you're looking for a sushi restaurant in san francisco. do you want to send a question out to your group of friends or family, you can send that out and expect answers to come back. so your local search is enhanced by your recommendations of people that you know. do on. well, i should've said, if you go back for just one slight. at the bottom, a couple things we did hear which really adds to the discussion. we again wanting to engage the customer in the actual privacy design of this, we first of all at the bottom, we don't say link to your privacy policy. we say very clearly here's how we're going to share information on this site. and we make that very clear, and identify it for what it is, the sharing of information, not protection of privacy. then go next. and then, once you get, if you click on that and you understand it, part of the future of the product when you are engaged,

when you go to the recommended site, is a feature of it is identifying who you are and who you are reflex how you want your privacy settings to be. so as a part of the actual product, you have to identified at the outset, are you shy or are you outgoing or can we word -- use words people understand, shy or not outgoing. and we explained by what that, in fact, means. shy, more protecting of information. outgoing, you really want everybody to see what your recommendations are. and in addition, the final feature of this is we actually say, by the way, shy is anonymous but made not be anonymous because if you're asking for the best sushi restaurant in madison, wisconsin, and you have for friends and you are anonymous but you're the only one living in madison, wisconsin, people may figure out who you are from

the context of that, even though it's anonymous. so we made clear in the statement very apt front, by the way, don't send sensitive information thinking it's anonymous because it may not be. and, you know, that's a balance. that we hope you do want to use the service but by the way, let's be aware that anonymous does it mean private. it means anonymous unless the context suggests otherwise. so it's a real early on site. we tried to build in all of these privacy features of an element privacy by design, an element of the product. and working with our business, and we didn't go out and say let's figure out whether this works in pullback, which is a challenge for us because the industry is really a little -- a little two-sided on that point, you know, some people go out and make mistakes and come back and we are all there have made mistakes in a corporate setting as well, but in this context we

deliberately tried to go forward and create the right privacy settings from the outset. we will see if it works and see people like it. thanks. >> jesse, would you like to rejoin us? >> both you and he are the respondents really. so getting back to where i started, you know, i think we see an extraordinary amount of adaptation in the privacy tool development space. and the last time i engaged in this, actually when danny and i first met. we were working on a platform for privacy practice, p3b. whether we're giving people too much choice, too much granularity, et cetera. and we're also working with bbb

on the bbb seal and trustee on the trustees who. i think it's fair to say that back in the world was two-dimensional and that we have lots of examples of much more sophisticated privacy enhancement technology. i think what i would like to do, start off with jessica and move to jules is how far does this go out? there are a number of issues. anne mentioned the importance of scale. scale is also important for the entire ecosystem. one of the things that lead mentioned that might've been passed over peoples heads was bbb is going to go out and they're going to probe cites that haven't signed up for some of these processes. and so just like in the example, somebody could be sitting out there just as any business that doesn't have a privacy policy and they can get a note from the

bbb saying guess what? we have searched your site and you're not falling best practices. does that get us there in terms of scale. the other interesting thing is, we see a lot of experimentations in the different companies approaches, which is great. does that lead to confusion on the part of the consumer? when do we get toward something that is more standardized? it's important to press the standardization. and then i think the big question is, you know, we see that this is effective -- i assume people believe a lot of these tools will be effective for u.s. consumers in the u.s. context. people noted that overseas, this dissertation around tool development and tool adoption, self-regulation is not there. so where does this get us in terms of global dialogue. so those are some of the pressing question. i don't know, jessica, if you

want to take a few of those. >> okay. >> i think we need a microphone for the tape. >> it's on. so i will start with your middle question, i think him and see if i meander towards some of the others. so i think it really spoke to me to say is this going to be confusing for consumers. so just to start off, i mean, everything everyone described here is exactly what the federal trade commission called for when as for self revelation. it asked for greater transparency in behavioral advertising, in particular is what i'm referring to when we did a project in that area. we asked for notice, you know, for certain notices to be more contextual as to privacy policy so consumers would be more likely to see. we are seeing activity in the government that we're encouraged by. in the short run, it's going to

be very, very confusing for consumers. as these models are developed, they are different from each other, maybe people are using different icons. i know jules potter wants a going to use his icon. but there are competing icons right now. even within jules' model, there are three different ones you could use and add choice. why did i get this added, interspace ad. and then we have the preference managers, and they are similar, but they are not the same. and so and on top of that, consumers will be needing to do this on a site by site basis pics i think in the short run building massive amount of confusion, but we are learning. and we are experimenting. many of these companies, and certainly 18 t. in what you describe are learning what consumers are responding well to and what they are not.

and so i think this is a healthy process but it's not like this is what we wanted, it is here and consumers are not going to understand everything. it is a process. and i think there's also, there's a lot of other things that need to shake out before we can see how successful these efforts are. whether the accountability? that's what lee is your to make sure of it. if you have a self-regulatory scheme and there's no enforcement or accountability, it's not very good, it's not very meaningful. and actually the ftc has been working to broadcast that message. we brought cases in this area recently against a steel program called controls can that was swapping feels on companies and we'll let's they didn't do any checking of the privacy and security, and yet these companies were getting deals. is pretty important for us to call that. so enforceability is another thing we're going to need to

look for. and as mike said, whether copies as we use it and implement it, principles are one thing, but actual implementation is another. and then is this question of is consumers, unit, are the choices going to be side-by-side and are consumers going to be confused by that? you know, they go, they opt out of something and then the next time they go to a similar site, they think maybe they have opted out and why am i, even though it is an unrelated site, why am i now still getting ads. there's a lot of things to be worked out, a lot of progress and growth that needs to be made before we see how this works. >> i will maybe jump in and say that day by day the only way there are self-regulatory advances, unit, it's not like there's nothing and all of a sudden we agree on something new. what happens is companies,

individually start to lead that they say what can i do better, i want to do something. if you wait until there is consensus, you know, in press nothing ever happens that ever waits to see who plunges in the water first. i think what we call our gallery of leading practices, not best practices, not industry agreed upon practices, but things, someone doing somewhere that just go a little bit further so that those are the things that people say, good. people believe works. they liked it. and then you get consensus and you have progress. i purge you to take a peek at some of the things we pointed out because i think you saw a couple of areas of examples that. a number of things that happened a couple of years that are done and aren't perfect but are all sort of maybe baby steps towards control. a decade ago when a lot of us

start focusing on this, tension gaza, what do you mean? it was my day. wasn't going to throw out data that might have somebody. and today the search data, unit, some companies have three, six month policies and serving a long files, for five years ago. i don't think there was anybody who had opposed that said here's how long i will keep that record. and today again, three, six, nine, 12, whatever the previous, you have dozens and dozens of companies having policies. you have companies that are now cashing or whatever they're doing. to recognize that maybe that's a bit more sensitive data field that others. it's all sort of the behavioral notices. one point to note. most of these things point to the nai site or to a similar process. sought one place you asked are going to opt out a 40, 50, 60

hundreds of different networks. so you don't need to do so again. again, whether users understand the process i think is still a big challenge. when we did our consumer testing and we asked users, focus group, if they knew what this was, the one remark that i remember well was one guy say yeah, yeah, i do. no one else knew. he said when you watch a movie and you're really hungry for popcorn. that's because they flashed something and you are hungry. no, no, no. it's hard to explain to somebody control when they are not aware it's happening. so i think that's like shifting from privacy policy when most of us are not in the privacy business. most of us are in the here's how we're using data for you for help you to serve to sell you, a bit bit more transferrtransfers would go a long way. there's something improvements in the opt out cookie.

and so now there are plug-ins that you can download to keep that policy. a mobile, i could like keep going so it profiled yours, what about the mobile world? they are not off the hook, are the? so you saw first mobile profile fewer launched last week to use the debated to the site when you see when you surf on your smartphone. and now that will let you have the opt out. the iphone, that when your location is being shared the will be a symbol indicating somebody is getting your location and sweet control over those ads. i don't want to argue that all is well because i think those are all come into three years, because of the europeans, because of ftc, companies leading and competing, a lot progress. but other areas where it isn't innovation, not rocket science. , and, just use a. i understand it's hard to get

consensus, but should a consumer have to download a plug-in to keep themselves when we give them an opt out? can we solve that with a browser, can we solve that with something. if our entire business bottle is if you don't like it, let's make sure that works the we can argue it's okay to have it default on. we don't have a workable definition of information. we know kind of what medical stuff is, but can i talk to you based on the fact that you search for the word cancer or something sexual or something embarrassing? many of the leading companies have internal policies, but we are all over the map and you've got every kind of practice going on in the world there. and again hard to do that perfectly, but it's not that hard to say, here are the terms, that this is the kind of thing where we are keeping about you to tailor you based on what you look at. the usability challenge of some

of the privacy controls, right? what kind of complaint about facebook but there's places where programming a vcr which is not for the deaths of some of those sophisticated things that we have in her home today. they will to be blinking zero and consumers are blinking their when it comes to these controls. and the smart product people are designing products now, we turn them loose and make those features so people don't feel like they are flossing their teeth. it's how i use this thing because it's a key part of why and here. >> can i make a comment on the icon to you raised again? just as they did two years ago when the ftc presented their original draft of the privacy principles, they put their finger on the right issues. and jessica porter put her fingers on the right issues here again. but there are areas where we want innovation and there are areas where i think we want standardization. and though sometimes are usually

exclusive. and so in the icon space as jules said, you don't want, you know, people going out and freelancing because from a consumer experience it needs to be a common experience and easily understood so we can educate as an industry and as the government can go back and educate the public at large. this is an icon that means something, and so you're going to see. it will become ubiquitous and you need to understand what this means. and overtime people understand because it is easily discover. that's what our industry group put out an icon, not a series of icons that we did put out three links warned sort of herbage that goes along with that. and that is sort of set as well. and that for different reasons you all wanted one, some other companies wanted another and and/or space limitations and we need to have a shorter one. but the point is we can standardize which gives us to come as marc said, gets to scope, wide scope so everybody

can easily about. their standardization. but i think on the back end is where we do want the innovation, and that's what the companies are doing. >> lee, did you want to interject something they're? i do want to give the audience a chance as one or two questions so if you can keep your comments short. >> i just think the whole panel is sort of demonstrating sort of the wisdom of the approach that the ftc took, actually twice. i mean, if you think about what would have happened if the ftc have gone ahead and come up with regulations or there was legislation in 2000, when they first looked at online behavioral advertising. i mean, we are a world away from that, from that approach. and, you know, the whole discussion that you are today about these wonderful preference manager technologies, you know, that really wasn't on the table or focused on during the first ftc set of recommendations for so predatory guidelines your it

was in itself a regulation that the ftc stepping forward and say here's what we want to see, and we want you to go out and develop it, was a real innovation. and i think what you heard today was people have really responded to it. and the last thing to emphasize what mike said. we really are shooting for consistency. i don't think it has to be complete uniformity on the wording though. the ftc has regulations where they say got to bury the warnings so consumers won't lose interest. [laughter] >> so i don't think just wording -- >> we will do this event at this point to go live now to the dirksen senate office building on capitol hill for a look at how the new health care law will affect how medical care is paid for. the group of industry professionals are discussing how to address public and private insurance coverage in provisions that contain costs and use of payment incentives to deliver a higher degree of health care quality. the form is being hosted by the

alliance for health care reform. it is live here on c-span2. >> the other is it less repeated mantra that the u.s. has the best health care in a system in the world. the colleagues at the rand, as the rand corporation, however, now that americans get the best care and the right care just let me more than the time. so congress and the president responded in the reform law by loading a number of arrows into the cost and quality quiver, if you will. to be sharpened and put into use over time over these next few years. and today's program is a closer look at some of those tools. and at the likelihood that they can achieve, i think very ambitious goals. that were set out in the new law. we are pleased to have as our partner in today's program the commonwealth fund, a

philanthropy raised in new york city that's been extremely active over the last several years in trying to explain various payment system options for policymakers. and as i've noted before ideas like medical homes, bending the cost curve, were almost clichéd and commonwealth before anybody else knew what they meant. i guess the only thing else i would say is that, to repeat a cliché, if they tell you it's not about the money, it's about the money. and we're going to hear today about how the money flows, how it ought to flow, what kind of changes are in place to help shape that flow, how long they're going to take and what we do in the interim. a challenging set of questions but we fortunate have a great panel. to address them. a couple of logistical items.

you have materials including biographical information in your packets. about this topic and about our panel. we also have a number of pieces of akron information online and a list of those that are in your packets as well. if you're watching on c-span, and have access to a computer, you can go to all health got bored and you will find, including the slides that the folks in the audience here are going to see on that site. so i think that is all we have. we have a webcast and a podcast of this briefing that would be available tomorrow. thanks to the kaiser family

foundation. in a few days you can also view a transcript, a briefing and we live every fabulous rhetorical moment. for those of you in the room, i remind you that you have a question card that you can use once we get to the discussion part of the program, and a blue evaluation form that we profoundly hope that you will fill out and help us improve these programs as we go along. so, let's get to the program. we have an incredibly good group of panelists today with broad range of experience. and we're going to start with the aforementioned stuart guterman. he is the assistant vice president for commonwealth program on payment system reform. many of the background publications in your materials, both in the packets and on the website, bear stu's name. he is a senior official at cbo and that meant that. he ran cms office of research develop in an information where

he was actually responsible for several important demonstrations projects involving payment. so we are very happy to have him start us off. stu? >> thanks, ed. i'm going to start by modifying something i just said, which is that if it indeed is about the money, it's about how the money can be used to improve health care delivery. because that's really the focus that innovation needed to have. it's generally that we need a payment system that provides all the wrong systems and generally agree the result is rapidly rising health care costs and quality that's disappointing particularly when you think about how much was spent. i have to thank al dotson for an article that i was reading years ago that had part of this code

into. a quote from franklin roosevelt when he was campaigning for his first term as president, and that kind of captured the attitude that i think needs to be adopted going into the third of health reform. and the bottom line here is but above all, try something. and i think we need to really keep that in mind as we're thinking about innovation in payment of health care delivery. it also contains an acknowledgment that we may fail occasionally. and i think that's something that needs to be borne in mind too, because we need to keep moving toward improved health care delivery, even if everything we do doesn't necessarily succeed the way we like. so what are the problems that we are facing? well, we have fragmented care. we have a lack of coordination in health care delivery. we have across all of parts the

country, across facilities. and we have high and rapidly growing costs. that's not a recipe that sounds very tasty to us, especially in this era. health reform. so our goals are to create the right incentives, to increase accountability for patient care outcomes and resource use. to provide rewards for improved care coordination, as well as quality and efficiency, growth and to put in place an infrastructure that it important for providerand improving quality and efficiency. and the question of course is how do we do that? and that's what we have to try. different approaches. this is a graphic the kind of lays out the three dimensions of health care, financing and delivery reform. on the left and vertical access, you see a continuum of payment bundling that ranges from the current fee for service system to all the way up to global

payment, which provides a single payment for a bundle of care that covers the entire time period for the enrollee. on the horizontal access, you see the continued of organizations we have in our health care system now. a variety of types of health or organization ranging from small and individual practices, independent hospitals, all the way up to the fully integrated delivery systems, which we do have a number of. and then on the right hand axes we have a continuum of rewards for high-performance or pay for performance. and we have a simple way to process oriented ways of paying for performance and we have the capacity to do, to develop more sophisticated ways that include a system measured in rewards for high-performance. the important thing to understand about these rewards is not that they reward good doctors and penalize bad doctors, although they certainly might comment is that they

provide the right signals. right now our system rewards performance. it rewards more point that it rewards more invasive procedures. it involves more care, but rewards more care but not necessarily better care. and so sending signals that the payment system that the health care system wants better care and more appropriate care and more coordinated care is actually important. but being able to provide the right incentive depends on the organizational environment that you are starting with. and you need to understand that's where we're developing initiatives to improve care, that we are starting from different points in different places. and attack the set of organizations that are at the extreme right hand side of this draft in the fully integrated system category are very different from each other, because they involve in different environments. so we need to be sensitive to that as with we developing the

right policy. in the health reform legislation, there are a number of new payment models that are either expanded or initiated. and they include the medical home, which is the provisions and a law expands the current medicare demonstration. that's in development to provide new medicare pilot. the medicare home, the medical home is a construct where you have a primary care at the center of health care, and with a primary care provider is the source, the connection of the patient to the rest of the health care system. it's kind of the way i view it, kind of like having a general contractor for your health care rather than having to make all of the decisions about where to go and who to go to your self. the aco is a very popular model

these days, the kind of care organization is basically a group of providers who are willing to accept broad responsibly for quality across patient care. it usually has rewards for quality and shared savings in it. the provision in the law serving as a share savings model for financing a. it's a very popular part because it's such a flexible model, because people who look at see whatever they want to see. but that's probably not a bad thing, because it needs to be a flexible model because, as i said, it gets implemented in different places in different ways. the main thing is that we need to understand that the health care system has a right to expect from it, from the providers and from the other components of the system. . .

but a key point is that medicare advantage should be looked at as a vehicle for providing models of coordinated care and making them available to medicare patients and providing a model for how the rest of the health care system ought to work and there's a center for medicare and medicaid innovation and i think that may be the most important provision from the perspective of making health reform sustainable over the long run. i've got a number of details on the center for medicare medicaid innovation.

