tv U.S. House of Representatives CSPAN December 23, 2009 1:00pm-5:00pm EST
the investors who placed their money in protected ponzi scheme operations. with regard to the proposed clawback amendment we endorse an amendment that prohibits callbacks for with regard to the 60-day payment amendment, we agree payments should be based on the customer's account balance ounce of their last statement -- as of their last statement, if they had no reason to believe the bernie madoff operation were fraudulent operations. regardless of what process is determined to be reasonable, we suggest strict parameters and guidelines be established and sipc be held accountable for
meeting those standards and guidelines. in closing, i suggest that this could happen to you and the congressmen mentioned it did happen to one of the investors who is a previous member of congress. we look to you and your colleagues to carry out congress' original intent to protect all investors and help us recover a portion of our tax- deferred retirement account losses. thank you again for the opportunity to present these matters. i would be pleased to answer any questions you may have. now we will hear from our friend from new york to introduce the next witness. >> thank you very much mr. chairman. thank you for holding this important hearing and allowing us from other subcommittees to sit in and and and listen. i want to thank all the witness,
and mr. leveton, i assure you that we will be discussing with mr. pearlman and others your suggestion. we are informed by the plight of our own constituents and did not necessarily know all the different aspects of this. to represent some of the folks in my constituency today, i am pleased to introduce a good friend of mine, of business manager for the local steam fitters union. he has served as the chairman of the employer trust fund since 2005. he is also the president of the central and northern new york building and construction trades council, representing 16,000 pensioners and their families from other unions inside europe. mr. lancette, thank you for coming to speak with us. i want to thank local 26677's counsel for coming down as well. they suffered serious losses because of the madoff council.
while the headline said been full of wealth and prominent investors who lost money, the pension funds of approximately 60,000 union workers and retirees in central and upstate new york were also exposed and suffered great losses. central new york unions loss at least $350 million, and as mr. lancette will tell us, local 267 loss $37 million. it is important to help them recover some of the funds that they have lost. i urge the chairman to continue working with me and others on the committee to address these issues after regulatory reform has passed the full house. currently the securities and investment -- sipc is only allowed to restore five and a thousand >> per fine.
-- $500,000 upon. i have introduced an amendment helping those to recover those money. i want that my colleague from minnesota from working with me and others to relieve victims of madoff. again, i want thank the chairman for holding this important hearing. and for mr. lancette sharing his story with us. >> thank you very much. i like to thank chairman and kanjorski, and the members of the subcommittee on capital markets, insurance, and government sponsored enterprises for having me here. my name is gregory lancette, currently the business manager of plumbers and steamfitters local 267 in syracuse, new york. i am chairman of the jointly administered multi-employer trust fund. i've served in this capacity
since 2005. local 267 is a chartered local union of united association of journeymen and apprentices in the plumbing and pipe fitting industry in the united states and canada. i am here today on behalf of not only by 1115 pension participants and their families, but they also stand here today as president of the central and northern new york building and construction trades council, which represents nearly 16,000 pensioners and their families also from central new york. today gallup like to discuss the direct relationship between sipc and bernard madoff's ponzi scheme. sipc today provides coverage to individuals with an individual and of $500,000. my members pension funds have no real coverage. my members, like millions of workers across the country, rely on pooled coverage which sipc
does not currently protect. when i was elected in 2005, the madoff investment was approximately 30% of our pension fund. we receive regular confirmations that our money was invested in s&p 500 cos. while the return on the account slightly trailed the s&p 500 index, we were assured that the strategy offered adequate there's a versification and lower volatility. we believe that the u.s. securities markets monitored by the securities and exchange commission provided protection for our members. the plumbers and steamfitters local 267 benefited fund had out market value of approximately $34 million invested with madoff's direct brokerage. local 267 had $6.5 million invested with bank and an associates. beacon is a fund consisting of a
basket of investments which comprised of the 40% of total assets invested in madoff. on to the current formula of sipc reimbursement, local 267 will receive $500,000 from the madoff direct account and the reimbursement for the be can i count will only be $900, due to the fact that the amount of local 267's portion consisted of only 1.8% of beacon's total assets. to summarize, local 267's pension loss $236 million and expected to recover $500,900 from sipc. .
the reason behind the amendments is that pension funds would be made closer to call to compare what is being compared back in central new york. currently, if all 30 funds received by kucinich thousand dollars reimbursement from pacific, $15 million will be returned to the new york area compared to $350 million in losses. $50 million returned, $350 million returned. the pension loss of nearly $37
million to equate to $33,183 per participant. this protection would not be unique. a similar path is available to retirement plans for funds in the fdic insured banks. the portion that would be required to reimburse within 60 days would benefit all plans. it to be accomplished by returning assets or paying benefits to retired members. funds that were affected by the backs of 30 madoff are facing insolvency. the securities and exchange commission was not able to defy fraud in a timely manner which led to significant losses. the pension protection act of 2006 requires funds to a more tight debt area.
i would ask for consideration of the tension protection act, allowing the plan to immortalize the losses at a 30 year rate. fthe plant could recover and naturally. it may lead to the plan being turned over to the guaranteed. is john a consideration for multiple investor groups or participants or any multi employer. i strongly urge the pension plans be allowed the proper time frame before the pension protection act to a more a ties -- amoratize losses. >> for we will hear from a
professor at columbia university law school. >> thank you. i am pleased to be here but disappointed on this first anniversary of mr. madoff's debt. they have done so little to prevent the reoccurrence of ponzi schemes. ponzi schemes are predictable. they cost investors on average something like a billion dollars a year. before we even heard of mr. madoff, in 2002, the ponzi scheme losses in that year were $9.6 billion. this is a recurrent problem. it will continue as long as the government persists in allowing advisers to be their own custodian. i will put this in a sentence.
mutual funds used an independent custodian. so do hedge funds. set mr. madoff used his own brokerage firm. his own brokerage firm was serving as the watch dog as a burning madoff the investment and pfizer. when you are your own watchdog, and nothing works. the sec has taken some effort to discourage the use of self- custodians. they have backed off under pressure. we need a true watchdog. that can only come from an independent custodian. that is not a topic today. i will move on to the protection act. i want to make three suggestions. all of all compromises and a line drawing and will be painful. insurance is costly.
i remember this panel has told you that the definition of " customer" is too limited. is understandably been the tip of the fifth -- understandably limited. in looking at who to protect, i think we should look at the continued big dent in the u.s. been the most injured and least able to protect themselves. for i think that is the pensionr and small pension funds. they suffer the most concentrated loss. they are losing their requirement -- retirement security and cannot judge their own interests. what they do is hire someone
like made out to be their investment adviser. on that kind of criteria, we have suffered a concentrated boss who is least able to monitor themselves. the first category you might think of the first category you would think, were you to expand the definition of customer under sipc, would this be a smaller pension fund? only defined contribution plans, because that is where the loss falls on the individual pensioner. you can't physically defined customer to include smaller plants, but you will have to put some financial limit on it. that will be painful and i will not tell you what that number should be. the second point, equally controversial, this is clawbacks. the appointed trustee in the
bernie madoff case will use the fraudulent conveyance actions under the bankruptcy code to go after those people who receive a very large distributions within the statute of limitations. this morning's "wall street journal" estimates they will bring suits totaling $15 billion from people who receive distributions in the statute of limitations. that is $15 billion against total losses around $19 billion. in other words, fraudulent conveyance statutes have the capability of restoring as much as 80% of the investor's total losses. that is not to say he will get 80%, but he has the capacity to sue for 80%. maybe he will get 25% or 30%, but even $5 billion dwarfs any
other source of recovery that the injured investor will receive. i am advising you you should be careful before you disable the trusty and cut off his effort to restore these fraudulent conveyances and put them in one common pool for the benefit of all investors. the language that says you cannot bring a fraudulent action unless the customer did not have a legitimate expectation that the assets in his account belonged to him, is language that i believe maine's, -- i believe means you'll have to show this person is a co- conspirator of bernie madoff. the cautious about stopping the trusty and going against the larger source of recovery. i would suggest we start with who are the victims who might be most injured by a fraudulent conveyance actions.
i would focus on charitable organizations. the bankruptcy code has long given an immunity against fraudulent conveyance actions to charitable contributions. charitable contributions are not an issue here. here they are charities with accounts. they are trying to get their own money back. the principle is there. congress has recognized that charitable organizations are a special category. i would suggest that if you are doing anything to cut back but to extend the immunity of charitable organizations beyond the contribution and say that a charitable organization cannot be sued for fraudulent conveyance unless it can be shown that either they have actual knowledge of the fraud or the charity was established by the clerk himself.
no one has explained the purpose of fraudulent conveyance. they serve one fundamental purpose. they prevented the crook from choosing the victims that will bear the loss. we do not have fraudulent conveyance statutes, they can still decide to permit some victims to recover and letting other people bear the losses. if we do not have a fraudulent conveyance that too, we will put strong incentives for the crook to direct to be the real victims in who will be the smaller victims. i do not think you want to do that. i think you can use is that he that has a different language. some the case law has construed to mean that you not show just good faith, but yet a good faith of a reasonable person. it is a negligence test.
i think my time is out. for the first time, congress is trying to move from being a rather strange non insurance system to a true insurance system that will charge risk adjusted premiums. for other was, a good brokers are subsidized and crooked brokers [unintelligible] we want the risk your broker to pay more. i will stop. >> each and every one of you has told a compelling story.
you of colleges being to some of the core issues that you are trying to decide 1/5 sell off home run into whether you are a victim of a fraud or the market. people want to be made whole. that is a natural human instinct. our problem is that the losses was somewhere between $7 trillion and $14 trillion in capital. if you had been an investor for one of the major banks in the united states, you go from $50 a share to $2 a share because of bad judgment or investments in the wrong area for potential fraud or participation in fraud, we do not know, there would have
been great disappointment and temptation of every shareholder to 6 "i want to be made whole at the price i got made in at or the high price because i was counting on that for something, " obviously, it was their savings or requirement. that is not a bad argument. foa few among us and the population will turn over the assets to their pension funds or bank accounts, a fellow citizens, to make them more whole. i do not see a long line out here in front of the capital. they have not shown up to suggest that they are willing to provide their fair share of your loss. i doubt that they will. our system and our decision will go to the question of "is it intended to have a system that has no risk?" that may not be the worst system
in the world. if we are that, we should not have pension funds investment and visors. we should have a governmental pension fund and somebody lens that to the united states government at a guaranteed rate. if you have very little upside or downside. if you want to get to the advantage of the free market system, there are risks to the market. you may say "but we did not lose our money in the market, we lost to a broad." that is part of the market. it may be vicious. it may be because she did not understand or know you were investing your money. there is no way in the world you can say it was the government's responsibility. our system does not say that. our system says it is each individual's responsibility to do and protect assets as they will.
i was here when the enron disaster happened. they are people invested their life savings in their 401k that disappeared overnight to the tune of hundreds if not millions of dollars. we were all sorry for them. they had to take their risk. that was the problem. that is our system. it is not the best. i still think it is the best system in the world. it is not a good system if you are on the losing side. if you are on the winning side, it is the best that we ever discussed. our problem is, how do we lessen the impact on everyone? we just cannot. it seems to me we cannot guarantee everyone is insured or guaranteed their return. i do not know how we do it.
if we were to tax the payment of loss of $14 trillion in capital for the last recession, what would it be per head? q. is the mathematician? it would be extraordinary the amount of dollars. and probably all of us have lost in some way. you have lost a great deal. there is no question about it. what do we do? we have done several things. we have provided changes in the investor protection act that will require certain actions go more in depth. we have a chain of command. information will go up the information ladder at the sec. all of those things help future legislation. there is not a lot in there that will help your cause.
can we come up was an equitable position? -- with some equitable position? that is a tough situation. if we were to honor $500,000 per pension member of the pension funds, we would soon end the guarantee appropriation. we do not have the funds in there to do it. i do not think that was ever the intent. i think we probably have to have much more lively -- and i think it will result -- we have to have closer eyes on the subject. we do force pension fund to do certain things with the assumption they will be able to carry them out correctly and they probably cannot. those individuals that did not know that madoff even had a touch on their funds. that is a tragic thing. that is the
responsibility of each individual to find out. my time has expired. if you think realistically, you can go out and buy a 5 and a thousand dollars home. you can buy it from your lawyer, doctor, minister, priest, rabbi, or friend. if you are not smart enough or clever enough or sensitized enough to have its search out that the individual has title to your home and to buy the home and pay your money in any find out that the person that reported to be the owner did not own it, i have news for you. you lost it. you cannot sue the government. you cannot hold anyone else response ible. what a difference is that in a pension fund it? it is really the same policy. our hearts go out to someone who pays five and a thousand dollars for a home that they do not
owner cannot live in. our hearts go out to the people who lose their life savings because of a fraud. it was perpetrated by someone appeared to have all the respectability. the federal law does not provide that because you have to register with the sec and the sec is supposed to test out and investigate, it does not say the guarantee that it has are that if we eliminated. we cannot afford to do that. in some respects, if you look back historically, it is a hell of a lot better today than it was in 1929. i hope it will be a lot better tomorrow when we passed a new reform regulatory bills than it was a year ago. it is the going to be perfect. we are not going to accomplish that. those of us that have the desire or wish are going to be grossly disappointed. i now plan to ask any particular questions. i have exhausted my time.
so many members have expressed their thoughts on the subject of the losses of their constituents. they have suffered. they are looking for a remedy. we are going to work as hard as we can to close some of the holes and weaknesses in the system. we are not one to solving create a perfect system. the possibilities and exposures to the government and people are far above what we can possibly provide. we will work toward getting uppity. there will be fairness. there ain't no equity or complete fairness in this world. it is a tough world. >> thank you.
