tv U.S. Senate CSPAN December 10, 2010 9:00am-12:00pm EST
market structure, it is certainly worthy of consideration. nobody winds to catch falling knives. we have seen it time and again. we are putting in place circuit breakers and other things that could be helpful in those calamitous events that make the provision of liquidity though probably on the small end, at least at some level more orderly and fair that it has been historically and maybe there is some value in that going forward. >> it is multi part so i will align myself with the last bit that mr. cronin said. there is someplace for mandatory liquidity in the marketplace. nanoj narang is right that that mandatory liquidity has not stepped in the way of moving trains but kevin is also correct that those trains with certain circuit breakers can only move so far so as policy makers continue to analyze the place of frequency traders in the marketplace and analyze the
all of the data, these different strategies. and that their focus should be on, i'll say the unfortunate strategies or the reverse strategy, and quickly, isn't that a fair summary of what you think we are? >> first of all let me say that i certainly agree that there is high-frequency strategies that perhaps have less social utility and others. i don't know the high-frequency strategies that are in use over that any hypothetically conceived of that are destabilizing to the market system in some way. the reason i say that is simply a recognition of the fact that virtually every high-frequency trading firm that is out their controls very little capital. the high-frequency trading firms in the world would not be inside hedge funds. in terms of the capital they control. the point, it takes capital to move market.
the buying pressure or selling pressure in any fixed unit of time that sufficiently long is roughly equal for a high-frequency trading for. that's what makes them have high-frequency. the high-frequency refers to the holding period. if your holding period is only one minute, what that means is an imminent you cannot have a protracted or permanent effect on a stock's price when you do that. that virtually rules out the possibility of destabilization barring some either unknown accidental bump that occurs. i think the question focus more on intentionality. so from a intentionality perspective, i would say that yes, high-frequency strategies like any other strategies run the gamut in terms of what value they provide. but i don't know that marketing should be policed based on some sort of subjective assessment about how much value a participant is adding to the market. i think that while that should happen his room should be made,
to make sure there is a level playing field and that the markets are fair. what i will tell you is that even though i am high-frequency trader, there are definitely unfair aspects of the market structure today that favor certain participants over others. >> thank you. first, i think you have illustrated there are at least two issues at play here. stability of the markets and fairness of the market. markets could be very stable but very unfair to participants, some participants, and grossly overcompensating others. i think it's an important point. mr. cronin, mr. peterffy, your quick comments. >> i would submit is one of the dimension other than buy and sell, and that his quotes. why are there participants allegedly quoting one stock 4000 times in a second? was the intention of there? so i do believe that there is
activity that goes on that is trying to get institution or retail orders to react without in fact taking the risk of taking an offering for that day. i think that is out there and certainly needs to be looked at. >> mr. peterffy, please, quickly. >> there is disruptive trades. it's very real. there is no justification for continuing naked access. we should stop it now. there is nothing to stop it. only irresponsible brokers who make it access. and there is no justification for continuing it. >> thank you. if i may just say, i've never heard of mr. narang before come and as far sign of his reputation is impeccable. [laughter] >> well, thank you very much. >> i second that thought. >> does not reflect on the record? >> what's interesting about this
historic as it is raise more questions than it has answered come and that's a good hearing come in my book. because this is a very extraordinary complicated topic and you of all shed so much light on a. there's one other issue here, and that is mr. narang made the point that primary markets form of capital. professor angel made the point of the primary market, the ipos seem to be diminishing. public companies are diminishing, et cetera. and so is there a contradiction between this very successful, if you will, secondary market highly liquid, et cetera, with the fact is not generating the kind of capital formation that puts people to work, i.e., the classic i didn't understand, i probably still do, the real economy versus the financial economy. we talk about high-frequency trading and naked, that's the
financial, the real economy is to have a job, glad capital to expand my business, et cetera. so if you could just comment briefly on that, professor angel. >> sure. icon the best of times and were sometimes just like times just like in charles dickens. to pick stocks, it is the best of times. but almost any measurable dimension of market quality, the market for microsoft, ibm, citigroup is very liquid, very cheap, very fast. it works really well. but when you get into the smaller stocks, you have liquidity drying up. i mean, it's better than it was 10 years ago but still, a lot of smaller companies just say hey, it's not worth it to access the capital markets. whether because it's the high cost of being a public company with all the compliance requirements, or the fact that the capital market isn't recognizing the value of these enterprises. we need the secondary market to provide exit for the people who buy in the primary market.
but we also need the ipo market to provide exit for the entrepreneurs who built the companies. we really need to pay a lot of attention to what's going wrong here. there is no one magic bullet here, but it is a serious cris crisis. >> very quickly. >> i appreciate it. i think you would be well served to solicit the testimony of venture capitalist on this topic i'm confident what they would say is the main reason why companies are not seeking to go the ipo route is because of the stock market has been roughly flat for the past 10 years. and a better exit for companies is to sell their firm to google or some other big public company that you listed themselves. so in other words, economic conditions could have a lot more to do with the state of affairs when it comes to listing companies than the help of the secondary market. the second thing i would say is it's also been shown, i believe,
that other exchanges across the world are perhaps more competitive than the united states. because of regulations such as sarbanes-oxley and other regulations that you have to comply with if you are listed in the united states. so that's another thing i think that ought to be studied. >> thank you all very much for your excellent testimony and participation your chairman levin. >> thank you again, senator reid, for all you have done in this area. for today's hearing, to doing this join with me and your staff has been very, very useful. i know to us and i hope also to the senate and its considerations. i have some additional questions which i am going to be asking of you. so, let me start i guess with mr. luparello. and then going down the line here. i think most of you, if not all of you, have said that the
trading across multiple market venues has made it necessary for the regulators to have information from those same venues in order to effectively regulate or to police potentially many good trading. they just can't look at the activity on their own trading platform. do you agree with that? >> 100%. >> does anyone disagree with that? okay, so i will shorten that. now, when it comes to the manipulative trading that exists in the view of some, i think many, that exist between platforms. including phony bids and layering strategies or other strategies.
let me i think start out with you, mr. cronin. have you observed what appeared to be manipulated same day trading between platforms? >> i have not directly. i have certainly heard about different things, but not really so much across platforms. if your document futures exchange relative to the underlying, i have not. >> but you've heard anecdotally about such -- >> yes. >> mr. narang? >> look, there is a little downs but stuff happens. you know, i was a treasury market maker in the mid '90s, making markets are long gone for a primary dealer. and i was very common in those days for traders to quote unquote paint the screen. in other words, to show buying interest on the screens when, in fact, they were sellers.
okay, that's not a new practice and really has nothing to do with computers or automation. in fact, i would hasten to add that those sorts of strategies really are the domain of human beings because they can't be modeled. they can't be simulated. you can't model the effect of what would happen if you show a large quote. okay. and that's why everyone, i was a so that disturbed when the trillion example of which everyone points to a kirkuk it was immediately planned on high-frequency traders. trillium was a firm as far as i understand that consisted of human daytraders come and the fact that they held their positions on an intraday basis should not immediately paint everybody who does that with a bad brush. the point is that these sorts of strategies are psychological in nature and humans have no -- its true computers have no capacity to run those sorts of things. that's on a theoretical level.
on a practical level one of the benefits of the market of computers, computers training that's not discussing much is the fact that it leaves very, very concrete paper trail. so the forensic analysis is readily doable within algorithmic traders are participating in the market. so because of that, you know, computerized algorithms have a very concrete recipe that's written down. it's discoverable. it can be subpoenaed. so it would be remarkably foolish for somebody whose antennae to engage in manipulative activity to do that with an algorithm. that's something that is best done by human beings, and for all practical purposes i know of no example that's been discovered that part of manipulative activity being done by computer. spirit putting aside how it's
done, that was about my question, my question was -- >> i have no doubt whether it's done but i know of no concrete examples. >> you have not observed many to get it same day trading between platforms? >> no, but i would virtually guarantee that it occurs. >> mr. peterffy? >> we see that happening all the time. but i do not believe that that should be such a great concern. i mean, it is bad but we have much, much more situations to do with with at this time. i'm suggesting here that each broker keep on record the identity of a person associate with each order, so if there's any order, that is the discretion of all it can be very easy collected either regulators from the different exchanges and correlate your submitter by
name. >> let me call professor angel before i go back to that point. do you have a comment on my last question, about whether or not you believe that the manipulative same day trading between platforms exist? >> well, there are two types of manipulation. there's the old fashion manipulation by order ignition where you dump a big sell order in the market, try to push the price down to scare other people, and trigger all the stockholders. that doesn't really depend on the platform. and, indeed, a lot of traders don't pay any attention to the platform. you know, they just send an order to someone like mr. pettiford and it figures out what the best execution for that order. there's a lot of trading him as a good trading and a lot of money and a lot of manipulative trading that doesn't pay attention to the platforms. now, if somebody, trying to sell
can't go to put his or her into this exchange verses that exchange because nobody will notice. >> the regulators don't have such automatic access? >> actually, the intermarket surveillance group feed actually does consolidate the data so if somebody is trading, the folks over at finnegan very quickly to electronically sheet, figure out who did what. they just can't put together the order book stood at the strategies and that's why they need better data. >> that's why takes an awful lot of time to put together these studies, doesn't come on these analyses? >> that is certainly one of the reasons but another reason is the quality of data we get for the purposes of running surveillance is come is fragmented and incomplete. that prevents us from looking at activity across markets. >> i want to ask you about an ex-con is that fragmented information, what is not included in the information i
guess is the beneficial owner or the person putting the order in? >> it is a variety of things at this point that you still have the equities markets being regulated somewhat inside of passions. we are in the process of aggregating our current regulation of the over-the-counter market and nasdaq adding in the new york stock exchange regulated markets, which give us, will give us a very much closer to complete picture of equities trading. but options market are still and silent fashion. so consolidated audit trailing i think it's a necessary step to getting to and ability to look at these things happening across market in a real-time basis. >> and our broker-dealers required to report the executing broker, the customer information? >> at this point broker but not customer information or to that level -- >> is that useful? >> customer information survey is useful. i think especially if you're looking at it not for maybe
necessary every customer, but certainly at the large trigger thresholds that the fcc has proposed a it is shortly a very good information. >> is that in the works? >> well, i think chairman schapiro alluded to developments in the consolidated audit trail. i can't speak to, but one of helping anything that came out of consolidated audit trail was not just the merger of the data at the exiting level, but the inclusion of some of the more granular customer data and spew back what a stock exchange's question you don't look at in? >> no, we do. >> do you get that same information found in? >> yes. the way it currently works and the way it would work and consolidated auditor is the merger of the data, not just at the executor level but also exchange order books. that is essential. >> and that is what the customer, the name of the customer would be useful as well? >> absolutely. >> does anyone want to comment on that?
>> on the customer information, while we completely support the idea of having the information in the regulators hand, that's very sensitive and privileged information. that it was any leakage could have very bad consequences to our clients and shareholders so we would just make sure that while the state is being collected and for the right purposes, that it is secure and that we don't read about wikileaks or anything else with our positions. because that would be catastrophic to our clients. >> subject to that, you would agree with mr. luparello that in order to regulate you have to have access to the information? >> yes. >> mr. luparello come is then are currently investing activities involving foreign-owned accounts that are held at u.s. broker-dealers located in other countries?
>> our jurisdictional limitations make that difficult and it is an area that we are quite concerned about. broker-dealers obviously have customers some based in u.s., some based abroad, in addition sometimes those customers are just, i don't want to say a cover, but something that is a network of other customers. since our jurisdiction only goes to the broker-dealers and our ability to compel the first level of information, investigations that we have to stop at that level. if there's an ongoing concern of illegal conduct that will result in a referral to the sec. >> so you basically have difficulty investigating foreign accounts that you suspect of trading abuses? >> will -- >> also because you can't get clients? >> we can get clients names in the course of investigation so we're doing an investigation, we'll ask a from for clients names. they will provide to us to our
ability to compel either financial information or testimony from customers is what limits us. so that's true whether they are domestic customers our international customers. the ability of the sec to reach this international customers create yet another layer of complexity. >> on the same point about foreign banks, mr. luparello. is it true that foreign banks that open accounts with u.s. broker-dealers are not required to disclose the names of their customers to u.s. broker-dealers? >> u.s. broker-dealers have an obligation to know their customer. that comes out in a variety of other different requirements, including most important public anti-money laundering. what exact requirements those the u.s. broker-dealers have to note not just the customer, but
the customer of the customer is an area that has been somewhat vague over the years. i think again 2.2, i would point to what the commission has put forward in terms of its rulemaking, that is mostly around naked access but could be used to add greater cheap to those know your customer requirements because there is that concerned that the customer of the broker-dealers is just a holding entity for the real customer sitting behind that construct exist in the u.s., to come in some master subaccount scenarios that we try to look through to have the customer of the customer be treated as a customer of the broker-dealer i think there's both further interpreted the rulemaking and in force but that needs to be done. >> mr. narang, you made reference to certain other aspects that exists to some participants. can you expand on what those unfair aspects are? >> yes. they are a little esoteric but i will do my best.
basically in the united states equity markets the vast majority of exchanges observe what is known as price time priority. that means that orders that arrive at the exchange at a particular price get first priority to execute against inbound orders, based on their arrival time. if your order arrives before mine, and in some who wants to that price actively will give you a feel before they give me a feel. now, because some technicalities of so used with reg particular and rule 611th of the so-called order protection will, the long-term investors who are attempting to trade and form a new price, in the process, they often lose their priority to
certain proprietary trading firms that have the ability to utilize specialized kind of ordonez intermarket suite orders. so what happens is that price time priority gets violated. you can calculate what price type authorities were. it's worth a lot of money. so there's a massive transfer of wealth underway from long-term investors who are executing the algorithms are just old fashion the techniques into the deep pockets of certain high-frequency traders who actively utilize that capability. i don't think that is high-frequency trade firms should be faulted for utilizing that capability because there's no intentionality behind that. what happens is that when a long-term investor goes to take an offer and post a bid at the new price, the exchange will hold up that dead until the price is formed by somebody who is using an iso- order. so the user of the ice order
doesn't need to know why i it's happy that basic note there is a 2 cents spread and what you tightened the spread. the high-frequency traders doing that is acting in the interests of the market as was his own interest but that is not a fair proposition. that is one of the few unfair aspects that i know that. be exchanges tend to give much higher liquidity rebates. not all of them. the vast majorities are a noble exception but many of exchanges give higher rebates liquidity rebates to the most active traders than they do to smaller traders. and i think that's an anticompetitive practice and ought to be seriously examined. by and large i do want to give the impression the equities market is unfair that i think this is one of the fairest markets in the world, and one of the most well functioning. that doesn't mean it's perfect. of the glitch in rule 611 that he mentioned to you is a very same glitch that is responsible
for all the market fragmentation that we have seen. this very same rule is what causes exchange is to route orders to other exchanges rather than posting them, if they appear to lock exchange is. that creates an economic incentive for new exchanges to spring up that never existed before. because they have the ability to virtually be guaranteed order flow from other exchanges. that's why the market, the marketers have proliferated to the extent they have sent reg ms-windows back in 2007. >> thank you. just one last question of mr. luparello. our first panel was asked a question by me about them and i believe you here during that question. about what appeared to be an attempted short squeeze by goldman traders using credit default swaps to bet against mortgage-backed securities are now, i think you here during
that -- >> i was. >> if a finra member was to attempted short squeeze or was unsuccessful in this, put to me as an intent to manipulation, would finra typically investigate this activity to determine whether it violated finra roles such as the general rule, rule about what high standards of commercial honor and just in ecuador principles of trade, closed quote? >> absolutely. that scenario, and i was not privy to the facts before this, and i think is probably a question about whether those were securities at the time. but that fact pattern in the current environment, trading practices that had a specific passionate specific intent behind them would be something that would be investigated and we will take good with the right facts the right facts right about of our rules. >> does anybody want to add
anything before we bring our hearing to a close? >> i would just like to thank the chairman for investigating the very important issues. i was very impressed by the eloquence and basically high quality of your opening speech. i want to urge you to keep up the good work. >> i'm glad we gave you the opportunity to say that. [laughter] >> does anybody else -- i better stop while i'm ahead. thank you all. we have a good number of letters from to exchanges which will make part of the record. there may be some questions that we would like to ask each of you for the record that may come to you. and you're not obligated to enter them. we sure would appreciate them. your answers. and we will stands adjourned again with our thanks to each of you, not just for your testimony, and your direct answers, but also for very
graciously being allowed to be moved about to satisfy a very crazy senate schedule. i won't say it's unusual. crazy is the usual. but thank you. [inaudible conversations] [inaudible conversations] >> to be convicted and removed from the federal bench by the u.s. senate. watch the entire process including the house impeachment, the senate trial and a final vote online at the c-span video library. search, watch and share any time, all free. it's washington, your way. >> it's friday, december 10. the senate has begun debate on the expiring bush era tax cuts. debate will continue today as centers run than the time
required for the first those for extending the cuts. it also extends the energy grant program. a number of other issues are awaiting senate action before congress and for the including federal spending. it includes an extension of long-term jobless benefits. now to live coverage of the u.s. -- here on c-span2. the chaplain: let us pray. sovereign lord, we put our hope in you. today, lead our lawmakers to strive to honor you. may they look to you for wisdom and seek to do your will, relying on your protection and
guidance. keep them from the slippery places of temptation, as you deliver them from evil. hold them in your hand and guide them with your truth. god, be in their heads and in their understanding. be in their eyes and in their looking. be in their mouths and in their speaking. be in their hearts and in their thinking. we pray in your great name. amen. the presiding officer: please join me in reciting the pledge
of allegiance. i pledge allegiance to the flag of the united states of america, and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. the presiding officer: the clerk will read a communication to the senate. the clerk: washington, d.c., december 10, 2010. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable mark warner, a senator from the commonwealth of virginia, to perform the duties of the chair. signed: daniel k. inouye, president pro tempore. mr. reid: mr. president? the presiding officer: the majority leader. mr. reid: following leader remarks if any the senate will return to a period of morning business with senator sanders of vermont to be recognized for -- to speak for whatever time he feels appropriate. there will be no roll call votes during today's session of
senate. the next vote will be at 3:00 p.m. on the motion to invoke cloture. as i announced last night that will be held open longer for usual to allow senators to make that most important vote. i have nothing further, mr. president. the presiding officer: under the previous order the leadership time is reserved. the senate will now be in a period of morning business. a senator: mr. president? the presiding officer: the senator from the commonwealth of pennsylvania. mr. casey: thank you, mr. president. mr. president, this month the obama administration will submit its review of the war in afganistan. i expect, and i think a number of members of congress expect that this review will provide answers to the key questions before us. the questions of the american people deserve -- the questions the american people deserve answers to. i believe these questions fall
into three broad categories, first of all, afghan governance, and, second, development and humanitarian efforts and, finally, establishing a sustainable security environment in afganistan. since the announcement of a new strategy in december of 2009 and deployment of 30,000 additional troops, i've sought to carefully monitor u.s. progress towards its goals. as part of this effort, i've paid special attention to combating the top killer of u.s. troops, which, of kowrgs, is impro -- of course, is improvised explosive devices. i chaired a committee hearing on this topic on november 18 and will continue to press our government and our leaders and governments in the region to do more to restrict the availablity of components that make up these terrible weapons. especially, of course, amode
immodium nitrate. i'm pleased that significant progress has been made by the department of state, the department of homeland security, and the department of defense to coordinate in all of government approach to solve this problem. the afghan security forces seized one metric ton of immodium nitrate on monday. all the key players appear to be on the same page on this issue. but there still has not been a significant increase in these deadly weapons in afganistan. i trust that the december review by the administration will address the flow of immodium nitrate and i look forward to continuing to work with the administration on this issue. at strategic level too many questions remain as we head into
the december review. i'd like to list some of these right now. first of all, on the issue of governance, i have two questions that i hope the december review will address. first, do we have a political strategy -- a political extrasy in place to en -- strategy to ensure that the afghan government is prepared to enact reforms that concretely shows the population's key interests and concerns. i believe our efforts to pressure the afghan government has been, at best, uneven in this area, due in large part to a reluctance to pressure the afghan leadership. any security gains in afganistan can be easily squandered without serious progress on governance. the united states, isaf and afghan security forces are sacrificing too much as the afghan government fails to enact reforms in the best interest of
the afghan people. it will be difficult to succeed in afganistan without a strategy to help build the institutions of government, including the judiciary, political parties, and, of course, elect ral institutions. the international community must be more willing to confront the afghan government on issues of political reputation, corruption, and the rule of law. and we should stand ready to help build and develop these democratic institutions. the 2009 presidential election and the 2010 parliamentary elections were rife with problems that seriously undermine the confidence of the international community and afganistan's ability to conduct elections free of fraud and manipulation. if the electoral process remains
deeply fraud, the afghan people support for the democratic process itself may well erode. while the government has said it wants to develop a -- quote -- "strategy for long-term electoral reform that addresses in particular the sustainable ability of the electoral process," few steps have been taken in this direction. the election law's need in serious reform. the executive branch has nearly exclusive power over the independent election commission an electoral complaint commission much the single nontransferable vote transition impedes the development of political parties in a long-term way to organize and represent the interest of the afghan people. corruption continues to be a serious issue that affects citizens across afganistan, in the southern part of the country. a recent public opinion survey conducted by "the washington
post," abc news, the bbc show that 55% of respondents in kandahar say that they have been asked for bribe from the police. 55%. well above the national figure of 21%. moreover, most kandahar residents say that their situation will only get worse if they exercised due process and filed a complaint about a public official. the united states efforts to improve governance at times competes with our security concerns. there is an inherent tension between the united states and ifef forces -- isef forces in efforts to combat combat extremist efforts and warlords that rule over certain areas. while there's an imperative to conduct intelligence, it may
require cooperation with local power brokers, i'm concerned that the long-term cost of such interaction is very high. are we empowering another generation of local power brokers who have little regard for representing the interest of the local population? that's a question that needs to be asked over and over again and we need answers to that question. it is a simple fact, diseffects with afghan citizens with the local government provides recruiting opportunities for the taliban. this is a serious concern because it gets to the heart of our engagement in afganistan, cooperation with local warlords can provide short-term security gains, but what is the long-term impact? i hope the administration's december review will address this issue. question number two, what's the state of the reconciliation process with the taliban? i've expressed serious concerns about the impact of negotiations
with the taliban on women and other vulnerable groups in afganistan. my concern grew and i know other reconcern as well. our concern grew in the poll numbers from afganistan recently. there was a 13% jump last year among respondents who say women's rights are suffering. the december review should address the current state of play with respect to these negotiations. the recent afghan polls show that nearly three-quarters of afghans now believe their government should pursue negotiations with the taliban with almost two-thirds willing to accept a deal allowing taliban leaders to hold political office. ultimately there must be a political solution to end the war in afganistan. i'm not suggesting that we're close at this time to that result. but we need to know the degree to which the administration and the hamid karzai government are
coordinated and headed down this same path. any negotiation will be essential to long-term success. pakistan has a role to play here and is a necessary element to any long-standing, long-lasting peace agreement. the next area, security. u.s. operations in southern afganistan appear to be having a positive impact on afghan public opinion. 67% of the people in the province of helmond describe their security as -- quote -- "good," a 14% jump from 2009. and nearly two-thirds of helmond residents state that afganistan is on the right track. this is positive momentum. such gains can be short-lived and in order to sustain a -- to
have a sustainable security we must ensure that the afghan government can provide for its own security. the training of afghan national security forces is a key threshold question. we cannot allow afganistan to once again become a haven for al wida or other extreme -- al qaeda or other extremist groups to launch attacks against the united states. isaf forces denied al qaeda this haven since 2001, however, we cannot survive this in perpetuity, the afghans have t to -- do more that are oir own -- their own security. so where do we stand at this point? i have to say that the view is decidely mixed. for years the international community exercised what -- what can be characterized as gross neglect in building afghan
security forces and only recently have we begun to take on this task. first, some positive news on this issue. we don't hear enough about this. under the leadership of lieutenant general caldwell, the nato mission -- the nato training mission in afganistan, the so-called ntma, has been a source of real progress. the afghan national army and police are exceeding -- exceeding their recruitment goals. as of august of this year the national army total strength had grown to 138,164, exceeding the goal of october 2010. as of august the police had a strength of 119,639, exceeding the goal of 109,000. these recruitment numbers are an important sign of progress, but serious concerns mame related to
quality -- the quality of the force, the retention rate and the low rate of literacy. the afghan army has a shortage of noncommissioned officer. junior officers are essential to a force since they control immediate on the ground situations. the ministry of defense and the training mission in afghanistan are working to overcome a shortfall of 4,500 afghan national army officers. there are more officer candidate school units, twice as many seats in the integration course in larger classes at the national military academy. as for noncommissioned officers, the afghan national army faces a shortage of more than 10,500. similar expansions in training capacity and direct entry programs are under way to address this deficiency. according to a recent pentagon
report, the gap will not be closed until the end of 2012. mr. president, the pentagon also reports that we face a shortfall of more than 900 international trainers in afghanistan. i hope that our allies in isaf can help to address this very important training need. many european countries have a proud history of developing elite paramilitary forces. this valued expertise is needed right now in afghanistan. while expanding capacity is critical to growing the force, i hope that the december review by the administration will address not just the efforts to grow more leaders but also describe how these leaders are laying the foundation for professionalizing the afghan national security forces. retention and attrition rates. for years, the afghan national security force's attrition rate has been an issue. facilitating rapid growth while
increasing quality requires the retention -- requires that retention rates remain high. in january 2010, the joint coordinating and monitoring board approved the goal of developing a force of 305,600 personnel by october 2011. recruiting efforts paired with increased retention have allowed the force to grow ahead of schedule so far. moving forward, the projections remain uncertain. the defense department reports that the police has met attrition and retention goals. however, the afghan national army still has issues with attrition that may impact its ability to maintain its impressive growth in numbers. this month's review by the administration should clarify projections and detail efforts to boost retention. literacy is a big problem. the literacy rates are very low in the afghan security force and
this must be addressed. consider this story from lieutenant general caldwell. he visited a base in northern afghanistan where 90% of the troops claim they had been unpaid for months. to limit corruption, the government has been paying the troops by electronic funds transfer instead of cash. the troops had no idea, however, since they could not read their bank statements. think about weapon security. how can a soldier be sure he has been assigned a weapon if he cannot read the serial number? ill literacy is widespread in the force. only 11% of enlisted personnel can read, write or do simple math. this creates significant challenges in professionalizing the security forces. in response, a huge literacy program has grown around the fielding of the afghan security forces. so we have much to do on that. i'll move to the last part of our concerns, and that's on development. a qualified afghan soldier is
much cheaper to train, equip and field than an american, so the overall cost to u.s. taxpayers would certainly diminish as the u.s. forces draw down. by investing in this large force, there are long-term implications. do we expect to pay for the afghan security forces ten years from now, 20 years from now? at what point will the afghan government be able to collect its own revenue to fund its security as well as other priorities? that's again why responsible afghan governance is essential. while the international community will shoulder much of the humanitarian and security burden in the short term, the afghan government needs to take steps to increase its domestic revenue collection and also put into place a sound legislative framework to encourage investment. they need to develop a minerals framework law, and they also need to put in place changes to bring about a stronger infrastructure.
mr. president, let me close with a reflection upon our troops. we have the obligation here in the united states senate to ask and have answers to very critical questions, whether they relate to development or governance or security, and especially on the question of security. we also have an obligation to remember and keep in mind the human toll. in the state of pennsylvania, like a lot of states, we have lost a lot of -- a lot of soldiers. to date, we have lost 60 service members since the beginning of the war in afghanistan. in iraq, we got to the number of about 196, just below 200. let me share one story as i conclude. two weeks ago, pennsylvania lost army staff sergeant sean flannery who died a hero in afghanistan. he's from the town of wymissing, pennsylvania, on the eastern side of our state.
he was an infantry squad leader. he was killed after delivering first aid to a wounded afghan soldier. sean and his team carried the man to an evacuation helicopter. they stepped on an improvised explosive device, which killed sean and another soldier. staff sergeant flannery was 29 years old. when he graduated from wymissing high school in 1999 and shippensburg university, he headed to serve his country. he was on his fourth tour of duty after having served two tours in iraq and a prior tour in afghanistan. he earned a bronze star, and because of his heroism, another commendation. his high school classmate -- one of his high school classmates paid tribute to his friend at a service earlier this week. he said, and i quote -- "his fellow soldiers talked about how much they respected him for what a great leader he was and how they had true love for him and
not a word of it surprised us. he was the type of guy everybody wants their son to be, loyal, humble and generous. i was honored to have him as a friend." that's what matt raider, a classmate of sean flannery, said about sean. all of us are honored to represent these young men and women who fight for us and some who died for this cause, and today we pray for those families. we pray for sean and his family. but in a larger sense, i guess we pray for ourselves as well, to pray that we are worthy and can prove ourselves worthy of their valor. one of the ways, one of the ways that members of the united states congress prove ourselves worthy of that valor is to ask and demand answers to these very difficult questions, no matter who the administration is, no matter what party, because we
have to get this policy right and we have an obligation to get it right. for sean flannery and for those who loved and lost and for our country. mr. president, i would yield the floor. the presiding officer: the senator from utah. mr. hatch: mr. president, i ask unanimous consent that at the conclusion of my remarks, the distinguished senator from rhode island, senator reed, be given time on the floor for his remarks. the presiding officer: without objection. mr. hatch: thank you, mr. president. mr. president, i just want to take a moment to pay tribute to someone who is very special and very dear to me. my former chief of staff, jace johnson. over this past recess, i learned that my chief of staff, jace johnson, would be leaving the senate to pursue opportunities in the private sector. a change often catches us by surprise, and as you can imagine, i had come to know and rely on the talents and insight jace offered over these many past years. he was my strong right arm, someone in whom i had complete
confidence and still do. for eight years, jace worked on my staff and dedicated his efforts to serving utah and improving our country. undoubtedly, his work ethic and straightforward approach to public service has greatly benefited us all, and jace is sorely missed by all of us on our staff and all of us in our office. he provided a strong leadership at a time when it was absolutely crucial to us. to fully understand the void created by jace's absence, you have to know a bit more about him. when you walked into his office, you were greeted by a proudly displayed utah college and utah university pennants. aside from -- aside from making an interesting and welcoming environment, the banners proclaimed jace's passion for sports. like me, he spent his boyhood as an avid basketball player, and i regret that we never had the opportunity for a one-on-one game, but i'm still convinced i
would have kicked his tail and that i would have won. although when i think about it, he's in a lot better shape than i am. his love of hoops led jace to play basketball at snow college in central utah. soon thereafter, jace served a two-year mission for the church of jesus christ of latter-day saints in the philadelphia, pennsylvania, area. being from small town idaho, i can only imagine the new experiences philadelphia had to offer. it undoubtedly left quite an impression. his wife corey credits her husband's time in philadelphia for his willingness to venture back to the east coast after college. they met while tweang college at brinkham young university in provo, utah. they have three wonderful children, ashley, benjamin and christian. upon finishing school at b.y.u., jace and corey made the move to washington, d.c. so he could attend graduate school at george washington university and earn his m.b.a. now, while jace was still in
school, he actually worked in my office as an intern. he didn't stay long, however, because as the saying goes, he had bigger fish to fry. by the time jace returned to capitol hill to work on a more permanent basis, he had already achieved remarkable success in the business world. after working for a few years at visa international, he became the director of finance at the corvis corporation, a cutting edge network and media solutions company. jace was the third employee to be hired at corvis while it was still a start-up. while he was there, he helped secure financing for the company as it prepared to go public in the year 2000. jace's contribution to corvis allowed the company to grow a small start-up, employing a handful of people, into an international company with more than 3,000 employees and a value of $40 billion. jace joined my staff in 2002, coming on as a legislative assistant, working mostly on telecommunications issues. in that position, he
demonstrated the keen understanding of strat -- and strategic thinking that had made him such a success in the business world. after three years, i appointed him to be my legislative director, and in that position, he continued to excel and became a vital and integral part of my efforts here in the senate. i grew to depend on him more and more. in january, 2008, jace took over as my chief of staff. i used to joke with him that working for me was only a hobby because he didn't need the money. of course, anyone who knew and worked with jace could attest that that simply wasn't true. he put his heart and soul into his work in the senate. for jace, failure wasn't permissible, so he spent early mornings and late nights ensuring the work was done and done right. his commitment to me personally and to my work here in the senate was rooted in his belief, a belief he reiterated at every opportunity, that what we were doing was in the best interests of our country and for the
people of utah. i think what i appreciated most about jace is his unwavering honesty. in a town filled with people who only want to tell you what they want you to hear, jace was refreshingly direct and straightforward. i've always attributed this to the fact that he has, to put it bluntly, just a little bit smarter, maybe just a bit smarter, a whole lot smarter than most people. people who don't see the big picture and who can't predict what might happen down the line have a need to hedge bets, cover bases and speak without committing. jace johnson has never had that problem. when a goal is identified and a plan set in motion, he is usually a few steps ahead of everyone else and can see where problems might arise, and chances are he has already come up with solutions to those problems. an individual with that kind of rare insight and understanding has the license to speak directly where others would hem and haw. i was lucky enough to be the
beneficiary of jace's ability to speak frankly and honestly, and on more than one occasion, that meant that i was on the receiving end. i think i can speak for every member of the senate when i say that that kind of support from staff is a treasured commodity. mr. president, it's very clear that i will miss jace johnson on my staff. however, i think it would be even more telling to hear from some of the people of utah who have high praise for jace and the service he has rendered. utah governor gather herbert had this to say -- "jace is a man of great insight and understanding. he is able to think strategically and anticipate potential roadblocks, which has and will continue to serve him well. i wish him the best of luck and success in his new position." jason perry, governor herbert's chief of staff, said -- "i have had the opportunity to work with jace for many years. his uncanny ability to difficult
fuse unpleasant situations coupled with his pleasant nature, has proven invaluable on several occasion." utah senator-elect mike lee said -- "i have looked to jace johnson on many occasions for his keen insight, depth of wisconsin wisdom and wise counsel. he has truly made a difference for me." his legacy of service will serve as a benchmark of excellence for years to come. stan lockhart said this, jace johnson is a class act, in positions of responsibility and authority, he is approachable and down to earth, in an environment of hardball politics, he remains integrity. with many issues to deal with on a daily basis he understands the big picture. i always like the fact that he understands the private sector with a successful background in the technology industry before
he came to washington, d.c. i'll miss jace. a prominent lawyer said this about jace, behind that i am just a boy from blackfoot, idaho, was a keen mind that always had orin's interest at heart. not diminishing any other person who has worked for orin, but jace was a delight and any trip to d.c. without seeing jace was not a trip. a true committed conservative who was not obnoxious, but one who believed what he espoused, hard work, honor, commitment, dedication to family, church and country, and -- and this coupled with compassion for those less fortunate is the jace johnson legacy. mr. president, that's high praise. we have lots of others who -- who feel the same way. but i'll leave it at that.
mr. president, during my time here in the senate, i've been extremely fortunate when it comes to my staff. i've had the privilege of serving with some of the most gifted and devoted individuals our nation has to offer. each of them has brought something unique and important to the table. but i have to say even among the select far tenty of -- fa tenty of senate staffers, jace is in a elite class that few will be able to attain. i have no doubt that jace will succeed in his new position. success is the defining characteristic of every endeavor he has undertaken. while the selfish part of me wishes he would have stayed in the senate just a little bit longer, i want to wish jace, his wife, corey, and his family the best going forward. as i gear up to run again in 2012, and we've been doing, that and meeting with people all over
utah, some who like us, and some who don't, i have to say that jace johnson's been an inspiration to me in working with people, in doing the work around here, in standing up for the principles that we both believe in, in setting an example for all of my staff, in literally being my best friend as he served with me in the united states senate. these things all meant a lot to me and they mean a lot to me to this very day. jace is an honest man, he's a decent, wonderful human being, he's a good family man, he's faithful to his religious beliefs and he's one heck of a bright guy. when it comes to the world of the internet, the world of high technology, the world of great places like silicon valley, like
utah's silicon valley, like massachusetts silicon valley, there -- there are very few people that i would rank with jace johnson. he understands that world as well if not better than anybody i've ever met. and i have to say he's highly respected in that world and he ought to be. jace, as he worked with me and with my staff, was an inspiration to everybody. but, most importantly, and -- some of the lows that we see around here, that we undergo, people think this is just a wonderful thing to do and that you just can't help but be exhilarated every day. i think the exhilaration part is very true. the fact of the matter is there are many tough times as we serve in the senate. many lows, but when you have jace johnson around, you just
couldn't be low. he was always optimistic, always upbeat, he was always very intelligent and ready to go to work. i have tremendous respect for him, and i count him as a brother in every way. i wish him the best, he and his wife and his family, the very best, and i know that he's going to go on to do an awful lot of things that very few in this whole world are privileged to do or have the intelligence to do. he's got it. he's great. and i'm going to miss him. mr. president, i yield the floor. a senator: mr. president? the presiding officer: the senator from rhode island. mr. reed: thank you very much, mr. president. mr. president, i rise today to pay tribute to our colleagues who are departing the united states senate after distinguished service here on behalf of their states and certainly on behalf of the nation.
