Celebrate Safe Communities

Floor Speech

CELEBRATE SAFE COMMUNITIES -- (Senate - September 30, 2008)

BREAK IN TRANSCRIPT

Mr. MENENDEZ. Mr. President, I was happy to yield to the distinguished Senator from Maine on her recognition of Senator Warner. I certainly join in her comments about Senator Warner, as we did recently when the Senator appeared before the Senate Foreign Relations Committee and recognized his tremendous service to this institution and to the country. I often say, as I said to him before at the hearing, that, in fact, I am privileged I came to the Senate at a time when I got to serve with John Warner and to see some of the finest traditions of service in this country. I appreciate his tremendous service, not just to the people of Virginia but to the people of this Nation.

Mr. WARNER. Mr. President, I thank the gracious Senator from New Jersey. I appreciate those remarks. Although it has been short-lived, we have had a good, strong working relationship; not always on the same side on several issues, but that is what democracy is all about. I thank the Senator.

Mr. MENENDEZ. I thank the distinguished Senator from Virginia.

THE ECONOMY

Mr. President, I rise to talk about the financial crisis our country is facing. I think to classify it as such is an understanding most Americans have. It is not an overstatement. The reality shows that today in a Washington Post ABC News poll, most Americans see the current financial situation as a crisis, and there is overwhelming concern that the failure of the House of Representatives to pass the economic recovery package may very well deepen that problem.

I think it is important to note the poll also revealed significant public concern with the bill that Congress rejected yesterday. Few voters have said the package did enough to protect ordinary Americans and nearly half said it did not go far enough to shore up the Nation's economy. Half said the failed plan did not do enough to help the broader economy, and 61 percent said there was insufficient assistance for the general public.

I think it is important, as we try to move forward in this institution and show some leadership, to keep those realities in mind--of what our constituents back at home are saying. They recognize there is a crisis. They also recognize there is a challenge to them in the mainstream economy, and they felt as though that specific package didn't do enough for them. So many Americans--I would say the great majority of Americans--who are meeting their obligations with tremendous stress and challenges, who meet their monthly mortgage payments--have for years and have continued to do so--what they reasonably want to know is what do they get out of this?

As my home State newspaper, the Star Ledger, said: Why, they continue to ask, should taxpayers have to subsidize the stupidity of people who were either greedy or maybe failed to do their homework? They go on to say in the editorial the real problem in Washington is that no one has made a cogent argument for why, in essence--this is paraphrasing--for why, in essence, we need to have a response and what does it mean to those who are not investment bankers or whose homes aren't in foreclosure.

I think the economists generally agree the Nation's economy is at a serious risk of the flow of credit threatening to freeze beyond where it is already. We see the interest rates at which banks lend to each other rising each and every day, suggesting that lenders are hoarding cash. I think that gets to the question of what the editorials have said in my home State and others as well: So then what is the case to be made?

Well, with banks leery of lending to each other, credit markets contract, making it difficult for businesses to obtain loans for expansion, to start new ventures or even to cover bills until unanticipated revenue comes in; car loans dry up, causing further suffering among the already ailing automakers; credit card interest rates rise, and all that forces, in essence, markets to shed jobs, creating more unemployment. Overall, this bleak fiscal picture causes consumers to scale back on spending, and then the little shop on Main Street closes as well. That is a broad brush. I would like to get to some of the specifics of how that affects us.

When we have watched the news or picked up a newspaper over the last few months, we see top stories about the problems of big institutions: Bear Stearns and Washington Mutual and Wachovia. It has been easy to see what dire straits our financial system is in, but what is not making the headlines is what this economic crisis means for people in our hometowns.

We have heard a lot about mortgage-backed securities, credit default swaps, and overnight lending rates. To be very honest with my colleagues, to a large number of Americans that is a foreign language--but not about what they actually mean in terms of mortgages, credit card bills, and week-to-week budgets of our families. Those are items which they clearly understand and speak about around the kitchen table as they face challenges.

I think some of us have been left with a mistaken impression that this crisis is just about Wall Street. I am worried people on every street in this country, who are being powerfully affected by this crisis, are being forgotten.

Now, the heart of this crisis is the housing market. So many houses are going into foreclosure that now it is hard for anybody to get a loan of any kind, to buy a home, to invest in a business or have that business grow, to get a college education. There is a credit freeze so businesses can't grow. They can't pay expenses. They can't look to the future. It is becoming a financial wildfire, ravishing our economy and burning away at the fabric of our communities. The crisis stretches across every city in, for example, my home State, but it is replicated across the landscape of the country, North and South and East and West.

