tv Politics and Public Policy Today CSPAN May 27, 2016 9:00am-11:01am EDT
. may offer amendments on in the future. i want to make it clear that this bill is not available. >> gentleman yield. i'm going to a -- unless this has changed there were going to be thousands and thousands of acres that were owned by the department of interior that were being sold and the money which would be federal money from that mass zif sell was going to be going to puerto rico. >> i believe --
>> would you amendment -- >> i believe that was removed. >> okay. >> can i get an amen, mr. chairman, i believed that was removed. it's not included in this legislation. >> you guys know how to go to my heart, don't you. stab it. stab it directly. yeah, that's not longer part of this bill. >> gentleman yield for another question? >> i agree and i think you're stating a fact that this is not a bailout. but the oversight board itself is a responsibility -- let me just finish. that the oversight board itself, is, as i recall, the financial responsibility of the territory and yet it has to be funded up front and this could have the unintended consequence of not allowing the supervisory board to do its work. >> thank you. that's a good question. as i recall from reading this, i believe the text was changed to actually require that -- puerto
ricans thought be used to seize and fund the oversight board. i'm getting a head shake. >> i think so. >> good friend. amen. now, in previous versions of the bill. it was different where federal fund did see the oversight board. this version does not have that. this board is to be paid with territorial funds. >> all right. is there further discussion, if not, do you? please. >> my concern, mr. graves, is that this could affect the board's ability to perform its work. the truth of the matter is when you look at this bill, it doesn't provide any authorization for federal spending in puerto rico, it doesn't. there's no provision here assigning funds. but the way the board works, it can be staffed internally using
puerto rico funds, but also federal agencies may assists the board on a reimbursable or nonreimbursable basis. and i want to -- i'll be quick. i wouldn't want to discourage that from happening. so all my intent here is simply to make this work and i see where you're coming from, obviously, this is not a bailout and you want to send that message loud and clear, i join you there. but i'm concerned that i don't want to -- for this language to make the board's work more difficult than necessary. i yield to you.
to look at something puerto rico is doing and not doing. if someone did offer that amendment i probably would vote for it. that's not what this one does. this is designed to make it crystal clear that this is not a bailout. it doesn't preempt in the future if someone does want to offer an toemt to attempt to bailout. this is designed to make it crystal clear that this legislation within the four corners is not a bailout. >> i reclaim my time. actually, would you agree to changing or tingering with your language so that it says, for payment on any existent bonded indebtedness so that it is more precise. >> no. because there could be future debt that is incurred and that would effectively be a bailout and raise concerns. >> what if we strike the word existing and then for payment on
any bonded indebtedness? >> can i -- gentleman yield? >> i will. >> everything you've been saying so far is correct. this does not -- the board is not paid by federal funds and, yes, this does not impact the board. this impacts liabilities. and if this amendment were to be adopted and we want to try to refine it, i'll be more than happy to pledge to work with y'all to try to refine it if goes to the floor if it's adopted. >> i certainly would, as well. i think the intention has been to try to convey it very clearly. i just in response to your last statement, bonded indebtedliness is certainly the majority of the debt that we're dealing with here, as i think the general would acknowledge, there is owner debt as well. i want to make sure that i can go home and tell the folks that i represent their dollars are not being diverted. but i certainly would -- if you can agree to adopt this, i love to work with this. >> i yield. >> yield. >> further discussion. all in favor of the amendment
saying aye, opposed so na. amendment passes. it's adopted. let's go back to mr. fleming, number 9 #0. that's been passed out to you. you've had it before. >> i would like to submit for letter i recently received from the former governor of puerto rico. in this letter he expresses his concern that the oversight board will overrule the democratic will of the people in puerto rico. now as -- excuse me -- now has he reminded this committee, many times. this crisis has come about through decades of fiscal mismanagement. in some ways this debt crisis does reflect the will of the people of puerto rico because they have repeatedly voted for representatives and governors to give them liberal social policies and generous benefits which is why we're here today talking about an oversight
board. at the same time, i am sympathic to the governor's argument about self governance. fortunately the promason bill already contains the answer. promason was written broadly so the provisions can one day apply to any of the five u.s. territories it creates special circumstances that apply only to puerto rico on this bill. to paraphrase section 101 "except for puerto rico it's established at the territory legislature adopts a resolution signed by the government requests in the establishment. in the case of puerto rico the oversight board is being established by this bill." i think that's a mistake. the oversight board will have much more legitimacy, if the people through their elective representatives asked for the tough medicine in this bill. it's also a test for the people of puerto rico, if they're not willing to accept the balanced
budget and necessary reductions and the size of government, then they should not gain access to the debt restructuring ability in title three of promasa which is tied to the functions of the oversight board. i'm pleased to be joined on this amendment by -- as cosponsor. and i yield back. through discussions. >> thank you, mr. chairman. oversight boards and control boards have a long and nasty history of imposing extreme on people. for that reason, i've been cleared of my opposition to oversight board from the beginning. this amendment would make the establishment and oversight board in puerto rico much much less likely. getting rid of an oversight board while appealing to me is probably also appealing to my colleagues on this side of the aisle, but who are concerned about the effects that i mentioned, but of the family
puerto rico. if this -- and it will therefore kill the bill, which is the soul purpose of friends of this amendment. . i yield back. >> is there other discussion on the amendment. >> mr. chairman. >> i personally am under extreme political pressure in dealing with this issue. and i don't want my fellow elected officials in puerto rico to have to bear it as well. it is very difficult to accept oversight over the garment of puerto rico. the only reason i'm doing it is because i am convinced.
>> this is our business as provided in the u.s. constitution. when congress enacted or created a board for the district of columbia, the district of columbia did not have to opt in. so if we look at a precedent and that's a precedent we've been looking at in creating this board in providing this debt restructuring mechanism, then we shouldn't be asking the political puerto rico to consent. i agree. i think this is simply another way of trying to dismantle or. >> will the gentleman yield. >> i will yield in a minute.
>> i represent the people of puerto rico. i am very confident that the vast majority of puerto rico get it, they want congress to intervene in a fair way. the political path, that's a different story. because by the way. in the puerto rico they're saying. why are you running for election if there's going to be federal oversight going. i am running for governor. we have to take this board the way it is because we need debt relief in orderly legal way i will yield now. you can't find a small group of good men and women who want to do the right thing and take this tough medicine and the reforms necessary to get away from the liberal progress tif policies that have so damage -- progressive policies that have so damaged the economy. >> i'll reclaim now my time.
>> i'm saying that it's not worth the risk. that we need to act. we need to act -- we have the power to act. we should do all we can so that the government of puerto rico stabilizes itself, doesn't collapse and so puerto rico is put back on the road map. democracy works this way. we'll see who gets elected for the governorship, for my position as resident commissioner as well as in the legislature of puerto rico.
