you can see that the missile silo is blown up, dismantled and i actually have a piece of the hinge. what a great success. no, the missile silo didn't have a missile delivered to destroy a city in america. we actually spent the money to pay for the destruction of a missile silo under the nun-lugar program. what a -- under the nunn-lugar program. what a spectacular success that is. mr. president, this is a picture of a submarine being dismantled. that is a russian submarine. it's a typhoon class ballistic missile submarine. it would have carried missile tubes. those missile tubes in that submarine under the water would have contained nuclear warheads that would have been used to destroy our country. and here is an example of the missile tubes on that submarine. these, too, were destroyed. i have a little vile of copper wire that was ground up that

came from that submarine. now, we didn't sink that submarine in an act of warfare. we actually paid to have that submarine dismantled and the copper wiring ground up, and i have some of the copper wiring here in my desk. just to remind us how important this program has been. now, mr. president, we have on this earth about 25,000 nuclear weapons, roughly. this comes from the union of concerned scientists in the 2010 area. russia has, it's estimated, about 15,000 nuclear weapons. the u.s. probably about 9,000-plus. china a couple hundred. france, several hundred. britain, a couple hundred. so here's the quantity of nuclear weapons on our planet. and the question is what would happen if someday in some way

someone detonates a nuclear weapon in a -- in the middle of a major city on this planet? i know what will happen. it will change life on earth as we know it. so let me describe a story, and keep in mind we have 25,000 nuclear weapons on the planet. let me describe a story. one month after 9/11, a c.i.a. agent nicknamed drag on -- dragonfly reported to the c.i.a. that he had evidence that a ten kill i ton russian nuclear weapon had been -- ten kiliton russian nuclear weapon had been stolen, had been smuggled into new york city and was to be detonated. that was one month after 9/11. it was october 11, 2001, to be

exact. the c.i.a. agent's nickname was dragonfire, sorry. dragonfire reported al qaeda terrorists had stolen a 10 kiloton nuclear bomb from a russian arsenal and may have smuggled it into new york city. it wasn't reported at that point, but there was an apoplectic seizure here. the president and others who had this information weren't sure whether it was accurate or not. it was a report from a c.i.a. agent, and they just in the shadow one month later of 9/11 of course were very much on their guard. our country was pretty much shocked by everything that had happened. and so this report by dragonfire meant that vice president cheney moved to a secret mountain facility along with several hundred government employees, we're told, so they were the core of an alternative government that would operate if washington, d.c., were destroyed by a nuclear weapon.

we're told that president bush dispatched a nuclear emergency support team to new york to search for a weapon. to not cause panic, no one in new york city was informed of the threat, not even the mayor of new york. and after a few weeks, the intelligence community determined that dragonfire's report of someone having stolen a russian nuclear weapon and smuggled it into this country was probably a false alarm. but when they did the post-mortem on it, they all understood that it was perfectly possible that a nuclear weapon could have been stolen from the russian arsenal, several possible that a nuclear weapon could have been smuggled into new york city or washington, d.c., and possible for terrorists to disarm the safeguards and explode the bomb. no one said it was impossible that a terrorist group would

want to kill several hundred thousand americans with one bomb in the middle of an american city. on the contrary, all of the experts knew this was possible. now, all of that, by the way, all of that angst about one ten-kiloton rather small russian nuclear weapon reported by a c.i.a. agent to have been stolen. but there is more than one nuclear weapon. there are 25,000 nuclear weapons on this planet. think of the concern about the potential stealing of one, and then ask the question what do we have to do to make sure that nuclear weapons that now exist are safeguarded, that there is adequate security? and even more important, that we stop the spread of nuclear weapons to others, other countries, and certainly terrorist groups who want to acquire nuclear weapons.

the description of the dragonfire report comes from a former clinton administration official graham expert, an expert on nuclear proliferation. he wrote about the incident in a book called "nuclear terrorism, the ultimate preventable catastrophe." the description i have just read is a part of the book by mr. mr. solomon. even though the cold war ended about two decades ago, we still have, as i indicated, about 25,000 nuclear weapons in the world. 95% of them are owned by the united states or now russia. we are now operating under the strategic offensive reduction treaty, also known as the moscow treaty. it requires the u.s. and russia by our agreement to have more than -- no more than 2,200 operationally deployed strategic nuclear weapons by 2012.

but it does not do anything to restrict nuclear delivery vehicles -- bombers, missiles, submarines. and it does not have any verification measures, and it expires in 2012. now, a few weeks ago, president obama and russian president medvedev met in prague, the czech republic, and signed a new strategic arms control treaty. it's called start. it limits each side to 1,550 deployed nuclear weapons, 30% lower than the existing treaty. it limits each side to 800 deployed and nondeployed icbm launchers, slbm launchers and heavy bombers equipped for nuclear armaments. one half of what the start treaty allowed. and it sets a separate limit of 700 deployed icbm's, deployed slbm's and deployed heavy bombers that are equipped.

it has verification regimes of on-site inspections, telemetry exchanges, data exchanges, and so on. now, this treaty, i know, will be controversial in some quarters, but i wanted to describe what admiral mike mullen, chairman of the joint chiefs of staff, has said just in the last month, because some are very worried about whether our nuclear weapons work, whether our stockpile is reliable. what if we use it? did we expect it to work? well, you know, the other side of the nuclear debate is if you use it, you would probably never be around to wonder whether it works. i think the face of this earth will change if there is ever an exchange of nuclear weapons of any kind between adversaries that have multiple nuclear weapons. mr. michael mullen, the

admiral -- chairman of the joint chiefs of staff, says i, the vice chairman and the joint chiefs, as well as our combatant commanders around the world, stand solidly behind this new treaty, having had the opportunity to provide our counsel, to make recommendations, and to help shape our final agreements." so the chairman of the joint chiefs says they are satisfied with this treaty, believe it's a good treaty. linton brooks says something very important. former nnsa, national security advisor, 2003-2007. he says -- "start is a good idea on its own merits, but i think for those who think it's only a good idea if you have strong weapons, this budget ought to take care of it." he says to make sure that the nuclear stockpile is up to date. "coupled with the out-year projections, it taxi care of the concerns about the complex and it does very good things about the stockpile and it should keep the labs healthy. i would have killed for this kind of budget."

the reason i'm mentioning this is we have people coming to the floor of the senate now and in public discussion -- douglas feith is an example of them. he says -- "since the administration is so eager for the treaty, the main interests of conservatives will relate to modernization. republicans are interested in the u.s. nuclear posture, the political leverage they will have will be on the treaty. one of the hot issues will be the replacement warhead." well, what's that mean? that means we have had people in this chamber and others, including the neil conns and the feiths and others, they have always wanted to build nuclear weapons. it started with we want to build new designer nuclear weapons. we need to build earth bunker penetrating buster weapons so we can use them. in afghanistan, folks were holed up well underground. what we need to do is develop designer nuclear weapons, earth-penetrating bunker-buster nuclear weapons. well, senator feinstein and i and some others got that

abolished. i mean, it just makes no sense to me for us to be off building new nuclear weapons. it just doesn't make any sense. but the fact that the bunker buster earth penetrator wasn't built, that doesn't matter. then they came with the r -- r.r.w., reliable replacement weapons, substantial costs of additional funding to build new nuclear weapons called the replacement weapons. here are some statements by some skeptical u.s. senators about this start treaty." well, i can tell you this, i think the senate will find it hard to support this treaty if there is not a robust modernization plan." another senator -- "the discuss of your administration in ensuring the modernization plan is fully funded in the authorization and appropriations process could have a significant impact on the senate." it means you've got to be building additional nuclear weapons, you've got to spend x amount of money here and there in order for us to support the start treaty. another senator says -- "my vote

on the start treaty will thus depend in large measure on whether i am convinced the administration has put forward an appropriate and adequately funded plan to sustain and modernize the smaller nuclear stockpile." me say what the jasn says about all this. it's an organization that really knows what it's talking about and issues a lot of reports with respect to the science of nuclear weapons. because some have said we've got to build a lot of new nuclear weapons here because the nuclear weapons we have dealing with the delegategation of the pits and other things, we're not going to be able to have confidence that they even work. here is what the jaiive says." jason finds no evidence that accumulation of changes incurred from aging and l.e.p.'s have -- life extension programs, have increased risk to the certification of today's deployed nuclear warheads." they're saying, quite clearly, there is no evidence of -- that there is an increased risk to be able to certify that our nuclear stockpile is reliable.

"lifetimes of today's nuclear warheads could be extended for decades with no anticipated loss of confidence, by using approaches similar to those ployed i theife extension programs to date." so to those who want to go off and spend a lot of money building new nuclear weapons at a time when we're deep in debt and leverage that in exchange for voting on the start treaty, i say you're wrong, you're just dead wrong. we have got to get about the business of reducing nuclear weapons. we have got to get about the business of agreeing to treaties like this because it is our responsibility, it falls on our shoulders here in the united states to be the world leader to steer us away from nuclear catastrophe. now, i understand nobody's talking about disarmament here, but we are talking about a circumstance where there -- whee there is able to be certification that our nuclear stockpile is reliable, and that certainly ought to satisfy the appetite of those who want to build more nuclear weapons. we shouldn't be building more

nuclear weapons. what kind of a message does that send to the rest of the world? we have 25,000 nuclear weapons on the planet already. the loss of one of which caused an apoplectic seizure around this place for those who knew it because they wondered what would happen? 9/11 was several thousand people. what would happen if several hundred thousand people were murdered with a nuclear weapon being exploded in a major city. not just any u.s. city. any city on this planet. it would dramatically alter life on this planet. mr. president, i just want to say this start treaty, i commend the president, a job well done. this is a very good and important treaty for our country and for the world, and i'm going to be strongly supporting it. we will have sufficient resources. the president has seen to it, sufficient resources for the life extension program to make sure that our nuclear stockpile is reliable, but this president has said, and to his credit, that our job, our responsibility as a world leader is to provide

leadership to stop the spread of nuclear weapons, to do everything that is necessary to keep nuclear weapons out of the hands of terrorists and rogue nations. and our job is to find ways to reduce the number of nuclear weapons on this planet. now, the president of the united states just hosted at the convention center here in washington, d.c., a -- i think the largest gathering, perhaps, of its kind in history of world leaders who came here to talk about securing loose nuclear materials and nuclear weapons. and some make light of that. a little gathering, good for them. no one should make light that have gathering. it was historic and unbelievably important. a very small amount of highly enriched uranium, the size after two-quarter liter of soda at the floor, that's enough to build a weapon. and the loose nuclear materials that is available around the

world must be gathered together and must be safeguarded and kept out of the hands of terrorist organizations. that's what this president was doing, cementing together the will of other leaders around the world to do that. that is unbelievably important. everyone should understand the historic importance of what this president has done. now, finally, this start treaty, as i indicated, i think has much to commend to this country. and this senate ought not find itself in the kind of dispute it almost always has on everything these days. if there's anything that this senate ought to be able to agree upon, it is that it is our responsibility and in our interest, in our long-term survival interest, to find ways to reduce the number of nuclear weapons on this planet, reduce delivery vehicles, and reach agreements with adversaries and potential adversaries so that all of us understand that we

cannot allow a nuclear weapon to fall into the hands of terrorist organizations. so i commend the administration. i hope on a bipartisan basis we can give a very strong vote to the start treaty when the hearings are completed and when we have a debate on that on the floor of the united states senate. mr. president, i yield the floor and iake a point of order that a quorum is not present. the presiding officer: the clerk will call the roll. quorum call:

dodd mr. president i'd ask consent that the call of the quoarnl reunderstand ised. the presiding officer: without objection. mr. dodd: we've been having a long -- well, not long but a conversation this morning, senator corker of tennessee was on the floor, a member of our banking committee, and he and i engaged in a conversation about our legislation. senator akaka from hawaii, a member of the committee as well, was here tiewk about the bill as

well. byron dorgan was here. he talked about arms control but also about the legislation. senator jim webb was here this morning to talk about provisions in the bill. while there are no votes today, there was an opportunity for people to come and talk about whether they are in support of or what they object to and what additions they might want to make. let me emphasize again, my hope would be that today and over the weekend and monday that members who have amendments to this bill, democrats and republicans, that they would let us know what those amendments are so we can begin to process them and possibly accept hopefully as many as we possibly can as additions to the bill, or modify some, macing them acceptable without having -- making them acceptable without having to necessarily go into votes. but we'd like to accommodate as many members as we can over the next couple of weeks on these matters. i know the leader has indicated this to me, and obviously this is finally up to the two leaders. the intention i've asked for is to come in very early every day

and to stay late next week and the week after, if necessary, so we can accommodate as many members as possible here-on-. i know that the floor staff of the united states senate is delighted to hear those comments about being in early and staying laivment but obviously we want to get this bill done, if we can. it is an important piece of legislation, and i know there are others who want to be heard on it. obviously it is an emotion al issue, given what our country has gone through over the last two years. so i lay that out as a backdrop for my completion and ask them to let us -- so i lay that out as a backdrop for my colleagues, and ask them to let us know how we can be helpful for them. i also ask for them to -- briefly this afternoon before closing out this discussion, mr. president, i wanted to talk about a very important part of this bill. we a been hearing a lot of discussion about too big to fail and about the derivatives

sections of the bill and the early warning system. one of the major i think attributes of this legislation is the establishment of a consumer financial protection bureau or division. we've never had one before. in fact we have many of them, witbut not one. we have seven on the federal level. various regulators. i have great respect for people who live in these divisions. but candidly, a think many of whelm them would test, the pre-- as i think many of them would attest, the consumer side of that equation has always been relegated to a second-class status in too many cases. as a result, over the years we've seen the consumer protection has not had, when it comes to financial services, the helevated status that it deserves. and so this afternoon briefly i want to talk about what's in our bill, i want to take great exception to some of the falsehoods that are being

bandied about to describe what's in this bill, address them each directly by quoting from the bill, members themselves can then read the legislation to determine whether or not they think the language is adequate or not. we don't want to overly burden anyone but nor do we want to leave a situation where people are burdened, tremendously so, with their homes, income, retirement have lost because consumer protection was not being considered at all during the time that the economic crisis was emerging and during the time it exploded. now, i'd be very surprised if any member of this body comes to the floor and says, well, i don't think we really need to put a focus on consumer protection. virtually everyone i've talked to said, no, no, this is very important. weefnedz twe need to have consur protection in the financial modernization, the financial reform bill. i think it is widely understood, mr. president, that it was a failure of consumer protection that was at the very heart of the financial crisis.

it was of course these bad mortgages that were being sold, that people were being lured into, that was where the fires began, that consumed our economy or nearly consumed our economy. the last year and a half in fact as the banking committee has held a long series of hearings on the root cause of the crisis, the pattern has been clear: americans, as we now know painfully, were sold mortgages they never understood and could never, ever have afforded. the very first witness, i had, mr. president, before the banking committee when i became chairman in january and february of 2007 -- i'd never been chairman of the committee before and because of the retirement of my great pal and friend and wonderful chairman, paul sarbanes, who had served as chairman, and richard shelby had been chairman. the very first hearings were on the mortgage crisis. i ththe very first woman was eaz

earl woman fro -- was an elderly woman from shiabi. they had been able to buy a home. they raised their family. tragically lost her husband, on this years. she had a very small amount of debt. i don't know whether it was a credit card debt or a utility debt, but i'm talking small, mr. president. it was like $2,000, $3,000, $4,000 as i recall now three years ago when she appeared as my first witness as chairman of the committee to talk about the mortgage crisis. in january, february of 2007. what happened to her happened, unfortunately, over and over again. a mortgage broker came and said, i know how to take care of that diivet a got, mrs. king. what we've do is rewrite your mortgage for you on your home. here she was on a fixed income as a retiree in our country trying to make ends meet, not a lot of retirement income. i this she may have worked -- i

think she may have work inned thin -- ithink she may have wore postal department -- she worked in a library in chicago. obviously not making a lot of money, mr. president. so son a very fixed, narrow income as a retiree. that mortgage this guy sold to her ended up exploding on her within a matter of months to the point where it consumed 70% of her fixed income and she lost the home. here a woman who'd done everything right, her family right -- and that went on over and over again. and if you want to know why we're in the mess we're in, although things are getting better, it was dolores king's story repeated over and over and over and over and over again that caused the situation we're living in today. so when i say the root cause of what happened to us financially began in the living rooms of

dolores king, that's exactly what happened. now, there are other phak tess as well. but but that's the root cause. so to talk about drafting a bill on financial reform and excluding the kind of protections that would have avoided dolores king losing her home and going through the financial turmoil as a retiree must be a critical part of this legislation. and why i feel so passionately and strongably this in our bill. the regulations we have in place simply can't get this job done. i have great respect for people who work in our respective public sectors at the local, state, and national level and i'm sure there are many, many good and talented people. but when you're subjected to a division or a bureau that kind of separates you out in kind of the basement or wherever else you are, not physically hower a treated in the context of it, you can get some flavor of what's happened here. these globs these seven other

regulative bodies have been divided up. so the legislation that we have before us, mr. president, replaces that failed setup with a single regulator, with the independence and authority to do the job right. that's what we're trying to do. this re -- this regulator will be a watchdog with bark and bite with the ability to take meaningful action to stop the ripoff ripofd empower consumers to make good financial decisions. the bureau will force large banks and credit card companies to explain their offerings in plain english so you don't need an m.b.a. or masters in business to be an informed consumer. it will shut down the scam artists and the sleazy lenders, and they're out there in droves, before they can take advantage of the delores kings again.

there wouldn't be sleazy lenders if it wasn't profitable. and so when we have large wall street firms that have earned -- earned isn't quite right. that gained billions of dollars by engaging in these practices. and don't think they weren't. they're not the broker that walked into delores king's house. they're not the small banks that necessarily decided to write that mortgage. but these large firms are involved. and the securitization and marketing of these products all bundled together that we've now learned at the hearings even last week they knew what crummy bundles they were there was nothing but a lot of junk and trash in there. not that delores king was that way, but writing a mortgage that she couldn't pay, knowing she was on a fixed income and knew that the mortgage would balloon up to the point that would consume 7 important of her -- 70% of her income.

don't tell me they didn't understand what that was and reading all that woman was subjected to was ridiculous. that's how the daisy chain worked. so this must be a part of our bill. the chamber of commerce is circulating some talking points about what this bureau is and how it will impact american businesses. and tom donahue and i are good friends. i've known tomorrow tom a -- i've known tom a long time. he runs the chamber. it's sad to me that an organization would put out a piece of paper with as much false information. they don't like consumer protection at the chamber of commerce. that's been a standard for too many years. i don't mind him taking me on and arguing me about the bill if they want to and you're entitled to all of the opinions that you want to have. but you're not entitled to your own facts, a the old saying goes. this is factually wrong what

they put out. i want to spend a few minutes addressing each one of their false accusations in that document they passed around. the chamber claims that the bureau would regulate and i quote, this is a quote, "virtually every business that extends credit." end of quote. suddenly they'll have you believe if anyone who bills you at the end of the month will be caught up in sweeping new regulations. mr. president, that sentence is totally false. now, you may not accept what i said as totally false. so let me read from the bill. the bill is here, mr. pdent, along with -- this large 1,400 pages. but let me read from the section of the bill that covers this particular point and i will read it carefulfully. the bureau, speaking about the financial protection bureau, "may not exercise any rule making supervisory enforcement or other authority under this

title with respect to a merchant, retailer, or seller of nonfinancial goods or services that is not engaged significantly in offering or providing consumer financial products or services." now, i don't know what part of the sentence they don't understand there. but that's about as clear as it could possibly be. you must be significantly involved in the selling of financial services and products. a dentist, a butcher, a retailer that sells you products allows you to pay later or on some delayed paying process here is not in the business of financial services and products. allowing their clients, their patients, their customers to have some delayed payment process here does not bring you under the purview of this law. so the line that virtually every

business that extends credit is a completely false sentence. and, yet, it's in the talking points of the chamber of commerce. i'll read the sentence again in the bill. "the bureau may not exercise any rule making, supervisory enforcement or other authority under this title with respect to a merchant, retailer or seller of nonfinancial goods or services that is not engaged significantly in providing consumer financial products and services." what does that mean? mr. president, if you run a tab at your butcher or grocer, you're not covered, merchants, retailers of financial services are covered. your doctor charges you a late fee. she's not covered by this. if a retailer refers a customer who hasn't paid their bill to a debt collector, you're not covered up under this bill. if you're a -- if a store accepts credit cards, you're not

covered under this bill. if your dentist allows you to pay your debt on time, you're not covered under this bill. this bill will not regulate accountants or oortsdz don'tists or -- ortsdz don'tists or anyone who is not offering consumer financial products or service. when you hear a member of this body and some will and have come to the floor to object to this agency or bureau by invoking a small business in their state, keep your ears perked. the strong likelihood is that the talking point is surfacing again. the second falsehood in the chambechamber. i heard this is a wide bureaucracy where the powers extend beyond traditional services, services products to the entire economy. in short, this -- this chamber letter goes on, in short it creates a new regulatory overlay

over the entire business community. that's the quote. not true, mr. president. completely false. the powers under this bill already exist. i'm not writing new powers under this bill. they exist under the fair credit act, truth-in-lending legislation, equal opportunity act, the home mortgage disclosure act, the homeownership equity act, under respa. there's a long list of legislation that passed years ago that's out there. this bill says those laws must be enforced. we're not writing new laws. these are the laws on the books. we had one new word, one new word, deisn'tive and fraudulent practices are covered and we had the word abusive. i'll acknowledge that. there is one new word, abusive, that we added to litany that caused the consumers the difficulties that they've been through. there is no new authority.

authority exists in existing federal law under the statutes i enumerated and there are many others, by the way, presently covered here. all we're saying is everybody -- what's the point of having these laws here? they're on the books designed to protect people. the issue is whether or not anyone's going to be able to do it. financial firms, i believe, will benefit from this in many way when we streamline regulatory burden. seven other agencies out there all responsible to one degree or another for this list of existing federal law. it seems to me the financial services sector benefits by having a single regulator with the ability to enforce this collection of laws out there that i've just described to you. it seems to me that would be a welcomed opportunity rather than having so many different regulators to potentially deal with. and the single new agency will be more easily held accountable for its performance as well. here's the third false claim,

mr. president. and i quote again, "this bill gives the consumer financial product agency authority to write rules, enforce rules, conduct examinations, require new review and approve disclosures regarding new consumer products, impose fees or assessments on all covered persons and require reports from any covered entities." again, mr. president, false. not true at all. this bill does not give this new bureau any authority to charge anyone a fee or an assessment. there's no fees or assessments in our bill here -- this bill on any of these entities. and, yet, that report out there indicates it does. completely false. it does not create a new government power. what it does do is create a level playing field for small community banks and credit unions, which today face unfair competition from largely unregulated shadow banking

industry. and this, as we've heard from our community banks over and over again about this, where's the level playing field? we get drawn in. we do our job. we're regulated. we operate carefully and then you have these operators out there totally unregulated and the reputation of everybody in the financial services sector suffers from the unscrupulous pay day lenders that don't have regulators at all. they're functioning or abusing or deceiving people and that regulated bank on the corner there is saying, why isn't that guy being regulated? i'm regulate. well, our bill changes that. our bill changes that. we apply -- those same rules and that's a great advantage for the community banks of the country to have a level playing feesmed because this new bureau will be able to write rules to prohibit unfair and deceptive practices in the banking sector and conduct investigations and gather information from nonbank

lenders and brokers, they won't have an unfair leg up on our community banks allowing those smaller institutions to compete more effectively and provide capital more freely. the fourth false claim is to see -- i'm quoting from this document, the consumer product agency -- quote --"would set the floor, not the ceiling regarding state consumer protection laws. this will create a new regulatory regime. companies will be subject to and consumers will be lost in the maze of federal regulations and disclosures. 51 state laws and state a.g.'s, attorney generals, interpreting an enforcing a federal law at state level. this is directly contrary to the goals of streamlining, modernizing and simplifying the regulatory systems and to consumers." that's the claim. mr. president, a federal consumer law has historically

established a minimum standard and that's what this bill does as well. ever since the truth-in-lending act passed in 1969, congress has allowed the states to adopt consumer protection laws as long that he's don't conflict with the federal law. state attorneys, state attorneys general have always been on the front lines of consumer protection and they will continue to play that role. meanwhile this single bureau will help to streamline, as i said a moment ago, and simplify disclosures. two agencies regulate mortgage laws, meaning consumers and community banks are forced to contend with two federal mortgage disclosures. under our consumer financial product bureau, we will eliminate the unnecessary duplication and create one form. fifth, the chamber claims that the consumer financial product agency will have the authority to mandate any company offering a consumer financial product has to offer a product with terms and conditions set by the

government, alternative products cannot be offered unless the plain vanilla is extended. this gives the largest banks a significant competitive advantage over smaller banks. limits consumer choice and will significantly increase the cost of any alternative products that are tailerred for -- tailored for specific needs. end quote. this is entirely made up of whole cloth. there is no such thing in our bill. none. i don't know where it comes from. there's one thing to disagree over the wording of something. but when you make up one out of whole cloth entirely, i don't know how to address that in any way. i don't know what they're talking about. this one comes out of the blue. finally, mr. president, i want to address the claim and i quote again the bill gives the consumer financial product agency the ability to hold reports from any covered entity including reports from banks about the types of accounts and the balances in each account.

the idea is that this new government bureaucracy will be collecting private information about your finances. and, of course, that is not true either. that is false. as regulators collect and share information about the companies they oversee, the consumer financial product bureau will be able to collect information an share it with other regulators. nothing new about that at all. it includes strong privacy protections in our bill to make sure that proprietary or confidential consumer information is kept just that, private. think about this for a moment, mr. president, opponents of this new bureau are actually suggesting it will be -- it will benefit consumers for regulators to have less information about what the companies they regulate are doing. so, mr. president, i've said before, people are welcomed to their opinions, but not their facts. and, again, i'm more than happy to consider ideas people have on how they think we can make this consumer bureau work better. i haven't shut the door on any

ideas that we want to bring up. but what i can't take is people making false accusations to incorrectly and falsely cause great concern among retailers and merchants and other across the country and that's the intent of all of this. i know what it is they don't want to take on the bill itself and what it does. and so they are out there and propagandize with false information out there to undermine what we're trying to achieve here. and again, some of those very businesses are the ones that pay an awful price. i had last year a wonderful couple in my state, mr. president, been in business -- started a business 40 years ago. they are a family-run small business. they watched -- they were late by three days, the first time in 40 years on a credit card payment. the first time in 40 years, three days late.

they watched their interest rate go from 5% to 22% and put them out of business after 40 years. now, that's a small business that extends credit, works with customers and others. they were taken to the cleaners because there wasn't someone saying no, you can't jump from 5% to 22%. that's unfair and that's wrong. and we had to pass legislation -- i tried for 20 years to pass a credit card bill in this chamber and never able to get it up even for a vote, except on amendments to bills, and last spring, we were able to bring it up and it passed 90-5 here in this chamber, although it was a highly partisan vote coming out of the banking committee. as a result, today we have protections in place so that that family in connecticut, like so many others, can watch fees and interest rates skyrocket for almost no reason at all. in fact, the language of the contract says it can do just that for no reason at all.

every time consumers get taken to the cleaners, it shouldn't take 20 years to pass a law to address it. the power of the credit card companies is they were able to stop year in and year out of me getting that bill passed. why can't we have a place, a place where consumers who purchase and use as we all do today financial products to have some protections? i have used the example lately of the consumer product safety commission. we have one in place. we all read the tragic stories recently of a car company that had problems with an accelerator. what happened? there was a recall of those automobiles to protect people against the harm that would befall them if that happened to them while they were driving that automobile. when someone marketed a crummy mortgage in an unregulated sector of our economy and took delores king to the cleaners, ruined her life, lost her home, lost the earnings she had, where did she go?

nowhere, nowhere to go. maybe some sympathetic banker might take pity on them. but why should delores king be subjected to financial ruin when the purchaser of an automobile that's faulty is protected? or a toaster or a television? all of these products if they are faulty or deficient in some way, there are places we can go to get our situation addressed. and yet, today in the world in which we live of mortgages and credit cards and financial products out there, there is nothing that exists to give people a chance to get the protection they deserve. our bill isn't perfect. i will be the first to admit there may be better ideas on how to do this. but i'm not going to sit around and listen to people issue false statements about what's in this bill, to inflame innocent people who want good legislation and being told that this legislation will do them harm. it does just the opposite, mr. president. so next week we'll begin the debate and i'm sure there will be a ton of amendments that will

try and undermine the consumer protection bureau we have established here. but i would hope my colleagues, democrats and republicans, would join in an effort to write the good, strong consumer protection bill, along with the other pieces of this legislation so that we can provide at least a better sense of security. i'll end on this note. i want to pick up on a point that senator dorgan talked about in his comments this morning, something i have addressed on occasion over the last number of days, but i don't think i have emphasized it as much as i should. i have been reciting statistics, 8.5 million jobs lost, seven million foreclosures, 20% decline in retirement, 20% decline in home values. i hear the numbers, i have said them so many times, i just could recite them. i'll tell you something i don't have a number for, mr. president, and it actually worries me far more than those numbers, as devastating as those numbers are. and what is the cost to our

country because the american people have lost faith and confidence in our financial system? i don't know how to put a dollar sign on that one for you. i don't know of anyone because i don't believe anyone can, but i know this much. that if people don't trust and don't have faith that the system is going to work for them, when they watch, as we all know, stories of their credit card fees and charges and every gimmick you can think of to reach into the pockets of hard-working families, you begin to wonder why have people lost faith in us? when they see and hear the stories about delores king and others when they have done everything right in their lives and someone comes in and decides to take advantage of them or reads these emails that we saw last week of these arrogant characters up there laughing about the widows and orphans they have just taken advantage of in a major investment bank. you know, what do you do about that? what's the number i'm going to put on that one for you?

but i tell you this much, we can write all the bills you want, we can pass all the regulations. if you don't get back that confidence and faith, which has historically been very much a part of our system. i remember i asked a man one time who was not a citizen of our country, but he invested here. he took his money and he invested it in the united states in our financial system. i said why do you do that? he said one, he said you people are a strong economy and you do well. but he said more importantly is the second reason. he said i have never lost a wink of sleep because i was investing in an economy or a structure that was unsafe. i may make a bad bet and lose because of that, but i have never worried about ever losing a nickel because someone in this country, in your financial structure would take advantage of me. rather, a wonderful reputation to have had and that reputation has been shattered. not just by some foreign investor, but i think by people here at home. again, i'm not suggesting to you

that passage of this bill will miraculously change all that, but i think it starts to move us in the right direction. i know my colleagues have a lot of good ideas. some think i haven't gone far enough. some think i have gone too far with the bill. all i have tried to do in the last number of months is put together the best ideas i could, what i thought would attract broad support from the hundred of us that are here. ultimately if i can't produce 60 votes or 51 votes, whatever you have got to these days, no matter how good the ideas are, they won't go anywhere. i hope my colleagues will read this, take a look at it. if you have constructive suggestions, i welcome those. i apologize for taking so much time. i wanted to address those concerns. with that, i note the -- mr. president, i want to now conclude, if i can, the business of the senate. i would ask consent that the senate proceed to a period of morning business with senators permitted to speak for up to ten minutes each. the presiding officer: without objection.

mr. dodd: mr. president, i ask unanimous consent that the record remain open today until 1:30 p.m. for the introduction of legislation, submissions of statements and cosponsorships. the presiding officer: without objection. mr. dodd: mr. president, i ask unanimous consent that the senate proceed to the immediate consideration of s. res. 510, submitted earlier today. the presidg officer: the clerk will report. the clerk: senate resolution 510, designating april, 2010, as distracted driving awareness month. the presiding officer: without objection, the senate will proceed to the measure. mr. dodd: i ask unanimous consent, mr. president, that the resolution be agreed to, the preamble be agreed to, the motions to reconsider be laid upon the table with no intervening action or debate, and any statements related to the resolution be placed in the record at the appropriate place as if read. the presiding officer: without objection. mr. dodd: mr. president, i ask unanimous consent that when the senate completes its business today, it adjourn until 2:00 p.m. on monday, may 3. that following the prayer and the pledge, the journal of the

proceedings be approved to date, the morning hour be deemed expired, the time for the two leaders be reserved for their use later in the day, and the senate resume consideration of s. 3217, wall street reform. the presiding officer: without objection. mr. dodd: mr. president, there will be no roll call votes during monday's session of the senate. if there is no further business to come before the senate, i ask that it adjourn under the previous order. the presiding officer: the senate stands adjourned until 2:00 p.m. on monday, may 3.

>> a senate hearing on the fy 2011 budget request for amtrak and the federal railroad administration. we will hear about plans for high-speed rail projects and safety improvements. patty murray of washington chairs the appropriations subcommittee on transportation. this is just under two hours. >> the meeting will come to order. for the federal railroad administration and the request of the national passenger rail work corporation on amtrak. we will be hearing testimony from two panels this point that the first panel will include the administered of the federal rail

administration, mr. joseph szabo. the second panel will consist of three witnesses, and tracks president and ceo, mr. joe boardman, amtrak inspector general mr. alves and the deputy inspector general for the department of transportation, ms. ann calvaresi barr. i want to welcome all of our witnesses at this time and thank you for being here this morning. i look forward to hearing all of your testimony. efficient rail transportation in america ticer committee together. it creates jobs and boost the economy and reduces the prices of goods being shipped. and it helps commuters around the country get to work. that's why i'm so glad this administration has expressed a level of interest in rail transportation we haven't seen any longtime. they understand the important role railroads played in our transportation system.

this subcommittee has seen too many budget request from previous administrations that would have guaranteed the bankruptcy of amtrak which would've been devastating to commuters and communities across the country. i know families in my home state deeply by our amtrak service, cascade lines, and set a new record for ridership this year. and i've personally heard from a lot of people who depend on it. i know that communities around the country value their rail service as well. that's why i'm so glad this year the administration's request for grants to amtrak, although it does not meet all of the needs identified by amtrak itself. in addition the administration is again requesting $1 billion for grants to support inner-city and high-speed rail. this funding builds on the 10 and a half billion dollars provided for the purpose is to does go year 2010 appropriations act, and the american recovery and reinvestment act. including 590 million to improve high-speed rail in washington state. finally, rail transportation is being included with roads and mass transit in discussions about the nation's larger network of surface transportation. in the recovery act we were able

to provide states with flexibility to invest their formula grants in freight and passenger rail. rail transportation is also played an up or in part in tiger grant from that i thought to include, but we still need to recognize that all of this work as well as recent proposals for additional funding is happening at a time when financial constraints are increasing and likely to become even greater. has families across the country look for ways to tighten our belts, leaders here in washington, d.c., need to redouble our efforts to get federal spending under control and reduce our debt and deficit. that's what the budget president obama sent to congress freezes domestic discretionary spending and the budget resolution recently passed in the senate budget committee goes a step further by reducing the spending by an additional $4 billion. we owe it to future generations do not burden them with debt. but we also owe it to them to continue making the investments we know will strengthen our economy and make our country more competitive long-term. that's why i am looking

carefully for areas to cut spending, but i also know that lower spending levels will make it more difficult for congress and for this committee in particular to find ways to pay for important infrastructure programs. i know many people think the answer to this problem lies in funding, finding a source of funding outside of the annual appropriations process. the highway program and the highway trust fund offer an easy example of a dedicated and what historically has been a stable source of funding for transportation infrastructure. but we should all understand that the financial constraints are just as real outside of the appropriations process. the highway trust fund has been threatened with insolvency for more than two years, and we still have not seen any realistic proposals to stabilize the trust fund throughout the next authorization period. this subcommittee has turned to appropriate funds directly from the general fund and are to provide additional investments in our nation's roads and transportation infrastructure

during the current fiscal year. so there is no silver bullet, and there's no way to avoid making difficult decisions and setting priorities. while i believe the administration's budget request would make important investments in rail transportation, there are still significant concerns that this subcommittee will have to consider for fiscal year 2011. the administration has failed to request any funding for positive train control, an important new technology for preventing rail collisions and derailments. the administration's budget request for grants to amtrak does not address the railroads need to modernize the staging fleet. during this hearing will have the opportunity to look at those important issues. in addition will be able to get additional details on the administration's effort to improve rail safety and specifically, its progress in implementing a risk-based safety program. however, one of the biggest questions is how well the new leadership at the federal railroad administration and that amtrak can manage our

investments in rail transportation over the long-term. the very beginning of the obama administration, the fra was cast with a warning $8 billion in grants for inner-city and high-speed rail. the program was brand-new and part of the recovery act and needed to be set up immediately. adding to the challenges the fra had never before administered such significant grant program. recent rail legislation has also added significantly to the agency's workload. fra needs to match its new responsibilities and build the workforce that has the skills necessary to successfully complete all of that work. amtrak also has a new leadership and there is a new level of cooperation between its board and management team. they have worked aggressively to complete a new strategic plan of a system for prioritizing capital needs, and develop a plan for modernizing its fleet. but the real test of anthrax new leadership team will be as the railroad implements new plans. this subcommittee needs to see that the leadership at the fra

and amtrak minister their programs and manage to funding effectively and responsibly. both organizations face significant challenges in the years ahead, but we cannot afford to waste taxpayer dollars or squander this unique opportunity to make a real roads work better for commuters, businesses and communities across the country. with that i will turn it over to mike ranking member, senator bond. >> thank you very much, madam chair and i join you in welcoming all of our witnesses today. and i thank you for outlining the tremendous budget squeeze we are going to be facing this year. and it is going to take a great deal of work to deal with the challenges we have and the limits which are placed on it. and as the chair said, making already bad situation worse, congressional budget office projects that the national debt will balloon to 90% of the economy by 2020. in interest payments on the debt

remained at the same interest rate level. they will have to pay an $800 billion. nobody who knows anything about finance thinks we won't have a significant increase in interest rates when our debt gets that i. in other words, we are drowning in debt, and the situation is going to get worse. the decisions we make on a budget appropriations will be critical to the future economic health of our nation, and we have to find the right balance, spending to fund critical national priorities. madam chair, as you have already described, our general revenue program compete against one another. transportation versus housing, both programs have strong programs, proposed as well as very compelling needs. and they seek to maximize funding for their priorities. high speed rail, amtrak, fleet

are all interact competition for funding with other transportation. priorities as well as critical housing and community development programs for the poor. hud is also in the same pool seeking significant funding for the coming year, 250 my for choice neighborhoods, 300 for transforming rental assistance. in addition to these programs in total are likely to cost several billion dollars more in each subsequent fiscal year. at the same time, hud is proposing the elimination of dedicated funding for housing programs to help the elderly and disabled. these are very important programs that they are great need is always a great support in congress for them. how we balance those funding needs both old and new, programs and hud are difficult, under whatever allocation we receive for the year, let alone in competition with substantial old and new transportation funding requests, and especially rail, which are likely to require not

just significant, but huge increases in subsequent fiscal years. personally, i grew up as a railroad fame. i always loved trains. first time i got a chance to ride a train i loved it. i wrote on a tree that when i got to be governor i started state funding for amtrak. there was nothing greater than taking my very young son from jefferson city to kansas city or to the state fair. so i come here as a rail fan, but at the same time if we increase funds for transportation projects like amtrak, when we have these other things, we're very real way in danger of railroading the poor using limited general revenues to pay for rail rather than housing programs. and housing programs are not optional. we have people who depend on housing. and we can't walk away from them. i think it's important, first, to take a look at the unprecedented amount of money rail projects have already

received. no one can deny that there is a lot of money going to fund the rail these days, following the passage of the arra. the biggest winner within the department of transportation, have been the fra. they are trying to manage grants beyond their wildest dreams, when the passenger rail and improvement act of 2008 was signed into law. who would have anticipated the rail would be the beneficiary of so much general revenue, paid for by the american taxpayer? these are not dedicated funds as the chair has pointed out, paid for by users of passenger users. these are general funds paid by all our taxpayers. amtrak received a record one put 3 billion in 2009 for capital grants, by high-speed rail received 8 billion with an additional 2.52010 million. fra have some expense in managing amtrak grants, but a whole new template by billion dollar program, and all of the

safety programs they're responsible for overseeing has to be a work in progress for any administration. this sudden influx of billions of taxpayers dollars, i want to ensure american taxpayers not only are getting what they're paying for but also know what they are paid for. billions of more taxpayer dollars poured into amtrak, which is, let's be honest and has had management problems in the past, i want to ensure that these dollars are not victims of waste, fraud, and abuse. to ensure that taxpayers get the oversight transparency they deserve, i guess the general accounting office to review the first 8 billion awarded for high speed rail. that includes how projects are reviewed, rank and scored within the department. taxpayers also deserve do not have the department applies the criteria for selection, and the

process used in evaluating awardees. they need to know how the score is given to each of these projects selected and those, which were rejected for funding in the first round. it's critical for our committee to understand the nature of the projects funded and to what extent they represent departure from or continuation of existing rail service and networks, and how they will fit in and the national rail plan do the committee on september 15 of this year. what's the future of rail in america? what does the unprecedented amount of new funding mean? this to me is a very important question. the american public and the private sector are unclear. at the recent funding for rail in america is just a blip or israel is here to stay. are we looking to fund beyond the $1 billion proposed per year by the administration for high-speed rail? are we supportive of amtrak's new flea proposal which, over the project won a 40 will cost approximately $23 billion in

$2009? taxpayer dollars are already scarce. where is the money coming from? will come under critical programs under hud? what is funding needs of traditional transportation programs like highways, roads and bridges? last year 1 billion budget for high-speed rail turned into a to .5 billion we went to conference with the house. this was due in part to artificially inflated budgets for transportation without any details or plans for a national infrastructure bank. when the national infrastructure bank failed to get support, general fund money on the table in my view should go to critical programs to help struggling families for deficit reductions rather than the rail industry. congress goes even further to find high-speed rail this year, we're definitely railroading the poor to pay for passenger rail. especially true this yuan is not a unified national rail plan that includes passenger rail, high-speed rail, and track, state rail plans, great rail and

a cost to complete as we. right now when it comes to rail, no one has a complete picture. we are looking, what we are looking to build a map, how are going to pay for a how much it will cost us. under last year's appropriations bill, we're supposed to get the plant on september 15, at plan should contain a map which quarters have been identified as high speed rail, we need cost estimates for these poor doors and we should have benchmarks and i did of health and to improvements along existing rail networks will benefit the traveling public. and have to be fully integrated with the state rail plans of amtrak existing lines. we should know the full cost of the equipment necessary to run this system. today, to be quite honest, despite her increase, we don't know what we're building, how much it will cost, and whether or not rail investment in america is here to stay without dedicated funds because the cost

seems to be going out the roof. the proposal so far have been just a hand out of general revenue with no funding source attributed to it. when our country as i've indicated earlier, is going further and further into debt. the worst part is, under the recovery act grants in 2010 we don't even know what you are building, where the use of taxpayer dollars for this purpose is an appropriate use of funds because, as i said, we don't have a plan. in march, secretary lahood testified before us on the budget, claimed that quote when president eisenhower signed the interstate highway bill, nobody knew how we were going to pay for all of it. so i'm not going to sit here and tell you that i know where all the money is going to come from for high-speed rail, closed quote. i was impressed with that statement, but it turns out that statement is simply false. according to research done by transportation weekly, the national interstate and have

predated the interstate pact act, and that predated the act by 10 years. the 1944 highway as directed 48 states to designate joely a map for national system of interstate, up to 40,000 miles. state designated 37,700 miles. at a map was approved by congress in august 1947. the map remain pretty much unchanged, although added miles have been designated to construct throughout the years. when the cost of the map, congress did have an idea because congress as the department of commerce to conduct a comprehensive highway study, cost study and submit it by february, 1995. congress required and updated state-by-state cost estimate of the interstate system every four years. for your national rail plan to september 15 include a detailed map? a cost to complete estimate? i'm afraid i must assume the answer to that, those questions is no.

