.. >> senate republican leader,

mitch mcconnell talk to reporters about negotiations to raise the debt ceiling. much time as he may wish to consume. the presiding officer: without objection. mrs. boxer: mr. president, yesterday the senate ethics committee voted unanimously to committee voted unanimously to >> mr. president, yesterday the senate ethics committee voted unanimously to release the special counsel's root port regarding the'seg actions of for senator, john ensign. to the committee also voted unanimously to refer several thd findings to the department of justice into the federal election committee.eve that

for election commission becauses he had reason to believe that senator ensign violated laws within their jurisdictions. i want to say from the bottom os my heart, the senators wholoor participate in this investigation, many whom are in the floor today.y. my vice chairman, the extraordinary theater, senator isakson. and when i say later, i need a a leader on the committee and i consider him to really be a cochair with me. and senator robert who has been on this committee a long time, and a who has a sense of history and a sense of levity, pragmatism and cooperation. to i want to note the participatioc

of chair brown, who came on this committee and began this journey with us in this very importantsr contribution. vy senator british who brought with them a various small vehicle ano i went to paint him and what to say a special word of thanks toi senator cardin who sat in on this case because senator pryor relationship and senator ensign had to recuse himself.e thank senator cardin, we thank you so much for coming in and focusing on this case and i just have too say that i am so grateful to have really been hired and collaboratively all were durings this 22 month investigation. i say and i mean it was an honor to work with my colleagues.

it'sd nonpartisan and its actios are bipartisan. that is so important are particularly during these very polarized times and also because this was such a long and reasons. i want to be clear about why they are releasing the report to the public and why senato isaacs and and i are addressings the senate today and if any of her comments, i hope they will do so. while senator ensign's resignation ended our investigation before the s nextt phase, which was the adjudicatory phase come the trial phase, it did not end ourr profound responsibilities to the united states senate, to our laws, to our rules, to our constitution and of course to the american people. article i section five does to-a

the constitution of the united states says quote each house may determine the rules of the proceedings for distorted behavior and what therence of concurrence of two thirds senate rules, does give the ethics committee the responsibility to investigate alleged violations of last,du rules and improper conduct, which may reflect upon the senate. that is a quote from our rules.s finally, ethics committee rules make clear whenever it's members have reason to believe, unquote, that a violation of law has occurred we shall unquote repore it tor proper authorities. let me say that again. ethics committee rules make it of a committee of reason to believe that a violation of lawr has occurred, we shall report it

so we have a solemn responsibility indeed. it's actually a mandate to refer possible criminal or civil to violation to the department of e justice and the federal election commission and that is the weweo have done today. we we also have another responsibility and that is tobra tell the american people what we believe laws and rules have bee. broken and comdex has been breached and that is what we have done today. cou bruce pratt speaks in great detail about confinement andtod. that has been released today. these findings are so disturbino that had senator ensign notthat resigned and had we been able to proceed to the adjudicatory phase that the evidence of annator ensign's wrongdoingubst

would've been substantial enough to warrant the consideration of expulsion. the harshest penalty available to the ethics committee and the th's why whe senate. resign, that is w thy when former senata ensign resigned, the vice-chairman and i put out a statement and we had we had madq the appropriate decision, unquote.pe i want toci give you the findins of the special counsel. one, substantial crediblee evidence that senator ensign inspired to violate doug hamptot plan. two, substantial credible evidence that senator ensign aided and abetted mr. hampton violation of the post-deployment contact ban. three come in very substantial credible evidence that an editon and false and misleading to the federal electioned commissionssn regarding the $96,000 payment

made to the him since.tial for her, there is substantial credible evidence that the $96,000 payment to mr. hampton violated federal campaign finance laws. senor five, there is substantial credible evidence that senator ensign violated a law and a senate rule prohibiting unofficial office accounts.credi credible evidence that senator n ensign submitted sporulation of documents and engaged in potential obstruction from justice. by then, there is substantial credible evidence that senator ensign discriminated on the basis of gender. edible he, there is substantialgn engag credible evidence that senator conduc ensign engage in improper inc, conduct reflect in on the senate

policies, britain and a manual. serious findings in the speciali report are the culmination of an extensive 22 month investigatioo in the basis for the committee's matter to the list and the chair federal election commission.itto as chair of the senate ethicstsf committee, i'm proud to report to the senate that are committee and staff of special counsel has been fairth and thorough. we depose over -- excuse me, we deposed or interviewed 72we witness. spp we issued 32 subpoena for documents. we reviewedwe more than half a a million documents, including are large number that were initially withheld from the committee and none of this would've been possible without the very hard work done by the staff of our committee, our personal officesl

the menfolk reports of them. the special counsel who is debt of extraordinary, who would operate part out of gratitude and i particularly want to thank the staff direct your in chief counsel of the ethics committee and his team. they were focused in the search for the truth and we believe they found the truth. i also again want to personally thank a special counsel and her team. her our founders gave congress responsibility to ensure thaturt its members behave ethically. we do this -- the ethics committee tries to do this i working to prevent violations oi rules for months been possible. we try to work withor colleagues before they do something they shouldn't do. we try to train colleagues sot

they understand what we mean when we say don't bring any u shame upon t the senate.ad and then if something bad happens, we get a fair hearing, we might sanction them and we do when necessary. that this isn't an easy task, to but every member of the ethics resibili committee is committed to fulfilling our critical btisan responsibility and a thorough, fair and bipartisan fashion.viod what senator anson resigned, he said and i quote, i have not violated any law, any rule or standard of conduct, unquote. i want to go on record as i chairman of the ethics committee to say how strongly i disagree with that statement. let's be clear. it was senator ensign's actions outside for the ethics complaint filed against him. ensign's action nensign's action that led to a 22 monththics onvestigation by the ethics ledt

committee and it was senator ensign's action that led to the berries.ort were i needs and referrals in the to t report released into the public today.re the committee believes thate every senator should read this report very carefully. b let me say that again. the committee believes that every senator should read this report very carefully because it is a cautionary tale. act it shows that our actions, all of them have consequences foror so, for families, for ourn. nation. it shows we must ensure that e every actionve we take is within the law, a the rules in the appropriate standards of conduct.nal and in my view, if i could say my own personal view, it shows s something else. and that is, when you are in a position of trust and power, don't abuse it. don't misuse it because people

can get hurt very, very her. we cannot violate the laws or rules that we set for others, including rn staff. by we must always lead by example, not by words alone.enate this case was a sad chapter fore tee w senate, but a firestarter chapter for those whose lives were saved to and destroyed by . his actions. the i want to thank the senate for commit pleasing its trust in thete ethe committee. mr. president, with that i would yield to the vice chairman of the committee, when i consider my cochairman, senator johnny am set. >> thank you unamended chairmand mr. chairman, on certain equations are the life of a public official, one is called upon to make difficult decisions and unpleasant ones, such as the case of the six members of themt united state ethics committeet's

today. though we recognize it's essential, that the institutiont the senate to pass his but allnd citizens must live under must also enforce the laws and rules of standard and conduct, whichbt we impose upon t ourselves. fute it's a song responsibility but important to the integrity and future of this is due to shame. the senate ethics committee looks upon itself as an advisory board and a source ofmemb information and counsel to our s members. we asked members to come to usel when there are questions about a potential ethical violation of a decision or even some paint made in passing be trivial.e our sjob is to make sure, in oo case, that everybody has a question gets an answer and no one unwillingly gets caught in an ethical situation. but it is also ourlso our responsibility would think their filed to follow up on complaints and if we find merit, to enter an initial investigatory periodf

of time, which at that a information there is enoughatioo likelihoods that violation has a occurred, it will ultimately goy to an adjudicatory phase and the finally a decision on the floore of the. senate.ituati i it is rare and i can tell youn personally it's a situation i insulted again.it bod but as i said, it's an essential process to the integrity of thee body. to when a particular complaint and questioned in the case came toc, us it was like any other case reviewed on an initial standpoint, determine iowhetherr ,ot it even merited an investigation. after the initial investigation determined he did merit that, jb the senate staff did anet overwhelming job of getting post information and evidence gathering testimony to how this getsio repositioned the beginnig to make a decision where he can go further in the case. o we didn't rely just onc ourselves. we sat forensic experts and oved computers and technology so over 500,000 documents that wereced d

what we were dealing with and how it was dealts with. a we went to the case of hiring at special counsel, which is a weird thing for the senateevidee ethics committee to do, but wasi essential because of where the y evidence and testimony was leaving the committee. i want to say at this point in s time that i have known a lot of lawyers in a day, once i'vetable hired s fomeone say that on they other side of the deposition oro table from. i've never known anybody more cl professional visibility i admirr more than carol elder bruce and i want to commend her on the floor of the senate today.mittih it was a report which we are also submitting with the referrals today that indicates we have looked to see there wast reasonable evidence to conclude that a violation may have occurred. the ultimate decision on that will be up to the united states department of justice and willen be up to the federal c elections commission. the report clearly indicates the senate committee did not act on what cha it thought or an opinid

your brand. it acted on facts determined through hundreds of interviews,t 500,000 documents that were com examined and testimony that came to our committee. it is the hope of the chairman a and myself and each member of se the committee that every member recognizes the senate ethics committee wants to be a source of information, advice and inst counsel to see to it this the institution always rises to the occasion is the most ethicalt we body in our government. but we will at to committee, that becomes necessary in theurr evidence finds that to be true, dn will pursue our responsibility of the committee and will do what was required of us in thisx body. mr. president, i want to thankth chairman boxer for the method in which he has handled this in the beginning to the end and lori schiller, who has been our aid throughout but i also want tomed commend john kirchner, chris th clarke and lee police met some

nice stuff for their tireless effort. the members also should be commended for their hard work and it is then harord work.mindr then cardin has been a commend his legal mind for us.son to sheriff brown and insightfulinfa person to carry out information in venice in the right roberts, direction. my dear friend senator roberts who is the team of the ethics smmittee and on the floor toda, senator robert sarkar and i wast under erasure might i was notut here but deserves equal creditel than is the chairman said his legal mind and insightful naturs of us to come to conclusions that we came to t today.ea i want to repeat my thanks tolde carol elder bruce f for elder bruce for her commend this effort in the work she the work she did as well as brain solarz, make missile and john who will w work with her legal team. the staff of the ethics committee staff director john susman has been invaluable and as for tireless hours to see toe it every iowa started, teaser cost and committee did its job and bill corcoran indians figure, thanks to them for all

the effort they made. b i will end where it began. no one in public officet we have volunteers for the type of responsibility we have had in the case of senator ensign.hat all of us to a responsibility when it upon us, recognizing integrity of the senate ande fue integrity of o our decision was important in the future of this body. xm is the deliberations were ine the ultimate result was, it was proof that the senate and itstaa ethics committee cannd stand ins the effort necessaryee to seek e at the institution's integrity perceived in t fhe futurenendan. uninhibited and in danger.ess te mr. chairman, president, with that remark come unless there's a member would like to speak, i will note the absence of a quorum. >> senator ensign resigned from the senate last week. you can read the ethics credit report at her website, c-span.org. go to the featured links

section. senate minority leader mitch mcconnell said president obama would have to agree to short and long-term spending cut in order to get his vote on raising the nation debt ceiling. senator mcconnell called specifically for a cap on discretionary spending over the next two years. he spoke with reporters after meeting with president obama at the white house. this is almost 25 minutes. >> that afternoon, everyone. as all of you know, we had a meeting with the president republican senator. i think it went very well. he graciously gave a number of my members, in fact everybody who sat recognition to make some observation a chance to speak. we had a candid exchange about the opportunity that lies ahead of us in connection with the decision of whether or not to raise the dead dealing, an

opportunity to work together to do something important for the american people appeared i can only speak for myself, but what i said to the president and the ctu as well. to get my vote to raise the debt ceiling, it will require doing something in the short term and to give you an example of some name that i think could begin to get my vote is to set up to up to three at 28, how much are we going to spend of our discretionary budget or the next two years and continue to move that downward so we are actually reducing spending in the short term. number two, in the medium term, that is beyond the two years on the discretionary side and on the entitlement side, but within the budget window, whether it's