it's total speculation to try to anticipate what future of its olders in puerto rico would do. this crisis is unprecedented. we shouldn't be assuming the government of puerto rico will do the wrong thing. no, on the contrary. what i will do myself and i promise to you that i will if i'm elected government of puerto rico, work with this board, so we get house back in order, physically in order and we get puerto rico to grow again. i yield back. >> further discussion, mr. gomer. >> thank you, mr. chair. >> i greatly respect my friend from puerto rico. i appreciate his sincerity and effort on his behalf of his constituents. the point continues to be made that puerto rico is not a state. puerto rico and i've missed it, is not voted to ask to become a
state. but that's also the reason that puerto rico, guam, virgin islands, actually every american entity, except for the district of columbia that does not elect a full voting member of congress does not pay federal income tax that's why i filed the bill of district of columbia paid federal income tax. but one of the things i've not really heard anybody address, we've talked about in europe the need for the minimum wage to be raised and when we for an individual who accepts, they may
be looking at $1,700 a month to take home where as under the current minimum wage, it's about $1,200 take home, well, the incentive there is obviously not to work, but i know my friends at heritage have encouraged as a solution lowering the minimum wage. obviously, that would even increase the disparity between what you take home, if you don't work, and what you take home if you do work. if you lowered the minimum wage, that's obviously not going to fix the problem there. but if the minimum wage is raised in puerto rico. since my friend from california has indicated they have a higher minimum wage, then people would be tempted to go from puerto rico to california to get those higher minimum wage jobs, except for the fact that people are
leaving california in droves coming to florida and texas because we don't have as much regulation, we don't have the higher minimum wage. we have less litigation and it's more of a helpful environment for creating entrepreneurisms and creating jobs. so when -- i keep thinking of the beauty of puerto rico and all that puerto rico has to offer and could not understand why in the world puerto rico does not already become the united states hong kong that's just flourishing growing since there's no federal income tax until i saw that there's a 39% corporate tax, not for federal, but just for local, there's a 6 to 7% sales tax last i saw and in addition to the corporate tax being higher than the federal
corporate tax, there's also a 30, 33% flat income tax rate, texas has no yk tax. we have a sales tax. puerto rico has all of the above and a 6% excise tax and it appears that really is going to have to be one of the things addressed lowering the number of people in the government, lower tax rates so it becomes that attractive hong kong and businesses want to flood in. but i'm not hearing those things addressed, but i didn't want people to think that it was all disadvantaged in purt row kobe not being a state because when that was found out that none of the territories pay federal income tax, i've had many constituents ask if we couldn't apply in texas to be a territory. >> gentlemen yield. >> i will certainly yield. >> briefly. i just want to set the record straight. in november 2012, was held in
puerto rico and 54% of the voters rejected puerto rico's current political status and 61% of the voters supported state hood. actually, i'm on the options given, more people voted for state hood on that site, than for any other option. and i have introduced a bill before this congress it already has 110 cosponsors bipartisan cosponsorship, providing for the admission of puerto rico as a state, once there is an up or down vote on state hood, like we had in hawaii and alaska before they became states. >> time expired. >> time has expired. >> mr. chairman, just briefly, my next amendment, i'm going to be asking that we remove the other territories from this bill. as it stands now, wiping out
this requirement that the legislature and the governor sign off on oversight board, we would be in the position of imposing an oversight board on any territory for any reason whether they were in physical difficult or not. it's a -- it seems to me it's a complete erosion of any kind of self determination and the territories. puerto rico will sign this because they need the relief that they're getting in exchange for this and, therefore, i oppose this amendment. >> thank you. let me also yield myself that i oppose this amendment as well for the practicality of it. the opt in will have the government of puerto rico pass the resolution of their own malfeasance, which is -- i don't think in the reality of it, is something that we should actually impose on somebody to try and do. is there any further discussion for this amendment? any amendments to it?
if not we'll vote on the amendment, all those in favor say aye, opposed say no. the nas have it. record your vote. >> no. >> votes. no. >> mr. young, mr. polatono, mr. goemer, mr. lamborn. whitman, mr. whitman votes yes. mr. fleming. mr. fleming votes yes. mr. -- mr. thompson. mr. thompson votes no. mr. hoffman, mr. ruis, votes no.
mr. duncan, mr. duncan votes, no. mr. cartwright, mr. cartwright votes no. . ms. torres. ms. torres votes no. ms. dingle, ms. dingle votes no. mr. cook? ms. cats, ms. cats votes no. mr. graves, mr. clay. mr. clay votes no. mr. newhouse votes no. mr. mccccarter votes no. >> those who have not voted. >> mr. gomer has not been
and the naes are 33. >> the amendment is not adopted. >> we're coming down on this thing. i think we've got six more amendments still to go. so let's go as quickly as we possibly can. six or seven. number 55. you've already had that passed out. you're recognized. >> thank you, mr. chairman. this amendment addresses an error in the bill that came from an over abundance of caution. the bill as it stands authorizes an oversight board with the same extraordinary powers for each of the nation's territories, except that none of the rest of them face the kind of looming crisis that is faced in puerto rico. no territory, other than puerto rico, has asked us to get involved. the u.s. virgin islands has expressly asked not to be part of this. in fact, i work with representative on this
amendment. and my concern is that it could have the unintended consequence of eroding other territory's access to capitol markets and the cost, if the control board can be brought in at any time. i had the written opinion of not one, but three constitutional lawyers that this is unnecessary language that we can focus this entirely on puerto rico and not the others. and what my amendment does is simply restores the bill to its purpose of restoring fiscal stability to puerto rico alone and not apply it to the other territories. and i ask for its adoption. >> i yield back. >> is there further discussion? >> thank you. >> mr. chairman, this amendment would limit the scope of legislation to puerto rico only since it is the one facing the crisis. the bill is introduced provides a process for restructuring and
physical responsibility for all territories should the other territories request it. the other territory, quite frankly, are included because leaving them out could be the bill to be declared unconstitution. as well as tension as the amendment is, all of our efforts over these last months would be wasted and more importantly, puerto rico will be left with no solution if this amendment were to be adopted. in fact, certain creditor's attorneys have already stated publicicly that they would challenge the legality of the bill if it covers only puerto rico as violation of u.s. constitution in uniformity clause. i oppose the amendment and urge my colleagues to vote against it. >> is there further discussion on the amendment? let me yield myself on this one. this hurts. this is an amendment which i will be voting no in chee. but i want you to know that i understand the premise of it and
i want to still keep working as we go to the floor to see if we can work some of these details out to adopt it at that particular situation. treasure department, as has been stated is very leery of this type of approach thinking they could be opening it up on a constitutional challenge which would threaten the entire bill. they said that in our testimony. at the same time there was another professor who disagreed with that. i think there's question there that should be explored at some time. i don't know what the correct answer is right now that if indeed this could threaten the constitutionality of the entire bill, the entire bill would go down on this one point, yeah, some of these litigants said they're willing to go to court on this particular issue. i do think, hopefully, we can work that out. there has to be a way of actually working some substance of what mr. mcarthur is trying to accomplish trying to be done without throwing into question whether there's a constitutional issue or not. since i'm not ready to do that,
i'm going to vote no on this particular amendment, recognizing that i still would like to try and go forward working to see if we can folsom language that will be comfortable, to everybody, including the treasury department and white house on this particular point going forward. i do understand the premise of what you're saying and i actual agree with the premise of what you're saying.
i'll be happy to bring it up there instead if it will be approved as floor amendment. if that will be more productive use and withdraw it at this time. >> yeah, actually, i think it would be. >> i'll withdraw the amendment and we'll work on it and bring it back to the floor. >> and my intention is to actually get something that we can bring to the floor. >> okay. >> i'll withdraw, then. >> amendment is withdrawn. thank you for your cooperation in working that way. i understand you're involved in this issue and a lot and been involved in this legislation. you have a lot of ideas that maybe we can still work on coming towards the floor. you have 094 which is the next one up. >> thank you, mr. chairman. this amendment simply exempts from this act that portion of debt issued by puerto rico that was backed by its constitutional pledge of all faith and credit and taxing power. now the commonwealth,
$72 billion of outstanding bonds, this would exempt, roughly, $18 billion of constitutionally protected debt. unless we forget, only about 12% of puerto rico's general obligation bonds are held by hedge funds. 40% are held by puerto rican residents. i laid out the agreements. i believe there's no reason to treat san juan's municipal debt than san jose. it's fundamentally different in it reliability must be maintained. never threatened to. to be applied.
