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tv   Capitol Hill Hearings  CSPAN  July 25, 2012 8:00pm-1:00am EDT

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mr. nadler: thank you, madam chair. i yield myself 4 1/2 minutes. the chair: the gentleman is recognized for 4 1/2 minutes. mr. nadler: ma dame chair, i rise in support of my amendment which would exempt rules to protect nuclear power plant safety from titles 1, 3 and 5 of the bill. it is rare that the premises of an entire week of legislative week on the house floor is wrong, but here we are. we are told this is regulatory week. during which house republicans have supposedly working to see that the yolk of oppressive government regulation is thrown off and the american entrepreneur's free to grow his or her business and increase jobs. . i'm reminded of a famous line, it is a tale told by an idiot signifying nothing. we will hear sound and fury on the house floor like all the other regulatory bills, but this will die in the senate. all of that talk will signify nothing. this, too, is a tremendous waste
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of time. more importantly, there i know evidence to support the position that overregulation is a major cause of our slow economic growth and high unemployment rate. according to the economic policy institute, studies do not find a significant decline in employment in these policies. do not take my word for it, this is what economists and businesses are saying. "wall street journal" surveyed dozens last july and found the main reason companies are reluctant is constant demand, closed quote. the national federation of independent business found when -- 45% said declining sales and if all of this is true why are we making it harder for the government to enact rules to protect the public health and safety? a senior policy analyst in the reagan and bush administrations
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suggests an answer. he has said regulatory uncertainty is invented by republicans to use current economic problems to support an ajeopardya year in and year out. it is political way. look at what this bill would do. it seems like frankenstein and it is very frightening. the underlying bill would block all efforts to protect public health, safety and the environment until the unemployment rate falls below the figure of 6% and it would impose canses on the government and would put impedements to consent decrees and settlements. nuclear power, the safety of the american public would be put at serious risk. my amendment to attempt to make this bill slightly less of a
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horror show. the dangers of nuclear power are well known. one accident could doom millions of people. because of the disasters that could happen, regulations to prevent from meltdowns in advance are important. the underlying bill would make it harder to adopt rules and policies. hampering the ability of the n.r.c. to put in safety measures could be devastating. my amendment would free the n.r.c. from the burdens of this bill and allow it to promulgate the rules and regulations necessary to protect us from the disaster of a nuclear catastrophe such as those that occurred at chern knowble in russia and japan. i ask everyone to approve the amendment. i reserve.
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the chair: for what reason the gentleman from florida seek time? mr. posey: this amendment -- mr. ross: this would exempt consent decrease. agencies do not need another loophole to make regulations by consent decree. as to title 5, part of the bill that was formerly known as the development act, this amendment would block needed construction projects from breaking ground. unemployment is stuck above 8% and millions are looking for work. march, 2011 no project study identified energy projects including nuclear projects if approved could generate $1.1 trillion and i appreciate the gentleman is concerned about safety of nuclear power.
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but this act does not require agencies to approve or denny any particular project or permit application, nor would any agency act on a permit before review has been completed. the act establishes a reasonable timetable for agencies to conduct an environmental review in making permitting decisions. this will give confidence that the process will not drag on indefinitely. it is consistent with the administration and with the president's job council's recommendations and builds on bipartisan legislation which has dramatically reduced the time it takes to reduce environmental impact studies. the road to economic recovery runs through permit streamlining and for these reasons i oppose the amendment and reserve. the chair: the gentleman reserves the balance of his time. the gentleman from new york. mr. nadler: how much time do i have left? the chair: gentleman has one
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minute. mr. nadler: first of all, we are dealing with nuclear regulatory with nuclear power plants. we are dealing with large businesses. secondly, we are dealing with permits for construction or modification of a nuclear power plant. because of the disaster in japan, we learned from experience it may well be that the nuclear regulatory commission will want to put out new regulations in light of what we have learned in what the japanese didn't do right. as long as unemployment is above 6% we must continue to risk all of our lives, that makes no sense. second of all, we want to do environmental streamlining and what this bill says is that if an environmental impact statement takes longer than a certain number of days, forget about it. but it's the sponsor, not the
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nuclear regulatory agency, but the sponsor that controls the timing. if you know you have a project that is an environmental disaster, all you have to do is slow-walk the agency and don't worry about any environmental consequences and risks the public safety and i urge adoption of this amendment. the chair: the gentleman's time has expired. the gentleman from florida. mr. ross: let's look at this. if the sponsoring agency decides to hold back and there is a presumption or approval, who better to have the onus of having to prove that it should not be built than those who failed to act as opposed to those who are ready to act. the one thing that we found out is that the regulatory environment is so burdensome that whatever recovery our country attempts to pursue right now is being strangled. polls show it, among 85% of u.s.
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small business owners who aren't hiring, 46% of these cited being worried about new government regulations. small business owners cite complying with government business regulations are overwhelming. we have placed in the hands of bureaucracies, authority that is strangeling the business recovery of this country. this bill as it is without this amendment would allow for the streamlining and 4 1/2 years of the permitting process and the permitting process will allow us to invest private capital to create private-sector jobs. i urge opposition to this amendment and i yield back. the chair: the gentleman yields back the balance of his time. the question is on the amount offered by the gentleman from new york. those in favor say aye. those opposed, no. in the opinion of the chair, the noes have it. and the amendment is not agreed to. the gentleman from new york.
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mr. nadler: call for the yeas and nays. the chair: pursuant to clause 6, rule 18, further proceedings on the amendment offered by the gentleman from new york will be postponed. it is now in order to consider amendment number 13 printed in part b of house report 112-616. for what reason the gentleman from west virginia seek recognition? >> i have an amendment at the desk. the chair: the clerk will designate. the clerk: amendment number 13 printed in part b of house report 112-616 offered by mr. mckinley of west virginia. the chair: the gentleman from virginia, mr. mckinley and a member opposed each will control five minutes. mr. mckinley: i offer an amendment to add more clarity and accountability to the rgla tower process. under this bill, congress will
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require additional analysis and reporting on all government regulations affecting the economy by $100 million or more annually. this amendment simply reduces this threshold of $100 million to $50 million. in f.y. 2011, nearly 4,000 rules were published in the federal register. only 83 of these rules were classified as having an annual effect on the economy of $100 million or more. this represents only $2.1% of all the rules published. thus far in 2012, 2,71 rules have been published and 51 of these have been projected to have an annual effect on the economy of $100 million or more,
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equating to 2.4%. according to the small business administration, the cumulative burden of regulations exceeding -- exceed more than $1 trillion annually on our economy, costing more than 10 r -- $10,000 per household. regulations are impacting our economy by this astounding $1 trillion each year and nearly 98% of these rules have virtually have no economic analysis or oversight. we have more than 23 million americans underemployed or unemployed. this political maneuvering and rulemaking has to stop. the american people sent us here to improve the economy, help them get back to work, but not to allow the promulgation of
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more questionable job-hindering regulations. when i served in the legislature in the 1980's and early 1990's, no regulations were adopted until the legislature approved them. not just a few here and there. every single regulation came before the legislature for approval, significant or otherwise. not conducting analysis and reports on nearly 98% of all government agencies proposed regulation confound and confront our job creators with excessive and burdensome rules. madam chairman, it's a reminder, in 1995, congress passed the job creation and wage enhancement act, which dealt with lowering the regulatory threshold from $100 million to $50 million, just as this amendment would do
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today. that bill passed the house by a vote of 2777 to 141, -- 277 to 141, including members who are present here today. madam chairman, i reserve. the chair: the gentleman reserves the balance. >> i rise to claim time in opposition. the chair: the gentleman is recognized for five minutes. mr. cummings: i yield myself such time as i may consume. i strongly oppose the amendment offered by the gentleman from west virginia, which would make a very dangerous bill even more devastating to the american people. this amendment would broaden the scope of this legislation to impede the issuance of even more rules that are impeded by the underlying bill itself. by allowing the threshold by such a regulatory measure is measured would have a cost to
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the economy of $100 million. the legislation would prevent the implementation of important rules whose benefits far outweigh their costs. one of the things that we don't zero in on with regard to this legislation overall and we saw it in our committee is the cost benefit analysis. and i think it's very, very significant when you think about the fact that there are certain rules and regulations which save lives, many which protect our constituents with regard to their pocket books, all kinds of things. and so sometimes when you just look at the cost of a business coming in and complaining as opposed to balancing with regard to benefits, sometimes i think things get out of balance. the amendment clearly
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illustrates why cash sunshine believes the moratorium is a bad idea as he stated ti oversight hearing, a moratorium would not be a scaffold or a machete but more like a nuclear bomb and would cost very little and very significant little health benefits. this amendment increases the size of the bomb we are dropping. just one example of pending regulation that would be halted by this amendment is the securities and exchange commission's proposed rule implementing a section of the d.o.d.-frank act to reduce the purchase of quote, conflict minerals, unquote. minerals whose sale by combatants by the democratic republic of the congo known for
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human rights abuses. d.o.d.-frank requires the s.e.c. to issue a rule directing publicly-held companies to disclose whether gold and other metals used in the products they produce came from central africa where trading in these commodities have funded years of civil i can't remember. the s. c. issued a proposed rule but delayed finalizing the rule in response to fierce business opposition and business lobbying. this proposed rule is proposed to cost $71 million. the benefits of this rule cannot be quantified. by ensuring that publicly-traded companies in the united states track the supply chain of minerals and disclose whether their purchases are financing armed groups for committing atrocities, killing people, rapes, hurting people, this proposed wrule will save lives
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and help prevent sexual and gender-based violence. adopting this amendment would prohibit the issuance of this regulation intended to quell international violence and help end humanitarian crises. we can't put financial property above our moral obligation to protect the most vulnerable among us. ladies and gentlemen, i urge members to oppose this incredibly dangerous amendment and i continue to reserve. the chair: the gentleman reserves the balance of his time. the gentleman from west virginia. . . >> i respectfully disagree with the comments made, roid recognizing again that this house has already spoken on this matter of reducing it from 100 to 50. and the real issue here is whether or not we want to have 98% of the rules that are being
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promulgated to go without oversight and review. mr. mckinley: it's time that we get this under control and allow more of our people to get back to work. so again i reserve the balance of my time. the chair: the gentleman reserves the balance of his time. the gentleman from maryland. mr. cummings: i will -- i'm going to yield back but again, madam chair, i hope that the body will vote against this amendment. the chair: the gentleman yields back. the gentleman from west virginia. mr. mckinley: i just encourage my colleagues to support this amendment and once it's adopted to support the piece of legislation that's so needed. thank you. i yield back the balance of my time. the chair: the gentleman yields back the balance of his time. the question is on the amendment offered by the gentleman from west virginia. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the
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gentleman from west virginia will be postponed. it is now in order to consider amendment number 14 printed in part b of house report 112-616. for what purpose does the gentleman from arizona seek recognition? mr. schweikert: i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 14 printed in part b of house report 112-616 offered by mr. schweikert of arizona. the chair: pursuant to house resolution 738, the gentleman from arizona and a member opposed each will control five minutes. the chair recognizes the gentleman from arizona. mr. schweikert: thank you, madam chairman. my amendment hopefully is deemed to be somewhat simple. as this piece of legislation moves forward, trying to make sure that the definition of cost from the regulatory environment is properly, shall we say, a proper box is built for it. so the amendment is, in many ways it's very simple.
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is the cost to organizations, a business, you know, a business concern, as rules are being promulgated, that businesses spending money to get into compliance? those costs should also be calculated and put into the cost to the economy calculation. secondly, as the calculations are being built, it should also -- the calculations should take a look at what it did to the revenues of organizations. because those revenues are what are used to hire people, to grow, to expand the economy and to ultimately expand the tax base. so the amendment's very simple. it basically says, as the calculations are being made for costs of regulation, ok, let's actually add them up in a fashion where we actually acquire the rule real cost. and with that, madam chairman, i reserve. the chair: the gentleman reserves. for what purpose does the
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gentleman from maryland rise? mr. cummings: claim time in opposition, madam chair. the chair: the gentleman is recognized for five minutes. mr. cummings: thank you very much. i yield myself such time as i may consume. i strongly oppose the amendment offered by the gentleman from arizona, mr. schweikert. which would make an already ambiguous bill even harder to implement. the amendment proposes to define the term annual cost to the economy as including any expected change in revenue of businesses. caused by such regulation. including any change in revenue as a result of preparing for the implementation of the regulation. imagine the consequences of this amendment, if it would cost a business any additional funds, to ensure that baby formula does not contain toxic substances, that business could block a regulation requiring those safety measures. is that really how we want to run our country? the truth is that businesses routinely blame regulations for
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costs they already incur. for example, power companies routinely blame the e.p.a. for the fact that high-cost coal plants struggle to compete in today's market with lower-cost natural gas plants. despite the fact that many of these coal plants are shut down because they are uncompetitive, some repeatedly blame e.p.a. regulations for forcing their closings. the intention of this amendment appears to be to give businesses a veto over any regulation they oppose, just by claiming that it's an implementation somehow affects their bottom line. since it would be virtually impossible for o.m.b. to confirm or deny such claims, they would be irrefutable. now, i do believe that the costs of regulations imposed on
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industry should be one of many factors considered. when we compare the overall costs and benefits of a rule. but these costs should not be the overriding factor to be considered as this amendment would require. the amendment is just another example of thes had guided effort to but the -- of the misguided effort to put businesses' profits before the health and safety of the american people. therefore i urge members to oppose this unworkable and harmful amendment and i reserve the balance of my time. the chair: the gentleman reserves the balance of his time. the gentleman from arizona. mr. schweikert: reclaiming my time, madam chairman, and appreciate the gentleman from maryland's comments. but he hit one part there. and that is, you do believe that the costs to industry, to business, to job creators should be calculated, it's just that the debate here is how they should be weighted and how ultimately, i assume, how they
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should be documented. all i'm trying to accomplish here with this amendment is a couple very simple mechanics. those costs that go into the preparatory to be in compliance with the newly promulgated rule should be calculated and that the calculation that -- of the cost in the net revenues, gross revenues, to a job creating industry should also be part of that calculation. and part of this was distribute bill is -- i obviously fully support, but i thought actually creating a little tighter definition of many of the types of costs that happen in a regulatory environment, i mean, obviously we will have a separation on the view of -- does it stymie regulation, does it help -- i'm from the view that i truly believe one of the great hindrances to economic growth, to job growth in this country is the substantial growth of our regulatory
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environment. ok, if we're going to run legislation, it says, regulations that exceed a certain cost, you know, are held to employment and others, you know, reach a certain level, why not make sure we're calculating those appropriately? and, madam chairman, with that i reserve. the chair: the gentleman reserves the balance of his time. the gentleman from maryland. mr. cummings: madam chair, i stand on my arguments and i would yield back. the chair: the gentleman yields back the balance of his time. the gentleman from arizona. mr. schweikert: with that i will yield back. the chair: the gentleman yields back. the question is on the amendment offered by the gentleman from arizona. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. the amendment is agreed to. pursuant to clause 6 of rule 18 -- it is now in order to consider amendment number 15 printed in part b of house report 112-616.
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the chair: for what purpose does the gentleman from california seek recognition? mr. miller: to offer an amendment. the chair: the clerk will designate the amendment. the clerk: amendment number 15 printed in part b of house report 112-616 offered by mr. george miller of california. the chair: pursuant to house resolution 738, the gentleman from california, mr. miller, and a member opposed each will
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control five minutes. the chair recognizes the gentleman from california. mr. miller: thank you, madam speaker. madam speaker, my amendment would allow the occupational health and safety administration to continue efforts to prevent dust and fire explosions in the workplace. combustible dust explosions threaten lives, limbs, jobs and property across this country. and it's abundantly clear that the federal regulatory action is needed but the bill before us today threatens to block that action. beginning in 2003, the chemical safety board investigated three major explosions caused by combustible dust in north carolina, kentucky and indiana, where 14 workers lost their lives. as part of this investigation, the board identified hundreds of other combustible dust fires and explosions costing -- causing at least 119 fatalities and 718 injuries over 15 years. the board recommended that osha issue rules to protect against these hazards because existing
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osha protections were inadequate. the investigators were not alone. family members have also a asked that action be taken. tamly miser of kentucky testified before congress how her brother, sean boone, was killed in a metal dust fire in huntington, indiana, in 2003. she told us how sean suffered from his horrific event. she said that sean did not die instantly. he lay on the floor -- on -- he lay on the smoldering floor after the explosion when aluminum dust burnt through his muscle tissue. his breath burned his internal organs as the blast took his eye sight. sean was still conscious and asking for help when the ambulance took him. he lived for a number of hours before he finally succumbed to his injuries. sean wasn't the first to die at work this way and he hasn't been the last. there are more -- in more than four years since an imperial sugar explosion in georgia, that explosion killed 13 workers, it caused hundreds of millions of dollars in damage. the tragedy was the result of unchecked accumulation of sugar
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dust that ignited and caused a chain of explosions and the sugar refinery was leveled. these workplace explosions have not stopped. there have been 23 major combustible dust fires or explosions that have killed 15 and injured 35 since that imperial sugar explosion in georgia. the response of osha has been to begin the development of a rule to reduce the risk of combustibldust explosion. that rule ou go threatened the opportunity of that bill to go forward and i reserve the balance of my time. the chair: the gentleman reserves. for what purpose does the gentleman from oklahoma rise? >> i rise in opposition to the amendment. the chair: the gentleman is recognized for five minutes. >> thank you. mr. lankford: while i can certainly, certainly empathize and have tremendous compassion for the families that are involved in the -- in this, osha has had this rule and started working through this rule since 2009 and been in the advanced rule making phase for a very long time.
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and the struggle they have is a large one-size-fits-all approach. osha has some great options. even under the passage of this particular bill. the option number one for them, narrow their rulemaking. they're doing a large one-size-fits-all to cover all types of dust, all kinds of factories, all kinds of places. if they were to narrow their rule to specific types of places they would be well under the $100 million limit. the second rule they have is very clear. this bill itself already sets in an exemption for health and safety. clearly this would be within that guide jns lines on health and safety. the president could do an executive order and pass that and then allow them to move forward or he can come back to congress. the thought that only the folks at osha are compassionate about issues like this fails even the most modest of tests. obviously people that are within congress are also compassionate to the needs so, if a regulation that comes that deals with a problem in a commonsense manner, that can function, certainly congree able to prove
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that. certainly a president's going to have tremendous compassion for the health and safety of individuals if they're able to come up with a regulation that clearly deals with this. . while i have compassion for these families, this bill already deals with this and this exception is not needed. with that, i reserve the balance of my time. the chair: the gentleman reserves the balance of his time. the gentleman from california. mr. miller: these workers who work in these dangerous conditions around all kinds of dust that explode on a moment's notice, without any notice, in fact, they should rely on the idea that we would all be compassionate here. the subcommittee reported this legislation, asked people in the industry and immediately targeted this standard. this won't be about compassion of members of congress but about the the special interests to keep this dust from going into effect.
