the presiding officer: the senior senator from west virginia. mr. rockefeller: i ask unanimous consent that the order of the quorum call be rescinded. the presiding officer: without objection. mr. rockefeller: i would like to just say very briefly that i strongly support the nelson amendment for a whole variety of reasons, all of which are very logical, extremely well ordered and which i do not have time to give. the yeas and nays have been ordered. so perhaps we can proceed to the vote. the presiding officer: the senator from texas. mrs. hutchison: mr. president, i just to want say that i, too, support the nelson amendment and appreciate his working with the intelligence committee to -- and the judiciary committee to assure that all the bases were covered, and i will be supporting it as well. thank you. and i yield the floor. the presiding officer: the question is on nelson amendment number 58, as amended. the yeas and nays have been ordered. the clerk will call the roll.

vote:

vote:

the presiding officer: has every member voted? does any member wish to change his or her vote? nelson amendment number 58 the amendment is agreed to 98 for, zero against. under the previous order, the motion to reconsider is considered made and laid upon the table. mr. rockefeller: mr. president? pyrite the -- the presiding officer: the senator from west virginia. mr. rockefeller: i ask unanimous consent that at 2:15 p.m. on this day, there be 20 minutes of debate equally divided in the usual form on the wicker amendment prior to the vote in relation to the wicker amendment, and that remaining provisions of the previous order remain in effect.

the presiding officer: is there objection? without objection, so ordered. under the previous order, the senate stands in recess until 2:15 p.m. recess: elsewhere on the hill this week reaction continues to the president's 2012 budget request released yesterday. we'll have a number of hearings this week looking at the budget, starting today with health and human

services secretary, cath len sebelius. she will discuss her department's budget before the senate finance committee at 2:30 eastern. tomorrow, defense secretary robert gates and joint chiefs chairman mike mull ledge before the house armed services committee. that starts at 10:00 a.m. eastern. thursday, homeland security secretary janet napolitano at the homeland security committee. that begins at 2:0. you can see all these hearings live this week on our companion network, c-span3.

>> the come to order. i'm going to submit my written statement for the record and will not make an opening statement and i will recognize members on our side until our 10 minutes is expired. i urge members to give a brief statement or submit a written statement so that we can move along. we will adhere to the 10 minutes on each side. without objection all members written statements will be made a part of the record. i want to welcome our witnesses and look forward to your testimony. and with that, i recognize the ranking member for his opening statement. >> thank you, mr. chairman. i'll ask to be recognized for three minutes. we'll stay within the 10 minutes. the hearing today is a

prelude to a very important set of decisions we're going to be making today on the floor. we have two very able and dedicated regulators who are extremely cooperative with us after the bill. we have three. mr. trilo is not on the floor this week with his appropriations since his age did i doesn't receive one. but the budget we have been presented for the securities & exchange commission and commodities futures trading commission prevent them from doing the job the american people need them to do. the cftc is a very small agency compared to the massive industry we have asked them to regulate. i believe it is clear. we'll hear more about the it from the financial inquiry commission that the lack of regulation of derivatives in various aspects contributed

greatly to the financial crisis. we gave the commodities futures trading commission and the sec instructions with some latitude how to deal with that. we are at this point in jeopardy of their not being able to carry out that mandate. the sec has other responsibilities, investor protection and elsewhere that are in jeopardy. so i hope we will as we go through this hearing and talk about the importance of this to be done thought fully and in coordination between the sec and the cftc. keep in mind that absence of funding will make all of this invalid. agencies that are not well-funded are not going to do a good job. i would say the people in the industry, the laws and rules, the laws having been adopted, the rules about to be, promulgated, it is not

in anybody's interest to have agencies that are not well-funded, not able to have the equipment they need. not able to have the personnel they need, to carry these out. and that i think is the overhanging question as we go through this hearing. we are about to debate a budget from my republican colleagues that will provide such inadequate funding for the sec and the cftc, as to make all this academic. i will be offering an amendment to increase funding for the sec. the cftc does not come within the jurisdiction of this committee. i have no amendment to offer there the administration has made mutual proposals how to increase its funding and i hope those will be also adopted but we will be voting on an amendment to raise the sec not to a left i wish could be asked but to a closer level that is need. as we go to the importance of this. even to those are critical

wished we had didn't done something we did, unfinding the rules that remain in place is the worst of all approaches. >> i thank the ranking member. mr. royce is recognized for one minute. >> thank you, mr. chairman. one of the lessons of the recent sale of the new york stock exchange, a great symbol of america's financial strength to a germ nan exchange is that our markets are competing against mature financial hubs throughout europe and asia. and many of these, many of this competition comes because of the unfriendly business environment we have managed to create here in the united states. we have the second highest corporate tax rate in the developed world. we have the most active trial bar in the world. and we have a regulatory structure that burdens business without yielding many benefits. in the derivatives realm, if transaction costs to end-users of derivatives increase because of

duplicative rules, because of complex, unworkable prescriptions, because of damaged liquidity, then end-users, end-users, simply will send their business to european dealers, whether it is barclays or deutsche bank, with whom many already have trading relationships. failure to create a common sense regulatory structure that recognizes this fact will do little to protect investors but will go a long way to benefit these growing financial hubs around the world. while title 7 wasn't what i would have liked to have seen, the benefit was that it gave the regulators, the supposed grown-ups in the room, the final say. unfortunately, all sides thus far indicate that this too was a mistake. i look forward to hearing from the panel and i yield back. >> mr. lucas?

>> thank you, mr. chairman, for holding today's hearing. i will ask congress, i worked with my colleagues on this committee as well as the august culture committee to bring miningful and responsible reform to derivatives regulation. although i was not supportive of the final legislation it is now critical we work together to insure the implementation of title 7 is done right. these new regulations will undoubtedly have a tremendous impact on our country's financial sector and overall economy. as we work our way through the rule making process it is important that the process is accomplished in a thoughtful and transparent manner and that the necessary regulatory certainty be provided for all market participants. i remain concerned that the current timeline for implementation is unrealistic and that more time is needed to adequately implement the law. additionally we must insure that the new rules are consistent with the congressional intent of dodd-frank. i look forward to continuing this discussion and hearing from our witnesses and yield back the balance of my time, mr. chairman.

>> mr. scott, for two minutes. >> thank you, mr. chairman. as we have seen from the recent financial crisis, derivatives bring with them a number of certain potential dangers, if not properly backed with capital or if the market lacks sufficient transparency. but despite these past troubles derivatives do serve a very valuable purpose for american businesses by protecting them against legitimate risks. the dodd-frank legislation passed in large part by our committee aims to regulate credit default swaps and other derivatives. the title 7 of the law requires central clearing. and exchange trading for derivatives that can, and i emphasize can be cleared and provides a role of both regulators and clearinghouses in determining which contracts should be cleared. in addition the law adds financial safeguards by insuring that dealers and major swap participants have adequate financial resources to meet their

responsibilities. and regulators now have the authority to impose capital and market requirements to swap dealers and major participants. these regulations, on derivatives were passed as part of did frank to increase accountability and transparency and to encourage stability in financial markets following the 2008 crisis. however, the effectiveness of this law depends heavily on how such rules are implemented by the regulators. and i look forward to hearing opinions from today's witnesses on how the requirements enacted in dodd-frank are being adhered to now. and how the regulatory process is proceeding and how those regulations are contributing to increased financial stability which is the end result we all seek. thank you, mr. chairman. >> thank you. mr. garrett, you're recognized for two minutes. >> thank the chair, thank the entire panel in. over the last several months there has been a tremendous volume of discussion on all

the rule-making coming out of dodd-frank and the profound effects that it is going to have on the derivative markets and the broader economy as well. but when you look at this freight train of rule making running down the track to the july deadline i think the think not enough alarm has been raised over potential devastating impact this rule making may have on the u.s.-based derivative marketplace. when i talked to several market participants, rule making particularly of the cft were to be implemented in its current form it could literally spell the end of u.s.-based derivative markets t would simply cease to exist. because negative potential consequences are many and far-reaching from making it prohibitively expensive for thousands of small main street companies to engage in responsible risk mitigation to making it basically impossible for many financial firms to compete around the wormed. so the real world impact of course will be felt in the loss of jobs. lots of jobs. but the u.s. has already

millions of manufacturing jobs have been lost, jobs over the last several years. but we have still remained a leader in financial services. but if these rules get implemented as is, that will no longer be the case. we wilhelmrage millions of excellent, high-paying jobs to other localities around the world where there will be little to no appetite i think to follow some of the more outlandish rule making part of a grand, i say unnecessary expense that could have massive, negative, consequences. so it's bad enough i think title 7 was written literally in the middle of the last night in the dodd-frank conference back in june. so let's not here now exacerbate the mistakes made that night by rushing through a rule making process even more far-reaching than contemplated by the bill's authors. derivatives i think have been a favorite whipping boy, if you will of many critics but if we continue down this road, and there is not a lot of time to change course, there literally may not be a

u.s.-based derivative market to kick around in this country anymore. i yield back. >> mr. lynch, for three minutes. >> thank you, mr. chairman. i thank the ranking member. i'd like to also thank the witnesses for coming to this committee today to help us with our work. the derivatives title of the dodd-frank act is central to reforming our financial system. i believe the derivatives market, it's opacity and extreme leverage caused a great deal of the difficulty and pain of the financial crisis. interconnectiveness of derivatives products and use magnified among anonymous, anonymous counterparties concentrated risk and much of it outside the reach of our regulatory framework. we asked the sec and cftc to issue numerous rule makes and hold public hearings to begin the process of regulating the derives

market which neither agency held jurisdiction over the past. i'm concerned despite the increased responsibility through dodd-frank and the sec and cftc have relieved flat funding due the extension of the continuing resolution. the ability of the agencies to police the markets and enforce securities and commodities laws is severely limited under current funding levels. what is particularly concerning by holding these agencies to fy 2010 budget levels, neither has been able to hire staff with expertise in the otc derivatives markets, which differs significantly from the prior responsibilities in securities and futures markets. to make matters worse, the republican proposal for full year cr would cut 178 million from the sec and 174 million from the cftc. that would force both of these agencies with new responsibilities to lay off staff. we need to insure these regulators have the tools and resources to complete the objectives that congress has laid out. don't worry about the markets running away to your are. they're trying to strengthen their markets just the way

we are trying to. this is a red herring and you think it is regulation is costly. how about the 7 trillion we just lost from not regulating the derivatives market? that has not been taken into consideration. i look forward to the testimony. i thank you, mr. chairman. and i yield back. >> mr. mchenry for one minute. >> thank you, mr. chairman for yielding time. over the past few decades the derivatives market developed into highly sophisticated and yet a central market for u.s. businesses for all sizes. therefore it is vital regulate toors empowered under dodd fringe continue to allow american businesses to manage their risk and protect themselves from market volatility. this is about jobs. a recent survey suggests that higher capital requirements could potentially cause end-users on main treat billions of dollars each year and put up to 130,000 jobs at risk. that is something we simply can not afford to do while

our economy is attempting to regain its strong footing. i would encourage the regulators to keep this in mind and certainly our oversight hearings here in congress will keep that in mind, and i yield back. >> mr. luke enmire. >> thank you, mr. chairman. i'll yield back my time. thank you. >> miss hayworth. for one minute. >> thank you, mr. chairman. senior colleagues here have rightly noted that the united states is become increasingly hostile environment for investment relative to other developed nations. and, i'm very concerned that our highest duty in this congress is to assure the security and freedom of our nation and our people. the specifics of what we do here have a material effect on jobs and on prosperity and that is literally the dignity and sustenance of our families. if we impeaden enterprize as would be the case through

excessive regulation of end user derivatives, to wit, a fortune-100 employer in my district would have to curtail key investment if required to meet capital requirements for end-users as may be specified in dodd-frank, then we will, we will lose our mission as a congress and endanger our future as a nation. so i look forward to hearing your comments on how we can relief that burden from our american enterprise. thank you. i yield back my time. >> thank you. mr. dole? >> thank you, mr. chairman. >> one minute. >> and i want to thank the witnesses for their time and for coming out today. i certainly share some of the concerns that have been addressed by some of my colleagues today. derivatives have been productively and efficiently used for a significant period of time by reducing risk and reducing price volatility, increasing stability. these derivatives markets

directly benefit companies, employees, consumers and our overall economy. in the past several years certain companies have made some mistakes in the derivatives markets to be sure. they didn't verify that their counterparties had sufficient collateral. they didn't verify that their counterparties ads ability to pay. they didn't determine whether the counterparties had too much exposure to market risk. as far as i can tell the end-users did not make the mistakes systematically. now these end-users are faced with the uncertain prospect of margin regulations that sufficiently and unnecessarily change their long standing successful business models while focusing them to deploy capital inefficiently. if they're forced to do so, then we'll unnecessarily force scarce capital to be unparked, unproductively on the sidelines. i believe that we'll lose jobs here in the united states and will damage our economy. instead of reducing risk and reducing price volatility and increasing stability for businesses, employees

consumers, and indeed i believe all americans we'll get the opposite result as risks that would otherwise have been absorbed into the derivative markets are passed along. i thank the chairman for the time and i yield back. >> thank you, mr. dole. miss waters for one minute. >> thank you very much, mr. chairman. the dodd-frank wall street reform and consumer protection act was designed to address the lack of transparency in capital and derivatives markets. to prevent the industry and its clients from needing another taxpayer-funded bailout, specifically, the legislation calls for the sec and the cftc to regulate the otc derivatives market to preapproved contracts before clearinghouses can clear them and to punish bad actors. in fact the dodd-frank act charges the sec to promulgate the seven rules to implement reforms to the otc market. some critics of the

dodd-frank act incorrectly represent these reforms to the otc market will result in fewer jobs. on the contrary, creating a system with transparency and regulation allows market participants to know what the rules of the game are and protects them from the impact of reckless trading of the sort that led to the 2008 financial rice sis. we saw the impact in 2008. two years later we're still seeing the effects of high unemployment, lack of credit and limited business investment that resulted from the 2008 financial crisis. the dodd-frank act will provide the transparency and regulation that otc market needs to protect counterparties and taxpayers. in the process it will save jobs. thank you, mr. chairman and i yield back the balance of my time. >> thank you. mr. canseco for a minute 1/2. -- >> thank you, mr. chairman and thank you very much for being here today, members of the panel. the breadth of rule making

as a result of dodd-frank is extraordinary. according to the committee on capital markets regulations, the ctftc and sec are both making about 10 times amount much rules they did per year before dodd-frank was passed. the amount of days it takes for a rule to get from the proposed stage to implementation has been halved at the sec. these two agencies along with the federal reserve and others have been asked to take on an incredible task that has serious implications for our financial markets and economy. dodd-frank left a great deal of discretion to the agencies. that is why today's hearing is so important. our job is to insure that as the federal agencies write these rules, they do not negatively impact the ability to hedge risk in our economy. from my experiences in the private sector where i work with the derivatives i know how important the ability of a company to hedge its risk, using derivatives is to our