evidence that the mere introduction of this legislation is already having adverse effects on the market. the cost of credit default swaps on illinois general obligation debt, which essentially function is insurance against the default has gone up nearly 100% this year, signaling a virgining uncertainty over the protections to full faith and credit debt" he estimates that a minor 10 to 15 basis point increase in financing cost will cost american taxpayers an additional 4 billion to $8 billion. could have respected the $18 billion of constitutionally issued debt while applying chapter 9 to the remaining $54 billion in municipal debt. supporters claim this is their intent. they point to language in title two of the bill and construct respect lawful priorities in the constitution other laws or agreements. the problem with this is among these other laws is the
government's repute yags of its debt. further, the same section instructs the control board to provide adequate funding for public pension systems and includes other contradictory instructions. the only possible interpretation of these conflicting provisions is that the sainty of the sovereign debt is subject to balancing and therefore subordination to junior claims by the control board. it removes any ambiguity by protecting the constitutional debt of this bill. the supporters of this bill are sincere. in their stated objection of one of puerto rico debt to be protected. they should have no objection to this amendment. if they are not sincere, then they should oppose the amendment, but at least openly admit their true intentions and accept responsibility for the billions of dollars of increased interest cost that taxpayers across the country will have to pay on their state debts as
markets adjust to this new world in which all faith and credit depends upon the wins of congress. it's not in the interest of high debt states of california, illinois and new york to protect, it's in the interest of people of puerto rico to uphold the credit clause in their constitution because they were desperately need that credibility in order to reenter the credit market once their affairs and put back are in order. >> further discussion? >> thank you. mr. chairman. mr. chairman, treasury officials estimated would take it a decade, at least, to untangle the claims that puerto rico is unable to restructure its debt and situation leads to competing litigation. and accelerate the departure of
puerto rican families. the amendment will make these things more likely by exempting certain categories of puerto rican debt from the carefully crafted compromise process for voluntary restructures of all debt that is providing them the underwriting bill. i visited the island early this month to witness for myself the impact the crisis is having on the lives of our fellow citizens. as i kand indicated in my opening statement on this mark up. this is not the bill that i or the members on my side it is legislation that is necessary undo the hard work and careful consideration of competing interest that went into drafting the legislation. i urge my colleagues to pose this amendment. >> is there further discussion? >> mr. graves. >> mr. chairman, invest store's
needed to recognize there was potential. >> i want to ask you a quick question, as i recall, i think it's the tenth amendment to the constitution, significantly distinguishes the status of the state compared to that of territory. we would be prohibited by the constitution from carrying out similar actions here in regard to sovereign state debt. is that an accurate understanding. >> yes. >> thank you mr. chairman, yield back. >> sir, up for further
discussion. >> i rise in opposition to this amendment. in terms of the impact that the potential restructuring we're authorizing could have in the municipal markets mr. miller who overseas the municipal investments in america. this is one of the largest holders of municipal debt. >> it will also have a positive
impact elsewhere. mutual funds respected traditional mutual funds like alliance have also stated that there's not going to be any impact in the municipal markets at large if we approve this legislation as is. wault street journal and bloomberg have also issued editorials supporting this legislation and saying that it's not going to happen -- to have a negative impact in the municipal markets at large. to the contrary, if we don't do anything, that could have an impact in the municipal markets because the bonds were held -- the funds were held by thousands of invest stores as an individual, all over america and we need to get the house in order. now, in terms of the status of puerto rico, again, i have to say, this is not going to set a
precedence for the state. i hate that that's the case because i would love puerto rico to be a state, but puerto rico is a territory and as the territory, we can do -- we can treat puerto rico differently so long as we basis for doing so. that has been the position of the u.s. supreme court for ages now. when we talk the clause in the u.s. constitution, that's why we have the power to treat general obligation bondholders differently than they're treated elsewhere in america. lastly, i am not promoting being
unfair to any class of creditors, all i'm saying that all of them should be part of the solution we cannot be simply listening to one particular class over the others, we should be encouraging them all to engage in negotiations and once, for example, two-thirds of them agree on a potential restructuring of the debt of any government entity in puerto rico than this bill allows, the board to take that deal to court and enforce it on all the creditors, that's going to be good for any debt issue in puerto rico. lastly, when we talk about chapter 9, well, i introduced chapter 9, so -- so that puerto rico would be treated as a state. and it was in congress's will to do so.
>> mr. fleming. >> the fact that puerto rico was territory and not a state does not in any way prevent these actions being taken as well. there is no constitutional or legal bearing on doing that. this opens the way psychologically and in every other way to do that. with respect to the general bondholders deciding to sell out to other funds on the way because they heard rumors of congress beginning to intervene, that's the whole problem here. if congress -- if word gets out there that congress is willing
to intervene and to create a retro gres zif chapter nine bankruptcy system then, of course, all of that is being eroded with full faith and credit is being eroded and no longer applies because if it can be reversed at any point. then what is it worth to begin with. i yield the remainder of my time. chapter nine was specifically written for municipalities which are subdivisions of states. the only reason that chapter 9 has not applied to the states is because congress has never threatened to do so because because doing so under minds the full faith and credit guarantees of their state constitution. this measure makes clear that congress has now changed now
willing to breach that faith and once we have done so, full faith and credit is no longer an ironclad guarantee that your bonds will be back by the full faith and credit of the issuing entity. the claim that this couldn't possibly happen, ignores the fact that it is already happening, as i stated, we're watching the insurance instruments for state general obligation bonds already increasing just on the prospect of us taking this action, six state governors have already issued warnings that this will effect their states and as asaid, i think the virgin island clearly understands the threat to their own debt of this measure and spiraling interest cost that it will make. so, again, if you -- don't want to protect the full faith and credit of the states, vote for this measure, but accept responsibility for the
aftermath. >> 22 classes of bondholder here. i understand the intent, but we sifrly are not equipped to adjudicate all of the different claims of all the different bondholders sitting in this room today. for example, very briefly, let's take a window who happened to buy the very first general obligation bond that was issued in excess of puerto rico's constitutional limit, because some bonds were sold in excess of what they were allowed. that widow bought her bond, it's one bond after it was
constitutionally guaranteed she thought she was buy ago general obligation bond and let's compare her to a hedge fund i have nothing against hedge fund general obligation bond from somebody else. it was bought from puerto rico and sold and sold and sold and hedge fund buys it. mr. -- wants to adjudicate the rights of those parties here and now. i just -- by declaration. it's a mistake for us to do that. let the control board apply the letter that we've laid down here in the bill that the respective rights of the parties have to be honored and let them adjudicate. let them certify claims that go to the court for further review, but let's not try to exclude nearly 20% of the bonds.
>> it goes too far in exempting an entire class which may or may not have been legally done and allows -- does not allow us to -- or allow the oversight committee, over night not control oversight board to actually make that kind of adjudication for which they're empowered. any other discussion. any amendments, if not we'll vote. all those in favor of the amendment say aye, opposed ssh the nos have it. roll call, please. mr. young votes no.