five or 10 years, within the window, medium-term in the future, both discretionary spending without caps and entitlement reductions. third, in the long term, all know that long-term we have over $50 trillion in unfunded liabilities and very popular programs and americans depend on, medicare, social security, medicaid data on an an unsustainable path. so again, for me, for my vote would take something to sum it up significant short-term, medium-term and long-term. now, who determines what's significant? as a starting place, standard enforced. one of the things that i just learned this morning that i know the secretary of the treasury agrees because i mentioned that he was shaking his head yes, if the financial condition of the

united states government is reduced, if we get a lower rating, there will be a single financial institution in america enjoying a higher rating. so it produces a kind of cascading effect on the credit rating of every financial and touche in america. what that proves is we need to address the problem. and the problem is the $14 trillion debt that's the size of our economy, which already begins to make us look like priests and in excess of $50 trillion in unfunded liabilities as i suggested to her that we simply cannot afford at the moment appeared with that, let me throw it over. >> leader mcconnell, some of the things you're talking about, implements and particularly medicare, but the types of things that could take a while for the system to appear until

to work its way through, are you open to increasing the time i met if it has some conditions that need more time? >> not be argumentative, but the ones i'm talking about a been studied to death yet we don't need more hearings. all the options are in the table next to the president's deficit reduction commission. it's a question of what you want to pick up and agree to do? an area that i think we do not have time to do it, that everybody and there was some brief description downtown today, an area that is widespread agreement we need to tackle this comprehensive tax reform. that cannot be done between now and august. there is all kinds of intended and not intended consequences attached to comprehensive tax reform. so that will certainly not be accomplished. we are talking here about pending reductions. there will be no tax increases in connection with raising the

debt ceiling. we're talking about spending reductions. we know what the options are. the only question remaining is, what will we pick up and agree to on a bipartisan basis? the context for doing that is the talks that are going on, led by the vice president and as you know, senator kyl is representing my talks. >> earlier this week, peter boehner said that any increase should be smaller than the spending cuts outlined. do you agree with? or is there some flexibility in the department? >> well, i don't think we can negotiate the deal. i'm comfortable with what the speaker had to say. they think it underscores were looking for trillions, not billions. we're no longer talking about reductions in this year's spending, amounting to billions. we're talking about trees.

>> the president again you are consistently saying -- what was the response? do you feel if the president is doing that message? >> you'll have to speak for himself. i doubt if he shares our view on that. in the context of the debt ceiling, i assure you we will not be raising taxes. >> leader mcconnell, yesterday president recorded spending cabs. i was wondering if that was a message that he conveyed to your members today? and also, you said you had opportunity to express the thoughts and try to get a sense of what the questions were. >> you want to quote my members tu? i don't think i'll do that. but we had eight or so members who spoke a.

i'll give you some names of people who spoke. marco rubio, bob corker, tom coburn, brockport man, pat to me, john hogan. i'm sure i'm leaving somebody out, but i'm sure you can ask them what they said if they decide whether or not to share that with you. i think it was a really -- candidly skeptical, but i think it is a very good meeting that gave the president an opportunity to have republicans on matters tell him directly how they see this. and i've rented it very respectfully. we didn't have a big food fight over the things we typically fight over in an election. i thought it was really helpful. >> on the spending caps question -- >> obvious they were going to have spending cabs.

for going to have to establish the cab are your one and here too. i'm not opposed to caps on the out years. it is often time ignored in one way or another congress. caps again referring to discretionary spending. on the entitlement side come if you change the eligibility since we don't vote every year, it is widely perceived in almost always israel. >> senator, if there is downgrade come without largely be -- [inaudible] >> i'm sorry? >> if we downgrade -- >> i don't know anybody in favor of default. but the subject raise by the request to raise the debt ceiling is the dead. what better time to do something about the debt in connection with raising the debt ceiling? >> senator, what kind of

medium-term spending cuts would like to see? >> within the budget window, both on the entitlement side and nondiscretionary side. i just admitted caps on discretionary down the road are frequently viewed as promises to do something someday maybe. so the discretionary side, the caps you can sort of depend on for the first couple years. but it's still worth doing it because it puts pressure downwards. any kind of entitlement reform, either inside the window are outside the window will likely be viewed by sap and others are as credible because we don't vote on entitlements everyday as you are nowhere on automatic pilot. to give you just a sense, taking a snapshot this year and looking, give you a sense of how significant all this is coming this year were taken in about $2.2 trillion.

were going to spend 3.7 trillion. the 2.2 trillion we've taken in will be entirely consumed this year by entitlements and interest on the debt. finish. entitlements and interest on the debt absorb every single dollar in new taxes we taken this year. that's how bad this problem is and that's why we need to act now. >> he said twice yesterday that tax increases are often in the context of recent debt ceiling. >> vessel were talking about now is what does it take to raise the debt ceiling what does it take to get republican votes to raise the debt ceiling? >> you said breathing taxes is off the table in the context. is there a context where it got? >> that's what they were talking about. how do you get the debt ceiling raised? what i'm saying is that both the

republican vote or raising taxes in connection with the decision. >> you are not saying it's going to tax reform? >> he had to tax reform in two months. we all think it ought to be done. at the sight of a hair. it's worth doing. it's so complex you can't do tax reform between now and august. what we do or do you have for the various options to reduce spending. the debt to reductions commission that it very thoroughly, very recently. the options are out there. the question is which one are going to pick up and do? on the tax reform side, much more complicated. for example, what happens if you lower tax rate below the individual tax rate. they pay taxes as individuals and ever-present 50% of small-business income in 25% of the workforce.

all these intended and unintended consequences of tax reform require a thoughtful process that was going to unfold here in the next couple months. there's plenty of study that's been done recently about what kind of savings you get with regard to reducing spending, both on on discretionary inattentiveness night. issues to question first of saying which combination of those are you going to do? >> to the president within the 3028 -- [inaudible] -- downward movement within the senate spending? >> we haven't gotten into the details of where, but the first step is currently done by the budget process and i think i've not been terribly risky here in suggesting were not likely to get a budget this year it's agreed to by a democratic senate and a republican house.

what is the most important thing that comes out of the budget? it's the topline, the rio two. how much are you going to spend? since the budget is pretty unlikely, let's negotiate the topline for the next two years in the context of the debt ceiling, which then prevents both the house and senate to go forward with the normal appropriations process, which then gives us the opportunity to pass individual bills and send to the president for his response. that is the best thing we can do short turn to ban the spending down, which is the continuation of what we did in the middle of the budget year last month. so that is very much in the forefront of these discussions in connection with raising the debt ceiling. >> senator come into a preference in terms of feeling

for enough respect to? >> that's part of the negotiation. how much and how long? that'll be part of the discussion. >> a president obama give any indication to which he prefers? >> if he had come i would quote to you guys, but no he didn't. that's a very smart question. i mean, how much -- [inaudible] >> congratulations. yeah, how much and how long will be a big decision. >> senator, understanding, did the president ask you to deliver this? and did he give you a list of parameters as to what you're going to have swallowed the chair? >> no, he didn't. the treasure now said august 2nd 18. >> democrats want early july.

>> colic until he is what they read in the newspaper. we started stipulated they had already said that it would calm -- needed to come to a head before august. we didn't spend time talking about it because they'd always said it publicly. >> leader mcconnell, when entitlement reforms do you favor the medium-term to be negotiated? >> now you know i'm not going to go into a tirade here, but all of the options have thoroughly reviewed by the president's deficit reduction commission. the question is, what kind of decision can be reached? we now have the most important democrat in america at the table. he is the only one of the 307 billion that can sign a bill into law and i think it's a step in the right direction. the biden group is the group that can actually reach a decision on a bipartisan basis.

and if it reaches a decision, obviously will be recommending it to our members. >> was there anything said in a meeting about whether the soviet clean bill, revenue and spending discussions or whether there'd be other things that could be tacked on the other side? >> the debt ceiling is that going to be cleaned. that's not what you're asking. obviously the debt ceiling is going to be cleaned. it's going to carry a lot of the stuff we've been talking about. >> will be strictly revenue matters or other social issues onto it? >> this is about reducing spending. >> has there been a commitment from both sides were either side of social issues will be acted on? >> nobody even thought about that. this is about reducing spending. >> senator, are you saying the short-term discretionary medium-term and long-term house to be part of the dazzling

package? >> from ipo, yes. there may be others who feel differently. look, i view this as a major opportunity for us to do something important in the country. if your looking for an example, think of tip o'neill and ronald reagan when they pitched security for generations to think of bill clinton republicans on welfare reform in 96. think of bill clinton and republicans balancing the budget in the late 90s. seems like ancient history now. how is very significant. look, divided government would neither party controls the entire government is the best time and some would argue the only time when you can do really big stuff. and if you do it on a bipartisan basis, i think i've mentioned this before. i hope i don't bore you by bringing up again, that is running for the senate the first time in 1984 and a year after the bipartisan agreement between reagan and tip o'neill bracey age for social security. i do not exaggerate when i tell you i was not asked about a

single solitary time. not once in the whole course of a very contested race. the reason for that was they did it together and when you do something big and difficult to gather, it's not usable in the next election. so i think we can stipulate that if there is a grand bargain of some kind with the president in the united states, none of it will be usable for either side in next year's election, none of the. we can do something important for the country together and this is the opportunity. that is the importance of this debt ceiling moment. it is the one time when we have to come together and we need to come together to do something really significant. >> how long do you want to -- [laughter]

>> my intent is a little bit of specificity a. >> you sure you want to try this? >> you said there was eligibility, but some low-hanging fruit seems to be the cap, the income cap for contribution and social security and medicare. are you open to those as the way forward? >> next question. >> to expect any -- there was talk about ringing the proposal in the senate. you have any sense about what the timing could be quick >> when they have plenty of the senate on plenty of veggies. i'm not trying to put you down, but what were talking about the sarin is something that would become law and be signed by the president. in terms of senate votes, you know, democrats may or may not try to do a budget committee and will have votes on the floor and probably did to me budget, other

budgets, but i'm talking this morning about what they actually become the law in the united states of america between now and august. he birdied 10 of points. >> you mention the fiscal commission report several times. that report really goes deeply into social security, not so much on medicare. were you suggesting that social security needs to be a part of the senate? >> out of the social security to be a part of it. the president can speak for himself, but i think he's not interested in social security without raising taxes. we don't think that's necessary. so we didn't spend time in the meeting talking about social security because our assumption is they don't want to do it. i wish they did because we ran a $50 billion deficit in social security this year, the notion this is not a current crisis is nonsense. but i don't expect that frankly

to be dealt with in the context of the deficit. under mac >> yeah, on the health care side. >> i think the dividing group is the one that will potentially be embraced by the caucus or conference. i say and not, you saying it is not going to do that? you know, what are you saying? >> yeah, let me put it this way. i'm not saying that you put anybody down. but the point is the most important democrat in america is the president in the united states. the only american in the country you can sign a bill into law is also the president and unless he is also directly involved in the discussion, it will not lead to an outcome. so, we've got plenty of discussions going on on a bipartisan basis on a whole variety of issues and that's not insignificant.

what i'm interested in is how do you make something hopping? from that point of view come the beauty of the debt ceiling issue advocates a result. i'm going to take one more even though she's not giving me the hook yet. >> to follow up to that, sir. >> you party have one. would anybody know like to -- yeah. >> i'm interested in why president obama is holding these meetings. there's been criticism of him having been from congressional deliberations. >> i say this not to be critical of the president, but he's doing it because he needs to. this is a tough thing to ask members of congress to do. you've seen the poll data. people are not wildly enthusiastic about raising the debt ceiling. this is a tough sell for the president then that's what he's working it hard and he should.

i wouldn't put him down for that. i think he is correctly recognized that this is a big challenge for him and that there is zero chance that there'll be a claim that feeling, zero. democrats wouldn't pass clean debt ceiling. his respond inappropriately. as i said, i thought the meeting was really construct even worth everybody's time. thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations] >> let me be as clear as i can be. without significant spending cuts and changes in the way we spend the american people's money, there will be no increase in the debt limit. do not follow debate on the debt ceiling as lawmakers continue to work on economic issues.