for that reason, this was appropriations bill, i ask that you provide us with a description of the funds necessary for you to complete a true cost and a true cause complete study math. we have to have that. in addition, i would like your input, mr. administrator, on how much he did the study will cost and have this could be worked into your current plans for completion of the national rail plan. until we have this information, my view it would be irresponsible for the committee to give the high-speed rail program any additional funds. along with a high-speed rail plan with amtrak, which should be included in the national rail plan, and i think you would agree. i think your department would include amtrak capitol and fleet. i am pleased with the first time amtrak's of a five year capital budget plan a long with its annual appropriations request. however, as soon as we get a comprehensive plan we find and add into the plant. which is a sizable investment of

446 million in the amtrak fleet. is amtrak going to admit it is yours capital budget request to include fleet last where we can see what priority, new fleet plays versus and track additional capital requirements, and the americans with disability act requirements. we were dealing with the general fund appropriations, i think we need answers to these questions before we provide the resources. and tracks that are committed and again into the budget submission on march 22 of this year. it's not been cleared by omb and not part of amtrak's regular five year capital plan. these are additional capital funds and track is seeking for its aging fleet. it's not included in all of the planning. and include in the budget on which we have to work. i am thankful, don't get me wrong, they finally said that a fleet plan. at least there's a plan and cost to complete estimate, unlike our national rail plan and high-speed rail plan. but once again there are no funding sources identified,

other than general funds, and loans paid, with great interest by the general fund. in other words, these loans will be a burden on future general revenue. once again, amtrak is competing and potentially other forms of transportation. and potentially railroading the poor if the subcommittee agrees to pay $446 million in additional capital for a fleet, or agrees to incur additional debt service using general funds to promote a trend -- for loans they may take out in fleet on 2011 and beyond. all these resources should be contained in one comprehensive national rail plan. if you agreed with amtrak's fleet plan, congress will agree over the next 30 years to pay for 23 billion in $2009. 46 going in as collated dollars, or more to provide replacement plates and track system by 2040. whichever approach is taken ill be a very costly endeavor to

acquire the fleet replacement at the same time we're attending to build high-speed rail. and in the mind of the administration, and hands state service passenger rail. what's a priority? we've got to establish a priority. we as a force have to know there are limits, even in the best of times that these pie in the sky request and and those of us who are rail fans, or he used to be. i would have to say. given our current deficit, you have to admit the initial request of 446 million outside of the budget capital plan is inappropriate. why is amtrak asking for replacing of locomotives on the northeast corridor and single level long distance cards? now, replacing aging locomotives along the northeast corridor might be acceptable because at least they're operated on much lower cost per mile per passenger subsidies and other routes for amtrak. but long distance service last year only had 1.7 million riders, with a cost per passenger subsidy of $153.

replacement of long distant cars in amtrak's fleet is $4 billion. these are the most costly rounds in the current amtrak system, and amtrak is proposing to ask for some of these cars first. where's the proposed money supposed to come from, who will pay? what the taxpayer paid once again at the expense of the poor? if amtrak chooses to go the low route for the subcommittee would have to pay for debt service is far into future. we are really talking the poor in the future to pay for rail. long after i have stepped aside, general fund would be needed to pay for out year budget for funding decisions that would be made now. my closing note in all this doesn't even touch the safety side. and unmet funding needs for positive train control. by 2015. laster our committee provided 50 million in grants for positive train control. the new regulation is estimated cost upwards of 13 billion to 15 billion for the rail industry

low, and to play for the transit industry, and there's nothing in the budget for the safety program. with a 12 trillion-dollar, we just can't throw federal funds at projects willy-nilly. we need to answer these tough questions. we need a roadmap for the future and we need to balance the scare tax payer dollars. i apologize, thank you for the time but i think the magnitude of problems for the prioritizing problems we faced deserve some answers. with that i live forward to the testament of the administrator. >> thank you very much, senator bond that i appreciated. mr. sable, we'll turn to you for your opening statement. >> very good. thank you, madam chair, ranking member bond and members of the subcommittee. appreciate the opportunity to appear before you today and to discuss fiscal year 2011 budget request. our $2.9 billion request reflects the administration's commitment to keeping the

nationals rail transportation system save and supports the administration's pledge to provide the traveling public with sound transportation alternatives to flying or driving. without question this is a transformational time in fra. the impact of the rail safety improvement act which requires more than 40 will making studies and reports, the passenger, the passage of the passenger rail in proven and investment act and its new initiatives in bringing the states in as partners in the development of passenger rail, and then of course the american recovery and reinvestment act has just set about an unprecedented time in our agency. over the past year at four a's executed its rail safety regulatory commission while simultaneously implementing an entirely new line of business, the design and management of multibillion-dollar high-speed rail grant program. in this transformation does not

come without obstacles, challenges, and lessons learned. considering fra's fiscal year 2011 budget request, i hope the committee recognizes the care that was taken to present a request that supports our key mission, rail safety. while also enhancing our capacity to manage high-speed rail programs. and i want to emphasize that when we put this budget together, we didn't just take last year's budget and start making adjustments to a. we sat down with a blank sheet of paper, and started from scratch taking a look at all of our new requirements, all of our priorities. and from there developing a fresh budget. for fiscal year 2011, we are proposing a strong blend of safety program enhancements and technical budget changes. currently, all of fra's administrative and operational expenditures and several safety related programs are funded under a single account and titled safety and operations. in fiscal year 2011, we propose

to eliminate this account and break into two new accounts, railroad safety, and federal railroad operations. the proposed new account, the structure, is more transparent and will provide greater insight into the cost of f. our ace safety program activities and internal administrative operations. programmatically, under the new rail safety account, a total of 49.5 million is requested to carry out as far as mission-critical railroad safety functions and activities. a total of 153.8948 million ftes are requested under the new federal red road operation accounts to fund at four a's administrative activities such as payroll, information technology infrastructure, and other shared cause at provides an eccentric human resources to ensure sound stewardship of our

fra safety programs. this includes 62 new positions that will enable at for a to make measure progress on the responsibilities mandated by the rail safety improvement act i'm a free and did ministers of high-speed rail initiative. finally, after a 2011 budget activity include a rail safety user fee which is modeled after the fra administered fee between 1991 and 1995. fra estimates that 50 million could be generated for defraying the salaries benefit cost of up to 330 of our rail safety inspectors across the country. and total of 40 minute is requested to support fra's railroad research and develop a program. specifically, in fiscal year 2011 fra will focus and resources on railroad system safety, train control testing any violations, and the newly authorized rail cooperative research program. although the foundation for a federal state partnership began with the passage of priia, it

was $8 billion provided in rf that is to advance the high-speed rail initiative. this year's 1 billion-dollar request continues funding passenger rail infrastructure and includes up to $50 million, the program administration and oversight activities, $50 million for planning grants and 39 for high-speed rail research and development. fra and amtrak have shared a strong partnership for decades. in fiscal year 2011 budget request for amtrak, which totals 1.637 billion is a reflection of this administration's continuing support of this relationship. within the overall request, 563 is requested for amtrak operations, and to support their ongoing efforts to reshape the company by undertaking meaningful reforms. a total of 1.052 billion is requested for amtrak's capital needs in debt service. this includes 281 million to finance and tax ada

requirements. finally, 22 but is requested for direct grant to the amtrak office of the inspector general. the past 18 months have just been filled with exciting but challenges at fra. but it's been a great challenge, and it is even though it's been a challenge, it's been fun. and we are continuing to enhance the safety of our nation's freight passenger rail systems, while also driving toward this vision of investment in high speed passenger rail. so with that, i look forward to the committee's questions. >> thank you very much for your testimony. let me start by mentioning that last february, amtrak published in plans for replacing its aging fleet of rail cars in part that plans they requested $446 million to fund the fleet

plan in fiscal year 2011. can you explain to the committee why the department's request had no additional funding to replacing and tracks fleet? >> well, i think as you know, that anytime you're putting the budget together, there are a lot of very, very hard and very difficult choices that have to be made. but clearly, we think that fleet plan is, you know, it's an excellent plan and it is a good vision. it has the opportunity to invigorate domestic manufacturing. and we're sitting down with amtrak and trying to discuss some financing alternatives. >> well, they have structured their fleet plan so that it can support a domestic industry for manufacturing rail equipment by spreading the orders over a 30 year period. their demand for rail equipment may be large enough and reliable enough to actually support a domestic industry. now right now we don't have any domestic manufactures of rail equipment, but i could help

revitalize a very important sector of american manufacturing and support the kind of jobs we all want to see to get our economy back on track. afford this led to her, manufacturers have to believe that amtrak really is going to be a reliable source of funding for its rail orders. i know they're looking at a variety of ways to pay for the fleet plan and have requested funding from this committee, and understand that it may apply for a loan for the fra's program. and you share with us what kind of financing you think would help give our domestic manufactures the kind of insurance they need to be confident that amtrak will actually be able to purchase rail equipment well into the future? >> let me say first, thank you that i think you're absolutely on the mark, that in order to reinvigorate domestic manufacturing there needs to be the believe that this is going to be sustainable. you know, the secretary pulled in all of the foreign infactions, domestic

manufactures, all of rail manufactures and to summit over at the deity back in the center. and if we heard one thing, it was, you know, clear articulated the need to ensure that these orders can be smoothed out over a period of time so you're not constantly going through these peaks and valleys. and that is the orders were truly smoothed out over a period of time, and they believed it was sustainable, that this would be what it would take to truly make the investment as businessmen that they would need to make in a play and equip an and sync these costs into establishing these types of facilities here in the united states. as far as the financing solutions, again, we are at the table with amtrak and i think it's going to have to take a blend. i'm not sure that there's this one single silver bullet that's going to, you know, just solve all the promise for financing the other plan, but certainly there is the potential for

possibly commercial lending, direct appropriations. i mean, i think we need to take a look at all of the alternatives and make sure that we come up with a sound financing plan. >> this committee is a strong supporter. we believe in it. but we have to have consistent priorities and know that that funding is going to be consistently that if we want domestic manufacturers to begin to develop that. and if we have a funding source we get every question issue, we funded by we don't know what will happen next year. i don't think that would be enough for a domestic manufacturer to make a decision to make the kind of investment, wouldn't you agree? >> i would agree. again, your marks directly aligned with what we heard from the manufactures back in the center. they need to know that that is stability. >> so what i'm saying to you is, we all need to have a concrete plan, not just for an

appropriation here or there, but for how we're going to do this long into the future. we want to achieve the goal i think we want to achieve. >> i would agree that there needs to be the appropriate mix. we need to find without appropriate mix is. >> let me turn to another issue, because under the rail safety improvement act, railroads are supposed to deploy the positive train control by 2015. senator bond mentioned in his opening statement that we know that's an important safety technology. designed to prevent train collisions and tournaments. but this is going to cost billions of dollars. now, you announce at a $50 million in 2010 appropriations for safety, rail safety technology grants. i want to know what you hope to accomplish with that funding and what are some of the additional challenges that need to be resolved so we can deploy the btc. >> what we intend to do with this initial 50 million is, instead giving grants down to a single railroad or a small

combination of railroads, using it for those kind of things that can be broadly shared, those initial cost that in essence would benefit the industry as a whole, and, frankly, that was part of the reason why we didn't make an additional request for 2011. we wanted the opportunity to roll out the initial 59 and 2010 kind of test the waters with that. and then the opportunities for these broader base funding programs that the dot, whether it's the tiger grass, whether through the high-speed rail program, or whether it's to the proposed infrastructure bank for the funding of positive train control. >> senator bond mentioned, we're talking billions of dollars. you have a plan for how to get there? >> welcome at this this point those funding requirements belong to the railroads, and, you know, certainly we are looking at those alternatives that might offer some help.

but again, the responsibility at this point belongs to those rail carriers regulation applies to. >> according to fra's regulations, railroads have to deploy positive train control on any line that carries passengers were certain hazardous materials in 2008. but for a lot of reasons these rows issues before the 2015 deadline coming at us. in that case the original rationale for deploying positive train control on those lines may no longer exist. now, railroads we given the opportunity, i understand, to provide for an exemption, ptc requirement along those rail lines that can you share with the committee what criteria you would use to determine whether or not to grant an exception? >> the key is it's all about safety and that has to be a baseline from where you start.

and so we believe that the regulation has a sufficient level of flexibility that we start with where we're at today, but as those routes change there's the ability to come in and verify, you know, the carries would need to verify to his the fact that the rows have changed, and it allows for the appropriate level of checks and balances that come as modifications are made, for us to ensure that there are the appropriate modifications and the public safety is maintained. >> thank you very much. senator bond? >> thank you very much, mr. administrator. i am concerned that you have talked about we need to find some alternatives that we don't know what they are. we have a request for 446 billion -- billion dollars out of, outside of the budget for only these budget for

amtrak. and yet we don't know how that's going to be paid for. we don't have our budget allocation, and i can guarantee you that we're going to have to start making some hard choices, because there are a whole lot of wonderful things out there for railroads. but we need some specifics to know what your priorities are. number one, if you have plans for the alternative source of funding, what are the? don't just tells alternatives. we are appropriate what we have. if you're going to get us more money, how are you going to get us more money. >> as i say we have just really sat down and started those discussions with amtrak, so again, we need to flush out what those alternatives are and get you the answers. >> i can't -- i can't move any dollars that haven't been fleshed out.

on arra, gave amtrak 1.3 billion, and apparently the i.t. of amtrak is going to tell us these programs are perhaps not going to meet the februar february 17, 2011 timeline. would you comment on the oversight that fra provide in making this grant, making these grants to amtrak? >> let me say this. first off, i had a sit down with the amtrak ig just this week, and we discussed some of his findings in the report. and we welcome that. you know, that's the purpose of the ig is to uncover potential areas of problems, whether the problems exist today or whether

it is a potential of developing. and they did identify one that they have concerned with. you know, regarding the extraordinary measures that fra is requiring -- >> paying double overtime i understand? >> and i think the key is what they said is and has the potential. we're comfortable that, to our discussion with amtrak and through the oversight that we're providing, that we are going to achieve that appropriate balance between the need to quickly create jobs, because that was the intent of these projects. while also ensuring that there isn't any waste. >> what did you do anything as? you're talking about the ig looking at -- had ever turned down, denied a grant to amtrak speak as i don't know but i can get you the answer. have i in the past year? i have not. but we can get an answer of what fra's history is on that. >> maybe you could tell us what

criteria you used, what judgment you exercised in making that money available to provide that for the record. what criteria you go to for making those grants to and track to make sure they were shovel-ready. >> definitely. >> and in your view, should the five year capital plan include fleet of the rail assets in the ada requirements, and what comprehensive fleet plan, is that going to be part of the planned? >> let me say this. one of the challenges,cally between fra's budget request and there has been a mismatch cycle the budget that amtrak is prepared. and the good news is that under joe boardman's leadership and dj static, there financial officer, that's change, which means their budget cycle will be more in sync with ours. so in the future what fra makes its budget application, to this committee, it will be based on more soundtracks rather than us

trying to estimate what we believe and track might need. and then their budget being developed a month or two later. >> mr. administrator, i suggest that your problems, not ours. >> and like i say, the good news is -- >> were up against the wall now. are the things in your budget request that you have submitted that you would like to reduce to offset to cover some of the 446 milliken and request or amtrak? >> we believe that we have a very sound budget requests that are appropriate address is -- >> so we should absolutely ignore the 446 million request for amtrak speakers i don't think you ever ignore any information. >> unless -- >> please, please allow me to answer. as i said, when we develop our

budget, there's always a difficult choices that we have to make. and so we make some decisions and we present our vision to you. but that doesn't mean that you should ever ignore new information, or to additional information, or different information that somebody else brings to you. >> i assure you, mr. administrator, we will have to do that. but we want to have going in is your best assessment, if you think the budget should be amended to take account of the 446 million-dollar request from amtrak, or some part of it, we would ask you to provide that to us because at least we would have some grounds to know, we need -- we need to look at your budget request as a whole. and this coming in over the transom gives us mixed signals on what the administration's

priorities are. based on what you said and what we've seen in the past, i would have to say that this committee is being passed by the administration to fund other things, but not -- to the exclusion of the amtrak request. so that's something you're going to have to resolve, is whether you think some of the requests for locomotives on the northeast corridor should be included and other projects that you have requested should be eliminated to make room for it. and, finally, you're telling me that positive train control and all that is totally the freight rail, the 13 million to 15 that is a freire responsibility and you're not going to recommend money for it. >> that's not what i said. what i said was we do have other funding alternatives that are available through these broad-based transportation programs whether it's a tiger print process for passenger rail potentially to the high-speed rail program, through the

proposed infrastructure bank, or even through thrift alone. so we do have some alternatives. but again, the responsibility -- we can get some help, we can get some help, the responsibility does remain with those rail carriers. >> i hope we will see that in the plan. and i'm sure the rail carriers will want to know how much they're going to be expected to pick up. thank you, madam chair. >> thanks, madam chair. one thing i think that's generally acknowledge, and that is that amtrak is critical for our society to function, critical. and, you know, when you see a disasters like september 11, or hurricane katrina, and track is called upon to move america's out of harm's way. and in the northeast corridor, amtrak operates the only high-speed rail service in the country. and as a matter fact, if we

didn't have amtrak running there, in the northeast corridor, you would have to run 243 more flights every day with the congested airspace in our country that you would also have to add, and after that, 3000 more cars. 30,000 more cars on highway and i 95. amtrak offers so many positive additions to our well being. and included in that is a commitment that all of us, that is to create jobs. and cannot going to build rail cars overnight. how long does it take, do you think, mr. szabo, from the time the equipment is ordered to a time is delivers? >> mr. bobrick could probably give you more accurate light on that. i would say roughly -- what, about a year from origin?

roughly three years. >> roughly three years. and the fact of the matter is, that as we look at what amtrak adds, reduces our dependence on foreign oil, reduce the cost of operation that reduces pollution, it had so many things, and also you get there on time. surprised? you get where you're going on time. 90 -- >> 90% of the time if you take amtrak that i took an airplane the other day, it was a 45 and a flight up to local airport but it took us an hour and half to take off. so that make the 45 minute flight a heckuva lot longer. >> the average age of an amtrak passenger cars is over 24 years old. and some are more than 60 years old. the fact that i regard that is young has nothing to do with what happens in the rail car.