and i've had the privilege to work with these individuals, to learn from them, to collaborate aand cooperate with them and to in some small way help them do what they've done so well, represent their states with fidelity, with great effort, and to move the agenda of the nation forward. senator evan bayh, a colleague and friend, we served together on the banking committee and finance committee, with his lovely wife susan and two children, he has served as governor and united states senator and extraordinarily to the nation. i can recall very early on in the operations in iraq where it became clear to senator bayh that unless we armeddorred -- armored our humvee vehicles, thousands and thousands of soldiers would be at risk. and he fought tenaciously to
ensure against initial opposition that we were able to begin to armor those vehicles, begin to develop new generations of armored vehicle to protect our soldiers. so quite -- quite literally his efforts saved the lives of thousands of young americans and for that alone we owe him a huge debt of gratitude. but in every endeavor from issues of children's health to education policy, brought a thoughtful, measured and brilliant mind to bear and a heart to match. and i wish he and susan the best. senator bennett and i worked together on the banking committee together. his thoughtful questioning, his deep knowledge of the subject were critical on so many different issues. i can remember when we were trying to get the extension of the terrorism risk insurance act completed so that the markets,
particularly the markets from properties wouldn't freeze up, he was instrumental in getting that done. that's one thing that he has done in public service to the people of utah and the people this nation. i want to issue he and joyce the very best as they continue to serve, as i'm sure they will, this nation and the state of utah. kip bond and linda bond have served with distinction also. as a member of the appropriations committee, he has made wise an judicious decisions about how we invest in this country. but in that process he has never forgotten the obligation to groups that are often overlooked and one of the areas where he has done so much work and so effectively has been on the issue of homelessness. his efforts, along with his colleague and friend and my colleague and friend, barbara
mikulski, has made a real difference in providing effective, efficient shelter to so many in our large communities and in our rural areas who otherwise literally would be on the streets of america. and one of the most disheartening images in this country is to see people who are forced, really, to be on the streets. there are many reasons. but kip bond has done a lot to ensure that there's at least a capacity to help people who need that kind of help. i thank him for that and commend him for so much for what he's done for the people of missouri and the people of this nation. i want to congratulate governor-elect sam brownback. he has decided to leave the riggers of the senate for the tranquility of being a governor. and i see our presiding officer who enjoyed the tranquility of being the governor of virginia.
so, sam, i know you're going to do great, but i think at some moments you might kind of mop your brow and think, you know, it wasn't quite at hectic at the united states senate. you are someone who is -- when involved in an issue and you did it with principle and conscience. we appreciate that. ways pleased to work with you on the conquer childhood cancer act which ultimately became law. that's just one example of your great skills as a legislator. in foreign affairs, you were someone who -- who kept watch on areas of the world which otherwise might have been neglected. your efforts with respect to car darfur in bringing justice and peace to that region are particularly commendable. i thank you for your service an wish you well as you assume the daunting responsibilities of governor of the state of kansas.
senator jim bunning and i served together for many, many years on the banking committee. and jim and mary kath rained kad their family brought so much to the senate as an organization and to the senate as a group of individuals, in some respects, a family. jim was one of the first and most insightful observers and critics of the growing issues in the housing market. he did it based upon his experience as a financial stockbroker in the world of finance and he did it basically also with his grasp of common sense and looking at things carefully and pragmatically based on main street, not on financial centers. we worked together on the housing committee and we did it in a way -- i enjoyed the collaboration. at times i was chairman of the
subcommittee, at times he was chairman of the subcommittee. in all those times, the collaboration and the focus on the issues of the people of this country were always forefront in his mind and distinguished himself immensely and i wish him well. senator burris brought a great bit of vitality and energy to the senate in his time here and i wish roland and burlene the best. he has had a remarkable career in illinois as someone in the banking industry and public service. a path breaker in so many ways. when he came to the senate, he came with that same enthusiasm knowing that his service would be limited in days, but not limited by any aspirations or any ideals. he wanted to do the best and did the best for the people of illinois and the nation. and, again, thank you, roland. byron dorgan and kim dorgan and their family, again, an intergal
part over many years of this senate. byron is one of those individuals whose wisdom you appreciate more and more each day. someone who spoke years ago about the offshoring of jobs. someone who spoke years ago about a tax system that doesn't reward investment in american jobs, but, in fact, ironically might encourage disinvestment of those jobs. someone who spoke with reason, with candor, with thoughtfulness, with facts about issues that today we're beginning to recognize the rest of us are so critical to future of this country. we will miss that wisdom. we'll also miss his steady hand on the appropriations committee where he battled to ensure reasonably that the priorities of this nation were met. his support and his help in terms of the l iheap funding and his support to me is deeply
appreciated. i thank him for his service and i know he will continue to provide in his writings and in his speeches the wise and thoughtful insights that, again, as we look back, i think we should have heeded with much more energy and enthusiasm when he spoke them. senator russ feingold, one of -- and this is said often, but this applies so frequently -- so accurately here. a conscience of this body. someone who clearly came here to fight for the principles he deeply believed in and would not deviate from that very, very serious challenge. he -- and he did it with skill, thoughtfulness and gentility. he was a champion of so many things, the pell grant, to make sure it was a watch and ward of this country. what he was most famous for was
the efforts on the campaign finance reform. and, frankly, we will miss him dearly because of that. there is a growing concern in this country that elections have become options, not about the quality of the candidates and their positions, but simply hutch money can be fund -- how much money can be funded in by how many different sources? at a time that we have to confront again an even more serious challenge of finance reform, we are losing one of the great force, one of the great minds in that effort. i know he will be helping us in going forward, and i thank him for that. carte goodwin served with us for a brief period of time, but in that time, you saw the incredible talent of this young senator. his skill, his judgment, his ability to communicate with everyone in this senate. he has been succeeded by another remarkable gentleman, senator manchin, who is keeping up
certainly the high standards of senators from west virginia. but carte, good luck and thank you for your service, and i know you will continue to serve the country. senator judd gregg and kathleen have been stewarts in the senate for their 18 years of service. i worked very closely with judd on so many issues, most recently in the dodd-frank bill where we worked collaboratively with respect to this whole complex issue of derivatives. i was impressed with his intellect, his grasp, with his balance, and, in fact, we both, i think, pushed ourselves to think harder, do better and come up with a solution, frankly, it was much better than i know i could have done individually. so i thank judd gregg for what he has done there and in so many other ways. my dear friend ted kaufman and lynn, we traveled the world together, to afghanistan multiple times. he is the one who served with such distinction.
he has taken up the effort to ensure that securities markets particularly are well regulated, especially in regard to the new phenomenon of high frequency trading. and it's no coincidence that just yesterday we -- or this week, rather, we had a hearing on high-frequency trading. ted has not let us forget that very critical issue in the future. senator george lemieux and his wife mism kki, again, they served here for a short period of time, but with such distinction, such character, such concern. i want to salute him. he and i worked together on the teacher and principal improvement act, a brilliant and a decent civil servant. thank you, george. blanche lincoln, blanchend aserved in the house together. she decided to go and raise her family, came back to the united states senate. i can say, without any hesitation, without her very
courageous stand with respect to some of the aspects of the dodd financial legislation, it would not be as comprehensive, as effective as it is today. she stood up and essentially demanded that we create a structure where you could trade derivatives rather than simply clear them. that is a remarkable achievement. it's her achievement. and finally, just -- and i beg the indulgence of my colleague from vermont who i know is scheduled to speak here. just let me say to arlen specter and joan specter, thank you for such service, and also to senator george voinovich and janice voinovich, thank you so much for what you have done. senator specter is the champion of the n.i.h. that is an incredible, incredible achievement, what he's done to fund that over the years, and george voinovich has been someone who has really tried to make opportunity the
mr. warner: mr. president? the presiding officer: the senator from virginia. mr. warner: mr. president, i ask unanimous consent that i be recognized for up to five minutes and that senator sanders be recognized upon the conclusion of my remarks. the presiding officer: without objection. mr. warner: mr. president, i rise again to recognize the service of another great federal employee. this is a tradition, mr. president, that was started by our friend, our former colleague, senator kaufman, and i am proud to carry on that tradition, and i appreciate the presiding officer's remarks about our colleagues who are leaving this body, and i share his great respect for not only senator kaufman but all of the colleagues who are leaving -- leaving the body at the end of the -- at the end of this congress. you know, mr. president, oftentimes we forget that thousands of federal employees go to work every day with the sole mission to make this
country a safer place to live. ms. deborah otter is one of those employees. as we enter into the cold and flu season, there is great concern about harmful medications that may fall into the hands of our children and other loved ones. as director of the food and drug administration's drug compliance office, ms. otter works to protect public health by minimizing americans' exposure to unsafe, ineffective, and poor quality drugs that enter into the marketplace. ms. otter is particularly focused on removing potentially dangerous prescription medicines, including could have medicines, antiinflammatory drugs, antihistamines and migraine medications, just to name a few. under her leadership, the f.d.a. has taken enforcement action to remove more than 500 unapproved prescription drugs from the market. she is also credited with
designing the program used to identify unapproved drugs, evaluate the public health consequences, and explore any potential legal challenges. many believe that ms. otter is the brains behind the f.d.a.'s aggressive enforcement efforts. in conducting that research -- in conducting the research for these remarks, we found a quote from mr. steven golson, a former acting u.s. surgeon general. this is what he had to say about ms. otter." she developed the program under budget constraints which stood scrutiny and criticism from some in the drug industry and congress, successfully navigated the internal f.d.a. process, and took aggressive action to clamp down on illegal drug marketers." and there are many others who have sung her praises and highlighted her commitment to public service. prior to work at the f.d.a., ms. otter was a trial attorney for the office of consumer litigation at the department of
justice where she served for seven years. in this role, she litigated civil and criminal cases on behalf of the f.d.a. i hope my colleagues will join me in honoring ms. otter for her dedicated public service and important contributions to our nation's health and safety. i would also add, mr. president, that in these challenging fiscal times, as we approach -- go through the holiday season, i hope we all recognize the enormous contribution that all of our federal employees make. the presiding officer many times reminds all of us -- of that enormous contribution that our men and women in the armed services play, and our thoughts and prayers are with all of them. but i think it's also important to recognize each great federal employee like ms. otter and literally the countless others who also oftentimes somewhat at
the disdain of folks in lake-effective office, but these are the folks who provide enormous public service to all americans, and i hope that we keep them in our thoughts as well during this holiday season. i also want to thank before i conclude my remarks my friend, the senator from vermont, who is a passionate advocate for trying to end the kind of growing income inequality in this country. i know he will be making impassioned comments coming up, and i appreciate him giving me a couple of moments to recognize this federal employee, and i look forward to hearing his comments. with that, mr. president, i yield the floor. mr. sanders: mr. president? the presiding officer: the senator from vermont. mr. sanders: let me begin by thanking my friend from virginia who are doing what is very, very important. i think the essence of what he is saying is that today there are millions of federal employees, people in the armed
forces who are doing the very best they can, and in many, many instances are doing a great job to protect our country, to keep it safe, and very often, to be honest with you, these folks get dumped on, and it is important that people like senator warner come here and point out individuals who are doing a great job and the people we are very proud of, so i thank you, senator warner, for that. mr. president, as i think everyone knows, the president of the united states, president obama, and the republican leadership have reached an agreement on a very significant tax bill. in my view, the agreement that they reached is a bad deal for the american people. i think we can do better, and i am here today to take a strong
stand against this bill, and i intend to tell my colleagues and the nation exactly why i am in opposition to this bill. you can call what i am doing today whatever you want, you it call it a filibuster, you can call it a very long speech. i'm not here to set any great records or to make a spectacle. i am simply here today to take as long as i can to explain to the american people the fact that we have got to do a lot better than this agreement provides. now, let me just enumerate some of the reasons that i am opposed to this agreement. first, as everybody knows, this nation has a record-breaking
record-breaking $13.8 trillion national debt. at the same time as the middle class is collapsing and poverty is increasing. and, mr. president, i think it's important that we say a word, because i'm not sure a lot of americans necessarily know this, about how we got to where we are today in terms of the national debt. i know there are some people who think that this all began the day that president obama took office. well, it's not quite the case. when president clinton left office, this country was running, in fact, a very significant surplus, and the projections were that we were going to continue to run a surplus. during the eight years of president bush for a number of reasons, including the war in iraq, the war in afghanistan, including huge tax breaks for the wealthiest people in this country, including a medicare part d prescription drug
program, and including the wall street bailout, among other things, all of which were not paid for. those are the primary reasons that we saw an almost doubling of the national debt during the bush administration. and since president obama has been in office, we have passed a stimulus package also adding to the deficit and national debt. but here we are today with a a $13.8 trillion national debt, debt, $1.4 trillion deficit, and almost all americans are in agreement that this is a very serious issue. so the first point that i would make is that it seems to me to be unconscionable, unconscionable for my conservative friends and for everybody else in this country to be driving up this already
too high national debt by giving tax breaks to millionaires and billionaires who don't need it and in a number of cases, mr. president, don't even want it. here's one of the interesting ironies. there are lists of many, many very wealthy people who come forward and say sure, i want a tax break, everybody wants a tax break, but you know what? there are other priorities in this country, i don't need it. two of the wealthiest people in the world -- bill gates of microsoft, warren buffett, berkshire, is billionaires, they said it's absurd. we don't need a tax break. all over the country, you hear a lot of folks who have a lot of money saying don't drive up the deficit and force our kids to pay higher taxes to pay off the national debt in order to give tax breaks to the richest people in this country. now, mr. president, we have been
told really not to worry too much because the extension of these tax breaks for the wealthy would only last two years, not to worry. well, maybe that's the case. but given the political reality that i have seen in washington, my guess is that two years from now these tax breaks for the wealthiest people in this country will be extended again. what happens around here is that the argument will be made that if you end these tax breaks, you're raising taxes is what we're hearing right now. i see no reason why in the middle of a presidential election those arguments will not be made again and i see no reason not to believe that those tax breaks will be extended again. and, clearly, we have a number of republicans who want to make
that extension permanent. whether it will be made permanent or not, i don't know. but the point is when you hear folks say it's only a two-year extension, i would suggest, take that with a grain of salt. and let me just say that if, in fact, we do what the republicans have wanted to do right now as we enter this debate, they wanted a 10-year extension that would add $700 billion to our national debt. $700 billion. now, i've got four kids and i've got six grandchildren, and i think it is grossly unfair -- none of them have a whole lot of money. i think it's grossly unfair to ask my kids and grandchildren and the children all over this country to be paying higher taxes in order to provide tax breaks billionaires because we have drich u driven up the natil
debt. that is just plain wrong. i think the vast majority of americans, whether pro gives, like myself -- progressives like myself, i think that we give tax breaks to billionaires when we have a tax -- when we have income tax breaks to the top 2% is not the only unfair tax proposal in this agreement. this agreement between the president and the republican leadership also calls for a continuation of the bush era 15% tax rate on capital gains and dividends meaning that those people who make their living off their investments will continue to pay a substantially lower tax rate than firemen, teachers, nurses, carpetters, and
virtually all the other working people of this country. and i just don't think that's fair. that's wrong. and we are continue, if this agreement were to be passed, that unfair arrangement. mr. president, on top of all of that, this agreement includes a horrendous proposal regarding the estate tax. and that is a teddy roosevelt initiative. teddy roosevelt was talking about this in the early years of the 20th century. it was enacted in 1916. and it was enacted for a couple of reasons. teddy roosevelt and the people of that era thought it was wrong that a handful of people could have a huge concentration of wealth and then just give that wealth -- transmit that wealth to their children. he didn't think that that was right. furthermore, it was a source of progressive and fair source of
revenue. under the agreement struck between the republican leadership and the president, the estate tax rate, which was 55% under president clinton -- and let's all remember we had problems with the economy under president clinton, but very few will deny that during those years we were creating a heck of a lot more jobs than we did under president bush. that's a fact. 20 million jobs under president clinton. we lost 600,000 private sector jobs under president bush. during the clinton era, the tax rate on the estate tax was 55%. what this arrangement would do is lower that tax rate to 35% with an exemption on the firs first $5 million of an individual's estate. $10 million for couples. now, here's the important point, mr. president, that i think many people don't know. because i have to confess my
republican friends and their pollsters and their language people have done a good job. this is the so-called death tax. people are saying, that's terrible. i have $50,000 in the bank and i want to leave that to my kids and government is going to take 55% of that, 35% of that, what an outrage. so let us be very, very clear. this tax applies only -- only, only to the top .3% of 1% of american families. 99.7% of american families will not pay one nickel in an estate tax. this is not a tax on the rich. this is a tax on the very, very, very rich. and if my republican friends had been successful in doing what they want to do, which is
eliminating this estate tax completely, it would have cost, mr. president, our treasury -- raised the national debt by a trillion dollars over a 10-year period. families like the walton family of wal-mart fame would have received this one family about a $30 billion tax break. so i find it hard to believe that when we are talking about massive cuts in programs for working families, when we have this huge national debt, that anybody would be agreeing to lowering the estate tax rate to 35%. that is what this agreement does, and i think that that is a very, very bad idea. and, once again, while the agreement on the estate tax is for two years, once again, there is very little doubt, in my mind, that the republicans will continue to push for lower and lower estate tax rates because
what they want. i think senator kyl has been pretty clear about this. they want to permanently repeal that tax. that is a trillion dollars in tax breaks to the top .3% of 1%. so i think we're down a bad path there, and that's another reason why this agreement does not make a whole lot of sense. mr. president, i would say, thirdly, and here's a very important point that i think has not yet gotten the attention that it deserves. and that is this agreement contains a payroll tax holiday. -- holiday which would cu cut $120 billion from social security payroll taxes for workers. and i think there are a lot of folks out there who say, well, this is pretty good. i'm a worker, my contribution will go from 6.2% to 4.2%. i'll have more money in my
paycheck. it's a good idea. let's take a deep breath and understand what this whole thing is about. this payroll tax holiday concept, as i understand it, originally started with conservative republicans -- and i know the vice president recently made the point -- this is virtually a republican idea. now, why did the republicans come up with this idea? well, these are exactly the same people who don't believe in social security. these are the same people who either want to make significant cuts in social security or else they want to privatize social security entirely. and here's the point, they understand that if we divert funding that is supposed to go into the social security trust fund, which is what this payroll tax holiday does. this is money that goes into the social security trust fund, it's now being diverted, cutback, in
order to provide financial support for workers, but that is a lot of money not going into the trust fund. now, what the president and others are saying, not to worry. because that money will be covered by the general fund. that is a very, very bad and dangerous precedent because up until now what social security has been about is 100% funding from payroll contributions. not from the general tax base. now, once again, is this -- this is a one-year program, the loss of revenue going into social security can be covered by the general fund, but we have a $13 trillion national debt. how much longer will the general fund put money into social security? is it a good idea for the general fund to be doing that? so i would argue, mr. president, that this is not a good idea. this is a very dangerous step forward for those of us who
believe in social security. but this is not just bernie sanders saying this. mr. president, one of the more effective, and i think important senior groups in america is called the national committee to preserve social security and medicare. they have -- i don't know exactly how many, but they have many, many members all over this country. i know they're active in the state of vermont. and i want to read to you from a press release that they just sent out the other day. and this is the headline on it from the national committee to preserve social security and medicare. cutting contributions to social security signals the beginning of the end. payroll tax holiday is anything but. and this is what they say -- this comes from now barbara ka kanelly. she is now the president and
c.e.o. of the national committee to preserve social security. one of the strong senior groups in america and this is what barbara says and i -- quote -- "even though social security contributed nothing to the current economic crisis, it has been bartered in a deal that provides deficit-busting tax cuts for the wealthy. diverting $120 billion in social security contributions for a so-called tax holiday may sound like a good deal for workers now, but it's bad business for the program that a majority of middle class seniors will rely upon in the future. and that's what the national committee to preserve social security and medicare says about that agreement and i agree with them. so for all of us who understand that social security is life and death for tens of millions of americans today and will be vitally important for working
people as they reach retirement age, that we understand that social security has done a great job. you know, mr. president, a few minutes ago you were on the floor talking about the strong work that our federal employees do and you're absolutely right. sometimes we also take for granted that social security has been an enormous success. it has done exactly what those people who created it wanted to do. nothing more, nothing less. it succeeded. it has taken millions and millions of seniors out of poverty, given them an element of security. it has also helped people with disabilities maintain their dignity. widows an orphans are also getting help. for 75 years it has worked well. it has a $2.6 trillion surplus today and it can pay out benefits for the next 29 years. it is strong. we want to make it stronger. this payroll tax holiday, i'm
afraid, is a step very much in the wrong direction and that is one of the important reasons why this agreement between the president and the republicans should be defeated. mr. president, included in the agreement are a number of business tax cuts. and i'm not going to be here to say that some of them may not work. some of them may work. some of them will work better than others. there are a whole list of them. this is what i will say, economists on both end of the political spectrum believe that if we are serious about addressing the horrendous economic crisis that we're in now, 9.8% unemployment, that there are far more effective ways of creating the jobs that we have to create than those tax proposals. with corporate america already
sitting on close to $2 trillion cash on hand. it's not that our friends in corporate america don't have any money. we've got to help them. they've got $2 trillion cash on hand. the problem is not, in my view, that corporate taxes are too high. it is that the middle class simply doesn't have the money to purchase the goods and products that make our economy go and create jobs. so i think that if our goal is to create the millions and millions of jobs that we need, and if our goal is to make our country stronger internationally in a very tough global economy he, i would much prefer -- i think most economists would agree with me, that a better way to do that, to create the millions of jobs that we've got to create is to invest heavily in our infrastructure. the truth is, and i don't think
anyone disputes this, the infrastructure in the united states is crumbling, and i will go into more detail about that later. i've got some very good information on it. but, you know, you don't have to be a civil engineer to know that. all you have to do is get in your car today and drive someplace. and in my the state and all over this country, what you are going to see are roads that are in disrepair. you are going to see bridges that in some cases have actually been shut down. you're going to see water systems. i remember, mr. president, i was in rutland, vermont, second or third largest city in the state of vermont. and the mayor there showed me a piece of pipe. it was an old pipe. he said, you know, the engineer who helped develop this water system and laid this pipe, he went off after he did this work for rutland, he went off to fight in the war. he knew there was -- i knew there was a catch line coming. i said well, what war was that? he said it was the civil war.
so you're talking about water pipe being laid in rutland, vermont -- and this is true all over the united states -- laid in the civil war, and the result is we lose an enormous amount of clean water every day through leaks, water pipes bursting every day all over the united states of america. well, we can put people to work improving our water system, our waste water plants. very expensive proposition, develop good waste water plants. i was a mayor, you were a governor. it is an expensive proposition. roads, bridges. furthermore, mr. president, i don't have to tell anybody here, our rail system, which used to be the greatest rail system in the world, is now falling way behind every other major country on earth. in vermont, as a result of the stimulus package which did a whole lot of very good things in the state of vermont, one of the things we were able to do is use
use $50 million of federal funds, private money, to make major repairs on one of our important railways in the state. but we remain far behind. most other countries around the industrialized world. china is exploding in terms of the number of high-speed rail lines that they have. we have got to do better. our airports need work. our air controllers need to be updated in terms of the technology they have, they use to make our flights safe. and the point here is that what most economists would tell you is, a, when you invest in infrastructure, you create -- you get a bigger bang for the buck, you veto more jobs for your investment than in most instances giving a variety of tax breaks to the corporate world. and second of all, and not unimportantly, when you invest in infrastructure, you are
improving the future of this country. you're making us more productive. it's not just creating jobs. it's creating jobs for a very specific purpose, which makes our nation more productive and efficient. and thirdly, let me tell you something, as a former mayor. infrastructure does not get better if you ignore it. you can turn your back if you're a mayor or governor on the roads or on the highways because you don't have the money to fix them today. they ain't going to get better next year. at some point, they are going to have to be repaired and fixed, and we may as well do that right now. so i believe that the money, the very substantial sums of money in this agreement between the president and the republicans, which goes into tax breaks for corporate america could be much better spent, more effectively spent on the infrastructure. a point i want to make in
opposition to this agreement is that what we have heard from the president and others is that, look, this is a compromise, you can't get everything you want. well, you can't get everything you want around here, and that's true. but one of the examples of the compromise is an extension of unemployment benefits for 13 months. well, let me be very, very clear. in the midst of a serious and major recession, at a time when millions of our fellow americans are not only out of work through no fault of their own, but they have been out of work for a very, very long time, it would be my view immoral and wrong to turn our backs on those workers. their unemployment benefits are going to be running out soon, and it is absolutely imperative that we extend those unemployment benefits for the two million workers who would
lose them. but here's the point that i want to make, madam mr. president. some people make the point that this is a compromise. the republicans gave on unemployment, the president gave on extending tax breaks for the rich, et cetera, et cetera. but here's the point. i don't believe honestly that the republican support now for extending unemployment benefits really constitutes much of a compromise, because the truth of the matter is that for the past 40 years, the past 40 years, under both democratic and republican administrations, under the leadership in the senate and the house of democrats or republicans, it has been bipartisan policy that whenever the unemployment rate has been above 7.2%, unemployment insurance has always been extended. so what you have had is long-standing bipartisan policy. that's what we have always done.
