wanted to do a documentary floia documentary film might have had to seek out some large-dlawr fund,now they can go to kickstarter, present their project and possibly raise the capital theengdz from thousands of small-dollar donors. in in 2010 a droment tri was made about jazz from a pool of 3,000 donors, most of whom don't natured $100 or less. we also have peer-to-peer lending on the internet, where folks say this is what i'd like to borrow money for and people say yes, i'll lend you that money. but what we don't have is a process in which companies can list themselves on the internet and say do you want to invest in my company? here is my dream. i'm going to make a better coffee shop. i'm going to make a small

wedding cake company. do you want to invest in my vision, in my dream? and here are the details. and folks can get on and join and help create that startup capital or create the capital for small business to expand. so that's what crowd funding is. it is parallel to these other efforts. and what we have in the house bill is basically a provision which says no rules, do whatever you want. now, unfortunately, that doesn't work. it doesn't work because if you don't require the company to give information about their company, if you don't provide rules that require accountability for the accuracy of that information, then what we're simply doing is saying here's a web site, where predators can put up a fictitious story about what they want to do, make it exciting as possible and run away with your money.

no consequences. pay themselves a salary, dump the money out. and the house bill requires no information. and if folks do put up information it doesn't require that information to be accurate. it legalizes predatory scams. and it says you can list and close in a single day. so for those who say, well, information will get out in some kind of miraculous manner, there won't be the time to get it out because a predator can put up their false story, collect donations and close the investment in a single day and walk away having scammed thousands of americans out of their hard-earned cash. so we need basic rules of the road. now, the possibility for capital formation through the internet, through crowd funding, is enormous. in 2011, americans had invested $17 trillion in retirement

funds. imagine if 1% of those investments went into crowd funding. the result would be $170 billion of investment in our startup and small businesses. that's extraordinarily powerful. more powerful than loans to small businesses across this country. so huge potential. so the small business or startup company would provide basic financial information, and vouch for the accuracy of this information. the company would explain its vision of how it's going to invest that money. the projects might range from small to medium size, a small wedding cake company might want to buy an industrial oven. another company might want to seek a new manufacturing line. and the crowd, that is, all of us surfing the internet would visit the portal, view the financials, the vision, say i want to be part of that and i'm going to invest and here's the percent of the company that i get in return. and the key to this is that the

companies provide accurate information. otherwise, as i've described, we simply pave the path for predatory tactics. that would destroy the reputation of crowd funding. that would destroy the ability to create a powerful capital formation market through the internet. the amendment that we're presenting does flee things -- three things. it streamlines the process for setting up a crowd funding -- crowd funding portal. it streamlines the process for companies to list themselves on that portal. and it provides basic information protections, the most important of which is to provide basic information about the company and for the company officers and directors to ensure the accuracy of that information. let's examine each of the three of these in turn. first, the streamlined registration for web sites that offer crowd funding. our amendment provides two

pathways. the first pathway is for a portal to register as a broker dealer. a second is a streamlined funding portal registration. these portals agree to provide a neutral market environment. that is, they do not solicit purchases, they do not offer vesmed advice and do not handle -- investment advice. they operate a marketplace much like the new york stock exchange operates without recommending particular stocks. it also creates a unified national framework. otherwise the portal would have to deal with rules from 50 states. that's an untenable structure. so we create a unified national structure for a portal to thrive in. now, turning to the second piece which is the streamlined process for companies to register. the amendment allows existing small businesses and startup companies to raise up to a

million dollars per year. that's a substantial amount for a small business. and it provides flexibility in how a company would do this. a company could basically say here is our target, and if the target is met, the investment closes. if i'm seeking $550,000 to do x when americans across the country have put forward enough small investments to reach that goal of $550,000, the investment would close. but also it allows if investors decide that they're offering more, maybe folks sign up, they're so excited about this vision, this product, this invention, this strategy, they say i'm putting up $750,000, even though you only asked for 550, it would still enable the small company some to say no, we can use that extra $200 --,

$200,000, thank you very much. if they choose to do so. it provides an fort provision so these small investors do not count against the shareholders number that drives companies to have to become a fully public company. and that is critical and interrelates with's parts of the crowd formation bill before us. and then turning to the third area, basic rules of the road to protect investors and ensure the accuracy of information companies post. companies participating in this marketplace must disclose their basic financial information, a business plan, a target offering amendment --, amount, and the intended use. they are subject, the seb sites -- web sites are subject to oversight by the s.e.c. and security regulators of their principal states. there are aggregate annual caps. this is a key predatory

protection to prevent pump-and-dump schemes. if you've seen the movie "the boiler room" you'll know what i'm talking about, where folks set to pump up a stock and the only folks trading it are those who kind of receive this special information and then as soon as they invest, normally they're investing, buying the stock owned by the folks doing the pumping and the whole thing collapses afterwards and their investment is worthless. so this is an essential part of making sure we establish a responsible marketplace that will succeed in being a foundation for capital formation. and we get rid of this one day list-and-close process so will that there is a 21-day period, very small amount of time in the course of raising capital, to create your startup or to advance your small business. 21 days which allows for the opportunity for the short of

oversight that a portal can provide or the s.e.c. can provide to stop known bad actors and fraudsters. finally, the officers and directors are accountable for the accuracy of the information. this is essential. without this sort of accountability, every fraudster out there will spin out a story and try to raise money for their scheme. but by holding them accountable for the accuracy of the information, it says no, i can't do that, i can be held accountable. this is exactly the right balance, because it provides a due diligence safe harbor. it requires that any information in dispute be material. and so it doesn't put the officer and directors at risk, it simply says when they've provided material information, they have to do appropriate due diligence to make sure that it's accurate. crowd funding has enormous, enormous potential.

too bring more americans than ever into the exciting process of powering up startups and expanding small businesses. i hope that in the course of consideration of the capital formation bill before us, we will have a chance to present a variety of amendments including this crowd funding amendment. and i certainly encourage my colleagues to listen very carefully to the points that senator landrieu has been making, senator jack reed has been making. that senator durbin has been making. the point is this: let's take and make a powerful tool work. let's not, however, take and destroy a powerful tool by opening it to all kinds of predatory schemes and scams. thank you, mr. president. i yield the floor.

a senator: mr. president. the presiding officer: the senator from louisiana. ms. landrieu: i'd like to just wrap up my comments in about five minutes. i see the senator from delaware on the floor, and he may choose to speak. i thank the senator from oregon for his comments. i think it's telling, mr. president,, very telling actually that this is a tuesday morning at 12:10. normally when there is a bill that is popular on the senate floor, there are lots of people that come down to speak for it. i understand that not one person yet has showed up this morning to speak for the house bill that we're going to be voting on today. i caution the democrats to raise your awareness. that is highly unusual. usually if a bill is well

thought through and is popular and can stand on its merit, there are any number of people on the floor speaking for it. the only people who have come to the floor are those of us warning you to read the bill, to reconsider your position, to not be lured by the title jobs bill, jobs bill, and read the bill and realize that there are some really far-reaching regulation elimination portions of this bill that are not going to be good for the small businesses described by the senator from oregon or the small businesses that we advocate for, both republicans and democrats, on the small business committee. and just at a time when investor confidence is increasing, where jobs are being created in the country, why would we go to such a far-reaching bill? let me start with statements

that have been made just in the last 24 hours. now, i've quoted from bloomberg, aarp, the chamber of commerce, from last week and over the weekend, today is tuesday, these are things that have come in just from the last 24 hours. steve perlson of "the washington post" march 18 -- quote -- "what we also know from painful experience from the mortgage and credit bubble, from enron, worldcom, the tech and the telecom bubble, from the savings and loan crisis and the junk bond scanlts and generations of penny stock scandals is financial markets are unapable of -- incapable. self-regulation. in fact, they are prone to just about every type of market failure listed in the economic textbooks. regulation is necessary.

now, i'm here to say that we need to reduce regulations on community banks that are now heavily regulated by the new sarbanes-oxley, by their own state regulators. i am approving and supporting reducing regulations to bankers in this important legislation. that's not the issue. the issue is what the senator from oregon spoke about, the new developing opportunities for the internet to be used as a powerful tool to raise money for ideas, for businesses, we can see this tremendous revolution occurring before our eyes. it doesn't mean that that needs the same regulations as the old-fashioned financial models, but we do need some regulations, and what we're saying is the house bill goes too far.

listen what floyd norris of the "new york times" said. -- quote -- "it gives some flavor of just how far the house bill goes that one of the changes three senators are pushing for would force a company trying to raise money from the public to show investors an audited balance sheet." one of our amendments is to -- for investors to provide an audited balance sheet. in the house in the house bill that we're considering, they can provide their own documentation, not audited by anyone, made up, and then there are no consequences, there are no safeguards, or very few safeguards in the house bill. i've quoted bloomberg now many times. again, the terrific bloomberg news editorial. "the jobs act goes too far. it would gut many of the investor protections established just a decade ago in the 2002 sarbanes-oxley law.

a wave of accounting scandals -- think enron and worldcom -- has destroyed the nettation of millions of americans and upended investor confidence in wall street. the relief would extend beyond small businesses and apply to more than 90% of the can that happens go public." written in "pc world," qurgs during the go-go days of the dot-com era, it was common to promote i.p.o.'s being offered by their managers regardless of the work offering. the existings rules, which would be scrapped by the jobs act now before the u.s. senate, were designated to protect investors from conflicts of interest that damaged the i.p.o. market after the pop of the dot-com bubble, damage from which we are only recovering. let us not jump back into the briar patch. we're just getting ourselves

untangled for it. what is the rush? this bill from the house has not even gone through the banking committee. we spend a decade arguing about sarbanes-oxley. we have multiple hearings. we have multiple debates on the floor. we have people come testify for pro or con. whether you're for it or not, it passed, with lots of public debate. and i know there's some people that still think those regulations are too onerous and yes, we are trying to relax them where we can. but a blanket exception for companies up to $1 billion in revenues? i think that's going a little too fark far, a little too fast. we have senior citizens to give some guidance and protection to. we have the middle class that is struggling from this recession. they depend on us to set the

rules of the road. now, this isn't about big brother, big sister government. people have to make their own choices. but when people make choices on the unts ne internet based on ws like an official documentation, they assume that someone either at their state capital or national capital has framed these rules and regulations in way that give them a fighting chance. we don't want to legalize fraud. and that's about what the house bill does. it legalizes pathways to fraud. that is not what we want to do. now, how we get out of the mess we're in, i'm not 100% sure. because we have a substitute on the floor, which is the reed-landrieu-levin substitute. i plan to vote for it. if we can get 60 votes, then we can get on debating that bill,

which is a substitute to the house bill, and perhaps the leadership will allow us to amend our own substitute, which we would be happy to do. and i think we could come to some agreement within really less than two days about what should be done here in the senate and then send the bill back over to the house for their consideration and then on to the president's desk, a bill that we can all be proud of and confident that we're doing the right thing with this new sort of frontier on internet investing. we want to support our entrepreneurs. we want to make this process more democratic. we want to get out of the secret boardrooms and the private conversations on wall street so many more people can take advantage appropriately of exciting investments and theent entrepreneurial spirit of america. absolutely we want to do that. but that's not what the house bill does.

so let us take our time. i'm urging my colleagues, if you can vote for the substitute and give us cloture on it, we promise we'll be open to amendments from both sides. if we don't get cloture -- and i see the senator from delaware -- if we don't get cloture, please vote for the ex-im bank amendment, which is a proper amendment to the bill, and then vote "no" on cloture. we don't want to end this debate today. you will be doing your constituents a great disservice to vote on cloture on that house bill today. we need to fix it, we need to amend it, and we can, and have a bill we can all be proud of and at least confident that we've established the right safeguards, that we can really be helpful in getting capital to main street and increasing entrepreneurship in america today. i thank the senator from delaware, who's been so outspoken and comes here with

such knowledge on these issues, and i appreciate his thoughtfulness and i hope that he will agree to join me in voting against the house bill and for his support of a new crowdfunding proposal. and i yield the floor. mr. coons: mr. president? the presiding officer: the senator from delaware. mr. coons: i rise today, glad this chamber is focused on job creation, on access to capital, on ways we can help strengthen the speed and the growth of high-promised start-up companies and grateful for the input and leadership of the senator from louisiana for her hard work on trying to make sure that we pay attention to the matter that is before this body today and making sure that we strike the right balance between continuing to ensure investor protection while also providing relief from regulations that may hold the promise of accelerating capital formation and job growth in this country. when i go home to delaware every

night and when i attend events across our state every weekend, i most frequently hear from those deeply affected by our too-long recession, from which we are still growing and recovering, families who are still dealing with unemployment, with loss of their homes, or with the threats to loss of their life's savings, businesses that are facing a credit crunch and struggle to expand or to retain their employment. americans, i've heard over and over, and delawareans want us to come together and find solutions in this body. ethe good news is that canadiana rare bipartisan spirit that's what we're doing. i'm glad we are taking up two different versions of this legislation to create a positive climate for capital formation for early-stage companies that have enormous potential to grow, one of which has passed overwhelmingly in the house and has earned the public support of president obama but the other which is, as you've heard a number of democratic senators speak to today, tries to mirror

those same core provisions but insists on investor protection and on ensuring that we don't overreach in opening up markets that we may regret later. sometimes, as you know all too well, mr. president, sometimes this body deliberates overly long, in fact in my first year and a half here i have been struck at just how long we deliberate before acting and how many measures have sat here on the floor without action that should have been taken up promptly and quickly. in this case, i am concerned about the opt sit the opposite,e rushing through a measure that deserves some careful consideration and review. in any event, making progress in access to capital for entrepreneurs and start upbusinesses is something i hope we can all agree on. in both versions of the bill there are great ideas and i continue to believe that ensuring investor protection, market transparency, and the vibrancy of our capital markets through preventing frawr prevend

andenssuring clarity is a principle we should all share. but without the right time to consider this legislation, i'm worried about the potential, the potential risks for investors, the potential burdens it may place on. -- place on business. i'm worried about concerns that may overly open the market to fraudsters and those who would scam investors on the in -- on e internet. two of the strongest proposals that we will consider today or tomorrow address a critical need for our business community, which is access to capital. capital is what allows businesses to invest in new technology, new facility, new workers, and in growth. and credit has been far too hard to come by in the last few years but we can and should take action to make it more available to small business owners with high-growth potential. one option, as we've heard a number of senators address today, is to continue to expand

the opportunity forbe financing from the export-import bank and the other is to make somewhat easier the pathway to an initial public offering. today's legislation would ease both processes and that's the kind of positive movement that will create opportunity all over the united states and for companies in my home state of delaware. first, if i can, the export-import bank has long established its record of promoting exports and job growth. it has provided capital to help manufacturers and small businesses all over the company export more american-made goods. the reauthorization measure we take up hopefully later today has passed unanimously out of the senate banking committee and has already enjoyed broad, bipartisan support. last year financing from the ex-im bank supported hundreds of jobs in my home state and thousands more across the country. the bank supported dozens of companies across delaware. one has a proprietary selectiv