>> committee will come back to order. i recognize the gentleman from idaho to explain the amendment and without objection the amendment is considered as read. >> thank you, madame chair. my amendment is attempting to clarify language to require the fiscal plan to endeavor to provide for the payment of pension benefits projected to become due unpayable due in the period of the fiscal. plan. i will be withdrawing the amendment. i want to put this on the
record, and the -- as the bill currently states, the fiscal plan is supposed to provide adequate funding of public pensions. that's what the language is. adequate funding. i have not been able to get a real definition of what adequate funding means. i understand the history of this was the white house was attempting the protect the pensions like they were protected in detroit. and we said, no, which is what the intent of this committee is to not protect the pensions like they were protected in detroit so i just want to make it clear. my language was attempting to make it clear that what happened in detroit was not going to happen because by the oversight board or in the courts. i have talked to a few experts who say that my language may be less clarifying than what the language that was already in the bill so that's why i'm withdrawing the amendment but i have been assured by the author of the bill and by the committee
that some language will go into the report that will strongly state that we will not -- the committee report to strongly state that our intent to make sure what happened happened in detroit does not happen in puerto rico. because then we will have a bond crisis if that's what happens. as the bond experts have told us, what happened in detroit was an anomaly. and that's why the bond markets did not react to detroit because it was a one-time event. if the same thing happens in puerto rico, then it will become a pattern and then the bond markets will react in a very negative way and that will affect each and every one of our constituents so with that in mind i will be withdrawing the amendment but i just want to make sure that we have the strong statement in the report. thank you very much. i yield back. >> the gentleman withdraws. the next amendment for our
consideration is offered by mr. bishop of utah. it is bishop number 2. i recognize myself for five minutes to explain the amendment and the amendment is considered without objection as read. this is a minor technical fix. it ensures the prepa deal is protected. it's taken two years to negotiate. it reiterates and clarifies the purpose of paragraph three to protect preexisting, voluntary agreements. i ask for your support. is there further discussion of the amendment? question is on the amendment. all in favor say aye. those opposed no. the ayes have it and the amendment is agreed to. there are further amendments.
and i'm going to return the chair to the chairman. >> thank the vice chair. you did a hell of a lot better than i'm doing. the next one is by mr. fleming as revised. that was passed out to you. revised 91. mr. fleming? >> all right. thank you, mr. chairman. i've consulted with mr. labrador after comments he made that he supported 91. in the change of one -- in the aspect that is applied here. changing the word respect to comply with. and therefore, we've agreed upon this as a good substitute for my 91 amendment. and ask that we make it in order
and pass it. >> further discussion? mr. pure lucieu pierluisi? >> amendment 91? >> it's the revised version is just the first two lines. it strikes respect and inserts comply with. >> okay. i rise in opposition. my concern with this language is that it could be interpreted as meaning that you cannot restructure any of the general obligation bonded debt. and as i have stated before, it is one thing to say that we're going to respect priorities. and treat bondholders differently depending on the type of securities they're holding and their rights.
it's quite another to say they cannot be part of any restructuring. everybody should be at the table. and i anticipate that there will be different, differences in the treatment to all the bondholders or the classes of bondholders that puerto rico has. so, again, for the purpose of ensuring that we have broad orderly, legal restructuring of the debt owed by the puerto rico government and it instrumentalities i have to oppose this amendment. i yield back. >> mr. chairman? mr. chairman? >> mr. whitman. >> mr. chairman, i would like to recognize the gentleman of louisiana, dr. fleming. >> i thank the gentleman for yielding. again, the word respect is a weasel word here. it has no meaning.
simply put, if you don't have a requirement to comply with those priorities then the general obligation bondholders have no priority whatsoever. they could slide to the bottom and pensioners slitd to the top. something all of us have a concern here that there would, in fact, be no meaning to a general obligation bondholder which is full faith and credit. so for that reason, this bill, this law, should require that those priorities be fully put in place and complied with rather than at the last minute through some shell game be moved about and again just like we saw in the general motors situation where priorities were turned upside down against law. i yield back. >> mr. chairman, i yield back. >> is there further discussion? look. i'm going to -- i'm going to weigh in with one word because
to be honest with you i don't know what to do on this one. i was saying it was comfortable. we may have problems with this if it goes forward on the floor. so i'm willing to -- i don't know what i'm willing to do. i'd be willing to work on the particular language if you want to. if it's not adopted in this bill, i'm willing to work with you on this language on whichever takes place. i think i'm going to have to vote no now because i don't know what i'm doing. mr. graves. >> gentleman from louisiana, i'd be happy to support this if you'd be willing to add at the beginning to the extent practical. to the extent practical, comply with. i'd be happy to vote if that provides any comfort. >> withdraw it? >> i -- if the gentleman would yield, again, i think that's -- that's adding more adjustment language. either it complies with the law in the constitution or it doesn't and i would prefer to move forward on voting on this
amendment. >> further discussion? >> mr. chairman? i intend to vote for this because of the word relative. relative is still in there. it will say comply with the relative lawful priorities or lawful liens as may be applicable. so the word relative to me says in relation to each other. relative to each other. for that reason, i believe that the amendment's okay. >> any other discussion? all those in favor of the amendment say aye. opposed say nay. the ayes have it. is there debate? roll call. >> mr. bishop? >> no. >> mr. grijalva? >> no. >> mr. young?
>> no. >> ms. napolitano? >> no. >> mr. gohmert? >> no. >> mr. lamborn? >> yes. >> mr. costa? >> no. >> mr. whitman? >> yes. >> mr. fleming? >> yes. >> ms. sangos? >> no. >> mr. mcclintock? >> yes. >> mr. pierluisi? >> no. >> mr. thompson? >> yes. >> mr. hoffman? >> no. >> mrs. lummis? >> yes. >> mr. ruse? >> no. >> mr. benishek? >> no. >> mr. lun that will? >> no. >> mr. duncan. >> yes. >> mr. cartwright? >> mr. beyer? >> no. >> mr. labrador? >> yes. >> ms. or the rice? >> no. >> mr. lamafa?
>> no. >> mr. dunham? >> no. >> mr. gug? >> no. >> mr. cook? ms. caps? >> no. >> mr. westerman. >> yes. >> mr. graves? >> no. >> mr. clay? >> no. >> mr. newhawes? >> no. >> mrs. hice? >> yes. >> mr. macarthur? >> no. >> mr. mooney? >> mr. hearty? >> yes. >> mr. lahood? >> yes. >> is there anyone who hasn't voted or wants to change? clerk will report. mr. chairman, on this vote, the 16-23. >> amendment is not agreed to.
but -- but, mr. fleming, i would like to still see if we can explore some way going forward on that one. 80, mr. fleming, next ones from here on in are yours so let's go with 80. should say i think we have three more to do. right? they're all mr. fleming's so let's go with number 80. >> okay. >> you're recognized. >> mr. chairman, thank you. azumi staff and i researched this bill and how we got here, it quickly became apparent that something was fishy. you see, puerto rico, like other territories and states, has a balanced budget requirement. yet, they've continued to grow their debt in at an astronomical rate that shouldn't be possible. the language constitution that congress approved requires that
revenues match expenditures. in other words, their budget must balance each year. however, the spanish language translation of the constitution uses the word recuresos. i hope i'm close on that. which means revenues but the puerto rican government interpret it to more broadly mean resources. and some crazy stretch of imagination they count debt as a resource and, therefore, they are able to balance their budget in quotes issuing more and more debt. this has to stop. my amendment would require puerto rico, the puerto rican government to correctly interpret their constitution going forward. if they will not, the oversight and the restructuring authority will sunset after two years. the board is supposed to balance the puerto rican budget as part of the fiscal plan. so it should be a simple matter for puerto rican government to
pe certify to the chair and ranking member of this committee to mononor the balanced budget requirements in the constitution going forward. if they cannot or will not it's clear that puerto rico is not serious about keeping the fiscal house in order after the board completes the work and we'll end up right back here in this same place. specifically, the amendment states that the government of puerto rico must certify to the appropriate congressional committees that they will honor the balanced budget requirement in article vi section 7 of the puerto rican constitution and that they'll not interpret recursos to include debt issued by the government of puerto rico. if they will not do the simple things in the authority of the oversight board will sunset along with its debt restructuring ability and we will have to negotiate a whole new approach. honestly, the requirement for puerto rico to correctly interpret their constitution
should have been a precondition for any congressional action but this amendment seems like a reasonable compromise. i yield back. >> is there fourth druiscussion >> thank you. let me state that the situation is puerto rico is complex and messy. achieving a balanced budget in two years may not be realistic at all. if they fail to achieve a balanced budget in that time frame this amendment would abolish the oversight board and the entity tasked achieving a balanced budget for the commonwealth. this amendment is not intended to be helpful. it is like other amendments designed to kill this legislation. finally, i would note that the people of puerto rico don't need clarification on the interpretation of their constituti constitution. they need congress to take the necessary steps to ensure future financial stability. i would also note that a
two-year limit, in fact, the budgets proposed by the majority here don't balance within two years, not even close to it. if that's the measurement that we're using here, then obviously, it's not applicable to puerto rico either. the amendment is not intended to achieve the goal stated. it's intended to kill the legislation and i oppose it and yield back, mr. chairman. >> further discussion? mr. pierluisi. >> i oppose the amendment and let me explain why. first of all, this legislation creates a board that is in charge of approving a long-term fiscal plan for puerto rico. at least five years worth of budgets and fiscal discipline. and one of the factors that the board is told it has to take into account is puerto rico's
ability to balance its budget. it's one of the factors laid out. no fiscal plan will be approved by the board unless the government of puerto rico is balancing its books. as simple as that. then the board, as well, is in charge of approving the budgets of the government of puerto rico on a yearly basis. and ensuring that they're properly balanced. so, that's the board's job. and we should be expecting the board to do what is entrusted to do. now, in terms of puerto rico's constitution, that is a matter for the supreme court of puerto rico to handle. the supreme court of puerto rico is the ultimate interpreter of our own constitution and this language that you're laying out hasn't been ruled yet or held
yet by the supreme court of puerto rico. so let's focus on the important thing. we want fiscal discipline in puerto rico. the board will be overseeing the government of puerto rico. in fact, the board can only cease to exist after puerto rico's manages to balance its budget for four consecutive years and it has access, adequate access to the markets. that's the bill that we're providing for. we don't need this amendment. and i agree with the ranking member that i just believe this is more -- geared towards messing with our purpose and the bill's prospects on the floor and in the senate. i yield back. >> is there further discussion to the amendment? >> mr. chairman? >> mr. wittman? >> i would like to yield to the gentleman from louisiana, mr. fleming.
>> look. i have to tell you the hard working people in louisiana, we are going through some difficult times. we're having to close a $2 billion budget gap, annual gap. by law and by constitution, we have to actually balance our budget every year. we're not allowed to go out and borrow money and consider that revenue which is exactly what puerto rico does so all this amendment does is it correctly defines what revenue and resources are. and currently, the territory is considering borrowed money, the money that people have lent in good faith to this territory who are going to lose much of their principal, widows and retirees. all it says is let's be honest about what a balanced budget really is. the state of louisiana, and the hard working people i represent, know what a balanced budget is. and they know they're having to go through the tough times right now to make that happen. increased taxes and cuts to services. and so, what we're saying here is, well, we're going to put
this oversight board in place but puerto rico doesn't have to live up to the same state as the state of louisiana and many other states. and make no mistake about it, there are a number of states that are nearing the situation that puerto rico is in. maybe as many as 15. and they're going to be saying, well now, if puerto rico can bail out of this situation, why can't we? i'm going to have constitutes i face and come to me and say, it doesn't make sense that puerto rico can consider borrowed money to be revenue. that really doesn't make sense at all. so that's -- that is very common sense amendment and i think it's very appropriate for this bill. >> is there -- >> mr. chairman, i yield back. >> thank you. is there further discussion? let me express once again my opposition to this. two years, not enough. it already can be sunseted if they do four years of
consecutive balanced budgets. all those in favor say aye. opposed say nay. the noes have it. let's go to number 92 by mr. fleming. this one passed out to you? you have it in paper form. >> mr. chairman, my second amendment related to the priority of creditors has some additional changes throughout title ii for pensions. again, i'm motivated by the memory of the gm bailout and while i hope that union retirees will be able to receive what they have been promised, the fact is that politicians in puerto rico made promises that they couldn't afford to pay. and parenthetically, that's true all across america. politicians of yesteryear made promises to the people of america and the people they represent that they could never live up to and future politicians, as well. now they're hoping to swindle the very people who lent them
money and in order to pay the pension benefits in the first place. the evidence is that puerto rico just released their fiscal year 2017 budget this week. that increases the government spending across the board including pensions for government workers. just what we were talking about a moment ago. while -- while puerto rico is in this very dire strait, they're increasing their spending, including money flowing into the pensions. this budget proves that the current government of puerto rico is trying to live out a fantasy in which actions don't have consequences. this not congress's failure to act is the root of their problems. my amendment clarifies that the oversight board will provide adequate funding or reasonable alternatives to satisfy contribution liabilities but solely to the extent contributions due under the terms of the plan which may be
restructured. it also tightens the language to ensure that funds are not transferred between entities to pay for pension shortfalls. finally, it puts a delay on bailing out underfunded pensions until after the board is able to complete an analysis of the pension system and determines how it is going to honor the constitutional debts. again, this is proved necessary by the budget just proposed by the governor which deliberately defaults on debt to pad the government's pension accounts and i urge adoption. >> is there further discussion on the snaemt mr. grijalva? >> yeah. i rise in opposition of the amendment. yet again, this amendment attempts to throw pensioners to the bottom of the barrel and flies in the face of hard-earned bipartisan agreements on this bill. not to mention denying pensioners hard earned savings f. you want to place conditions on who should be paid back in
the restructuring deal, pensioners simply cannot be the ones taking the hit. i oppose the legislation. this is -- and yield back, mr. chairman. >> further discussion? very briefly, mr. pierluisi. >> i will be brief. this bill is not picking winners and losers. it has the right framework and it provides for fair restructuring and all stakeholders are involved. there's language, by the way, prohibiting interdebtors transfers so you couldn't have your concern of transferring assets to favor one set of creditors over another. and we shouldn't be expecting that the board will be making the wrong calls. on the contrary, the board, we should trust the board, federally appointed board, to do the right thing. if you get to the legalities of
this, the supreme court of puerto rico has held that once your pension is vested, you have a property right in it. you have a contractual right. and so, pension holders will be treated accordingly. that doesn't mean they're totally out of the equation. but we should make -- we should allow the board to review the pension systems in puerto rico, study them. they're seriously underfunded. and as the bill provides ensuring that the fiscal plan and the budgets of the government of puerto rico provide the pension systems adequate funding so that systems can honor their obligations. throwing 330,000 american citizens in puerto rico under the bus cannot be a solution. obviously there's a crisis. we're suffering through it. including the retirees. but we shouldn't be -- we
shouldn't view this bill as picking winners and losers and we shouldn't be harming or intentionally harming pensioners in puerto rico. i oppose the amendment. >> let me just respond, as well. i'm voting no because when it deals with priorities and the intradebt transfer and alternatives that's duplicative language in the bill and affecting those on pensions four months without receiving one if they're currently only it so i aurch a no vote. is there any other discussion? if not, all those in favor of the amendment say aye. opposed say no. the noes have it. we have one amendment left. ms. torres, what? >> sorry, mr. chairman. i know the hour is late but i move to strike the last word. >> actually, the hour's pretty early in the afternoon and late for all of us. you have that right. go for it.
