satisfy political agendas. when the truth of the matter is america is very interwoven than what expected. we need our brothers and sisters in illinois, and they need us. americans all over the country depend on each other for a variety of resources. we should focus on that. the government is broken and is beginning to affect american people who deserve better. it is our duty duty -- it is yor duty as stewards of the public to fix this. please do your best for the american people and put this nation back to work. thank you again for the opportunity to be heard. >> thank you. mr. rusco. >> thank you. chairman issa, ranking member cummings, and members of the committee, i'm pleased to speak with you today about the department of interiors challenges associated with managing federal oil and gas in the aftermath of the macondo oil

spill. interior leases federal lands and waters for oil and gas exploration, development, and production. these activities provide a domestic source of energy, create jobs, and raise revenues that are shared between federal, state, and tribal governments. revenue generated from oil and gas on federal lands and waters is one the largest nontax sources of federal government funds, totally billions of dollars annually. the deadly explosion on board the deepwater horizon and resulting oil spill emphasize the importance of interior permitting and inspection processes to ensure environmental safety. as found by the national commission on the bp deepwater horizon and offshore drill, it was a step of several missteps by bp, haliburton, and transocean, which government regulators lack the authority, necessary resources, and technical expertise to prevent.

in recent years, gao has evaluated many aspects of interior's management of federal oil and gas resources. we have a found material weaknesses in three brood areas and as a result in 2011, gao placed oil and gas on the high risk list. first, interior has been unable to complete production inspections, maintain reliable royalty, and production data, and provide responsible assurance that the public is receiving it's fair share of oil and gas revenues. in recent years, interior hasn't met the goals for verifying the companies report volumes of oil and gas produced on federal leases. interior has lacked consistent and reliable data on the production of oil and gas from federal lands and has been unable it was able to provide assurance it was appropriately assessing and collecting royalties. secondly, interior faces

challenges in hiring, training, and retaining staff in key gas, oil, and inspection position. in addition to hampering production verification efforts, the human capital challenges have resulted in delays, leases, and caused interior to be unable to meet the goals for performing safety and environmental inspection of oil and gas facilities. finally, in may 2010, secretary salazar announced plans to reorganize the minerals management service into three bureaus. under the reorganization, offshore leasing, planning, and permitting will be done in the bureau of ocean and management. offshore inspection and enforcement by the bureau of safety and environmental enforcement and revenue collection by the newly created office of natural resources revenue. organizational transformations are complex endeavors that require inconcerted and sustained efforts of management and staff. interior's reorganization will be challenging because it is

happening at a time when the agency is working to implement dozens of recommendations made by gao, interior's inspector general and other entities. because interior is still responding to the aftereffects the macondo oil spill. the efforts include implementing new practicing and procedures for inspection. we have stated we will require increased level of funding, which will be difficult to achieve in the time of tight budgets. it is essential that interior gets the reorganization right. the agency must provide congress and the public with responsible assurance that billions of dollars of revenue owed the public are properly assess and collected and oversight of oil and gas activities on federal lands and waters maintains an appropriate balance between efficiency and timeliness on one hand and protection of the environment and operational safety on the other. while interior has already come a long way towards implementing

organizational change and has responded to many recommendations, it may require congressional attention to fully accomplish it's goal of restructuring and improving the management of public oil and gas resources. this ends my oral statement. thank you. i will be happy to respond to any questions that you may have. >> thank you. mr. bromwich. these activities include putting in place strengthened safety measures and regulatory reforms relating to reviews applications plans and permits to drill. those measures and the many other steps we have taken over the past year has been part of the response to deepwater horizon and aftermath. as you know, my agency is not directly involved in gulf coast recovery efforts, nor do we work

with bp. it's beyond the jurisdiction, i will take it back to the department of interior to other agency. at boemre we have devoted efforts to put in place standards for safety and responsible in our offshore development program. our aggressive reforms and oversight are the most extensive in the united states history. these reforms strengthen requirements for everything from well design and workplace safety to corporate accountability and are helping to ensure that the u.s. can safely and responsibility expand development of our energy resources. over the past year, multiple reviews and investigations have produced reports advocating the need for change in our agency. the president's commission on deepwater horizon, the department of interior, department over safety oversight, and multiple committees of the house and senate including this one all have highlighted the need for reform in the way the department

does business and oil and gas operations are carried out offshore. many of the recommendations presented in the reports have validated the administrative actions and reforms we have been undertaking at the department to promote safety, science, offshore oil and gas operations. the changes were necessary to ensure that industry and government worked to help prevent an accident like deepwater horizon from happening again. we have issued new regulation to bolster safety and enhance evaluation and mitigation of environmental risks. our new drilling safety rule put in place tough new standards for well design, casing, cementing, and blowout preventers. including it be certified by a professional engineer. our performance-based rule required them to develop a safety and environmental program that identifies the hazard and risk reduction strategy for all phases of activity. boemre has also issued notices

to clarify how operators must comply. we have clarified that operator must have a well-specific blowout and worse-case discharge scenario that provides the calculations behind those. we have clarified that operates must certify they will conduct their drilling operation in appliance with all applicable agency recommendations, including the new drilling safety rule and we have clarified we will assess whether each operator has submitted adequate information that it has access to and can employ the deepwater blowout. in addition to the enhancing drilling and workplace safety, we have worked on reorganization of the mms and independent entities with distinction missions. they are releases development, regulation of drilling, and election of rev nighs from federal energy development. having these three conflicting functions reside within the same bureau enhance the potential for internal conflicts of interest

within the agency. instead of one with multiple missions, we will have three new entities, they are beom, bsee, and honor. we are on track to complete the organization by october 1 of this year. boemre continues to issue permits, we have in every case that the application reaches the standards. when new safety and environmental standards went into effect last june, seven permits are pending, returned for more information. deepwater falls into two category, deepwater permits that involve activitied barred by the moratorium. we have approved 40 permits for unique wells since they demonstrated in february it had

developed the capabilities. 25 permits are pending, 20 permits have been returned to the operator. second, there is a category that is frequently ignored in discussions. deepwater activities not barred, including water injection, completions and workover. since the implementation of safety and environmental standards, 40 permits have been approved, only one is currently pending. although the permitting of drills activities has been moving ahead, there are reasons why the pace is somewhat slower than in the past. our new regulations required operator to make sure the applications fully comply with the new requirements. in addition, the drilling engineers have had to work to ensure compliance. this maybe frustrating to some in the industry, but the rules and heightened scrutiny are appropriate and in the best interest. in closing, we have made significant strides in reform the way offshore oil and gas is carried out at the department of the interior and on the outer

shelf. we have promoted safety and science in offshore gas and because of the hard work of industry and people in boemre we have issued permits and getting people back to work. that concludes my statement. i'm happy to answer question. >> thank you. thank you all of you. we go to gentleman from texas for five minutes. >> thank you very much, mr. chairman. i'd like to first -- members have industry on their panel, i'd like to thank you for coming up and sharing your thoughts and concerns. i hope you'll exclusion me if i ignore you and talk to the government regulator that maybe giving you some of the problems. if i could ask ask -- mr. bromw, you went through a lot of numbers quick and i wanted to make sure you got an adequate handle on those and talk about the pace that we are looking at. so there have been permits, you said there have been permits on 15 projects that have been

issued since the moratorium is ended; is that correct? >> there are deepwater wells for activitied prohibited under the moratorium, we have permitted 15 unique wells. the 15th yesterday. there are multiple permits for individual, unique wells. >> of that 15, how many were in the process before the moratorium. >> depends on what you mean by in the process? >> follow the application and y'all have been working on and stuck on the shelf or -- >> we hadn't stuck any on the shelf. a number of the projects were ongoing, they were stopped by the moratorium, then apply indicated had to be resubmitted to make sure they comply with new safety regular laces. >> correct me if i'm wrong, there are four or five new ones that weren't resubmitted or weren't in the works prior to

the moratorium. >> that's right. i think the number maybe lower, but those are projects that put people back to work. the distinction is really quite irrelevant. >> how long are we looking at? if i got a lease and wanted to drill a well, how long under the process would it take, assuming i'm responsible about my paperwork? >> that's a big assumption. [laughter] >> one the challenges that we've seen that industry has face and they fully acknowledge this, they have frequently submitted both plans that are incomplete and noncompliant and permit application that is are incomplete and noncompliant. we are working with industry every day to try to eliminate the number of times that we have to return either plans or permits so that we can process them straight on throw and approve them. >> but is this a result of the fact there's so many new

regulations y'all aren't even sure what needs to be done. the complete that i'm hearing from oil -- my friends in the industry, i'm from corpus christi, texas, it's big in gulf drilling. they don't know what they need to do to satisfy your criteria. i understand there's growing pains. these things were getting out in two weeks prior to the deepwater horizon. >> before the new enhanced safety and environmental regulations. that's right they were being turned out quickly and the new safety and environmental rules makes the process more a little bit more slowly. >> are we talking now two months, six months? you have have four new ones since february, that seems like we are looking at much longer. >> well, i can tell you congressman, if the plan was submitted and a fully come compliant application to drill was submitted we're talking about a few weeks not a large number of mops.

that has not so far been our experience. i take your suggestion that industry doesn't understand what the requirements are. i think they didn't at the beginning. i think they do now. talk to them today, i think they would acknowledge that. >> would the gentleman yield? >> i will, mr. chairman. >> would you say that months again when the moratorium was officially lifted you had full and complete guidance available to those oil companies on that day? >> no, i don't think we had full and complete guidance. let me make something clear. >> that's all i wanted. >> i do want to reclaim my time. >> the rules were issued october 15th in my opening statement. three days after the moratorium was lifted. that's what began the adjustment time and cost for both industry and extent for us. >> what's happening with the 33 previously permitted deepwater wells? >> well, we don't track them that way, congressman. a number of them have not

resubmitted their application. we can't do anything about that. we can only act on the applications that we have -- >> so they were permitted, the rules changed, you moved the goal post, and they have to start over again. >> that's not the way i put it at all. one the obstacles is the fact that they now have to demonstrate access to and the ability to employ containment. i don't think you or i want anybody drilling in deep water that can't show that. >> i'm out of time. if we get to another round of questions, i have a couple more. thank you very much. >> i thank the gentleman. gentleman from maryland, ranking member for five minutes. >> thank you very much, mr. chairman. the -- first of all, i'd like to thank all of you for your testimony. it has been extremely helpful. one of the things that i say to my constituents is that this is our watch. we are on the earth now, we have

a duty to pass on a better environment than the one we've found when we came upon the earth. i truly believe that. and director bromwich, you know, i was listening to governor barbour, and he said something that was very interesting. when i asked him about this -- the department of interior drilling permit requirement that's called ntl2010 and what it says is it was talking about the moratorium. it said it has to -- these companies that they have to show that they -- it has access to and can deploy surface and subsidy containment resources that would be adequate to promptly respond to a blowout. and, you know, it's interesting that -- i kind of surprised me

when governor barbour said that he felt that the risk -- the risk of what happened with deepwater horizon was worth it when he considered the cost. i understand -- believe me, i sympathize with people being out of work. as a matter of fact, i've done everything i know how to make sure they get compensated. let me, do you have an upon on that based upon what you've been doing in the administration? >> yes, i do. i would like to take issue with something else that governor barbour said, the deepwater horizon blowout was the first event of it's kind or anything close to it in the history of deepwater drilling. the president commission says it's not so. they cites 79 incidents of loss of well control which is what macondo was, loss of well control, between 1996 and 2009.

so another way to describe that is 79 near misses, 79 almost deepwater horizons. so without going into the details of each one, that's what the president's commission found. so to say that the risk is one in a million, or one in x thousand of deep water wells drilled is not accurate. we will never be able to reduce the risk to zero. we know that and you know that. but we have to work constructively to try to diminish those risks in a balanced way so that we don't impose inappropriately high cost on industry and yet we do raise the bar on safety. we've done that. so i think we have lowered the risk and my risk threshold maybe different from governor barbour, i would not have been comfortable going forward without the strengthening of the

safety rules that we put into play. >> let me ask you, does the administration put into place all requirement that the companies have a formal government to call if services is needed. let me quote the new requirement that says boemre will evaluate whether each operator has submitted adequate information that it has access to and can deploy surface and substy containment resources that could be adequate to deal with the blowout. let me ask you this, can you explain in layman's terms why you require companies? >> i think we were all sickened by the fact that 87 days, the oiled flowed into the gulf with the trial-and-error process was used to try to cap the well. finally after 87 days it was capped. we don't want that to ever

happen again. we want industry to be prepared and in a way talking about the period of the moratorium is a false issue. because the fact is the containment requirement is critically important and industry admits it was not ready with containment until the middle of the february of this year. >> you know, you say in your testimony that the temporary moratorium was lifted in october of last year, but you didn't issue the first deepwater drilling permit until february. why is that? >> because there were not the containment resources that were ready until february. the first panel we talked about the containment company. there's another group, the helix well containment. neither of the groups were ready and tested the equipment until the middle of the february of this year. >> i see my time has expired. thank you. >> thank the gentleman. gentleman from new hampshire for five minutes. >> thank you, mr. chairman.

mr. bromwich, i have one question for you and i want to get to some of the other panelist. in considering the plans or permits, how much do you look at the economic impact and the loss of economic activity in considering the process by which your agency goes through? >> well, the individual plans and permits are reviewed by our field personnel in the gulf of mexico. i have absolutely no role in that. and i don't think it would be appropriate for them to scrutinize plan applications or permit applications for any other reason other than to determine whether they are complying with all applicable regular -- regulations. so they do not and should not. >> they do not consider the economic impact. >> they do not. and they shouldn't. somebody who is inspecting plans and permits should not do that. >> okay. i want to move to mr. kief. thank you as well for coming.

can you just describe to me very, very quickly the type of company that you have and the average employee that you have? the kind of individual that you represent? >> we are in the tugboat business. we move drilling rigs for a living. i'd say 80% of our employees are seamans, engineers, captains, mates, and the rest of the 20% are staff. you know, from maintenance people to personnel and administration. >> how many people employed? >> approximately 110. >> and has that number changed since the moratorium? >> well, as i stated, we've had a few layoffs, but we've had to adjust wages on our employees and, you know, we have thresholds that we are meeting where we know that we are going to have to lay off people.

>> not only are you going to have to layoff people in the future, but you've reduced salaries? >> yes, sir. >> for almost everyone in the company? >> about 50%. >> about 50%. these are families that depend on that source of income? >> yes, as a matter of fact, three of the companies we have -- this company offshore towing is a partnership of three companies. one of them was actually founded by my grandfather. and my aunt actually owns it now and her daughters, and i run that company as well. >> i assume it's safe to say you'd like to see the economy grow, come back as quick as possible, you'd like to see the government participate in a positive way to make that happen? >> yes, i would. >> thank you very much. mr. taffaro, thank you for being

here. i also wanted to ask you a little bit about the economic impact that -- it seems to me here in washington we're so focused on the regulatory side of this. and there's good reason to be concerned about the regulatory environment. i don't think anybody disagrees that we want to have safety, we want to make sure this never happens again, i don't think that's a partisan issue win think it makes sense. it's good public policy. my concern is with the thousands of people who are negatively impacted for the long term in the decisions that have been made by the administration. my heart goes out to each and every individual who no longer has a job or who is waiting desperately to have the responsibility of -- to have the possibility of getting back to work. i believe we ought to move forward in every public policy

decision that we do. it doesn't mean that you provide a permit if it not appropriate. it doesn't mean you provide a permit to someone who's not capable of handling it. i do think we have a responsibility to consider the negative impacts that have occurred to regular, everyday people, who were desperately looking for employment. could you just talk also bit about how that's impacting the people that you are representing? >> well, the main issue, i think, is that we have to keep in mind that part of what happens is there is a trickledown effect. a rig not being permitted or a drill operation not being permitted doesn't just affect those men and women that work the rig. it affects every other spinoff company and agency that provides support for those businesses or for that operation. that's where we really feel the effects in st. bernhard --

bernard parish and beyond. the main issue that we want to make sure is the comprehensive impact is reviewed and we want safety and we don't want to have another impact or disaster as the one we experienced just over a year ago. we definitely don't want to exacerbate that call to safety by under mining the economics of our region. >> thank you. thank you, mr. chairman. >> i thank you. mr. clay for five minutes. >> thank you so much, mr. chairman. let me thank the witnesses for being here. people who have long been concerned about the public welfare have raised some important questions about the aftermath of the bp oil spill disaster. some disturbing information has come to light regarding money

spent during efforts to recover from the spill. for example, from my hometown, mr. dick gregory, who is here today, he and others have brought to my attention some investigative articles written by pro publica and the "washington post". these articles are worrying. they allege there are who profited from the bp oil spill cast -- oil spill disaster. they apparently gamed the system to take so much money inappropriately that they earned the nickname spillionaires. those are here on the panel. as a politician, i know what it is like to read a newspaper article about issues with which i am involved, i've had the experience of reading articles

where i cannot recognize the events as they have been described by the reporters. so i know how it can be sometimes for others in similar circumstances and we don't always have an opportunity to respond to those articles. perhaps set the record straight. therefore, i feel duty bound mr. taffaro and mr. williams to give you the opportunity here today to respond to those articles and to what they have alleged about your conduct in the wake of the bp oil spill disaster. mr. taffaro, would you like to take a stab at it? >> sure, congressman. i'll be glad to if you could give me a specific question, i'll be glad to answer it. >> sure. in both articles the "washington post" and "propublic a" they

talk about hand picked contractors and they talk about you taking a and implementing a 30-day emergency which allowed you to pick contractors outside of normal government procedure. one contractor was given -- was renting or leasing land at $1700 a month and happened to lease the land back to bp for $1.1 million a month. is that accurate? >> well, i would be glad to respond to that, mr. congressman. >> the gentleman will suspend. your under oath, you are required to speak truthfully, you are not required to answer questions outside of the scope

of this hearing. you may choose to answer, but that would be true of any of our witnesses. if something is outside the scope and meaning of this hearing, including quite frankly any impugning of individuals that came here to testify but, gentleman -- >> i'll be glad to testify. this is exactly the concern that has been raised again. excuse me my frankness, i had the job by miss barker who had no to think if the staff researches that information has no factually data to compensate or substantiate your comment. we were under a state of emergency, i did declare a disaster, i think everybody who had any involvement in the process would see that as justifiable.