selectively proprietary membrane. one company that creates high-quality jobs in our communities and is able to sell these products through ex-im bank financing. and equally importantly, the ex-im bank hasn't added a single cent to the deficit. it works to give a fair shot in the global market. if american workers are going to be competitive, we have to ensure they have the support they need. otherwise they'll continue to lose out. china already provides three to four times as much export financing as we do to help their exporters. our companies, our manufacturers, our communities simply ask for a level playing field. and in my view, reauthorizing the ex-im bank is vital to these companies and our manufacturing sector. given the realities of the global economy, it is not enough for american companies today to just make great products. they also have to be able to sell them to the middle-class. as we all know, 95% of current and future customers and consumers live outside of the united states and reaching those

consumers who are hungry for american products is essential to the steady growth of businesses of all sizes. boosting american exports will be central to creating the kind of growth that will continue to sustain this ongoing economic recovery and allow our businesses to hire new workers. financing from ex-im can come in at a critical time for businesses in need of capital, but it doesn't meet the needs of every company. for some other early-stage companies, delaware businesses in particular, when they are in need of capital, one solution is to move towards an initial public offering, by becoming a publicly traded company. today's legislation also includes an onramp to ease the path to an i.p.o. by reducing the regulatory burden on highly innovative companies, we can encourage job creation on a great scale. at the moment we're simply not seeing the rate of i.p.o.'s in our economy that we need to be healthy. 92% of the jobs that a company createcreates come after it goes

public. there's many reasons companies choose not to go public but one of them that i've heard cited repeatedly in delaware and in washington is regulatory compliance under the sarbanes-oxley section 404(b) which requires some auditing, disclosures, some pre-i.p.o. work which while the spirit of the law is the right one, ensuring transparency is the right direction. this particular section has proven in practice to be overly burdensome to businesses with potential to be the greatest job creators. after hearing about this issue many times, i got together last fall with my colleague, senator rubio, to craft a solution. we found bipartisan agreement on this and six other issues which we included in our joint legislation, the so-called "agree to" act. that legislation was chockful of

job-creating proposals designed to encourage more of our colleagues to come together on this sort of bipartisan jobs legislation we can and should move to. in the case of encouraging i.p.o.'s, that's exactly what's happened. senator schumer and toomey have also picked up this particular proposal and moved further along with it. then on the house side, my longtime friend and fellow del delawarean worked with his colleague to write and pass legislation on this exact issue, whicwhich has now come to us ast of this jobs package, h.r. 3606. i want to congratulate congressman carney who became the first freshman congressman in the house to pass a major piece of legislation. as you heard senator landrieu speak just a few moments ago, and as several senators have raised today and last week, in providing this relief from sarbanes-oxley 404(b), where do we strike the right balance between investor protection and

accelerating capital formation and job growth? is it at $250 million as we proposed in the "agree to" act, $350 million as democratic alternative that proposals today or $1 billion in the bill from the house? in my view and the view of many democratic senators, we need to take the time to debate this, discuss it, and ensure that we're striking the balance. it is wor it is worth a few more hours of our time to get this matter right, mr. president. creating a favorable environment for businesses to create jobs can and should be our top priority. since i arrived that hasn't always been the case but today it can and should be. the primary focus of our work. there is no reason we have to rush to pass this today, mr. president. we can and should take some time to deliberate, to work through the appropriate process and it is my hope that we will reauthorize and extend the reach of the export-import bank and move to a consensus bipartisan bill that will strengthen access

to capital for entrepreneurs and for early stage companies and that will show all the people of the united states that the house, the senate, and the president can and will stand together on the side of job creators in this economy. thank you. with that i yield the floor. and, mr. president, i ask unanimous consent that the senate go into recess until 2:15 p.m. today. the presiding officer: without objection. under the previous order, the senate stands in he recess until 2:15 p.m. votes are scheduled moving the bill forward. that will happen 4:00 p.m. eastern and we'll have live

coverage here on c-span2. mitt romney and rick santorum are competing for the 54 delegates at stake in illinois. the primary comes on the heels of former governor romney's victory sunday in puerto rico. recent polls indicate mr. romney may have expanded his lead over rick santorum in illinois and we'll have live coverage of the results getting underway at 7:00 eastern on c-span networks, c-span radio and online on c-span.org. the top u.s. commander in afghanistan says efforts to hand over security to the afghans are on track despite anger over a u.s. soldier's alleged massacre of afghan civilians. marine general john allen is testifying today before the house armed services committee. you can see that live right now on our companion network c-span3. he goes before the senate armed services committee on thursday. see that life nine 30 eastern on c-span3. >> nation's highest court starts oral argument on the health care law.

they are hearing self challenges. justice agree to release audio of the argument each day. we'll bring it to you 2:00 p.m. eastern on monday, tuesday and wednesday next week. it will be on c-span3, c-span radio and at c-span.org. coming up at 12:45 eastern we'll get remarks from fed chair ben bernanke. he is lecturing on the history of the federal reserve at george washington university. that is live at 12:45 eastern. until then house budget committee chair paul ryan released the republican spending plan for the budget year earlier today. it cuts spending by five trillion dollars over the next decade. reduces the deficit by $3 trillion more than president obama's proposed budget >> good morning, everybody. it is a good day. i'm proud to be here with my fellow colleagues on the house budget committee. they worked very hard.

we have together, to produce this document that we are all holding in our hands, the path to prosperity. i'm also grateful for senator jeff sessions who is here with us who is the ranking member of the senate budget committee who brings a proscutorial zeal to the budget that had gotten out of control. one year ago we offered our path to prosperity and this year we are offering again our path to prosperity. this year we're going to build on the important work that we did last year. we're going to take several new and improved strides. first, we propose that we repeal the president's disasterous health care law. it stops the law's mandates from trampling on our liberties. it stops its spending from threatening our fiscal house and stops this board of bureaucrats from threatening medicare. instead we propose to save and strengthen medicare by taking power away from government bureaucrats. we preserve the medicare guarantee for today's

seniors so they can count on the benefits they have organized their retirement around, and, we preserve that garnerty going into the future for tomorrow's seniors by 'em poering them whith choice as knee for service traditional option within a premium support system. we believe competition and choice should be the way forward versus price controls that lead to rationing. on the budget, we also propose to strengthen medicaid by 'em poe you aring our states, returning money to them so they can design programs unique to their states to tailor this program to meet the needs of their populations. we also reform welfare. the 1996 welfare reform was very successful getting towards an upward mobile society. getting people off dependency and on to lives of self-sufficiency. fortunate that was only programs of means entitlement programs that was reformed and we're proposing similar reforms to

the states so we make sure we're not creating a culture of dependency in america but a culture of self-sufficiency and getting people back on their feet in the lives of upward mobility. we also propose as one of our hallmark issues to get to economic growth and job creation to reform the tax system. specifically we include in here a tax reform proposal provided to us by all of the members of the ways and means committee. we propose to collapse the six different tax brackets into two rates, a 10% bracket and a 25% bracket for individuals and a 25% bracket for corporations which is at the international average and going to a territorial system. all those kinds of specs and details you can get on the website that shows the letter given by the ways and means committee. finally i would say something about what is coming this next year. the sequester is coming. now a lot of people in washington would like to simply ignore this. a lot of people in washington think we can spend as we're going and

ignore the fact on january 2nd the sequester kicks in. we don't think we should ignore this. so what we're doing in this budget this year is something we haven't done for six years. we're going to propose a reconciliation process. now you might be thinking, well they used reconciliation a couple years ago. they distorted the reconciliation process to jam through a new partisan health care entitlement. we're going to bring reconciliation back to what it was meant to do, which is to get spending and deficits under control. we're instructing six authorizing committees to bring their spending cuts to the budget committee and therefore to the floor by may so we can show how we would replace next year's sequester. we think that that is extremely important to show the country exactly how we would prepare for these eventualitis. now i think it is also critical to reiterate the several challenges facing our country. i want to bring everybody's attention to these charts. wow, this thing actually

works. now, we've had deficits in the past. we've had for brief moment surpluses but we've had deficits. look at where our country is headed. look at where the president and his budget is taking the country. the president's budget is putting us on a path of a debt crisis, of decline and these are the deficits that are in store for america if we stay with the status quo. here is what the path to prosperity proposes. we propose to get our budget on a sustainable path. we propose to get our budget not only on a path to balance but to paying off the debt on the path to prosperity f we actually start growing the economy faster which we think our policies will result in, then the budget would balance even faster than is shown right here. let's talk about spending. the president keeps the size of government at historic highs now and well into the future. he never brings spending back down where it historically has been. by 2015, we get spending down to 20% of the economy,

which is our historic average and below that after that. all in all, what we're proposing here is to cut $5.3 trillion in spending from the president's budget. this results in at least $3.3 trillion in deficit reduction compared to the president's budget. now, here it is really what it all matters to and that is what about the national debt? we know in front of us is one of the most predictable crises we have ever had in this country's history, a mountain of debt that is coming. this is what the congressional budget office is telling us our future is going to look like. this is the future that the president's plan of debt and decline brings us too. this is what the senate gets you by doing nothing, not passing a budget for three years in a row. this is a future that gives our children a diminished country. this is a future that ruins our economy. this is a future that we don't want to see happening. and so if we have a difference opinion with the

president and direction he and senate leaders taken the country which we do, we feel morally bound to offer a choice. and we have a legal obligation in our budget laws to produce a budget. so what our budget does, it shows precisely how we will get this budget under control and get our debt levels under control. the end of the day, it is all about growth. it is about growing opportunities. it is about growing the economy. it is about lifting the debt, restoring economic freedom. reforming the tax code so that we can help have our economy reach its full potential. it is about turning our system that has become a dependent culture, into an upward mobile society. getting people back on lives of self-sufficiency. if our economy grows even faster than what we produce here the results are all that much better. before i close i would like to thank my colleagues on the budget committee for all the hard work we put together in putting this budget together. i want to thank senator jeff

sessions for his leadership over in the senate. i'm hoping to call him chairman next year. and at its core i want to basically say this. this plan of action is about putting an end to empty promises from bankrupt government and restoring the fundamental promise of america. insuring that our children have more opportunities than we do. that is the american idea. leave your children better off. we know for the first time in the history of this country that that legacy will be severed unless we act. if we step in and fix this problem now, we can avoid a very painful debt crisis tomorrow. we are here to offer americans the chance to choose which future they want for themselves. the president's path of debt and decline, or the path that we're proposing, a path to renew prosperity for americans. with that, let me turn it over to senator sessions.

>> the house republicans were elected to a new majority and they have courageously, intelligently and responsibly laid out a new plan for america's future. they have met their duty, that they were sent here to fulfill. we have never needed a budget more than we need it today. we are facing a systemic threat to america's financial health. the budget that they have offered will alter the debt course from unsustainable to sustainable. it will take us from decline to prosperity. it is the right thing for america. the senate democrats have abandoned their obligations and have refused to offer a budget for three straight years now. they didn't bother to write one last year and they're going to miss the april 1st deadline this year and they're not going to produce one this year. senator harry reid, the democratic leader, said it would be foolish to have a

budget. the senate democratic majority has forfeited their claim to leadership for america. if the voters give the republicans in the senate the honor of having the majority and leadership, we will work with the house to pass a congressional budget. it will be an honest budget. it will change the debt course of america. thank you, paul, and all of you for the great work and leadership you provided. >> questions? >> chairman ryan, talk for a minute, the democrats are already in full force to frame this as medicare again last year. just a few minutes ago, john marston, chair of the democratic caucuses deja vu all over again. we look at concrete plan. most people aren't going to sit town and read this. most people aren't -- >> go to www.budget.gov. you can download this yourself. >> most people are going to see a 30 second ad, most

people will hear a quick sound bite, oh, my gosh they want to cut medicare? how can you defend, how can you argue against that and win that argument? >> here is what i would simply say. if we simply operate based on political fear, nothing is ever going to get done. if we allow entitlement politics, fear, that your adversaries will turn your reforms into political weapon against you, we cow to that, america will have a debt crisis. i've got news. medicare under the president's law is going bankrupt. medicare under the president's law is next year turning medicare over to a board of 15 unelected, unaccountable bureaucrats, whose job is to circumvent congress and put price controls on medicare which will lead to denied care from current seniors. medicare under the president's law, raids half a trillion dollars from medicare, to spend on his new health care proposal. we're saying, get rid of the rationing board.

stop the raid and preserve the system. don't change benefits for people in or near retirement. they have already retired or they're about to retire. they have organized their lives around this program. and we're saying, let people in the future, in order to save the system, have a list of choices of guaranteed options, including the traditional fee-for-service program who wants to choose like we do as members of congress for our health care choices. saving medicare this way, which has a rich tradition of bipartisan support for this kind of medicare reform, the most humane and most common sense and bipartisan way to save this vital program. let me turn it over to dr. price, expert on this, a member of the ways and means committee. >> thank you, mr. chairman. chad, the american people are smarter than democrats give them credit for. they understand the program, the current program is broken. they understand that what the president has done with his party as the chairman said, removed $500 billion from the current program. the current medicare program. they understand that what

the president's plan is through his law currently is to put in place the independent payment advisory board. that is a board of 15 unelected bureaucrats who have the power, without appeal, to deny payment for services for seniors. american people understand this. they know that what we've been working on is strengthening and improving and saving the medicare system which is why the work that was done between last year and this year, allows seniors, would allow, will allow seniors the opportunity to stay on the current medicare program if that's what they desire or to voluntarily move to a different program through a premium support process. so the american people are brighter than the democrats give them credit for. >> briefly, if i can follow up, there are some on the other side of the aisle, you described, this mr. chairman as -- >> a portion of the press briefing on the republicans 2013 budget plan. you can see the rest of the briefing and the plan itself go to our website, c-span.org. we'll leave it at this point as federal reserve chair ben bernanke is taking a break from his day job this

afternoon. he will teach a class at george washington university. this is the first of four, one-hour lectures on history and role of the federal reserve today. mr. bernanke is the first fed chair to teach a course while in office. we're expecting him in just a moment. [applause] >> well, good afternoon. i think the students here may know who i am, but for those watching the broadcast, i'm steve knapp, president of george washington university. this is the first class entitled on federal reserve and reflections on its place in the today's economy featuring the chairman of the fed federal reserve dr. ben bernanke. we have two of the university trustees and also a number of faculty members

here in the audience. some of them will be teaching later in the series. today's the first university lecture series delivered by a sitting chairman of the federal reserve. i think it does provide extraordinary opportunity for students who are here in the classroom but also for those watching online who have an opportunity to gain insight into the nation's central banking system and wide range of issues that affect this country and the world. i want to say there are microphones available for the students and certainly encourage you when the chairman's lecture is over to a veil yourself of those. we hope there will be a lively exchange of questions and answers at the end of the lecture. now a distinct honor to introduce the chairman of the board of governors of the federal reserve system, dr. ben bernanke. dr. bernanke took office in 2006 and is now serving his second term as chairman. he also serves as chairman of the federal reserve's open market committee. before his appointment as chairman, dr. bernanke was involved it with the federal reserve in several roles. as a member of the board of