[laughter] >> and i ask you, do we -- how essential is it, in your judgment, for us to get replacements for the cars that we have on the railroad right now in order for the amtrak to be functioning the railroad we would like to see? >> it's important that i would say from both a safety standpoint as well as a reliability standpoint. >> critical, which is a? >> it's getting very close to critical. >> were not yet at criticality? >> it's close. >> mr. szabo, your two well-informed to not be able to say yes to that. do you ever take the railroad? >> every chance i can get. >> how often is that? >> i would say at least a couple times a month. when i -- i go to chicago a couple times a month that i

might in d.c. >> i do it every week. and i can tell you, my handwriting was never my best skill. but when i get off of the amtrak train, and i try to write some things that had to take care of, it's barely readable because it shakes, rattles and roles. and it is ridiculous. if we want to make this railroad the thing that america should be proud of, invest like china or spain or like countries that are far less able to do these things then we, and we are like a third or even a fourth rated country. in terms of railroad. it's shameful what happens. so i agree with my colleague here when we talk about replacing equipment. we need that 400 plus million dollars for new equipment and we've got to get those orders out there.

how much cash does it require on the barrel head in order to get these orders going? when you pay a deposit, you know, if you want to buy a car, you pay a deposit. >> it would be roughly $70 million. >> okay. so that sounds like a starting point to me, and we ought to work like the devil, and i've heard you say that there's no silver bullet's, and these are difficult decisions. all of that, those tales of all, mr. szabo, they're interesting but they don't get the job done. so when we look further, rail safety law that mandated, that railroads positive train control on certain routes by the end of 2015 and created a grant program to help railroads lead to safety requirements. however, the president's budget

eliminates funding for this critical grant program. what's administration going to do? to help public and private railroads because deadline? would do anything about speakers yes. again, we would have funding available to potentially the tiger program for the passenger rail's possibly, the high-speed rail program, the proposed infrastructure bank and potentially through ripped those pics we believe there are some options out there. >> do you have any idea of the amount of resources funding that might be available? >> well again that would, it would be depend on the amount of tiger money is made available, these difficult that would vary over time. >> everything depends on something else, we know that. my state of new jersey we have a rail grade known as the or to bridge that is over 100 years old, and in critical need of

being replaced. one of the biggest factors is in delays on the northeast corridor is the bridge. what is fra's plan to replace this bridge so that high-speed rail service on the northeast corridor can be searched we develop? >> well, as i think you're aware, we, through high speed real program, have already allocated $38.5 million, which is also being matched by 16.5 million from the state of new jersey to fund the final design of the replacement of the bridge and will continue to work with the state dot to see what alternatives are appropriate. >> if i might, madam chair, just one last thing. the last environmental impact statement of the northeast corridor was completed in 1978. in order for the core door to receive this kind of high-speed rail replacement, it needs this assessment, one need to be --

lester congress provided $50 million for the department of transportation to move forward on this assessment. do you know what the status of this review is that when it will be complete? >> yes. the secretary has asked for submissions from the governors to establish the northeast corridor commission, study commission. that's been established and will be putting together the appropriate plans to bring the core door to the next step, to the next level. we are committed to that. >> madam chair, thank you very much. some of that, will have the record open so submit questions. >> absolutely. thank you. mr. szabo, funny for high-speed rail has to make a change the workload at the fra. we can't forget the fra is a safety organization. you are requesting 26 new positions or rail and safety center can you describe force

your workforce strategy for this new positions? >> roughly half of those will be field inspectors, and then the remaining will be at headquarters, being utilized to make this shift -- you know, we have to always maintained a strong inspection program, while they also shipped to the more creative approaches through our risk reduction programs, and the direction that the congress sent us on under the rail safety improvement act. and so the remaining half would be benched strength that we need to put together our new rail safety initiatives. specular propose covering that with $50 million in user fees from industry. that's a lot of money, especially were asking them to also do positive train control. can you explain to us the rationale for charging user fees? >> it's not unprecedented when it comes to safety inside the dot, not only is a utilized in a

couple of under votes at dot but there is some history of using it as fra. as you might be aware, we had such a user fee to the mid '90s, roughly though i think 90 to 95. and so again there's a basis for doing this, and we believe it's appropriate to try and come up with revenue sources, and that in some way we try to supplement the cost of the railroad safety program. again, it's about public safety. it's about ensuring we have the resources and the inspectors we need to keep the nation's railroads safe. >> okay. in another arena, before the recovery act, states didn't expect the federal government to provide a significant amount of money for high-speed rail. and and less than two years ago, has now committed $10.5 billion to inner-city and high-speed rail. that is an important long-term investment. we all know it's not realistic to expect high-speed rail quarters to be in operation in

the next years, but can you give us idea of what timeframe do you think will be necessary to see the development of high speed rail quarters in the beginning of service? >> i think you need to keep in mind that congress develop this program as a state driven process. and so it's the state and the regions that develop their vision for their service, and then they apply to the federal government capital money to construct. and i were to each of those states and regions are any different maturity level, as far as where they're at with their plans. you know, in the case of those that got some of the early awards, these are state duties that have been investing in planning in real through their state programs for many years. in the case of california, the case of your state, washington state, in the midwest, north carolina. the states have been at this for almost a decade. 200-mile an hour service why

california is going to take a long time to build that. there can be small pieces that can be up and running and carrying passengers much more quickly. but, frankly, it's going to be projects more like the midwest plan. the midwest regional initiative they can have service at 110-mile an hour quickly in the next couple of years as it continues to build out and develop. in washington state, to spit you requested a billion dollars to can you tell us how much you expect used for intercity projects and how much for high-speed rail corridor? >> under the 2.5 billion that we wrote up this year, we allocated roughly about 85% of that to high-speed rail, and probably about 15% more towards the intercity projects. and if you take a look at the percentages on the 8 billion that we put out, you know, roughly, i want to save roughly about 45% was in that category of true high-speed rail, over

150 miles per hour. roughly another 46% what to what i would call the emerging high-speed rail, those in 110-one in 25-mile per hour category. and roughly about 15% into the smaller projects and conventional service. so that seems to be, you know, a good balance, good match. >> in order to decide which project you're going to find through this program you're going to have to rely on forecast of ridership levels and revenues and public net benefits, project costs. and so far we haven't seen you develop these strong requirements. and i know the department's i.t. is trying to investigate best practices. can you tell us what you're doing to make sure that the grant awards are based on sound forecasts, project based on cost and benefits of? >> yeah, i'm in, it clearly it has been a marriage driven process. and we do make these types of

analysis. but again there has to be an acknowledgment that this is a brand-new program. it's in its infancy, and less than a years time -- >> are you developing those? >> precisely. and that's kind of what i go back to its, a lot of it is about the lessons learned. when it comes to ridership -- >> will we see this in writing? >> well, i think ultimately we will be developing rules, but again, we are just going to utilizing the grant guidance. we really need to get this first round under our belt, you know. and experience the, yeah, we have to execute the first round before we start taking a look at those tweaks that need to be made in future rounds. >> okay. i have one more question. under the americans disability act, all amtrak stations are supposed accessible by july 26 this year. amtrak has aren't admitted that it will not be able to meet that

deadline and start a five year effort to come into compliance. do you believe that over the years and track did everything it could have done to comply with ada? >> well, i think is this committee is probably aware, historically, no administration has ever made and ada request on behalf of amtrak. and so i mean it really puts them behind the eight ball. you know, that is one of the reasons why we came for this year and have in fact made the $22 million request to start funding those legitimate needs. >> thank you. senator bond? >> thank you, madam chair. i would just note one thing. as a former governor i can tell you that looking to the states to make massive investments in high-speed rail is not going to happen anytime soon until the states get out of the holes there in. in california, you mentioned,

probably is in somewhat of their between greece and spain in having budget problems. but, madam chair, i'm going to submit questions in writing for the record. and i need to have a lot more specifics, firm priorities, amounts. not just we're going to work on a plan, but a plan, criteria, priorities, before i can support any of these requests. i need to know how they fit in our overall budget. so thank you for your testimony, and mr. administrator, and we have other witnesses and we will be communicate with you. thank you. >> thank you very much, senator bond. there will be questions from the committee that we will need responses for you in providing. thank you very much for your test going today, and with that i would like the second panel to come forward. >> thank you.

>> [inaudible conversations] [inaudible conversations] [inaudible conversations] >> we would like to welcome our second panel today, and mr. boardman, we will begin with you. [inaudible] >> do you want to turn your microphone on, please. >> thank you, madam chair, and i

appreciate the opportunity to speak with you today. before i begin the discussion about amtrak's funding it needs, i'd like to share with the committee some good news that was announced on april 8. and track is on pace to break its annual ridership record carrying a best ever 13.6 million passengers during the first six-month of the fiscal year of 2010. it with historically busier summer travel season ahead, comparing march 2010 to 2009, ridership increased by 13.5% to a record 2.4 million passengers for the month. in addition every single amtrak route carried more passengers with several experiencing double-digit growth. furthermore, one of the i think important things to say today is that we have had other wins. i went with moody's. moody's has upgraded the rating for amtrak from an aide to the a1 just this last month it had

been no material weaknesses found in our audits. this is the first time since 2004 that that has occurred. and ridership on long distance trains increase by 60% in march and is a fight or 2% for the first two corridors of 2010. in every one of the services, whether the missouri river writer, where senator bond is, it's up by 24.2% for march. and 15.8% for the first half of amtrak. cascades increased by 11 points for% in march saw a 16.7% increase for the first six months of the fiscal year. these numbers reinforce what so many of us know about passenger rail. that provide a safe, reliable user-friendly system to the traveling public will use. what i'd like to do those to spend, it's been time talking about what i think is the most important piece of what we're asking for, and i know in the last hearing there were several questions on it.

and it is the amtrak equipment plan and needs, which is by your table right now. and just as, an introduction, the fleet code is the key for customer perception and willingness to use our system. the operating reliability, particularly important and the cost of maintaining a fleet is critical for us for the future. the railroad belongs to you. it belongs to the united states. it belongs to the administration and the congress, and it has for the last 40 years. the united states. we covered non-of our capital costs. just like highways, capital support comes from the federal government and the payment on debt comes from the federal government and that will continue to be that way for as long as you the owners of the

railroad decided to operate a real road. amtrak suffered insufficient federal cattle investment over the full 40 years it's been here. the ada has been around 20 years in every administration has failed and every congress has failed to deliver what it passed to deliver when it passes as law to fund the ada requirements and that's not the case with the highway. gizmos are not. against the poor, they are. against highways and aviation and real. nowhere is there more evidence in the railcar fleet of locomotive fleet, the strategy, the average age already said to be 25 years old or more than 24i think the words. the fleet needs to be recapitalized. domestic production is needed

both for employment and to secure a nation as we enter a much higher cost of energy for the future. we need real roads and passenger railroads and the first table identifying for you the plan the car locomotor procurement you can see is ready and yellow lines, the yellow lines are the cars and the red are the locomotives in the two high marks on the yellow lines are when you replace train insects like the services which are higher. in the second table of what you see is the average annual miles in thousands that the cars operate for amtrak and on the far right of this table what you find is that all of this amtrak cars are operating in some cases 180,000 miles a year in comparison to all the transit operators which are on this side of of the table, tri-rail been the most of 66,000 miles a year.

the utilization then for amtrak all of the amtrak cars is much higher than any other operation in the united states. and they're all older. if you look at the third page you find the same kind of information for the average annual mile locomotive mileage and what you see is the closest competitor and there aren't competitors, they are a host, it is bnsf which has 83,000-mile annual locomotive use for a amtrak 160,000 miles, almost double what the mileage is by our private railroads. i think perhaps the most compelling slide in the d.c. have in front is the last one because it's a snapshot of the present. it's the locomotive's talking about replacing which is the electric locomotive on the northeast corridor, the aem-7,

the 1980's category and utilization, you saw a couple minutes ago, the heritage baggage car that was built in the 1950's, its the sleeper cars which is the newest on this fleet, the heritage diner which is the same age i am born 1948 and this was born in 1948, and as one of the things that keeps our speed down on the northeast corridor. you can only operate 177 kilometers per hour, as 110 miles per hour and when we replace these will build to immediately go to 200 kilometers per hour or 125 m.p.h. by replacing these which then reduces the time takes to travel on the northeast corridor. then the coaches from 81 to 83, this is the florida bound a silver star and i think it demonstrates what we needed for

fleet for the future. thank you for the opportunity to speak. >> thank you very much, mr. boardman. >> good morning, madam chair, ranking member and members of the subcommittee and thank you for the opportunity to discuss amtrak 2011 budget request. i like to start by thanking mr. copper, amtrak chairman, board of directors, president mr. boardman and members for the support i received during the past five months as amtrak inouye inspector general. i'm also pleased to report that amtrak management and the oig have agreed to a new relationship policy and that the inspector general of the farm credit administration found the new policy is consistent with the latter, of the oig act. i want to thank the subcommittee for including this very helpful requirement in last year's appropriations act.

today i will discuss the significant opportunities amtrak has to provide increased levels of high quality passenger rail services and for important challenges management must address to take advantage of these opportunities. first, the opportunities. the passenger rail investment and improvement act fundamentally changed amtrak role within the national passenger rail system. rather than relying on amtrak to the development revenue intercity passenger rail services alone, priia calls on state-supported with federal grants to share in developing new corridor and high-speed rail services. as a result, amtrak will become one of many choices states have to provide real services rather than the only practical option.

the first challenge is that amtrak needs to organize properly and operate more efficiently. amtrak is making organizational changes to help as successfully compete for new contracts and has taken steps to operate more efficiently. to illustrate the company has made some american progress implementing reliability centered maintenance practices in response to a 2005 speech to report. using reliability centered maintenance on a zero sell-off lead to reduced cross generating $60 million in revenue in 2009. amtrak to continue applying this maintenance concept across its fleet. however, amtrak can do more. for example, we recently identified opportunities to adopt european best practices including better asset management systems and more advanced technologies.

second, amtrak needs to improve its human capital management practices and in may 2009 and report we made several recommendations that management agreed to implement. as a result, amtrak is focusing on strategic workforce planning including identifying as critical skills and competency, implementing total compensation philosophy and improving recruitment and retention practices. fully implementing these corrective actions will require a concerted effort over several years. third, significant i.t. investments always involve risks. amtrak has four major technology initiatives under way and has taken a number of it measures to address the risks including: establishing discipline procedures to guide both product management and technology development, forming independent team to enforce standards, implementing reviews to ensure projects meet quality standards

before proceeding to the next development phase. to ensure that these projects stay on track and achieve anticipated benefits, amtrak should closely watched progress, address emerging problems quickly. the fourth challenges managing risks associated with the recovery act project. specifically amtrak may have to take measures that could reduce productivity, adversely impact project quality or significantly diminished railroad operation in order to finish some projects by february 2011. amtrak faces this issue in part because the terms of the grant are stricter than the terms of the act. the act requires amtrak to take measures to complete the projects by february 2011. the fra brand, on the other hand, requires amtrak to take continuing measures and even extra mirror measures to complete the project by that

date. as projects face slippages, amtrak is considering taking mr. nouri manages to make the completion date. these measures include adding a second or third ships which studies indicate having negative impact on productivity. and reducing the scope of projects which reduces the benefits associated with the final product. although the term extraordinary measures has not been defined in, we do not believe that amtrak should take actions that would significantly reduce productivity, adversely impact the quality of the final product or significantly diminished railroad operations. madam chair, this concludes my testimony and i'd be happy to answer questions. >> thank you very much. ms. calvaresi barr. >> members of the subcommittee, thank you for the invitation to discuss ongoing efforts to strengthen the nation's passenger rail network. as in the recent legislation

calls for some evidence investment in real an investment that demands oversight to ensure passenger rail goals are achieved and taxpayer dollars are used wisely. my statement today focuses on fra's expanded role and responsibilities under priia and the real safety piven act. the challenges fra faces and carry out their role and the progress amtrak has made in improving its operating and capital financial management processes. priia and the safety act dramatically expanded the fra's role and together these call for fra to develop from the ground up a multibillion-dollar high-speed rail program and to undertake several new safety and passenger rail services and has been initiatives. among the tasks set out for fra are development and performance measures for minimum passenger rail service requirements such as on-time performance levels and the establishment of

discretionary grant program to develop and apply positive train technology. in this expanded role presents several challenges for fra especially as related to implementing high-speed rail program. to assure program's success fra must develop a sound and implementation strategy while fra has develop project selection criteria. it's yet to provide grants applicants with a detailed methodologies needed to adequately complete their applications. for example, the fra has not issued guidance on how to prepare forecasting project ridership and revenues costs and public benefit for high speed and intercity passenger rail. without such guidance, fra is not a position to effectively assess the merits of a real grant application and ensure sustainability of service. fra must also enhance its

internal policies and practices in order to effectively oversee these larger project grants. according to a zero ft, plans for program monitoring and administration are in developing. finally, fra must obtain adequate staff for the right skill mix to receive programs implementation. the recovery act greatly accelerated the fra's roll out of the high-speed rail program further exacerbating fra's challenges. within 10 months after its enactment, fra was required to issue strategic high-speed rail plan to establish interim guidance and process all applications for the $8 billion stimulus investment. balancing other priia responsibilities with traditional responsibilities create even more challenges for fra. for example, priia requires fra to cornyn with hundreds of public and private sticklers to

establish national rail plan that addresses and your schenectady with other modes of transportation, inform development of state real plants and recognizes the need for sustainable funding mechanisms. at the same time fra was not lose sight of traditional responsibilities. chief among them insuring real safety and oversight exam -- must be tendered and effectively managing these critical programs will require sustained progress and oversight by fra and the d.o.t. oig. we have begun to shift resources accordingly. specifically we have under way the evaluation of best practices for forecasting high-speed rail ride a ship in revenue, cost and public benefit. audit of infrastructure access agreement between the states and freight to ensure access agreements adequately address

cost, schedule and performance goals. the and a quantitative analysis of amtrak delays that will help fra in short investments' yield of the highest returns. given the important role amtrak plays an inner city passenger rail, our work on amtrak financial management as relevant to fra's efforts. amtrak establish key performance indicators to measure both the efficiency and effectiveness of its operational and financial performance. for example, amtrak developed cost recovery indicator to measure the portion of expenses covered by revenues and writer ship growth. this approach appears to be a more efficient way to monitor and improve operating and financial performance than its previous approach of tracking it savings from specific reforms. our ongoing work also indicates the amtrak has improved as

long-term capital planning. specifically amtrak develop long-term plans for fleets and infrastructure in the my transparent process for pressurizing its capital needs, and guidance on conducting post reviews of its capital investment. clearly, amtrak success hinges on effective implementation. in closing, while we are dedicating additional resources to oversee fra and expanded role we are encouraged that the amtrak oig under its new leadership will enhance its oversight of amtrak related work. chairman mary, this concludes my prepared statement and and be happy to answer questions your other members may have an. >> thank you very much. mr. boardman, under amtrak new leadership we've seen some important improvements in how the railroad has been managed and in some of limiting focus of getting through each day, the

managed team now has strategic vision and started to look at long-term planning. amtrak overall capital plan and the company fleet plan reflects that new priority on strategic decision making but amtrak still makes separate requests for its capital plan and for its fleet plan. if you do not get all of the funding your requested for fiscal year 2011 howell you decide on funding between the separate plans? >> i thank you are referring to basically we're almost a billion dollars over the poor the request came from the administration and is accounted for all capital. talking about a fleet and all the projects that are capital of related on the northeast corridor and on the ada and the other projects needed. so as amtrak has done in the past and as amtrak is to look today to the future, we look at every opportunity for us to gain

those dollars and one of them being a preparation process and another and i think administrator talked a little, we are in discussion with administration about either a federal loan or even going out into the commercial market to borrow money, but in the end it all comes back to congress because all capital is subsidized by congress. in one fashion, form or another just like all capital for the highway or aviation side to subsidize the congress. they have a different methodology, they have a program that provides user funds for highways but those user funds also are distributed to transit which are not necessarily and i think we talked earlier, they are not paid for by the transit rider, they're paid for under the same structure the highly riss use those funds and the same way that aviation receives those funds. it all comes back to the congress and making decisions.

the need for amtrak is to put on the table to congress on our capital needs are and we've not been bashful about doing that because we need to rebuild the railroad. >> in addition to replacing the aging locomotive several cars, as i talked about earlier, this could revitalize domestic industry from manufacturing rubber of equipment and help us on focusing manufacturing jobs in the country. but realizing that goal assignment it will require companies to have the confidence that amtrak has reliable long-term source of funding for its fleet plan. what will it take the blame for u.s. manufacturers to allay passenger rail equipment is viable line of business? >> like the commercial on tv says buy my product, fund my plan. >> so you need to know -- they will need to know there is -- >> yes chairman, there is a new understanding across the world today i think that we're in a

different competitive environment for not only the economy but for energy for the future and every country today is looking at how are they going to solve this problem. rail becomes a key part of that. we've already seen that as a key part in terms of what the investments are with transit but it is to be connected to the rest of the world. for the rest of the country -- there are two key elements that amtrak brings to the table and one is its workforce, and the people that operate this railroad and know what needs to be done and the other is connectivity across this country. up and down from border to border and coast-to-coast. this railroad will be a key reason why this nation can live in a more prosperous position in the future. >> you are saying if we have that call as a country its clear and consistent and will send a message to domestic

manufacturers we are in an. >> mess and that is getting their. >> in the past amtrak has purchased real equipment from a bombardier in canada. in amtrak purchasing the service from bombardier and will it do so in the near term? >> yes, we continue to enhance our relationship with bombardier energy and others across the u.s. >> i understand that amtrak is still trying to decide on the bus strategy for replacing the fossella fleet which was originally provided by bombardier. one is to purchase additional cars to the fleet to expand capacity along the northeast corridor even though these new cars would be replaced after a couple years along with that original fleet. how likely is it that amtrak would purchase additional cars from bombardier before updating equipment for the northeast corridor? >> when we looked at was the

ocella lead, northeast quarter covers 121% of costs so you're making money on ocella as compared to other modes and services on the court or so we looked at that we can improve the amount of revenue and enhance ridership if we could extend the number of trains we operated that were ocella train so the opportunity is for us to to increase our revenues if we can find about five train is that we can add to the corner for high-speed service. certainly the bombardier services that are existing are already proven design and don't have to spend the time to go through to test an entirely new technology to provide that service so there's a great -- trying to find the right word, but there's great opportunity for us to do that with bombardier but haven't made that decision and decided that's what

we will do. >> okay, in my opening statement i talked about the fact that i'm glad in the administration is not submitting a budget request that would guarantee bankruptcy amtrak anymore but the request for capital grants is still lower than the railroads on request by $500 million. what impact with the administration budget have on your capital investment? >> more show already projects will be available for us to do for the funding if available and what i mean is that we have as every state d.o.t. and every confident operation has a list of projects that need to be done especially when you have a five to $7 billion backlog just on the northeast corner but there are other projects that could be done. i know senator dorgan may talk to me about one in particular on double slate so we have opportunities in the money be available to get a job done a. >> what about on the operating

side? the request is $40 million less than yours. will that have impact? >> it will not cause of the question is to cut back services, we are looking for a way that we can make sure the be provided that to be some decisions for example i still get messages from those who ride for albany to new york city asking what are regard to return to the cafe car which we don't have any longer. we eliminated that to reduce costs, so it impacts us that is not as convenient for people to draw the service as before. >> thank you very much. senator bond. >> thank madam chair. mr. boardman, we heard mr. alves testified that second and third shifts are reducing productivity and compromising the work that's done. i understood that the

1.3 billion in arra bonds 44 shovels ready projects. were they not? was amtrak not shovelled ready? what have you had to take these extraordinary steps which apparently are more costly and less productive? >> i think all the projects were shoveled ready and i think that the ig did a job looking at the risks along the way, but the nine projects he looked at, one was a bridge, to a positive train control the projects, and los angeles maintenance facility were the top of that they were worried about risk. when you look at the number of points and look at acquisition, environment, schedule, technology, size, complexity, and human capital management, fraud, which you wound up was 10 points rich of the first three

they were worried about, nine for the fourth and eighth for the fifth and when a look at the test which you find it is the risk is really environmental and size and complexity. the things that ted and his staff found a, it's costing us more as a dozen every capital area, was when you try to get it done as quickly as we were trying to get it done and had to put on the second or third shift. >> so that was a mistake trying to put the time deadline on? that was a mistake in terms of cost, productivity, so that's a signal not to put time lines on. i would hope the request to have would have a reasonable time lines that are achievable and i didn't have anything to do with that bill so i can't speak to that. you mentioned in your taking a look at different types of

funding for amtrak and you mentioned the high on the priority list in the private market. correct me if i'm wrong, if you borrow that means this budget, this committee's budget will have to pay the interest cross and the debt service to every year so that will really be in charge of this budget. are there any dedicated sources of funding that you're looking out outside of putting it cellar type trains to generate profits, making things probable that will give the money need? >> no. all capital comes from the the federal government. >> well, i would urge you to find out ways to emphasize that what is profitable and deemphasized that which is not probable because we are up against a wall as you heard me

say earlier. >> none of it is profitable. >> it has to be less costly. >> that's happening. even it is less costly though, it doesn't mean they can pay the capital with it, it means we can pay the operating. >> they come out of the same pot of money. you're looking here doesn't matter where you call the capitol operating, it will compete with your operating which will compete with housing. let me turn to mr. alves. sort of a two-part question, i know you are new to the office of ig and the bulk of new. in 2009 amtrak alan strategic guidance document and i would like to know how it's being implemented and to what extent are amtrak managers are others being held responsible for achieving the key performance indicators that have been developed not only affecting pay and promotion?