>> earlier, federal reserve chairman come at ben bernanke said failure to raise the debt limit by congress would hurt the u.s. economy and lead to higher interest rates. he testified along with fdic chair, sheila bair on the 2010 regulation of the dodd-frank lot. tim johnson of south dakota chairs the senate banking committee. the hearing is two hours. [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] >> i'd like to call this hearing to order. today is a committee continues its oversight of the dodd-frank wall street performance consumer protections that are a welcome our witnesses back to talk about the systemic risk in the financial of both flashy when this committee that out the response of the worst economic

crisis in the risk and too big to fail with key tasks. any serious financial reform had to include an early warning system that could detect systemic risk report to bring down the entire economy. equally important was creating new orderly liquidation process to prevent future bailout and large risky financial firms to plan ahead with their own possible failure. dodd-frank, we accomplish these goals, but those changes cannot just take place in the flick of a switch peer-to-peer witnesses will provide us with an update on their implementation of provisions related to systemic risk and promoting financial

stability less than 10 months after the legislation was signed into law. each of these agencies here is part of the financial stability oversight council for fsob continues to be the job for financial systems. it is important to note that the seats of two voting members remain vacant. the cfpa number we need to nominate those members as soon as possible. any political aim on these nominees to try to subvert would be irresponsible and risk our nation's economic recovery. one note fsoc's early test was to break rules for large wrist

financial institutions or enhance the provision. the so-called chatter banking system is one of the key pieces that led to the crisis. and while it is important to provide oversight of the shadow banking system, it is also important that this definition does not become a synonym for two big to fail. the dodd-frank act in a too big to fill bailout definition, there are liquidation authority to unwind financial firms about putting the financial system for taxpayers at risk. in fact, ranking member shelby worked closely with dan sherman dodd to craft an amendment that became the veil text of this revision in dodd-frank and i want to thank ranking member shelby for his work.

but we will never be able to anticipate every possible cause of the crisis, we're much better equipped to deal with the next crisis if and when it occurs. we should never forget the magnitude of the cost of the financial crisis, especially the section of millions of jobs of household wealth. upon the financial reform, we want to use revision history, but americans have not forgot that the recession was caused in part by incentive risks among some of the largest financial firms. with dodd-frank, we have created a new economics foundation against the entire economy in the financial firm in it that

they cannot back up. the implementation of these reforms is critical to our economic security. i want to remind my colleagues and the witnesses that as soon as we have a quorum present, we will move into executive session to report out ex-nominees. when finished with the nominees, we will return to her hearing. given the time constraints today, only the chairman and the ranking member will deliver opening statements. ranking member shelby. q-quebec mr. chairman, to expedite the hearing, i ask unanimous consent to my opening statement would be made part of the record. >> it will be perceived. >> chairman, i believe i'm right on the number. i believe we just need one more person to show up to have a

quorum. >> please proceed. we have a quorum. >> i have moved that the committee entering to an executive session to vote on any

nominations were well consider the following nominations to be a member of the board of governors of the center is to assist in. the honorable david s. going to be a new secretary for terrorism and financial crimes. u.s. department of the treasury. mr. jl sub when of treasury. this wonderful event the first vice president of the expert bank of the united states in the honorable shawn robert to be the first or the export of the united states. at a time when our economy and financial markets are in fragile recovery, it is vitally important that we do our job here in the senate to act on the

president's nominees in a timely manner. i support the nominations and recommend a committee report unfavorably. to the full senate -- and that the senate as quickly as possible on their explanations. ranking member shelby and i have agreed to move the nominations for this closer, falling in mr. albini and block the advisable. we will then hold a roll call vote and mr. colin n. roll call vote. senator shelby, would you like to make a statement on the nominees? >> sure. i just want to make a statement, mr. chairman, regarding dr. diamond. as they said many times, i don't believe dr. diamond is there a person for this job. he is of course a very accomplished academic and economist in his field, but i don't believe he has the appropriate background or

experience that makes him the best person for the job at this point in our economic history. the feds responsibility cut across three broad areas and be monetary policy, supervising our financial system and responding to financial crises. he does not have experience in any of these areas and i believe he's an old-fashioned big government. he supported wheeling out the big gangster in the crisis. he supports additional stimulus. he supports the use of behavioral economics to help bureaucrats control choices americans make. when i come he's advocating creation of the gse model after fannie and freddie to subsidize health care. i believe, mr. chairman, wearing nation of talented people. surely the president can find another nominee with the level of erie and to garner bipartisan support. i would hope he was chairman would encourage him to do this. with that --

>> are there any other members present to wish to be heard on the pending nominations. >> mr. chairman, i am going to support the nominations except for mr. colin. they supported mr. cho in the finance committee to move on because i thought it was an incredibly important position as the under-secretary of crimes and we need to position to be filled, but we also need to have a robust enforcement of our sanctions law. and to be very honest with you, i did not get a level of satisfaction at the nominees. but in fact there is going to be that level of robust enforcement of the sanctions for. and the sanctions bond the coast where cnn forced or not in fours to the full capacity is ultimately a two-foot tiger and

sends the wrong message to those countries like iran for which we ultimately want to make it very clear that their path to nuclear power and nuclear weapons is not accepted. and we have letters that are pending that have not been answered. and until i get a better sense of his answers and until i get a better sense of how vigorous mr. keohane is going to be in a critical position. and when i see information that would lead me to believe they're actionable items against companies that in fact should be pursued under the sanctions and are not, maybe further political considerations, i get seriously concerned. so i'm going to cast a no vote today on mr. cohen and hope that both the letters being sent,

senator curt and i have sent will be responded to, that i can get a clearer sense that there is going to be a vigorous enforcement of the law, that when there is clear actionable items that in fact we are going to take action and i hope to be in a position to be supportive of mr. cohen. right now at this point, i cannot. so why not nominee, i wish to be recorded as a no. >> senator curt? >> mr. chairman, i want to back up what senator menendez has is. i am also concerned that we sent a letter -- senator lieberman and i sent a letter to secretary geithner about the lack of enforcement of the iran sanctions signed by the president into law last summer. we have a detailed classified annex, laying out the companies where we think actionable intelligence and policy

administration to enforce the act. we also have now seen uncracked weedeater showing that gasoline deliveries to iran, which are the center point of the sanctions regime by the united states and u.n. against iran, gasoline deliveries between january and march have gone from 60,000 barrels per month to 200,000. and we know the identities of the company providing the petroleum in direct violation of u.s. law. and so i also will be voting no on the cohen nomination because i am worried about the lack of enforced and of current u.s. law signed by president obama just last summer. >> are there any other cop vince? >> we will now hold the first

vote -- a voice vote to report on block the nomination of mr. daniel tweezer to be assistant secretary for financing, used department of the treasury to be first vice president at mercer shot robert albini to be a member of the yours for the export import inc. of the united states. those in favor say aye ko. those opposed say no. aye appear to have it. they are reported to the full senate. we will now have a roll call vote on the nomination of mercer david cohen to be undersecretary for terrorism and financial crimes, u.s. department of treasury. the clerk will call the roll.

.. [roll call]

[roll call] >> maza nomination is reported to the full senate. we will vote on the nomination to be a member on the board of governors of the federal reserve system. the clerk will call the roll. [roll call]

[roll call] >> the vote is in favor the nomination. >> hereby ordered reported to the full senate. the executive session is adjourned.

i want to provide my colleagues the record will remain open the next seven days for anything you'd like to submit. our witnesses today have all been before this committee numerous times this year so i will keep the intersections briefed. the executive secretary of the u.s. department of the treasury the honorable ben bernanke is currently serving as second term as chairman of the board of governors of the federal reserve system. the honorable sheila bair is the chairman of the federal

department insurance corporation and recently announced she will be stepping down as the chairman of the fdic at the beginning of july when the current term expires i would like to think you for all the work you have done to serve the people of the united states. i will truly miss you come july and wish you well in any future endeavors that you pursue the honorable mary schapiro was the chairman of the u.s. securities and exchange commission. the honorable gary eve ensler is the chairman of the committee future trading commission. mr. john walsh's the comptroller of the currency of the office of comptroller of the currency. i thank you all for being here.

secretary, you may begin your testimony. >> thank you. jarman johnson, a ranking member shall be, members of the committee, i appreciate the opportunity to update you on the treasury department implementation of the dodd-frank act. although our economy and financial markets have made progress towards recovery, we cannot forget what the congress passed and the president signed the dodd-frank act last year. in the fall of 2008 we witnessed a financial crisis of a scale and severity not seen in decades. the crisis exposed from the entel failures in the financial system. our system favored short-term games over stability and growth. the system was weak and susceptible to crisis and the system left taxpayers to save it in times of trouble. we had no choice but to build a better, stronger system enacting dodd-frank was the beginning of that process, and as we move forward with implementation from our efforts are guided by a broad principles. we are moving quickly but carefully. treasury and regulators are seeking public input and

committed to getting the details right. we are conducting this process in the open bringing full transparency to implementation. we are consulting broadly making input on rulemaking publicly available and posting the details as the senior officials' meetings on line is that the american people can see who is at the table and an. wherever possible we are seeking to streamline and simplify government regulation. dodd-frank consolidates the structures and oversight responsibilities updating and rationalizing patchwork regulations, built up over decades. we are creating a more coordinated regulatory process. regulators are working together to close gaps and prevent breakdowns in coordination and within the financial stability oversight council, looking across agencies and instilling joined accountability for the strength of the financial system. we are working to ensure a level playing fields, working hard internationally to develop similar remarks on the key issues we're global consistency

is essentials such as liquidity, leverage, capital and otc derivatives. we are working hard to achieve a careful balance and protect the freedom for innovation that is absolutely necessary for growth. we are keeping the congress informed of our progress on a regular basis. treasury made significant progress in the short time since the dodd-frank act was enacted. in those months we have stood up the eslocker which is working to identify risks to u.s. financial stability and promote market discipline while developing procedures for deciding which non-bank financial institutions and financial markets utilities will be subject to heightened provincial standards. we have made significant progress in creating the office of financial research which is working to improve the quality of financial data available to policy makers who knew and facilitate more robust sophisticated analysts of the financial system. dodd-frank creates and the treasury is stand up to the

consumer financial protection bureau working to protect consumers making sure they have the information they need to understand the terms of financial products. treasury is also working to enhance ability to monitor the insurance sector through the federal insurance office. which for the first time provides the u.s. government dedicated expertise regarding the insurance industry. we have made significant progress in the ten months since the enactment. continuing to move forward is essential to the country's financial well-being. there is no response alternative because if we don't invest in reform now we run the unacceptable risk that we will pay dearly leader and we cannot allow that. dodd-frank was enacted to make sure that our financial system is the world's strongest most dynamic and most productive. thank you, mr. chairman. >> thank you, chairman speed. chairman bernanke.