governors, as a visiting scholar and as a member of the academic advisory panel at the federal reserve bank of new york. he also served as chairman of the president's council of economic advisors from june 2005 to january 2006. now chairman bernanke is no stranger to academia. has been a faculty member at princeton, stanford and new york university. he held the guggenheim and a sloane fellowship and is a fellow of the econometric society and american academy of arts & sciences. chairman bernanke received bachelor of arts from harvard university and ph.d from mit. please join me welcoming the chairman of the federal reserve, dr. ben bernanke. [applause] >> thank you very much, president knapp. gee, this is great. this is it what i use to do before i got in this line of work. for 23 years. and i've always enjoyed engaging with college

students, so thank you for being here. i hope we do have a good conversation, let me particular hi thank president knapp and professor fotre and george washington university. as everybody here knows these lectures are part of a real course and after i get off the scene, there will be other professors talking about other aspects the fed and you will hear different points of view which is great. and you will have to do some papers and all kinds of things and i will read a few of the papers. i look forward to doing that. so, i'll be talking from, from slides, which is in part for the purpose of making this available to others who might be interested. these slides will be posted on the federal reserve's website, federalreserve.gov as we go through. if you need extra copies by all means do that. and, as president knapp said

i'm going to be talking for a while from the presentation but at the end i hope we can have some questions and answers. so when let me get started. what i want to talk about in these four lectures is the federal reserve and the financial crisis. now, my thinking about this is very much conditioned by my experiences as an economic historian. i think when you talk about the issues that just occurred of the last few years, it makes the most sense to think about it in the broader context of central banking as it has taken place over the centuries. so, even though we're going to be focusing a good bit of lectures, particularly next week on the financial crisis and how the fed responded, i think we need to go back and look at the broader context. so as we talk about the fed, we'll be talking about the origin and and admission of central banks and look at

previous financial crises, most notably the great depression and see how that informed the fed's action and decisions in the recent crisis. let me give you a road map of the four lectures. today, lecture one, we won't touch on the current crisis at all. instead we'll talk about what central banks, are, what they do. how central banking got started in the united states and we'll do some history. we'll talk about how the fed engaged with its first great challenge the great depression of the 1930s. the second lecture on thursday, will take up the history. we'll review developments in central banking and with the federal reserve after world war ii. talking about the conquest of inflation, the great moderation and other developments that occurred after world war ii but we'll spend a good bit of time in lecture two talking about the buildup to the crisis and some of the factors that led to the crisis of 2008-2009. then next week we'll get

into the more recent events. in lecture three we'll talk about the intense phase of the financial crisis. it causes, its implications and particularly the response to the crisis by the federal reserve and by other policymakers. and then in the final lecture, lecture four, we'll look at the aftermath. we'll talk about the recession that followed the crisis. the policy response of the fed including monetary policy. the broader response in terms of changes in financial regulation and a little bit of forward-looking discussion about how this experience will change, how central banks operate and how the federal reserve will operate going forward. so this is our topic today, its origins and missions of the federal reserve. so let's talk in general about what a central bank is. if you've had some background in economics you know that a central bank is

not a regular bank. it's a government agency and it stands at the center of the monetary and financial system of a country. central banks are very important institutions. they have helped to find guide the development of modern financial sieves, modern monetary systems and they play a very major role in economic policy. we've had various arrangements over the years but today virtually all countries have central banks. the federal reserve in the united states. bank of japan in japan, the bank of canada and so on. the main exception is only cases where you have what is called a currency union where a number of countries collectively share a central bank. the most important example by far of that is the european central bank, which is central bank to 17 european countries who share a common currency the euro. even in that case, each of the participating countries does have its own central bank which is part of the overall system of the euro. so central banks are now

ubiquitous, even the smallest countries typically have central banks. now, this is a very important theme here. what do central banks do? what is their mission? and as i will discuss throughout the lectures, it's convenient to talk about two broad aspects of what central banks do. the first is to try to achieve macroeconomic stability. and by that i generally mean, stable, growth in the economy. avoiding big swings, recessions and the like. and keeping inflation low and stable. so that's the economic function of a central bank. the other function of central banks, which is going to get a lot of attention obviously in these lectures is the financial stability function. central banks try to keep the financial system working normally and in particular they try to prevent or if unsuccessful in preventing, they try to mitigate

financial panics or financial crises. i will talk more about what those are. now, what are the tools that central banks use to achieve these two broad objectives? in very simple terms, they're basically two broad sets of tools. on the economic stability side, the main tool is, am i'll sure everyone knows is monetary policy. in normal times the fed, for example, can raise or lower short-term interest rates. it does that by buying and selling securities in the open market. again in normal times if the economy is growing too slowly or inflation is falling too low, the fed can stimulate the economy by lowering interest rates. lower interest rates feed through a broad range of other interest rates. that encourages spending, acquisition of homes, for example, construction,

investment by firms, borrowing. it just generates more demand, more spending, more investment in the economy and that creates more thrust and growth. so that, to stimulate an economy you lower interest rates. and, similarly, if the economy is growing too hot, as inflation is becoming a problem, then, the normal tool of the central bank is to raise interest rates. so by raising the overnight interest rate, known in the united states as the federal fund rate, higher interest rates feed through the system and help to slow the economy by raising the cost of borrowing of, buying a house, buying a car or investing in capital goods. and that will slow the economy and reduce the pressure of overheating. so monetary policy is a basic tool that central banks used for many, many years to try to keep the economy on more or less even keel in terms of both growth and inflation. now a little less familiar

is the main tool of central banks in dealing with financial panics or financial crises and that tool is the provision of liquidity. so to address financial stability concerns and for reasons i'll explain, one thing that central banks can do is make short-term loans to financial institutions. as i'll explain, providing short-term credit to the financial institutions during a period of panic or crisis, can help calm the market, can help stablize those institutions and can help mitigate or bring to an end a financial crisis. so this activity, which is an old one, as i will discuss, is known as the lender of last resort tool. so, again, if financial markets are disrupted, financial institutions don't have alternative sources of funding, then the central bank stand ready to serve as the lender of last resort,

providing liquidity to the system and therefore bihelping to stablize the financial system. now there's a third tool which the fed has had from the beginning and most central banks have, which is financial regulation and supervision. central banks usually play a role in supervising the banking system, assessing the extent of risk in their portfolios. making sure their practices are sound. that way trying to keep the financial system healthy. to the extent that the financial system can be kept healthy and risk-taking within reasonable bounds, then the chance of a financial crisis occurring in the first place is reduced. however this activity, i will come back to it, this is something which is not unique to central banks. in the united states, for example, there are a number of different agencies like the fdic or the office of the comptroller of the currency that work with the fed in supervising the financial system. so this is not unique to

central banks. i will be downplaying for the time-being and focusing on two principle tools, monetary policy and lender of last resort activities. now where do central banks come from? one thing people don't appreciate i think is that central banking is not a new development. it's been around for a very long time. the swedes set up a central bank in 1668, 3 1/2 centuries ago. the bank of england was founded in 1694. and that of course, for many decades, if not centuries, was the most important and influential central bank in the world and france in 1800. so central bank theory and practices again, not a new, a new thing. we have been thinking about these issues, collectively as an economics profession and in other contexts for many, many years. now, i've exaggerated slightly in the sense that

say the bank of england in 1694 wasn't set up from scratch as a full-fledged central bank. it was originally a private institution and over time it acquired some of the functions of a central bank such as issuing money or serving as lender of last resort but over time the, these central banks became essentially government agencies, government institutions as they all are today. certainly one important responsibility of central banks for much of the period that i'm talking about was to manage the gold standard. to issue paper money that was backed by gold. and i will talk more about gold in a few moments. now, the lender of last resort function which i mentioned earlier became important in the mostly, in the 19th century. early in the 19th century the bank of england was

doing a lot of this type of activity and they became very good at it. as we'll see, while the united states was suffering with banking panics in the latter part of the 19th century, banking panics in the united kingdom were quite rare. so the bank of england sort of set the, set the pace in some sense. it was the the most important central bank and it helped establish the practices and approaches that we still use today. now i need to talk a little bit because it is less familiar about what a financial panic is. in general a financial panic is sparked by a loss of confidence in an institution. i think the best way to explain this is to give a familiar example. how many of you have ever seen the movie, "it's a wonderful life"? less people are watching christmas movies than they used to be i guess. well one of the problems jimmy stewart runs into as a

banker in it's a wonderful life is a threatened run on his institution. what is a run? well, let's imagine a situation, like jimmy stewart's situation, before there was any deposit insurance. no fdic. and imagine you have a bank on the corner, just a regular commercial bank. first bank of washington, d.c. and this bank makes loans to businesses and the like and it finances itself by taking deposits from the public. and deposits are demand deposits, which means anybody can pull out their money anytime they want which is important because people use deposits for ordinary activities like shopping. now, imagine what would happen if, for some reason a rumor goes around that this bank has made some bad loans and is losing money. now as a depositer you say to yourself, i don't know this rumor is true or not.

but what i know is if i wait and i wait to pull out my money and i'm the last person in line i may end up with nothing. what are you going to do? you will go to the bank and say, well i'm not sure this is a true rumor or not, but knowing everybody else will come to the bank, i will pull my money out. and so depositers line up, they pull out their cash. no bank holds cash equal to all their deposits. they put that cash into loans. so the only way the bank can pay off the depositers, once it gets through its minimal cash reserves, is to sell or otherwise dispose of its loans. but it is very hard to sell a commercial loan. it takes time. you have to sell it at a discount. by the time you've gotten around to doing that, depositers are at your door saying "where's my money?"? so ultimately a panic can lead to the bank to close and be a self-fulfilling prophecy. the bank will fail.

it will have to sell off assets at discount price. ultimately many depositers may lose money as happened in the great depression for example. a bank panic is a problem faced by any institution where it has loans or other illiquid type assets and it finances itself by short-term deposits or other short-term lending. now panics can be a serious problem. obviously if one bank is having problems, people at the bank next door might begin to worry about problems in their bank. and so, a bank run can lead to widespread bank runs or a banking panic more broadly. sometimes banks, again, prefdic, banks would respond to a panic or a run by refusing to pay out deposits. they would say, no more. we're closing the window. so that restriction on the access to depositers to their money was another bad outcome and caused problems

for people had to make payroll or had to buy their groceries. many banks would fail and beyond that, banking panics often spread into other markets. they are often associated with stock market crashes, for example. all those things together as you might expect were bad for the economy. so a banking panic could lead to a crash in the economy as well. so here's a formal definition, just for your reference. the less you see people standing around the corner waiting to take out their money but a financial panic can occur anytime you have an institution that has longer term illiquid assets. so think of a bank that has loans that are long-term loans that are illiquid in the sense it takes time and effort to sell those loans and which are financed on the other side of the balance sheet by short-term liabilities like deposits but could be other signs of short-term liabilities. anytime you have that situation you have the

possibility that the people who put their money the bank or the lenders or depositers, may say, wait a minute. i don't want to leave my money here. i'm pulling it out and you have a serious problem for the institution. so now to come back what we were talking about before, how can, how could the fed have helped jimmy stewart? well, again, lender of last resort is the basic tool. imagine that jimmy stewart is paying out money to his depositers. he has plenty of good loans but he can't change those into cash. he has got people at the door looking for money. well, if the federal reserve was on the job, jimmy stewart could call up the local fed office and say, look, i have a whole bunch of good loans. i could offer them as collateral. give me cash, give me a cash loan against this collateral. okay. so the central bank would act in this way as a lender

of last resort. the, jimmy stewart can take the cash from the central bank. he can pay off its depositers and so long as he really is solvent, as long as his loans really are good, the run will be quelled, will be stopped and the panic will come to an end. so by providing short-term loans, taking as collateral the illiquid assets of the institution, the central bank can put money into the system. pay off depositers, pay off the short-term lenders and calm the situation and the panic. this was something bank of england figured out very early. in fact a very key person in the intellectual development here was a journalist named walter badge get, who thought a lot about central banking policy and he had a dictum which said that during a panic, central banks should lend freely,

whoever comes to your door, as long as they have collateral. give them money. this is during a banking panic. against good assets, to make sure that you get your money back. you need to have collateral. that collateral has to be good or it has to be discounted and they could lend half the value of collateral, for example. and charge a penalty interest rate so people just don't take advantage of the situation but rather they signal they really need the money because they're willing to pay a slightly higher interest rate. so again, if you followed his rule you can stop financial panics. as a bank or other institution finds that it is losing its funding from, from depositers or other short-term lenders, it borrows from the central bank. the central bank provides cash loans against collateral. the company then pays off its depositers and agains things calm down.

without that source of funds, without the lender of last resort activity many institutions would have to close their doors. they could go bankrupt. if they had to sell their assets at discount fire-sale prices, that would also create problems because other banks would find the value of their assets had gone down. so the panic through fear or through rumor or through declining asset values could spread throughout the banking system. it is very important to get in there aggressively as a central banker, provide that short-term liquidity and avoid the collapse or at least serious stress on the system. so again, using the assets as collateral, banks borrow from the central bank. so, that's a little bit of general theory about central banks and what they do. again their two broad functions are macroeconomic stability and financial stability. and they have tools on both sides of that equation. so let's talk a little bit about specifically the

united states and the federal reserve. and what we'll find is that the federal reserve which was founded, the last waa passed in 1913. it was founded eventually in 1914 will find concerns on both sides of this equation motivated the decision of congress and president wilson to create the federal reserve. let's talk first about financial stability in the united states. now after the civil war and into the early 1900s there was no federal reserve. there was no central bank. so, any kind of financial stability functions that couldn't be done, say by the treasury had to be done privately. and there were some interesting examples of private attempts to create lender of last resort functions. so, it, for example, very interesting example is the is the new york clearinghouse. the new york clearinghouse

was a private institution. it was basically a club of ordinary commercial banks in new york city. it was called a clearinghouse because initially it was, it served as a place where banks could clear checks against each other. they came at the end of each day and they traded my next against you and your checks against me and it was a way of reducing a cost of managing checking. but, as time evolved, clearinghouses began to function a little bit like central banks. so for example if one bank came under a lot of pressure the other banks might come together in the clearinghouse and lend money to that bank so it could pay its depositers. so in that respect they served as a lender of last resort. the other possibility sometimes the clearinghouses would all agree, we'll shut down the banking system for a week, all banks. and then they would, they would go look at the bank that was in trouble and evaluate its balance sheet and determine whether it was in fact a sound bank.

if it was, it would reopen and normally that would calm things down. so there was some private activity to try to, to stablize the banking system. however, in the end, these kinds of private arrangements were just not sufficient. they didn't have sufficient resources. they didn't have the credibility of a independent central bank. after all people could always wonder whether the banks were acting in other than the public interest since they were all private institutions. and so, it was necessary for the united states to get a lender of last resort that could stop runs on illiquid but still solvent commercial banks. so, this is not a hypothetical issue. financial panics in the united states were a very big problem. so here's the period basically from the

restoration of the gold standard after the civil war in 1879 through the founding of the federal reserve and the graph here shows the number of banks closing during each of the six major banking panics that occurred during that time in the united states. you can see in the very severe financial panic of 1893 more than 500 banks failed across the country. that was a really big panic and had significant consequences for the financial system and for the economy. now, 1907 was also a pretty sharp financial crisis. the banks that failed were larger. . .

bank. before the new central bank was established there were another financial panic in 1914. this really was a very serious problem for the u.s. economy. so financial stability concerns were a major reason why congress decided to create central-bank in the beginning of the 20th century. the other major mission of central banks is economic stability, monetary and economic stability. the monetary history of the united states is pretty complicated. i won't try to go through it all but in the period after the

civil war, until world war i, into the 30s, on the gold standard, as you know the gold standard is a partial alternative to a central bank. with the gold standard? what a gold standard is is a monetary system in which the value of the currency is fixed in terms of gold. for example by law in the early 20th century the price of gold was set at $20.67 an ounce. there was a fixed relationship between the dollar and a certain weight of gold. that in turn helped set the money supply, helped set the price levels in the economy. there were central banks that helped manage the gold standard

but 2 significant extent a true gold standard creates an automatic monetary system. basically money is tied to gold. gold standards are far from perfect monetary system's. one small problem which is not on the slide is there is a big waste of resources. and in the basement of the federal reserve bank of new york. milton friedman used to emphasize there's a serious cost, gold being dug up and put into another hole. there is some cost to having a gold standard. there are some other serious

financial and economic concerns that practical experience concern show were part of a gold standard. the gold standard on the money supply, since it determines the money supply there's not much scope for central bank to use monetary policy to stabilize the economy. in particular, under a gold standard typically the money supply goes up and interest rates go down in periods of strong economic activity. that is the reverse of what a central bank will do today. because you had a gold standard which ties the money supply to gold, there was no flexibility for the central bank to lower interest rates in recession or raise interest rates and inflation. some people view that as a benefit of the gold standard taking away the discretion of central banks and there's an

argument for that but it had the implication that there was more volatility year to year in the economy under a gold standard than there has been in modern times. for example movements in output, variability was much greater under the gold standard and year to year movements in inflation of volatility was much greater under the gold standard. there were other concerns with the gold standard. one of the things a gold standard does is create a system of fixed exchange rates between the currencies of countries that are on the gold standard. for example in 1800, the value of the dollar was about $20 per ounce of gold. at the same time, the british set their gold standard as saying roughly four pounds, four

british pounds per ounce of gold. $20 is one ounce of gold. four lbs. is one ounce of gold so $20 = four pounds. what that is saying is basically a pound is $5. so essentially both countries are on the gold standard. the ratio of prices between the two exchange rates is fixed. there is no variability when the euro can go up or down. again some people would argue it is beneficial but there's one problem which is there are shocks or changes in the money supply in one country and perhaps even a bad set of policies. other countries that are tied to the currency of that country will also experience some of the effect of that. i will give you a modern example. today, as you probably know, china ties its currency to the dollar.

it has become more flexible lately but for a long time there was a close relationship between the chinese currency and the u.s. dollar. what that means is if the fed lowers interest rates and stimulate the u.s. economy because they were in recession it means also that essentially monetary policy is easier in china as well because interest rates have to be the same in different countries. those low interest rates may not be appropriate for china as a result china may experience inflation because it is tied to u.s. monetary policy. fixed exchange rates between countries tend to transmit both good and bad policy between those countries and take away the independence that individual countries have to manage their own monetary policy. yet another issue with the gold standard has to do with

speculative attacks. normally, a central bank with a gold standard only keeps a fraction of the bold necessary to back the entire money supply. the bank of england was famous for keeping a thin film of gold. british central bank only kept a small amount of gold and it relied on their credibility to stand by the gold standard under all circumstances so that nobody challenged that about that issue. if for whatever reason the markets move confidence in your willingness or commitment to maintaining that gold standard relationship you can get a stake of attacked. this is what happened in 1931 to the british. in 1931 for a lot of good reasons, speculators lost confidence that the british pound would stay on gold so just like a run on of bank they brought their pounds to the bank

of england and said give me gold. won't take long before the bank of england is out of gold because they didn't have the goal they needed to support the money supply and there was essentially had to leave the gold standard so there was a lot of financial volatility created by this attack on the gold standard. there's a story told that a british official treasury official was taking a bath. and aide came running in saying we are off the gold standard and he said i didn't know we could do that. but they could and they had to. they had no choice because there was a speculative attack on the pound. moreover in relation to this as we saw in the case of the united states the gold standard had plenty of financial panic associated with it. financial stability was not always assured by the gold standard. and finally one last word on the gold standard.

one of the strengths people fight for the gold standard is it creates a stable value for the currency. creates stable inflation and that is true overlong periods. for over a shorter periods maybe five to ten years, you can actually have a lot of inflation, rising prices or deflationary, falling prices in a gold standard and the reason is in a gold standard the amount of money in the economy varies according to things like gold strikes. for example if the united states gold is discovered in california the amount of gold in the economy goes up and will cause inflation whereas if the economy is growing faster and there's a shortage of gold that would cause deflations over shorter periods of time you frequently had both inflation and deflation. over very long periods of time, decades, prices were quite stable. this again was a significant concern in the united states.

there's a famous figure with a good public speaker, william jennings bryan, three time democratic candidate for president. in the latter part of the nineteenth century there was a shortage of gold relative to economic growth and since there wasn't enough gold the money supply was shrinking relative to the economy, the u.s. economy was experiencing a deflationary. prices were gradually falling over this period. this caused some problems and the people who were most concerned about it work farmers andere farmers and other agricultural related occupations. have a mortgage that caused fixed payment of $20 a month that amount of money have to pay

is fixed but how do you paid that? pay and by growing your crops and selling the crops that market. if you have a deflationary going on that means the prices of your corner or cotton for gra or cot falling over time. deflationary cause of pressure on farmers as the prices were going down and as their debt payments remained unchanged. and so farmers were squeezed by this decline in crop prices and they recognized this deflationary was not an accident and inflation was being caused by the gold standard. william jennings bryan ran for president and his principal platform was the need to modify the gold standard. he wanted to add silver to the

metallic system so there would be more money circulation and more inflation. he spoke about this in the usual very eloquent way of nineteenth century or raiders. he said you shall not press down upon the brow of labor this crown of thorns. you shall not crucify mankind upon a cross of gold. and again what he was trying to say is the gold standard is killing honest hard-working farmers who are trying to make their payments to the bank and find the price of their crops going down over time. the gold standard also created problems and again was a motivation for the founding of the federal reserve. in 1913 after all the study, congress passed the federal reserve act which established the federal reserve which opened in 1914.

there's a picture here which hangs in the fed of president woodrow wilson signing the federal reserve act in 1914. president wilson viewed this as his primary most important domestic accomplishment in his first term. so again, one essential bank, federal reserve called on the newly established fed to do two things. serve as lender of last resort and try to mitigate the panics that banks were experiencing every few years. and secondly to manage the gold standard that is to take the sharp edges off the gold standard to avoid sharp swings in interest rates and other macroeconomic variables. that was the objective of the federal reserve. interestingly the fed was not the first attempt by congress to create a central bank. there had been two previous

attempt. one of them suggested by alexander hamilton and the second later in the nineteenth century. in both cases congress that the central bank died. basically the problem was there was a lot of disagreement between what today we would call main street and wall street. the folks on main street could include farmers for example, feared that the central bank would be mainly an instrument of the money interest and new york and philadelphia and would not represent the entire country. would not be a national central bank. both the first and the second attempts at creating a central bank failed for that reason. woodrow wilson had a better idea. he tried a different approach. what he did was he created not just a single central bank in

washington but created 12 federal reserve banks located in major cities across the country. and so the picture shows 12 federal reserve districts that we still have today and each one has a federal reserve bank in it and then a board of governors which oversees the whole system is in washington d.c.. notice by how many black dots are to vote right. in 1914 most of the economic activity was the eastern part of the country and now it is much more even but reserve banks are in the same location as 1914. the point here, the value of this structure was again creating a central bank where everybody in all parts of the country would have a voice and where information about all aspects of the national economy would be heard in washington and that is in fact still the case

when the fed makes monetary policy. it takes into account the views of the federal reserve banks around the country and therefore we have a national approach to making policy. so the fed was established in 1914 and for a while life was not too bad. the roaring '20ss, the charleston, i think. life magazine. never heard of that. a very famous magazine for a long time. anyway the 1920s, so-called roaring 20s was a period of great prosperity in the united states. the u.s. was dominant economy in the world at that time because most of europe was in ruins from world war i. there were lots of new inventions. people gather around the radio and automobiles became much more

available. there was a lot of new consumer durables and economic growth during the 20s. that was the period of prosperity particularly in the united states and the fed had time and established its procedures. in 1929 world was hit by the first great challenge for all u.s. economic policymakers which was the great depression. the u.s. stock market crashed in october 29th, the financial crisis of the great depression was the u.s. phenomenon it turned global.

the most damaging was the large austrian bank that collapsed in 1931 and brought with it many other banks. it was a global phenomenon. their economy contracted sharply and the depression lasted for what seems an incredibly long time from 1929 and ended when it ended the war in 1941 after pearl harbor. here are some facts about the depression and important to understand how deep and sir the episode was, here's the stock market, and october of 1929, the climb in stock prices not surprisingly, the crash that was made famous by many writers including john kenneth ballburg and others who host stories about brokers jumping out of windows and all those other

things. was one you to take from this picture is the crash of 29 was only the official -- the first step in a more serious decline. you see how stock prices kept falling. by mid 1932 stock prices had fallen an incredible 85% from their peak. this was much worse than a couple bad days in the stock market. the real economy, non-financial economy suffered very greatly. the left-hand picture shows growth in gdp. if the bar is pointing up it is a gross period going down. in 1929 the economy grew by 3% which is growing substantially but you can see from 1930 to 1933 the economy contracted by large amounts every year. it was an enormous contraction

of gdp close to third. at the same time the economy was experiencing deflation. deflation is falling prices. as you see from the right picture, in 1932 prices fall by 10%. if you are a farmer in the twenty-seventh century, in 1932 when crop prices the dropping by half or more you have the same payment to the bank for your mortgage. as the economy contracted unemployment soared. we did not have the same survey of individual households in the 1930s we have today is so these numbers are estimated. they are not precise numbers but as best we can tell at its peak

unemployment came close to 25% in the early 1930s and you can see the light blue line is the recession period. even at the end of the 30s, before the war changed everything, unemployment was still around 13%. so unemployment rose tremendously. bank failures as you might guess with all that was going on a lot of depositors ran on their banks. the picture on the right shows the number of bank failures each year. you can see an enormous spike in the early 30s in number of failures. what caused this colossal calamity? i would reiterate it was not just the u.s. problem but a global problem. one country that had a worse depression than the united states was germany. that lead to more or less

directly to the election of hitler in 1933. so what happened that caused the great depression? this was a tremendously important subject and received a lot of attention as you might imagine for economic historians. as often is the case for large events there are many causes. i mentioned a few here. the repercussions of world war i. problems with the international gold standard which was being reconstructed and a lot of problems after world war i. the famous double in stock prices in the 1920s and the financial panic that spread through the world. there are a number of factors that created the depression. but the one i want to focus on here eager to let me say one more word before turning on. part of the problem was

intellectual rather than policy per se. at the time of the 1930s there was a lot of support for approach for thinking about the economy called the liquidation theory. the idea behind it was the 1920s was too good a time. the economy expanded too fast. there was too much growth and credit extended. stock prices went too high. what you need when you have a period of access is a period of deflation. a period when all the excess is squeezed out so that was that point of view that the depression is unfortunate but necessary. we have to squeeze out all of the excess debt accumulated in the economy in the 1920s. there's a famous statement by andrew mellon who was hoover and secretary of the treasury. liquidate waverly person will liquidate stocks, liquidate farmers, with with a realistic. sounds hard and it was. what he was trying to convey is we have to get rid of all the

excesses of the 20s and bring the country to a more fundamental, sound economy. for what i want to get into in the last few minutes is what was the fed doing during this period? unfortunately the fed met its first great challenge in the great depression and it failed. both on the monetary policy side and on the financial stability side. on the monetary policy side, basic bottom line here is the fed did not ease monetary policy the way you would expect it to and period of the recession. for a variety of reasons because it wanted to stop stock market speculation and wanted to maintain the gold standard, because it believed in liquidation, the fed did not ease monetary policy at least not very much and so we didn't

get the offset to the decline that monetary policy could provide. what we saw was sharply falling prices. you can argue about causes -- when you see 10% decline in the price level you don't know monetary policy is too tight. so deflationary was an important part of the problem because again, it bankrupted farmers and others who rely on the sale of products to pay fixed that. to make things even worse as i mentioned before a few have a gold standard with fixed exchange rates than the fed's policy essentially transmitted to other countries which also essentially therefore came under excessively tight monetary policy and that contributed to the collapse. as i mentioned one reason the fed kept money's tight was it

was worried about a spike of attack on the dollar. in 1931 the british faced that situation. the fed was worried there would be a similar attack that would drive the dollar off gold. preserve the gold standard and raise interest rates rather than lower them by keeping interest rates high that would make u.s. investments attractive and prevent money from flowing out of the united states. that was the wrong thing to do relative to what the economy needed. in 1933 franklin roosevelt abandoned the gold standard and suddenly market policy became less tight and there was a powerful rebound in the economy in 33-34. the other part of the fed responsibility was to the lender of last resort. once again, the fed did not meet its mandate. responded inadequately to the bank runs, your allowing

essentially this tremendous decline in the banking system as many banks failed. as a result, bank failures left the country. very large fraction of the nation's banks failed. almost 10,000 banks failed in the 30s. that continued until insurance was created in 1934. why did the fed not more aggressively lend to these failing banks? in some cases the banks were insolvent, wasn't much could be done. they had made loans in agricultural areas and loans were going bad because of the prices in the agricultural sector. part of it was the fed appeared to some extent to agree with the liquidation this theory which said there is too much credit. we are overbank. lead the system contract. that is the healthy thing.

that was unfortunately not the right prescription. of course in 33, franklin roosevelt came into power. roosevelt had a mandate to do something about the depression. he took a variety of actions. he was very experimental. some of those actions were quite unsuccessful. for example, something called the national recovery act required -- tried to fight deflationary by requiring firms to keep their prices high. that wasn't going to help without a money supply. a lot of things roosevelt did didn't work so well but he did two things which i would argue did a lot to offset the mistakes, problem is the fed created. first was in 1934 the establishment of deposit insurance, the fdic. now if you were an ordinary depositor and the bank failed you still got your money back

and therefore there was no incentive to run on the bank. in fact once deposited insurance was established we went from literally thousands of bank failures to zero. it was an incredibly effective policy. the other thing fdr did although to a lot of smoke when doing it was he abandoned the gold standard and by abandoning the gold standard he allowed monetary policy to be released and allowed expansion of the money supply which ended the deflationary and lead to a powerful short-term rebound in 33-34. the two most successful things roosevelt did were essentially offsetting the problems that the fed created or at least exacerbated by not fulfilling its responsibilities. so what are the policy lessons?

it was a global depression, had many causes. the whole story requires you to look at the whole international system. but policy areas in the united states as well as abroad played an important role. in particular the federal reserve failed in its first challenge in both -- both parts of its mission. it did not use monetary policy to prevent deflation and collapse in the economy. it failed its economic stability function. it didn't adequately perform its function as lender of last resort allowing many bank failures and resulting contraction in credit and money-supply. in that respect the fed did not fulfil its intended mission. these are key lessons. i want to keep these in mind as we continue how the fed responded to the 2008-2009 financial crisis which we will be getting to the beginning of

next week. next time on thursday we will review developing central banking, and spend time on the lead up to the crisis in 2008 and we will begin to see how the history of central banking explains how the federal reserve responded to this most recent and severe crisis. i will be happy to take questions on the lecture. >> you mentioned saving -- [inaudible] >> like increasing margin and take any nationality. >> that is a good question.