what we can try to do from the government's perspective and make sure there is justice. we need to strive in order to get justice. get justice. i do agree tha i do agree that at the beginning of the day that everyone should be held accountable for executing their own due diligence in their investments, and part of that due diligence changes from who you are. if you are the middle old lady at one level, conversely the union official who might have more resources than a little old lady at a different level. to a fund of some sort in between those, so the level of
due diligence will be changing, but we do expect everyone exercises due diligence. to the extent that does not work out as far as investments going up and down, that is your responsibility. added to that is when net due diligence is in reliance on the government in certain areas, then that is a responsibility of the government to come forward. when you do your due diligence looking into the sec, has the sec done their job? you are relying on the sec to do their job. when you look -- that is before the fact. after the fact, you should be able to look to sipc to do their job. this is a whole issue that we are doing. there is a bill on the floor this week which does what occurred here. it creates a moral hazard, if
you will, by relying on the government, as you did because the government says, we will protect you with the sec, so you have a right to rely on that. maybe you would have done more due diligence if that was not there, but you were told you could rely on that. we also set up the sipc and said you could rely on that. had we never set that up you may have made other decisions. now we have created a different investment strategy and a moral hazard. the bill we will be voting on expands those involvements or activities by the government, so you may be even more reliant on the government and less due diligence. was in regard to callbacks. everyone except fomr. believes d
not have calawbacks? one of the testimonies entered into record said any clawbacks should begin with the ftc. -- s. you see. you were in reliance upon them. -- the sex. -- sec. you were in reliance upon them. we are doubling their salary and their appropriations. we are saying hopefully in the future you will make some changes but we will increase the. we might want to take a look at what is coming down on the floor tomorrow. we should be holding them accountable for what they did wrong in the past and humming the people for tivoli accountable for the failures they made. before we give them any more
money, we should make sure there are changes. use said that the trustee is running expenses of $100 million a year. they say the trusties have only paid $1.2 million so far. >> i can clarify that. the trustee's legal fees have been approved for the first 15 weeks. it is running at dollars a week. -- at $1 million a week.
at the net investment is not required by the statute. they have said that the expenses are running at the rate of $1 million a week. >> i see my time has come up. it is almost an incentive for things to move at an expedited basis. we have they could be there that is guaranteed to pay. >> there is an inherent conflict of interest in the way the statute is set up. >> some of these aspects may have impact upon getting more fees getting in or broker deals. we did suggest that sica may want to testify or be it the hearing. they declined to do so. we would certainly like to hear from them at some point in time at what they see as the impact. i think i am on board with where most of you are.
for we really have to be real tight in a language. why you do not want to do is come up with language that does not have been you will -- that has wiggle room in it. you will have to hire a lawyer with the release should not have to go to that aggravation. i think you probably agree. lawsuits would be very targeted. i think the target would be very limited. there was the potential for pollution. is that where you are going on that? >just for any other losses that they would have potential? >> i think you could move from the current good faith in defense, which is based on a reasonable person, to a lot of
recklessness standard. it to make it harder to recover on fraudulent conveyance. >> you do not want an overly zealous [unintelligible] now they have a reckless standard. >> mr. picard on behalf of small investments. there is no villain here. i hope he is able to recover a good deal from some of those larger investors to benefit the smaller investors. >> some of those are not the villains. i would assume the best majority of them are not violent either. >> he could have been reckless. >> the error not villains. then have to make that case. we do not want to have the other people being swept into that and incur the expense. but right now they are simply negligent. >> i agree with that.
>> we will hear from the gentlemen from new york. but thank you. we do not really know the full extent of the number of victims. what we do know is that the first victim was the public trust, the trust the people in their government, the trust the people in the us, the trust in the system that we set up that they believed would protect them and have every reasonable right and expectation that it was going to. we know the number of claims that have been filed. we know the number of people who have been named. we know the number of entities that are on view this. as we can sneak -- on the list. as we can see from one local union, they are named as a
victim but a lot of these groups and organizations and investment groups represent thousands and thousands and thousands of americans, some of whom think they are lucky because they had no stake in madoff. they do. 11 people do not understand this issue. -- a lot of people do not understand this issue. they do not look sympathetically at victims that have more money than they did. if they were getting a high interest rates. they should have known better. this is part of what we used to call blame the victim mentality. it is the victim's fault there in the predicament that there and when nothing could really be further from the truth. chopin's, how many new mr. madoff? -- show me hands, how many people knew mr. madoff?
not one of the victims knew mr. madoff. that is the problem. how could they do due diligence? they relied on the government to do due diligence. maybe we should take away the right of the government agency to do diligence and enough people like mr. madoff free of sen, crime, culpability, el intention and anything else. maybe we should let the little old lady from peoria be able to do due diligence and go in personally to mr. madoff. every citizen should be able to do due diligence how do we do it? we do it by doing what we do. we do it by empowering government agencies and entities and people with badges to go in and investigate and make pronouncements that other people trust. that is what we do in a
sophisticated financial system hig. everybody can investigate anything. the only people have the blame the victim mentality are the people who are not victims. they think they were lucky. some of them or not. there are so many victims here that we do not even contemplate right now. you put money in your bank. you have brokers. you put your money somewhere safe. you know the line of defense, because those are all public. if your bank went through brokers, so many other thousands of people may lose money that we will never hear of any end. fourth the system loses all the money. there is not enough money in this insurance fund that people thought that they had.
-- to make them whole to the extent of $500,000. we have a mess on their hands. we have a large group of american investors who were first robbed by mr. madoff, abuse by the governments in the system into thinking that they wear and -- they were insured. they were not. there were devastated by the irs. they were taxed on the money they thought they had. they did not have the investment returns. the government robbed them by charging them a tax. they can only go back a few years and not the full 13. the government illegally robbed them of taxes.
so many are now being raped by the clawback decision. it the think they have this money in their account that they did not have and they spent it to live on. that is what it was for. i have met people who have content for the victims because they should have known better. how? i represent the north shore of long island. it is paces from where mr.. operated. country club see belonged to. thousands of people who thought they were likely to know such a nice man who is so reliable received all the alkylates did alkylates -- all the accolades.
these people thought they were lucky. they were probably the unluckiest people of all. they were further ripped apart. they knew this guy they thought was a wonderful human being. how lucky were they? now they are personally devastated. to those people who look upon the victims and thought how smart they are and how stupid they were, they really do not get it. some of them are involved in this fraud personally.
we have to be able to somehow do better. i think it is interesting almost everybody on the panel have actually selected witnesses to appear before is that we understand who the victims really are. keep in mind, what we have to do is try to fix the system so it brings the thing that i think we all know, we cannot treat everybody equally. we had set people upon themselves against each other because of whether or not they needed to live off their interest or need it to continue working so they did not need to
live off the interest. which group is luckier? it behooves us to figure it out. i think that despite the fact that this is the more remarkable of the panels for the american people to understand what happened, i think we will have a lot more questions in the next panel, mr. chairman. we all look forward to hearing from them. i thank the people who have come here to share their tragic stories with america and to keep in mind that we all bear some culpability here in this situation in which we all find ourselves. i would yield back the balance of my time. >> thank you very much. >> i want to throw out a figure. if the loss you suffered in this recession, $14 trillion, it would break down to $46,666 for
man, woman and child in america. bear in mind what that would mean if we try to make up for everybody's losses and failings in the system. that money was lost by a lot of people in many different ways. some through fraud and bad judgment. i just want to throw that out. even if it is half of that that is a lot of money. mr. king of new york. anxiety of law school class. have questions for you. i agree with the overriding principles. we also have competing principles. one of the main purposes of sica to maintain consumer confidence. it gives some reasonable assurance that if they invest in
good faith for and use reasonable diligence, that they will be protected. if the stock collapses, that is part of the game. you lose. when i look at this specific web site, it had a specific mission. customer assets are missing. without it, investors might lose their securities are monies for ever. it does have a caveat in there. there is certain limitations. but every investor is protected, no fewer than 99% eligible to get their money back. it is stating that if you play by the rules he will be protected. when we have people that have played by the rules, it appears
to me we have a trustee that is trying to make villains. he is creating a one category of villains and victims. 99% of the people are all victims. let me ask you a question. are either of you aware of any instance where they have defined equity? >> do you want to go first? >> i would be happy to. i can assure this committee that there has never been a change where a they get taken the position that they do not have to comply with the law. this the first time in spic's history where they have taken the position that net equity does not apply to sipc.
>> they should not misrepresent what they are doing to the american public. until recently, sipc was underfunded insurance. broker-dealer firms paid only $150 a year. that is awfully cheap. when you look at this insurance system, you should look at what most of businesses do. they may spend 1% of their revenue. this test been an awfully cheap insurance. it has never been under great stress before. it could happen again. in the old days when this was set up, most investors were individual investors. that is change. only 25% of investors are individual retail investors. most of them to invest collectively through pension funds, etc. we cannot give insurance to everyone.
it to look like socialism for the rich. i do think there are special categories where we could recognize that if we are willing to make any change, we should start at the end of the continuing. i think there has been some misrepresentation about what s ipc can do. i think the sec is probably consistent with what they are doing. it has never come up before in this way. >> i would comment on that. anytime you get beyond the specific of the law, they are more deserving. it is a risky path. my time is starting to run. if all of you could address the
issue of reimbursement of people who pay taxes. they pay taxes on money they never received. >> i do think the legislation that is being proposed would allow you to carry these losses forward. that would be a way of reducing some of the bite. i think we should be very sympathetic. it was a phony tax that you were paying. >> thank you. we are not seeking a total bailout or restitution. all we are seeking is that the sec and sipc comply with the law. we are seeking the five and a thousand dollars of swipc insurance that we were promised. -- $500,000 of sipc insurance that we were promised. i do not think the present statute contemplate that. the statute clearly caught and tapes -- contemplated that a customer that deposits with a
broker is entitled to buy from a thousand dollars in sipc insurance and based upon the customer's last 8 them. -- entitled to $500,000 in sipc assurance based upon the customer's last insurance. the customer was entitled to replacement securities up to five and a thousand dollars, even if they have tripled in value. how come we trust our government if the president of sipc can assure a court that even if the securities, which were never purchased, tripled in value, sipc would replace the securities up to $500,000. we had a bright to rely upon that statement and rely upon the ball. with respect to taxes, there is
no question that economically the irs was the largest in this area of madoff's ponzi scheme. used in treating short-term capital gain and people were paying taxes on the income they thought they were receiving at the highest tax rate. the internal revenue service and congress have done a great deal to help investors on the tax side. it will give madoff investors a great deal of relief. it is not 107. we
>> i will ask you some questions, so you will get a response. >> [inaudible] >> we will now hear from the gentle lady from new york. >> thank you, mr. chairman. thank you for holding this hearing. i agree with some of my colleagues on the committee and i disagree with others. the bill on the floor today was put in place mainly because the government has failed in many ways. it is our job to protect the average citizen, so i will give you a chance to talk about what you want to talk about, because my husband was a stockbroker for close to 30 years. he used to come home all the time and say, brokers should ninth get commissions. it only drives them to buy and
sell and line their pockets. they should get a good salary. what we have seen in the last two years from enron, there has been a slow deterioration of moral obligation with large corporations. if anything, we have seen that with the meltdown in the economy we have right down. we have seen the victims. as far as helping some of those victims with a tax break, they don't have any money left to pay taxes. the money is gone. the ones that were injured were a lot of people who did everything right. as far as consumer beware, i am one of those that will read everything that comes into my house. i am not a lawyer and i don't understand it all. if i ask my broker a question he
has to look at the answer. we trust and we try to trust businesses. unfortunately that has not worked out. i will give mr. leveton a chance to speak about anything he wants. >> thank you very much. remember the camel trying to put their nose in the tent example? that is where the indirect investors are. i totally understand the issues of neck equity and clawbacks and other things that are valid. for the indirect investor, unless they are in the sipc customer definition, none of those things are relevant. they will not get any benefit anyway. i think that this is not so much a legal issue as it is an issue of fairness, because you
are distinguishing between direct investors on one hand and in direct investors on the other hand. now there is a further definition here. that is the pension fund investors has separated from the other in direct investors. everybody lost their money in the same way with the same fraud. i cannot speak about the wealth of the direct investors. i can only speak about the wealth of the indirect investors in our particular hedge fund. these are people who have worked all their lives, save it diligently, and accumulated enough money to invest in a hedge fund at a level that was over the minimum requirement. they are not rich by any means, to the extent they might have
more liquid assets than the example of people that were only able to scrape together $50,000 in the pension fund. that may well be right, but from the standpoint of this discussionm to distinguish between those people who have created many jobs over the years, but distinguished between the hedge fund investor and the direct investor seems to be totally unfair and not appropriate. i think congressman ackerman, that you understand. what you said was right on. the intent -- let me say that
another way. my reading of the discussion in 1970 when senator muskee said that this legislation will protect all americans, they did not say direct investors. all americans from brokerage firm of fraud is what was intended. >> i think that there is no way that sipc can rectify that, regardless of how good the arguments are, but congress can, and it can start right here.
you have taken the time and effort to allow this group to talk with you very freely. thank you. >> thank you. our next member. >> thank you, mr. chairman. i think it is clear that the hearts of every member aches for the experiences that the investors have suffered. there is no doubt about that whatsoever. i think we also, despite the fact that mr. markopolos tipped the fcc off almost a decade ago -- to to the sec off almost a that it ago that mr. madoff was tried to pull off a ponzi scheme, they ignored him, and he was allowed to do it and allowed to do it and allowed to do it.