>> chairman johnson, ranking member shall be and members of the committee, think of the opportunity to testify on the federal reserve board monitoring system at risk and promoting financial stability both as a member of the financial stability oversight council and under our own authority. the dodd-frank act created the fsoc to mitigate threats to the united states. during the existence the fsoc has established the organizational structure and process necessary to execute its duties to read the fsoc have completed studies on the limits on proprietary trading and investment in hedge fund private equity funds by banking firms and so-called volcker rules. on the concentration limits, on the economic effect of the risk retention meet and economic consequences of systemic risk regulation the fsoc is currently seeking public comment on proposed rules that would establish a framework for identifying and non-bank

financial firms and market utilities that could pose a threat to financial stability and therefore should be designated for more stringent oversight. importantly the fsoc has begun systematically monitoring risk to financial stability and is preparing its inaugural year annual report. in addition to the role on the fsoc the federal reserve has other significant financial stability responsibilities under the dodd-frank act including supervisory jurisdiction of which the companies and non-bank financial firms that were designated as systemically important by the council the act also requires other financial regulatory agencies to take a macroprovincial approached the supervision and regulation. that is in supervising financial institutions and critical infrastructures we are expected to consider the risk to the overall financial stability in addition to the safety and soundness of individual firms. a major thrust in the dodd-frank act is addressing the two big to fail problem and mitigating the threat to financial stability

posed buy systemically important financial firms. as required by the at the federal reserve is developing more stringent provincial standards for large banking organizations and non-bank financial firms designated by the fsob. these standards will include enhanced risk-based capital leverage requirements, liquidity requirements and single counter party credit limits. the standards will also require system and the important financial firms to adopt so-called living wills that would spell out how they can be resolved in an orderly manner during times of financial distress. the act also directs the federal reserve to conduct annual stress tests of large banking firms and designated monk financial firms and publish a summary of the results. to meet the january 2012 implementation deadline for these enhanced standards, we anticipate putting out a package of proposed rules for comment this summer. our goal is to produce a well integrated set of rules that meaningfully reduces the probability of the failure of

our largest and most complex financial firms that minimizes the loss of the financial system and the economy for such a firm should fail. the federal reserve is working with other u.s. regulatory agencies to implement dodd-frank reforms in additional areas, including the development of risk retention requirements for securitizations sponsors, requirements for the over-the-counter derivatives and incentive compensation rules and risk management standards for the counterparties and other financial markets utilities. the federal reserve has made significant organizational changes to better carry out its responsibility. even before the enactment of the dodd-frank act, we were strengthening our supervision of the largest and most complex financial firms. we have created a centralized multi disciplinary body to oversee the supervision of the firm's. this committee uses horizontal or cross firm evaluations to monitor interconnectedness and common practices among firms that could lead to greater systemic risk.

it also uses additional improved wanted of methods for evaluating the performance of the firms and risks that might pose and more efficiently employs the broad range of skills of the federal reserve staff to supplement supervision. we have established a similar body to help carry all our responsibility regarding the oversight of systemically important financial markets utilities. more recently we also created an office of financial stability policy research at the federal reserve board. this office coordinates our efforts to identify and analyze potential risks to the broad financial system and the economy. it also helps evaluate policy to promote financial stability and serves as the board's liaison to the fsob to read as a complaint of those efforts under dodd-frank the federal reserve has been working for some time with other agencies and central banks around the world to decide and implement a stronger said of provincial requirements for internationally active banking firms. these efforts resulted in the

agreements reached in the fall of 2010 when the major elements of the new basil iii provincial framework for globally active banks. the requirements that such banks hold more and better quality capital and more robust liquidity buffers should make the financial system more stable and reduce the likelihood of the future financial crises. we are working with the other u.s. banking agencies to incorporate agreements and to u.s. regulations. more remains to be done in the international level to strengthen the global financial system. the key tasks ahead for the committee and the financial stability board include determining how to further increase the loss of the capacity of systemically important banking firms and strengthening resolution regimes to minimize adverse systemic effects from the failure of large complex banks. as we work with our international counterparts we are striving to keep international regulatory standards as consistent as possible to ensure both

multinational firms are adequately supervised and to maintain a level international playing field. thank you. i would be pleased to take your questions. thank you, sherman bernanke. trenberth. sherman johnson, a ranking member shall be and members of the committee, the key for the opportunity to testify today on behalf of the fdic. the recent financial crisis has highlighted the critical importance of the financial stability to the functioning of our real economy. when the emergency measures taken in the crisis stabilize financial markets and help end the recession in its wake almost 14 million americans remain out of work and the nation's face a number of serious economic challenges. consistent with historical precedent, a central cause of the crisis with excessive debt and leverage in the financial system. in the fall of 2008, many of the large intermediaries of the core of the financial system had to

the capitol to maintain market confidence in their solvency and the period leading up to the crisis we sell excess leverage of financial institutions, securitization and real estate loans that made the entire system highly vulnerable to the declining home prices and a rise in the problem mortgages. the need for stronger bank capital requirements is being addressed through basil free and here in the u.s.. one of the most important -- excuse me one of the most powerful towards excess leverage institutional risk-taking before the crisis was the defacto policy of too big to fail. with the expectation of the government backstop the largest financial companies are insulated from the normal discipline of the marketplace that applies to smaller banks and practically every other private company. the situation represents a dangerous form of state capitalism which the market expects the companies to receive generous government subsidies in the times of financial distress. and the result is likely more

concentration and complexity in the financial system more risk-taking at the expense of the public and in due time another financial crisis. however the dodd-frank act provides the basis for a resolution framework designed to make it possible to result systemically important financial institutions without a bailout and without stopping at a systemic crisis. the in designated as a competitive advantage by an institution as too big to fail the heightened supervisory requirements placed in putting higher capital requirements and the need to maintain resolution plans seems to represent a powerful disincentive for large institutions to seek the status. the the key consideration in designating the firm should be whether it can be resolved in the bankruptcy process without systemic impact, provided we have sufficient information to evaluate the results of devotee is likely that relatively few non-bank financial companies will ultimately be designated and subject to heightened

supervisor requirement but we do need the information to make the determination. the liquidation of ortiz been called bailout mechanism by some and a fire sale by others. but neither is true. instead, it is, i believe a highly effective resolution free-market enhance his ability to provide continuity and minimize losses and financial institution failures. excess luggage is a problem that extends beyond the purview of the financial regulators to a broad a range of economic policies that encourage the use of that opposed to equity and this is where i hope the members of the senate banking committee can play a leadership role promoting economic policies including tax measures and fiscal reform that can reduce or eliminate incentives for excess leverage in our financial system and our economy. there are two additional risk management issues i feel should be high priorities for the financial stability oversight council under the mandate to identify and address the risks to financial stability. first mortgage servicing divisions remain a serious area

of concern. although the fdic does not supervise the largest fund services over four years ago we began identifying and trying to address the problems using the authority at our disposal. problems in the mortgage servicing or another result of the misaligned incentives in the mortgage process for the fixed compensation provides few incentives to employment cost the labor-intensive service and techniques that are necessary to deal with high volumes of the problem loans. not only to the problems represent significant operational reputation will and litigation risks to the mortgage servicers which we insure the also holding back the recovery of the u.s. housing markets. the fsob needs to consider the full range of exposure to the problem and the related impact on the industry and the real economy. we also believe the fsob needs to actively monitor interest rate risks with a full devotee of borrowers and financial institutions to set in volatile spikes in interest rates. borrowers and depository institutions may be subject to sudden increases in the cost when interest rates rise, and

they will inevitably rise. this issue takes on particular urgency now in light of the current level of interest rates and rapid growth in the u.s. federal debt developing policies that clearly demonstrate the sustainability of the u.s. fiscal situation will be of utmost importance in maintaining the confidence and ensuring a smooth transition to higher interest rates in the coming years. thank you again for the opportunity to testify about these critically important issues and i would be pleased to answer your questions. >> thank you, chairman bair. because we need to leave shortly, i ask that the remaining witnesses testimony be submitted for the record. we will now move directly to questions. senator shelby. >> mr. chairman, thank you for yielding. we are going down to the white house to meet with the president. i yield my time. estimate senator shall become think you very much. i'd appreciate that as well as all of your cooperation in this

process and many other matters. thank you. mr. chairman, thank you very much for holding this hearing. i think it's a very important topic, and i appreciate your doing this with all the witnesses. i know how busy you are and i'm grateful you are here once again to answer our questions. i'd like to see a win if i could on the process by which the council will be designated in the nonfinancial, non-bank financial institutions and. i think this is an important issue and i confess up front i'm hoping this council capps the narrow neck rather than the broad net and i think it is literally important we have a well-defined very objective process by which we make these designations. the notice of proposed rulemaking that cannot in january i would suggest lacked the specificity that we need to understand how this is going to unfold as i think everybody knows reseated the statute and it didn't provide the kind of

guidance on how the statute would be applied. i did several of you, maybe all of you, have acknowledged in your testimony the intent to provide additional guidance and i appreciate that. but i feel very strongly that the form of that additional guidance takes needs to be a new proposed rule and that new proposal needs to have a comment period and that comment period needs to be at least 60 days because we haven't had the chance for anybody to evaluate how this is going to be applied. as i would appreciate if each of you would confirm that it is your intent to issue a new proposed rule and to provide such a comment period. >> center, as the testimonies of indicated we will be issuing additional guidance that will be in the form of some public rulemaking, and we will be seeking a public comment a think the council has not yet landed on precisely what that rule will be stifled and with the length

of the comment period will be, but we want to make sure that we get sufficient public input as we think we have already obviously given the opportunities for public input i think as we provide further clarification as to how this process will unfold we will want to make sure we provide adequate opportunity for people to react and provide. >> i would like to underscore their has been no opportunity to respond yet on how the statute will be applied. so under the presidents exec of order call for all agencies as a general matter provide 60 days' that is a minimum that's necessary but i'm sorry i'm interrupting. >> senator, i think more details are necessary. i favor providing more information to the public and getting robust in put and

comment. i should say while we can provide more information in terms of metrics and criteria i don't think that we can provide an exact formula that will apply mechanically without any application of judgment. but the we are going to have to look at a variety of issues which cannot always be put into numerical metric. that being said, i certainly agree with you that we should get all the input we can from the public on this process. >> we support going after the commented devotees filled metrics and the comment period is something we try to adhere to in our rulemakings, so i think it's important to get a comment to provide more clarity and metrics. that said i agree with the german bernanke i think i don't think we can provide a complete guidelines. there needs to be an area for judgment and getting more detailed metrics. >> is it your view the form that

should take would be a notice to proposed rulemaking? >> that's a good question, senator. i a understand there may be a legal issue with the ability to write rules with this kind of criteria versus guidance and i would defer to the treasury legal counsel on the format. we have the legal authority to do it as a rule i think the would be fine but i would be for you to the treasury on that. >> senator, i agree with nearly everything that's been said with german bernanke about the use of violence and the subject of factors with the exercise of reasonable judgment but that said i think more transparency in the specificity about this process would be very valuable and i think robust comment period would inform the process greatly so very supportive of that. >> senator, just comforting chairman bernanke said is is

metrics would be good to the metrics out to the public comment and we have generally 60 days. i think that's a good period of time with it is guidance or an actual if you delete your -- view on the guidance i think works very well. as long as we get the public in but -- input. >> it would be hard to think of something new to say. [laughter] but certainly going out again with greater detail and a greater clarity and seeking the views and pursuing a process of review and comment i think is entirely appropriate. let me just strong the urge that we go with the noticed proposed rulemaking by the mechanism we do this and we have at least 60 days. i also like to stress i think we really have to have this as objective as possible. the implications for the firm

being designated are huge as you know very well. it's really profound. and so it is perfectly reasonable for the firms to be able to expect to be able to anticipate whether or not they will be brought in bye virtue of these objective standards so i would strongly urge you to pursue that. if i have time for one quick additional question mr. chairman, thank you very much. i'd like to touch on specifically the question of mutual funds, and again i will say that by their very nature, their inherent characteristics i think is a general matter it is very unlikely that the mutual funds are systemically significant to the degree that would justify this is a commission. understand certain issues surrounding money market funds that occurred during the crisis are very important but also know that the sec has taken steps to address these in the rules of last year and a new set of rules or regulations that are being contemplated now the deal with issues like liquidity and

reserve, so my question is our money market funds under consideration for this designation and if so, why. mr. wolin? >> i think it is for me to be will answer that question the deputies of fsob have been putting together pachauri material and as we just confirm to you we are planning on putting out additional guidance for the public to comment and until we do that and get the responses from the public and until the principles have an opportunity to have these kind of conversations i think it is hard to know what the right answer to that question is, and we will move forward obviously with the public input and that fsob has been providing to date. >> anybody else like to -- >> senator, i would say i think

that the determination is an institution by an institution designation and not an entire sector, so under any circumstance i think we have to look at individual entities, and we held actually today's of, i'm sorry, one day of round tables this week exploring systemic risk issues implicated with respect to money market funds and how the investor and i think that would inform us that the sec as we go forward in making determinations about what further efforts we might make specifically with regard to the regulation money-market funds but also all fsob representatives were at that roundtable and able to participate in a very robust direction with the mutual fund industry as well as with european and other regulators. we will be well informed when we get to the process of thinking about institution by institution designation in money market fund and mutual fund area.