it begins in 2011. basically the secretary of health and human service has brought authority to expand or extend models that are being examined and tried based on their promise for providing higher quality and lower costs. there's some key considerations in terms of how the center for medicare and medicaid for innovation ought to operate that need to be taken into account. one is multipayer involvement. we currently have not only a fragmented health care delivery system but also a fragmented health care financing system and as long as we have the fragmented financing it is very difficult to make good progress towards coordinated care delivery. so, more, coordination among different payers to at least make their policies consistent with each other i think is called for in this

process. being willing to entertain ground up as well as top down development of new initiatives, there are many initiatives that are out there in the field and, medicare and medicaid ought to be willing and able to participate in some of those initiatives, as well as developing their own. there needs to be, as i said before, an array of potential models because this doesn't play out the same way everywhere across the country. there needs to be flexibility in design and implementation. i refer to the change in attitude that needs to take place as try versus test. that is, when you say you want to test new ininnovations, that implies you're waiting back on your heels something to be proven to you as opposed to willing to try new things and keeping them going as long as they seem to be working and i think we need to have that change in attitude to

kind of free us up to try, to be willing to try new things. we need to establish an infrastructure to support success. again we're not testing folks to see if they can do this on their own. we're trying to see how we can have a better health care delivery system that delivers better care at lower cost to our people. and, the federal government can do a lot of things and started to do a lot of things to help that, make that more possible, including improving health information technology. the federal government put a lot of money into that into the stimulus package and again in the, in the health reform legislation, and i think, there are other kind of shared resources that can be put into effect, like, community level coverage for, that provides 24 hour, seven-day-a-week access to health care. practice nurses or other practitioners that can help work with chronic care

patients to improve how they manage their care. and again, we'd like to see these new initiatives be plugged into, what medpac does and what the new medicare commission does and also to feed into the medicaid division commission does, and, also feed into the independent payment advisory board deliberations so that they have more tools at their disposal for trying to bring health costs under control. and i think to improve the process we also need better transparency and when i say transparency, i mean a two-sided situation where you have the goals and objectives of innovations be crystal clear so people know what they're getting into and people know what to expect and you also have information available that enables you to mon for -- mon for these innovations continuously to make sure we know what's working and what

isn't working to monitor things on the fly to help them work better. of course resource availability is crucial. we need to make sure sufficient resources are available to develop, implement, monitor, evaluate, these innovations and to turn them into workable policies. and i'll end with another inspirational statement. this one recently by galandi who talked about the role of government in kind of spurring new innovation. he was particularly every aring to health care and he used the agricultural extension service as an example how that worked successfully and the key in this quote is the last three words, the last four words. we've done it before. this is a big challenge but i think we need to be up to it because the alternative is just isn't very pleasant and i want to thank heather drake, who is my coauthor on the paper that was in your

packets. and you can get more information from the commonwealth fund web site. thanks a lot. >> okay. thank you, stu. by the way i think this is the first time we've had the convention center size screen available and i hope it helps you in the back see some of the more impenetrable slides we sometimes put up. next we're going to hear from a variety of perspectives and expertises about the way payment can and can't work and first in that lineup we're pleased to welcome back gail wilensky, senior fellow at project hope. health economist extraordinaire. gail ran the agency now known as cms she was chair of medpac for several years. she was the main health and welfare advisor to president george w. bush. i'm -- george hw burn. i'm not frequent enough

panel lift at alliance briefly. gail, thanks for being with us. >> ed, i want to make four or five points that, support and expand some of the comments as george guterman just made. the first to indicate, that this is the right strategy to be taking now. there is widespread agreement across different parts of the political spectrum this aggregated fee-for-service, particularly as we know it in physician payment where physicians are billing medicare some 7 or 8,000 different codes, is anathema relative to the way we want to see health care move where we reward providers, institutional and clinical who produce good quality care with appropriate clinical out comes in an efficient way. the problem is while we have an idea about what a better system would look like, we have very little knowledge

about how to get there from where we are. where we are is a completely different world where most physicians are practicing in single, specialty practices, usually of three or four individuals, 75% of the physicians practicing of groups that are fewer than nine. mostly not affiliated or aligned in any type of formal way with the hospitals where they practice. so the problem is given that we are in such a different space, how do we try to use the payment system to begin to transform the organization in delivery of health care? and recognizing that it will be difficult, and that one model is not going to work everywhere in this country. secondly point is to be mindful of our history. one the advantages being older than most around this table, other than ed, he keeps me company in that vein, having seen some of

these attempts before, a word of caution and warning. yes, this is different from some of our previous attempts to use demonstrations to change the way the health care is delivered or paid for in the medicare program. it does give more tort -- authority to the secretary. it does provide for additional funding for the agency. it sets up a new center for innovations. nonetheless, we have a lot of history to suggest that putting out a changed payment mechanisms is cumbersome, it takes time, needs to be developed and accepted by the congress and by the participants in the process, and will take some time to both play out and to assess in order to upscale to see whether it can work on a broader level and that all of these stages are

fraught with difficulties where it is easy to have it become unglued or derailed. the third point is that it is extremely important to have realistic expectations and i'd like to at least share a word of caution that i've been feeling when i have been reading some of the comments of my colleagues would seem which express an optimism and enthusiasm that bears no relationship to the reality that i know. and that is the notion that these payment innovations which are discussed and included in the pilot will be producing major savings, way underestimated by the congressional budget office within the next budget period. yes, we have all said many times that we believe that there are ways that health care in the u.s. could be organized and delivered which would allow us to do so at substantially slower

rates of growth and spending, or even potentially at absolutely less but we know that the history of trying to make these changes is fraught with difficulty. if we are aggressive in starting, if we are imaginative in what we try to see played out across the country, and if we are lucky that we pick some good models and they can be scaleable, it is possible to imagine in the second five years of this coming decade, perhaps, or more likely, in the decade that follows, significant changes to how health care is organized and delivered and therefore a very different trajectory in terms of health care spending. but the notion we are likely to see anything in a significant way different in this next three to four-year period or more likely, in the second five years of this coming decade, just bears, as far as i'm concerned no relationship to

reality. it might be just dismissed as being overenthusiasm by a group that is very pleased with having seen health care reform passed and now law of the land. i'm more worried that when you have unrealistic expectations and they're not achieved, that is then spawns undesirable behavior in its aftermath. we're going to hear later from nick wolter about an example of the group practice physician demonstration which i am a big supporter of, but in some ways, we can look at that history and see why we need to put all of this change in some kind of perspective. this is an example that first was thought about in the early part of the decade. it took until about 2003 or 2004 until the rfc was actually released. we had 10 of the most

promising sites in the country that agreed to participate. places where we might have expected to seizure winners. it took, in fact, in its first year only two that were able to achieve both hurdles. that is both the quality and the efficiency hurdle. and we are now ending that decade and we are still trying to understand and see what we can make from this very promising demonstration. i don't think that it always needs to take that long but it's a good reminder when even good ideas can take a long time to play themselves out. fourth, i have some concerns that we need to assure ourselves that there is enough variation in these pilots in terms of who gets the money that we will really understand the implications of having money

primarily going to the hospitals or to groups of physicians, or to payers or to various mixes. my concern, although, depending on who you speak to, you can hear the opposite concern raised, is that because hospitals tend to be more organized with more significant infrastructures, that they are more likely to lay claim for the dollars for accountable care organizations than say groups of physicians. while i think it is important to understand what happens to accountable care organizations that are led by hospitals and where the hospitals are the primary recipients of the money, i am uneasy of that as either the only model or maybe even the dominant model seeing what has happened during the current decade where we've had substantial consolidation of hospitals and hospital power and therefore, the not surprising result of seeing

the influence of the hospital consolidation in terms of increased pricing and spending, particularly in the private sector. i don't want to not see the models where the hospitals are the recipients of the funding but i think we need to be sure that it is no the only model there. a final thought, is that the specifics can be really important. there is, as i have indicated in my mind at least, widespread agreement about the nature of the variety of demonstrations that we, and pilots that we want to see. the accountable care organizations, medical homes, et cetera, but the specifics can be very important in how they play out, and i just want to give a couple of short examples about why these specifics might matter so much. we were speaking earlier this morning about the importance of trying to encourage in the medicare advantage program real coordination and making use

of the coordinated possibilities that medicare advantage might offer to seniors. there is now, as you know, a bonus program that is available for those who are able to show that they are providing higher quality care, but the specifics will be very important. should it be only for the top 10 or 15%? should it be graded on a curve? or should it be available to those who perform at good quality, particularly relative to the fragmented fee-for-service. are the measures being used which weren't really developed for payment purposes, the right measures? if not, how quickly can we change them so they become so? and finally, since we give so much attention to the potential role of accountable care organizations, is a different model to use going forward, we need to remind ourselves that it is not just the providers that need to learn how to play differently. we need to be sure that we're involving the seniors

as well. i at least have not heard nearly so much attention focused on what it will take to get seniors involved in being part of accountable care organizations as opposed to what it will take to get physicians and hospitals interested in seeing whether they can share savings produced in this different organizational structure. so the right general strategy, keep the expectations reasonable and realistic, and don't forget about the details. >> terrific. thank you, gail. mark miller is up next. most of you know mark as the executive director of the medicare payment advisory commission. sounds pretty relevant to today's topic to me. so his official job is advising those of you on congressional staffs about matters involving medicare payment and quality and access. he's also occupied senior positions at both cbo and omb as well as within cms

itself. those of you who around the country and don't know what all those things me, go to our web site and it explains all the acronyms. mark, thanks for being with us. >> sure. it will be some overlap in comments that you've heard so far, so, with my inflection of my voice or with gestures i'll try to make it sound different. [laughter] so the first thing i would say is that the commission has, there was a framing of the problems at the beginning of this and for several years now the commission has maintained that fee-for-service incentives are, fee-for-service is part of the problem. that it is not designed to coordinate care. it does not focus on quality, volume is what it rewards. and for many years we've been pushing for different strategies for reimbursing providers in medicare that would promote focus on quality and try to be more judicious in the use of resources. and many of the ideas that

are being contemplated now, medical homes, bundling strategies, acos, more focus on primary care, are all things for several years now we've been writing to. so like gail, i think the commission agrees that this is the right direction at the right time. more specifically to the notion of pilots, demonstrations, the innovation center, that notion which has been put on the table, there again the commission has spoke about the need for more resources, specifically devoted to this. the idea of flexibilities in order to cycle through ideas and try things more rapidly. and the flexibility for the secretary to implement things that she finds are effective. so there again, the commission is, you know, in the same place where, we seem to be headed, with this. now there are some other

comments that i would make and, i, just before i leave that one, i think, that as we go through this, i think we'll even see there are other flexibilities that the agency may need in order to execute this as they go. i think that the agency will encounter problems with their current procedures and we may even need to think about other processes that need to be relaxed a bit in order to move this at the speed that some people hope were or people were already anticipating. but then, just to shift a bit, and talk about money, since, you know, that is at least one focus here, one positive development that i've seen over the many years that i've been doing this is much more linkage between congress asking cms to undertake some new responsibility and actually giving cms resources to do this. this happens more frequently. we can argue over the size and how closely connected it is but more and more, that

is happening, i think it is a positive thing. at least, in this legislation there is money to implement the overall legislation and money set aside for the innovation center which a lot of my comments are going to be on. i think we have to be vigilant and i think that both as congress and the executive branch, that the money actually is protected and used for those purposes. sometimes when blocks of money are put out there, i know this comes as a surprise, people begin to try and redirect or define themselves as part of that task. and i think it will be very important that we stay focused. if this is what we want to use this money for to try things, then we should be vigilant about that. i think the tradeoff, and again, i think stuart mentioned this point so again this sun about of those two-time things, but i think the tradeoff for cms is transparency. so if they're going to be giving these given this resources and going to be given the extra authority to go out and implement the

program, that is a big deal to providers, to beneficiaries and to congress and i think it will be very important cms spend a lot of effort keeping people informed. if a demonstration or pilot going south, telling people and coming forward and keeping people informed regularly. the most important thing i think is no surprises. some of this stuff is going to work. some of it isn't going to work. the key will keep congress informed, so it doesn't come as a shock to implement something further or they take action to stop. this is something i think the cms folks know and i have talked to them and these are not things that they haven't thought of themselves so the tone don't come across that way. with respect to research and sort of actually doing the pilots and thinking about the innovation centers, a couple of things occur to me. you know, there is this notion of trying to set up networks of providers to generate ideas and then to take those ideas into more

of a formal pilot and put it out on a prodder scale. and i think that could be potentially one way to keep ideas moving and to move through things quickly and it is definitely something i don't think cms has a lot of experience with and you think will be something will have to be worked through. i think it is very important that quality is improved. i want to be absolutely clear about this before i say the next thing i'm going to say. very important that quality is improved and i think even some of the demonstrations that are along these lines has shown that there are ways to improve quality. what i think is murkier and absolutely has to come out of this these tests is to figure out whether we can reduce the expenditure trend and think it is absolutely critical that that happen. in some ways i think the commission beyond improving quality and coordinating care is looking at some of these ideas, the next generation to affect the

trend in spending and so these pilots i think are absolutely critical in that sense regardless of the timing. whether it is sooner or later. i agree with gail we may not see things right off but that should deededly be an objective. i also think there is kind of a difficulty we're all going to have to face here which is this. in order to move faster and innovate as you to, it will be much harder to definitely put a pin in something to say this worked and here is how much it worked. it was 10, not 9. those type of statements. that's the way to move quickly, get things done, test ideas. but for people who have to do scoring, cbo, office of the actuary, does thisdea actually work, it is going to be in some ways harder ringconnect 1200in tha,,,,,,,,,,

there are lots of things that we have yet to learn. the group demo included these organizations and i think one of the things isn't included multispecialty groups with no formal hospital relationship, included a group of organizations that did include a group practice in hospitals and included an academic centers. so there's a variety of organizational types as stu mentioned in his talk, they were part of this demo. in montana, they have some

challenges they stunner geography. reeser for tertiary care almost 500,000 people, but they can be 200 miles away from us. some of these people are actually assigned to us as our responsibility in this demo. and just to quickly point out that from southeast montana to northwest is the distance from washington d.c. to chicago. the demo really was based on code we reduced rate of annual spending per beneficiary per year? it was designed as most things were in recent years to be budget neutral and to involve both financial targets as well as quality target. and this site just illustrates that as figures in the demo unfolded, more of the performance pay, so to speak, migrated to quality and it became a 5050 based on quality and financial performance.

but there was a threshold, if you did not reach the threshold for financial performance, you did not share in any savings. we have very robust volume measures in the areas of diabetes, heart failure, coronary disease, hypertension and certain cancer screenings. this without going through shows i think what would be considered a very good group of mashers that to some degree would reflect are we doing a good job managing people's health. on the bottom right screen of the site come in the financial savings were largely impatient driver because that's where more customs bending us although the quality measures in this case were largely outpatient driven. and you can imagine the interesting situation for those groups that work or practice but no hospital was involved because they were taking measures to reduce hospital spending, even though that did not involve

their own organization. in our case, whenever we reduce hospital spending, we reducer of revenue. just one slice of something we did about reenrolled very sick people with heart failure. we use the telephony system to track certain of their science and symptoms daily. and they're actively managed by a nurse. and what we found is they any significant performance in terms of averting the mission and these two graphs, one as i measures, the other is the research group rci that sort of validated things. but we have heard it benefit missions over this period of time that it probably saved the program three or $4 million. if you could generalize that across the management of congestive heart failure, there would be significant savings. as gail mentioned, if you look

at this demo honestly and it did probably lead to savings i can't quite read that, but i think you remember $232 million on the far right. as enumerator overall of the medicare spending in all of these groups, that would not be a large percentage. and so, i think we have to try to learn what we can from what went on while in this demo, but also to understand we have a lot of work to do to try to raise the bar. this just shows how the assembled is initially a three-year demo became a five-year demo. now we are looking at can we migrate this into an accountable care organization pilot? accountability was local, that is we were responsible and yet we had to organize a lot of things that we did not necessarily have complete control over. stu has covered some of this, but as for the picture staving comparing it to fee for service and capitation different

incentives unfold in the idea of trying to reduce expenditures as a move toward capitation obviously the financial incentive to do that is quite a bit higher. and i showed a slide because under private list they are your organizing care for the patients who were assigned, you have a lot of services that have to be recognized. in some cases they are not in your organization. we're part of the pace program for the elderly and more have been a contracted providers for services we don't provide. that's a very good learning for us right now in terms of how we might look at these accountable care organization pilot. again, some of the new financial incentives that will be coming our way, that authority been discussed and i think we're going to see experiments on all of these areas. i like the slides that stu and the commonwealth fund show.