In Newark, there is a single mother who has lost her job and now holds down three different part-time jobs to make up for it, while her kids are at home by themselves. In Clifton, there is a couple who work two jobs and bring in $4,000 a month together, but when the mortgage payment, the car payment, the electricity and gas, utility bills come in, and the grocery bills and the credit card bills come in every month, they worry they can't make ends meet. In another part of the State, there is a builder who is finding it almost impossible to get funding to keep his business going. Banks want bigger deposits, bigger monthly payments, and stricter payment deadlines.

Today, I wish to focus on what the credit crunch means for every New Jerseyan and American--the jobs, the businesses or anyone who needs a loan to drive a car or go to college--and what it means for those who are closer to the twilight of their life and are thinking about their retirement and what that retirement has meant to them in terms of what is taking place and what will continue to take place if we see no action and how they may very well have to extend the time in which they thought they could retire.

Let's talk about businesses, especially small businesses, because they are the ones that create 75 percent of all the jobs in America. We have always been an entrepreneurial people. We have always had the ideas and are willing to take intelligent risks to start a business, and those businesses are the ones that create jobs. They rent stores. They buy buildings. Those people who are employed ultimately are gainfully employed in a way that they have income to spend in other businesses for goods and services they need, which employ other people, and, of course, these businesses pay revenues, to their local, State, and Federal entities. So we can see the cycle of how important they are.

Now, if you want to start a business, this is one of the worst climates in our history to do so. Loans aren't available, even to people with good credit, and especially not to entrepreneurs who are getting started. So that dream of Americans having business ownership is now miles further away. But the credit crunch hurts small businesses. There are those of us who every day are feeling restricted in our spending and frugal when we open our checkbooks. That means we aren't going, for example, to see this lady at the counter. She is ultimately at the other end of the business cycle. We are restricted in our spending. This is a reality. It is a reality we feel in our lives. We see what is happening in the country. We may already have faced some pressures in our own economic circumstances in a personal family way, so we hold back. We say: Let's see what will happen. How do I decide? So we restrict our spending and we are frugal when we open our checkbooks. That is probably in many ways smart, but there is also a consequence. That means a lot of us aren't going out to eat as much, which means the waitress isn't getting the tips she depended on to bring home for her family and the challenges her family has, and owners of that business aren't getting the checks they depend on, which means restaurants have to either contract dramatically the size of their workforce, or, in the acute set of circumstances, they have to close. It means the local retailer--perhaps from whom we buy the treat we have once a week at the end of a long week or a gift we are buying for a family member or a friend's birthday--will see depleting sales. As their cash input decreases, they have to decrease their output, and they will be giving pink slips to their employees. It means we see more of this sign that says ``store closed'' for business. It means the local lunch spot or the barber will not have the same lunchtime rush or the same Saturday appointments. While we certainly can all live without a haircut as frequently or without eating our favorite sandwich, those shop owners depend on our steady business. They depend on that appointment to make ends meet. When, in fact, that doesn't happen, there is a consequence to them and those who work there and the families of all who are situated there.

Small businesses don't have access to capital because banks have severely cut back in lending. So, for example, when my dear father was alive, he was an itinerant carpenter, and he used to go to the lumber shop where he had a little bit of credit to get some supplies as he did the business--the work for the people who hired him--but that lumber store obviously had to get their suppliers and the credit that, in fact, they needed to get those supplies there, to then extend credit to him so he would be able to go ahead and do the job and then get paid and then pay for his supplies and the chain goes on. When, in fact, that chain is broken, there is a consequence, and the consequence of that is people lose their employment. There is a ripple effect. It is not only they who lose their employment but all the resources they had in making the purchase of goods and services that ultimately hired other people and who had families and who had needs and who made expenditures. So we see the consequences of that.

In the construction field, for example, we have a set of circumstances where, in fact, you have contractors who get a job in southern New Jersey, but he doesn't get paid for that job upfront.

He makes a bid. It might be a public contract or it might be a private construction project. He doesn't get paid up front. So that contractor needs credit.

What does he need the credit for? He needs the credit for the supplies to bring to the job to do the work. He needs credit for floating so that he can keep his payroll going for the people he has to pay up front every week so they can do the work that creates the home or the building or the business structure that ultimately will pay them, and they will repay their credit from their suppliers and then ultimately be able to make a profit.