: >> use of resources, and then change those personnel out. and then didn't pay them what they were owed. that is a true economic impact of what we have going on. >> how about these selections of certain fishermen take you to

hell with the cleanup and then some getting paid, some didn't getting picked, what was the criteria they are? >> every selection process that we used to employ the exact individuals who are impacted by this spill, whose livelihoods overnight were ripped from them. whose generational cultural identity overnight was ripped from them. every selection process that was implemented was done in a public forum. and was continuously reviewed and modified to make sure that those individuals who are most impacted were those people who were being put to work, to respond to the disaster of no doing of their own. >> thank you. >> mr. williams, you may respond. >> i appreciate that question and i think it's very critical as indicated.

i come from a county in northwest florida that has less than 20,000 people. we are a very small county. we have an operating budget on a basis based on $9 million. you're going to run into family folks i felt like answer and i'm glad we are here in the office of oversight and reform because and personally, not that i take offense, i appreciate the question, but i feel like it is a red herring for the issues that we're here to address today. we were under a tremendous amount of pressure. i have two people in my emergency management department, too. we had no resources from the state with no guidance from the federal government. we were put under tremendous strain, and the article you're referring to, the author of that, never came to my can. never step foot in our county. but what you are indicating there is a girl then worked as a public information officer, and she had volunteered during that period of time tremendously through that process. so with all due respect, sir, my study would be you have to

understand, i am proud of what we did, trying to put people to work together, and asking what we have basically a militia people who are trying to fight for what was coming on our shores. and so i appreciate the question but i think it's very misleading to the ultimate goal that i would like to present from the federal government what you can do to help me at the local level. >> and i'm glad that you both have responded in the way you have. >> just for the record, did your ethics board clear that action speaks yes, mr. chairman. i appreciate the opportunity. actually before that was done, the board of county commissioners did not approve any of the contracts as my colleague indicated. this was done primarily through our county administrator. however, we went to our legal counsel. we went to the state of florida's ethics commission. we also went to the governor's task force that was guiding that and asked for permission ahead of time to make sure it was there. so i feel like the media

exploited this scenario to make it look bad for a lot of folks who are doing the best they could. but yes, sir i appreciate you giving me the opportunity because i was -- we did it right. we stop profiting. i served on the governor's task force. we went to an we saw companies coming in and asking for several hundred thousand dollars to demand some of the small counties. we refused to do that. we turned and asked the governor for assistance, and through the department of emergency management we worked under the guidelines, under the premises and we did the best we could under the circumstances. >> thank you. my time has expired. >> i thank the gentleman. right now to recognize myself for five minutes. i'm just old enough to remember, i guess the '60s in some cases, but mark mccormack who was a prolific writer wrote among other things the terrible truth about lawyers, and you know, what they don't teach you at the harvard business school. and i don't take what every

quote from all those books but i take away one, which is that a problem is something money can't solve. mr. bromwich, if money was not a problem, and i presume money was available whether it was the 20 billion from bp, the billion dollars in industry, the former work response for future potential spills, et cetera, why did it take you not just the six months of the moratorium, but essentially another many, many months of permatorium before you had guidance so that we could begin having oil wells, new oil wells drilled again and primitive? >> mr. chairman, i think it's fair to say that deepwater horizon was an earthquake, through the industry. be acknowledged that, and is a government. we acknowledge that. imf to your question. >> let's put into perspective. your agencies, inspectors went on a rig that had not one, but

two battery packs not active. and oil wells that you mention the 79, this thing have had repeated missteps. this oil well was like a drunken driver swerving, crossing the line repeatedly, and mms did nothing to do. mms had a study back in 2003 that question the bypass -- blowout preventers but did nothing but say pick one. all of these things had occurred prior to that day. so, was it an earthquake in your organization? was it an earthquake to the oil industry quick the oil industry has made pretty clear that bp was a bad actor on this well, and a bad actor in the gulf. but, in fact, there was a reason that their actions were not consistent with other drillers in the gulf. so, which earthquake was a? wasn't an earthquake in the oil drilling industry, or an earthquake within your agency? and as. >> both.

and it's appropriate to speak about bp as the only bad actor here. that report which is based on a thorough investigation pointed out that halliburton was at fault and transocean was at fault, and as you know, halliburton and transocean the work and provide services in a huge percentage of deepwater -- >> mr. bromwich, isn't it true -- i will go to mr. rusco. isn't it true that the real organization is as much at fault for the delay in the ability to get america working again in the gulf? isn't that what gao study finds is that this is a distracted agency because it's reorganizing? >> i think is a complicating factor. i can't say that it caused the delays. i take mr. bromwich is point that once they decided that the companies needed to demonstrate the ability to contain a blowout, that that was the

binding constraint until -- >> and when was that request made? when was the starting date for that? >> i'm going to have to defer spent mr. bromwich, when was the starting date for the requirement that they contain, if the blowout preventers -- >> blowout preventer additional -- >> if it failed, if the blowout preventer failed, contain it. when did you say they must prove they can contain even if we clarified -- >> we clarified in writing on november 8. >> november 8. how long was that after the moratorium began? >> less than a month. after it began? the first moratorium was put in place i believe in me. several months after. >> get a six-month moratorium and a month after that moratorium is over, basically then you say you have to do that. isn't this taking six, seven months to decide that you add one more way to stop the oil

industry from starting again? wasn't that reckless to go seven months to discover six months to discover that you miss something as basic as that? >> i don't think those reckless and i don't think [talking over each other] nobody said it was missed other than you expect i'm saying why wasn't it passed? >> as you know, mr. chairman, in july, then you at that point that that was going to be an obstacle of getting deepwater permits until they put together the resources. so it took them and they took later helix a number of months, close to seven months from the time they recognize it needed to be done, and they announced it, till they were ready to go. the mere fact that we clarified what was required in november didn't start and does reflect any requisite at home. >> are you still clarifying various things for the industry?

>> of course. that's what a regulator does. >> so, when will it be clear? >> i think it is clear to 95% of the operators now. the other 5% come forward and ask questions of us, we will clarify it for them. we need all the time, mr. chairman, with operators. we met this week with a group of operators, delegation headed by director of natural resources for louisiana, they have been at forum for asking questions, asking for clarification and getting them. >> okay. i'm sorry that we really can't do more for you today, but we are not going to give up on this on any of your testimony here today. mr. bromwich, you said you take something back if it was outside of the mainstream. i want to make sure you take this back today. there's pending litigation, or there's current litigation, in the, in eastern district of louisiana challenging seismic surveys in the gulf of mexico by the infamous nrdc versus

salazar. our information is that the secretary has in fact worked out tuesday that case and is discussing settlement. the question for the department of interior is, if you settled one more time with a radical environmental group that soothes and then gets settlements leading to regular tour changes or areas off limits, don't you have a conflict of interest? in fact shouldn't this case be a case in which those with a vested interest, the state and the oil companies, should have a seat at the table rather than having a settlement issued around what they would call their interests along with the gentlemen here today? >> i don't need to take that one back because i am involved in that matter. first of all i think the characterization of nrdc is a radical environmental organization. [talking over each other] but secondly, we have to make litigation judgments, litigation

judgments about whether the settlement cases or not without going into the details of settlement discussion, there are settlement discussions ongoing and i will tell you that one of them, the goals of such settlement discussions is to prevent or radical injunctions or actions taken by the court. with respect to the involvement of the oil companies they are interveners in the case of a have a seat at the table. >> but they are locked out if you settled. and attack the nrdc has on their website -- so you may not consider them radical, but an organization that basically litigates in order to legislate, and an agency that settles in order to effectively create legislation is exactly what this committee is concerned about. so you may not consider them radical. you may not consider your settlement around the intervenors as in fact somehow

un-american or that you have a conflict, but this organization here is finding that conflict more and more consistent. i want to thank you all for -- i want to thank you all for your continued testimony. we now recognize the gentleman from north carolina for five minutes. >> i thank the chairman, and i think the witnesses for being here. mr. bromwich, i've got a question about the marine archaeologist, the new rule that your organization has promulgated. so is it true that operators -- in order to comply with this? >> what? >> pardon the? >> is it true they have to what? i couldn't hear what you said. >> i will repeat what i said. in context of the new archaeological assessment repo report, is it to the operators will have to employ a marine

archaeologist by with this will? >> they will have to of his survey conducted what about hiring someone, contracting or whatever. we don't mandate that that they'll have to get an article logical survey, yes. >> why is that necessary? >> it's because a number of discoveries have been made in recent years, shipwrecks, and other structures that are protected by various federal law, including the national environmental policy act. and as we have eliminated the categorical exclusions with which used to do exploration plan, and now are doing environmental site-specific assessments, the way to process works is where different subject matter expert who have to look at the issues. and our archaeologist subject matter experts simply do not sign off on exploration plan without the kind of survey. so that's the reason. >> okay. well so, in terms of what your

organization does, does that have anything to do with safety speak was it has to do with protecting the environment which is part of our mandate. >> was there a cost-benefit analysis in context with this regulation? >> i'm not sure whether there was or wasn't. >> would you be willing to follow up with the committee? >> sure. >> and give us your assessment of the cost and benefits of this regulation? >> i would be happy to. >> thank you. mr. williams, thank you for being here today. certainly an interesting process to testify before congress. but in context with your experience, there's a difference between the opa and the stafford act in terms of responsibilities and everything else. do you think that operating under opa was reasonable, proper, good? was it a better outcome than operating under stafford? >> will you turn on your microphone? >> i'm sorry.

that paralyzed us at the local level. i think opponents of opa come we're not trying to basically supplant opa with the stafford act. but we are trained to go in a state of florida. we have tested models. we have put everything through over and over case studies, and because we are so impacted by our storms, we were unable at the local level to make decisions firsthand. it has always been at the local level and worked that up. under the unified command, the responsible party hijack the entire process. we were basically at their mercy, their decision-making. we were disconnected from our state partners, and idly from our federal partners in the process. we called it unidentified command. we would wait for weeks and weeks trying to get things done. we wasted incredible amounts of time looking at boom strategies and national contingency plans in every contingency plans that were extremely dysfunctional. they were antiquated. there was no span of control.

there was no unified command. the state of florida in my area, the panhandle was being controlled from mobile. it was a breakdown as the governor indicated earlier, from communications and processes, methodologies. it was completely broken. so the answer your question emphatically no. opa did not work on the ground level. it did not work at the state level and i think it failed the folks of our country. >> this is a management problem? >> yes, sir,. >> clearly. and your expense with storms is what? >> primarily living in florida and i guess growing up originally i was start i guess when i was four in mississippi. but with florida i've been elected since 2004 in 2005. you know the history where we crisscrossed our state for hurricanes in one year. had heavy damage. and as an elected official i have watched a process, and obvious he florida i think has mastered mr. fugate now being head of fema coming from florida. we know how to do it at the ground level. we make good decisions.

we work with our partners but we work with our state partners to make those critical online decisions. this process was dysfunctional and broken. >> and stafford is clearly better? >> yes, sir. it gives the local government the ability to pull in the resources as necessary but to make on the ground feel decisions that we can intimate immediately. we had to go through and approval process to give a very poor analogy, like go ask your mom, go ask your debt. and i never could get a straight answer. it is a system that i think this group particularly in congress has to look at. there are lessons in homeland security. there are lessons as the governor indicated earlier. if we go off of cuba, china, et cetera, as bad as that was without a responsible party, where would we be? multi-jurisdictional lines has to be charge. one point i would like to me, i came a few months ago during the national association of counties, and met with intergovernmental affairs and

requested the ability for intergovernmental affairs from the administration to work with the directors of emergency management within the five affected states so that we could go back and look at case examples and studies and what do we do better. that i think is a critical and i want to ask that the chairman and his commission review that so we can get down to our emergency management people at the state and county level so this never happens again. >> i thank the gentleman. we will not do a cigarette butt to be a couple of quick comments. one from the german from texas and one from the ranking member. please go ahead. >> i just wanted -- mr. bromwich, do you think that what is going on now is an increase process in the time and called is driving up the price of gasoline? >> no, i don't. >> you don't think there is a concerted effort going on to do that, float down the gulf of mexico which is a quarter of our domestic supply -- >> an effort by whom?

>> i think this administration, i'm not a black helicopters guy but if you look at what is going on. if i were expected i would be buying oil futures. we've got a slow down in the gulf, a slow down of land leases, the epa talking about fracking regulation. we got another court of the production in the basin of texas. it's like we're trying to run these gas prices up. >> i can speak for the issues i am aware of which is offshore, there is no such effort. there has never been such an effort. >> would the gentleman yield? if the gentleman can respond to the mms finding up on the board which we cited earlier, that might clarify it. in a mess down there was a correlation between a reduction in the gulf an increase in price. that's your own study. >> i have never seen that before. i don't like to comment on things i just been introduced. i have read very knowledge for commentators including economists who say it is a world

market, and a minor of relatively minor slow down in permitting here has virtually no impact on prices. in addition to that as you know -- >> okay. >> there have been no delays in production. production has continued all on. there was never a moratorium on production. >> i do want to reclaim my time for a second that historically speaking, you have seen a spike in prices of oil, whether it is driven by speculators or the market. even when there's a hurricane, delays production in the gulf just over a couple of days. how can you rationally say that a long-term slow down in the permitting process isn't going to affect the price of oil? >> because you asked me whether it was causing a rise in the price of oil now. my understanding of world market conditions is that production has continued a pace, the projections or the declining projections are not for the present. they are for the future. and, therefore, i thought the question was about the present and i don't think it is having an affect. >> real quickly.

there have been reports, record oil production in 2010. do you think domestic production, do you think the record is going to continue through 2012? we start to see the results of some of these changes and policy? >> the eia which is considered the most reliable sources of energy production does predict a decline in 2011 and in 2012. i don't have a crystal ball but -- >> so decrease in production, typical under supply and demand would probably result in an increase of price of oil, corollary price of gasoline at the pump? >> that present will have -- which we don't. >> thank you very much. >> we have enjoyed -- i thank the gentleman. we have been joined -- wait a second would the gentleman yield for just a second? >> yes. >> mr. bromwich, i would just like you -- will give you a copy, that study that said they would be a rise based on less

reduction in the gulf and actually occurred or is occurring. that was a deliberate under our request on your organization. you gave it to us. so hopefully you will take it back, look at the information that we received pursuant to our request from you, and figure out whether or not you should have seen that document or your agency. >> i don't review every document that you ask for and receive, just to be clear. >> i understand, but since this one said just the opposite of what you are saying, i think it's a good one for you to review. you can comment back about what you think it was accurate since it was an internal documents. >> be happy to do it spent we have been joined again by mr. connolly for five minutes. >> thank you, mr. chairman. and i have another hearing so that's why been going back and forth and i think the chairs intelligence. mr. bromwich, during the first panel, you probably heard what i heard from governor barbour state that simply enforcing the

rules would prevent future oil spills. when the national commission of the gulf oil spill issued its report, dated say that simply enforcing these regulations would be sufficient? >> no. >> what did it's a? >> it pointed to a series of contributing causes to the oil spill, a variety of primary human errors committed by personnel from bp, transocean, halliburton and so forth. and it specifically said that, i believe, as i recall that enforcement of existing regulations would not have prevented it. >> would not? >> would not have prevented the oil spill. [inaudible] that could be helpful to? >> yes and we've already taken many of the steps. our drilling safety rule which is addressed to well design, well casing, cementing and blowout preventers. we think substantially reduces the risks of another still like

deepwater horizon. as i said before i'm not sure you here, will never be able to reduce it to zero. we won't. but we have reduced it already substantially, and i think over time as industry wants to go into deeper and deeper water and the regulatory process needs to keep up, i hope that we can further reduce that risk. but it will never be reduced to zero. >> one of the arguments made by governor barbour and others is that you have 31,000 oil rig's, the safety record is fine. one bad apple shouldn't cause us to turn everything on its head. my point to governor barbour was, well, but one blowout of this magnitude is pretty significant, and can we -- should we be doing everything on our part to try to minimize that from happening. and the fact that it happens

once is wants to me given the severity and 92 of the disaster. what is the view of the administration with respect to sort of rolling the dice and taking our chances on a blowout? >> we don't want to roll the dice and take a chance on a major blowout again. the risk will never be reduced to zero, but we think we can do and have already done many commonsense things to reduce that risk. and for the measure whether you here at the time, but this is not unprecedented in the sense of losses of well control that nearly led to blowout. this was the only actual blowout, but the president's commission found that there were 79 instances of loss of well control between 1996-2009. so another way to put it is, 79 almost deepwater horizon's. >> so the idea, this really partly an act of god or something like that is misleading?

>> thankfully it was unique in terms of the fact that the well totally blue angel at 4.9 million barrels of oil spill into the gulf, but in terms of the problems that arise, particularly in deep water, with high pressures and so on, no, it's not so far out of the norm that it begs to be dismissed. >> one of the things that the obama administration did that some might view as prudent after such a high magnitude accident was a temporary moratorium on additional permitting, until we had our arms around the causes and prevention and so forth. in listening to some of the rhetoric and even reading some signs, we seem to favor around your, one would have the impression that moratorium has led to significant plummet in domestic production. is that the gay? >> no, that it had no impact on production because production was never stopped or delayed.

>> is it not true that domestic oil production in the obama administration is actually higher than that of the bush administration? >> yes, as of the end of 2010 that is exactly right. >> is also to the application for permit to drill actually increased in the obama administration over the bush administration? >> i believe that is ripe. >> is it also true that production on outer continental shelf actually also increased in the obama administration over the bush administration? >> it has. >> thank you very much. ..

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> this hearing coming to a close now. committee members heading to the house to take part in a series of votes on funding for the homeland security. members voting on amendments will vote on final passage expected later. you can see all of that on our companion network, c-span. if you missed any of the hearing today, see it on our web site at c-span.org. our plan was to bring you coverage of the mitt romney's

presidential announcement. he's making that right now. our plan was to bring it live. because of the hearing, we've moved it over to c-span3. you can see that right now live on our companion network, c-span3. >> today marks the first time when the legislative branch in it's entirety will appear on that medium of communication through which most americans get the information on what our government and country does. >> several times today, it has been referred to as an historic occasion. whether or not it'll be an historic occasion is, i think, a subject for the judgment of history. >> this week marks 25 years of televised coverage of the u.s. senate. on the first day in 1986, c-span2 was carried in 80 homes. today it's carried on nine

million homes. it's all searchable, shareable, and free. the c-span video library, it's washington your way. >> you are watching c-span2 with politics and puckly affairs. on nights, watch key public policy events and every weekend the latest nonfiction books. see past programs and get our schedules on the web site. join in on social media sites. >> coming up shortly, we plan to return live to capitol hill to the hearing on the irs e-file program and identity theft. discovering 400,000 instances since 2008, and they use the irs e-file program to steal the refund. we will hear from doug shulman,

along with the ceo. that hearing expected to get under way in 10-15 minutes. live here on c-span2. until then, your phone calls from this morning's "washington journal." >> here's the front page of the minneapolis "star tribune" this morning, new signs economy recovery is faltering. here's the front page "wall street journal" economic outlook darkens. from the "washington post" lead story, few remedies left as recovery momentum lags. the economic recovery is falters and washington is running out of way to get it back on track. two strike spots over the past few months, manufacturing and job by private companies. according to news records on wednesday, the data come amid other reports of falling home prices, declining auto sales, weaker consumer spending, and rises pace of layoffs.

just a few months ago, the economy seemed pose to finally strengthenen --

>> host: on friday, friday the labor department will release the job growth. economies expect 180,000 were created dropping from 244,000 in april -- >> host: again, that's from "the washington post" what do you think washington's role in the economic recovery, if any role, should be? we're going to start with the

democrat from cleveland. steve you are on the air. good morning. steve, good morning. >> caller: good morning. >> host: please go ahead with your comment. what do you think washington's role in the economic recovery should be? >> i think the congress of the united states should immediately draft legislation to stop the corporations of this country from outsourcing and pursuing the cheap labor that is oversead. and i really believe this is why we're in iraq, this is why we're in afghanistan, and i think this country is short selling the american people out for the sake of higher -- for not having to pay higher wages. >> host: from georgia, our friend, joe mccrutchen who calling in every 30 days. >> caller: peter, i think to get the economy rolling, we have to have a president that

understands. that's why i'm excited about electing mitt romney president. i think we need to get elected president, cut the capital gains. peter, we got to give people an incentive to invest their money and i'm thinking about changing my name to cut spending mccutchen. the democrats, all they do is spend money and tax. the republicans have a plan. the republicans met with president obama yesterday. the democrats have no plan for the american people for the last 50 years, peter, expect raising taxes. but the main thing i think we need to do is elect a president like mitt romney that understands the economy. >> host: joe, what's the economy like in the atlanta metro area? >> caller: it's rough. we're a real estate-based economy. i went to a manufacturing summit, carpet is the big industry. they are all hurting. people are uncertain. the regulations the obama administration has put out, that's been a damper.

we need to cut the regulations. we got to give people -- i'm a stock market man, peter, the market dropped big time yesterday. you know why? big reason people have lost confidence in the washington administration. the president is a nice man, but the democrats whole agenda is raising taxes, increasing regulation. we need somebody like romney. he's smart enough. he's created millions of jobs. we have to create jobs. the only way to do that is to cut spending and taxes. >> host: that's joe. we'll talk to you in 30 days. he mentioned his support for mitt romney. he announced his presidential bid today. former massachusetts governor mitt romney will formerly declare his candidacy for president during a barbecue in new hampshire. this will be live on c-span. it is on c-span2. sorry that about that.