the thing i would show in the relationship between payment and organizational type, the thing i would like to emphasize is the word feasibility here because we do have a number of best practices organizations in the united states right now to receive fee for service in that they're coordinating care and providing care in the low quartile of cost. and those are organizations like intermountain health care, mayo clinic, building clinic, geisinger. so we have models out there that are doing good work. again, we're going to see a trend worth looking at more organization of the payment system, hopefully to invent more organizations of this type. and then this is some of the language from the health reform bill that talks about accountable care organizations and how different models might be tried. i don't want to read through this line by line. i think it's in your packet. but i think we're going to try to learn from the demo that the

group practice demo, in terms of how we look at accountable care organization requirements and how the financial model works. i did want to discuss a few design issues. asher duchenne, by that i mean, how are patients assigned to last that we are then responsible for bikes and in the case of the group are this demo, if they receive a plurality of their outpatient care, in other words, maybe less than 50% of their outpatient visits were us, they were assigned to asked. the question raised by both beneficiaries didn't know they were in a demo. and actually we didn't know who they were. they didn't tell us who they were until later we were given performance results. in terms of knowing which patients we were managing, we did not -- we did not know them by names. it's very difficult to do managed-care when you don't have

a good sense of who is your population. the issue of rapid performance feedback. it was as long as two years sometimes before we received data back on how we were doing in this demonstration project are at risk adjustment, very important, but not an exact science. some of the organizations he did receive shares savings did so because their risk scores were significantly higher than other organizations. this comes down to coding and how well you know how to risk or how you know how to demonstrate severity. that's another factor that needs attention. infrastructure investment, it cost us $125 per beneficiary per month for those payments in our heart failure program. and we did know who they were in a particular case because we actually enrolled them. that was about $100,000 a year, but we spent significantly more effect in total to manage this. the financial design, unless he

received a 2% improvement in savings, he received no shared savings. i think there are some issues with that. and want to go beyond that perhaps sharing in all the savings would make sense. and then some of us really wonder, will shared savings be a good long-term design feature? we're not sure. it's very complicated to devise shared against models. and hopefully there'll be some other things tested in the pilot. i would like to respond to mark based on our experience. i'm not much of a fan of virtual bundling because i think it's hard to managed-care unless you know you're taking care of, but presumably both of these models may be tested. and then just quickly a few other thoughts. i think it's important to continue to focus on high-volume high cost areas of care. if you want to than the cost group we should start for the low-hanging fruit is. to refine fee for payment service at the time or doing these other new payment models

because fee for service is not a plaque and a of ways. we make a ton of money in my organization on heart disease among your surgery, orthopedics, but we lose our shirts and mental health care and we need rebalance that and the same would be true in how physicians are paid. other incentives that drive fragmented behavior include physician ownership. other relationships that physicians have with pharmacy and device manufacturers. and of course hospitals have their own behaviors to because they like to work with physicians to drive volume. the relationship between delivery system and organization and payment policy can be nonlinear as i mentioned. there are organizations motivated to do the right thing, which leads me to emphasize leadership and culture will be a big part of the next five to 10 years as we see how the delivery system changes. and we really need that in addition to payment reform. collaborative learning, when you

get into these pilots, if you can share with the others that are in them, you really can learn from best practices. and then i often hear that some of these things can work in rural health care. i won't go in detail right now. rural health care is ready for some of this and i hope will have a chance. this is a 17-year-old quote, jeff goldsmith, a health care futurist. the key to new integrated health models is collegiality, it's not just payment, it's not bricks and mortar. and i'll pass on that slide. and just to finish, this is a quote from a 1913, dr. charlie mayle come in the past 50 years have been marked by advances in the science of medicine at the next 50 will be marked by improvements in the organization and teamwork of how health care is delivered. i think he hopes we get it right this time because we haven't come quite as far as he was thinking back then. thank you rematch.

>> that's great. thanks very much, nic. [applause] >> he was just a century ahead of his time, that's all. the next 50 years that we're going to see all of this. there are microphones. with the light shining in my eyes, i can't see where they are, but i am confident that they're there. there are also green question cards that you can fill out and hand either to one of the panelists or to one of the staff who will pick it up and bring it to the panelists. and let me start, if i can, by going back to a theme that a couple of you have touched on and that is that this stuff isn't going to happen overnight. dr. wolter has been doing this for sometime but some of of these to demonstration pilots are going to take time to organize and get some return on investment flowing. is there the political

patience -- i don't know if i should be asking you or the audience to allow that kind of development to be talking about two date groups, start to change the culture and actually deliver some results. gail, you want to start. >> i worry about that. and that's why i caution against what seems to be wildly optimistic assumptions about how quickly we are going to see a larger amount of saving make that all of us up for a collective fall when they don't materialize. what i'm concerned about is how long we can go without making some significant changes in how we pay physicians. you heard me say it almost add-ons and that there is nothing more in medicare than the road to value scale combined to the sustainable growth rate, such are the sustainable growth rate without replacement of the other value scale with something

that doesn't pay physicians more for doing more and more complex as an invitation to even more unsustainable spending. that's my greatest concern with my predecessor description that we've got three or four or five years go by and spend a little more money to try to keep fees flat without really doing something. this is probably the biggest media see it, media issue that i see on the horizon for medicare. the other parts hopefully we can keep going while we try to come up with a better delivery system, but that physician payment problem is a major one. if you might, a word of caution as if you take away the pressures because of the growth rate it will be very hard to get the physicians actively involved

in embracing these very different changes. so push it down a year at a time until you figure out how to replace the current rvr bs the sustainable growth rate. >> already. i would ask you to identify yourselves and keep your questions as brief as you can so we can get to as many as we can. >> and a communication consultant and ms. wilensky mention the difficulty of getting people into the per program. dr. wolter mention the 1990's. that takes into the early 90's for the hmo started as an attempt to court may care as best it could be court made it in this rudimentary computer days. and my question is, how much of what will be happening now will be based on what was learned from the hmo experience and what happens if people paid it, will they loosen it up again? the hmo actually control costs at that time. we go back to the early 90's and

it seemed to me we're probably going to have to do some of those types of things. so is that going to be a problem, or is it so far divorced from hmos that it won't make any difference? >> you are raising a very good point, that people don't always acknowledge how successful managed-care in aggregate was in the mid-and late 1990's in terms of slowing down spending compared to what was going on in the fee for service that her. is questionable that it was managing care much. it was mostly managing costs, making use of excess capacity and it does raise the issue about what happens when you wake nor the beneficiaries are the participants. my take on part of what we thought in the 1990's is that individuals and private insurance were not a part of the decision-making. employers offered a single plan or a limited choice and

employees found themselves in plants that constrain their choice. they didn't like it. you didn't see the kind of pushback you saw in washington, where the federal employees health care plan dominates so much of the insurance space and people can change their insurance rates every november. to me, it's a good reminder that if the seniors are not a part of being able to choose the kinds of plans that they can participate in, you want to expect to see a pot of pushback. so a lot of what we may be learning from the night to 90's is what not to do and to be smarter as we go ahead in this next round. there were a lot of good models out there, they're just not relevant for most of the population. >> stuart. >> just alleges that quickly, one of the tools we have now that we didn't have in the 90's

was much better ways of measuring quality of care. and i think that's a really crucial aspect to that situation. we can do better in making sure that care doesn't suffer and whether or not it was true, there were certainly a strong perception in the 90's, certainly in the late 90's that care was suffering under managed-care. one that we can measure pattern even though we have a long way to go to develop better measures of quality of care, we are a lot farther along family were were done. >> i think you're next, go right ahead here to >> i'm barbara tovar from the college of emergency physicians, but i do question for dr. wolter or anyone on the panel for the sustainability. i was on the panel and ph shows where the up-and-coming thing. those didn't turn out because by and large the hospitals have incentive to get their occupancy

up mlb incentives now will be cared towards keeping people out of the hospitals and out of the emergency departments as well. so how can you get hospitals leadership on board to do things that will basically sort of cut their revenue? >> well, my take is that many hospitals are going to struggle with this. but i did spend a few years on the american hospital association board and there are very progressive leaders in the hospital community, who i think believe that to do the right thing we need to change a wee look at what a hospital is, what it does and how it works with positions. and i think the same is true in terms of the bell curve amongst physicians. there are many that are going to come into this fighting and screaming and others who believe that we should get going and make changes. and of course, if we don't, we will see significant across-the-board cut in unit

pricing in upcoming years. >> go ahead, stu. >> i would add to that that we are not talking in the most optimistic forecasts of what the impact of any of the initiatives would be. it doesn't involve the decline in health care spending. about the growth in health care spending. in fact, growth in health care spending relative to the rest of the economy. so is just a matter of shaving some off the top of the track with this project did currently. so there have to be a way to realign resources so you can do the right they and also not lose your shirt. >> i'm with you. i think it's a real problem and we need to make sure that physicians -- at least we see models on the money goes to position them let them a line if they choose what hospitals and we can see whether or not they will do the right thing or be

satisfied in shaving off the top. >> yes, go ahead. >> hello, my name is karin qureshi, a medical student and a legislative director for the medical association. my question is in regards to primary care. on the individual patient level, primary care is often the point of coronation for health care and primary care is also often considered a way to increase quality while decreasing costs. as well as preventative medicine. how do you see the primary care shortage that we have currently been kind of an obstacle to payment innovation, or d.c. hopefully increased incentives and primary care as a way to help implement payment reforms in the future? >> that's a good question. go ahead, mark. >> i guess a couple of things. i mean, i think is some of these innovations that are being talked about work in the way that they are described they

would change their view of the primary care physician. and in addition to reimbursement and lifestyle and other issues, one of the things that i heard when i talk to people about why they do or do not accept are going to primary care is the notion of the importance of the role and what responsibility they have been providing care and to the extent that a medical home for an acl puts that much more at the center of the care process, that may change some of the view of people coming through medical school. having said that -- i also think that there are things that depend on how the reimbursement works in the savings models work. they raby actually more resources for those types of physicians. with that said, i think there's probably changes that also need to occur on medicare and this is stuff that the commission is talking about. i won't go into it in detail, but there are changes that need

to be made on the way medicare is graduate educational funding process works, but i think could have a big impact on not and i won't go into the details because it's not the point here. and in the last thing i'll say, which i think gail has referred to, and again the commission is talked about this a lot. some of the rebalancing of the valleys within the fee schedule to be clear that even the individual service price signals are altered i think our ways to try and get at that. those are at least some set of ideas. >> selective loan forgiveness would help a lot also when they keep raising the, trying to get this idea embraced by either the congress or the administration. it would at least take away a negative that exist now for many of the students and residents who carry big loan burdens. >> hi, tony hausner, firmly with cms. just mention a few ideas or comments that i have.

one i think pay for performance that's been studied through physicians, hospitals and home health agencies and others is going to be very critical in terms of moving us forward in improving and driving down costs. one project that was done a number of years ago by general motors gave consumers financial incentives to pick better plan. i think that's an idea that should be expanded. and then i think the third factor that's critical is the more we get to outcome-based measures, i think that will help drive the system to be more efficient, more cost efficient. so i'm interested in comments about those three items. >> either way, just as the panelists are considering their responses, one of the pieces that you have on the sheet

referred to on the sheet that listings not in their packets fully texted, but rather on the website is an appendix to stu guterman's paper including some of the private sector initiatives that would tony was talking about here at anybody want to pick up on the question itself? gail. >> we raised the issue about the importance of involving the individual beneficiaries depending on which population you're looking at. when you look at the health care reform legislation and much of what has happened historically in medicare, all of the pressure is being put on or has been put on the provider community. and while it is important to change how we reimburse physicians and institutions, so that we reward them for the kind of behavior we like to see, it makes little sense to me to

ignore the incentives that are out there for the seniors as well. we can clearly reward them for choosing efficient providers, high-quality fish or providers. it's more common. or becoming more common in the private sector. and while we have attacked very much about this today, there is a real advantage to try and have more court nation going on between the changes that are being tried in medicare or medicaid in what goes on in the private sector. so this may be an area where we'll see more innovation and leadership in terms of what's been tried to involve the patient consumer of health care or just the holder of the insurance, but it's a mistake to leave them out there and it can't be ignored when you get yourself in trouble. again, to me that's a big asset to the 1990's in the managed care pushback is people were brought into the process and the

choice and they didn't really like much what they saw. >> one other aspect to tony's question had to deal with the pay-for-performance. and i wanted to just follow up. we've been hearing about providers who are very upset with the variety of quality indicators or efficiency indicators that they have to comply with to get the pay for their performance and there are different competing ones that are described in stu's appendix as a matter of fact. i wonder if they'd come and some not. dr. wolter, do you have to jump through different hoops to get different rewards at the clinic? >> yeah, i think this is an important point and i think when you look at with cms's out team, with some of the private payers are asking for, the specialty satiety of all the development measures, it is -- it is

expensive and it's hard to coordinate all those things at times. the other thing i would add to just expand that, this whole issue of administrative simplification and the requirements we get not just some quality reporting, but around compliance with hepa and the meaningful standards for health standard. i think i was told about 15% of our staff really are related to building, collecting and complying with regulation of one kind or another. there's a lot of money there. if we could find her way to some simplification of some measure, i think it would help us with a name this cost curve as well. >> mark. >> i agree and this is something that, you know, we've talked about as well on the commission and i think here are some of the discussions have been about in

terms of pilots and things like that, being sure that you have coordination between public and private effort. and this is certainly an area where that could apply. with respect to pay-for-performance, if we're talking about narrow kind of spaced on single kind of silo tape so services, hospital physicians come a small percentage rewards, i don't know that they affect a lot of change. they may send a very important environmental signal that the world is changing around you, but i don't know that they execute and accomplish any major change. to the point of what kinds of measures, i've been in some ways while there are methodological issues associated with them, there seems to be and i don't want to make this point too strongly, but seems to be some coalescing around things like free admission rate, you know, avoidable admissions, use of the emergency room, mortality generally has been around for a while and it seems that you could get a handful of outcome measures that you could agree or at least a focus that it's not

the entire focus you could begin to drive some of these pilots and demonstrations off of. >> there is one hesitation that i have to the issue being raised. i'm sympathetic to the burden that is being placed on clinicians and institutions with the multiple reporting requirements. i'm a little uneasy about coalescing to quickly around a narrow set of outcomes and performance measures, given how much we don't know and how quickly it is evolving. it would be possible to see the government put out, cms put out a relatively restricted set that everyone had to use. but i'm not sure the price that would be paid in doing so because there is so much that we are learning as we are going. so it's going to be a balance of

how to try to minimize the burden that we place on people and institutions providing services and making forward progress. now, there is administrative simplification requirements in 2013 and 24 team as part of the health care reform act. we'll see how that actually plays out in terms of whether it produces the reduction or administrative burden that we might assume the legislators would as they drafted it. >> yes, go ahead, nic. >> i'm just going to add that we are having some success migrating input into our electronic health records so we are doing somewhat less obstruction on quality measures. and i think as the systems mature and believe me they're not mature yet, the electronic health record may help us with that burden to some degree. >> yes, okay. we've got a question here that

comes from a congressional staffer asking the panel to address the issue of the new independent payment advisory board and whether you think it's going to play big role in promoting payment record and other innovation in medicare. you want to start, stu? >> of course the easy answer is that the effect that the board has depends on how well it actually carries out its mission. what i think it's already plays an important role because one of the things that comes up when you're talking about alternative ways of pain in organizing and delivering care is the need to get away from fee for service and the need to make it clear that fee for service payment is not going to be a comfortable place to be down the line. and i think the existence of the independent payment advisory board kind of dramatizes that

because if we don't come up with good ways of controlling the cost of health care, then we're going to to be left with the more primitive tools that people have used in the past and i think that it needs to be cleared to everyone in the system that that's not going to be a pleasant alternative. so we need to do our best to make sure that we find alternatives that work and that are more palatable. >> and just to add to your point of view, gail, i just want to make sure the primitive tools are talking about our cuts and primitive traits. >> i'm not a supporter of the concept of the independent payment advisory boards. in so i'm hopeful that before it begins to take effect into the second half of the decade that the congress will have changed its mind and empowered the secretary to put in place the

results of pilots that have been shown to reduce spending and improve polity. in the reason that i'm not in favor of it is really twofold. the first is at once appointed the individuals on the independent payment advisory board are totally unaccountable to the congress of the american public or anyone else, unlike the secretary and the cms administrator who remain accountable to the president, who remains accountable to the american public. and also that the exclusions and limitations of the advisory board are such that it focuses on only one narrow area and these issues are much too broad to have that. but mainly i am hopeful that in its place we could see either authority granted or triggers put in place that would implement some of the pilots that are shown to reduce spending and improve quality

without reliance on this otherwise i unaccountable board >> the second half of this question was addressed to mark miller. and that was how would medpac, which advises payment policy interact with the independent board, which presumably is going to have a relationship with congress, respect to payment policy. >> well, this is the first i'm hearing of this, so -- [laughter] also, i've got to say it is freezing cold up here. >> and let me just say, if there's someone in the back from our staff, if they could make any adjustments, it would be very helpful. >> i slipped into a coma earlier. >> i'm having trouble pushing the button to turn my microphone on. >> a couple things before you bury myself further, if there were several things as we went

down the table and i would disagree or icq, let's put it that way, and just to kind of go back to the point. i think whether it's effective or not, there's a lot of questions. and i mean, you think there's an important process, organization prices, is that support process into what gail insane, it's plainfield. so i think all of those are serious questions and my honest answer is i don't know. with respect to what our role is, the legislation seems pretty clear that they wanted medpac to continue doing what it's doing and give us additional responsibilities to respond to as an additional product, to respond to the recommendations that a new entity makes an sordid say to the congress, these are good ones, here are our alternatives and that my

sense. and i am thinking about it. we have not made changes yet. it's unclear exactly when it will come online, but its actual role is still a few years off. but am thinking about the -- how my organization will have to be configured to deal with it. >> this is a question for stuart. the person is concerned that cms implementation of the innovation center is not going to yield experimentation bold enough and persistent enough to satisfy frankland eleanor roosevelt's standard that you cited. their plan sounds like just a bigger rnd shop. maybe most important is fast experimentation. and i wonder if you could delay this person's concerns? >> l. try.