Again, all of those construction materials that are provided to that contractor, those people, those entities have credit as it relates to those who provide the supplies that they sell to contractors. So there is, again, an intricate balance of all of these interests coming together in a way that affects the person wearing a hard hat on the front lines of building the infrastructure, the homes, the churches, and the businesses of our community.

Again, the reality: When a credit freeze takes place, the pink slips start getting printed, and the workforce is suddenly unemployed. Now the contractors cannot pay their suppliers, so their cash inventory drops and their ability to issue payroll at the end of the week is also jeopardized, and it pushes more families into the ranks of the unemployed. It is a vicious cycle occurring far away from Wall Street, but it is affecting our families, our neighbors, our friends on Main Street.

The credit crunch changes our ability to shop. Every business to some degree depends on this credit process for what they sell and the supplies they get. We often use our credit cards in the process of purchasing those goods. But when manufacturers cannot get loans that they need to keep the manufacturing process going to create the products that ultimately get consumed at a store where the store takes credit and purchases it from them but gets maybe 30 days, 60 days the manufacturer needs to continue to produce the product so that ultimately it goes to that store where ultimately consumers seek to purchase, in fact, they cannot get the money to keep the product on the shelves, and, of course, the cycle is clear.

Look at farmers. New Jersey is called the Garden State. I often tell my friends you have to get off the turnpike if you want to know what the Garden State really looks like. We have spinach. We are in the top two or three in spinach. We have a whole host of speciality products--peach orchards, cranberry bogs, blueberries, to mention some.

For farmers, crop planting depends greatly on the amount of available credit. Farmers cannot plant next year's crop if they cannot get this year's loans. So from cranberries to blueberries to all of these other products, everything you buy at the grocery store is going to be more expensive. Some food products may wind up in very short supply. They are going to be more expensive because even if you have a great credit history--as the cranberry bogs in the pinelands of New Jersey--if you have a good credit history but the credit crunch creates a higher and higher standard for what you will borrow and under what terms and conditions you will borrow, that is going to be reflected ultimately in the end cost of the product we consume on the dining room table.

We have a challenge that is direct for farmers, for family farmers, and for all of us as consumers as we put fruits and vegetables on the table for our families to consume, and that has a direct consequence to us.

Credit cards. As loans become more and more difficult and expensive to get, people will continue to increase their usage of credit cards. I hope if people have some disposable money that they will pay down their credit card debts. That is a good thing to be doing in these times and not be looking at spending a lot of interest on credit card debt. This is a good time, if you have the resources, to pay down credit card debt.

I know so many families who tell me they are using that credit card as they have transitions in jobs, as they meet some of their challenges. We see credit card interest rates which are already rising, and they will continue to escalate as banks look for ways to recoup the losses resulting from those defaults that are taking place.

This is an issue I raised before about credit card reform. We need to pursue reform in several sectors of our financial industry. We already have credit card debt in this country that collectively equals $850 billion. Now we are seeing the consequences of those who find themselves using their credit cards in this economy who ultimately are facing higher interest rates and, should they be somewhat late, higher fees for those payments for being slightly late. Then we will see a ripple effect of those fees pushing people beyond their limits, and when they get pushed beyond their limits artificially, they are in default. When they are in that default, they find themselves with a whole host of new charges that continue to push up their debt. We need to do something about this situation. But it is part of the reality of our present existence that, in fact, we see this driving up as we speak. That is a consequence to the average consumer in this country.

I had a teacher in New Jersey who recently showed how hard it is getting for anyone to get a car loan. This teacher is not living within the community in which she teaches. She has to drive there. It is not a location where public transit is easily available. This teacher in New Jersey, who has driven to work every day for the past few years, has to buy a new car because hers is broken down. But the auto lending market essentially has been closed to buyers with credit scores of less than 720.

By the way, 720 is an excellent score. Yet finding the resources for an auto loan, not having the money to put it all out to purchase a car up front in cash--they need the opportunity to get access to that auto loan, and even with scores of 720 or less, they are finding it increasingly difficult to do so. Even if they have some savings and just want a modest new car to take them where they need to go to work, unless they have excellent credit, they quite simply are not going to get a loan to get that car.

If we don't act soon, we are going to see students who will have trouble paying for their education. Parents trying to save for their children's college education will see their investments shrink, along with the stock market. College endowments that invest in the stock market are also getting hit hard, which makes it harder for them to provide financial assistance to students.