>> the mistake we made about the stock market, excessively priced and there was evidence for that. attack it solely by raising interest rates without attention to the effect of the economy. by raising interest rates they wanted to bring down the stock market and succeeded but the side effect was it also had major impact on the economy as well. i think what we have learned about price bubbles is they are dangerous and we want to address them if possible but where you can address them through financial regulatory approaches is a more pinpoint approach than raising interest rates for everything. margin requirements are looking at the variety of practices. there are a lot of very risky practices by brokers. the equivalent of day traders.

every paper boy had a tip for you. there were not many checks and balances on trading or who could make a trade and what margin requirements were. it is a good question. the first line of attack should have been more focused on bank lending the personal financial regulation, functioning the exchanges. [talking over each other] >> everything we know about monetary policy -- why is there still an argument for returning to the gold standard and is it possible? >> the argument has two parts.

one is desire to maintain, quote, the value of the dollar. desire to have very long run price stability. the argument is paper money is in fairly -- inflationary. to some extent over a long period of time but from a year to year basis it is not true. it is helpful. the other reason gold standard advocates want to see return to gold is it removes discretion. doesn't allow central bank with monetary policy to booms and busts, and the gold standard, better not to give flexibility to central-bank. those of the arguments. i think the gold standard would

not be feasible for both practical reasons and policy reasons. on the practical side, the simple fact it is not enough gold to meet the needs of a global gold standard and achieving that much gold would be expensive. costa lot of resources. more fundamentally than that the world has changed so the reason the bank of england could maintain the gold standard even though it had small number of gold reserves was everybody knew -- their first, second, third and fourth priority was bold and no interest on any other policy objective. once there was concern that bank of england might not be fully committed, there was a speculative attack that drove the law bowl. economic historians argue after world war i the labor movement

became much stronger and there was a lot more concern about unemployment. and business cycles. in the modern world of the commitment to the gold standard would mean we are swearing the matter how bad unemployment gets are going to do anything about it as monetary policy. if investors have 1% batch of that we would follow that promise, take out bolt and would be a self-fulfilling prophecy. we have seen that with various fixed exchange rates that have come under attack during financial crises. i understand the impulse but if you look at actual history you will see that the gold standard didn't work that well. it worked poorly after world war i, there was a good bit of

evidence that the gold standard was one reason the depression was so deep and long and a striking fact is they left the gold standard early and gave themselves flexibility and monetary policy recovered more quickly than countries that stayed on gold's to the bitter end. >> president roosevelt -- and the gold standard to help that inflation and i believe in 1930-1937 or 1941, the recession -- we pushed out of the recession, things that we need to be careful of and possibly --

the great depression -- >> the great depression was two recessions. there was a sharp recession in 2933 from 33 to 37. in 37-38 there was a second recession that was not quite as serious but still serious. it would take awhile to go through the discussion but there was controversy about it but one of view that was advanced early on was came from premature tightening of monetary fiscal policy. in 37-38, there was roosevelt under a lot of pressure to reduce budget deficits and so on, type in fiscal policy quite a bit and the fed worried about inflation and tight monetary policy. i don't want to claim -- lot was

happening. early interpretations were the reversal in policy too soon prevented the recovery from proceeding faster. talk about lessons later on and if we accept the traditional interpretation it is that we need to be attentive to where the economy is or move quickly to reverse the policies helping the recovery. >> what we sought today and other historical trends, after an economic slump the recovery often -- [inaudible] -- i was wondering do you think it is common for unemployment remained

at high levels? hand by criticism start off premature and how do you address these concerns in the political environment in the short-term fixes? >> let me just comment that the depression was a sort of extraordinary event. there were many declines in economic activity in the nineteenth century but nothing quite as deep or long as the great depression. the high unemployment that lasted from 1929 until world war ii was unusual. we wouldn't conclude that was a normal state of affairs. more generally there is some research that suggests that following a financial crisis it may take longer for the economy to recover because you need to restore the health of the financial system and that might

be one reason the recovery, the most recent recovery is not proceeding faster than it is. it is still an open question. a lot of discussion about the research as well as discussion that might underlie the affect that is out there. it is not always the case. if you look at recessions in the postwar period in the united states you see very frequently that recoveries take a couple years. but -- in fact very sharp recoveries typically -- recession are typically followed by a faster recovery. that is the pattern of the postwar period. what may be different about this episode and this is a subject of debate, is that unlike the other recessions in the postwar period this was related to and triggered by a global financial crisis so it may be that it will

take longer. already taking longer for the economy to recover. again, a lot of issues to resolve. books last question. anyone else? melanie. [inaudible] >> war global cooperation for banks to have -- [inaudible] >> you sent me a perfectly for my lecture next week. i talked about how the fed and central banks cooperate. they continue to cooperate. one of the problems in the depression was bad feelings left over from world war i. in the nineteenth century there was a reasonable amount of

cooperation among central banks but in the 1920s germany was facing reparations, france and england and the u.s. bickering about more debts and so the politics was quite bad internationally and that impeded the cooperation of central banks. the other thing to say is international central bank cooperation is even more important with fixed exchange rates. so you have fixed exchange rate in the 20s because of the gold standard. that meant monetary policy in one country affected everybody. that was certainly a case for more coordination. didn't get it. at least today we have flexible exchange rates which can adjust and tends to insulate other countries to the effect of monetary policy in a given country so that reduces the need for coordination but there's still a need for coordination. this has been great and i will be back on thursday.

thank you. [applause] >> we are just about out of time at 2:00. i told my friends that the fed as we were setting this up, we thought we might have 15 minutes for questions and answer after the chairman, this is a little professor. once he gets up there he will have a good time and we will have q&a that will go on for a while. i'm delighted with that. great questions. wonderful questions. what i would like to ask you to do since we didn't have a lot of time for additional ones is to send me an e-mail with two additional questions you want to follow up on in two weeks. we will see you this thursday at 12:45. thank you very much. [applause] >> as the fed chair leaves u.s. senators are holding their weekly party lunch meetings. senators will be returning to

the floor at 2:15 eastern to continue debate on the small-business bill allowing small companies to raise funds from small investors over the internet and change regulations on small business going public. votes are scheduled on moving the bill forward at 4:00 eastern and we will have live coverage on c-span2. house budget committee chairman paul ryan released his budget plan for 2013 today and proposes to cut $5 trillion more than president obama's plan cutting medicaid and food stamps and telegrams and other programs president obama promise to protect. white house communications director dan piper says the plan is paid for by undermining medicare and the very things we need to grow our economy in the middle class. things like education, basic research and new sources of energy. the budget committee told the hearing on the plan wednesday. senate budget committee chair kent conrad says the spending limits agreed to in last summer at the budget control act served as the budget for fiscal year

2013. chairman conrads a republican plan seems to walk away from the deal agreed to last summer and will ultimately threaten the government shutdown. kent conrad will file the resolution for the senate budget for 2013 today. this is about 15 minutes. advance >> everybody ready? okay. why don't we begin. i am here to discuss the budget resolution that i will file in the senate later today. this resolution sets the spending limits for fiscal year 2013 at the levels agreed to by the congress and the president last year and set out in last summer's budget control act. it allows the appropriations committees to proceed with their work in drafting bills for next year and it ensures the senate will have the tools to enforce those spending limits that we agreed to on a bipartisan basis. i want to emphasize that we do

have a budget. it is the law of the land. it was passed last year. is in place. those who say we do not have a budget have either failed to pay attention to what they voted on or they are deliberately trying to mislead the public. the budget control act was passed by the house of representatives. it was passed by the united states senate on an overwhelming bipartisan vote. it was signed into law by the president. it is now the law of the land. and it established the key component of the budget for both 2012 and 2013. here is the language from the budget control act itself. it is very clear the budget control act is intended to serve as the budget for 2012-2013.

it states and i quote, for the purpose of enforcing the congressional budget act of 1974 through april 15th, 2012, the allocations, aggregates and levels in subsection be 1 show apply in the senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012. that same language is repeated for 2013. in many ways the budget control act was even more extensive than a traditional budget resolution. it has the force of law. unlike the budget resolution that never goes to the president. all of you know a budget resolution is purely a congressional documents. the budget control act is a law. number 2, it sets discretionary

caps for ten years instead of the one year normally set in a budget resolution. number 3. it provided enforcement mechanisms including two years of resolutions which allow budget points of order to be enforced. and forth, it created a reconciliation like supercommittee process to address entitlements and tax reform. and it backed that process up with a $1.2 trillion sequester. so i think we can put to rest the claims that there is no budget in place or that we haven't enact a budget. a budget was enacted for last year and this year and next session in the budget control act of last year. last week we received cbos updated budget estimates which allowed me to complete work on the budget resolution for 2013.

the filing of this resolution was required under the budget control act. i filed a similar resolution for 2012 back in september. the budget control act is crystal clear that the spending limits in the resolution should be set at the level agreed to in the budget control act. again, here is the language taken directly from the law. it states not later than april 15th, 2012, the chairman of the committee on the budget shall find for the committee on appropriations, committee allocations for fiscal years 2012-2013 consistent with discretionary spending limits set forth in this act. it doesn't say at a muffled below the limits set forth in this act. it says at a novel consistent

with the limits set forth in the act. let's remember what the limits mean. under the budget control act, spending caps that are put in place in the law, discretionary spending is cut by nine hundred million below the cbo baseline for the next ten years and that is not including the sequester cuts. that is just the result of the budget control act spending limits. house republican friends now seem to be walking away from these levels even though they agreed to them just seven months ago. let's look at what they themselves said just last summer. here is what the house budget committee chairman said on the house floor on august 1st of last year. and i quote. what the budget control act has done is it has brought are two parties together. so i would just like to reflect for a moment that we have a

bipartisan compromise here. that doesn't happen all that often around here. i think that is worth noting. that is a good thing. what are we doing? we are actually cutting spending while we do this. that is a cultural. that is significant. that is a big step in the right direction. we are giving two thirds of the cuts we wanted, 66% in the right direction a lot better than going in the wrong direction. last summer our republican house colleagues were pleased to be getting 66% of what they want. on that basis they made an agreement. they shook on it. and they passed it as long. now they are threatening to walk away from their agreement. and it seems as though our house republican colleagues are on their own because at least so far the senate republican

leadership has agreed that we should keep to the spending limits that we agreed on just last year. here is what senate minority leader michel mcconnell said on the senate floor last month. and i quote. we have negotiated the top line for discretionary spending for this coming fiscal year. we already have that number. there is no reason for this institution not to move forward with an appropriation process that avoids what we have done so frequently under both parties for years and years either continuing resolutions or on the bus appropriations. the senate republican leader concluded i hope we can join together and do the basic work of government this year and 2 is in a timely fashion. i hope our house republican colleagues are listening. it is very clear we have a budget for this year and for

next. that budget is in law. and i am pursuant to that law filing the resolution in a senate today that provides numbers that the appropriators need to proceed with their work for the year. b.c. a sets the revenue level and mandatory spending levels for the year. again i hope our house republican friends are listening. we still must come together on a long-term plan to deal with the long term death threat. the short-term budget is in place. it is the law. it was included in the budget control act that they agreed to last summer. it provided for about $900 billion in discretionary spending cuts over the ten years of that agreement.

so the senate is proceeding with its business. i will be filing the resolution for 2013 today and we will be moving forward with appropriations bills at the levels that everyone agreed to this last year. hou year. house republicans, i hope, will do the same. if they fail to do so they will once again threaten to shut down the government and needlessly imperil the economic recovery. i am happy to answer questions that people might have. >> what the republicans say is we have this massive sequester coming along and what they are doing is cutting $19 million instead of seventy-eight billion and also have a reconciliation process that would take care of

the other cuts. you don't have any plan as far as i can tell. what is it? >> first thing that has to be done, first responsibility i have under the budget control act which is to file the resolution that sets the budget for this next fiscal year. i pe, doing that today. my legal counsel tells me that meet the requirement and responsibility for the budget committee to file a budget for this year by april 1st. a longer term plan as i indicated is what remains to be don, w that has to be done in some bipartisan way. and so i am hopeful that as we go through this year we will find a way to do that. i will go to mark up and provide an outline of what i think make sense as a long-term plan but

the april 1st deadline has been met. ght how do you deal with thing like the defense department and lockheed martin lot of this happening and suppliers going belly up? how do you deal with that when dealing with the deficit issue? >> what is provided that everybody agreed to last year sets the defense and nondefense fire wall for this coming fiscal year. that has been decided. the question is sequestration which tass s howngsct at the enf this year. that is what has to be addressed in a longer-term plan anti will

propose a longer-term plan at some point in the isanture. talking to colleagues about that now. the first requirement i hav>> first responsibility is to meet april 1st deadline set out in the budget control act and i do that today. ght conventional wisdom that there's not much fine to get that done? > havei p own belief -- we're i veryity nusual situation and people are kind of trapped e a what they know from the past. in the past we have dealt with budget resolutions. that is not what congress and the president did. instead we passed the budget control act.

who are no longer tied to the april 1st deadline. that deadline has been met by what we file here today. what we need is a long-term plan and that is a matter of judgment. when is it most likely that the two sides can come together? many of my colleagues say is most likely after the election. that maybe. i don't know the answer to that. what i do know is we met the requirements for a budget this year, what is still needed is a longer-term plan. and when i make the judgment that we are in the best position to move forward on that we will go to mark up.

>> on, house republicans predicted china's numbers. >> not that i know of. >> that would be the key point when the senate is forecast -- >> i really don't know what the key element is here. what i do know is the budget control act is off. i was given the responsibility to file a budget by april 15th. i have done that. the appropriators can now go to work. they are not restricted. that is the whole reason we have in the underlying budget control act, a requirement that i filed by april 1st so the appropriators can get started. >> you can see the rest of senator kent conrad's briefing on our web site and c-span.org. we're leaving it as senators

return from their weekly court lunches. senator conrad is offering remarks. democrats and republicans in last summer's budget control act. it allows the appropriations committees to now proceed with their work in drafting bills for next year, and it ensures that the senate will have the tools to enforce the spending limits we agreed to on a bipartisan basis. i want to emphasize to my colleagues that we do have a budget. those who continue to claim that we do not have a budget are either unaware of what they voted on last year or are seeking to deliberately mislead the public. the budget control act was passed by the house of representatives, it was passed by the united states senate and signed into law by the president. it is the law of the land, and

it established the key components of the budget for 2012 and 2013. mr. president, here is the language from the budget control act itself. it is very clear that the budget control act is intended to serve as the budget for 2012 and 2013. it states, and i quote -- "for the purposes of enforcing the congressional budget office of 1974 through april 15, 2012, the allocations, aggregates and levels set in subsection b-1 shall apply in the senate in the same manner as for a concurrent resolution on the budget for fiscal year 2012." it goes on to use that exact same language for fiscal year 2013. in many ways, the budget control act was even more extensive than

a traditional budget. it has the force of law, unlike a budget resolution that is not signed by the president. i think most members here know a budget resolution is purely a congressional document. the budget control act is actually the law. number two, the budget control act set discretionary spending caps for ten years instead of the one year normally set in a budget resolution. three, it provided enforcement mechanisms, including two years of deeming resolutions which allow budget points of order to be enforced. and four, it created a reconciliation-like super committee process to address entitlement and tax reforms, and it backed that process with a $1.2 trillion sequester. so these claims that we do not have a budget can now be put to

rest. by filing the deeming resolution provided for in the budget control act this morning, the budget levels have been set for next year. last week, we received c.b.o.'s updated budget estimates which allowed me to complete work on the budget-deeming resolution for 2013. the filing of this deeming resolution was required under the budget control act. i filed a similar resolution for 2012 back in september, and the budget control act is crystal clear that the spending limits in the resolution should be set at the levels agreed to in the budget control act. again, here is the language taken directly from the law. it states, and i quote -- "not later than april 15, 2012, the chairman of the committee on the budget shall file, for the

committee on appropriations, committee allocations for fiscal years 2012 and 2013 consistent with the discretionary spending limits set forth in this act." it doesn't say at a level below the limit set forth in this act. it says at a level consistent with the limits set forth in this act. and let's remember what these limits mean. under the budget control act, spending caps, discretionary spending is cut by about $900 billion below the c.b.o. base line over the next ten years, and that is not including the sequester cuts. that is just the results of the budget control act spending limits. let me make clear, mr. president, our house republican friends now seem to be walking away from these

levels, even though they agreed to them last year. let's look at what they said last summer. here is what house budget committee chairman ryan said on the house floor on august 1. "what the budget control act has done is it has brought our two parties together, so i would just like to reflect for a moment that we have a bipartisan compromise here. that doesn't happen all that often around here, so i think it's worth noting. that's a good thing. and what are we doing? we are actually cutting spending while we do this. that's cultural. that's significant. that's a big step in the right direction. we are getting two-thirds of the cuts we wanted in our budget, and as far as i am concerned, 66% in the right direction is a whole lot better than going in the wrong direction." so, mr. president, last summer, our house republican colleagues were pleased to be getting 66% of what they wanted. they made an agreement.

they shook on it. they ought to keep the agreement that they made. and it seems that our house republican friends are on their own because at least so far, the senate republican leadership has agreed we should keep to the speed limits that we took on just -- spending limits that we took on just last year. here is what senate minority leader mcconnell said on the senate floor last month, and i quote -- "we have negotiated the top line for the discretionary spending for this coming fiscal year. we already have that number. there is no good reason for this institution not to move forward with an appropriations process that avoids what we have done so frequently under both parties for years and years. either continuing resolutions or omnibus appropriations. i hope we can join together and do the basic work of government this year and do it in a timely fashion." mr. president, i hope so, too. i hope our house republican

colleagues are listening. we still must come together on a budget plan that addresses the long-term fiscal imbalances that we confront, but the short-term budget is in place and it is in law. it was included in the budget control act that everyone agreed to last summer. it provided for about $900 billion in discretionary spending cuts, so the senate is now poised to proceed with its business. i have filed the budget-deeming resolution for 2013, and we will be moving forward with appropriations bills at the levels that we all agreed to. i believe house republicans should do the same. if they fail to do so, they will once again threaten to shut down the government and needlessly imperil the economic recovery. mr. president, i thank my

colleagues for this time, and i yield the floor. the presiding officer: the senator from kentucky. mr. paul: i rise today in opposition to corporate welfare. at a time when our country is borrowing over a trillion dollars a year, i think it makes no sense to loan money back to countries we are borrowing from. for example, we borrowed $29 billion from mexico, and yet we're sending them back $8 billion of the money we borrow from them to subsidize trade. a lot of the subsidized trade goes to very wealthy corporations. you know, when 12 million people are out of work in the united states, does it make sense for the u.s. taxpayer to subsidize loans of major multinational corporations? the president's big on saying well, these rich companies need

to pay their fair share. well, why then is the president sending loans out to these very wealthy corporations and he's actually giving them their fair share of our taxpayer money? why is that occurring? i have often asked the question -- is government inherently stupid? well, i don't think government is inherently stupid, but it's a debatable question, but what government is is government doesn't get the same signals that your local bank gets. your local bank has to look at your creditworthiness, your local bank has to make a profit, your local bank has to meet a payroll. but once the government gets in charge of these things, katie bar the door. we don't have a good track record with government banks because they don't feel deep inside the same pain that an individual banker feels when he gives a loan. so we have got freddie mac and fannie mae losing $6 billion a

quarter of your money, and what do they want to do? they want to expand another government bank. so get this right. the fannie mae and freddie mac that are government banks are losing $6 billion a quarter. just recently, they wanted to give them multimillion-dollar bonuses. they said well, you have got to pay people if you want to keep good talent. you know, my question is how much talent does it take to lose $6 billion a quarter? i think there are people here today watching the senate that would take $19 million a year to run one of these government banks to have your only record be that you lose $6 billion a quarter, that's outrageous. and they are wanting to expand a new government bank and give money to very wealthy corporations that are making a profit. it makes no sense what over. now, jefferson said that government is best that governs least. now, what did he mean by that? he meant that he wanted government to be small because

government is inherently inefficient. government doesn't get the same signals. that's why we should only let government do the things that the private sector can't do. banking is something the private sector can do. we're not talking about starting new companies for the most part. we're mostly talking about subsidizing very wealthy multinational companies. with the start-up companies, though, let's look at the companies that the export-import bank is subsidizing. one of them is called first solar. now, you may have heard that a lot of these solar companies are big contributors to president obama. i wonder if that has something to do with them getting loans. but here is the loan that first solar gets from export-import. you know what? they get paid and they have a loan that says that they're going to make solar panels, and then who is going to buy the solar panels? themselves. so they made a deal with another company they own, and the taxpayers -- the taxpayer is

stuck financing a loan so first solar can make solar panels and then buy them from themselves. well, that sounds like a good deal. you get the government to subsidize a loan to buy your own product. who else were we subsidizing? we gave $10 million in loans to solyndra. you may have heard of solyndra. solyndra is owned by the 20th richest man in the united states who just happens to be a big contributor to president obama. coincidence? i don't know. guess who works for the department of energy. the -- solyndra's lawyer, her husband works for the department of energy, and he was apparently a big fan of these loans and a big fan of restructuring these loans. do you think people approving the loans should be related to the people getting the loans? robert kennedy jr. from the famous kennedy family, they got $1.8 billion. just so happens they are big supporters of the president politically also. how did they get the loan? somebody who used to work for

kennedy now worked in the loan department at the department of energy. it sounds like there might be a conflict of interest. this is a real problem, but this is a problem that's endemic to government banks. once you get the government get hold of the banks and once you let them make the loan decisions, they do it and they give the money to their favorites. so when one party is in charge, their favorites get it. when the other party is in charge, their favorites get it. the government shouldn't be in this business. these are large multinational corporations that can find loans for themselves. guess what? sometimes they are loaning money to other governments that then compete with our industry. we are loaning money to india, who we also owe billions of dollars, but then india subsidizes an airline that competes with u.s. airlines. it doesn't make any sense at all. but we continue to do things that are counterproductive, counterintuitive at your expense, and then we say well,

to keep good talent, we have got to pay these guys millions of dollars to run these government banks. the problem is government banks don't respond the way business does. they respond in a fashion where they don't really feel the pain. no one loses their job, no one loses a night's sleep over a government loan. when a bank loans you money, somebody has to make a profit and meet a payroll. it's different. the checks and balances of the marketplace. you don't need to have the government involved here. so there are a couple of questions we should ask before doing what the other side wantsd to do, they want to expand the size of this corporate welfare. they want more corporate welfare going out to multinational corporations. and in doing so, they want you, the taxpayer, to be on the hook for more money. so i would say we have to ask some questions. should we be dispensing loans based on political favoritism? should it matter if you're a big contributor to the president? should that matter in getting a

loan? i think that ought to be illegal if it's not immoral, it ought to be, it is immoral, it ought to be illegal, we shouldn't be doing that. the other question is, does it make sense to send billions of dollars to borrow it first from china or india and then send it back to them and say please buy our products with it? we borrow the money from them and send it back to the very same companies. it makes utterly no sense. by ask that the senate consider very seriously whether at a time we're running a trillion-dollar deficit it makes sense to be running profitable -- sub deciding large multinational corporations. i don't think so and i don't think the taxpayer thinks so. thank you mr. president, and i yield back my time. the presiding officer: the senator from michigan. mr. levin: mr. president, over the last several days, there has been an immense outpouring of concern about the so-called

jobs bill that the house has sent to us. and this outpouring should weigh upon us. it should make us question the speed and the lack of deliberation with which we are considering this house bill, and question the wisdom of just sending it back to the house if there is one amendment to it which is on the ex-im bank and hoping that somehow or other that investors are going to be protected in a conference instead of by the united states senate. what we are considering today should be done with great deliberation. we should take the time to get this right. the house majority leader suggested yesterday that those of us who are concerned about the house bill are -- quote -- "creating phantom investor protection issues" -- close quote. we did not create these issues. people who know far more about

capital markets than the house majority leader or myself or probably any of us have asked us to reconsider what we are poised to do. start with the council of institutional investors. this group's members invest a combined $3 trillion in our nation's capital markets. they include the nation's largest pension funds, university endowments and foundations. the council of institutional investors, an outside, independent, objective group that's sole purpose in life is to make sure investors are given sound opportunities and are not defrauded, they are warning us that rather than boosting investment in our economy, that we could frighten investors out of the market. they are asking us, they are pleading with us to reevaluate, and we should. and now next take a look at the letter from the current s.e.c.

chairman, mary shapiro to the banking committee last week. chairman shapiro issues a lengthy list of warnings about provisions in the house bill. she sums up her warnings this way -- quote -- "if the balance is tipped to the point where investors are not confident that there are appropriate protections, investors will lose confidence in our markets and capital formation will ultimately be made more difficult and expensive" -- close quote. that's precisely the opposite of the impact that thee she should wopt. we should listen to the institute of certified public accounts which warns us that the house bill would -- quote -- "create marketplace and investor confusion" -- close quote that dampens rather than strengthens investment in growing companies. and we should listen to the associations, or the association that represents

states securities administrators. what does that association do? they warn us that -- quote -- "congress is on the verge of enacting policies that although intended to strengthen the economy, will in fact only make it more difficult for small businesses to access investment capital" -- close quote. we should listen to the editors of bloomberg news, one of the most trusted sources of commentary on the markets who tell us that provisions of the house bill -- quote -- "would be dangerous for investors and could harm already fragile financial markets" -- close quote. now, mr. president, canny of us who lived -- canny of us who lived through the fearful days of the fearful crisis, days we wondered if the entire economy would crumble, should any of us vote to rush through this body legislation that threatens harm to fragile financial markets?

do we really want to live through that again? we should amend this flawed house bill so that we can create opportunity for american workers, companies, and investors, and not opportunities for fraudsters, boiler room hucksters, and con artists. we can do that and we should do that. one way to do that is to invoke cloture on the alternative that senators jack reed, landrieu, and i have offered and to begin debate and amendments on that alternative so that the senate's deliberative process can begin. if that cloture vote fails, the only remaining prudent alternative is to reject the cloture motion on the underlying bill so that the senate can begin, begin to deliberate and consider amendments to a bill that has aroused such concern among so many experts whose very

job it is to protect consumers. now, some may fear that by slowing a runaway train that they risk being portrayed as hostile to job creation or to small businesses. after all, how can we oppose legislation titled the jobs act? well, it takes more than a clever acronym to create jobs. and as the astonishing amount of concern among market experts tells us, this jobs act, this so-called jobs act, is not a jobs act. but an invitation to the kind of fraud that destroys jobs. the senate, the u.s. senate, is the place where care and deliberation are supposed to rule, and are supposed to rein in the excesses of haste and

incaution and i urge my colleagues to undertake that responsibility today. mr. president, i yield the floor and i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

quorum call:

quorum call:

quorum call:

mr. sessions: mr. president? the presiding officer: the senator from alabama. mr. sessions: mr. president, i would ask unanimous consent to be able to speak in morning business for up to ten minutes. the presiding officer: the senate is in a quorum call. mr. sessions: mr. president, i'd ask that the quorum call be dispensed with. the presiding officer: without objection. mr. sessions: and that i be allowed to speak as if in morning business for ten minutes. the presiding officer: without objection. mr. sessions: mr. president, i was surprised a bit, although you're never totally surprised in this body, when my democratic colleagues are saying this morning that something bad has happened because the historic budget that would change the debt course of america, that has been announced by congressman paul ryan and his house budget committee today, violates the budget control act. it spends a few billion dollars

less than what was capped in the budget control act. but the budget control act that passed, it did put a cap on spending a little over $1 trillion next year for discretionary spending only, that that $1 trillion-plus cap, they were reducing the spending by $10 billion or $15 billion or $19 billion in their proposed budget today. that this somehow violates the good spirit around here and is the wrong thing. but i would just say we all knew when that budget control act passed in the wee hours of the morning, at the 11th hour, the 59th minute before a government shutdown occurred, we knew it wasn't enough reduction in spending. it wasn't half of what experts have told us need to be reduced over the next ten years to put america on a sound debt path. we're on a disastrous debt path.

we're heading to the most predictable financial crisis this nation has ever face, because we are spending 40 cents per dollar more than we have. we're borrowing 40 cents of every dollar that we spend. borrowing it, just to maintain this href of spending. -- this level of spending. so the house made some changes, or made a proposal to reduce the spending level below the budget control act, and they also recognized that the $1 trillion or so in spending that was covered by the government control act, that is the discretionary spending is only a little over 40% of total spending. over half of the spending is in the entitlement mandatory spending category. they proposed under the budget control act nothing really there to make any changes. so the ryan budget proposed tow

spend $180 billion next year less than the president's budget that he submitted earlier this year proposed. and did the president's budget adhere to the b.c.a.? my colleagues, they're just mostly disheartened that the republicans would take the spending down below the level by about $19 billion or so under the budget control act numbers. but i didn't hear them complaining when president obama submitted his budget. you know what the president's budget did? it wiped out over half of the spending cuts in the budget control act. can you imagine that? we agreed on $2.1 trillion in spending reductions. $1 trillion of that was voted on explicitly, and $1.1 trillion was an automatic sequester, automatic cut in spending if the

committee didn't reach a long-term agreement. the committee didn't reach an agreement, so automatically $1.1 trillion in cuts were to be imposed. that's the current law. president obama's budget wipes it out. not only does he add, therefore, $1.1 trillion immediately to spending as a result of wiping out the sequester that we agreed on just last august, he adds another $500 billion in spending. his budget that he submitted just a few weeks ago calls for spending increases *f $1.-- of $1.6 trillion more than that was in the budget control act. and so my good friend, senator conrad, who chairs the budget committee, and our democratic leadership that are threatening a government shutdown because

congressman ryan and the responsible house budget committee proposed actually taking a few more billion dollars out of discretionary spending, they want to complain about that. i didn't hear them complaining when we had the most astounding event after the president signed the budget control act it, passed by both houses at the 11th hour, a compromise agreement, a compromise we all knew was not sufficient, five months later before the ink is hardly dry on it, he proposes to wipe it out. no wonder the american people don't trust congress. we say in august we're going to save $2.1 trillion. trust us. and we're going to raise the debt ceiling, so americans can continue to borrow at this extraordinary rate. but we're going to cut spending. we're going to raise it, but don't worry, we promised we'd cut spending. and the president of the united states within five months of

that agreement being reached submits us a budget that wipes out half of it. i'm amazed nobody's been talking about it. i've tried to raise the issue. and it just points out to me how silly it is that our colleagues here in the senate would complain about congressman ryan. the american people gave the republican a majority in the house of representatives. we are facing the most systemic debt threat this nation has ever faced, and they knew it. and they proposed last year and again this year an historic budget that would alter the debt course we are on, take us from unsustainability to sustainability, take us on a path that we would hope avoid a debt crisis. although we're so close to it, i'm not sure we can avoid it. hopefully we can. that we can avoid a debt crisis.

but our debt is tremendous. our individual per capita debt is $44,000 per man, woman, and child, greater than any country in europe, greater than greece. we're in the danger zone. clearly we are. so they propose this budget last year and again this year, and it laid out a plan. so what happened? the president of the united states calls congressman ryan and castigates him in a speech and he's sitting right in front of him. the senate democrats, who haven't produced a budget in three years because they're afraid to, because they haven't got the courage to lay out the tough choices that are going to be necessary to save this republic financially, they attacked congressman ryan and his house members for trying to do the right thing. it's unbelievable to me. i'm just amazed. and now we have them complaining

that he goes a little below the budget control act numbers. give me a break. does not anybody know what's going on here? the american people do. they gave a shellacking to a lot of the big spenders in the last election. surely we would have thought congress got the message. the house did. apparently the senate has not. senator reid, our majority leader, he said it would be foolish to have a budget. foolish to have a budget? the law requires us to have a budget. by april 1, we should have one in the committee. we're not going to be meeting before then. and we should have one passed in both houses by april 15. that's the law in the united states code. unfortunately, i guess we don't go to jail as a result of not passing one because we haven't passed one here for three

consecutive years. haven't passed a budget in three years. senator reid said it's foolish to pass one. why? i think he meant politically. it would be foolish for him to allow a budget to come to the floor where there's free debate and opportunity to offer amendments in large numbers, and not to debate the challenges and vote on them. senators in public, not in secret meetings. but in public actually vote on these issues that are important to america and be held accountable, and the american people can see how the choices are. because the choices are tough. it's not going to be easy to balance this budget. i'm telling you, i've seen the numbers. i'm ranking republican on the budget committee. i've sat down with my staff, and i wish i could say it would be easier than it is. it's not going to be easy. mr. president, this is a frustrating moment. i'm not really surprised. here we are going into the

summer, trying to deal with a financial systemic threat to america that admiral mullen calls the greatest threat to our national security. our debt. and we've done nothing about it. the house has. the republican leadership in the house has done their duty. they produced a courageous, thoughtful, responsible debt course change that will put us on the road to prosperity, not decline. their budget includes tax simplification and tax reductions even, while they are doubling the amount of savings that president obama achieves. the house budget, although it doesn't balance in ten years, and i wish it did, but it doesn't balance in ten years, but it adds half the debt in the next ten years that president obama's budget proposed. cuts it more than in half.

it puts us on a path. and in the out years, it's even more positive in its effect and clearly takes us out of this disastrous course we're on. so they should be congratulating for being honest and detailed. and speaking of details, why don't we see the democratic members of this senate lay out their budget plan? why not? last year, senator reid calls up the house budget so all can vote against it. so senator mcconnell called up the president's budget. every democratic member voted against that. senator toomey's thoughtful budget -- the presiding officer: the senator has used more than ten minutes. mr. sessions: mr. president, i would ask unanimous consent to speak for one additional minute. the presiding officer: without objection.

mr. sessions: so the net result was that the president's plan was brought up, voted down 98-0. they voted -- all democrats voted against the toomey plan, all of them voted against the house plan. they voted against everything. not one plan did they produce that they voted for, and that's the course we are on today, and i don't think that's a plan and a policy you can be proud of. i think it's unworthy of a party given leadership in the united states senate at this critical time in history. i thank the chair and yield the floor. a senator: mr. president. the presiding officer: the senator from louisiana. mr. vitter: mr. president, i have returned to the senate floor today to talk about what is a true crisis for many louisianans, many americans,

which is the ever-rising price of gasoline at the pump. this hits everybody in their tough, tough pocketbook in a horrible economy, and so it really is a true crisis for many american families all around the country. now, in this debate -- and it has been a significant national debate -- a lot of republicans say, well, president obama doesn't have a plan, doesn't have a policy to address the price at the pump. a lot of supporters of president obama say, well, no president can really have a significant impact, can determine the price at the pump. mr. president, i think both of those statements are equally wrong. i think the president, this administration, they do have a policy, they have made specific proposals, and it will -- would, if we enact it, have a significant impact on the price at the pump. it would just be the wrong sort

of impact. it would drive the price even higher than it is now, not help american families by stabilizing that price. i wanted to focus on one very specific, clearly laid out policy of president obama, and that is to increase taxes on oil and gas and energy producers, increase taxes on that product, which i think clearly is going to only drive up the price at the pump. mr. president, president obama has advocated this very consistently for a long time. he advocated as a united states senator. he laid it out as a central plank of his energy policy when he was originally running for president in 2008, and he has fought for it ever since, including it in every budget submission to congress. he's always advocated increasing

taxes on domestic oil and gas energy producers. to underscore this point, one of the president's biggest supporters in the u.s. senate, president menendez, has introduced this concept in the senate just yesterday. senator menendez introduced the repeal big oil tax subsidies act just yesterday which again does exactly the same thing as the president has long advocated. it increases taxes on that product. it increases taxes on those domestic producers. now, mr. president, i think the american people get it. now, we can argue about fairness, we can argue about other considerations, but in terms of the impact this is going to have on the price at the pump, i think the american people get it. it's economics 101. if you tax something more, you

tend to drive the price up in the market and you decrease supply. and again, that's economics 101. now, i could talk about the true facts of this with regard to energy companies, the fact that they pay an effective tax rate of about 41%, the fact that they account for 10%, enough revenue to cover 10% of our entire discretionary budget, that they are not undertaxed at all by any reasonable comparison, but i'm not going to focus on that because, mr. president, quite frankly i don't care about the direct impact on the companies. i care about the direct impact on louisianans, on americans, on consumers, on what so many middle-class, lower middle-class families are dealing with right now, that real crisis i talked

about that you face every time you go to fill up your car, and that is the burden of skyrocketing prices at the pump. that's what we should all be concerned about. as i said, i think it's pretty obvious, it's economics 101, that if you tax something more, the price at the pump, the price at the market goes up and you get less of it, but even if that weren't so obvious, we have history to look at it, and there is a very clear history lesson from the carter years when this came experiment was actually enacted. back then, in 1979, it was the windfall profits tax. you may remember that debate. that was actually enacted here in congress, here in washington. the crude oil windfall profits tax act. it was passed back then and it went into effect april 2 of

1980. again, same arguments, same policy. somehow tax treatment of these companies is unfair. somehow they are not paying their fair share even though the facts show otherwise, so we're going to increase the tax on those domestic energy producers. well, what happened? the first thing that happened is that the price at the pump went up. it went up significantly for several years. now, there is a lot going on in the world at the same time. i know folks will point to developments in the middle east and everything else, but that's what happened immediately following the enactment of that law. the price went up by about 50%, stayed there for several years. but let's look at other factors. you can argue about the impact of politics and developments in the middle east on price. what about things that shouldn't be so impacted by developments

in the middle east? what about things like domestic production and whether that increased or decreased? well, in fact, as a direct result of the windfall profits tax, domestic oil and gas production, energy production went down over that entire period, from between 3% to 6% if you look at the entire period of the tax, it went down. now, in this debate, everyone at least has paid lip service to the idea that we should be producing more energy here at home, and yet, in this historical example, in this experiment, increasing the tax on this product did what you would expect it to do, again from economics 101. it decreased that activity here at home. it decreased domestic production. what else did it do? well, the second big impact that

it had is increased our dependence on foreign oil. again, you can connect the dots. this is exactly what you would expect. you increase taxes on domestic production, you decrease that supply, and guess what? we're even more dependent on those unstable foreign sources that we want to get away from. that's exactly what happened in the jimmy carter experiment. he passed the windfall profits tax, and during the entire tenure of that tax, dependents on foreign oil increased significantly, between 8% and 16%. and then something that might be a little less obvious is impact on revenue. there were enormous promises made about the revenue, this windfall profits tax would bring in. well, at the beginning, it did

have that impact, but guess what? over time, that impact declined enormously down to actually zero net revenue increase by 1987. the tax was eventually repealed in 1988, but this impact on revenue went down to zero before that repeal, not because of the repeal. it went back to zero in 1987. this purple is what was promised. this purple is the increase in revenue that was promised and projected by president carter. this gray is what happened. sure, an immediate spike, and then guess what? domestic energy producers react. they do less activity here. you tax something more, you get less of it. we're more dependent on foreign sources. we drive out that activity, those jobs and that revenue. so a steady decline until it's

actually zero net additional revenue in 1987, leading to the repeal in 1988. so, mr. president, i would hope when we look at this proposal, i would hope first we focus on the american people, we focus on their plight every time they go to fill up their gas tank, ever-increasing prices, and our top goal is to give them relief. increasing taxes on that product, increasing taxes on domestic producers of energy is not going to give them relief. it's going to do exactly the opposite. every rule of economics says that. you tax something more, you get less of it. you increase the price in the market, and history proves that. a very clear lesson from the carter years that some folks on this senate floor, president obama, others want to repeat.

this is not good policy if we truly want to help the american people with their everyday struggle of the price at the pump. i think what's going on is a completely different agenda. folks are so set against fossil fuel, folks want to advantage newer forms of energy so much that they're willing to resort to actually increasing the price at the pump to do it. that's exactly what secretary of energy chu advocated in late 2008 right before he was appointed to his present position. let's not do that. the american people can't afford it. they need relief, they need it now. an american president can make a difference. unfortunately, this one has a policy that would make a difference in the wrong direction, taxing something more increases the price, produces

less of it. we need to be doing the opposite. we need to be increasing domestic supply, bringing down the price, helping the american people right in their everyday struggles with their family budgets with how to manage their scant resources in a very, very tough economy. thank you, mr. president. i yield the floor. a senator: mr. president. the presiding officer: the senator from washington. ms. cantwell: mr. president, i rise to talk about the cantwell-johnson-graham amendment that's going to be voted on shortly in this series of votes that we're going to be having, and to urge my colleagues to support this important amendment that would reauthorize the ex-im bank for four years until 2015, and the current authorization is set to expire in may of this year so it's very urgent that we pass this authorization, and it would increase capacity for the bank because there is demand.

the ex-im bank people may know or maybe not know supplies credit stability to foreign purchases of u.s. product where those purchases have limited access to the -- the purchaser has limited access to private sector capital due to political risk or instability or limited access to capital, and it's something we've had since 1934. so this program has been away -- a way for u.s. manufacturers, small businesses, a variety of u.s. companies to make sure that they get sales of their products in international markets. so it's been an incredibly important tool. somebody called it one of the most important tool boxes in u.s. economic capacity to help our economy. in 2011 the bank supported over $41 billion in u.s. exports from over 3,600 u.s. companies and it supported nearly 290 knew

export-related jobs in america. so that's a very, very big impact and according to the congressional budget office, the reauthorization of this program will help reduce the deficit by over $900 million over the next five years. that's right, a program that's run by the government that actually helps our deficit be reduced. and that is because of the amount of money that is made from these transactions and returned to the treasury. so i want to thank my colleagues, senators johnson, graham, shelby, warner, schumer, brown, hagan, coons, akaka, kirk, durbin, mccaskill and casey for all sponsoring this important amendment. the reason we're out here is to make sure that our colleagues know this is the 25th time this legislation has -- has been up for extension since its original executive order establishing it. i'm looking at the record here.

1983, passed by voice vote on the reauthorization. passed by unanimous consent, 1992. again passed by unanimous consent, many of the times. so here's a program that for over the last several decades has been passed by unanimous consent and yet all of a sudden this legislation is being stalled or held up, and what i want to make sure my colleagues know is what an important tool it is for job creation and why it's so important that we not take the capital that's left over in the ex-im program and delay it because what's going to happen if we don't get this reauthorization done right away is that they're going to stop the activity that is actually helping job creation in the united states. so as you can see here, in 2011 the total number of jobs that it

helped support was nearly 300,000 jobs. so that's a pretty good impact by basically saying as a program of a financing of last resort, the united states is going to make sure that u.s. companies can get their product sold in various marketplaces. that's why the chamber of commerce, the national association of manufacturers, many companies and organizations are supporting this legislation. and as an added bonus as i said, it is generating revenue to the u.s. economy. in fact, it has generated a lot of money, $3.7 billion for u.s. taxpayers since 2005, and i know some of my colleagues on the other side of the aisle think the program could have more transparency. i'm all for more transparency for the ex-im bank but if one of my colleagues can figure out with more transparency how to get more than $3.7 billion to

the u.s. treasury out of a government program, i'd love to hear about it. because this is a program that has worked successfully. so let's talk about some of the places that these jobs were created, i mean actually supported and helped sustained. in pennsylvania, in 2011, $1.4 billion in export products were helped to be purchased by the ex-im bank and supported over 9,000 jobs in the state of pennsylvania. so there is help and support for those small businesses, those manufacturers in pennsylvania that want to access international markets, but there's purchasers just like with the s.b.a. program or other finance programs needed to help and and -- needed help and support in getting the financing done. let's look at massachusetts, another robust state. $566 million in exports in 2011. that was over 4,000 jobs supported through this ex-im program. in my state there's many jobs,

and you can see from looking at the list of the companies that got support through this, you have obviously aviation has done very well with having this kind of financing, particularly competing in a big global market where other countries have this kind of financing tools. but you also have a lot of small businesses. you have clean tech, you have agriculture, you have seafood, a lot of different companies. texas, probably another state that's been a huge winner in having the ex-im program, 35,000 jobs supported by the ex-im bank in texas, and over -- almost $5 billion, $4.9 billion of business that was done in the state of texas through this program. so my colleagues can see that this is a very, very viable and important program to get reauthorized. so i know some people think that we ought to hold it up and some

are saying let's just stop the program altogether. stop it and get rid of it even though it's been around, it's been a tool, it's been authorized many times on unanimous consent, but now all of a sudden some people think that this program hasn't served the american public and the american job economy very well. i would differ with them. it has served us very well. another example, florida. it has in 2011 helped support $1.1 billion of florida product sold in international markets. it helped support over 7,600 jobs in that state. so again, a big boost to that economy. let's look at north carolina. another -- north carolina, thank you. north carolina, it has helped support over 3,300 jobs and over $456 million in exports. what i also like about this is

for the first time with this legislation the textile industry is going to get a member of the export-import bank so that is to further help export products from places like north carolina and south carolina get access to the marketplace, and to make sure that they're being competitive on an international basis. and the last chart, ohio, which is over $398 million and 2,888 jobs. so all of these are important jobs for our economy, and as i said earlier, this program is expiring in may, and so if we fail to reauthorize it now, what we're going to run into is the export bank cutting off those types of businesses, those types of jobs in the very near future because they're almost at their capacity for this year.