>> yes. thank you, mr. chairman. while i am happy to be having this very important discussion on puerto rico today, i still have significant reservations about the oversight board provisions in this bill. for one, i am searched with how members of the puerto rico oversight board would be chosen. as the bill is turntly written, there is nothing guaranteeing that the board members represent a diverse set of background and experiences. while there are several fields that members can come from, including experts in finance, municipal bond markets, management, law, business and government, there is still nothing to say that all members can't come from just one of those fields. for example, all members could come from the financial services sector or law. the oversight board should reflect the diverse interests of puerto rico.
and a long-term commitment to the commonwealth. the board should look like puerto rico. and as it is currently written, there is no guarantee that it will. i am also concerned that under this current proposal future appointments could circumvent the bipartisan selection process intended in this bill. while all eyes are on puerto rico right now, i am sure we all have the best intentions of bringing the commonwealth out of this crisis. what happens when this issue is out of the public spotlight? we are leaving the board open to political gamemanship and manipulation. i know it's taken us a lot of work on both sides of the aisle and with the administration to get us to this point. but we cannot afford to make puerto rico solvent only to set it up to fail once again.
i hope my concerns are taken into consideration as this legislation moves forward. and i ask for assurance from you, mr. chairman, that this committee will provide the necessary long-term oversight to the board to make sure that it truly is addressing the needs of the puerto rican people. i yield back. thank you. >> thank you. all right. we're now running to the last amendment which is o 93 by mr. fleming. i reserve a point of order against the amendment. mr. fleming, you are recognized. >> mr. chairman, i want to thank my colleague andy barr for approaching me with this bill. h.r. 5276. in an effort to keep within the scope of the bill i limited his approach to only puerto rico but his original bill would apply to state and local governments as it should. the stated purpose is to ensure that taxpayers never have to make a direct payment to puerto
rico to bail them out for their poor fiscal management and bloated government spending. this amendment would simply prevent that from happening by prohibiting the direct purchasing of debt, extending loins of credit or using the federal reserve to purchase their bonds. it's a simple amendment and important for clarification and i do understand there's a point of order by the parliamentarian. >> fine. is there any discussion to the bill? good. the point of order is still violates rule 10 because it's the discussion -- discussion of areas not in the jurisdiction of this committee. such, the amendment is falls. all right. we are now to the point are there any other amendments? good. all right. if not, the question is now on an adoption of the bill as amended. the voted just started. all those in favor say aye. opposed? the bill is amended. noes have it with -- do you want a roll call vote first?
all right. call the roll quickly? >> mr. bishop? >> yes. >> mr. grijalva? >> yes. >> mr. young? >> yes. >> ms. napolitano? >> yes. >> mr. gohmert? >> no. >> mr. lamborn? mr. costa? >> yes. >> mr. wittman? mr. phlegming? >> no. >> miss tsongas? >> yes. >> mr. mcclintock? >> no. >> mr. pierluisi? >> yes. >> mr. thompson? >> yes. >> mr. huffman. >> yes. >> ms. lummis. >> yes. >> mr. ruse? >> yes. >> mr. benishek. >> yes. >> mr. loanthal? >> yes. >> mr. duncan? >> no.
>> mr. cartwright? mr. gozar? mr. be ye ye? >> yes. >> mrs. torres? >> present. >> ms dingle? >> yes. >> mr. dunham? >> yes. >> mr. giaga. >> yes. >> mr. cook? mrs. caps? >> yes. >> mr. westerman. >> yes. >> mr. pulis? >> yes. >> mr. graves. >> yes. >> mr. clay? >> yes. >> mr. newhouse? >> no. >> mr. zinki? >> yes. >> mr. heist? >> yes. >> ma'am? >> yes. >> mr. maccar author? >> yes. >> mr. mooney? mr. hardy? >> no.
>> mr. lahood? >> yes. >> is there anyone who hasn't voted? >> mr. cartwright has not been recorded? >> yes. >> mr. gozar? >> no. >> mr. wittman? >> no. >> mr. lamborn? >> i'm sorry. mr. gozart votes no. >> yes. mr. wittman votes no. >> votes no. >> mr. lamborn? >> no. >> mr. lamborn votes no. >> is that everybody? clerk will report. and actually, after this, we've got to do this? this is technical. mr. chairman, on this vote, the yay 29 and the nay 10. >> the bill is approved as amended. and the ordered -- favorably
reported. slate on the table. if you guys want to go vote i have to do some other crap here. you might as well leave. minority? wait, wait. i don't have time for that. don't -- just go vote. minority has a motion. >> i here by reserve the right of the minority for views and order measured by the committee. >> please vote quietly. go away quietly. staff be allowed to -- so ordered. i ask consent the staff be allowed to make conforming changes and reported today hearing no objections so ordered. hearing nothing. i also ask consent for any bill ordered rorted today the bill reported with an amendment to strike out all after the enacting clause and insert the clause and adopted in the committee. hearing no objection so ordered and a heartfelt thanks to the office of legislative counsel for their tireless work on this bill that was not an easy task
the atlantic hurricane season is about to get under way beginning next wednesday june 1st and runs through november 30th. federal officials will brief reporters this morning on what they expect. you can see the national oceanic and atmospheric administration event starting live at 11:30. candidate donald trump is campaigning today in california. that state holds its primary on june 7th. c-span will have live coverage of the campaign rally from san diego starting at 5:00 eastern today. this weekend, live coverage of the libertarian party convention taking place in orlando, florida. under way tomorrow night at 8:00 eastern when presidential candidates hold a debate. and c-span live again from the convention on sunday morning at 9:45 eastern when the party chooses its presidential candidate. libertarians are the only third party on the ballot in all 50 states. >> madame secretary!
we proudly give 72 of our delegate votes to the next president of the united states -- ♪ ♪ with congress in recess next week, american history tv programs are airing in prime time on c-span3. look for the history features each night beginning at 8:00 eastern including a vietnam summit of the johnson presidential library. a 50th anniversary retrospective on the conflict. monday the first major engagement of the war.
and then the soldiers battle after the war with physical and psychological trauma and a conversation with henry kissinger. >> as the administration went on, a president who all his life had been known as concerned primarily with domestic policy was engulfed in a division of the country that in a way has lasted to this day. >> tuesday authors and historians on how america was divided over the war. and then a conversation with filmmakers. >> by the time we got four or five decades away where the historical try angulation can take place, when you can have the kind of distance and perspective necessary for a reactive and journalistic response but something that is hopefully greater than the sum of its parts, you begin to realize that almost everything you thought you knew was not
true. >> and wednesday, a look at the war from the perspective of those that fought it and those with vietnam. thursday 8:00 p.m. eastern, the real america series looks at the 1975 church committee hearings for the intelligence efforts. and with the national museum of african-american history and culture opening in september, friday at 8:00 p.m. eastern, all-day conference with talks on african-american religion, politics and culture and history as american history. >> i couldn't get that out of my mind, that my students were thinking that somehow this african-american history wasn't real because it -- there was no textbook to textbook as there was in all of the american history courses taught in the department of history. and so, i decided to write a real textbook. >> for the complete american history tv schedule, go to
cspan.org. federal communications commission chair tom wheeler is defending the commission's proposed privacy rules for internet service providers appearing before the subcommittee on privacy, technology and the law. chairman wheeler says consumers should have similar prooifty protections while on the internet as they have when using telephone networks. this is about 90 minutes. >> committee will come to order. we're here today to discuss the federal communications commission proposed privacy rules that are currently in the notice and comment phase. the fcc under its most recent net neutrality order have created a vacuum in privacy enforcement when reclassified broadband as a common carrier under title 2 of the communications act.
previously, the ftc had successfully enforced privacy against broadband providers except for the net neutrality order, the ftc would still be doing that. over the last ten years the ftc has brought a number of enforcement actions against broadband providers. however, none were a result of privacy violations. given that, many wonder what justifies the new proposed rules which are a significant deviation from the ftc's approach and more burdensome as well. in fact, there are widespread concerns that these proposed rules are another step in the fcc's attempt to become the policemen of the internet. these rules will also have a number of problematic consequences. first and foremost, the proposed rules will impose unnecessary and static regulations on a dynamic and innovative internet ecosystem. would we have the same internet today if these prescriptive rules were imposed a decade ago?