i don't think it is ever realistic to expect that we can ever have loaws that can make sure people will not become criminals. the deterrent to that is swift and sure punishment. despite the numerous inquiries, the testimony, the investigations, i don't know that anyone at the sec -- i don't know if there has been a verbal reprimand, i do not know if they have been fired. we just don't know how they have addressed it. the only way to deter criminal activity -- you police it the best that you can, and when you find it, you must have swift and
sure punishment, even if the government is in on it. you must have swift and sure punishment if you want to deter bad activity. you have already made it illegal to perform back to the pre we have plenty of law -- to perform a bad activity. we have plenty of laws out there that an violated. the damage was done. it could not have been much worse, i don't think. but i think we need to focus on having a day of reckoning for that kind of bad behavior. it seemed to have permitted the industry. -- it seems to have permeated the industry. the whole reason this economy is in the dump that it is now, and future generations are basing the uncertainty that they are now, it is a lack of respect for the process, electric respect
for the fellow man, a lack of respect -- a lack of respect for your fellow man, a lack of respect for investors. a lot of people have the right to be greedy, but they don't have the right to steal from other people. until we see that, besides just one man, bernard madoff -- until we see that there is justice for everybody that is culpable in the scheme, it is just going to encourage more activities, despite the laws that we act. all right, mr. chairman, i yield. >> just a quick note. i think the frustration americans have, besides the fact that people have been defrauded, is that there has not been
enough punishment. accountability is one thing, and it is the responsibility of the government agency to follow through and remove those who did not do the job. one of the the explanations was that there were not enough people and in terms of regulation, quality of people. mr. markopolos is the best example of the fact that information was presented and it should have been shut down a long time ago. there is a second line on this that goes into the private sector. i don't think personally that there is enough punishment, criminal punishment, for people that brick at ws and the fraud -- that break the laws and defrauding the american public. mr. madoff could not have done this himself. i don't accept that. there are too many people involved in the process, and there needs to be swift punishment. let's get to the specifics here. thank you for your testimony,
but as individual investors and professionals, for giving your thoughts -- both as individual investors and professionals, for giving your thoughts on this. one of the things that i said before is people know that the sipc symbol means something, and the investor public needs to know that it means something. if we look back at the original language, the sipc series rules, a federal regulation through other 0.500 -- 300.500, the legitimate expectations of a customer based upon the written transactions, confirmations, sent by the broker-dealer to the customer. it seems pretty obvious to me. did you get a statement? >> yes. >> was it a reasonable expectation that distance would
-- your statements with look- alike the ones you would get from a merrill lynch and anywhere else? the set of expectations you all had in this process -- one of the interpretations the sec seems to be talking about, based on this lack of precedent, but that there -- is that there is no case law, and that the interpretation should be that if the investor told the broker to purchase specific securities, it seems to be a very clear case where the sipc can come in. but if you do not at specific line of securities, both going to your broker and there is a risk assessment and saying -- that does not seem to be covered. you have a thought on what the sec's view -- why that doesn't make sense? >> last evening, when i saw the
written testimony, i have to tell this body that there is no authority in the statute for the sec's position. in other words, are beginning to end, the first word to the last word, no where does it say that the full production of this that -- for protection of this statute are reserved for customers who make your own decisions, but not for ones who rely upon financial advisers. if you analyze the economics of what the sec is suggesting, instead of protecting investors, which is what we as taxpayers fund them to do, they are protecting the industry-funded insurance companies, because the vast majority of americans don't make their own investment decisions. my clients are in their 70's, 80's, and 90's. they don't have the capacity to decide if they should buy something one day and sell at
the next day. they hired financial advisers and they go to brokers who make the decisions for them. if they invest through fidelity are vanguard. -- they invest through fidelity or the vanguard. >> is it your view that if this interpretation were held up, and this is the sec's interpretation -- it seems that millions of investors were given a more general parameter of investment authority to the investment house, may not be covered by a failed account, a failed broker, who sipc sets in on. >> precisely. the purpose of the statute was to instill confidence in the capital market. if the fdic to borrow, in the next bank liquidation, besides that we don't insure the accounts except for the net investments -- we are
eliminating all securities that have been created, then there would be a run on the banking system. the file for this committee could create a run, because no investor in this country has any idea what kind of coverage they have in the event that they are dealing with this honest broker. >> professor coffee, you had a comment about the zero sum game being changed if -- i agree with your comment, that it is illusory, and the amount of actual cash and bank -- >> we -- i congratulate this committee because you are raising the assessment -- >> it seems to me, professor, that one of the problems is that there is a certain amount of money and we are backing the coverage in to that amount of money --
>> you are quite right. >> it is being funded, that ought to be an assessment or some way of making people -- not saying it is 500,000 because we do not have enough cash and bank to make this whole. i go back to our strategic and essential it is that the public to know -- for the public to know that there is money to protect them if there is broad and insolvency and those things out there. >> i think you are quite right. the extent that you raise the amount of assessment that the brokerage industry has to pay, you also give them an incentive, to organizations, to cut back on risky behavior by brokerage firms like with mr. madoff. by now they cannot stop mr. madoff from being a cowboy and doing what he is doing. but if they have a high assessment, it will have an interest in controlling the outliers in the brokerage
community. >> let us start with the law. the protection is there. the people should be given the full $500,000. nobody is looking for $8 million to $10 million back, but the sec has a responsibility to make sure that the law is followed correctly. >> may i make one response to something mr. klein said it? >> he already did runoff, and we of the courtesy -- we want to get mr. perlmutter in. >> i would like to start with mr. green. he has had his hand up for a couple of times. if you share what you were going to share, and then i will launch into my tirade. >> thank you, mr. perlmutter. two things -- what is i wanted to a ballot, because at the
beginning of my remarks, i did not acknowledge that i'm a lawyer. in this discussion about how decisions will be made, mr. chairman, you have raised the issue that some tough choices are going to have to be made, and i would like to, again, try to focus on some of the prior housing considerations, public policy considerations, particularly embodied in what was treated as one of the three legs of the school to promote the retirement savings of the -- created as one of the three legs of the stool to promote the retirement savings of the american worker. the public policy was to encourage employers to create plans to put funds into retirement, instead of at the end of the year put it into dollars for workers to spend. there was a keen observation by congress that workers were not
saving those funds for retirement. incentives were created that there be qualified funds that could be put into retirement. the type of fund we have is an eligible individual account fund. there has to be college -- individual accounting of income, expenses. the only purpose for which it was activated was for investment purposes. -- for which was aggravated was for investment purposes. the consequence -- because we have talked about consequences of decisions that will be made by this committee and by congress on this issue -- if in fact we undercut the confidence in the qualified plans, because we do not extend specific protections to them, then we
will discourage the confidence of employers of putting those bonds into the qualified plans, -- those funds into the qualified plans, will instead encourage them to give it directly to the workers, which is phenomenal for the employers to do profiteering like that -- >> so for each person in the plan, you think there should be firefighter thousand dollars in insurance? >-- $500,000 in insurance? >> for each participant, there ought to be covered in the plan up to the account for each individual, subject to whatever the specific and it is. -- specific limit is. >> under today's levels, it would be $500,000 per person in the plan -- >> i am not going to comment on the net equity issue. i'm not qualified to do that. >> that is ok. i have some questions for mr. langford.
i represented -- ms. langford. i represented trustees at a ponzi schemes, investors who were victimized, people who had invested $100,000, about $50,000 back, and other people only got zero back. i understand where mr. coffee is coming from in some of his comments. what i'm trying to figure out is, going back to those three things that i brought up earlier, bankruptcy -- how far and who should be subject to the call back -- sipc -- how far should insurance reach? in my state in area, i have the indirect investors that mr. leveton talked about, who did not know, mr. madoff or any of these guys, but invested in a fund that invested in these particular entities. how far should the sipc
insurance reach? and tax wise, when tens of th -- when somebody takes those illusory gains and the carry- back, that might give the least some recovery. those are the three baker policy -- those are the three big policy questions. ms. lankford, how did you get into the meat off network -- ms. langford, how did you get into the bernie madoff network? >> by looking for a vehicle -- i had just sold winehouse -- sold my house, and it was my retirement. i asked a friend, i said i wanted something safe, liquid, and diversified. and he said, hands down, the best place to put your money. so i entered into it that way. >> so you were a direct investor with may off -- with bernie
madoff? >> no, in direct. it was a limited partnership. technically -- it was not technically a retirement account, but it was my retirement money. >> ok, thank you. one more point, to mr. coffee's statement, mr. kanjorski's bill that we will hear today and tomorrow and friday does, i think that $10 million level, separate custodial accounts from investment advisor accounts to try to separate those things so that somebody is not posting a phony statements and advising you at the same time. hopefully, that kind of separation will work, as you have suggested. >> thank you very much, mr.
perlmutter could we are waiting for the house to go back into session. rather than tie this tunnel up with further questions, we will dismiss the panel, and thank you very much for your examination. and then to stand in recess until three minutes after the call of the next vote. we anticipate that it may occur in the next 10 to 15 minutes. we will return to take the second panel. without any other further comments or objections, the committee will stand in recess.
this hearing will come to order. i am pleased to watch on the second panel. may i caution the audience that it is against the goals of the house to have demonstrations could we understand it feelings run high, but we would appreciate if you extend the same courtesies to the second panel that you did to the witnesses in the first panel. that being said, we will address it no more. now i am pleased to first recognize mr. michael conley, that the solicitor of this series and exchange commission. -- deputy solicitor of the securities and exchange commission. >> thank you for the opportunity to appear for the securities and
exchange commission. my name is michael, and i am a deputy solicitor. -- michael conley and i and the deputy solicitor. i want to focus on the liquidation of bernie madoff's securities funds. we are keenly aware of the devastating losses incurred by thousands of investors who edge to their money to mr. madoff. many, if not most of the victims, had their lives up ended. chairman schapiro has encouraged all of us to learn from that experience and reform the way we operate. over the past year, we have taken significant steps in that regard, reinvigorating the enforcement division, enhancing our inspections, bolstering our training programs, revamping our tips and complaints process, and hiring personnel with new skills sets. we will continue to reform. with regard to the bernie madoff liquidation, the commission and its staff has been analyzing sipc, its legislative history and case law, to find out how
to value the claims of the investors. the statute does not expressly address how to address the net equity in the customer's account when a broker-dealer as gauged in -- is engaged in the fraudulent scheme that mr. madoff retreated. the bank itself will hear arguments on the theories proposed for its value in customer claims. in the end, the court will decide how the investors' claims should be valued. the date of liquidation reses and the question, specifically, how does sipc apply when the brokerage a statement shows what the broker concocted after the fact? two primary approaches have been proposed. the first is the final accounting method. under this, and equity customer account would be based on the securities positions shown on the final counts statements customers received before the
offer was placed in liquidation. the second approach is the cash- in, cash-out method. under this approach, that equity is determined by the amount of cash the customer deposited in the account, subtracting any amounts withdrawn from the account. based on the analysis, the commission will recommend to the bankruptcy court the customer claims in this case determining for the cash-in, cash-out method. however, we believe that the amount should be adjusted to ensure that investors' claims in the long-running scheme are valued most accurately and fairly. the commission decided not to recommend a final accounting method on the facts of this case. it believes that it would result in claims based on account balances that mr. madoff himself concocted an that bore no relation to reality mr. madoff essentially promised customers that he would pick winning stocks for them, did not tell them which stocks would purchase, waited to see which
ones did well, and then falsely reported that he selected stocks that met their investment expectations. through no fault of investors, the account statements mr. madoff said were illegitimate tallies of a fraudulent scheme. neither sipc nor any of the cases determining that -- as a result, the commission has concluded that the fairest and most reasonable way to measure the value of it mad-- the madoff net equity is to look it as a proxy for the securities he told investors would make for their accounts. many of them withdrew all or most other -- most of what they invested with mr. madoff. at the same time, the commission is sensitive to fairness concerns raised by the cash-in, cash-out method.
that that it favors litter customers at the expense of earlier customers by treating -- later customers at the expense of further customers by treating the dollar of 1987 as having the same value as the dollar of 2007. it is appropriate to convert the dollars invested in to constant dollars. we believe that approach will result in greater fairness across different generations of madoff investors, treating early and later investors alike in terms of the real economic value of their investment. the commission understands that the total pool of money available for claims is limited, and that there will not be enough to compensate all victims. money allocated to one victim will affect the amount of money available to compensate other victims. the bankruptcy court's past and the commission's goal in making its recommendation is to arrive at the fairest way, consistent with the law, of the fighting that pool. i thank you again for the opportunity to appear today and
would be pleased to answer any questions you may have. >> next we will hear from steve harbeck, president of the securities investor protection corp.. >> thank you for giving me an opportunity to discuss sipc's work and possible amendments to the securities investor protection act. i have worked sipc for 34 years and i became president in 2003. when sipc is informed that a brokerage firm is still, we institute a proceeding in district court and proceed to the bankruptcy court. firms are protected within statutory limits. the first such a source of
protection is a prorated distribution of customer property. as mr. coffee noted this morning, that makes it a zero sum game. sipc can supplement the property by as much as 5000 per customer. sipc is overseeing the return of approximately $160 billion to customers and the defense more hundrethan 323 million prior toe mamadoff case to do so. i appeared before you to report on the largest brokerage firms and a history, lehman brothers and madoff. in the bernie madoff case, the transfer accounts were simply a possible. through the claims process, -- a plea in possible. through the claims process, there were $4 billion of claims,
returns to 1600 clemmons. sipc has committed as against $550 million. -- and has advanced $550 million, more than all combined in the past. there have been 11,500 claims determine, or 71% of the claims. the trustees have collected $1.1 billion, filed 14 lawsuits seeking the return of $14.8 billion, and we will discuss that again in just a moment. the subcommittee has asked specifically for information on the fees in this case. as you heard this morning, the trustee has been paid 1.27 $5 million. i remind you that is the largest ponzi scheme in history, and most trustees and legal scheme efforts that are being expended here, for the purpose of recovering assets.