>> i see my time is expired something to mr. chairman. >> thank you, cementer toomey. >> -- senator toomey. >> chairman bernanke and chairman bair, title i had to our important cornerstones of the dodd-frank act. of the house republican proposal includes the repeal of title to and other legislation has been introduced in both houses to repeal the dodd-frank act. what do you think of the repeal effort? should we go back to the system of regulation that existed before the financial crisis? >> mr. chairman, as i sit in my opening comment, i think it there is no alternative but to move forward with a dodd-frank statute as enacted. the idea that taxpayers continue to be on the hook in these

moments of stress is one that is unacceptable, and i think the statute clearly puts an end to it and so we think that it's critical that in the kind of very as you discussed in your opening statement, orderly liquidation of 40, the resolution plans that need to be put forward to both the fed and the fdic that these are critical elements of making sure that we in the the two big to fail and that we make certain that the tax payers are not any longer on the hook. >> mr. chairman, it was clear, painfully clear in retrospect the regulatory system that was existing during the crisis was insufficient. there's been a long and process about how to reform the regulation. i would reiterate what mr. wolin said about the importance of addressing too big to fail. chairman bair also mentioned

this. the rate that the new legislation addresses this at a number of levels including enhanced oversight, tough capital liquidity requirements and getting rid of too big to fail would be a very important step. more generally, the philosophy of dodd-frank which is to encourage a systemic macroprovincial approach to regulation where broad systemic risks are taken into account as well as individual firm or market risks is ann portales debt and one that is being adopted globally as well as the united states. >> would be harmful to repeal the there's a lot of work going on now that is moving towards ending too big to fail. the tools are there, the implementation capability is there and i wouldn't want that work to be diverted, and i think that we pealing and trying to reverse back to the process we know bankruptcy doesn't work. and so that will be an open invitation to the more bailouts

if there is no alternative to that. so, we are working very hard to implement this authority to convince the market can and will be used. there is highly important and constructive improvements sponsored by senator dodd and senator shelby during the consideration. i think the vote was 95 in favor that put an additional safeguard like to call back the 40 so it is a very good provision that we are taking very seriously to implement and i hope we will be getting bipartisan support to continue that process. >> according to this chairman of the fdic who testified before the committee on tuesday as well as others, the fear of the federal bank regulators to address a significant consumer protection issues contributed to the financial crisis secretary

wolin and chairman bair, would you please discuss why we need in any consumer protection agency and how the new agency can identify and mitigate the systemic risks? >> mr. chairman, i think that it's very clear that failure of consumer protection are very much of the core of what caused the financial crisis we've just been through, and the federal government wasn't welcome quote to make sure that the consumer protection issues were well handled. the responsibility for the consumer protection was spread out across a wide range of agencies in the federal government, so it is critical in our view to make sure that there is an agency that focuses very intensively on the consumer protection issues to make sure that the consumers have the information they need to make responsible choices to make sure that the kind of judgments in the individual and certainly the

aggregate which helps to contribute so mightily to our financial stress are looked after. so the consumer protection -- the consumer financial bureau implementation team is off to i think a very strong start making sure they put together a set of rules coming efficient but nonetheless clear consumers can use to make sure they understand the implications of the judgments and make sure the rules are adhered to across the financial system among the banks and also among the the non-bank parts of the financial system which has heretofore not been something that the federal government has had the authority to focus on. for the consumer protection with a very profound problem getting to the crisis we had the community bank yesterday a number of community banks on the advisory committee that our mortgage originators and in the

years leading up to the crisis it is continued they lost significant market share to the unregulated third party mortgage originators that had nothing, not much in the way of consumer protection requirements, so they are i think these are good lenders and people who want to do the right thing for the customer and they are gaining market share again in this area. but, you know, as we get further and further from the crisis a lot of us could start up again and i think we do need an agency to provide a good strong comments across the board. i think you will be good for consumers and will also be good for the more heavily regulated sectors and the good players in the industry trying to do the right thing. that said, i think it's important for there to be the market approach to the consumer regulation and the focus is i think the current leadership indicated on have a simpler disclosure, better information to make their own decisions. that's really what we need and i think there will be very important value added for the consumer agency. >> senator brown.

>> i have questions for the panel concerning, but i want to say a couple of things first, before any institution, and the institution subject to examination and rules for capital risk it must be designated and the council will soon be missing five full-time members and by sorry our colleagues are not here to hear this because i want to speak pretty bluntly about this the five that had to the fdic, the fha and the insurance representatives will undoubtedly make it harder to designate new companies of systemically important. we need strong nominees who will not be afraid to take a bold steps to prevent a new financial crisis, but if qualified nominees for these important positions are blocked it will increase the likelihood we have another aig or lehman brothers and i urge everyone to remember what happened to the financial system of the economy three years ago and it's a serious business and shouldn't be so

politicized the to block the nominee for nominee after nominee. and the panel agrees with that and i'm sorry my colleagues are not here to at least discuss this and think clearly through what actually can happen. my question for deputy secretary wolin u.s about the financial crisis in large part necessitated by the shadow banking complex initiated by the wall street firms that typically sell outside of the scope of regulation, the designation of the systemically important financial institutions as opposed to address this problem. i want to agree with senator toomey's comments and questions to each of you the council proposed rule seems like reflection, not an aberration or a road map of what is systemically important. it's not clear to me, and i guess from the answers to his questions from you at what point a large hedge fund because systemically important it's

impossible to the regulated mean streak property-casualty insurers would be systemically important and my question mr. secretaries if you believe the mutual companies engaging in personal alliance of insurance, do you think they pose a threat to the financial stability of the economy should they be categorized as systemically important? >> thank you for that question. we are and it's a process that we are going to provide further elaboration. i think it is again premature for me to make judgments about who is in and who is out. it is a specific kind of consideration as the chairman shapiro mentioned, and i think we've done, the statute obviously lays out the factors that are relevant. the council will put out an additional guidance and clarification about how we think it out those various factors and i think the firms in the first

instance will make a judgment about whether they think they are of sufficient size and interconnectedness' and so forth and until the process reaches a level of maturity until the members of the council have an opportunity to have conversations about how to think about those criteria i am not in the position to rule any particular firm in or out. but i think firms can make judgments based on whether they have those kind of attributes or not based on the additional guidance that we give, and we will be getting affirms an opportunity to be heard on these questions. that's in the statute we have laid out in our own rulemakings what process will be even before there's a proposal for the designation they will have an opportunity to come to the fsob and the out with a thing about the application of the factors to their particular circumstance. so there will be a long process in which the individual firms have a very substantial opportunity to be heard and

their views to be considered before any designations are made. >> thank you. mr. chairman, i just want to say to chairman bair, thank you for your service the last half decade. you've served your country well and have been helpful to so many of us. thank you. >> senator benet. >> thank you, mr. chairman and very much for holding this hearing. thank you to all of you for what you try to do to implement. this bill so that we don't have the kind of systemic risk we face come to the front end of the crisis and i think the oversight of this committee is important and it's in that spirit i want to ask secretary speed and bernanke whether or not in your analysis of what we are facing in the economy right now there's anything the would create more systemic risk to our economy than the united states congress failing to raise the debt ceiling in the united

states. >> senator, if i might, i think it is absolutely unthinkable that we would not raise the debt ceiling in order to make good on obligations that congress and presidents in the past have made. secretary geithner has spoken many times publicly about the wide range of catastrophic implications to failing to raise the debt limit as necessary with respect to first of all those in this great national asset that we have and the full faith and credit of the united states has been considered sacred to the real implications with respect to funding and interest rates that will affect not just the u.s. government i ron ackley which has its own set of fiscal the implications, but also individual -- >> let me stop you there. has its own to the fiscal implications in the sense that it would actually make our fiscal condition worse rather than better? >> it would require us to spend more money to finance the

deficit that's already built up on the interest rates go up and if your funding rates go up, so i think -- >> i interrupted you but where you're headed is the implications for by people living in places like colorado? >> every american whether they are borrowing a house or buy a car or pagen off their credit card bills will have to experience higher interest rates which will have real effects on their pocketbooks but i think more broadly the effects on welfare and so forth of people's balances and their mutual fund accounts would be put in jeopardy in ways that are unthinkable, so the implications are enormous and is something that we think of as an enormous risk. we have city and we believe as has been the case in the past congress will increase the debt limit but it is also would like critical that that would happen, and that we would work for the broad set of the fiscal issues which are enormously important

and once the president has been very clear need to be addressed but the we not hold the debt limit as hostage to those critically important discussions. >> mr. chairman? >> senator, first, let me say that this is in the context of the broad discussion of fiscal stability and fiscal discipline, and i fully support all the efforts of the congress and i know they are very difficult challenges to bring the long term fiscal situation into something closer to balance, so and no way do i disagree with those objectives. that being said using the debt limit as a bargaining chip is quite risky. we don't know exactly what would happen if the debt limit was not approved. there are certainly significant operational problems, legal problems associated with making sure that debt is paid even if the debt is paid, there's the issue of market confidence and how the market will respond to

the risk of default or the fault on the non-debt obligations, so i think it is a risky approach not to raise the debt limit in a reasonable time. in the cost at minimum would be an increase in interest rates which would worsen the deficit and would hurt all of the bar was in the economy including mortgage borrowers and the like. the worst outcome would be one in which the financial system was again destabilized azzaoui salles following lehman brothers for example, which of course would have extremely dire consequences for the u.s. economy. >> i share your concern about the fiscal conditions as well, and i believe we are going to be able to have a constructive conversation about it. one of thing i would like to say or ask you, secretary wolin in

particular is the longer this goes on the debt ceiling, isn't there a risk that the markets will react even before the august date that secretary geithner has given to get this done or is there a risk? >> we haven't seen it today to but there isn't at risk if we get too close and the markets don't see a credible way through. >> thank you, mr. chairman. >> senator reid. >> thank you mr. chairman and ladies and gentlemen. chairman bair, let me join my colleagues in thinking you for your extraordinary service and i wish you well room. your testimony reflects on one of the most pressing economic problems we have in the country and that is the housing crisis. we've taken extraordinary measures to assist the financial sector. we have taken very few effective measures to assist homeowners, 28% of homeowners in the united states are under water today.

that is probably the biggest and my view drag on economic recovery that we face. yet the most recent attempt by the regulators to provide some clarity in my view is woefully inadequate. i wonder if you might comment on that and what we have to do to be as fair to homeowners as we have to the financial industry. >> i do think the regulatory orders are just one step and the examination focused on the issues didn't really get into broad issues of whether the loan modification is evaluated and approved or denied. we have done some of our broad analysis of banks to service loans under the last year's agreement and have found not insignificant rights making the error rates and determination's but whether the borrower should

qualify for the mortgage, so we think in the next phase to be looked the third party that the orders require a very important davie 100% of consumer complaints and 100% of modification denials because not insignificant numbers of the calculations based on the sample we've done with our last share requires. i think more broadly, we need to be thinking about simplifying the service process, modification process as well as the relocation process cost to the critical some borrowers are not going to make it. we've also been exploring ways to provide a relocation system there's an incentive where there is not the possibility of the loan modification for the bar were because they simply don't have the income to make the restructuring. we think will save money because it is so backed up now and one of the reasons the housing is in clearing and can't recover until

it clears. so the short sales and relocation assistance can shorten the time that it takes to get the back of the market and can mitigate losses which we see in our financial interest, so yes, they're needs to be much more aggressive action in terms of looking back for the borrowers that have been harmed for the streamlined process is and the major borrowers are appropriately dealt with and less litigation and restriction efforts occurred where they should. so that is a positive, but there's a lot more work to be done and dvorkin isn't going to clear until we get this fixed. >> what you said i have to agree has been said repeatedly the last two years and all of you collectively as regulators have had a chance to make these things happen. and essentially what you chose to do is just kick the can down the road a bit further, let the

banks appoint an independent evaluator to go in and look again. can i ask what is the definition of independence? would this be someone who's never done any business before? is this a division of a company that has big contracts and all these banks and will be independent in the sense that the rating agencies are independent? >> we are not the primary regulator of any servicer, so their representatives and the primary regulators might want to respond to that. we've is servicer who had a problem to tell the bank the servicer for them needed to take some significant remedial steps, and so i think our view on that is the third party does need to be independent and their needs to be some validation process on independently by the regulators. >> for your participation there is no definition of independence