what we've been hearing out of cms is there is every intention for them to think about these things differently than in the past. i agree that if they try to do just newly titled things in the same way that they've been done in the same environment that they've been done in, then we'll have a difficult time getting many successes out of the process did although i would point out that the demonstration process which is frequently maligned has produced a number of fairly substantial successes and improvement in both medicare and throughout the health care system, including the prospective payment system for ambition hospital payment, the hospice program and in fact medicare advantage, with no medicare advantage as well as the peace program and several other smaller scale, but very important, kind of improvements. an incision is seen you refer to the rnd term because i think

that's exactly what cms needs to do is to think of this new innovation center is the rnd shop for medicare and medicaid and justice private sector r&d shops try to function, they take some risks. they do new things and they try to improve the standing of the entity that they work for. in this case, the medicare medicaid programs. and in terms of having quick results, you know, i think there are some things that probably could produce relatively quickly sold and i know, you know, i share the good that we certainly shouldn't expect to see a major bending of the curve and the next six funds after the innovation center gets put in place. but you know, 10 years passes before you know it. and there's a lot of money on the table for even small changes in that curve. if we, over the next 10 years,

were able to hold health spending to say the rate of growth of gdp, then we'd be saving on the order claims of dollars over that period of time. i could certainly be used for other contingencies in the government or in the health care site her. so i think i'm optimistic. i think the charge is for this new center to work the way it needs to work to produce some real innovations. and i think the charges for the health care sector to respond well and for us to think about how we can put incentives into place to make those responses constructive. >> yeah, i just wanted to underscore something gail said in her comments and that if we need to be realistic about how fast this was happening. my organization was formed when mike is a commercial at the hospital across the street in 1993. for the last five to six years,

i think we have become much for focus on what i would call performance improvement, both in quality and cost, but it's 15 years in and we are still learning. and so, i think that we want to get their, but it is going to be 10 or 15 or even 20 years. i think the key thing is let's get it going because as stu said, 10 years will go by and what a shame if we don't see some progress over the next 10 years. >> is sort of a broad question, noting that cms is only one large payer and asking the panel to speak at uc we organization of structural components of physician practices occurring if only cms supports every organization there is changes in payment methodology. >> this is an issue that has come up in a number of other discussions about where medicare

can lead and where medicare has to follow and where the air can provide some leadership. obviously, it very somewhat with the speaker in terms of those views. but it seems to me that seattle has can lead in terms of some of the pilot, can help organize some of these different ideas, funded them to see how they begin to play out. the third camp and i believe will take advantage of some of the changes that are being tried out. in fact, has led some of the earlier rounds of the innovations already in terms of pay for performance and the bridges to excellence work, et cetera. private sector is much more flexible in terms of how and when a cannonball of change.

what cms ultimately can do is that 800-pound gorilla, is that when there is some sense of agreement about what works, based on the pilots that are tried in the public sector and that are being used either before or in complementing the site typically can put it as the force of law of the land. but it will be very difficult to fundamentally change the organizational payment from where we are, without having some supporting private sector involvement. a lot of this is going to be paying differently for providing care relative to what's been done in the past. and it will be difficult to differentiate payments for that care, using quality bonuses and pay for performance if it's only been done in the air. that's been the hardest thing for the public sector to do. every time he tries to do contracting, it tries to do

competitive bidding, tries to differentiate in some way does that it wants to reward for others to maybe providing or would like to provide the services. it has stumbled. and so it really will be trained to work with the other so that you can reinforce or try some other variation can be a resounding, a sounding board and a widow to see you whether you can't enlarge some of these interesting demonstrations and the dirt and then have them go forward and change the law. >> let me just elaborate on that. what about -- i'm attacked a little bit about this earlier, what about turning it on its head. that is the kind of private sector initiatives that now public or agreements, particularly medicare are having a deuce of a tie in joining or maybe they don't want to join.

and i particularly heard from a number of state officials that they set up these demonstrations and can't get medicare to cooperate even when you're talking about fade to a legible such as a major terror. how much is there in the new lock him in the new authority and how willing to go along those lines and how willing are the folks who are doing it likely to be to use that authority? stewart. >> well, there is language that encourages collaborative efforts with states between medicare and state. there's a language in there that encourages collaborative effort with private payers. so you know, there is a platform for working with that. the legislation also create an office for coordinating health care for the dual eligibles in

cms. and that's another, you know, as well as met back and matt pack, the organizations that the center for innovation not to be working with to make sure that it takes advantage of every opportunity to improve health care finance demand delivery. >> please. >> just a couple things on this. i think this question is really important from the days that if medicare is trying to send a and the private sector is not involved in any way and depending on how it plays out, you know, the permanent risk air or the risk that is always present is access issues for the medicare beneficiary if the providers not to play. so it's incredibly -- not to continue to play with medicare. i think it's incredibly important issue. i think gail was saying in a curry with that there'll be some natural spillover, they're pretty much have been whenever

medicare has done these innovations, the private sector has picked some of them not. so i think there's something there, but i think just to reinforce the point and unfortunately i don't know how to do this, but reinforce the point of the need to draw in both medicare and private in medicaid providers into these demonstrations. and one place to think about that is there are places around the country where they are closer to that. vermont has the models go in and there's some other places that have a little more of this and it's not much, though. and certainly for cms to at least try and focus there and see if they can drop those models as places to start, where you might actually have beginning with the public and provider -- or public and private providers could one thing i'll say and this coming in now, i'm hesitating to say this, but it's out now, so --

there's a lot of reasons why you think that things don't come together well between the federal and the state government and i think there's lots of problems on both sides, you know, cms's ability to focus and bring resources to attempting to cross the programs is certainly part of it, but i also think it's incredibly naïve to ignore the fact that there's also been something of a history here, where some days, when they get access to federal dollars and try to pull it in particular, they use a two-step back their own efforts. and so, and it's also important that whenever the federal government steps in to one of the situations where there's going to be the sharing of effort. ms analysts, we can all see the potential advantage or, trying to get, you know, postacute care to work other so you avoid hospitalization which is on two different sides of the program. everybody gets those models, but they do create opportunities. and i guess what wasn't mentioned because it so far back

in history that most of you weren't born yet, but i worked for medicaid agency and for sure you're constantly focused on figuring out ways to get medicare to pay for this picture currently paying for. i'm not saying that these models should be examined, but there should be a deciding program integrity and maintenance of effort component to it because they're offensive in history. >> one of the real question is will medicare and medicaid finalists are working together? some of us have been frustrating that house i loathe the dual eligibles are the people who are represented or a small part of the population to use an environment share of the resources or on medicare and medicaid eared again, this is an area where the legislation is permissive, even encourages such coronation at the long way from actually seeing models of automated behavior takeoff.

>> actually, i'd go one step further. there's actually -- there has been silos that are labeled medicare, medicaid federal and medicaid state. and i think all three of those sets of players need to work constructively together. the good news is that they would think there's a strong incentive, these problems that we're facing are very serious and the ability to address them adequately, which i think is immeasurably strengthened by working together, rather than separately. and each one in its own self-interest really has some terrific potential payoffs. and there's nothing to encourage people to talk to each other like the prospect of, you know, really benefiting, whether it be politically or financially from doing things that are together rather than doing things more separately. >> author, as these may be good

point. i think particularly for the private payer, private payer, something to stay focused on them with something of this conversation or is that these models involve consolidation of providers and that increases their power to leverage negotiations with the private sector and i can drive the price is on your side. so to stu's point, the notion that the act or is may have some shared motivation for cooperating may be present at least in that instance, if the private sector sees that medicare is for them to go ahead and do this, they may feel or be somewhat compelled to look at these things so that they don't get the negative side of price increases. >> yes, go ahead, stu. >> seemed to be bouncing back and forth. a 1.0 not that i meant to raise because it's come up several times, the issue of

consolidation has been raised a lot in the context of work would need to care an integrated care systems. one thing i'd point out is that if you read the literature, a lot of consolidation seems to be happening right now. a lot of hospitals are buying a physician practices. again, there seems to be a real move towards consolidation market power. so one could argue that if you're going to have this consolidation anyway, you might as well use the consolidation or take advantage of it to help make the health care system and for better better incentives out there. >> can i ask the panel to kind of take one more step along that discussion, maybe a broader look. there's been a lot of talk about ways to make things more efficiently, but isn't it true that a lot of these changes

really represent substantial gains for some providers in substantial losses for others? how big is that a problem and is there sufficient staff built into the new law and the demonstration of pilot authority to offset that to the extent that you can get some good results? >> i think this is a very significant intermediate problem. i don't think it's a short-term problem because i don't and you will be threatening in the short-term as long as these are pilots and they're being tried various ways in various parts of the country. ultimately, if we change how we finance and organize the delivery of health care, we will make an adjustment into the incentives included in the new form of a less fragmented payment for care. if the intermediate part that i'm mostly concerned about. we have very disproportionate numbers of specialists versus

primary care physicians. much of what we've talked about will pull money relatively away from the high-volume of procedures and payments in that direction and may potentially pull money away from some of the freestanding high-tech centers and/or surgery centers, hard house lows, orthopedic hospitals, it better. or at least put pressure on the numbers that are out there that are able to provide care on a going forward basis. and my presumption is that those that are going to be relatively disadvantaged by this shift and payments will not go quietly. and that means we're going to have to expect to see pushback from the specialty groups or areas where there is likely to

excess capacity and to reorganize delivery system. over a document. the first part, when people aren't happy with the new system, is my patients will get poor quality or less at did or other issues that make them unhappy and it will be very important to be able to show in an incredible way whether or not this is the case. but in order to see if worse hitting the incentives so that the integrated care and purpose on primary and preventive care and less in the way of what appears to be very high-volume technically, sophisticated care that may not proceed that they'll be lots of pushback

comes particularly in this intermediate. if we can demonstrate that quality is as good or better. >> yes, go ahead, mark. >> i think to thought and i think gail is right. i think we should just assume that we're going to have to live with it and paste it good and i think probably the two ways to think about it is one his collaboration, whereas as these new models are developed and the measurement for her performance is developed to have input from the shed of coming back at the end and say well, you were involved in drafting this performance or the outcome is not what you like. you at least have some input. we all know that doesn't necessarily get you very far

down the road, but it still something that should be done, for design reasons and to potentially being able to say you were involved. i most remember nick stanek, but just to make sure if anyone else did is the other way that this works is that if the fee for service side of things, the kind of standard traditional fee for service side becomes more difficult place to live due to payment rate you're creating an environment where the provider is looking at their circumstances and perhaps these new models are at least other than where currently again that involves not necessarily the pilot and demonstrations as much as the larger context on what's happening with the congress in the medicare program probably.

>> we have time for just one more question. >> will leave this event at this time it's the u.s. senate is about to gavilan. they'll begin with about an hour of general speeches and possibly reaction to only make a game to replace justice john paul stevens that the supreme court about three akaka eastern senators will resume debate on new financial regulations, several amendments are pending that no vote today. life in the coverage now on c-span 2.

once again the senate about to gavilan within our general speeches, reactions to speeches at a lena k. ginter replaced justice john paul stevens. she was nominated this morning by president obama, that the two of them walked out along with vice president joe biden to the east room in the white house. ms. kagan born in new york city holds a bachelor degree from princeton come a master's degree from oxford and a law degree from harvard. she was the first dean of harvard law school in the first two service top supreme court lawyer for any of evisceration and you can read more about her on our website you span.org.

unanimous consent to speak as if in morning business.

the presiding officer: we are in morning business. mr. merkley: mr. president, in honor of national nurses week, i'd like to recognize the more than three million nurses who work hard day in and day out to give patients the care they deserve. because my wife, mary is a nurse, i have seen firsthand what an enormous impact nursdz have on -- nurses have on patients and families. their compassion and devotion to their patients an families, and play an irreplaceable role to make sure that the hospitals and clinics run smooth lymph unfortunately many nurses are overworked and underpaid and our hospitals an clinics have trouble retaining them. through the health care reform act that congress passed earlier this year, we made significant strides in addressing many of the challenges nurses face. we expanded the nursing student loan program to help make

nursing programs more affordable. we also expanded the nurse loan repayment program and scholarship programs to students who commit to working at an acredited nursing school for two years. this will help ensure the nursing schools have the teachers they need to train additional nurses. woo invested $1.5 billion over five years in the national nurse program for primary care providers including nurses who practice in underserved areas. in addition we included $50 million in grants for nurse-managed health clinics that offer primary care to low income and uninsured americans. while we made good progress using many of the difficulties that nurses face, much more still needs to be done. nurses play such a crucial role in the delivery of care. we need to provide them with the resources they need to do their

jobs. the nursing shortage also remains a serious issue, especially in hard-hit rural areas. defined commonsense solutions to the problems that nurses face, i formed the senate nursing caucus with senator johanns, senator mikulski and senator snowe. together we will explore ways to enhance the role that nurses play in the health care system and address the nationwide shortage. i ask my colleagues and fellow americans to take a moment during national nurses week to show your appreciation to nurses across the country for their hard work, commitment, and dedication to their patients. their dedication is invaluable to the success of our health care system and, most of all, to the patients who depend on them. thank you, mr. president.

mr. durbin: mr. president? the presiding officer: the senator from illinois. mr. durbin: mr. president, i want to join my colleague from the state of oregon in speaking on behalf of nurses across america. we know with the baby boom generation that we're going to need more nurses than ever. and with these nurses we're going to have the professional medical care that we need across the nation, but we better get busy. we're falling behind. we don't gra graduate enough nus to take care of those needs. we have been poaching nursing talent from other poor nations from around the world. filipino nurses in chicago play a major role in many hospitals, particularly inner city hospitals and nurses around the world. many times the philippines generates more medical professionals and expect that they will serve overseas. but some places in africa lose their best medical professionals

for higher, and more predictable pay in places like the united states, england and france and germ niche we have to reach -- and germany. last year in illinois 2,000 qualified nursing applicants were turned down because we didn't have the capacity in our nursing school. we didn't have enough clinical opportunities. need focus on this. in addition to lauding the profession, i echo my colleague in that regard. we need to think ahead to make sure that we have more nurses when we need them and that day will be fast upon us and i thank the senator from oregon for his words. we're resuming consideration of this bill, and, of course, it's the wall street reform bill, the financial stability act. it's over 1,400 pages long. the senator from virginia, who is presiding over the senate now is a member of the senate banking committee, senator mark warner have worked on the bill and large sections are his handy

work to make changes on wall street to protect our economy and make certain that we don't relive some of the horror stories that we've seen over the last several years and we all know the stories ptty well. there was a time about a year and a half ago when under the previous president i was brought into a meeting just a few steps away from the senate floor with the chairman of the federal reserve, ben bernanke, and the secretary of treasury, henry paulson and they said, we want to let you know the largest insurance company in the world, a.i.g., is about to go broke. and when it goes broke, it's going to bring down so many companies an corporations with it, that it could cradle the american economy and chairman bernanke said to there is -- there was a moment of silence in the room and someone ht nerve to ask, i don't remember who it was, where did you ge

get $85 billion from the federal reserve? and chairman bernanke said something like, oh, we have our resources. someone asked, where did you get the authority to give it to a private company? and he said it was a law passed during the depression that said if it looks like the economy would crater, then it's allowed. since their separate agency and don't go through our appropriation process ended up propping up a company which didn't cost $85 billion. i think when it was over it wa was $180 billion or somewhere in that range. the reason we couldn't let that company go down was they had literally insured contracts an corporations all around america that there would be no default. they insured more contracts then they had a reserve to cover and as the contracts started to fail they didn't have the reserves to back up their promise of insurance. and so that was the first meeting. only few days later they asked

us to meet again and i thought this ought to be equally interesting and it was. they brought us to a meeting and secretary paulson, the secretary of the tresh said, now we're seeing with the failure of lehman brothers and other companies the potential that the largest financial institutions in the -- in america are also going to fail. so secretary paulson said, we need a fund of money immediately by friday, and this is a tuesday meeting, we need a fund by friday of $800 billion to buy the so-called toxic assets, tarp funds, toxic assets relief program. and, again, there was a stunned silence in the room because those of us in washington who deal with millions and billions on a regular basis were stunned to get a request fo for $800 billion in a hear the of days. and so the first question that was asked was who'soing to prepare the legislation that actually asks for the money. and they looked around and no

one thought of the detail and said the white house should. secretary paulson prepared it and it was 200 pages long asking for $800 billion. many of us thought it was not adequate. we needed provisions on how the money was spent and the supervisory of congress and so forth. it was eventually passed. people like myself who voted for it did it out of a feeling for desperation. what else could we do if we were being told by the financial leaders of our government that our economy was about to fail, we'd seen it already in the stock market going down in value, and we knew that people were losing their jobs and businesses were failing, we felt this was the only way to try to stop this terrible crisis from becoming much worse. well, the toxic asset relief program ended up sending billions to the financial

institutions. they were struggling because they made bad judgments. they bought, created and sold securities, derivatives which were, in fact, toxic. they were based on a mortgage market that turned out to be totally wrong. they made bad business decisions, their companies were about to fail and the federal government, make that the taxpayers of this country, were expected to step in and save them, which we did. and to show their gratitude for this act of mercy, rescuing them from their own bad works, they declared bonuses for one another. they gave one another bonus checks after the federal taxpayers bailed them out. is it any wonder the people across this country have a bad taste in their mouth about wall street, about the tarp program, about the bonuses? is there any wonder we're here

this week considering a bill to make sure we never relive this financial crisis? it's overdue. long overdue. we know what this crisis cost us in real human terms. the estimates are that it too took $17 trillion out of the american economy. $17 trillion in value. and it hit almost everybody. anybody with a savings account, retirement account, knows what i'm talking about. the value of the account went down 20%, 30%, 40% or more. so your net worth, your necessary egg, your retirement plan went down because of the recession. in addition eight million people are currently unemployed across america having lost their job by this recession. another six million have been long-term unemployed and not trying as hard as they once did. even though the numbers are getting better, last week there was a good report, we know it's

still serious. too many people are out of work because of this recession much when we tried to bring this bill to the floor two weeks ago, mr. president, we had a tough time. we had three votes monday, tuesday, wednesday two weeks ago and they were filibusters from the republican side of the aisle. while the filibuster votes were going on on the floor of the senate, though, on another stage on capitol hill, the permanent subcommittee on investigations of the homeland security committee, chaired by senator carl levin of michigan, was holding a historic hearing in bringing in the top leaders of goldman sachs. including their c.e.o. asking them about their practices that had led to financial difficulties at the company and were being questioned now even in a lawsuit that has been brought by our government against that company. that display and that testimony was happening at the same time that the republican filibuster to stop this reform bill was going on on the floor.

