incurred, regardless of the duration and timing

of the federal assistance.

This was an important step in the right direction. However,

estimating the scale of required taxpayer resources remains

problematic. In particular, the ability of loan recipients to

make timely and complete repayments will be influenced by

future individual, household, and economy-wide economic

conditions. In the same way, the obligation of the federal

government to undertake guarantee payments will be driven by

similar forces.

While such future individual and economic conditions are

uncertain, reliable techniques exist to estimate the likely

size of the taxpayer obligation. Unfortunately, FCRA

needlessly restricts the analyses to credit risk--the

probability of failure to fully repay--while ignoring the

fact that the timing of those failures matters enormously. As

the past few years have starkly reminded every American, the

need to tax, borrow and otherwise deprive the private sector

of another dollar has far greater implications during the

depths of economic distress than during periods of robust

economic growth. Adoption Of FVA would rectify this oversight

I recognize that significant reform to budget procedures

should not be undertaken lightly. However, my views are

informed by the fact that during my tenure as director, the

Congressional Budget Office undertook a number of studies of

the implications of accounting fully for economic risks in

the budgetary treatment of financial commitments like credit

programs. In example after example (pension guarantees;

deposit insurance; flood insurance; student loans; and

assistance for Chrysler and America West Airlines), it

becomes clear that an incomplete assessment of risks leads to

misleading budget presentations and may engender poor policy

decisions. FVA would be a significant step toward improving

this informational deficit.

My views are echoed by a wide array of budget experts. In

March 2010, CBO issued a new report recommending the use of

FVA for federal student loan programs on the grounds that

budget rules do ``not include the costs to taxpayers that

stem from certain risks involved in lending.'' In addition,

the Pew-Peterson Commission on Budget Reform proposed ``fair-

value accounting'' for credit programs and the President's

National Commission on Fiscal Responsibility and Reform

advocated for reform of budget concepts that would more

accurately reflect costs.

In addition to these research views, there is a track

record of success. FVA has already been used successfully for

the budgetary treatment of the Temporary Asset Relief Program

of 2008 (TARP) and the federal assistance to Fannie Mae and

Freddie Mac.

Last but not least H.R. 3581 would also fix another

shortcoming of FCRA; namely that the administrative costs

associated with federal operations are not included in the

budget cost and must be provided for elsewhere. H.R. 3581

would require that administrative costs (called ``essential

preservation services'') to be accounted for up-front,

thereby balancing the playing field.

In sum, I believe that the Congress should adopt fair value

accounting and, in particular, pass H.R. 3581 in a timely

fashion. I would be happy to discuss any aspect of this issue

in greater detail.

Sincerely,

Douglas Holtz-Eakin.

With that, I yield 1 minute to the gentleman from California (Mr. McClintock).

I yield 2 minutes to the gentleman from Oklahoma (Mr. Lankford).

Madam Chairman, I yield myself such time as I may consume.

The gentleman from Maryland speaks of the report of Marvin Phaup from 2008, I guess that was, and also speaks in reference to the Center on Budget and Policy Priorities. In front of me, and I'll ask, under general leave to enter this into the Record as well. Just recently, just this week, I guess, he has now issued the final report, and this report says as follows:

``This comment responds to a recent release from the''--as the gentleman's referring to--``from the Center on Budget and Policy Priorities (CBPP).''

And what does he say?

``My view is that the CBPP misrepresents our work''--that you were referring to. They misrepresent his work--``and more fundamentally incorrectly characterizes the purposes and consequences of moving to a fair value approach to credit valuation in the budget.''

One of his main points is the legislation before us would do what? It ``would remove `phantom' gains to the government from the budgetary treatment of direct lending and loan guarantee programs. These illusory gains mislead public policymakers about the costs of their policy decisions.''

What does that mean? What that means is, in the numbers that the gentleman from Maryland was talking about that are actually making more and, over time, exceeds outlay, Marvin Phaup is here saying, no, just the opposite, that this bill would address that. It would remove those gains and show it for the reality of what it is.

Fair Market Values and the Budgetary Treatment of Federal Credit:

Comment on CBPP's Release on H.R. 3581

(By Marvin Phaup)

This Comment responds to a recent release from the Center

on Budget and Policy Priorities (CBPP). The release asserts

that the federal budget currently measures the cost of direct

loans and loan guarantees comprehensively and that as a

result the costs of cash and credit programs are directly

comparable. CBPP asserts further that enacting H.R. 3581,

which would require the use of fair market values in

calculating the budget cost of federal loans and guarantees,

would add a cost of risk that the government does not incur.

Consequently, it claims, this would overstate federal costs

and the budget deficit and create a bias against the use of

credit programs. CBPP also refers critically to my earlier

work with Deborah Lucas, showing that government credit

activities are subject to the same market risk as private

credit and exploring the implications of this finding for

budgeting. My view is that CBPP misrepresents our work and

more fundamentally incorrectly characterizes the purposes and

consequences of moving to a fair value approach to credit

valuation in the budget.

In this note, I make the following points:

H.R. 3581 would remove ``phantom'' gains to the government

from the budgetary treatment of direct lending and loan

guarantee programs. Those illusory gains mislead policy

makers about the costs of their policy decisions.

Illusory gains on federal credit also encourage budget

gimmickry. For example, FCRA would permit the government to

balance its budget immediately on paper by issuing large

amounts of Treasury debt and using the proceeds to invest in

an equally large portfolio of risky loans. This result would

be absurd because in issuing a dollar of debt and buying a

dollar of risky loans at market prices, the government's net

financial position is unchanged.

If the current practice of using the prices of Treasury

securities to value risky loans rather than the market value

of the risky securities themselves were extended to other

assets, then the government could--with the same logic--

direct the Treasury to buy a ton of lead, value it at the

price of gold, and record the gain as deficit reduction.

