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tv   Key Capitol Hill Hearings  CSPAN  November 5, 2015 2:00am-4:01am EST

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been seeking legal help before we went to the media. i contacted several lawyers and did a lot of legal research to find out what my options were. for all the lawyers i spoke to and said, do we have a case? they say, yes, we do. i said, great. can you represent us? they said, we are not touching that with a 10-foothold. -- 10-foot pole. and so shady that most did not want to touch it. it was only after we talk to the media that we found a lawyer who was willing to step forward. a public citizen came forward and said, we can help you. we want to help you. we have the means and resources to do so. sen. nelson: well that is a good news story. mr. medros, i want to look at the other side. tell us about evidence of bad actors trying to take advantage of businesses by threatening to
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post a false negative complaint. mr. medros: there are certainly some instances where consumers threaten a business with a negative review, threatened to share their experience online. and that business, rightfully so, has concerns that that is going to impede their future marketing efforts and impede their business. reality is, first of all, we encourage businesses to proactively communicate those threats to us and we monitor for thoseerties negative reviews. in the vast majority come -- the vast majority, they never appear. we asked the businesses to respond to any consumer review. we believe transparency will solve the problem. future is get to read those
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responses, the fact and forth between those two parties, and make their own decision, their beliefs as to whether this is the right business for them to visit. so you encourage those businesses, if there is a false review, to contact you. would this legislation prevent a business owner who is threatened with a false or malicious review from bringing a case in court against the consumer for defamation question is -- for defamation? mr. medros: i am probably not the best person to answer from a legal standpoint. what i can tell you is that i do not believe it will prevent businesses from interacting with tripadvisor and asking businesses to be reviewed. we do employ an entire staff and we look at every review where an owner or another member of our community flags it as inappropriate against our
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guidelines or perhaps irrelevant. sen. nelson: at the end of the day, i think what we want is the access for the courts -- to the courts for whoever is the aggrieved party, the consumer or the business. ,n the case of ms. palmer apparently it was her access to the court that finally brought about the redress of her terrible situation. -- rheingold, let me ask you on the arbitration clauses, when this friends used and family program to basically trade away the right to go to court in exchange for a $200 discount, should we be doing something to protect consumers more than just the non-disparagement clause? mr. rheingold: absolutely.
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you made a very good point. the way consumers can seek redress is the public core system. a lot of these stories and a lot of the bad damages that are done to consumers is because they do not have access to the courts. ms. palmer was lucky. her story was a very compelling story and the press picked it up right away. sometimes you need to go to court and publicize those stories. did is happening across this country in every consumer place you can imagine and it has gotten sanctioned. what is interesting is there is a reward for signing it away. in most cases, people are signing away their right to go to court without ever knowing about it. it is in clauses, in shrink wrap things.n there is a dual justice system that is going on where consumers do not have access to our roots.
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whenever they enter into any sort of agreement with any type of business. this committee has seen a proliferation of these things recently. fiat is just one example. ignition switches and so forth. airbags.he takata that is still in the news. you for your comments. because these things that are subject to mandatory arbitration or adhesion, you would really lose a lot of your ability if we cut off the access for either ievorggrieved or the aggr into the courts. sen. thune: thank you. the bill does specifically say that defamation cases to something that is said that is
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untrue, those cases can proceed. we do not do anything to impinge on that right. bluntr mccaskill, senator , still basking in the glory of the kansas city royals world series. >> we had hardly anyone show up for the party yesterday. sen. thune: which begs the question of what you guys are doing here. >> there are not that many people in kansas. >> i tried to have a debt from the senator from new york. i would offer kansas city barbecue if you would agree not to talk for 45 minutes. [laughter] bet, noted your vet -- mine. >> bad move on his part. >> and many miss have loyalty elsewhereourians in your state. finally, you are wearing blue and you are wearing red. >> i will not even go into the
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history of the team in kansas city, missouri, but we are welcoming all fans from card -- from kansas. >> she is a loyal cardinals and. pleasedmccaskill: i am thune hasor tune -- agreed to take out the provision that limits the tools available to attorney general as it relates to contingency fees. let me ask you, ms. palmer, i assume there was a contingency agreement with the lawyers that ultimately represented you in this case. fortunately, a public citizen, as a nonprofit was kind enough to work with us pro bono. we could not afford legal representation on the scale which we needed. aside from people just saying, we are not touching this. when i say, what if you just wrote a cease and desist letter or helped us a little bit smr -- a little bit?
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they were offering thousands of dollars -- senator mccaskill: it is hard for an individual to get to court unless there is a contingency agreement. ms. palmer: even with the contingencies, they said, we want a retainer. havethat, if we do not $3500 to pay them, we do not have $5,000 to pay you. >> i will admit i am a chicago littlen, so i am a disappointed today. that is ok. congratulations to kansas city. one important thing about consumer statutes, particularly the fair credit reporting act, they have fee shifting provisions. so the damage that was done to ms. palmer, they would not have to charge ms. paul murphy what they do is they only get paid if they win the case. the court will award them damages after they successfully when the case. it is a little different than contingency the way congress has
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drafted consumer protection statutes in the past is to have shifting statutes and that provides direction for consumers like ms. palmer. mccaskill: did the public citizen recover the cost of their litigation? ms. palmer: we are still working on recovering any costs. senator mccaskill: so you have not collected yet? are they still in business? ms. palmer: as far as i know. senator mccaskill: that just drives me crazy. ms. palmer: the judge did award us our settlement and tacked on the lawyers fees for the public citizen as well. so if and when anything ever is collected -- senator mccaskill: which is the fee shifting that he was referring to. if you had lost, they would not have gotten anything. ms. palmer: true. that was always an issue.
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-- with any of the other lawyers we contacted, they were not interested in working on a contingency basis. they wanted a retainer up front. senator mccaskill: that is one of the challenges in figuring out how we fund lawsuits where the damages do not appear to be enough to warrant the risk that a lawyer takes on when they get into a costly litigation. that is one of the advantages that these big companies have. they know that it is small enough -- there are two things a lawyer has to have to bring a lawsuit. one is liability and the second is damages. how large the damages are is irrelevant to whether or not that lawyer wants to take on the costly risk of going forward with a lawsuit, which does kind of even the playing field in some ways too much in favor of the big guys. about talk to mr. medros
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his service. i know who draft this stuff. they are lawyers. is just the terms of service. website terms and conditions, and notices. this is another five pages of fine print in privacy. how many people do you believe are reading that they go on trip advisor? mr. medros: i would imagine very few people read through the entire terms of use and privacy statement. mccaskill: so what is the point? if we know no one is reading it, why aren't we working on making this -- have you thought about making -- taking a stab of making the terms of service as forthcoming and clear as the rest of your website?
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t we would welcome the opportunity to make privacyrip and terms of service clear. we take privacy extremely service to the -- seriously. i believe that, in the case of a bill like this, you often see a ntesident and ace -- precede for how terms of use and privacy are conveyed to consumers. senator mccaskill: one of the reason that contracts are so successful is because they are way that thed in a average person is never going to understand what is being done to them. i think many of them would run in horror -- i think ms. palmer would have run in horror if she would have realized what that
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company was purporting to do. it seems this is something we really have to work on. waste. this is a lot of nobody is reading this stuff. why are we doing it if it is not providing the service that it needs to provide to the consumers that it is designed for? we have got to work on that. case, they added this long after the transaction occurred, correct? ms. palmer: yes. i read through the terms of service three times to make sure there is nothing in there that would have invented -- that would have prevented me -- especially since i did not purchase the items, my husband did. so i did read through it several times. when they came back three years later and said, you violated this non-disparagement clause, i looked at my husband and say, that did not exist. there was no non-disparagement clause.