that is with a what we should be doing in the future. i do not regard that republicans now supporting what their party has always supported, extending unemployment benefits when unemployment becomes very high, i don't see that as a compromise. i see that as what has been going on in this country and in the senate for four decades. now, mr. president, i've talked about the negative aspects of this proposal, but i am going to be the first to admit that, of course, there are positives and good agreements in this. and what are they? what are some of the positive aspects of this agreement? let me just tick them off. number one, i believe very strongly and i know the president does that it is absolutely imperative that we extend middle-class tax cuts for 98% of the american people. i don't think there has been any debate about that.
when median family income has gone down by over $2,000 during the bush years, when millions of our people today are working longer hours for low wages, when people can't afford to send their kids to college or take care of childcare, i think it makes absolute sense, and i don't think anyone denies that it is absolutely imperative that we extend middle-class tax cuts. and that's what this provision does and that's the right thing. furthermore, in this agreement, an extension of the earned income tax credit for working americans and the child and college tax credits are also in there. every one of these agreements is very, very important. these programs will keep millions of americans from slipping out of the middle class and into poverty, and they will allow millions of americans to send their kids to college. so i'm not here to say that there is not anything of value
in this agreement between the president and the republicans. there are. we have got to fight to make sure all of those programs remain in the final package when it is passed, when the final package is passed. but when we look at the overall agreement, we must put it in a broader context, and that is what will the passage of this legislation mean for the future of our country, and in that area, if you look at it in that context, i think the evidence is pretty strong that it is just not a good agreement and not something that should be passed. mr. president, passage of this agreement would mean that we would continue the bush policy of trickle-down economics for at least two more years, and that is not a good thing to do, because i think as most americans know, that philosophy, that economic approach simply did not work. the evidence is quite
overwhelming. i don't think there is much debate. when median family income during bush's eight years goes down by by $2,200, when we end up losing over 600,000 private sector jobs and all of the job growth was in the federal level, i don't see how anybody would want to continue that philosophy. but that, in essence, is what will happen if this agreement is passed. now, i want to say another -- make another point here about what happens if, if -- i will do my best to prevent this from happening, but what would happen if this agreement would pass? does anybody seriously believe that our republican colleagues would then say okay, well, we have got an extension of tax breaks for the very richest people, we have lowered the tax rate on the estate tax. those have been victories for millionaires and billionaires,
and we're going to go home now, we're not going to continue the fight? i don't think so. i don't think so at all. we're already hearing soundings about where our republican friends want to go. the president put together what i thought was a very poor deficit reduction commission. i thought that the folks on it were not reflective of the american people. i thought there was very much big business, corporate partiality there, and the initiatives that came out of that commission, which fortunately did not get the 14 votes they needed, suggests to me that those of us who are concerned about protecting the needs of the middle class and working families, we are going to have to be pushing back pretty, pretty hard for what's coming down the pike. i think that what we will be seeing is that if this proposal negotiated between the president
and the republicans is passed, what you will be seeing within a few months are folks coming here on the floor of the senate, and that is what they'll say. they'll say you know what? deficit is high, national debt is too high, and, yes, oh, yes, we drove the national debt up by giving tax breaks to millionaires, but that's the way it goes, but we're going to have to deal with that national debt. then the republicans will tell us we have a great way to deal with it. we have given tax breaks to billionaires, but now what we're going to have to do is start making deep cuts in social security, and that deficit reduction commission started paving the way for that. very substantial cuts in stliewrt. maybe we'll have to raise the retirement age in stliewrt to 69 or 70. maybe we'll have to make cuts in medicare. maybe we'll have to make cuts in medicaid. i think we're beginning to see in the state of arizona now what goes on when you make deep, deep
cuts in arizona -- in medicaid. in arizona right now, there are people who are in line who need transplants, who will die if they don't get transplants. and in arizona, as a result of legislation that they passed there, they're saying to people, young people, sorry we can't afford to give you the transplant, and you're going to have to die. is that what we're looking forward to seeing all over america? i certainly will do everything i can to prevent that. we're certainly going to see a tax on environmental protection, on education. some of us believe that if this country is going to prosper, succeed in the global economy, we have to have the best educational system in the world. from childcare through college. right now, it is extremely difficult for middle-class families to send their kids to college. does anyone have any doubt whatsoever that our republican friends are not going to come back here and say we can't afford to raise pell grants as we have in recent years, we
can't afford to support working families who are having their kids in college. cut, cut, cut. pretty honest about it. so i would suggest, mr. president, that if their argument is that we have a high deficit and a high national debt, that if we pass this agreement and the national debt goes higher, it only gives them more impetus to go forward to cut programs that benefit working families and the middle class. and let me also say that there is no doubt in my mind what many of -- not all. what many of my republican colleagues want to do, and that is they want to move this country back into the 1920's when essentially we had an economic and political system which was controlled by big money interests, where working people, the middle class, had no
programs to sustain them when things got bad, when they got old, when they got sick. when labor unions were very hard to come by because of antiworker legislation. and that's what they want. they don't believe in things like the environmental protection agency, they don't believe in things like social security, medicare, medicaid, federal aid to education, and that is the fight that we will be waging. i think to surrender on this issue is simply to say that we're going to be waging fight after fight, starting within a couple of months. now, mr. president, president obama has said that he fought as hard as he could against the republican tax breaks for the wealthy and for an extension in unemployment. well, maybe, but the reality is that that fight cannot simply be waged inside the beltway.
what our job is is to appeal to the vast majority of the american people to stand up and to say wait a minute, i don't want to see our national debt explode, i don't want to see my kids and grandchildren paying higher taxes in order to give tax breaks to millionaires and billionaires. the vast majority of the american people do not support that agreement in terms of giving tax breaks to the very rich. and our job is to rally those people. and i would like very much to see the american people saying to our republican colleagues, some democratic colleagues, "excuse me, don't force my kids to have a lower standard of living in order to give tax breaks to the richest people in this country." and what the president and all of us should be doing is going out and saying to those people, call up the members of the senate. call up the members of the house
and say, excuse me, how about representing the middle class and working families for a change rather than the wealthiest people in this country? that's what democracy is about. this fight is not going to be won inside the beltway here in a senate debate. it is going to be won when the american people stand up and say wait a second, we cannot continue to give tax breaks to people who are doing phenomenally well right now. we can't give tax breaks to the rich when we already have the most unequal distribution of income of any major country on earth. top 1% earns 23 partly cloudy of all income -- top 1% earns 23% of all income in america. they don't need more tax breaks to be paid for by our kids and our grandchildren. in my view, mr. president, the vast majority of people are
behind us on this issue, but they have got to make their voices heard to their senators, to their congressmen. and when they do, i believe we can come forward with an agreement which protects the middle class and working families and not as a boondoggle for the wealthiest people in this country. mr. president, it is important to put the agreement that the president struck with the republicans in a broader context. you can't just look an agreement unto itself.
you have to look at it within the context of what's going on in this country today both economically and politically. and in my view, and i think i speak for millions and millions of americans on this, there is a war going on in this country, and i'm not referring to the war in iraq or the war in afghanistan. i'm talking about a war being waged by some of the wealthiest, the most powerful people in this country against the working families of the united states, against the disappearing and shrinking middle class of our country. the billionaires of america are on the warpath. they want more and more and more, and that has everything to do with this agreement reached between the republicans and the president. mr. president, in 2007, the top
1% of all income earners in the united states made 23.5% of all income. let me repeat that. top 1% earned over 23% of all income. that is more than the bottom 50%. 1% here, 50% here. but for the very, very wealthy in this country, that's apparently not enough. a percentage of income going to the top 1% nearly tripled since the 1970's. now, all over this country people are angry, they're frustrated. it's true in vermont. i'm sure it's true in virginia. it's true all over america. but one of the reasons that people are angry and frustrated is they're working incredibly hard. in the state of vermont, which i
represent, i can tell you there are people that don't work one job, they don't work two jobs. there are people working two jobs and -- three jobs and four jobs trying to cobble together an income to support their family. i suspect that goes on all over the country. people are working harder and harder. in many cases their income is going down. and the fact is that 80% -- 80% of all new income earned from 1980 to 2005 has gone to the top 1%. let me repeat that because that's an important fact. and i think that explains why the american people are feeling as angry as they are right now. they're working hard. they're not going anyplace. in some cases their standard of living is actually going down. 80% of all income in recent
years has gone to the top 1%. middle class shrinks. millions of americans fall out of the middle class into poverty. but -- but that is not apparently enough. our friends at the top, who have a religious ferocity in terms of greed -- they need more and they need more. it's like an addiction. $50 million is not enough, they need $100 million. 100 million is not enough, they need $1 billion. i'm not sure how much they need. when will it stop? today wealth, as opposed to income, the top 1% now earns more wealth than the bottom 90%. we went to school and used to read in the tax books about latin america, for example, and they used to refer some of the countries what they call banana
republics, families that control the political life of the nation. i don't want to get americans too upset but we are not all that far away from that reality today. the top 1% has seen a tripp pelg of the percentage -- a tripling of the percentage of income they earn since the 1970's. the top 1%, only 23% of all income, more than the bottom 50%. top 1% now owns more wealth than the bottom 90%. that's not the foundation of a democratic society. that's the foundation for an oligarchy society. rich gets richer, poverty increases. apparently that is not good enough good yet for some of the rich nest this country. i say some. there are a lot of folks there who do love this country, they're not into greed. but there are some, that's what they need. more, more, more.
for example, and this ingalls me and -- and this i think galls me and other people in the country. the tremendous reswergs in right -- the tremendous recession we're in right now where millions of people have lost their jobs, lost their savings, lost their homes, this recession is kaufrd by -- caused by the greed, recklessness and illegal behavior on wall street. these guys, through their greed, resulted in the most severe economic recession since the great depression. the american people bailed them out. and now two years after the bailout, guess what? they are giving themselves more compensation than they ever have so they're saying to the american people, sorry we caused this recession because of our greed. sorry you're unemployed. sorry you lost your house. but you know what?
that's not really all that important. what's important is that i on wall street continue to get tens and millions of dollars in compensation and in bonuses, that i have big parties. how can i get by on one house? i need five houses, ten houses. i need three jet planes to take me all over the world. sorry, the american people, we've got the money, we've got the power, we've got the lobbyists here on wall street. tough luck. that's the world. get used to it. rich get richer. middle class shrinks. not enough, not enough. the very rich seem to want more and more and more, and they are prepared to dismantle the existing political and social order in order to get it. you've got economics and distribution of income and wealth is one thing. but then we're talking about politics. and what happened last year, as i think most americans know, is
the supreme court made a very strange decision. the supreme court decided that corporations are people. they're people, and they have the right of free speech and they have the right without disclosure. all of this is through the citizens united supreme court decision that corporate heads can put as much money as they want into campaigns all over the country. in the last campaign, that's what we saw. billionaires in secret just pouring money into campaigns all over this country. does that sound like democracy to anybody in america? you get a handful of billionaires probably dividing up the money. put this amount of money into virginia, vermont, california or wherever. the rich get richer. they don't sit on this money. what they then do is use it to
elect people who support them to, unelect people who oppose their agenda. and they use their political power to get legislation passed which makes the wealthy even wealthier. mr. president, one of the manifestations of that is in fact the agreement reached between the president and the republican leadership. the wealthy contribute huge sufpls money into campaign -- huge sums of money into campaign. the wealthy have all kinds of lobbyists around here as the corporate america. and what they are going to get out of this agreement are huge, huge tax breaks that benefit themselves. and that is not what we should be supporting. as i mentioned earlier, we should understand that this legislation, this agreement is
really just the beginning of an assault on legislation and programs that have benefited the american people for 70 or 80 years. mark my words, there will be an intensive effort to privatize social security and medicare and medicaid. furthermore, as part of the republican agenda, they want to expand -- and it's not only republicans here, i must say. some democrats as well. they want to expand our disastrous trade policies so that large companies in this country can continue their efforts to outsource american jobs to china and other low-wage countries. i think any objective analysis of our trade policies have shown that it has been a grotesque failure for ordinary americans.
hard to calculate exactly, but i think it is fair to say that we have lost millions of decent-paying jobs. during the bush years alone, some 48,000 factories in this country shut down. we went from 19 million manufacturing jobs to 12 million manufacturing jobs. and in country historically manufacturing jobs were the backbone of the working class of this country. that's how people made it into the middle class. that's how they had decent health care benefits, decent pensions. and every day we're seeing those jobs disappear because corporate america would prefer to do business in china or other low-wage countries. i returned from a trip to vietnam last year. beautiful country. people there work for 25 cents, 30 cents an hour. sometimes when you go to a store, you may see a shirt made in bangladesh. that shirt in all likelihood is made by a young girl who came in
from the countryside into the city, one of the factories there. now the good news is that in bangladesh, the minimum wage a number of months ago was doubled. the minimum wage in bangladesh was doubled. it went from 11 cents an hour to 23 cents an hour. are american workers going to be able to compete against desperate people who make 23 cents an hour? so my view, and i think it reflects the views of the american people, is that of course we want to see the people of bangladesh and the people of china do well. but they don't have to do well at the expense of the american middle class. we do not have to engage in a race to the bottom. our goal is to bring them up, not us down. but one of the results of our disastrous trade policies is that in many instances wages in the united states have gone down. i believe that in the coming months you're going to see an
animas to him at all -- i think i met him once in a large room. his name is jamie diamond, the c.e.o. of j.p. morgan chase. over the past five years, mr. diamond received $89 million in total compensation. a bank that we now know received hundreds of billions of low-interest loans and other financial assistance from the federal reserve and the treasury department. mr. dimon received $89 million in total compensation. his bank was bailed out big-time by the taxpayers. but under the legislation that the president negotiated with the republicans, mr. dimon -- and i use him just as one example for thousands; nothing personal against mr. dimon here -- will receive $1.1 million in
tax breaks. peds 1.1 million in -- $1.1 million in tax breaks for a major c.e.o. on wall street who over the last five years received $89 million in total compensation. meanwhile, there is -- just to contrast what's going on here, two days ago, mr. president, i brought before the senate legislation which would provide a $250 one-time check to over 15 million seniors and disabled veterans who for the last two years have not received a cola on their social security. many of those seniors and disabled vets are trying to get by on a $14,000, $15,000, $18,000 a year. the total package for that bill was approximately $14 billion
that would go out to over 15 million seniors and disabled vets. we won that vote on the floor of the senate 53-45. but just because you get 53 votes in the senate doesn't really mean you win. the republicans filibustered. i needed 60 votes. i could not get 60 votes. i could not get one republican vote to provide a $250 check to a disabled veteran trying to get by on $15,000 or $16,000 a year. but mr. dimon, who made $89 million in the last five years, will get a $1 million tax deduction, if this agreement is passed. now, let me make sense -- now, that may make sense to some people t does not make a lot of sense to me.
and again, no particular knowledge, amnimas. i don't know that i've ever met john mack in my life. else the c.e.o. of morgan stanly. in 2506 he received a $40 million bonus, which at the time was the largest bonus ever given to a wall street executive. two years after receiving this bonus, morgan stanley received some $2 trillion in low-interest loans and billions from the treasury department. instead of losing his job, urdz this agreement, mr. mack will be receiving an estimated $926,000 tax break next year. congratulations, mr. mack. you're doing just fine. couldn't get $250 for a disabled vet.
mr. president, over the past five years ken louis, the former c.e.o. of bank of america, received over $165 million in total compensation. in 2008, bank of america received hundreds of millions of taxpayer-backed loans from the fed and a $45 million bailout from the treasury department. what will mr. louis receive if the agreement negotiated between the president and the republicans goes forth? he will get a $713,000 tax cut. on and on it goes. i didn't mean to specifically pick on these guys. some of the wealthiest people in the country will be receiving a million-dollar of this plus tax break, and so we as a nation have got to decide whether or
not that makes a lot of sense. i think it doesn't p. mr. president, let me mention that just a couple of weeks ago a -- the fed -- the federal reserve -- published on their web site some 21,000 transactions that took place during the wall street meltdown period. and that disclosure was made possible as part of a provision that i put into the financial reform bill, because i thought it was important that the american people, for the first time, lift the veil of secrecy at the fed and get a sense of the kind of money that was lent
out by the fed and who received that money. now, it's very interesting -- now what's very interesting is that the american people and the media have focused on the $700 billion wall street bailout now known as tarp. i happen to have voted against that agreement, but in fairness, that agreement was pretty transparent. the treasury department put up on their web site all of those people who received -- all of those banks and financial institutions who received the money. if you want to know where the money went, it's right up there on the treasury department's web site. but, at the same time, a bigger transaction was taking place than tarp, which got relatively little attention, and that was the role that the fed was playing in terms of the wall street bailout. while the tarp issue was being
debated during that period, ben bernanke, the chairman of the federal reserve, tim geithner, who was then the president of the of the new york fed, and a handful of other very powerful people were sitting behind closed doors getting ready to lend out trillions -- underline "trillions" -- of taxpayers' dollars to large financial institutions and corporations with no debate going on in congress, no debate what is over. now, on march 3, 2009 -- and i am a member of the budget committee, the senate budget committee -- i asked the fed chairman, mr. beer naing, to tell the american -- mr. bernanke, to tell the american people the names of the financial institutions that received this unprecedented backdoor bailout from the fed, how much they received, and the exact terms of this assistance.
and i will never forget that. i asked mr. bernanke for that information. he said, "senator, noarntion not going to give it to you." not going to make it public. well, on that day, i introduced legislation to make that information public, working with a number of members of the house and senate, some strange bedfellows, various conservatives, progressives came together on this issue. we managed to get into the bill a disclosure provision. and just on december 1, last week, that information was made public. and let me talk a little bit about what was in that information made public by the fed. after years of stonewalling, the american people have learned the incredible in jaw-dropping details of the fed's
multitrillion-dollar bailout of wall street and corporate america -- not just wall street. one of the things we learned. as a result of this disclosure, in my view -- and i'm going to get into what was in what we learned -- congress has got to take a very extensive look at all aspects of how the federal reserve functions and how we can make our financial institutions more responsive to the needs of ordinary americans and small businesses. now, what have we learned from the disclosure of december 1? and this is based on an examination of over 21,000 separate federal reserve transactions. we will more research needs to be done. but this is what we've learned so far. as it is a turns out, while small business owners in the state of vermont and throughout
this country were being turned down for loans, not only did large financial institutions -- and i'm talking about every major financial institution -- received substantial help from the fed, but also some of the largest corporations in this country, not financial institutions, also received help in terms of very, very low-interest loans. so you got every major financial institution, you got some of our largest private corporations, but here's something that we also learned: and that is that this bailout impacted not just american banks and corporations but also foreign banks and foreign corporations as well, to the tune of many, many billions of dollars. and then on top of that, a
number of the wealthiest individuals in this country also received a major bailout from the fed. the emergency response, which is what the fed described their action as during the wall street collapse, appears to any objective observer to have been the clearest case that i can imagine of socialism for the very rich and rugged free market capitalism for everybody else. in other words, if you are a huge financial institution whose recklessness and greed caused this great recession, no problem; you are going to receive a substantial amount of help from the taxpayers of this country. if you are a major american
corporation like general electric or mcdonald's or caterpillar or harvey davidson or verizon, no problem; you are going to receive a major handout from the united states government. but if you are a small business in vermont or in california or virginia, well, guess what? you're on your own, because right now we know that one of the real impediments to the kind of job creation that we need in this country is that small businesses are not getting the loans they need. furthermore, what we now know is the extent of the bailout for the large financial corporations. goldman sachs received nearly $600 billion. morgan stanley received nearly $2 trillion.
citigroup received $1.8 trillion. bear stearns received nearly $1 trillion. and merrell lynch received some $1.5 trillion in short-term loans from the fed. but i think what is most surprising for the american people is not just the bailout of wall street and the financial institutions and the bailout of large american corporations like general electric, but i think the american people would find it very strange that at a time when the american automobile sector was on the verge of collapse -- and goodness only knows how many thousands and thousands of jobs we have lost in automobile manufacturing in this country -- that the federal reserve was also bailing out tai yow at that and mitsubishi, two japanese carmakers, by purchasing nearly $5 billion
worth of their commercial paper. from november 5, 2008 through january 30, 2009. while virtually no american-made cars or products of any kind are bought in japan, i think the american people would be shocked to learn that the fed extended over $380 billion to the central bank of japan. to bail out banks in that country. furthermore, i think the american people are interested to know that the fed bailed out the korea development bank, a wholly owned state-owned bank of south korea, by purchasing over $2 billion of its commercial paper. the sole purpose of the korea development bank is to finance and manage major industrial projects to enhance the national economeconomy not of the uniteds
of america but of south core cee a. i'm not against south korea, i wish the south koreans all the luck in the world. but it should not be the taxpayers of the united states lending their banks money for jobs in south korea. i would suggest that maybe we want to create jobs in the united states of america. at the same time, the fed also extended over $40 billion to the central bank of south korea so that it had enough money to bail out its own banks. now, mr. president, at a time when small businesses all over this country, in vermont, all over this country cannot get the loans they need to expand their businesses, i think the american people would find is extremely -- i don't know what the word is, maybe amusing -- that the fed bailed out the state-owned bank of bavarian.
it's not pennsylvania, not california, but bavarian, but purchasing over $2 million of its commercial paper. furthermore, when we cannot get support on the floor of this senate to extend unemployment benefits to millions of americans who are on the verge of seeing them expire, i think the american people would find it incomprehensible that the fed chose to bail out the arab banking corporation based in bahrain by providing them with over $23 billion in loans with an interest rate as low as one-quarter of 1%. so small businessmen all over america, maybe you better run to bahrain and work with the arab banking corporation there. you get some pretty good loans. but it would be a nice thing i
think if maybe the fed would start pay attention -- start to pay attention to banks in this country. furthermore, the fedex tended over -- the fed extended over $9.6 billion to the central bank of mexico. now, what's interesting about all of this, mr. president, is that we had a very, very vigorous debate here in the senate and the house over the $700 billion tarp program. every person in america would turn on c-span and hear that debate, hear what president bush had to say, hear what then senatothen-senator oh obama had, senator mccain had to say. it was all pretty public. but what took place at the fed which, in fact, amounted to a larger bailout was done behind closed doors. over $3 trillion was lent out with zero transparency. in fact, as a result of this
recent disclosure -- this is the first time, first time, we have gotten a glimpse of the magnitude and the particulars, the specificities of where that money was lent out. and i think this is not a good thing for this country. again, i voted against the bailout of wall street, but the debate was open, it was public, people wrote to their senators, called their senators. that's called democracy. after the tarp bailout took place, all of the loans were put up on the web site, transparency, the american people knew who got the money. but the actions of the fed were done behind closed doors. and, in my view -- this is an issue we're studying right now -- i think that there was significant conflicts of interest. i think you had people sitting there at the new york fed who were beneficiaries of this bailout and that is just an issue that we've got to explore. and i should tell you, mr. president, that as part of
the provision we got into the financial reform bill, the g.a.o. is, in fact, doing just that, investigating possible conflicts of interest at the fed with regard to this bailout. but i think the question that the american people are asking, as they read about what the fed did during the financial crisis, is whether or not the fed has now become the central bank of the world without any debate on the floor of the united states senate or the congress and without the knowledge of the american people. and i think that that is wrong. so i would hope that out of this effort in bringing disclosure and transparency to the fed, that one of the things that will come will be more transparency at the fed.