The cost of market risk should be a budget cost because it

is a cost to government stakeholders and its absorption by

some yields an unrecognized subsidy to others. CBPP would

include this cost in cost-benefit analyses where the purpose

is to decide if a federal activity produces a net gain but

not in the budget. Budgeting without an evaluation function,

however, is little more than a redundant projection of

Treasury's borrowing requirements.

The cost of market risk should not be excluded from the

budget on grounds that the money isn't paid out by the

government. Both the Universal Service Fund and the United

Mine Workers of America Benefit Funds are included in the

budget, even though the money is untouched by federal hands.

Purposes of Budgeting, Fair Value, and Cost Comparisons

Budgetary costs serve several purposes, but arguably the

primary one is to measure the value of public resources

devoted to an activity by the government. For many

activities, such as the purchase of goods and services, this

purpose is well-served by a cash measurement focus and basis

of accounting. The cash costs that appear in the budget for

these activities are fair value costs because they are based

on the market prices of the goods and services purchased

(directly, or indirectly through the use of grants and

transfers) by the government. When the government buys a

fleet of trucks, the budgetary cost is based on the market

price of the trucks.

Accounting for the cost of credit on a fair value basis

would similarly identify the budgetary cost of credit with

its market price, thereby putting credit and non-credit

activities on a conceptually level playing field.

Under the Federal Credit Reform Act of 1990 (FCRA), the

budget records the cost of direct loans and loan guarantees

on an accrual basis. FCRA mandates that the budget record the

estimated lifetime cost of a direct loan or loan guarantee

when the loan is disbursed as the government's loss on the

transaction. FCRA requires that for a direct loan, the

government's loss is the difference between the value of the

cash disbursed and the loan asset acquired, where the latter

is valued as the present value of expected repayments of

principal, interest and fees discounted at low-risk

(Treasury) rates rather than rates applied in the market to

risky cash flows. The loss on loan guarantees is calculated

similarly in that the government's expected net payments to

honor its commitment are also discounted as though they were

Treasury bonds.

The use of Treasury interest rates to value risky future

cash flows means that a risky loan is assigned an FCRA budget

value greater than its market value. Thus the FCRA budget

cost of a federal loan or guarantee is less than the cost

incurred by private lenders or guarantors. This is because

people are risk-averse and require compensation--in the

form of higher expected investment returns--on investments

that expose them to risks that cannot be avoided by

holding a diversified portfolio or buying insurance. In

particular, they are averse to ``market risk,'' which is

the risk that low investment returns will coincide with

periods during which the overall economy is weak, and

resources are the most valuable. The government

effectively transfers to the public the market risk

associated with its activities through the tax and

transfer system. The CBPP example involving a coin toss

does not illustrate this line of reasoning because it

involves a risk that is easily diversifiable by both

individuals and the government.

Market risk also affects the price of non-financial assets

purchased by the government, and those costs are reflected in

the budget. For example, the cash price of a navy ship

includes a return to the capital used in its production. The

expected return built into the ship's price depends on the

risk premium associated with ship-building. From that

perspective, the CBPP characterization that the proposal will

``add a further amount to reflect private-sector risk

aversion'' is misleading. It is more accurate to say that

incorporating a market risk premium into FCRA estimates would

make them more comparable to cash estimates, which already

reflect the full market price of the associated risk.

Fair value estimates of the value of federal direct loans

and guarantees include the cost of market risk. Effectively,

they use the same estimates of uncertain future cash flows as

FCRA estimates (assuming those projections are as accurate as

possible), but they use market discount rates (or ``risk-

adjusted'' discount rates) in place of Treasury rates for

discounting. Risk-adjusted discount rates can be represented

as the sum of a Treasury rate and a risk premium.

One implication of the meaning of fair value is that,

contrary to CBPP's view, discounting expected cash flows (net

of expected default losses) does not double count those

losses. If the expected net losses are certain, then the

expected cash flows are certain and the fair market value is

obtained by discounting at risk-free rates. This is rare.

Otherwise, net expected cash flows must be discounted at

rates appropriate to the market risk of the cash flows to

obtain fair market values.

``Flaws'' of the Fair Value Approach

CBPP gives a list of reasons why the fair value proposal is

thought to be flawed. The first is that government may be

less risk averse than individuals. The authors offer several

reasons why that might be the case, and point to the

government's ability to borrow at low Treasury rates. Those

arguments have several shortcomings:

The idea that low Treasury borrowing rates are a reason for

the government to be less concerned about risk neglects that

Treasury rates are only low because bondholders are protected

from risk by taxpayers, who must absorb the market risk

associated with the government's activities. For example,

when a risky loan has insufficient returns to repay the

Treasury debt that notionally is used to fund it, taxes must

be raised or other spending cut. Under FCRA accounting, that

risk to taxpayers is treated as being free to the government.

In fact, the government could be more risk averse than

individuals rather than less risk averse. For example, the

government may be more concerned about the risks of global

warming than is reflected in market prices because it puts

more weight on the welfare of future generations.

In practice, adjusting budgetary costs based on conjectures

about the government's preferences would undermine the

discipline and transparency of the budget process.

The second alleged flaw is that risk aversion is not a

budgetary cost. As discussed already, a consistent basis for

measuring budgetary cost is to use market prices, which are

affected by risk aversion and by the preferences of people

generally. Further, as noted, that government does not write

checks for the market risk of direct loans and guarantees is

not dispositive of the appropriate treatment of an activity.

A further criticism is that the proposal does not treat all

programs the same. Specifically, it raises the concern that

the change would make credit programs appear more expensive

to Treasury than other programs. The opposite is generally

true: cash basis estimates incorporate the price of the

associated market risk because they are accounted for at

market prices, whereas FCRA estimates are relatively downward

biased. In any case, the examples given suggest a

misunderstanding of the type of risks that would be

incorporated into fair value estimates. For instance, the

paper notes the uncertainty associated with the future costs

of many programs, including Medicare, and points out that no

adjustment is made for the cost of that uncertainty. However,

the same type of uncertainty exists for credit programs, and

the risk adjustment associated with a fair value approach

does not address those sources of uncertainty:

First, future Medicare costs do not affect the current year

budget deficit because those programs are budgeted for on a

cash basis, not on an accrual basis. The budget enables

policymakers to compare the cost of current-year spending on

Medicare with the estimated lifetime cost of new current-year

credit assistance. Measuring the cost of new current-year

credit assistance on a fair value basis makes it more

comparable to current-year Medicare expenditures, which

reflect the market prices of doctor salaries, hospitals, and

medical equipment.