finally several republican senators spoke up to their leadership and said, that's it. we want to engage this debate. we want to get this are started and do it in a prompt way and the filibuster finally broke and we nominally started the debate last week. can you count on one hand all of the amendments that we considered last week. we could have done a lot better. we wasted a lot of time. there are important policy considerations that have to be asked and answered by votes on the senate floor. some from the republican side, valid questions. some from our side, from the democratic side. what we're looking for here, what i think the american people are looking for here is for the senate to be the senate. stop being a dead end for debate. instead, deliberate these issues, cast a vote and move forward. there was an amendment of great moment offered by senator sherrod brown of ohio, senator ted kaufman, the state of delaware, as to whether or not we should limit the size of financial institutions. they had a very catchy mantra,

and the mantra was too big to fail means too big, and so they would limit the size of financial institutions so that you couldn't have these big giants dominating the scene. there would be more competition and more financial institutions involved in our economy's business. that amendment failed. it got 31 votes. i was one of the 31 who voted for it. i was disappointed, but let's be honest. that amendment had its day in court. it had its day on the floor of the senate. we debated it back and forth and a vote was taken. now we're moving on to other equally important amendments. senator bernie sanders of vermont is going to offer an amendment, probably tomorrow, as to whether or not there should be an audit of the activities of the federal reserve. this is a big amendment and one that is somewhat controversial, but i think we have reached a point where senator sanders is likely to prevail. he stepped up with a bold idea, and now i think we're going to

move toward that idea. the senate is doing what it's supposed to do, but there are other things that we need to take up as well. senator mccain is going to offer an amendment about the future of fannie mae and freddie mac, two government type entities that literally back up the mortgages for most of the homes across america, and they are in trouble because so many homes across america are going under water. that is, that the value of the home is lower than the mortgage balance. and if that affects one of the four, one of the five homeowners across the country, you can understand that these agencies are going to be in trouble financially. what are we going to do about it? if we eliminate the agencies, the housing market in america will collapse without this government guarantee, but if there is going to be a government guarantee, how much will the taxpayers be on the line for? it's an important policy issue. so i'm glad that we're moving into that debate. mr. president, i want to offer an amendment which goes to credit cards. you know, we debated i guess two

years ago credit card reform, and at the time passed an historic bill which changed some of the rules and gave consumers across america more rights and more disclosure when it came to the use of credit cards. if there was one mistake made in that credit reform, it was this argument by the large banks and credit card companies that they could not implement the changes unless they were given a long lead time before they occurred. and they were given that lead time in the bill and they have used that lead time consistently to raise interest rates on credit cards across america. it was a mistake. we shouldn't have given them that much time. we should have anticipated that they would have done the wrong thing during that period of time. there is another aspect of credit cards which i would like to discuss in a moment which i am going to offer an amendment on. it relates to something called an interchange fee. if i reach in my wallet and pull out my credit card at a restaurant in chicago and pay for my dinner, i'm going to be billed, of course, for the cost

of that dinner on my monthly bill and i have to deal with the credit card company about how much interest i would pay on any balance this i owe, for example. however, there is another part of that transaction that takes place between the restaurant and the credit card company. if i use a credit card, then the restaurant is going to pay to the credit card company some percentage of the bill for my dinner, and it turns out the so-called interchange fee between the retail establishment and the credit card companies has become a serious, serious problem. let me give you an illustration. i go to the same restaurant and instead of using a credit card, i pay by check. it isn't done much anymore. it used to be done a lot. but if you pay by check, the restaurant takes your check, takes it to the bank, the bank calls your bank, transfers the funds in, no fees involved. however, if you use a debt card, a debt card which would take the money directly out of my

checking account, the same as my check, it turns out that the interchange fee is applied. so many restaurants and retail establishments are saying why is it with a check the bank gets no extra money and with a debt card, the credit card company gets money? what is that all about? should it be the same fee as a credit card for a debt card? these are legitimate questions that just aren't some minor issue. they turn out to be a major issue. i had the c.e.o. of walgreens contact me last week, and he told me that when they look at the expenses of walgreens, this national chain of drugstores, the number one expense, of course, is compensation of employees, personnel costs. number two, mortgage and rent payments. number three, health insurance. number four, interchange fees. it turns out the fees that walgreens pays to credit card companies is the fourth largest item of cost for their business. now imagine that instead of

being walgreens, a big national chain of drugstores, you are a small town store. now let's think it through. how many times have you gone to the cash register and stood behind as somebody handed a credit card or a debt card for a pack of chewing gum or something even smaller? i saw it at national airport, and after the person left, i said to the person at the cash register what is the smallest amount anybody has ever put on a credit card here? he said 35 cents. when you look at the interchange fees, it turns out that the retailer loses money on that. most of these involve a flat fee that is certainly more than the profit they are going to make on a 35-cent or even a $5 sale and a percentage of the actual item that is charged to the credit card. i ask consent for an additional five minutes. the presiding officer: without objection. mr. durbin: senator gregg is going to come in shortly.

i will yield the floor to him when he returns. if you look at this circumstance, you will see why some smaller businesses want to say there will be a minimum amount you can choose. obviously not 35 cents, but something where they won't lose money if someone uses a credit or debt card under the interchange fees. currently the major credit card companies, visa and mastercard prohibit, prohibit companies from accepting their credit cards from establishing a minimum amount that can be charged. they are going to make money. they are not going to give these retail establishments that kind of opportunity. and of course they prohibit that company, that small retailer from saying well, i get a better deal on the interchange fee from visa than mastercard so i will favor visa. remember when they used to say if you go to the olympics, so and so credit card is the official credit card of? well, they can say that but the retailer can't say it. if you own a restaurant and say i prefer this type of credit card, you violate these agreements with credit card

companies. so here's what we're trying to do. with this amendment, we're trying to establish that the fees charged to retailers for credit card usage at their establishments will be reasonable and proportional. it will be monitored by the federal reserve which has that responsibility when it comes to credit card charges for consumers, so there is some parallel thinking here. the federal reserve will look at both sides. the retail establishment as well as the retail customer in terms of the reasonable fees that can be charged by credit card companies. secondly, we eliminate the prohibition against what i consider to be competitive practices where you would say you can't use a credit card or debt card by establishment if -- at my establishment if your bill is less than $5 or something of that nature. currently prohibited. would not be prohibited under my amendment. this amendment has the support of some of the largest retailers and small businesses across america. thousands of them have come to me and said please give us a fighting chance with these

credit card companies, they're killing us. i can't tell you how many speeches have been made on the floor of the senate on both sides of the aisle about small business. we believe, i think botharties believe if we're going to come out of this recession, it will be because of the strength and recovery of small business. this amendment is the number one priority of small businesses across america. i want to bring this amendment to the floor for a debate and a vote so my colleagues can decide. do they want to come down on the side of retail establishments and small business or on the side of credit card companies? some of them will say wait a minute, senator, what about community banks? the small banks, they issue credit cards, too. we specifically exempt them when it comes to this whole question of debt cards. if your establish many has less than $1 billion in assets, your bank does, you're not going to be subject to this kind of regulation. we are going after the largest banks that make the largest amount of money out of this, not after the small town banks with their local credit cards. so we're trying to make this focused and fair and help small

businesses. i went on friday to a press conference at a supermarket in downtown chicago. potash brothers have been around for decades. a great success story of the family that came and opened a store, now they have two or three. they are really well liked and well respected. they came and testified at this hearing about -- and this press conference about what they are going through, the struggle that they have to make it as a small business in downtown chicago, a supermarket that has to pay these high fees to the credit card companies. all they are asking for is that the fees be fair. we know that with the use of a credit card, the credit card company runs some risk that you won't pay off the balance, but we know with a debt card, that money is going to either come out of your checking account or it isn't. there is not a big risk factor involved in it. so i'm hoping that we can move in that direction. many people don't realize the size of this chrebet and debt card involvement in today's

economy. those cards are rapidly replacing cash and checks. there are over a billion credit and debt cards in the united states, over a billion. a nation of 300 billion, but over a billion credit and debt cards. that's more than three per person in the united states. last year, americans conducted conducted $1.7 trillion in transactions on credit card, card, $1.6 trillion on debt cards. credit cards and debt cards are now used in more than half of all retail sales in america, and the number is growing. yet, this paying with plastic may be a convenience for some, but it turns out to be a real problem for small businesses. that's why this amendment is so important. to give these small businesses a fighting chance. individual businesses have no chance against the giants, visa and mastercard, which unfortunately -- or fortunately, depending on your point of view, control about 80% of all the debt and credit cards in the united states of america.

about $50 billion in interchange fees were collected in 2008, and about 80% of that money went to ten big banks, the ones that we think should be the subject of this requirement that the fees be reasonable and proportionate, based on the amount of work that is being done. it is no surprise that these ten banks hate the durbin amendment like the devil hates holy water. they can't wait to see this defeated on the floor, but i want my chance. i want to debate it on the floor, on behalf of the retailers and small businesses across america, and i'd like my colleagues to have a chance to join me in this effort. i don't think it's unreasonable. the big banks are going to try to stop this amendment from coming to the floor. i'm ready to fight for it, and i think in fighting for it, we're going to put people on the record as to how they want to vote on this important issue. this will be the first time interchange fees have been taken up, to my knowledge, in the history of congress, and it's about time. this has become a major part of our economy, and i think a fair and reasonable fee for the use

of credit and debt cards is something that we should stand behind and unreasonable charges are unfair to small businesses and should be basically prohibited based on the regulation of the federal reserve. so, mr. president, i will be offering that amendment this week. i hope my colleagues will join me. those who want to cosponsor it are certainly welcome to. i see senator gregg has left the floor for the moment, so i am going to suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

a senator: mr. president? the presiding officer: the senator from alabama. mr. sessions: i would ask the quorum call be dispensed with. the presiding officer: without objection. mr. sessions: mr. president, i want to make a few remarks about the financial regulation bill, the restoring america's financial stability act. and certainly we need to take some steps to deal with the catastrophe we've gone through with the damage and destruction, the financial mismanagement that has wreaked on us. and it's people suffering today from it. and this crisis exploded in the fall of 2007. it was centered in the housing industry, in the housing market home loans. and the question people ask and should ask first: how did it happen? did congress know about it? why didn't congress do something about it?

there's a false myth out there, and many of you heard it, that somehow this was a product of ronald reagan and his disciple, george bush, because they didn't believe in regular labor, that they opposed the regulations, and that more regulations would have prevented this and this deregulation is what caused it and so forth. and so to the rescue, this myth says, comes democratic colleagues and president obama with more new regulations that are going to fix the problem. well, let me just say i believe good regulations can be helpful. anybody that's lived in the world and been in business and governments know that there are bad regulations that drive people crazy every day, driving up the cost of products, costing jobs in america and they shouldn't be on the books. so the question is, how do you

have a good regulation or a bad regulation? let me focus for a second on the critical component of the fundamental problem, which was the housing market and how it is that government-sponsored entities came to be responsible for half of the housing loans in america, that's freddie -- fannie mae and freddie mac. 50% of the housing market, how did they get involved in that and how is it that this was the big factor in the destruction long economically that we suffered? today, fannie mae and freddie

mac, the federal housing administration, the veterans administration have backed 96.5% of the home loans in the first quarter of 2010. it used to be you went to your bank and they loaned you the money. if they didn't think you were credit worthy, you didn't get the money. some people would complain but a lot of times people were saved from very unwise decisions because their banker correctly intuited that they weren't going to be able to make these payments, there were too much risk there because they had a better perspective in who can be successful in paying off loans. but before freddie and fannie collapsed in 2008, they guaranteed $5.2 trillion in mortgages and mortgage-backed securities, about half of the $12 trillion market. prior to that, freddie and fannie were leveraged at twice the rate of bear stearns that

failed. they were capitalized, in other words. they had half the real capital for the loans that they made, as did bear stearns, which failed. and so to date, freddie and fannie have cost the taxpayers, because of this improvident policy, $126 billion. that is a incredible sum of money. fannie mae, $72 billion for 2009. freddie mac, $22 billion for 2009. just came the other day for another $10 billion. c.b.o., our congressional budget office that analyzes these things, projects fannie and freddie will ultimately cost the taxpayers $389 billion. but it's really not on our books because the way the books of the government are managed, these

two institutions are supposed to be somehow quasi-private and not to be affecting the government treasury. but they did affect the government treasury. so i asked the question at the beginning here: how did it happen? what did congress know and did we know? and why didn't congress act? and this is a good question, and i'm just pushing back here a little bit. i'm u.s. not going to continue to have all this -- i'm just not going to continue to have all this talk that somehow ronald reagan is responsible for this crisis. let me read this letter. and i don't think a lot of people paid much attention to it at the time but it was very real. i remember reading from it i believe in debate in or about this time.

it was a letter to my colleague from alabama, senator richard shelby, who was then-chairman of the banking committee. it was march 31, 2008, from the board of governors of the federal reserve system, signed by none other than alan greenspan, chairman of the federal reglerchlt "dear mr. chairman:" this is what he wrote. now, remember, at this time, senator shelby had become concerned and republicans had become concerned about the health of freddie and fannie. they realized this thing was overleveraged and it presented great risk. this is 2004, about three years before the collapse occurred. and senator shelby felt something should be done about this, and he offered legislation to do something about it, just that. my republican colleague. and so this is what senator -- this is what alan greenspan wrote him: "thank you for requesting the views of the

federal reserve on the legislation to improve the supervision and regulation of government-sponsored enterprises." that's the g.s.e.'s, that's freddie and fannie. quote -- "as i stated in my testimony of february 24, the congress needs to create a g.s.e. regulator with authority on par with banking regulators with a free hand to set appropriate capital standards and with a clear process sanctioned by congress for placing a g.s.e. in receiversh receivership." well, nobody was publicly -- people it hadn't begun to dawn on them that these g.s. esm's would go into receivership, that they were so overleveraged that they were on the verge of collapse. that's what he wrote to senator shelby 2004, early 2004. he goes on to say, and this

language is dramatic: "to fend off possible systemic difficulties which we assess as likely if current trends continue unabated, preventive actions are required sooner rather than later." isn't that a dramatic statement? "to fend off possible systemic difficulties..." did we not have the whole system go into a spin and we're still suffering from it and may for years to come? then he goes on to say, "the board believes your proposed legislation makes substantial progress toward meeting these objectives. with regard to the receivership issue, the board continues to believe that the congress needs to clarify the circumstances under which a g.s.e. can become insolvent and, in particular,

the resulting position, both during and after insolvency, of investors holding g.s.e. debt. the process must be clear before it is needed. leaving the matter unresolved, as it is under current law, only heightens the prospect that a crisis would result in an explicit guarantee of g.s.e. debt. in this area too, your proposal makes substantial strides." it's basically an endorsement of senator shelby's efforts. not basically, it is a flat-out endorsement of it. and he goes on to say, "with regard to capital, the board" -- that's the federal reserve board -- "continues to believe that determining the suitable amount of capital for g.s.e.'s is a difficult and technical process and that a regulator should have a free hand in determining both the minimum and

risk-based capital standards for these institutions. your proposal, which gives a new regulator more discretion in these areas, is an important improvement in that respect." so this was the endorsement of the federal reserve board of senator shelby's efforts to reform. and what happened? senator shelby brought it up in the banking committee and it passed the committee on a straight party-line vote. all republicans voted for increased regulations, increased accountability, increased capitalization of freddie and fannie, and every democrat on the committee voted against it. and so when it hit the floor, it was subject to a 60-vote filibuster and it was clear that the democrats i guess had sent word that they were not going to

support it and there was no prospect of passage, the bill never actually passed the senate floor but it did pass the committee. so i just want to say that the idea that the only greed, the only mismanagement, the only problems were with private bankers is not accurate. there was plenty of that. i have no grief to bear for the big guys on wall street. they roll the dice. i voted against their bailout. i don't believe they should have been bailed out at all. they should have suffered the consequences, and probably we'd be better off today economically because we would have taken the hit and gotten it out of our system. but we can dispute that. all i would say to you is there are other areas of greed and

mismanagement. half the loans in america, now 96%, are being managed by government institutions: fannie, freddie, the v.a., the housing administration. and who's to say they're always perfect? and we know, as senator mccain has pointed out in his amendment to this legislation that's before us today, that we can still do more about it. well, since now 96% of housing mortgages are being held by government institutions, why does not this legislation deal with it? why does it not? it completely sidesteps the issue. why? because we'd have to deal with how to score and add to our debt another $400 billion almost. is that one reason?