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>> you actually read those agreements. that is most impressive. sen. thune: my neighbor to the south, senator fischer. senator fischer: you have mentioned that small businesses in particular may make use of these non-disparagement clauses as many of them view it as personal when they get negative feedback. i am on the small business committee hearing the senate and i fully understand how important small businesses are to the state of nebraska and also to the economy here in our country. while i agree that the use of these non-disparagement clauses is a practice that should be discouraged, i would like your views on whether this will -- bill contains sufficient protections for small businesses that are out there. do you think it does?
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>> the goal is to create a letter -- level playing field. any companies distorting their ,ublic persona using these gag non-disparagement clauses is hurting the overall marketplace and the opportunity for small businesses to get customers to their side of the equation. if anything, i think this bill is essential for preserving the vitality of the small business community and making sure that the markets are open to them to come and enter. senator fischer: do you think those protections are in this bill? i support this bill as drafted. i did write some thoughts on how it could between. even if we do not do that, i think this bill would be super helpful in advancing the interests of small businesses. senator fischer: esther atkinson, do you have any comments about if small businesses, do you believe they are protected under this bill
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the way it is drafted? that we are still allowing consumers to be able to express their views without being punished? mr. atkinson: i would echo mr. goldman's comment that a lot of the damage from these clauses are harming small business competitors that are doing a good job. consumers do not have a way to weight who is better. secondly, there are still legal remedies that a company can use if they feel like someone has outright lied. the bill does not prohibit a company from taking action in that way. there really is a lot of evidence that a small businesses , a small-business owner post posts something and said, we do not agree with the review, then it really can minimize the damage if a company is sincere in what they are trying to do. you thinkscher: do small businesses have the resources where they would be able to respond to those negative comments where they
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really can take action? it is hard for consumers to take action. we have heard that. it is difficult. lawsuits are expensive. what about the small businesses? how do we reach a balance here? mr. atkinson: the way a lot of the online trading platform's work is you can monitor what your customers are saying about you. frankly, in the internet age, that is something every business needs to do. you are not going to search the web every day for everything, but there are platforms that you can and should monitor as a small business owner. doing that is not, i don't think, overly burdensome. a quick reply, one minute kind of reply everyone in a while -- you do not get negative reviews every day. i do not think it is a burden for companies to do that. i think it is good practice in the internet age. fischer: in the senate version of this bill, we are of the at enforcement
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prohibition on non-disparagement clauses by the federal trade commission. in the house version, we have the enforcement by the department of justice. do you have an opinion one way or the other on who would be the best position to assume that role? an atkinson: i don't have opinion on that. the person who leads this work for us, daniel castro, who is not able to be here, i will talk with him and i would be happy to get back with you on that. senator fischer: that would be great. thank you for being here. sen. thune: senator warren. -- moran. moran: on the topic of small business, i would assume that small businesses use reviews as well. small businesses need information about what business, large or small, they might want to deal with the online reviews may be helpful to a small
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business. several of you outlined some is not harmfulis or perhaps beneficial to small business. one of the other ways is small business cannot make a mistake. it is more difficult if they enter into an agreement with another corporation that turns out to be a bad deal. the consequences are harder to recover from. i assume that small businesses also utilize the reviews, make purchases of goods, services. everybody is shaking their head. does anyone want to disagree with that? ok. let me last -- let me ask about state laws. california, in particular, has state laws dealing with this issue. >> california is the only state. moran: isrren -- there anything we can learn from what has transpired? i hate asking this question.
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law hasay that this been interpreted or enforced? we do not have any data points about how it has applied in the field. it is relatively new. the only thing i will call attention to is that there is a statutory damages provision in the california statute that awards consumers who are subjected to these clauses to abstain statutory damages. -- to obtain statutory damages. that is worth discussion, whether that would be a helpful addition. while we are: focused on non-disparagement clauses, in this world of online reviews, are there other or similar issues that congress ought to be paying attention to? a couple that have been mentioned previously, fake reviews, false reviews. are there issues that surround this new development? in my life, particularly as a
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rural, small town resident, these reviews occurred. they occurred after church, at the grocery store, at the café people -- at the café. people within our community would talk about what service they got or did not get and how quality the product was or was not. today, i suppose the consequences are magnified because of the volume of information that is available. is there something we're missing as we look into this issue of non-disparagement clauses? i will reiterate my interest in the federal solution. it would enable lawsuits that are brought alleging defamation or other types of harms like that on content that would be of social interest to be tossed if they are illegitimate.
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the real ways that reviews get scrubbed off the internet is not through these clauses, although these clauses are problematic. it is because people are threatened to take them off line, like ms. palmer's claim. ms. palmer said she could not remove them, but that was unusual. in other cases, the contact comes down immediately. the federal law would decide -- help consumers decide, i am not going to be bullied off the internet and i am not going to be betting my house in legal fees. i would second is point on that. there was a report last year about the whole issue of anti-slap and the issue it has. i think that is another component. obviously, both pieces of legislation are important. mr. chairman, thank you for your hearing.
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i apologize for intruding on your commentary on the royals. i wouldn't have it any other way. senator shots. senator: ms. palmer, thank you for your courage and clarity. i know you have been through a lot. i know it has been a difficult sell -- it has been a difficult several years. we appreciate everything that you are doing. your case perfectly illustrates why we need a law. individual consumers are in no position to this injustice. we neede also shows why a federal law and that a patchwork of individual statutes are not going to work in the age of the internet. my first question is for mr. atkinson. we have been talking about two things. one is that consumers don't know what rights they may be waving -- waiving when they click i
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agree or sign off on the hotel desk. there is another related to intimidation and admonishing or warning customers against a negative online review. those are different tactical approaches. companiest that these are employing? are they tricking customers into signing away their rights or are they warning customers against negative online reviews? because they cannot be doing both at the same time, it seems to me. first of all, there really has not been enough surveys. there are a lot of anecdotes which are quite compelling. we have just heard one here. other folks have talked about that. i think there is a lot there and we do not know exactly which strategy companies are using more of. one of the reasons why this bill is so important is it is not just the fact that even if there were no law, and people think
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that they may be gone after -- i think we are at a point where if we do not solve the problem soon, there could be something nds whereonsumers' mi it gives them a little doubt and fear. i have heard of someone in a suit so i am not going to take the risk to online reviews are contributed to the public good. it is not going to help them. they are trying to help everyone else. if we have a collective climate of fear, people are just not going to be able to do that. does point out that we are operating at the beginning of this problem. therefore, we are lacking good decision support on exactly the size and scope of the problem. speaking of that, does anybody on the panel no primarily know primarily whether these clauses are being employed by small or large enterprises western mark it seems that is an -- or large enterprises?