economy and to our consumers. many of the benefits of derivatives are hidden to consumers. but when our fellow citizens go to the store to buy gas, milk, clothes or whatever else they sometimes don't realize that the affordability of these products is due in large part to the manufacturer's ability to hedge risk. with this in mind, i look forward to hearing from today's witnesses on this important issue and i yield back my time. >> mr. carson, for one minute. >> thank you, mr. chairman. i welcome the opportunity to review dodd-frank to insure the bill accomplishes what we intended it to do when it was writtenen in this committee last year. however i'm deeply opposed to deunder ifing the bill because our friends on the other side were opposed last year and continue to be opposed. the bottom line no legislation is perfect and the opposition has the right to propose changes. however, banks and financial institutions have brought reform upon themselves. it was through their

carelessness and disregard for the rights of citizens that our economy nearly collapsed and spurred action by congress in the first place. thank you, mr. chairman. i yield back. >> last speaker on our side, mr. sibe are. s, for a minute and a half. >> thank you, mr. chairman. i'd like to thank the witnesses for being here today. it's really important that we get title 7 right, both in law as well as in regulation. there are companies in my district, including american electric power, who are end-users. that company has 4,000 jobs in my district. there are many other companies who use them to reduce risk in their, in their business model. and i'm really concerned about the inconsistency between the sec and the cftc on their rules and regulations especially with regard to the definition of dealer or trader. as well as capital requirements and, because this is so important, both to reducing risk in our system, costs to consumers

and jobs in our districts, i really look forward to hearing from the witnesses and working with the witnesses to make sure we take a consistent approach that doesn't affect jobs or increase prices but looks out for the safety and soundness of the system. thank you so much and thank you, mr. chairman for holding this hearing. >> thank you. and now we introduce our first panel. we have the honorable mary schapiro, who is chairman of the u.s. securities & exchange commission. honorable gary gensler, chairman of the u.s. commodities future trading commission. and the honorable daniel tarullo, member of the federal reserve board. want to welcome all of our witnesses. without objection, your written statements will be made a part of the record and you will each be recognized for five minutes summary of your testimony. and chairman shapiro, you can begin. >> thank you very much, chairman backus, ranking member frank and members of

the committee. thank you for inviting me to testify today on behalf of the securities & exchange commission regarding the our implementation of title 7 and 8 of the dodd-frank wall street reform and consumer protection act. it's a pleasure to appear with my colleagues, chairman gensler and governor tarullo. as you know these provisions are intended to bring greater oversight and transparency to the derivatives market and clearing payment and settlement activities and with that to increase the stability of our financial system. while implementing these provisions is a complex, and challenging undertaking, particularly in light of our other regulatory responsibilities, we recognize the importance of this task and we are committed to getting right. these rules are intended among other things to reduce counterparty risk by bringing transparency and centralized clearing to security-based swaps, reduce systemic risk, protect investors by increasing disclosure and establish a regulatory framework that allows otc derivatives markets to continue to develop in a transparent, efficient, accessible and

competitive manner. since passage of the legislation we have been engaging in a very open and transparent implementation process, seeking input on the various rules from interested parties, even before issuing rule proposals. our staff has sought meetings with a broad cross-section of interested parties. we join with the cftc in holding public roundtables. we've been meeting regularly with other financial regulators to insure consistent and comparable definitions and requirements across the rule making landscape. to date the sec proposed nine swaps related rules. among them are rules that would address potential conflicts of interest at security-based swap clearing agencies, execution facilities and exchanges that trade security-based swaps. rules that would specify who must report security-based swap transactions, what information must be reported, and where and when it must be reported. rules that would require security-based swap data repositories to register with the sec rules that

would define security-based swap execution facilities, and establish requirements for their registration and ongoing operation. and ruleses that would specify information that clearing agencies would provide to the sec in order for us to determine if a swaps must be cleared and specified the steps that end-users must follow to rely on the exemptions from clearing requirements. in addition with the cftc we proposed rules regarding definitions of many of the key terms under the act. our staff also is working closely with the federal reserve board and the cftc to develop a common framework for supervising financial market utilities such as clearing agencies, which are designated by the financial stability oversight counsel as systemic important. in the coming months we expect the proposed rules regarding standards for operating and governing of clearing agencies, rules to establish registration procedures for security-based swap dealers and major security-based swap participants and rules

regarding business conduct, capital, margin, segregation and record-keeping requirements for dealers and participants. we will also propose joint rules with the cftc governing the definition of swaps, security-based swaps and regulation of mixed swaps. we recognize the magnitude and interconnect he hadness of the derivatives market. so we intend to move forward at a deliberate pace continuing to thought fully consider issues before proposing and adopting any specific rules. the dodd-frank act provides the sec with important tools to better meet the challenges of today's financial marketplace and fulfill our mission to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. as we proceed with implementation we look forward to working closely with congress, our fellow regulators and members of the financial community and the investing public. thank you for inviting me to share with you our progress on and plans for implementation and i look forward to answering your

questions. >> thank you. chairman gensler? >> good morning, chairman baucus. congratulations on your chairmanship. ranking member frank, members of the this committee. i thank you for inviting me here to speak about the dodd-frank act. i'm pleased to testify on behalf of the commodities futures trading commission. i also want to thank my fellow commissioners and all of the staff of the cftc for their hard work. and dedication fulfilling the mission. i also am pleased to testify along with chairman shapiro and governor tarullo. president obama announced our nominations on the same day back in december 2008. i guess this is the first time we're appearing in public together at a hearing. but it reminds me, in 2008, the financial system and the financial regulatory system both failed the american public. it wasn't one or the other but i think it was in fact both. the effects of that crisis reverberated throughout the american and global economies. in the u.s., hundreds of

billions of taxpayer dollars were put on line to bail out the financial system, ultimately to secure the american public's economy. but millions of jobs have been lost and are still lost. though the crisis has many causes the unregulated swaps market played a central role. congress i believe responded in passage of dodd-frank, specifically in title 7 to bring transparency and to lower risk in the swaps market. cftc is working closely with the sec, with other regulators to implement those futures. we're coordinating internationally and we've received thousands of comments from the public before we made proposed rules and after we made some proposals that informed the commission and yes, will change the final rules, will change based on those comments. one area where the cftc is seeking input is with regard to the implementation of various requirements of, of,

margin which many members here have raised, with us. and, in the dodd-frank act, congress recognized different levels of risk posed by transactions between financial entities on the one hand and those involved with nonfinancial entities or what many people are calling end-users. consistent with this, consistent with what congress said the nonfinancial end-users would be exempt from clearing, we believe that the cftc that margin requirements should focus only on transactions between financial entities rather than those transactions with the non-financial end-users that so many members have talked about in their opening statements. to adequately fulfill our statutory mandate the cftc does require additional resources. the u.s. futures market today, 40 trillion dollars notional size. the u.s. swaps market? roughly 300 trillion. roughly seven times the size, far more complicated, very important for all the end-users, to have

transparency, openness and competition. yesterday the president submitted his fiscal budget for 2012 that included $308 million in funding for the cftc. this is able to fulfill our mission. in 1992 our agency had 634 people. it shrank from 1992 to 2008. it was down to 440 people right now in the midst of the crisis? only last year with the help of this committee and help of congress did we get back to our 1990s head count, about 680 people. but staff is not enough. technology is critical. the only way to really regulate these vast markets is with sufficient funding for technology to be efficient. working closely with the sec and international regulators. . .

>> we will get this margin thing right. we understand congressional attempt on the. the cftc is a cop on the beat that ensures markets are protected from fraud, manipulation and other abuse. i look forward to working with congress to ensure that we can accomplish our mission to protect the public. thank you and i would be happy to answer questions. >> thank you. governor. >> thank you, mr. chairman, ranking member frank and other members of the committee.

i appreciate this opportunity to provide the federal reserve board's views on the application of title vii of the dodd-frank act. the board responsibilities fall into three broad areas. the first relates to consultation and coordination with other authorities, both foreign and domestic. dodd-frank requires the cftc and the sec consult with the board on rules to implement title vii. in providing feedback for the request for consultation we tried to bring to bear out experience in supervising dealers and market infrastructure, and our familiarity with markets and data sources to assist the commission. important coordination activities related to derivatives regulation also are occurring internationally. most prominently the group of 20 4g 20 leaders set out commitments related to reform of the otc derivatives market. that would form a broadly consistent international regulatory approach.

the basel committee on banking supervision has recently strengthened international capital standards for derivatives and created leverage and liquidity standards applicable to them. the committee on payment and settlement systems is working with the international organization of securities commissions to update international standards for systemically important clearing systems, including central counterparties that clear derivative instruments and trade repositories. the goal of all these efforts is to ensure a level playing field that will promote both financial stability and fair competitive conditions by preventing activity from flowing to less regulated jurisdictions. the second task given to the federal reserve with respect to title vii relates to the strengthening of infrastructure. central counterparties are given an expanded role in the clearing and settlement of swap and security based transactions. if properly designed, managed

and overseen, central counterparties offer an important tool for managing counterparty credit risks and thus can reduce risk to market participants and to the financial system. title eight of the act complement to the role of central clearing through heightened supervisory oversight of systemically important financial market utilities. this heightened oversight is important because financial market utilities such as central counterparties concentrate risk and thus have the potential to transmit shocks throughout financial markets. as part of title viii the board was given new authority to provide emergency collateralized liquidity in unusual and existential circumstances to systemically important market for silly. were carefully consider how to implement this provision in a manner that protects taxpayers and limits the rise in moral hazard. the third task committed to the board by dodd-frank with respect to title vii is that a supervision. capital and margin requirements

are central to the regulation of financial institutions active in the derivative markets. as well as to the internal risk management processes of those firms. the measure will make a responsibility of the board and other credential regulators under title vii is to adopt capital and margin regulations for the non-cleared swaps of banks and other regulated entities that are swap dealers and major swap participant. the board any of the u.s. banking agencies played an active role in developing the enhanced capital leverage and liquidity regime agreed to in the basel committee. these requirements will strengthen a the credential framework for otc derivatives by increasing risk bank capital and leveraged requirements and by requiring making firms to hold an additional buffer of high quality liquid assets to address potential liquidity needs resulting from their derivatives portfolios. the statute also requires the

prudential regulars to adopt rules imposing initial and variation margin on non-cleared swaps to which swap dealers or major swap participants that they supervise. the statute tracks these margin requirements be risk-based. within the statutory constraints and instructions the board and other credential regulators are look working to prevent revisions in what it takes appropriate account of the relatively low systemic risk posed by most end-users. for example, one approach under consideration is to allow a banking organization that is if you are major participant to establish a threshold with respect to an end-user counterparty based on a credit exposure limit that is approved and monitored as part of the credit approval process. below which the end-user would not not have to post margin. the board understands that posting margins imposes costs on end users possibly inhibiting their ability to manage the risk of the board also believes the

marjorie jean should be applied only to contracts entered into after the new requirement becomes effective. thank you for your attention and i would be pleased to answer any questions you might have. >> thank you. there were two presidents in recent history who actually reduced the government spending as a percentage of gdp, and that was president clinton and president reagan. so i say that in a bipartisan way, one on each side. a part of that was the growing economy, and i think that's going to be the key to a staging our national debt and our deficit. so i want to applaud chairman gensler come your statement today, and i think if i heard correctly, it's that all end-users would be exempt from cftc clearing and margin requirements.

on over-the-counter swaps. >> consistent how congress exempted the non-traditional end-users and click him as we take officials at the cftc which we hope to in the near term, that the same end users, these 287 is a provision in the statute, would not have any larger requirements consistent -- is really consistent with what congress did when clinton required. transactions financial company, the financial company consistent with what congress did might be, again we're still sorting through the proposals to put them forward to the public and get comment. >> i know members on the majority feel is critically important, that we don't impose margin requirements or clearing requirements on end users. and by end-users, and you said nonfinancial companies. these that do not -- to hedge

risk as a part of their inherent business. >> that's correct. hedging is a really important thing. tens of thousands of commercial end-users use these products, use themselves -- use them successfully. did before 2008 and need to for our economy to prosper. dodd-frank at its core promotes transparent open and competitive market. and markets that are transparent and competitive the lowest pricing. i believe dodd-frank in its core will lower cost to these commercial end-users because of the transparency and competitiveness. and also because they will be less prone to risk. the american public didn't have to stand behind at $700 billion in the t.a.r.p. so it's a balancing that actually congress put forward speak of the 700 billion, none of that was a result of commercial nonfinancial end users. >> but it did at its core have the risk from the unregulated

swaps market place, particularly credit default swaps. and we all know the story of a aig. >> i appreciate that. do you need the cooperation of congress? do we need legislation to clarify that these over-the-counter swaps will not be required at clearing? >> we at the cftc believe that is well written, and it gives us sufficient authority to ensure that such margin requirements on the swap dealers does not cover the nonfinancial end users. that authority is there for us. of course, he'll be subject to public comment. >> governor carrillo come you look at the provision. do you agree? >> mr. chairman, what we have done is to read the statute as it's written. the statute as it's written

tells us that each registered swap dealer, and major swap or does that from which there is credential regular has to be minimum capital and minimal initiative and margin requirements. how that applies broadly, it is obvious a new exception provided for any class of counterparty. however, the statute goes on to say that the standard shall be spaced. and given the systemic risk base perspective with to try to bring to our activities, title vii generally, what we are thinking in terms of is a risk-based approach to margin requirements, which would recognize that for end users generally there is much less risk associated with derivatives transactions. so what in essence we will do would be to create -- if this approach turns out to be the one

we adopt and want that is been worked on internally now, what we will do is to create these thresholds within which, under which margins would not be required. and precisely because end users in general present substantially less systemic risk, and in many cases no systemic risk. those margin requirements for end users -- ski-doo, the threshold for end users would be substantially higher than those for financial market participants. >> thank you. let me very briefly, i think the proper sequencing of your rules needs to have a definition of swap and commercial risk prior to some of your other definitions. are you aware that you're going to need to define those terms fairly soon? >> the statute defines many

terms we join with the sec put out with proposals in december on swap data, major swap or dissident and the like. the commentary action closes federally 22nd. and what we encourage the public to do, and we posted this on our website is if you have comments on any of our other proposals at the ctc, even if the commentary close basically those comments in this definition comments so that we can consider them. we do have discretion even after commentary to close to get the right file, right team. i know as a commissioner we will read them. >> at the definition of swap and commercial risk, your other definitions will depend on that? >> the definition of commercial risk also we put out in december. and that's open to the same period of every 22nd and we look forward to hearing broadly from the public whether we got that right consistent with what congress did.