i'm concerned that we would not. additionally, it's likely that these regulations would only confuse consumers and give them a false sense of security. finally, there are serious legal questions surrounding the proposed rules. in particular, are they consistent with the first amendment? to discuss these issues we've assembled what i believe to be the perfect panel. we have the chairpersons and minority members of both the fcc and the ftc to provide their perspective. i thank them for appearing here today. i look forward to the testimony. senator franken will give his opening statement and then i'll swear in and introduce the witnesses. >> thank you, mr. chairman. i want to thank you for holding today's hearing on the fcc's proposed rules and the very important issue of consumers' online privacy. chairman wheeler, chairwoman ramirez, commissioners pait and ohlhausen, thank you for appearing before our subcommittee.
a little over a year ago the fcc voted to preserve a free and open internet. it was a very exciting moment for supporters of net neutrality. and that means it was a very exciting moment for a whole lot of people. nearly 3 million consumers and business owners spoke out and urged the fcc to adopt rules that would insure the internet remain the platform of free expression, innovation, and economic growth that it always has been. it was a very exciting moment for me and remains one of the highlights of my career in the united states senate. many of my colleagues and i long fought for strong rules, and we argue that these rules should be be grounded in the fcc's authority under title 2 of the communications act. if they were to survive judicial scrutiny and withstand the test
of time. now that very question is currently before the d.c. circuit, and we could see a decision from the court any day now. but as we await that ruling, the fcc has a job to do. since the open internet order went into effect, the fcc has had a responsibility to implement privacy rules to protect consumers, promote competition, and ensure that broadband providers are given certainty with respect to their obligations under section 222 of the communications act. so i commend the fcc for starting this necessary process. for my part, i believe americans have a fundamental right to privacy. they deserve both transparency and accountability from companies that have the capacity to trade on the details of their lives. and should they choose to leave
personal information in the hands of those companies, they certainly deserve to know that their information is being safeguarded to the greatest degree possible. now, this transparency and accountability should come from all the companies that have access to americans' sensitive information. this includes telecommunications providers like comcast and at&t, but also, edge providers like google, facebook, and amazon. i have repeatedly pressed website operators and other online service providers to ensure that their customers have more information about the data being collected about them, about how the data are being used, and whether the data are being shared or sold to third parties. here, however, the fcc has an obligation to specifically address broadband providers' collection and use of americans' personal information, and we're
talking about a whole lot of personal information. isps have easy access to americans' unencrypted online communications and browsing histories, as well as internet usage patterns which can provide a lot of insight into people's daily lives and habits. practically speaking, this means that comcast knows exactly what ails you when you visit webmd's symptom checker or that you recently experienced a major life event when you're browsing maternity clothes on target.com. it also means that comcast can tell if your home internet connection, which may be silent during the day, suddenly starts seeing increased use between the hours of 9:00 and 5:00. combine that information with the browsing history of employment bulletins and comcast can infer that you've recently lost your job.
senator hatch is here now and needs to leave somewhere else pretty soon. glad he's here and we'll allow him to make an opening statement now. >> i'm headed to the white house after this. thank you, mr. chairman, for holding this important hearing. as a strong proponent of free and open internet, i recognize the need to allow the internet to continue to flourish and to drive our economy while also protecting consumers' privacy and data security. consumer privacy is an extremely important issue. however, i have significant concerns about the fcc's proposed privacy rules for broadband internet service providers. and like many of my colleagues, i believe that the fcc's 2015 open internet order which unilaterally reclassified broadband providers as common carriers under title 2 of the communications act was a serious overstep of the agency's
while subjecting some but not all to a completely different system of rules and regulations. second, i am following closely the issues surrounding the so-called set top box rules proposed by the fcc. technological advancements have provided consumers with almost limitless options to watch pay per content on an array of smart tvs and other devices. now, streaming technologies have freed consumers from costly and cumbersome set top boxes. to date, the fastest growing streaming market has forced cable and internet service providers to be more nimble and competitive, unleashing greater innovation and consumer choice. this committee has exclusive jurisdiction over intellectual property rights protections. as such, i continue to be concerned about how the proposed set top box rules will impact video content.
unfortunately, many believe that if it's on the internet it must be free. but producing and distributing video content is not only costly it also requires a legal framework to license that content. approaches that ignore the need for licensing or undercut existing licensing agreements will, in my view, increase costs for consumers, reduce choices and discourage innovation. i strongly urge you to keep this in mind when considering the set top box issue. third, i would like to comment briefly on the charterer time warner merger which the fcc voted to approve last week with conditions. mr. pai, you dissented from the commission's decision on the ground that the conditions the commission imposed have nothing to do with the merits of this transaction. rather, you said the conditions
are about the government micromanaging the internet economy. now, this is not the first time you've raised concerns that the commission is improperly used merger conditions to micromanage the internet. last summer, for example, you dissented from the commission's decision to impose 17 pages of conditions on the at&t/directv merger saying the conditions have nothing to do with the transaction at hand and characterizing them as, quote, the force tribute that the company must offer to nullify the capital, unquote. mr. pait, i want you to know i share your concerns. in fact, i've been troubled recently by a number of commission actions that in my view have sought to extend the commission's authority beyond statutory bounds and to push administration priorities in a one-sided way. now, i'm unfortunately able to stay and ask you questions
today, but i'll be submitting some for the record so i will look forward to the responses of all four of you. and i just want to express my gratitude that all of you are willing to be here today and help us to understand these issues better. i hope we can make some headway together, and, of course, i'm going to do everything in my power to try and make sure that we live within the framework of the laws. thanks, mr. chairman. >> thank you. thank you, senator hatch. it's custom to swear the witnesses in. if you'll stand. do you affirm that the testimony you're about to give before the committee will be the truth, the whole truth and nothing but the truth so help you god? record will show they all answered in the affirmative. i'll go ahead and introduce all of you together and then turn for opening statements. chairman tom wheeler is the 31st chairman of the fcc, a position he's held since november 4, 2013. for over three decades, chairman
wheeler has been involved in telecommunications networks and the services as a policy expert, an advocate, and a businessman. prior to joining the fcc, chairman wheeler was a managing director of core capital partners, a venture capital firm investing in an early stage internet protocol based companies. he served as president and ceo of shiloh group llc, a strategy development and private investment company specializing in telecommunications services and co-founded smart brief, the internet's largest electronic information service for vertical markets. chairman wheeler is a graduate of the ohio state university and is recipient of its alumni medal. commissioner ajit pai has been a commissioner of the fcc since may 14, 2012. between 2007 and 2011 commissioner pai held several positions in the office of general counsel serving most prominently as deputy counsel
general, or i'm sorry, deputy general counsel. prior to being sworn in as commissioner, pai worked in the washington, d.c. office of jenner and block where he was a partner in a communications practice. commissioner pai has served in all three branches of the federal government, clerking for the honorable martin feldman of the u.s. district court, and the eastern district of louisiana, serving in a number of roles in the department of justice, as well as working as chief counsel on the senate judiciary committee. commissioner pai received a b.a. from harvard university with honors and a j.d. from university of chicago where he was editor of the university of chicago law review. thanks for being here. chairman edith ramirez was sworn in for the federal trade mission and was designated to serve as ftc chairwoman effective march 4, 2013. prior to joining the commission, ramirez was a litigation partner in the los angeles firm of
quinn emanuel irgaheart and sullivan. before then, ramirez was an associate of gibson dunn and crutcher in los angeles. she clerked for the honorable alfred t. goodman in the united states court of appeals and for the 9th circuit. ramirez graduated from harvard law school cum laude where she served as editor of the law review. and holds a bachelor's degree from harvard college. she probably will get along well with the guy to my left here, my far left here. just kidding. joking. harvard jokes. commissioner -- >> i get it. >> commissioner maureen ohlhausen has served as a commissioner for the federal trade commission since april 4th, 2012. prior to joining the commission, she was partner where she focused on ftc issues including privacy, data protection and cyber security. she previously served on the commission for 11 years, most recently as the director of
policy planning from 2004 to 2008, where she led the ftc's internet access task force from 1998 to 2001, she was an attorney adviser for former ftc commissioner orsen swindle, advising him on competition and consumer protection matters. before coming to the ftc, she spent five years on the u.s. court of appeals, after the d.c. circuit, serving as a law clerk for judge david b. sintal, as staff attorney. commissioner ohlhausen graduated with distinction from george mason university of law and graduated with honors from the university of virginia. thank you all for being here. we appreciate -- i know it's an effort to get you all here. chairman wheeler, if you'll start the testimony and if all of you will summarize your testimony to about five minutes, we'll include the longer version for the record. chairman wheeler. >> great. thank you very much, mr. chairman.