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it seems that is an important part. a large national or international brand would probably cause bigger companies not to utilize these. i would like to know whether some of the bigger companies are using them. does anybody know? mr. medros: i don't think tripadvisor seize any evidence one way or the other. distortnot want to consumer opinions by getting negative with -- negative reviews withheld in favor of positive reviews. sen. schatz: let me move on to the way trip advisor works. you have a pop-up screen that warns consumers if there is a particular hotel or travel company that has a non-disparagement clause. is that correct? mr. medros: that is correct. we put a red badge on the property warning consumers so
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they can make an informed decision on whether to stay there. sen. schatz: how do you figure out if they have a non-disparagement clause? is that based on consumer complaints or do you have a process internally? i would imagine it is a resource question for you to have a team of lawyers scrubbing over all the individual contracts. is it just based if someone pops up? based ons: it is consumers reporting it to us and us investigated that is why we need this legislation. we only see a small percentage of these contracts that may exist. some consumers may not notice the clause or maybe too fearful to report it. widespread banishment of these types of clauses is critical. sen. schatz: that is the most important point with respect to whether or not there is a private sector and your net-based dilution. it seems to me that there is not
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without a statute. you just cannot make yelp or tripadvisor or anyone else responsible for reviewing legal language in any company that may or may not be mentioned on your platform. mr. medros: i would wholeheartedly agree. mole. a game of whack-a- sen. schatz: thank you. sen. thune: senator daines. daitor gains: this is a -- nes: this is a really intriguing subject today. tois an overused cliché suggest that the customer is in charge. we all know that now., feedback is a i think it is insecure companies , like bullies on a playground are insecure, that have these
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anti-disparagement clauses. welcome to the free market and the internet. let's compete and let the consumer have their voice. frankly, it is condescending to thatmers to suggest consumers can see that the folks are a bit unhinged. some companies posting false claims to prop it up and competitors posting claims to disparage. having said that, i can tell you from montana's economy, tourism is one of our largest businesses. it is $4 billion. 11 million people visit our state and they are going online and booking trips. they are relying on online reviews. i spoke to a small business owner a couple weeks ago. i said, how was your summer? he said, best summer ever. he said, -- i said, why?
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he said, online reviews. people went and they found us. he has a 4.5 out of five rating on yelp. just a little hometown advertisement there. curious about how we ought to approach safe online reviews. fake online reviews. whether it is businesses paying for positive reviews or competitors writing. negative reviews. -- false negative reviews. i am curious about policies or procedures that can be used to combat fake online reviews. your first point about consumers becoming more sophisticated, in some ways, analyzes them.
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consumers are becoming more sophisticated. people know there are bad and good reviews. as people get more comfortable with the internet economy, they will be able to sit through that. in terms of what companies are doing, there are companies like yelp and others who have sophisticated algorithms. they have employed software engineers and data scientist to be able to use technology to flag these reviews that are at a high risk of being false and taking them off automatically. there are companies and technology now that companies are employing where those reviews do not get posted. i would like to first point out that, no matter how big the problem is fake reviews,-- with fake it is a legitimate concern and i want to stress how important this bill is. with fake reviews, consumer
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reviews are still a relatively new phenomenon. we can take them back maybe as far as 20 years ago. modern consumer review economy is maybe a dozen years old. if you think about it in those terms, we are seeing the evolution of review sites and developing better and more aggressive techniques for managing consumer reviews. in the end, they are the solution. we need to have trustworthy think that wei are seeing improvement on that front every day. sen. daines: this is incredible, valuable data. this is what you're used to pay a lot of money to focus groups for and now you get it real-time, unedited. the disparagement clauses, we based oneal with that a lot of stories and miss palmer's story as well. but this is a gift if you want to become a world-class company. embrace it.
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stories in we see places that consumers would not have thought of traveling to or would not have had the courage to travel to create a -- pre-internet. the best businesses leverage tripadvisor to use it as a free marketing tool and encourage people to share their opinions and set their expectations of what that trip is going to be like. so that people feel safe to venture to some of these more remote places that are amazing experiences all around the world. we hear the story over and over again from small business owners. what makes it possible is the scale of our platforms, the free ability to share those opinions without being sued or bullied by owners who may not like every piece of feedback. and the best businesses take that feedback on an ongoing basis and make their business better. they improve their service.
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they change things about their property. they remodel. they use that as a feedback tool that otherwise, companies would have paid millions of dollars for in the past. sen. daines: thank you. sen. thune: in our line of work, we get plenty of feedback. sen. daines: we do. i am going to embrace the idea that it is a gift. sen. daines: i will stay off of your facebook if you stay off of mine. sen. thune: thank you. the senator from minnesota and noted author. senator: i was thinking the same thing when he said it was a gift. i was thinking of some of the hilarious tweets and facebook votes -- posts that i get. this is a very important bill and subject and i want to thank schatzirman and senator
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for the work they have done on this. i would start with you, ms. palmer. your experience sounds like quite an ordeal. i read about it. the scale of the harm by what was a $20 purchase is astounding. your persistence at finding a solution is extraordinary. in response to their initial demand to take down the review before they made a negative reports to the credit agency, how much time would you estimate a u.n. your husband sent researching and responding to the demands? ms. palmer: it was several hours. eport.comsen ripoffr seemingly at random. to find out that they do not allow reviews to come down -- it took me several hours to find out what options i had. to the point of e-mailing them and saying, here is my problem. i am now being bullied. what options do i have?
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they had to respond to me and spell out, this is in our policy. it is a little convoluted, but we do not allow you to take them down. here is why. we want to make sure that people are free to post a review without feeling bullied or like they have -- they can take it down without allowing businesses to remove it. it was several hours. sen. klobuchar: mr. rheingold, this is one of those softball weston's, but do you think most consumers are likely to be as in theent as ms. palmer face of companies seeking non-disparagement clauses and what will happen if they are not as persistent? mr. rheingold: her story is remarkable. i wish all consumers acted like she did. most people give up. consumers are going to do whatever they can to move on with their lives and try to get the review removed.