>> i would just add i think we all share your consumer get the sequencing right so particularly those who have to the full scope of the potential applications of all the rules on them, whether or not they will be determined to be a dealer or major swap or dissident, or some other kind of participant in the marketplace. so we've got a lot of that done. the not so narrow but important issues of swaps, security based swaps, they are basic statutory definition but there's more work for us to do there. we are very committed to getting them out quickly. >> thank you. ranking member frank. >> thank. let me ask you, mr. gensler, you talked about and i assume ms. schapiro does come will not see much requirements published on end users, and they don't have to clear. i do want to address build the perception some might have, therefore nothing has changed if you did mention transparency.

so what would be the effect with regard to end users? >> even swaps have to be recorded to the swap data repositories -- >> which means the price will be made public? >> yes. >> i will tell you that i had a visitation from a couple of people in the financial industry, an older one and yet what the two companies. the young once said they have these problems. and i said we're not going to go after the end users. what we're talking about is price be made public and he said yeah, that's a we don't like. and people can come in ahead of us. and asked if that meant he was afraid of competition. and his other will older colleagues and we are not pressing that argument i want to make a coma not talk about margin requirements. we are talking about reporting requirements which have come if i'm correct, the ventures of all of giving the end users some ability to get a better price because they will not now be captives and he'll get to know what other people are charging. and secondly, you won't have an

unknown quantity of those in the economy. will do the mechanisms for us therefore keeping track for what the totals on the topic, ms. schapiro? >> i think transparency is the critical piece you because of the last participants to understand, with respect to transparency at what price transactions have occurred. that will encourage price competition. there is a provision that will allow for block trades to be disseminated on a delayed basis so the concern about the potential for front running, a large position or front running the hedging of a large position should be able to be dealt with through the delayed dissemination. >> we are talking about making it more competitive. >> absolutely. >> now i just want ask you about the budget proposals. you've been urged to take more time but also be more thorough. at the levels that have been

proposed in the budget that come out of the appropriations committee, mr. gensler, what effect will that have on your capacity to a comment what members of this committee are asking you to do? >> no. the number i believe was to take as from $168 million, continuous elation data $112 million. we would have to have significant curtailment of our staff and resources. we would not be able to police or ensure transparent markets in futures or swaps. >> the numerous possibility get for the derivatives market, including the financial part, you would not be able to undertake those responsibilities of? >> there's no doubt in my mind we would have to go from 680 staff -- actually smaller than 440 if it was for the whole year because we are already halfway through the year. would have to shrink even further than that. >> ms. schapiro you are given

and built numerous responsibilities. what would the effect of the proposed budget be on your ability to carry those out? >> i'm sorry. it will have a very real effect on the sec's ability, not just with respect to dodd-frank implementation also with respect to our core mission which is already being impacted by the can to need resolution. but most particularly we have responsibilities now for hedge fund examinations starting after hedge funds are registered in july. so we have to build a registration capability. we have to be able to examine and have examiner's deal with hedge funds. we will be recipients of large amounts of data that are required under the act for systemic risk for reporting purposes for hedge fund. a mechanism for -- >> i don't want to go over the time. the systemic risk and the data is important -- >> and over-the-counter surveillance. we cannot rely on sro in a

space. >> i remember when mr. bunning t. told us in 2008 that he was going to have to do is $80 billion to aig and a week later they needed another 90 or $100 billion. no one had an idea what the exposure was. that will no longer be the case. but just to summarize with regards to hedge funds and derivatives, many of us believed they were insufficiently not just regulated, but we have much information about them, that they were a polite slate. and we have with hedge funds light registration, but monitoring with derivatives and financial industries are regulated. end users are not there but i take it that if you were to get the budget level that were proposed in the billick came out of the appropriations committee, neither one of your agencies would be able to do anything significant regarding the new

responsibilities involving derivatives and hedge funds come is that correct? >> that's correct. would basically be involved a large reduction in force, about 65%. the end users wouldn't benefit from any transparency. >> ms. schapiro? >> i don't know whether the will be in reduction or force or technology decline, but we will certainly not be able to operationalize many of the rules that we're implementing as result of the new law. >> thank you. i should mention -- one more thing. the total amount of money for the two agencies together that's in the president budget is how much? >> 1.4 billion. >> and 2012, 308. >> for this current year about a billion ahead. ms. schapiro, how much money did the sec take into the federal government? >> i did last year our budget was 1.1 billion we brought and just some transactions about

1.3. >> so at the expense of getting adequate regulations we will turn you into a profit center. thank you. >> thank you, mr. frank. >> thank you, mr. chairman. chairman gensler come in your testimony i believe you said something along the lines that unregulated swap markets played a central role in our economic crisis. i assumed he was mainly a living to aig come is correct? >> yes, but also i think it helps accelerate the bubble. >> just remind us all of the record, in march of '09 ahead of the ots, testified to a question that i asked again in retrospect it wasn't the lack of authority, it wasn't the lack of resource, it was at the lack of expertise. you just flat-out made a mistake. is that a correct assessment? answer, yes or. in 2004 we failed to assess how bad the mortgage economy, the

real state of the economy would become in 2000 a. so at least the regulator in question thought they had the authority and expertise. i peeked into the testimony come into the testimony of the panel the following year. so to some extent i want to try to bust a bit of the conversation here. we'll hear from a gentleman, craig reiners, with the miller tours company. and that his testimony a requirement for end users like miller tours to post margin to its counterparties we have a serious impact on our ability to invest in and grow our business. go in user on a truck is subject to the trading requirements, excessive capital requirements imposed on our counterparties into forcing end users onto regulated exchanges, execution platforms and clearinghouses could significantly increase our cost. chairman gensler, a provision that was supposedly aimed at wall street may be increasing the cost of the sixpack.

i think he just got the attention of the american people. has your agency considered the pass-through cost concerns in your economic analysis as you develop these new rules? >> i read very closely the testimony of miller coors. we met with miller coors. we are aware and focused on the cost of the sixpack because we're also in the agricultural markets. and i would say our intention is not to have margin requirements apply to issues such as miller coors. so very directly to his plight, we are very focused on his testimony and his concerns. >> we will be monitoring your progress at the local convenience store. also saw testimony from mr. terry duffy, executive chairman of the cme group turkey testified quote entities such as

cme often cannot fully anticipate the meaning of a proposed rule when that proposal is reliant on another rule that is not yet in its final form. for example, rules dealing with the definitions of swaps, security based swaps, swap do as you well know, tried to the goes on. mr. duffy goes on to say they must be established before interested parties can meaningfully address of the proposed rules. so, your commission i believe says proposed some rules, comment periods have close on other rules. and yet, many commentators don't even know without the proper definition clarity whether or not certain rules will apply to them. so how can you have a meaningful comment period, chairman gensler? >> we've indicated and i've read mr. duffy's testimony very close as well. we've indicated with mr. duffy that we want all of the cnes and all of the public's comments if

these rules have been staggered partly because we are too. we need to just move them out. but if your comments on earlier proposals for close page have happened and to relate to this definitions rule, including. send them in. will use our discretion industry there and get them into the right comment files. everything that you'll have to say it is important to our process as well. spent i. >> i thank the gentleman makes a good argument i hope you can find a better way to run a railroad because i think again working with trillions of dollars and it was capital, dealing with jobs. i think it's so critical that we have an effective rulemaking process. i see my time is winding down. one more question for you, chairman gensler. i understand your abdicating the adoption of position limits, even for passive investors such as commodity index funds, isn't that correct? >> consistent with the dodd-frank act we've put out a

proposal in january and we look for public comments. so i think it's consistent with -- >> does the cftc have any data to indicate how they propose limit rule would affect the operation of these passive funds the? >> the passive funds -- we publish data regularly on passive funds, and index investment in the marketplace. and that's on our website. we've included some of that data in the preamble in the rule but we look for to the public comment in the proposed rules so and agricultural metals and energy position limit. >> i see my time has expired. thank you, mr. chairman. >> ms. waters. >> thank you, mr. chairman. i am very concerned about representation that dodd-frank is going to lead to fewer jobs, and i understand that many of those who are critics have been citing a study by the roundtable

that claims that the margin requirements of dodd-frank will result in 100,000 fewer jobs. let me ask each of our witnesses today, first ms. schapiro, have you seen the steady? >> that was released yesterday? yes. i did have an opportunity to look at it. i haven't studied it in detail. >> mr. kempe, have you seen the steady? >> i read this are the last night around midnight on the w web. >> mr. tarullo, have you seen a steady? >> i did read it, yes. >> can you tell us how effective regulation of the derivatives market can actually save jobs? let me start with mr. gensler. >> i think that at the core we lost over 7 million jobs in this country, the financial system and predatory systems failed to detect. and swaps are part of that so i think is his jobs were just making the whole system safer for america. and it helps end users have more

transparency and lower costs, competition in the market place. as long as we handle i think congressional tent on the march and many of the other end user issues which want to work with you on transparency promotes economic activity. transparency competition in markets. .. >> it enables companies to raise the money necessary to create

jobs, but by the same toik token when companies have confidence in the regulatory regime, they have a level of comfort in investing, so i think there are a number of studies that will show good regulation, intelligent regulation, not overregulation or underregulation can actually lower the cost of capital for industry. >> ms. waters, i say with perspective to the study that you refer to is it acknowledged what it did was a quick and dirty economic assessment because of opposite of the survey and study didn't have access to the data it needed for the response. what they did was to say based on our survey, here's what we think our relative level of unitization of derivatives is, and we've got to multiply that

by a margin requirement which we think might be imposed, and that gives us the cost -- >> i'm sorry, you're saying the scientific study? >> they were not to be misleading, but they said we're going on the basis of a survey and extrapolating. the most important point to make is they were assuming that there would be the survey, and when you heard this morning, that's not the case. >> how effective will regulation be to help to save jobs? >> yes, from our point of view again which is one of systemic risk and contain systemic risks means the keys is watching for leverage and transparency because in the absence of transparency, you have

unoperating markets and in the presence of excessive leverage, you then have collapses of institutions and markets as well, so i think a well-honed, well-conceived regulatory system in the financial sector is one that is designed to allow the allocation of capital to its most productive uses. >> basically all three witnesses at the table really do believe that an effective regulation of the derivatives market can actually help to save jobs; is that correct? >> yes. >> yes. of course, effective is what everybody is going to be discussing as we go through this regulatory. >> thank you very much. i yield back. >> thank you. mr. royce. >> thank you, mr. chairman. as to the application of the cfdc proposed rules to foreign

counterparties and foreign dealers, i was going to ask you about a concern here over regulatory arbitrage and over the fact also they're going to wait this out. you have your policies here, we see more and more derivatives, more business go to europe, and at the end of the day, we have american financial companies severely disadvantaged. this would be the foreign competitors. i mentioned in my opening statement that in the long run odorous rules that are not necessary will in doubt drive capital to nonu.s. markets, and you've testified here that you're in contact with regulators in europe. you expect them to follow the american approach, but how do you -- how do you have those concrete assurances? do we have a memorandum of

understanding with european regulators? tell me how you assure of us that fact. >> we're working very closely. our three of the agencies are working closely with the european regulators. we share our documents and drafts with them. >> right. >> i think depending upon budgets, i guess, but i'll be back over in europe in march in front of the european parliament possibly. we are working closely. their proposals are consistent on clearing the end-user approach, swap data, depositories, information regimes, and they are time wise a little behind us. >> they are going to be later, and i don't know where brazil and toronto and singapore will be here, but i think it's going to be very hard to try to convince us that american firms are not going to lose business to european competitors when

there's a already happening now. let me ask you another question, and that has to do with the fact -- i noted that the cftc, you're saying they are trying desperately to get this collaborative environment, but on the most important rules you're failing to get that collaboration between the agencies, and the difference in the derivative markets you oversee are virtually nonexistent. there's a lot of overlap there between product and users, and the fact is you insist on producing two very different sets of regulations here, and if this is the end result, end users and investors are not going to be better off. it's going to be a boom for foreign companies. i'll give you a few -- in terms of what's discussed in the press

press, realtime reporting, where the agencies have different rules for the definition of what realtime means. block trade definition and reporting times for block trades, the number of data fields is different, which entity task is submitting trade information to the public, all different. second, we have the block trade definition where the fcc wisely asked for further public comment and will likely embrace different definitions depending on assets and liquidity where the other has a one-size-fits-all approach that's overly restrictive, and third, the swap facility rules where there's a request for five liquidity providers, and the fcc takes a more reasonable approach in allowing the customers to choose the providers to select quotes from. it's different in every case,

and i'd like your comment on that as well if you could. >> i'd have a comment on that, congressman. we are working closely together, and there are many more things that are the same than nay are different although you pointed out some important differences. >> i picked out some of 50 in the business press that have been pointed out where they differ. >> we are still at the proposal stage, so there's lots of opportunity in the comments process with industry and others to bring these rules closer together. when we propose something that's different, we ask people what's a better approach or is the f chiropractic c approach or is there a third way to go about dealing with this. i would say also that it's -- there is differences in the markets we regulate. the swap markets represents about 5 ct of the notional --

5% of the notional values. they are different. to some extent the differences in the marketplace dictate some things that are different. let me agree with you, though, that rules are going to fall upon institutions that are contracting and working in both markets. it really is incumbent upon us to make them close as io identical as possible. where the rules go to, for example, in the way orders interact in the market place, there might be justification for slightly different rules because of the nature of the products being traded. >> thank you. mr. chairman, i have a question for the record without objection on speculations that could hit long term investors. i meant to ask that question, but i'll put that in the record and get the response from the

witnesses. >> thank you. >> thank you, mr. chairman, and i thank all the panelists for your public service and testimony today. in the continuing resolution, there's literally on the floor this week, there is a drastic cut in funds from what the president requested in his 2011 budget, and our republican colleagues proposed that the fcc and ftc budget be cut back to 2008 levels. now, that is the level and the year that the economy cratered and fell and i can hardly imagine that any of my colleagues are pleased with the level of oversight that was performed by our regulatory agencies in 2008, so cutting them even more than what they had then, i feel will make it

impossible for them to implement dodd-frank and be responsible regulators. according to the ig of the fcc, the republican proposal would force the agency, the f chiropractic c, to cut -- fcc to cut roughly 600 in staff. is that correct? >> i believe it is, but i will say i think the budget proposal comeing out of the house doesn't put the fcc back to 2008 levels, although it represents a cut off the continuing resolution number. >> if you put it in perspective with the numbers, the total loss of household loss as a result of this great recession has been estimated to be approximately $14 trillion, and the over-the-counter derivatives market is $200 trillion, and the

entire world was over $74 trillion, and the flash crash in 2006 wiped out $1 trillion. it seems to me penny-wise and popped foolish not to invest in the agencies required to come forward with the new rules, the new studies, and to prevent the madoff's of the future. now, as i understand it, correct me if i'm wrong, but dodd-frank calls for 95 new rules for the fcc; is that correct? >> depends how you count, but that's in the ballpark. >> and 61 from the ftc; right? >> more in the order of 45. >> 45? okay. >> i don't know. people can count differently. >> and how many studies are required? i know the bill has 60 staids. how many of these one-time studies did you have to do? >> required to do more than 20 studies to create five new

offices within the agency. >> how in the world are you going to do that with the reduced budget? can you hire the people to oversee the new derivatives and everything that you got to do? >> no. clearly, we will not be able to operationallize the rules that were obligating and ultimately adopting under dodd-frank under that budget scenario. i will say if we were able to hire people, we can get them. we are getting amazing talent willing to come to the securities and exchange commission at this time willing to work on these important issues, but we are under a hiring restriction right now. >> i would just say the staff of the staff has been excellent under this uncertainty there. they are doing terrific work. i think working with the fcc and public continue on writing rules, but it is no doubt in 2012, we will not be able to oversee the markets and ensure the transparency in the markets. if we were taken back to 2008 levels, however, then we'd be in

a very different circumstance because we're in a unique circumstance where we were just growing back to where we were in the 1990s. taking us back to 2008 would be significant. >> it's valued at $600 trillion and the budget for the ftc in tben was just $169 million, so as my colleagues call for more oversight and accountability, we certainly need to give the tools the oversight agencies to get the job done. i hope my colleagues on both sides of the aisle support appropriate funding for the ftc and the fcc. there's been talk that we're not competitive in the world, some of my colleagues said we have a competitive disadvantage, but with the capital requirements are the same; is that correct?