>> as far as again i would defer to mr. bernanke and wolin if they want to share thoughts on that because they are the primary regulator of the servicers. but i agree with you there are a lot of professional banking consultants that may be independent in the sense that they don't work for the bank but they may have other business with them or future business they would like to do with them so this is a huge issue and their needs to be some validation process. >> let me ask another question and the days you indicated that the loan modification process was explicitly excluded from this review, is that correct? >> this review is focused on the mortgage document processing. >> again, two years of struggling through this multiple times we have attempted to fix it. the problem is the foreclosure modification together, not one or the other come and this to me is a way of defining the problem

, and frankly it's very disappointing. my time is expired and if there's an opportunity again i will raise this with the primary deily but one of the reasons i raise the review is i think that you have been very forthright and the fdic going back to 2007 has been effective with the other agencies have been more apologetic in. >> senator schumer. >> thank you, mr. chairman. first, chairman bernanke, have a couple of statements that were recently made by the speaker of the house, john boehner, and i would like to ask about them. the first is he said, quote, we are calling for the end to the government spending binge that is crowding out private investment and threatening the availability of the capitol needed for job creation. now several economists reach you did the notion that given particularly now with our current slack in the economy and corporate america having lots of money and still being reluctant

to invest for other reasons, so they disputed the notion that we are crowding out private investment with government spending. do you agree with speaker's statement that the government spending is at this time crowding out private investment? >> there is a lot of crowding out as you pointed out interest rates are quite low. there is a lot of excess resources available for the firm's that need to for civil high your additional workers obviously. that being said of course if we don't address the fiscal trajectory that we are on we are going to be facing increasingly severe crowding out problems and perhaps financial stability problems in the future. >> but it's not occurring now? >> not to a substantial extent. i do think that if we had a long-term plan to produce our long term fiscal deficits it

might help to lower interest rates and increased confidence today, but under the conventional definition of crowding out the credit markets and labor markets we are not seeing too much. >> second statement is the inverse of fact. speaker boehner said the recent stimulus spending binge hurt our economy and hampered private sector job creation in america. cbo own analysis seems to contradict the statement. do you agree with speaker boehner's statement that the stimulus spending hurt the economy and hampered private sector job creation in america? >> i would distinguish between the short run and the long run -- >> we are talking about the stimulus. >> we have a long run problem to the extent that we are pushing our debt situation further and further into the red. we are taking greater risks. that being said, i have cited

the cbo analysis in the past as being a reasonable analysis. >> do you disagree with speaker boehner's view that the stimulus we passed last year hurt our economy and particularly hampered private job creation? >> my best guess is the stimulus increased employment. >> thank you. i'm glad you disagree. [laughter] >> next question, this is also for you, this isn't the same type of question. [laughter] the fed along with overprint regulators and the cftc issued proposed rules relating to when the counterparties and the derivative transactions are required to post margin that is put up cash as a security for their obligation as you know i've spoken to you about this shortly after the rules were announced and several members of the new york delegation sent you a letter on this. i'm concerned with the part of the proposal we all wore on the new york delegation that would apply only to the u.s. firms and

would result in them facing competitive disadvantages, ivies of the international competitors here's the basic issue as reported last week in the financial times. if the chairman, in the sector were to do in interest-rate swap with the u.s. banks london norms it would have to cough up margin but if the german car maker did a slot in the british bank it wouldn't have to. that is the financial times summation of this. do you agree this might cause u.s. firms to be at a competitive disadvantage? >> yes, i do agree. in the transactions with u.s. customers both foreign and domestic banks have the same rules. transactions with foreign customers we have put out margin and capital rules which have a good purpose which is increasing the safety of our financial system. currently, under the basel agreement capital rules will

probably be in effect, similar capital rules will be in effect for foreign banks but at this point they have not yet done the margin. >> that leads to my last chairman with the indulgence >> what is the treasury doing, secretary wolin, to ensure that the european regulators about the same or very similar rules and would we go forward and enact the rules before they did if it could our firms, our u.s. firms at a disadvantage? because obviously i'd like to see american institutions to as much foreign business as possible it creates jobs in new york. >> we are working very hard with the europeans in brussels and also individual european capitals to make sure we have as much as possible level playing field. we are making good progress on that but we have to stay vigilant. on the question of whether we would put forth rules i would defer to the chairman and the

market regulators as to how they would move forward, but i think is of course important as we said repeatedly to have essentially level playing field so as not to disadvantage u.s. businesses. >> i assume you are urging the regulators to do just that right here. thank you, mr. chairman. >> senator merkley? >> thank you very much, mr. chair, and you all for your testimony. i was just downstairs in the gathering of the health committee in a hearing and was rustling with the impact on the middle class of the last three years and essentially the hollowing out of the middle class in america, and i think there is a chart that captures much of the concern as it tries to show how middle class wages rose with productivity of the country over the 30 years following world war ii. but starting in roughly 1925,

1974 for the next 30 years enormous divergence of which middle class working wages, inflation adjusted and we had a tremendous increase in the productivity of the country, but families, working families did not share in that and raises the question of what kind of country do we want? do we want a country where families participate in the wealth of this nation where they are able to send their children to college and plan for their retirement or own a home, department ownership society or one in which essentially fewer families are in the position to access those fundamental instrument related to the quality-of-life. and it's discouraging to see that half over this last 30 years. in some ways, many of the issues we dealt with in dodd-frank are

related, and we have seen basically the doubling of the national debt under the bush administration and then a tripling of the debt as a result of the house of cards the was built in the mortgage deregulation by the bush administration. and now we are seeing their recommendations from the house that say okay let's dismantle what's left of the programs to provide support for families as a consequence of the debt even though the debt was created by strategies that were not designed to support the no class to begin with. the entire picture troubles me. ..

but it certainly -- we invaded to the performance of the financial system as it affects families. anticipate the anticipated addition of a foreclosure is 5 million from the provides and the impact on construction and just straight affects almost every aspect of my state economy how do you hobbies and topics that have been wrestled with in the financial stability oversight council? should they be opened up? does anybody care to comment?

>> senator, first you talk about a number of broad macro issues in a cute do justice to them, but i note the federal reserve and its pulitzer is trying to address unemployment, which is a major source of foreclosures as well as mortgage interest rates another fact is a fact in foreclosure crisis. we are addressing a do not respect. attempting to address for closure crisis directly, you know, there's an effort and so far only modest success. it's proving very difficult to find solutions in many cases. in other cases, the process has not, you know, not the inadequate in the cases of banks of the party discussed here a bit to recent review of servicing part says.

the federal reserve and the occ with this worth the fdic received as part of cents. issued cease-and-desist orders to try to stop that practices and try to require banks to go back and discover who was harmed in to help offset those problems where possible. going forward we expect to assess civil money penalties as well. but you are right that this remains a very, very difficult problem and some level, regulation of the problem, but some of us in academic problem and that needs to be addressed in terms of global and national employment and economic conditions. >> anyone else care to comment on this? >> well, i thought i'd see the financial stability oversight council has not talked about some of these matters about the rising commodity prices as a

council and at staff levels. i think the train for atkins a number of features that helps market regulators like the cftc for writer for the american public your weird high-priced veteran that is not what the congress were american public has asked it to be. but the train for i.t. this broader authority see the whole derivatives market swap stronger anti-manipulation of rudy, in our case, more summer to the fcc's, to actually ring in some of the foreign ports of trees and foreign exchanges and also to move forward with what i think congress said with regard to limiting some of the size of the speculators positions in these marketplaces. so prepare proposals on all of these matters consistently with congressional intent and we look were to public comment trying to finalize the rules. >> senator chester. >> thank you jimmie johnson.

once talk about debit interchange. of course mr. bernanke, we are hearing february. we talked about the serious risk that the durbin amendment would have on small community banks and credit unions because of the lack of ability to enforce the 10 billion under exemption. you've got more information since then. do you still deal with the information you've got that an exemption can work? >> to be honest with you, we write gnostic. we're still not sure whether it will work. a number of the networks have expressed their interest willingness to maintain a tiered interchange fee system. but of course that is not required. there is no law which says we

have to do that. the suggestion we got was that we should ask for even require networks to make public to put the interchange fees were they recharging. the e. some value in terms of transparency. there are market forces that would work against. >> you've been in the business for a long time and you're very intelligent guy. i know in the political process and i know you've probably been getting a lot of pressure from people at least one person on the senate. i'm talking about rural america but here. i'm talking the community banks and credit unions in a big rates another nail in her coffin. it is really important -- i think it's really important. is it going to work? >> i can't say with certainty. there's good reason to be concerned about it. >> if it doesn't work, what's the impact from the rural market?

>> well, it's going to affect revenues of smaller issues and could result in some smaller banks being less profitable or even failing. >> okay. thank you. when it seemed a prudent thing to do is to step back and get more information? wouldn't you agree the amendment was put in rather quickly? >> it was put in quickly but i think i have to defer to congress on what kind of information you want to get. we have done one review and we've got 11,000 comments. >> to jamaica decisions with that information? >> can you make good decisions with little to no information? >> that's a problem. we've received 11,000 comments and done an enormous amount of sitting in the industry and so on. >> you've been able to read through those comments? >> that's why we wrote that we were going to be late but i will

come up we are making progress. >> chairwoman bair, i went to thank you for your service. i very much appreciate all the work you've done. a senator brown said, you've been very good at what she'd done. same issue from your vantage point committee think it possible to send community banks with debit interchange? >> i think it is questionable. i think we have suggested that the fed perhaps could use authority to require the networks except here praising and our lawyers have different subnet and i think i was called to the fed's role. so if you have reasonable authority to require that come it does become more problematic. and so i do think this is going to reduce revenue but smaller banks and they will have to invest that two customers in

terms of higher fees, per merely for transaction accounts. it's going to happen. as a direct result? you need to determine not, but i think it will happen. >> was there any impact on their safety and soundness? >> our initial houses we don't think that will happen, but clearly we trust them and there are still other challenges confronted in the banking and it's probably something they don't need to be dealing with right now. >> you talk to but you didn't know if this is what the impact of congress would have. i trust that this would potentially and will certainly need higher fees and other areas for facilities. >> yes. >> okay, mr. welsh committee of anything you'd like to add to this issue?