Just as with future Medicare expenditures, the volume and

cost of new future-year credit assistance from ongoing

programs is uncertain. However, that dimension of uncertainty

does not figure into fair value calculations (or into FCRA

estimates).

To the contrary, a problem with FCRA accounting is that it

treats different credit programs as too much the same. That

is, some credit programs expose taxpayers to much more market

risk than others, but FCRA accounting does not recognize

those differential costs between credit programs.

CBPP both endorses FCRA accrual accounting and criticizes

an accounting practice necessitated by the uses of accruals

in a mostly cash-basis budget, described in the release as

``phantom offsets.'' Under FCRA, direct loans cause the

government's cash shortfall (and hence its need to issue

additional debt) to be higher initially than the reported

deficit in the year the loan is made. That is because the

loan principal paid out (not included in the deficit) is

generally much larger than the recorded subsidy cost

(included in the deficit). Similarly recognizing the time

value of money in federal credit transactions requires

adjustments to the cash deficit. Loan guarantees also

necessitate ``phantom offsets'' to reconcile the cash deficit

with the expected cost of loan defaults which are included in

the deficit when guaranteed loans are disbursed. Furthermore,

accruals involve uncertain future cash flows, and subsequent

adjustments (FCRA refers to them as ``re-estimates'') are

always needed to reconcile accrual projections with cash

realizations. However, there are multiple account structures

that would achieve the comprehensive up front recognition of

the lifetime cost of new credit assistance and reconcile

those costs with Treasury's cash borrowing requirements.

In conclusion, there appears to be general agreement that

the primary purposes of budgeting are better served if the

budget is supported by an accounting process that measures

the public resources devoted to an activity comprehensively,

comparably across programs, and up-front at the time of

decision. By that standard, the use of fair values for direct

loans and loan guarantees in the budget would unambiguously

improve federal budgetary accounting.

With that, I yield 2 minutes to the gentleman from Kansas (Mr. Huelskamp).

I would advise my colleague from Maryland that we have no further speakers.

I yield myself such time as I may consume.

And again, I'll say to the gentleman as well, as your colleague did as well, commended us for raising this important issue, and I do agree that it is an important issue. But I think the American public is tired of Washington simply raising important issues and discussing important issues and having committee hearings on important issues. I think the American public is looking for Washington, once and for all, to take some decisive action in the name of the American public, in the name of the hardworking taxpayers whose money it is that is on the line. It is the people's money that we are talking about in all of these bills. It is the people's money that has been put on the line when the Federal Government issues loans and loan guarantees.

And I want to remind the gentleman from Maryland of how much money we've been talking about in all these things. When we talk about all the bailouts that the American public stood and railed against, rightfully so, as did I, whether it was the oil bailouts or the bank bailouts or the Wall Street bailouts, they all pale in comparison to the bailouts that we're talking about here with the GSEs, $186 billion and counting. The gentleman, Mr. Ryan, raised the issue before that, I believe, it was going to go up to $280, $290 billion and counting.

That's not Washington's money or the government's money or the gentleman from Maryland's money. That's the hardworking American taxpayers' money that was initially put at risk without any idea what the real risk was going to be for all these other loan programs and now is going out as outlays.

Now it is going out without any prospect whatsoever of being repaid. The

gentleman says these exceed these estimates of fair value accounting, and they exceed outlays. Well, they exceed it until they don't. They exceed it until the loan fails. They exceed it until you're talking about a Solyndra situation where you guarantee over $500 million, and then the company goes bust. That's what we're trying to address here, to make sure that you're actually properly grading and accounting for this. We're not asking for something extraordinary.

I know the gentleman from New Jersey came to the floor and he said this is extreme, what we are asking for here. Extreme? Why do we ask the private sector to use this same sort of accounting? Why do we ask the mom-and-pop shops, the big Wall Street firms, and everything in between to use this sort of accounting when they do so? When you ask for a student loan, a car loan, a house loan, whatever, we ask local banks to use this same form of accounting. If it is good enough for the rest of society, if it is good enough for all of my constituents and your constituents, if it is good enough for all of the businesses back at home, I think it's good enough for the Federal Government to play by the same rules. That's all we're asking for here.

He says, how far should we go? I think we should go as far as to say that the Federal Government should have to do the exact same thing, play by the exact same rules that our businesses back at home have to do. That's all this bill does. It shines the light of day on what we're spending, and if we are spending too much, then we have to do what we are elected to do: set priorities, decide where we want to spend it on this program or that program, or maybe cut back on this program and expand someplace else. But we can't make those decisions until we actually have the information before us. We can't say this one is working and this one is not working, this one is worthwhile and this one is not worthwhile until we actually have that information before us. That's the long and short of it. That's all this bill does. It gives both sides of the aisle and the American public that information.

With that, I would call for support of this legislation of sunshine and accountability and transparency in the way the Federal Government runs their business.

I yield back the balance of my time.

Madam Chair, I would first like to thank Chairman Ryan and the Budget Committee staff for their hard work on H.R. 3581, the Budget and Accounting Transparency Act.

Unless you've been living on Mars the last year, it should not come as a surprise to hear that our country is broke. However, what should surprise you is that the true extent of our country's debt crisis is a lot worse than anyone in Washington is letting on.

How much worse? That's the thing, nobody knows; and we won't ever know until we reform the broken budget process in Washington, DC.

As many have talked about before, our budget process is broken. Simply put, we need to make the budget process more transparent.

Fortunately, today we are taking a step in the right direction with H.R. 3581, the Budget and Accounting Transparency Act of 2011. I introduced this bill in December, along with Chairman Ryan, as part of a comprehensive set of reforms to overhaul Washington's broken budget process.

The bill before the House today--the Budget and Accounting Transparency Act--is a common-sense attempt to introduce more ``sunshine'' and ``common sense'' into our budget process.

What would this legislation do?

Specifically, this bill recognizes the budgetary impact of government-sponsored enterprises Fannie Mae and Freddie Mac by bringing these black holes of debt out from the shadows into the sunshine and on-budget.

This bill also requires that the federal government apply the same credit accounting standards as the private sector when making or guaranteeing loans.

In September 2008, as the country was reeling from the fallout from the financial collapse, Fannie and Freddie were placed into conservatorship by the Federal Housing Finance Agency (FHFA).

Under this agreement, FHFA took control of the two companies and the Treasury Department risked hundreds of billions of taxpayer dollars to bail out the government-backed mortgage twins.

To date, the American taxpayers have sunk over $183 billion and counting into these failed institutions. As if this weren't enough, Fannie and Freddie have also issued more than $1.2 trillion in debt and hold or guarantee about $5.3 trillion in mortgage-backed securities (MBS).

Because Fannie and Freddie have become the explicit financial responsibility of the federal government, it only makes sense that we treat them the same as we would any other obligation of the federal government by formally bringing them on-budget.

The non-partisan Congressional Budget Office took this step several years ago, but the Office of Management and Budget has resisted the change preferring to obscure the total federal exposure to Fannie Mae and Freddie Mac.

It's time the Obama administration did the same.

Bringing Fannie and Freddie on-budget exposes some ugly and inconvenient truths. But I know the American people did not send us here to play a shell game with taxpayer dollars.

The combined debt obligation of Fannie and Freddie isn't the only black cloud hanging over us; inaccuracies and a lack of transparency in budgeting for federal credit programs also loom large.

Take the case of Solyndra, for example--the poster child of government loans gone bad. As we saw with the Obama administration's $527 million ``investment'' into the solar energy company, when Washington makes a bad bet, it's the American taxpayers left holding the bag.

Federal loan loan guarantees are contractual obligations between the taxpayer, private creditors and a borrower such as Solyndra.

Loan guarantees are a promise by the American taxpayer that they will cover the borrower's loan in the event that the borrower defaults. If the American taxpayer is on the hook for default, shouldn't we have a better idea of the cost of the loan in the first place?

Unfortunately, under current law, when the government issues a loan or loan guarantee, the inherent riskiness of that loan is not reflected in the loan or loan guarantee's cost.

In fact, the non-partisan Congressional Budget Office estimates that our current federal accounting rules understate the cost of credit programs by some $55 billion a year, because the rules do not account for market risk.

Why shouldn't Washington play by the same rules that every American family and business must play by when taking out a loan?

The Budget and Accounting Transparency Act fixes this shortcoming by requiring market risk to be explicitly included in estimates of federal credit programs, bringing federal budgeting practices in line with what's long been standard practice in the private sector.

Specifically, it requires the executive branch and Congress to use ``fair value'' accounting in calculating the costs of federal credit programs that consider not only the borrowing costs of the federal government, but also the costs of the market risk the federal government is incurring by issuing a loan or loan guarantee.

Accounting for market risk is the key--your local banker does it every time you apply for a home or auto loan. The federal government should be doing the same.

In fact, during the House Budget Committee's consideration of this legislation, the director of the non-partisan Congressional Budget Office stated:

``We believe that the fair-value method of accounting for federal credit transactions provides a more comprehensive measure of a [program's] true cost.''

While the Budget and Accounting Transparency Act won't prevent future presidents from making similarly risky bets, at least it will force them to be honest with the American people about the true upfront cost of their boondoggles.

Lastly, the legislation before us today increases the amount and timeliness of information on agency budget requests, requiring that these budget justifications be provided to the public when they are sent to Congress.

It's the people's money and they ought to know what agencies are planning to do with it.

These provisions would go a long way to fixing our broken budget process and bring much-needed transparency to the way Congress functions.

For too many years, Washington has played by a ``special'' set of rules.

With mounting debt and lackluster job growth, it's time to force government to play by the same economic rules as every American family and business.

For too long, we have not been honest with the American people about the cost of government. If we truly are committed to reversing our country's race towards bankruptcy, as we say we are, we need to be honest with ourselves and the American people about the true cost of government.

Today, I say we put our words to action by bringing sunlight and transparency back into our budgeting process.

First of all, let me just begin by saying I appreciate the gentleman's effort with regard to this legislation. I appreciate also the bipartisan nature and intentions behind the amendment as well. There are unquestionably circumstances where accrual accounting is the best way, the most appropriate way to display the Federal Government's budgetary costs and obligations.

Now, as you know, the underlying bill does focus on one such area where accrual accounting has long been in use, and what it does then is to try to build upon those years of experience and try to study the application of that as applied to Federal credit programs.

The underlying bill, I should say as an aside, also includes a study of another area--because I know there's a question of how far are we going in these things--where it might be appropriate to extend this, and this is with regard to the Federal insurance programs. Why is that? Well, it's because we don't have as many studies on that.

I might just add to the point of the gentleman from Maryland before, there have been a number of references on an area that we're looking to. CBO has done some with regard to student loans, with regard to housing, with regard to SBA and energy. CBO has issued a number of reports with fair value accounting included, and that is why we included it in this bill.

Again, I appreciate the gentleman's work on this amendment. I oppose it as it stands now, however.

Not only will I work with you, I believe the chairman of the full committee will be intentioned to work with you on this as well. The goal is the same by all of us here, and I think by the other side as well, to try to get as much information that is able to get out to come out, and we will be glad to work with you on this.

I rise in opposition to the amendment.

Madam Chair, in essence, the amendment has the effect, as so many amendments often do that come to the floor, of basically gutting the entire bill.