our capital requirements are not higher, are they? >> that's correct. we are on an even playing field on the capital requirements. >> yes. we internationally agreed upon a leverage ratio, yes. >> do you believe our markets are disadvantaged because we have regulation or regulation that didn't appear in 2008. >> let him answer the question. >> okay, okay. >> yes. certainly with respect to capital we've been able to standardize across all the members of the bossel committee. there's still standards to be appliable and such. >> thank you. >> my time expired. >> thank you, mr. chairman. first question is for chairman.

currently, the cftc is looking at setting position limits and on swap data, and my concern is and i know i asked this question of secretary geithner in 2009 whether there was an analysis that looked at the critical and necessary data regarding this, and it seems i'm concerned and, in fact, multiple future exchanges have raised concern that without this critical data, there will be improperly set position limits which would impact liquidity and effective price risk hedging, and it seems like you're putting the horse before the cart if you don't have that study of the the state that is still important, and i

think not analyzing this before you put it in the new regulation and my concerns not only here but that there's talk of some dealers that have looking at moving abroad, and we're going to lose those jobs. would you comment on that? >> the report the commission put out in january is consistent with the congressional provisions that we put something out with regard to the physical commodities, metals, energies, and agriculture. the agency has been working with the limits, and most of these for what's called the spot mod, but also looking at the other mods, and it really would be a three steps to this. a proposal phase, we asked the public for data. we're going to be well-informed. final rules not taken into consideration until we get

comments. we had 8200 comments on earlier limit proposal a year ago. no doubt we'll get public input, and it will be help. . we changed the proposal on those earlier comments and we'll probably change the final based on other comments. the third phase is getting data from the markets when the swap data is set up, and we propose that will take time. >> that is crucial in how you set those limits so there won't be something done before you get that data? >> we anticipated that the proposal says even once it is a final role, it would not be implemented until there is data upon which to apply formulas. limits are done on a formula of the total size of the market. how big is the market, and so -- >> but my concern is 1 that we're -- is that we're going to have some of these traders that are going to go abroad because they can't wait for all the comments, and

then, you know, to set that later on. it seems like you are putting the cart before the horse and not having the data before you really set those limits. >> again, congress asked us to put proposals out. we're soliciting comments. this is one that's very important to get the comment on these 28 physical commodity markets. we have had position limits in the agriculture markets for decades. there were positions in the energy and metals markets in the 80s and 90s, in fact, all the way back to 2001, and we look forward to public comment and to hear on this, but it does say in the proposal it would not go into effect until they are based on the actual statisticked based on the future size of the mart and the swaps market. >> well, maybe congress was wrong in how they designated that should be done, but let me

go on to another question. the department of labor has proposed a new definition of few -- few few diewsh yarr. the fcc has completed their 91 study that looks at the study of care of broker dealers and providers providing advice about securities to retail customers. both of these proposals will be setting advice for irs's. have the fcc consulted on these proposals, or is this something that could come out differently? >> congressman, you're right. we published our investment adviser broker dealer study a

few weeks ago. we are clear to say it does not implicate the fiduciary under that. they proposed to expand the fiduciary standard if it has the potential to effect ongoing arrangements and relationships between broker dealers and their ira clients. we are proposed to work with the department of labor. we offered any information or expertise that we can provide to them about the regulation particular of broker dealers in the context of advising accounts, and we will continue to reach out to them and see if we can be of help. >> have you actually been in contact with them? >> yeah, yeah. >> thank you. i yield back. >> thank you, mr. chairman. i'd like to use my time here to zero in on the part of this that i had the most involvement in,

the section 733 which became known as the watt-meeks amendment and ask questions about the proposed regulations that cover that section. seems to me that one of the great accomplishments of dodd-frapping was to pull derivatives trading out of the shadows and into the sunlight requiring swaps to be traded on swap execution facilities or exchanges that create pretrade price transparency. section 733 known as the wait-meeks amendment has rules of instruction and directs the fcc to update their rules to require the use of the best technology available for creating pre-trade price

transparency. we were intentional in not asking for flexibility for swap dealers when swap dealers have flexibility before dodd-frank. they chose the least transparent method of training which was telephone calls. instead, congress said that swap execution facilities must give multiple participants the ability to trade swaps by accepting bids and offers made by other participants using the best technology for a free trade price transparency. now, chairman, it seems to me that your draft rule comes pretty close to doing what wreer trying to get to. am i correct that you require a swap execution facility to include a central trading screen

where everyone can see everyone else's prices and am i clear that you are not going to allow swap dealers to trade only on some dark corner of the platform where one participant asks for quotes that only he or she can trade, and that dealers will have to put their prices on the central trading screen; am i correct that that's what you intend? >> it's correct that the proposal brings transparency, that the facilities have to allow any participant to put a live bid or offer so everybody can see that. >> okay. >> but no one will be required to do it. there's no market maker obligation. if you want to, you get a choice, but the end users would also have a choice if they didn't want to put a firm bid or firm offer, they could also use the requests for quote. >> all right.

let me move on because it seems to me that your proposal differs and hasn't taken congress' directives as seriously as the ftc has because you're allowing security based swap execution facilities, and i'm quoting from your proposal, "enable every participant to choose a single request for a quote to just a single liquidity provider." which seems to me not to be what we're trying to get to here. are you all interpreting these things differently or, yam, are you setting -- or, i mean, are you setting up a situation here where you're going to have the potential for

a race to the bottom with the two agencies potentially interpreting this thing different or setting up a different set of rules and enabling participants to argue that the lowest common denominator ought to be at play here. >> i don't think so, congressman. we've taken it very seriously, but have taken a different approach in part dictated to the ability of the swap market that swaps on single issuers are really quite different than the much more liquid foreign exchange or interest rate or commodity swap market. we thought if we take a different approach in the proposal, and again, it's just a proposal, we would not permit single dealer platforms, but find a step as a trading platform that allows more than one pampts to act in the trading interest of more than one pampt,

and under that the quote requesting party must have the ability to send a single request for quotes to all participants on that trading platform, but if that party also seeks to limit the number of participants to whom their quote goes to, they would have their option only, the capability to do that. >> if i might say, where the two agency's proposals line up is both say to be an execution platform, you must allow any market participant even if you all run congress and set up to be a market participant, and you could get in and make a live bid, a live offer, put your capital at risk and compete. markets work best when they are transparent and there's competition, and both rules have that. there is a little bit difference on this request for quote approach, and we're looking for public comment to see if they should be synced up as well. >> thank you.

>> the subcommittee chair. >> yeah. i thank you the chair. when you think of all the rules that have already come out and all the regulations proposed and the mounds of paperwork that came out in a short period of time with these agencies not to be funded to the level they want to be funded at, i can has discard a guess where we are looking at for the money they asked for. from the other side of the aisle the solutions to the problems we have is simply spend more money on it and the take away from this side of the aisle is the solution to the problems is we want to get it right as far as the rules and regulations these agencies are getting. if you look at past history, if you look at nms and compare that to what we're doing today, now, that was regulations and rules coming out of 80 some odd pages. that took, i'm told, from four

to six months from rule making period of time here. there they did it for approximately 15 months, and there they took over a three year period of time to role them out and -- roll them out and get into implementation. we are compressing this into a much, much shorter period of time and a larger area of the environment where we ask the industry to come up with an entirely new architecture structure, build new complex new technology systems that they don't have yet, create a new operational process they don't have yet, a new legal process that they don't have yet, creation of new clearinghouses, sets, connectivity between all of these entities, all that wasn't fair in the past. you're trying to do it now in an extremely expedited manner, so it goes to the point i raised before, if we do it in the timeframe you're talking now, won't this lead to either a

ceiling after the derivative market or sending of the market overseas or create unfair advantages between the big players in the market place and the small players who cannot keep up with what you're trying to do. i'll leave that there. . . >> it is a paradigm shift as you are referring to.

and i think we want to as you say get it right. >> i would agree with that. i think that might suggest to a deadline we've been working to. we have much more discretion with respect to the implementation timing and sequencing so we can put the rules out and make them ineffective in order that makes sense for the industry in order to build a system, -- >> right. and both of you realize, the feedback, and both of you sit here and tell us that you would like congress to give you more time? we know we have a deadline of july. do either one of you think you can do this approach really and meet the deadline of july and so fairness to the market place? >> i think we have the discretion on the implementation. >> but what about the rule promulgation? >> ip with a significant crisis in 2008 which was a very real crisis, and the excellent staff at the cftc and commissioners,

what time he has been put out there is a doable. we are human. some of these will happen after july, no doubt. it's not like a firm deadline, i understand that we're going to get this right and some of these will be after july but we are also going to take a final rule right in the spring and summer. >> one aspect of this and i'll ask both of you. president obama's order, ensure they do not stifle job creation and make the economy less competitive. this doesn't apply to either one of you idly by the executive order. is a part of the process you're going through that you wish to comply with the executive order so you make sure we don't stifle jobs and we don't have the economy? >> as you and i discussed, the terms of the executive order don't apply to the security exchange commission but we are determined to make sense for us to try to act as though they do. i should say right off the top that much of what's in their we

already do. we already comply with the paperwork reduction act, the cost analysis. but in terms of the other go back and look at some of the rules that have been around for many, many years and see if they are having an unintended consequence given all the changes in our economy and and technology in particular, we want to do that. will look at the impact a small businesses and we've been very focused in our rulemaking over the last year, in particular to make sure we can give small business, we're trying to do that and accommodate as possible as we can. >> mr. gensler. >> we took a very close look at the executive order. our practice are consistent though in one place congress in our act has given us how to do cost-benefit analysis. we have to follow congressional mandate rather than executive order. in terms of looking at our entire rulebook, we do plan to do the 120 day plan where we

would tell the public how we're going to look at our entire rulebook, even if it's not related to dodd-frank speak of thanks to -- >> thank you, mr. dear. >> thank you, mr. chairman. i am asking unanimous consent that my statement he made a part of the record. >> and all statements will be. >> into letters. the other, a statement by craig of miller coors corporation. >> thank you. let me say this to all members. at the end of this hearing you could submit any letters -- i think we've got for the record if you like, so thank you, mr. chairman. >> thank you, mr. chairman. dodd-frank directs the cftc to adopt commodity position limits in order to prevent excessive

price fluctuation and, of course, deliberate market manipulation. i know some of my colleagues have asked about this, or other aspects of this particular provision. as part of this authority, cftc is entitled to consider exemptions for different classes of investors to allow for enhanced protections without unduly restricting investors options. i'm concerned that the commission's proposed regulations make no distinction between an investor classes trading market speculators the same as ordinary commodity index fund investors. is that the way these regulations should work, or should there be a distinction between commodity index funds that buy and hold, versus those that are in and out of the

market in days, hours or minutes? >> we put out propose rules that as congressman said, did not make a distinction because the statute doesn't make distinction, in that way the statute does make a distinction between bona fide hedgers which is the statute, and this has been true in our statutes in the 1930s in some regard, relates to having some physical commodity in the merchandising channel. the congress in dodd-frank tightened the definition so we have to comply with that intent of congress of tightening that. and it tightened it with regard to swap dealers. swap dealers were under various no action letters from the cftc, able to be bona fide hedgers. congress tightened that is the only to the extent that you ashley are helping somebody on the other side hedge something, who has the physical commodity. so we are trying to take this as congress deliberated and took

this up, but we look for to the public comments. it's going to be a very thick comment file. >> every time i ask a regulator about something, they always say it's congress' fault. has your commission recommended a technical fix, or do you think it is appropriate as a matter of policy not to distinguish between the internet investor on one hand, and the commodity index fund on the other? >> we have not recommended a technical fix. this is something that was debated in many committee hearings, maybe not in this committee but other committees about the role of index investors and so forth. so, but we do look forward to the public comment and your comments. >> i may disagree with you on whether the existing statute gives you the flexibility here. the statute as a you're supposed

to adopt limitations as appropriate, and i look forward to working with your attorneys to convince them that we don't need a technical fix. assume your attorney to come to you and say yes, you can distinguish between classes of investors in these regulations, as a matter of policy should there be a difference between the index fund on the one hand and a day trader on the other? >> i think it is going to say i'm going to keep an open mind. with 8200 comments on the last position limit rule, i think this will be such a thick comment, if i might say, i'm going to keep an open mind as a commissioner to these views. some have recommended that the class limit on all indexes. should be over something. some of recommended there should be no limit. so it's a wide set of comments that we are already receiving on index investing. >> i hope you were able to give a clear and more definite response to some of my other

colleagues questions, but on this one i just gather that you're keeping an open mind as to both the law and the policy. and i yield back. >> thank you. mr. neugebauer? let me say this. the first panel will be excused at 12:15 p.m. and we will see the second panel, and i no mr. ryder from tranninety sitting there on the first row ready to testify. so we will find out what your announcement this morning does to the price of beer. if it helps it or hurts it. >> hopefully transparency will keep beer for all americans speak of how bout margin requirements may help? >> i hope so. >> mr. neugebauer? >> thank you, mr. chairman. mr. gensler, i answer his concerns about the high cost and severe consequences and burdens that these dodd-frank is going to be putting on a number of

different agencies. and i've asked all of the entities that are affected by dodd-frank to furnish us information of what is the startup cost and what is the continuation cost of just implementing dodd-frank. i have heard from your counterparts on either side. i got a nice thank you letter for me sending you a letter. but i'm looking for a little more robust and detailed response to that letter from your agency as will. >> i think you received it this morning, and i apologize if maybe you were not aware, but i plan to take any questions about the letter. >> one of the things we saw the president's budget that he laid out, that he's estimating that $6.5 billion number to implement dodd-frank. may be going to hire, over 5000 new people. i believe that number when we do the calculations, and i think

when we get some history on that i think it's going to be a much bigger number than that. but one of the things i'm concerned about, for example, the cftc's chie chief compliance officer rule requires firms to designate a chief compliance officer, established a complete new set of compliance policies including implementation and compliance with hundreds of pages of business conduct rules, prepare an annual report to regulators, perform a review of every requirement under the commodity exchange act, and your agencies estimate what what this would cost the market participants is $13,600. everybody else out there, that is about to implement this if this is going to cost millions of dollars to comply with that. and so one of the things that i think it's flawed about this, and the fact that we are accelerating this process, putting these rules are at

record levels, we're not doing any cost-benefit analysis of these rules. and we've underestimated in many cases the costs of complying with these. and so as we talk about dodd-frank in the sense that we think this is going to be a wonderful thing from transparency and integrity in the markets, the question is is what of the markets going to look like when we get through making them more transparent and operating with integrity, are they going to be incrementally more transparent and is there going to be incremental integrity in the markets? but also the cost of achieving that. and what i'm very concerned about his long-term we are going to be pushing those markets to other places. in fact, in the last couple of weeks i sat down with people that are participating in these markets, in these markets are looking for a pressure relief valve because they're looking at these kinds of costs. and for our small participants, this is extremely big problem. and so i guess the question i