is another reason because fannie and freddie have been so powerful politically and they've been able to fend off the oversight that they should have been subjected to from the beginning? is it a belief somehow that because there are quasi-government institutions, they can do no wrong, that only private industries and institutions can do wrong? i don't know exactly why all of this is so but it is not dealt with, and it should be dealt with. senator mccain's legislation will deal with it. he made a speech thursday, i believe it was, in which he delineated the history of what -- how this all occurred. i thought it was a very valuable insight. americans should know about th this. and when the government comes in and allows politics and

governmental policy on everon ride financial reality, then -- policy to override financial reality, then we can get in trouble. if you order agencies or agencies are willing to make bad loans because they think it's somehow good policy, do people think nobody's going to have to pick up the tab someday in the future? well, i'm afraid they are. so, mr. president, the unreality of the situation that we're in i think arose from the fact that the -- the richly paid g.s.e. executives and their political supporters had no skin in the

game really on the loans they were making. they were getting their salaries, they kept getting their salaries even when it became clear that they were mismanaged and heading for disaster and going to have to be bailed out by the american taxpayers. so they -- they operated risk -- recklessly and they -- they were, i believe it's fair to say, "the" precipitating cause, frankly, in the collapse that we've seen of the financial markets, if not "the" cause, one of the primary causes of it. and it is unbelievable and improper that when we propose legislation that's to restore america's financial stability, we don't fix the freddie and man

knee problem. the presiding officer: senator's time has expired. mr. sessions: i would ask for 30 seconds, with unanimous consent. the presiding officer: without objection. mr. sessions: "the wall street journal" wrote that reforming the financial system "without fixing freddie and fannie is like declaring a war on terror and ignoring al qaeda." well, they were at the center of it. they were a cause of it. they need to be reformed, and i'm disappointed that the one thing this government should be doing is fixing these quaiscy government agencies, that that's not done. i thank the chair and yield the floor. the presiding officer: under the previous order, the senate will resume consideration of s. 3217, which complort. -- which, clrt. the clerk: s. 3217, a bill to promote the financial stability of the united states by approving accountability and transparency in financial system and so forth and for other

purposes. mr. dodd: mr. president, i'd note the observes o absence of . the presiding officer: the clerk will call the roll. quorum call:

mr. dodd: mr. president? the presiding officer: is not snrr connecticut. mr. dodd: i ask consent that the call of the quorum be reunderstand ised. the presiding ofcer: without objection. mr. dodd: mr. president, i want to share a few thoughts if i may in a minute or so on the pending matter buffs. before i do that, and at a later

time i'll speak at greater length about this, but i wanted to express my greets over the decision made in utah over the -- my regrets over the decision made in utah over the weekend about our colleague, bob bennett. i have served with him for 18 years. we've been on the banking committee during that time. obviously we have differences of opinion on a lot of policy questions. in fact, the majority of policy questions we've had our differences. but at critical moments, bob bennett was always someone you could talk to, always someone you could approach with an idea or issue. and he went through a tough battle over the last number of weeks and did not prevail in his convention in utah over the weekend. but i just want to express to him and to joyce how much this institution will miss them in the coming year. he's thoughtful, considerate individual, he is deliberate in his views, accessible with your

ideas, and in my view, it will be a loss for the institution he won't be back here. it's coming from a democrat on this side of the aisle, and i realize there's a contest coming up. but i didn't want the day to begin or end without expressing my disappointment over the results in utah. i know that's probably not appropriate for democrats making comments about republican races, but bob bennett is one fine united states senator, and he's played an invaluable role, a critical role at critical junctures over the last number of years that i've served with him. after that, mr. president, let me make some comments about the bill before us. it has been nearly seven weeks since the banking committee approved legislation to reform wall street. and it's been more than three years since our committee, the baying committee, began work on this very important topic. it was in january of -- early february of 2007 that i became chairman of the banking committee for the first time, and obviously the news even that early date was about the

mortgage foreclosure issues and a lot of work has gone on in the banking committee. we've literally had dozens and dozens of hearings and meetings with people on how best to address the economic decline that we've suffered, the 8.5 million jobs that have been lost, the 7 million homes in foreclosure. over the weekend there was a report, mr. president, nearly 4 million households are severely delinquent on their mortgages. in the last three months, 250,000 homes have been seized in the first three months of this year. in foreclosure. and with 4 million homes delinquent, the largest backdrop since the crisis began, and while there were 209,000 jobs create inned in the month -- create created in the month of april, we're clearly seeing an

economy that seems to be improving. but when you have 4 million homes that are under water in this country, the largest backlog since the crisis began, then you realize that we're far from out of this dirveghts particularly if you are a working family in our country. we also of course saw last thursday a market decline of 1,000 points in almost 17 minutes that hab subject matter -- in fact the presiding officer and i have talked about this over the weekend. i appreciate his insights about the matter as someone who spent time working in the field before getting involved in public life. there are a number of ideas that are emerging as to how this happened. my hope is that as early as next week our banging committee -- our banking committee would either have an informal meeting with the people from the securities and exchange commission and the future products safety commission as well as others to hear from them what they think happened and when steps they're taking to minimize that event from occurring again. and then of course over the weekend we had the stories emerging about europe and the

euro and a wha was occurring in grays and other nations that were in danger of going into default because of the huge debt problems that exist. and again by tomorrow morning our committee will be briefed by the federal reserve as well as the secretary of the treasury on exactly what plan has been put in place in europe. i don't want to dwell on either of those points at this juncture except to make this point, mr. president. here we have an event totally unrelated to mismanagement of financial institutions. in the case of a market decline as precipitous as we saw thursday, events beyond the borders of our own nation that will have an impact here at home. we're told that this is not going to have any kind of severe impact. at least we don't believe it will at this juncture. but we do live in a highly sophisticated computerized world where this flash trading, as

it's called, high-frequency trading, as it's referred to, where within macro seconds buyers and sellers are matched up. what the system doesn't accommodate for is panic. the circuit breakers in market-wide exchanges to minimize these events when they occur. and also events that occur in a nation, a small country, in the mediterranean in the case of greece or portugal or other nations where their debt situations all of a sudden pose risks globally. so it's critically important, in my view, and while the legislation before us is not going to stop crises from occurring, what we try to do in this bill is provide our government with the necessary tools so we can respond when kraoe cease like this -- when crises like this emerge. no one can stop the rain from coming. it will happen. it will happen again and again. what you can do, however, is make sure the rf is going to be solid enough so it doesn't leak or you're not going to be in a situation where things break down and the next crisis,

however modest it may be, doesn't endanger the job creation we saw in this country, put homes as we are presently today seeing massive foreclosures occurring, retirement accounts declining. the value of homes has gone down some 30% in the last several years. there is some indication things are improving here at home, and we welcome that news. but if you're one of those 8.5 million that lost a job or home, if you're a retiree that's watched your savings disappear overnight, as many did in this country, then this positive news, while it's welcomed, is hardly any relief to you. so it's critically important, because, mr. president, we are in no better shape today, despite advances and patriot tkpwres we've made on this bill. but if something were to happen tonight or tomorrow in our own country, or something happened elsewhere it would have the effect, the contagion effect to spread here or elsewhere, we have not yet passed this

legislation. we don't have any other provisions in place than we did in the fall of 2008 when the problems exploded in our country. and while we've written strong provisions in this bill that never would allow us again to become, or an institution to become too big to fail, the fact of the matter is that's only been adopted in a bill that is yet to pass this body to be reconciled with the language in the other chamber of this congress and to be signed into law by the president. it's important that we get this job done, and there's been a good debate up to now. my hope is that this week, with the guidance of our leadership that we'll begin tomorrow morning considering amendments, allowing for some adequate debate, hopefully not too long on each of these ideas. and there are a lot of ideas that our colleagues have, democrats and republicans. we can have our votes on those matters, either include them or exclude them from the legislation, but to get this job done. i hope this week, at the very

latest, at the end of this week so we can send this bill to the other body and resolve the differences and get this legislation to the president. i'd be the last one to suggest to you that what we've written here takes care of every imaginable financial situation. it doesn't at all. what it does do is end too big to fail, puts in place a consumer protection bureau that's never existed before in our nation, so that average citizens might have some redress when a mortgage broker or company takes advantage of them. we try to put in place a early warning system, so when matters like europe or other places occur, we can respond to them early and adequately so they don't explode and expand to affect everyone else in the economy, and also deal with some of these exotic instruments that were totally unregulated. there are other provisions but those are the four major goals before us. as i said a moment ago, i know there are other circumstances

that people wanted to accommodate here in this legislation. but as my colleague from new hampshire pointed out the other day, some of these other issues are so complex, they will need adequate study and determination in trying to sort of hurl them into this bill ought to eliminate things without any alternative being proposed is not exactly the wise way to be dealing with matters as this, as important as the financial sector of our nation. so i'm very grateful to our colleagues for what they've done already. as many have pointed out, this has been, i think, a worthwhile process. it's taken a long time. but considering the complications -- implications, none of us obviously want to have the so-called unintended consequences. no matter how good our ideas or we think our ideas are, we want to make sure what we're doing is not going to provoke their own set of difficulties. so we have to finish our work, mr. president, on this legislation, not just in recognition of what has happened but in preparation of what may happen next.

as we've seen in recent days, the shocks to our system are as inevitable as rainfall. throughout europe, again as we've seen, countries are bracing for the effects of the greek crisis, effects which respect no boundaries and offer no safe haven for anyone. right here at home our market stumbled, as we saw last week with a stock market tumbling hundreds of points before righting itself. so, mr. president, again, as i made reference a moment ago, the rain is coming, but we need to fix our roof so we don't all suffer as a result of the inevitability of rain. the issues raised by the crisis in greece and last week's stock market scare require our attention, and they haven't. i've asked senator jack reed of rhode island who chairs the subcommittee dealing with the securities and exchange commission to prepare for hearings on the stock market issue so we can get to the bottom of what happened. and as i mentioned, our staff is working to assure that our government does its part to help contain the crisis in europe, least to watch it and determine

whether or not there's any spillover effects. but these events are a reminder, mr. president that, our work on this legislation must look through the windshield at the crises to come, not just in the rear-view mirror at the one which we are now just emerging from. and they are a reminder further that our work does not end with this legislation. i'd urge my colleagues to join us in making a final push to get this bill done so we can move on to those other emerging issues. and when we do, we can face these challenges with the knowledge that we have strengthened our financial system that. although we cannot prevent crises from occurring, we can prepare for them so their effects are not felt by ordinary americans to the extent they have been in the last number of years. and that's all we're really trying to do here. i always get uneasy when i hear authors of bills claim they're going to solve every problem known to mankind in that issue wary. we do the best we can under the circumstances. but again, last thursday and

weekends event are a constant reminder that we live in a shrinking world. it's not because some company did something wrong. it can happen far, far away and yet have implications here. but we need to make sure this next generation are going to have the tools at hand so we can spot problems early on and begin to take steps to minimize their effects here at home when they occur. and that's really all our goal is through this bill. it's not an insignificant one but it's an important one as well. so i urge my colleagues, and i thank so many of them. they have been extremely constructive and thoughtful over the last week or sofplt we had a good weekend. a lot of people stepped forward, and we were able to accommodate and work out some language that i think would allow various provisions to be adopted. i hope they are as part of this bill. more work needs to be done, but, again, i'm confident we can achieve that goal. and i'd be remiss if i didn't acknowledge once again my thanks to the presiding officer, a new member of this body, a new member of the banking committee, but he's been an invaluable,

made invaluable contributions to this proubgt. -- to this product. while not a chairman of even a subcommittee yet, has acted as a very, very senior members in many ways because of the knowledge in the discussion and the debate and that has been invaluable to the members of this kph-fplt and i thank -- of this committee. and i thank him personally for his efforts in that regard. with that, i see my colleague from mainend i yield the floor. ms. collins: thank you, mr. president. mr. president? the presiding officer: the senator from maine. ms. collins: thank you, mr. president. i rise today to speak on behalf of of an amendment that i filed to direct regulators to impose tough risk and size-based capital standards on financial institutions as they grow in size or engage in risky business practices. and i'm pleased to offer this amendment on behalf of senators shaheen and myself.

our amendment, mr. president, is aimed at addressing the too-big-to-fail problem at the root of the current crisis by requiring financial firms to have adequate amounts of cash and other liquid assets to survive financial crises without turning to the taxpayers for a bailout. it is critical to our ability to avoid future crises that this amendment be adopted. mr. president, i'm very pleased that the fdic chairman, sheila bair, has strongly endorsed our amendment. in a recent letter to me, chairman baird called this proposal -- quote -- "a critical element to ensure that u.s.

financial institutions hold sufficient capital to absorb losses during future periods of financial stress. with new resolution authority, taxpayers will no longer bail out large financial institutions. this makes it imperative that they have sufficient capital to stand on their own in times of adversity." end quote. mr. president, chairman baird also noted the importance -- chairman bair noted the importance of ensuring that banking companies and large nonbanks are held to the same capital and risk standards that are implied to insured banks in order to protect against excessive leverage that could de stabilize our financial system. as chairman sheila bair put it, this amendment accomplishes this goal simply and directly.

it makes no sense that capital and risk standards for our nation's largest financial institutions are more lenient than those that apply to small depository banks when the failure of larger institutions is much more likely to have a broad economic impact. and yet, that is currently the case. we must give the regulators the tools and the direction to address this problem. if financial firms, including bank holding companies, were required to meet stronger capital standards, they would be far less likely to fail and to trigger the kind of cascade of economic harm that we have been

experiencing since 2008. the collins-shaheen amendment directs federal regulators to impose minimum leverage and risk-based capital requirements on banks, bank holding companies and those nonbank financial firms identified by the new financial stability oversight council for supervision by the federal reserve. neither current law nor the bill before us requires regulators to adjust capital standards for risk factors as financial institutions grow in size and engage in risky practices. the current financial regulatory reform bill also does not require regulators to apply

minimum capital and risk measures across financial institutions as would be required by our amendment. as the f.t.c. chairman has noted about the current financial crisis -- quote -- "far from being a source of strength to banks, holding companies became a source of weakness, requiring financial support." end quote. she went on to caution that they should not be allowed to operate under consolidated capital requirements that are new perricly lower -- new perricly lower and qualitatively less stringent than those that apply to insured banks. our amendment would tighten the standards that would apply to larger financial institutions by requiring them to meet, at a

minimum, the standards that already apply to small banks. mr. president, this only makes sense. if a small bank fails, the fdic can close down that bank over a weekend, allow it to operate, avoid a run on the bank and deal with it in an orderly way. but if a large bank holding company fails, it is so interconnected in our economy that it sets off a cascade of dire economic consequences. that was the point that the chairman of the banking committee was just making. we live in such an interconnected global financial system now. so from my point of view, a view

that is shared by the chairman of the fdic, it only is prudent for us to empower the regulators to impose, at a minimum, the same kinds of capital and leverage requirements and restrictions that apply to small insured banks. mr. president, i would ask unanimous consent that the letter from chairman baird be placed in the record immediately following my remarks. the presiding officer: without objection. ms. collins: mr. president, i had the privilege of serving the people of maine as a financial regulator for five years, about 20 years ago. this is an issue that i care deeply about and am committed to helping forge a solution to so

that never again can the problems and the excesses of wall street have such dire consequences for main street. increasing capital requirements as firms grow provides a disincentive to their becoming too big to fail in the first place and ensures an adequate capital cushion in difficult economic times. but directing the regulators to establish capital standards that take size and risk into account, our amendment strengthens the economic foundation of large financial firms, increases oversight and accountability and helps prevent the excesses that contributed to a deep recession

that has caused millions of americans their jobs. mr. president, let me just conclude by thanking the chairman of the banking committee and the ranking member of the banking committee and members like the presiding officer and senator corker and senator gregg for their work on this very complex issue. more than a year ago i introduced a financial regulatory reform bill. i had the pleasure of dcussing the bill with the chairman of the banking committee. and i am pleased with my much of what is within his bill at this point in the debate. i hope we can continue to make further changes, such as, the amendment i have proposed with senator shaheen.

but i do want to salute the members of the banking committee. i know this is an enormously complex and, at times, a thankless task. but it is so important. in fact, mr. president, i argued that we should have dealt with financial regulatory reform last year. i think it's that important to the future of our economy. we realized that we were operating with regulatory block holes that a -- black holes that allowed, for example, trillions of dollars of credit default swaps to develop with really no one having oversight or visibility as far as their impact on the financial markets. they were not regulated as insurance even though i personally believed that they act as an insurance product, nor were they regulated by the

banking regulators. the creation of the counsel of regulators in this bill has not received a great deal of discussion, but i think it's one of the most important provisions in this reform. and it's one that has widespread bipartisan support. it was the key feature of the bill that i introduced last year. i've discussed it with the presiding officer as well. now, i personally still believe that we need an independent chairman of that council rather than the secretary of treasury. and i think we need to broaden the -- the makeup of the -- of the council to include some state regulators represented so that the insurance area is covered -- the state security administrator since they play such a critical role. i think the state regulators should be brought on to the

council as a nonvoting, given the constitutional issues. i think that we should have the regulator for credit unions on to that council. what we want with that council is as broad an overview as possible bringing together everyone who has a role so we don't have these regulatory gaps, these black holes develops in the future and we can bring the collective wisdom of these officials to the table. so that's an example of a provision of this bill that i think is extraordinarily important, but perhaps because it does have widespread support, it hasn't generated much discussion on this floor. so i wanted to -- to mention that and to salute the committee for what i think is a provision is going to make a real

difference in preventing the kinds of problems that we saw that triggered the recession of 2008. i also want to commend senator levin and senator coburn for their work on the permanent subcommittee on investigations. the senate's premier investigator subcommittee, which is part of the -- subcommittee's of the homeland and governmental affairs committee which senator lieberman and i have the privilege of leading. they have given us great insight into the role of everyone from the sloppy mortgage brokers and bankers who threw underwriting standards out the window and made loans that never should have been made to people who could not possibly repay them. they've looked at the role of -- of the credit rating agencies

that also did not perform in the way that we would like. and they've looked at the role of investment banks like goldman sachs. we need to take what the lessons that we have learned, the great depth of knowledge in this body, and work together in a bipartisan way. and that's what we've been doing in the last couple of weeks. and, mr. president, in closing let me just say we've made a lot of progress. i'm confident we can get there. let's not pull the plug on this debate prematurely. there are a lot of amendments that are good-faith amendments that are still out there. let's work through them. continue to strengthen and improve this -- this bill which has so many excellent features to it. at the end of the day i hope that we can vote on a bill that will command the support of 70

members of this body. i'd like it to be all 100, but let's -- let's aim for 70. and in doing so we can demonstrate to the american people that we can come together and work on an issue that really matters. it matters to our economy, to the american homeowner, to our small businesses, to anyone who has a retirement account. it matters to every american. thank you, mr. president. a senator: the senator from connecticut. mr. dodd: mr. president, before my friend and fellow new englander leaves the floor, let me thank her for her comments, but also let me thank her for this whole notion of leverage an capital standards as well. it is something that we feel equally as strongly about. we have some prog visions in the bill, but we're very interested in the idea that you and senator shaheen have brought to the

table and invite your staff to get with ours an see if we can't and i'll talk to senator shelby as well. because it's important. there's been some debate. i go back and forth in this regard. i always resisted the idea that the senate should set accounting standards. we've had some times in the past on stock options. i recall a few years ago the debate was whether or not we would set the accounting standard on stock options. there was a persuasive argument made by an industry that we should probably consider them as a tool to attract, particularly startup companies. but as attracted as i was to their ideas, i didn't want to open up the box of beginning to set accounting standards in congress. we have competency here, but sometimes we get beyond our competency. we have to have stronger leverage in capital standards and the debate is should we set the leverage here or do we say we want strong standards and defer to our regulators and

determine what that standard ought to be. and that's -- but, clearly, we need t have better leverage and better capital standards. if we don't, these large institutions -- my colleague from maine is absolutely correct in this regard -- that you'll end up having these institutions that are interconnected. if we don't demand great air account ability through that requirement, then we expose ourselves to what we're seeing elsewhere. i thank her for this and over the next day or so let's see if we can take a look at your amendment and adopt it as well. i appreciate your ideas on the oversight council that we crafted here. and, actually, many of us like the idea of having an independent chair. the secretary of the treasury is not my first choice. when you're trying to get a committee to agree on something, the idea of having the secretary of the treasury as the one that preveiled as the presiding officer will recall.

having the idea of the credit unions makes a lot of sense. it's a major part of our economy. and having state regulators rented at the table as well makes sense as well. maybe before this is over we can accommodate those ideas. i thank her immensely for her contribution and i appreciate she understands how long and arduous as it is. when you have 100 of us here dealing with something of this magnitude, it's harder to get that together. we ought to be able to finish this. it doesn't mean we will satisfy everyone, and it can't go on forever but we ought to accommodate as many ideas as we can. and i thank her immensely for her contribution. i thank you, mr. president, and i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

quorum call:

mr. kyl: mr. president? the presiding officer: the senator from arizona. mr. kyl: i ask unanimous consent that further proceedings of the quorumall be dispensed with. the presiding officer: without objection. mr. kyl: thank you, mr. president. as the debate over wall street enters a pivotal stage, i think we should ask ourselves what is financial regulatory reform really about? i think we all agree that one of the main objectives of the legislation is to ensure the taxpayers will no longer be forced to bail out or subsidize financial institutions that engage in risky behavior. that means ending so-called too big to fail. unfortunately, the legislation we are now considering does not mention the two institutions that have come to epitomize too big to fail.

i'm referring to the two government-sponsored enterprises, the so-called g.s.e.'s fannie mae and freddie mac which are currently in federal conservatorship. the egregious behavior of these two institutions has rippled throughout the entire commercial banking sector and our economy as a whole. let's recall just how central the two g.s.e.'s were to the housing bubble. fannie and freddie represent the dangers of what former american enterprise president chris demuth has described as fusion enterprise or the intermingling of politics and power with finance and commerce. this is a perverse business model that allows companies to reap enormous private profits while enjoying either implicit or explicit -- either implicit or explicit public backing. et cetera the model that enabled fannie and freddie to inflate

the subprime mortgage bubble. for years, some of my colleagues and i have urged this chamber to impose stronger regulations on fannie and freddie. as chairman of the senate republican policy committee, i authored several papers on the threats posed by the size of their mortgage-backed securities portfolios. i was particularly concerned that the government's implicit guarantee of these institutions permitted them to operate without adequate capital, to assume more risk than competing financial institutions, and to borrow at a below market rate of interest. of course, that's just what happened. smaller companies got crushed while fannie and freddie engaged in increasingly risky lending, with the backing of the federal government. wall street understood how it worked, so when fannie and freddie wanted these toxic loans, the mortgage markets would produce them. between 2004-2007, fannie and freddie became the largest buyers of subprime and alt-a

mortgages. and although these two institutions had their own dedicated regulator, the office of federal housing enterprise oversight still allowed the institution to spiral out of control. fannie and freddie made mortgages available to too many people who could not really afford them. that easy credit fueled rapidly rising home prices. as prices rose, so did also the demand for even larger mortgages, so fannie and freddie looked for ways to make even more mortgage credit available to borrowers with a credible ability to repay. by 2008, the two g.s.e.'s held nearly $5 trillion in mortgages and mortgage-backed securities. they were overleveraged and too big to fail. it was a textbook example of moral hazard on a massive scale. worst of all, m and and t bank's c.e.o. robert wilmer recently

wrote in "the wall street journal" -- "are the tracks of foreclosed homes lef behind by the mortgages by the lax credit standards made possible by fannie mae and freddie mac. congress would have done well to support a bill adopted by the banking committee in 2005 under then-chairman shelby. the bill would have established a new regulator for fannie and freddie and given that regulator authority to make sure that the g.s.e.'s maintained adequate amounts of capital, had adequate liquidity and reserves, properly managed their interest rate risk and controlled their asset investment portfolio growth. but the legislation was filibustered, its opponents included then-senator obama. as american enterprise institute scholar peter wallison who has written extensively on this topic concluded, and i quote diagnoses "if legislation along the lines of the senate committee's bill had been enacted in that year, many if not all of the losses that fannie and freddie have suffered

and will suffer in the future might have been avoided." but, of course, we didn't avoid that fate and today fannie and freddie continue to impose on the taxpayers while accruing massive debt. in fact, their total debt outstanding, the debt held on their balance sheets or as mortgage security guarantees is an astounding $8.1 trillion. $8.1 trillion. this is debt that is not reflected on the national balance sheet. and last wednesday, freddie mac announced that it will need an additional capital injection of $10.6 billion. that's from the taxpayers. that's after it lost $6.7 billion during the first quarter of this year. in ten of the last 11 quarters, freddie mac has lost a total of of $82 billion, which is twice the amount it earned over the previous 30 years. this morning, it was reported that fannie, too, has asked

taxpayers for more money. $8.4 billion to cover its soaring losses. the combined government loss for both companies now stands at $145 billion, according to the associated press. where will this end, mr. president? weren't we supposed to end taxpayer liability for entities too big to fail? well, the mccain amendment, which we will be voting on hopefully tomorrow, will provide us with another opportunity to target the problems caused by fannie and freddie. senator mccain's amendment would end the conservativeship within two years and place both companies into receivership if they are not viable. it would also reduce the company's mortgage holdings over the next three years, reimpose restrictions on the size of the mortgages they can buy, and force them to pay state and local taxes just as private companies do.

as "the wall street journal" editorialized thursday, and i quote -- "if the housing giants are no longer subsidized, they will become small enough to fail. that means they will stop lending money to people who can't pay them back and in turn will stop endangering taxpayers." this is a genuine antibailout vote. and they were referring, of course, to the mccain amendment. so let's be clear. every day that fannie and freddie remain in their current form is a day that u.s. taxpayers are subsidizing their activities. financial regulatory reform must include a restructuring of fannie mae and freddie mac, and that's why i urge my colleagues to support the mccain amendment tomorrow and really end too big to fail. mr. president, i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

mr. kyl: i ask unanimous consent further proceedings of the quorum call be dpensed with. the presiding officer: without objection. mr. kyl: thank you, mr. president. i neglected to ask unanimous consent to include in the record at the conclusion of my remarks "the wall street journal" editorial to which i referred by robert g.wilmer, titled "what about fan and fred reform"? the presiding officer: without objection. mr. kyl: thank you, mr. president. i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

a senator: mr. president? the presiding officer: the senator from idaho.

mr. crapo: mr. president, i ask unanimous consent the quorum call be lifted. the presiding officer: without objection. mr. crapo: thank you very much, mr. president. i stand today also to discuss the mccain amendment. we have had a lot of debate on the floor about the financial regulatory legislation that is before us, and a lot of the debate has focused on the content of the bill, with concerns being raised by some like myself about whether we truly are eing too big to fail and truly are ending bailouts and whether we are going too far in creating yet again a big government response to an issue that really needs to have more effective response rather than just more government, a snoons will hammer main street, not -- a responsibility that will hamper not main street but in other parts of our economy. and we've seen that in way too many parts of our exphoa far, and some of us are concerned

about -- economy so far and some of us are concerned about that. but what i want to talk aut today is something that is noticeably absent in the bill and that is the reform of fannie mae and freddie mac, our government-sponsored entities, actually, our government-managed entities now, and the fact that these entities are at the core of the financial crisis that we are dealing with and yet are not even touched by this legislation. americans remain rightly outraged that their taxpayers were used to bail out irresponsible watt tree is firm- wall street firms and auto companies. i voted against these bailouts and i've been working with my colleagues to make sure that we don't set the stage for yet more government bailouts. the most expensive government bailouts of all, however, will be those of fannie mae and freddie mac, the largest housing lenders that purchase home loans, package them into investments and then guarantee them against default.

i think a little history of how we got to where we are is appropriate here. congress chartered fannie mae and freddie mac to provide access to home financing by maintaining liquidity in the secondary market. according to peter wallason with the american enterprise institute, their implicit or assumed government backing enabled them to drive all competition out of the middle-class housing sect turks permitting fannie and freddie to acquire over $5 trillion in mortgages, which they either held in portfolios totaling approximately $1.5 trillion, or as securitized -- or they securitized them as mortgage-backed securities. continuing his quote -- "in pursuing their mission to support low- and middle-income housing, also called affordable housing, fannie and freddie assumed the credit risk on almost 11 million subprime and other high-risk mortgages and contributed substantially to the growth of the housing bubble. when the bubble began to deflate

in 2007, they began to suffer huge losses." but i want to go back and talk a little bit about the history before 2007, when it became toaft everyone what was evident to everyone what was happening to fannie mae and freddie mac and to our housing markets. because it just didn't become known them. as my colleague, senator sessions, has already mentioned on the floor today in his earlier remarks, the banking committee was heavily engaged in reviewing this issue for several years leading up to this, as was the office of federal housing enterprise oversight at h.u.d. and the fed and a number of other analysts. senator sessions quoted a letter, i believe it was, from then-chairman greenspan of the fed who noted that we need to take focus on fannie and freddie then. this was back in the 2004-2005 time frame. and that if we did not establish

much tighter regulatory control over fannie and freddie, that their excesses were going to create systemic risk that would put the taxpayer at extreme jeopardy. the committee itself focused very heavily on this same dynamic. and in 2005 -- in 2006 of may, we had established legislation that would have, had it been able to been passed on the floor of this senate, created a strong new regulator for fannie mae and freddie mac, begun the process of setting the right capital standards and the right regulatory environment in which we could control this excessive growth, and set the process in place for us to take fannie mae or freddie mac into receivership or into trust if the -- if they eventually failed, as it began looking like they would. the office of federal housing enterprise oversight completed a multiyear special examination of fannie mae and freddie mac -- excuse me, of fannie mae and

issued a report describing finding recommendations in may of 2006. ofeo found the following. fannie mae senior management promoted a false interrise of the enterprise as one of the lowest-risk financial institutions in the world. a large number of fannie mae's accounting policies and practices did not comply with generally accepted accounting principles. fannie mae had serious problems of internal control, financial reporting and corporate governance, resulting in fannie mae's overstating reported income and capital. between 1998-2004, fannie mae senior management deliberately and intentionally manipulated accounting to hit earnings targets so that senior management maximized their bonuses and other executive compensation they received. fannie mae's board of directors failed to be sufficiently informed to act independently of its chairman and other senior executives and to exercise the requisite oversight over the

enterprise's operations. and then the final finding of the report, despite rapid growth and changing accounting and legal requirements, fannie mae's senior management did not make investments in accounting systems, computer systems, other infrastructure and staffing needed to support a sound internal control system, proper accounting and gap consistent financial reporting. again, as a result of these findings and of an increasing awareness of the threat that was being posed by the excesses at fannie mae and freddie mac, the banking committee, on which i served then and still serve, developed legislation to address these very excesses and to create the kind of regulatory structure in which we could control these problems. along with 26 of my colleagues in may of 2006, i signed a letter to then-majority leader bill frist and to the chairman of the banking committee then, senator richard shelby. in the letter, we stated, "we

are concerned that if effective regulatory reform legislation for the housing finance government-sponsored entities is not enacted this year" -- remember, this is 2006 -- "american taxpayers will continue to be exposed to the enormous risk that fannie mae and freddie mac pose to the housing market, the overall financial system and the economy as a whole. therefore, we offer you our support in bringing the federal housing enterprise regulatory reform act, s. 190, to the floor and allowing the senate to debate the merits of this bill, which was passed by the senate banking committee." i might note that when we debated this bill back in 2006, it came out on a straight party-line vote out of the banking committee. all of the republicans voting for it, all of the democrats opposing it. as history shows us, we never were able to get that bill to the floor, because although we had 55 republican votes, it

takes 60 votes to move legislation on the floor of the senate in the face of filibusters, and that bill was filibustered and we were not able to get the additional support to get it past the filibuster. and i'd like to quote from a -- an editorial recently written about this chapter of the fannie mae/freddie mac history. peter wallason on april 20 in the "wall street journal" wrote, "one chapter in this story took place in 2005, when the senate banking committee, then controlled by the republicans, adopted tough regulatory legislation for the g.s.e.'s on a party-line vote. the bill would have established a new regulator for fannie and freddie and given it authority to assure that they maintain proper capital, had adequate liquidity in reserves and controlled their asset and portfolio growth. these authorities were necessary to control the g.s.e.'s risk

taking, but opposition by dispean freddie, then -- fannie and freddie, then the most politically powerful firms in the country, have consistently prevented reform." he goes on to say, "the day that the banking committee's action is important. it was in 2005 that the g.s.e.'s, which had been increasingly acquiring subprime and although-a loans for years, in order to meet their h.u.d.-imposed housing requirements, accelerated the purchases that led to their 2008 insolvency. if legislation" -- and this is the key part of the editorial -- "if legislation along the lines of the senate committee's bill had been enacted in that year, many, if not all, of the losses that fannie and freddie have suffered and will suffer in the future might have been avoided. mr. president, what happened was the bill was stalled, fannie and freddie collapsed when it became

evident that the losses were going to occur, there was a rush on the floor of the senate to get back to that bill and in 2008 the bill passed. after the horse was outs out of the barn. at least, though, we did get it passed in 2008 and fannie and freddie were taken into conservatorship. and where are we now? the congressional budget office has estimated that in the wake of housing bubble and the deflation that resulted, the government's cost to bail out fannie mae and freddie mac will eventually reach $381 billion. and as we talk on this floor about bailouts, this is the biggest bailout of all. it exceeds, in fact, all of the other bailouts together by far. and yet it is unlimited. i mean that literally. last christmas eve, in what was considered by many to be a

christmas eve taxpayer massacre, the treasury department announced that it was lifting the $400 billion loss cap on these two companies, creating a potential unlimited liability and effectively providing the full faith and credit of the government to support their to date the federal government has already provided about $126 billion to $130 billion to fannie and freddie, and as i indicated, the congressional budget office stpeuplts that will -- estimates that will top $380 billion and many believe that is a conservative number. direct taxpayer bailouts that are not even mentioned in this bill, that reminds me of the fight back in 2005 when we were trying to get the legislation to reform freddie and fannie passed then. yet knowing what we were supposed to do, seeing these bailouts, knowing the american people want these bailouts to stop and we were resistant

trying to bring an amendment just to add fannie mae and freddie mac to the bill. last week freddie mac announced it lost $8 billion in the first quarter and requested another $10.6 billion to add to this mounting bailout. as the government has pledged more and more money to cover these company's losses, it has assured the public that planning is underway for overhauling these firms so that the bailouts will end. in december, the administration said it expected to release a preliminary report on how to remake fannie and freddie around february 1. but february 1 has come and gone, and no plan has been provided. and now we're being told it will be another year before the government proposes how to restructure these firms. 18 months after they were seizeed to prevent their collapse, the companies remained wards of the state in what has become the single costliest

component of bailouts in our financial system. in september of 2008, the federal housing finance agency planed fannie mae and freddie mac which allows the regulator to establish control and oversight of a company and put it into a sound and solvent condition. since being placed in conservativeship, fannie mae and freddie mac have actually become yet a bigger part of the market which will make reform of them even more difficult. last quarter, fannie mae and freddie mac were responsible for two-thirds of all federal home loans that's primarily because there's nobody else able to play in the markets these days except for these government, now completely government-controlled and financed entities. and when you add in the federal housing finance administration, the united states government is behind 96.5% of all loans.