12:30 p.m. eastern time. that will be live. the senate is out of session this week. so c-span2 is open for those types of events. romney '08 backers are backing out this time. this is an article in the "washington post". it says that -- >> host: in south carolina which is third, romney highest

profile backer is state rep nathan valentine. but in 2008, romney counted u.s. senator jim demint as a senior advisor -- >> host: that's just a little bit from the article about mitt romney. when they talk about the whole presidential -- the republican presidential candidates, this is what comes up when you put one word up and you can see this is done in that way where the most obvious word, the words they use most about the republican field is the largest. you can see there unimpressed, disappointed, incompetent all stand out. this is a research center poll. back to your calls. michael in charlotte on the

independent line. good morning, michael. >> caller: good morning. how are you? >> host: good. >> caller: i feel that the democrats are right that we need to tax. however, we don't need to tax the oil companies. i feel we need to tax the companies that produce alcohol and cigarettes. because i've seen on several charts that they are creates huge surpluses in profits and they are creating large profits and bigger runs than the oil companies have ever made. and i also agree that the republican needs to create a jobs bill. because we need small businesses to be created as well, not just producing jobs that other businesses have lost. and that way it is to create incentive and other job bills and the republicans haven't passed any yet. >> host: john is a democrat in white plains, maryland. john you are on the air. what do you think the role in the economic recovery should be if anything? >> caller: well, i think my biggest point is what are the jobs that the low tax rate that

is we have in creating. we have the lowest effective tax corporate in generations and no businesses are stepping up to the plate. you know, you saw the results for may. you know, it happened somehow under reagan. the taxes went down, jobs went up, but then reagan also had to increase taxes in order to make a budget that made sense. and so the republicans continue to say that we cannot tax to improve the economic outlook if it'll result in more instability. you cannot have a government that has more operating income when the corporations have the money beyond what they paid -- excuse me, what the credits were so they received. they paid nothing and took billions from the government in terms of additional credit. how can we look at that example and say that the tax policy is driving the problem when we've given away store already and the companies are taking profits and

not hiring. >> this tweet from i am the -- tax the rich, tax the corporations. taxes at historic lows. our children need more money for quality public education. front page of the "new york times" this morning --

>> host: newport, florida, zach on the independent line. good morning. >> caller: good morning. i love c-span by the way. i called a couple of months ago. basically, like i told everyone on the air a couple of months ago, there will be no more jobs and with the fed destroying the dollar, there's no way that --

yeah, basically there can be jobs because it's like called in costs and when you destroy the dollar, the unput costs go up and nobody can hire. now, i guess, the federal reserve, yeah, i guess there was an article like a month ago or so i read that basically said greenspan was talking about selling -- yeah, selling put options on treasury bonds to, yeah, basically alleviate investors intentions when they buy them. what happens when those actually go into the money. are we going to have to print up 100 or something like that? they just need to stop destroying the dollar. it has nothing to do with taxes. you can look at, like, the real value of the savings, it decreases every year. it's not softening. they could tax the whole economy 100%, steam everyone's wages, and the monopoly money to petition the fed to print up

couple trillion more. it doesn't matter. >> host: zach, what part of florida is newport? what's the economy like? >> caller: it's near tampa. it's atrocious. like the guy that called before. we were real estate. that's been the country for the last ten years -- or actually twenty years, go back and say thirty years as soon as nixon closed. it's been a ride up on the back of, yeah, savings being destroyed. >> host: debra. in pennsylvania democrat, good morning. >> caller: good morning. >> host: you are on. please go ahead. >> caller: okay. frankly, i believe the reason we are not having any better recovery is because of the republicans are going exactly what they said they were going to do. making sure, they are doing everything in their power to make sure that barack obama only

has one term. they don't care if the president goes bankrupt, they don't care if we default or not, all they care about is making sure that the next president is a republican. >> host: okay, direction -- debra, there's the political side. what do you think the republicans should be doing to help improve the economy then? >> caller: they should put everything on the table. that includes tax increases. if we've gone into the deficit after three consecutive tax breaks, then what the -- and a recession -- then we have no choice but to increase taxes while we try to cut spending. >> host: that was debra from darby township, pennsylvania. stafford, new jersey is now. evan -- i'm sorry, maria. >> caller: yes, i have four suggestions. number one, the president has the power to aggregate all of the trade agreements which has been sucking the jobs out of the country. he only has to announce it, give

six months notice, and have the senate approve it. number two, instead of income taxes on american st. st. citizd real businesses, we should reinstate the tariff. number three, stop all fortunate sate and wars and our country has a king who is proclaiming war and congress doesn't care. he doesn't care about the war powers act or the constitution. number four, we have to get rid of the federal reserve, give the power back to the treasury and go back to the gold standard. >> host: that was maria in stafford, new jersey. this is a treat from fred bingham. >> host: back to the "new york times" article on the economy, the white house, it's possibilities contained by the gridlock in congress has offered

no new grand plans. >> host: jeff in florida, republican line. jeff, is it ovito? >> caller: yes. >> host: where is ovito, florida? >> caller: down near orlando. >> host: all right. what do you think washington's role in an economic recovery should be? >> caller: i think when we looked back at what obama talked when he first came into office, who was the issue that we were dealing with which was the housing market and downturn, more so than anything. and after getting into office, number one, they did absolutely nothing to address that, expect to give an influx of money to the banks which were a part of the problem and the people ended up not getting anything, being

stuck with the houses, and then at the same time in which the banks did absolutely nothing to address that issue, even today, most banks will not even sit down with most individuals to even work out a deal so they can stay in the house or at least deal with interest rates. what washington needs to do in my opinion it's not about republican or democrat, because they generally -- when you focus on just republican and democrat, it becomes about politics. they need to do is identify those problems and get back to dealing with those issues. and i kind of wish people would stop with the whole class warfare thing. stop talking about who should be taxed more and start with the fact that the more money that washington gets, they are not dealing with the crooks on the issue, but democrat or republicans dealing with whatever programs and promises they have made to big businesses or other constituents. >> host: jeff, if you would, give us a snapshot of the orlando area economy. >> caller: here in florida, you know, our unemployment rate

is coming down. it's still slightly higher than the nation. here in this area in florida we don't have -- most of our revenue is derived from tourism and the housing market. with that downturn, things are coming back. because of the nature of our system that we have here in the capitalistic system, it will come back. just like it did after 9/11. whether washington does anything or not, if they would get out of the way and let things happen, it can happen. they can assist by start trying to streamline and creating the chaos with the class warfare. here in florida, i think things are beginning to come back. we're dealing with our problems as well. >> host: from harrisburg, pennsylvania, zach on the democrats line. you are on the air. >> caller: hey, thanks for taking my call. thank god for c-span. yeah, my comment, and i like jeff from florida. i love educated voters. because my opinion is also that

i believe on the situation like this, the first thing that should have been done is a forensic audit and the names called out on who knew what and when they knew it. because we still got companies that are sitting on trillions of dollars in assets and not hiring people. these companies have names. but they also have heads who head these companies. who are these guy who's are holding back our economy by not hiring people? you know what i mean? and the $3 trillion in our economy that just disappears, i don't believe it just disappeared. someone has that money. the one person who called and talked about the bailout. that's correct. they took the bailout money at zero interest, you know, and created absolutely nothing. they linked to each other instead of to the american people. you know, that's including the people who had the homes who were under water. i had a friend who, you know, not only had a great mortgage,

but he had a second mortgage that he never knew about. he was put into his home. a lot of lending. we had young kids, i had one situation where i had kids from mcdonald who qualified for a home. both of them had mcdonald jobs. there's no way they should have been in $120,000 house. yet it happened. i once asked the appraiser, how much do you want the house to go at? there was a lot of stuff going on. until we come to grips and be honest with what happened, we're not going to be out of this. like one other caller said, the same people that we put in charge to get us out of it causes. >> host: all right. thank you for calling in. harrisburg, pennsylvania, james whitehall e-mails in the government has got intrusive into everyone's private lives in business, every cut is going to be seen as cruel and hurting somebody. government spending is not

helping economic recovery. it did not work when fdr was president and it isn't working now to get the economy going. just doing away with the epa and apolishes corporate income tax would cause an immediate increase in employment and business activity. that's from james in whitehall, arkansas. >> host: a couple of headlines from "usa today" from the money section, june lives up to bad representation. dow's 280 point drop a saw start to month. and auto recovery pauses in may. here are some stats about how companies did --

>> host: lawrence independent louisville, kentucky, lawrence, you are on c-span. what do you think washington's role in the economic recovery should be? >> caller: well, i think they ought to do a lot of things. i'm calling about the people that call in the program. i hear them say take this away. i hear politicians say take subsidies away from companies and everything. they act as though that's going to fix the problem. people who make $25-$50,000 have no concept of what $1 trillion is. i do. i taught math for 21 years. graduate math for 27 complete with my career. i've got graduate students who can't articulate what $1 trillion. let me tell you something, if we took all of the oil subsidies

away and put it towards the operational budget of this government, the everyday cost, we would be able to run for 90 days and take those subsidies away. 97.8 years. that's how insignificant they are. so that gives you an idea of the problem we are facing. people just don't -- they act like $1 trillion is a couple of million. it's not. it's pulling us over a cliff. we have to get rid of subsidies, increase taxes, get rid of subsidies, we have to cut programs, shrink departments, we have to do a myriad of things. we're not going to do them because the politicians won't do them. it's as simple as that. >> host: all right. we'll leave it there. >> host: "financial times"

this morning -- >> host: that's in the "financial times" this morning. now this is from the wall street

journal. their second editorial. the debt limit dance. political theaters sometimes has it's uses such as tuesday 318-297 house vote to increase --

>> host: derek is in cleveland. he is a democrat. what do you think washington's role in the economic recovery should be? >> caller: well, i've been listening to everybody call. everybody is right. at the same time, everybody is wrong. you can't do everything. you want to cut taxes, raise taxes, raising taxes might be fine. but at the same time, it hurts the people who wants to employ. they are not going to hire anybody. but sending all of the jobs out of the country because it's

cheaper for them to make the products outside of the country. >> host: what do you do in cleveland, derek? >> caller: looking for a job. >> host: what was your last job? >> caller: i used to drive trucks. >> host: how would you describe the economy in cleveland at this point? >> caller: slow recovery. >> host: all right. thanks for calling in. daily news, here's an update on weiner's situation with the twitter account. sexy pick might be him, but he didn't send it. here's the "new york post" --

>> host: orlando, florida on the republican line. james, what do you think washington's role in an economic recovery should be? >> caller: good morning. thanks for c-span. i think the woman -- a lot of people are intelligent this morning. i think the woman from new jersey really hit it on -- hit the nail in the head with the trade agreements that need to be revoked. they are all in favor of other countries. they benefit a handful of americans who have become filthy rich out of it, but they don't benefit america in general. and the tariffs who need to be put back in place, the ones removed in the '80s. there were there for two centuries, they did protect us from cheap labor and other countries who subsidized their shipments over here.

they protect an american company who wants to manufacture and provides american citizens and ship overseas. the gold standard does not need to be returned. something has to be done. as far as the cuts in spending. cutting spending and raises taxes. i'm a proud republican. not proud of what we've been like over the last three decades. so i bash republican leadership all the time. i don't really pay attention to the democrats because they don't really have the same ideology that i do. but i like to reassure the democrats who are concerned about taxes that the tea party is definitely looking at reforms the tax structure and increasing revenue. at first we want to decrease spending first. to me it's kind of like you have a college age kid who's maxed out a few credit cards. he comes to you asking for more money. you are going to tell him, look,

you got to get the spending under control before i'm willing to give you anything else. that's the way the tea party is looking at it. we have to get the spending under control before we start giving washington anything. >> host: james, do you agree with that? >> caller: yes. >> host: thanks for calling in. dayton, ohio. >> caller: i have two points. slow recovery is better than no recovery. all of the people on the republican side, they say they are going to run. if they are not running, we don't need to hear them. don't show boat and all of this. big business is making money up. don't have a job, don't look at the small people. it's not the problem. a tax hike on them would be the best thing america have. please stop running against the president saying that he's -- we want them to run for their card and help make this place a better place and get back on

their feet. that's what they are do. >> host: may in dayton, ohio. this is a tweet from an american hero -- >> host: from the "hill newspaper" --

>> host: ken, democratic, california. economic recovery in washington's role, what do you think? >> caller: well, i tell you, i'm 62 years old. and i really do believe the for the of the problem our world has today at least why it's in the united states is you have the second generation ownership. that has taken over companies from the parents who help build businesses, excuse me. and the reality is they have no compassion, nor do they have any understanding for the working individual. and for them to go ahead and outsource their companies business is no big deal. and they look at it from the stand point of, well, i'm still making the same money. and the reality of the situation is that, you know, when you are talking about the republican party, they got to stop throwing bromo the fourth story window

and then campaigning about how he lands. this makes no sense at all. and i don't know what you do to get these people to work with each other. >> host: thanks for calling in this morning. the republicans, of course, met with president obama yesterday. the democrats are meeting with him today. and in about 15 minutes or so, barbara lee, democrat from california will be out here to take your calls and talk about the democrats meeting with the president. after that nan heyworth, a republican freshman from new york will be here to take your calls and talk about the debt ceiling. secretary geithner up on hill today talking with the house republican freshman about his view of increasing the debt ceiling. we'll get her perspective as well. sandra on the independent line in massachusetts. washington's role in economic recovery. what do you think? >> caller: the economic recovery for massachusetts is good. it's a very good outlook. i mean we have a lot of jobs

opening and everything else all over the place. the thing of it is we need a million dollars that are set aside for probablies which i brought up before. that's already been set aside in the front to fix bridges and roads. why haven't they used it? that's what i want to know. you know, it's freed money that we already have. >> host: all right. thank you, sandra. from the hill this morning, senator demint mulls white house bid. jim demint is considered running for government after they have pleaded with him to run. he told the bill he has discussed with wife --

>> host: ted, oregon, democrats line. you are on the air. >> caller: good morning, peter. this is one the baby boomers that got to live in the sweet spot. you never know what we learned from our fathers, like daryl's dad told me that my grandfather, his father, lost every dime he every made in the great depression. like daryl's dad said, son, get a trade, get a license trade. so i became a journeyman plumber. he said, son, get a union card. you'll never be at anyone's mercy. so i did. to be honest with you, it hasn't been a bad run. dad said if you want to gamble, go to vegas. the house is engineered to take a loss.

don't every gamble with a banker, he'll win every time. with that, i feel sorry for the people that are upsidedown, i feel sorry for the people with the credit cards. as far as a government bringing about a recovery, i think a good starting point would be to take the tax lawyers off of the television set and wretch up the irs and go get our money. there's a lot of people that owe money to the irs. they owe tens of thousands. they pay hundreds. i've paid every nickel that ever been required. is this learned behavior? i find it very shocking. >> host: ted, can i ask if business slowed down? are you a private contractor? >> caller: no, sir, i'm a journeyman driving a contractor's truck. >> host: okay. has business ever been slow? >> caller: well, i run a little satellite shop. and i'm a one man show. if i need more labor, all i got

to do is call. i can send a -- get a fleet of vans here in a short amount of time here on the north oregon coast there's not very many journeyman plumbers. especially ones that know what they are doing. if i need to bring them from the big city, i can. but it has been slow, no doubt about it. but it doesn't really affect me because i've never played with the credit cards, i've never had a loan expect when i bought this house, i'm a veteran, so i bought this on a va loan, that's the only credit i've ever had. i pay cash. you know? >> host: how long are you? >> caller: 52, peter. i can retire in two years, two months, and 27 days at 55. >> host: congratulations to you. you talked about living in the sweet spot of history. >> caller: exactly right. yeah, i can remember you bringing that up a few weeks ago. you got a kick out of it. i've been waiting until you are on the screen. but i think back to the 50s, the 60s, the 70s, and what

my dad was able to provide for all of us rotten kids. it just seemed to be a lot better time. people were having a lot better time. you know? and now i feel sorry for the generation and the millenniums, because the only time they could ever experience that would be through a history book. you know? >> host: all right. ted, we're going to leave this there. that was ted, from oregon. next is tom, an independent from groves, texas. >> caller: first i'd like to say how nice you moderators present yourself. i consider "washington journal" part of washington. i think you all could expose a lot of the hypocrisy by asking the guests, what is your income? how many jobs have you created in the last years? particularly the last two years. juan williams recently got a $5

million contract. i wonder how many jobs he has create the out of his personal income. i also had a legislator from georgia, i believe, a while back that said that he was going to introduce his jobs bill and his jobbing bill was all tax cuts. tax cuts are not jobs. to create jobs, you have to hire somebody to fill a need for you. i've created jobs maybe four or five in the last ten years. i'm disabled. not full times jobs, but that's how you create jobs. >> host: all right. tom in groves, texas, i appreciate that call. from the cnn web site --

>> host: last call on washington's role in the economic recovery comes from chicago. hi, joyce. joyce, are you with us? >> caller: yes, i'm here. >> host: please go ahead. >> caller: okay. i'm camming from chicago. first time caller. my problem is since you've all been there, argument by democrats, republican, and about the party. mostly it's about us. we the people of the united states, the formal union, we

argue among each other. obama is the greatest president that we have. the best was carter. i went through the depression with carter. he went in the white house with a coat on and going through changes. he's been calling every day. how can we help? all you have to do on your computer. go to public debt, go down on the computer and look down and say how do make -- excuse me, how to make contributions to reduce the debt. you go down a little further, then you go down further and put paid to the government. and then as you said, pay to the government, you contribute your money. i contribute every month. it's not much. but it never disappear. it all contribute money to help ourselves. we are good people. but we do need to do this. it's not by religion, it's about helping each other in time of need. all of us is children of the

united states. >> host: joyce, what do you do in chicago? >> caller: well, i'm a retiree. i'm 66. i'm not worried about my -- i'm a pastor. >> host: you are a pastor. >> caller: you know, the regulate the state from the church. >> host: and you are retired from your church, from your congregation? >> caller: no, i retired from c.t.a. >> host: now you are a pastor? >> caller: yes. i'm a counselor at bible camp twice. >> coming up, we plan to go live to the hill on the e-file program and identity theft. it's being held by a house oversight committee. members are voting rite now. i understand there are two five-minute votes left. we'll have live coverage when it

gets underway in just a couple of minutes on c-span2. until then, remarks from john boehner. this morning he called on president obama to become involved with congressional leaders on budget cuts needed to get the votes to raise the debt limit. >> good morning, everybody. >> good morning. >> you know, it's now been nearly a year since the white house declared the beginning of recovery summer. all in all, it hasn't been much of a recovery. the american people are still struggling with high energy prices, high food prices, jobs continue to be scarce, and practically the rebound in the economy has failed to materialize. yesterday we told the president what many americans were

thinking that the economy isn't creating enough private sector jobs and washington continues to be a big reason why. reason, this issue has been and continues to be a focus of our majority. and last week, we put forward a job creation plan that builds on our place to america and we asked the president to take a look at it. and this blueprint recognizes that spending, borrowing, and regulating are a way to prosperity. it hasn't work and it won't work. that's why a release of statement yesterday signed by more than 150 economist who agree that to help create jobs, any debt limit increase must be met with an even larger spending decrease. because increase in the debt limit without spending cuts and reforms would spend a message to our job creator that we are just not serious about stopping the

spending addiction going on here in washington. the american people won't stand for it. which is something that you've heard me say since the obama administration first raised this issue back in january. we've also passed a budget that backs up this position. of paying down the debt over time without raising taxes. we actually have a plan that eliminates our budget deficit and paying off our debt over time. so it's no surprise that yesterday our members continued to press the case to the president, where's your plan, mr. president? so it's pretty clear to us that we don't get our fiscal house in order, the markets will act for us. remember, the warning from standard imports six weeks ago was about washington's failure to tackle our massive debt, not the debt limit fight. i've said for months, i'm ready.

our members are ready, i think the country is ready. and the time to act is now. and if a white house is truly committed to it's own goal and timeline, it should put a real plan on the table so that we can get this done as soon as possible. the talk is being led by vice president biden, which the majority leader, mr. cantor, is doing a great job representing us and has been productive. the fact is we haven't seen enough progress from the white house. if the white house wants to get this done, it's time for them to step up the plate and get serious about it. we told the president and i think we've demonstrated to the american people that we are ready to deal with the big challenges that face our country. i hope the president will join us soon. >> we're talking about libya here for just a moment. was there concern by republicans that the resolution by congressman kucinich would have passed if you put it on the

floor, which was the original plan? and number two, was there concern you are mindful on what's going on in libya, but you didn't want to handcuff the president so that's why there's the turner resolution which is proving what's going on. > we're going to meet with or members this morning to talk about libya. we'll see what our members have to say. but i expect that this issue will be resolved tomorrow. >> which of the three resolution that is are out there, kucinich, turner, which one is going to survive? >> we're going to have a conversation with our members today. we'll see what they have to say about it. >> mr. speaker, what do you make -- apologies -- what do you make of the controversy involving twitter and congressman weiner? do you have concerns of a member serving his official duty -- >> i think you'll have to talk to representative weiner about

that. >> do you think the ethics committee should look into the matter? since it's a matter that should not reflect positively on the house? >> i think you'll have to talk to representative weiner about this issue. >> mitt romney is about to announce his bid for presidential contention. because he was one the original architects of what now the republicans call obamacare, and he now has since changed that position, i'm wondering how you feel -- >> more comments in the question that i'm comfortable answering. [laughter] >> let me finish. how comfortable are you with him running as head of the party, especially since there are now movements like tea party that say they are going to sock romney? >> i've got all i can do as speaker of the house. my focus is really right now is dealing with the giant debt problem that we have and getting americans back to work. that primary election for

president will sort itself out. >> mr. speaker -- >> with that question, in the authorization bill last week, there was the mission force transfer enhanceable fund which is $1 million, which was killed by amendment before the bill passed. $700 million or so was authorized before the amendment killed that. if appropriators would kill the authorizations when the dod comes up, would they be earmarks. would it violate the earmark ban if things from the fund were appropriated? >> the house has made clear in our rules there will be no earmarks. we have gone to great lengths to make clear to our members what the rules are and the fact that there will not be earmarks. i don't know the specifics of the -- your outline. but i can tell you that we are not going to do earmarks. we're going to keep our word to the american people.