have to you is, what kind of cost-benefit analysis is going on as you are turning these regulations out to actually determine the cost of compliance and impact of that cost and compliance to the market's? >> if i might also answer your earlier question in the letter and in the budget, this agency has talked about $308 million, 77 million related directly to dodd-frank, and about 240 decisions directly related in the 2012 numbers. we as an agency are mandated by our statute, section 15 a unedited cost-benefit analysis which was adopted many congresses ago. but that actually rather detailed about taking into consideration about the price of discovery function, the lowering risk, about the integrity of markets that you just, to which he referred. we also asked each of our rules

a question to please help us. as commenters come back with a cost because those are important for our consideration before we move to final rules to actually hear from the public. i think that he might have referred to, though i don't know every rule by heart, is within the paperwork reduction act piece of it, but to comment on that as well as the cost-benefit analysis cost. so that as we go forward to consider final rules, that we get public spot on that as well. >> are you doing cost-benefit analysis? >> absolutely in compliance with our statute. >> win in the process are you doing that? before you send out the rule or after you get comments? >> it's an ongoing process but it's pretty proposal, part of the proposal phase and and its influence for the by commenters as we move to the final rules as

well. >> is that cost-benefit analysis made available to the people that you're requesting comments? >> yes. >> so they can respond to your analysis? >> i don't know if it chairman schapiro, under a little different guidelines, but just. >> we publish our cost-benefit analysis -- >> you can see the rest of this online at c-span.org. has been is coming back in after weekly party lunches for more work on federal aviation programs. in about 10 minutes or so the chamber expected to vote on the wicker amendment dealing with collective bargaining at the transportation administration. t right now john mccain is speaking of arizona. .. obviously outdated and unnecessary $200 million of the taxpayers' money. i am reminded, to paraphrase a comment made once by senator --

president ronald reagan, who said, the closest thing to eternal life here on earth is a government program. there is nothing that illustrates that point more than the essential air service program. i would like to ask unanimous consent that three letters be included in the record. one is from freedom works. the other is from the national taxpayers' union, and the other is from the citizens against government waste. i would ask that they be included in the record. the presiding officer: without objection, so ordered. mr. mccain: freedom works says, "the e.s.a. is a prime example of wasteful spending. a graph produced by the f.a.a. shows that 99.95% of all americans live within 120 miles of a major public airport. the taxpayers should not be forced to subsidize rural

airports with too little demand. i urge you to repeal the e.a.s. to save taxpayers $1 billion over the next five years." and national taxpayers' union cites the city of macon and athens, georgia, are both less than a 90-minute drive from atlanta-heartsfield jackson international airport. despite this, the u.s. department of transportation subsidized 26 flights per week to and from each city at a clip of $464 per passenger for macon, $135 for athens. and then, of course, the government -- citizens against government waste points out that congress cannot continue on a spending rampage while ignoring the nation's balance sheets. mr. president, on probably the -- probably the loudest complaints have been from the state of alaska, a state i love and enjoy. there's a great article that

appeared in an alaska newspaper and it's called "self-sustainability: is it time for alaska to grow up?" among other things that i didn't rknow about is that while the nation faces a $14 trillion fiscal hole and congress is looking to tighten its belt, its inevidentable that alaska is going to feel some of the pain. but the interesting thing is that the state of alaska, he goes to state, "had $12 billion in reserves and another $40 billion banked away in the permanent fund o. "wow. i don't know of another state in the union that is that well-o. he goes on to say, it's written by andrew helkrow, "we alaskans fancy ourselves as rugged individualists who are quick to askew the long arm of the federal government and big brother. however, our actions sometimes don't match our rhetoric."

and what about the amendment -- he goes on -- "to eliminate essential air service subsidies in small, rural communities throughout alaska? currently, the fed subsidizes air service to more than 44 communities to the tune of $12 million per year." and the author goes on to say, "is it really the federal government's role to subsidize air service to rampart, a community with 15 people?" interesting question. he goes on to say, "we've known this day was coming but have done little to prepare our communities for it. we have continued to live in a subsidized world, where one of the biggest issues so far this legislative session has been a debate over suspending alaska's measly gas tax. this week, laws senator mark begich, in response to the announced ban on earmarks,

stated 'i've said many times alaska is a young state with many needs and we deserve our fair share of federal funding to develop our resources and our infrastructure.'." the author goes on to say, "while i would absolutely agree that federal policies have restricted alaska's ability to develop its vast resources, the young state argument has been used for decades to justify growing demands on the federal budget for things like the denali commission and earmarks for controversial bridges. this year, alaska turns 52 so arguably we're not kids anymore. is it time for to us grow up?" is it time for all of us to grow up and eliminate these federal programs that cost billions of dollars of the taxpayers' money which originally may have -- and i emphasize may have -- in 19 w4-778when we deregulated the airlines, have a legitimate

reason? obviously it doesn't anymore. so i look forward to the fact that our conservative organizations are all judging these as a -- as a key vote. and i would also point out to my colleagues, if we're serious, if we're serious about cutting spending and going about making tough decisions, this is an easy decision. and if we vote against my amendment, if the majority votes against my amendment to eliminate essential air service, the message to the american people as of november 2 is we aren't serious, we aren't serious. because if we can't eliminate a program like this, how can we make the really tough decisions that are coming? so the yeas and nays have been ordered. i hope that we will have a vote as soon as reasonably possible and look forward to the -- to the continued debate on this issue, which seems to have

created quite a -- a large degree of controversy throughout the country. mr. president i yield the floor. the presiding officer: under the previous order, there will be 20 minutes of debate equally divided prior to a vote in relation to amendment number 14, offered by the senator from mississippi, as amended. the senator from mississippi. mr. wicker: i yield, under the previous order, four minutes to the senator from maine, senator collins. the presiding officer: the senator from maine is recognized. ms. collins: mr. president, i thank the senator from mississippi. mr. president, i'm pleased to be a cosponsor of senator wicker's amendment to provide additional work force protections for transportation security officers while at the same time ensuring the management flexibility that

is vital to the operational efficiency of the t.s.a. and, thus, the security of the american people. mr. president, instead of dramatically changing the t.s.a. personnel system in a way that could interfere with t.s.a.'s ability to carry out its essential mission as the administration plans, we should instead make some targeted but important reforms in the system to ensure that t.s.a. employees are treated fairly. first, we should bring t.s.a. employees under the whistle-blower protection act which safeguards the rights of whistle-blowers throughout the federal government. second, we should give t.s.a.

workers the right to an independent appeal of adverse personnel actions. for example, a demotion would qualify. what we're proposing is that a t.s.a. employee so affected would be able to appeal to the merit system's protection board. third, we should make clear that t.s.a. members can, in fact, join a union that. is a different issue from collective bargaining. so our amendment specifically provides that we are not depriving employees of that choice which they have right now. mr. president, i've just received a letter from a form he t.s.a. administrator, kip holly, who was extremely well regarded and served as the head of t.s.a. for four years. he expresses support for the

amendment that senator wicker and i are offering. mr. holly knows firsthand how important it is for t.s.a. to have the flexibility in order to respond quickly and effectively to changing conditions, to emerging threats, to new intelligence and to impending crises. and i would note, mr. president, this is not theoretical. t.s.a. has used this authority in the past. in 2006, for example, t.s.a. had to respond virtually overnight to the liquids plot to blow up airplanes that originated in great britain. overnight, t.s.a. had to retrain its workers, redeploy them to different airports. this is not a theoretical

concern. another example was the blizzard that occurred in denver, where t.s.a. officials had to be -- screeners had to be flown in from another city to cover the shifts of t.s.a. employees at that airport. this kind of management flexibility was also used in the wake of the gulf coast hurrica hurricanes when there were massive evacuations. in his letter, mr. holly states that although t.s.a.'s recent determination states that security policies and procedures will not be issues subject to collective bargaining, the dividing line between security and nonsecurity practices is not a bright one. he makes the same point that former homeland security secretary chertoff made the last time we debated this issue and

that is detbhieng is and what isn't -- defining what is and what isn't subject to collective bargaining undoubtedly will be subject to subsequent litigati litigation. he further notes that the resolution of these issues could rest with an arbitrator with no direct knowledge of security issues, intelligence, and transportation security, and that could place the performance of t.s.a.'s security mission in the hands of someone with neither the expertise to make these decisions nor a person who is accountable for them. and i would ask that the entire letter be part of the record. i would ask unanimous consent. the presiding officer: without objection. the senator has used her time. ms. collins: thank you, mr. president. i urge our colleagues to support this amendment. i think it's a balanced approach that will give these employees

more rights than they currently have without it interfering with the essential mission of this law enforcement agency. thank you, mr. president. mr. wicker: mr. president? the presiding officer: the senator from mississippi. mr. wicker: do i understand that i have six minutes remaining? the presiding officer: senator has 4 minutes and 4 seconds. mr. wicker: okay. i was under the impression that i had yielded four minutes to the senator from -- from maine. the presiding officer: would the majority object to the senator from mississippi taking six minutes? withouwithout objection, the ser has six minutes. mr. wicker: i will reserve the balance of my time. thank you. mr. harkin: mr. president? the presiding officer: the senator from iowa. mr. harkin: mr. president, i'll

just yield myself five minute right now. -- five minutes right now. mr. president, i listened careful to the statement made by my friend, the senator from maine, and, quite frankly, i wonder if we're in parallel worlds here and we're talking about the same thing but in a different context. my friend, the senator from maine seems to ignore the very careful limitations that t.s.a. has placed on collective bargaining rights. for example, under the provision of t.s.a., the transportation and security officers cannot bargain over pay. they cannot bargain over deployment procedures, who works where? the senator mentioned the incident involving great britain. they had to train people overnight. well, they can't bargain on training either. that's not part of the bargaining rights that they would have.

the senator mentioned about the deployment of people to denver because of a blizzard. deployment procedures, who works where, is not, again, subject to collective bargaining. and emergency response, that was dealing with great britain, who goes where and how long they have to be there for an emergency response is not negotiable. it is not part of the collective bargaining agreement. i'm at a loss to understand what the senator from maine was talking about. they cannot bargain over emergency response procedures, deployments or other security issues. so, again, this is -- this is -- this is not something that is part of the collective bargaining agreement. now, last -- last week the transportation security administration said that the -- the administrator, john pistol, testifying before the house subcommittee, said that the employee morale is a security

issue. employee morale. why did he say that? a recent survey ranked t.s.a.220 out of 224 federal employers as the best place to work. in other words 224 would be the worst place to work in the federal government. t.s.o. was rated at 220. they have a high turnover rate, high injury rate, and extremely low morale. so what we're trying to do is give them that boost up in morale. here's what the t.s.a. administrator said last week -- quote -- "the safety of the traveling public is our top priority and we will not negotiate on security. but morale and employee engagement cannot be separated from achieving superior security." while. so my colleagues suggested that providing collective bargaining rights could jeopardize security, nothing could be further from the truth. unionized security personnel are just as effective, dedicated and

willing fought their lives on the line in an emergency. i point out, for example, border patrol personnel have collective bargaining rights. immigration and custom officials have collective bargaining rights. our capitol police officers who protect us here have collective bargaining rights. why should t.s.o.'s be any different. to suggest that a unionized security personnel are less effective, less dedicated, less willing to put their lines on the line in an emergency, i believe, is an insult to every man and woman in uniform in country who works under a collective bargaining agreement. i only need to remind everyone, remember 9/11. remember that image of all of the people in new york running away from those towers as came down. the thousands of people running away from that calamity and the picture was of other people running into it, our police, our firefighters, our emergency personnel.

who not only risked their lives but gave their lives to help save people in that tragedy. every single one of them, every firefighter, every policeman, emergency personnel, were all union people. belonged to a union with collective bargaining rights. and, yet, look what they did during that emergency. so, again, i think it's important to have, mr. president -- to add, mr. president, that under this agreement they get limited collective bargaining rights. they cannot bargain over security procedures and policies, deployment, disciplinary standards or -- quote -- "any actions deemed necessary by the administrator or his or her designee to carry out the emergency mission during the emergency. can't negotiate on that. so, again, mr. president, we just want to help raise the morale there to give these

people bargaining rights -- the presiding officer: the senator's consumed five minutes. mr. harkin: i'll take one more minute. the presiding officer: without objection. mr. harkin: they can bargain on grievance procedures. that helps on morale. nonemergency scheduling helps on morale. awards and recognitions, uniforms, bidding on shifts and procedures used for how they bid on shifts. who gets the 2:00 a.m. shift. all emergency type of situations. this will help give them a better morale and i think help in terms of insuring security. don't take my word for it. take the administrator's word for it, administrator john pistole, who said this will help ensure the safety of the traveling public. i reserve the balance of our time. mr. wicker: mr. president? the presiding officer: the senator from mississippi. mr. wicker: i yield myself five minutes.

and, of course, i rise in support of the wicker amendment. senator collins, who spoke earlier, is a cosponsor of this amendment. i might also note that senator coburn has joined as a cosponsor also. the wicker amendment has everything to do with public safety. it has everything to do with preventing excessive litigation when it comes to the definitions of the roles of our t.s.a. workers. it has everything to do with preventing increased deficits here in the united states and in the federal government. and for that reason, groups that support the wicker amendment today and urge -- and i -- urge an eye vote include -- yea include americans for tax reform. now, just a little history for

those who haven't followed this debate over the last several days, currently t.s.a. employees are not allowed to collectively bargain. that has been the policy of the federal government since the inception of the transportation security administration. for a decade t.s.a. employees have not been allowed to collectively bargain. their rights and considerations and -- and morale issues have been taken care of in other ways. since the creation of t.s.a., its employees have been treated like those in the f.b.i., the c.i.a. and the secret service for purposes of collective bargaining. in fact, in a 2003 memo, the undersecretary of transportation for security, which is now the t.s.a. administrator, prohibited t.s.a. security screeners from unionizing with collective bargaining rights.

and the undersecretary at the time made this decision -- quote -- "in light of their critical national security responsibilities." and that has been their regime -- the regime under which we have operated the t.s.a. for the entire existence of the agents sism now, however, the -- agency. now, however, the obama administration is i think intent on dolling out awards to campaign supporters and moving to reverse this decade-long decision and to allow t.s.a. workers to collectively bargain. my amendment would -- would prevent that and, as i say, would keep the t.s.a. employees under the same restrictions as f.b.i., c.i.a. and secret service. now, senator collins and her modification to my amendment provided some very important safeguards.

it allows t.s.a. workers to be under the merit system protection board. it also provides whistle-blower protection act. the protections for t.s.a. employees. now, we're told that our concerns about safety have been taken care of because the agreement -- or the decision by the t.s.a. administrator says we can't have collective bargaining over other security issues. it named several and said other security issues. what does that mean? that's what the former administrator was talking about in the letter to senator collins. this is going to require litigation to determine what -- quote -- "other security issues are." i'll tell you what apparently is allowed under the administrator's proposal, it

does allow bargaining over the selection process for special assignments. it allows collective bargaining over the policy for transfer. it allows collective bargaining for shift training as my friend from iowa just acknowledged. all of these are going to make the t.s.a. less flexible and -- and less efficient in going about their business of protecting americans. i would close by saying this, this is a budget debate also. at the other end of this building we're having hour after hour of debate about how to keep this deficit from ballooning. how to keep the cost of government from going up. does anybody think that allowing collective bargaining for 50,000 additional federal employees is going to cut the cost of the federal government? the presiding officer: the senator's consumed five minutes. mr. wicker: i would yield myself the final minute. the presiding officer: without objection.