in terms of legislative initiatives that are before you, sipc has proposed a number of amendments, and these include increasing the amount that sipc can advance for claims to $250,000, and to index that dollar figure to inflation by a specific formula. we would increase sipc's line of credit with the treasury to $2.5 billion. we would increase the number of cases where sipc can use a streamlined procedure. i would suggest to the members of this morning's panel should agree with all these changes. there are other proposals that i must address. one is extended coverage for participants in pensions, which was extensively discussed this morning. on a going-forward basis, this certainly deserves study. however, the proposal's lack of any analysis in terms of risk management or the possible cost to either sipc or the treasury,
and as the chairmen and ranking member implied this morning, it is imprudent to enact a measure without that analysis, and knowing what it would cost as a possible brain on the treasury. sipc cannot take a position on this without the appropriate due diligence, and my written statement and it's a great deal more on that issue. -- contains a great deal more on that issue. sipc is a complex law, but it is common sense. if you can call your broker and get stevens, you are a customer. the statute was drafted in a simpler time when that was the standard, but that is still the law. one of this morning's panel members testified that he is an indirect victim, and he certainly is. but i think i have to elaborate. he placed his money with a hedge
fund which invested in another hedge fund, which invested in another hedge fund, which invested in madoff. again, as prof. coffee said, it would be very difficult to craft legislation that would cover that situation and expand the coverage of the statutes beyond what was ever intended to be. now i would like to address the point that i feel personally very strongly about, and that is depriving our trustees in the prospective legislation of the reply to recover in certain instances. -- of the right to recover in certain instances. i cannot urge you strongly enough reject this amendment. mr. coffee noted this morning, and he is absolutely correct in that regard. the trustees used the powers
granted him judiciously. he has not sued small investors. he has small 14 -- has sued 14 large investors. he is open to reason. this is a man who is extraordinarily practical. he served as a trusty in more of these cases than any other human being ever. he has instituted preference in proceedings against larger investors received a disproportionate recurrence. but the weapons in the trusties arsenal include the fact that all must prove this disparate returns, without any issue of legitimate expectation of rising. the written statement on page 17 says the trust the imf has sued several elderly investors. -- the trustee in may, has sued several elderly investors. she is factually incorrect. there were only three instances
where the clams and ignored the claim filing procedure that has been in place for 39 years and instituted a lawsuit against the trustee. the trust was required to institute mandatory counterclaims. in short, the proposed legislation addresses a problem that has not arisen, will not arise in this case or any other, and would do extensive damage to the very people it seeks to help. indeed, it would actually encourage ponzi schemes in a real sense, because it would allow people to be a free of the prospect of what you occurred today called clawback, more accurately described as congressionally mandated equitable distribution, depriving the trustee of the ability to get money back from somebody who has gotten all of their money back, someone who is kept stolen money from others, and who will share in that, in the pool of assets at the direct expense of other people who have
not gotten all their money back. that is wrong as a matter of both law and policy. in the written questions submitted by the subcommittee, you have asked if extending sipc coverage to victims in cases like the stanford financial group makes sense, and there is legislation to deal with that situation. sipc protect the custody function that brokerage perms perform, and in the stanford case, and the assets were not located at the specific member firms. instead, in the stanford case, investors sent money at their own request to a bank in antigua, which issued certificates of deposit investors have physical copies of those cd's. i do not believe that these of the bindi should make the -- that the subcommittee should make sipc the insurer of any
underlying value or to guarantee the debt of an offshore bank. retroactive application of those amendments, particularly with respect to the madoff case, would change the a fetish for one group to another in a completely arbitrary -- would change the advantage from one group to another, in a completely arbitrary way. i would like to address mr. conley's mention of the constant dollar carried the first time s-- constant dollar theory. the first time sipc was presented with this was november 23. we have in our amendments asked for an indexed to inflation with respect to the cash protection under our statute. it creates different arbitrer results, one that the statute now has. -- different arbitrary results
from the one that the statute now has. he would have to say that a person who received all his money back and received stolen money would get even more at the direct expense of people who have not been made whole. in about two dozen of those accounts, we located -- in about 2000 of those accounts, we located in new york 130 people who received net, given what we expected the trusty to recover, and $19 million less. we do not think that is the best of all possible worlds. it is a zero sum game. that said, because this is an issue of first impressions, we will continue discussing this with the sec on that matter. with that, i would be pleased to answer your questions. >> thank you very much. i will ask you a few questions, perhaps unrelated to the testimony this morning.
in the cases were mentioned -- you mentionementioning about stanford financial -- [unintelligible] >> the sipc may have. people who had their assets at the clearing firm now have them all back. the folks who are missing -- and i met with the receiver for stanford last weekend. i have had extensive discussions at various levels with the sec on this subject. the problem is, and since sipc projects the custody functions those folks perform, -- protects the custody functions those books perform, but he would give the back is the initial purchase price of the fraudulent security, and that has never been the law. >> but those who bought the
securities in the offshore banks, in the place of business or on the stationery, did they indicate to the customer that they were insured by your corporation? >> i don't know the answer to that. >> don't you think it would be somewhat important that you do know what? >> on the facts of this case, no. >> why is it important for you to find out that there are some people fraudulently using your potential insurance to entice customers into the establishment? >> we could do nothing about that, because we don't have any enforcement powers. that is the sec. the fact of the matter is, even if people are defrauded into believing that they have coverage, that does not make it so. >> no, that is true, but i don't recall -- sometimes we miss all the mail that comes into the committee or in to our various
subcommittees, but i don't recall any letters from your organization indicating that you needed additional authorities, thought there were loopholes in the law, that there were failures in the system, in all the 25 years that i am sitting here. did i miss a lot of that commission? >> of course you didn't mr. chairman, and it is because until september of last year, the system was gliding along very well. we detected 99% of the investors liquidation. -- protected 99% of the investors' liquidation. >> when that time -- when times are good, there is no problem. when times are bad, that is when we find some of the bodies. >> if you are refering to stanford, the fact of the matter is that if stanford -- even if
the bank was in the united states, i don't think you want us -- and we never have been in the business of -- giving people back money when the value of their investment goes down for any reason. >> and i am sympathetic to that and we want fairness through the whole system as best as possible. i guess what i'm getting to is did you hear the outbreak of the panel that we had earlier this morning? -- the outrage of the panel we had earlier this morning? >> mr. chairman, i hear every day. >> i have to believe that our rage -- that outrage is sincere, and within reason. these people felt there were representations made by the individuals they dealt with, whether they were dealers or banks, whoever they were, but the united states government in someone was watching out for
their best interest, and in some instances under a lidaw, insuring. it was not until after the fact that they found out that they were totally misinformed, or they misunderstood, what they just were not supported. -- or they just were not supported. they are asking us to look to this, and that is one of the things we clearly can do. what we can do to prevent a recurrence it them -- or recompensate them for the losses it is very questionable. i think what i am particularly disturbed about, this whole 15-, 18-month disaster we have been in, is the attitude of the governmental level, or quasi- governmental level, that it is not our problem, we do not have to take investigative steps.
i think you do. it is our problem. is the committee's problem, it is the congress passed a problem, it is the president's broz -- it is the congress' problem, it is the president's problem. we cannot as a matter of course except that people feel the government let them down wrong with so. and that they -- in many of these instances, there is very little that they could have done. by god, in some of these instances, i don't care what actions they took. somebody mentioned to me, and i won't identify mr. ackerman by name -- [laughter] çthat during the stock market crash, mr. madoff was getting calls from officials from the united states government about what was his recommendation, should they close the market. that is understood.
wasn't he president of nasdaq at one time? he is a pretty substantial person in this country. after we see what happened, what are we doing to prevent this in the future? are we checking out some of the things that these "a very substantial people close to or involved in? are they trading on that -- "a very substantial people" are involved in? but the trading on that? what have we done? what has your corporation done? asking them how they are getting advice as to -- what if ice is being made? -- what advice is being made? or do we not really give a damn, is up to them, and if they get cleaned, they get clean? it seems to me that once you see something like this happen, being in the government or
quasi in the government, we have more responsibility to do something. we cannot prevent all injury, but obvious injury, obvious things that are fraud or figures that exist, we have an obligation. -- or failures that it is, we have an obligation. i see my time is up. i feel offended that more federal agencies or quasi- federal agencies such as your own are not coming forward to tell us what they need, how can we change the law, how can we better educate people? it is not enough to say, and " tough luck." 15,000 people got clipped by every professional artist -- by of every professional artist. we have to learn from that and make sure that there are not other madoffs or stanford
financials out there. i think i have taken action and the legislation is on the floor today against the sec. you all i have to -- you all have to -- let me point out what i found so damn offensive about this thing -- you have no chain of command. i cannot believe you can do three or four investigations over a decade and come up with really important questions about the credibility and viability of a person, although very highly thought of on the street, but it never goes up beyond one or two levels in an organization that is 10 levels. what the hell would we do with a four-star general that put a lieutenant in the field that killed 150 innocents? if he did not know about it within 24 hours and take action,
he would be gone, or should be gone. sometimes, a think about it -- i think about it, we have not had been disciplined in any way. we have a chain and a command, be it in the military of the government, where we find out what is happening at the lowest level and we take action but we have to make sure that that chain of command has communication. i saw the commissioner the other night -- the chairmean -- mary and i are good friends so we had our part on the subject. -- a heart-to-heart on the subject but we want you to to a study of the most thorough type of where the dysfunctional nature of the sec exists. if anybody over there does not think the organization is dysfunctional, read the
inspector general's report on madoff. it is the most classic bit of evidence i have ever seen that shows a dysfunctional operation. it is not just madoff, but other areas of the organization. i am not going to speak for the chairman, but i suspect that she agrees. as i said to her last night, i don't want to even stop at the sec. all related agencies around the sec should be so studied and investigated and is closed, and the reports sent to congress for remedial action. i think that should be the beginning point for what i am sensing from the american people -- they are not going to take it anymore that we in government just say, "well, we cannot do anything about it. it happens. we are sorry." well, that's nice. we did not lose. these people lost. it does not make them feel too good. it would not make me feel good if i lost $5 million, $10
million, or $50 million. it does not matter. i lost it. if everybody was performing their function in the ideal way, it would not happen. but they obviously were not, and the number of security people that were sleeping on the switch were incredible in this instance. i want you to take that message back. i've eaten up more than my five minutes and i will be very lenient, since i have no republicans -- look aline i can be to my friend -- look how lenient i can be to my friend -- [laughter] >> notice, mr. chairman, i did not tell you your time is up. i cannot agree more with what you said and the way you put it, mr. chairman. everybody, including the people who are testifying in this panel, have been trying to get us out of this modeuddle.
i think all of their intentions are beyond question. i think that this is a very difficult gordian knot 21 tie -- a very difficult to gordian knot to untie. i just wanted to know t -- to note that for a long number of years, nobody came to us about our obligations and responsibilities, any federal agency, including those which are before us today, saying that we need more resources. as a matter of fact, the previous administration seemed to have a philosophy, if not an agenda, for deregulation rather than more regulation.
they did not want to provide the resources. chairman frank had a proposal to more fully provide access to the sec and sipc for additional resources to be able to do the kinds of investigations that were obviously needed, and that was moving forward until it was scuttled during a different congressional leadership. it was not until chairman schapiro came along, doing a fine job that she is doing goo. it does not necessarily resolved the situation that is before us by now, as it has already regrettably occurred.
i think there is a difference between the average citizen investor being told that they did not do due diligence, which certainly many of them did to at least 100 percent of their capabilities and the legal limits of what they could do for to diligence, but certainly our agencies could have been doing a little bit more of a better job, including coming to us and telling us over a large number of years, a long the number of years, that they could not handle the workload, with the publication -- the complications and the large number of investments and investors, but they needed additional access. we did not see that, we did not hear that. we rely upon the administration.
we do oversight, which means we rely heavily on what the agencies tell us and try to supervise where they find their resources, which they did not ask for in this case. i have several questions to ask. in what we heard about small investors versus larger investors, is there a distinction in either of your minds in the morality of larger investors versus middle-size investors versus small -- is one of more than the other? i am not talking about spas of the individuals. -- not talking about specific
anindividuals. are they more suspect? >> absolutely not. that is what the trust in the -- why the trusty in the madoff investigation has started 14 lawsuits treat some of those lawsuits -- lawsuits. certainly, with respect to the former, the trusty is doing his job, and trying to return to the common pool of assets, defined in this case as customer property, the largest amount to distribute to the greatest number of people consistent with the law. he is doing that. to get your point on morality, i would like to get to practicali ty and compassion. the trust has taken the position -- trust he has taken
the position -- he said a letter to everyone who received more than they put into in that scheme, and said, ", and talk to me." the trusty not going after you -- >> what is the difference if he withdrew in overtime or late in the game or early in the game? >> in all ponzi schemes, going back to the original one, people out the day before, and prof. coffee spoke to this rather eloquently, it should do no better than the person who did not have the good luck. that has just been the law as enacted by congress since at least the 1920's. >> so it is a matter of law? -- a matter of bloluck?
>> no, it should not be a matter of lockner -- of luck. he has exercised his authority with discretion and a passion -- discretion and compassion. >> is it possible in your mind, speaking of compassion, that there are large investors -- i am not advocating for anybody here. there is a problem, because this is a zero sum game, and somebody coming out of the same pot of money -- people all losers -- is it possible in your mind that you could conceive of situations where larger investors are more desperate than some of the smaller investors? >> i have not seen that in this case, sir. >> you think there are no larger investors, someone with $100
billion, who is doing something -- $100 million, who is doing so big and invested another $100 million with an investor, and is upside down on the real estate or the house or business or property, despite the fact that they took money out, and now they why -- wind up paying $50 million in taxes which the government should not have borrowed, have invested other people's money along with their own to do something, and now being told that not only did they have nothing, but they owe back $200 million? that is at least as desperate as the other people for whom i have great sympathy, who had $200,000 invested -- and invested
$100,000. how do you morally make a distinction here? is it possible in the formulation that somehow you could come up with a solomonic kind of solution and splitting, according to some formulaic way, how to deal with all these people? >> congressman ackerman, i don't think formula is the answer. i think analyzing individual situations is the answer. >> each case individually? if i was getting paid $1 million a week, i would like that. [applause] >> i believe that this trustee -- >> i am not questioning the
trusty. i am just questioning the irony in this situation. >> first, no customer money goes to pay attorneys' fees the trusties fees. >> where does that come from? >> the securities and investor protection corp.. the second point is, looking at these cases individually, our statute was designed to protect the small investor, and i think that is exactly what he is doing. >> as i understand it, brokers, investment advisers, are required to put into the fund to be covered by sipc $150. >> that is not correct. currently, the assessments would
require each bridge firm to be as -- each brokerage firm to be assessed at 1/4 of 1% of their net operating revenues. when we started paying madoff claims, we instituted the first assessments based on revenues -- >> when? >> april 1. >> april fool's day? some said that is when you identify to people who have been april fooled. after the ponzi scheme fell apart, because he turn himself in -- before that it was $150? >> when we reached -- >> before madoff it was $102? i don't have a lot of time left -- it was $150?
somebody should have come down here and sounded the alarm and said "i am paid too little for -- i am paying too little for insurance. how much insurance can i really buy for 25 cents and accounts -- an account?" i would suspect that was not getting a lot of coverage. no? let me go on to something else. if i may, mr. chairman? ok. thank you. people relied heavily on sipc and the sec. very heavily. for something that you cannot expect them to do it themselves.
that is the reason for sipc and the sec. people cannot become attorneys and investigators and spend their whole life investigating something. if you do not snow if something is kosher, you ask the rabbi -- if you do not know if something is kosher, you ask the rabbi. and if the rabbi says it is kosher, it is kosher. you guys are the rabbi to these people. if you said he was legitimate, he was legitimate. they relied on that. it was the issue of your agency and my government that said these products were fine. people thought they had the insurance on money, whether or not it was the interest. i figure might account is in short for up to $100,000 in my bank -- $250,000 for the rest of these people.
i assume everything is in short. it becomes a different number for everybody who had an investment for a long time. as a matter of fact, it would you -- it was you and your agency that testified in your testimony in the new times case in which you say -- this is a quotation. "reasonable and legitimate claimant expectations on the filing data controlling even when consistent with transaction reality." i am quoting you. when they received written confirmation reflecting purpose, the claimant has are reasonable expectation that he or she hold securities identified in the confirmation and therefore generally is entitled to recovery of the securities, within the limits imposed by sipc, a financial limitation of
$500,000 or what ever it is. even when the purchase never actually occurred and the debtor converted the cash deposited by the claimant to fund the purchase. it seems that these people were again reassured that the way we wrote the law, the way the regulations existed, and the way you interpreted them, telling them they were entitled to that money -- even if their money triple. even if there was not real money and someone fraudulently is still a. now you go to a different court case and you change your view, saying the money was stolen and not invested. this is a shell game that you are playing with these investors. i mean, this is over the heads of most of the people on our committee, i would think, how
this happened. people relied on you. they were let down. you have to all collectively figure out a way to make all of them as whole as we can make them. >> thank you. now we will hear from the gentleman from new jersey. >> thank you. i just have a couple of questions. some of my questions were covered. you are here to the head -- to help the small investor. i think that is what your message has been throughout the hearing. that raises three questions -- time, money, and to. the time aspect -- if we're trying to help up the small investor, how long does it take and still say we are helping them out? obviously if it takes 10 years, then we're not helping out the small investor. if it takes five years -- now it has been about a year.
at some point in time, we can say we're not helping the small investor. what is the timeline to say we want you back for another hearing and you can say we are done, and folks have been compensated to a large extent? >> there are two points to that response. first, in two cases prior to the madoff case, the majority of investors were in complete control of their accounts within 10 days of the failure. we are proud of their results. >> i understand that. >> in this case, the lack of records makes it very difficult to answer your question. there are still 7000 boxes of records in control of the prosecutor. it is difficult to access. we are working with that as fast as we can.
71% of the people have had their claims determined. and we will get the rest of them out as fast as we can. there are complications involved when accounts are tied to others, when accounts are tied to insiders, when accounts are split. those are very difficult accounting procedures. >> there are problems getting the records from the prosecutor? >> i think we have transparency back to sometime in the 1980's. but we do not have complete transparency on all the records. >> because? >> the sheer volume is one answer. >> 7000 records -- >> i believe the prosecutor still has in their ongoing criminal investigation, they still have a large segment of the records. we access those, but we do not have complete access. >> so to give me a short answer, which -- in light of all the constraints, in light of all the
difficulties, the reasonable time frame would be in light of those hardships would be -- >> a year. >> secondly, with regard to the money -- the gentleman from new york was asking about the old fee and the new fee and what have you. the new fee. based and what you know now, and i understand you do not have all the information, is that the an adequate feet to compensate as you are planning to pay out? >> the answer is yes. the fee is adequate to pay what we anticipate paying as we understand the claims. >> you've heard the testimony from the panel before you. i think some of the questions were along this line. some take this view, it should be more expansive them what you're intending to pay our now. if your definition of who should
pay -- the question is -- if we have the gentleman sitting here, i am sorry. it is not just the direct investor, but someone who has gone through a fund. each case can be a small investor, right? you can have $10,000 in the fund. if the definition is broaden its as to who should pay out, as some have suggested it should be, would that be adequate? >> the answer is no if the conditions are as expected as we heard this morning. >> can you come up with an estimate as to what the fee it should be to adequately cover that? >> it will probably be difficult because of the way some of the large hedge funds have their claims, how often, helped many iterations he would have to go down -- you would have to go
down. it would be very hard. >> i would suggest if you could get some kind of ballpark, i believe that would go to one of the other questions. if we were to go down that road, that would have impact, not only on what you have to do, but on who the fees would be assessed against. i believe most of my time is up. i think some of the other questions were touched on. i do not want to repeat myself. the comments i made earlier, obviously, we're looking for fairness. i do not know if you will get fairness. what we're looking for is justice. we're looking along the lines of the independence investment decisions they're making -- we are not looking along the lines of the independent investment decisions they were making, but
the organizations they relied upon. thank you. >> the gentle lady from california. >> thank you, mr. chairman. i guess my first question is for you, mr. harbeck. i have only been around for less than two years. my take is the industry gets a license to a lot of things come and we are left to pick up the pieces when they fail. when you look at why sipc was created, there were these huge bankruptcy's in the early 1971 s, and money was taken from investors and wanted to make investors whole. sipc is created, and as you pointed out, for a long time, because you thought you had ample funds, these brokers were only paying $150 a year.
for 19 years, they were paying $150 a year. you have increased it recently because of the madoff scandal. i have one question, which is i think the insurance product is out of date. and i think it is very important for you to go back and reformulate an insurance product that reflects the way people invest today. people invest today through mutual funds and hedge funds, and if you are going to offer a product has no relevance today that have relevance in 1970, i do not believe you're doing your job. -- that did not have relevance in 1970, i do not believe you are doing your job. if you are charging one quarter of one% -- 1% of revenue, what would prevent you from coming up with one eighth of 1% to create
a fund to pay the new outfit comes some kind of compensation -- to pay the madoff victims some kind of compensation? can you do that? >> it would have to be statutory. >> you're able to make this change from $150 to one quarter1% with no trouble -- to one quarter of 1% with no trouble. >> it was by by law. >> it was bye-bye law -- by by law? >> when you are seeing in you would have to the purpose the statute -- what you are saying is he would have to repurchase
the statute to make remedies to these victims. >> if you say this would require statutory, not something you can do -- you are a separate corporation. i'm having a hard time understanding why use a corporation cannot just decide up the cause of this travesty and because the insurance product you offer is inadequate today and it should be reformulated anyway, that you cannot create a new fee that would be imposed. it would be a modest fee, but it would help immeasurably a lot of people. >> we are not a government organization, but the statute creating s was a federal statute. >> we are really great at passing moral law -- laws. creating entities. yet, you have to come back to government to fix things. either you should be a federal
agency where you have a responsibility, the ability to act immediately, or you should be a corporation and have the ability to do things independent of statute. i have a question for mr. connolly. then we will go to a vote. mr. connolly, having observed over these two years the madoff fiasco, the travesty that it has created for the american people and the federal government -- the sec failed. it failed miserably. when you had the whistle blower before us, i was astonished at the degree to which he continued to pursue this. he came before the sec five or six times seeking the sec to take some action against mr.
madoff. even when the sec went out to see mr. madoff, mr. madoff has admitted that when the question was asked of him, "who is your custodian?" he rattled off the name and he was convinced he would be shut down because the custodian the not provide the services to mr. madoff. but the sec never made the phone call to find out whether or not mr. madoff was operating to that the stadium. from my perspective, the federal government failed miserably. the sec and in particular. so my question to you is this. since we were responsible for this travesty, should we not take responsibility now in trying to make the people who were impacted by our incompetents and arm -- our incompetence and are malfeasance
to make them somewhat home? what would prevent the sec from doing that? >> thank you. i can respond in two ways. the fund did you talk about is certainly something congress could do. if it were determined that was the important thing to do, certainly could do that. with respect to that shortfall, the failures you have identified, that is something the commission has recognized and take seriously. sens chairman shapiro has come to the commission, -- sense chairmanship euros come to the commission, since chairman shapiro has come to the commission, there have been numerous measures identified in the report. a number of things have changed that, on a going forward basis, make sure it something like this will not happen again. there has been the training of
hundreds of employees to be certified fraud examiners. there is the requirement now in all examinations of third party verification of customer assets under held by the investment adviser, the broker/dealer. we've been hiring more people with particular expertise that will make examination teams more effective. we're looking to deploy more people to the front lines. more investigators who will root of this fraud on an ineffective way. -- read about this fraud in an effective way. there'll be rules designed to address the situation of investment advisers and the custody situation, that encourage investment advisers not to have custody of investment assets and to have
them with third parties, to prevent the kind of stuff that went wrong here. >> my time has expired, mr. chairman. i certainly think that need to appreciate the going forward does not fix those who have been injured by governments in action, and -- government's inaction. and we should do what we can do to make these people hold -- whole. >> just a couple of questions. i think you're absolutely right, mr. shapiro. you talked about increasing premiums and in the future. why had he not thought about making a back assessment? you are punishing the people that will come into the business, and me not have been in business when madoff was around. -- and may not have been in business when madoff was around.
that would put it an incentive on the dealers to be working more in conjunction with the sec and your organization to see this does not have been. in order to accomplish an assessment instead of a future increase in premiums -- >> yes, we would, mr. chairman. >> would you prepare the request and get it to the committee? we will look at it. i have spent a number of days meeting with legal representatives about 1300 claims better in 23 countries around the world. they tell me, under present conditions, to handle the claims that are out there because they are under all the various laws of 23 nations, is going to take something like 30 years to
resolve these claims. i was going through the roughly $100 million per year in fees. are you prepared to pay out $3 billion to settle these claims? quite frankly, i think will end up these fees will be larger than the claims. what i am saying to you is, what are you doing in terms of establishing some form of arbitration for international settlements? why should that not be before congress? and should that recommendation be coming from organization? you know what your problems are. you know what you face. these frauds will continue to occur. why do not have a simplified way to get the issue before the arbitration board, somebody, on a relatively uniform basis instead of creating these in ordinate fees for trust these?
damn, i do not think there is any member of this panel that would assume that much money for a week. naturally, we would never do that. seriously, can you make recommendations to the committee as to what should be done? >> the one thing we have done on an international basis is to enter into a memorandum of understanding with our foreign counterparts to sipc, in case and organization fills with a footprint in more than one organization. we have those partnerships in canada, the night kingdom, china, korea, and i want. -- and taiwan. what you suggested is far more complex. i would be willing to discuss
it. >> id is not a one time deal. -- it is not a one time deal. this is going to happen in this case. it is a tragedy. >> i just wanted to follow-up on the question the chairman just asked. under the legislation, under which you act, you have a line of credit of $1 billion, which can be accessed at the fund is depleted. there is still a lot of money in the fund. if you did and therefore can act by resolution, why can you not generously paid out to the greatest number of people promptly -- as the statute requires -- whatever money is in
theire, access your line of credit coming in at least have $1 billion? everybody working on this, who are entitled to whatever money they are entitled to wear -- earned, been trustees, they expect to be paid promptly. if the people who are victims, who paid promptly a couple months ago -- some of them could have had a 40% rise. they were investors. they could have gotten 40% in the market right now. everybody is losing and double losing and trouble losing because of the delay. -- trouble losing -- treble losing because of the ballet. -- of the leg. >> no. >> because of your
interpretations of the statue? >> they have uniformly held since 1973 that with respect that to fraudulent statements that are backdated, all of the cases, uniformly -- including the new times case -- hold the those claims are not customer claims. the fraudulent documents should be ignored. >> ok. thank you. we're down to less than five minutes. >> i will be brief. i would like you to come back to the committee with a proposal for providing an insurance product that is really going to reflect the kind of investing done by average american investors today who do most of their investing through funds and who do not have the sophistication to know whether or nine the actual stocks they have purchased are indeed being
purchased. that is where the sec comes into play. we needed different product. the product that exists justice not meet the needs of the american people. if you could provide to as -- what does one quarter of 1% of revenue generate? >> this year, i believe it is $480 million. >> $480 million? and you came up with one fourth of 1% on your own? >> may i suggest that calculation be supplied so we can give it to our members? the chair notes that there are additional questions for this panel. the record will remain open for 30 days for members to submit written questions to today's for dissidents and to risk -- to place their responses in the record. thank you. no just make the request to all
members present. -- may i just make the request to all members present. let's just have a little bit better cooperation between the members of the committee and get down to the substantive questions that need to be answered. the panel is dismissed. this meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]
>> a live look at the senate floor where votes on health care legislation are under way at this hour. most of the provisions concern points of order. also the adoption of the democratic substitute a minute and the final procedural vote on limiting debate. senate majority leader harry reid announce the time change for tomorrow morning's vote on final passage, moving it up to 7:00 eastern. the senate plans to vote on reducing the federal debt limit to two months before leaving for their holiday break. you can watch it on our companion network, c-span 2. democratic leaders are planning a news conference on health care legislation. we will bring it to you live. it is scheduled for 4:00 eastern. we will have it live on c-span.