The core reform made by this bill is to--what?--adopt for all Federal credit programs fair value accounting. Now, this is not a precipitous or rash decision that we're going to make here. The Budget Committee, both with the Republican and Democrat leadership, has, over time, studied and worked on the implications of moving to a fair value accounting for Federal credit programs.

The CBO, which we reference all the time, is an independent arbiter of what is right here and has studied these things, and other academics have conducted studies going back as far as the 1990s, if not earlier, on this question as well. In fact, there was a commission, a commission featuring 36 experts, including six former CBO Directors.

What did they recommend? They recommended moving to a fair value accounting in 2010.

Indeed, it was back in 2009 that this House, under Democrat leadership, voted to require the use of fair value accounting with respect to U.S. commitments made to the IMF, the International Monetary Fund. Additionally, the CBO has conducted analyses of dozens of Federal credit programs on a fair value basis.

So this bill is not precipitous. This bill is not rash. This bill is not extreme. This bill takes a cautious approach and applies fair value budgeting in those areas where we have the most experience while calling for a further study of those areas in which it makes sense to do study--Federal insurance programs.

So I urge my colleagues to oppose this amendment and to support the judicious and experience-based approach of the underlying bill.

I yield back the balance of my time.

I rise in opposition to the motion.

Mr. Speaker, the prior amendment that this House just overwhelmingly voted down would have gutted the underlying bill entirely. This motion to recommit will now try to gut the bill by approximately one-third. I commend the other side of the aisle for at least going in the right direction. But, Mr. Speaker, I remind us all of the words of the President of the United States when he stood in that same position where he speaks of fairness and the agenda that he proposes, and he speaks of fairness to the American public.

Well, Mr. Speaker, we know that the budget process in this country is broken. We know that there is no fairness in that. This amendment will undercut the legislation before us, and the underlying bill will try to restore it.

We need fairness to the hardworking American taxpayer who, at the end of the day, will be the one who will have to foot the bill when the loans go sour like we saw in the situation with Solyndra. We need to bring fairness to the small business owner who is already compelled to comply with the exact same requirements that we have in this bill. Mr. Speaker, we need to bring fairness to the American public who simply wants to know where their hardworking tax dollar is going.

Mr. Speaker, in conclusion, let me just say this: as we here in Washington travel through that great twilight which is that murky area of obscure accounting rules, let us commit ourselves to one thing--that we will bring clarity, that we will bring transparency, that we will bring sunshine, and, most importantly, that we will bring fairness to the American public as to the spending of their tax dollars.

I recommend that we vote ``no'' on this motion to recommit.

I yield back the balance of my time.

Mr. Speaker, I thank the words of the chaplain who says may we indeed know the Lord.

Mr. Speaker, I rise today to recognize Chaplain Karen Hallett on her selection as the 2012 Reserve Officers Association Chaplain of the Year. She is a resident of Vernon, New Jersey, which is a part of the Fifth Congressional District.

The chaplain enlisted in the Army in 1983 and completed basic combat training at Fort Dix, New Jersey. She went on from there to graduate from West Point and was commissioned as a second lieutenant in the United States Army Ordnance Corps in 1988.

After that and after fulfilling her enlistment obligations, she spent 18 years in the civilian sector, successfully managing businesses while remaining engaged in full-time ministry. In 2009, after completing her master's of divinity degree at Bethel Seminary, she returned to military service as a captain in the United States Army Reserves. She currently serves as a brigade chaplain for the 411th Engineer Brigade.

Throughout her more than 20 years of ministerial service and missionary work, and now through her military service to our country, she has dedicated herself to ministering to the spiritual needs of others. It is her selflessness and her service that exemplify the mandate to esteem others better than ourselves.

I thank her for her service. I congratulate her on receiving this recognition as Chaplain of the Year.

Mr. Speaker, I rise today to honor a recently fallen warrior, Specialist Ronald Wildrick, Jr. Specialist Wildrick served with the Army's 2nd Battalion, 35th Infantry Regiment, 3rd Brigade Combat Team, out of Schofield Barracks in Hawaii.

Ron was raised in Byram, New Jersey and graduated from Lenape Valley High School. Specialist Wildrick joined the Army in 2008 with the hope of making a better life for his wife and two daughters, Kaylee and Leah, through service to his nation. In September, he was deployed to Afghanistan's Kunar Province as a part of Operation Enduring Freedom. On December 11, 2011, his unit was attacked in the Kunar Province with an improvised explosive device. Sadly, Specialist Wildrick was killed in the line of duty while serving his nation.

As a result of his sacrifice, Specialist Wildrick was posthumously awarded a Bronze Star Medal. His dedication to country and loyalty to his fellow soldiers was evident throughout his Army career. Prior to his deployment to Afghanistan he had the solemn duty of serving with the U.S. Army Old Guard at Arlington National Cemetery, where he regularly recognized the sacrifices made by his fallen comrades. Ronald Wildrick is a true American hero, and he will never be forgotten by his friends, his family, or the country he fought for. My thoughts and prayers, as well as the thoughts and prayers of a grateful nation, are with his family and friends during this difficult time.

Mr. Speaker, last year, when we passed the Comprehensive Iran Sanctions and Divestment Act, I came to the floor stating that we must go further. Our stated goal then, as it is now, was to protect Americans, our allies, and the Iranians who suffer under a tyrannical regime. We have made it clear that it is unacceptable for Iran to develop nuclear weapons.

While a step in the right direction, last year's version of Iran Sanctions gave too much flexibility to the administration and included vast loopholes that weakened the law's effectiveness. As I speak now, the Obama administration has only applied sanctions to ten foreign companies and has given leeway to companies operating in Iran. Iran has continued development of nuclear weapons and poses an even greater threat to America and her allies.