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it will not meet the standard of imminent danger. we have 18 of these a year and people are killed all of the time and in different settings with different dust. this isn't about one size fits all. this is about dust that explodes and kills people and burns them to death on the job, destroys the workplace and some cases, it's never rebuilt and the jobs are never brought back and in other cases and one of these cases, the employers are now saying, give us this dust standard. give us this dust standard. the workers in this country have a right to rely on the law to protect them, not some notion of this committee or this congress' sense of passion and whether it will be invoked on that given day or not by the lobbying effort by these industries. it's about the law that protects workers and their families. workers who get up every day and
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families and themselves hope they get to come home at night, but it doesn't happen for a lot of workers. in these industries with dust, it happens over and over and over again, they get killed on the job. i have been here a long time working on combustible dust and the industry doesn't say, we have killed enough people, let us hold hands and see if we come up with something. it is complicated and based upon science, based upon research so that you can isolate the dust and so the explosions don't happen. but this legislation suggested by the committee, notice in the committee that this is one of the regulations that they would target. they can say one size fits all. you are working around combustible dust, maybe we can
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whittle it down, and take care some of the dust and not all of the dust so we can get under the rule. what are you talking about? these are the lives of the american people. these are lives of working people. this is an interesting notion you have. it just doesn't fit in the workplace and doesn't fit in the daily lives of these people who are threatened by these horrible, horrible, horrific incidents that take place. usually through no fault of the worker. other decisions were made about not keeping the plant clean. other decisions were made about not installing equipment. and that's the reason we need the law. the workers in this country need the law. not some expression of compassion late at night in an empty chamber of commerce. the one night in an empty chamber of commerce. the proponents says we will be
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compassionate when it comes to the floor. we'll figure it out and honor an executive order. b.s. the chair: the gentleman's time has expired. the gentleman from oklahoma. mr. lankford: how unfortunate to have the implication that members of congress, including myself, that have workers in my district that live with this same thing, that we would not have compassion for our workers. on or abouta has not completed this regulation. they have delayed this and delayed multiple options and need to complete their work. there is a work-safety issue here. but the bill as it currently stands, stands up strong for worker safety and allows any exception for worker safety currently in this bill. so while exceptions are pursued
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to add additional things in this bill, the bill itself already contains those things. with that, i yield back. the chair: the gentleman yields back the balance of his time. the question is on the amendment offered by the gentleman from california. those in favor say aye. those opposed, no. in the opinion of the chair, the noes have it. the amendment is not agreed to. mr. miller: i ask for the yeas and nays. the chair: the gentleman asks for a recorded vote. pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentleman from california will be postponed. it is now in order to consider amendment number 16 printed in part b of house report 112-616. for what purpose does the gentlewoman from california seek
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recognition? ms. woolsey: i rise today to offer an amendment to titles 1 and 2 of h.r. 4078. my amendment would exempt -- the chair: the gentlewoman is recognized. the gentlewoman will suspendment the clerk will designate the amendment. the clerk: amendment number 16 printed in house report of 112- 616 offered by ms. woolsey of california. the chair: the the gentlewoman from from california, ms. woolsey and a member opposed each will control five minutes. ms. woolsey: my amendment would oppose a worker safety rule from the regulatory freeze and the prohibition on so-called midnight rules. this rule would update 40-year old protections for those working around high voltage and distribution lines and equipment bringing them into the 21st
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century. if this amendment is not adopted, many workers will be needlessly burned from the electrical hazard at least until unemployment drops to 6%. are we going to make workers drop -- wait until unemployment rate drops to 6%? well, if we are, they will be waiting for a long time because this republican majority shows no interest in passing a jobs bill. is it fair, madam speaker, to make these workers wait for 6% unemployment before their employers have to assess and provide safe minimum distance from high-voltage lines and make them wait for a full economic recovery before they get full
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protection so their arms aren't blown apart from contact with high-voltage lines? certainly not. 35,000 degrees feels just as hot no matter how many americans are out of work. shock at 14,000 volts of electricity does the same damage whether unemployment is 8% or 6%. yet, this bill seems to assume lethal hazards are somehow less lethal during tougher economic times or even worse, this bill implies that preventable electrocutions are somehow acceptable whenever unemployment is high. this is irresponsible, if not unethical. with that, i reserve the remainder of my time. the chair: the gentlewoman
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reserves. mr. lankford: i rise in opposition to the amendment. the chair: the gentleman is recognized for five minutes. mr. lankford: i thank my colleague for bringing this up. but this is dealt in the text of the bill. there would be issues like this. on page 3, line 23 of the bill, it states, the president has the ability by executive order dealing with any significant regulatory action to go ahead and waive this and if it's necessary because of health, safety or other emergency. this is already dealt with in the bill itself. and while we need to deal with this and obviously the vast majority of electricity providers are very attentive to their workers including the company in mill district that takes great pride taking care of the workers that are out there in very dangerous situations, we have the ability already within this bill to be able to address that. for that reason, i would oppose that.
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i reserve the balance of my time. the chair: the gentleman reserves. the gentlewoman from from california. ms. woolsey: 74 electrical workers are killed on the job. another 144 are severely injured. os hmp a regulates the hazard when the facility is more than 1 in 1,000. the fatality rate is 14 times that level. full compliance would eliminate 79% of these fatalities and injuries. madam speaker, the one size fits all approach of this bill will block a commonsense cost-effective rule that produces $4 in benefits for every dollar in costs. osha's proposed update would provide $100 million in savings every single year. while the authors of this bill argue that the president can
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seek a waiver from congress to allow the rule, i'm not buying it. as we saw with the so-called bill offered by mr. sensenbrenner a number of years ago, it took three sessions of congress just to fix a harmless typo. we all know that when a special interest wants to stop something around here, there are countless ways to win. if this bill is not amended, congress will be sentencing scores of workers every year to preventable electrocutions and to burns. i ask for adoption of this amendment. and i reserve the balance of my time. the chair: the gentlewoman reserves. the gentleman from from oklahoma. mr. lankford: this particular rule is unique in a lot of our conversation because it has already gone through the process. the office has had it for the last 30 days and could issue this at any point.
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this is right at that point -- it wouldn't fall underneath this law. we pass this ball and send it over to the senate and they could release it. while i have tremendous compassion for the workers on the lines and tremendous respect for electrical companies around the country and how they take care of their workers, this particular rule has gone through the process and would not apply to them. with that and also the knowledge that we have the built-in safety, i continue to oppose this and yield back. the chair: the gentleman yields back the balance of his time. the gentlewoman from california. ms. woolsey: the gentleman from the other side of the aisle is not correct on this. if this rule were adopted, then the president signing the bill would be mute. it wouldot -- just the opposite. if the president signs the bill,
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the regulation would stop it. so with that, madam speaker, in closing, the adoption of my amendment will save lives, the lives of americans who work in some of the most dangerous conditions imaginable. it is ridiculous and it'sdown right cruel to tell these men and women who risk electrocution every day that osha will only step in to help them when the jobless rate reaches an arbitrary level whether it is 6% or 8% or 10%, or whether the economy is strong or weak, we need to protect our workers. i ask for members to support my amendment. and i yield back the balance of my time. the chair: the gentlewoman yields back. the question is on the amendment offered by the gentlewoman from
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california. those in favor say aye. those opposed, no. in the opinion of the chair, the noes have it and the amendment is not agreed to. ms. woolsey: i ask for a recorded vote. the chair: pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentlewoman from california will be postponed. the chair: it is now in order to consider amendment number 17 printed in part b of house report 112-616. it is now in order to consider amendment number 18 printed in part b of house report 112-616. for what purpose does the gentlewoman from california seek recognition?
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ms. waters: i have an amendment at the desk that's made in order under the rule. the chair: the clerk will dress nate the amendment. the clerk: amendment number 18 printed in part b of house report 112-616 offered by ms. waters of california. the chair: pursuant to house resolution 738, the gentlewoman from california, ms. waters, and a member opposed each will control five minutes. the chair recognizes the gentlewoman from california. ms. waters: thank you very much. first, earlier today during the vote for h.r. 459, the federal reserve transparency act, i voted yes for this legislation. this was not my intent. i intended to vote no. i strongly believe that the federal reserve should remain an independent citizen bank that is free from political influence. therefore i would like to -- like the record to reflect that my vote in favor of this ledge was an error and i voted against it and i thank you and now on my amendment -- the chair: the gentleman -- ms. waters: my amendment authorizes such appropriations
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as may be necessary, to allow our financial regulators to carry out the activities required under title 6 and title 7 of this legislation. the purpose of the amendment is that if we're having our regulators undertake new and perhaps even duplicative economic analysis functions, we should provide them with the resources to do so. mr. chairman, we know that the majority has tried to shortchange our federal regulators in terms of appropriations, particularly when we contrast their funding with the new responsibilities entrusted to them after the financial crisis. let's consider the s.e.c. one of the cops on the beat for wall street. this agency is tasked with enforcing our security's laws. they protect investors and make sure firms are held up to account, when they create toxic financial instruments. the fiscal year 2013 republican
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budget proposal calls for funding the s.e.c. at almost $200 million less than what the president has requested and what the senate appropriations committee has provided in their funding bill. this is just another part of an onslaught of cuts to the s.e.c.'s budget that republicans have proposed and that we have been fighting against over the last two years. the s. e.c. funding has been erratic, after significant increases in the early half of the decade, the agency was forced to reduce staff during this period of inconsistent funding, trading volume more than doubled. since 2003 the number of investment advisors has grown by roughly 50% and funds that they managed have increased nearly 55%. the s.e.c.'s 3,800 employees currently oversee approximately 35,000 entities, including thousands of investment advisors, mutual funds, broker
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dealers and public companies. with all of this responsibility, my colleagues on the other side of the aisle want to spread the commission even thinner, with new duplicative cost-benefit requirements that open the agency up to constant litigation and they want to do this while at the same time refusing to devote additional resources to the agency. the result is that the s.e.c. would be forced to divert resources away from other key functions of the commission, including perhaps prosecuting wrong doctors who violate our security -- wrong doers who vie lawsuit our -- violate our securities laws. i reserve the balance of my time. the chair: the gentlewoman reserves. for what purpose does the gentleman from arizona rise? >> i rise in opposition to the amendment. the chair: the gentleman is recognized for five minutes. mr. schweikert: thank you, madam chairman. and to my friend from california , she's always been a passionate and very articulate in the battle for resources for the regulators. but i'm going to stand here in opposition to this amendment for a couple of very simple reasons.
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one, this is already the job they're supposed to be doing with the money they have. this cost-benefit analysis, and we can talk about that further, but also as you work through the amendment, i have great concern of law of unintended consequences and that is in a weird way subsidizing and incentivizing bad cost-benefit analysis. in the amendment it basically says, if you end up in litigation over your cost-benefit analysis, there should be an appropriation unspecified amount of money that the appropriators should send you for that litigation. so if you do a really bad job in your cost-benefit analysis and you get sued, you actually get more money that's supposed to be appropriated to you. so, it's that sort of constant thing i focus on a lot, is that law of unintended consequences, of does it actually create an incentive that -- to draw down more cash for the agency, for the litigation, the way you get to the lilt gation is the
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quality of the work -- litigation is the quality of the work that was done in the cost-benefit analysis. so there's two primary issues. a, this is what the agencies are supposed to be doing. and, b, in the design of the amendment, i actually have a concern that ultimately it may incentivize the very thing we're trying to stop. and with that, madam chairwoman, i reserve. the chair: the gentleman reserves. the gentlewoman from california. ms. waters: madam chair, my amendment also addresses title 7 of the bill, which relates to the commodities futures trading commission. the cftc is the cop on the beat that we ask to regulate much of the derivatives market, under the wall street reform act, and the cftc is the agency that cracked down on barclays when they manipulated a key interest rate benchmark, the libor, in order to benefit their derivatives trade. this bill also imposes new cost-benefit requirements on the cftc, while the onerous, i think it is inappropriate to spread the cftc any thinner when
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republicans have proposed to cut the cftc's funding by 12% relative to last year and 30% relative to what the center provided. as cftc chairman said last month, the result of proposed funding -- house funding cuts is to effectively put the interests of wall street ahead of those of the american public by significantly underfunding the agency. congress tasked to oversee derivatives, the same complex financial instruments that help contribute to the most significant economic downturn since the great depression. finally, i disagree with the claim that more cost-benefit analysis can solve every regulatory question we face. in fact, i think that these economic analyses often offer a false sense of precision and fail to capture things that aren't easily quantifiable. things like avoiding the next financial crisis and protecting the overall market integrity. i would urge my colleagues to
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support my amendment which makes compliance with the new requirements under the underlying bill contingent on them receiving sufficient appropriations to carry out these functions. i would reserve the balance of my time. the chair: the gentlewoman reserves. the gentleman from arizona. mr. schweikert: thank you, madam chairman. my two arguments still stand but there is one other point. and i actually have a little bit of information here. according to the inspector general of the cftc, the commission regularly employs a strip-down type of cost-benefit analysis and this has proven perilous, proves perilous for the financial market regulators. in the past they've used a stripdown methodology so in many ways what we're doing here is saying, here's the box, you're supposed to be doing this. it's already part of your budget. and as i spoke earlier, in the design of the amendment, i have the fear of the unintended
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consequences, that you're almost incentivizing that when the litigation happens the agency actually ends up getting more money. and with that, madam chairwoman, i close. the chair: the gentleman yields back. the gentlewoman from california. ms. waters: in closing, this bill adds duplicative new rules. s.e.c. has already -- is already held to account on cost-benefit analysis, access was overturned, the bill opens cftc up to new industry lawsuit. i would ask for an aye vote on my amendment. i yield back the balance of my time. the chair: the gentlewoman yields back the balance of her time. the question is on the amendment offered by the gentlewoman from california. those in favor say aye. those opposed, no. in the opinion of the chair, the noes have it. the amendment is not agreed to. ms. waters: i call for a recorded vote. the chair: pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentlewoman from california will be postponed. it is now in order to consider amendment number 19 printed in part b of house report 112-616.
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for what purpose does the gentleman from pennsylvania seek recognition? mr. fitzpatrick: madam chair, i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 19 printed in part b of house report 112-616 offered by mr. fitzpatrick of pennsylvania. the chair: pursuant to house resolution 738, the gentleman from pennsylvania, mr. fitzpatrick, and a member opposed each will control five minutes. the chair recognizes the gentleman from pennsylvania. mr. fitzpatrick: thank you, madam chair. the amendment i'm offering tonight would require the sequester -- s.e.c. when reviewing regulations to consider the burden of applying section 404-b of sarbanes-oxley to companies with a public float of less than $250 million. simply put, this amendment requires regulators to consider the cost of a specific regulation which hinders job creation in my district and across the nation. section 404-b requires audits of
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a public company's internal controls. while this sounds innocuous, the cost of external controls can be staggering. those costs are exponentially more burdensome on smaller companies. currently the law extends the auditing requirement to any company with a public float of $75 million or more and that number has been widely criticized as too low and adds an extremely costly burden on small and growing companies. recognizing that burden on emerging growth companies, the house overwhelmingly passed as part of the jobs act an exemption from 404-b for companies with up to $1 billion in revenue for five years after their initial public offering. this amendment would merely require the s.e.c. to consider the burden of section 404-b when reviewing their regulations and would not change current law. this amendment would apply to all companies and would not discriminate based on when a company issued their i.p.o.
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congress and the s.e.c. have appropriately recognized that all companies are not the same and smaller companies should be exempt from certain regulations. this amendment asks that the s.e.c. consider these costs on smaller companies. if companies are priced out of being able to go public, it restricts capital formation and job creation. for those companies who still choose to go public, resources that could otherwise be used to hire and grow are being sucked away but unproductble compliance costs. madam chair, synergy pharmaceuticals is a new york-based company that does their entire r&d in my district. they have 10 employees and their -- in their research facility and 10 employees in new york. these are good-paying jobs by most definitions, but this is a small company. in fact, their market capitalization exceeds even the increased threshold of $250 million that this bill references which is why some have advocated exempting
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companies with a public float as high as $500 million or $1 billion. but i've reached out to their chief scientific officer and their chief financial officer to discuss this issue with them and their comments were very instructive. i heard that 404-b was one of the most significant regulatory burdens they face. in their words, it hurts. and it was not the direct costs of the audits or the person they had to hire internally to deal with these requirements. but the time that was spent and the efforts that were wasted. according to them, hours and even days worth of time was spent find ways to document and justify their procedures, for something as menial as where the checkbook is kept. what would they do with the extra money if they didn't have to spend it on compliance? the answer i got was that there was no question it would go directly into research and development. i ask my colleagues, where is this money more productively used? in documenting how the checkbook is scored -- stored at night or
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hiring research assistants in communities like doilstown and new york? madam chairman, entrepreneurial companies like synergy are those we are counting on to create wealth and jobs and to restore america's vibrant economy. their story is not unique. particularly in industries like biotechnology. this congress recognizes the importance of decreasing the regulatory burden on small and emerging companies and a -- in a strong bipartisan manner just a few months ago with the jobs act. this amendment is an extension of that effort and i encourage my colleagues to support it. i reserve the balance of my time. the chair: the gentleman reserves. for what purpose does the gentleman from massachusetts rise? mr. frank: i rise in opposition. the chair: the gentleman is recognized for five minutes. mr. frank: i yield myself three minutes. this is an effort to exempt companies under $250 million. now, the jobs act, which was recently passed, with broad support, said that a startup company for its first five years
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would be exempt from this. this now would do away with that five-year restriction without having had the kind of committee consideration it seems to me it ought to have. it does it in this way. i differ with my colleague from pennsylvania when he says it doesn't change the law. it didn't change the law, they wouldn't offer it. he's not up here at 9:00 at night just to get exercise. it changes the law in a very significant way and sets a very bad precedent. the underlying legislation to which this would be an amendment requires the cost-benefit analysis. this cooks the books. this is not content to let it be an unbiased cost-benefit analysis, but it says, it instructs the s.e.c. to take into account the heavy burdens that -- let me get the exact words, the large burden of such regulation. in other words, it's an effort to tip the scales of the very cost-benefit analysis and we know that by the way as to intent because the original version of this amendment was
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just a straight exemption of $250 million, but for parliamentary reasons, because that's not this committee's jurisdiction, it had to be redone. we don't really want to exempt everybody forever as opposed to a five-year exemption for a startup but he had to amend it and he amended it in a way that impugns the integrity of the cost-benefit analysis, it puts a thumb on the scale, it says the cost-benefit analysis here should take into account the large burden. it's already supposed to do it. adding this is an instruction to the s.e.c., essentially, to find they should be exempt. we have had a rash of chinese companies buying small companies, and people investing in them and getting taken. the problem is, chinese accounting is very opaque. what this bill would do would be to prevent the united states authoritying from --
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authorities from applying sarbanes-oxley. you can't -- i believe the gentleman is right when he has a company in his district, but you can't legislate for one company. sarbanes-oxley has improved integrity of the capital market, it has improved confidence in the market, and it does exempt startups. this says in effect by instructing the s.e.c. to find the cost outweighs the benefit no matter what, this gives a permanent exemption, de facto if companies up to $250 -- up to 250, including people who might be scamming as in the case of the chinese companies and it sets the bad precedent, we're going to have cost benefit analysis and i think that can be overdone. let's have it in an open, honest way. let's not put a thumb on the scales this way.
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i reserve the balance of my time. the chair: the gentleman reserves. the gentleman from pennsylvania. >> i yield one minute to the gentleman from tennessee, mr. fincher. the chair: the gentleman is recognized. mr. fincher: i rise in strong support of mr. fitzpatrick's amendment. ms. chairman, unemployed americans are crying out for more jobs, causing congress to review rules and regulations. overly burdensome regulations are hurting business expansion which is why we're debating this bill this evening. overly burdensome regulations is why i introduced h.r. 3213, the small company job growth and relief act to exempt sarbanes-oxley for those less than $350 million. supporters of increasing the current $75 million exemptions from sarbanes-oxley 404b would
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save duplicative audit costs which hinder many companies from going public. going public provides opportunities for companies to raise needed capital in order to expand, reinvest and create jobs. providing a permanent exemption for sarbanes-oxley for companies with a public float of $250 million or less just makes good sense. i stongly encourage my colleagues to support this amendment and i -- and i yield back. the chair: the gentleman's time has expired. the gentleman from pennsylvania. the gentleman's time has also expired. the gentleman from massachusetts. he has two minutes remaining. mr. frank: the company about to go public is already exempt the bill we passed into law exempts companies for five years until they go public. this is not relevant to
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startups. it has relevance to those who have been in exist eps more than five years for public companies. and it says, in effect, don't give us this unbiased cost benefit analysis. we'll tell you what cost benefit analysis. and when we are in the house under general leave, i'll insert into the record an article from "the new york times" talking about the advantages we have in i.p.o.'s these days, how the soccer team from england came here to do an i.p.o. because our corporate governance laws are more favorable to them in allowing different kinds of stock. i'm sorry to see this repudiation of george w. bush, i know he's not coming to the convention, but he signed sarbanes oxley. oxley is mike oxley mitigating circumstance predsessor as chairman of the committee. it's an accounting requirement. and what this does is to make
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another chunk out of that regulation. maybe we hear different people. the american people -- my friend says the american people are crying out for an end to regulation. every indication i have is everybody is tired of irresponsibility, by a few, not everybody, but they are tired of people being scammed and the notion that the fact -- that what we need is less regulation is an odd one. it comes from people who didn't see the cry sess we had because sarbanes-oxley came about after enron. so i would align myself with president bush, i think he got this up with right. i think mike oxley got this one right. for startups, for people about to go public, they have a $250 million exemption. but to give a permanent exemption is a mistake and don't start monkeying with cost benefit analysis. the chair: the gentleman's time has expired. the question is on the amendment offered by the gentleman from pennsylvania.