>> mr. speaker, i wanted to ask you about the cyberattack on google. and that google says they think originated from china. are you aware of any members accounts that might have been compromised? do you have any cause to believe that the chinese government might be behind it? >> i'm concerned about the reports that i just heard about. and i am confident that the fbi will be looking at this, but those -- we just don't have the details yet. i'm hopeful that we will soon. >> mr. mr. speaking, can you tak about your decision to hire, are you sure it's not in violation of the anti-deficiency act? the amount of money without being agreed upon by congress. second, the contract hires from florida, the cap of $500,000. can you assure the taxpayers on

the hiring? >> this hiring was approved by the bipartisan legal advisory group. and i'm confident that it complies with all of the rules of the house. >> just looking at the votes last week on amendments on afghanistan, there was a lot of bipartisan support for the amendment last week. looking at this week in libya, do you think those measures are an indication that maybe some members are turning in their support for the u.s. efforts aboard? >> well, i think there's a lot of concern given the budget deficit, given our debt. i think every penny that the congress spends is getting a lot more scrutiny. in addition to that, as i said several weeks ago, members had a bit weary about the amount of money that we've spent in america, in afghanistan, and that we're spending in libya. and as a result, -- earlier, we

were wondering what's our vital national security interest there? i think i have a pretty good feel for it. but i really do believe that the president needs to speak out. in terms of our mission in afghanistan. our mission in iraq, our mission in libya, and the doubts that our members have, frankly are reflected -- they are reflecting what they are hearing from their constituents. i think a president has a role to play here. the president really does need to step up and help the american people understand why the missions are vital to the national security interest of our country. >> mr. speaker, i'm wondering -- the republicans are the president has a withdraw about 5,000 troops. do you think that's a helpful level? deeper than that? >> listen, i've been supportive of the president's goals in

afghanistan. i was supportive of the surge in troops in afghanistan. and i said then, and i'll continue to say as long as the president is listening to our diplomats and our commanders on the ground, i will support him. i don't know what the number from the correct number should or shouldn't be, but if he continues to work with our diplomats and our generals on the ground, he'll have my support. thank you all. :

continues. host: we'll are pleased to welcome welcome for the first time to the "washington journal" n a nan. congresswoman if you would start by telling bus your district. what do you represent? >> guest: district 19 is the hudson valley of new york. so we start about 45 minutes to an hour north of new york city of manhattan. and extend the town of poughkeepsie in southern duchess county. >> well, it looks like we jumped the bill. on the irs efile program and identity session. >> but are glad to have received the written testimony from all of our witnesses and again, we

appreciate everyone's patience and flexibility as we juggle the schedule. we have the commissioner of the irs douglas ace shulman. we appreciate your work and the work of your department. and you're working with this committee and members and staff as we try to address this very important issue of how better to protect american taxpayers from being defrauded collectively by tax identity theft -- or identity theft that's tax related. and also to protect each and every citizen who's victimized by these criminals when such fraudulent conduct occurs. i'm not going to go through your whole bio in the interest of time. you've been very patient as we juggle the schedules as the other witnesses have been so we'll go right to your testimony. it is the practice of the oversight committee to swear all of our witnesses in so if i could ask to you stand and raise

your right hand. do you solemnly swear or affirm the testimony you're about to give this committee will be the truth, the whole truth and nothing but the truth. so thank you, commissioner. and the record reflect that the witness affirmed that oath. and with that, i'll turn it over to you for your statement. >> chairman platts, thank you for the opportunity to testify before the committee on the important issue of identity theft. before i discuss the efforts the irs has taken to combat identity theft, and to assist its victims, i just want to personally apologize to the taxpayers sitting behind me. i had a chance to talk with them and apologized to them personally. i know that they had a frustrating experience with the irs. as the head of the irs, which serves 140 million individual taxpayers, i always stress to our employees that we need to

walk in each taxpayer'shoes. and while most taxpayers have a smooth seamless experience with the irs, we obviously need to do better with the taxpayers who are here today. on behalf of the agency, i apologize and i've asked my staff to follow up immediately with each one of them to make sure all of their issues have been resolved. let me talk about identity theft for a minute. first i want you to know that we take the identity theft issue around the tax system very seriously. regrettably by the time that we detect and stop a perpetrator from using someone else's personal information, that victim's data has already been compromised outside of the tax filing process. i think it's very important to state for the record that all of the examples here today, the irs

is not the cause of the identity theft. rather, the terry sensitive information was stolen outside of the system and they use that identity to try to get a tax refund. it's a growing problem nationwide identity theft and we've seen a five-fold increase of tax-related issues around identity theft in the last five years. in 2007 because we saw this as an issue we created the office of data -- information protection and data security. let me briefly highlight some of the actions we've taken to try to get ahead of this. first of all, we set up filters and we stopped about a billion dollars since 2008 of potentially fraudulent returns coming in due to identity theft. we've also tried to set up ways to assist victims of identity thefts.

we put markers on accounts which puts heightened scrutiny on those accounts when they came through. the key to those markers is setting up the right filters that block the criminals and don't put too much burden on the victims. while not perfect, we've gotten a lot better. two years ago, 80% of the returns that were tripped by our filters ended up being legitimate taxpayers. this year that's almost reversed. 75% of the tripped returns ended up being the fraudulent taxpayers. so we're going to keep getting better every year. we've also this year launched a very promising program which is we've given 56,000 taxpayers a p.i.n. when they file the return, it will go through, if you have the p.i.n., if a return comes in with that social security number with no p.i.n., it will be blocked. i really think this is the future and i commend my staff for being in front of this and working on it although it didn't

help the folks who did not have a p.i.n. i could go on and on. we do a number of other things. we have criminal investigations. we coordinate with the justice department, the fbi, the federal trade commission and i'm happy to talk about it in questions. before i conclude, let me just turn to the written testimony of the witnesses who experienced unprofessional behavior on the part of some of the sisters that they encountered at the irs. i must tell you in all candor that all of my personal experience and the data that i review on a regular basis suggests that our telephone representatives on a whole are extremely professional and courteous. all of our customer satisfaction measures, those measured both by the irs and by external third parties show that while we run one of the largest phone centers in the world, the irs manages to provide high quality of service with a high degree of accuracy.

with that said, i take these taxpayers at face value that they had a bad experience with the bad irs and i take this very seriously. i believe the cations we have with victims of identity theft present unique challenges to your assisters. often, it's during the initial conversation with the irs that the taxpayer is told that they've been victimized. as we've heard, these can be very emotional conversations and they're very unlike the majority of calls that we receive on a daily basis with specific questions about your account or the tax law. and so for many of our assisters, especially the ones on our general toll free line, this may be the first time that they've received a call from a victim of identity theft. so based on this testimony and what i've heard, i'm initiating a thorough review of the training provided to all of our

phone assisters to ensure that they have the tools and the sensitivity they need to respond in an appropriate manner to victims of this heinous crime. let me conclude by telling you that i realize that in the process of increasing our efforts to block attempts by identity thieves to exploit the tax system, there have been inconveniences and frustrations created for honest, hard-working american taxpayers. for that, i'm deeply sympathetic. as identity theft continues to grow as a problem for our country, we need to do our part in the tax system to assist innocent victims. we dedicated significant resources over the last few years, streamlining the processes for innocent taxpayers caught up in an identity theft. these efforts are starting to pay off but we're going to need to keep working on it and you've got my commitment that we're going to be focused from this day forward on continuing to improve our operations in this

area. >> i thank the commissioner for your statement. and the commitment you've made as far as going forward. certainly, i'm grateful for your apology for those witnesses here today and all those who have been victimized and perhaps have believed they've not received the level of assistance that they should have received, whether they're here today or around the country. and, you know, i think what you said here as far as going forward, you all captured in your april 6th address at the national press club and it was about continuous improvement. that since you joined the irs in 2008 and in your own words, i've made it one of my top priorities to put the irs on a path of continuance improvement to get better. i believe we should perform the best we can today while embracing change that we can perform better in the future and i think this is what this is about. especially when we look at the

numbers in this area where we see identity theft-related tax issues jumping about 500% in roughly 2.5, 3 years, 50,000 or so that we're aware have to over 250,000 in the most recent year. and i think that goes to your other statement about the training of the staff who are on the 1-800-number that is for most constituents that will be their first point of contact. that the committee made to go back and evaluate and strengthen that training because as we get more and more of these cases, as we're seeing, that's who's going to get that initial call. and as you reference the written statements of the citizen witnesses who will be testifying a little later today, yeah, their description of the treatment they received is

pretty outrageous. and, you know, not putting words in the mouth but quoting them, as we'll hear from lavona thompson. i spoke with the most rude and discourteous person i've ever spoken with in my life. another witness after dealing with an irs agent in person, in a local irs office, and feeling so frustrated and how the engagement occurred, i went out to my car and cried. i was very overwhelmed. this is a case where we have individuals who were victimized and, in essence, feeling victimized the second time and your acknowledgement of that and your commitment to go forward to improve the training of your staff is much appreciated. and i'm one as we talked about before, yes, believe in the

ideals of public service and am grateful for the work of all public servants and that includes all of the personnel at the irs who are out there in the irs and trying to do a good job and the misconduct of certain individuals to paint a bad picture of any and all irs agents personnel. we know that's not the case. so as a committee we certainly will be grateful to be kept in the loop as you move forward with these training changes or upgrades so that we can make sure we are doing better with the assistance provided to the victims of identity theft. a number of issues i would like to address with you -- you mentioned the -- the -- about a billion dollars in savings that you prevented from being fraudulently paid out. and the filler system is now identifying of those that it kicked out, about 75% were

fraudulent and that would have otherwise been paid out but for being caught. do you have a number roughly in, say, the last three years the best estimate of you've identified what was paid out fraudulently and what, if any, of those dollars have been recouped since being identified? >> let me address -- we have the specific identity theft maneuvers that were moving and we have very sophisticated algorithms that block out fraud. we block out 2 million returns every year that never go out. and a bunch of those are probably identity theft 'cause they can be duplicate tins but they haven't gotten an identity theft marker so we don't know what that is. so we don't have a good number as of today how much potentially that went out that we know was

identity theft, but, you know, it's something that we're going to work on going forward. the other thing i just would mention -- there were a bunch of statements in the testimony that assumed just because the innocent taxpayers refund went out and that means the perpetrator's refund went out. that's not the case. there's a bunch of cases where we get a flag on the first one and we're working that and a second one gets a flag because it's a duplicate. and we have someone who has a purse stolen. someone gets their identity. they sell it to 20 people so we could get multiple filings with the same -- it doesn't mean that any of those necessarily go out. a lot of times we're holding them all trying to sort out exactly who's who and who deserves the refund. >> i understand you don't have the exact amount perhaps that's identity-theft related in the

recent years, is there a number that you have at this point of how many returns were filed that are identity-theft related, whether you know -- >> our cumulative number is a little over 400,000 since we started tracking those but those are the ones that we put the marker on. so, for instance, the ones that are coming in this year until the case is resolved, you know, the markers are not on it 'cause sometimes, you know, the most common mistake in tax filing is someone not transcribing their social security number so sometimes it's literally is a number. it's not an identity theft it's called a duped social security filing. but the cumulative number over three years has been 400,000 that we've marked as having some identity-theft related. some there's never been a return but we found through other criminal investigation, a cache of information that has a bunch of social security numbers so we'll mark that. and some, the taxpayer

identifies some we find the way most of the people who testified found out, which is when they filed they realized somebody else had filed. >> i know one of the issues that you kind of touched upon that comes through in the testimony where a fraudulent return was paid out, and then the law-abiding citizen submits and, you know, is told it's going to be four, six months or longer. can you address that -- you know, we have cases that have been brought to our attention where a fraudulent return was paid out within two weeks of an e-file being submitted in, say, january or february, then the law-abiding citizen -- and that was based just on the name and social security number and no supporting documentation done in the e-file. they created an employer id and income but then the law-abiding citizen comes forward with all

the documentation, w-2's, you know, all the proper id to show that they are legitimate taxpayer -- you know, why is it four, six -- or i think in the one witness used, it was about a year and a half till they got their legitimate refund. i know there's a man power issue here but that seems pretty extreme that the victim has to go that long, you know, given how quickly we paid out the fraudulent payment. >> so one thing i just really want to verify because i think there was confusion in both a bunch of the press reports and other things, the first return that came in was received and put into our system. that doesn't mean the refunds were paid out. and so the refunds weren't necessarily paid out in all those but then to address the question of when the real person comes in what would take it so

long. one there was a staffing issue and i told you we more than doubled the staff so that we can get this addressed. frankly, we didn't know there was going to be this explosive growth and we were trying to balance budget cuts and potential government shutdowns and once we found out there was more growth, we threw more resources in this. >> is this just in this current calendar year. >> yes, this current calendar year. we're trying to balance resources as we go. second is, there are cases and one of, i think, the witnesses described a case where the person had, you know -- had their w2, had their employer, had their dependent, all those things -- when you get all of that, identity theft has become a very serious organized crime. and it's one thing -- you get a social security number you file, you probably will trip a filter and get blocked. and if you don't, when the real person comes in, they're obvious but sometimes we write to both

people and both people come back with a driver's license, with a social security number on it. maybe they've gotten a passport. they know the names of all the dependents. they know what the agi last year was. that usually means that there's some sort of work-related crime or someone has gotten into some sort of payroll processing system where they get information, and when that happens, it can take a while to sort through. some of the delay was we had some things sitting on the shelf waiting for people to get to it. we think we've addressed a lot of that by putting more people but sometimes when our analysts get there, they have to start making calls to employers. they have to ask for more information. and again, this can be 30 people all that they're trying to unsort those cases so those will always take really long. >> understandably. >> and i guess the other thing i would say is, you know, i did -- i looked into -- there were a lot of public accounts about people and without getting into any taxpayer, there were lots of public accounts that i saw where someone said someone told me it

would take six months but we know for a fact they got their refund within a couple months and a lot earlier than that. i think it depends on circumstances. with that said, you know, it shouldn't take nine months. it shouldn't take a year and a half. and we should get better at sorting this through. i think the p.i.n. i mentioned is going to be one of the real solutions. everyone testified here want to make sure the p.i.n. here assuming the pilot will go, their refund will fly through. anyone trying to use their social security will just be blocked. much better than the flag and the filter, which is a step in the right direction but the p.i.n. could be the real solution here. >> and i certainly understand where you have a fraudulent claim, where they didn't just get a name and social security but they got access to, you know, all that information. you know, so they're filing correct status, you know, everything is good other than where the money is going. and i understand those are going to take a lot longer. those where it is just a name

and social security number and this kind of comes back to the issue of the training of your staff and how they handle it. that initial saying we're going to do this as quickly as possible, hopefully, it will be, you know, you know, a month or whatever you think is the best case scenario but it could be six months but please know, you know, we're going to be giving you regular updates. and that is part what i would call an internal control on the training side and the follow-through. i really -- when you and i talked yesterday, my wife served on the victims assistance board in why can in her home community a number of years back. and, you know, there's -- when you're dealing with victims of crime, you know, it should be one of our highest priorities in how we handle them because it's

not just what they, you know, lost and here the taxpayer loses the money ultimately collectively, the american taxpayers, but it is a financial impact on the law-abiding citizen who has been victimized and for those who especially are really looking to that refund to pay, you know, whatever pressing bill they have, whatever there may -- maybe it will be a financial impact and there's a mental health aspect to it as well. and i think that's what came through to me, not just again in the witnesses we're going to have here today but the other cases, i think, we have 12 cases that we're currently working in my office. and i haven't talked to my colleagues, mario-diaz in florida and around the country, is that, you know, we really look at those individuals appropriately. that they've been victimized by criminals and so, you know, we really need to prioritize how we

held out and one of those regular contact between your agency and those individuals once they've been identified so they're not sitting out there waiting so to your knowledge but kind of get those regular updates. i'm going to touch on one other area that you just mentioned before i turn to the ranking member, and that is in trying to prevent it, and i appreciate that preventive approach, in fact, in your april 6th statement at the national press club, i appreciated that you're looking at how to be proactive and not just catch them after the fact and do something but to prevent fraud and other misconduct, and i think one of the things you mentioned about trying to have the employer's identification number and that w2 data up front rather than getting it in a sense after the fact and then trying to play catch up. and i realize that's a substantial engagement to pursue

and i think maybe it was good congressman diaz balart being here as an appropriator on the subcommittee that directly overseas irs, you know, as you looking to make those type of improvements that will prevent fraud up front that we engage him in what those financial aspects may be as far as making those improvements. but you mentioned the p.i.n. -- you know, the filler system and putting flags on, and i think at least one of our witnesses in the next panel testified that they were supposed to have been flagged and apparently were not properly flagged so they were a victim of identity theft a second time regarding their refund. whereas, the p.i.n. approach seems like it would more than likely prevent that. where do we stand in that pilot program? and i think it was 50-some thousand individuals in the current year and how quickly do you envision anybody identified as even a possible victim of identity theft being able to get

that p.i.n. to try to make certain that only they will be receiving their refund? >> so we're really -- we've got all the data now. although people still file after april 15th. they just -- they've gotten themselves an extension but we've got most of the data in. we're looking at it and are parsing it. like i said, i think it's very positive. my desire would be to expand it dramatically. and potentially give it to anyone who's been a victim. we for next year we got to balance that against, you know, all of the demands but i think unless we see something we're not expecting to see, by next year, we're going to try to dramatically increase that. >> you know, my hope is that we can move that -- that direction. in fact, you know, not a witness here today but one of the victims that had submitted a written statement, pamela eslee from york and without objection, i'm going to submit her statement for the record and in

the name of full disclosure as i shared with you before, it is a family member -- i'll say my big sister, although she's in the audience. she stands 4'10", maybe that. she's one of these victims. and, you know, because of it being a family member i'm most familiar with how her case played out. and the filter system, you know, is what really worries me. that if we rely on that, while i'm glad it's getting 75% of those that are kicked out are ones you want to catch, is how many we're not catching with the filter system because as in this case where my understanding, you know, it was a different filing status, a different employer, you know, a different address, a different dependents. i mean, there was one -- what i would call that mario referenced earlier, one red flag after honor that i thought that filter system would have caught and kicked it out, hey, something is

askew here. unfortunately, it didn't. and when the written returns were received by irs, about a month after the fraudulent returns, nothing happened for another two months until the taxpayer, miss lee, then contacted irs saying where's my refund? so now it's three months after the fraudulent return was submitted and paid out in january, two months after the irs received paper documentation that, hey, there's something wrong here. yet, even then nothing had been done. and so that's why i do worry about the filter approach versus getting to the p.i.n. and as a way to maybe better protect. and this may be too broad a sentiment or thought. is there -- the possibility of getting beyond just a social security number for each and every taxpayer.