Today's bill, H.R. 1905, the Iran Threat Reduction Act, takes the threat of Iran's nuclear program seriously. This legislation would mandate sanctions against the Central Bank of Iran. It would also impose sanctions on foreign banks that continue to do business with the Iranian Central Bank. Just last week the Senate unanimously supported sanctioning the Iranian Central Bank. As the House and Senate are deeply divided on other major issues, we all believe that Iran is a threat that must be dealt with swiftly and that the Central Bank must be sanctioned. H.R. 1905 also would reassert that it is U.S. policy to ensure Iran does not obtain the ability to produce nuclear weapons. Finally, the bill would close the loophole in current U.S. law that allows foreign subsidiaries of U.S. corporations to bypass U.S. sanctions.

Will this legislation single-handedly prevent a nuclear Iran from emerging? Likely it will not. We may have waited too long for our actions today to single-handedly dismantle Iran's nuclear ambitions. However, with this legislation, allies are already indicating they will follow our lead and potentially sanction the Iranian Central Bank as well. As we show the rest of the world we take this threat seriously, they will too. I urge my colleagues to support this measure.

Mr. Speaker, today I extend my deepest condolences and heartfelt sympathies to the family of Liz Coventry. Liz passed away on October 26, 2011, after waging a valiant battle against cancer. Throughout many years of my public service--from my Congressional campaign days to my early days as a U.S. Congressman, Liz was an unwaveringly loyal and exceptionally focused member of my team. Whether working on casework for constituents, tirelessly advocating on behalf of veterans, spearheading the annual Congressional Art Competition for my office, or organizing various special projects, Liz took on every endeavor with passion. I cannot imagine the early days of my office without her.

Yet far beyond being an employee, Liz was also a friend. And as anyone who knew Liz would undoubtedly agree, to be able to call her ``friend'' is truly an honor. While Liz's daily presence will be acutely missed by those who knew and loved her, the memory of her friendship and her legacy will remain.

I deeply appreciate Liz for her friendship and support, and I honor her for her service to our state and our nation.

Mr. Speaker, I rise today to speak in favor of a balanced budget amendment, and some would say it's the only solution to our current fiscal crisis.

Statesmen throughout the history of our Republic have stressed the importance of fiscal responsibility, but it's the voice of Thomas Jefferson that, I think, we must pay particular attention to.

Thomas Jefferson bore the burden of debt throughout his entire life, and some historians have argued that Jefferson's personal experiences influenced his thinking about the public debt as well. Jefferson inherited a significant amount of debt at the young age of 31, and some say his own spending added to that and worsened his financial condition personally during his life. When he died, he, unfortunately, passed his debt on to his descendants, which is exactly what this Federal Government is doing now to future generations today.

So, if the Federal Government says that it's so concerned about the welfare of our children and the next generation and the next generation, then we should be taking the time right now to address this staggering public debt that our children and our grandchildren will stand to inherit if our leaders here in Congress fail to have the courage to--what?--cut spending and to balance our budget and to live within our means.

Jefferson had a moral message to the future public servants in this regard. He believed that those who are entrusted by their constituents to represent them, as he said, ``shall consider themselves unauthorized to saddle posterity with our debts and are morally bound to pay them ourselves.''

Jefferson expanded on this message in a letter he wrote to James Madison in 1798. He said, ``Neither the representatives of a nation, nor the whole nation itself assembled, can validly engage debts beyond what they may pay in their own time.''

Still writing to Madison, he explicitly endorsed a balanced budget amendment, stating, ``With respect to future debts, would it not be wise and just for a nation to declare in its constitution that neither the legislature nor the nation, itself, can validly contract more debt than it may pay within its own age.''

So what would Jefferson think about where we are in this country today?

The CBO, the Congressional Budget Office, has projected that maintaining all of our current spending would eventually require that the middle class in this country would have to have a tax rate of almost two-thirds of all their income--63 percent--and that the small businesses in this country would have to see their tax rates skyrocket up to 88 percent in order to cover all the spending.

These numbers have a real impact on the lives of individuals, on families, and on businesses. So, if Congress were then to keep on spending and have to raise taxes as much as the CBO has prescribed, Congress would do what? Congress would basically doom our families to a crushing tax burden, and this would smother the ability of businesses to expand and, therefore, to create jobs.

See, the economics of all this is very clear. If we refuse to address our spending problems, tax rates are going to have to rise, and they will rise in such a manner that would commit future generations to a tax burden to pay for--what?--the spending of today.

So we now, as often is the case, stand at a crossroads. We can continue to do as we have done in the past, which is to overspend and borrow and put this burden on our children, or we can do something else. We can demonstrate our commitment to a balanced budget by making it the supreme law of the land in this country.

Let me conclude then with a final quote from Jefferson:

``To preserve the people's independence, we must not let our government load us up with perpetual debt. We must make our selection between economy and liberty or profusion and servitude.''

So let's make Jefferson's dream a reality. Let us pass a balanced budget amendment.

Mr. Speaker, on rollcall No. 854, had I been present, I would have voted ``yea.''

Stated against:

Mr. Speaker, on rollcall No. 855, had I been present, I would have voted ``yea.''

Stated against:

I thank the gentleman for yielding.

I thank the gentleman from California as well for his leadership on this issue, as well as others, and also behind us over here, the chairman of the full committee, Spencer Bachus, for his leadership on this issue as well as on the general issue of trying to do what we can do best in order to facilitate the greater liquidity and openness of credit in the marketplace. This bill is one step in that direction, so I commend both gentlemen for their efforts in that regard.

I've been on the floor, I guess, for the last few days now, and I've heard Members from the other side of the aisle repeatedly coming to the floor, saying, Where are the jobs bills? We haven't had any jobs bills come through.

Here is certainly one of the pinnacles of the jobs bills that we've been talking about that this House has passed already and that today we will pass going forward.

What this bill will do is provide, as has already been indicated, to both small and big businesses the opportunity to get the wherewithal to start their businesses, grow their businesses, expand their businesses--and to do what after that? Create jobs. That's what this is all about.