mr. president, as i indicated a moment ago, the fed said that this bailout was necessary in order to prevent the world economy from going over a cliff, but three years after the start of the recession, millions of americans remain unemployed and have lost their homes, their life savings and their ability to send their kids to college. meanwhile, huge banks, large corporations, have returned to making incredible profits and paying their executives record-breaking compensation packages, as if the financial crisis they started never occurred. what this recent disclosure tells us, among many other things is that despite this huge
taxpayer-funded bailout, is that the fed did not make the appropriate demands on these financial institutions which would have been necessary to rebuild our economy and protect the needs of ordinary americans. in other words, what they simply did is give out billions and billions of dollars, which were used in the self-interests of these financial institutions rather than saying the american people, who are hurting, are bailing you out and now that we bailed you out, your responsibility is to do what you can do to create jobs and to improve the standard of living of the people, many of whom whose lives you have severely impacted. and let me just give you a few examples. of what could have been done and what -- examples of what could have been done and what should be done. at a time when big banks have
nearly $1 trillion in excess reserves parked at the fed, the fed has not required these institutions to increase lending to small- and medium-sized businesses as the condition of the bailout. in other words, instead of just giving men t to the fed, infed - money to the fed, instead of the fed giving this money to the financial institutions, we should have said we provide you this money to get it into the economy, start providing loans to small businesses. mr. president, at a tile when large corporations are more -- mr. president, at a time when large corporations are more profitable than ever, the fed did not demand that corporations that received this backdoor bailout create jobs and expand the economy once they return to profitability. what's going on in america, unemployment unofficially at 9.8 -- unofficially probably at 15% or 16% -- wall street is
doing fine. a few years ago, wall street earned some 40% of all profits in america. they're doing great. but what the fed should have done and should do now is to tell watt street, -- tell wall street, you're part of the economy, you're not just an isolated area just living for yourselves, you've got to be part of the productive economy, you've got to lend out money to small businesses to start creating jobs. mr. president, my office intends to investigate whether these secret fed loans in some cases turned out to be direct corporate welfare to big banks that may have used those loans not to reinvest in the economy but, rather, to lend back to the federal government at a higher rate of interest by purchasing treasury securities. now, we don't know that. maybe that's true, maybe it's not true, but we'll take a look at it. in other words, did the fed give one-half of 1% loans to a bank
and that bank then purchased a treasury security at 2% or 3%? if not, you got a 2% profit margin. and that is nothing but corporate welfare. the goal of the bailout was not to make wall street richer. the goal was to expand our economy and put people to work. furthermore, mr. president, you know as part of the tarp agreement, there was an effort to say to the financial institutions that we're not bailing you out in order for you to get huge compensation packages. we're not going to give you federal money so that you can make all kinds of money. we put limitations on executive compensation. did the fed play the role of allowing some of the large financial institutions to pay back the tarp money, use the fed
money and then continue with their very, very high executive compensation? don't know that. it is worth investigating. furthermore, mr. president -- and this is an issue that i have worked on for a number of year years -- you know, every major religion on earth -- christianity, judaism, islam, you name it -- has always felt that usury was immoral. usury. and we mean by usury is that when somebody doesn't have a whole lot of money and you lend them money, you don't take blood out of a stone, you don't ask for outrageously high interest rates when somebody is hurting. that's immoral. every major religion, all great philosophers have written about this. and yet today, mr. president, we have millions of people in our country -- and i hear from vermonters every week on this issue -- who are paying 25% or
30% and in some cases even higher interest rates on their credit cards. 25%, 30% interest rates. that is getting blood out of a stone. and yet many of the credit card companies were bailed out by the taxpayers of this country. what the fed must do is say to those companies, sorry, you can't continue to rip off the american people and charge them 25% or 30% interest rates. now, as it appears, the four largest banks in this country, which are bank of america, j.p. morgan chase -- j.p. morgan chase, wells fargo and citigro citigroup, issue half of all mortgages in this country. four huge financial institutions issue half of all mortgages in this country.
now, that unto itself is a huge problem. they issue half of all mortgag mortgages, two-thirds of all credit cards. and that speaks to another issue about the need to start breaking up these financial institutions. but when you have a handful of banks who have received huge bailouts from the federal government, who are issuing two-thirds of the credit cards in this country, it seems to me to be somewhat absurd -- somewhat absurd -- that the fed did not say to them, sorry, you can't charge people 25% or 30% interest rates on their credit cards. and the same principle applies to the mortgages. i don't have to tell anybody in this country that we have seen millions of folks lose their homes through foreclosure. and once again, we see the four largest banks in this country -- bank of america, j.p. morgan chase, wells fargo and
citigroup -- issue half of all mortgages in this country. four banks issue two-thirds of the credit cards, half of the mortgages. we bail these financial institutions out. don't they have some responsibility, some responsibility to the american people? how many more americans could have remained in their homes if the fed required those bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans. in terms of the interest rates on credit cards, a lot of people don't know this, but right now the banks are able to charge as
much as they want to charge, but in fact credit unions are not. right now we are looking at a situation where over one-quarter of all credit cardholders in this country are now paying interest rates above 20%, and in some cases as high as 79%. and in my view, mr. president, when credit card companies charge over 20% interest, they are not engaged in the business of making credit available to their customers. they are involved in extortion and loan sharking. nothing essentially different than gangsters who charge outrageously high prices for their loans and who break kneecaps when their victims can't afford to pay them.
so that's where we are right now. i get calls -- and i'm sure every other senator gets calls -- from constituents who are really upset. they're going deeper and deeper into debt because they can't pay 25% or 30% interest rates on their credit cards. we bailed out the credit card companies. there was no provision that said stop ripping off the american people. stop these companies from committing usury. and we are working on legislation which would say to these private banks not to charge any more money for the credit that they provide than do the credit unions. it's going to be a tough fight because the lobbyists from wall street are all over this place. wall street spends huge amounts of money in campaign contributions, and it's going to
be tough. but i think we need to pass that. i think the fed needs to be much more active in terms of what kind of interest rates credit card companies should be paying. mr. president, today i'm going to focus a lot obviously on an agreement reached between the president and the republican leadership that i think does not serve the american people well. and one of the areas, as i mentioned earlier, where i think we could do a lot better in addressing the crisis of high unemployment in this nation is by investing the kinds of money we need in our infrastructure. according to the american society of civil engineers, they graded america's roads, public
transit and aviation with a "d" and shade that we -- and said we must invest $2.2 trillion over the next five years to get a passable condition. passable. unfortunately, in the agreement struck between the president and the republican leadership, to the best of my knowledge, not one nickel is going into investing in our infrastructure. and let me tell you why we need to invest in infrastructure. a, that's where you can create the millions of jobs that we desperately need in order to get us out of this recession. but, second of all, we need to invest in infrastructure because if we don't, we will become less and less competitive internationally. according to the national service transportation policy and revenue study commission,
$225 billion is needed annually for the next 50 years to upgrade our surface transportation system to a state of good repair and create a more advanced system. the federal highway administration reports that $130 billion must be invested annually for a 20-year period to improve our bridges and the operational peformance of our highways. at present, mr. president, one in four of the nation's bridges are either structurally deficient or functional obsolete. one in four of our bridges are either structurally deficient or functionally obsolete. and yet in this agreement struck by the president and the republican leadership, to the best of my knowledge, not one nickel is going into our infrastructure.
we need to invest in our infrastructure. we need to improve our infrastructure. and when we do that, we can create millions of jobs. mr. president, the federal transit administration says that $22 billion must be invested annually -- annually -- for a 20-year period to improve conditions and peformances for our major transit systems. in my state of vermont, the situation is no different than in the rest of the country. 35% of vermont's 2,700 bridges, nearly 1,000 bridges are functionally obsolete. in recent years we've had to shut down bridges which caused a lot of inconvenience to people who lived in those areas, to workers who had to get to work using a bridge. nearly half of the bridges in the state of vermont have structural deficiencies. rural transit options are few and far between, making rural
low-income vermonters especially vulnerable to spikes in gas prices. in other words, in vermont and in other areas of rural america, you have one choice in the vast majority of cases as to how you get to work. and that one choice is you get in your car, you pay $3 for a gallon of gas, and that is it. and that's because rural transportation in this country is very, very weak. we can create jobs building the buses, building the vans that we need, making it easier, cheaper for workers in rural america to get to work. urban area, different. subways, new york city, chicago, right here in washington, d.c. are in disrepair. let's improve, let's expand our public transportation system. it makes america run better, makes us more efficient, makes us more productive, more competitive, and it creates jobs now. not one nickel as far as i can
understand has been invested in our infrastructure in this agreement. mr. president, the united states invests just 2.4% of g.d.p. in infrastructure. 2.4%. whereas europe invests twice that amount. and here is something that i think every american should be keenly aware of and very worried about. i don't have to tell anybody that the chinese economy is exploding every single day in almost every way. in china, they are investing almost four times our rate, or 9% of their g.d.p. annually in their infrastructure. years ago i was in shanghai in china, and i was coming from the airport to downtown as part of a congressional delegation. and while we were on the bus coming in, my wife noticed
something. she said what was that? there was a blur that went right by the window. i of course didn't notice it; she did. turned out that that blur was an experimental train that they were working on, high-speed rail, which is now operational there, but similar proto types are being developed all over china. so here we are, the united states of america, which for so many years has led the world in so many ways, and now you're seeing a newly developing country like china, high-speed rail all over their country making their country more productive and efficient. and in our cities, our subways are breaking down. amtrak is going 50 miles an hour, 60 miles an hour. and the chinese and europeans have trains that are going hundreds of miles an hour. this is the united states of america of america. maybe i'm old-fashioned; i think we can do it too.
i think we can rebuild our rail system, make our country more efficient and create jobs. mr. president, china invested $186 billion in rail from 2006 through 2009. and according to "the new york times," within two years they will open 42 new high-speed rail lines with trains reaching speeds of 200 miles an hour. that's china. so i think, mr. president, if china can do it, the united states of america can do it. that's the way to rebuild america, make a stronger -- make us stronger and create jobs. by 2020, china plans to add 26,000 additional miles of tracks for freight and travel as well as 230,000 miles of new or improved roads and 97 new
airports. 97 new airports. anybody in america have the same problem that i have when you go to the airport and you're waiting on lines and you have to deal with all of the problems of older airports? china's building 97 new ones. we're not. we're not. and if we're going to be effective in the international economy, if our kids are going to have decent jobs, it's high time that we woke up and began investing in our infrastructure. so that is not only to improve the long-term strength of america, our economic prowess, but it is also to create jobs right now when we desperately need to do that. but unfortunately, in this bill, this tax agreement between the president and the republican leadership, there are many, many billions of dollars going into tax breaks for corporations, but there is not a whole lot of money -- in fact, there's zero
dollars going into rebuilding our infrastructure. and similarly, aeupbd know there's -- and i know there's been debate yesterday on this issue, there may be a small breaksp* through. but i don't have to tell americans, at least in the state of vermont, about what happens when the weather gets cold and you're forced to pay very high prices for heating oil. the time is long overdue for to us make the investments that we need to transform our energy system away from coal, away from oil. we are spending as a nation -- and everybody in america is going to appreciate this. we're spending $350 billion every single year, $1 billion a day roughly, importing oil from saudi arabia and from other foreign countries in order to make our economy and in order to keep people warm. $350 billion a year. and let me be very clear, the royal family of saudi arabia -- and saudi arabia is our major source of oil -- they are doing
just fine. don't worry about the royal family of saudi arabia. they got zillions and zillions of dollars. maybe it's a good idea that we move to energy independence, that we broke our dependence on fossil fuel, that we became far more energy efficient, which, by the waeurbgs investing in -- way, investing in public transportation certainly will do. and we move to sustainable energies as wind thermal and biomass. guess what? that's what china is doing. many of the solar panels that are coming into this country not made in the united states of america. made in china. they're big in wind turbines. so i think, mr. president, that the time is now for us to rebuild our infrastructure and create the jobs that we desperately do. and, again, unfortunately despite the enormous needs,
infrastructural needs in this country, this agreement signed by the president and the republican leadership does not do that. and when we talk about transforming our energy system and moving away from fossil fuels and making our homes more energy efficient and building solar panels, moving toward solar thermal power in the southwest of this country, in new mexico, kwra*dz, nevada we have some of the best solar exposure in the entire world. there is evidence on federal land we can provide 30% of the electricity that american homes need if we move toward solar thermal. need to invest in our transmission lines. so, mr. president, what we are talking about here is massive investments to create jobs, make us energy independent, clean up the environment, deal with the
huge amount of greenhouse gas emissions which are contributing to global warming. that's a win-win-win situation. and yet, we are not seeing that in this bill. and i will want to tell you something, mr. president. i'm going to get into this at greater length yesterday. and that is when we talk about our good friends in the oil industry -- and i'm not here to make a long speech about b.p. and what they've done in louisiana, et cetera, but i want everybody to know this. i'm going to get into this at greater length later. last year our friends at exxonmobil -- and exxonmobil has historically been the most profitable corporation in the history of the world. last year exxonmobil had a, for them a very bad year. they