you know, what would be the cost of, you know, the p.i.n. being sent out annually that here's your p.i.n. not just, you know, the half million or so that have been possible identity theft. is that something you're even considering or is that because of the additional cost and, you know, would it be effective or not? >> if you don't mind, if i could just address the two things about that you had mentioned. one is the -- that series of filters you said, why didn't it stop someone? >> yeah, yeah. >> i just learned of the taxpayers and obviously i can't discuss individual taxpayers publicly but there's nothing to say it didn't trip a filter or that that refund didn't get stopped. and so we're going to look into all of these, but i will tell you, like i said, there's 2 million refunds that gets stopped and there's enough indicia there. we change these very year. they're very sophisticated and

the crooks keep testing all our tolerance levels but we're very serious of stopping refund fraud. >> and i don't want to imply otherwise. as i've said to you, i know you want to prevent every fraudulent filing and payment as much as i do. and i know your department across-the-board shares that and that's why the purpose of this hearing is how do we partner here with you to help you do just that? >> on the -- on the p.i.n. -- i mean, it's an interesting idea. we're, as you know, everybody is in very tough fiscal times. my guess it would be very expensive. we're looking first to expand the p.i.n. to make sure it works. second expand it to the group of people most likely to have one of these problems. right now the social security numbers is what's used. i think it's been an overstatement in some of the testimony submitted today that all you need is a name and a social security number and you automatically get that refund.

there's a lot of things that go into looking at that. with that said, you know, i'm very open -- you know, as you quoted from a speech earlier this year, we should always be looking at how we do it better. and it's certainly something as identity fraud grows, we're going to have to figure out how to stay on top of it. >> i do appreciate that it's not necessarily that simple, but i'm looking for -- yeah, i've got too many pieces of paper in preparation for today's hearing. but that is a statement from a conference call with an irs employee stating to committee staff that social security number and name is all you need. you know, the e-file and that it is that simple so that's not just citizens, witnesses making that statement. that is one of your employees saying that to my committee staff. >> well, i'll look into both the

employees who are rude to people on the phone and that employee because there's a lot more that goes into issuing a refund than just a name and social security number. >> yeah. it was -- yeah, you know. we won't identify the individual here -- >> no, i take it at face value that i'm glad to share that information with you. >> but i'm finding my place here. i'm not finding the exact one but we'll get it to you 'cause that seemed to be what was being conveyed to us. a final question there and then i'm going to yield to mr. towns, is there any conversation -- again, we're looking at ways how to prevent this wrongdoing, to stop the criminals, protect the innocent. you know, i know in some of these cases -- and i don't know if it's consistent or something that you've identified as a consistency in the fraudulent claims, they were filed in

january electronically, which is before most americans -- i know i never get a w2, you know, till the end of january -- the last minute from current federal government as my employer or from previous employers. is there any consideration that that is a specific red flag? that anybody who's filing electronically in january that we look at with extra scrutiny because, you know, of -- the propensity, you know, they're trying to beat the law-abiding citizen who hasn't yet got their w2's so they have not yet -- or not yet -- i think, i'm generalizing here and i may be wrong that most americans are not able to file till at least the end of january or the end of february until they get their employer information and then go forward and submit everything, that that would be a specific red flag that anybody filing

electronically that earlier, you know, would get extra scrutiny? is that something you would consider? >> you know, i guess there's two things about that. one is a lot of the people who are -- you know, the common perception is april is when everyone files. the reality is, you know, our peak starts january/february and there's a lot of people who file who are as you discussed earlier, people who are really counting on that money and to go get from their employer because most employers, especially large employers who employ, you know, large chunks of lower income workers can make the w2 available earlier. and so there's a lot of people who file who are some of the neediest taxpayers who really need the money. second of all, as we talked about yesterday, i just want to be -- we have seen no nexus between electronic filing and this identity theft-tax related fraud because you can get your return in just as quickly by sending it overnight mail to us. and the speed issue a lot of times is about, you know, whether you get a check or

direct deposit and we have to send something to fms. so it's again -- everything is on the table and i would certainly look at anything. but usually the time is not the issue because we actually -- the thing that nobody wrote about and, obviously, there wouldn't be a hearing and a lot of interest in it, but we stopped lots of people who -- the legitimate taxpayer filed got their refund and never knew anything had happened and then the crook comes in later and we block those, too. obviously those ones aren't devastating to the victims. so but it certainly is something we look at. what i will tell you is we have technologists, statisticians looking at our screens, refining them year after year, working with our criminal investigators and other people and these -- and i get brief on them all through december to make sure we test them. we test them gets last year's

data. we test them throughout the year and so we're looking at these filters very carefully and we're trying to get as jim white from gao testifies, you know, the key to these things is, stop the bad returns and don't burden the honest taxpayers. >> am i mistaken that if you file a paper return then you do have to have your w2's -- i thought when you file an electronic return you don't send any w2's in, you know, with that because you're dealing electronically but if you file by paper i thought you then had to file your w2's with the return. >> the electronic return usually has -- you can do it electronically next year. we've been working on our e-file. next year we'll be able to actually pdf any attachment to an electronic return. >> but i meant as far as -- that identity theft is paper or electronic, isn't it harder to

do it with paper because you have to have those w2's attached? >> a lot of people get them late. what i can tell you is we look -- we screen with the same material on paper and electronic. >> okay. that's what -- i'm looking for that nexus that you referenced. and i would encourage you and if you see anything with the -- with that 75% of those that you did kick out and were fraudulent, you know, that analysis, you know, was a large percentage of them in january, you know, and what percentage of them was electronic if your staff could follow up with the committee on those two specific issues. that would be great and my ranking member has been very tolerant of me going very long here. i yield to the former chairman of the full committee and the ranking member of the subcommittee, the gentleman from new york, mr. towns. >> thank you very much. no, i think, you know, your questioning, you know, i think is just so important to try to

get to the bottom of it. and not get involved in terms of a blame game because we're all in this together. i think so your questions i thought were really right on point. and to the point. you know, because i'm always concerned about if people do things and get away with it, you know, then they will almost encourage them to do it again because if nothing really happens -- and then, of course, others hear that they did it and nothing really happened so i guess the point i want to ask you -- since 2008, how many prosecutions have there been? >> so i actually don't have -- i don't have the cumulative number, but i nut my testimony and mentioned earlier, >> can we keep the record open so that we can receive that?

>> just last year, we took to full investigation and recommended to prosecution and we don't do that unless we've coordinated with the justice department prosecutions of people who had stolen 50,000 identities that had been used in tax crimes. so when we prosecute we obviously like any other agency, you know, we've got a very small part of our operation that has a criminal investigation division. we have to spread it across terrorist, financing, offshore tax evasion, any number of things. as this problem has grown, we put more resources and plan to continue to put more resources into it and we try to find prosecutions, a, where we can get the proof. but importantly, that the ones that impact large numbers of taxpayers is, frankly, the ones that u.s. attorneys will take and work with us on, et cetera. and so if you look at 50,000, i think the number was actually

56,000 taxpayers who are affected with the prosecutions that we took all the way through our criminal investigation chain, that represented, you know, more than a quarter of all the identity thefts that was identified, which is a pretty high number for any federal or frankly state or local investigator to be able to follow up on that percent. >> would you know the rate of conviction. >> what's that? >> would you know the rate of conviction? >> a very high rate of conviction. i believe it's 95% but let me get back for sure on the record. >> right. how much of the fraudulent paid money has been recovered from thieves? >> so every year we block billions of dollars of fraudulent refunds. we blocked about a billion over three years with identity theft. i mentioned to the chairman, we haven't tracked specifically identity theft numbers related that has gone out and what we've gotten back. we haven't started tracking that. we plan to as this problem grows

so i don't have a number for you, mr. towns. >> you know, my concern is that, you know, sometimes when we don't have the resources, you know, we know there are things that should be done, you know, but we don't do them because we don't have the resources to do it and, of course, sometimes in that process, you know, the wrong kind of message gets out. i know that, you know, as the commissioner that you just can't come up here and bang, bang, bang saying you want money, money, money. but the point is i think that when you see a problem that, i think, that it becomes our responsibility here to give you additional resources to be able to go out there and fix the problem because if a person is expecting his or her return and then they don't get it, and then all of a sudden they can't get an answer because really somebody else has gotten it and the frustration around that and the problem, you know, to me is

something that we need to really take very seriously, i'm talking about members of the congress as well, and i agree with the chairman. i was so happy that we had one of the appropriators here today because, you know -- and i think if you feel that you need additional resources, you know, don't hesitate to make that case because i think at the end, we're going to save money by you doing that at the end of the day. based on what i'm hearing and what has been said here. that if we spend it to fix it, then in the long run, we'll be much better off. and i know how difficult it is to make the case for resources especially in this atmosphere and climate. but sometimes we have to do that in order to be able to correct the situation that we now find ourselves in and to make certain that people have the confidence

and not to be worried about whether, you know, somebody is going to get my return because of my identity. let me ask you, what department really covers this in your shop? what department -- the name of the department that handles this? >> handles, i'm sorry? >> that handles the claims in terms of the identity -- you must have a department that handles that and looks at identity theft. what's that called? >> we have the centralized office of information protection, privacy and security that sets all policies and cordinates. the fraudulent -- most of it is in our wage and investment division that deals with individual taxpayers. that's where all the service officers are, where we talk with the victims' testimony and our criminal investigation is the arm, obviously, that follows up on fraudulent schemes that we see. >> right. now, was that the department -- i know there's some cutbacks, was that department had some cut

back. >> we had some cutbacks in every department of the irs this year. >> because i'm really concerned about making certain that you have the resources that do the job that needs to be done. and that's really -- i think sometimes, you know, we are involved in situation where is we have a problem and we know that resources are actually needed to correct the problem, but we do not deal with it. and we're guilty of that here in the congress. so i want to let you know that i stand ready to push to be able to assist you to get what you need to be able to correct the situation because, you know, it's going to grow if you don't. and that's the problem. you see, when people do something they get away with it, they tell others. and then it gets bigger and it gets bigger and bigger. and then the problem, you know, becomes one that becomes a lot more costly to be able to

handle. so i think that if we can move forward now and correct some of the things that are going, and send a message forward that this is not something that you do. you know, if you do this, you're going to spend time in jail because -- and i think that point has to be made because if people do it and they get away with it, they're being encouraged. >> yeah, i couldn't agree with you more. what i'll say and i'm biased because i'm the commissioner of the internal revenue service and responsible for this agency, but this problem is a good illustration of why, you know, i advocate for the right resources for the irs because on one side we need to have the service resources to quickly process the returns and the refunds for the victims and on the other side, we need to get the enforcement resources to pursue this kind of

crime. the service resources i think are fundamental because every american is expected to pay taxes so this isn't a choice. this isn't an optional department and we owe it to the american citizen to see treat them right. the enforcement resources are just obvious from an economic standpoint where there's a huge return on investment. you know, we return for our enforcement from 8 to 1 to 23 to 1. $23 for every dollar we spend and that doesn't count -- that's conservative accounting that omb and pbo has come up with. that doesn't count the deterrent effect of people seeing it and never doing it to begin with. this is a kind of microcosm of why, you know, we always argue this agency is a little different, collecting the money for the government because it has a huge return on investment and a real obligation to serve every taxpayer in a way that's dignified and respects their own individual situation. >> but the problem, mr. shulman,

is that people compare you with other agencies in terms of american express -- and they say well, this person went to purchase something with his american express card and they called me, you know. but the point is that they can do that because they have the staff, and they have the system in place that they pay for to be able to raise these kind of flags so that's the point i want to make and, you know, because you're going to be compared with them, you know, and, in fact, some of our colleagues have already done that today. and i was on the nor of the house and a guy came over to me and says he doesn't understand the problem because of the fact that he won't talk about in terms of how the credit card -- that company woke him up. he was asleep at 2:00 in the morning and they called him and said, are you making this purchase, you know? but the point is that in order to do that you have to have

staff. you have to have resources. and that's the difference. and i told him there's a big interest on that card, there's a big interest on it so, therefore, they can hire staff and do things and say things and we just want you to know that we sit here -- we're not just going to blame, but we want to work with you and we think together that we can do better. that's what i'm saying. and i know that in order to do that, we will have to do some things on this side of the aisle. and other than just saying you got to stop it. you know, we have to help you stop it. and i'm prepared to do that. >> i appreciate it. >> on that note i yield back. >> i thank the gentleman. and i'll wrap up quick for you, just a couple of quick follow-ups. one is on the issue that the ranking member raised on the prosecutions. there was a press story in the

"sun sentinel" in florida, end of april, that identified -- and i'll read it verbatim, prosecutions for identity theft-related tax fraud are rare, agents for the internal revenue service who are responsible for criminal investigations have pursued just 412 such cases nationwide since 2007. now, there's specifically referencing identity theft-related tax fraud. i take it that you believe that's an inaccurate number? >> as i told mr. towns, i don't have the cumulative number with me but i'll get back for the record. >> if you could. >> but i think the important thing is a lot of these people are committing -- there's one criminal with thousands of taxpayers. that could represent a lot. thathat's not one victim that could be 100 victims. >> but that very well may be the number but what i'm telling you as this problem grows, we're going to devote more resources and, you know, our prosecutions will -- or our investigations will continue to grow and our

recommendations to justice for prosecutions will continue to grow. >> and that kind of follows up with what ed just said. we're an authorizing committee, we're not an appropriation but we're glad to work with our friends on appropriations in kind of two areas that i think you're looking at doing. one is your manpower commitment to the victims so that after being victimized by the criminal, that the government does right by him so it's not six months or nine months till they get their legitimate -- that's a man power issue but also a man power issue of going after the criminals and -- 'cause if that number is accurate 412 cases going from 50,000 to 250,000 obviously that's a very small percentage of prosecutions if we're accurate in those numbers. that question on these prosecutions, i know, excuse me, on statute -- the irs -- you're

understandably restricted pretty significantly in what information you can share with anybody because you're protecting very personal data. and are there statutory restrictions on you that in some way are preventing your criminal investigation division in working not just with justice but with local law enforcement because i understand that as with some of the cases, you know -- i've heard about or we're going to hear about today where it's a 3,000 or 4,000 and it's not multiple but one person defrauding using one, you know, name and social security and information, when that goes into the department of justice and they prioritize all these criminals are going after, that's probably going to go pretty well in that totem pole because of that amount. because for local law enforcement they prosecute shoplifters who maybe stole $100 worth of goods. it's something they know how to do. is there anything that prohibits

the agency from working with local law enforcement so that we can -- we know who the person is, they don't get the message as mr. towns mentioned, as long as i don't ask too much each i can prospect 3 or $4,000 because they're never going to come after me and we're sending that message, hey, you know, i'm good to go. and just don't get too greedy, as long as you don't get too greedy you're safe, i think to combat that we've got to engage, i would contend, local law enforcement. i don't know if here today, you know, if there's anything that prohibits or restricts it or hinders it? >> what i will say is i think some of the articles might have overstated the restrictions but there are some restrictions around specific information. we need to give information that's pertinent to the investigation to know where the investigation is going, et cetera. you know, i always people i got sworn in as irs commissioner when i came back to the office the people who talk about the laws around taxpayer privacy were in my office.

just as an example of how seriously this agency takes data protection. and there are very restrictive laws because we're holding very sensitive information about taxpayers. we can, though, do coordination with other law enforcement agencies. it's not always just, you know, look at our databases and we'll share everything that comes in but there's specific things we could do. i'll be happy to have further conversations about exactly -- where there could be some restrictions. if you don't mind, i also just want to be clear because i've not been clear earlier, when you said 250 cases of identity theft with only 400 prosecutions. >> 250,000 -- >> and those numbers seem skewed, one, is 250,000 was the flag that were put on. we put some of those on because we happened to find, you know, a

database. or someone called and said, my wallet was stolen and so those aren't necessarily anything. there hasn't been a crime committed. it's just a flag so that we can put it through more screening. >> okay. >> and second of all, you know, even though last year it was 116 investigations, 41 of them ended with recommendations for prosecutions, that was still 50,000 taxpayers. so the number was more like 50,000 for 200,000, just -- and i don't know that i was clear earlier. >> right. >> 'cause again because of the likely prosecutions at this point are those more large schemes involving laudable or significant number of taxpayer id's being taken so the number of cases might be small that you're prosecuting but the impact is that 50,000 number >> yes, i want to be clear in my explanation number earlier. >> one other item if you could follow up on the record, my earlier questions of those

identified in, you know, and kicked out as being fraudulent, you know, that -- how many were e-filed, how many were in january and the issue of how many were asked to be refunded in the form of a debit card versus a check or a direct deposit, again, i'm looking -- trying to help personally so i can, you know, better work with you and your agency, you know, what is a common issue that comes to the broad issue of internal controls and how do we ratchet up our controls to address whatever is most common. and knowing as you well stated that the criminals are always going to try to stay -- whatever we do they'll try to get a step ahead of whatever we did. if we could have that information about the debit card refunds that are identified, that they were asking for refunds and you caught them. but they were looking to get it on a debit card. and again, the belief that that

maybe is easier to get away with it versus if they know they got to go to a bank and have some kind of contact with a bank to get that fraudulent refund from that bank. with that, mr. towns, do you have any other questions? i'm going to thank you for your testimony. conclude by saying, you know, while i think as you've referenced and in a written testimony and we're about to hear from our other witnesses, we do have a lot of progress to make, work to do. i also want to recognize the progress you have made and the commitment that you -- your understanding of this is a growing problem isn't because we asked for this hearing. it's because you're seeing the data as we're looking at it and are out there, you know, trying to lead the effort forward in a positive way. and for those hard-working

employees, we're grateful for them and hopefully those who haven't provided that level of service you clearly want to be provided that, you know, they'll learn from their mistakes and do a lot better in the future with the american public that they interact with. so i thank you again for your testimony. i look forward to continuing to working with you and your staff and our thanks for being flexible here today with the schedule. >> thank you. and if you wouldn't mind, since i was up here at 12:00, and i hoped to be here when the other witnesses spoke, i'm going to have to step out but my team is going to stay to follow out. >> and we shared -- >> you do all have my apologies again with having a frustrating experience with the irs. >> and, you know, we appreciate your understanding of their testimony from the written and as we discussed yesterday, you know, at pretty good detail the subject -- the message of their testimony and your staff's willingness to stay with us is also appreciated. thank you, commissioner.

and we'll take about a 2-minute recess while we get the next panel situated. and then begin. [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] e [inaudible conversations]

[inaudible conversations] .. [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> we will continue with our second panel. and we are honored to have for individuals with us. first, mr. jim white director of strategic issues at the government accountability office. we appreciate not just her presence here today but you and your colleagues at gao, the important work you do for all of our nation, but especially for congress and the resources that you bring to are working on the the hill. as well as three citizens witnesses. unfortunately, who have been victims of identity theft as it relates to the tax filings. we have first, sharon hawa, is that correct? from the bronx.

we have lori petraco from york, pennsylvania, and ms. lavonda thompson also of new york. will also grateful of you being here. and as i said a number of times now, you have been very flexible with us and very patient as we try to figure out meeting schedule around floor schedule and full committee. so we are grateful for the. if i could ask all four of you to stand, and again so i can swear you income if you would raise your right hand. do you solemnly swear or affirm that the testimony you're about to give to this committee will be the truth the whole truth and nothing but the truth? and the clerk will reflect that all four witnesses affirmed the of. and we are going to set the clock at five minutes but if you need a little more time, we want you to be able to give your testimony as you see fit. and we are glad to hear. so mr. white we will start with

you. >> chairman platts, ranking member towns, i thank you for inviting me. if you hear from the victims, id related tax fraud is a hideous crime. to begin i want to describe hypothetical and simplified example of refund fraud which is illustrate on page three of my statement. i think up on the screen. first, thieves steal the taxpayers identity. this happens outside of irs. second, if he files a tax return come -- claiming the name and social security number of the taxpayer. after verifying that the name and social security number match, and this again may be simplified, then irs issued a refund to the thief. later the legitimate taxpayer files a return, at that time diarist discovers two returns that has been found using the same name and social security number. irs holds up any refund while it notifies the taxpayer of a

problem. and investigate. the notification from a irs may be one that taxpayer first learned his or her identity has been stolen. employment fraud is different, also illustrated on the screen. with employment fraud a thief uses a stolen name and social security number to get a job. the following year when taxes are due the employer reports the income to irs on which statement and innocent taxpayer files a tax return. irs matches the to and discovers income report in the end of the innocent taxpayer that was not included on the taxpayers return. irs sent a notice of underreported income to the taxpayer and that's when the taxpayer and irs may 1 learned about the id theft. so to summarize so far, irs learns about and identity theft affecting taxpayers long after the theft occurs. and available evidence she just a problem is growing. now want to outline what irs is doing to resolve taxpayers idf

problems. starting in 2004 in the commission summarized some of us, irs create an id theft strategy set up an office to oversee it, but theft indicators on victim's accounts, screamed some returns for fraud and set the identity protection specialized unit and an id theft hotline. in 2009 we recommend iris develop measures and data for assessing effectiveness of viruses effort. irs agreed and has since taken new actions to help resolve innocent taxpayer's problems, this identity theft makes it appear to either claims to refund for underreported their wage income. irs is placing a temporary id theft indicator on account while still investigating. the purpose is to alert all irs offices that id theft may be the explanation, what appears to be. to detect id theft related tax on irs screens returns filed in the name of past victims. the screens are not perfect.

is for example, iris greens are returned with a change of address it was love refunds with some legitimate taxpayers who moved. if it's greens too loosely, more fraudulent returns get through. this year about 200,000 returns failed the screens, 146,000 more fraudulent, 50,000 more innocent. also irs is expanding with screens for the social security numbers of deceased taxpayers to try to prevent thieves from filing using those identities. another new step give victims special pin number to irs screens at returns, and less the p.i.n. is attached. irs is ability to address identity theft and constrained by law, timing and resources. the laws governing the privacy of taxpayer data limits to some extent as the commission also describe, irs facility to disclose information about id thieves, federal, state, or local law enforcement agencies

unless certain conditions are met. complicating any investigation is the fact irs typically discovered the id theft long after it occurs. finally, criminal investigations require resources. last year irs initiated about 4700 criminal investigations of all types including id theft, tax evasion, money laundering and other financial crimes, far fewer than the number of id theft cases. given all of this, can irs do more? options exist but they come with traders. irs screens tax returns filed in the names of known identity theft victims more tightly, but that will increase the number of false-positive and delay refunds to those taxpayers. it could also burden employers to be contacted about reported wages. looking forward, irs needs to continue assessing its efforts such as pens and screens for deceased taxpayers to learn what is effective. we have not assessed the

effectiveness of these steps. in the long-term irs should be looking at how to take more advanced of new processing system that it is building with better processing irs might someday be able to match tax returns to wage statement before refunds are issued, and thus prevent more refund fraud. however, much prefunded matching would require employers to file wage statement earlier in the year. mr. chairman, that completes my statement and i would be happy to take question. >> thank you mr. white. ms. hawa. >> good afternoon, chairman platts and ranking member towns. thank you for allowing the opportunity to provide you with my testimony regarding this atrocious and rapidly increasing identity theft crime. it not only impacts individual livelihoods but it also steals minds of those on the osh treasury year after year and will continue to do so until something is done to prevent it. this unfortunate situation has taken a turn is an emotional toll on me. the stress, fear and anxiety are all compounded by having to deal

with terribly organized agencies such as the irs and the taxpayer advocate service which only adds feeling victimized by the inefficient systems and lack of communication. knowing that i and other legitimate taxpayers like me remain foldable, taxis and after taxis and, lease me both infuriated and it also frustrates me. in three years these manages to my tax refund twice by filing fraudulent tax returns in mining. the first time was in 2009 after i found to my local tax preparation offices i had for the previous five years. two days later i received word that the irs rejected my return because my social security number was used more than once. scared and and shot i took measures to secure all my personal assets, credit reports and accounts. i attended police report, filed with the federal trade commission and mailed in hard copies of my returns to various irs addresses as instructed by different units within the irs.

after 12 months of back and forth confusion, the irs is identity protection specialized unit assigning to an incredibly rude and hard to reach taxpayer advocate where i had to explain my situation, resubmit the documents, improve my obscenity all over again. it took a painstaking 14 months until i finally received my $6604 refund. refund. meanwhile, i to take on a second job to support myself and spend a lot of time, money and energy drafting letters and sending in the necessary information. in 2010 i was unaffected by still remained extremely anxious. when i finally received both my 2009 and 2010 tax refund a few weeks apart, i hope the worst was over. but this year i learned i fallen victim again and this time they also stole my state refund, together totaling $6335. researchers show me how antiquated the taxpayer system is. i realized the irs has been dealing with this crime since nearly the start of the millennium. so why do these things go in

expense and incompetent in handling the matter and why has anything been done yet to combat it? the very process designed to accommodate taxpayers it has also become a windfall for these. there's been increasing tax that as result of e-filing and direct deposit which do not necessitate validating person lays identity went on to a digital signature to e-file senator carson a self selector is less identification number which is the taxpayers number from the previous year to turn the information that is easily obtainable. furthermore, a direct deposit on across the banks running number in order to release the fund. no further vetting of personal information or identity is required. so on two separate occasions identity thieves be filed early in the taxis and if i physically receive my w-2 form and use direct deposit accounts to steal my refund. to make matters worse in 2009, they receive $1895 more than i was due and i received a notice from the irs stating that i owed that amount in overpayment. electronic filing was created to

deceive the irs most of dollars. versus a paper return was cost $3.29. but i urge instead to look at the many millions of dollars fraudulently paid out to these criminals. cases jumped 640% from 2004-2007 and an additional 300% since last year and many most of taxpayer dollars are needlessly and disgustingly wasted due to the broken and expose system. in and what technology is still prevalent when the topic priority would be placed on this issue. it is absurd that the government pays out twice on a single stone refund come a multiplied by hundreds of thousands still of stone refund if you. since the country faced with the worst economic situations in its history, this appalling travesty needs immediate attention and repair. this entire ordeal is a large part to the unacceptable lack of sacred measures that the irs and u.s. government have placed on the personal identity of

taxpayer. and as an outstanding citizen of this country i demand change. i demand first that legislation be enacted to force federal estate tax offices to put appropriate measures in place that prevent thieves from taking the people's hard earned refunds away from them, and forcing them to fight for the identity of a tax refund for the rest of their lives. i second demand that federal government work more closely with state and local law-enforcement agencies to target and catch the criminals so that victims like me can rest their note that these criminals are serving time. and i 30 minute each day develop and enact the necessary laws to protect consumers from corporate tax preparation offices that have little incentives and safeguarding their customers personal information. i hope that by getting a testament to take measures will be put in place that will no longer have to deal with this nightmare into law. i thank you for your time and effort in making these critical changes happen now. >> thank you, ms. hawa. ms. petraco. >> good afternoon. my story begins on march 15,

2011 come when i retrieve my mail from my mailbox. i received an envelope from the internal revenue service. inside was a window envelopes that by the postal service returned to sender attempted not known unable to forward. inside the window envelope was an irs change of address form, and more poorly a notice cb 12 for tax year 2010, dated february 14, 2011. my social security number, my first and last name which are all accurate but an address of wardy five, apartment three b., yonkers, new york, 10705. i had never lived at this address, let alone ever lived in yonkers or the state of new york. the form state i had a miscalculation on my 2010 form 1040ez in the area of tax credits and that my new refund amount would be $4552. i read this formed several times

in his belief, and called my husband. i nearby joint tax return was prepared by an accountant, that we as a 1040 long form simply two children in college, and finally that we just been a return within the last two weeks. i wanted to believe an error was made that would explain this. i.v. immediately called the irs 1-800 number, but after 20 minutes on hold without being able to speak to anyone, i gave up. the local irs office is about one mile from my home that they were closed for the day, and so i spent a restless night wondering what this all means. march 16 i arrived at our local irs office early and was asked to step up to the counter. the clerk was courteous, but the cabinet is in no way private. everyone sitting in the shares directly behind me could hear our conversation and the lobby was full. when i should the clerk what i had received and that this

wasn't my return, she blurted out, your identity has been stolen, i will need to fill out and identity theft affidavit. the entire waiting room heard this. until then i was hoping that this was just a mix of. she asked for my name and for me to recite my social security number. just seconds ago, this irs employee proclaimed that i had been a victim of identity theft, and was not asking the to recite, where others could hear, the same sensitive information she concluded had been stolen. i said no comment that she could take information from the form in front of her, and i would be happy to show her my driver's license. she asked, when did you lose your social security card? i replied, i didn't. she wanted to see it, but i don't carry it in my wallet because i don't want my identity stolen. she completed affidavit until they to come back with my social security card so that she could send the license associates

agree number with the affidavit. she also told me because this person found the return as a single person and got $4552 already, my legitimate return would be held up and i would not see my refund until perhaps october or november, roughly eight or nine months later. i asked her, how can a person file a return and without validation or proof of anything receiving refund? she replied, do you know how may people file electronically? we expedite the return and match up the information later. finally, she said, don't forget to file a report with the federal trade commission, the social security administration, and the three credit bureaus. again, the clerk was courteous to her matter-of-fact manner and abruptness, that this happens all the time, in front of a roomful of strangers, was upsetting. i went out to my car and cried. i was very overwhelmed. i was so upset that i begin to

wonder how far the seafood company. i i went home, signed onto all three credit bureaus on the internet and reported the identity theft and printed my current reports. everything was okay. i pulled out my bank accounts to see if my balances were okay. they were. i was late for work that day in order to protect all that i have worked hard for. i felt the need to report this to my supervisor as well as to the chief, as i work in law enforcement and did not want someone to jeopardize my job or my good name. that eating about a report with the federal trade commission, and they requested that i file a police report with my local municipality. i am not sure why because this is cybercrime involving someone in yonkers, new york, and not york, pennsylvania. march 17 i contacted springettsbury township police department as though to detective raymond craul, and explained what had happened and what the federal trade commission requested.

he was somebody with federal trade commission's request and gave me an incident report number, but stated he had no jurisdiction to investigate. i added the police department incident report number to the federal trade commission's website on my incident page. i again had to leave work early to go out to the social security office in york, pennsylvania, to inform them of the identity theft. unfortunately, at that time they still didn't have my 2010 earnings to verify for accuracy. i was resigned to the fact that this nightmare would continue indefinitely. at the irs would hang onto my tax refund, and that i would have to be vigilant with a credit bureaus for the rest of my life. on april 27, i discovered i was not the only local government employee in york county affected by the identity theft via the irs. one of these victims suggested to our local congressman, todd platts, and his office could do. i follow through with contacting

the york office in filling out the constituent service form with all related documentation. on april 28, i told my story to two special agents from the department from the department of the treasury out of philadelphia who are also launching an investigation. i in here today to tell you that i'm a victim of identity theft. i am forever changed. i will always need to check on my credit and be vigilant in what information is shared with others. i am a victim, being victimized by the irs it was only at my refund because they don't have checks and balances in place to prevent crimes like this from happening, to timely verify personal and financial information, or to time and adequately assess people like me who have fallen victim to identity theft. if they did, they would have seen the following things. that i filed my taxes with the same man as married filing jointly for the last 28 years, that i've lived at the same location for the last 12 years

and never found any change of address with any other governmental agency, meaning social security or the postal service. and finally, that we always complete the 1040 long form an that we always filed by mail and not by using the internet. i thank you for the opportunity to tell my story in the hope that changes occur within the irs that would prevent this from happening to others. hopefully, my tax refund will not be delayed until october or november so that this law abiding citizen can get back to living her life. thank you. >> thank you, ms. petraco. ms. thompson? >> good afternoon. my nightmare began on monday, forever 28th, 2011. that day my account was in the process of e-filing my federal tax return. he received a message from a software provider alerting him that a tax return had already been filed for me. he responded by devising that it

could not be filed already because he was trying to file it now. he then called the irs and they in fact confirm that a return have been filed in my name. my accountant called me and told me what had happened. he gave me the number to the irs to call and find out what the person used to file the return because they could not release that information to him. i called and was told they could not tell me anything. once i get home from work, i called the irs again and spoke with mr. baird. he told me what i had to do as far as five and identity theft affidavit with copies of my drivers license and social security card. calling the federal trade commission, filing a police report, contacting the credit bureau and social sturdy office. once i finish speaking with him, i call the federal trade commission and spoke with an employee whose name was mark. he took a complaint and gave me a confirmation -- a confirmation

number. i called social security and was informed that had called the federal trade commission and i informed the representative that i just talked to someone. she said okay and wished me good luck. that day she said that i was the fifth person that should spoken with who had their identity stolen. on february 28, 2011, i found an incident report with the york county, pennsylvania, district attorney's office. on march 1, 2011, i followed a police report with york city police department. a detective found out who did it but he could not charge the person because that person is reportedly located in the state of new jersey. he was told the irs would bring charges against them. on march 15, 2011, i forwarded a letter to the irs with the following document. identity theft affidavit form 14039, prepare explanation for not filing electronically form

8948, incident investigation information, copies of my social security card and pennsylvania drivers license. on march 16, 2011, at approximately 10:25 a.m., i call to get some information on my case because they would not release it to the detective, and he wanted me to call and get it. i spoke with the most rude and discourteous person i've ever spoken with in my life. when i asked her about my case she proceeded to yell and scream at me. when i asked for her name and id number again, because she said it so fast when she answered the telephone, the phone went silent. she had hung up the telephone. i then called the detective and told him what happened. he told me to calm down and call back and hopefully i'll get another person. at 10:30 a.m. i called back and mrs. bennett answered. i could not stop crying and told her what it just happened to me

when i had called a few moments earlier here mrs. bennett kept apologizing for the previous person, which she is not required to do so. she informed me that the person used my social security number, first and last name, no middle initial, he filed that return. once my return was received, the irs considered it to be a duplicate return. on march 18, 2011, i voted there to the irs about the situation on march 16, 2011, and i did not get a response. our telephone calls monitored by the irs for the purpose for hearing what is being said? is this unhelpful attitude toward the public a single incident or is it a general attitude? on march 30, 2011, at 11:10 a.m., i called again to get an update and spoke with mrs. dandridge. she informed me that it would take 16 weeks to six months for

me to receive my return because of the identity theft. i thanked her for her help. i had to close my checking and savings account and get a new one and order new checks because of this. and added expense albeit a minor one, but one which i did not need. i had to bow my credit reports and luckily, so far, there has not been any activity on the part of the teeth. i had to put a 90 day alert on my social security number. on may 10, 2011, i bought a letter to experience, to put a permanent alert on my social security number. on may 17, 2011, i wrote letters to trans union and equifax requesting the same. you may not be able to know how stressful this has been. i can't sleep. i wonder what the person will do next as far as a study of credit card or anything in my name. now that this has happened i've

told the irs will monitor my social security number for the next three years. when i found my return, it will take them longer to process it because of this. what, if anything can't is a diary doing to rectify that this does not happen again to me or another person? in my work history, i've had the occasion to see and work with victims of crime. i have seen to call me an encouraging effect a policeman, a prosecutor, or others involved in the criminal justice system have had on victims of crime. the system i work with make every effort to avoid victimizing the victim a second time. the way i feel i've been treated by the irs system has made me the victim a second time. i ask and wonder how many people have had the same unpleasant experience. thank you. lastly on to stay may 31, 2011, i received correspondence from the irs dated may 13, 2011,

regarding another individual high a tax return using my social security number. this incident started february 28, 2011, and i'm just now receiving correspondence. why would it have taken -- why would it take three months for me to receive this information? thank you for your attention. >> thank you, ms. thompson. and again, my thanks to all for other witnesses, and to our three citizen witnesses, victims of identity theft, i want to add my words of apology to the commissioners, on behalf of not specifically the irs but on behalf of our federal government for how each of you have been treated as law-abiding citizens seeking to comply with their obligations as taxpayers, and instead becoming victims, not just of criminal conduct, those

who sought to defraud you, but also victims of poor service from us, the federal government. and all of us bear responsibility for that ultimately, especially as elected representative of two of you, and, i know for our third witness, you know, on behalf of all of my colleagues, we want to do better on your behalf. i want to kind of focus a couple of questions, with you three come in mr. white separately. and maybe, mr. white, actually ask you first. minute year -- my notes here. i apologize. here we go.

in the commissioners testimony, and also in your written testimony and your assessment here today, mr. white, you talked about the screening process. and i'm not sure what, if any, detailed gao's review that as far as how the filter process works, and whether you're able to make any assessment of kind of relates to my questions earlier to where we have these three witnesses or others, where it was, while worth certainly the 140,000 or so, clearly others slipped through that seem to have a fair number of red flags they get caught up in an usher if you give an opinion on how to assess that process. >> we have an assessed it ourselves. i can say several things though. one, the filter process does not work perfectly as we have heard.

and it does stop some fraudulent returns, some fraudulent refunds from going out the door at irs. however, they are both false positives and false negatives. so far in 2011 there's been about 50,000 false positives. those returns of honest taxpayers that got stopped by the filters, by mistake. so that great a burden on those taxpayers. and then on the other side you false negatives where fraudulent returns slipped through the filters, perhaps because the id theft still so much of the honest taxpayers identity that they can get through the filters. they had enough information to get through. so you both kinds of problems. the filters don't work perfectly. we've recommended that what irs needs to be doing and they've agreed with a recommendation and started doing this, they need to be assessing every unit the effectiveness of the actions they're taking. they've taken a number of steps. they're taking a number of new steps this year. each year they need to be assessing those steps and then

feeding back. the need to be a feedback. whether they learn from what they've done and correct and adjust the properly. part of the problem here is these are adjusting as well. so it needs a continuous problem by irs. they have started that. >> and in essence what i would call annually auditing internal control system to prevent this type of fraud from occurring? >> yes, to learn what's working, what's not working, do more of what is working, pin numbers, for example, turn out to work well in the spirit then that would be something to think about expanding obviously. >> on a specific, i know they're looking at the results of that. is that anything that gao, that you are engaged with the irs in assessing that that pilot program? >> no, we are not. our sins though based on the work we did in 2009 is that p.i.n. seems to be a promising approach.

it depends on taxpayers using it for it to work, but it ought to be an addition. it seems like it has the potential to be in addition to the filter system that would make that system work more effectively than it does right now. >> okay. >> the profit is if an id theft is stolen, a lot of the taxpayers identity, more than just the name of social security number, they can make a return to look realistic prevent have a copy of last year's tax return. so they can get through the filters. that p.i.n. is a number that only the honest taxpayer would have, unless the thief is hacking into the home computer, for example. there is no perfect solution here, but that's a solution that seems have a lot of potential. >> and from what i've come to learn, seems to be the more we can expand that effort, if the data plays out, it seems like it may, that that would be one way to really try to crack down and

prevent this fraud from occurring. >> than i do think there are some long-term solutions. these are years away, but for example, right now irs does not match tax returns to the wage statements, the wt use that employers filed out until months after the filing season ends. the first match is done in june. part of the reason for that is employers don't have to send those information returned to irs until either the end of february, the end of march. and irs matches later so the refunds go out the door first and that kind of matching is done afterward. if irs can modernize their processing system, and if the due date for those employer wage statements could be moved earlier in the year, irs could do matching before refunds go out and catch more refund fraud. but this is something that is years away. they are working on their processing systems but they are not ready right now. >> and as part of my conversation with commissioner

in his april speech, referenced that for looking ahead and try to again be proactive in the long-term. i didn't get the chance to ask him that question because the fact that we are providing w-2s by the end of january, once that employer makes that available to the employee it would seem why wait another month or more before having it also shared. so that alone would hopefully allow us to move it up just that one change, you know, the earlier the better. >> we have worked on going for the ways and means committee. we are working, looking at this trying to see if there are some options to move that up. >> great. before i go to our other witnesses i'm going to yield to the gentleman, mr. tasker for the purpose of questions and then i'll come back with other questions. >> thank you, mr. chairman. and also let me to the

witnesses, really apologize our regret that happen. we are happy are able to take the time to come in and share with us in terms of what occurred. i really appreciate that. ms. petraco, as i understand it you discovered that your identity was compromised after receiving an address change request? >> yes. >> okay. was the identity thief attempting to change your pennsylvania address to a yonkers address? could you explain that? >> the letter i received had a change of address. the envelope and i went to yonkers and was rejected went back to the irs. the irs put it in another envelope and and wrote my name and address, i guess they got from their files, and then that

envelope came to me at my legitimate address in your pennsylvania. so when i opened it up i saw this yonkers, new york, address and i knew something was wrong. >> right. had there been any other attempts to use your informati information? >> no. to the best of my knowledge this is the first. >> no credit cards or anything like that happen use? >> no. >> it appears that your id was simply used to just commit tax fund fraud, that's what it was used for? >> correct speculating about the status of the investigation being conducted by the treasury department? >> no. since i painted irs office i have heard nothing. except through office -- mr. popps office. >> but otherwise you have not been -- they have not been touched with you? >> no.

>> ms. hawa, is that it? thank you. has your id or any other to victims been used for purpose other than tax refund fraud? did they use anything else the? >> not to my knowledge. >> how long did it take you to get assigned an agent while you're waiting for 16 months of? >> the first year i was dealing with various agents within the irs for about 12 months. and then after 12 months they assigned me to a national, a taxpayer advocate service agent. who continued their quest -- the request to get my refund suspected you get your refund? >> it took 14 months but they sure know i was just contacting us going to get it within 10 days. >> okay. >> and this year i did not get a signed an agent all. >> do you have any indication

that action is being taken by the irs to find and prosecute the person? >> it's very difficult to get information about the fraudulent claim, just getting information about how much the refund was for when it was issued, is not something that they freely share. and that is after they identified that you are a legitimate taxpayer. so no, aside from just the basic information which i had to plead for come i have no idea what the status is on the criminal investigation. >> that he has to also, have you, you any idea where your identity was stolen in terms of what happened and how they're able to ascertain it? i'll ask all three of you that. >> for me in 2009 it started when i went to a local tax-preparation office in my neighborhood. i've been going to this tax-preparation office for five years.

and i realize that it was a tax-preparation office went 20 additional customers of this offers came forward and said the same thing happen to them. >> i have no idea. to the best of my knowledge, i thought everything was cured. >> ms. thompson? >> no, i have no idea. >> let me just go with u2, mr. white. you talked about the appropriate procedures should be put in place come and you also talk about modernizing the system. that costs money, doesn't it? >> irs spends a lot of money modernizing their systems today. they have made progress. we've been reporting this for a long time now. and after congress passed the irs restructuring act in 1998, irs got much better in managing systems modernization. it is still not where it needs

to be to do the sort of pre-refund matching we are talking about. there -- they are probably years away from that right now. >> i'm concerned about this money. everybody is concerned about, i'm just thinking that sometimes we sort of react to things when we should spend and we would save. we ended up not spending and it would end up costing us more. it happens that i think we do that a lot, especially in government. so, i'm just concerned about that. i think the episode of make the appointment because i really do this is very, very serious, if a person is waiting for his or her money and is stolen, and they're sitting waiting, that's very frustrating. >> i agree. irs as you may know has a separate appropriations account for systems modernization, and under the law, gao looks at that

account before they can spend money out of it. the balancing act is always been making sure the irs has management capacity and the controls in place to be able to spend that money smartly so that they didn't get more money than they could spend effectively, but enough so that they continue to make progress modernizing. >> let me just tell you what my real concern here is, and aside from the fact that a person has lost -- i'm thinking credit scores, employment or other things, all the negative things that can happen, you could be impacted by this. i mean, and may i ask you, how about your credit score? have you dealt with this? >> well, i'm cautious to begin with, even though prior to this incident happened the first year.

i always kept up on my credit reporting agencies and i always had freezes on my accounts. so this just exacerbated my need to continue the freezes and always be on top of my accounts that this is going to be a lifelong issued to do with. even if my taxes are not so next year, i'm still going to be concerned that my identity is compromised and i'll have to worry about accounts being opened in my name and whatnot. so this is not just a one time thing that we have to do with. this is a lifetime issue. >> ms. petraco? >> i agree. i don't see this ending for me anytime soon. currently, it's just the irs but i will be vigilant about the credit scores. because, you know, i work in law enforcement so that the impact for me is just, you know, the fact i am a law-abiding citizen. i'm supposed to be protecting others in my roll.

so it does have an impact, you know, because i don't know what way this person is going to use my identity. and my name is unique, so you know, that limits the amount of people that have that name out there. so it is me. >> ms. thompson, there's been a proxy three months since you discovered that your identity was used to commit tax fraud. you also reported a problem to the irs and the ftc, is that correct? >> yes. >> have you received any written key mutations from either of those agencies? >> federal trade commission wrote me a letter. i have my confirmation number on it. irs connecticut any income except lead i just got the other day.

>> what did that say to you? >> that individual use my social security number to file a return, but those three months ago. they're telling me what to do as far as the affidavit and contacting federal trade commission. but i already did all that so it is three months late. >> right. did you contact the your td? >> yes. >> what was their response be? they have a police report and so does the district attorney's office. >> do they appear to be investigating with you, we do no? >> the new york city police department found an address and a name in new jersey, but the irs when they came to talk to the other month, he said he can't arrest or. they are going to arrest or. he said he can't touch or. >> when you say day, do you mean -- >> the irs. >> have you received either written or verbal communication from the irs which gives up,

easier an update on the progress of tax fraud? >> no. >> just that letter and that's it. now, mr. chairman, i think that's a real issue in terms of the amount that is involved it because if the person discovers that if this 3000, $5000 nothing is going to happen, the irs is not going to pursue it and nobody, you know, why not do it again next year? that might be the way he make a living from this point on. until something is done about. so i think we need to look at the possible legislation that would encourage local law enforcement to also get involved in terms of even if it is $1000, 500 it doesn't matter that it's not theirs. and i think that until he come up with something of that

nature, i think that this is going to continue. and i must say that we need to do everything we can to make sense that this does not continue. and i think in my particular legislation, i yield back. >> i thank the gentleman, and share the gentleman from new york's interest in pursuing this further, specifically on the prosecution standpoint. as with a conversation with the commissioner, and with the gao, what, if any, current statutes prohibit the sharing of information from the irs with local law enforcement you know, the state department -- they partner with justice but as a reference earlier, when the talk but a 3000-dollar case here, $4000, justice has limited resources as well, but our local law enforcement, you know, they're pretty efficient at dealing with these. so i think, if this is something i've conveyed to our citizens

who are with us, that when this hearing ends, that will continue to work in a nonpartisan way with committee, with gf's -- gao, with a irs officials to see how to strengthen that ability. because i am one that believes exactly what you said that if we don't start sending a message, whether it's $1000 or $100,000, we're coming after you. if you steal money from the american taxpayers, and you victimize law abiding citizens, we are not going to just ignore them. we are going to go after it and try to hold you accountable. to look forward to doing that. using myself time now. -- yielding myself time now. i think the two or three victims here, one, a sincere thanks for you to tell your stories are so by being here you help raise public awareness of this issue. you personalize it, he's human i

see. this isn't just about improper payments being made by federal government to criminals. this is one piece of a huge, huge pot of improper payments. official number most recent of $125 billion a year in proper payments being made. and what's going on here is one part of that. you know, millions and those of dollars going out in fraudulent tax refund. so you are helping to your story is very important. and in each of your statements you captured it in different ways from the need for us to work with the commissioner and his staff to strengthen the training of irs agents in how we assist victims of crime, which is what each of you are. and you stated it in different ways, but i think state it very well, and ms. petraco, i am here today you -- i hear today today i'm a victim of identity theft.

i am forever change. ms. thompson quote, i betrayed by irs system has many a victim, a second time. ms. hawa, your statement they continue to treat me as if i am the one to blame, adding even more stress to the situation. that's not acceptable, and the commissioner acknowledged that. i appreciate the commissioner's colleagues staying to hear your stories. if you have had the chance i deputy commissioner tucker who is here with us, she was part of my meeting with commissioner shulman yesterday, understands the importance of us to do right by you and all victims of this type of criminal conduct. and i think it captures earlier by referenced each of you unfortunately dealt with irs agents who were not living up to the standard of assistance as you well reflected in your

statements come in your testimony deputy commissioner tucker is a 27 year employee of the irs, dedicated to do right by you. her presence here today reflects that along with her colleagues. and i guess a couple of specific question, mr. towns testimony, once you have been told are what action you are aware of, on how the interaction with irs went, a couple of additional questions. ms. hawa, i want to make sure i understand one part of your written testament to what you shared here today. when you were -- find my spot again. you were contacted in october of 2009. and i believe in writing that you owed an amount of $1895 back to the irs?

>> correct. >> and that amount was the difference between what you are lawfully supposed to get and the amount that the criminal had gotten fraudulent, correct? >> that's correct. >> by this time though you are already giving with representatives of the irs, to kind of go after this identity theft, correct? >> yes, but i did have one person i was dealing with. i would just talk to the identity protection specialist agent. every time i called it was a different agents i did not are consistent my profile showed that i was a victim. >> that kind of captures what the commission and i know what we talked about the training aspect, you know, that there's a breakdown in the training system that, not just in training but in the internal tracking system i guess is how i described, that you are already in the system

working on identity theft, and i assume probably maybe seven or eight months into doing that, because this is the fault, yet the system kicked out hey, we overpaid you. well, they did overpay, but not you. overpaid the other person the full amount. and also, when you are dealing with not those in the identity protection, the specialized unit, but also i understand that two of the general agent you dealt with were not aware of that there was a specific unit to deal with victims of identity theft? >> that's correct. issue when it happened i had lost the number for the identity theft unit, so i call the general 800 number just thinking that they would transfer me over, and when asked, they have no idea what you i was even referring to. and they were giving me different instructions on how to

deal with filing my paper return. addresses to send to and what i really needed to file. >> not understanding the scope of the issue. you are trying to deal with which was, because you enforcing have been through it before, you knew what was going on, trying to get to the bottom of it. >> writes back and i think -- will, i am grateful for your statement that those agents that don't typically deal with, that that's part of the review of how they get training. so when someone such as yourself calls them. one of the specific question to you, ms. hawa, am i correct in understanding after 2009, and you are supposed to be flagged, were you also given a p.i.n. number? are you supposed to be? >> i had requested a p.i.n. because i heard her moorings of people being issued out p.i.n. when this first happened to me.

even a gentleman that had this happen, this happened to him earlier in -- he said he received a p.i.n. there are some sort of verification method so it didn't happen to him again. so i requested that immediately, and they told me that they're going to look into it and i never received it. and in 2010 i was not impacted at all. so i thought that the worst was over but it wasn't going to violate the irs for a pin number. this year but i found out what happened to me all of the game i call the irs to see why my profile wasn't flat, as they promise, they didn't know why. they had no explanation stack so it was back in '09 where you were told it would be flagged, you asked for a p.i.n., that didn't happen but you thought you still flagged. then in 11 something, you know, that didn't work. >> that's correct. >> and that kind of comes to discussions with commissioner, with mr. white, that hopefully that if we are able to expand

that p.i.n. process, that they will be more exact and the three giving examples, next year you have to have a personal identification number, you know, and it's not a question of keeping flag but they only you can file and be able. with one caveat. mr. white hit it, depending on how you receive that if those electronically, personal e-mail versus mail or even mail, that that p.i.n. isn't stolen, you know, in some fashion. but certainly would be another hurdle to guard against it. i think i had one or two other ones. i appreciate everyone's patience here. and this kind of, ms. thompson, mr. towns i think pretty well covered this.

when you are dealing with the york city detective, new york city police department's detective, understanding because this person identified as being the criminal here was a new jersey, they weren't going to be presenting it, irs would. were you told over the phone by the irs that they would be pursuing it, or were you told by the detective that his understanding from the irs? >> when the to irs agents came a couple months ago to talk to us, they had told the detective that he could not arrest her, that the irs would. >> okay. so and i was kind of what we engage from a casework standpoint, they came out to look into from the philadelphia office of? >> yes. >> but you're not received any feedback from that? >> nothing at all. >> the and let me look you a

second. a final question, ms. petraco. when you in the york office and understandably, you are trying to figure out what's going on here, and then already being a little concerned and then being told that you are a victim of identity theft and the engagement that happen in a public setting, just i guess in general, did the agent that you are dealing with understand, get it when he didn't want to say the information publicly with other people sitting there listening? was there just, you know, an understanding, sorry about that, or was it just more they did realize what they were doing? >> i think my tone of voice when i said no, you know, no. get information off before. she. she said okay, okay.

so, you know, i just don't think she really thought about what she was saying, or you know, just didn't put it all together. >> marchers name, social security number and not taking, you know, you know, thinking i've got -- because i ask that because again, it's an issue of training of the sensitivity of this information that we're always on guard. i'm like each of you, you describe your own approaches. my wife thinks, you know, i have a shredder at home to anything as any kind of identifying goes into the shredder. for years i have been trying to be very productive because of this very concerned. and it sounds like each of you have tried to do that. and, unfortunately, it wasn't enough, not because of a lack of effort on your part. i don't have any other

questions. mr. towns, do you? >> no, i don't. as i indicated though, i just think that a lot of things could sort of fall through the crack and not be dealt with. for instance, if the person is in another state and it's not a lot of money, that ticket very easily almost even ignored, because if you have to, seven and $50, so, therefore, why would you spend 15,000 to collect the 750? so sort of pass it along. and that's my concern. so i'm not sure that, we need to look at that because if they are saying that the person in your cannot make the arrest, and i'm not sure that the arrest is going to be made, then i think the fact that there's no to medication, to me is very troubling because the person,

the victim should be informed as to what's really going on, and i think that's something that really needs to be looked at. also understand in terms of the irs, i mean, how much do you want to spend to collect 500,000 -- i mean $500, you know. so i think we have to look at this and i think we have a role to play here. and it's not just the blame game. ..

>> longer term if there could be more refund checking. that takes the profit out of the crime. you are absolutely right, irs doesn't have the resources and never will and probably should not to chase $500, it costs much more than that to collect it. it has to be prevented up front. >> but the person who is a victim -- >> yeah -- >> feels differently. i think that's the way they should feel. >> absolutely. that's why it is such an insidious crime. for the victims, it is a big deal. >> right. with that, i yield back, mr. chairman. >> thank you. i would wrap up the discussion where i started in kind of the three primary issues. if we do better up front on internal controls and even the filtering system. that's why in my questions and

comments earlier. i think you went through in your testimony all of the things that we're -- have no changed in 28 years. the status, your address, you know, that filtering system itself, if it's a january turn, asking for a debit card refund, you know, and without any substantiating documents. that should be a big red flag. we get into those who maybe -- likely identity theft victims. the more we do up front reduces the number of fraud cases. when they do occur, there are fewer to pursue to throw the back at to go after mr. townsend's point. we're coming after you. if someone knows everything year get an extra 3-$5,000. do it once a year, produce the number so there's fewer to go after to hold accountable.

and third is, in doing that, we do better with victims' assistance. i'm not a law enforcement professional, but my understanding is where there is criminal product -- criminal conduct and, you know, victims of crime, an important part of the healing process is the victim being kept fully informed all the way through that process of pursuing the criminal, the wrongdoing to know that ultimately it's not just a -- they were made whole as you are going to made whole. you are going to get your refunds. but that justice was served. and i think that's when we have, no matter what the dollar amount, that we are not pursuing them. justice isn't served that prevents that ultimate healing process for the victims. i think prevention, prosecution victims assistance, and, you know, i think by statements, the commissioner understands that and is committed to that not just today, but has been. you know, we need to partner

with them and with the deputy commissioner and this committee and appropriations and make sure that we're -- we're well devoting the necessary timed effort and resources to this issue. so thanks again for our four witnesses here in this panel to our irs officials who are still here. commissioner shulman on the first panel, certainly helped raise great awareness of this issue and allow us as a committee to be more effective going forward to try to make sure that you three certainly are never again victimized in this way, as well as other americans are not victimized and we do right by you and the taxpayers in the dollars sent to the government. we will keep the hearing open for two weeks for additional information requested or that you want to submit to the committee to supplement the record. with that, this hearing stands

adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> today marks the first time when our legislative branch in it's entirety will appear on that medium of communication through which most americans get their information about what our government and country does. >> several time today it's been referred to as an historic occasion. whether or not it'll be an historic occasion is, i think, a subject for the judgment of history. >> this week marks 25 years of televised coverage of the u.s. senate. on the first day in 1986, c-span2 was carried in a little more than six and a half million homes, today it's available in over eight billion homes. watch online at the c-span video library. it's all searchable, shareable, and free. the c-span video library. it's washington your way.

>> this weekend on booktv, live coverage from the chicago tribune fest. authors on native americans, taliban, beginning of the 20th century. also from chicago, "in depth" with a live studio audience and your calls and questions. >> going live now to the white house. house democrats just wrapped up a meeting with president obama. speaking now is steny hoyer, minority whip.