mr. wicker: thank you, mr. president. what is happening out in the states, mr. president? state after state after state is facing bankruptcy. and a large part of it is the cost of government brought on by employee union contracts. that's just a fact. and state after state -- governor after governor, they're coming to washington, d.c., and saying, we're going to have to do something about it this. we're going to have to break these contracts and save us from financial ruin. now, at a time when governors are moving in that direction and trying to get out from under these public employee collective bargaining agreements, wouldn't it be the height of irresponsibility -- wouldn't it be the height of irony if the federal government -- for the federal government to go in the other direction. vote for the wicker amendment

and save the taxpayer the additional money that it will take to move to collective bargaining. the presiding officer: the senator from west virginia's recognized. mr. rockefeller: mr. president, how much time remains on our side? the presiding officer: four minutes and four seconds. mr. rockefeller: the t.s.a. administrator has a right to allow collective bargaining for t.s.a. employees through the authority provided in the original transportation and security act passed in 2001. when congress passed that, we came to an agreement that left the determination of allowing collective bargaining rights for transportation security officers to the t.s.a. administrator. i firmly believe that this issue should remain with the t.s.a. administrator. the current agreement was approved under the bush administration and approved by a republican-controlled house of representatives. i saw no reason to alter this compromise at this time. there are valid reasons to keep

the authority with the t.s.a. administrator. he works firsthand with the employees every day. the nature of his work is very hands on. and he's better qualified to determine the agency's mission, how it can be improved, with or without collective bargaining. he, really, more than anybody. on friday administrator pistole announced his intention to allow collective bargaining over workforce issues, but security an pay will not be subject to negotiation. most other federal law enforcement agencies, including others housed within the department of homeland security, such as customs and border control have collective bargaining rights. i don't believe the sponsors would question the dedication of these law enforcement officers despite their right to collectively bar gain. t.s.a. employees must follow civil service rules that prohibit the right to strike and allow managers to move forward, workers to different areas and roles in the event of an

emergency and security is needed. i cannot support this amendment. file it could negatively impact security if t.s.a. permits collective bargaining rights to improve employee retention. finally, this amendment is a security issue and one that is better addressed when a t.s.a. reauthorization comes to the floor. this is our problem. we're not talking about security here. we're talking about other matters. i urge my fellow senators to oppose the wicker amendment. i thank the chair and yield the floor. mr. harkin: how much time do we have left? the presiding officer: one minute and 3 39 seconds. mr. harkin: mr. president, i listened to my friend from mississippi talk about deficits and deficits and we have to be concerned about deficits. the first thing here on what they cannot bargain on is pay. that is not something they can bargain on. no federal employee bargains on pay, i might add.

so i don't know what that means. i mean, he's talking about deficits, but they can't bargain about pay anyway. and then talked about the f.b.i. and the c.i.a. and the secret service, that they don't collectively bargain. those agencies all deal with very highly sensitive national security information. what are we talking? we're talking about the people who check your bags. we're talking about the people at the screenings and that do the patdowns. but we're also talking about an agency that has one of the highest turnovers of any federal agency. i don't want a high turnover rate among those people at the airport. i want them to be highly skilled, highly trained, highly motivated. i want a good morale system there. everyone says it's one of the lowest morales, highest turnovers of any federal agency. giving these people the right to organize, bargain collectively on things that are not of national security measures. not pay, not measure procedures, but other things that make life

a little bit better for them so that they know basically what is the procedure for me being posted here, what's the procedure for working at 2:00 a.m. or 7:00 a.m. so they have a system whereby they know what's expected of them? to me, that is the way to build morale. the presiding officer: the senator's time has expired. mr. harkin: i ask for 30 seconds. i just gave him two minutes. the presiding officer: objection is heard. mr. harkin: i just gave him two minutes. the presiding officer: the time that was given to the other side was due to an error by the chair. i guess the question is on the wicker amendment, number 14, as modified. mr. wicker: i ask for the yeas and nays. the presiding officer: is there a sufficient second? there appears to be. the clerk will call the roll. vote:

vote:

the presiding officer: are there any senators who wish to vote or change his or her vote? if not, on this vote the yeas

are 47. the nays are 51. under the previous order requiring 60 votes for the adoption of this amendment, the amendment is withdrawn. the clerk will call the roll. quorum call:# quorum call: quorum call:

quorum call:

mr. reid: i ask unanimous consent that the call of the quorum be termed. officer sphe without objection. mr. reid: i ask that the senate proceed to the consideration of the paul amendment which is number 21, amendment number 21, there be 100 minutes of debate equally divided between senators paul and rockefeller or their designees, that upon the use or yielding back of the time, the senate vote in relation to the

paul amendment. that there be no amendments in order to the amendment prior to the vote and the mexico be considered and made and laid on the table with no intervening being a or debate. the presiding officer: is there objection? without objection, so ordered. who will yield the time? the senator from texas. mrs. hutchison: and the tile to be charged equally. the presiding officer: without objection. the clerk will call the roll. quorum call: mr. reid: snrp. the presiding officer: the leader. mr. reid: i ask consent that the call of the quorum be terminated. the presiding officer: without objection. mr. reid: i ask consent that if we have quorum calls during this period of time, that the time be charged equally.

the presiding officer: without objection. the clerk will call the roll. quorum call:

mr. rockefeller: mr. president? the presiding officer: the senator from west virginia. mr. rockefeller: i ask unanimous consent that the order for the quorum call be vitiated. the presiding officer: without objection. mr. rockefeller: mr. president, the impending paul amendment would cut the f.a.a.'s authorization levels for fiscal year 2011, 2008, $14.7 billion for the entire agency representing a near $3 billion cut from the administration's electrical of approximately $17.5 billion. that doesn't seem like a lot of money -- of course, it does, but let me explain. managing f.a.a. at the 2008 levels would result in immediate retrenchment of core functions to reduce operating costs. to wit, f.a.a. would eliminate

services and throw out all air traffic organization employees for at least 20 days. the primary service of the a.t.o. is to move air traffic safely and efficiently and that for a period of 40 days would cease. f.a.a. would implement a hiring freeze for the a.t.o. which -- air traffic organization -- which would force the a.t. o'to focus on major airport's with scheduled service resulting in service reductions, in particular to smaller and rural airports. which affects some of us. the aviation safety office would eliminate 680 employees through attrition. it would also furlough all 1,015 operational support employees, an average of two days each week. pretty hard to carry on, you know, three days and then three days the next week.

and that particular agency, aviation safety, is responsible for the certification, production approval and continued airworthiness of aircraft. and certification of pilots and certification of mechanics and others in safety-related positions. that's what this amendment would do. the f.a.a. would have to defer major next-general nation air traffic control system initiatives. that's extraordinarily painful. after all, we go back to our old story that i think it's -- is it mongolia alone? we're behind mongolia in this modernization effort. just a thought. and we -- in all of this we would be including next-generation network-enabled weather, data communications, systemwide information management, safety security,

environmental security, information tool set. this means accurate weather forecasting would go down and pilots would have less relevant information, resulting in increased delays and congestion, as aircraft would have a lot more difficulty navigating storms. weather is the associated cause of 70% of delays. much less accidents. it cuts to datacom would impact pilot-situational awareness and lead to degradation of air traffic safety control having an effect on safety. it would cut f.a.a.'s research and development and would cause the delay or cancellation of nextgen. i repeat, to cancel or delay nextgen . specifically, f.a.a. will terminate all related programs that were started since 2008, including the continuous

low-energy emission and noise program, which develops cleaner and quieter aircraft technologies, and alternative aviation fuels, safety research would also be impacted, including a one-year delay for research on continued airworthiness for small aircraft as we will as research on emerging technologies for large aincht specific office impacts, office of human resources, f.a.a. would furlough all employees for at least 46 days. furloughing a.h.r. employees will impose a significant hardship on their ability to provide human resource services to f.a.a. aviation safety and security hazard materials, all that have would be reduced. this means fewer inspectors for airlines, fewer parts certified as safe, delays in producing new u.s.-manufactured aircraft. office of the associate

administrator for airports would also be cut. this would mean increased risk of runway incursions and delays to technology that would minimize such risks, which have been widely reported in the press and are often not reported in the press. but, nevertheless, happen. the f.a.a. would implement a hiring freeze, which monks many things would -- which amongst many things would thread a loss of support staff in air traffic control towers and consequently controllers would pick up administrative duties and will have less time on the boards in front of them, the lights going off and on this. could lead to an increase in the number and severity of operational errors. we cannot make operational errors in the control tower. you cannot hand that off to other people. that is called "essential air safety." this a means fewer air traffic controllers and ones that are less focused on directing

airplanes. on the safety side and on the maneuverability side -- both would subside. elimination of all federal contract tower funding will effectively shift the cost of operating these towers to the effective airports or to state and local government. i don't know what good comes of that, since state and local government doesn't do that stuff. i could go through state by state of what the effect would be, but what it does is just a hand-handed approach to make cuts, and it is a very interesting thing about air traffic safety. it's highly sophisticated. it's compartmentalized. you can't just shift people from this to that as quickly as you can in other lines of work. lives are at stake.

homes on the ground are at stake. crashes are at stake. collisions are at stake. so it's all well and good to do something which appears to be cutting the budget, but when you're putting the lives of americans on the ground and in the air at risk directly, that strikes me as something we should not do. so i am extraordinarily unenthusiastic about this amendment and will hope that there are many eloquent speeches that follow me in this manner. i thank the presiding officer. the presiding officer: who yields time? a senator: mr. president? mrs. hutchison: mr. president? mr. president? the presiding officer: who yields time? the senator from texas. mrs. hutchison: i will take such time as i may consume and senator paul i'm sure will be here shortly. mr. president, the paul amendment does reduce the

aggregate authorized spending level to the amount appropriated in fy 2008, so basically it is going back to the 2008 levels. i am going to support the amendment because i think that we have to make a start at cutting back on spending in every area of government that is discretionary and where we can make responsible cuts. however, i do want to say that i think that we have to -- the better approach, in my opinion, would be to have an overall cap on spending at the 2008 levels and then pick the priorities that we must fund and take away the lesser priorities for government funding. i think we need a more measured approach on infrastructure

spending, and in the case of the f.a.a., i want to pointed out that the agency has -- i want to point out that the agency is funded through a mix of aviation trust fund dollars and general fund dollars. specifically, three of four main ncts the f.a.a. -- accounts in the f.a.a. budget -- airport improvement, facilities and equipment and research -- are paid for entirely by the aviation trust fund. the aviation trust fund is funded by revenue from various users of the u.s. aviation system, through taxes and fees on the industry. so all capital investment in aviation infrastructure is paid for by the users of that infrastructure. the fourth account, operations, is then funded partially by the aviation trust fund and partially from the general fund. so as we move toward conference, i think we need to make sure that infrastructure projects

that increase airport capacity, improve safety, increase efficiency of our aviation system and modernize our air traffic control system are adequately funded. this should be especially true when the revenues used to pay for these projects are paid for by the users of the aviation system. i am certainly committed to restoring fiscal responsibility. i think we have to choose the strategic places that we must invest to assure that our infrastructure serves the needs of our people. i believe congress would be much wiser to have an aggregate discretionary spending cap and then allow us to debate the priorities that would be funded under that cap. but that means business not as usual. it means we don't take each bill individually, each department and agency individually.

it means we set an overall cap for federal spending and then decide which places in which agencies should be well funded and which ones should take a pass for the present until we get our fiscal house in order. so i'm going to support the paul amendment but i do believe that we need to have a more systematic approach going forward and tbhawnd needs to be funded. and i do believe f.a.a., aviation security, aviation infrastructure and efficiency in our air traffic system should be funded. but i think we have to do it in a bigger picture than each individual bill that is going to go through here, and i ask my colleagues to think about a better approach going forward than this type of amendment. thank you, mr. president. and i yield the floor.

mr. begich: mr. president? mr. rockefeller: mr. president? the presiding officer: the senator from west virginia. mr. rockefeller: mr. president, i yield five minutes to the senator from alaska. mr. begich: thank you very much, mr. president. thank you, mr. chairman, and to the ranking member, i think the work you have done in this bill, as i said yesterday, is very exceptional on the time it's taken to goat where we are. i understand -- taken to get to where we are. i understand the amendment that's being proposed and the goal of it, and i have been one of these have supported the deficit commission that's brought forward some recommendations thousand manage this budget. i've supported multiple efforts on this floor to reduce and manage the budget in an overall scheme of how we move down to sustainability for our finances of this country. this is one bill that you have to take into account not only what is being proposed but what it does and what it will impact, and i'll just use from my state. you know, when you think about alaska, there's no question when it comes to air travel, there's no other state that has the kind

of rural and extended air travel than what we have in alaska. when you think about the issue i talked about yesterday on essential air service, there's 44 communities that are affected by the funding to ensure that people who are not next door to any airport, that aren't a few miles from an airport but in some cases from their airport to a hub might be 1,200 miles. so the -- the work and the resources of the essential air service is critical for us to not only conduct business, move people back and forth from communities for medical servic services, but really is the lifeblood for our communities. this amendment would literally wipe that out or reduce it at such a point that it would be impossible for us to make it economical for some of these airports to operate and some of these flight services that bring the only service to these communities to survive. when you think about nextgen, if we went back to the 2008 levels,

next gen was just in its -- next gen was just in its beginning stages. not that the federal government was anxious to get it done right away. the chairman may remember this, we had to push the federal government to move this forward. why? because it was the private sector that came to us, the people flieft sector -- private sector who came to us and said it is important that the federal government move this forward, expedite this resource, help us move this new technology forward to help save fuel, save time, increase capacity at our airports, make it a better business operation for the private sector airports. so when i see this amendment, my view of it is, it's a job-killing amendment. this wasn't a decision that the commerce committee said well, let's just move this up a few years because we think the federal government should do this right away. it's because the private sector came to us because they wanted to invest in this new technology but they're not going to make the investment until there's certainty from the federal

government on their part of this arrangement. so that's what we're doing. that's what we're doing in this bill. so this amendment from my view is truly a job-killing amendment. then i look at the airport improvements, and, you know, i was looking and i was listening to mr. chairman, you were talking about the contracted services. i quickly looked at the list that affects alaska. kodiak. kodiak is where the largest coast guard base in this country s. kodiak also has a contracted services tower. i don't know how that will affect the coast guard. i would be very nervous about what it might do. this type of amendment may be well meaning in the sense of how we all are going to sit here and it's going to be -- you know, i left the budget committee meeting to come here. the budget committee is where we're talking about how to manage this budget in a wholistic way, not nit-pick it, like maybe the amendment may be well-intended to try to get control of the budget but may not understand the impact. again, airport improvements is

another piece. now, i would challenge the individual who sponsored the amendment, i -- if he's been to alaska, great. i'd love to take him to a couple of those airports where the question -- as a matter of fact, there's a great tv show now, a reality show about flying in alaska. it is so dangerous to fly in alaska they to make a reality show out of it. so i would encourage those just to turn that on once and see why nextgen, new technology, which was pioneered in alaska, why it's so important. why this investment that the federal government's making is an important investment for the private sector to be a better tool are us to utilize for transportation in this country. again, airport improvements are another piece which in my state are critical. it could be everything from just refinishing a runway to just having a gravel runway, one that brings food and supplies and medical and moving people in and out. it's a critical piece of the equation. now, mr. chairman, i -- i'm like

you, i -- i came up with the phrase you used, you were less enthusiastic is the phrase i think you used about this amendment. i don't like the amendment as it is written today specifically around this bill. i am anxious to get to the bigger debate which i hope once this bill is cleared off, we get to the big debate of how we manage this deficit of this country, how we look at the long term. and i know i'll hear this is a start, this is the way we've got to start that. would make sense if this bill was started with that intent in mind. but in 2007, when this authorization expired, nextgen was just an idea. well, this is a new investment we have to make in order to make our air travel safer, more economical, save fuel, and respond to the private sector that has requested us to get off the dime, create certainty so they can make the stroassments make their business -- investments to make their business model more effective. so again, mr. chairman, i had no intention of speaking today. i was in the budget committee.