>> now, only that we provided a comment letter that did not address particularly this distinction. it dealt more with flexibility the fed has to sort of except the overall level that they set. we've been doing it for one it for one of outreach of outreach to community bankers and it certainly has been a key concern for them. >> the impact on community banks, d.c. very similar to the way -- how do you see a? >> well, i would say to the extent it works out as suggested camorra cuts into revenue for community banks, is one more stress on them. >> do you think an exemption can be implemented? >> i haven't really studied the issue of whether that can work. >> thank you very much. >> senator warner. >> thank you, mr. chaiman. let me start by adding my

comments to some of my other colleagues in thanking chairman bair for having extraordinary service and lots of hope personally to me and senator corker as we navigate through some of these issues. i hope mr. chairman, since her down to the field at this point, maybe we can get a second round of questions since i've got lots of things i'd love to raise. first of all, for deputy secretary neal himelfarb six, i continue to think the jury is out on whether the members hope and aspiration of what the fsoc will be will be accomplished. i think it is a critically important early warning signal. one of the things that i think will make the fsoc a more informed entity will be the art

of creation of the bar. i was wondering, do you have any thoughts of what would make it the nominee? >> we certainly hope soon. i expect the president will make a nomination for that important job soon. i want to assure you that in the meantime we are working with an awful lot of intensity and focus to stand up to ofr and make it the important addition to the landscape but it is beginning to be and will be. we have made very good progress in hiring senior people. we're just now in the last few weeks brought on to burner, a very accomplished individual with lots of experience in markets and risk, with impeccable credentials to lead the standup affair. we have hired chief business

officer to run the datacenter. chief operating officer and two other folks. they are together beginning to work together with the other members of the fsoc in evaluating risk, trying to work through the kinds of data issues that will be critical for the ofr to work through. >> i got a lot of questions. i appreciate that, but it's been 11 months. we need a nominee. i want to also three echo that senator to me and senator brown mentioned as well in terms of the designation. we've got to give more clarity here. visitor the better. one of the notions i personally believe is if we give guidance to reaffirm and parnevik was a

safe harbor and take actions to ensure they are not designated, that would benefit the system. that means in effect will the limiting risk exposures so they don't get this designation. again, that helps us move along in this process. i concur with chairman bernanke's comments that this cannot be with dollars and cents. the sooner we can move this forward, the better. and the notion of some sense of a safe harbor, whether it's insurance funds, money market funds is helpful. i would put one other caveat here from some of our financial institutions to repeatedly with cobb and appeal.

perhaps share jobs overseas. towards the formation of dodd-frank when they said please, please don't give firm guidelines and legislation. leave it to the regulators. and now they're coming back and saying my gosh, regulators have got so much to do. hopefully this in the audience who visited my office when they were saying please don't legislate specifics, that you recall the system of which you asked for. i would also urge because i know one of my colleagues asked the point that some of this chipping away at for it is my sense there is an enormous not complete agreement with what we've done but across the e.u., around the world, there could be that first. any effort to try to retract

that would be potentially devastating to international implementation and i want to do -- i know my time is gone, the chairman bernanke, one of the things we think about what the g20 and my fear is the crisis gets further away from the financial legislation issue falls down the level a little bit, how do we be sure that we really get their? how do we be sure is be sure cpk in the e.u. and the billing options rather than some resolution activities that we keep this international implementation and international perhaps slightly different roles, but at least a unified approach on track? >> well, that's a major priority of the whole process and i think on the whole it's gone pretty well. people have joined in in good

faith to try to create a level playing field. so while there are some international differences, at this point i don't see very many. senator schumer talked about some aspects of margin requirements and things of that sort. but herbig in general, i don't see many irresolvable differences at this point. moreover, a very important part of this is ensuring that roles are both implemented in a consistent way across countries and enforced across countries. part of what the basel committee and financial stability board are trying to set up frameworks for looking into those things as well as paper rolls. >> my time is expired, but i'll say run for second round. do you or chairman barrett want to comment on resolutions for example with the uk's bail in? >> well, there's been a lot of

work. the defense as a neither shows for large financial entities. no one is trying to be the bankruptcy process. it is just not suited for it. it's used as much as i can, but for some instant not suited. i think the g20 over the year ago we cochaired to cross resolution and played a leading role in devising, so there's really progress moving forward. i think there's another tool in the tool kit. i think dale and as one toolkit is a good thing. they are not suggesting that can replace resolution regimes. you'll always need the backs that they feel. also bailey and busy resolution and i would like to bring some of the unsecured debt into an institution has a lot of problems and is one of the structures to my pursuant to resolution planning. so there's a tremendous amount already with the u.k. china has a number and also the

e.u. is moving forward with development to special resolution regimes. so i think there's tremendous progress and i hope we can forgive and train and continued political support for it. >> at the suggestion of senator reid, we will produce eight with a brief second round. for other panelists, currently there are several vacancies at the financial services regulatory agencies. this summer there will be several. i am increasingly assigned of the comments by some of my colleagues that any and every man and he will be brought to. not having done individuals in the place of the agencies will continue to implement soon to be

dead to handle in the economic recovery. what do you believe is the impact of these legacies? >> mr. chairman, these are important roles in it's important to fill them. the president will be making nominations on these open positions. those that he hasn't made nominations for her. i think it is of course important to have leaders in the seats. having said that, the work of the various agencies goes on in the fsoc has been off to a very strong start and has been very effective in its early days and will continue to be so, but that is not to suggest it is important to get folks in these areas jobs. >> chairman bernanke.

>> why do you think the agencies or to another, leadership to set direction and tone and i think it's important to have highly qualified people at the heads of these agencies. that being said, the senate has to do its duty of advice and consent in ensuring these are qualified people. but i hope there will not be unnecessary delays and politically motivated blockages that prevent those qualified people from undertaking their duties. >> chairman bair. >> i think this is very important. after i depart on july 8, our ots will be gone july 21. we could rapidly go from five to three directors quickly and actually down to two because one of our internal directors right now is on hold status as other

opportunities. i think this is very important and i think having the next term is important. it's important for the senate to have their say and will process the president to have his prerogatives as is constitutionally charged with nominations and appointments. so i do think if members want independent thought in an agency, it's important for that senate confirmation. all the tough decisions i made if there is an acting capacity, it would've been very inhibiting to me, so i hope the process can move forward. >> chairman schapiro. >> i think with the five-member commission is important to have a way to intend a full complement of commissioners. it's particularly true right now given the huge volume of work both with respect to law enforcement and that duties the most particular respect for the rule writing responsibilities we

have taken on under dodd-frank. we had no vacancies at the moment although we have one commissioner explaining of the year ago it has been holding over that position. >> chairman gensler. >> where 5% position and have sides are equal and fairly engage commissioners, but we do have a term that comes up after serving two terms will be open in june and yesterday the president did announce that he's forwarding a nomination to the senate so i was glad to see that. i look forward to maintaining. i think it will always have five commissioners there we engage. >> comptroller walsh. >> as the one acting agency had here at the table, i guess i would add the thought that secretary gates are invited me to do this job and certainly encourage me to do the job as if

it was my job. but the fact is i have said repeatedly that i do it's very important for independent supervisory agencies to have nominated and confirmed heads in place for the perception of independence and they think it's obviously the right way to proceed since that is the structure that exists. so why would join others in support of that. >> senator merkley, do you have any questions? >> first i want to join my colleagues in thanking you, chairman himelfarb bair. i wish you well and the next chapter of your life and will continue to ensure many of us look to your advice. one of the things i wanted to

pursue in deputy secretary wolin, it's appropriate to ask you about this and that is if we turn the clock back a year and a half, there was another continues to be a real challenge in terms of lending capacity at a lot of work community banks. in wrestling with this and talking to many, many experts and stakeholders, we produced a planned called small business lending fund, which was to essentially counter the irrational fear that follows irrational exuberance. how's that we fear related to capitalizing community banks? that capitalization is leveraged provided to 300 billion community bank lending. that was some game that was amended into small-business jobs

bill in a bipartisan fashion. everything's coming coming to me now that are applying and saying there is no sign of the treasury is ever going to respond to applications. it just seems like the process is absolutely frozen. what's wrong and how is treasury going to fix it? this is an important issue to bring our economy back on track. >> thank you, senator for that question. it is a critical element to getting a credit flowing against small businesses. we supported very strongly and are spending a lot of a lot of energy implementing. we have received lots and lots of applications. you can expect will start making announcements of investments very quickly in response to this applications. >> that's great news and they thank you. i want to have the same stream of folks asking me what's going

on. second question i wanted to ask and i may turn to share schapiro is to follow the flash crash from a year ago. the fcc of the league has had to address greater audit trail for about 20 years the flash can't put an exclamation point on the need to both develop a real-time audit trail can look at other issues related to preferential treatment for high-volume and high-speed trading. maybe you can update us on where the fcc process is in your personal perspectives on how important is this in terms of the confidence of small investors and others. >> i would be happy to. let me start with the last part 1. it's absolutely essential that we as a market structure that's resilient and capable and perceived by all market participants to be fair -- i

mean, is fair. on may 6 we quickly made a number of changes in the market structure to deal specifically with the extraordinary volatility we saw on that day. so we instituted single stock breaks out the prices stop was for than 10% in a five-minute period, just time to catch their breath and come back into the marketplace. we also eliminated the rules that were permitted of the executions 1 cent a hundred thousand dollars on that day. the exchange clarified the rules on the road for when they would break trades are clearly erroneous or not valid trades in the marketplace. about 20 27,000 trees were broken that day. and get access to the markets of customers and broker-dealers must go through and must not directly into the marketplace. important things had been done. our next type respect was to

move to an up-and-down proposal will be proffered by exchanges that would limit the ability to put into the marketplace in order that was out of a reasonably tart range of the current trading and that will be important as well. we have broader issues are very focused on. many are in our concept relief for 14 months ago, 15 months ago focus on high frequency trading and used by all the rhythmic traders. we are moving forward with that in pieces and hopefully will begin to take action in the area. the most important pieces of the audit trail and a large treasure reporting system that was specifically proposed by the agency era go for almost a year ago and it's my hope those will come back for final approval in the next couple of months. they're absolutely essential to our ability to reconstruct trading after an event full day

like may 6, but also for us to determine whether people are manipulating markets or taking advantage of other market anticipates in any way. the consolidated audit trail will bring together data from the many trading venues that exist in the u.s. market is really critical regulatory tool that simply hasn't been done and we're going to move ahead and try to get it done in the next couple of months. >> or appreciate. but it remains something you're hard at work on. >> absolutely committed to it. >> chairman warner. >> to pick up for mr. merkley left off. i still have some concerns that can you keep up with the technological challenges, co-location techniques, some of the technology aspects one of the things i find curious is some colleagues on the other side of attacked the consumer

bureau because of its ability to have a funding source. i think we ought to try to get the bill in place wanted to make sure the prudential supervisors or at least parity vis-à-vis the new consumer entity in its curious one of the ways to do that, particularly the fcc would make sure they have adequate funding so they could upgrade technologies to win the deal with flash crash technology challenges, when thinking about perhaps voting on a new challenge to the fcc in terms of reported back as major publicly traded companies are subject to cyberattacks, which deeply buried challenges. if we maintain the parity to keep the supervisors appear that role, they've got to have resources to do it. that brings they now to one of

the areas that i want to ask both chairman shapiro and chairman concern. we're seeing, as they relate to this process on some of the swap execution challenges. difference between sec's approach that h gensler hives. let's get five votes. i'm not sure where they should all play out, but i'm anxious to see how we between the two entities have the reconciliation whether at some point this is where we will ultimately be bumped up to a fsoc -- i recognize your different markets, but some type of clarity to what was ultimately end up at the fsoc. >> let me begin in an alternate to garrett. it probably shouldn't be surprised we have some different

approaches. some of those are results of having different statutory foundations, but also because there's differences in progress based on liquidity and how they trade and that argues in some instances a different regulatory approach. i will say we are working together extremely close to you. or so the proposing stage while these rules. we've added the cross, so with the cftc took a different approach. we asked questions whether that was better or whether the sec approach is better or an entirely different way to go. we continue to review each other's comments so we have a good understanding and continued to meet with industry and other interested parties to talk about what is the approach for for filling the statutory mandate to bring this product under regulatory shame in a way that's

a fact that of investment have institutions to different sets of regulations where that would be silly and unnecessarily costly. for a very focused on all of these issues and our staff continue to do really fabulous for together to try to narrow the differences. i expect as we get to the stage where we adopt rules, you will see differences continued. >> if i could just come back to one core piece. transparency is a key part of how markets work is. i truly believe competitive and transparent markets are what helps the american public and lowers systemic risk of a future crisis in terms of our working relationship, it's remarkably close in a dozen or 15 joint work roundtables and sharing the comment letters as chairman schapiro said. more particularly on the swap

execution facility rule, one of the challenges we have is that the future's regime, the regime were trading features as mandated in the 1930s, that i was on the central exchange, 100% has to be transparent and out there for the public to see. that's a good thing i think for the american public. the security laws are different. there were guests and we started between securities and futures. as we come up with rules or swaps like interest rate swaps, we have to be mindful they are not so far after the futures market that we start to undermine even her futures markets that work very well in this country even to the crisis. so were focused not just on the gap between security-based sauce and slots, but also focused on a recreation is something that undermines the futures markets when we do this while waiting for something called swap execution facilities. >> i have an indirect result of

a proposed nonexchange treating swap. if we have to have a a threshold in terms of pushing it and peered >> senator warner, this only relates to something that is cleared -- it has to be cleared. has to be made available for training and thirdly it cannot be a block. the way both of us looked at this rule is this is for the five or $10 million interest rate swap, not the tune of 50 million or 500 million interest rate swap. if not for the bilateral swaps or swaps to corporate america as opposed to the nonfinancial corporate america. financial entity to financial and indian transaction is cleared made available for treating and is not a block. >> to us questions very briefly and i appreciate the chairman granting me this. we clearly need to move these

transactions into clearing houses and i just raised the question, a critique we want to have an open access to not just create such a limited amendment or clearinghouse, but i do have some questions whether the $50 million b. is. i sure want to make sure the base requirement for any clearinghouse is proof of true capital and we get that right. i think trend of robust competition is good, but we've got to make sure they really have the ability to get the counterparty assurance. >> this is important to assure robust competition among steelers. what happened is it's a very close, concentrated groups of dealers. in the future is wrote an securities road, very many members of clearing houses and

that's allowed. their 60 to 70 members of the chicago mercantile clearinghouse for instance. it is swaps road is closed and i think they're high in arbitrary limits for judges have $5 billion of capital than $1 trillion swap book and i wasn't part-time to keep a barrier to entry frankly. i think congress address that they seen the clearinghouse has open access. we could put a rollup for a proposal to hear from the public, but it's also for pension funds and asset managers to have more choices as to who is going to be their clearing, who is going to represent them on the buy side? i think this is actually a rule that hopes pension funds, asset managers of america, financial entities who are not swap dealers have access to this clear he cannot be constrained and have to go through a handful of big wall street firms. >> finally again, secretary himelfarb six, sounds like the

ftc and the cftc are working well together. but at some point it is this members hope that so we wouldn't have this patchwork and pilot approach in duplicated sets of regulations, the fsoc was hopefully the place that would help resolve these issues and at some point there needs to be that umpire. i hope secretary geithner will realize not just in this particular case, but in a series of others. i think the indulgence of the chair. >> well, senator warner, as you heard from the chairman they are still early in the process and we will move forward. i think while respecting the independence of regulators commodities for the fsoc has a responsibility to look at things that has important implications and try to bring to bear consistency across the system where those issues are relevant. that is something we've been focused on.