>> engaged and the president responded positively with a clear objective that we need to address the debt, the deficit, bring those down, while at the same time, strengthening the security of the american people through making sure that medicare is strengthened and preserved for our seniors in addition to that, obviously, the american public was focused on jobs. we have a jobs agenda. we call it make it in america. not only make it in terms of succeeding, but make it in terms of manufacturing and growing it and sending it around the world. america can compete with anybody in the world. given the proper incentives and environment. we intend to work with the president to create that and continue to create jobs with this economy which has flowed and will get back to work to provide the job that a lot of people need. on -- i'm now pleased to yield

to the jim clyburn. >> thank you, mr. whip. i was pleased to share with the president of the united states about the feelings about the talks that we're having about the biden group. i've said to him as i've said to many of you in the past the atmosphere in the room is cordial, we are making significant process, i do believe the attitude is there among all of the members on both sides to get something done for the american people. we want to do it in such a way we preserves the principals of the caucus that say that we just preserve medicare, we must protect medicaid, and we must have revenue raising that's fair andequitable. with that, i will leave it to

our chair. >> thank you, jim. the first member of our caucus to speak to the president was our newest member. cathy underscored what is so vitally important to all americans. she said in her race she reached out to republicans and independents who supported her in the ongoing protection of seniors by the preservation of medicare. she appealed to small businesses and need for job creation and underscored the importance of making it in america. something that resonates all across this nation and clearly with our caucus as well. there was a great exchange with our president. we left united, we left together, and we intend to pursue these goals to make it in manufacturing -- to make it in america by investing in

manufacturing and preserve medicare and make sure in this discussion as cathy said, that revenues are placed on the table in terms of balancing our budget. i now yield to the vice chair, javier paer is a. >> he said failure is not an option when it comes to america pays it's bills and he made it clear that the middle class and seniors will not get stiff armed. i believe that every single democrat is ready to stand with the president to make sure that the priorities of america are fulfilled. with that, let me yield to the yanking democrat on the budget committee and one the negotiators with the biden group. >> thank you, xavier. i thought it was a good exchange with the president as my colleagues have said. mr. clyburn and i congratulated

the vice president on the tone of the talks. vice president doesn't there, we let the president know that we thought the vice president was conducting these discussions in the right spirit, a very serious tone. and we laid out the principals with which we've come to the table. number one is nothing that we do as we try to reduce the deficit in a predictable way should upset the fragile economy. we know that people are hurting out there. the american people are struggling with that fragile economy. we need to make sure that we focus on jobs and nothing that we do should interfere with that. secondly, you need to have a balanced approach. you need to make sure that as we put together a plan to reduce the deficit, we do not adopt the lob sided approach that the republicans did in their budget. what did they do? they said we're doing to terminate medicare, slash medicare benefits, cut medicaid

benefits that help seniors in nursing homes while they allowed to stay in place big subsidies for the oil companies and while they have not asked the very wealthiest americans to participate in addressing this issue. so we made it clear that we supported the president's approach that he laid out a number of weeks ago in sees that you need to take a balanced approach. yes, we need to come up with a plan today to produce the -- to reduce the deficit. let's do it without hurting the economy, without hurting jobs, in fact, invest in the future, and in a balanced way. >> the republicans said you haven't put forward a detailed plan yet. the white house hasn't put forth a detailed plan. why not? >> the president has a budget, mr. val hollen, i'm going to yield to you to talk about the democratic budget that we voted

on in the house. which is the basis that mr. val hollen and clyburn go to the meetings. we are graced by mr. val hollen and mr. clyburn of the talks and about the good faith initiative that is being taken there and working together if we are determined to reduce the deficit, we will, and we will have that message in a timely fashion so that we cannot default on our debt in a timely fashion and hopely that will be soon. so i want to yield to mr. val hollen, that is not the issue. the issue is how do we work together to have fairness in the taxes, preserve medicare, create jobs, make it in america. i'm going to yield. >> the point of the meetings is both parties come out and talk with the president and hold to

the same position. >> well, in fact, as the vice president -- as the vice president has said, mr. clyburn and i have said as the republican counterparts have said, we have made progress on some important issues. have we engaged on the huge politically nuclear issues, no, but the reality is that you have to begin a walk with the first step. and we have made progress and we're going to have to find a way to address this issue going forward. but again, true to the principals i just outlined, that is why we are continuing at that effort. the president has put a proposal on the table. he did so a number of weeks ago. >> can you tell us about the progress? >> i think mr. van hollen is correct. this is a thousand mile journey that we are on here. we are taking some first steps.

i do believe that everybody will agree that you cannot do anything unless you create an atmosphere within which you can have productive talks. that atmosphere has been created, we are having productive talks, we are not where we want to be, and we will be sometime getting there. but i would hope by the time we all celebrate independence day we will demonstrate that we have shown our patriotism to the american people in a very positive way. >> downgrade come up in the discussions over the debt ceiling? >> the downgrade threat did not come up. it was interesting that we learned when we came out. it was interesting to some of us who were in new york a week and a half ago talking to the new york partners and meeting with the new york partnership that the head of moody's at that time, the head of moody's said to us at that time, they would probably not downgrade.

this is interesting news today. but the fact is we cannot default on this. we all agree to that. and if the message that we have to send -- i think what was interesting in the meeting was the -- how our members came together around the idea that the not defaulting on the debt was a pivotal moment to do deficit reduction in a real way, in a balanced way, and in a way that will give confidence to the market as we do not default. >> i agree, it is a pivotal. >> well, i think all of us agree. every republican leader and every democratic leader agrees that defaulting on the debt is not an american value. americans believe in paying their bills and americans believe we make a promise and

borrow money, we're going to pay it back, we're going to pay it back. holding hostage, the credit worthiness of the united states of america is not a worthy bargaining chip. this week the republicans frankly offered a debt extension which they announced way offered to have it fail. in fact, it failed. but i think we are prepared to work with the republicans in a bipartisan way to make sure that america's credit worthiness is not put at risk. i think what moody's has done makes it more clear it needs to be an objective of us all. not just the president, not just one party, all of us. i think the public expect us to reform that responsibility. i welcome mr. boehner's comments to do it by the end of the month. you may recall when we met with the president about two months ago, i indicated we ought to get it done by june 8th. we're not going to get it done

by june 8th. this is, of course, july 8th was going to be the deadline. we've extended that because our care has been better, to august 2. if we are going to be responsible people and in speaker boehner's words, adults, we will come together and get this done. >> from moody's perspective though, what would have changed from the conversation last week? >> i think -- let me say this not to speak for the people at the meeting, but what we learned on our trip there, if we were to fault on our debt which we have no intention of doing, it would really cause a real mess in the mortgage market. and that would have it's own impact on our economy. so there was some other aspects of what would happen if there was a default that were discussed at those meetings and perhaps that had an impact on the decision. i don't know. you'd have to ask them.

but i think it has to be clear we're not going to default, we're going to use this opportunity to take us on the path of deficit reduction, we have no intention of passing on debt to our children and grandchildren, and it is the fiscal soundness of our country is important to our economic growth. so creating jobs and growth will be one way to produce -- to reduce the deficit. again, putting revenue on the table is another way and making the cuts that we need to make, which we are fully prepared to do and determined to do to reduce the deficit. >> can i reiterate, i share the leaders confidence that we're going to get this done. the markets ought to know we're going to get it done, i've told speaker boehner, and leader cantor that i will work with them, that the leader will work with them in making sure that we get this done. we clearly have differences. we clearly are going to have some, i think, very serious

negotiations that mr. van hollen and mr. clyburn have talked about. but we're going to get this done, we're going to work together in the final analysis. i believe john boehner and eric cantor when they say default is not an option. it would have catastrophic consequences which we as americans are not going to let happen. :

affordable quality health care to lower those costs and energy and the green infrastructure for country. and these investments in science and knowledge he as well as tax credits and the rest would be used to make us number one. the president said it. woo out innovating out the. some are going to do it in a new way to peace new industries for countries to be competitive to be number one in the world. and he reiterated that today. so this is not a contradiction of terms. it's actually a reinforcement of the same message. and very important to it is all of these point to making it in america. >> the president tomorrow will be going to toledo. hope you talking about an

extraordinary success over the last 18 months, where we invested in automobile companies, nature they could have the opportunity to be successful. they are now creating jobs. we've saved upwards of a million jobs in the automobile industry. received an industry critical to national security and jobs and opportunities for people. so that was a specific example of the kinds of investment. we need to invest in infrastructure we need to invest in innovation. the president has spoken about those in his state of the union. that's the kind of agenda were going to be pursuing so our people can in fact make it in america. >> are you telling us to talk led by vice president biden both produce a budget by july 4th? >> that's not what i'm telling you. now, that's not what insane. >> were going to get the budget that limit results. people house consonants in the american people will know they

were presented, republican and democrat. >> when to expect -- >> working on deficit reduction and whether it's necessary for us to be able to do in increasing the debt limit in the budget and on that stuff will be worked out by others once they get the frame then peered at me say this about jobs. one of the things that was very important and something a lot of this has invested in is the president made it very clear that secretary chu and a few others have said to him that we can in five to 10 years created not a mobile type just 300 miles to the gallon because of what the technology is in the electric cars. i drive a hybrid myself. so i can tell you that technology is working. but there is an age-old matter

of fact talk about and that is rebuilding our infrastructure. that doesn't decline a whole lot of new technology. that is for us to get roads and bridges that are deteriorating and we can do that in the two ways that a fundamentally sound manufacturing jobs involved. >> that was part of it. >> let me just say this about the conclusion. we began the meeting by thanking the president and joined by my colleague for the inspirational message in missouri. as we gather here across our country, people in the south still staggering from the natural disasters that came their way. mystery just devastating and now massachusetts today. we've had some ultra natural disasters that are not finished

yet. so i succumbed together we have to recognize people in our country in some parts of the country are suffering in a greater way and our hope is as we help those in crisis that we can do so in a way to help build their economy afloat. so the terrible experience as an opportunity to build their economy. what they were talking about the underlying manufacturing basis, these countries are crying out for a one way we can help them. and yes we started this in the recovery package and there were magnificent things in there, but there is a prospect is more to come as we went from people in the case of survival to take them to success and now the president is talking about his transformation will be talked about the number one in the auto industry in these new

technologies. when you do that you can only succeed if you do not cut these investments in science and knowledge he and tax credits and the rest to encourage incentivize the dirt to do its job. this is a public private partnership more than a partnership, an encouragement to the private sector. so we are hopeful about the future. we are determined to work together, democrats and republicans, house and senate, white house and congress to make sure we remove all doubt that there is no default on the dad and how we go forward. we'll send a message of confidence to the market and we can have a budget arrangement that is balanced. again, while preserving medicare. [inaudible] [inaudible conversations]

>> house speaker, nancy pelosi and other congressional democrats speaking on the weight has stayed late after meeting with president obama about freezing the debt ceiling, reducing the national debt and spending cuts. vice president biden meanwhile continues talks with a small group of lawmakers from both parties and identify and spending cuts and trillions of dollars. that patent group meets next on june 9. up next here on c-span two come a house financial services subcommittee looks at lending practices by the federal reserve during the financial crisis as well as how and when they disclose those activities. this is just over an hour. >> -- our life all the time, and therefore do mike is off and those two down there is hope. first, i want to welcome our two witnesses and they will be introduced a little bit later.

once again, i apologize to everybody for the inconvenience. i apologize to myself because nobody likes to be inconvenienced, but looks like we the system set up to we can pursue with our hearings. and without objection, all members opening statements will be made part of the record. chair know some may have additional questions for this panel, which they may wish to submit in writing. without objection committee hearing will remain open for 30 days for members to submit written questions and to place their responses in the back. also, i would like to emphasize at this time that this hearing deals with a very complex matter and it's a large amount of material and therefore written questions i'm sure will be followed also. i ask for as much cooperation as you can give us because there

are times when questions are santan and they sort of get lost because there is so much in our time looks like he will be shortened, we may have to depend a whole lot on her written testimony and we ask for your cooperation mayor. but i will go ahead with an opening statement and all-time for anyone for anyone else who wants to have an opening statement. yeah, we haven't done that yet. i wanted to emphasize that these hearings i consider very, very important. they have come about because many things over the last two years. there's been a lot of movement in the country for more transparency in general as well as the federal reserve system and i think my position on this is fairly well known. but also there is than

legislation passed. dodd-frank bill has stipulations about more information coming to ask passed last year. there's also been a court case is that has required the freedom of information act and reload stealing be dealing with that today and also provisions in the law that was put in by basically senator john sanders that is required some additional information. but you know, what is referred today so often on hearings and materials that came out of the freedom of information act is called the dump and i find that rather interesting to collect that because because it sounds like a lot of material was dumped. when you think of 29,000 pages of technical information, it is

very large and a lot of people can study it. our staff have been working very hard and quite frankly it isn't all that easy to figure out. it reminds me of the story that was told, supposedly a true story that an individual was being audited by the federal reserve and it came to them and said they bought five years of everything he's ever done in every receipt you've ever had. and of course that made him very unhappy so he put them all together in a bushel basket and he dumped them. i'll tell you what, it didn't seem to go very well and he got into a lot of trouble. i'm not suggesting this is similar, but a story that reminds me to take her out really what we have and there's a lot of material is not easy. the one argument and i understand the argument very clearly on the hesitancy of the

federal reserve not to get give out too much information too early with the idea that it might be proprietary. you might set the stage for concerns in the market. you know, i think of this in contrast to what the purpose of the sec has. the sec has a purpose to investigate the man reported to get the information out immediately and that's their responsibility. if a company doesn't let us know exactly what they're doing and what their accounting procedures are, taking into a lot of difficulty. the argument seems to be different for the federal reserve that if we have information about it inc. that might be in difficulty, you know, in the market situation that information should be available to us. so i take the position that information should be that detrimental to us and the more we can get, the better. i am hopeful that today will be

able to ask them pertinent questions to get more information that members can follow up with more questions later on and there will be more transparency without ever entering anybody. that certainly would be michael. i would like now to yield five minutes to mr. claeys. >> thank you, mr. chairman. and thank you so much for holding this hearing to examine information disclosed by the federal reserve in compliance with the dodd-frank wall street reform and consumer protection act and the freedom of information act. also i want to thank the witnesses for appearing today. due to the u.s. financial crisis, the congress passed a dodd-frank wall street reform of 2010. this legislation was crafted as

a response to the financial crisis which has caused nearly 10 million american jobs and over $10 trillion in household wealth, nearly 4 million families have lost their homes to foreclosure and an additional 4.5 million have slipped into the foreclosure process are seriously behind on their mortgage payment. according to the financial crisis and choir reporting combination of excessive or income or risk investment and the of transparency but the financial system on a collision course of self-destruction in the years leading up to the crisis, too many financial institutions as well as to many households borrowed too much, leaving them vulnerable to financial distress if the value of the investments decline even modestly. for example a massive 2007, the

five major investment banks for operating with the extraordinary than capital. their leverage ratios were as high as 40 to one, meaning for every $40 in assets there is only one capital to recover losses. less than a 3% drop in asset value could wipe out a company. leverage was often hidden and off balance sheet entities interpret the dispositions and through window dressing of financial reports available to the investing public. within the financial system and the danger of this debt was increased because transparency was not required or desired. undercover corporate dealings assisted in the financial not down which still plagues us today. in order for democracy and capitalism to access correctly,

transparency must be at the core and trust and transparent to you and the rule of law are fundamental to this nation's success. in business depends in some ways on trust, a trusted business produces egg progress and will deliver good service. democracy depends in some way on trust. transparency are not government accountability, free and fair election, competition and free markets and the rule of law and are critical to it. the dodd-frank wall street reform and consumer protection act addresses these issues by reforming the federal reserve. one, limits the federal reserve's 13, three emergency lending authority by prohibiting emergency landing to an individual entity. the secretary of treasury must approve any lending and the

program must be brought based and loves cannot be made to insolvent firms. collateral must be sufficient to protect taxpayer from losses. and two, it requires the federal reserve to disclose counterparties and information about about, terms and conditions of dirt teams come at three and discount window lending an open market transaction on an ongoing basis with specified time delays. and these are just a few examples of the importance of the dodd-frank wall street reform and consumer protection act. thank you, mr. chairman i look forward to the witnesses comments. >> i thank the gentleman. do you care for an opening statement? no more opening statements. will go on an introducer witnesses.

first we have mr. scott alvarez's general counsel with the board of governors since 2004 has been with the board for 30 years and also mr. thomas baxter junior has been executive vice president of the legal group at the federal reserve bank in new york since 1995. he also served as general counsel of the fomc. mr. baxter has been with the new york fed for more than 30 years. without objection, your written statements will be made a part of the record. it has been agreed upon by the witnesses ranking member clay and myself, mr. alvarez will deliver the oral remarks at a joint written testimony of mr. alvarez and mr. baxter. this may run longer than the customary five minutes and i yield now to mr. alvarez. >> chairman powell, making member clay, members of the subcommittee on the thomas baxter, we appreciate the

opportunity to discuss the ways the federal reserve informs to congress and the american people without its policies and actions. central bank lending facilitates implementation of planetary policy and allows the central bank to address short-term liquidity pressures in the banking system. this role as lender of last resort is a critical one longfield around the world, especially during times of economic crisis and discount window lending can indicate strains in financial markets that could otherwise escalate in the two sharp declines in output and employment. and the united states, all discount window loans are fully secured in the federal reserve has not suffered a loss to date on its discount window lending. the federal reserve regularly releases significant detailed information about its operations in order to promote understanding of how the federal reserve fosters financial stability and economic stability

and facilitate an evaluation of actions while preserving the ability to responsibilities that congress has given the federal reserve. since 1914, the federal reserve has published its balance sheet every week. we also publish full financial statements annually that are audited by an independent public accounting firm woolwich for the last for years has been devoid to. these audits covering the brain can donate money to enabling pre-as well as transactions through the discount window and with foreign central banks. the federal reserve publishes a special meant to report to congress posted on their website that details the federal reserve's emergency lending programs, including providing information on the amount of 19 under each program, the type and level of collateral associated with those funds and information about our asunder those facilities. in addition the federal reserve bank of new york maintains a

website that includes schedules of purchases and sales of securities as part of open market operations with information describing securities involved. the federal reserve is fully cooperating with the gao and an extensive review of each of the special lending facilities develop during the crisis. this will assess operational integrity, internal controls, security and collateral policies, policies governing third-party contract is in the existence of any conflicts of interest or inappropriate favoritism in the establishment or operation of the facility. as provided by the dodds frank out on december 1st, 2010, the board publish detailed information on its website about the federal reserve's actions during the financial crisis. this release includes names of par or worse borrowed, did credit was extended, interest rate charged on information about collateral and a description of the credit terms

under each facility. similar information was provided for the cause of foreign central banks on their dollar liquidity swap lines at the federal reserve. for agency mbs transactions, details included name of the counterparty, security purchased or sold in the date, amount and price of the transaction. on march 31, 2011 come in the federal reserve released documents related to the discount window in response to requests filed under the freedom of information act. the march 31st release included documents containing information related to barbers at the discount window between august the, 2007 in march 1, 2010. it was not required to close under the dodd-frank act. going forward, and the dodd-frank act provides for release of information on any broad-based emergency lending facility one year after termination of the facility as well as the gao audit of the

facility. the act also provides for release of information regarding discount window lending an open market operations conducted after july 212010 for the two-year lag. for lending facilities, including both emergency lending facilities in the discount window and for open market operations on the federal reserve will publish information disclosing identity of berber counterparty transaction amount, interest rate or discount paid and collateral pledged. the federal reserve believes flags provided by the dodd-frank act furthers the transaction level information established an important balance to the public's interest in information about participants in transaction with the federal reserve and the need to ensure the system can effectively use its congressionally authorized power to maintain stability of the financial system in limit monetary policy. we will carefully monitor developments in the use of the discount window another federal reserve facilities and keep congress informed about their

effectiveness. the federal reserve has worked and will continue to work with the congress to ensure that our operations promote the highest standards of accountability, stewardship and policy effectiveness, consistent with meeting our statutory responsibilities. we appreciate the opportunity to describe the federal reserve's efforts on the subject and are happy to answer questions you may have and will be responsive to any written questions you may submit as well. thank you very much, mr. chairman. >> i thank the gentleman. i will yield myself five minutes, but announce that we will likely be able to have repeat questioning. i think time will permit that. i will start off with the five minutes. i first want to ask unanimous consent to admit an article for the record firm bloomberg called fed gave crisis gains on $80 billion secretive bones without objection. i want to refer to one document.

and this document from the material of the week from the federal reserve is called h.r. pack of market monitoring metrics for facilities and i'm sure you know all 29,000 pages -- actually what i'm talking about. but it tells you about the problems that we have been trying to find out information in this particular document has 327 pages to it. but this has some interesting material that i did not know about and i want to ask about it. there is a previously undisclosed federal and new program know is the single open market operations and is referred to as s. t. o. m. o. this is some thing new and allows us to give points or 1%

that is free money to companies like goldman sachs and is essentially a freeload today's well-connected businesses. but also the problem we had in analyzing it turns out in this 80% of the content has been regard to reinterpret 19% as information we have to sort out. the question is, why were these details not mentioned? is it that everything has to be done in secret? see now, we would like to now, the people at the tonneau, but we didn't see any evidence of this is out of here and maybe it was mistakenly not redact good or something like that.

that of course is one of my beefs with the federal reserve is that the central bank wields so much power you literally can have transactions that we can do with their own budget and that's why it is a deep concern to me but why was this not published why were so many pages redacted with the freedom of information act we don't know what has been excluded. and i would like to get your reaction from this and talk about this program and what's been going on with it. >> the program you refer to was

not a secret program. it was actually publicly announced that the federal reserve on march 7, 2008 when the program began. it ended in january 2009 in transactions that were good under that program is part of our open market operations were reported along with other market operations on the new york federal reserve bank website very quickly after the transactions occurred. the document you have before you are from the response for the freedom of information act request. and so that is so should explain why their retractions. the way to freedom of information act works as it is a request for search and information in documents. the reductions are made. first the agency collects documents that may have been information that relates to the request.

the information that is not requested is taken out of the documents, redact it from the documents, simply because it is not responsive to the request. if not desire to keep things secret. it is instead a desire to be responsive to their request. often when a requester asks for documents, it often is information that is extraneous or not the kind of information requested, not relevant to the request and that is taken out of the documentation. that is why you see so much reduction in the documents before you. these documents were reviewed by the court and released by the court in accordance with the freedom of information act. >> does that nina someone would follow up and broaden that request but all that material would become available? what they have to just change the freedom of information act request? >> up another request is made for broader range of permission, we would review the inf