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those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. the amendment is agreed to. the chair recognizes the gentleman from massachusetts. mr. frank: i ask for a recorded vote. the chair: pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentleman from pennsylvania will be postponed. it is now in order to consider amendment number 20 prinned in part b of house report 112-616. for what purpose does the gentleman from florida seek recognition? mr. posey: thank you, madam chair. i have an amendment at the desk, number 20. the chair: the clerk will designate the amendment. the clerk: amendment number 20 printed in part b of house report 112-616, offered by mr. posey of florida. the chair: pursuant to house resolution 738, the gentleman from florida, mr. posey, and a member opposed each will control five minutes. the chair recognizes the gentleman from florida. mr. posey: shaung -- thank you, madam chair. i yield myself such time as i may consume. the chair: the gentleman is recognized for five minutes.
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mr. posey: my amendment stops the securities and exchange commission from pursuing an agenda on climate change and instead focuses on protecting investors. we've seen madoff and other ponzi schemes biling people out of billions of dollars. people are shocked an outraged that such a travesty could happen. one would think after such embarrassments, the s.e.c. would do everything it could to focus its finite reresources on doing whatever it could to stop the next ponzi scheme. it appears they would get serious on safeguarding the public from fraud and corruption. however in 2010, they issued an interpretive guidance for companies to issue the effect
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global climate change would have on the company. they did it without the consent of congress and outside the rule making process. there are no law os in the united states addressing climate change. the guidance is inappropriate considering the s.e.c. has biggest priorities. climate chame is a controversial and unresolved issue from a securities perspective, climate change information on a disclosure is highly speculative and dubious at best. if allowed to proceed, it invites all kinds of compliance costs and confusion down the road and depess who will ultimate pay all those costs? our constituents, the american public. importantly, my amendment does not stop companies from mentioning bona fide weather and environmental risk and disclosures and if a company really wants to weigh in on climate change for some reason, they're free to volunteer the information. it keeps the s.e.c. focused on what they're supposed to be doing and that is protecting
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people not forcing unrelated agendas down their throats. i urge my colleagues to support the amendment and reserve the balance of my time. the chair: the gentleman reserves. for what purpose does the gentleman from maryland rise? >> i rise to claim time in opposition. the chair: the gentleman is recognized. mr. cummings: i yield myself such time as i may consume. federal security law requires financial disclosures by public companies for the benefit of shareholders and investors. the securities and exchange commission provides detailed guidance on how to interpret and comply with these disclosure requirements which are intended to ensure that potential investors fully understand a security before they purchase it. the s.e.c. recently prvided guidance an existing rules that require companies to disclose the impact that business or legal developments related to climate change could have on a company's bottom line.
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they want investors to know about this. these disclosures help investors understand how climate change affects a company's operations and their potential investments in the company. this amendment seeks to prevent this guideance from taking place, it seeks to keep investors in the dark. rules discussed in the s.e.c.'s guidance are clearly needed and the s.e.c.'s guidance will help publicly traded companies understand how key areas of climate change such as new legislation on international accords could affect what they need to disclose to the public. this guidance is also intended to help companies explain how the physical impacts of climate change could affect their performance. in issuing this guidance, the s.e.c. did not opine on the science of climate change. the guidance seeks to help companies assess the
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possibility that eventually climate change may materially affect their bottom lines and trigger public disclosure requirements. this guidance is prudent and serves to benefit both the investor and the company. ironically, with this amendment, my friends on the other side of the aisle will proclaim the value of transparency are acting to hurt investors by denying them important information. this amendment would also harm wall street by preventing the s.e.c. from issuing clear guidance to help publicly traded firms understand what they need to disclose on this this -- on this topic to ensure compliance with the law. it provides some certainty. i urge my colleagues to oppose this amendment and i reserve the balance of my time. the chair: the gentleman reserves. the gentleman from florida. mr. posey: how much time do i have?
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the chair: three minutes. mr. posey: the gentleman's points about disclosure are on point, they simply don't apply to what this amendment does. it does not deny required disclosure of risk. let me be clear. thousands and thousands of american families were devastated by madoff, by stanford, m.f. global and the like. people lost their homes. people lost their cars. people lost their children's education funds. people lost their lifelong retirement savings. i could go on and on forever but we have a limited amount of time. the job of the s.e.c. is to protect those people. the job of the s.e.c. is to protect honest people from dishonest corporations and persons. it's not to impose other agendas on the american public. it's not to talk ability the environmental stewardship of corporations. if a corporation dealing with
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securities does not disclose a significant environmental risk, then they're going to be liable for that failure to disclose but it's not the s.e.c.'s job to talk about their stewardship. s.e.c. knew for a decade, a decade, a full 10 years, over 10 years, that madoff was stealing from people and this they refused to take any action for over a decade and over $70 billion evaporated. people's lives were devastated, people died. people died. there are dead people because of what madoff did. and the s.e.c. didn't lift a finger, they were too busy doing other things. now here, we intend to put s.e.c. back on the job and focus on what they're supposed to do, protect honest people from dishonest people. i reserve the balance of my time, if any. the chair: the gentleman reserves. the gentleman from maryland. mr. cummings: you know, when we had the s.e.c., before our
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committee, i made it very clear that i thought more could have been done and i think it is -- with regard to madoff and i think it was extremely unfortunate, what happened. but again, that does not mean that we shouldn't provide clarity over all subjects which may affect investors. and that's what we're talking about here. i'm going to -- i rely on my argument but i'm going to yield to my good friend, mr. frank from massachusetts. mr. frank: thank you for yielding. the gentleman says the s.e.c. wasn't on the madoff thing for many years. that's true. i have to say, while i supported the bush administration on sarbanes-oxley, i am critical of their administration of the s.e.c. for almost all of that time, we had an s.e.c. that was not inclined to enforce. and i do not think the s.e.c., under a very good chairman, mary shapiro work a much more vigorous approach, ought to be taxed for the failures that was
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ideologically driven by the previous s.e.c. i don't think it's valid to say, well, because they didn't catch madoff. the s.e.c. in the bush administration reflected an unfortunate philosophy of knopp regulation, of giving to companies more atonmy than they should have. it's not a good basis on which to legislate going forward. i thank the jelled for yielding. mr. cummings: i continue to reserve. . mr. posey: how much time do i have? the chair: one minute. mr. posey: i think a large percentage of the people in this chamber and this country have endured all the finger pointing and blame that they can endure. i don't care who shot john. i don't care who was in charge of the s.e.c. before. the point of this bill is to keep the s.e.c. answering to investors.
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mr. frank: will the gentleman yield? mr. cummings: how much time do i have? the chair: one minute. mr. cummings: i yield 30 seconds. mr. frank: the fact is that the gentleman from florida is the one who is pointing fingers. when i talk about who is in charge of the s.e.c., all of a sudden he is above the criticism. he said the s.e.c. did nothing under madoff. if you are going to accuse the agency, you have to talk about who is running it. i was responding to my committee colleague from florida. i thank the gentleman. mr. cummings: reserve. the chair: the gentleman reserves the balance of his time. the gentleman from florida. mr. posey: it's off point. the amendment wants us to focus on protecting people from dn --
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dishonest people. i reserve. mr. cummings: how much time do i have, please? the chair: 30 seconds. mr. cummings: let me be clear, the s.e.c. has a responsibility to dispose that information that investors need and this is one of those areas we want to protect investors with everything we have and this amendment flies in the face of that and i would hope the body would vote against the amendment. the chair: the gentleman's time has expired. the gentleman from florida. mr. posey: i appreciate the comments and once again, i inform my colleagues to support this good amendment to keep the s.e.c. on tact. their job is to protect investors from dishonest people and dishonest corporations and with the passage of this amendment -- the chair: the gentleman's time has expired.
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the question is on the amendment offered by the gentleman from florida. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. and the amendment is agreed to -- mr. cummings: yeas and nays, please. roll call. recorded vote. the chair: the gentleman from maryland requests a recorded vote. further proceedings on the amendment offered by the gentleman from florida will be postponed. it is now in order to consider amendment number 21, printed in part b of house report 112-616. for what purpose does the gentlewoman from new york seek recognition? mrs. maloney: i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 21, printed in house report b 112-616 offered by ms. maloney of new york. the chair: ms. maloneryy and a member opposed each will control
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five minutes. the chair recognizes the gentlewoman from new york. mrs. maloney: i thank the chair and i recognize myself for as much time as i may consume. my amendment concerns title 6 of the bill and the enhanced cost benefit analysis that it requires. the amendment very simply requires title 6 of the underlying bill needs to get in line behind all the critical and previously assigned responsibilities congress has given to the s.e.c. to keep consumers, investors and our financial systems safe. my amendment would require the chair of the s.e.c. to certify that the commission can perform its core mission of protecting investors and do the job it was created to do, safely maintain efficient markets and promote access to capital before it
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diverts any of its resources to carry out the new requirements of title 6 in this bill. the financial reform that we enacted two years ago, gave the s.e.c. critical new tools to oversee a multilaterally dollar market and make sure we do not get ourselves into another crises and the reforms require the s.e.c. to conduct extensive rulemaking and complete a number of critical reports. unfortunately, this congress has chosen to underfund the s.e.c. and hamper its ability to provide the required oversight of the financial industry. the s.e.c. is now facing $195 million shortfall this year alone. they are also operating on a budget that is a 12% cut from
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what the president requested. the s.e.c. needs every dollar it now gets just to carry out its core mission to protect investors and to implement d.o.d.-frank and provide enforcement. i do not believe that it would be responsible on the part of this congress to require that already strained resources be diverted from the s.e.c.'s core mission in order to comply with the new burdens of this title. the congressional budget office has made it quite clear that additional resources would have to be used to carry out the provisions of this title. imposing these new and severe burdens on the s.e.c. cost benefits analysis process would ensure that the s.e.c. would be hardpressed to carry out its regulatory functions. the s.e.c. would have difficulty
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protecting investors even when it has identified harmful practices. the s.e.c. is already required to conduct a cost benefit analysis. and recent court cases prove that if the process has been insufficient, the s.e.c. must start over. last year, for example, the s.e.c.'s proposed rule on proxy access to give shareholders more of a say into the activities of companies, the court of appeals for the district of columbia very directly state that had their cost benefit analysis had been inadequate. that represents a very real and very effective existing check on the s.e.c.'s authority. but title 6 of this bill will effectively shut down the s.e.c.'s rulemaking process all together by requiring significant resources be directed to burdensome new requirements. so that i believe before we hobble an agency that keeps
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consumers, investors and the financial sector safe, it would be wise to require that the chair of the s.e.c. must certify that it will still be able to carry out its core mission before this provision can go into effect. also because we already have a cost benefit analysis. and in the wake of all the costs, the pain and the dislocation of the great recession, we should not now crip will the s.e.c.'s ability to do its real job, that of protecting investors and our financial markets. i urge my colleagues to support this amendment. and i reserve the balance of my time. the chair: the gentlelady reserves. for what purpose does the gentleman from arizona rise? mr. schweikert: i rise in opposition to the amendment. the chair: the gentleman is recognized for five minutes. mr. schweikert: to my friend
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from new york, this is sometimes one of those amusing moments where we are both referring to the same litigation as part of our argument against the my side and for her amendment. someone making the point that in proxy rule litigation demonstrating that the s.e.c. actually didn't do the proper job and actually that's what the court stood up and told them. one of the reasons -- and maybe this is just the classic funnel -- fundamental different view that what they should be doing to protect investors and working towards capital formation, you would think that the chairman of the s.e.c., instead of moving this to the bottom of the ranking, it would be at the very, very top. you would think actually in many ways you would want to rewrite this amendment and one of the very first things that the s.e.c. chairman does is say hey,
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we did an appropriate, detailed, cost-benefit analysis for this new rule and regulation and here's the impact it has on the economy, here's the impact it has on job creation. if we stand here repeatedly say how much we care about jobs and economic growth, woy think that would be the order you would want to be pursuing. not in many ways, but what the amendment does, it does the reverse and lowers it to the bottom of that ranking. with that. i reserve. the chair: the gentleman reserves the balance of his time. the gentlewoman from new york. mrs. maloney: how much time remains on both sides? the chair: 30 seconds. mrs. maloney: 30 seconds? in the response to my friend on the other side of the aisle, our regulations did not cause the great recession and did not cause the loss of jobs. what caused the loss of jobs was the lack of regulation and the
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lack of enforcement and certainly areas, large swaths of the economy that were not regulated at all that brought on the great recession. and it was the regulations that d.o.d.-frank has put in place and restoring the strength of the s.e.c. to protect our investors and protect our economy and putting hurdles and blirble expenses in front of the s.e.c. when they don't have the money to enforce the new laws and things they have to do. they are very overburdened. this is a reasonable amendment and i urge its passage and my time has expired. the chair: the gentlewoman's time has expired. the gentleman from arizona. mr. schweikert: just one quick comment. i'm part of the belief system that one of the great burdens right now in economic growth and to sort of that next generation of what's the next world of jobs
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that will be coming into our economy, how we are going to form the capital, how are we going to see what our future looks like is what we are debating here. and i do believe the massive growth in the regulatory environment in the last couple of years is stopping that next generation. think of the last decade and i'm doing this from memory, but a decade ago, the s.e.c.'s budget was about $300 million. today i believe it's $1,350, 000,000 to give you some sense of how much massive increase has moved into the regulatory body. and with that, i yield back. the chair: the question is on the amendment offered by the gentlewoman from new york. those in favor say aye.
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those opposed, no. in the opinion of the chair the noes have it. mrs. maloney: i request a recorded vote. the chair: the gentlewoman requests a recorded vote. pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentlewoman from new york will be postponed. it is now in order to consider amendment number 22 printed in part b of house report 112-616. for what purpose does the gentleman from illinois seek recognition? mr. manzullo: i have an amendment at the desk. the clerk: amendment number 22, printed in house report 112-616 offered by mr. mann zuleo of illinois. the chair: the gentleman from illinois, mr. mann dual hoo and a member opposed each will control five minutes. mr. manzullo: i recognize myself for two minutes i'm offering an amendment to h.r. 40778 with my
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good friend from north carolina. this amendment would codify some of the administration's own policies regarding scientific integrity. in march of 2009, president obama announced a new policy on scientific integrity. this amendment requires agencies to follow their own scientific integrity guidelines. it's important to consider the nature of federal regulations has been changing with more and more decisions being made without developing formal, final agency actions. instead we see more and more policy changes being made through the issuance of guidelines through the development of agency listings. they will tell private parties that the guidelines are not really regulations because they aren't final actions, but the impact of the marketplace should be pretty final. the amendment codifies the requirement that the director will require each agency to develop guidelines to maximize
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the quality, objectivity, utility and integrity of scientific information used by federal agencies. the amendment requires appropriate peer review to the disclosure of scientific studies used in making decision. and requires federal agencies to give the greatest weight to information based upon data that is developed in accordance with scientific method. these agency actions it does not make them subject to challenge by stake holders. i hope my colleagues consider this amendment an objective, bipartisan attempt at improving the regulatory process. the chair: to does the gentleman reserve? mr. man sioux zoe -- mr. manzullo: i reserve. the chair: for what purpose does the gentleman from maryland rise? mr. cummings: i rise in opposition to the amendment. on first read this amendment may sound like a good idea.
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however, its true effect would be to put the director of the office of science and technology policy in charge of deciding whether any agency in the entire executive branch can make policy decisions. the amendment says that no policy decision issued by any agency after the end of this year can take effect until that agency's guidelines on scientific integrity have been improved by the director of the office of science and technology policy. i agree that agencies should have strong guidelines on scientific integtism in fact, agencies are already required to have such guidelines in place under a memo issued by president obama. however, it's not realistic to expect that the office of science and technology policy could approve guidelines for every agency by january 1, 2013. the amendment would undermine the spegity of science in the
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federal government by jeopardizing the ability of agencies to use our best science to protect americans' health and safety. specifically, the amendment would block any listing, labeling, or other identification of a substance, product, or activity as hazardous or creating risk to human health, safety, or the environment. under this amendment, for example, the f.d.a. could not alert the public about a defective drug. the department of homeland security could not implement safety measures to screen for terrorists. and the nuclear regulatory commission could not recommend an evacuation zone if there was a nuclear accident. this amendment, i'm sure, is well intentioned but the way it has been drafted makes it dangerous. i urge my colleagues to vote against it and i reserve the balance of my time. the chair: the gentleman reserves. the gentleman from illinois. mr. manzullo: i yield to mr. mcintyre of north carolina for two minutes.
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the chair: the gentleman is recognized for two minutes. mr. mcintyre: i rise to speak in favor of the amendment congressman manzullo and i propose to improve h.r. 4078. our amendment would make a sensible and needed adjustment to the nation's regulatory process to instruct them to issue guidelines on the integrity of scientific guidelines. this is a goal not only supported by many members of congress from both sides of the aisle but also by the administration. in march of 2009, the president issued a memorandum directing the office of science and technology to require federal departments and agencies to develop procedures for restoring scientific integrity to government decision making. last year, the government issued h.r. 1653 saying that they should ensure the integrity of any scientific
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information and process used to support the agency's regulatory actions, end quote. our amendment, which is based on bipartisan legislation that congressman manzullo and i introduced earlier this year, builds on the president's action, has bipartisan support and codifies the requirement that the director of the office of science and technology compel each federal agentity si to develop guidelines regarding the scientific information used by federal agencies. additionally, this amendment would clarify that scientific information be supported by peer review when appropriate, ensure that scientific studies used in -- be disclosed to the public and require an opportunity for stake holder input. this is just common sense. it requires federal agencies to give the greatest weight to data developed in accordance with the scientific meth and it would provide grounds for any agency's actions that violate these glipes that they have to be deemed arbitrary and subject to challenge by the affected stake holders this common sense
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amendment requires maximizing the quality and integrity of scientific information used in the regulatory process and i encourage my colleagues to adopt this bipartisan amendment. the chair: the gentleman's time has expired. the gentleman from maryland. mr. cummings: i reserve. the chair: the gentleman from illinois. mr. manzullo: how much time do i have? the chair: the gentleman has one minute remaining. the chair: i recognize mr. fincher of arkansas. mr. fincher: i rise in strong support of mr. manzullo's amendment which urges the federal government to develop scientific integrity policies when a federal agency implements a rule or regulation. science should be at the heart of the federal agency decision making. right now, the pork producers in my state are fighting the f.d.a.'s concerns about using antibiotics in animals when
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there's no scientific evidence in those concerns. this is why i introduced house resolution 98 last year which would send a bipartisan, common sense message to the food and drug administration to rely on scientific fact in its development of rules and regulations. pr man sioux hoe's amendment gos further, guiding all agencies on a path toward scientific integrity, not just the f.d.a. i would like to remind my colleagues that americans are constantly facing the challenge of widespread and needless interventions in their life. why let this continue through our agencies' misuse of science? i urge my colleagues to support the manzullo amendment and yield back the balance of my time. the chair: the gentleman's time has expired. the gentleman from maryland. mr. cummings: madam speaker, after hearing the arguments of the other side i'm going to rest on what i've already said. i think i've made it abundantly clear why this is not an appropriate member and with that i hope the house will vote against it and i yield back. the chair: the gentleman yields
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back. the question is on the amendment offered by the gentleman from illinois and the gentleman from north carolina. those in favor say aye. those opposed, no. in the opinion of the chair, the noes have it. the amendment is not agreed to. pursuant to clause 6 of rule 18 -- i'm sorry, the amendment is agreed to. the chair thanks the gentleman from illinois. pursuant to clause 6 of rule 18, further proceedings on the amendment -- the amendment is agreed to. it is now in order to consider amendment number 23 printed in part b of house report 112-616. for what purpose does the gentlewoman from wyoming seek recognition? mrs. lummis: madam chairman, i have an amendment at the desk. the chair: the clerk will
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designate the amendment. the clerk: amendment must remember 23, pripped in part b of house report 112-616, offered by mrs. lummis of wyoming. the chair: pursuant to house resolution 738, the gentlewoman from wyoming, mrs. lummis, and a member opposed, each will control five minutes. the chair recognizes the gentlewoman from wyoming for five minutes. mrs. lummis: i have two amendments made in order under this rule, however, i will offer this amendment and intend not to offer my second amendment with thanks to those i have been working with across the aisle, thank you, mrs. maloney. the equal access to justice act was passed in 19 0 by a congress concerned that everyday citizens could not afford to challenge the federal government in court when they had been wronged by government regulations. as originally designed, eja would reimburse small piss, seniors and veterans for
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successfully challenging the federal government in court when no other law provided for that reimbursement. it was a -- it was a good idea then, it remains a good idea today. for 15 years, the law has worked mostly as intended but over time, cracks in the system have formed. upkating eja has become necessary to repair those cracks and to ensure eja's viability into the future. three issues need to be resolve. first, we need to ensure that our nation's veterans, senior, and small businesses have access to qualified attorneys. right now, eja puts up unnecessary roadblocks to these legitimate users. second, we need to close loopholes that have allowed eja to be exploited by those dissatisfied with reimbursements provided for them in the nation's environmental laws. and finally, we must reinstate tracking and reporting
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requirements so that congress and every american has an accurate accounting of how much taxpayer money we spend to reimburse attorneys. all three of those issues are addressed in h.r. 1996, the government lit fwation savings act, but this amendment -- the government litigation savings act, but this amendment, the one we're debating right now, only addresses the third issue, the transparency gap in eja. as recently released g.a.o. reports make clear, there's a severe lack of information on these payments and while we don't need that data to know exactly what's been happening with eja in recent years, going forward, we need robust tracking as a management tool to ensure that eja works as intended. tracking and reporting of eja payments is the part of the government litigation savings act that has broad agreement. i greatly appreciate the works of the chairman of the
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judiciary committee and the ranking member of the judiciary committee have put into this issue. we have come a long way on this and the bill has benefited from constructive input from both sides of the aisle. and we must continue to work together to provide a fair market rate for lawyers who represent veterans, senior, and small businesses as well as instituting a reasonable eligibility standard. both of these issues require further deliberations and i'm hopeful that the chairman and ranking member will commit to working with me to further update eja as i am committed to working with -- working with them. in the meantime, let's pass this transparency amendment, the third leg of the three-pronged need to address the eja issues and this is the one on which we all agree. this third issue of transparency. mr. chairman, i appreciate -- excuse me, madam chairman, i appreciate your time and i reserve the balance of my it.