If students need loans--and I know in my own life, someone who grew up poor in a tenement, the first in my family to go to college, if it wasn't for what we have done in the Federal Government through Pell grants and Perkins loans and also through other loans, I would not have been the first in my family to go to college and then law school.

Students who manage to find loans will carry a higher interest rate than they would otherwise, leaving our graduates with crushing debt. We are already seeing so many of our children graduate with enormous debt. They graduate with a diploma in one hand and enormous debt in the other one. That is only going to rise under the current circumstances--crushing debt before they even enter the job market.

When they do leave school and start to look for a job, at this point, these graduates in the next year or two are going to be greeted by one of the worst job markets in 5 years. We are already at 6.1 percent unemployment and rising. We will see inaction only create a greater percentage of unemployment than we have experienced, and that will be some of the highest unemployment we have seen in well over a generation.

In addition to burdening young people who are just about to launch their careers, failing to act will exacerbate the already difficult situation facing those who are winding down their careers and looking forward to retirement. We saw yesterday that the Dow lost the equivalent of $1.2 trillion in value. That is not just about wealthy people who have money to make investments in stocks. That is about those who have 401(k)s, that is about pension plans that make investments on behalf of their pensioners, that is about a broad breadth of all of us.

Failing to act exacerbates the already difficult situation facing those who are winding down their careers and looking forward to retirement. When I looked before, the Dow was going back up, but the problem is that we see no sense of stability. Losses are real. It is not just the point on the Dow; it is the overall S&P performance as well. These people will see their decades of savings continue to shrink smaller and smaller as their IRAs, 401(k)s, and mutual funds drop in value.

Yesterday's stock market alone accounted for approximately a $1.2 trillion loss. Without action, those losses will only get worse.

I know that a lot of people do not want to look at their 401(k)s right now, but everyone is going to have to look at them eventually. Those on the cusp of retirement cannot afford to wait several years for the market to stabilize on its own. They will be forced to stay in the job market long after they planned on retiring. That is a cruel reality for people who have worked a lifetime to help create families, build communities, and now find themselves in this challenge as they go into those years in which they thought their hard work would pay off. These hard-working Americans, who worked hard their whole lives, need us to act in a strong and sensible way to ensure that 30 years of savings do not get largely eliminated within 30 days.

Let's talk about mortgages, which is at the heart of what our challenges are and the foreclosures that are mounting.

The credit crunch affects your mortgage even if you pay it on time because if you have a mortgage, whether you pay it on time or not, you are going to find it difficult, if not impossible, to refinance your mortgage or to take out a second mortgage if you need it for the college education of your children or if, God forbid, there is an illness in your family that isn't covered by the insurance you have, if you have insurance, or if you are underinsured. You are going to find yourself with higher rates and different lending conditions.

Your neighbors who are struggling and who are walking away from their homes because there is a padlock on the front door--their loss; you may think they maybe didn't make the right decisions, maybe they are part of that 6.1 percent unemployment who lost their jobs and now find themselves in a set of circumstances where they cannot meet the mortgage payment, maybe some should have known better. But regardless of the circumstances, whether they lost their job, don't have the income stream they had before to pay their mortgage, or whether it is because they were led to bad mortgages--I have people come into my Senate offices in New Jersey, and when we look at their information, we see they could have been very responsible borrowers at fixed rates, but they were led to mortgage instruments that, yes, were lower at the beginning but ultimately ballooned later.

It is a crime that those mortgage lenders drove them to those products, knowing they could have been a very responsible borrower and had the ability to pay a long-term loan at a fixed rate, they led them to those products and had them choose a mortgage product where now they find themselves losing their home.

Neighborhoods with foreclosures bring down home values for everyone in that community. I looked at the Center for Responsible Lending, and I looked at what they are saying about some of our challenges. In New Jersey alone, there are approximately 53,000 homes, and rising, in foreclosure. By the way, we are not the worst State in the Nation in this regard but by way of example. What does that mean? That affects neighborhoods and other homes and becomes a multiplier effect of enormous proportions.

When a home forecloses in your neighborhood, the overall value of homes in that neighborhood falls. In New Jersey, that is the equivalent of about an $11,000 loss on your home. Having done absolutely nothing, paying your mortgage, being responsible, you still lost $11,000 on your home because of foreclosures taking place in your neighborhood. When there is a multiplicity of those foreclosures taking place in your neighborhood, it drives the value down even more.

That has a consequence too. When values are driven down, as a former mayor I can tell you that means the ratable base begins to shrink. When the ratable base of all values begins to shrink, that is less taxes being paid. When that happens, there are two decisions to make. Either you cut services--police, fire, education--or you have to raise taxes collectively. Of course, that has a spiraling effect in and of itself.

This foreclosure crisis is very much a reality not only for those who are losing and/or have lost their homes, but it is very real for those of us who still have a home because our home simply isn't worth as much as we paid for it.

The credit crunch makes it harder to get financing to go buy a home presently. We have a story of someone who, totally responsible, good job, buys a condo and gets preapproved for their loan and they sign a contract. But a week before the closing, they are told the market in which they have purchased is declining and now they have to come up with twice the downpayment they had originally been approved for. So that may mean that home doesn't get sold, that person has to make other choices or, if they have any assets to meet the greater downpayment, they now have to make other choices in their lives as well. So the house sits on the market continuing to lose value and affects the values of all other homes in that neighborhood. That has a consequence for all of us.

I have tried to outline what some of the challenges are. Let me talk about what I hope we will consider moving toward. As bad as the situation has gotten, with hundreds of thousands of Americans losing their jobs and millions losing their homes, energy and health costs sky-high, with businesses in trouble and loans of any kind incredibly hard to come by, most Americans have been morally opposed to the rescue plan leaders in Congress and the administration presented. Most Americans aren't too interested in a plan that risks rewarding those who got us into this mess, and they are absolutely right to be outraged.

I, personally, as someone who in March of 2007, at a Senate Banking Committee hearing, raised the fact that we were going to face a tsunami of foreclosures and that we should be ahead of the curve and deal with that reality, unfortunately, had the administration say to me at that hearing that it was an exaggeration. Well, unfortunately, we haven't even seen the crest of that tsunami, and this is the issue that is at the core of our challenge. So I am, personally, incredibly angry that the greatest economy in the world has been brought to this point.

But let us be very clear: Those people who brought us into this process have to be brought to justice, but while we consider that, the reality is we are all facing a consequence. That said, the need for accountability doesn't take away the need for action to rescue the system they damaged. As much as maybe some reckless CEO deserves to lose their job, we can't watch 2 to 3 million Americans lose their jobs to achieve that result. We can't let the entire system fail to punish the few who brought us to where we are today.

We have already lost over 600,000 jobs this year alone. We have a 6.2-percent unemployment rate--the highest in 5 years. In some communities, such as the Latino community, it is 8 percent unemployment and rising. We have to be very clear. If the crisis continues, it is going to drastically change our way of life for the worse. So doing nothing is not an option. If we don't shore up the economy's foundation, the floor is going to cave in on all of us. We have to do something to thaw out the credit market, restore trust in our financial system, and put out this economic wildfire before it is too late.

Once we saw centuries-old financial institutions fail, once we saw our credit markets freeze up and Americans' savings begin to disappear, the question wasn't do we have to act, the question was how to craft a plan that would work and would give maximum protection to the taxpayers who might fund it.

Now, I believe there is something that wasn't in the plan but that should be included, and I appreciate Senator Obama's suggestion of it today, where he proposed lifting the current limit on the Federal Deposit Insurance from its current limit of $100,000 to $250,000. He said he believed it would be:

A step that would boost small businesses, make our banking system more secure, and help restore public confidence in our financial system.

Right now, the Federal Deposit Insurance Corporation guarantees deposits up to $100,000 for every citizen or business. Meaning that if the bank goes down, the Federal Government guarantees your first $100,000 are safe. This would raise that limit, at least for a period of time.

The FDIC has a long history of experience in protecting taxpayers from an infusion of public capital, especially by preferred stocks and warrants. They know what is the right stock and warrant. These are the guarantees for taxpayers. It would stop the flight by small businesses from some banks to those banks that are considered too big to fail but leaves other institutions without the resources to be part of the lending that is necessary in the community. Deposits would stay in these institutions because there would be newfound confidence, and others would now be depositing their money because they would have a higher insurance level, of up to $250,000, which would provide liquidity to lend to those very businesses that may be placing their resources there. Again, these are the small businesses that create 75 percent of all the jobs in the country.

So I hope we will look toward including that provision. I think it is a good one. Change is a good part of what we are seeking to do with an institution that has a long history of being successful on behalf of the taxpayers.

I also hope we will look at homeowners. I had a pastor in my home State of New Jersey who had been working with not only his congregation but others with his community development organization to try to save homes. We are told that, in fact, we are getting the lenders and the banks to reconsider the mortgages and refinance them and work with people so they can stay in their home and be responsible borrowers. It is better to have a performing mortgage versus one that is nonperforming and is a negative asset to that bank. So if we can keep people in their homes, making it a performing mortgage and making sure it is, in fact, an asset and not a liability to those institutions, we should do that.

Yet recently we had a situation--one example--of a home in New Jersey with a $238,000 mortgage. The homeowner was in foreclosure crisis. They offered to give $220,000 of the $238,000 through the community development corporation. The bank said no. So they are getting zero. Instead of getting zero, they were going to get $220,000 of the $238,000--an $18,000 difference--and they said no. So the community development corporation went to the foreclosure sale and bid the $238,000, the full amount of the mortgage. What did the bank do? They bid it up to $240,000. So they preferred to have this person go in foreclosure. They bid more than they were even getting on the mortgage, even though they could have been made whole, and at the end of the day they had a mortgage that was nonperforming. So we need to do a lot better, a lot better at what is the core of the problem.

I think the New York Times said it well when they said:

Homeowners were also given short shrift with provisions that mainly urged lenders and the Treasury to do more to help them. That's unconscionable. The financial crisis is as much a problem for homeowners as for Wall Street investment bankers. Appeals to lenders' better natures has not worked to bring lasting relief to homeowners. If they are still not working in the coming months, Congress needs to revisit the issue.

I agree with them totally. It should be a basic principle of our actions now, that if we have to rescue Wall Street from their profit-seeking failures, we should also rescue homeowners, many of whom are in trouble through no fault of their own. Remembering Main Street is beneficial to all of us, and remembering that a foreclosure in our neighborhood affects the value of every house on the block and brings down the broader economy, it doesn't make sense to simply sign off on a plan that keeps the CEO in their office but kicks a family out of their home.

If we are going to solve the problems that are at the root of the crisis, we have to provide real relief for struggling homeowners. That is incredibly important. One of those ways is through Fannie Mae and Freddie Mac. They are now Federal entities. Not only were they federally backed at one time, but they have now been taken over by the Federal Government. They do not need legislation to have a 90-day freeze on mortgages that may be in foreclosure. We can try to rework those mortgages and make them performing loans and keep people in their homes. We can make them positive assets versus negative assets for the bank, and that is one thing we can do without any action. But we need the Government and the administration to move in that direction. That also further limits taxpayer exposure.

Finally, let's go back to that poll. What did Americans say? They understand this is a crisis, but they don't see the connection in their lives, and I have tried to make that. They also didn't think there was enough in the package to deal with the challenges they face. Therefore, I know our colleagues, many on the other side of the aisle, didn't vote for the stimulus package we offered as Democrats. But it is time to hear what Americans are saying to you. It is time for a new economic stimulus package targeted at creating hundreds of thousands of good-paying jobs so we can offset the 600,000 that were lost over the course of this year and to prevent cuts in critical services for millions of Americans. I hope we will revisit that.

We should institute a loan program to help jump-start one of the most important economic engines in America--small business. As I have said before, because of this severe credit crunch, many small businesses--especially those starting out but many well-established businesses--are having trouble finding credit on the private market. I think emergency loans should be available to small business along the lines of what we provide during a natural disaster. This is a pretty big financial storm, and temporary relief can make a big difference. After all, these are the businesses that create 75 percent of America's jobs.

Tom Friedman put it well when he said:

If our economy were a car, the financial markets would be the transmission, but they're not the engine. The engine of American prosperity is American innovation. And until we get that engine revved up again, investing in higher education and advanced energy, we are going to be driving over a rough stretch of road.

Most importantly, if the Federal Government is either going to take on these bad assets or find some other way of capitalization, there must be regulatory reform as well. Those regulations must be robustly enforced. We can't have the cop on the beat, which is the regulator, ultimately hitting the snooze button instead of being at their post and making sure we don't have excesses in the marketplace in a way that ultimately leads us to where we are today.

So we never find ourselves in this position again if we pursue robust regulation and its enforcement. If we do not do that, we will send the message that it is okay for firms to behave recklessly, and we will be forced to follow this challenge further down the line.

I do not mean to say that the movement toward a rescue plan, with some of the additions I talked about, whether in that plan or following on, is going to bring the sunlight of prosperity tomorrow. I think no one here should believe that. But the consequences would be far greater.

I think it was said best in the past when President Hoover said, ``The fundamental business of the country is on a sound and prosperous basis.'' Well, we are not on a sound and prosperous basis. It sounds similar to some of the comments being made today. We need to address some of these fundamentals. This in and of itself will not be it.

So I hope the Senate will stay even after we meet this challenge in the next day or so, and hopefully the House will follow the leadership that has taken place here. I hope we will understand that there are still challenges in the days ahead. The administration has left us with bad choices, but they are choices, nonetheless, that we have to deal the best and act on in the Nation's interests at the end of the day.

As a member of the Banking Committee, I agree with Chairman Dodd. We should have sessions to look very closely at the regulations we need, this administration and the one in the future. This one does not have too much left to it to adopt. We need a strong response, but we need one that is well calibrated, has the appropriate oversight, and we want to make sure Main Street is protected as much as Wall Street.

The financial crisis we face is not an academic exercise. I know some people talk about this esoterically. It is not an academic exercise. I hope people do not treat it that way because in an academic exercise, you can be wrong and the consequences are not great. If we think this is an academic exercise and we are wrong, then the consequences will be very significant. It is a threat to our everyday way of life, and if we do not act, we risk the flood of suffering washing over the entire country.

This is one of those moments that each Member of the Senate and each Member of the House must look to determine the courage that is necessary to act in the face of something that is not very popular, obviously.

We might take a page out of John F. Kennedy's book ``Profiles in Courage.'' In that book, which is stories of courage that have taken place in this institution and in the other in moments of great importance to the country, he said in that book: In whatever arena of life one meets the challenge of courage, no matter the sacrifices he makes--the loss of his friends, his fortune, his contentment, even the esteem of his fellow man--the stories of past courage can teach, they can offer hope, and they can provide inspiration, but they cannot provide courage itself. For this, each man--and, I would add, each woman--must look into his own soul.

Preventing collapse, helping those in need--that is our challenge. I hope that, with some changes and a commitment to do more in the mainstream economy, we will have every Member look in their own soul and provide the courage that is necessary to do what is right for our country and its people.

I yield the floor.

The PRESIDING OFFICER. The Senator from Connecticut.

Mr. DODD. Before my colleague from New Jersey leaves the floor, I wish to commend him for his comments. I had an opportunity--I was not on the floor the whole time but was in the adjoining offices. Of course, with modern technology, we have the opportunity to listen to each other and express our views. I commend him on his. It was a very thorough and important hour to take. We have few opportunities which allow us to have a chance to lay this out as the Senator from New Jersey has just done, going back and examining sort of the autopsy of all of this.

We are sort of caught up in the moment and exactly what is happening from moment to moment with the stock market and the bond market, the credit markets across the country and the unemployment numbers. But I think going back and understanding the genesis of this is tremendously valuable. We have some very important and difficult decisions to make in the next few days that are critically important. He has outlined them as well. None of them are perfect. None of us like being here. But we have a challenge in front of us.

I think he did an admirable job of explaining this, of where we have come and the idea of how we come back to the decision we make in the next 24 or 48 hours but also what needs to be done after that to make sure we do not find ourselves back here in a matter of weeks or months grappling with even more compound and difficult economic choices.

So I did not want to miss the opportunity to come out and thank you.

Mr. MENENDEZ. I appreciate Senator Dodd's words, and I appreciate, above all, his leadership on the Banking Committee and here in this institution. You took a document that was sent to us that had no protections, no guarantees, and certainly nothing for the homeowner, and you dramatically made it better. I know you are working to look at what else can be done.

Above all, I appreciate the statements you have made moving beyond the immediate crisis, the leadership you will exert on the committee to have us immediately look at some of these other challenges which are incredibly important for the Nation and a reassurance to the American people. I appreciate the Senator's leadership.

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Mr. MENENDEZ. Mr. President, I rise in support of the Passenger Rail Improvement and Investment Act and the rail safety bill.

I thank Senator Lautenberg, the senior Senator from New Jersey, for being a tireless advocate for rail travel and for successfully shepherding these two essential bills to the floor and hopefully to final passage. In a time of high gas prices, rising air fares, increasing traffic congestion and concerns about greenhouse gas emissions, rail travel can give Americans a sensible alternative mode of travel.