>> on osher i can fully answer that question but i will do my best. the strategic guidance identifies the key things that amtrak is trying to retain and amtrak has been taking steps under a new performance measurement system to develop performance measures and goals for its key executives and is then to follow those through the system to support immense. .. or is their performance for those who need it? >> i am not sure about a bonus but the rating and the pay is going to be tied to those measures. >> all right. welcome. you have spoken about the problems that apparently came

from putting too much money, too many requirements on fra, in other words i think i interest you safe to say a bunch of m >> a bunch of money was put on them that was impossible to meet. that's why there have been failures to achieve what is expected from fra. is that a fair amendment? >> yeah, i think the assessment and the point that i really want to make is looking at fra and what its traditional role really was, a small regulatory agency that's been asked to transform into a large grant making organization. not only do they issue their own grants and internal policies for good solid project management and oversight, but they have to oversee a larger grant operation on behalf of amtrak. overlay that with all of the new

safety that came out of the safety act as it relates to positive train control, as it relates to americans with disabilities and a whole host of other things, that is a big challenge. that's a hugely expanded role. and i think if i had to characterize what it's like, it's like needing to design and implement at the same time. that's very difficult. >> are they able to handle the response of the resources and the demands that they are expecting now? are they able to handle it? >> i think they're on their way. they've requested the ftes but they're nowhere close to where they need to be. >> okay. finally, with the d.o.t.ig, amtrak oig, how are you going to relate the roles of the two igs? >> okay, i can start first. ted and i had discussions about this as well.

we're thrilled he is in place and can pick up traditionally where we've been focused on some of the amtrak issues. the way i guess i would divide the responsibility i think it laid out pretty well the challenges that fra has before it. and i think yourself, mr. senator, indicated this national rail plan is something that needs to be looked at. very, very closely. >> that would be -- >> that would be something we would look at. we would look at all the other mandates, the requirements, how well they're overseeing project oversight. and we would hope the amtrak ig is continuing doing what he is doing looking at some of those internal policies and practices and management challenges going forward with their new requirements. >> you've got the fra ball, mr. alves, you've got the amtrak ball. >> i would like to say a couple of words if i could. i agree with what anne is saying. the amtrak ig i think had some very capable people and has done some very good work.

but i think that our focus needs to be on the major challenges that amtrak faces. and its strategic goals that are outlined in that strategic guidance. and we have put together a new strategic plan that builds on that strategic guidance. and basically directs us, our goal is going to be spent much more of our resources addressing the big major issues. and so i think that will fit with what you're looking for. >> i would encourage you with your sharing. my apologies to you, madam chair and my colleagues. >> senator lautenberg? >> one of the things that has been talked about with a degree of frequency and that is searching for new corridors where we can bring rail -- good quality rail service to these places.

where would we -- how would we fund the equipment, the tracks, the infrastructure. we can't handle the equipment needs for amtrak as it exists. we're talking about other corridors. how is that going to be paid for? >> senator, it's good to see you. first of all, i think there are a lot of those corridors that we can extend the use of our existing equipment. for example, springfield mass to new haven, for example. that's one of the things that's being funded and certainly there is been a lot of activity about how that will get financed for the future. when we extended the corridor to lynchburg, virginia, we were able to use equipment that was available that extended from the northeast corridor to provide that service. but there are areas, as you say, for example, one of the

corridors that i think has great promise is the milwaukee to madison corridor, for example, for the future. that will require the rebuilding of the tracks. and it will require additional equipment. and you have a state that's made a strong equipment in regard to that being wisconsin and both in terms of equipment that they would buy and pay for in some cases on their own and also applying for and rebuilding the line between milwaukee and madison or at least part of that line that they own. and i think that's where the key for priia came was that the states would take a leadership role in those corridors for the future and it would not only with adding tracks and facilities but also with the equipment. we're there to help them. but they're going to have to take a role in that process. and also use the federal money that's become available. >> a question that arises here,

you know, i looked at this. and one thing that we all know here, whether we like to look back and talk about all of the years of neglect in investment that we made. i mean, if you compare what -- what's happened with amtrak on an annual basis, i think it runs something over a billion dollars a year over the -- since the '70s when it became amtrak as we know it. and when you look in other places and commitments that are made, $10 billion a year in germany to get high-speed rail going. and they did it. and it doesn't do us a lot of good to beat our chest here about that. but the fact of the matter is,

this has been the case of sheer neglect on our part to step up to the plate. when you look at these amounts of money, this isn't something that comes out of the blue. it's trying to make up for some lost time. >> well said, sir. >> and when we look, for instance -- i want to ask a couple of questions about the equipment. you pretty well gave an endorsement of buying into bombardier equipment. how about the maintenance costs for bombardier and the durability of the equipment. i heard chatting around that the maintenance costs right now are outrageously high. is that not true? is that because the equipment was over -- it's been overworked? >> well, right now -- i don't mean to interrupt you.

right now we're rebuilding them at the midlife. it's 10 years. the cost right now is somewhat higher. we expect these train sets to last for 20 years. one of the things we did with the fleet plan is we began to recognize that there was a commercial life and then that was useful life. there were no manufacturers other than bombardier in the united states that really built the heavy-duty long-lasting inner city rail cars in the united states. so we really had to have a spec. i'm mixing terms here. we need a spec that was heavy-duty that would drive domestic manufacturing. part of the reason that we're committed to bombardier is because we're committed to bombardier. we have 20 train sets out there that are operating. and i want to get things done and keep things moving. and i truly believe right to my core that we're sitting on the precipice of huge increases again in high school costs. -- fuel costs.

and our need to deliver for our nation and for the community is going to mean that we need to move faster. somebody said -- asked the question earlier, how long does it take to get these cars in here? three years? maybe if we push them two years. we're at $80 a barrel. we're going to be headed to 100 by at least some estimates and maybe beyond that. it's when that happens that you begin to see a total breakdown in the aviation business model for short distance. and those are the kinds of things that railroads can provide in the most efficient manner. so i don't want to say that we have to buy bombardier for the high-speed rail sets. and i want a new generation of high-speed rail that's open and competitive. but right now in order for us to move things the way we think we need to move them, we need the relationships with bombardier. and we also need relationships and we are improving our relationships with general electric, for example, that we have over 200 of our diesel

locomotives are general electric locomotives that we're improving our relationship with him so that they will become longer lasting and we're looking at the potential for a new generation tier 3 -- >> can we get any acceleration of the speeds -- you held out some hope there made me glad for a minute. in this environment that's pretty hard. but fact is with new equipment, you've projected a real sharpening of the trip from here to new york. >> we believe the time savings can be -- >> if we -- the midlife repairs that you talked about. does that give you the kind of equipment advantage that in any way enhances the amount of time that we have to go on the northeast corridor to get the destination?

>> some. but it doesn't get us up to the speed of the acela because of the infrastructure that needs to be fixed as well. >> mr. boardman, thank you for being here. senator lautenberg and i were just talking about the fact that both of us think you're doing a good job and we were reminiscing with mr. gunn who used to run amtrak who i thought was a superb leader as well. but thanks for sinking your teeth into this. this is a big challenge because you've not gotten the money from the congress for capital to do what's necessary. i was in russia recently. and was on a fast train from moscow to st. petersburg. i'm thinking wait a second. why is it there's a fast train with faster and better equipment in russia than here? it makes no sense to me.

well, i'm a big supporter of amtrak. i think rail passenger service is an important part of the transportation network and i think congress just has to do better. i know we have some among us here in congress who believe we shouldn't do this at all. i think this is a very important adjunct for america's transportation system. now, having said all that and complimented you sufficiently, let me -- >> devil's lake on your mind? >> yes, it is. yes, it is. you know, you mentioned, i think, that the empire builders is probably the most successful long distance trains on the amtrak system. senator washington knows that because that's where it ends up. over half a million people get on that train from chicago to seattle. it goes through north dakota. and we face a problem as you know we have a chronic lake flooding that's been going on for a dozen years now in what is called devil's lake. it's dramatic flooding.

they could see only circumstance in the great salt lake. we have a closed basin and we don't know where it will all go. the lake has increased in height i think 25 feet now. and it just continues to rise. this year it's expected to rise. we have a bridge near church's ferry on a track owned by burgle northern where amtrak, i believe, slows down to 25 miles an hour in order to go over that bridge. >> yes. >> but if the water goes much higher, perhaps another foot and a half, you won't be able to go over that bridge. and we met in january about that. i'm hoping that quick action can be taken to begin the work to resolve that issue. i don't think you want to avoid stopping at grand forks, devil's lake, rugby along the route of the empire builder. you get a lot of traffic in that area. so tell me where we are in your minds. and what can we do to fix this? and to do it on an urgent basis? >> we've been regularly meeting

in regard to this in the state and with burlington knowledge. -- northern. no one has stood up to pay for the bridge which is understandable but it's time. it's time for all the parties to decide what part of this do they need to help pay for and how do we move this forward? so i would propose to you with your -- with your blessing, i hope, that we meet with the state in a more structured way with our senior folks to find a way to not only design and engineer but finance the appropriate bridge that solves this problem for the future. >> the track and the bridge belong to burlington northern? >> they do. >> and what will the design and the engineering cost be? >> you know what? i had it and was supposed to remember it and it's gone but i can provide that to you for the record. i think -- i think the construction of the bridge was

around $60 million. and usually it's about 10% of that but i think -- i think it was like between $4 and $6 million to design it. and then the more -- maybe more difficult part for the future was we had to replace some rails for the future and maintain it. which brought the whole thing up to maybe in the 100,000 plus or minus category. >> 100 million you mean? >> 100 million. if it was 100,000, we'd take care of it. sorry. [laughter] >> i was trying to convert kilometers -- >> $100,000 -- [laughter] >> we never hear numbers like that. well, let me make a suggestion, i wonder perhaps if we shouldn't do a conference call next. my staff has been involved with all of these calls. i mean, we've had some weekly calls but frankly nothing is happening. >> yes, sir. >> nothing constructive is happening. and i wonder if we shouldn't do a conference call with the ceo of burlington northern,

mr. rose, yourself, the governor, the congressional delegation and in that call decide who's going to do what when and how we're going to get this fixed because i worry very much that we could come up to a time here in just a matter of weeks when something could persuade the structural issues and others could persuade you that you can't any longer run that amtrak train through grand folks, north dakota. >> you're very persuasive to me in the meeting we had in january that i would continue to operate. >> well, i tried to be persuasive. but let me suggest that i'll talk to you following this hearing. why don't we put together a conference call of principles first. make some judgments there about who's going to do what and when. >> yes, sir. >> but again, you want this railroad to run well. you believe in passenger service as do i. and i think that the chairman of this subcommittee i know has

lautenberg. you've got a very strong support in the vice president office. we watched him as a senator spend a lot of time on amtrak as well. i really you to succeed. we need to find a way to get enough capital into this rail passenger system so that you can make decisions in intermediate and longer term. it's the only way we're going to get to where we want to be and need to be to have a healthy rail passenger system that works well. so let me again -- madam chairman, thank you for the time and i'll look forward talking to you either late today, mr. boardman, or tomorrow. we'll set up that call. >> thank you. >> thank you very much. i have one final area, and that is in fiscal year 2010, amtrak committed to spending $144 million on station improvements

to bring the rail system into compliance with the ada. the original budget request for 2011 included $281 million for the second year of its five-year plan for ada compliance but today amtrak is lowering that estimate, i understand, by $15 million because of difficulty getting the money out the door this year. and i understand that part of that is due to the fact that you don't own all the facilities. but i wanted to ask you today, mr. boardman, if you still believe that amtrak will be able to bring all of its stations into compliance within ada within the next five years? >> i don't know that we can. i'm not happy with my organization that reduced the amount from the 181 down to the 131. and i don't yet have the answers from them. as to what we're going to do to make that five-year decline. if we have to drop it $50 million right this minute for me to testify to you that we can

deliver it in five years, i don't think would be the appropriate thing for me to do. >> well, in want you to know this is a high priority for me. it's about people's civil rights and it's not going to get any easier in the next five years. so i'm going to continue to press you on this. >> yes, ma'am. >> with that i don't believe we have any other members that have questions. so i want to thank all of our witnesses for their testimony. and i will recess this hearing until may 6th at 930. at that time we'll be taking testimony from lahood on the fiscal 2011 budget request related to community liveability and sustainability. >> thank you. >> thank you very much. [inaudible conversations] [inaudible conversations]

>> the u.s. senate has completed work for the week. they'll return monday at 2:00 eastern to continue debate on the financial regulations bill. the new version filed yesterday creates a new consumer protection regulator and sets new rules for derivatives and other complex financial instruments. more amendments next week with votes planned on tuesday. >> what i think is vital now is that the americans agree to talk to the taliban.

>> in 2000 >> the people who were coming to us for risk in the housing market wanted to have a security that gave them exposure to the housing market and that's what they got. >> the senate hearing with goldman sachs executives went nearly 11 hours. see every moment. it's washington your way at the c-span video library. every program since 1987 free onli. >> now a house hearing on the problem of antibiotic resistance. the witnesses are dr. thomas friedan centers of disease control and the director of national institute of allergy and infectious diseases.

frank pallone of new jersey chairs the committee. this is about 2 hours. >> the hearing of the subcommittee is called to order. today we're having a hearing on antibiotic resistance and the threat to public health. and i will first recognize myself for an opening statement. this is a very serious public health concern. and i know it's an issue of great interest to many members of the house of representatives. antibiotics are among the most impactful medical innovations of the 20th century. though first discovered in the late 1920s, antibiotics became part of routine treatment to combat bacterial infections in the 1940s. they were the main contributors of the decline of infectious diseases. illnesses that happened widespread and often fatal prior to the development of antibiotics were suddenly curable with the administration of these new wonder drugs. in fact, the cdc lists control over infectious diseases is one

of the top ten great public health e. whats in the last century and mentions antimicrobials. they are living organisms and they are such and mutate over time to be able to resist the drugs that have been developed to combat them. and we now find ourselves in the situation where our triumph or infectious diseases is in jeopardy. more and more bacteria are moving tore resistance to the antibiotics on the market. unfortunately, these resistant diseases are among the most predominant illnesses in the population including respiratory diseases such as pneumonia and food related diseases such as cole and salmonella. -- e. coli and salmonella. and other resistant staph known as mrsa. mrsa is migrating out of the health care setting and can also

be found in the community posing a new threat to americans. newspapers across the nation report on the danger and prevalence of these bacteria. in my state of new jersey we had a number of schools close a few years ago after children were diagnosed with mrsa. some were hospitalized for weeks. and i'm sure everyone here remembers the scare we had not long ago in the house of representatives when mrsa was found in the house staff gym. the consequences of these antibiotic resistant bacteria are dangerous, expensive and at times deadly. in 2005, the cdc estimated that roughly 94,000 americans contracted mrsa and 8,000 died including young and otherwise healthy patients. and many in the medical community believe that mrsa might not be as big of a threat as some of the other antibiotic-resistant diseases as fortunately there still are some drugs that can treat mrsa. for other diseases, there are very few options.

as articles in the press have highlighted, it was a particular concern among the wounded troops in iraq. 35% of those infections responded to only one antibiotic on the market today and 4% were resistant to all of our current drugs. it's pretty horrifying to me to think our soldiers can survive a war only to succumb to a bacterial infection we are powerless to treat. in treating these highly resistant infections, physicians often have to prescribe more expensive and less commonly used that can cause serious side effects. patients end up hospitalized for longer periods of time and often suffer recurring infections that send them back to the doctor time and again. and these illnesses tend to be very expensive. not to mention the threat they pose to all who come in contact with these patients. and that's why this hearing is important today. i'm very eager to hear from our

witnesses about the problems that we are experiencing with resistant bacteria. i know both of you are engaged in some exciting research that will hopefully help us tackle antibiotic resistance in the most effective way possible. i want to welcome you both to the committee. i apologize for the fact that we had to start so late. i know one or both of you mentioned catching a plane. i don't know what the situation is with that. but for now i'll recognize our ranking member, mr. shimkus, for an opening statement. >> antimicrobial drugs are effective and lifesaving tool when used correctly. we know that microbes including bacteria can become resistant to drugs and resistance is already a concern in our community particularly in the hospital setting when numerous deaths occur each year as a result of a resistance. i'm glad we have our panel before us in the cdc and the nih

the role the federal government has played i believe it with the u.s. interagency task force or antibiotic resistance. i look forward to the hearing more on the progress made and what we might expect from the task forces of the action plan expected to be released later this year. i've always believed a crucial component in this fight is providing industry and regulatory framework that provide more antimicrobial drugs. many have turned away from new antimicrobials because increased incentives to develop drugs and other therapeutic areas and the uncertainty of the marketplace. as members of believe committee we should work hard to break down the barriers encouraging the marketplace incentives like extended patent exclusivity for antibiotics. and economic incentives such as an r & d tax credit. unfortunately, i believe that the $27 billion tax on the drug industry and the health reform law will have a negative effect and only serve to stifle not

encourage more development of antibiotic drugs. perhaps that isn't the case but this is another example of why we must hold hearings on the new health reform law. last week i raised issues we already knew were problems. preexisting conditions coverage for children, individuals who don't qualify for the new high risk pools. families being forced into medicaid, premiums going to rise on average $2100 for those in the individual market. and being able to drop coverage and avoid penalties after three months and one day. and this week we already have new questions. the majority said health care spending would decrease. the president even pledged that costs would be down.wv but last week national health care expectations expenditures will increase by $311 billion. making health care 21% of the gdp. should we believe the cms

actuary expert or the majority in their bill? now law. are the $575.1 billion in cuts to medicare unrealistic and unsustainable? as the report claims? will the cuts drive 15% of hospitals in the red and force them to close their doors? how would this jeopardize access to care for seniors? what does the hospital community say about this? are 50% of seniors going to lose their plans. can 14 million low wage working americans have their insurance dropped forcing them into medicaid? how will the state medicaid plans handle these new populations and costs? these are the questions being raised in the real concerns and fears coming from the public. this committee and this congress cannot just bury our heads in the sand and pretend these problems don't exist in this massive health reform law. chairman pallone, i asked before and i hope -- and chairman waxman is here.

i hope we have hearings on the implementation of this law and address some of these problems that should -- we should start moving to fix before they actually become problems. and i've identified quite a few of them. and with that, mr. chairman, i yield back my time. >> thank you. chairman waxman is recognized for an opening statement? >> thank you very much, mr. chairman. we need to debate the health care bill and review its implementation but we ought to be able to chew gum and walk at the same time. 'cause there's it's not going to make much different if you have health insurance or not if you're going to die from something that could have been prevented from an antibiotic. and we're seeing more and more antibiotic resistance. the revolution of antibiotics starting with penicillin in 1927 has been a mainly accomplishment in the health care world. and has led to many people surviving things that in the

past might have cost them their lives. before we had antibiotics, common skin infections could turn fatal. childbirth could be a death sentence for both mother and baby. and superficial wounds could deteriorate rapidly often resulting in amputation. antibiotics changed all that. and with the discovery of these medicines, doctors could readily treat infections and literally save lives. the modern annual of medicine was launched. some 80 years later this medical miracle is still saving lives. and without antibiotics many of today's cancer protocols would be nearly impossible to use because the immune system, it becomes compromised by the treatments would quickly lead people to die from opportunistic illnesses. whether you like the provisions of the health care bill or in the.

we need to have antibiotics available. and shockingly, experts, which i understand is supposed to be the reason for the hearing are telling us we are in the precipice of losing the power of today's antibiotics. as a greater number of bacteria become more resistant to them for reasons that we'll explore this afternoon, antibiotics become less effective making infections far more hazardous to health. this is not an exaggeration or a hyperbole or the stuff of some computer model. this is not propaganda which we hear a lot about in these committee session which is people are campaigning for the november election and not looking at the issues that we have to deal with. too many americans have already succumb to our inability to treat infections and the numbers are staggering. today we'll learn about the impact of antibiotic resistance on human health from two of the

nation's leading experts on infectious diseases dr. tom friedan, director of the centers for disease control and prevention and dr. anthony fauci director of the national institute of allergy infectious disease at nih. as we do, i hope we can start to understand and appreciate the severity of the problem we face. and together work toward a public/private plan of attack. i don't know what we need to do, obviously, research. that's our default and most important answer to any problem like this. but it's going to take a strong multifaceted yet coordinated strategy to get the job done. i think we have to think about things that have not been on the agenda for a while because the pressure for some of the special interest. what is the impact of using antibiotics without a medical need when it's applied to large numbers of animals? is this resulting in more drug

resistant antibiotics? what will it take to get the pharmaceutical companies to do more work in this area? i met with a group yesterday who told me they need believe. they need that and they need the other thing. but they don't want to work on antibiotics 'cause it's not profitable enough. well, let's look at that problem. let's look at whatever it's going to take and keep our eye on the objective. we cannot afford to live in a world where antibiotics don't work anymore. and i think the numbers are just so staggering. 90,000 americans die each year of deadly hospital acquired infections which are predominantly caused by antibiotic-resistant bugs. over 18,000 americans including healthy young people die annually from staph known as

mrsa and we've seen soldiers come home with an deadly antibiotic resistant bacteria. and we need more hearings so that we can say these words correctly. [laughter] >> because these are infections that we want to stop with antibiotics. thank you very much, mr. chairman. i look forward to the testimony. >> thank you, chairman waxman. the gentleman from kentucky. >> mr. chairman, thank you very much. we look forward to this very important hearing and certainly appreciate our two witnesses being here today. i would, however, like to reiterate the importance and necessity in view of holding hearings regarding the implementation of this massive and far-reaching change to our health delivery system. as chairman waxman noted, about

hospital infections, according to the centers for disease control, 2 million people acquire bacterial infections in hospitals each year. and of that around 90,000 people die because of these infections. and according to the information given to me, 70% of the hospital-acquired infections are caused by bacteria that are resistant to at least one of the drugs most commonly used to treat them. i also do believe that we must explore incentives and other options to encourage pharmaceutical companies to continue their research and coming up with new medicines to deal with this problem. i look forward to the testimony of our witnesses today and yield back the balance of my time. >> thank you. the gentlewoman from the virgin islands, miss christensen.

>> thank you chairman pallone and thank you for being here and it's good to see you again. the hard facts and data about the prevalence of antimicrobial resistance is nothing short of astounding because of repeated and widespread improper antibiotic usage almost every type of bacteria has been stronger and less responsive to treatment. that's roughly 2 million people who will develop an infection and 90,000 of these patients die. this trend is relate to the fact that more than 70% of bacteria that caused these infections are resistant. at least one of the antibiotics that is most commonly used to treat them. though the full economic impact is difficult to determine, the estimated cost is somewhere in the vicinity of $5 billion a year. what is also so disturbing is that because of believe resistance we are facing the prospect of reverting the times in health care where we're only able to offer a hand to hold. not only might antibiotics be priced out of reach but we may

see cases where there are none that are effective in a given infection and that's unacceptable. i know the pressures that we are always under to prescribe antibiotics. i made it a point not to use them until -- unless i thought they were indicated either for my patients or my family. i thank g.w. and howard for that. as i see the resistance -- as i see it, the resistance horse is out of the barn. the only way to contain it is to fence it in by the national institute developing the vaccines as they did which had a good result or spurring the results of new antibiotics, or the cdc new campaigns. especially including the public. none are easy but half to become a priority because this country and the world cannot revert to the dark days of medicine. so thank you, chairman pallone and ranking member shimkus for holding this hearing. dr. fauci and dr. friedan, i

look forward to the discussion. >> thank you, mr. chairman. antimicrobial drugs have saved countless lives over the last half century. unfortunately, we are observing a growing amount of bacterial resistance to antibiotics. and many infectious diseases are becoming increasingly difficult to treat. as a result. there are multiple reasons for microbes becoming drug resistant including inappropriate use by physicians, inadequate diagnostics, hospital use, and agricultural use. i was pleased to see that in the majority's memo for this hearing they noted that, quote, the national institute of allergy and infectious diseases acknowledges there's debate about the public health impact,

end quote, of antimicrobial use in animal agriculture. particularly, in animal feed. because i believe that the legitimate and judicious use of antibiotics in animal agriculture has been unfairly attacked and demonized in recent years. fda puts these drugs through a rigorous approval process with many newer antibiotics having been extensively reviewed specifically to assess any risk to humans as a result of drug resistance. treatment, prevention, control, and growth promotion, feed efficiency are all fda-approved uses for antibiotics. fda also conducts post-approval monitoring and multipublic and private surveillance systems monitor for any sign of antibiotic resistance. while every possible cause of antibiotic resistance should be

studied and explored, i would hope that this series of hearings would focus more on areas where the science has told us there's cause for concern. and that is not the antibiotic use in animals. i look forward to hearing from our witnesses. and i thank you, mr. chairman, for scheduling this hearing. >> thank you. chairman dingell? >> i thank you. i have a splendid statement. i know everybody will benefit by reading it. i ask unanimous consent to insert it into the record. and thank you, mr. chairman. >> without objection, so ordered. the gentleman from texas, mr. burgess. >> thank you, mr. chairman. and due to the high octane witnesses we have, i'm going to waive an opening statement and submit for the record and reserve time for questions. >> without objection, so ordered. did you have a statement -- [inaudible] >> oh, submitted for the record. all the statements will be submitted to the record. thank you, mr. burgess.

the gentleman from -- the gentlewoman from illinois. >> i'll put my full statement in the record but i do have a couple of comments. in my home state, the illinois department of health has stated in four years the incidents of mrsa has increased 57% to over 10,000 cases. and as we're going to hear from the cdc and the national institutes of allergy and infectious diseases, antibiotics become less effective as humans are increasingly an often unnecessarily exposed to them. this can happen when they're overprescribed. but it also happens through other types of exposures. for this reason that i find, the rampant use of antibiotics for nontherapeutic purposes in livestock populations is alarming. many factory farms give cows, chickens and pigs antibiotics in their daily feed. they aren't treating any known diseases.

they're promoting growth and compensating for bad sanitation. when antibiotics are used in livestock populations, it gets into our food systems and into our water supply using highly potent medications for this type of use continues to contribute to the increasing prevalence of antibiotic-resistant infections. i applaud my good friend representative lewis slaughter for the preservation of antibiotics for medical treatment act which would take needed steps to protect the effectiveness of antibiotics. i'm a cosponsor of this legislation. and i look forward to dr. friedan and dr. fauci's testimony on this issue. i hope you'll address this as well. and i yield back, thank you. >> thank you. the gentlewoman from tennessee, ms. blackburn. >> thank you, mr. chairman. and dr. friedan and dr. fauci, thank you for being with us today. and i'll have to say this is a hearing that i've waited a long time for.

i first wrote you, mr. chairman, in october '07 with my concerns about mrsa and the fact that we needed to look into this. i find it astounding when you look at the 2005 stats that there are more people that die from mrsa-caused infections than those that die from aids, parkinson's, emphysema and homicide each year. and i do think this is something that has to be addressed. i was surprised as i looked at the issue first in '07, to find out from our tennessee department of health that there is not a national standard on a way to report mrsa issues. and that is of concern to me. it's something that i'll want to address with both of you as we move through the hearing. i do have a full statement that i want to submit for the record. but i thank you for the hearing and look forward to our witnesses.

>> and the full statement will be entered into the record. thank you. our vice chair, the gentlewoman from california. >> thank you, chairman pallone. i'll be very brief but i want to thank you for holding the hearing and thank our witnesses for coming today and for their testimony. i want to give a special thanks to dr. fauci who gave us is stirring commencement speech for someone named amy fisher who's now my medical health specialist on my staff. so you must have said just the right thing when she graduated from emory. thank you very much. this issue of antibiotic resistance is of extreme importance to both the health and the economic well-being of all americans. resistant strains of bacteria are harder to treat often requiring longer and more difficult courses of treatment. and the longer an individual must spend fighting an illness the greater the loss of valuable time at work and at home with families. but there's also an economic consequence to the nation as a

whole. these infections cost the health care system more expensive treatments and nearly $5 billion in animal cost associated with hospital-acquired infections. for many years we have taken for granted that when we are sick we can go to our doctor, take a week's worth of medicine and be well again. but now we must face the facts that we need a more comprehensive approach to treating bacterial infection. perhaps most concerning is that there are a broad range of potential causes for the antibiotic resistance that affects us today. individual level factors like wind and what medicines a doctor prescribes and how well a patient adheres to a treatment combined with health care-associated infections. agricultural antibiotic use and the lack of new antibiotic treatments all of these have contributed to the current state of antibiotic resistance. i look forward to hearing our witnesses' thoughts on how we can employ evidence-based strategies to combat antibiotic resistance and the multiple

factors that contribute to it in a coordinated approach. so thank you for being here. and i yield back. >> thank you. next, the gentleman from utah, mr. matheson. >> thank you, mr. chairman. i have a full statement and i'll submit for the record. i'll make one brief comment. i'll point out on this important issue i have once again reproduced in this congress h.r. 2400 to address antimicrobial act or the s.t.a.r. act. i believe this is of a comprehensive piece of legislation to strengthen our country's response to pathogens that are increasingly become resistance to antibiotics. orin hatch will have a companion bill and i hope the s.t.a.r. act can be contributed to this debate and to make progress on this issue. with that i yield back. >> thank you. the gentleman from ohio, mr. space. >> i thank you, mr. chairman.

for holding this hearing and i would like to thank the witnesses for their attendance today. i think we have all as a nation kind of taken it for granted that the antibiotics were there. and certainly as a parent i've not thought much about the consequences if they hadn't been there. and it's a little unnerving now to see, you know, in combating some forms of bacteria we can now say that antibiotics are less effective. in the words of chairman waxman, this would be a very frightening world if it were a world without antibiotics ring true. i'm very pleased the cdc and the fda and other agencies have begun to take some basic steps to combat the problem. i think public awareness is certainly a big part of it. i think this congress and other agencies have an obligation to advance research into the issue. my only hope is if this congress

this term decides to take l legislative action. researching and developing of a solution to this problem is very important. but ensuring access to antibiotics for all americans is equally important during the process. and with that, mr. chairman mr. chairman, i yield back. >> thank you. the gentlewoman from florida, ms. caster. >> thank you, mr. chairman. for holding this afternoon's hearing on human resistance to antibiotic drugs. welcome to our witnesses. this is a critical and rather frightening issue that we must work to resolve. particularly, the findings of the recently released agency for health care research and quality report are alarming. post-operative blood infections increased. and urinary tract infections increased.

there are more statistics like that and the numbers should be going down. not up. i thought it was also disturbing that the report found that blacks, hispanics, asians and native american patients were less likely than whites to receive preventive antibiotics before surgeries. and all these infections caused nearly 100,000 deaths each year. and it accounts for up to $26 billion a year in additional costs. many of these infections are resistant to some of the strongest antibiotics causing some patients to be in the hospital for weeks or months. in florida, drug resistant mersa infections are growing. and are infecting healthy adults and children. the number of cases in florida from outpatient facilities increased more than four times in the three-year period from 2003 to 2005. drug-resistanting gram negative infections different from mersa are also on the rise.

they are acquired in hospitals or long-term care settings. they have a high death rate and are resisting to antibiotics usually known as the last line of defense. according to the cdc, the antimicrobial resistance problem is a major looming public health crisis. researchers that i've heard from have highlighted to meuwñ the l of resources coming from nih for this particular issue, they've highlighted the lack of resource from the state level to detect monitoring and control and antimicrobial in public health habits. -- laboratories. florida does not have the ability to categorize resistance patterns. gentlemen, we need your help in tackling this crisis. i look forward to your testimony. thank you, mr. chairman. >> thank you. i think everyone has had a chance to give an opening statement. so we'll now turn to our panel. we have our two witnesses today. i want to welcome you.

let me introduce on my left dr. thomas r. friedan, who's director of the centers for disease control and prevention.w and to my right is dr. anthony s. fauci who's director of the national institute of allergy and infectious diseases. thank you for being with us today. sorry again you had to wait. you know, we have 5-minute opening statements that are made part of the record. and you can submit additional statements or comments after. and we may also follow up with some written questions. so i'll start with dr. friedan, thank you. >> thank you very much, chairman pallone, chairman emeritus dingell and members of the subcommittee for your interest in this topic and for holding this hearing. as an infectious disease physician myself and having worked as a tuberculosis control officer, health commissioner for more than 20 years i've seen the growing problem of drug resistance. and also the potential to prevent and reverse drug resistance with effective public

health action. i appreciate the opportunity to speak with you today about the public health threat of antibiotic resistance and the role that cdc plays in preventing, detecting, better understanding and responding to the problem. i'd like to show several slides to illustrate the problem. the first one shows the increase in drug resistance in two different organisms. one is resistant to penicillin something that emerged almost immediately after penicillin became available early on. tiny doses of penicillin were able to cure severe infections. those resistant organisms first emerged in the hospital and then after a gap of a decade or so in the community. that same pattern has existed with mrsa which first merged in hospitals in the late '70s, early '80s.

seen increasingly in the community. antibiotic resistance is an increasing public health problem. resistance occurs virtually wherever antibiotics are used. many bacteria become resistant to more than one class or type of antibiotics and doctors and nurses are all too often faced with treating infections with antibiotic options that are limited or in some cases nonexistent. as resistance increases, both the risk of death and health care costs increase. addressing each antibiotic-resistant pathogen requires a balanced portfolio. an approach that would reduce appropriate use of antibiotics, prevent the spread of resistant organisms and develop new antibiotics for the future. dr. fauci will speak about the need to continue and accelerate our efforts to develop new antibiotics. but unless we improve our monitoring and use of

antibiotics through effective public health action, we will steadily lose the ability to use both current and future drugs. the next slide shows our approach to combating antimicrobial resistance. it starts with surveillance. understanding what's happening. surveillance is key to assessing and monitoring the scope, magnitude and trends of antibiotic resistance. surveillance data can drive and direct prevention efforts and determine treatment recommendations, guide new drug developments and evaluate whether our prevention efforts are working. we need to detect and respond including through more effective laboratory facilities, in hospitals, in state and local health departments and throughout the federal system.?v we need to develop and implement prevention strategies. an example of this -- cdc working with the veterans administration hospir in pittsburgh documented a 60% decline in mrsa infections.

that same approach was rolled out to the va system nationally and then to many other health systems nationally. and although drug resistance is a growing problem, we've had some good news in that there has been a documented decline in mrsa nationally by about half. and by -- and of those susceptible of hospitals by 40% according to the hospitals that we track over time in the national health care safety network. and finally, to rigorously evaluate the impact to see what's working and what's not. in my written statement, i highlighted several high priority antibiotic infections and prevention strategies. and the next slide highlights those. gonorrheal infections are becoming increasingly resistant tuberculosis where infections increase the risk of death and the cost of treatment. generally we work to improve

antibiotic use, facilitate rapid and accurate diagnosis, improve treatment of infections and we've seen significant progress in reducing inappropriate antibiotic use among pediatricians. improve infection control and wherever possible create and distribute vaccines. for example, to prevent nummo cockal diseases and save $300 milliongsoñ in direct medical c each year over the past decade. we speak of the preantibiotic and antibiotic eras. but if we don't improve our response to the public problem of antibiotic resistance we may enter a post-antibiotic world in which we will have few or no clinical interventions for some infections. we are working on our colleagues on this important issue. we very much appreciate the committee's interest and welcome your questions. >> thank you dr. friedan. dr. fauci? >> mr. chairman, ranking member

shimkus, member dingell, members of the committee, thank you for calling this hearing and thank you for giving me the opportunity to discuss with you for a couple minutes here the role of the biomedical research endeavor and the comprehensive strategy to address antimicrobial resistance. as shown on the slide on the screen as pointed out so well by dr. friedan, the strategy to address antimicrobial resistance includes surveillance, infection control, and the promotion by various means of the rational use of antimicrobials. an important component of that strategy is the biomedical research endeavor fundamentally to understand the mechanisms of resistance and to do the basic and clinical research to develop the counter-measures that are needed against antimicrobial resistance. on the next slide is a picture of a journal in which we have published the research agenda of the national institute of allergy and infectious diseases

which has three major pillars to it. basic fundamental research. research, clinical research and transnational research leading to product development. on the next slide i want to very briefly address the issue of basic research. fundamental to the basic research approach is the study of the microbe itself. we have been enormous leaf bud at an advantage over the last decade by the striking if not stunning advances in the ability to sequence the genome of microbes. just to give you an example, in 1996, when the first microbe come become opelousas influenza was sequenced it took a year and a million dollars. in the year 2000, you can sequence a bacteria it would take about four davis. today you can sequence a bacteria for $1 and it takes to

several hours so we have the capability right now to do sequencing, mass sequencing of microbes as they evolve into a resistant form and this gives the opportunity of what we're pursuing very aggressively in our research is determine the molecular mechanisms of resistance and to use that to target both diagnostics, vaccines, but apparently the targets for new pipelines of antimicrobials. in addition, we study the host pathogen interaction, namely how the microbe in a villa virus or bacteria interacts with the host and what the body's immune response is in the form of immunological response. on the next line we also do clinical research activities and as dr. frieden pointed out we focus on some of the problematic organisms. in this case one that was mentioned several times already this afternoon, mrsa.

in addition, the escape organisms which are also prone to resistance are on our top priority. what we do with clinical trials besides testing new drugs? we determine under certain circumstances treatment to even needed such as infections that turn out to be viral infections that enriched the use of antibiotics might not be appropriate and also in 80 new which we should use and for how long. thir appropriate duration of therapy for different types of infections has still not been fully worked out an import really we're looking for new uses for older off patent drugs that have fallen into disuse because of the more modern antibiotics white actually be brought back into the ball game to treat multiple drug-resistant microbes. in the next slide it's a scheme that goes from left to right. i think this is a very important slide out like to spend a minute on because it's the scheme of

what happens when you develop products for into microbial scum in this case those that are resistant. on the far left is what the and ih, does best and does more intensively and that is the fundamental research to develop concepts to develop countermeasures and these can be diagnostics which are critical in the dressing resistance because you want to know of dealing with resistant microbes paris the other is a vaccine which some have mentioned to prevent some of the infections in the first place and then development of new antimicrobials drugs. as you go from left to right industry plays more and more of the role and as we have seen her the incentive for industry to get involved in the development of new antimicrobials is not very great and i heard several of a mention in you're opening statements we need to address some of the incentives we might

partner with them and getting them involved and of important public health problem that they don't have as an economic incentive, something that's really a great drive on their force to get involved and this is something we generally use when we deal with emerging microbes for which there are not countermeasures and this is something we should address when dealing with a dressing of older microbes that have developed resistance. finally going back to my first line on the next slide to reiterate that there are multiple strategies had multiple components of strategy is to develop the issue of antimicrobials resistance and in conclusion i want to say that we will continue to pursue the biomedical research approach as a form part of that comprehensive strategy. thank you mr. chairman, i'd be happy to answer questions. >> thank you doctor and now we will have questions, five minutes or in some cases eight if people with their opening

statements and i will start with myself for five minutes. and guess i'm really addressing this to both of you because both of you agree that resistance occurs where ever antimicrobial, sir, used weather in the community on the farm or in health care. i don't have time for all of these some going to concentrate on resistance in the community and help my colleagues will talk about farm use or use another health care settings so let me focus on the committee. you both described poison which antibiotics are prescribed and let me be clear when i said, outside of the hospital dr. fauci testimony described the fact that physicians often prescribe antibiotics to patients who have ireland factions, not bacterial infections simply because patients have come to inspect or demand treatment with antibiotics even when they can't help. so my question is, how concerned should we be about these

practices? to put it bluntly, are dodgers using antibiotics inappropriately and too frequently? if that's true, what can we do about it? >> thank you very much. the centers for disease control had a cervical the national ambulatory survey and this is one of our main instruments for determining whether doctors' practices are and allows to check over time what happens in clinical encounters and most of the systems that's nationwide and allow us to monitor the quality of health care. in the service we have seen improvement and that there's been a smaller proportion of patients to come in with upper respiratory infection who live with antibiotic. it still remains to come in a practice and the challenge is educating physicians and have a monitoring system in place to give feedback to clinicians'. one of the things that will facilitate that is expansion of

electronic health records where support systems can remind doctors that this is a ticket use of antibiotics and can give feedback on what the behavior of individual conditions are. selene's you both have the monitoring coming intervene by educating and we need to put to the process of health care automatically is a telling doctors but by helping doctors. >> it's hard for me to relate to these questions because i never want to go to the doctor and when i go i would try to avoid having them give anything but i know this, and practice. >> i agree completely with dr. frieden and is an issue of getting better sensitive point of care type of diagnostics where you can underscore and confirm because sometimes when a physician is talking to a family member and receive that to put my child or has been on the

antibiotics because i know the have infection oral derrin one nitze and if you could in the office show immediately that person doesn't have bacterial infection it will go along way to convince the person the decision they're making is appropriate. >> what about the gets smart campaign, dr. frieden. in the you want to talk about that and i guess -- you haven't recommended that that it continued in the budget so do want to say why? what it is and why you are not recommending. >> the gets smart campaign is an intervention that course with physicians to reduce unnecessary or and judicious use of antibiotics. we are faced with significant budget constraints and not able to continue or expand all the programs which would like to continue or expand and we're

committed to maintaining and strengthening work to reduce the resistance. >> so it's not the reason you have recommended continuing is not because it isn't a good thing but not that important compared to other priorities, is that fair to say? >> we believe it's effective but not able said conclude and the budget request. >> the answer is, yes,? >> i want you to reflect the you said yes not me. the gentleman from illinois, mr. shimkus. >> thank you mr. chairman. and tried to get my handle around this conjecture and now that's making the claim that antibiotics use in animals is translated and change in the resistance in humans which in one of the testimonies said that casually and there are assumptions made on the other side.

is there any peer review cdc study that shows a direct correlation to support that assumption? >> it's clear that any anti mackerel bill use will result in virtually the emergence resistance or spread it in antibiotic resistance ran not organisms of the use of antibiotics and farm animals will generate development and spread and persistence of antibiotic resistance among the farm animals and that relates to whether there's evidence that that resistance has spread to humans. it we do that know their interconnections between human and animal health. there is experience from several countries in europe anbar where prescription and antibiotic that is related to vancomycin was shown to be associated with

increase in vancomycin resistance among humans. that was experienced in the european union countries and that was banned in the european union and resistance level then declined. and there's no scientific doubt about the theoretical possibility of transfer of parts of viruses transposed onto other ways you could spread and resistance from animals to people and they're also myopic many outbreaks. >> the question is two have peer review scientific research that shows this connection? >> , there is. you research in europe. >> vancomycin. >> in the united states and has been documented. >> my point is i use this across the board in this committee

they're running on the motions is running on emotions running on science and fact and peer review replication critical if we will move public policy and we don't seem to want to do that here in washington. bettino the danish study, example of banning antibiotic use in livestock? >> , familiar with the study. >> that actually banned the use in livestock and what they found is a couple things. antibiotic resistance even though it was bandy increase in humans. issue to was antibiotic use increased in the use of animals because it was then used therapeutically so than the other question has to be asked would rather have none in the livestock consumption industry

antibiotic use for healthy animals or rather be using antibiotic use trading sick animals so these are all part of this debate and i just wonder and caution people to make this jump without scientific research,. to study that makes a direct correlation and i think my friends would want to do this. one of the issues of this is the industry, how to get industry to develop that ban we done that with different types of drugs and chairman waxman has been good. how do you get industry to market areas where we want to do? one thing you don't do is add additional $27 billion tax to an industry to incentivize 23

life-saving antibiotics which we just did not in the health reform bill hopper and unconcerned that if we take antibiotic use out of livestock if you believe in economics 11 supply and demand you reduce another supply avenue before selling antibiotics and then you limit the ability of return on investment producing to begin with with both so this is an import hearing in their scientific aspect to this but i would plead that we make sure that any action we do is not based on emotion but do peer reviewed science and with that i yield back my time. >> thank you chairman waxman derrin. >> thank you mr. chairman. and tried to understand the science and it seems from what i understood that when a use antibiotics over and over and over again in appropriately and

by that i mean why not to deal with a bacterial infection but for other reasons, whether used on animals or people assume it increases the chance of resistance to the antibiotic. is that correct? >> this is. that's is the nature, but of how organisms are involved. you put pressure on them they will select for survival and is resistance and it's a natural phenomenon of interaction of a microbe with the pressure you put on the microbe and that's the scientific realities. >> to avoid antibacterial resistance microbes we should be sure that we're using the antibiotics where it's necessary and not using where it doesn't have therapeutic purpose, does that make sense?

you both answered, yes. >> there's no disagreement about the use of antibiotics to treat infections nor is there disagreement about theoretical risk of drug-resistant to the widespread use of antibiotics. >> i don't know if anybody would argue we shouldn't give up antibiotic to animal but that has an infection because it's a legitimate therapeutic purpose. i haven't heard anyone give antibody to a person who has bacterial infection that can stop that but if you give it to large numbers of animals for non therapeutic purposes as a preventative and give it to kids who may have a virus and not bacterial infection for our rerunning a greater risk of assistance? >> yes, our basic principle is to promote judicious use of

antibiotics, the institute of madison called for phasing out -- >> is this from signs from europe or science that is accepted in the united states? >> in public health authorities including institute of medicine call for phasing out for uses to promote growth. there's no disagreement about the use and for treatment and/or evidence based prevention of infections. >> dr. fauci you raise the question if we don't have companies making their products we need to do breakthroughs' bonn on antimicrobials and it appears to be a market failure. i don't accept the idea that if we used it in a more widespread way that would encourage the drug companies to make more antimicrobials. it sounds to me like we're running a risk of making war

until resistance diseases and might make more money but i'm not sure then because the product will work after a while. >> we have had market failures in the past when we're in this room many years ago first hearing about this opera and there's a small patient populations and didn't know what resources we had to treat them. in this room we had many hearings on people with rare diseases that didn't offer profit potential for companies to put efforts into drugs for people with a small number. we came up with the drug act, we tried to give other incentives for research and development. we have a patent law. we have renewal of time to help the producers. do you have other ideas how we can correct what appears to be a

market failure? is it not profitable? because it is too few seldom used and not widespread enough? >> certainly mr. waxman one of the major reasons, pharmaceutical companies do great things driven by the profit margin and what they have to answer to their boards and accompany has a choice of making major investment to develop a new drug its several hundred millions of dollars average of 700 million which includes a risk that they take in the development of the product so if they make a choice of making product that a lot of people will take every day for the rest of their lives a lipid lowering agent or never you have they're going to lean toward that rather than make a new product that is relatively small proportion of the population will use 10 days

to two weeks out of the. then because it happens naturally after a time there will be resistance against that antimicrobials have so from the interactions i've had with the industry we need to work with them and partnership to figure out what incentives we can do. we at the nih showed a slide and are fundamentally doing research but what we're doing now is offering some research resources, animal model capabilities, agent repositories and even clinical trials of to lessen the risk of investment on industry to give them more incentive to get involved and i'm sure there other types of financial incentives that can be worked out inappropriate way but i do think we need to push the envelope a bit and getting rid of some of the disincentives forgetting them involved. >> one last question, i assume this is a problem for the

health-insurance bill passed over the last month? >> yes, sir. >> we have a bigger problem now though. >> thank you chairman waxman. the gentleman from texas mr. burgess. >> it's troubling to keep from taking the bait. [laughter] let me depart from what i was good to do for a moment because the whole issue profitability the penicillin is clearly aware full discovery a properly honored with the statute erected by the bullfighters in spain but really was an american manufacturing company, i think it was pfizer for the sectoral or to change penicillin from a parlor trick that inhabited bacterial growth to one of clinical utility for thousands and hundreds of thousands of

because of ability to create a lot of its in the manufacturing process that they developed in the second world war and there would have capped the number of doses of antibiotics kahlo and kept the price high but there what with the mass production and as a consequence soldiers during the day were. life and limb because they have readily available abundant cheap penicillin which worked well until the bacteria figured out they could to the rank and survive nicely with their cell walls intact so it's not always the profit motive. in that was -- and tell yourself you know better than i, this was an event that fundamentally changed the way subsequently all of us were trained to practice in the generations that followed. truly was a life altering event, but let's think for imminent,

dr. fauci, the new molecular entities for broad spectrum antibiotics that have been introduced by the fda and the last 10 years, do we have idea of how many new drugs have been produced? >> new antibiotics, very few. handfuls. >> have a list of 10. >> that sounds about right. >> but my staff has about 25 pages of into back -- antibiotics for new indications any reference that on your slides, new drugs we might find. but these older drugs not necessarily helping fight the war against resistance on antibiotic found to have indication for something else. the problem is there are 10

truly new antibiotics produced in the last decade and then another document that tracks $92 million in federal research at your institute in fiscal 09 alone. and does that sound like a fair figure? >> [inaudible] -- about 200 plus. >> so my numbers were low. taxpayers are pumping in a lot into the pipeline and we're getting out the other end of approximately the average of one antibiotic a year? and by making the correct? do we have a problem -- it sounds like we have a problem with the pipeline so where is

the problem? the dollars pumping in, the research putting into it, the fda? worse the problem and the pipeline? >> mr. burgess, the problem is right in the middle of that era that i showed in one of my slides and that is the pharmaceutical company as much as we can do research and sequence as i mentioned for a reason which can sequence at thousand microbes for a reasonable price really quickly and pinpoint all of the different targets that could serve as a target for the development of a drug. there's not an overwhelming incentive on the part of companies to get involved in developing a new antimicrobials and that's why an answer to the question of mr. waxman emphasized there are a lot of issues that go into why we don't have a lot more drugs for the

amount of fundamental research we put in but one that is paramount is to get the companies involved and incentivized into wanted to make them were and i don't have the complete answer. you're trying the things i mentioned in response to mr. waxman's questions but we need to do better than that. >> i don't want to cut you off because i know your position in the scientific world and mine.com but i need to ask you this. market incentives, are those always dollars where are there changes we can make in the regulatory level that would help the environment? >> the fda right now is putting a considerable effort and pushing what is referred to as regulatory science. in other words, to get them involved in developing the markers, new clinical trial designs that would facilitate the development of any product including the product that is

geared against resistant microbes so there something we can do with the regulatory level and the fda is trying to push that agenda. >> on going to ask mr. shimkus is a question, to put $27 billion tax on to the industry under the health bill? likely to have positive or negative effect on the pipeline problem we have? we will go to the next question. [laughter] desert is two to track how much of their research investment is translated to applications and approvals at the fda? what kind of data does the national institute of allegations -- that can be shared with the subcommittee? >> when using information everything is transparent and you can get anything you want but i think you're asking -- >> approvals and applications that go to the fda and that

approval of the applications at the other end of. >> as a product? that's a question that's difficult and impossible to answer because we don't control the concept to product. we do fundamental research that might develop a concept that can be pushed to the preclinical but if we were solely responsible for soup to nuts and give exact answer but we're not. we have to pump into the pharmaceutical companies and that's the point of. >> it seems on one of the slides with the mrsa and the numbers going up and up community acquired -- that's a huge problem in dormitories and jail and homeless shelters. seems like the market is being created and the companies aren't interested in being the first across the finish line with the silver bullets to stop mrsa?

or is that in our generation? >> i would think personally that the company would be issues in in getting in. they've balanced the risk to the benefit and as i mentioned that there's considerable risk for a company to put several hundred of millions of dollars to develop a product and what i would be proposing is somehow we in the federal government help alleviate that risk by doing some of the things i mentioned we can do but aren't the only player in this. >> a quick question of hospital acquired infection. my epidemiologist i rely on, bob haley, he told me early on that in order to fix something you've got to be able to measure and in order to measure you got to drive out fear, you can't have people friend to report data will never have the accurate data to measure. is that palin? >> yes, in fact, we have

standing and actions already 28 states reporting mandatory early and half of all hospitals in the country. >> three's me to the point, what is the best approach you're? i voice felt of the 28 states that report finding the best practice or set some floor perhaps of the federal level, let you guys deal with the identified aggregate data as you aren't getting information privacy issues so that you then have the data steady as opposed to what we seem to see at this committee sometimes looks punitive. if you make a punitive, doctors we will find a way to obscure things for you so you don't pin it on us. i'm oversimplifying but that had tried to peer concept is one that we need to have breaks, cms needs to embrace and i would just encourage you to continue

to work along that line and i think that is where the ultimate answer for this problem lies. >> thank you mr. chairman for your indulgence and i wheeled back. >> chairman dingell. >> thank you mr. chairman. gentlemen, welcome to the committee. i am curious, has there ever been a definitive study on the impact on microbes and other similar creatures to define what the impact on them might be in terms of resistance to antibiotics by reason of using these antibiotics in animal feed and for other similar uses? >> there are clear studies that show that use of antibiotics in animal feed increases resistance among animals. >> among animals or amongst bacteria? >> resistance in the bacteria that are resident within the animals.

>> would such a study be useful? i mean, if they're there is ongoing analysis of the matters there in bits and pieces? >> there is an increasing body of evidence that looks at where antibiotic resistance emerges and how it spreads. an additional evaluation of that to understand the spread from animals to community, i think, is something that is -- many groups are working on. there is not right now definitive evidence. there is a clear understanding that the more judicially we use antibiotics the longer we'll be able to continue to use them effectively. >> has there been any work that has been defined efficient use in antibiotics in animal feed? in other words, how much is necessary? how much is too much? how much does it work? how much we could do without? and what would be the benefits

of the different steps? has there been any study of this kind? >> as the director of the disease control and prevention i would have to defer to my colleagues at the fda and the usda on those questions. >> i don't see anyone from the fda here in the room. who has authority to do believe kind of research or to fix this level of tolerance or content or the time of which these antibiotics are fed or inserted into animal feed? >> mr. dingell, i would imagine the most important venue to do that would be the u.s. department of agriculture. i mean, that's an obvious question of great importance for > do they have -- do they have the authority? to fix this or not? >> i don't know if i could answer that definitely. i cannot imagine that they don't have the authority to do a study if they would want to do it --

>> it is if they don't have authority and b, they don't use it if they do. now, let me go into some other questions. cdc's overall budget would see a 5% cut. and the antimicrobial resistance program would see a cut of more than 50%. gentlemen, do you think these cuts would negatively impact the work that you're doing related to antibiotic resistance especially support for state and local surveillance prevention and control efforts? and the get smart campaign? >> mr. dingell, we're committed to doing as much as we can with the -- >> that's not an answer to my question. is that level of cut going to hurt what you're doing? >> it will be difficult for us to continue current programs at that level. >> would you tell us -- would you submit for the record the level of your request for our

financial supports for these programs in the budget? and also submit the amount that you have been given for the last three years and for the coming three years? >> we will provide that information. >> all right. now, you've addressed this slightly but i'd like a little more on it. there, appears to be, much debate over the practice of adding antibiotics to agricultural feed is such to promote drug resistance. what does current science and surveillance tell us on this point? is there a direct link? and what is it? >> i think we know that theoretically there's a risk. there's literature that we've reviewed outlines a problem that clearly emerged in europe.

i'm not aware of evidence in this country that's documented the spread from animals to humans, feed animals to humans. we have, of course, seen spread from animals to humans in a wide variety of infections. but we know the more antibiotics are in the environment given to antibiotics and people, the higher the selective -- >> let me -- let me try, sir, to kind of reduce this. i'm getting the impression from what you two gentleman are telling us here that we really don't4@e know what the nexus between the feed is and the feed with antibiotics and when there's a point of danger. and what is the level of danger. and what research is going on. what comment do you make on that statement? >> from your questions, mr. dingell, and the questions we had from other members, there

is no doubt in anyone's mind that if you give antibiotics to anybody, any animal and you do it chronically that resistance to microbes will evolve. i think the question that mr. shimkus brought up and others, what is the evidence that if you give it to an animal for feed and resistance develops in microbes in that animal, that that resistant microbe will spread to a human. >> it might spread to other microbes or it might spread to humans. but i don't have much information on that now. let me, doctor, get to this because my time is limited here. the food and drug administration withdrew its approval for the use of antibiotics that's fq's in poultry. are there any preliminary, any

surveillance reports that would indicate the impact of fda's decision? yes or no? >> i would have to get back to you on that to give you the most recent information. >> now, dr. fauci, in addition to the work that your agency is currently engaged in with the smaller manufacturers, what additional steps can or should be taken to incentivize participation of industry both large and small manufacturers in developing new, effective therapies for these drug resistance infections? >> there are several things that one is to make available to the company some of the assets and capabilities that we have in the government including in my own institute.

and that's various reagent repositories, animal models and clinical trial capabilities. and then also to reach out and partner with them on the risk for the advanced development. it's something that they generally do themselves. and if we could diminish somewhat the risk they take, i think there will be much more of an incentive for them to get involved? >> is this question raised at any point in the government regulatory structure when you address the questions of whether or not or how much antibiotics should be used in animal feed? and if so, who has authority to do that? >> well, we certainly -- that's not something that we as a research -- >> here's the purpose of my question. if we're putting too much in the animal feed, not using it wisely and don't have any particular constraints on its use, we're obviously increasing a risk if a risk there is; is that right?

clearly that's yes. >> well, i'm not sure what -- >> would you say there's no risk in this? so we're agreed -- doctor, my time is limited and i'm trying to get this through here. who has the responsibility for defining the level of risk and defining what ought to be done to protect the american public and the world against run-away infections caused by antibiotics that no longer work. and that on drug-resistant bacteria. does anybody have this authority or not? >> yes. both the fda and the usda. >> they do? >> okay. now the orphan drug act was written in 1983 to encourage

pharmaceutical companies to develop drugs for diseases that have a small market. this was done through a series of incentives. fdaaa, the reauthorization of the fda user programs included provisions to strengthen the antibiotic pipeline through the orphan drug program. how effective has the orphan drug program been in your research? and development work related to drug-resistant bacteria? and what cooperation has it induced on the part of manufacturers, feed manufacturers or antibiotic producers or farm organizations? >> certainly the orphan drug act has incentivized the development of drugs of various types. >> now, you have said that this has incentivized.

what particular incentive has it produced to do research and development work related to drug-resistant bacteria? >> the basic research that we do feeds into a company wanting to develop a drug for a, quote, orphan disease. a disease that's a relatively rare disease. >> so you make it available to them automatically? is it made available to food and drug? is it made available to them by the department of agriculture? or is it just catch and catch can so that they can do something about that and who's in charge of that? >> mr. chairman, it has to be the last question. >> well, he can answer this and then we'll move on. >> okay. when we provide the assets that we have, we essentially make it available for anyone who needs it, who has a reasonable project. >> so if they think they need it, they come by and see you? >> they do. >> if they don't think they need it or there's no incentive to

come by, they don't come by, am i right? well, mr. chairman, this is a very interesting subject.fry i commend you for the hearing. i think we got to learn a little more here. and i don't want our two very fine panel members to think that i have in any way been trying to demean them. i think that we need a great deal more knowledge on this before i'm going to feel comfortable on the subject. >> thank you. >> the gentleman from missouri, mr. blunt. >> thank you, mr. chairman. i agree with chairman emeritus. this is a good hearing. i may take a different tact on the same topic, though. several questions came to mind as chairman dingell asked his question. and one would be, do we know that the food chain, the animal food chain doesn't get less safe if you don't put certain antibiotics in the food and the system? how do we know that? i mean, there's a veterinary guidelines on these antibiotics.

how do we know it doesn't have the opposite effect? >> mr. blunt, if you don't mind, i would like to finish the answer to a question which might feed into what you were saying. the issue is if you give antibiotics to anybody, an animal, a human or whatever, you will unequivocally ultimately induce the occurrence of a resistant-microbe. >> well, isn't it true antibiotics to animals -- you don't have much of a chain of life span here in animals? now, i agree with you, if you and i took an antibiotic for 30 years, or three years, it might make a difference. but we both know that this is not the processing system for animals. so let's not go there that you're going to convince in the animal -- the individual animal itself an antibiotic reaction because they've had antibiotics for a long time. 'cause the process just doesn't go that long. >> well, with all due respect, you can develop -- i can have an upper respiratory tract infection.

and i could take an antibiotic that is suboptimum and i could i have a resistant microbe. >> does that mean you shouldn't take any antibiotics. >> no. >> i think you're answering my friend mr. dingell's question instead of mine. >> no >> aren't there veterinary -- american veterinarian guidelines on antibiotics to animals? >> that is not my area of expertise of antibiotics to animals. >> well, then what is -- what -- why wouldn't that be something you'd look at as you look at this, get smart, know when antibiotics work on the farm program. why wouldn't you look at the veterinary medical association's guidelines on judicious use of antibiotics if it's not your area of expertise. >> actually, mr. blunt, that is more of a cdc issue -- no, it is. >> i'll be glad to turn to mr. friedan to answer the question. >> thank you.

the basic question is, we know that there's no disagreement about certain things. we should start with those. first, we know that no one disagrees with the need to treat infections in humans and animals that are responsive to those with infections. second, there are evidence-based preventive antibiotics that are sometimes needed in the situation of outbreaks or similar situations. third, there is a clear theoretical risk of the -- well, there's a known fact that you will -- the more antibiotics you give, the more resistance that you will. the theoretical risk is whether those resistant organisms that emerge in animals and persist in animals will cause human disease. and on that, there is some evidence as i've indicated several times that it occurred in europe. and there is less evidence in this country. >> dr. friedan, aren't there animal antibiotic guidelines -- am i wrong?

isn't the relative processing life of most food animals pretty short? so the more you give in a short period of time, i would think the veterinarian medicine guidelines would have more impact there than the more you would give over a longer period of time. i mean, the processing time or the production time for animal agriculture is relatively short. and there are guidelines for the safety of animals. and i guess another question would be, are you sure you don't make the food chain less safe by not giving the proper amounts of additives including antibiotics to animal feed, for instance, the question mr. dingell asked appropriately several times. >> so two key points to make. the first is that, unfortunately, for humans, microbes divide very rapidly and as dr. fauci indicated even in the course of a ten-day

antibiotic course, you can have emergence of resistance by a variety of molecular mechanisms. so relatively short durations of treatment may be a widespread of drug resistance. second, antibiotics are not be a essential nutrient. they do increase growth, but they're not an essential nutrient and there's ways to keep the food supply safe without promoting growth. >> i believe mr. dingell asked if the u.s. -- does the usda have the authority to look at animal antibiotics. and i believe you said you didn't know or what was your answer to that? >> yes. >> we said yes. i cannot imagine -- i don't have the authority to do that. there would be no reason why anyone would prohibit -- >> and do you have the authority to look at animal antibiotics? >> i have the authority but not the mandate. that's not what the mandate of my institute is to look at

animal antibiotics and the agricultural issues. >> not the mandate but you think you do have the authority but you don't have the mandate? >> well, it depends by authority if someone comes in with a grant and wants to do that -- >> but you believe the usda does have the authority? >> i do believe that but i don't know for sure. >> thank you, mr. chairman. >> dr. fauci, mr. shimkus and i are under the impression that you wanted to answer a question that you couldn't. would you just answer the question. [laughter] >> it's an extension of my time. >> i was almost going to get to the point that as dr. friedan and i had said several times that there's no doubt that if you give antibiotics to an animal, a cow, a bull or whatever -- if you give them an antibiotics, in that animal there's unquestionably going to be the evolution of antimicrobial resistance in that animal. the critical question that

mr. shimkus was getting at and that dr. friedan answered with regard to a european study is that the question that people are struggling with is that if you develop the antibiotic-resistant microbe in an animal who's getting antibiotics as part of the feed, is that a danger to the health of humans by transferring of that microbe to the humans? and there's some data that says that is the case. that's european data. to my knowledge and to dr. friedan's knowledge, i don't think any of those studies have been done in the united states. so that's still something people argue whether there is any significance to that. >> okay, thank you. the gentlewoman from the virgin islands. >> thank you, mr. chairman. dr. fauci, as you talk about the -- your institute supports basic research. how much of that research is done at universities?

and how many of the universities involved in the basic research of minority-serving institutions? well, that's the question to begin with. >> about 90%, 89 to 90% of all of the research funding that we do goes out to universities on the outside. we fund by grants and contracts virtually all of the primarily minority institutions whether or not they have grants in antimicrobial resistance i'd have to get back to you on that. but we readily fund primarily minority institutions in our.. >> okay. and i have another question. last week at our spring with the minority health forum where you received the award last year, we had a discussion a lack of adequate minority participation and critical trials and the need for diversity. in the translational research that's being done in this area, is it diverse enough because given the different

environments, i would assume there are different exposures, maybe different immunities and maybe possibly even different responses to antibiotics. so do you feel in the translational research area that you have a good representation of minorities and women? >> it really varies. if you look at the clinical trials that we do, for example, with hiv-aids -- because of the disproportionate disparity of infection among african-americans and to a lesser extent hispanics, we are overrepresentative relative to the population. but equitably represented with regard to the burden of disease. that's for a specific disease. it really varies. there's some clinical trials because of either the location of whether -- of where the trial takes place or, quite frankly, some of the mistrust that the minority community has against -- >> we're going to really make an

effort to those two organizations and others to work on that. thank you. dr. friedan, you mentioned in your testimony that 10 states make up the network for a.i.p.s. these states have diverse populations so that the information you get is reflective of the country's demographics? >> yes, it is. they are. and, however, this is an area that we feel we need to continue to develop to ensure that we have adequate representation. >> thank you. and you talked about helping states respond to outbreaks and cdc has been very helpful to the virgin islands and assisting and investigating some of our outbreaks. as far as the nhsn, are the territories included in that? >> i would have to get back to you. >> okay. and if you find they're not, could you see what you could do

to make sure that we are, if it's appropriate? >> absolutely. >> thank you. this question is a little different. because there's like certain concern. in the patient protection and affordable care act, which you heard a lot about this afternoon, there are provisions that -- where hospital-acquired infections occur. the hospitals will not be reimbursed and the providers i assume would not be reimbursed for the care that's provided. and there are a lot of antimicrobial products on the market that is used to clean surfaces in the hospitals and some questions have been raised and brought about whether they are effective. and i think it's very important if we're going to penalize hospitals and providers to know that these antimicrobials being used in the facility are effective. do you have any information on

whether -- that would suggest that they're not? and do you think that it would be worthwhile for the oversight subcommittee or the subcommittee to take a look at that question given the importance of it going forward with the new legislation. >> this is a complex issue. >> i'm asking both of you that question. >> that the new legislation does is requiring reporting of hospital acquired infections and this will be done through the national health care safety network. this is something that we believe is an essential first step in recognizing and addressing infections. for some infections, environmental cleaning may be very important. it may be challenging because it can be hard on the equipment to do it regularly. but this is an area where we worked with others, with the hospital systems to identify effective strategies to prevent the spread of infection or to stop outbreaks once they occurred. >> dr. fauci, did you have

anything to add? okay. thank you, mr. chairman. i yield back my time. >> thank you the gentlewoman from illinois. >> i want to get back to antibiotics in animals. both of you in your opening statements talked about -- and the reason we're here public health problems, increasing magnitude. serious public health challenge posed by antimicrobial resistance. both of you acknowledged it's a serious problem. we know that both of the antibiotics that are used in the united states are used for animals. and most of that is used for nontherapeutic use, mainly for growth of animals. you know, we're dancing around this because there's a lot of opposition. this is a highly charged political issue. and there are many forces who think that, you know -- stay out of the farm. leave that alone. and i know that.

but i am trying to understand why we don't have an answer to that question. if all of this use of antibiotics is going on right now in what people are eating and we are facing a serious health threat in this country, explain to me why there has not been any research done in the united states that you can cite. why we don't have an answer to this question. and why even if we don't have an answer to this question, why nontherapeutic use of antibiotics is so loddy-dah if potentially it has this kind of negative effect, dangerous effect. it feels to me if -- there's so many threats that we could totally control. but here's one. if we know about it, as a potential threat -- i mean, how

much money are we spending in the defense department and homeland security to defend against potential threats? this is a potential threat. at least don't you think we ought to find out if this is a real threat? will both of you police answer. >> i think there's no doubt as i've said before that there is a potential risk of spread. there's also no doubt that this is not the only way that resistance gets into the community. we see a widespread abuse or -- >> why don't we try and find out whether or not this is a source of the problem. and are there any plans to do that? i'm a cosponsor of congresswoman slaughter's bill. what you're saying is not responsive. >> there are several ways to study this. what we can do is look in more detail. what is currently happening. what are the additional ways to get more information on it.

>> the simplest way to find out -- 'cause antibiotics are used in feed for the reasons that you mentioned. we both spoke of the theoretical risk, the real unanswered question, definitely unanswered is what is the risk? >> that's correct. that's what i'm asking. >> you're asking a very appropriate question is that how do we get the answer to that? it would seem since there's widespread use of antibiotics in a nontherapeutic, nonprolaughic -- >> that's right. and are no farms in which they're not using the -- >> yeah. >> so is there not -- are you telling me that science cannot determine whether or not this is a risk to human beings? is that what you're saying? >> no, i'm saying you could determine it by stopping the use

of it and seeing if the -- if the antimicrobial resistance goes down. >> there's no laboratory way? there's no possible way to find out? i mean, in don't -- >> no. i understand your question. and i understand your dilemma. if the question is, if an animal is given antibiotic in the feed, will there be resistance? and i could tell you -- we could do that study but i can tell you what the answer is. it's going to be yes. the question is, does that resistance -- does that resistant microbe get out in the community and spread into the community? that is not a very easy thing to get the answer to unless you stop it completely and measure for years what happens -- >> really? >> yes. >> no. if we are going to test whether or not the fact of resistant

bacteria in an animal then can transfer to a human being. i mean, you can't possibly do it without stopping -- >> there are several ways to do that. >> thank you >> one of them to look for the markers of resistance and see if there's a specific way resistance that has emerged in animals can out in the community. i mentioned several times the european experience with a drug, which is related to a very effective drug which is used to treat severe infections in animals and people. it's the last line of defense for many organisms. so it's very important to preserve the drug for use their builtcally. -- their builtcally. -- therapeutically. and it was gradually phased out and banned by the european union. it was found community carriage

of the strains of one particular microbe which is a highly resistant organism was quite common before the ban. and after the ban gradually did decline. that's why we can say that there's strong evidence from europe that suggests that there is spread between feed animals and people in that environment. and that restricting the use in that environment for that -- for that antibiotic resulted in a reduction in the amount of resistant organisms in the community. that type of study we would have to look more comprehensively to see what's been done in this country and what could be done by different means. >> well, i certainly think that we ought to do that. given the amount of antibiotics that we're feeding to animals and, therefore, eating ourselves given that we have this problem. it's shocking to me that this kind of work is -- doesn't seem to even be on the table. >> thank you.

our vice chair, the gentlewoman from california, ms. capps. >> thank you very much. it's been a very interesting hearing. i have a couple of questions for dr. fauci and i have time for dr. freed scombran. -- friedan's in today's hearing we're getting i believe by the public some mixed messages. on one hand there's overuse of antibiotics. but on the other hand we do need greater production of the antibiotics as antidotes to resistant strains of antibiotics. and, of course, underneath it all for provider and consumer education plays a role in all of this. how do you reconcile -- this message is for the public. how do you reconcile these messages and how are they working to devise a comprehensive strategy to combat antibiotic resistance by educating consumers? >> that's an excellent question. there are two fundamental issues. you're asking a question if

we're concerned about antibiotic resistance why are we trying to make more antibiotics? well, antibiotics are really -- >> well, i understand. it is a mixed mental. >> no. but i'm going to try -- we can get away from the mixed messages by compartmentalizing it. you try as best as you can to by the public health measures that dr. friedan spoke about. unfortunately we are in aww position there are resistant microbes. so there is a clear need to fill -- to feed into the pipeline for new antimicrobials. so i look at it as not a mixed message. we need to do two things simultaneously. we need to put the lid on the evolution and the development of antimicrobial resistance. and then we've got to have a pipeline of drugs to take. the message is we've got to get more antibiotics but we've got

to prevent further evolution of resistance. >> do you have a public message that you're putting out for the public on ways to not go and keep asking your doctor something for a sore throat. is that being done? psas and that sort of thing. >> yes. >> i'll assume that's happening. and now from the other side 'cause i want to get at the concern that has been raised about, you know -- i appreciate the history of the story and the development of penicillin. but pharmacology, pharmaceutical companies, are very much working from more of a profit motive today than perhaps they were when some of these initial antibiotics came onto the market just because they were -- they were on their way to being develop. dr. fauci can you illustrate on the pathway from private research to private development.

how you're collabing which you noted isn't necessarily the first area of private -- that private industry would like to invest in. in other words, you really want some -- you know, some antibiotics to fight these resistance and fight the mrsas and other diseases. how can you -- how can we incentivize them to do this? >> well, i can give you actually a concrete, real time example how we've done that with one particular finding. since we are involved fundamentally in pursuing and supporting basic research for concept development, we have funded a group of investigators from several of our centers. and they have found a small molecule which has the capability of inhibiting essentially any virus that has a lipid component to it its envelope or its outer quoting, potentially a really, really important advance. they have -- >> did you do this at -- >> we funded them at a university. >> okay. great.

>> they made the discovery.fsnñ so how we're partnering with industry and biotech is that we are providing the resource reagents, the animal models, the capabilities to do a phase one clinical trial for those investigators and hooking them up with biotech companies and then ultimately pharma in order to take what was just a concept into something that might actually be a product. and when -- i want this comes to fruition of a product. and if and when it does, we're going to provide the clinical trial capabilities to test it in people to see if it works. so we're really forming a partnership that goes right from the investigator who makes the original observation and develops the concept up through and including the translation of that through biotech and industry. >> and you have a commitment from biotech and industry because they see the kind of research that you're -- that you're incentivizing at the

university level, if you will, and so they're committed already that they'll take -- >> we hope that they're committed and stay in the game. if we make -- and that's the point i was making in answers to several questions. if we can facilitate that difficult process from concept to product by any way we can, by making our assets available, other things beyond our control such as financial incentives, et cetera, it makes that transition from concept to product much easier. we play an important but not an exclusive role in that. there are other components that have to come in to do that. >> thank you very much. that's helpful. i have a question for you, dr. friedan but i'm out of time so we'll wait for the next hearing. thank you very much. i yield back. >> thank you. the gentlewoman from florida. >> thank you, mr. chairman. i'm interested in whether or not you are able to accumulate enough data to track what is

obviously a major public health issue, one that has deadly consequences for so many. when i look at the estimates, we have estimates in the number of antibiotic-resistant infections. and then we have estimates in the number of health care-associated infections. th cdc's most recent data is that in the u.s. every year it's about 2 million hospital infections and about 90,000 americans die from that. and the other one included in our materials in america, there are -- annually about 94,000 cases of mrsa every year with 18,000 deaths from mrsa. doctors, do these figures sound about right for you? is it fair from these figures to conclude that over 100,000 americans die from antibiotic

resistance? >> i think the estimate you gave is 90,000 which is an estimate that was used before. there has been progress with mrsa. where we've seen a decrease of about 50% in serious infections in the hospitals that participate in the national health care safety network.3 >> so how is the data collected for you to compile these numbers and estimates? >> we have two major methods. the one that's more widespread is the national health care safety network. this builds on really more of a decade of experience working with hospitals, working with infection control practitioners, standardizing definitions, encouraging reporting and now we have 28 states. 21 use the infrastructure to report. and about half of all hospitals in the united states currently are on board including many hospitals in states that don't require a reporting publicly yet. that reporting we expect to see

expand nationally over the next couple of years. >> why would states not mandate that? and why would hospitals not? >> it's a recent phenomenon. so 5, 10 years ago no state mandate began in the few states it's been gradually spreading. it is concerning to hospitals. they're worried about reporting from reputational risk. and the approach has been to make clear that reporting is a good thing because it helps us to identify problems and then address them. >> so would the estimates you have now -- knowing that some is not reported and some states don't mandate it, do you extrapolate -- >> yes. these are extrapolated from both nhsn and the network called the abcs which allows us to monitor antibiotic resistance to a series of core infections in a representative sample across the country. >> should it now become a reportable disease? >> certain strains of

antibiotic-resistant organisms are mandtorial reporting and sampling may be more effective. for many organisms reporting is something that's recommended by the council of state and territorial epideemologists in other states. >> it sounds like we can do better. what are you working on or what recommendations do you have to improve reporting so that -- we're able to track with adequate data? >> thank you. all excellent questions. one of the things that we have done is to try to use electronic health records to extract information which then is validated by human beings but would allow us to ensure that infections are reported reliably or assess the completeness of reporting. one of the things that's essential to make that happen is electronic laboratory reporting. so when a laboratory gets a

result, it ends up in the medical record. if it's a reportable condition it ends up with the authorities which it should be reported. we also fundamentally need to make better use of the information so that we implement the programs that we know work. and there's some programs that we know can drastically reduce central line associated infections and hospital associated infections and we continue to generate knowledge so that we can better prevent problems that we don't have good tools to prevent such as community associated infections. >> doctor, you want to comment on the data track? well, i wanted to say in my district back home, we have a researcher that's working on the antibiotic resistance. and this is the doctor at the university of south florida. and his research is mrsa-based. and he is particularly looking at the design and development of

nanoparticle based technology. and in his comments to me in advance of the hearing, he was right on point with what you all are saying with what happens from the basic research level and then turning that into some kind of new antibiotic. that it's a real issue. and along with the lack of funding at nih, cdc say it's nonexistent. he simply can't get the private companies to take any interest. thank you very much. >> thank you. gentlemen, mr. shimkus wanted to ask an additional question and if anybody else does, i'll allow it because i don't want to have another round but i know there's a great deal of interest here. i recognize the gentleman from illinois. >> thank you. and i'm just -- you know, we've

talked about the cdc, usda and the fda. and then through this hearing i remembered that the copper industry had been working with the department of defense to test copper as an antimicrobial killer. and so epa has just certified -- the environment protection agency approved the registration by the copper development association for copper and copper alloys to make public health claims as being antimicrobial. these claims acknowledge the fact that copper is inherently capable of killing bacteria. have you guys done any look at that? and should you? is that something that cdc or nih or is this the problem of -- the federal government is huge. and we're doing different things.

>> it may not be the direct answer that you're asking for. but there's a lot of elements that can have microbial activity. the question is to get it in a drug that would not be toxic. >> but this is making a claim that copper being made on surfaces kills microbes. this is what -- and i think we had federal dollars doing research in dod through the department of defense -- all i would say is, think -- you know -- >> you want to get back to us. >> the epa has said that they can make that claim. >> right. >> why don't you ask -- why don't you get back to us. >> okay, will do. >> all right, miss capps, did you want to ask your additional question? [inaudible] >> i guess in the interest of fairness, and i don't want to keep you because you've waited most of the afternoon anyway. but my question -- and it kind of ties up before and it may

come up in another hearing. i was just curious because according to the national antimicrobial resistance monitoring system data -- and that is a mouthful, about at least 80% of meat and poultry products are tainted at least that is a study that has been out there. can i use that as a basis of fact? >> i'm not familiar with that specific statistic. >> okay. we'll make the assumption since this is a national and antimicrobial resistance monitoring system data, and they did state that at least 80% of meat and poultry products are tainted with antibiotic-resistant bacteria. tainted. i don't know what level. my question was, what bacteria are we testing for in our food. are we doing any kind of antibiotic-resistant pathogens

like staph or like mrsa, is it possible to test for any markers or any kind of -- the fact that this might be in food products? >> these are all relatively easily tested for in small quantities. if you want to test large proportionate of the food supply there are obviously logistical and financial implications. this really is territory of the fda. >> i know. i understand that. but just from the science point of view, and you don't have to agree to the study if it's something that you're not familiar with. >> i don't disagree with you. >> we can just take believe off the table. but supposing something like this is true, there is the science to be able to pick up the markers or tests in food products. and again, i'm not suggesting that we should. and i understand this belongs to another department. but there is concern about the spread of mrsa and whether or

not it's there. and some research in another department like the fda could do this. >> it's scientifically possible -- >> i hear you. >> the fda tests broadly and they only have the capability in the logistical capability of a small fraction. >> exactly. thank you very much. and that completes -- >> i thank you. dr. burgess, do i dare ask if you have a question. >> of course, you can. i would like to hear from one or both of you, just what are some of the things you see over the horizon just very quickly that this committee should be aware of? dr. fauci, you referenced a couple of things and sync things very rapidly. we didn't get in the diagnostic part of this. but just very briefly what's over the horizon that you guys see on a daily basis that we wouldn't be aware of. >> i think in terms of practice

the first thing is to scale up the proof and means of reducing hospital-associated infections and reducing inappropriate antibiotic use. this is something that we made progress in but we could make a lot more progress. and i have to say because there's been a lot of discussion of antibiotics in animal feed and used for growth promotion and feed efficiency we do not consider use to promote growth in antibiotics. the direction we are going is first apply the things we know well to reduce infections. and i think we have a lot farther to go there. and second, to continue to generate knowledge. on how we can reduce infections through programs such as hospital-associated programs, electronic health records, reminder systems, of control systems that will support doctors in restricting use of antibiotics. and as dr. fauci mentioned, point of care diagnostics which is very important in helping a

doctor know right there, a kid doesn't have strep throat you don't have to treat them for strep throat. >> you know, we obviously may ask additional written questions. we'll try to get them to you in the next 10 days or so, which is the normal routine. but members are free to, you know, send more written questions or comments to you. so i just want you to be aware of that. but i do thank you. i mean, this is a very good hearing. and obviously members are very concerned about the issue. and the work that you're doing is really crucial. so thank you very much for your participation. and without objection, the meeting of the subcommittee is adjourned. >> thank you. >> thank you. >> thank you very much. [inaudible conversations]

>> now a hearing of the global implications of the greek debt. panelists examine the importance of transparency issues. and what congress can do to bring stability to the financial system worldwide. over the next two hours we'll hear from several finance professors at this hearing held

by a house financial services subcommittee. >> this hearing of the subcommittee on capital markets, insurance and government sponsored enterprises will come to order. pursuant to committee rules, each side will have 15 minutes for opening statements. without objection all members' opening statements will be made part of the record. good morning. at the request of our colleague, congresswoman maloney, we gather today to examine important policy questions that have arisen from the greek debt crisis. the crisis has quietly oinvolved ooefrt years. -- evolved over the years.

and bankers have the potential to destabilize not only a single country but an entire economic region, especially if transactions they concoct distort transparency or heighten speculation. this hearing will allow us to explore whether the titans of wall street act as traders of government debt by underwriting bonds or traitors of government by using credit default swaps that gamble that sovereign debt will fail. those who seek to default the government are as bad as government arnold. when used for general hedging for the tool but when they are used for speculation they are have the potential of a trojan horse that will affect our markets. some smart and sophisticated

investors have characterized naked credit default swaps as, quote, weapons of mass destruction. that can cause imaginary value out of thin air. the tragic situation in greece underscores the urnent need for wall street to reform at home. some of recent news reports suggest that bankers crafted derivatives to hide greek debt and other stories note that the u.s. market for credit default swaps on municipal debt is growing. congress must respond by creating more transparency in our derivative markets as provided door in the house-passed bill. the derivatives bill recently approved by the senate agriculture committee similarly advances the goal of disclosure. additionally the response of the markets, the greek debt crisis raises more questions about the utility of rating agencies. as we all know, the rating

agencies greatly contributed to our recent financial crisis by failing to appropriately raise collateralized debt obligations and other structured debt. the growth in the issuance of these faulty financial instruments which the rating agency's blessed contributed to the explosion of the credit default swap market. while some have raised concerns, other experts have concluded that a large and liquid market for credit default swaps including positions leave the cash bond market in price discovery in predicting adverse credit events. if this is true, then i question why the rating agencies waited so will to downgrade greece's debt. after all the cost for purchasing credit default swaps on greek debt has soared for many months but moody's and standards & poors have downgrade the debt.

the house takes strong steps to impose a liability standard on a rating agency and reduce conflicts of interest and market reliance on them. as we proceed today, i look forward to understanding whether credit default swaps do promote price deficiency and whether we should do more to reform rating agencies. the crisis also parallels a problem in our financial markets. the problem of too big to fail. greece's problems have placed an enormous strain on the european debt markets and the european monetary union. in fact, the european central bank president has said that a greek default is out of the question. lehman brothers and washington mutual among many others has shown that congress must act to mitigate systemic risk. that is why the house-passed

legislation and the senate bill include provisions to end the era of too big to fail. like my amendment directing regulators to break up financial firms that have become too big, too interconnected, too concentrated or too risky. in sum, today's hearing continues to build a case for financial services regulatory reform. more than two years ago, have passed -- more than two years have passed since the financial crisis began. and the senate must take swift action on its bill so that we can finally end wall street's narcisstic pursuit of profit and change the way our financial markets operate. i'd like to recognize the ranking member garret for 4 minutes. mr. garret? >> and i thank you. i thank the chairman. i thank the witnesses whar about to testify.