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the chair: for what purpose does the gentlewoman from new york rise i? mrs. maloney: i rise in support of the gentlelady's amendment. and i would like to add that this amendment is -- the chair: without objecon, the gentlewoman is recognized. mrs. maloney: thank you, madam chair this amendment is one of two amendments mrs. lummis had submitted. she has indicated that she will not be offering her other amendment and we are very pleased as we have we had some serious concerns about that amendment. this amendment i am support ofing, though. it would require federal agencies to gather valuable data and would require the administrative conference of the united states to issue a report based on that data. this report would help taxpayers and congress determine where taxpayer funds flow under the equal access to justice act. this amendment has merit. we should have mechanisms in place to crack where taxpayers'
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money goes and the report this is amendment requires would help congress conduct more thorough oversight over federal agencies. there are still some concerns that some have raised about the extent to which the data will be made public. this data could include names of social security claimants and veterans who bring claims under eaja and this may have a chilling effect on those claimants. we are willing to work with mrs. lummis to address thees concerns. mrs. lummis herself has raised more specific concerns with how eaja has been used and urges congress to amend the act this ecommittee held a hearing and marked up her bill, the reported bill contained several needed improvements to address many of our concerns on this side of the aisle. we thank her for working with us on these changes. the bill still needs some more work and we will continue to work with her to address all of our concerns. i urge my colleagues to support this amendment.
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the chair: does the gentlewoman yield back? mrs. maloney: i yield back. the chair: the gentlewoman from wyoming. mrs. lummis: i thank the gentlelady from new york and i wish to yield the balance of my time to the gentleman from oklahoma, mr. lankford. . the chair: the gentleman is recognized. lampinglanching i rise in support of this amendment. and how the equal access to justice act is being implemented. unfortunately, it seems some special groups, environmental groups of late are abusing eaja to advance a special agenda. this amendment does shine light on who is receiving attorneys' fees by revising and improving eaja's reporting requirement which has not been revised in many years. taxpayers need to know how the money is being spent regardless of the special interest group. to what extent that finance is
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being used to advance any ideology. i'm grateful for the bipartisan support. and i yield back. the chair: the gentleman yields back the balance of his time. the gentlewoman from wyoming. the question is on the amendment offered by the gentlewoman from wyoming. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it and the amendment is agreed to. the chair understands that amendment number 24 will not be offered. mrs. lummis: that is correct. the chair: the chair thanks the gentlewoman from from wyoming. it is now in order to consider amendment number 25. for what purpose does the gentleman from florida seek recognition? mr. posey: i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 25 printed in part panch house report 112-616 offered by mr.
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possessy of florida. the chair: the gentleman from florida, mr. posey and a member opposed each will control five minutes. the chair recognizes the gentleman from florida for five minutes. mr. posey: i would like to yield myself such time as i can consume. mr. posey: the banksers have reported to me they have seen as much as 300 million leaving the united states banks for overseas banks. why is this money leaving the united states? adoption of this amendment will stop hundreds of millions of dollars, soon to be billions of dollars if this amendment is not adopted. this is according to studies by the internal revenue service. for nearly 100 years, the united states has had in place a policy that encourages foreigners to put money in our banks. we have told them that the united states is welcoming and a safe place for their deposits.
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earlier this year, apparently clueless about the financial conditions we are in as a nation, the i.r.s. finalized a new rule to take effect january, 2013, that basically assumes the message to law-abiding foreign depositors that u.s. banks don't want their money. under this rule the united states would no longer provide the confidentiality that they have had and that they need. the new i.r.s. rules are to impose new reporting requirements. they will simply withdraw their money and put their money to work around the world. this is bad for the united states economy. it has been a strong bipartisan opposition to the i.r.s.'s proposal. the entire florida delegation, all 25 members, republicans and democrats, every republican and
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every democrat, wrote the treasury last year asking them to withdraw the regulation. bipartisan letters have gone to the internal revenue service urging them to withdraw the regulation. and bipartisan legislation has been filed in the house and senate to stop the regulation. each day congress refuses to act, depositors are leaving the united states for singapore, baugh ham as, cayman islands and elsewhere and this money will not return to the united states once it leaves. this capital will not be available to our small businesses and families when they need it to build in america. the new regulation will harm the u.s. economy and we must stop its implementation. the same regulation from the i.r.s. was rejected by the agency when they thought it was a good idea then. a strong bipartisan effort from congress led to the i.r.s.'s withdrawal of the rule and we must do that today.
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the economic recovery and believe that the united states should be a welcoming place for foreign depositors who want to put their money to work in the united states, i urge you to join us in support of this amendment. please vote yes and i reserve. the chair: the gentleman reserves the balance of his time. for what purpose does the gentleman from massachusetts rise? mr. frank: to oppose the amendment. the chair: the chair recognizes the gentleman from for five minutes. mr. frank: i understand that the banks in america don't like this because they would like to continue to be a place where people can come from other countries or send their money from other countries and not have it reported back home. the problem is that in america, we suffer a much greater loss from americans who evade their taxes. most americans don't. but taxes being parked in the cayman islands are a problem and we passed in 2010 a bill to try and get money owed to the united
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states that requires the cooperation of other governments. members are aware of the goirks with switzerland and -- negotiations with switzerland and other tax havens. we want you to collect taxes owed to us and we will do the same. it is the tax evade ers' bill of rights. the gentleman says they are law-abiding citizens, most of them are. why do people in the came and islands want to put their -- cayman islands want to put their money in the united states? people who put money in the united states include people who evade taxes. what this says to the united states is that we have to abandon the effort to collect taxes owed to us in foreign countries because we are telling the foreign countries, we will not cooperate with them. we have tax treat yees that we are pursuing. this basically aborts.
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yeah, americans who want to send their money elsewhere and don't pay taxes, they like this idea. the american banks -- people have said, send their money elsewhere. the notion that we should compete in a race to the bottom, the notion that we should match other countries in the absence of rules is the philosophy that gets us in trouble. i believe we will get a number of countries that will work with us, but that's the essential point. if members favor a vigorous effort by the united states government to recover taxes owed to us from elsewhere, they should reject this amendment. i reserve. the chair: the gentleman reserves the balance of his time. the gentleman from florida. mr. posey: how much time do i have left? the chair: the gentleman has two minutes remaining. mr. posey: this is about jobs, about mortgages, about the economy and this is about our communities prospering. information can be shared today on a case-by-case basis and if
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the i.s.r. suggests otherwise it isn't true. let's not forget how fortunate we are to live in the united states of america. too often, too many people forget this it seems. we live under a stable government and a relatively stable economy compared to some of the other countries we receive deposits from. many nonresidents, deposits come from countries where governments themselves are unstable and their personal security and security of their property are major concerns. it's very probable that the depositors' personal bank information could be leaked to persons in their home country. criminals or terrorist groups could make their families targets of kidnappings and other criminal activities. imagine living with that over your shoulder every day. your information is safe -- our
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-- i ask the secretary of the treasury if we would stand liable for any breaches that would cause loss of life or harm and they said they weren't willing to do that. and i resevere the balance. the chair: the gentleman from massachusetts. mr. frank: i yield the balance of my time. in fact we suffer more from taxes evaded in the u.s., i believe, than the money we have here. the point, however, is and i will when the house becomes the house, submit the comments from the department of treasury, we will not be sending this to countries with which we don't have a tax treaty. there are strong statutory requirements that prevents this information being sent to countries. maybe members don't think that is strong enough. if you would like to strengthen
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the statutory requirements to make it clear that some countries qualify and some don't , the question is because some governments would abuse it, should we protect every tax evader who wants to use the united states as a haven from having their money at the price of not getting cooperation ourselves? that doesn't mean everybody puts money as a tax evader. if you are a tax evader, there is no problem. as far as the pentagon being hacked, people have been hacked. if the i.r.s. is going to be hacked, a lot more would happen. the fact is that the security of tax returns in america is one of the best things about our government. administrations of both parties for time and memorial having protected the security of tax returns. we have a very good record as a government and shouldn't
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denigrate it in protecting the integrity of tax returns. people have filed tax returns and great privacy in them. this is the central point because some of the banks would like to get this money and not care whether people are tax evaders are not. do this by case by case? impossible task. and then the i.r.s. becomes more intrusive. you want to do a frisk of each individual and decide whether he or she has her returns done case by case? is the fundamental point, we are making inroads to collect taxes. this would make it impossible to do it with any efficiency. as i said, there are very clear statements of policy against sending this information toe venezuela. this is the question.
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are we going to allow american standards to try to impose taxes that are legitimately owed here to be eroded by other countries? the almentioned the cayman islands. i don't want the cayman islands to set the standard for american tax collection. the gentleman mentioned that the cayman islands is sending money here. i don't want them to be setting the standard for american tax collection practices for the need for america to do the right thing. those people who are investing money will not be frightened by this and america's ability to get taxes owed to us would be destroyed by this amendment. the chair: the gentleman's time has expired. the gentleman from florida has 30 seconds remaining. mr. posey: i don't know how to he get the taxpayers in venezuela, cuba or iran but put america's investments in other
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countries. according to a study from george mason, $88 billion and this is oppose todd maybe at the high side estimating we will recover $800 million from taxpayers. that is president good percentage. that's not a good investment and bad business in every sense of the word. i urge my colleagues to vote in this amendment to help our economy recover and help america stay strong. the chair: the question is on the amendment offered by the gentleman from florida. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. mr. frank: i ask for a recorded vote. the chair: the gentleman requests a recorded vote. pursuant to clause 6, rule 18, further proceedings on the amendment offered by the gentleman from florida will be postponed. for what purpose does the gentleman from oklahoma rise? >> move that the committee do now rise.
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the question is on -- the chair: all those in favor say aye. those opposed, no. the ayes have it. the motion is adopted. accordingly the committee rises. the chair: mr. speaker, the committee of the whole house on the state of the union, having had under consideration h.r. 4078, directs me to report that it has come to no resolution thereon. the speaker pro tempore: thank
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you. the chair of the committee of the whole house on the state of the union reports that the committee has had under consideration house resolution 4078 and has come to no resolution thereon. the chair will now entertain requests for one-minute speeches. for what purpose does the gentleman from massachusetts rise? the chair lays before the house the following personal requests. the clerk: leaves of absence requested for mr. culberson of texas after 5:00 p.m. today, ms. jackson lee of texas from 1:00 p.m. today through july
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26. the speaker pro tempore: without objection, the requests are granted. for what purpose does the gentleman from oklahoma rise? mr. lankford: i move that we adjourn. the speaker pro tempore: the question is on the motion to adjourn. those in favor say aye. those opposed, no. the ayes have it. the motion is adopted. accordingly, the house stands in adjournment until
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colorado. here on c-span when members come back in thursday at 9:00 a.m. eastern. the first weekend in august, visit the kentucky city named for louis the 16th on book tv and american history to be. >> we have been collecting since 1884 and we have amassed over 128 years if the nominal collection. everybody has heard of the lewis and clark expedition. what many people do not realize is that the expedition has deep roots here in louisville and kentucky. many historians believe this is the only verify animal artifacts from the expedition. the horn of a big sheet. we know from information that william clark provided and family tradition that the family used it as a doorstop. >> august 4 and fifth when they
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explore the heritage and the rick perry -- literate culture on book to be an american history tv on c-span2 and c- span3. >> it is the tradition of, not judges not to recall -- not to reply. i cannot tell you how many wonderful letters i have written to the washington post. just for my own satisfaction than they are ripped up and thrown away. you do not send them. that is the tradition of the common law judge. >> supreme court associate justice scalia reflects on 25 years on the bench and interpreting legal documents. "qday at 8:00 on c-span's &a." >> at the house hearing, treasury secretary tim geithner testified that regulatory agencies are investigating the possible impact of the libor
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interest rate on the u.s. financial system. he says he warned british authority at all possible manipulation of the libor lending rate in 2008. the treasury secretary also enters questions about the financial stability oversight council. the board created by the dodd frank law is charged with identifying risks to the economy posed by large banks and financial firms. this hearing is two and a half hours. >> the hearing will come to order. the committee is honored to welcome secretary geithner to deliver the annual report of financial stability oversight council. as previously noted, under committee ruled three f two -- 3f2, statements are limited to 8
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minutes on each side of the aisle. all members written statements will be made as part of the record. the chair now recognizes mr. fitzpatrick for one minute for an opening statement. >> thank you, mr. chairman. and thank you secretary geithner for taking the time to be with us this morning. we are interested in avoiding the next financial crisis and i think we can all agree the best place to start is by doing this. committee has examined the effect of dodd frank. it is the opinion of many that the law favors big banks and hurts small banks which in turn hurts small business. the more immediate issue remains lack of growth in the economy. an increasing marginal tax rates reduce economic growth by
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creating a strong disincentive to hard work, savings, and vesting is. increasing taxes will do more harm to our economy. i hope the fsoc will adjust the pro-growth policies americans are waiting for, lower budget deficits, smarter regulatory policy and tax code simplification that lowers rates. we look forward to your testimony. >> thank you. the chair recognizes mr. duffy for one minute. >> thank you, mr. chairman for yielding. secretary geithner, i know you are here to talk about the stability of the nation's financial system. as i travel around the northwest corner of wisconsin, my constituents feel like the system is far from stable. they are concerned about the economy. i would like to hear today your commentary on the liber scandal,
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the american debt crisis, the american jobs crisis, the american economic growth crisis, the codification of too big to fail and dodd frank. i want to hear your views on why you think this has been along best and latest recovery since world war ii and what we can do to turn this ship around. i yield back. >> thank you, mr. chairman and thank you, mr. secretary for appearing before us. your work in comments about the fsoc are so important. i consider -- i share the concern of mr. fitzpatrick regarding having a robust economy in the face of the new regulations being imposed as a result of dodd frank. the office of financial research and fsoc are working together to formulate the designation non- bank financial companies.
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i have a letter i would ask unanimous consent to be introduced into the record regarding concerns in terms of the coordination between fsoc and the ofr. and the entities themselves so that we do not create a disruptive enterprise compromising situation through promulgation rules that may not be practically applied in the real world. you have advocated for global cooperation in terms of extraterritoriality which i think is very important and one i hope you will share with the -- with us. i do look forward to your testimony regarding how we go forward in a way that will be least disruptive. >> thank you. >> i would like to welcome
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secretary geithner and thank you for your extraordinary public service. this may be the last time that you testify before the financial-services committee and i really want to make sure that my appreciation and the appreciation of many americans are expressed to you for steering us through the worst financial crisis in our lifetime. certainly in my lifetime. i would like to hear today about what it costs this country. last summer when we went up against the debt ceiling and the crisis that ensued because congress could not make a decision, the hundreds of billions of dollars, but it meant to american families. i would like to know what happened financially if we come up to that cliff again this summer.