>> c-span -- christmas day. a look ahead to 2010 politics, including republican congressman eric kantor and david gregory. buzz aldrin on the legacy of apollo 11. a discussion on the role of muslims in america and the world. later, a former cia intelligence officer the role of al-qaeda in afghanistan. and then remembering william f. buckley jr. and senator ted kennedy. >> now available -- c-span nice book "abraham lincoln, great american historians on our 16th president." is a unique perspective on lincoln from 16 journalists and writers. from his early years to his life in the white house and his legacy today. abraham lincoln in hardcover at your favorite bookseller and on digital audio to listen to any time, available where digital audio down as are sold.
learn more at c-span.org/lincoln book. >> i can get the health care vote has been moved up at 7:00 eastern tomorrow. and democrats will be holding a news conference at 4:00 eastern. 30 minutes from now. we will bring it to you live here on c-span. in the meantime, a conversation with the national transportation safety board chief from today's "washington journal." >host: thank you for joining us. about the plane that overshot the runway in jamaica. a couple of serious injuries. no fatalities. when you have a situation like this with an american airline on foreign soil, what is the will of the ntsb? guest: we have international agreements that govern how we handle international
investigations. the safety board sends an accredited representative and invested it is to help authorities with the investigation. -- and investigators to help authorities with the investigation. there are american manufacturers there are american manufacturers there are american manufacturers involved. they will help the country where the accident occurs. host: typically they say they listened to the black box. what is that? guest: there is a great misnomer. they are not really black. they are orange. is the cockpit voice recorder and a flight data recorder. the cockpit voice recorder will record the last 30 minutes to two hours of conversation in the cockpit.
thrust, directional control. host: the mid-air collision involving a single-engined plane in new york city over the hudson river, not long after we saw that miracle in the hudson with the u.s. airways jet that landed. in a situation like this, what is the role of the ntsb? guest: this if the board goes to investigate the accident and we try to figure out whether the outcome is good or bad and if there are lessons to learn. in a situation like the hudson, where we had a fantastic outcome, there is a lot to learn from the accident. with a mid-air collision, it is a little different. everyone in that accident died. we are looking at that accident to figure out how to prevent something like that from happening again, and also what we can learn within three weeks of the act -- what we can learn to hit within three weeks of the accident, we issued changes for
air safety on the hudson, coordination between atc. the faa has taken very quick action. charts have been changed and the airspace over the hudson is safer now because of those changes. that is exactly why we exist, to make transportation safer. host: the metro accident that killed nine people over the summer -- what was the cause of the accident, and what did you learn? guest: that accident occurred in june and it is still under investigation. the safety board will hold a hearing in february on that accident, and we will determine the causes of the accident and issue the final report. we've already issued two rounds of recommendations, not just to wmata, the local authorities, but to transit operators nationwide about looking at the system. we found something with the metro accident that led us to believe that there are concerns
not just with this system, but systems around the country. these systems are aging and need to be monitored very well and make sure that the signal systems are working properly and that there are no anomalies that create an accident like this again. host: i cannot generalize this next question, but when i ask this call -- when i asked what caused this accident -- specifically, mechanical, weather-related, man-made -- can you break that down? guest: in all modes of transportation there are a lot of factors. we do find similarities across the modes. on our most wanted list of safety improvements, our top 10, we of made recommendations about fatigue. we know that human beings that tired, we are diurnal, and people need about eight hours of sleep a day. whether you are a pilot or air traffic controller or ship captain or driving a truck on the highways, we know that
fatigue has played a role in a number of accidents that we have investigated. we also look at mechanical issues. i think that the good news there is that the vehicles, whether it is an airplane or a bus or a locomotive, have gotten sicker and sicker over the years, and there are fewer and fewer mechanics -- safer and safer over the years, and there are fewer and fewer mechanical errors. a lot of accidents are caused by human failures, and it is important for us to understand why people make mistakes. that is probably the most difficult question of all. you have people who are professionally trained, conscientious, and our focus on the duties, and they do something that is out of character for them. every time they fly, they do something one way, the correct way, and then on one day they don't do it thatç way. and you try to understand, with a tired, preoccupied? what was going on, what happened that day? host: our guest is served on the ntsb board for more than five years and since the past summer
is now the chair of the national transportation safety board, deborah hersman. our phone lines are open and you can send us an e-mail. whether it is a bus, train, airline accident, what are the first questions your team on the ground will begin asking? guest: we are always looking to gather the perishable evidence first. we get the accident site secured and make sure that all of the evidence is maintained, and look for those black boxes, if it is aircraft. there are reporters on the vehicles. we that event data recorders on larger vehicles. we are always looking to capture sq%ei+ we don't want it to be written over, recorded over, and so we want to capture witness interviews, or survivors, or operators, that might have been involved. it is kind of a timely and we want to capture that right away. drug tests, drug and alcohol testsok -- these happen every
single time we go, trying to go back and construct a history leading up to the accident. it is usually not just one thing that causes an accident. it is a chain of things that actually lead to an accident occurring. we have a very robustç system f safety in the united states as far as transportation goes. it is usually not just one thing. it is several things that occur to allow an accident to happen. host: 1 accident this past winter just outside of buffalo, new york, a plane that was traveling from new york city to buffalo. in essence, what we have been hearing is that the pilots may be were ill-prepared to fly the plane. guest: thet( safety board looked at that accident with 50 fatalities, and within three months of the accident, we held a three-day public hearing, and there were a lot of issues that came out during that hearing with respect to training, with respect to the flight history of the pilot, with respect to their
experience in certain conditions. also, the commuting. these pilots were based on the east coast and the captain was commuting from florida and the first officer was commuting from seattle. i think there has been a lot of attention since the public hearing focused on some of these issues. i think we think that that is very important. the captain was older, the first officer was fairly young. we are looking very closely at their experience. we are beginning to wrap up that investigation and we will be holding our board meeting on february 2 to release the probable cause an additional recommendations for the accident. host: our guest spent a number of years on capitol hill, a her master's at george mason university. okour first caller is doug from tennessee. caller: i know you put a lot of work into security and everything, but people flying and things -- well, it is not
really -- i know it is for the best interests of everybody, fliers, but it is really more of an inconvenience. i am sure a lot of people who fly would just say, "man, if that guy has got aç gun, just t him on the plane, because as long asç that means where i am goingç quicker -- -- and maybe you should test the pilots and everything. you don't know what they are doing. just recently i saw on tv -- host: i think he is referring to the flight that overshot minneapolis and as a result -- they apparently were on the blog receiver -- the wrong receiver and on laptop computers. guest: for the color, i want to
let you know that the safety board is looking at accidents and determine the probable cause so that they did not happen again. tsa is a part of the department of common security. with respect to the overflight of minneapolis, the safety board is investigating that incident, and the pilots when they were interviewed indicated they were on their laptops at the time. the safety board is looking at distractions at all modes of transportation. host: patty is joining us from alexandria, virginia. caller: good morning, and thank you for taking my call. this will sound corny, but i want to thank ms. hersman for her service to the american people. every time there is an accident, we see ntsb there, and i think it is something we should say thank you for. i understand that ntsb is up for
reauthorization this year. d.c. special challenges? gues -- to use the special challenges? guest: patty, thank you for your comment. it is an honor to represent all the employees of the safety board. we are going to jamaica and san diego and looking at a collision between two ships. they worked very hard. thank you for that complementary i will pass it back to them. we have -- thank you for that compliment. i will pass it back to them. the senate has passed a bill for reauthorization, and the house is going to be considering that in the coming year. i don't foresee any specific challenges. içó think that our responsibiliy is to be responsive to the congress and the american public that we serve. if there are changes that need to be made to improve the way that we do our jobs, i think we are happy to receive that guidance. host: the ntsb was created
during the johnson administration. how to fit into the larger picture of the department of transportation? guest: that is a great question, because the safety board was part of the department of transportation in 1967 when dot was created and the safety board was created. but congress realize that it was probably not a great idea for the safety board to be housed within the department of transportation when one of our main jobs was to do oversight over the department of transportation, the faa, the federal railroad administration. and so we were made wholly independent, separate from the department of transportation, and we exist as an independent investigatory agency, with a separate budget, and we have a dual report to the executive branch and congress. host: our next call from queens, new york, for deborah hersman. good morning. caller: i'm actually jamaican,
and i'm very disappointed in what happened in jamaica when i heard about that last night. you are from the safety board, is that correct? you are the director? guest: yes, ma'am. caller: why is it that the plane overshot the runway so much? it has been such a common problem becau. i do not think you deserve a thanks or a boost for that . the airlines have to take a strong responsibility for the fatigue of the pilots. there was a recent hearing in congress, and one of the pilots testified that there has been a lot of fatigue with pilots. they don't allow -- they don't get a lot of rest time, pfirst of all. something should be done to actually help pilots.
i think that has been ignored, a large part. what is going to be done about that, and how are you going to help my homeland, my country, jamaica, with the cleanup and helping to reimburse them for what happened from american airlines? i would really like to know what is going to happen with that. host: thanks for the culprit we should point out -- thanks for the call. we should point out, preliminary we should point out, preliminary information from the assoc -- from the association indicates the weather may have been a factor in jamaica. guest: we make recommendations to prevent accidents. i agree with the caller. we have made recommendations about the teak for pilots. that is on our most wanted list.
we think it is important for pilots to get adequate rest ended their fatigues to be able to call in and report of duty. we do think fatigue is an important issue, not just for pilots, but also for air traffic controllers. i think there was another question imbedded in their regarding the incident -- one of the things that is very interesting to note is the excursions are not that uncommon. internationally, we think about 30% of incidents internationally in golf excursions. the safety board has investigated excursions on the midway in travers city, mich., and also other incidents. we look very closely at the
issue of excursions. that is also on our most wanted list under runway safety. we have looked closely at incidents to learn from them and make recommendations. still very early in this investigation regarding the incident in jamaica. our best investigators are en route to assist the jamaican authorities. host: jack is next on that the republican line from murphy, n.c. caller: good morning. how are you? guest: good morning. caller: i wanted to congratulate you for being from one of the organizations in america that is universally respected. my question is the black box is considered an archaic methods. why not use telemetry to transmit to a satellite?
that way you do not have to worry about digging out of the wreckage and everything -- trying to capture everything there is. guest: that is a great question. i think there are a lot people asking questions like that. there has been some technology that has existed for some time. some manufacturers of smaller business jets are actually doing some of that. direct data link. as far as looking at the health of the engines and monitoring aircraft. after the air france incident this past summer where they were unable to locate the black boxes out in the ocean, i think there has been a lot of additional questions about whether or not we will have longer life on the transponders that are the beacons on the black boxes, that they should last longer than 30 days. as well, i think people are asking the same question you are. is there a way for us to
download or have a data link with information about aircraft? is a lot of people trying to understand if there is a bandwidth, a capability. we have hundreds of thousands of aircraft in the air at any one time around the world. we of got to be able to have the right kind of bandwidth to get that information from them and to catalog it and save it in a way that is protected and that we can get access to it. all of these issues are very important, and i think there are folks at our agency exploring that right now. host: your resume includes a certified child passenger safety technician. what does that mean? guest: a lot of people wonder what that is. i am the mother of three boys, and five and half years ago, i want to go take a vacation. people make recommendations about appropriate sizes for
children, car seats, and i wanted to make sure i understood this issue and i was doing it appropriately. i have advanced degrees, and after i took this course, i had to go home take out all my car seats and reinstall them after becoming a certified technician. one of the challenges for parents is that there are so many different models of car seats. you might have bucket seats or a bench seat in the back. we have made recommendations to make it easier for parents to install these seats, whether it is having a sitting stations, a lot of fire stations and police stations do this for free, or to have better designs of these seats. we have in your system in cars that are about 10 years old, and you can just kind of plug -- connect the hook -- that is what those hopes are for. but there are still challenges.
i want to look at what was the size-corporate strength for the chop, that i understood the science -- size-appropriate strength of the child, that i understood the science of it. host: and the shoulder belt is often dangerous for toddlers. guest: that was from the insurance institute of highway safety, and they're talking about the models of booster seats. the most important thing for parents to know is that children are much safer in a booster seat that without one. seat belts are made for adults. but a chat with a seat belt on, it usually comes across -- when a child puts a seat belt on, it usually comes across the neck, and they can get spinal cord and neck injuries, can become paralyzed that way. you want to make sure they are pushed up a little on the booster seat, and that the belt comes across the bony parts of their body. host: and to keep it that way. guest: that can be a challenge.
as parents, we have to make sure that we model behavior that is good, because if parents buckle up, kids are much more likely to. host: anthony is next, joining us from long island, new york. caller: good morning, mr. scully, good morning, ms. hersman. i want to wish the c-span people behind the scenes a happy holiday season as well. i have an important question, pertaining to those orange boxes, or black boxes. it seems as though when they are found, they are sometimes kept from the public eye. i just wondered, why is it that if it is taxpayer-funded, what you don't have full access to those boxes? more importantly, on 9/11, four plans crash, and not one set of black boxes has been revealed. you might say, well, the boxes were never found, but that is not true.
the boxes were recovered, and yet they are kept from scrutiny from either the media or from the scientific community to expose exactly, precisely what was on those boxes. host: or the boxes down? -- were the boxes down? guest -- >> found? guest: in most of those cases they were found. that was actually a criminal investigation. with respect to what is revealed on the boxes, i want to make it very clear that there are two sets of data. one of them is the cockpit voice recorder, and that is the last recording of the voices and the comments of the pilot. the safety board, when these are recovered -- we make a transcript of those recordings and we put those on the public docket. those are available for everyone, published with an
appendix or report when we release our report. however, we are barred by law, we do not have the statutory authority, to release the audio recordings. so you will not hear the audio recordings of the last conversations or last minutes of those flights, because congress has explicitly protected those and told us that we are not permitted to release them. with respect to the flight data recorder and information on that, that is also on a public docket, and that is downloaded. it could be hours, 32 hours of data, and we do put that on our public docket. i think that the good news for folks is that we are becoming much more transparent. since this summer, we began putting all of our public dockets on our website. you do not have to come to our reading room anymore or make a request to get that information. you can search it on the web. since this summer, we have been
putting forward all of our investigations on the web site, and we are working our way back through historical investigations to put those public dockets on the web site as well. so hopefully that makes it easier for everyone to see that information for themselves. host: will there be a point when the recordings will be released from september 11? guest: that is really up to the criminal authorities that are looking at them. from our perspective, we don't have any authority to release them. we are prohibited in our statute from releasing the data recordings -- the audio recordings. there is criminal proceedings, there may be limited audition pursuant to how the judge is going to proceed. but really, that is not our area, and we stay out of the criminal side of it. host: there is a perception of commuter planes that they are less safe than the commercial airliner, a larger boeing jet.
true or false? guest: i would not say that is true. what is important to understand is that all of the airline operations -- any scheduled service you buy a ticket for, they come under the same rules and regulations. they're expected to have the same level of safety, one level for everyone. there might be more flights taking place. if you have a large carrier, a 747, they are going to make one long international flight, or if you have a 757, they might make a coast-to-coast flight. whereas if you have a regional jet, they will make six flights during that same time, because it will go up and down, up and down. is it different exposure, differed workload, -- it is a different exposure, different workload, and the weather conditions may be different. we have looked at regional carriers, and we have had a number of incidents involving regional carriers.
most of the fatal accidents that the safety board has investigated since the five -- in the five and half years since i've been with the board had involved regional carriers. we want those folks to make sure that they have at the same level of attention. if there is a fatigue policy in place, we want the same one in place for con air. we have made recommendations to make sure that some of those things change. but everyone is supposed to be complying with the same rules and regulations and oversight from the faa. host: michael is joining us from detroit. caller: good morning. mrs. hersman, i don't know how long you been with the safety board -- steve, i think you might remember this -- at the end of the clintons administration, president clinton asked al gore to come up with recommendations
for improvements in airline safety. one of the recommendations he came up with was putting locks on cabin doors. this was pooh-poohed by the airline industry and the republican party, who were in charge then print in hindsight, that would have been a great recommendation to do. i am just wondering, when is the transportations -- what has the transportation safety board done now about blocking cabin doors and improving safety as far as somebody getting into the cabin? guest: i think the focus of that is security rather than safety. i can tell you that there are requirements after 9/11 for cockpit doors to be locked and secured. that is not something that the safety board is responsible for. that is something that the department of homeland security is focused on. host: i want to go back to
something -- a ruling by the transportation department that if you are on the one way for more than three hours, it has to go back to the gate. if you are on a plane or bus or train, and you have concerns, you think you could be headed for potential trouble, what rights do passengers have? what can they do? guest: i think that is a great point in very important. a lot of times, in certain operational environments, when you have a lot of cockpit doors -- we have seen an accident where we have bus drivers who were sleepy, it was actually the passengers who recognized that the bus driver was fatigued, they work try to talk to the driver and were concerned about their own safety. people are taking an interest in their own safety and making sure that the speak up if their concerns, if they're knowledgeable, and to address it is important. we have made sure that there are 1-800 numbers that people can
call if their concern. and a slower speed is not just people who are passengers, -- thank you for taking our viewer calls. guest: you are very welcome. " a series of votes, the senate has rejected all republican constitutional challenges to health care bill this afternoon. more procedural votes continue right now on the senate floor. a reminder that final passage -- the vote on final passage of the health care bill will be at 7:00 tomorrow morning. democrats will hold a news conference on the health care bill. it was scheduled for 4:00 today. right about now. we will bring it to you live when it gets under way here on
c-span. until then, more from today's "washington journal." host: defending his first year record, talking about the economy and his financial overall. the president vigorously is not just grudgingly supporting the health care bill. he goes on to say that nowhere has there been a bigger gap between the perceptions of the compromise and the realities of the compromise than in the health care bill. . . host: we will hear some of the debate on the senate floor and some of the comments from democrats from the news conference. the chairman of the finance committee max baucus. but mark is joining us from philadelphia on the democrats win. good morning. caller: how were you? host: fine, thank you.
caller: i think it is working. it is not pretty obviously. it is not pretty obviously. there are things i am not happy about. being a liberal democrat here in philly, a blue city and state. i would like to have seen a public option. unfortunately that has been negated. i'm a retired federal employees and now they want to in effect model of the employee health benefits. the only problem is what i see, on my plan, a lot of that elderly federal employees and up in blue cross, the one planned, therefore the premiums are rising steeply and i thought the whole purpose of the whole exercise was to control health care premiums. i don't see how you can control premiums without a public option. host: some of the comments from the editorial appeared "orange
county register." technically the senate could be in session as late as tomorrow evening, christmas eve, a vote that could happen 7:00. we, of course, will have live coverage both here on c-span with more on your comments and the expected result, 60-40, the democrats say they have the 60 votes necessary to end the filibuster and bring the final vote to passage tomorrow. of course, live gavel-to-gavel coverage. tonya from martinsburg, west virginia. has it worked? caller: no, it hasn't. it made me mad. this is not change you can believe in. my senator jay rockefeller, they all gave nice speeches and then they vote when you don't want them to compromise. it should be change you can
inside -- the essence of the story as this. a final bill is expected next month. they are jockeying for modifications double buffer the impact. retailers want a delay before new employees qualify for company-subsidized benefits. small construction companies want an exemption from the employee coverage that the senate bill already applies to other businesses with fewer than 50 employees. across the spectrum, businesses worry that a series of new taxes and fees to pay for expanding health-care coverage will push up premiums, particularly for smaller employers. you can read more from the "wall street journal quoted caller qu"
you have to think. if you give everybody food and medicine, then what is left? [unintelligible] host: thank you for the call. from twitter -- maureen dowd today, is there a real mccain? she writes, the man used to be such a constructive independent that some of his republican senate colleagues call him a traitor. now he is such a predictable obstructionist that he is indeed just say no vanguard with the same conservatives who used to despise him. they can be disturbed by his star cannot predict sarcastic persona, a far cry from the
honorable man portrait so lovingly pumped up in books. here is what mccain said yesterday on the senate floor. >> you're president said during the campaign, and we are a little cynical about politics and campaign promises, but time after time the president said, i am going to have negotiations around a table. we will have doctors, nurses, insurance companies, they walls -- they will get a seat at the table. they will not be able to buy every seat, but they will be on c-span. of all people, you recognize that drug companies. it got the best deal of all? this spent the most money on advertising? pharma.
it could have been saved by the consumer that what a been able to reimport prescription drugs. host: a number of editorials this morning, "usa today," never wanted to see sausage and laws being made, that is the sentiment on the eve at a party line vote. this let's make a deal legislation is terrifying -- is turning what the late ted kennedy movingly called the cause of my lifetime into a cheap bazaar. the editorial goes on to say that the revolution of the last week -- last-minute dealmaking should not obscure the fact that something enormously worthwhile was emerging from this sort of process. the united states is saddled with the developed world's most back word help system. if and bank of people get sick, and cruelly denies coverage to millions who have pre-existing coverage and cannot afford insurance.
keep in mind that after the vote tomorrow, which will happen at 8:00 a.m. eastern time, there will be a conference, do not expect final passage into january. good morning and welcome to the program. caller: happy holidays. i know how the process works. i have relatives on both sides of the aisle. at the beginning of this process, at what -- everyone was on table and it was on one. it was on c-span and it was on the white house website. my issue is there has been so much compromise. differences between both bills -- there is a public option in the congress bill -- the house
bill -- which is run by the help in siemens services. and it is a public option and it is run by the same or head people the cover the federal employees. there are good and bad things about both bills. but in the public option, what would be the bottom line that you would have to pay? i do have insurance through my employer. my insurance went up for my children 41% starting the first of january. i now pay over $750 a month. i wish that this would be enacted soon because it is getting where it is 40% of my sour. >> for how many family members? caller: my employer pays for me and then i pay for my two children. my oldest is still going to
college got kicked off. my husband was working for another company. when his commission's slow down, he got a second job. and then when he was laid off, he took that second jump -- second job full-time. i wanted had him to my policy, but in september, i found out that my children to insurance was going up 41%. i could not at him on. now he is without insurance. he is not making as much money as he did before. he is a diabetic and that is on his record. his policy will be expensive. host: have you been following the debate on the senate floor? caller: i have been. i am going to put it mostly on the republicans because they are not being honest. the democrats, i wish that that
would come out and push their points for. what i have seen so far from the democrat from michigan, i am bored by all of it. i have never been active in politics but i am going to work twice as hard to get people who will vote for us in the 2012 election. host: we appreciate your comments. another twitter comment. does the process work on the health care debate? from the "wall street journal," the price of history. blanche lincoln and evan bayh must feel like saps. the arkansas and indiana democrats spent my caterwauling about this so that position -- this or that provision in the
senate health care bill, and then they bowed to speed its passage without getting some much as allows a t-shirt. harry reid said in defense of his frantic dealmaking, i don't know if there's a senator that doesn't have something in this bill that was important to them. he said this at a press conference that offered an unintentional commentary on modern democracy. "and if they do not have something in it important to them, then it does not speak well of them." jamesñi madison, phone home. the practice of political medicine, get used to it. as president obama likes to say, is history in the making. we will hear from harry lead in just a moment. damon joins us from georgia. caller: i think that this is ridiculous that we in america, one of the largest industrial countries, can i get health care
like everybody else has. it was disheartening to see how michael moore's showed how the people down their offer them health care in the work that out. but why take a different direction here. this is not about health care. this is just the beginning of how we do business in america. when we refinanced gm a while back, there were talking about how they would restructure gm and do things differently. the health care industry is just at the beginning of how they are going to start doing that. all of our businesses hemorrhaged money to añixd certn number of people in this country. whoever is on top, and then as people at the bottom.
you trace where that money is going to and who is up on top, and the party lines when the city's politicians fight to see where they're going. the money that they are receiving and then you get at the root of the problem. host: thank you for the call. if you go to cns.com, there is a part about the arts to peck bart -- there is a story about bart stupak. a quote from him -- they think i should not be expressing my views on this bill until they show me the language. i do not need anyone dead tell me the language. i know what it says. i do not need to have a conference with the white house.
i have the legislation in front of me. he was able to get 64 democrats to join him to attack as pro- life amendment to the health care bill. it would prohibit the federal government from allocating taxpayer money to pay for any part of health insurance plans that cover abortion, except in cases of rape, incest, or when the life of the mother is in danger. did the process work? let's hear from harry reid talking about what is happened thus far and previewing the vote tomorrow in the u.s. senate. >> we are focused on one thing and one thing only, passing this bill. we hope to be able to completed tomorrow. with the ice storms coming in the midwest, we hope that we can finish -- we hope not to work on christmas eve but we will do what we have to do. we will work with our house counterparts and the white
house, but that will come at a subsequent time. tomorrow is to complete this legislation. host: the baltimore was 8:00 eastern. also on line at c-span.org. welcome to the program. caller: i have been waiting on line 17 minute. everyone you have called so far have been a democrat. you don't identify anybody by party. if all the other monitors identified the callers by party, you are the only one. everyone else has been a democrat. host: that was an error on my part. the floor's yours. caller: let me first say that when bush was in office, every
time his poll numbers went down, c-span, that is all you would hear. bush's numbers have gone down. why don't you give obama's poll numbers, below is any president at this point? host: we just did talk about them over the weekend. one poll has him down to 45%, and other polls had him in the low 50's. caller: and the democrats are going off the cliff, killing against other people, and they are going to lose big-time next year. and we're going to give republicans back in.
thank goodness for the republicans for saying no. stayeeve, i wish you will identy each caller by party, if you would. if that wouldn't be too much trouble. host: happy holidays. next is chris on the democrats' line. caller: i am listening to the discussion, and the last caller was a very interesting person. when president clinton tried to initiate a health-care plan back in 1993, he lost a lot of the popularity but he still became a president a second time. his numbers were down also.
he will probably lose a lot of seats in congress, but he will get that health care plan in place. obama is going to get it in place, and he is actually getting legislation passed that people with pre-existing conditions -- that is going to be declared and, where they are not going to be legal anymore. you tell all of these insurance companies, and you have to cover these people from this point on. and i really appreciate this health care bill. president obama in one year is actually getting a health care plan in place to cover every person in the united states. and all of these people criticizing him and putting him down in speaking evil about him,
that is not right. he is helping the entire united states of america. everyone is going to be covered. and i just wanted to be saying that we are about to get a health care plan that is going to take care of everybody. and i'm glad about that. host: another twittered comment. this story is in the "new york times quot." perhaps the most riveting, given the historic nature of the legislation to revamp the health-care system, was that on a 23rd straight day of floor debate, senators seem to have run out of things to say. with a how come all but certain, they gamely repeated meeting of the competing
arguments that had dominated the discourse for the past few weeks. from new orleans, the democratic line. caller: how are you? nice to talk to you. i am a writer and i just wrote this piece today. in the senate, special interests and lobbyists hijacked the health care plan that obama originally was looking for. to begin with first of all, we do not how the health care option but most polls will tell -- will show you the more than 50% of americans wanted a health-care option, public insurance option. what happened to that? i tell you, special interests
happened. there is a report that circulated all over the internet right now and you have probably seen it, it is done by the northwestern university news service and the tribune newspapers and the center for responsive politics. host: it's the medill news service. caller: are they friends of yours? host: no, but i understand your point. caller: that is not a word in the english dictionary. they found that 166 former pages of congress in the senate right now are part of the lobbying groups that are shaping this health care legislation.
if you remember, when obama first got office on january 21, he instituted new ethics rules were his whole administration would not and could not -- they had decided paperwork saying they could not be lobbyists. and they have held themselves to that. the problem is, senators like steny hoyer and max baucus are virtually running a whole industry on the side, where all their former aides and staffers go on to make millions of >> for the health-care company's that center whole year is supposed to be working for constituents -- force in nature -- senators ho yer is supposed to be working
for constituents. host: there was a story on line about pastry having a very good money -- a very good year. -- k street has been having a very good year. caller: k street, i am going to look that up. host: leslie miller has this twitter comment. this is in the business section of the "new york times." house speaker nancy pelosi and her colleagues are in a tough spot. they already seemed poised to yield on abortion and the public option to get the bill through the senate. now the senate and the white
house will be at asking them to be more serious about holding down costs as well. but the health care experts i spoke to thought there was room for a sensible compromise. the liberal leaders had few realistic demands to make in exchange for accepting the cost control measures that are in the senate bill. you can track all of this, including details of what is in the bill, by logging on to our web site and clicking on health care hub. the day -- the debate, the legislation, and the floor debate -- is all there at c- span.org. janet joins us from brandenburg, kentucky on the republican line. caller: how are you doing? i've got the ohio ballevalley c. host: i hope you feel better by
christmas. caller: i'm on disability and my husband is in the construction industry. we are on private insurance. all of my disability goes to pay for my insurance. and then i have my medicines costing about $98,000 a year. host: $98,000? caller: yes. host: that is an awful lot of money. caller: yes, and in july i am going to have to go on medicare. host: how old are you? caller: i am 51, and i will not be able to go back to work. and i am a registered nurse.
i have no short-term memory. i take that little test, the three words to remember, and i cannot remember anything very long. my biggest concern is that i have a great love for this country. we need to do something for health care, but this is not the time to do it. we are so far in debt, and my youngest daughter, she is putting herself through law school, and i asked her, what will happen to this country if we go bankrupt? her response to me was, i do not
know. this country has never gone bankrupt before. so we have not discuss that in class before. host: i have to get on to other comments but i want ask you, have you all for $98,000 in medical prescriptions? caller: in kentucky, we have a ñrprogram called kentucky acces. it allows maie to have $15 copayment. host: your out-of-pocket expenses are how much? caller: $15 on each prescription. those bills add up really quickly. and i take 30 a day. host: we appreciate your time
sharing your story and we wish you a merry christmas. we will go to mike, also from kentucky, on the democratic line. caller: i don't know how the process worked. i have been watching c-span -- tried to watch most of the debate for the last four days. it seems like the democrats, any time that they are talking about health care, they are talking about people. any time the republicans are talking about health care, they are talking about what it cost. but i am 60 years old and disabled for about 12 years. when i worked, my wife never worked. last year, she had a hard time. neither one of us -- i'm on medicare but now she can i get any health insurance. you end up going to the doctor, and you cannot tell the doctor the truth, because the order so many tests, and write so many
prescriptions for her. what you end up doing is you get by on a minimum amount that you can stay alive with. it seems like they would be more worried about the people instead of what it costs right now. they talk about going bankrupt or how much it costs -- if you are personally affected where you're going to die, you're not worried about how much it costs. host: mitch mcconnell was recently reelected from there. al is he? caller: he is just obstructing and delaying everything. host: thank you for the call from the democratic line. an editorial from the "philadelphia inquirer." to hold his caucus together,
we've had to jettison the core concept of establishing a medicare-like health care plan for working age adults. it is no panacea, but the so- called public option would provide a competitive counterpoint to the ever rising premiums and private insurers at times capricious changes in coverage. and it twitter comment -- >> a live picture from the u.s. capitol where we expect to hear from senate democrats shortly talking about the health care bill. in the senate is now under way that will set up a final vote on health care bills tomorrow morning. tomorrow's vote, on final passage of the senate health care bill, has been moved up to 7:00 a.m. eastern time. you can watch live senate coverage on our companion network, c-span2. the senate also plans to vote to
increase the debt limit for two months before leaving for their holiday break. we're waiting for the senate democrats. the majority leader and other senate democrats coming to this location for a press conference scheduled about half an hour ago. but the senate is now wrapping up a series of votes, so it should begin shortly. more from today's "washington journal" with a discussion on micro loans. a party around the world, we want to welcome alex counts, president -- focus on poverty and run the world, we want to welcome alex counts, president and ceo of the grameen bank. we hear about microloans. what are they? guest: they are ways of finding finance for the poor, who cannot find jobs in the marketplace and have to create their own. microloans give them the investment capital to get started some basic activity -- raising livestock, setting a
small type of shot, something like that. host: it you are in africa, haiti, how does this work? how'd you get the contact, would you get the money -- where do you get the money, how to pay back the individual? guest: when i was in bangladesh -- they started a process that has been replicated around the world. they said a local organization staffed with local people that goes into the urban community, the village, and say to someone that if you want to create your own job, we can create finance for you, and we will make it easy for you to repay it come over the course of a year in many cases, and that will give you time to get your capital rotating and grow your business. host: is that the message of your book, "small loans, big dreams"?
guest: exactly. i spent time to see what happens when a number of women who get the finance that they need to create their own jobs, 4d%@"$$"" pple effect throughout host: some of the photographs in the book. as you look at these faces from individuals from ethiopia and bangladesh, one of the common themes is that these individuals are in countries that are quite often corrupt. guest: absolutely, there is corruption in every society. we certainly have our share of it in the united states. but the petty corruption very common in these countries is something that microfinance has to guard against.
the measures that people go to to keep their system clean are quite extraordinary. and to the foundation's work, technology enables them to guard against corruption and keep it clean. host: in terms of the mechanics, you get the loan from a different group and pay it back with an interest rate? guest: you pay it back on market interest rate. it is more less what the businessmen in the capital are paying. and you pay back over about a year. one of the ingenious things that has been developed is requiring that people join a support groups of other entreprenuers in their village. they agreed to support each other as they go to the process to start expanding a business. this creates of pressure and support network to make sure
that people invest the money that they promised and pay attention to their business. and help them out if they get into any problems. host: we hope that you would join in to our conversation on the phone or on line or you can spend a -- sen date twitter message. how you measure the success of these endeavors? guest: there been 20 research studies done over the past few years. one study is available on our web site. is the family growing their asset base? is there in on -- is their income increasing? is she playing a large part of the decision making? we see that consistently and well developed microfinance programs they use what we call best practices that have emerged of the last 20 years. host: take some of the problems
>> we are going to get started now. it has been a long, hard road for all of us. now we have cleared every 60- vote hurdle along the way. we stand a few short steps on the most significant finish line we have had in congress for many decades. this debate has been dominated by partisanship and politics,
but i do not see this as 60 democrats be a stop 40 republicans. i see it as 60 leaders who stood up to insurance companies and stood up for working families all across america. i see it as 60 leaders to know is long time past that we declare health care are right in not a privilege. i see 60 leaders who refused to let your overwhelmed the facts. i am honored to be here with members of this great democratic caucus. you see, health insurance reform is about people. it is about 540,000 nevada ns who today have no health care but will have the coverage that
they have long since needed. it is about nevada families already fortune and not to have health insurance but who will send save $1,600 a year in their premiums. we stand on the doorstep of history. we recognize that, but much more important stand so much more close to make some many individual lives better. there are so many people who have worked hard on this legislation. we have members of the help committee, the finance committee, we have senate leader and chairman of other committees, and it is really unfortunate for made that we're going to have a small number of people speak today. but it is important that we understand that senator baucus and dodd, senator harkin had been involved in this because of their committee assignments. just because their committee assignments are taking for front does not mean that those
who did not have chairmanship of those committees have not been involved. i must say this -- standing next to me as barbara mikulski. we came to the senate together, we got on the appropriations committee together, and for me, barbara, senator mikulski, you brought a tear to my eye when she was the 60th vote today. ok, baucus, god, and then harkin. -- dodd, and then harkin. >> today as a victory for american families in our business alders and for our economy which -- and for generations to come. when we started on this path to your ago we knew it would not be
easy but we have worked tirelessly to deliver more affordable health care. to deliver an insurance market the worse for patients, not profits. to deliver billions of >> -- billions of dollars and tax credits and to control health- care costs to get american families and businesses and the economy back on track. today, we can all be proud of what this bill accomplishes. we can be proud that every american in every state will benefit from new consumer protections and a more stable, secure health care system. passing health care reform is a challenge for each of us. together, we discussed and debated and struggled to find workable solutions to complex problems. but together we persevered. why? because too many americans were counting on us. i thank my colleagues for their extraordinary dedication and courage to lead.
leader read especially, and in particularly my colleagues in the finance committee. but all the democrats, all 60 of us, standing together courageously and getting health care passed this year. leadership is not doing what is the be -- what is easy. leadership is taking on what is difficult and what is right. we all know that the challenges that we face in this legislation paled to the challenges that may in americans face because of our broken health care system. today we can say that we confront the challenges, we lifted those burdens, and we did what is right. i am very proud to say that americans one. -- that americans won. >> well, let me -- this is quite a moment for all the standing here. the 60 of us who comprise the democratic caucus.
we cannot take great pride in this moment. i'm confident i speak for all of us and for more than a million americans that recognize that every group of individuals has to have a leader. and we've been blessed to have a leader by the name of harry reid for our majority leader. and we thank you, leader, for your patience in all of this. i want to congratulate max baucus, a colleague with whom i've served for 35 years in congress, tom harkin, who live served together with for the same number of years, are riding together. i want to thank barbara mikulski and patty murray and jeff bingaman, along with tom harkin, who followed ted kennedy's lead in ed fisa to allow us to develop the bill that we did. and the rest of the members of that committee.
and those that worked with max to produce this bill. and our staffs as well. i also won at thank mike kinsley's staff who did not vote for the bill but contributed to it. his support may be remembered in a moment like this as well. the last time the senate of the united states met on christmas eve was 1963, only weeks after president kennedy's assassination, and they met to debate the vietnam war. this is the second occasion when it has let -- has met for as long a period of time as we have, 24 dead. we now rank second in the longevity for the senate to consider something as this bill before us. there are moments where we who do serve in this body are reminded just what an honor is to stand in this arena. tomorrow the senate will once
again meet on christmas eve to pass historic legislation that will finally make decent health care a right for every american citizen. the road to this moment have been long and difficult. progress always is. but the moment many christmases ago, when george washington took soldiers across the river, those who have tried to make our union more perfect have always faced its odds. we pushed for passage of this legislation and the final bill reflects the necessity of compromise. but we few, we happy few in many ways, feel privileged to cast our votes. we will never cast a more important vote in our careers. history would judge harshly those who have chosen the simple path of obstruction over the hard work of making change. it always does. but for those of us who have
fought long and hard and the memory of ted kennedy who root -- who began this charge so many years ago, this bill made compromises when necessary and stood firm in the face of long odds, and we will always, we will always remember this day. thank you. >> i am going to be really short. there are more and -- there are important meetings taking place soon and i want to make sure i get to that meeting. enormous thanks to all the senator standing here today, especially my td but you will classmates, senator dodd and senator baucus, for shepherding us through. but every senator carhere had it into this legislation and they can all be proud of the fact that we all bent over backwards
on your committee, the finance committee, and on the help committee to conduct bipartisan proceedings. we held out our hand, but we were rebuffed. the leadership on the other side said know. well, we would not be here today without a great work of every senator here. there's one person who has been here every day since we started, has not been home, not with his family, and i hope he gets out tomorrow for christmas the. it would not be possible without senator reid. i said this yesterday and i say it again. to put it in biblical terms, he has exhibited the patience of job, the wisdom of solomon, and the endurance of samson. and he is on the verge of achieving what majority leaders over half a century have failed to accomplish. with this vote today in the
final but the mark, make no mistake, majority leader reid has earned his place in the senate's history. it has often been said that senators are they constitutional impediment to the smooth functioning of staff. [laughter] we laugh at that, but we know there is a scintilla of truth to that. all of us, especially the staff on the help and finance committees, all of your staff, senator reid, had been just wonderful, working literally -- i do not know how, working 24 hours straight for the past seven days.
i'm going to name all the staff members who contributed to this bill, but here before this congress -- caucus, i want to single out one person. we are all saddened and cognizant of the fact that the real author of this bill, ted kennedy, is not with us. but there is one person who really carried on for him. he had a staff person for almost 20 years, the staff director of the help committee for the past decade, to carry on. are amazing staff director, michael myers. people are saying, where's michael? believe me, there is only one
reason that michael myers would not be here. his son is recovering from surgery and he is with him in the hospital. but he is going to be ok, so i am told it is going to be fine. he is there. michael is a consummate professional. he was senator kennedy's right- hand man on the committee for more than a decade. no one has been more loyal and dedicated to carrying on senator kennedy's addition, so michael meyers in absentia, we want to thank you. one other person i want a fight. she has not been here involved in the intricacies. she has always been on the phone and available to call people and talk to people. it was wonderful when we had that 1:00 a.m. but on monday morning to look up in the gallery and see vicki kennedy. she has been wonderful. and we just thank you, vicki, so much for helping us out through this long endeavor.
well, this is a great achievement. with all the talk in the debate and the charts and all of this and all of that, and all the people -- those on the senate floor, it comes down to this. we've had one dividing line in america that no other developed country has. we have had a dividing line which on one side those with wealth and health had good health care. they had the privilege of having good health care. but on the other side, some money did not. what this bill does is we finally take that step, as our leader said, we take that step from health care as a privilege to health care as an inalienable right of every single american citizen. as i said before, this bill is not complete. i used the analogy of a starter home. we can add editions and
enhancements in the future. but like every right that we ever passed for the american people, we read this it is later on to enhance and build on those rights. and we will do that here surely. we will enhance and build on this. but we have made that first, most important step to make a right rather than a privilege. >> we are going to hurry up to durban's party. we can ask a couple questions. >> how difficult do you think the negotiations will be what the house? while the president be able to sign it before his state of the union address? and one comment on senator byrd. >> first of all, this bill is not going to pass until tomorrow morning. my eyes are focused on tomorrow morning.
there will be proceedings after tomorrow morning but i worried about those after tomorrow morning. i want to talk about senator burton. i had a wonderful conversation with him today. this is a strong man. one time senator byrd told me, i do not want to -- i never done anything physical and exercise. but every day i exercise my brain. and he does. he taught to me about what he was going to read during a break. he had something planned to do. this is a remarkable human being, one of the most remarkable human beings i've ever met in my thigh. i have so much admiration for his intellectual capacity, but his physical capacity, he is a tough, strong man who was essential to our passing this bill.
>> how you plan on treating the conference committee process? will it be you when speaker pelosi or will it be more transparent? >> ok, you obviously were not listening. i am not going to talk about conference. i'm glad to pass this bill tomorrow. you can ask that question in as many different ways and you look at the same answer. i am looking forward to this vote taking place between 7:00 and 9:00 in the morning tomorrow. after i have a chance to talk to other people about how we proceed on this bill, but the time frame i am focused on is in the morning. and for a few days after that. frankly, i am going to sit back and watch my rabbits eat my cactus. [laughter] [captioning performed by
let me introduce the subject. it is very hard when you have a bill the size of this legislation, and then another 400-page amendment that comes in and over the weekend of the snowstorm when you're trying to do your best to read through and understand what it means, to really get all the things that are important out in the open soon enough with the schedule of voting that is occurring here. and this is been very troubling to a lot of us. one of the things that senator sessions and senator gregg have come upon is another big error that some of our colleagues are attempting to take advantage of. error and not in the same kind of way that cbo disclosed last