there's also from treasury's perspective and need to worry about international dimensions are not only to read consistency where we can with the united states but it can latch up to offer in the g20 and beyond again for the level playing field that we think are important. >> today's hearing has been very helpful with given us all understanding of important provisions and the dodd-frank act to promote financial stability in our nation's economy going forward. we cannot afford to go back to the old financial system that has jobs and cost chileans of dollars. the creation of the fsoc and other new tools to archive your regulators to monitor systemic risks and feeling financial institutions are just many

weaknesses in the old system. this will help the regulators better manage virtue crisis. thanks again to my colleagues and our panelists for being here today. this hearing is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> how does it transform? what choices do they make to become terrorists? to kill hundreds of thousands of other people? >> in his new book, masterminds

, >> coming up shortly, former director of the cia, michael hayden talks about challenges federal intelligence agencies space for donating

duration of my remarks. the presiding officer: without . mccain:ding officer: without >> senator mccain spoke for 20 minutes. >> successful end of the ten-year manhunt to bring osama bin laden to justice heightens the appreciation for the ou diligence, patriotism and re intelligence community. very great credit andinspirat inspiration to the country that is not so much abandoned like all americans, i am in baghdad.r their success has also reignited debate over whether the so-called enhanced interrogation techniques of enemy prisoners,ii including waterboarding were instrumental in locating bin laden and whether they are mea necessary and justifiable means for securing valuable information that might helpur prevent future terrorist attacks against us and our allies and made to the capture and killing of those who perpetrate them. or or are they in should they bend

laws as torture or cruel, inhuman and degrading treatment. i believe some of these pack says, especially waterboarding, which is a mock execution and indisputably torture are sep and should be prohibited in a nation that is exceptional iny o its defense and advocacy of human rights. i believe they are a violation of the detainee treatment act oo 2005.icle the military commissions act ofc 2006 and common article iii of the genevall conventions, all of which were good cruel, inhuman and degrading treatment of captured combatants, whether a they wear the uniform of astates country or are essentiallysimir stateless. similar srro-called enhanced interrogation techniques beforem osama bin laden was brought to justice and i oppose them now.ur

i do not believe they are necessary to our success in our advocates of war against terrorists as the advocates of these techniques claim they are. even more importantly, i believe that america uses torture, it could someday result in torture of american combatants. our yeah, i know al qaeda and other terrorist organizations don't share her scruples about the treatment of enemy combatantssod and have been will continue tote subject american soldiers in cruelest treatmentimag imaginabd we must bear in mind thee likelihood that sunday will be involved in a more conventional war against the state and not a terrorist movement for use insurgency. and they carefully do not set a standard that another country could use to justify their psone mistreatment of our prisoners.ae lastly, it is difficult to

overstate the damage that any practice of torture or cruel, inhuman and degrading treatment that americans does to our repuo national dirt and historical exc chewer standing as antion the exceptional nation among the countries ofit the world, it isi too grave to justify the use of these interrogation techniques.the wor america has made its progress in the world not only by avidly pursuing our geopoliticalations interest, but persuading an inspiring other nations to embrace the political valuesuish that distinguish. still as i've said many times before and still maintain, this is not about the terrorists. us. it's about us.vern i understand the reasons thatthe governed the decisions to t improve interrogation methods than i does to improve them and apply them in the interrogationd

of captured terrorists were admirably dedicated to prtiotech i know they were determined to keep faith with the victims of terrorism and prove to our enemies that the united statesla would pursue justice tirelessly, relentlessly and successfully no matter how long it took. u grave and urgent and the strain of the duty wasatio considerabli i admire their dedication, lovee of country, but i dispute that he was right to use these methods, which i do not believe were in the best interest of tht justice or our security or the ideals that define us and whicho we have sacrificed much to defend. tse i don't believe anyone should be prosecuted for having used these techniques in the past and i agreed the administration shoul. state definitively that no oness will be.bits

as one of the authors of the military commissions act forogan which i believe prohibits waterboarding and other enhanced irrigation techniques, we wrote in the language of the law thatl no one who used them before the enactment of the law should bes prosecuted. o and i don't think it's helpful the. i many advocates of these techniques have asserted their use on terrorists in our custody, particularly khalid khd sheikh mohammed, reveal thesheih trail for bin laden come a trail uhich had gone cold in recent m years at least to destruction.e the former attorney general of the united states, michael mccarthy recently claimed and i quote, the intelligence that led to bin laden began with a bt disclosure from khalid sheikhhad mohammed that broke like a under the pressure of harsh interrogation techniques that includedio waterboarding. he was the target information, including eventually nicknamedn

of a trusted carrier of bin laden. that is false. so much misinformation being ess said into such an essential public debate is the fund, i i asked the director of central of intelligence, leon panetta for the facts and they received thee following information.g the trail to bin laden did not begin with a disclosure from khalid sheikh mohammed who was eaterboarded 183 times. l we did not purslane from khalidl sheikh mohammed to the name of bin laden's career or his alias. our command for both kuwaiti, a man who ultimately enabled us to find bin laden.st allowed the first mention of the name abu park med as well as a description of him as anrom important member of al qaeda came from a detainee in another country.nee's

the united states did nott counr conduct these detainees interrogation, nor do they render him to the country for the purpose of interrogation. n we didot not learn abu augments real name or alias as a result of waterboarding or any enhance. interrogation technique used on a detainee in u.s. custody. none of the three detainees who were waterboarded for his real name, his whereabouts or role inaccurate description of his role in al qaeda. in fact, not only did the use of enhanced interrogationhalid techniques on khalid sheikh us mohammed did not provide us witn tea leaves on bin laden's carrier, abu othman. and actually produced false and misleading information. specifically told his interrogators that abu othman hd had moved to posh water, gothawt married and ceased his role as an al qaeda facilitator, which

was not true as we now know.alle through the use of waterboarding and enhanced interrogation techniques against khalid sheikh mohammed was confirmation of the already known fact that the courier existing and used an of alias. senat i've sat further information from the staff of the senate intelligence committee and theys have confirmed in fact the best from the detainee, information l bin laden was obtained through standard noncoercive means, not. through any enhanced interrogation technique. tortu in short, it was not torture or cruel, inhuman and degrading detainees but that is the major

themes that ultimately enabled our intelligence community to find osama bin laden.orrect i hope former attorney general casey will correct his so misstatement.gain it is important that he do sompt because we are again engaged in iois m important debate that wet have much at stake for security reputation. do so each side should make its own case, butup do so without making for up its ownmy facts. for my part, i would oppose any legislation fna should bereturne proposed that is intended to authorize the administration to return the use of waterboardingr and i sincerely believe ther torture of cruel inhuman and uny injurious to our country. this debate is ongoing, but i don't believe it will lead to ao change in current policy prohibiting these methods. but t so perhaps this is just a debatt

for the history books, but it is still important because americans in a future age as well as their leaders may face o the samevi questions. or should to our best to provide them a record ofde our debates d decisions that is notable not just for his passion before it's delivered advanced and opinions informed by facts and withsecurf scrupulous care by both sides for security of the american people and success of the idealy we cherish. an have a duty to the future american generations with anstri history to offer them not confusion, but instruction as they face their crises andthrouh challenges and try to lead can't america safely and honorably through them. both those sites can't be right atent coors, that those sites can be honest, diligent and sincere. let me briefly elaborate my reasonshe for opposing the retu.

to these interrogation policiest obviously to defeat enemies to need intelligence, the treat intelligence is reliable. we should not torture or treat e him humanely terrorists we have captured. iha believe abusive prisonerse harms, not helps her war effort. ntd my personal experience, thei abusive prisoners sometimes often produces bad intelligence because under torture, a persons will say anything he thinks his captors want to hear, whether it is true or false if the police that will relieve his suffering. often information provided to stop the torture is deliberatelf misleading. what the advocates of cruel ande harsh interrogation techniques can never prove as they could not have gathered the same mean intelligence through other moree humane means that provides solid

reason to be confident that we can. the cost of assuming otherwise can be hugely b detrimental. iec it has been reported in the staff of the senate intelligence committee confirms for me that a man named sheikh khalid b. who had been captured by the united states and render to each of,l-, where we believe he was tortured, provided false and misleading information about h saddam ushussein's weapons of mr destruction programs. that false information of ultimately included in the secretary of state colin u.n. sy powell's question to the u.n. security council and i assume hope to influence the bushinvade administration's decision to invade iraq.y unfa furthermore, it's unfair to thed women in our intelligence community and military who for i decade to locate osama bin ladey to claim falsely that the onlye succeeded because we used

torture to extract intelligence from detainees several years ago. evidence i have not found evidence to suggest that torture or so mucht of our disagreement and interrogation methods they believe are torture, which i. believe are prohibited by u.s. law and international treaty obligations. we are not just a party to, butc leading advocates of played an important part in finding and killing bin laden. rather, i think his death at the hands of the united states argues quite the contrary that we can succeed without resort to these methods. it is also the case that the mistreatment of enemy prisoners endangers our own troops who might someday be held captive. while some enemies in al qaeda surely will never be bound by the principle of reciprocity, we should have concern for thoseced

americans captured by moremore conventional enemies if not inne this war in the next. i until about 1970, north vietnam ignored its obligations not to mistreat the americans they holi prison, claiming we're engaged n in an unlawful war against them and us not entitled to protections of the geneva conventions. but when abuses became widely wl known and cited unfavorable p.o' international attention, they subsequently decreasedso mistreatment of our pows. some have argued that if it is right to kill bin laden, then it should also be right to tortured and an even capture rather than killed. i disagree. first the americans to kill bina laden run a military mission against the leader of a terroristh we organization witht which we are at war. prima it was not a law enforcement operation but primarily an

intelligence operation.d, did they cannot be certain that binf hem,n, even though he was unarmed did not possess some means of harming them, a suicido festering stents and they weres. correctly instructed to take no unnecessary chances in the completion of their mission.turd second, bin laden was a mass ule murderer and had recaptured himt would eventually receive -- he would've received the ultimate sanction for his terrible crimes. as captured war criminals in previous wars have. war criminals capture, tried and executed in world war ii, for instance, were not tortured inon advance of their execution either in retaliation for their crimes or to elicit information that might have helped us and locate, ivory hand and conduct m other war criminals.istincti bee thisen is not done because civilized nations have long made a distinction between killinghe and injuring in the heat of combat on