it's a privilege to be here and to be with our colleagues from the federal trade commission. you know, the ftc in 2012 set forth some key privacy concepts in their report, and the money sentence, if you will, in that report is this. broadband networks are, quote, in a position to develop highly detailed and comprehensive profiles of their customers. and to do so in a manner that may be completely invisible. but this is not the first time that society has had to deal with this kind of a technological challenge to privacy. making a phone call also generates similar information about the consumer. long ago, however, society dealt with the problem through an fcc rule prohibiting nonnetwork exploitation of information
created by the consumer's use of the phone network. this policy has been in effect for decades. the issues aren't new nor is the fcc's expertise. here's an example of how that works. when the consumer picks up the phone and calls, for instance, air france, the phone company is prohibited by fcc rule from selling this information to tour services or hoteliers in france unless the consumer expressly grants permits. it should be the same thing with the privacy of online information. going to the airline's website should be no different than going to their switchboard. now, of course, the airline may decide to do something with the consumer's information themselves. but there's long been a big difference between the
information created by the consumer's transaction with a third party which is a matter of choice and the information the consumer has no choice but to provide in order for the network to connect them with that third party. thus, the proposal on which we are currently seeking comment welcomes the innovation created by digital networks or retaining the values and the rights that have traditionally applied to network operations. and those values are simple. the information that consumer generates in order for the network to function is the property of the consumer. just because the consumer hires the network to deliver them to a service does not mean that the network can unilaterally take ownership of that information that the consumer provides. and what a trove of information it is. here's what one isp says they collect. quote, a combination of information from wireless and
wi-fi locations, tv viewing, calling and text records, website browsing and mobile application usage, and as if that's not enough, other information we have about you and other customers. now, there are two things that jump out from that extensive list. one, nothing on that list is the network's information. it's the consumer's information that's been provided to network so the network can operate. and second, there is no choice. this is a, this is what we do, take it or leave it situation for the consumer. and the ftc's privacy report specifically called out this issue of take it or leave it for broadband internet access saying, quote, consumers' privacy interests ought not to be put at risk by such one-sided transactions.
now, we respect the network's desire for new revenue from selling digital information created by the operation of the network. but they should not be able to redefine the responsibilities of a network simply because the network switched from analog to digital. our proposal provides that networks can use the consumer's information, but they must first get permission from the party whose information it is, the consumer. they can't sell something that isn't theirs, nor should consumers be forced to waive their privacy to get service. the networks need to seek permission of the party whose information it is. and further adhering to well-established principles, our proposal only applies to network providers. in the air france phone call example, what the airline may do with the consumer's information
is a transaction separate from the consumer's transaction with the phone company to deliver the call. we do not regulate those with whom the network terminates in the vernacular of today, the edge providers, and this by the way includes network affiliates acting as edge providers. and we have never asserted jurisdiction over edge providers and do not assert it now. finally, we are in the midst of building a record in this proceeding, as you indicate, mr. chairman. in keeping with good process, we put forth proposals to focus the debate and the comments. but it is a proposal, not a conclusion. and we have asked multiple questions about the proposal, its assumptions and details. we will of course build any final proposal on the record that is established in that regard. look forward to this hearing to further enrich our consideration. thank you, sir. >> thank you, chairman. commissioner pai. >> chairman flake, ranking
member franken, members of the subcommittee, thank you for holding this hearing today. it's a privilege to appear before you alongside our distinguished colleagues from the federal trade commission. thank you as well for giving me opportunity to testify about the fcc's proposal to selectively regulate internet privacy. every day millions of americans enjoy the freedom that the internet provides. one reason is the united states' historic commitments to light touch, technology neutral communication when it comes to internet privacy. start-ups haven't had to hire an attorney to navigate complex federal rules and entrepreneurs have been free to invent and discover new ways to monetize their services without fear of government standing in the way of profitability. as the nation's preeminent federal agency on privacy issues, the federal trade commission deserved significant credit. for two decades, it has applied a unified approach to all online actors. the ftc has been quite active carrying out more than 150
privacy and data security enforcement actions, including actions against isps and against some of the biggest companies in the internet ecosystem. it's been so successful that the u.s. government has touted the ftc's work to the european union as officially robust to protect online consumers against predatory privacy practices. but, unfortunately, the fcc tore apart the ftc's unified framework 13 months ago when it reclassified broadband as a public utility. there's now a gaping hole in our privacy protections, a hole that needs to be refilled. how best to do that? i can't put it any better than chairman wheeler did, testifying before congress in november of 2015, because consumers deserve a uniform expectation of privacy, the fcc will not be regulating the edge providers differently from isps. but ignoring that commitment to congress, the fcc decided in march 2016 to target isps and only isps for stringent
regulation. regulation far more invasive and prescriptive than the ftc's case-by-case approach. for several reasons, this approach doesn't make sense, or, as president obama's first ftc chairman and most recent ftc general counsel put it, the ftc's proposed rules would do little to promote the cause of privacy. first, it makes no sense to give some companies greater leeway under the law than others when all may have access to the very same personal data. search engines log every query you enter. social networks track every person you've met. online video distributors know every show that you've streamed. and if the fcc burdens one niche of the marketplace with asymmetric regulation, this approach doesn't benefit consumers or the public interest. it simply favors one set of corporate interests over another. second, the fcc's approach strangely singles out new
upstarts in the concentrated market for online advertising. as president clinton's chief counsel for privacy and president obama's special assistant for economic policy has recently explained, the ten leading ad selling companies earned over 70% of online advertising dollars and none of them has gained this position based on its role as an isp. he continued, that's because isps have neither comprehensive nor unique access to information about users' online activity. or, as former democratic representative rich boucher wrote recently, by the end of this year, 70% of internet traffic will be encrypted and be beyond the surveillance of isps, selectively burdening isps gives a windfall to those already winning in the world of advertising. the big data marketplace will carry on, except ironically, they will have isolated their biggest players from isp competition.
third, the fcc's proposal may signal the end for ad-based discounts on online services. the agency put in its crosshairs free services in exchange for information as well as programs that offer consumers discounts on the broadband service in exchange for consent to use web browsing data to tailor a consumer's ads. i don't see how denying consumers such choices is in their interest. finally, everyone in the online ecosystem should recognize that the fcc's decision to target isps is a calculated political choice. in crafting this online privacy regulation, the agency relied on section 706 of the telecommunications act. under the majority's reading of that section, the agency has a power to take practically any action it believes necessary to break down barriers to broadband deployment and adoption, including regulating edge providers. and to be clear, i don't support the majority's reading. but regulating the privacy