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seek legal help and could not get it. they would just walk away from the problem. palmer,, unlike ms. stop posting reviews. i think that would have a chilling effect on most consumers from ever doing it again. i think ms. palmer is unique and we should clone her in terms of her behavior. sen. klobuchar: very good. thank you. i once had a similar thing with a bill and found some people that pursued things like this palmer did.- ms. it was a lutheran minister and a math teacher had gone to see these tiny little charges that added up over time. you are in good company i guess. i understand the concerns of small business owners that worry that on there or false reviews can hurt their livelihood. atkinson, who. cited a study showing that one star increase in a restaurant
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rating on yelp can lead to a 5% increase on revenue? on it, aless rosy spin one-star decrease can have a serious consequence on its bottom line. what tools do you think small business owners have two address unfair or false reviews? all, innson: first of the lion's share of those ratings, they are accurate reviews. the most important thing for a restaurant to do would be to improve their service and the quality of their food. said, a couple of people that is valuable information for a company to be able to continuously improve their service. a lot of these platforms, including yelp and tripadvisor, have mechanisms in place where you can challenge reviews that are bad. not in the sense of taking someone to court, but saying it is a bad review. companies can and do post and say, we do not agree with this
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review and here is why. or we do agree with this and here is why we are sorry and here is how we are going to fix it. i was looking at some last night, not in preparation for this hearing, but i would like to say it was, and i had seen those. mr. medros, what incentive do companies have to limit false reviews? mr. medros: we give the consumers the ability to share all of their experiences. ultimately, when we hear about limits to free speech, we want to warn and penalize businesses that try to neutralize that speech. sen. klobuchar: professor goldman, does your research bear out what he just talked about? mr. goldman: which aspect? sen. klobuchar: he talked about the fact that there are incentives for companies to limit unfair and false reviews. mr. goldman: i am sorry. you are talking about the review
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sites. , they are thees mechanism for providing that feedback to the marketplace. can be reputable and persuasive. is competition among review sites to convince their consumers that they are trustworthy. that competition is a great incentive to fight against fake reviews. sen. klobuchar: thank you very much to all of you. sen. thune: senator blumenthal. : i want tomenthal thank the chairman for not only having this hearing, but lending his support to the idea of protecting consumers about this new, ingenious wrinkle in the -- old practice of varying traps in thes and fine print of contracts. it gives new meaning to hidden tricks and traps and discourages
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consumers from informing and warning other potential consumers about the downsides of particular experiences or products. these sorts of sneaky sentences a paragraphs essentially gag consumer from giving services or goods a negative review when they have paid for it, they are disappointed in it, and they want to warn other consumers. usually, they are buried in the fine print. a sales contract or an invoice. they are a one-way ratchet. they prohibit negative reviews but not positive ones. standpoint,omic they distort the free market and they kill speech. i am a supporter of the bipartisan bill that has been announced. i want to thank him for engaging on me -- with me on this build
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the -- on this bill. my initial objection included a relating to state attorney general enforcement. that was concerning to me as a former attorney general. i believe that the language should be removed when we moved to the markup. i am proud to add my support as a cosponsor of this bill. have a viableral and vigorous role in protecting consumers and adding to the resources and intellectual show i appreciate the chairman's understanding and never got -- in that regard. some would raise the question, why do we need a federal law? the answer is that these standardized anti-defamation provisions may be considered common law, but
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there are a number of them throughout the country and they confuse consumers because consumers have to go to different state laws to know whether or not they are valid in one state or another state. say thatike to simply making these provisions a violation of the ftc act is exactly the right thing to do, prohibiting their use and the chilling effect that they create in the first place promotes the free market nationally. services areducts, sold and marketed nationally. the information should be available nationally without the impediment of a patchwork of different state laws. so i would like to ask mr. medros, can you
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talk about the virtue of a federal solution here? let's say a connecticut consumer gets a hotel through a website located in north dakota for a hotel in utah. should a consumer have to research the state laws in three different jurisdictions before he can exercise his free-speech right? mr. medros: we would thing missing palmer's case is a great case is a. palmer's great example of how consumers do not understand these clauses or get any value from them. they certainly hurt consumers. they probably hurt other businesses that play by the rules and depressed the overall market. mr. goldman: to the extent that we believe that the clauses might already be illegal, that might depend on things like state interpretations or public policy.
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there are significant state and regional variations on those doctrines. a federal standard would clean up any ambiguity. sen. blumenthal: my time has expired. this subject is one that is extremely important and i thank you all for being here today. sen. thune: thank you. senator markey. senator: thank you for convening in today's hearing. online review sites provide customers with an important and ,pen forum to provide feedback to share experiences and hold businesses accountable. some of these websites allow customers to compare products and prices amongst many service providers, helping consumers select the best product at the most affordable price. last week, i visited tripadvisor's headquarters and saw firsthand their wonderful staff working on key innovations and interfaces to ensure consumers have unfettered access
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to online reviews and travel prices. i am proud that one of the largest travel site in the world is based in massachusetts and i am happy to see tripadvisor testifying here today. it has come to my attention that some airlines made the restrict may be restricting access to schedules, making it difficult for sites like tripadvisor. if they cannot view all of the schedules on one website, the consumer might be unable to identify the best travel prices. as a result, the consumer might pay too much for her flight. how are consumers harmed when airlines do not provide their information to travel sites? are harmed consumers any time you reduce transparency. in this case, it would be pricing and availability. given the consolidation in the
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airline industry, particularly in the united states, that limited information, limited visibility around real pricing, availability, fees, does not help consumers plan trips and does not help the economy grow. sen. markey: our airlines providing travel sites like tripadvisor from accessing ticket fees and flight schedules? mr. medros: yes. increasingly, airlines are attempting to withhold that information and not make it freely available for consumers to compare and shop. should airlines provide travel sites with ancillary fee information as on baggage or advanced seat selection fees? should that be made available so the consumer can see what the total charges going to be to fly?
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mr. medros: absolutely. i cannot think of any consumer who would not want to know what to expect in terms of pricing. sen. markey: so we have gag clauses, provisions buried in contracts that encourage -- discourage consumers from posting negative reviews online, which ultimately wind up hurting consumers and businesses alike. i am concerned about these americanste -- sp ite americans' freedom to post reviews. penalizingreat of customers for poaching negative reviews -- posting negative reviews might discourage some customers from posting at all. other customers might not have the information needed to make informed purchasing decisions. how can gag clauses also heard businesses -- hurt businesses?
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mr. medros: by reducing the amount of feedback that they get and distorting the marketplace for other businesses in that market. , whatarkey: mr. rheingold other attacks on consumer rights are some other businesses including in terms of service? this is the end of the line. we have seen it going on for years and years. clauses that restrict people's ability to get to court. nowtration clauses have grown to be widespread across every single industry you can imagine. people have complaints and cannot get into our public system of justice. it is a real concern. is naturallyspeak following the right to go to court. palmer has: ms. highlighted one of the more examples.
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mr. medros, can you provide other examples? mr. medros: absolutely. we have seen similar gag clauses with fines upwards of $5 million and daily fines of $50,000 to consumers until the reviews are removed. we heard of cases from consumers who have contacted us to remove a review because of the threat of a lawsuit or further action against that individual. in all of these cases, the consumer stands by their content, but is choosing to remove their content and squelch their own speech so as not to end up in a case like this palmer, -- ms. palmer, with a lien against them. sen. thune: a couple of quick questions and we will close this out. industry particular where consumer gag clauses are especially pervasive?
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mr. goldman: i mentioned in my initial testimony about the medical and health care industry , where the entire industry was encouraged to adopt these restrictions. many participants did so. i think that that industry has moved on. i would like to that they have recognized their ways. i think it is an illustration of how the clauses can sweep an entire industry once a few people try it. other businesses say, that sounds like a good idea. that gives me the control over my reputation that i want. if i do not do it, my competitors will have the good reviews and i will have the good and bad in public. i did mention in my opening remarks that i think we will see other industries where the clauses will sweep that are
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driven by small businesses and professional service providers. lawyers, doctors, accountants, etc. as well as places like hotels and bed and breakfasts, fertile grounds for these kind of clauses. mr. atkinson: i would agree with that. certainly health care, hospitality, personal services, areas where you are dealing individually with the actual service provider. i would address this to everyone on the panel. the consumer review freedom act. do you believe that it strikes an appropriate balance in terms of consumer rights versus the ability of businesses to protect their reputations? businesses have a
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wide range of tools to protect their reputation. i cannot come up with a single circumstance where it is legitimate to tokens was they cannot share their honest, truthful feedback. in my mind, the particular question that the bill addresses, there is no balance that would be appropriate to be worried about. in my mind, it is a review of the business-consumer relationship to tell consumers we want your money, but we do not want you talking about it. mr. atkinson: i would agree. i think it is a strong and important bill. now that the one provision is being stripped, we are happy to support it. i would also like to point out that, as consumers, we do not have a lot of power when it comes to trying to defend ourselves against a business that would seek to have us remove a review or come after
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us. they have a lot more money, a lot more lawyers on staff than we could ever choose to get. knowing that there is a law in place that says you guys cannot come after us just because we told the truth is extremely empowering to consumers. i believe it will go a long way. mr. atkinson: i agree with mr. goldman. what your legislation is trying to prevent or things that are simply unfair or harmful to consumers. as we have said, consumers have many other options that this bill would not take away. mr. medros: not only are consumers harmed, but other businesses that play by the rules and want a level playing field are also armed iv existence of gag clauses that distort the market. sen. thune: thank you all very much. thank you for your testimony and your responses to our questions.
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ms. palmer, thank you for your inspirational stories, an example that one person can make a difference. i think you are sort of the reason why this issue has taken on a life of its own and certainly why we are here today. thank you to all of the panelists. we spent a lot of time on this committee, the congress committee, studying these issues related to the internet. how do we keep the internet ecosystem protected? how do we look at the potential that it offers? you look at the digital economy and how powerful it is. how many people are using it to do business, to purchase products and services. obviously, what is happening out there in terms of these various practices seems to completely contradict what we are trying to accomplish in terms of creating more freedom and protecting consumers.
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certainly empowering people as they use this powerful tool in a way that can enhance not only their lives, but those around them as well. andppreciate your insights thank you again for making the time to be here today. we are going to try our best as we move forward. we have a markup scheduled here in a couple of weeks. we will hopefully try to move this bill to the senate floor and try to get some action on it. we have a companion bill in the house and it would be nice to see something that we can put on to addressnt's desk an issue that is becoming increasingly important in our digital economy. the hearing record will remain open for two weeks. senators will be asked to submit any additional questions for the record. on receipt, we asked the witnesses to submit written answers to the committee as soon as possible. people being here today. this hearing is adjourned. -- thank you all for being here today. this hearing is adjourned.
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[captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit]
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>> next on c-span, janet yellen discusses the economy at a hearing of the house financial services committee. and presidential candidate marco rubio campaign's in manchester, new hampshire. tomorrow on c-span3, freshman senator ben sasse testifies about the closing of health insurance co-ops under the affordable care act. we have live coverage at tenant a.m. eastern time. 10:00 p.m. eastern time. federal reserve chairman janet yellen told a house committee that the u.s. economy is performing well and a rate increase could happen in december. she also talked about the fed's regulatory powers under the dodd frank act. this hearing is three hours.
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>> the committee will come to order. without objection, the chair is authorized to declare recessed at any time. testimony from the federal reserve's supervision and regulation of the financial system. threerecognize myself for minutes to give an opening statement. the dodd frank act requires the federal reserve vice chair to testify before our committee twice a year regarding the supervision and regulation of financial institutions. passage ofafter the dodd frank, no such person exists. president obama has been unwilling or unable to follow the law and appoint a vice chair. we can no longer wait for the president to do his job so that we can be allowed to do ours. thus, chair yellen appears
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before us today in substitution. dodd frank rewarded the federal reserve with the vast, new, sweeping regulatory powers despite its contributions to the last financial what is clear is despite the largest monetary stimulus in our nation's history, middle income are not getting ahead
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and the poor and middle class are falling farther behind. the gdp is coming in at 1.5%. every man, woman, and child is thousands of dollars poorer than they should be. millions could be fully employed, who are not. millions of dollars of capital remain sidelined, due to a regulatory tsunami, much of it dictated by dodd frank. serious questions must be asked. why isn't the fed subject to costs? to findhe fed yet any connections in the drop of bond market liquidity? why do regulators punish banks
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for failing to meet standards that are never stated either in advance or after the fact? the fed has a lack of transparency with its new authority under dodd frank. if we are not careful, our central bankers will become our central planners. the house will soon have the opportunity to reform the fed and make it more transparent with the federal oversight reform. yield five minutes to the ranking member for an opening statement. >> thank you, mr. chairman. and thank you to federal reserve chair yellen. the 2008 financial crisis
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inflicted staggering damage to our economy. unemployment tops 10%. home closures is placed millions of families. entire industries are on the brink of collapse. congress responded by passing the most comprehensive overhaul of our financial system since the great depression, the dodd frank wall street reform and the consumer protection act. the act interested significant responsibility to the federal reserve and directed them to improve its supervisory program, so another crisis of such scope will never happen again. recognizing that the federal reserve failed to apply appropriate standards to large banks, congress erected the fed it to impose enhanced to ensure that no large bank or group of banks,
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could again endanger our economy. i am eager to hear from chair yellen on the progress of these reforms. along with a description of how the fed is using the flexibility embedded within dodd frank. permittedpecifically the fed to differentiate among companies on an individual basis, or by category. likewise, dodd frank provided the fed with new responsibility to collectively regulate the such ases of entities insurance companies, aig. i very much would like to hear from chair yellen about how the
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fed has bolstered its expertise. i am expressing my concern. the legislation would like the -- to other legislation would undermine the financial stability of oversight cancels. the ability to identify the gaps. finally, as we just surpassed the five-year anniversary of dodd frank, i think it is important to remind the
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committee and public to be ever vigilant of the threat of another crisis. we must guard against complacency. among the law enforcement, we must hold institutions and individuals accountable. this is something that we did not adequately do. us to congress must be mindful of the attempts to defund dodd frank. the american economy has made substantial progress, but that will be threatened if we do not protect these reforms both in statute and practice. thank you, mr. chairman. a yield back. we recognize the gentleman from texas for two minutes. you, mr. chairman. today marks the first time since the passage of dodd frank that th someone from the federal
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reserve has testified. testified was not confirmed for that position. i remain baffled that the president has failed to put forth a single name to serve in this important role. governor,l reserve who serves as the chairman on the internal commission, can already exercise these actoorities in a defec authority. over the past few years we have seen significant rulemaking, driven in large part by the federal reserve that has significantly altered the rank capital structures. testing, arguably the most important process the bank must do, remains completely
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opaque. to gather these important regulatory operations of the federal reserve to serve much of our needed attention. today, i hope chair yellen will address some of the most t integral points. i hope to gain a better understanding of how she sees each capital working together. we have already seen unintended consequences into the bond market. i look forward to her thoughts c-car moremake see transparent.
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thank you, mr. chairman. i look forward to this important hearing. >> we look forward to the testimony of the honorable janet yellen. she has testified before this committee. without objection, chair gallon, written -- chair yell and your written statement will be made part of the written record. think you need to hit the microphone there. yellen: i appreciate the opportunity to testify on the federal reserve regulation. one of our most fundamental goals is to promote a financial system that is strong, resilient and able to serve a healthy and growing economy. we work to assure the safety and
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soundness of the firm's we supervise and also to make sure they apply to applicable consumer protection laws so that withmay, even when faced financial conditions that are stressful, continued serving customers, consumers, and communities. weould like to discuss how have transformed our regulatory and supervisory approach in the wake of the financial crisis. he for the crisis, our primary goal was to ensure the safety and soundness of individual financial institutions. a key shortcoming of that approach is that we did not focus sufficiently on shared reform abilities across firms. consequences of the distress. failureall of 2008, the
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or near failure, of several of these firms, many of which we did not supervise at the time, sparked the panic that engulfed the financial system and much of the economy. today, we aim to regulate the supervised financial firms in a manner that promotes the stability of the financial stump as a whole. -- financial system as a whole. as my written testimony describes, we have introduced a series of requirements. in addition, we now supervise financial institutions on a more coordinated, forward-looking basis. at the same time, we have been careful to make more measured changes in our approach to
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regulating and supervising firms and the other end of the spectrum. we are committed to ensuring that the supervision of smaller institutions is tailored to the business model and activities of individual and to editions. -- individual institutions. our approach aims to target risk areasto hire ch and two in short banks maintain risk management capabilities. community banks many important roles and provide economic support across the country. the supervision of community banks must be balanced and measured. we have adopted many reforms since the crisis. proposedss the risks
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by large institutions anin two ways. reducerms the possibility -- the reforms reduce the probability that the large banks will fall. we recognize that we cannot eliminate the possibility of a large institution's failure. second aim has been to limit the systemic damage that would result if a large institution were to fail. my written testimony provides more details that i wish to highlight for you. we have two examples at how we are addressing this too big to fail challenge.
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a adopted resolution plan ruled that requires large banking organizations to show how they could be resolved in a orderly manner. a bank just last week proposed a rule. with the new requirements, its losses would have wiped out a firm's capital. long-term amounts of debt would provide a mechanism for absorbing losses and withoutlizing the firm generating contagion across the financial system and damaging the economy. theddition to strengthening most large and complex institution, we have transformed our supervision of these firms.
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our work is more forward looking and multi-disciplinary, drawing on a wide range of staff expertise. we put this new approach into operation with the creation of a large institution supervision coordinating committee, which is charged with the supervision of impose elevated risk. we have annual horizontal programs that examine the same firms at the same time on the same set of issues, in order to promote the better monitoring of trends and consistency of assessments. example, our comprehensive capital analysis and review ensures that large u.s. bank holding companies have rigorous forward-looking capital plan
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processes and have sufficient levels of capital to operate through times of stress. an increase of almost $500 billion has been found. a new regulatory and supervisory approach are aimed at helping in remain more work needs to be done, but i hope you will take away from my testimony just how much has changed. our supervisory approach is more comprehensive and worked looking, while also tailored to fit the level of oversight to the scope of the institution and the risks it poses. the federal reserve is committed to remaining vigilant as regulator and a supervisor of the financial is the tunisians that serve our economy -- the financial institutions that
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serve our economy. thank you. >> chair yellen, the first couple of questions i have deal with the concerns. hasn't the fed crossed the line from being regulator to manager? we have had a number of individuals come to our committee to tell us that fed officials have regularly attended corporate board systemicallyhe important financial institutions under the fed's purview. is that true? chair yellen: i am not sure if that is true. >> you were unaware of any fed officials attending board meetings? chair yellen: it is conceivable that that might have occurred. i am not saying that it did not occur. >> is it did occur, what legal authority would you site for having employees of the fed invite themselves into corporate
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boardrooms? chair yellen: i don't know what the circumstances are in question, but i can for example tell give that when i was president of the san francisco fed that i occasionally would attend a portion of a board meeting of one of the firms we supervised to make a presentation to the board about our supervisory findings and the emphasis -- >> but you were unaware of any fed employees attending these board meetings? chair yellen: i really don't have the details about any officials. >> we would appreciate it if you could look into this and get back to the committee on this matter. we have also heard from individuals with respect to the stress test, with which we have had both public dialogue on and
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private conversations. many of us on this committee consider that to be a rather opaque process. and so, this committee has a number of questions. a would also have number of employees who have been on the receiving end of these stress tests. we have been informed by numerous individuals that they have been told by the fed not to speak to members in congress about the stress test. do you have any knowledge of this? chair yellen: i have no knowledge of that. >> is it the policy of the fed to instruct members of banks subject to the stress test not to speak to members of congress. chair yellen: i strongly doubt that that is our policy. >> you are unaware of that being a policy. would you object to these people speaking to members of
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congress? private citizens can interact with members of congress. >> are you willing to direct your employees to ensure that dialogue can take place? chair yellen: i will certainly look into that. >> with respect to the stress test and again, great concern with how opaque and nontransparent these matters are, i guess the first question is, we don't doubt that you have regulatorys, smart, employees that handle these matters, but we don't know much about this. how are market participants supposed to be convinced that we have less systemic risk when they have no insight into these tests. members of congress have little to no insight.
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however as opposed supposed to reaffirm market confidence? deal yellen: we do a great in my opinion, to explain the methodologies that we employee. overviews ofshed the methodologies that we use. we update those every year. they include detailed information about the scenarios, the analytic framework, that we use and information on the models. ofdetail may be in the eye the beholder because members of congress still don't understand this. in our dialogue with banking organizations, they still don't understand either. i have one last question. the stress tests have become your main supervisory tool for the large banks. my concern is, if you have one youralized view of risk and
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are imposing that view on our large banking organizations, to some extent, isn't that exactly bozzle 2 did. how can the lower systemic risk if we only have one centralized view of risk and it may be wrong? i wouldllen: i guess dispute the idea that we have one centralized view of risk. the purpose of this exercise is to help the firm's. m to developm to their own capability. it helps them to develop a robust capital planning process, which is what we evaluate in our exercise. conclude thecould same thing, but we have
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insufficient information about your test. the chair now recognizes the ranking member for five minutes. >> i am pleased to see you chair yellen. unlike the chairman, along with many of my colleagues, we have heard from regional banks about the comprehensive capital analysis and review of stress have complained that they are not sufficiently calibrated to the unique profile of large bank holding companies that focus on traditional banking activities. i have no indication that they tove been told not t talk to us. they talk to us plenty.
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can you discuss why hr1309, a bill debated by this committee yesterday which addresses this topic, would be severely damaging to the fed's ability to respond to systemic risk on a comprehensive basis? will the federal reserve commit usingng further tailoring the existing authority provided by section 165 of the dodd frank act? your microphone. chair yellen: i am concerned the process that would require, as i understand 1309, would require the board to
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use a statutorily set of factors or make findings based on factors to decide whether or not to check firms to higher standards. i would see such a process as inhibiting our ability to take necessary supervisory actions to address a firm's risk. we do do a great deal of tailoring of our supervisory approach to make sure that it is appropriate to the size, riskexity, and systemic proposed by a particular firm. we are looking at further ways in which we can tailor our supervisory approach. particularly, the process we were discussing. we have ideas about how we might to apply, particularly
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to smaller firms. we have indicated that there are some constraints on our ability to tailor our supervisory firms,h for the smaller subject to the 165 requirements. in particular dodd frank requires that we administer the stress test and receive plans.ion our experience and thus far is that the safety and soundness value of those requirements or the smaller of those firms probably is not sufficient to justify the cost imposed on them. and if so, we would value for the firms on the smaller end of the spectrum, being able to relieve them of those requirements.
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i do want to make clear that we do tailor our supervisory approach according to the complexity of the firm. >> i am so pleased to hear that because what we heard constantly yesterday was that you do not. somehow, they kept talking about one size fits. using your not tailoring authority. so thank you for explaining that to us. we are absolutely supportive of your being able to do that. we think it makes good sense. perhaps, what we needed to do is work with your staff a little bit more to understand what ever restraints there are involved in authorityand whatever and flexibility you have. thank you for clearing that up. you know you have the authority. you understand that dodd frank
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gives it to you. you use it. the welcome any questions from this committee about how you use it and how you can't. the yield back. recognizes thew gentleman from texas. >> thank you, mr. chairman. chair yellen, it seems like there are many different regulations all trying to drive at the same thing. for an outsider, it is hard to see how they are for donated. weone broad area of capital, the annual stress test on ccar. can you walk me through how all of these capital rules could to get there and what each is trying to address? certainly.n:
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we do see these rules as fitting together. most of the requirements that you just mentioned are imposed g68, larger u.s. firms. given the risks that the failure of one of these firms would impose on the financial system, it is important that they be subject to more stringent capital requirements, liquidity requirements, and ability to stressed event. we think the various things that you mentioned coordinate with one another. in particular, we have put in place so-called surcharges that impose additional high quality capital standards.
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ofis based on our estimate the impact that the failure of one of those firms will have on the overall financial system. ratiopplementary leverage is a backup tool that works in a coordinated way. we see those as working together. tests we impose our very robust. they have a forward-looking approach for assessing whether or not firms could survive a very adverse stress scenario. and could they continue to serve the credit needs of the u.s. economy? these are coordinated approaches, these requirements that you mentioned, they are the
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requirements we think are necessary so that one of these firms were to fail, in spite of all of the resilience that we expect of it, that it would be possible, as dodd frank requires, to resolve that firm under bankruptcy or under orderly liquidation. >> at what point does the ccar process override all of the other requirements? compliance with these other requirements, but they could fail there ccar. ccar driving in the regulatory process? or are these standards you are putting in place driving the regulatory process? chair yellen: i believe they are complementary. i believe that ccar is a
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valuable process because what we expect firms to do is not simply to be able to meet some standard, a minimum capital standard. what we want them to have in place is the internal ability to analyze the risks that face the unique organization and have a rigorous capital planning process that that firm is using to make sure that, whatever our rules may say, we want that for to make sure they have adequate capital to survive a severe stress. process areand ccar looking to make sure they have governance and risk management that are and plays designed for that organization, and for the unique risk profiles that they are manageing their
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risks in the way we think a systemic firm should be able to do. >> each entity is different. you are imposing any of these standards on all of them, i assume on a consistent basis. ccar or stress one business may go under is different from another. ccar? big test here the chair yellen: we believe it is a built in system. we believe they work together in a coordinated fashion. >> the time for the gentleman has expired. the chair recognizes the gentlelady from new york. chair yellen, i will get to questions about regulation in a moment. first, i would like to ask one question on monetary policy. when you testified in july, you said in response to one of my questions that's one of the
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advantages to raising rates a little earlier is that, and i quote, we might have a more gradual path of rate increases, end quote. one of the down sides is it could end up hurting the fragile economic recovery. boehner recently said raising rates to early could end up prematurely taking up its port. it has been so critical to the economy's vitality. do you think the risk of raising rates and december, before inflation reaches the fed's 2% target, outweighs the benefits? chair yellen: what me say that i see the u.s. economy as performing well.
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domestic spending has been growing at a solid pace. our trade performance net exports is soft, but the committee judged in october that some of the downside risks had diminished relating to global economic and financial developments. i see under utilization of labor resources as having diminished significantly since earlier in the year. we have, it recently seen some slowdown in the pace of job gains recently. ith that backdrop in mind and inflation, as you mentioned running significantly below our 2% objective, never the less, the committee judges that an important reason for that relates to the climbs in
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energy prices and the prices of an on energy imports. as those matters stabilize, inflation will move back up to our 2% target. with that economic backdrop in mind, the committee indicated in our most recent statement that we thought it could be appropriate to adjust rates next. no decision at all has been made on that. what it will depend on is the committee's assessment of the economic outlook at the time. informedssment will be by all of the data that we have received between now and then. committee has been ing is that the economy will continue to grow at a pace that is sufficient to
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generate further improvements in the labor market and to return inflation to our 2% target over the medium term. if the incoming information supports that expectation, our statement indicates that december would be a possibility. importantly, we have made no decision about it. it is, you asked about the timing of such a move. the committee does feel that fashion, iftimely the data and the outlook justify enth a move, is a prud 'llng to do because we b be able to move at a more gradual pace. we expect the economy will it evolved in such a way that we can move at a gradual pace and so, wese, after we do
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will be watching very carefully, whether our expectations are realized. mentions thatgue inflation is low, if we were to move in december, it would be based on an expectation that i believe is justified. with an improving labor market and transitory factors fading, inflation will move up to 2%. if we were to move, we would need to verify over time that expectation was being realized and not just policy of appropriately. i know there is a great deal of focus on the initial move. it has been a long time that interest rates have been at zero. markets in the public should be thinking about the entire path of policy rates over time and the committee's expectation is
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that that will be a very gradual path and will depend very much on the actual performance of the economy. >> the time for the gentlelady has expired. the chair recognizes the gentleman. day aboutd the other all of the benefits that came out of dodd frank and all of the work the fed is doing overall. i want to look a little deeper on that, individually and emotive late. passed acongress regulatory improvement act. that applies to all federal fed,ies, including the which says, you shall consider the causes and burdens that will be placed on institutions. you have to look at the cost of regulations and also, the benefits. we do hear about the benefits.
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i ask is this question of the governor. individualne those cost of benefit analysis? i did not get a clear answer from him. very briefly in a sentence, do you believe that the development act applies to the fed? as such, you are required to do a basic cost-benefit analysis each time you do a regulation. that is a yes or no i guess. we follow rules of the administrative procedures act and always request public comment on -- >> so you do an actual analysis. did you do an actual cost benefit analysis? chair yellen: we did do an actual cost than if it analysis. >> do we have a copy on that? chair yellen: it is described in the proposal we issued last week. in some cases, we have done a
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cost-benefit analysis. >> in other cases you do not? chair yellen: very often what we are doing is putting into effect or rule, what congress has directed us to implement changes. right, but you are doing to the rule and under lockdown rule --under the regal act does not set you can pick or choose as to when you can do a cost-benefit analysis. it says you shall, not made y, consider. it sounds like you are doing it in some cases. let me move on to the broader issue.
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i asked your predecessor, has anyone done an analysis to all analyses fortive dodd frank? his answer was no. i will throw the question out to you as well. everybody else says you have not done it. have you done a cumulative cost-benefit analysis on the regulations? answerellen: i think the for the kind of analysis you have in mind is probably no, but we are carefully monitoring the effects of these rules. >> i appreciate your candor. if you have not done a cost-benefit analysis ly, there is
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nothing in this report that the negative effect on the economy. there are about one dozen different factors that he came up with. and he is right. the regulatory burdens are not listed as a factor. now i understand why. thatse you just told me they never did a cost-benefit analysis cumulatively. ,f you have not looked at it then of course it will not be in your summary as one of the impacts. because you are not even studying it. this report is a little useless, isn't it? if you are not going to study the problem, you don't know what it is. chair yellen: it is important to take a step back and realize that we lived through a devastating financial crisis. to cost of that crisis households, businesses, to the u.s. economy was enormous. --do have a summary of the
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chair yellen: we have done basic analysis when we put in the capital rules and liquidity requirements. >> i appreciate that, but you just told us that you have not done an individual analysis and you have not done a cumulative analysis. if you have not done the study, then your analysis is basically useless. the time for the gentleman has expired. we now recognize mr. sherman, from california. >> let me give you advice in the other direction. there are a host of titles and provisions in dodd frank. the fact that they come to you in a political package called dodd frank or in another political package is of interest
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to politicians. just because a provision was in dodd frank does not link it to another provision or de-link it to another process passed later. i would hope you look functionally because your purpose is to give us advice. have you improved depository institution regulation? leave it to the politicians to second-guess bills named for politicians. we do get one benefit from the fact that the vice chair for supervision has yet to take office. we get to spend another day with you. this is a great personal joy to me. from your standpoint, you get to spend another day with our chairman, who is the most prominent american who does not use point tomation spell his name.
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you came here and july and i spent my five minutes laying out reasons why you should not then increase interest rates. my most gullible friends believed i was successful and have said, that is why interest rates have not gone up. but i want to keep doing it. as i argued then back in the summer, god's plan is not for things to rise in the autumn. as a matter of fact, that is why we call it "fall." nor is it his plan to have things rise in the winter. in plan is that things rise the spring. if you want to be good with the almighty, you might want to delay until may. many economists say we should not move forward now. the managing director of the imf
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has been candid. we have a that growth report. you are aware of it, but you probably won't estimated as highly as i will because of my occupation. don't underestimate the ability of politicians in europe and the united states to screw things up. psychological interest to retirees with nominal interest rates of 5% so they can live on their retirement savings without a nominal invasion of principal. that is not in the gdp statistics. they are not going to psychologists and spending money. it does enhance. finally, as i pointed out to you and i do want to talk to you privately about this, there is hurt thelion change to
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economy. and decidetoo soon that you did, you put yourself in a position where you have a zigzag policy and will face criticism. second, if you then want to go and the other direction, you only have a quarter point to play with. if you hit the break too soon, you don't have any gas. with that in mind, i am concerned about the effect raising interest rates would have on the real estate recovery and i would ask you what you would think the impact would be of raising interest rates on the housing recovery and what we squeeze credit worthy borrowers out of the housing market? you have made a
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large number of very good points and indicated many relevant considerations that the committee is trying to weigh and balance. with respect to the housing market, of course, the level of rates is relevant to housing. we are very aware of the sharp rise in mortgage rates could have a negative affect on housing. we do however, have a recovering economy where employment is going up, income is going up, households are in better shape to form households. whether it is, they are moving into rental properties, the millennials seem to have a later preference for
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house purposes. we do envision gradual recovery in the housing sector. let me come back to the point i made earlier. the committee anticipates a very gradual increase in interest rates. we are not envisioning that when we begin to raise rates we are going to be looking at a very ratespass of interest that will cause the kind of harm you are wearing about for the housing sector. that whole path matters and it is a gradual path. >> the time has expired and the chair recognizes the gentleman from missouri. >> it is always interesting to listen to the gentleman from california. he is a very bright guy with interesting correlations, that i have never heard of god's plan for the seasons correlated to the fed raising interest rates.
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this morning i want to talk a little bit about the designation of insurers. we are concerned that this has become the rubberstamp for the financial board. the extensive analysis from the ispanies, other than what publicly available. if you did not receive information from companies, how did you come to the conclusion that they posed a risk to the global system? chair yellen: in every case there was an extremely detailed evaluation that was done. the summary of the evaluation is publicly available. it didn't in default interaction with the company. involve interaction
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with the company. the fas the analysis of soc. had very detailed assessments of what the consequence would be for the u.s. financial system. that is not the answer we get from the company's side of this. did you solicit information from them? chair yellen: we have detailed interactions with the companies. ,art of the designation process there have been detailed interactions with the companies. they have provided information. they have at every opportunity to weigh in and offer their views. >> it is interesting though,
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that one individual who has insurance background is the one who said, no. yet they went ahead and did it. can you enlighten us as to why that occurred? we have a great deal of expertise in insurance among the staff who look at this. wet i can assure you of is have very detailed analysis done. it is specific analysis with the failure ins of the mind. firms have the opportunity to weigh in. respect, i am not sure they have plenty of time to respond because now they are going to court to resolve the
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situation. if they could have responded, there could've been an ongoing discussion to minimize this and they would not have gone to court. they could have agreed with your analysis. chair yellen: they disagreed, but they did have a good opportunity to weigh in. in the case of one firm, i was only involved myself in the designation of one firm. my firm had the entire opportunity. >> i recently had the opportunity to meet with some of the international folks. theas very concerning to way they went about it. to take their analysis without our own is very concerning. chair yellen: we have done our own analysis. to one otherd issue, yesterday we passed a
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bill to deal with the specific designation for banks. in the bill, we have guidelines that you actually used, the fed uses in their own analysis. concerned about the way ith discussion went wit respect to the ranking member. we try to tailor a supervisory program that we think is appropriate, given our full understanding of the risks. >> this significant ones you believed need to be used to provide the guidelines -- so make the designation. chair yellen: we look at those factors, but we tailor an entire
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program that is specific. youn previous testimony agree to that those are important criteria and supported the bill. time for the the gentleman has expired. the chair recognizes the gentleman from massachusetts. ansome of us do use exclamation point at the end of your name. some of us use hashtags as well. mr. chairman: as long as you spell it right. >> thank you for being here again. it is a pleasure to see you. i have a few questions and we will start on one that has concerned me. sectionrequirements to 956 b of the dodd frank act. i want to be clear. i for one do not care how much
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anyone in this country makes. how much is not my concern. the how is my concern. it is a concern in law because of the incentives that may be involved. some of us think those incentives have to do with the problem. and yet, the law says 90 days. fine, ok 90 days. hundred 80 days. ears? y and we do not have a regulation on this issue. i am just wondering, could you tell me, when do you think we might have one? chair yellen: if i might start by saying, from a supervisory perspective, many years ago we put into effect guidelines pertaining to incentive compensation.
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our supervision is very attentive to aspects of incentive compensation that could lead to excessive risk-taking. it is not focused on the total overall level of a, but on the potential adverse incentives that could be embodied in that pay. >> that is not the regulation called for time off. very yellen: it has been challenging and there are many agencies involved in trying to come up with this. who do we have to kick to get this done? what is the hold up? chair yellen: i can't give you a good answer. >> have you done your job? chair yellen: we have been working with the institutions now for many years. and the law says 90 days. at some point, regulators have to regulate. i am not complaining it is 91
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days. 65am not complaining it is 3 days. tell me who it is. if it is not you, maybe it is my friends at the fcc. simply allow us to know the incentives that are involved. have you done your job? chair yellen: we have tried to work constructively with the other agencies. >> i love the way you never give answers. i think the fed has done a good job. i am not complaining about the fed, but this one is long overdue. each and every regulator that comes before me, i will ask. i am not asking you do a specific item. incentives the are appropriately placed so the american taxpayer does not get put on the hook again.
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everybody agrees this item was a problem and it should be relatively easy to fix. chair yellen: i agree with your assessment that it was an important problem. that it is a central to address it. supervision weur have addressed it and we do feel we have seen a meaningful change. >> one, i want to talk just base ically to the results of the current next it race of living wills. back a few years ago when we had them they were all called not credible. in the living will provision, in dodd frank as you know was pretty important to many of us. we think it is a way to avoid too big to fail. ,


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