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what is it going to mean for american families? how much did it cost america during that crisis? i also want to know the statement made earlier today by the former ceo of citibank. he said earlier this morning on cnbc, what we probably should do is put up investment banking from banking. have banks be deposit takers, have banks make commercial loans and real estate loans. have things to do something that is not going to risk the taxpayer dollars. that is not too big to fail. i feel that that is a strong statement, strong than the volcker rule calling for the
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strictest rule possible, a return to class siegel. the goal of this committee and the treasury department is not to have this type of crisis again. and the steps, your reaction to that -- i feel this statement is something we should act on. in libor, i'd like to hear your statement about what you could do or could not do. england is a separate, sovereign country. to what extent can our country imposed requirements on a foreign country? i would like to hear about the car industry. how is it that the treasury department with others were able to save 1.4 million jobs and turn an industry that was billing -- failing into an
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industry that it expanding, employing an exporting. that is a terrific story of success. thank you for your role and leadership in achieving that for american workers and in other ways. my time has expired. thank you. >> thank you, mr. chairman. good morning, mr. secretary. thank you for being here and for your service. i look forward to hearing exactly what the fsoc has done to make our financial system stronger and more secure. one of the most obvious lesson of the plan at a crisis was the system had become too complex for banks and regulators. we have become overly reliant. instead of simplifying the system and reducing the amount of jurisdictional bickering between regulators, we decided to double down on a failed system instead of consolidating
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the number of regulators and providing clear responsibilities. we rewarded the failure of certain agencies and added three more bureaucracies for good measure. i hope to hear from you what fsoc has done to strengthen our regulatory system. i would like to hear what has been done to end too big to fail. most importantly, i will like to hear what fsoc plans to do to hold regulators accountable for being asleep at the wheel during the financial crisis. i yield back. >> thank you, chairman. secretary geithner, thank you for taking your time to be with us. our bipartisan objective has to be to maximize private sector job growth and global competitiveness while also ensuring economic stability. regulations are obviously necessary but they must be sensible and balanced. the rules must be transparent, unambiguous and enforced. anything less leaves us with
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unnecessary and potential negative consequences. diminished global competitiveness, a racket enforcement, potential regulatory favoritism, higher costs and weaker economic growth and job creation. in many respects, our regulatory environment is not sensible or ballast. i do not think any of these are controversial points. president obama has called for rigorous cost-benefit analysis of existing regulations and proposed regulations. i am interested in how fsoc will contest a bird and regulations and adjust battles among regulatory agencies. i am also interested in whether you would recommend ways to simplify, and streamline regulatory agencies themselves. the new york times has called dodd frank's failure to do so a lost opportunity. i think we might also have some bipartisan agreement on that
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point. >> mr. swaggart of arizona. >> mr. secretary, almost the same thing you heard from other opening statement, we are engaged in a project where we are building a flow chart of the regulatory mechanics and try to predict some of the world propagation. the chart is becoming ridiculous. to be becoming together to move towards a single point of contact, something much more simple and understandable. has dodd frank created a structure that is unworkable for the future? a personal side area, i would love to touch on -- bonds being issued. should be moving much further up, back to the discussion of
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the super bonds. >> thank you. the ranking member is recognized for five minutes. >> mr. chairman, as my retirement approaches, a certain amount of nostalgia is inescapable. i try not to indulge it. but i am overwhelmed with it today. it is 2006 all over again. when i was about to become chairman of this committee after the 2006 election, i was besieged by the wall street journal and the chamber of commerce that we deregulate america. that if we did not dismantle sarbanes oxley and cut back on the oppressive regulation of the financial community, everybody would soon be in england or hong kong. what then happened was the worst collapse of the american economy in a long time because of the lack of regulation. people seem to have forgotten that. i am hearing again that the problems of the american economy
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are too much regulation. ben bernanke - when president george bush had an important economic appointment to make, he set for the usual suspects who were always ben bernanke. he appointed him to be on the board of governors to the federal reserve in his first full year. then he made had to cancel -- chairman of the federal reserve. he stayed at the most bipartisan person in this city. he testified before us and he listed the headwinds against the american economy. excessive regulation was not one of them. he said there are all kinds of factors but he said no, it is not a significant head wind. europe is a head wind. my colleagues on the other side have tried to retard the efforts of some to help with that. we are being told the problem is not enough freedom for the
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people whose irresponsibility cause this problem. we are being told to back off and that the regulations are too complicated for these poor people in the financial industry to understand. they did not understand their own shenanigans. that is what got them into trouble. i do want to address this question of consolidation. people said we created these new agencies. there were to agencies that had similar functions. we consolidated those. so we got what -- the rate of one and created one new operating agency, the fsoc. it gets information. the can understand there are people who do not want us to have. but we did create one in new agency, the consumer financial protection bureau. we took from existing bank regulators the function of protecting consumers and make it their primary job. it has been working very well
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although at that we have had 11 hearings now in which we have complained there is not -- there is no oversight. that is not their complaint. their complaint is that we are standing up for consumers. i will acknowledge there is one major flaw in our structure -- we should not have a separate securities and exchange commission and commodities peter trading commission. the biggest single that we have in the american financial regulatory system was the decision to not regulate derivatives at all. we made a major breakthrough in the finance reform bill while regulating derivatives. we are just now getting those rules in place because 10 people have to be involved. five commissioners of the sec, five at the tsc. that split reflects a deep cultural and economic split in america. the commodities future trading
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commission was created many years ago to deal with protecting theoretically farmers. the answer to predict security exchange committee -- i would like to get the consolidated. republicans talk about consolidation. they knocked about one out. i want to go back to the fundamental point -- the notion that the problem in america today with financial institutions is too much regulation, once a week we get a demonstration that that is not true. mr. dimon of j.p. morgan chase is a well-regarded executive, losing control of billions of dollars. they do not know how much money they have lost. capital one admitting that they had vendors who were treating people and only an independent consumer bureau stepped in. there have been problems in the
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past. a controller was not a good regulator in the sense of the banks. we have a new one and i think you will see a great deal of improvement. but the notion that our problem is too much regulation, i am a step by the people who make that comment. it is coming from people who were born apparently sometime in 2009. >> thank you, ranking member. new york is recognized for one minute. >> thank you, chairman and good morning, mr. secretary. the american people were told when dodd frank was signed that they could -- these regulatory failures would be a thing of the past but over the last two years, we have seen massive scale regulatory failures. we have witnessed the collapse of mf global. we have seen the collapse of bfg
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commodities, close to $200 million in customer funds missing. now i tremendous manipulation of the libor interest rates. i am very interested in hearing from you how do we get the american people to feel that these 400 new regulations will give them the comfort uncertainty they need to invest and come back into the markets? as someone nepalese like most americans that we have the strongest economy -- who believes like most american that we have the strongest economy, will dodd frank lead to more american jobs? i yield back. >> our last statement will come from the gentleman from texas. >> thank you, mr. chairman. the crisis of 2008 was caused by a number of factors. at this point, we can say with confidence that lack of
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authority by regulators was not one of them. instead of advancing age reform of our regulatory structure, dodd frank double down on the failures of the past by elevating the influence of the same agency that missed the last crisis. this notion that a new super council regulators will predict the next financial calamity is a fallacy. it further distract regulators from their core duties, to police the financial markets. we have already seen an example of this with mf global. this is harmful for our financial system and i am eager to look into this matter further. i yield back. >> thank you. before i recognize secretary geithner, let me say that the secretary has indicated that he must leave at noon today. to accommodate as many members as possible, the chair announces that he will strictly enforce the five minute rule. members who wait until the final
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few seconds to ask a question of the secretary should be advised that it will be asked to suspend when the red light comes so we can allow other members to be recognized. without objection, your written statement will be made a part of the record. you are recognized for five minutes, a summary of your testimony. >> i ask unanimous consent to say hooray. >> thank you. i know i have your cooperation. [laughter] >> mr. secretary, you're recognized. the only thing that will not be strictly enforced is the five minutes on your statement. >> chairman, ranking member, members of the committee, thank you for giving me another chance to testify today on the recommendations of the financial stability oversight council's annual report. >> i think it needs to be little louder. >> i am also happy to arrange
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other comments and questions you raised in your statements. we have made in a bit of progress in the united states preparing and reforming our financial system. we have forced banks to raise more than $400 billion in capital to reduce leverage and to fund themselves more conservatively. the size of the shadow banking system that has fallen by a trillion dollars. the government has closed most of the emergency programs put in place during the crisis and recovered most of the investments made into the financial system. on current estimates, the tarp bank investments will generate a profit of approximately $22 billion. credit to the business sector is expanding and the cost of credit has fallen to the thinly from the peaks of the crisis. these improvements have made financial system safer, less vulnerable to future economic and financial stress, more likely to help rather than to
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hurt future economic growth and better able to absorber the impact of billions of individual financial institutions. we still face significant economic and financial challenges. the ongoing european crisis presents the biggest risk to our economy. the economic recession there is hurting economic growth around the world and the ongoing stress in financial markets in europe is causing a general tightening of financial conditions, exacerbating the slowdown and growth. here in the united states, the economy is expanding but the pace of economic growth has slowed to a last two quarters. u.s. growth has been hurt by the earlier rise in oil prices, the ongoing reduction spending at all levels of government, and slower rates of growth of household income. the slowdown could be exacerbated by concerns about
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the approaching tax increases and spending cuts and by uncertainty about the shape of the reforms to tax policy and spending that will be necessary to restore fiscal stability. these potential threats underscore the need for continuing progress and repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run. the regulators have made important progress over the last two years in designing and implementing the regulations necessary to implement the reforms to call dodd frank. nine out of 10 of the rules with deadlines before july 2, 2012, have been proposed or finalized and the key elements of all will largely be in place by the end of this year. we have negotiated much tougher capital requirements with even higher requirements for the largest banks. we now have the ability to put
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the largest finance companies under enhanced supervision and standards, whether they are banks or nonbanks and also the ability to subject key market infrastructure firms to tougher prudential standards. the fcc is putting in place in new framer for derivatives oversight, providing neutrals and bringing the derivatives market out of the shadows. and the consumer financial protection bureau has worked to simplify and improve disclosure of mortgage and credit-card loans so the consumers can make better choices about how to borrow responsibly. this process of reform is very complicated. it is a complicated and challenging process because our system is complicated, the financials themselves are complicated. we want to target damaging behavior without damaging access to capital and credit.
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we want the reforms to indoor as the financial markets -- endure as the financial markets evolve over time. beyond the reforms enacted in dodd frank, the council put forward a number of recommendations to strengthen our financial system going forward. reforms are necessary to address remaining vulnerability is in the short term funding markets, and to mitigate the risk of potential runs in the future on money market funds and to reduce interest date credit exposure in the secure funding market. the regulators should enforce strong protections for customer funds. benigno firms and regulators need to continue to improve risk-management practices, including strengthening capital buffers about complex trading strategies and other areas.
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the council recommends further improvement in the quality and availability of financial data. the office of financial research will continue to lead this effort as it has done so over the past year. the council continues to support progress towards comprehensive housing pinelands reform that will be designed to bring private capital back into the housing market. these recommendations will build on the considerable progress made by the members of the council over the past two years in making our system safer and more resilient, less vulnerable to a crisis the stronger protections for investors and consumers. we have a lot of work ahead of us and we need your support to make these rules strong and effective. we need your support to make sure the enforcement agencies have the resources they need to prevent fraud and manipulation and abuse. i want to thank the other members of the council and their staff for the work they have done over the past year and want
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to underscore again that we look forward to working with this committee in congress as a whole to build a stronger financial system. thank you, mr. chairman. >> thank you. the chair deal to sell five minutes for questions. mr. secretary, it is widely reported that you discovered in 2007 that the world's biggest banks were manipulating libor. your own recommendations made in may at 2008 indicated there was an incentive to miss report. that raises substantial questions about the honesty of the libor submissions and presence of fraud. when did you alert the u.s. treasury and justice department of the possibility that libor
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was being manipulated and to whom did you state those concerns? >> thank you, mr. chairman. in 2008 as the financial crisis intensified and there were broader concerns about the financial strength of banks, european banks have libor -- banks. those libor rates began to rise. concerns were widely available in the market and were published in the wall street journal and other publications. at that time, this was in 2008, we took a careful look at these concerns. we thought they were justified. we took the initiative to bring those concerns to the attention of the broader u.s. regulatory committee, including the agency's responsibility for market -- responsible for market regulation and the peace. i've read the president's
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working group on financial markets. -- i briefed the president working groups on financial markets. the justice is not a member of that committee. >> you are aware of the possibility of fraud? next we were aware not just of the reports that banks were under reporting or mis reporting but that the nature of the rate set in london overseen by the british bankers' association, a rate that has an average of estimates by foreign banks of what they might pay to borrow in 10 currencies of different maturities. >> we were aware 3 u.s. banks. >> 3 at that time. we were aware of the risk, that is created not just the incentive for banks to underreport but given the opportunity to underreport.
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that was a problem. >> i know that he went to the british regulators and -- but what action did you take > you were aware that they took no action? >> the meet again explain what i did. our first instinct was not just to brief the u.s. community but to bring this to the british. i raise this with the governor of the bank of england and i sent him a detailed memorandum recommending a series of changes. >> let me ask you -- he has denied having any evidence of rigging or misconduct but according to what you supplied him, his testimony would not be correct. is that right? >> i felt that we did the important of all the appropriate thing which is to bring the attention to the people not just
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here but the british and not just the reports available in the public domain but the range of problems in the way this rate was designed. bebop those concerns to their attention. -- we brought those concerns to their attention. we felt it would be on them. >> what action was taken at that time to address concerns that libor was being misreported? ftc did was c initiate a investigation that ultimately took four years that resulted in the strong enforcement response esau announced earlier this month. -- you saw announced earlier this month. >> fleming ask you this last question -- you used libor to
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set the aig and the $100 billion -- now we know those are understated. >> we were in the position of investors around the world. in many cases, you have to choose a rate. we did what everybody else did which is to use the best rate available at the time. we are all taking a careful look. this is a matter of litigation. to what extent the rate was moved up or down or actually affected. we do not know yet what the results of those discussions will be. i cannot speak to them but you are right to point out that we
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had to take advantage of the rate available at the time. we chose libor at that point. >> thank you. >> mr. geithner, of what to get the context. what has happened here is that some of the financial institutions of the world behaved in an outrageous fashion. these were not bad guesses about derivatives. these were not over confidence about mortgages. this was conscious deception of their own self-interest done not just by individuals but an association that was given powers to self regulate in some ways. when i hear my colleagues talk about the need for more self regulation, libor comes to mind as a strong reputation. part of this that is troubling to me -- in the press, there has been an effort to blame you for this because you happen now to
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be the secretary of the treasury in the obama administration. you were an important but not one of the top officials. i did not mean to denigrate you. it has been given more importance recently than it ever has before. people want to say you were running the world back then. you had a chairman of the federal reserve setting the libor to set the rates. you have the secretary of treasury paulson. this all happened under the administration of president bush. and the working group with mr. paulson, etc. i stress that because there was a failure to be tough enough with these private sector people doing this but the notion that it was all the department of the federal reserve in new york is striking. you reported this to the
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president working group on financial reform. who are the members of that group? give me names. >> the chairman of the federal reserve, the chairman of the sec and the secretary of the treasury. probably the chairman of the fdic at that stage but those were the core members. but these were all bush appointees. i think this is a problem not of the regulators but of the private-sector and that the british because this was a burgess association. -- a british association. >> you are not a presidential appointee. >> no. >> so these were five or six people above you to whom you were reported what you found and maybe things were not done tough enough.
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so we have a situation where private banks formed in a british association but american bank participation previously misbehaved. you hear about it, reported to the financial work group consisting of bush appointees, many of whom live value highly, and some people are dissatisfied that not enough was done to take a responsibility. but ask you this about too big to fail -- the legislation says that's a large part nestle institution cannot pay its debts, it is put out of business and no money can be spent by the federal government on the process of putting it out of business. these are the -- they were for big banks. the ceo and other officers have gone. the shareholders are wiped out. that is what the law says.
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the law also said if there is any money that had to be spent to wind it down responsibly, you or your successor is mandated to recover it. what i read is, for instance the president of the federal reserve of dallas and his staff, that that's not going to work because it there was a failure, there would be pressure on you or your successor to provide federal funds to keep that institution alive. do you think that is likely? >> i would not have the authority. what congress did it change the law to limit the authority available to the regulators to protect institutions from their mistakes. >> they are then put out of business. there are some now who lament that. there is a new book out by mr.
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conrad, a managing director of bain, complaining that we have restricted the ability of the federal regulators to intervene to save an institution to much. but i appreciate your point. if a large institution fails, you would have no option under the law but to have it fail and if anything had to be done to put it out of business, you would get the money back from the banks. thank you. >> mr. chairman. good morning, mr. secretary. i do not quite understand your answer concerning the fed's use of libor. i think you have said that we acted very early in response. we were concerned about it but it appears that the early response was to keep using it which means it appears you treated it almost as a curiosity
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or something akin to jaywalking as opposed to highway robbery. i think i heard you earlier in your testimony say "it was our best choice." there are other interest rate index is out there. how can a number that you know has been manipulated possibly be the best choice? >> we were concerned about this and we did the important consequential thing of bringing it to the attention of the full complement of regulatory authorities that congress had given responsibility and authority for market manipulation of use. >> but you were not obligated to use it. yes or no? >> of course not. but we had to make a basic choice among alternatives. i think that was the right choice back then. >> to include a manipulated number and a non manipulated number? >> i would not say it this way. it was a rate that was
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structured in a way that was vulnerable to miss reporting. well we decided to do was try to initiate a reform of the process with the british but also make sure that the relevant authorities made use of it. >> we have a limited amount of time. i would like to ask another question. as i review the annual report, i see a lot of discussion of the european debt crisis. i see little discussion of the u.s. debt crisis. we know that on a nominal basis, this country has now racked up more debt in the last three years than in the previous 200. our debt to gdp ratio exceeds our economy. even the president's own budget after the tenure window states the fiscal situation deteriorates badly. the president has previously said that the major driver of long-term debt is medicare and medicaid, our health care
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spending. nothing comes close. that was in 2009. i have yet to see a reform plan or entitlements spending out of this administration. you testified before the budget committee in february and this year -- of this year. he said paul ryan was right to say being ministration is not coming before you today to say that we have a definite solution to the long-term problem. what we do know is we do not like yours. that was in february. i assume i have not missed any of the news clips that the administration has come out with a plan. so if the president says this is a major driver, we know that the head of the federal reserve also spoke about are unsustainable spending driven
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by entitlement spending. i cannot find one mention of the world -- word entitlement or medicare or medicaid. yet your own budget says fiscal situations deteriorates badly. how can this not be sided as a major factor that could disrupt u.s. financial stability? when is the administration going to move on this? job is fsoc's councils not to recommend solutions to our long-term fiscal crisis. we agreed that our fiscal deficits are unsustainable. >> what is chapter 3 of this report all about? does this not impact the competitiveness and stability of u.s. financial markets? >> we identified in the report
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that these brought term long -- brought long-term risks are a significant risk to the economy and therefore the financial system. >> you make no recommendation on what is actually driving according to the president of the united states, the debt crisis. >> i think it would be a strange thing to ask the fed to recommend a detailed medicare reform plan. that would be a strange thing. you are right to say it is a risk. the council is right to highlight the risk but i do not think it is correct to say the council should have laid out reform recommendations for restructuring 8 -- >> perhaps next time you could help me with a highlighter. >> thank you very much. according to angelo, a professor or scan lookslibio worse in the financial scam in
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the history of markets. i will like you to tell me if you think that statement is true. i would also like to know what impact this manipulation had on our financial markets and what impact it would have moving forward. take time to tell us about your series of changes that you recommended. i would like to give you time and not take all the time so please go ahead. >> let me just say a bit about the broader question and thank you for giving me the chance to do so. in the detailed recommendations we gave to the british, we identified specific things that would make it untenable for this rate to be affected by the bank s' incentive to lower their reported cost of funds. we keep them there is specific detailed changes for doing that. if those had been adopted, sooner, you would have limited
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this risk going forward. right now, let me highlight a few things we think are important given where we are today. you will want to know what is next. let me just walk through that if he does give me a minute. the fsoc and relevant agencies -- the fed, the sec and tftc, are looking at how to address any potential implications of this remaining challenge for the financial system. these bodies are carefully examining other survey based measures of interest rates and financial prices overseen by private financial firms to assist in the potential there for miss reporting similar problems. they are carefully examining a broad range of potential reforms and alternatives for libor. there is a global effort led by the financial stability for which includes all of the
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world's major central banks and regulators together in a global effort to review potential reforms we are considering how to deal with the careful and delicate question of how do we make it possible for an fourth agencies -- enforcement agencies that reveals behavior that could impact the financial system as a whole? how to make it possible for them to share that information with appropriate safeguards with the relevant agencies that have responsibility to the overall functioning of the system? a very important question. we need to take a careful look at parts of the system where we rely or the market allies still on informal private bodies run by financial firms like the british bankers' association that have some formal or informal self regulatory role. a very important question your colleague referred to earlier.
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we all need to make sure that these enforcement agencies have the resources they need to do their job. you have a small town with a police department. the population of that town increases by 10, 100 times. you will need to increase the size of the police department. it is the necessary and responsible thing to do. if we do that, you will have a more powerful determined -- deterrent. in addition to the things, we will cooperate fully and be fully responsive for broader information on this and we will brief the congress on the progress of each of those efforts looking at applications and how to reduce the vulnerability of the system in the future. >> given those recommendations and the problems we have had with the economic meltdown in this country, what else can that the do to ensure
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interest rates that are being paid between the banks is fair and equitable and somehow will not negatively impact a person who is taken out a mortgage in the united states? >> i think what you should do is what you're doing. you are conducting oversight of these agencies and you should ask for periodic updates from these agencies on the reforms under way to address that risk. that is fully a profit. we welcome that effort. we will be fully responsive to it. >> thank you. i yield back. >> thank you, mr. chairman and good morning, mr. secretary. i have a question about the president's working group on financial markets. there is an article that said that if the president's group
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was briefed on financial markets in june of 2008, i assume you are president of the new york fed -- >> eight was actually in may that a breach them. -- it was actually in my that we briefed them. >> does that mean you did it or someone else from the fed? >> i went to provide -- i was not a member of the group of but i occasionally went. my staff subsequently briefed officials of the treasury. >> you're the chairman of the group right now? >> yes, i am chairman of the council. >> in relation to that meeting you had and the meetings you have had sense, do keep detailed minutes of those meetings? >> we do keep minutes of the meetings and we put them in the public record. >> , often to those meetings
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lead to policy changes were you make a decision -- how often do those meetings lead to policy changes where you make a decision and it meant changes? >> the congress gave it two different sets of authorities. one is responsibility for things like designating financial market utilities that have systemic implications. that is a specific responsibility the fsoc has. it gave a broader responsibilities to make sure you are not leaving large gaps in the system. agencies are working together, not against each other. >> not specifics. on libor, i do not want to get into the details of fraud and who committed crimes and who should be punished. i want to talk about the principle. the principle here is that
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people are complaining because they believe libor was fixed. and that it benefited somebody financially. i do not think there is a big argument on that. that is what barclays was penalized for it. but isn't this like what the federal reserve does? are today fixing interest rates all the time for the benefit of special individuals -- aren't they fixing interest rates all the time for the benefit of specific individuals? if banks get into trouble, interest rates are lowered. right now, interest rates are like zero and banks get a lot of free money. they turn it around and put it back and earn interest. they are doing quite well. it seems that there is a tremendous amount of manipulation of interest rates for the benefit of some individuals but as manipulation of interest rates harms people
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who save money. they are retired and cannot earn anything, it seems like -- in the sense of morality and economic policy, our monetary system -- everybody is as guilty of what we are accusing of libor of doing. the fed may be protected by rules and laws but isn't there something we should question about the manipulation of interest rates for the special benefits of some individuals at the fed does this? >> i would not make any comparison. i do not think they are remotely similar. the fed with authority congress gave it to maintain -- >> i am not talking about the authority but what they did. >> but the fed is doing is with the responsibility congress gave it to keep prices low and stable over time. and unemployment low over time. it is using a set of tools in
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the public interest to achieve those objectives. i would say it's a fundamentally thing from the behavior of individual banks to misreport the price they are paying to borrow -- >> i do not think we will resolve that because i have another quick question. we support change in policy -- will you support change in policy with the fed can buy debt directly? wouldn't this be better for the american taxpayer? >> for the fed to directly finance? >> by can they buy treasury -- why can't they buy treasury? the fed buys these bonds and bond dealers make money off this. >> let me be careful answer this question. i am a strong defender of to strong principles, one is to make sure the fed has a full independence and to make sure there is nothing in this
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relationship between the fed and the treasury that would raise concern that the federal reserve is directly financing the fiscal deficits of the united states. that would be something very damaging to the fed's independence and to the fiscal credibility of the united states. i do not think that is what you are implying. so maybe i should talk to you in more detail about your specific questions about the market function issues. >> thank you. >> mr. maloney, five minutes. >> thank you for your service. it is f. lee huge -- it is huge that sandy has called for the breakup of the big banks. i would like a detailed answer on what this means to the financial crisis in investment- banking and banking have been separated, what would that have meant for aig, lehman, wachovia, all of the big banks?
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i want to use my time on crisises now which is libor. and the debt ceiling crisis and what is meant and financial loss to the american families last summer and what it could mean in the future. specifically on libor, was this a british problem or a united states problem? >> it was a rate set in london that has implications far beyond london. not just the united states but financial markets around the world. >> was upset by a -- was it set by an association in the united states or elsewhere? >> it was said by a group of banks in great britain. >> for you aware of any other members of the president's working group following this issue? -- were you aware of any other members of the president's working group following this issue? >> the cftc started at that time
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-- went to their credit. >> the din york fed -- did the new york fed have what the new york fed has a range of authority, but the enforcement powers of the fed rests with the board of governors in washington, not with the individual reserve banks. but the other agencies that are part of our system involved a range of other authorities and responsibility for things like market manipulation and abuse. >> could you have taken any action as secretary of the treasury against barkley's? >> as secretary of the treasury? >> or of the head of the mirror
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fed -- of the new york fed index clerks at the new york fed -- and i have thought about this a lot -- i believe that the necessary and appropriate thing was very early in the process. >> could you put this in context in terms of the of the things you were working on in 2008? i was getting calls from my constituents screaming that there was a run on the markets. there was a fear of a complete financial meltdown. what was it like for you? what were you working on in 2008? can you put this in the context of what was happening at the time? >> at that time, we were -- it got much worse later. but at that point, the pressures
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on the financial system here and around the world was very acute and they were creating the real risk of a broader run, broader collapsed on the american financial system. the recession was already many quarters old at that point. we were seeing the economic effects of it. and it would get dramatically worse. of course, we had a lot to do at that point. but on libor, again, we were worried about this. we were concerned about it and that is why we did what we did at that point. despite all of those other preoccupations. >> can you comment that call on the debt ceiling crisis this country suffered through last summer? what the cost our country? what did it cost american families? and what would happen if we had yet another debt ceiling crisis? if we went over the cliff began? -- cliff again? in terms of the increase in
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unemployment, can you tell us what the effect was last summer for can i get together for a reasonable agreement? >> the threat of default of the u.s. economy in june-july of 2011 was very damaging. it caused economic growth to slow at a vulnerable time of the recovery. it caused stock prices in the u.s. and around the world to drop dramatically. it caused a precipitous drop in consumer confidence, magnifying the reduction in growth. it was larger than you see in a typical recession, very damaging, very substantial, completely avoidable, not necessary and it would be irresponsible to put the country through that again. >> my time has expired. this may be the last sunday testify before us. thank you for your service.
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>> mr. chairman, thank you very much. mr. secretary, thank you for being here today. i have said many times in my district and here in washington that the two worst votes i have made were the iraq war, which was very unnecessary, and the repeal of glass-steagall. i was here with many of my colleagues when president bush and secretary paulson called on the congress to bailout those who, in my opinion, where gambling on wall street. with the taxpayers' money. and we bailed out those in trouble. i didn't vote for it then, so i will take the blame on that one. but it seemed like every time the financial institutions get the in trouble, congress and the taxpayer and
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say, we need for you to help us out. well, mr. dimon admitted that they made a $2 billion mistake in investments. then it became $10 million. and the american people are tired and sick and fed up -- and i think a lot of it, if i could vote today to create public financing, we might bring some sanity to this issue that we're talking about, the financial institutions, and really have oversight that we should have. but we will not change the way we finance campaigns in you cannot change it if you wanted to. but my question to you is isn't it time to have a discussion and a debate about the reinstatement of glass-steagall? >> congress thought about that
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very carefully in the context of the dodd-frank discussions. that is inappropriate thing to do. -- that is an a proper thing to do. but they forced banks to hold much more capital against risk. that is a very important thing. they limit how large large banks can get as a whole. that is a very important thing. and as your colleague said earlier, they deprive the institutions of government the ability to rescue a bank from its failures. all we can do is try to protect the economy from the failures banks willie bennett -- will and a -- will inevitably make. our job is to make sure that, when they make mistakes, they don't imperil the broader economy and the safety people's
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savings and make it harder for businesses to borrow. and this law was the toughest, most far-reaching, most comprehensive set of protections against that same concern than the u.s. has ever experienced or contemplated. should we keep looking at what more we can do to make it safer? absolutely. you should always go back and examine the judgments in this case. but i think it is a very tough set of constraints and we should give those reforms it chance to take effect and to work. >> mr. secretary, i appreciate your comments. for too long, we continue to -- i mean, i was one of the few republicans to vote for dodd- frank. it was a decision that i made -- there was more good than bad in that legislation and maybe it would do what was necessary to bring some honesty and integrity to the markets.
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so therefore, i hope that most of my colleagues will get that chance. maybe it needs some aspects to go through you. -- through review. but i would hope that we would take a serious look -- i joined in the h.r. 1489 to reinstate glass-steagall. i'm not trying to interpret your words, but it seems to me that if would benefit to at least have a hearing from experts, you being one, about the possibility of reinstating aspects of glass- steagall to turn -- to certain types of banks. with that, mr. chairman, i thank the secretary for his answer to my questions. >> mr. gutierrez for 5 minutes.
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>> thank you very much. first of all, i would like to go back. how did you find out about the manipulation of barkley's and the libor manipulation? how did you first find out about it? >> as i said earlier, there was a lot of concern in the market and a lot of talk in the financial markets, much of which was ultimately published in major newspapers of record, about not just the potential that banks could misrepresent what they were paying to borrow, but they were actually doing that. so we first learned about those concerns -- at least i first learned about those concerns in spring of 2008. >> and you learned about it through published news media reports? >> no, we learn from a variety giveaways. one of the things that the new york fed does is spends a lot of time talking with people in the fire might -- in the financial markets about what is going on.
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>> so what did you do as a consequence of that publicly? or privately? in order to respond to what you're seeing were manipulations in the libor rate. >> first, we took a very close look to see if there was any basis for those concerns and we thought there was. and then we briefed the relevant members of the american financial bodies, the treasury, the fed, the cftc, and others. and then we brought this to the attention of the british. >> europe the may memo, didn't you? >> we wrote them a detailed memorandum with a very set of detailed recommendations on how to fix it. there responded affirmatively to those recommendations, said they shared the concern, supported the recommendations, and would pursue them pierre >> to the best of your knowledge,
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the investigation that led to the $453 million fine against barclay's and the investigation begins where? >> that is a question you should refer to the ftc -- to the cftc. but i believe they said it was in april 2008. >> if we look at the investigation, it begins at the moment in which you were made aware as head of the new york reserve and carried out your responsibilities. then you informed the secretary of the treasury of this situation. what was the response of the other major stakeholders in our markets, in the protection and the oversight of our markets to your comments about this and your inquiry? >> i believe they share our concerns. as i said, the british, too, share our concerns.
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and the concerns we had were a sufficient basis for the cftc to instigate this far-reaching investigation. >> i want to ask about the annual report, which i am sure your dying to get to. identify risk of financial stability of the united states by eliminating expectation of government bailout, respond to emerging threats to the u.s. financial system tell us how you're doing? how is the council doing? you agree those are your three major goals. how're you doing? >> i would say it is a little early stillpoint i will tell you what i think the main challenges. we have a very complicated system of oversight that involves a lot of agencies. they are writing a set of rules that are very complicated by definition because the problems are complicated. we have a huge interest as a country to make sure they do that stuff carefully with all
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the necessary speed, but do so in a way that they're not creating new opportunities, new gaps in the system, new incentives for people to move risked. -- move risk. >> can you give as examples of measures to have taken to protect and to ensure that there are not any -- >> i think you have to step back and look at the scale of the changes that have been put in place in our system, not just by the measurement -- the measures it took in the financial emergency, but in the reforms. we moved much more aggressively than any other country than in any other time of modern times to hold these banks to hold much
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more capital. the derivatives complicated challenges, these agencies have made major progress in laying out a sweeping comprehensive reforms and give them new tools to combat manipulation and abuse. apart from the u.s. efforts to bring supervision -- from the new efforts to bring supervision, they have made mortgage and credit-card forms easier to understand so that individuals can compete for better terms and are much more aware of the risks of borrowing providing those are the best examples. the fdic has put in place a very innovative framework with a huge amount of global support to implement this important objective of the law to make sure that, when firms make big
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mistakes, we put them out of their misery with no cost to the taxpayer, with as little damage as it can to the rest of the system. they deserve a huge amount of credit for it creative and very innovative framework using the authority that congress gave them. those things in bank capital coming derivatives oversight coming consumer protection, when what some people call for large dome banks, those things are very consequential reforms. we still have a lot to do. the housing system still needs a lot of work to do in that context. >> the difference time has expired. >> thank you, mr. chairman. thank you, mr. secretary for being here. which regulator dropped the ball with regard to aig? which regulator was in charge of regulating aig fp, which is the
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division that is engaged in the risk management of the default swaps trading and led to a near collapse? were insurance regulators in charge of that or the holding company? >> i don't think there was any competent authority that was responsible and accountable for the broad entity of that complicated global system. you're right to say that both yes -- that ots had a broader responsibility, but their authority did not extend to the comprehensive oversights that would have been -- that was necessary. >> who is regulating a id right now? earlier this morning, the tarp special inspector general released a damning report about aig oversight, saying that it has had no consolidated banking
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regulator of its non-insurance financial business. and the otc is now responsible for regulating the aig's savings bank, but not the rest of the company. the federal reserve did not regulate aig before the bailout and has not regulated it since. but the fed could take over if ctarp -- but they do not think that will be in existence for too long. i take that back. the treasury -- until the treasury holds less than 50% of e, maybe -- of the aig, maybe
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the fed could take that over. the proponents of dodd-frank said it was about avoiding too big to fail and regulating the financial industry. but in fact there is no regulator for aig. house as possible? >> dod-frank gave the united states the authority to designate a non-banks financial institution, which could cause broader damage to the system, like aig, to give the council the authority to designate those firms and give the fed the ability to provide that broad comprehensive oversight you refer to. and with that authority, the
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council and its agencies are now carefully examining which of the firms out there that present that potential risk need to be brought within these broader and tougher constraints on capitol and leverage. the council is in the process of doing that. two weeks ago, a set of market utilities for the same reason and it is looking very carefully -- >> they really haven't done anything about -- there is no oversight. who is in charge of regulating aig right now? >> we are moving to put that in place -- >> but there is no regulator now. >> under the laws of the land, right now, that is true. that is why we ask for the authority in dodd-frank to move carefully. as you know, when you think about how to apply these rules to insurance companies and other
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types of institutions, you want to do it carefully. but aig is a dramatically different entity than it was in 2007. >> tarp said that there is no plan to ween aig off of tarp. could you submit the plan to tar and to congress? >> a would be happy to, but i would say briefly that we have a minimum financial exposure inequity. we have to absorb a large chunk of that. we plan to sell as much of that as soon as they can because we won nothing to do more than two -- we want nothing more than to recover the taxpayers' money. on current estimates, the taxpayer will burn a substantial positive return on the full scope of tens of billions of dollars in exposure that we took with aig.
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>> the gentle lady's time has expired. >> i am happy to respond and lay out what our broad view is of how we get out of our remaining exposure. >> the gentleman from new york for five minutes. >> thank you, mr. chairman. and thank you, secretary geithner, for your service. some stakeholders -- as you know, community banks are significant source of small business lending and we have dealt with this issue since 2008. the access to capital for small businesses and, as a result, we have a small business lending bill. some firms have estimated that u.s. community banks sustained $448 million in damages for that
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year alone. my question to you is how does an artificially low libor rate hurt small banks that operate on thin profit margins and rely more on interest income than large banks? >> that is an issue which a lot of people are taking a very careful look at. and it is a matter of litigation and an ongoing review by a bunch of agencies that should be taking a look at it. and i think it will take a little time to present to you a good answer to that basic question. but i would be happy to do that. >> loans on index to libor affect a lot of financial products. what impact will be libor scandal have on lending for
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small businesses? >> i don't think it will have any financial impact. >> how do we restore public confidence in the financial sector? >> we do it by making sure we put in place tougher rules. we give people the resources and authority to enforce those rules. and where the responsibility finds evidence of bad behavior, they should be punished for it appeared that is what it will take. i would just say the obvious. the financial system of the united states and those institutions that dominate it obviously have a long way to go in restoring the trust and confidence of the american people in their ability to protect consumers and manage the risk they face. >> ok. thank you, mr. chairman. >> the chair recognizes the gentleman from california for five minutes. >> we sent you a letter in mid-
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june and would like to ask you some of the questions we put to you in that letter. when do you expect the for will conclude the study? >> the important thing to do in part because the council has to figure out what to do with their designation authority for that mix of institutions, if anything. what they're doing right now is taking advantage of all the public information available about the risk, construction of institutions, what it means for the system, and there will be able to take advantage relatively quickly with the new exposure requirements. but they're making progress and i welcome your attention to it. i would be happy to give you
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responses to that letter. >> dodd-frank requires fsoc to coordinate with international regulators. what are you doing to ensure that the oversight -- and if there is not global coordination, what impact does that have on the u.s. economy? >> with your colleague is referring to is the requirement that we negotiated globally to put on the largest firms higher capital requirements against the capital they hold pared their forced to hold more capital against their risk that a smaller institution. we were forced to negotiate uniform rules. that is not enough. you want to make sure they are
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enforced on a common basis and that is a very challenging process to have a level playing field. so what the fed is doing is trying to work out with other supervisors and central banks ways to make sure that the rules are enforced in a consistent way. >> are you apply that to foreign regulators as well? >> yes, everybody wants there to be a level playing field. >> if we don't, it will be a detriment to our economy. >> exactly if you end up raising standards in the united states and leaving them lower and weaker outside of the united states, risk will shift to those markets and that will ultimately hurt us, too. >> recent rulemaking by the fed insures the fed ridges capital standards -- reaches capital standards. it has been criticized for being bank-centeric.
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that is a major concern, that they're getting into an area that there were never authorized to get into. it looks like it will enter replace it should not. >> we are aware of that concern. the federal reserve recognizes that, if they were in a position where they had to apply these brought standards to financial institutions including an insurance company, there would have to make some changes to to recognize the specific differences in insurance businesses from banking. they understand that and they're taking a careful look at how they would need to be adapted. if, in the end, the council decides to designate, for example aig. >> do you agree that capital standards need to be
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appropriately recognized and the difference between banks and insurance companies have to be defined where they don't splash over and one in compasses the other? i have been meeting with more and more bankers and the insurance sector is concerned that the splash over there seeing out there will have a huge impact on their services and they have not been prepared for it. >> i agree have to be adapted and modified. i think the fed shares that view, too. i'm much more confident though that they will be -- if they are faced with that need, that there will be able to do it to mitigate those concerns. >> you agree with -- you agree that the concerns need to be mitigated. >> absolutely. >> high understand your statement and i agree with that. but i want to make sure that it is implemented. i yelled back. >> thank you.
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mr. secretary, you have gone a lot of questions about libor and i think that is important. this obviously affects rates and the ability of people to get loans. but i want to dwell on that. i actually went to bill on two other things that are significantly important -- i actually want to focus on two other things that are significantly important in my community. i want to reference page four where you said that the council recommends a set of reforms that address structural older buildings, including short-term lending markets, such as money- market firms appeared to allow my constituents have money invested in money market firms. will you just and send me or tom or i can access these
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recommended reforms so i can look of that. i won't dwell on that either, but i find it important also. but i do want to talk about automobile dealerships. the special inspector general for the troubled asset relief program came out with a report. i've understand you're disputing some of the conclusions that they reached. but the fact that -- but there are facts that are hard to dispute. june 10, 2009, general motors had terminated 789 dealerships. i'm sorry, chrysler had terminated 789 dealerships and general motors had wound down
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1454 dealerships. that is a significant impact. i want to approach it from a minority perspective because the statistics indicate that the number of ethnic minority dealers was disproportionate in the number that were terminated. and the african-american-round automobile dealers were hit the hardest with a decline of 50%, from 523 dealerships to 261 dealerships. a number of those were in my congressional district when i was practicing law -- congressional district. when i was practicing law 25 years ago, i had five african- american-owned dealerships in my district that i represented. they don't exist anymore.
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so my question to you is what leverage, if any, do we still have with these automobile companies to leverage them into being more aggressive in rebuilding those minority-owned or at least in the new dealerships that are being opened, giving some preference as they had been a starkly -- had been historic way to minority dealerships? >> i would be happy to think about that question more and come back to you on it. i endorsed and your concern with it. i ended -- i am understand your .oncern with it coul as part of our effort to save the industry, in this crisis, we ended up owning a significant
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amount of common equity. we have been very careful not to get in the business of running those institutions. >> i and stan that. -- i understand that. i am not criticizing. i think it was wonderful that we bailed out the automobile industry. we would not have a domestic industry if we had not done that, in my opinion. so i am not questioning that. the inspector general says the government had quite a role in pushing the termination of these things. i guess what i am asking for is you to give some thought to how we can now go back and help to restore -- and we can talk more offline could i think i have 10 seconds left. so we can talk more. i just want your commitment to
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brainstorm with us to brainstorm this problem. >> you have my commitment. >> i yield back. >> the chair recognizes the gentleman from new jersey. >> mr. secretary, on the libor situation, you cannot have your cake and eat it, too. you have been before this committee callous numbers of times since 2008. if this is the crime of the century, never once did you ever come and mention it as being a problem. never ones to come here and say that this is what you about it. never once did you say that these would be the new regulations that you propose congress to take. you tried to pass a dodd-frank piece of legislation. never once did you say that this should be a part of it. now this comes up that this is the crime of the century and something needs to be done about it.
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knowing these problems, knowing the falsifications, why did to set up these bailout programs with the aig's situation, where we use libor in there, where we use the benchmark? and your answer is, you know, we're just -- we did what investors did elsewhere. we are just like investors around the world in mr. -- around the world. mr. secretary, you're not like investors around the world. you're the secretary of the treasury of the united states of america appeared for four years, you did not do anything about it been the banks may have made problems, but we're looking to the secretary of treasury to do what every other regulator has done and that is to point the finger at someone else. you also said that, when people do wrong things, they should be
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published appeared in the private sector, that occurred. -- they should be punished. in the private sector, that occurred appeared someone lost their job because of this. what about the new -- when will something happens when the regular is -- when the regulators did nothing about this? will they be fined? will any regulators from the top down lose their job, mr. secretary? >> congressman, in my judgment, the regulators did the necessary and appropriate thing in this context and they started that process very early. >> did you talk to congress about this? >> we did not. again, what we did -- and again, these concerns were in the public domain. it is a matter public record. having looked into these concerns and believed they were a problem, we took the initiative to brief the broader
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regulatory community so they had that information, even though it was in the press, and we pushed the british to resolve it. we did that very early and very quickly. >> the the regulators implement any changes in the banks in this country, the difference between their trading and the reporting -- when you set these programs, that you were sure the problem had been solved? >> the two things that happen, as i said in my other remarks, there will be more that has to happen. the british set in motion a set of reforms -- >> i am not talking about the british -- >> i am coming to that. and the cftc said at that time a very far reaching a comprehensive investigation that included the ftc and justice and sought tougher enforcement reaction. >> the same justice department
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was not at the table and you had not notified them. i am taken aback by the fact that there is so much finger- pointing after the fact. so we have the designation with regards to the banks. so those with over $50 billion of assets have been designated to big to fail. we have seen a doubling down in this. we have seen a consolidation in the industry. fail, theytoo big to will find they're finding cheaper. i think it is the wrong way to go. i will dropping less insulation -- i will be dropping legislation in trying to avoid this. allow them to get cheaper funding because of this, allow them to swallow up their lesser
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entities -- why would you want to do that? >> we have no intention of doing that point the law does not allow us to do that. and we would not want to do that for the reasons you said. and -- i respect your concerns -- i do not think you're right to believe that the designation itself will confer a financial advantage. let me just explain why. the purpose of this authority is to make sure that institutions that could threaten the broader economy are required to hold capital against risk and hold more capital against risk than other institutions. if you listen carefully to the markets now, i think you will find it hard to justify the view that designation is something firms would welcome. in fact, many of your colleagues are spending a lot of time trying to prevent us from designating firms because they
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are afraid they will come with constraints that will be tough on them. i've understand your concerns and i respect your views on this. >> the chair recognizes the gentleman from california for five minutes. >> i am trying to understand what is going on here. british banks lied to the british banking association. the bank of england and other british regulators screwed up and did not catch them pen even though they got extraordinary outside help from an ocean away. since some british bankers like, some british regulators screwed up, the solution is obvious. we have to blame america. in particular, we have to find an american weaken blame, preferably one of the other party. i for one am not part of the "blame america first" crowd.
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what happened in london has caused an awful lot of private contracts, adjustable-rate mortgages, etc., to be off by half a dozen basis points. that is not a huge outcome for anyone individual -- any one individual consumer. if anything, the consumer benefitted and some consumers and individual investors were hurt. today, we have american attorneys who have forms. they have mortgage forms. they have contracts bid and they all got plugged in their -- libor. and it is natural for them to want to have a dollar- denominated interest-rate sensitive adjustment mechanism in their contracts. but now most of them would prefer to have one that is not a result of a few private actors acting privately could they prefer to have a government-
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released rate or maybe one that is tied to a public market, auction market, that is so broad that it cannot be manipulated. a few in my own party have suggested that i return to the practice of law. when i go back to my old forms and they say libor, what alternative benchmarks are available? >> we are taking a look at that question. there is lots of potential alternatives to this. the challenger though is not finding -- the challenge though is not finding a rate that captures the government cost of funds. the challenge is finding a way to capture the credit risk and exposure to a bank. since people are looking at that
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question, they will look at all of the factors and review the process. >> it would be great if you could release this -- and there will be court cases where people will seek modification of contracts or prospectively or retroactively and it would be great if judges could turn to the secretary of the treasury and say, when the parties agreed to libor, they did not agree to something private and subject to manipulation. and the thing that is not subject to manipulation, the closest is a report that i look forward to getting from your department. in your opening statement, you said, as we move forward, we must take care not to undermine the housing market, which is showing signs of recovery, but is still weak in many areas. a few suggested that, while
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there are a -- if you suggested that we could eliminate the mortgage deduction and the property tax deduction. that would no doubt drive housing prices down. i wonder whether a decline in housing prices would be bad for the economy, that for the deficit, but particularly bad given the fact that today we are not just the government. you happen to own a couple of large companies -- fannie and freddie -- and obviously, if home prices go down, foreclosures go up and the cost of these foreclosures go appeared so losing -- go up. what affect would it have on the federal government through its effect on the economy and fannie and freddie? >> i think you are right in describing the effect and it is important to remind people that we have a very long way to go to repair the remaining damage in
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the housing market. i think our overwhelming obligation is still to do everything we can to give people a who cannot -- the people who can afford to make their payments to stay in their homes and repair and heal the damage that is out there. we will continue to use the authority we have and also encouraged congress that we consider legislation that makes it easier to refinance, if you are under water, for example of course, as we do those things, we want make sure we're not making long-term problems worse for the economy and the taxpayer. and we will be very attentive to that, too. >> thank you. >> the gentleman from texas for five minutes. >> mr. secretary, good to have you back. i want to go back to april 2008.
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i think that is when you were president of the federal reserve bank in new york. you first addressed the issue of libor. were you aware in the fall of 2007 that some in former e-mails were coming into the new york fed saying that there's something up with libor? >> congressman, i do not believe that i was aware of those specific concerns before the spring of 2008. but we are going back and looking at the full range of things available and make sure that you have that. >> i was looking at your response, back to the bank of england, about this disclosure. basically, i thought what you made in five or six bullet
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points, some recommendations for how libor could be more reflective. but here is my issue with that. if they were having structural problems, i thought your e-mail was appropriate. but what was being disclosed year was flawed -- was fraud, that this rate was being manipulated. the special counsel for the financial crisis inquiry committee, making a criminal referral if you suspect a crime had occurred and how manipulating even live board didn't rise to the level is a little puzzling to him and a little puzzling to me. >> i thought about this in two different ways. you had a rate set in london overseen by the british banker'' association, which, because of its design, created not just
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the incentives to underreport, but the opportunity to do that. that was a problem for a lot of different reasons. opportunity it created for manipulation, not just and reporting. so it was very important that there would be an effort to fix those problems in the rate and it -- and, of course, our first instinct was to go to the british and they said, we agree with you, we are on it. now, we didn't know if that would be sufficient or not. so we also did the appropriate thing. again, we did it at an early stage, even though these concerns were in the press. and we briefed the relevant authorities with enforcement authority and responsibility for fraud and manipulation. so that they would have the ability to choose whether to act on those concerns. and we thought the combination of the concerns in the public domain and the efforts we took
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directly with them provided more than enough basis for actions, not just to reform the structure of the rate, but to pursue the behavior that was obviously so, the question. -- so consequential. >> i spoke with mr. ginsberg current he said the information received was not from the new york fed, but from "the new york -- from "the wall street journal" article. but this was not just the british problem. you know. you have been involved in the financial markets for a long time. your very knowledgeable. you should have known that manipulating libor, with the small impact -- i mean, they are on the buy side and the sell side print some people benefit in -- some people benefitted and some were losers. the outcome of that transaction is based on that.
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there were domestic u.s. banks who were a part of that. >> i agree with you. this rate had implications for not just the united states, but for financial markets around the world. that is why we did what we did. we did not do this as something that was a small isolated incident. and you're exactly right. so we tried to push them to fix it, reform act -- fix is a bad word in this context -- and to make sure that the u.s. enforcement agencies and authorities were able to focus on -- >> i will interrupt to -- after the june memo, did you ever follow-up and say, hey, what have you done since our last conversation or our last memo? >> our colleagues did good the bankers association, at three
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separate points after we acted in this context, announced some changes to that process. but, obviously, we don't think they went far enough. >> the gentleman's time is expired. the chair recognizes the gentleman from new york for five minutes. >> i want to go back to something that mr. sherman was talking about. i am understand and i agree that the libor is very important. but what i see a continuing divide between wall street and main street and you touched on a previously that there is a lot to be done for those individuals who are under water in mortgages and that whole area. i believe we did the right thing when we did tarp. but there are a lot of questions. here is what main street says. you helped out others. why not me?
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why can i not give a lift up? an article in "the new york times" about out of the box-type proposals, whether government had used to the legal doctrine of eminent domain -- using eminent domain to purchase underwater mortgages at a fair market value then have private investors -- then homeowners would no longer be under water and be able to repair their credit rating so that they would not likely default. thus, new investors would be repaid and the taxpayers would not be involved, nothing added to the budget. i first question is, to me, out of the boss -- out of the box thinking -- have you and the treasury thought about that
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proposal? what other out-of-the-box thinking the have for underwater homeowners? >> we're looking at that proposal. it raises a lot of complicated legal and policy questions. i do think it is important to recognize that there is a broad range of other tools available for states, probably because we have provided the money. within existing adored, to provide reduction for those who have mortgages under water. we have been supportive of those programs in the programs we administer and we encourage the other agencies to take advantage of those things. we'll continue to do that and we will continue to look at those proposals and the implications. >> hemp has been a good program,
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but not too many people have been able to ticket at the jet and too many are still suffering. -- able to take advantage of it and to many still suffering. an article talks about an effort to get banks to lend money again and the central banks in europe cutting their interest that they pay on excess reserves to 0%. many banks have to pay the central bank to keep reserves with them could and this was a powerful incentive to leave their land or -- to have the banks either lend money or put money into the market appeared you -- into the market. you work closely with the federal reserve.
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would that help our economy? >> i want to be careful about the authorities that the fed has. i will tell you my general view on this. the economy is not growing fast enough. unemployment is very high. a huge amount of damage left in the housing market. americans are living with the scars of this crisis. the institutions with authority should be doing everything they can to try to make economic growth stronger. that is an obligation we all share. congress, under the constitution, has the authority for the most powerful tools we have available for economic growth. we would like congress to use those tools now in this context. and, again, we will keep supporting anything practical and sensible to get more people back to work, make credit more available to more people, not just to buy a home or to refinance the mortgage, but to make sure businesses can expand.
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we made a lot of progress doing that, lending to small businesses is growing. but we have a lot of work to do. given the damage remaining from this crisis, the obligation we all shares to do as much as we can to make sure we're getting growth stronger. >> of the gentleman's time is expired. the chair recognizes the gentleman from north carolina. >> just a note for the record, the questioning of the libor issue, it was about three months later after the libor issue came to note and you -- taxpayers are on the hook for
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that, $85 billion. mr. secretary, the unresolved eurozone debt crisis, obviously, a severe consequence for the global economy. do you agree? >> absolutely. >> that has an impact on the economy -- on the american economy, does it not? >> it has already had a significant impact, slowing growth around the world. >> you say, concerning the spanish fiscal performance, fueling doubts of adhering to strict budget targets amid a deepening recession. as a result, the euro zone area finance ministers provide assistance to recapitalize its troubled banking sector. market reacted adversely to this. it seems to me that spain has proved positive that relaxing
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fiscal targets and spending more money does not work. would spain be better off had they maintained and adhered to more austere fiscal targets? >> my own view is that the actions of the spanish government is taking is moving in the right direction. let me just explain why. you are right to remind us all that, if you have unsustainable deficits over time, if you leave them on addressed, they will hurt you. absolutely. we agree with that. but when you are in recession, as europe is a more when you're in it, growth that is still slow, you want to be careful that, when you're putting in place reforms to address those long-term questions of sustainability, and they're not -- you have to make sure that you put in reforms overtime and that they do not make the challenges worse. >> do you believe that the
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issues in the eurozone will get worse before they get better? >> it depends on the choices they make and can afford. they are doing some important and necessary things on the form side to make their economies better and more competitive. but they ought to make sure that the institutions of europe, over time, create better fiscal discipline and better management of their financial stem, which could very big and very risky and very leveraged. but in the near term, they will have to do more to make sure there is confidence in their markets and banking systems. and the countries that are doing this face lower borrowing rates. >> there might be a parallel or not, but the u.s. public debt percentage of gdp is greater than it was in spain when the sovereign was jacked up to 7% and all this action took place. do you think that the markets
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are already discounting the address consequences of the eurozone crisis on the world economy? >> there is no way to know that. you cannot tell what markets do. >> you can only tell looking back. >> even then, the you can tell e market every day is making a new assessment a bellwether european leaders are going to do enough to hold it together. they have committed to do that. they said that is their intention. they have the ability to do that. >> my question to you is what is the obama administration's plan? i know there have been numerous summits. you're spending a significant amount of time on this problem, are you not? ok. so you have any plans, large action by the world to take on this issue? what is the obama
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administration's plan? what is the significant plan you are putting forward to take on and to show some leadership on this? >> as the european leaders have said in public, we have played a role in encouraging them to move much more aggressively to contain the damage from this crisis. we have been careful to where we have the ability to help that context mitigates the pressure on us. we have done that. we have also been very supportive of the imf coming in providing some assistance in that context. we will continue to do that. but the solution to this problem will have to come from the europeans. they will have to finance it. it has to sit with their politics and economics. we cannot want this more than that. what we can do is try to put --
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as much pressure as we can on them to move more quickly and credibly to adjust this. >> the gentleman's time has expired. the chair recognizes the gentleman from massachusetts for five minutes. >> thank you, mr. chairman . mr. secretary, some people think he did not do enough in 2008. but it strikes me that these are the same people that thought you were doing too much most of the time. they do not like any regulation. they are currently in the funding and undercutting the fec and others to deregulation. they argued against every regulation on everything, no matter what it is. they learn nothing from 2008. do you think that is the best way to look for? what would you say to those people who were not happy with you did not do before and do not like when you are doing now? >> i cannot know what to say to them except to say as you did, we have had compelling evidence
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in the financial crisis of the damage you can do to the average american when you allow a system to outgrow any sensible said the protections and safeguards for consumers. that is what happened to our country. the irresponsibility of this body and of the executive branch is to make sure -- the responsibilty of this by the end of the executive branch is to make sure -- we are going to work against that because we want to make sure these reforms are tough. but you need to not does have good design and tougher rules and protections. blogs do you think the word hypocritical might be appropriate? >> i will leave that to others to say. but we need the support of this committee and congress to put these rules of dental plates and make sure these agencies have the resources they need to enforce them. >> do you agree with moody's
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comments that they made in june of this year when it downgraded 50 financial institutions on page 14. "we believe the fdic remains committed to achieving the goals set out including ending bailouts of too big to fail institutions." do you agree with their assessment? >> i try never to comment on those reports for obvious reasons but what they point out is to remind people that under these reforms, congress has limited its and evidently the ability -- the ability of the government to in the future, in and protect an institution from its failures. for that reason, if you look at the financial markets today, there's much less confidence in markets. this is a good thing fundamentally. that congress in the future will
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come in and protect them from their mistakes. >> it is also another matter that some of the same people that voted to repeal the act and the ones complaining that some banks are getting bigger today, i happen to agree with them. i voted against the repeal. the libor matter cannot be ignored today and i do not intend to ignore it but i am not interested in rehashing history. but nonetheless, since we passed dodd frank and in the last year are so, we have had the mf global issue, capital one having a significant find -- fine and now barclays with a $450 million fine. that is about 1% of their annual revenue. it is a good number but not the kind of will change anything. yet on page 9 of the executive
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summary report, you point out that the boehner abilities in the financial system can be broken -- grouped into three clauses -- classes. the incentive to take too much risk. i understand you are working on that and we will continue to do that but those are not in place yet otherwise these instances would not have happened. they took too much risk. maybe a different type of risk. but i would ask a simple question and i know this is by your place. as a member of fsoc, do you think it would be appropriate for fsoc to be in touch with the justice department to inform them -- do you think the markets would be well served if individuals were held liable for criminal activity? if there is criminal activity here. barclays has indicated there might be criminal activity in
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this libor situation but it people are doing something wrong, some point some individual has to be held as possible. i would like to hear your opinion on the matter. >> i want to be careful not to respond directly to the question you raised about these enforcement actions but i will say the following -- it is very important to this country that we have in place a very tough enforcement regime so that people who violate the law are held accountable for their actions so that they are not as held accountable the we are deterring others from engaging in that behavior. we have huge institutions try to restore a powerful enforcement mechanism and part of that is good will against manipulation and the pews. a big part is to make sure there's adequate resources available. if we start them of resources,
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they cannot do an adequate job of protecting investors and consumers. we will keep working very hard to meet that test. >> thank you. >> the chair recognizes the gentleman from new mexico for five minutes. >> thank you, mr. chairman. and mr. secretary for being here. as you respond to the questions about separation of investment banks and the independent community bankers, of a like to be included in the written response. to be includedke in that written response. i have to say you have an impressive and resume. secretary of the treasury. chairman of the new york fed. one of the colleagues is try to make some choirboy with the terrible bush appointees. you have got a really strong
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resume and you have accomplished a lot. there are critics the city did not have the next -- have enough experience for the new york fed. i think the estimation is the work with the bush administration to minimize the policies in 2008. people question whether not the actions did that or not. we can accept the fact that there discussions. i do not know that the policy. i did the congressman from the mexico. we do not have a big banking institutions. i will not sit here and give you some questions that will reach orient your thinking about the country but i have an obligation to those people who elected me to represent them. we have got the whole idea of the administration came in with, a definite change for the country. it was pitched that this is the
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hope for the peter -- for the future. we have financial difficulties that are erupting everywhere and pension system that are going to file trillions of dollars short that will make the debt in europe look small. it looks like you are not going to stay. if you do not believe in the path with you have laid out -- i am just going by what our friends on the other side of the aisle said. i am not on the inside. so if you're going to go or even if the state, why should people f new mexico -- they're all 99%. why should they believed in -- in you or the policies he said in place? >> let me say a few things in response. i believe very strongly that this country, this economy is a much stronger place than it was
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when the president took office. by every measure, we are in a dramatically stronger place and much better position to deal with the challenges still ahead of us. not just on our fiscal deficits and the remaining problems people face getting a job or keeping a home. i also believe the policies we have laid out in before the congress are the best way to make the country stronger, not just go back to living with and are means of making sure we are making the economy more competitive in the future. i am committed to those things. you are right that i am in public office terry i have a privileged and making lots of decisions. those decisions will be controversial decisions. i have taken a lot of criticism for adjustments i have had to make on both sides. all i can do is what i think is in the public interest and to
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help president deal with the country. those adjustments will be viewed -- those judgments will be viewed and i fully respect it. but all i can do is make sure i am doing things i think are in the public interest. >> i appreciate that. on page 4, you talk about the budgetary trends are unsustainable. in your written testimony, you talk about the fact that the budgets are being cut in government spending is being cut causing a week is to the economy. the report talks about budget trends being unsustainable, it is talking about the debt and deficits or the cutting and spending occurring? >> it is to the government spending is falling across the american economy and that is making growth weaker.
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it is also true that our long- term deficits are unsustainable and would be good for the country for congress -- the deficits are too high and if left unaddressed, our debt will grow to be too large. >> let me finish up here. i does have a second. you spend a lot of time talking about the debt discussion but almost no time talking about that and i think that is a huge indication -- if you could give that in writing, that would be great. >> the gentleman from missed -- from massachusetts. >> mr. secretary, i want to thank you for help with this committee with its work. there has been a document refer to a number of times -- referred to a number of times. this is regarding your response back in 2008.
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there were a series of articles that came out in the british press about a possible manipulation of libor by some of the british bank. he had an opportunity. he responded --0 your responded. -- you responded. back then, it was secretary paulson, ben bernanke at the fed, chris cox and cftc. >> there are other agencies represented but the -- it was the head of the agencies. >> after you informed them, i have a document that has been mentioned a few time -- a memo dated june 2008. it is the cover page that says it was delivered the previous
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tuesday, i just to mervyn king. was to the governor of the bank of england at that time? >> yes. >> and is from you. can i have somebody -- i want to put a fine point on this. you talked about your response but it seems to be ignored. i want to make sure this goes into the record and that we have a clear understanding of what you actually did when you are at the federal reserve bank. it has here a -- recommendations for enhancing the credibility of libor markets and research and statistics group. do you recall what the recommendations that he may wear? this is unfair, i have the document, you do not. that would help. thank you.
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to save time, maybe you can look at the document and say exactly what it is rather than me asking you these questions one at a time. >> there are s -- six recommendations. strength in government and establish a credible reporting procedure. increased the size and brought in the composition of the u.s. dollar panel. add a second u.s. dollar libor fixing for the u.s. market. specify its transaction size. only report the liable maturities for which there is a net benefit. eliminate incentives to misreport. each of the subheadings, we gave a series of specific suggestions. what that goes to explain as -- is in significant detail, the range of potential boehner abilities in the way this thing is being run. >> exactly. mr. chairman, i would ask
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unanimous consent that this memo from the head of the federal reserve bank of new york to the governor of the bank of england be accepted into the record. >> without objection. >> thank you. secretary, there is also an article that came yesterday in the press and i cannot lay my hands on that but it talked about the fact that a lot of the requests for manipulating libor came from traders who were asking to lower libor as opposed to coming from lenders asking to raise libor to enhance their loan portfolios. in this article, it talked to the fact that for berkeley's and other banks, two-thirds of their
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depository assets were invested and used in their trading portfolio of and only one-third of their depository assets were used for making loans. so there was a bigger upside if they could lower libor and enhance their trading positions as opposed to raising the interest rate to enhance their low performance. this goes back to what the volcker rule is trying to get at. i just want to know, do you think that that fact that ba nks -- this goes to what was talked about this morning that maybe we have to go back and look and what banks are doing.
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and if we're going to have the taxpayer supporting their conduct and the performance of their basic businesses tackle the gentleman's time has expired. >> is it better to separate the risk-taking versus the traditional lending? >> good question. in response to have to think about the volcker rule in this context, i am happy to respond more to the numbers question. >> the chair recognizes the gentleman from pennsylvania for five minutes. >> thank you, mr. secretary for your testimony and time today and for the report. i want to follow up on the question asked regarding annual budget deficits and a growing national debt. in the report, page 8 entitled potential emerging threats to the united states financial stability, you read that threats
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to financial stability like threats to national security are always credited. a couple of years ago, admiral michael mullen when he was chairman of the joint chiefs of staff said the greatest threat to our national security is our national debt. its stock to allow the people. do you agree that the growing national debt is a significant threat to our economic and financial security going forward? >> if left unaddressed, our long term fiscal deficits would damage the american economy. i agree if left unaddressed, that would be true. >> honey morgan jr. secretary treasurer under franklin roosevelt. he has often been quotes recently. he said, "we are spending more
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money than we have ever spent before and it does not work. i want to see this country prosperous, i want to see people get a job. we have never made good on our promises. i say after eight years of this administration, we have just as much unemployment as when we started and an enormous debt." what's different between then and what is happening now in light of secretary's comment? >> good question and context. chairman greenspan and others have said this crisis was caused by a shock, a storm much larger than what caused the great depression but because of the things we did, and we were able to get the economy growing again much more quickly. the economy is much stronger than was at that time in history that you refer to and much stronger than it was when we came into office. the fiscal challenges we face --
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you were right to say they are unsustainable but these are manageable challenges for our country at this time in history. there are much more manageable than what is faced by many countries around the tree -- the world. the challenge reface -- we face is to decide how to do it. we have to balance the obvious concern. we need to have growth stronger but also we have to protect our national security interests and make sure we protect the basic safety net for retirees and low- income americans. we will have to make tough choices about what we do for education, infrastructure, incentives for investment, so we make both stronger over the long run as we figure out how to make sure we make those commitments to retirees and low-income americans more sustainable over time. i think that is the challenge. that is what separates us. not a recognition that it's
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unsustainable but a debate about what's the best composition of spending, savings and tax reforms to return sustainability. >> normally is a budget resolution. would you agree to bring this back down to manageable levels budgetdn't passing in resolution in both houses put this on a path towards getting the deficit under control? >> i know where you are coming from but you are right, congress has to act. it will not happen on its own. it is not enough for us to propose things. congress has to come together and negotiate remarked that brings these reforms in place. -- negotiate framework that brings these reforms in place. >> section 112b2 of dodd frank
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requires a sign pavement indicating what reasonable steps such member believes the government should be taking to ensure financial stability yet neither the annual report or any individual member has recommended the senate democrats pass a budget resolution. >> that is true but it would be strange if you ask the fdc to tell congress how it would restore fiscal sustainability. there is nothing standing in the way of congress taking more action or some action to reduce these deficits. except that you need both sides to come together on some agreement. >> yield back. >> the gentleman's time has expired. the gentleman from north carolina is recognized for five minutes. >> secretary geithner, you have said today and previously that you and others at the new york fed became aware in 2008 that there were concerns about libor and it was vulnerable to
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manipulation. it was essentially an honor system. there were incentives to misreport and there were rumors that that was in fact happening and the new york fed conducted investigations and decided there was a basis for those concerns. and passed along the concerns to the fsa and bank of england as well as the members of the president's working group. but among the documents released by the new york fed is a transcript from a telephone conversation on april 2008 between an employee of the fed and an unnamed barclays trader in which the trader said they were reporting about 20 basis points lower than what it would really cost them to do it. that when it posted an honest libor rate, there was an article that they were coming in higher
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than the other banks. there is an implication the other banks for also misreporting. but when that happened, there was an article in the financial times the raised questions about barclays. barclays stock went down so they decided they were not going to report accurate libor any more. he said we know that we're not posting on and on his libor and the reason they did was not to have questions about barclays financial conditions. this was a month after bear stearns and jp morgan chase. did you know of this conversation? >> congressman, i did not believe i was aware of that specific conversation but i did not need to be made aware of that. the concerns about the structure of the rate and the brought
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concerns across the market about what could be potentially happening, we saw a sufficient basis to do the things which was -- >> this conversation is not just about the vulnerability of libor to manipulation but in fact, an admission that it was being manipulated. that there were false reports being filed by someone involved in it. i asked chairman bernanke last week, is there any element of criminal fraud that is not committed to in this transcript? >> there is a set of lawyers double answer that questn and you can be confident they will do that but on the basic point, we had a sufficient basis based on what the market was saying was happening. and the way this thing is designed, on which to take the
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actions we took. >> i understand that. what were you told this conversation or others like it that not just -- it was not just theoretically possible but participants in libor admitted they were misreporting. were you told it was not just a theoretical vulnerability but in fact it was happening? >> i believe that's -- that this was not, we were not concerned of the theoretical vulnerability. we were concerned about the range of different reports that are out there with upper credible. that things were actually misreporting. it was not on the basis of its theoretical concern that we did the things we did. those reports were plausible incredible and that is why we took the steps we did. >> you said the justice was not part of the president's working
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group. so you did not report this conversation or any others like it to the justice department? >> i want to be careful about this. my colleagues at the fed are going back to the records but i do not know what the new york fed staff did in terms of who will stay informed about. >> but you did not? >> i did not. >> mr. secretary, you also said earlier that the litigation was certainly possible and they contemplated various lenders to had filed suit or contemplated litigation against the libor banks are having -- got paid too little in inches. are we pursuing claims to get back some of the money that we did not get because libor was artificially low did during that time?
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i do not know whether we were disadvantaged by this practice. obviously we will take a careful look at that. we also do not know what the net effect was of this behavior on the prices. as many of your colleagues have said, some people believe that those who borrowed money generally benefited. people who lend money generally did not benefit. it is not clear that is the case but that is subject to a very careful and extensive be viewed by a lot of people. it will take some time for them to figure that out. >> the gentleman's time has expired. to honor our commitment to make sure the secretary gets out on time and to make sure we are getting as many questions as possible, the chair will recognize the gentleman from michigan for three minutes. >> thank you. i would like you to expand and revisit -- i was watching squat
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box this morning and then saw the crawler. he did go back and revisit it. i do not know if you had a chance to see it or -- but i would like to get your reaction both here and in debt. if you have any reaction or comment. >> i have not seen those comments to know what he meant. but on the broader question about laying out to this committee the extent of the actions congress has authorized and taken to limit this risk, i would be happy to walk you through that as much as he would like. it struck me that maybe he was getting at the too big to fail element and the question of whether some the ordination -- organizations are too big. >> that is a widespread and common subject of concern and it is something people will be looking at for a long time. i think it is important to recognize that we did force the
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space to hold much more capital against the risk they take. we have forced a dramatic restructuring of the financial system. congress put in place limits on how large they can get and deprived the government of the ability to rescue them from their mistakes and that is significant ways. if you look at the net impact of those actions on how the market perceives the risk of too big to fail, the market's perception is diminished significantly. i am not saying that is the end of the story. >> i want to touch on the reserves here in the remaining time. you talk about $400 billion increase in reserves and the cost of credit has fallen. it strikes me that whether it is denmark, switzerland, countries out of the eurozone, the united states is color -0
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- is gulliver. it's now we're doing so great but maybe that everyone is such a mess. i had a very prominent economists who put out an e-mail today to its clients -- his clients regarding those reserves and he was saying reduced access to reserves by the fed was $100 billion and that means there is $100 billion less. i e-mail him back looking to hear his answer but it does seem that his argument is that it runs counter to a lot of the goals, some of those reserve requirements. on one hand, requiring additional reserves yet on the other hand, lowering interest rates for quantitative easing and other things. is it truly a liquidity problem or do we have other issues? >> i would be happy to look at
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his concerns if you want to share them with me. i think those are combining to different things. there is $400 billion more capital in the financial system than there was before the crisis. it makes the system safer. >> is that because of the reserves? >> that is the differencing. i think you are referring to a question about access reserves in the banking system and what that does. but i would be happy to take a look at his concerns. >> i appreciate that. people may be put that down in writing. thank you. -- we will maybe put that down in writing. thank you. rex secretary geithner, there has been a request from some of my colleagues to see if we can have an equal number of members on this side ask questions. we would like to ask you to stay
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for an additional three minutes. the chair recognizes the gentleman from texas. >> thank you, mr. chairman. you indicated that the economy is in much better shape now than when the president took office. i am bringing this to your attention notwithstanding libor and fsoc because if you're not very careful, the fatuous will be perceived as fact. i think it important for you to reiterate the condition that this economy was in when we took office and juxtapose that to where we are now so we can move forward with a much better opportunity. i would like to yield time to -- do not allow the fatuous to become fact. >> we have a long way to go. we have to be honest and open.
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the u.s. economy was shrinking at an annual rate of 9% in the last quarter of 2008. we are on the verge of a plausible chance for the american financial system to collapse at that time. trillions of lost well in six months later -- lost wealth and six months later, the economy was growing. the economy has been growing for three years since. not fast enough. the reason is because of this combination of concerns you are all aware of. europe is hurting us, spending is declining, not increasing by the government, and people have been bringing down their debt and try to fix some of the problems that got us into this mess. we have a long way to go but we are definitely in a stronger position. >> to be more specific, we have incredible people say incredible
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things and i'm sure you're aware of the statements. we were about to lose the american auto industry. i think you agree. do you agree that the auto industry is in a position now that it is coming back? >> i do. >> at that time, the president came into office, the financial system was almost in collapse. do you agree that it has been stabilized and that it is now in much better shape than it was when the president took office? >> absolutely. >> when the president took office, the you agree that economic uncertainty -- do you agree that economic uncertainty was to the extent that banks would not lend to each other? >> that is true. >> which is why you cannot structure a deal with banks to save the auto industry. because the banks would not lend to each other. there were not about to salvage
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an auto industry when they were trying to salvage themselves. true? >> true. there is no private market solution to a financial crisis like be faced. >> for those who want to lay all of this at your feet, i have heard the term black swan that - debt. >> absolutely, yes. let the debt, has expired. thank you for your time and testimony today. some members may have additional questions which they may wish to submit to you in writing. this hearing will remain open for an additional 30 days for members to submit written questions to secretary geithner and for you to replace -- to place responses in the record. this meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]
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>> secretary geithner returns to capitol hill tomorrow morning. this time, he will talk to the senate banking committee about the state of the economy and the financial stability oversight council. live coverage begins at 10:00 a.m. eastern on c-span3 and c- on c-span tonight, and look at the foreign policy prescriptions of the romney and obama campaigns.
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a state department officials on china's human-rights record. later, a house hearing on forecasting droughts. >> it is the tradition of common law and judges not to reply to criticism. be clobbered by the press all the time. i cannot tell you how many wonderful letters i have written does for my own satisfaction and then thrown away. >> you do not send them? >> you do not send them to -- that is the tradition. >> justice scalia reflect on over 25 years on the bench and interpreting legal documents in his latest. sunday at 8:00 on c-span's "q &a." >> and visit the kentucky city named for louis xvi on book to be an american history. >> we have been collecting
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since 1884 and had amassed over 128 years, a phenomenal collection. >> everyone has heard of the lewis and clark expedition but what many people do not realize is that it has very deep roots here in louisville and kentucky. many historians believe this is the only verified animal artifacts from the expedition. the horn of a bighorn sheep. we know that william clark provided it in that family used it as a doorstop. >> august 4 and fifth as we explore the heritage in their -- literary culture of louisville on book tv and american history tv on c-span2 and c-span3. >> officials from president obama's and mitt romney's campaign offices discussed the candid its foreign-policy. michelle flournoy from the
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president's campaign and rich williamson mitt romney campaign talk about the violence in syria and the national security leaks. the brookings institution hosted this 90 minute discussion. >> good afternoon, ladies and gentlemen. welcome to the brookings institution. a special welcome to the overflow crowd in the other rooms. we are glad to have the opportunity this afternoon to host a special conversation about the foreign policy approach is a president obama and governor romney, his presidential challenger. i am the director of the fallen -- foreign-policy program here at brookings institution. we had for a long time wanted to host both president obama and
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governor romney to give their foreign-policy speeches here. for reasons that will probably be cured -- clear to you, they both gave speeches at another venue, the veterans for foreign wars. i am not sure why the preferred that then you to brookings but they did. in the last two days, they have both outlined for policy. of course governor romney is embarking on a foreign trip on friday which will take him to london and then to jerusalem and warsaw. we thought it was an appropriate time to have a conversation rather than debate between representatives of the obama
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ma and ronnie campaigns. we are delighted to welcome both michelle flournoy and rich williamson. michelle is probably known to you because she served from the beginning of the obama administration through february of this year as the undersecretary of defense for policy where she was the principal adviser to the secretary of defense in the formulation of national security and defense policy. and let the development of the defense department's new strategic guidance. michelle is well known to us here at brookings and has appeared many times both when she was an administration spokesman as a senior defense
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department official and also as the co-founder of the center for a new american security, a new think tank that is doing excellent work in the field of developing national security and defense policy. she served in previous administrations as a principal deputy secretary of defense strategy and direct reduction. she is now chair of the national security advisory group of the obama-biden reelection campaign. rich williamson, ambassador, is a non resident senior fellow at the brookings institution now on leave to the campaign for governor romney. he founded the strategies group
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but at the chicago. previously he had a number of distinguished responsibilities in both the reagan, george h. ush and george w. bush's administrations. in the white house as assistant to the president for governmental affairs. his many diplomatic posts including the ambassador to the united nations in geneva, assistant secretary of state for international organization affairs and most recently, as president george w. bush's envoy to the sudan. he is a long-term member and now vice-chairman of the board of directors of the international republican institute.
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so we are very glad to welcome both rich and michelle to this podium. brookings pride itself on being a non-partisan think tank and it is in that context that we are hosting this event today. our moderator is a guest scholar at brookings and former chief diplomatic correspondent for cbs and ncb news. former anger of the meet the press program -- former anchor of the meet the press program and author of "the haunting legacy," marvin calb. it is my pleasure to hand the podium to you. >> thank you. thank you very much. i assume all of you are for policy fans. and you all realize this is our
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moment in the sun for the 2012 presidential campaign. i have not a clue as to how long it will last but let's take full advantage of it. like all of you i am sure i read both of the speeches, the governor's speech and the president's speech. what i will do is run down major highlights and ask you questions about it. starting with iran, every now and then when i think about iran and listen to the governor and the president, i ask myself, what is the real difference between the two? they both wanted that iran not have nuclear weapons. there will be patient that the process has gone on for this long. let's assume for a second that governor obama -- governor obama, get that. that governor romney is elected in november and the president takes place next year.
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would he in his impatience to get this process moving cut off the negotiation and began to seriously consider a military option? >> iran as an important issue and i have to put a bit of context. four years ago this month, in israel, senator obama and gave an important speech about the middle east and identified iran as perhaps the most growing threat to international security in the middle east. we are more than three and a half years into the obama administration and irrefutably, iran is much closer today than they were three and a half years ago. so whatever the strategies are, they have failed. governor romney has been clear that a nuclear iran is an enormous threat to the u.s. security, to our friends in the region and need to be addressed.
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>> and essentially unacceptable, is that right? >> unacceptable. he reiterated his view, consisted with the u.n. resolutions of 0 and richmond. a suspension of infringement. >> but that had not happened up to this point. >> diplomacy without the threat of force is music without insurance. there is no credible threat of force. no one in tehran or in the region feel that the obama administration will use force. for example, they legitimately wanted to pursue a policy of engagement which contributed to a muted response to the green revolution when innocent iranians were being beaten offer charlie and arrested and killed. -- arbitraily and arrested and
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killed. it allowed the security council to define what sanctions would be in place, allowing russia and china to have a veto over what we did to pursue our own interest. and the current engagement of discussions are going nowhere. -- i thinkk in time as you know from the press reports, there are suggestions that there might be acceptance of a 5% in rich and -- enrichment. that message is ok, we can wait until they moved. they keep moving the red lines. that would be unacceptable. >> so would he also be impatient to get the process moving and if the negotiations
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are not working, move towards a military option? >> he would create a credible threat. he is not taking it off the table. the mixed messages we have had we did the president gave a firm speech -- we have had -- the president gave a firm speech. i have is a real's back. the next day, republicans made a response. president obama said republicans are too militaristic, they are undercutting a war. we are just reiterating what he said. ok. >> ok. begot the masses. -- we got the message. what is is -- the you agree there is that kind of perception of the president not
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choosing to act militarily and in light of what rich said, what is it that you sink and obama administration reelected ought to do. >> i do not share his characterization. i am sure that is very surprising to you, of the president's record on this. the truth is this is a president who is very careful about what he says and does what he says. you can track that on his iraq policy, his afghanistan policy, his al qaeda policy. he was very careful when he chose t word he used with regard to iran, that we must prevent them from gaining a nuclear weapon. >> he also said he does not laugh. >> and he does not laugh. -- not bluff. i would strongly reject the notion that the policy has failed. the truth is we went for a period of engagement because it
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is the only way to create international unity behind any sort of effort to pressure iran. so we went for a period of engagement and got a disappointing response. that set up the possibility of getting un sponsored unsanctioned -- sanctions against iran with russia and china on board. then that set up further action for the eu to take steps and into this today, we have the most serious sanctions ever put in place against any country on the face of the earth, including sanctioning their oil products, their central banks and so forth. some of those effects are still to be felt. some of the most recent round of sanctions started in july. at the same time, you have had
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an effort at negotiations. at think everybody has been disappointed with the iranian response. the president has been clear that the military option remains on the table. he has never taken it off the table. i can assure you the pentagon planning for this is incredibly robust. it is ready to read if you look at our posture in the region, it is very strong and well positioned. the military option is a real. the president's judgment is that now is night at the time because there is still a chance with further sanctions biting for iran to change. >> how much longer does the president feel if can wait and give the negotiations a chance? >> the key is that we have to ensure iran is not able to enrich material to get a weapon. that is what the intelligence
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community is watching very closely. the judgment is we do still have time. >> how much time? but they have testified publicly on this a year more. at minimum. >> let's jump ahead to syria which is another urgent issue. michelle, if the assad regime used chemical weapons in any way against its own people, an international force moving in, with the obama administration use american military power to stop it? >> i cannot speak for the president on that issue. that is going to be his decision and we are now getting into hypothetical but i can say is that the president has been very clear on a repeated basis that the use of chemical weapons
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either in syria or to transfer chemical weapons to any elements like al qaeda would be unacceptable and that the syrians involved would be held accountable. i also know that this has been a topic of intense discussionwithe neighbors of syria, to say what would we do, how can we prepare for that contingency? i have every confidence that the president is taking that that very seriously and would take appropriate steps. >> that includes israel in those discussions? >> governor romney has said many times he would support the syrian rebels but in what way? is he talking about providing american weapons to the rebels? does he know things that many of us do not know about who the rebels are? is there the possibility these weapons will and up in the hands of al qaeda? >> governor romney has been
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clear and has a different approach than the president on syria. now into 17 months, 17,000 people have been killed. the rhetoric has been justified that libya action looks pretty how the cut -- hollow when you look a what does happen in syria. over a year ago, governor romney said we should be using our resources to work with the opposition to try to identify moderates, help organize some of the things we have done in other spots. the administration has been telling people recently about how five weeks ago, we began to work with the opposition. which is great. but it is 15 months late in the year after governor romney said we should be leading. he said we should be willing to arm the moderate opposition. we do not even know who they are now.
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>> did we know a year ago with the work? >> you do not know if you do not talk to them. this administration did not send resources in to have a dialogue like we have done in other parts of the world. so we did not. the point is, leading means engaging an issue like syria, one that is according to the commander, the biggest strategic blow we could give to iran is if assad leaves. it is strategically important to the soviet union. the rhetoric used in libya is shown to be hollow in the context of syria. and to neighbors like turkey, and jordan and israel were we have interest and alliances. >> the idea of the u.s. under president money -- romney providing american weapons is providing american weapons is


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