what we have seen here is literally another government takeover. we've seen the government takeover in the health care industry. we've seen the government takeover in the auto industry. we've seen the government takeover of a.i.g. and the insurance industry. we've seen the government takeover in multiple parts of our financial industries and a greater government takeover being proposed in this bill. and yet, we have the literal government control and management of fannie mae and freddie mac going unabated and unaddressed in the legislation that is before us. well, what does the legislation do? the longer that fannie mae and freddie mac are allowed to operate in their current role as political rather than businesses -- business entities, the greater the financial loss will be for taxpayers and, frankly, the greater the risk that they will simply continue endlessly in government control and government management, with the government managing yet one other big part of our economy perpetually.

that's why the mccain amendment requires the current conservativeship of the companies to end in the next two and a half years and begins the process of shrinking their portfolios. if the companies aren't viable at the end of that period, they would be placed into severeship, which is a form -- into receivership, a form of bankruptcy restriction. without a hard deadline, i am very concerned that congress will not act. and just like back in 2005, we will find the gridlock here in the senate stopping us from moving forward and be left with a nationalized fannie mae and freddie mac. the the amendment would also establish the $3 billion cap and accelerate the 10% redisukses of the mortgage portfolios effectively requiring the companies to shrink those portfolios by holding a combined $1 tbrl their current levels. this will also limit risk that the taxpayers will face in lifting all caps on december 24

of last year. it also includes fannie mae and freddie mac as part of the federal budget as long as either institution is under conservatorship or receivership. this is going to show the american people the true picture of how much our national debt has increased the bailout of these institutions and just as an aside here, as most people probably did not realize, the united states senate budget committee recently acted on a proposed budget for the congress this year. we were supposed to have declared and created a budget for us to operate under months ago. but because, i think, an unwillingness to literally put it out there, how much money this government is spending, the committee and the senate have not acted on a budget yet. but the budget committee actually finally did act on one. i didn't vote for it. it's more spend and trying to spend ourselves into prosperity again as the last budget was, but a at least acted.

and in that proficiency i brought an amendment to require that fannie mae and freddie mac debt be added to our national debt calculations. now, why would i do that? according to the congressional budget office director douglas elmendorf, "after the u.s. government assumed control in 2008 of fannie mae and freddie mac, two federally chartered institutions that provide credit guarantees for almost half -- and by the way, as indicated, it's almost two-thirds of all the outstanding residential mortgages in the united states -- the congressional -- the congressional budget office concluded that the institutions had effective become government entities whose operations should be included in the federal budget. so here we have the chairman -- or, he is us could me, the director of the congressional budget office says, we run these companies. we're financially backing these companies. we should at least include them in our budget. the purpose of my amendment then

and the same language that is in this amendment on the floor today was to include in the debt calculation of the budget resolution the debt obligations of fannie mae and freddie mac. this allows the american people to see a true picture of how much our national debt has been increased by the bailout of these institutions. at the end of calendar year 2009, per the financial statements, those figures are $774 billion for fannie mae ands 781 billion for freddie mac for a total of $1.555 trillion of debt. that's debt the united states holds today that has not been schiewsed as part of our -- disclosed as part of ow debt because of our interesting budget procedures. to put into perspective how large these entities are, their combined total books of business are nearly $5.5 trillion. the congressional budget office has estimated that in the weak

of the financial bubble, the government's costs to bail out fannie mae and freddie mac will eventually reach $381 billion and that estimate may be too optimistic. i also already mentioned that last christmas eve treasury lifted the cap. we actually had a cap so that the taxpayer was at least protected at $4 billion. and last christmas eve -- and i told you earlier, someone called it the christmas eve taxpayer massacre -- treasury lifted that cap so that there now is no limit to the amount of debt that we will assume and pay for as companies as a result of this bailout of fan me mae and freddie mac. according to a january 2010c.b.o. background paper, c.b.o. -- quote -- "believes that the federal government's current financial and operational relationship with fannie mae and freddie mac warrants their inclusion in the budget."

by contrast, the administration has taken a different approach by continuing to treat fannie mae and freddie mac as outside the federal budget, recording and projecting outlays equal to any cash infusions made by treasury into the entities. the office of management and budget's -- budget of the u.s. government fiscal year 2011 states, "under the approach in the budget all of the g.s.e.'s transactions with nonbudgetary because the g.s.e.'s are not considered to be government agencies. so we have the administration saying that they are not considered to be budget -- or government agencies and, therefore, we aren't going to consider their debt and their financing and we have the congressional budget office saying that they should be. c.b.o. has included the g.s.e.'s in its budget baseline but does not include the debt in its calculations because of their narrow view of how to calculate the federal debt.

in light of tall these facts, i think it's evident that we need to have transparency. and we need to start telling the american people exactly what it means that we have taken fannie mae and freddie mac into receivership and that we are not going to put their finances on the -- in the federal budget. going back to what the amendment that we're debating here does, in addition to putting fannie mae and freddie mac in the budget, it establishes a senate-confirmed special inspector general within the government accountability office with responsibility for investigating and reporting to congress on decisions made with respect to the conservatorships of fa fan me and freddie and this special inspector general would provide quarterly reports to congress. there is no one politically accountable to the public for the operation of these multitrillion-dollar entities, since the president has yet to nominate anyone to officially

run the federal housing finance agency and the office of special inspector. the office of the special inspector general for the troubled asset relief program has done a good job to inform the congress and public about tarp and we should follow this model with fannie and freddie. it's not credible to say that we're protecting the taxpayer and fixing mortgage financing and do nothing about fannie mae and freddie mac. well, mr. president, let me conclude by reading from a couple of editorials. if you scan the editorials today about this issue, you'll see editorials across this country. i think one of them said the silence on this issue is devining. others have said that there's a huge hole in the legislation. the title of another one, "congress remains missing in action on two key causes of the financial crisis." i just wanted to read from one of the "wall street journal" editorials on may 6 of this month. and in part it says, "one sign

that the white house financial reform is less potent than its advertising claims is that it doesn't even attempt to reform the two companies at the heart of the housing mania and panic: fannie mae and freddie mac. so we're glad to see that yesterday john mccain and senator shelby and judd gregg introduced a fannie and freddie amendment." going on, it say, "the financial crisis inquiry commission spent yesterday focusing on financial leverage using bear stearns as an example. but fannie mae and freddie mac were twice as leverage the as bear and much larger as a shaifort mortgage market. fan and fred owned or guaranteed $5 trillion in mortgages and mortgage-backed securities when they collapsed in september 26008." this is a quote that's been read on the floor before but it is exactly applicable. again quoting the editorial, "reforming the financial system without fixing fannie and freddie is like declaring war on terror and ignoring the

al qaeda." "unreformed, they are sure to kill the taxpayers again. only yesterday," and this was on may 6, "freddie said it had lost $8 billion in the first quarter." which i have already mentioned. going on to another editorial, this one also in the "wall street journal" by robert wilmers, and i quote just a part of t "at the end of the 2009, their total debt outstanded either held directly by their balance sheets or as guarantees or on mortgage securities they sold 10 investors was $8.1 trillion. that compares to $7.8 trillion in total marketable debt outstanding for the entire united states government. the debt has the implicit guarantee of the federal government but is not reflected on the national balance sheet. the public has focused more than

taxpayer bailouts of banks, automakers and insurance companies, but the scale of the rescue required in september 2508 when fannie and freddie were forced into conservatorship, their version of bankruptcy, was staggering. to date, the federal government has been forced to pump $126 billion into fannie and freddie. that's far more than a.i.g., which absorbed $70 billion of government largess, and general motors and chrysler which shared $77 billion. banks received $205 billion of which $136 billion has been repaid. fannie and freddie continue to operate in the red with no end in sight. the congressional budget office estimated that if their operating costs and subsidies were included in our accounting of our overall federal deficit, as they properly should be, the 2009 deficit would be greater by $291 billion." well, mr. president, the point is simple: this bill is alleged to be focused on trying to solve the

problem of bailouts. you'll hear senators on this floor say day a and day out that this bill will end the bailouts and stop too big to fail. yet the two largest enter prices, which were at the core of the financial crisis, are exempt from the provisions of legislation. they're into the even mentioned in the legislation. and apparently they are too big to fail. because we in this senate will not put them into a track of being resolved properly. as indicated earlier, i'm concerned that the same outcome is going to happen now that happened back in 2005 and 2506 when we tried before their collapse to put some restraint into place, and that we will not afnlgt the net result of which will be that we will in effect nationalize fannie and freddie and have a huge portion of our

nation's mortgage market be run by the government. the mccain amendment will simply give us a track to move forward to stop that result from happening. and i encourage all of my colleagues to consider strongly supporting this amendment. if we don't, then i don't think that we can honestly call this a bill that truly ends the bailouts in our country. thank you very much, mr. president. i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

mr. franken: mr. president in. the presiding officer: the senator from minnesota. mr. franken: thank you, mr. president. i rise today to speak again -- the presiding officer: we're in a quorum call. mr. franken: i am sear. i would ask that -- i am complete i would ask that the quorum call be suspended thpresiding officer: without objection. mr. franken: thank you. thank you. thank you, mr. president. i rise today to speak again on the problem of credit rating agencies and the inherent conflicts of interest that drive the industry. the underlying wall street reform bill takes some steps in the right direction, but i believe can go much further in addressing the fundamental problem. the opportunity to shop around for the highest rating. currently the bank that issues a security can shop its product around to one of the three biggest credit rating agencies, all three of them, seeking out the highest possible rating. credit rating agency promising

the highest rating will get hired. this process ensures that the credit rating agency won't just be evaluating the risk of the financial product; it will be weighing its own business interests when offering up a rating. if the agency hands out a aaa rating, the customer will come back again. the bank will come back again. that incentive affects the ultimate rating the product receives. this ratings shopping leads to major conflicts of interest, and it was one of the major causes of the financial meltdown. now, you've probably heard something in our court system called forum shopping. it's when an attorney seeks out the judge that will be most sympathetic to the case. if a prosecutor is bringing a case against a defendant for

drunk driving, that prosecutor might negotiate with the court clerk to get the judge known for being tough on drunk drivers. you can imagine the problems that forum shopping has created and the corruption that it has bred. and so the courts have identified forum shopping as a practice that manipulates outcomes and undermines public confidence in the courts. given these problems, the courts have sought out ways to reduce forum shopping. in fact, the majority of federal courts now use some variation of random drawing to match cases with judges, though each district court has discretion to make its own specific rules. accommodations can be made for particular circumstances. for example, a subset of qualified judges can be set aside for particularly complex criminal cases. and the caseload of each judge can be taken into account.

but overall, the primary selection method in most federal courts is a rotating assignment system. this rotating assignment system is used in my home state of minnesota. new york, the home state of senator schumer, who's joining me on this amendment, also uses a rotating system. the use of a rotating assignment system limits opportunities for forum shopping, increases public confidence in the court system and reduces corruption. so now let's return to the problem of credit rating agencies. i filed an amendment that seeks to reduce the conflicts of interest inherent in the issue-pays model. in this model issues of financial products have incentives to shop around for the best ratings possible. in order to obtain businesses

credit ratings will try to keep businesses coming back. the system incentivizes high raid ra*eutings, not accurate ratings. the same forum used in the courts can be used for credit rating industries. my amendment allows for the same type of discretion awarded to individual district courts. a court can develop special provisions for the assignment of particularly complex cases. my amendment would allow a new credit rating agency board to designate certain ratings agencies as being qualified to rate the most complex products. a court can take into account the existing caseload of a particular judge. my amendment allows the board to take into account the institutional and technical capacity of credit raters.

but the rotating assignment model used in the court system can be used in the rating system. it hasn't eliminated every problem, but it's gone a long way to reduce the corruption and conflicts of interest in selecting judges for particular cases. my amendment won't eliminate every problem facing the credit rating agency industry, but it will go a long way toward reducing rating shopping. rating shopping is the root of the problem, and it's what allows issues to bar -- issue toers bargain with -- issuers to bargain with credit rateer. if the rateer nose the issuer can't turn to another rating agency, there is no pressure to issue a high rating just to retain the business transaction. my amendment won't reduce competition, nor does it seek to

put any rating agency out of business. quite the opposite. my amendment actually will increase and incentivize true competition by allowing a board to assign more work to credit raters producing accurate ratings and assign less work to those producing knack rat ratings, the market will finally reward accuracy and no longer reward ratings inflation, which was the case during this whole fiasco and what led to it. it's only by limiting ratings shopping and adjusting the market's incentives that we will finally have credit rating agencies in which the public can have faith. the wall street reform bill includes many important provisions addressing the credit rating agency problem, such as increased disclosures and pwraoufd postrating surveillance. -- improved postrating

surveillance. when the stability of such a significant part of our economy is based, for better or for worse, on the accuracy of these ratings, we can't take any more chances. i'd like to thank senator schumer and nelson in helping me lead this reform, and to senator wicker, who recently joined our efforts. i also appreciate that senators johnson, whitehouse, brown, murray, merkley, bingaman, lautenberg, shaheen, casey and sanders support this approach and have joined as cosponsors. i look forward to other colleagues joini us, and ultimately i hope that this bipartisan amendment will be taken up and passed by the senate. mr. president, i want to thank you for being a cosponsor of this amendment. i want to thank you for the time, and i yield the floor.

i suggest the absence of -- sorry. i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

quorum call:

a senator: mr. president? the presiding officer: the republican leader. mr. mcconnell: are we in a quorum call? the presiding officer: we are. mr. mcconnell: i ask unanimous consent that the quorum call be dispensed with. the presiding officer: without objection. commr. mcconnell: i will proceen a few moments on my leader time. the presiding officer: the republican leader is recognized. mr. mcconnell: we continue to learn more about the terrorist who attempted to kill scores thousands in new york. brent insaid that shahzad was

working on behalf of th talibanr t.t. all the time. it is an retofling strategy on -- evolving strategy on dealing with captured terrorists. this was clear when attorney general holder said in reference to the times square bomber that america is now -- quote -- "dealing with international terrorists and this may require changes on how terrorists are issued miranda warnings." now dealing with international terrorists? i would remind the attorney general that we have very much been at war with international terrorism for a very long time and that we face threats in this war for those -- from those who attacked us on 9/11, al qaeda, al qaeda's associated troops, those who attack us every day in afganistan and iraq, the man who tried to blow up a plane over detroit over christmas and the man who wanted to mame and kill

in times square. once the administration realizes this, a lot of other questions will become a lot clearer. unfortunately the administration seems to have too often a trial and error approach. on guantanamo, they tried to close it and realized that it wasn't that easy. on the question of the proper venue for trials, they announced they would try the mastermind khalid sheikh mohammed in new york city, then realized maybe that wasn't a good idea. when it came to the christmas day bomber, they treated him like a common criminal and realizrealized that wouldn't bee best route either. now they're wondering outloud if they should revisit their approach to administering miranda warnings. let's make it easy for the attorney general, every terrorist -- every single one of

them, every single terrorist should be treated like one. in the first months of the administration the president signed executive orders ending the c.i.a.'s terrorist program and closing guantanamo and essentially putting the attorney general in the war on terror. more than a year after the executive orders were signed and after several failed attacks on the homeland, the administration finally -- finally seems to realize that the war on terror is not a simple matter of law enforcement. a clear and forceful strategy is needed just as much at home as it's needed abroad. republicans have been saying this all along. it's time the administration decides on a strategy that recognizes the implications of the war that we're in and the dangers we face not only abroad, but right here at home. mr. president, i yield the floor.

mr. dodd: mr. president? the presiding officer: the senator from connecticut. mr. dodd: mr. president, i want to take just a few minutes, if i can. i listened with some interest this afternoon, as i did last week, to my colleague and friend from arizona, talk about his amendment regarding the government-sponsored enterprises, specifically fannie and freddie. and i'd like to respond to some of those and some comments today about these two agencies and their value, and present condition of what needs to be done. first of all, i want a little revisionist history in all of this seems to be maybe important. in 2005, the house financial services committee, under the leadership of mike oxley, a republican from ohio, was the chairman of the committee, and

he passed bipartisan legislation dealing with fannie mae and freddie mac. the senate democrats picked up that proposal that it stalled in the committee over here despite the support for it. the republican-controlled committee then passed a bill and never filed it, never brought it up for vote here on the floor of the united states senate 2005. i became chairman of the banking committee in 2007, and as the presiding officer recalled when he arrived in 2008, we had a significant number of hearings and discussions about fannie and freddie. and in the summer of 2008, the banking committee passed a comprehensive overhaul of the regulations of fannie and freddie including the establishment of a tough, new regulator,