so instead of saying washington or florida products or ohio products or pennsylvania products ready for sale, basically what we're going to say is u.s. products in a warehouse waiting for opportunity. we're basically going to say that the door is basically shut on selling these products because we haven't gotten our job in making sure the export program is reauthorized. so i hope that my colleagues will realize that around here, very few things are getting done very efficiently. there are lots of things being held up. and the u.s. economy is paying the price for it. if we can't push something like the ex-im bank through this process, that again, has been authorized and reauthorized so many times either by u.c. or voice vote and all of a sudden we're going to turn it into a political football, then the american economy is going to pay

the price for that. and so i urge my colleagues to help us get this cantwell-johnson-graham amendment passed out of the senate today, and on its way to the house so that we can expedite the process of making sure that we don't have a sign across america, "u.s.a. products stuck in warehouse." instead we have a sign that says "u.s. exports on the gain, the united states making great headway and selling great products and services around the globe." so i know my colleagues earlier today were saying, well, you know, there are some things that people want to change. the amendments people want to offer in this legislation are people who want to stop this program. this legislation has transparency, it has improvements that have been recommended on market-based rates and it puts the united states in a competitive advantage to make sure that we

are competing in a world in which export market opportunities have grown something like 500 times in the last 25 years. so if we want to be in the jobs game, we've got to get our products overseas. the ex-im bank will continue to help us do that. i urge my colleagues to support the cantwell-johnson-graham amendment. a senator: mr. president. the presiding officer: the leader. mr. reid: as the senate is aware there are differences between the senate and the house work truct on the stock act. this legislation limits trading by members of congress. it certainly would have been my preference to work out these differences between the two houses through a conference committee. i know that's the preference of the republican leader. that's the usual practice. but we've been advised that there would be objection to going to conference by consent. tried it and tried it, we can't break through that. that means it would take filing

and adopting three separate cloture petitions over the course of weeks to get to conference. that is if you could be successful on the first two. but we need to address this issue more quickly. because otherwise we don't address it at all. and we need to address it. mr. president, as a consequence i'm going to in a few minutes file cloture on a motion to concur with the house bill on the stock act. it's my hope that we can revolve this matter expeditiously, thereby make clear congress' intent to prohibit insider trading by members of congress. mr. president, i now ask the chair to lay before the senate a message from the house with respect to 2 -- s. 2038. the presiding officer: the chair lays before the senate the following message from the house. the clerk: resolved, that the bill from the senate s. 2038

entitled an act to prohibit members of congress and employees of congress from using nonpublic information derived from their official positions for personal benefit and for other purposes do pass with an amendment. mr. reid: i move to concur in the house amendment to s. 2038. the presiding officer: the clerk will report motion to concur. the clerk: the senator from nevada mr. reid moves to concur in the house amendment to sempletd 2038. mr. reid: i ask the yeas and nays on that motion mr. president. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. mr. reid: i have a cloture motion at the desk. the presiding officer: the clerk will report cloture motion. the clerk: cloture motion, we the signed senators in accordance with rule e of the standing rules of the senate hereby move to bring to a close the stop trading on

congressional knowledge act signed by 22 senators as follows --. mr. reid: i ask for the reading of the names be waived mr. president. the presiding officer: without objection. mr. reid: i move to concur in the house amendment to s. 2038 with an amendment. the presiding officer: the clerk will report amendment the motion. to concur. the clerk: mr. reid: moves to con tur -- i i mr. reid moves to concur this the housel amendment. mr. reid: i ask for the yeas and nays on my motion. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. mr. reid: i have a second-degree amendment at the desk. the presiding officer: the clerk will report the amendment. the clerk: the senator from nevada mr. reid proposed an amendment numbered 1941 to amendment numbered 1940. mr. reid: i have a motion to refer the house message to the homeland security committee with instructions to report back

forthwith an amendment. the presiding officer: the clerk will report. the clerk: the senator from nevada mr. reid refers to refer the house message on s. 2038 to the committee on homeland security and governmental affairs with amendment numbered 1942. mr. reid: i ask for the yeas and nays mr. president. the presiding officer: is there a second sufficient? there appears to be. the yeas and nays are ordered. mr. reid: i have an amendment by instructions which has also been filed at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada mr. reid proposes amendment numbered 1943 to the instructions with the motion to refer the message on s. 2038. mr. reid: i ask for the yeas and nays. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. mr. reid: i have a second-degree amendment to my instructions which is also at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada mr. reid proposes an amendment numbered 1944 to

amendment numbered 1943. mr. reid: i ask unanimous consent that the mandatory quorum under rule 22 be waived with respect to the cloture motion that i've just filed. the presiding officer: without objection. mr. reid: i now suggest the absence of a quorum. the presiding officer: the clerk will call the roll. would the senator -- mr. reid: i withdraw that. the presiding officer: the senator withholds his suggestion. the senator from rhode island. mr. reid: i ask consent that senator reed be recognized for two minutes, senator landrieu for two minutes. do we need time on this side? i ask consent that those two senators be recognized. the presiding officer: without objection. mr. reed: i thank the majority leader. mr. president, i rise today to speak on the reed-landrieu-levin substitute amendment.

this legislation corrects glaring defects in the hous house-proposed bill on so-called jobs bill. it protects investors. it allows capital formation but it does not do that at the expense of investors. we have taken all the major provisions of the house bill with respect to the i.p.o. on-ramp. we've not deleted them. we've improved them. we've lowered the -- the threshold in terms of the size of the business so that these i.p.o. on-ramps can be designed for small businesses, not for businesses with a billion dollars in annual revenues. we've gone ahead and we've looked at the aspects of regulation a in the house and we agree there should be an increase in the limit from $5 million to $50 million but we've made improvements. for example, the house bill will allow people to solicit these securities under regulation a without ordering the financials. i think at a minimum the

investing public should have ordered financials to rely upon. we have taken provisions with respect to the ability to go dark, the ability to stop reporting if you have 2,000 or less record owners. we've raised the limit from the existing one to 750 beneficial owners but we haven't opened it up broad some that large companies, well-known companies could suddenly stop reporting on a routine basis their financial information. we've looked at the reg d offerings in terms of what is a private offering versus what is a public offering and we've given the securities and exchange commission the ability in this age of the internet and of twitter to make adjustments so that a private offering under reg d won't be compromised because it gets into the media through twit, et cetera, but we haven't opened it up to general slis tai as the house -- solicitation, as the house bill does. and, by the way, our bill actually tries to create jobs,

not just opportunities to raise funds through wall street. with senator landrieu's help, we have strong small business provisions in there. we include the ex-im bank provisions of senator cantwell. we've worked very closely with senator merkley and senator bennet and senator brown of massachusetts to include a crowd funding provision which is much superior. if we do not achieve cloture, we will see, by default, a bad house bill on its way to become law. the presiding officer: the senator has used two minutes. the presiding officer: the senator from louisiana. ms. landrieu: thank you. madam president, following up on the leadership of the good senator from rhode island, let me say that there are many reasons -- many reasons -- to vote against cloture on the house bill, and i'll get to that in a minute. but i am urging my colleagues to vote "yes" on cloture for the reed-landrieu-levin substitute.

we have tried to address the many, many concerns raised by the house bill in our substitu substitute. if we vote "yes" on cloture for our substitute, we can then go into some more meaningful debate on the senate floor, and this bill needs some additional debate. mary shapiro from the s.e.c. said clearly that the house bill goes too far. the chamber of commerce even says there are concerns in the house bill. aarp is opposed to the house bill. securities and exchange commissioner mary shapiro wrote last week, "h.r. 3606 would remove certain important measures put in place to enforce separation between research analysts and investment bankers who work for the same firms.

these careful principles were put in after the scandals, madam president, that ensued on wall street. this bill has flown out of the house. even barney frank said that what we're doing in the senate by slowing it down and amending it is the right thing. so i urge my colleagues, give our substitute a chance. you can vote "yes" on senator cantwell's amendment, vote "no" on cloture to the house bill so that we can continue this important debate in the senate. the presiding officer: the clerk will report the motion to invoke cloture. the clerk: cloture motion. we, the undersigned senators, in accordance with the provisions of rule 22 of the standing rules of the senate, hereby move to bring to a close the debate on the substitute amendment numbered 18363 to -- 1933 to h.r. 3606, an act to increase american job creation and economic growth by improving access to the public capital markets for emerging growth companies. signed by 18 senators.

the presiding officer: by unanimous consent, the mandatory quorum call has been waived. the question is: is it the sense of the senate that debate on amendment number 1833 to h.r. 36 on 06, an act to increase amerin job creation and economic growth by improving access to the public capublic capital marketsr emerging growth cups shall be brought to a close -- growth companies shall be brought to a close? the yeas and nays are mandatory under the rule. the clerk will call the roll. vote:

vote:

vote:

the presiding officer: are there any senators in the chamber wishing to vote or wishing to change their vote? hearing none, on this vote the yeas are 55. the nays are 44.

three-fifths of the senators duly chosen and sworn not having voted in the affirmative, the motion is not agreed to. mr. mcconnell: madam president? the presiding officer: the republican leader. mr. reid: may we have order? the presiding officer: will the senators please take their conversations out of the well. please. now. the majority leader. mr. reid: madam president, we need order in the senate. people should take their seats. the republican leader has some words he wants to share with the senate. the presiding officer: the republican leader. mr. mcconnell: madam president, on me leader time very briefly, there is substantial support on this side of the aisle for the ex-im bank. however, it's important that we get this bipartisan jobs bill that passed the house overwhelmingly, that the

president supports, on down to the president. so it's going to be my recommendation to my members, which i hope they will follow, that we oppose cloture on adding the ex-im to this bill. and i would say to my friend, the majority leader, i've discussed with virtually all of my members. we believe that if you turn the kph-pl matter we can -- the ex-im matter, we can pass in very short period of time with very few amendments related to the subject matter. but i think it's important that we get this jobs bill down to the president. and i would urge my colleagues on this particular point on this particular bill to oppose cloture. mr. reid: madam president? the presiding officer: the majority leader. mr. reid: at a meeting very recently with people from the pentagon, their number-one issue, their number-one issue was not afghanistan, it's not iraq, it's not pakistan, it's not north korea, it's not iran.

it's cybersecurity. we have to move to that legislation. the post office is going broke as we speak. we have to move to that bill as quickly as we can. we have to move forward on that. we have so much to do in such a short period of time. madam president, the ex-im bank is a powerful piece of legislation, 300,000 jobs this year alone. it saves $1 billion. and my republican colleagues, as has been standard procedure around here, even on a bill that is as supportive of this by the country, want to have a fight. the fight is on a procedural matter that want to offer amendments, plural. as my friend, the republican leader said, we can pass this bill in a relatively short period of time.

think about it. right now we could pass that. it would be part of this i.p.o. bill we got from the house. we could go on about our business. so, madam president, i think that this is a huge mistake of my republican colleagues. everyone listen: ex-im is for the forseeable future not going to be able to move forward. i can't move it to the front of everything else when we have all these things to do. and i've only talked about a few of the things that we have to do, and we have to do them very, very soon. go ahead, my friends. you picked a fight where there is not a necessary fight, but you may be surprised how this weighs up. i say no more. i know what the rules are of the senate, and i'm going to follow them. have at it. vote "no" on ex-im bank. mr. mcconnell: madam president? the presiding officer: the republican leader. mr. mcconnell: this jobs bill passed oefrp wheplgly in the

house -- overwhelmingly in the house with only 23 votes against it, supported by the president of the united states, is ready to go to him for signature. if we add the ex-im bank to it, we only delay the passage of this bipartisan jobs bill, and we send it back to the house, and we don't know how they feel about the ex-im extension. we do know here in the senate, as i just indicated, there is a significant majority in favor of passing this legislation, which we ought to be able to do very quickly. so, i don't think there's any particular reason for delaying a jobs bill that is overwhelmingly supported on a bipartisan basis. therefore, i would say to my friends on this side, who are in favor of the ex-im bank, i'm in favor of moving to that rapidly. i can say to the majority leader, as i said before, we'd be willing to agree to very few amendments related to the subject matter. and i would encourage him to turn to that soon even though it doesn't expire, i believe, until some time in may. with that, i yield the floor. mr. reid: madam president? the presiding officer: the

majority leader. mr. reid: go ahead and vote on a bill -- vote against a bill you favor. madam president, it's very clear the only way to ensure that this program, ex-im bank, advances is to see that it's attached to the house measure. clearly that's it. and i am very, very tired of this bill, the i.p.o. bill, being referred to as a jobs bill. that takes a lot of gall to talk about that as a jobs bill. madam president, we have a jobs bill that we on a bipartisan basis passed, after five weeks on the senate floor. have i heard one word about from my republican colleagues about a real jobs bill, saying why is the speaker driving a nail in this bill that we worked on for five weeks? so, madam president, understand that the surface transportation bill is a jobs bill. the i.p.o. bill is a nice thing to do if it were done in the right manner. we had some amendments that were -- got rid of some of the

bad provisions. and before this is all over, that may be just what happens. mr. mcconnell: madam president? the presiding officer: the republican leader. mr. mcconnell: if i may, let me just say to those who are watching and those who are interested in the ex-im bank, if i had my good friend, harry reid's job and i were the majority leader, we'd be turning to the ex-im bank next right after this, and we'd be doing it with very few amendments, because the advantage to being the majority leader obviously is you have the ability to schedule. so i just want everybody who's following this issue to understand that if i were setting the agenda, the next item up right after this bipartisan jobs bill would be the ex-im bank. mr. reid: madam president, remember anyone who can read at all -- we can all do that -- read the morning press accounts. cantor of the house leadership has said that he does not support the ex-im bank, that my amendment -- my amendment -- sponsored by democrats and

republicans, was a partisan maneuver. they are not about to take the ex-im bank unless it's part of the overall package. and that's why we're doing it this way. so, madam president, as my friend, the republican leader, says so clearly, he's not the leader. i am. and we have a number of very important issues that we have to deal with. even though i believe in the ex-im program, it's going to drop to the bottom of the calendar because we have things that we have to do. the presiding officer: the clerk will report the motion to invoke cloture. the clerk: we the undersigned senators in accordance with the provisions of rule 22 of the standing rules of the senate hereby move to bring to a close debate on amendment number 1836 to h.r. 3606, an act to increase american job creation and economic growth by improving access to the public capital markets for emerging growth companies signed by 18 senators. the presiding officer: by unanimous consent, the mandatory quorum call has been waived. the question is: is it the sense of the senate that debate on amendment number 1836 to h.r.

3606, an act to increase american job creation and economic growth by improving access to the public capital markets for emerging growth companies shall be brought to a close? the yeas and nays are mandatory under the rule. the clerk will call the roll. vote:

vote: