Reply #84: You talk about this crisis as if it's the first one since 1984.

[ProSense]

Yes, Kerry has been in the Senate since 1985, and he was there during the Savings and Loan crisis and was busy in the late 80s to early 90s with the BCCI scandal. He was there during the RTC debate:

The floor debate in the Senate took place just a week before the April 1 deadline, with some members, such as Kent Conrad and Robert Kerrey, indicating they opposed the bill because of their dissatisfaction with the effectiveness of RTC operations and the agency's (lack of) accountability. John Kerry attempted to resurrect an amendment that had been defeated in committee that would have required RTC funding to be treated as spending for purposes of budget enforcement. This measure was an attempt to force the use of either budget cuts or new taxes to offset the RTC spending. With strong Democratic support but the opposition of the Democratic leadership, the amendment failed.91 In the end, perhaps the most persuasive argument was the simplest—the government had to fulfill its promise to insured depositors—and the bill passed, though not resoundingly, 52-42.92 Both Democrats and Republicans had similar voting splits: it was not all that surprising that 25 out of 54 Democrats went against the bill, but the opposition of 17 out of 40 Republicans suggested that Republican antipathy to RTC funding was not confined to the House.93

The commodities bill was signed into law in December 2000, its primary effect was the Enron loophole:

The Commodity Futures Modernization Act of 2000 has received criticism for the so-called "Enron loophole," 7 U.S.C. §2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The "loophole" was drafted by lobbyists for Enron working with senator Phil Gramm<3> seeking a deregulated atmosphere for their new experiment, "Enron On-line."<4>

Several Democratic legislators introduced legislation to close the loophole from 2000-2006<5><6> but were unsuccessful.

Kerry joined the Finance Committee in early 2001. You can say that Dems didn't do enough, but you can't claim they did nothing, and Senator Kerry also offered solutions.

From the Office of Senator Kerry

Tax Haven and Abusive Tax Shelter Reform Act of 2002

Friday, April 26, 2002

Mr. President, the recent demise of Enron Corporation has generated national attention and shed light on an alarming trend. A growing number of corporations and individuals are exploiting tax havens in the Caribbean and elsewhere to evade and avoid paying taxes.

Often cloaked in a web of bank secrecy and taxpayer privacy, businesses and individuals operating in offshore financial centers create sham corporations and partnerships. By sheltering tax-dodgers and tax cheats, these overseas tax havens undermine confidence and trust in our federal government. The spread of illegal tax haven activity punishes those who play by the rules. The end result is higher taxes on the little guy--those who comply with the law. They are stuck paying the tab, forced to make up for the lost revenue through unnecessarily high taxes.

The exact details of Enron's tax avoidance practices are still under investigation by the Senate Finance Committee. What we do know is the energy conglomerate held over 800 subsidiaries in tax haven jurisdictions. Enron created 692 subsidiaries in the Cayman Islands alone. Through the use of sophisticated financial instruments, at least one analyst estimates Enron was able to avoid income taxes in four of the last five years.

Enron is not alone. The use of offshore tax havens by corporations and wealthy individuals is widespread. Through accounting tricks and tax loopholes, large companies not only avoid corporate income taxes, they claim sizable tax refunds. In a typical example, a corporation establishes a foreign subsidiary not subject to American taxes, shifts profits to the subsidiary which then sends them back to the parent corporation in a form that is considered not taxable under U.S. law.

While some corporations use loopholes to skirt the edges of the law, other individuals use tax havens outright illegally. The Internet has simplified the process of launching a corporation or opening an account offshore. While Americans are taxed on their worldwide earnings, individuals operating in offshore financial centers gamble that the IRS will never uncover their overseas income.

Taxpayers select tax havens because they offer little or no taxation on income in their jurisdiction and have privacy rules that help taxpayers hide what they are doing. Once the transfers are established, income is often repatriated back to the U.S. owners through loans, credit cards, or debit cards. By using complex transactions and multiple entities, the individuals using these schemes hide their income and avoid potential tax liabilities.

The scope of the problem is daunting. Assets in offshore entities have climbed from an estimated $200 billion in 1983, to an estimated $5 trillion today. One private sector estimate suggests the use of tax havens to illegally shelter income results in the loss of $70 billion annually. The IRS estimates that in tax year 2000, about 740,000 taxpayers used abusive schemes (both domestic and offshore).

Clearly, Congress must act to restore public confidence in our federal tax system. We can start by ensuring that honest, middle-class Americans are not the only ones left holding the bill. Unfortunately, the Bush Administration's has shied away from aggressively attacking tax evasion. Last May, Treasury Secretary Paul O'Neill voiced suppport for abolishing the corporate income tax. The Treasury Department recently fought to water down an international campaign to reform tax haven practices led by the Organization for Economic Cooperation and Development (OECD). Last fall, the Administration sought to repeal the corporate alternative minimum tax, a tax designed to ensure that large corporations do not entirely escape taxation.

Mr. President, exempting our nation's largest firms from taxation altogether is not the answer. On the contrary, Congress should take steps to ensure that criminal tax evasion is detected and addressed accordingly. The Tax Haven and Abusive Tax Shelter Reform Act of 2002 would impose strict measures against nations identified as uncooperative tax havens–those which use confidentiality rules and practices to undermine tax enforcement and administration or refuse to participate in effective information exchange agreements. The legislation would limit foreign tax credits claimed by taxpayers operating in uncooperative tax havens. It would require a strict reporting of outbound transfers by U.S. taxpayers. The bill imposes a new civil penalty on U.S. taxpayers who fail to report an interest in an offshore account. Finally, it mandates a comprehensive review of the offshore tax evasion problem, including specific mechanisms used by taxpayers to shelter income and assets. By imposing real consequences for jurisdictions which are identified as uncooperative tax havens, the bill pierces the veil of secrecy which shields tax cheats from scrutiny and provides a strong incentive for otherwise uncooperative tax havens to enter into commitments with the United States to reform their practices.

The peddling of abusive corporate tax shelters also demands attention. Pre-packaged, tax-motivated transactions with no real economic risk or business purpose–but which capitalize on technical ambiguities in the tax code–are sold to corporations by creative practitioners to generate artificial losses and deductions. Provisions in the Tax Haven and Abusive Tax Shelter Reform Act of 2002, identical to those introduced in the House by Rep. Lloyd Dogget (D-TX), would disallow tax benefits from transactions that have no real business purpose other than tax savings. In addition, they expand disclosure requirements so that the IRS is fully aware of dubious tax schemes and tighten penalties against gross underpayments resulting from illegal tax shelters.

A tax system which asks working families to pay their fair share, but gives large corporations such as Enron a free ride, is a national disgrace. And as tax havens and shelters proliferate, confidence in the integrity and fairness of our tax system and government declines. Middle-class families rightly conclude that our own government cannot effectively enforce its laws. The Administration, while proposing new disclosure requirements, has offered little in the way of substantive changes to alter the tax treatment of transactions which clearly serve no real business purpose other than tax avoidance. Furthermore, the Administration has undermined international efforts to aggressively address sheltering activity in tax havens. The Tax Haven and Abusive Tax Shelter Reform Act of 2002 is the first step in what will surely be a long road to restoring the confidence and faith of the vast majority of hard-working, law-abiding Americans who pay taxes on every dollar they earn. I urge my colleagues to join me in this effort.

He also sponsored the Predatory Lending and Consumer Protection Act in the early 2000s.