Unfortunately, we have not provided rail travel the funding it needs to truly flourish. Every year since 2002 Amtrak has had to scrape by and continue operations on a yearly basis without adequate funds to maintain the rail system over the long haul. The system is at a breaking point. Amtrak's equipment is aging and no amount of maintenance can keep old equipment in service forever.

And our rail infrastructure is at the breaking point at a time when our citizens need this system the most. In July Amtrak had more passengers than in any month in its 37 year history. But Amtrak is not just a transportation system that serves 25 million people each year. Amtrak is also an economic engine that creates jobs, fights sprawl, and fosters economic activity. I know firsthand the benefits of Amtrak because over one hundred thousand New Jersey commuters depend on Amtrak's infrastructure every day.

Some critics want Amtrak to be the only major transportation system in the world that operates without government subsidy. This prompts a question. Do we ask roads to pay for themselves? Some of my colleagues like to think that gas taxes pay for roads, but this has never been the case. The Texas Department of Transportation recently revealed that not a single road in Texas has ever been fully paid for by a gas tax and most roads recoup less than half their costs from the gas tax.

Asking transportation to pay for itself is a standard that is simply impossible to meet and a standard we do not hold any other mode of transportation to. Over the last 35 years we have spent less money on Amtrak than we will on highways in this year alone. When you factor in State and local subsidies for infrastructure and parking some studies suggest that up to 8 percent of our gross national product is spent on subsidies for automobile use.

This bill will not give all the funds I think Amtrak deserves or needs to meet its full potential, but I think this legislation finally authorizes the funding Amtrak needs over the next 6 years to plan ahead, adequately fund its operations and finance some critical capital improvements. But these funds are not free.

The bill requires Amtrak to tighten its belt while simultaneously improving service. The bill requires reforms that will reduce Amtrak's operating costs by 40 percent. In addition, the bill provides funds for States to provide new passenger rail service between cities. In some instances these State operations will likely provide service that complements existing Amtrak service just as the recent light rail projects in New Jersey have done. But in other cases these funds may actually create competition for Amtrak for service between some cities. And this bill will also require Amtrak to use its resources to provide a new level of service that improves on-time performance, upgrades on-board services, and provides easier access to other transportation systems.

The Amtrak bill has also been combined with critical rail safety legislation that would strengthen our railroad security apparatus by investing $1.6 billion in critical transportation safety initiatives.

Tragically, we learned just over 2 weeks ago how important railroad safety is when a Metrolink commuter train plowed head-on into a Union Pacific freight locomotive just outside of Los Angeles. Twenty-five people lost their lives and over 135 people were injured in the deadliest train crash this nation has seen in 15 years.

Every one of those 25 Americans woke up and got ready for work that Friday morning just like any other day. Mothers and fathers kissed their children goodbye after breakfast, never assuming this would be the last time they would see their loved ones. Weekend plans were made--but were never fulfilled. That fateful Friday morning not only ended the lives of these 25 Americans, but took away 25 mothers and fathers, sons and daughters, brothers and sisters from family members who will never be the same.

When people board a train in the morning on their way to work, they deserve to have peace of mind that they will reach their destination safely. This legislation would take significant steps to give the American people this peace of mind. It ensures that railroad officials have the resources and tools to do their job safely and effectively by implementing training standards for all safety-related railroad employees and requiring train conductors be certified that they are up to speed with the newest systems in place.

The bill also reforms hours-of-service requirements for crews and signal employees so that these critical workers are at their sharpest and most alert while on duty. In addition to these measures designed to reduce human error, we must also address the shortcomings in our rail infrastructure. Crumbling tracks, deteriorating bridges, and failing signals create an environment where it is only a matter of time before the next rail disaster strikes. This legislation fills many of these gaps by authorizing millions of dollars for critical improvements to infrastructure and safety features to make our rail network as safe as possible.

This bill also ensures that safety rules are strictly adhered to by strengthening the Federal Railroad Administration's enforcement tools and increasing the penalties for safety violations.

It is important to remember that our railroad network is not just critical to commerce and transportation but to national security as well. When the terrorist attacks on September 11 crippled our aviation sector, our Nation relied heavily on trains to make up the shortfall. This illustrates just how important a safe, efficient, well-operated rail transportation network is to all aspects of our nation's well-being--from commercial and economic capacity to national security.

With record high gasoline prices, congested highways and airports that are experiencing record delays, we need all of the alternative forms of transportation we can provide to the frustrated American traveler. I urge my colleagues to recognize that a strong, well-funded and safe rail system is essential to our country. Please join me in voting for this critical bill.

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

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