We just had a litany of people come to the floor, one right after the other, just as the sponsor of the bill has done.

He is someone who started out with probably not much in his pockets but was able to get that all together and probably get some capital outside of that as well--and do what? Create a business. It wasn't a one-man operation, I'm sure. He then brought people into that business. He created jobs. The other speakers who came to this floor, they created jobs as well. As the other side of the aisle has already indicated, this bill will create jobs.

Now, one of the other things this bill does is to create certainty in the marketplace, which is something that has been a problem over the last couple of years with all of the legislation and regulation that has been coming out of Washington. This will provide some degree of certainty in the marketplace so that investors and business owners will understand how they can get into the credit marketplace and then do so.

I know a little bit later from now we may see some attempts to amend this bill which would go in just the opposite direction. What would it do? It would provide more uncertainty in the marketplace; it would provide more convolution to the system; and it would make it even more difficult to do what we're trying to do today.

Support this bill clean as it is right now in order to create more jobs for the American public.

I thank the gentleman from North Carolina for all of his work on this legislation, as well as the chairman of the full committee, Spencer Bachus, for his leadership on this initiative as well.

To the extent, as with the previous piece of legislation that we had, it goes to the overarching theme I think of today--and also during the last 10 months of this time in the House--which is job creation for this country, what can we do here in the House of Representatives to facilitate the creation of more jobs.

And just like with the last piece of legislation, what we can do is help businesses, both small and large, to obtain additional capital, capital being at the heart of the ability of a small business to go out, to expand, to grow, to

hire new employees, and to create jobs in this country.

The legislation before us goes well in that direction. And now, done in a bipartisan manner, it, as the sponsor, stands head and shoulders above the way it was before because it adds additional provisions for safety and soundness to it.

It allows for equity financing, in which investors can purchase ownership stakes in the company in exchange for basically stock or shares in those companies to grow in a future direction, to grow larger and what have you. And it allows the companies to obtain those funds without having to repay specific amounts at any particular time. What does that mean? That means it enables the company today to obtain that capital today to expand the company and hire new employees.

Now, through the efforts of the gentleman from North Carolina, what they did, in a bipartisan manner, was to add additional--what do you want to call it, protections, I guess, it will--and which was part of the discussion I think we had in committee at the time. And that was a good discussion there. We had the markup in the committee to allow for some of these discussions; and I know it went further, after the hearing and eventually with markup, to achieve this.

I think it's important--I'm just going to spend a minute--I know you touched on some of these, but I want to take a minute or two to run through what the additional protections are that we are providing for investors, in no particular order--well, maybe they are, actually. They are in the order of page eight and nine of the bill, but in front of me here, first: Warning investors of the speculative nature generally applicable to investment in startups--and that's what we're talking about here, they're startups. And if you're going to invest in a startup, it's not a sure thing, it is speculative. So those warnings are there.

Secondly, warning investors that they are subject to the restrictions on sale requirements. What that basically means is that if you're investing in this today, don't expect necessarily that you can just take your money out tomorrow, but that there may be restrictions as to when you can take out your money. But that's necessary, as I said before, so that the business can have that capital to grow. So it's reasonable.

Thirdly, taking reasonable measures to reduce the risk of fraud with respect to such transactions--again, a reasonable measure.

Fourthly, providing the SEC, the Securities and Exchange Commission, with continuous investor-level access to the issuer's Web site. Why? Because we want to make sure that that information that is being conveyed to whom--the investors in this--is the same information that the SEC has. A good provision.

Fifthly, requiring each investor to answer questions, to do what? To demonstrate their abilities--and I think the gentleman from North Carolina already went through this as far as what those restrictions should be--but, A, recognition of the level of risk generally applicable. It goes back to what I said before: If you're going to get involved in this, make sure that you understand it. And that's one of the questions. B, risk of liquidity. If you're talking about a startup company as opposed to something that's traded on one of the exchanges, there's not a lot of liquidity out there, generally speaking.

That means there's not a lot of folks out there who are trading these shares on a daily or hourly basis. So you have to understand that there is going to be a restriction on liquidity in this marketplace.

And, C, such areas as the SEC may determine appropriate, so broad authority there.

Sixth out of seventh I'm going to touch upon, and maybe this is the point that the gentleman was just referencing in some respects, the outsourcing of cash-managing functions to a qualified third-party custodian. And I think the gentleman referenced traditional broker- dealers, but actually this goes into a slightly different caveat from that which, I think, is actually the appropriate manner; otherwise, what you may be doing with all these restrictions being good, you don't want to get too restrictive in this and too costly. If you did do that, then you may end up making this just as difficult as if you were in some other framework.

I yield to the gentleman from North Carolina.

One of the reasons that you do that is because we are talking about small companies, companies that may be creative artists starting up a business, a nonprofit starting up a business, a small entrepreneur, so you're talking about small folks, small businesses. You're talking about businesses under $1 million.

If you were talking about what we read about in The Wall Street Journal, if we were talking about things that may be shortly traded on the New York Stock Exchange, that would be more appropriate. But you're talking about these much more, smaller type of industries here; right?

Part of the other problem is that you may not find the interest actually by the broker-dealers if you're talking about a $25,000 or $50,000 or $100,000 enterprise.

Is that another reason why you went this way?

Before you leave, tied to this is another one of the two last points I was going to raise, which perhaps you would like to illuminate on.

The bill also requires that the intermediaries state a target amount that you're raising. You just said perhaps $50,000; right? And one of the requirements under it, as I understand it, is that you would have to withhold the capital formation proceeds, the money that you collect, the capital, until you hit a percentage of or that target amount. Is that correct?

The point of that is, again, what? Basically investor protection here. What you don't want to have happen, I guess, is: Say I'm going to go out into the marketplace and start raising money, and as soon as the cash starts coming in I can start using it right away, even though I was intending to raise $200,000, but I'm going to start using it right away. Those proceeds may not go to the point where you intended.

I see the gentleman from Colorado is nodding his head. Is that your understanding? Is that the reason why this was included in here?

Well, I will very briefly. I understand that I've gone over the time that I was supposed to be speaking.

With that, I rise in complete support of this legislation.

I thank the gentleman for not only managing the floor tonight with regard to this conference, but also with regard to all your great work with regard to trying to push forward the BBA, making sure we get over the goal line this time.

As the chairman and founder of the Constitutional Caucus, we rarely come to the floor to advocate for an amendment to the Constitution, but that's exactly what we're doing here tonight. It brings us here tonight because the United States Government has what? Just as the other speakers have said, overspent, overborrowed, and overtaxed, putting this Nation on the road to fiscal ruin. Yet, as much as that is true, there are many who believe that the solution going forward is even more of the same: more spending, more borrowing, more taxation. And only here in Washington, DC, could that ever be given serious consideration.

American families are not given that luxury. American families have to do what? They have to live within their means or face fiscal disaster in their family pocketbook. So, too, here in the United States Government we should live within our means as well; but unfortunately, today, as you saw the previous chart and previous speaker, we have been incapable of doing that. And that is why we're here tonight because we know we must force ourselves to do so through a balanced budget amendment.

Now, step back. Amending the Constitution is a difficult process. It should not be entered into lightly. The process reflects the Founders' commitment to republican self-government while protecting what? The integrity of the supreme law of the land.

And so in the spirit, then, of the Founders' vision for an amendment to the Constitution, we support tonight a balanced budget amendment as the only solution to excessive and irresponsible spending that we've seen go on for far too long. And yet we hear from the other side of the aisle and the other House--Senate majority leader called the balanced budget amendment a radical new idea. But how radical is it really? Radical? Well, 49 States in this country have some form of a balanced budget amendment, and they realize they must abide by it to live within their means.

A new idea? Well, indeed, Thomas Jefferson is the intellectual forefather of the balanced budget amendment. So we can go back some 200 years. Back in 1798, when Jefferson wrote to Virginia Senator John Taylor that the solution to then-extravagant spending was a constitutional amendment eliminating the power of the Federal Government to incur debt, he went on to say:

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an article, taking from the Federal Government the power of borrowing.

Now, the balanced budget amendment is the Jeffersonian solution, therefore, to today's debt crisis. And yet, when you think about it, the amount of spending and overspending that they had in Jefferson's time pales in comparison to the reckless spending that we have today and the reckless and fiscal ineptitudes that we see going on in Washington.

According to CBO, the Congressional Budget Office, the government will spend nearly--get this--$1.5 trillion this year more than it takes in. And if we refuse to balance our budget, as your amendment would do, what will happen over the next 10 years? Almost $9.5 trillion in additional red ink will be added to the bottom line.

So, in conclusion, the choice I think is clear: Either we continue down the same road with blissful disregard of the warnings of financial catastrophe that we've seen, or we do what? We amend the Constitution to require a balanced budget and put the United States back on the road to sustainability and also prosperity.

So let's make the balanced budget amendment the 28th Amendment to the Constitution.

I thank the gentlelady for yielding.

I rise in support of H.R. 358, the Protect Life Act.

Doesn't that name really say it all, the ``Protect Life Act''?

Historically, the Federal funding of abortion has been restricted. Time and time and time again, an overwhelming majority of Americans has indicated that they oppose the Federal funding of abortion. Go all the way back to 1976. Congress has repeatedly passed the Hyde amendment.

What does it do?

It ensures that no Federal Government dollars are used to pay for elective abortion or insurance plans that provide elective abortion under Medicaid. Unfortunately, the insurance plan that was forced through Congress this last session would now allow Federal funds to subsidize, to basically support and pay for, abortions on demand in America for the very first time since 1976. So the Hyde amendment, as it stands today, only extends to HHS.

The Obama health care plan, what does it do?

It exploits that loophole. As the law now stands, the government can literally force that federally funded and private health care providers cover abortion under the guise of family planning or pregnant women services or countless other euphemisms.

My friends on the other side of the aisle will say, Well, that's incorrect because President Obama signed an Executive order to bar abortion funding.

No. Members on both sides of the aisle know that pointing to an Executive order is disingenuous at best. We all know, as we come to this floor, that this Executive order, the same one that the Planned Parenthood Federation of America calls a ``symbolic gesture,'' can be completely undone by a future administration.

The only way to ensure that taxpayer dollars are not spent on abortion is--how?--through legislative action.

President Obama's insurance plan passed Congress. It did so over the objection of the majority of the American public. So it is time now that we come to the floor to respect that majority of Americans and to ensure that they do not fund abortions simply by paying their taxes every April 15. Therefore, I urge all of my colleagues to support this bill, as I said at the very beginning, the Protect Life Act--the bill that says it all.

Mr. Speaker, I rise today in objection to the Palestinian Authority's blatant attempt to circumvent its past agreements and treaties with Israel and seek a unilateral declaration of statehood at the United Nations (UN) later today.

Peace between the Israelis and the Palestinians will not be settled through a resolution at the United Nations. Lasting peace will only be achieved through direct negotiations between Israel and the Palestinians.

The Palestinian Authority's unilateral declaration of statehood directly contradicts UN Resolution 242, which states that the two nations must work together to achieve peace in the region so that both states are secure.

When Resolution 242 was passed, President Johnson stated, ``It is clear . . . that a return to the situation of June 4, 1967 will not bring peace. There must be secure and there must be recognized borders. Some such lines must be agreed to by the neighbors involved.''

Now is the time for the UN and the Palestinian Authority to heed that advice. The borders should not be dictated to the Israelis; rather, an agreement should be based on direct negotiations between the two states. Recognition in any way by the UN will only embolden the belligerent Palestinians to avoid the negotiating table and circumvent direct negotiations with Israel.

An affirmative vote by the UN Security Council, even with a United States veto, will have dire consequences for years to come. I urge the UN to reject the resolution so that both nations can return to the negotiating table without pre-conditions.