i third and i wanted to come down and say a few words. so again, i thank you for the time to allow notice say a few words -- me to say a few words from an alaska perspective. and again, i would just emphasize this amendment is a job-killing amendment. thank you, mr. chairman. thank you, mr. president. the presiding officer: who yields time? a senator: mr. president? the presiding officer: the senator from kentucky. mr. paul: everyone agrees that the f.a.a. plays an important role in air safety. i don't think there's any real discussion or debate on either side with that regard. my amendment calls, though, for having spending levels at 2008. this is actual what's going to be produced out of 9 house. house has already published their spending proposals and most of their spending proposals will be at the 2008 level. this is a small down payment on the debt. some say, oh, this is the wrong place to starkts but you've got

to -- start, but you've got to start somewhere. everybody says they're going to be for balancing the budget or tackling debt or doing this. you don't get there unless you cut spending. now, you can't create a situation where you make it an either/or situation; either we have air safety or we don't have air safety depending on a spending level. perhaps you can spend money more wisely. perhaps the job of a rej later is to find out how you spend money, how you find savings and how you make do with less f. we don't, we're never going to get out of this problem. the deficit is an enormous burden on all of, on our kids and our grandkids. the last election was about the deficit, about the mounting de debt. but the other side doesn't seem to have listened to this. they also need to understand what the deficit does to jobs. our debt, our national debt now is approaching our gross domestic product. that means our debt is about equal to what we produce as an economy for a year as our whole country. when it does, there are estimates that it kills the rate

of growth of our economy by 1% and costs a million jobs a year. this is from the debt. they're talking about what $2 billion will do within one agency. we're talking about what $14 trillion worth of debt does to an entire economy. 1% loss of growth and a million jobs a year. the debt, the national debt, is killing us. so we had an intervening election and a message was sent. the message was, listen to the american people. they're upintet passing this debt to -- upset about passing this debt to our kids and our grandkids, so we've got to respond. the president laid out his budget this week. do you know what this president's budget will do? the president's budget will spend $46 trillion. i'm not making that up. $46 trillion over ten years. that means to me and tells me that the other side didn't get the message. $46 trillion over ten years.

now, what does this mean? the debt when president obama came into office was about $7 billion, $8 billion maybe. we're now going to triple that debt if he wins a second term. the president will have tripled the national debt in eight years. his ten-year proposal will double the debt in just ten years. the deficit this year alone will be $1.65 trillion. the president has said, well, he's going to freeze spending. well, he's going to freeze spending and this tiny percentage of the budget. it's not enough. it doesn't do. it the republicans want to go back to the 2008 level, which i'm proposing here. it's not enough either. you're looking at one tiny sliver of the budget. today we're looking at one small program. the problem here is people are starting to recognize the problem of the debt, but they're unwilling to do what it takes to look at the entire budget.

you're going to have look at military spending, nonmilitary discretionary spending and look at entitlements. but you have to say every program has something good about it. everybody can stand up here and say we need nextgen. i want nextgen. if you're a legislator and have less money, let's find where we find the money. i proposed $500 million in savings by saying, you know what? when we build airports, let's don't make it be the union way or the prevailing way. let's have the market. that would have saved $500 billion. that goes a long way toward funding nextgen. another $400 billion to $500 billion is in the unprofitable airports that we're going to subsidize in this bill. there are savings to be found, but we never find them. in washington, what do we tend to do? if we want something, we add more money to the bill. there's always arguments for these programs, but we have to also understand what are the consequences of a $14 trillion

debt? president obama's 10-year plan that he released this week will change $14 trillion into nearly $27 trillion. the numbers are mindboggling. if we don't do something about it, it's a threat to our country. the president's own secretary of defense has said the number one threat to our national security is our debt. it's out of control. i don't think the problem is fully grassped by either side. i know if we're here today and can't come to an agreement to save $2 billion. think about it. i'm asking to save $2 billion out of a budget o of $3.7 trillion. it's such a small number. they might argue, well, it's such a small number, why do it? if you don't start somewhere, how will you balance the budget. how will we get out of this mess if we're not willing to save $2 billion? it's a start. it's a down payment. it's how we can say to the

american people, we heard you in november, we realized we cannot pass this debt on to our kids and grandkids and that something has to be done. but instead what we get from the other side is that we make this into, well, the other side's not for progress. they're not for developing airports. they're not for g.p.s. systems at the airport. it's not that simple. i'm for all of those things, but i'm for saying, let's step up as legislators and say, how do we find the savings in the existing budget? because the alternative is, how are we going to pay fo for $14 trillion in debt? how are we going to pay fo for $26 trillion in debt that will be added if the president gets his plan. you can pay for debt in a variety of ways. you can tax people. you can tell by the movement most people think we're taxed enough already. the average taxpayer is often paying 40% to 50% of income. the average taxpayer is paying

more than they do for food, clothing and transportation and all their expenses, they pay in taxes. i don't think the general public wants to pay taxes. the other way is to stick your head in the sand and borrow. that's what we keep doing. it threatens our very economy and threatens our country. how does a country also pay for debt? are we going to default on our debt? no, we'll ultimately print money to pay for it. that's downside to that too. countries have ruined their currency. germany in the 1920's destroyed their currency. if you look at the curve to what happened to the currency in the 1920's, it happened over a period of six months. you had bread that sold for 100 marks and then a billion marks. the money became so devalued. it was burned as a fuel. people went around with a wheelbarrow full of money. workers demanded to be paid two and three times a day. that's what happens to you can't

that has a massive debt. you can't tax people enough. greece went through default recently. as greece went through default, they tried to pay taxes, everybody was paying too much already, everything was forced into the underground and you could raise the tax rate 90%, and you don't get the money. the money just went underground. you can print the money. if you print the money, you destroy people's savings. you steal from those who have saved and take the value of their dollar. so this bill really is the beginning of the the debate. it's the first bill we've had to come forward with a new congress that talks about money. it's a very small downpayment. i'm asking for a $2 billion -- a little over $2 billion in savings. it's a 2008 levels. it's what the house is asking for. you have to realize also what happened between 2008 and 2011. do you know how much spending went up? spending went up by 24%. spending is just out of control in this city and we have to

realize the consequences. if we stood up here and had an argument over whether nextgen is a good thing, there's no argument. it's a good thing. we should have g.p.s. we have g.p.s. in our cars, for certain we should have it in our airports. i'm all for modernizing airports. what i'm saying is it's irresponsible as legislators to stand up here and say more, more, more. we're going to spend more money. we can't do it. and the thing is it's not just the program. we're not talking about whether the program is justified or whether we should spend money. we're talking about what are the consequences of a massive he debt. i think that's where we are. the american people know this. they instinctively know this. i think there's a great danger to not stepping up. i wish the other side came back and said, why don't we split the difference and try to sav save $1.5 billion. that's what the compromise would be. if they don't want to sav save $2 billion, why not sav

save $1.5 billion. we need to save money everywhere. it can't be every program you want to cut is somebody else's program. and then when it gets to be your program, you won't cut it. everybody has a self-interest in their program. they've got an interest in their particular spending. so i'd say this is a small upr payment -- is a small downpayment. this is way to say to the people in the election, we know this is a problem. i urge my fellow senators to vote for this amendment. it is something that has nothing to do with quality. it has nothing to do with whether you believe in air safety. it has to do with whether or not you think the debt is a problem, whether or not you think the debt is a threat to us as a country and whether or not we're going to step up and do the responsible thing. mr. president, i yield back my time. -- at this point. actually, i ask unanimous consent to allow senator

rockefeller to speak and i'll reserve my time. mr. rockefeller: mr. president, i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

quorum call:

mr. durbin: madam president? the presiding officer: the senator from illinois. mr. durbin: i ask consent the quorum call be suspended. the presiding officer: without objection. mr. durbin: madam president, what is pending before the senate at this moment? the presiding officer: the amendment of the senator from kentucky. mr. durbin: it's my understanding, madam president, that this amendment by the senator from kentucky would establish a new authorization level for the federal aviation administration, which would revert to the level of 2008. i think it's worth noting that this may cut spending in some regards, but i don't believe it is a wise decision by the senate to move in that direction. our world has changed

dramatically since 2008, and the world of aviation even more so. the aviation industry is not the same today by any means. we debated the f.a.a. bill here on the senate floor in 2008, and at that time oil was $120 a barrel and the airline industry was in the doldrums. eight airlines either completely ceased operations or filed for bankruptcy that year. that cost 11,000 airline-related jobs in america. airlines that weathered the financial storm lost millions of dollars because fuel costs were going through the roof. united airlines, based in chicago, which i'm honored to represent, reported a a $537 million loss that year, driven by $618 million increase in fuel expenses. the airlines reacted to this market reality in 2008 by reducing capacity across the industry by 25%. flights were reduced at airports all around the country. the point i'm trying to make is if you take a snapshot photo of

the aviation industry in the year 2008, you would find an industry devastated by high fuel prices still recovering from some of the episodes that followed after 2001, and dramatically cutting back its services across the united states. now we have a suggestion by the senator from kentucky on the floor to return to that level of spending by the government when it comes to our responsibilities related to the airline industry. i don't believe that that is a thoughtful suggestion, because it doesn't reflect the reality of where we are today and what we are likely to see in the future. today is a different day. the airline industry is seeing a major rebound at this point in america. airlines reported a $15 billion profit in 2010, and the industry is adding jobs. airline activity is up considerably compared to three or four years ago. today the f.a.a. announced that their forecast for aviation traffic for the next 20 years

were too low. the f.a.a. now predicts u.s. airlines will reach one billion passengers per year by 2021, two years earlier than last year's prediction. so the obvious question is if the airlines are now going to move forward into a period of expansion with more flights, can we afford to say to the american public and the flying public from around the world as they come to the united states that we are going to dramatically cut government investment in aviation? what the senator from kentucky would have us cut, unfortunately, is not the fluff and the extras. it goes to the heart of the responsibility of the federal aviation administration. madam president, you and i and our colleagues get onto these airplanes every week. we put our fate and future in their hands. trusting that we have a qualified airline crew, a plane that is ready to fly and air traffic controllers that will move us safely from one spot to

another. much of that is being done by those who are employees of the airlines, but a lot is being done by the employees of the federal aviation administration. what senator paul is suggesting is that we in a time of great expansion in this industry need to cut back on the government role. it means fewer dollars and equally important, fewer professionals who would be inspecting these airplanes to make sure they're safe. fewer air traffic controllers, less of a role by our government in making sure that the airlines are operating in a safe and efficient manner at a time when the aviation industry is expanding. senator paul's suggestion moves us in the wrong direction. if there was ever a need for more vigilance, more oversight and more professionalism at the f.a.a., it's now. cutting back to 2008 spending levels will take away the professional men and women that make the f.a.a. the fine agency that it is. we signed the last f.a.a.

re-authorization bill into law in december, 2003. that bill expired in 2007, about the same time congress was considering the fiscal year 2008 spending levels of the f.a.a. we have now extended this law 17 times, lurching forward each time, waiting for this moment when the bill came to the floor. congress used to re-authorize the f.a.a. every two years, just to keep up with a changing aviation industry, and to make sure our government agency working with the airlines was on top of its responsibilities. now we have been stuck with the same authorization bill we crafted nine years ago, and the senator from kentucky with this amendment would have us go back to spending levels of 2008. almost all senators agree that we need to do more than make sure that we have the best men and women working for the federal aviation administration. we need to talk about a new generation of air traffic control. almost all senators understand that we need to update an air traffic control system that is

really based on world war ii technology, technology from the 1940's 70 years ago. it's good but it could be dramatically better. this bill before us makes that investment in a technology known as nextgen. these investments move us from radar-based systems to a g.p.s.-based system. it 4 is incredible to me that i could stand on the floor of the united states senate making this speech while i carry a cell phone which has a g.p.s. device which some people could use to determine where i am at this very moment in time. and yet when i board an airplane to fly to chicago, this technology is not being used. instead they are using radar. not an ancient technology, but a very old technology. if a g.p.s. is good enough for my cell phone, if it's good enough for so many other applications like the buses that travel back and forth on the

streets of the city of chicago, why don't we have it on airplanes? because we've never moved from that old technology to this modern technology of g.p.s., using satellites to determine exactly, pinpointing where the planes are at every moment. the f.a.a. bill before us moves us in this direction. the paul amendment by the senator from kentucky would basically eliminate our development of this new technology. the amendment moves us back to the past, and it doesn't save money. the paul amendment, in fact, would basically deny us this new technology. the f.a.a. administrator under president bush, marion blakey was asked what she thought about the movement to roll back funding to the fiscal year 2008 levels, the paul amendment, when she was administrator. she said it's false savings. in the long run it will just cost you so much more. she knows and we know we have to move to g.p.s. from radar to make it safer and more up to date. senator paul of kentucky says

let's stop talking about the future. let's focus on the past. can you really afford that when it comes to the aviation industry, where we entrust our lives and the lives of the people that we love every single day on these airplanes? ms. blakey said rolling out the nextgen system by 2018, which is the goal of this bill, would save $22 billion mostly because fewer delays would mean less fuel burned. but reducing f.a.a. spending to the fiscal year 2008 levels, as senator paul suggests in this amendment, would amount, as marion blakey noted, to a cut of $1.3 billion, the amount being spent this next year on nextgen. it would really roll back and stop nextgen, this new technology, before we can move forward with it. this amendment is not about saving any money. this amendment is about cutting corners in an area where we should never cut corners. when it comes to the safety of the american public boarding airplanes every day, you don't cut corners. you make sure you have the best

professionals working for the agency and the best technology being used by airports and airlines as well. i'm afraid senator paul's approach may have some appeal to those who would cut blindly but if you open your eyes and look at it, this is a bad move, a move which invites terrible consequences. we need to keep america investing in modern technology. we need to expand our national airspace safely and efficiently. i urge my colleagues this afternoon and this evening to vote against the paul amendment. i know his goal is to save money. this is money that needs to be spent for the safety of the american flying public. madam president, i yield the floor and suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

ms. cantwell: madam president? the presiding officer: the senator from washington. ms. cantwell: madam president, i ask that the quorum call be dispensed with.

the presiding officer: without objection. ms. cantwell: madam president, we're out here talking about the f.a.a. bill, a bill to improve the transportation system in america dealing with our airways, and there's a lot of great things about this legislation, everything from a passengers' bill of rights to improvement in airport infrastructure that many of my colleagues have been out here on the floor talking about, even the presiding officer, articulating why it's so important to make improvements in our ground-based system. practically every elected official in america knows airports are a cornerstone of economic development. if it's falling behind, if it's dilapidated, people are going to go somewhere else for their economic development. improving the ground transportation system as part of the airport infrastructure is critically important for improving jobs in america. so i know that my colleagues are out here offering amendments, and the pending amendment is the paul amendment, which is a very

concerning amendment from the prospects of what it would do to cut the innovation that we're about to implement in this f.a.a. bill, the long-standing improvements to the federal aviation system that have to do with taking our airways from a 1950's technology to really a 21st century technology that improves both the situation for the pilots in the sky and the efficiency of our system and it improves and coordinates the communication system on the ground. all of that also increases jobs in america, high-wage jobs, it puts america back in the drivers seat in the development of key technology. those are the kinds of jobs and manufacturing that we want to be creating in america. so when my colleague from kentucky comes out and offers a proposal to basically slow down the implementation by the f.a.a. on key employees in these areas

that are part of the technology and infrastructure, what you're really going to do is slow down high-wage manufacturing jobs in the united states as well. now, this legislation with both the improvements to the airport infrastructure and what is with the nextgen system going to take place with new technology, we are talking about thousands of new jobs in america. and we certainly want those manufacturing jobs to be here in the united states and to get the benefits of this nextgen system. so i wanted to take a moment to talk about that nextgen transportation system and why it is so important to us in creating jobs, because when my colleague may not realize, from kentucky, that you actually cut people and you cut the number of programs that are geared towards this like in the nextgen system.

you're talking about the r.e.d. program could be reduced by as much as $25 million. funding for areas like how to do self-separation, weather technology in the cockpit, weight turbulence. i don't know about the presiding officer, but i fly a lot back and forth across the country almost every week, and some of the pilots i've been flying with say this has been the most turbulent weather this winter that they've seen. i know personally i want to know as much about this and the latest technology that can help us. but under this proposal, estimated loss of jobs and cutbacks in grant programs and targeted areas could mean the loss of expertise in r&d critical for our flying air transportation system and safety. what are we talking about in the nextgen system?

we're talking about improvements in flight performance and improvements in how we use fuel. what i like about the nextgen system most is that it reduces total flight days by 21%. that's not the day we pass the bill or when the president signs it, but over time the implementation of this system -- which again is a very old 1950's system. it's basically radar, so it's taking a picture in the sky and saying here's where planes are and having air traffic controllers talk to those planes and control, and pass off movements, control where those flights are going. in fact, i would say to the presiding officer, i don't know if you've ever played flight simulator or had anybody in your family, there's probably more certainty and predictability in the movement in flight simulator

than in that radar system that we have today. but we're going to change that. what this does is by allowing for more accurate tracking and interface and information, the ability to have flights fly on a more direct path, to be able to coordinate better with flights and transportation and to have that system totally integrated on the ground. so even those kind of flight delays that happen on the ground at airports where you're waiting and taxiing at the airport and this flight is here and that flight is there, all of that will be more improved. in fact, that improvement, the estimates are will reduce carbon dioxide emissions by the air transportation system by 12%. that's a positive aspect of moving forward on next generation. obviously if you are improving flight days by 21%, i guarantee you you're going to be improving the passenger experience. when they know that we are trying to get to them where they need to go on time in a better

coordination fashion and saving it, really helps us. but it also is going to improve the ground transportation system. if you think about that, our ground transportation system is always in need of coordination. we've actually had some accidents on runways. people have heard those in the news over the last several years. so what this does, when you, again, have a g.p.s. system, the g.p.s. system is coordinating that, so you have better coordination of the taxiing of planes and airport vehicles and the entire ground transportation system. that should not be minimized. the fact that we can imagine how a g.p.s. system can give us better data in the sky is important, but there is a lot that is lost on the ground with flights and the coordination of flights. if you can imagine one of my personal pet peeves, when you fly all away across the country and you end up at your destination after five and a

half hours and no one is there to meet the plane or it takes an extra ten minutes because somebody didn't know the plane was at the gate. all of that will change with that system. you know where the plane is and when they're going to be at that gate, how long it is going to take to taxi and how long it's going to take to get there. that is a great improvement in this system and something that shouldn't be underestimated. the issue of safety is also of critical importance. the fact that safety and any kind of improvement to our system has to be the paramount issue, to me that is what nextgen delivers. it delivers better air traffic controller information. it means there is no routing passoffs as you do now, when you're flying between cities at some point of time seattle is tracking you. when i leave seattle, at some point in time it's handed over to another sector and then to another sector and another

sector. this situation is going to have accurate information all the way across. no passoffs or challenges with pass-offs. and it's going to give the pilots themselves better situational awareness. it's giving them more information about how they fly and about the information on the runway. and so that's critically important for this system. we want safety. we want safety. we want advancement. so in a lot of ways my colleague may be we will-intentioned in trying to come and resay let's reduce our budget. but when you look at these numbers and look at what the next-generation system is going to deliver, you don't want to cut that out of the government system. these are things that are going to give you efficiencies. they're going to help our economy. they're going to create jobs and they are going to improve the safety of air transportation travel. and, madam president, i can tell you, i certainly wans to improve -- i certainly want to improve

the safety and situational awareness of pilots. i mentioned fuel efficiency. and i want to talk about fuel efficiency for a second because i know that fuel efficiency is an issue where we, you know, the flying public may think, we will, why do you want planes to be more efficient? the more the transportation system uses fuel, obviously the more expensive we have seen, you know, gas prices going up; it means our transportation tickets and prices are more expense syver. so if you can start driving with this next-generation system, more fuel efficiency in dwriewr air flights by 5% or 6%, then you are going to help keep the efficiency in the transportation system. this pilot program on something like next-generation was done by southwest airlines in a pilot project in texas. and it actually demonstrate add 6% fuel savings for flights

between dallas and houston. by that i mean it showed how giving pilots more information, being allowed, because of a satellite system, like apreach towards transportation instead of radar, they are able to fly a more direct route from takeoff to destination. that efficiency translates into savings in the fuel cost, and it alone is a very, very important aspect to the system. so the net-net of this is, high-wage jobs for us in this particular sector, and when you think about this, it's high-wages jobs in engineering, in software development, and other high-tech workers that are part of developing this system, and it is in the jobs for the flight crews and maintenance and basically everybody who benefits from the fact that we have a

traveling public and tourism in our economy. so, i hope my colleagues will turn down the amendment by the senator from kentucky. all of these things are very, very positive aspects of the next-generation system and the improvements to our air transportation. this amendment would cut the viability of many of these programs within the nextgen system and the jobs that can be created from this particular legislation. it is definitely long overdue, something that the public is expecting from us. i mentioned, madam president, that there is a passenger bill of rights here which in and of itself is a very positive aspect of the legislation, giving access. anytime there is a delay on the runway that you have to make sure that there is access to food and water and necessary medical treatment and basically the department of transportation

cacan issue fines four fine fore of airlines. i know the traveling public will love this aspect of the f.a.a. legislation. so i hope that we can dispose of this amendment by my colleague from kentucky and move on to passing this important legislation. it is about jobs. it is about safety. it's about fuel-efficiency. it's about on-time arrival. and it's about not gutting this legislation when it's needed most to be passed by this body. so, i thank the president, and i see my colleague from washington is also here to speak, and i will turn the floor over to her. mrs. murray: thank you, madam president. madam president? the presiding officer: the senator from washington. mrs. murray: madam president, i ask for unanimous consent to take ten minutes of the republican time, unless a republican senator comes to the floor on the remaining time on this amendment? the presiding officer: without objection. mrs. murray: thank you, madam president. madam president, we are here on the floor debating an amendment

by the senator from kentucky that is very important for the american public to understand. everyone agrees that we've got to take some smart steps to cut waste and reduce our debt and deficit. but cutting back doesn't mean cutting blindly. it doesn't mean indiscriminatetory cuttinily cug jobs. so make no mistake about it. the paul amendment that we are considering, that we'll be voting on shortly, directly impacts the safety of air travel in this country. we all know the f.a.a. has a very specific mission. it is responsible for keeping air travel safe. it overseas the safety of our airline operations. it certifies the equipment they use to meet safety standards. it's responsible for the air traffic controllers that guide our planes. and it makes sure that the pilots that are responsible for

our safety are fit to fly. that's what the f.a.a. does. but under the amendment that we're considering this afternoon, the f.a.a.'s ability to do that job would be dramatically hampered. because under that amendment, the f.a.a. would lose hundreds of its safety inspectors adds would have to use furloughs to reduce the work hours of its entire safety inspector work workworkforce. the f.a.a. controls air traffic every hour of every day. under the paul amendment, the f.a.a. would have to furlough its air traffic controllers for significant periods of time because we wouldn't be able to afford to pay for the controller work fuss to make sure --workforce to make sure there's safety in the skies. it would mean stretching thin a work nares bears the burden of keeping millions of air treaferls safe every day. the paul amendment would force the f.a.a. to continue controlling air traffic with

outdated equipment. that's not what we should be doing today. we know the f.a.a. is currently in the midst of a long-term initiative called nextgen that the senator from washington just talked about to modernize our air traffic control system. it will increase the capacity of our aviation system. it will reduce delays and cancellations that everybody knows is hampering our air traffic right now. it saves fuel, and it lowers emissions. it is a modernization effort that is long overdue. you know, right now our air transportation system still relies on radar technology that was developed during world war ii. that's right. if you're flying today, you're relying on radar technology that was developed under world war ii. the cell phones that are in everybody's pockets make use of satellite positioning, but we still haven't moved the f.a.a. to a satellite-based system that could guide our planes with increased efficiency. every one ever us use computer

networks every day in our lives, but we are still making the investments to move the f.a.a. to network-enabled operations that will help the agency coordinate more effectively, with homeland security and the defense department. we all rely owrn blackberrieber. the f.a.a. still relies on voice communication. if you're on a flight and listen to your head phones to the traffic that the pilot talking to the air traffic controllers and you know they step on each other, you know the system is not efficient. we will, nders the paul amendment that's being offered today, that entire modernization effort would face significant delays. with goals for reduced delays in fuel savings in sierkts we believed setting -- stepping on the brakes. and ironically, madam president, that would increase the cost of

these nextgen investments over the long term forcing all of us as taxpayers to put in more money to reach those necessary goals. madam president, this amendment would not only impact the safety of our travelers in this country, it would create a major impact on our efforts to create jobs and boost the economy. i told you, this amendment would furlough or eliminate the jobs of workers across the country, and they're just not nameless, faceless bureaucrats. threes people who are air traffic controllers who are right now controlling the planes in the sky as we speak. these are the safety workers who are responsible for keeping watch over our airlines and certifying our pilots to make sure that plane you're flying and any repair that's made is done correctly. they are the researchers that are working to find cleaner and quieter aircraft technologies and alternative aviation fuels. but this amendment wouldn't just impact those workers, who we all rely on; and that's because when

we're forced to continue flying with fewer air traffic controllers in the tower and with older technology, we are going to face huge delays and inefficiency that will lead to billions of dollars in lost revenue. ask anybody in the hotel business or restaurant business or tourist business what happened after 9/11 when our air traffic was shut down. madam president, the impact on our economy is huge. so we need to make sure that when we make cuts to our budget, we do it wisely. and the paul amendment that's before us that affects our economy, affects jobs, and critically affects the safety of the american public, that's not wise or responsible. you know, the most recent statistics show that civil aviation accounts for about $1.3 trillion in economic activity in this country. even more importantly, aviation provides jobs for hardworking

americans. just a few years ago, 121 million americans were -- 11 million americans are employed in the aviation-related field. they earn about $400 billion. madam president, this is not the time to put this vital job sector at risk by cutting back on our efforts to modernize and innovate. and we should never be willing to put the safety of our skies and our airports and americans at risk. this amendment is a misguided attempt at providing savings that comes at too high of a cost. we all know and we all agree that we need to be prudent about our spending, but we can't undermine the f.a.a. as our first attempt out here and put the american public at risk. that's not wise. that's not prudent. it's not what we should be doing. so i urge the senate to consider the very real danger this amendment poses to our safety and our economy and oppose this amendment. thank you, madam president, and i yield the floor, and i suggest

the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

quorum call:

mr. nelson: madam president? the presiding officer: the senator from florida. mr. nelson: i ask consent to lift the quorum call. the presiding officer: without objection. mr. nelson: madam president, i ask consent to take one minute of the time remaining allocated to the other side of the aisle. the presiding officer: is there objection? without objection. mr. nelson: madam president, i can say it in one minute. why do we not want to savage the f.a.a. budget, cutting millions and millions to go back to the 2008 level? simply this -- it's safety of the public flying. the airways are getting more

crowded. the delays on the ground, on the airports are getting longer. that's the whole idea of creating a new system of air traffic control in order to handle more traffic safely by having instruments in the cockpit that operate off our constellation of satellites that can keep the separation between airliners, can fly more efficient, direct routes and it all be coordinated instead of through radar from the ground. that is the whole purpose of the updating of the f.a.a. air traffic control called the next generation of air traffic control. if this amendment is passed, al of that is savaged and that is not where america should be

going. i yield the floor. mr. kyl: madam president? the presiding officer: the senator from arizona. mr. kyl: madam president, i want to commend senator paul for his diligent work to try to bring spending in line with our nation's fiscal realities. his amendment reduces the overall authorization level for the federal aviation administration to $14.71 $14.719 billion. that's the authorized level for fiscal year 2008. that's down from $17,526 billion, which is proposed under the 2011 bill. to put this in perspective, it's a 19% increase in just three years. 19% increase in three years. if we continue to have those kinds of increases, it's not

going to be sustainable, given our large and growing debt. and holding spending to 2008 levels is really not so outrageous or unworkable, as has been portrayed. by reducing only the -- the top-line amount, the amendment provides the secretary of transportation with the necessary discretion to make the appropriate reductions to the related f.a.a. accounts. not all of them, for example, are safety accounts and so priority could be given to those matters. now, there's an argument that could be made that since this is an authorizing bill rather than an appropriation bill, really the overall spending levels don't matter. but authorization bills do establish guideposts for it is appropriations. and in this case, the spending limits reflect how much will be appropriated out of the airport and airway trust fund. additionally, a portion of the f.a.a.'s funding comes from the general fund of the u.s. treasury. now, in posing -- imposing

spending cuts to this f.a.a. authorization bill also i think poses a tiny but i think necessary signal to other members of the body, the administration and the fblg markets thafinancialmarkets thas is prepared to begin dealing with our pending budgetary catastrophe. the simple fact is that the united states is $14 trillion in debt and is running an annual deficit of $1.6 trillion. our record level of debt is equal to 45,500 people -- $45,500 per american citizen and $127,500 if you just count the taxpayers in america. and each day the u.s. pays another $1.273 billion in interest alone on this debt. to be clear, the amendment could result in reduction of some f.a.a. services. this is a reality that setting

the tough spending priorities will cause some services potentially to be trimmed and certainly unnecessary functions to be eliminated. but i don't think the debate over this amendment can occur outside the context of the difficult spending decisions that we're going to need to consider the next several weeks. we literally have to start somewhere, and almost everywhere is going to require some sacrifice. the house of representatives will consider cuts to the f.a.a. funding levels this week and likewise, this body will be required to do the same. so i appreciate the work that senator paul has done and hope that my colleagues will strongly consider supporting his amendment. madam president, i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: