with the senate banking committee held this hearing today to consider a bill that would allow credit unions to lend more to small businesses. witnesses representing credit

unions and commercial banks testified. this is one hour and 20 minutes. >> the >> and good morning. i want to welcome and thank of the witness for being here today to testify on the issue of the credit union business lending. weigel wheat wheat for one of the ranking member to make his appearance, i will go ahead and start. the credit he unions are limited in the amount of business lending they are permitted to engage in. they have a good amount of business loans made by a credit

union is restricted to the lesser of 1.5 tons of the credit unions net worth or 12.25% of the credit union's total assets. the member was put in place in 1988 with a message by congress of the credit union membership access act. since that time, the credit union industry has advocated for the removal of increase in the business lending cap. senator mark udall has introduced legislation that would raise the capitol to 27.5% of total assets. there is a wide range of views on this matter especially as congress considers proposals to speed the economic recovery. i think that is as important and

would take the time to examine this issue here in the committee and provide the opportunity for all expressed views on this subject. i look forward to your testimony, chairman, to our other witnesses' testimony and the questions and answer period. i see there is not any other members of present. the chairman of the national credit union administration since august 2009. prior to the department, she was the executive vice president and chief operating officer of the federal credit union of certain maryland. the chairman has also served as a board member of ncua from

gentry, 2002 to 2005. chairman matz, welcome and please, proceed. >> the thank you, chairman johnson to really appreciate the opportunity to discuss credit member business legislation, regulation and supervision and a significant of such lending to small businesses. credit unions have always offered member business loans and the industry's early days business loans primarily support of agriculture to the overtime business lending has devolved changing with the needs of entrepreneurs who deserve greater not fewer affordable credit options. today credit unions have more than 167,000 outstanding loans to businesses. as a starting point i will see three tangible benefits provided by credit union business

lending. first allows small businesses to obtain reasonably priced loans. simply put, more competition benefits the entire market place and has a positive affect on the cost and availability of credit. second, prudent member business lending strengthens a credit union balance sheet and diversifies credit union portfolios and in preus ability to withstand economic cycles. sir, business lending supports communities, spurs job growth and expand its consumer access to goods and services. as the provincial regulator they recognize member business lending poses a unique set of risks and requires specialized rules and oversight. our experience has shown to succeed credit unions making loans to small businesses need to be aware of cash flow portfolio management and liability issues to name just a few. in response, the tayler rules to

emphasize sound underwriting collateral and tested management. these criteria for the foundation of prudent lending. ncua has taken care to ensure the rules keep pace with of the evolving marketplace. like other loans, business loans performance are cyclical. a recent member business lending trends reflect the financial stress of the economic downturn. member business loan delinquencies stood at 53 basis points in 2006 peaked at 3.9% in 2010 and has since improved to 3.76%. member business loan delinquencies and charge-offs increased during the recent economic downturn those increases primarily resulted from a severe decline in the real estate values in the five states arizona, california, florida, nevada and utah. 40% of the delinquencies and 49% of the charge-offs are isolated in the five states.

nationwide more than 2100 credit unions make member business loans. the figure has risen nearly 10% since 2006 despite the economic downturn. while nearly 30% of the union's underwrite business loans, these loans comprised of 1% of all commercial lending. however the statistics don't capture the fact credit member serves an important market place, small businesses and entrepreneurs. the average member business loan is $223,000. of course the average represents a wide range of loans for a variety of business purposes. on a whole, credit union loans can be much smaller work and other business lenders. for example, credit union loans for commercial and industrial purposes such as building and equipment average $127,000. by comparison bank loans and commercial and industrial purposes average $643,000 more than five times larger than the

credit union averaged. to extend credit union service to the business community senator mark udall proposed legislation as s. 509 to increase the permissible level of business lending from 12.25% to 27.5% for credit unions meeting the high standards. the bill would allow healthy glow capitalized credit unions to enter business loans and small manufacturers will increments. these credit unions however must meet stringent standards that place a premium on experience and proven track record of successful management. let me assure you with the changes increase the cap, , promptly revise the regulation to ensure additional capacity in the credit union system would not result in on intended safety and soundness concerns. ncua would remain vigilant carrying out a supervisory authority with respect to legislative changes. it proposed legislation to get there with responsible

regulatory approach would provide credit unions the opportunity to prudently pro-business loan portfolios. in so doing the credit unions would increase diversity and overall loan portfolios thus reducing the concentration risk. ncua regulations require any credit union that is less than adequately capitalized to suspend business lending and s. 509 would adopt a similar safeguard. in some s fifer nine make more capital available to small businesses while ensuring the loans are made in a prudent manner consistent with each credit union capability. entrepreneurs work hard, take risks and put people to work. to fulfill their dreams they need capital. credit unions have long metcalfe will needs of small businesses. credit unions are the only lender willing to make small loans to open a car repair shop come expand a boutique or start a day care center. the capitol provided to hard-working americans provides

employment and reinforces the economic base of communities. s 509 would permit them to empower more enterprising individuals and meet the needs of more small businesses to expand and creating jobs and opportunities for their communities. thank you. i look forward to your questions. >> thank you, german matz. members will have five minutes for questions. sherman matz, when you testified before the committee in december, you're written testimony indicated there are levels of in delinquent member business loans in charge offs have increased. you also noted an increasing number of large credit unions about which the ncua has supervisory concerns and the primary or secondary contributing factor.

given this concern, why do you believe that is prudent to increase the lending done by credit unions? >> thank you. well, member business lending does have hi your delinquency charge-offs than other consumer loans but in the last quarter the delinquencies started to decline. so, since delinquencies lead the charge-offs, we are looking forward to the decline in the charge off as well but i should point out if a credit union has delinquent loans that doesn't necessarily result in a loss even the charge-offs even if they are well capitalized. so they can have delinquencies and charge-offs and still not suffer a loss the will be collateralized and that's part of the supervision to make sure that they are.

but in terms of actual losses, they are about 2200 credit unions making business loans right now, and in 2008 and 2009 we only had one credit union's failure that was primarily attributable to the business lending. so, member business lending is being done prudently by and large and we are supervising them with business lending in those credit unions that engage in business lending very carefully to make sure that they have experienced staff and they are underwriting properly. >> chairman matz, the senator deutsch of legislation would require that the ncua develop a tiered approval process by which a credit union would increase the amount of business lending it engages have you given any

thought to what that process might look like and how you might implement it? >> the process will be very helpful in terms of increasing supervisory ability and ensuring safety and soundness because credit unions will still be able to make loans of 12.25% of assets but to get above that, the of to meet the guidelines and have to have made business loans for five years, they have to be well capitalized and well-managed and the to be at or above 80% of the cap, but behind that this regulation to ensure even above and beyond that, the credit unions that go above beyond the cap do so in a moderate way they crawl before they walk so we won't necessarily let them go up to

30% increase in one year. we will have regulations that modify that and increase more gradually than that. >> on the second panel they suggest credit unions are making loans banks previously turned down. is that the case? if so, arguing as a regulator concerned about the safety and soundness of such loans? >> well, from what i hear and it is anecdotal credit unions sometimes to make loans banks have turned down but it's my understanding it's based on the size of the loan and the use of the loan because what i am told is that very small businesses that need small loans don't have access frequently to not have access to banks of the come to

credit unions. the credit union average loan is $223,000 that average of course includes much larger loans and so the median is closer to $127,000 cost of these are small loans. i'm not concerned about the risky nature and i -- as long as the credit unions are underwriting the loans, i'm not concerned that they are approving loans banks have turned down because i do believe by and large it's based on the size of the loan and not the risky nature of the loan. >> i have an additional question, member business loans often have higher delinquency rates than other types of loans. therefore it seems counterintuitive with a potential to report legislation

to increase the business lending kept. we do require more details about why you support the bill and why you believe the committee should not use this legislation as a risk. >> that's a good question because it does seem counterintuitive a regulator that is extremely concerned about safety and soundness and in fact that is my exclusive focus would support the legislation to raise the cap but raising the capitol would enhance the safety and soundness because the cap at 12.25% is artificially low and there are a number of credit unions the would like to get into business lending but don't because they don't feel they will be able to cover their investment. but in fact, business lending would help diversify their portfolio. now credit unions are probably

over concentrated in mortgage loans and they also have a lot of car loans so i view it as a an opportunity to diversify the portfolio and reduce the concentration of risk in the portfolio and reduce the interest rate risk they have for the long term mortgages so i view it as a safety and soundness benefit, not as increasing the risk. >> chairman matz, what percentage of credit unions are currently at the limit, and therefore constrained by this capital? >> there is a small number at or near. it's under 300 credit unions at or near the limit. >> how many credit unions? >> 7300. so it's a very small number but it is misleading because the cap constrains all credit unions. there are so many that are not

making business loans because of the cap even though they are not mere and they just don't want to make the investment coming in defense on credit unions that are making business loans don't market it, they will make it to people who walk in the door and ask for them but they don't market it because they don't want to be in the position to have to turn away customers once they get close to the cap. >> senator? >> thank you mr. chairman and chairman of matz. i have something a little off topic is whether reunite talk a little bit about how the credit unions feared during the economic crisis we just went through and slowly climbing out can you give us a sense of their experience in this period of time? >> certainly and i can provide it into two parts, the credit union and retailer. the corporate credit unions had a large concentration of

mortgage securities on their books, and as a result when the bond market collapsed, the found to have the bonds collapsed and we had to place the credit unions into conservatorship and it has been a significant crisis that we are bleeding the credit union out of. the five credit unions in conservatorship we have put into place a much stronger rules governing the corporate credit unions and at this point, we are beginning to -- the corporate system is stabilized, and we are beginning to feel like we've seen the worst of the corporate situation. right now credit unions are the point of deciding whether or not to capitalize the corporate credit union and we will know that by september, and at that point, credit unions will either

get their liquidity and payment processing through corporate or elsewhere but september is the deadline we are on track and it's very effective no interruption of service and the systems have been effective so we are coming out of that but we learned a lot of lessons and as a result have significantly changed the rules governing the corporate credit unions. the retail or the consumer credit unions are also beginning to show signs of recovery the first order for the credit unions were positive indicators that net worth is up and the assets continue to rise and they decided the two started to trend down and it's been a difficult

time but through it all credit unions continue to lend since 2007 to 2010 the increase 6%. so its modest, it's down from where it was but they are still continuing to lend. so i'm optimistic that the problems have bottomed out and they are starting to recover. >> thank you. if congress did increase the cap on the member loans, you just testified only about 300 closed the gap. how many credit unions do you think what to get a vintage of that, are there some -- you just talked about the distinction between the corporate and consumer. are there certain kinds you expect to be in the business before others? how do you see this going if we did this? >> i would think that larger credit unions that are well

capitalized, and by that i mean credit unions 50 million up or 100 million up would be more likely to start making business loans. there are those making business loans the would be inclined to expand as previously credit unions tend not to market business loans so if the cap would raise the would be more likely to market and make loans but there are probably about -- i'm guessing about 2,000 credit unions over 15 million assets that would be more likely to take advantage of this. >> thank you mr. chairman. thank you. >> cementer mendes. >> thank you mr. sherman. are you?

>> good to see you. >> i've been a strong supporter of the credit unions, but i think there's serious questions here. how is it we will hear from the next panel i just want to look at a couple of arguments and get your sense of it. one is today will say this legislation would allow credit unions to aggressively pursue business customers toward the commercial real-estate loans it would also serve as an invitation to credit unions that are not near this now to focus on business lending to the exclusion would further greater limitation to be eligible for an increase in the business lending cap. are you concerned about that? >> i think you would be an opportunity for credit unions to expand their business portfolio

but of the loan to the share ratio of credit unions is a high 60s may be 68% so there's still a great deal of capacity for the credit unions to spend business lending and meet the needs of consumers. >> what about the fact that credit unions by the nature are tax-exempt and obviously don't live with in the regulatory requirements that banking institutions live under if we expand the nature report for portfolio and the tax-exempt and because they are not subject to regulatory requirements in the institution giving some of the transactions would be subject to. is that not a fair criticism? >> credit unions are more stringently regulated than banks as far as business lending. in 2001 the treasury department did a study of credit business

lending and found -- they said they found no evidence that credit union business lending would adversely impact banks and in fact that they would increase the competition with small banks and the benefit would go to the consumer so whether or not they are tax-exempt is not something i deal with, i deal with safety and soundness issues, but credit unions are tightly regulated in terms of making business loans or any loans. >> but you're certainly not regulated to the same extent banks for example they don't have a community reinvestment responsibility banks have. >> know they don't and credit unions can only serve people in the field of their membership. >> so the question is what would

you do if we were to pass this law power to decide whether it is okay for a credit union to increase its member business lending and if you had to approve applications what's the criteria you would use? >> we do our exams based on safety and soundness, so if a credit unions has experienced lending standards in place and it's a well managed credit union and its well-capitalized, those are the types of issues that we will catch. >> but right now they have very little commercial author of an auto loans and real estate? >> 2200 credit unions make business loans. >> so that's the universal would more likely be up for the possible the? >> i think would be more than that. i think there are credit unions that are not making business lending because of the cap that

likely would start making those loans because right now credit unions i'm told are reluctant to get into the business lending business in some cases because they feel they won't get a return on their investment because the cap because it is a sizable investment in terms of the staff and infrastructure that needs to be put in place. >> so you are saying that if we were to do this you're not concerned about consumer lending being squeezed out as a result of the credit unions seeking more of the business lending and you're not concerned about overall risks as it relates to taking on the expanded portfolio in regard to the credit union? >> no, i'm not. >> thank you, mr. chairman. >> senator shall be? >> i was detained earlier. can i ask unanimous consent that my opening statement be in the

record? thank you, mr. chairman. chairman matz come i am sorry that i was not here earlier. conagra's come as i am to stand, originally imposed business lending limitations to limit excessive risk-taking. you might have gotten into this. i'm not sure, i wasn't here -- by credit unions. do you believe a higher cap on the business lending would adversely impact the safety and soundness of credit unions and how would increasing the lending limit impact the national credit unions sharing insurance fund? >> i don't believe increasingly would adversely impact safety soundness and as counterintuitive as it may seem -- >> if not, why not? >> i think it would have a positive impact on safety and soundness because right now credit unions have a very large

book of business in mortgages and auto loans. as we learned from the recent economic downturn, confirmations are not good for the financial institution portfolios. so, being able to add business loans -- >> you mean concentrated in one spot. >> correct. adding business loans to the portfolio would actually diversified portfolio and enhance -- reduce the concentration and in my opinion enhance the safety and soundness. >> of the 55 credit unions it found in 2009, 2010, 20 underwrote business loans at the time of their failure. what role did business lending play in the failure of these credit unions, and how did the amount and nature of the business loans made by the failed institutions compared to

those made by healthy credit unions? i know you've gone back and look at this. .. and any business lending. in addition he noted that only about 7% of credit unions are close to the cap on business lending. of these few credit unions, nearly two-thirds have assets of

over $500 million. which types of credit unions would benefit the most from an increase in the cap? in other words, large credit unions or small credit unions or do you have any evidence that you can share with the committee that increasing the cap would benefit small businesses? we have a lot of small business credit unions. >> i would say that the credit unions that would benefit the most are probably the ones that are over 50 million. the ones that are 50 to 100 million, almost half of them are making business loans. for the other categories, 100 million above it is a majority of the credit union, so i say it is the credit unions most likely to make business loans are over 50 million. >> when testifying before this committee last year, just a few months ago, you noted that for those credit unions that engaged

in business lending ben and had poor ratings, often the business loans were responsible for the low ratings according to what you testified. how can business loans get a credit union into trouble? or how can they avoid trouble so to speak? and should a credit union be required to have a high rating for its home business loan he can beat -- landing can be increased. >> answering the second part first, i think yes, i think that they should have, particularly on management the m in a camel. i think they should have a high camel rating in order to go beyond the bottom tier. >> well that is just common sense for safety and soundness, isn't it? >> yes and if this legislation is passed, we will quickly implement a new set of regulations to implement the

statute and most likely that will be one of the things that we include in it. >> what is your estimate or your judgment on the number of credit unions that are currently not making any business loans but will start to make business loans if the cap is increased? do you have a number on that, roughly? >> well, there are about 6000 credit unions that are exempt from, that are not exempt from the cap. there are about 1200 that are exempt from the cap or one reason or another and from the 6000, probably 4000 of them are under 50 million, so probably 2000, 2200 probably would benefit from it if they chose to. >> how much with the business lending cap have to increase to basically make it cost-effective for small credit unions to engage in business lending? have you done any work in that

area? >> no, i don't know the answer to that but for small credit unions, there are small credit unions that engage in business lending and frequently it is through participation in the loans or through a credit union service organization rather than doing it themselves. >> thank you. >> thank you chairman matz. now i would like to welcome the witnesses for our second panel today. mr. bill cheney is president and ceo of the credit union national association, which represents most of the nations nearly 7800 credit unions. mr. cheney became president and ceo of cu na in july 2010

following a quarter-century experience in the credit union movement. mr. wilcox is president and ceo of grand rapids state again also director and member of the executive committee of the independent community bankers of america. mr. lussier is the chairman of the board of the national association of federal credit unions and has over 25 years of banking and credit experience. mr. stephen wilson is chairman and ceo of -- national bank. he is also the recently elected chairman of the american bankers

association. i thank all of you again for being here today and i look forward to your testimony. i will ask the witnesses to limit your remarks to five minutes. your written statements will be submitted for the record. mr. cheney, would you like to begin? >> yes. mr. chairman, ranking member shelby, members of the committee thank you very much for calling today's hearing on credit union business lending. although it is whether the crisis well. is everyone agrees more needs to be done to help america's small businesses create jobs. credit unions can help if congress enacts s. 509. senator mark udall's small business lending enhancement act. this much-needed commonsense legislation would increase the statutory member is this lending cap from 12.25% to 27.5% and impose statutory and regulatory safeguards on increased leading

to protect the insurance fund from additional risk. the safeguards were designed by treasury and the ncua. we estimate the credit unions could land an additional $13 billion to their members who own small businesses in the first year, helping them to create 140,000 new jobs without an outlay of a single taxpayer dollar. as my written testimony describes credit unions have continued to lend to their members throughout the financial crisis. increasing business by 38% since 2007. bubba banks commercial loan portfolios shrank by 5%. currently there are over 330 credit unions need the cap and they account for over half the business loans subject to the cap. these credit unions have been a source of most of the growth and credit union business lending. over the next two years these credit unions will dry up without an increase in the cap and that would be bad for america's small businesses. the utah bill establishes a two-tiered structure for credit

union business lending. tier 1 credit unions would be able to engage in business lending up to the current limit. tier 2 credit unions would have to make statutory and regulatory criteria and be approved by ncua owned only then would be permitted to gauge an additional business lending. the udall bill would permit credit unions to help small businesses in native credit well at the same time ensuring the credit union is engaging in additional business lending in a safe and sound manner. it is hard to believe the government is telling credit union cannot help create jobs and local committees. there is just one reason why. the banks closed it. this answer does not satisfy the small business owners who have been turned down for a loan by multiple banks and should not satisfy congress. to satisfy no one. there are at least 140,000 recent to let credit unions do more small business lending and there are no sound public policy reasons not to. failure to extend the credit union member business lending cap would literally leave money on the table that could be loans to small businesses and create

jobs. the bankers as a business lending is not part of the credit union mission but credit unions have been doing member business lending since day one. the bankers say increased business lending would undermine credit union safety and soundness that credit unions do this type of lending more safely and soundly than banks. the bankers increasing the cap would only affect a small number of credit unions while at the same time increasing the cap will hurt community banks. the bankers are wrong on both counts. increase in kapalua profound effect on the hundreds of unions that will reach the cap in the next few years but it will not affect the bankers dominance currently at 95%. in fact credit union member business lending helps local committees, including community banks stabilizing the economy and creating jobs. the bankers say that increase credit union business lending will lead to a reduction of other types of credit union lending but most credit unions have plenty of liquidity to fund the increase. the bankers say the credit union should not be granted an

expansion of power because of their tax status. this argument is disingenuous when one third of all banks are exempt from federal income tax except for s corporations. the tax status is based on the not-for-profit corporate structure of credit unions not credit union powers. the bankers increased lending caused -- calls into question the commitment to serve the underserved yet the credit union record of serving the underserved is well demonstrated and while we have attempted to do more to serve the underserved the bankers or brought lawsuits to stop us. as we recover from the great recession small businesses are underserved if the bankers say small business credit is not in short supply. many small-business owners small business owners report being turned away by their banks and it is a primary reason congress gave the banks access to 30 billion taxpayer dollars last year. their lending is down. are leading us up. there must be demanded the market for our lending is increasing. creditors want to meet the demands of their owners and the time is now to set aside the

false and misleading banker rhetoric. weird congress to permit credit unions to do what they were established to do, serve their members including those who own small businesses. we have the willingness to help and the capacity to help that we need congress to enact the udall bill supported by treasury and the ncua. thank you for allowing me to testify and i look forward to your questions. >> thank you mr. cheney. mr. wilcox. >> thank you chairman johnson ranking member shelby members of the committee. i am no wilcox, president ceo of grand rapids the bank the fourth-generation community banker and member of the executive committee of the independent community bankers of america. grand rapids a bank as a state chartered bank, 230 million in assets located in grand rapids minnesota. i'm pleased to represent community bankers and icba's 5000 members in this important hearing on credit union business lending. icba appreciates the opportunity

to testify in legislation that would expand credit union powers by raising the cap on member business loans to percentage of assets. we strongly oppose the small business lending enhancement act as 509. congress did not expand credit union business lending powers unless it is also prepared to tax credit unions and require compliance for the community reinvestment act. the current tax exemption is strictly linked to and can only be justified by their original mission of serving individuals of modest means. credit union business lending is an immediate threat to my bank. i'm happy to compete with other taxpaying lenders and even large banks of the credit union tax exemption creates an unfair advantage and distorts the market. on countless occasions i have lost business lending opportunities with established customers to credit unions who underwrite -- underprice my competitive rates. last friday was preparing for this hearing a longtime customer with personal business lending relationships told me they were taking three loans to two separate credit unions.

one was alone on real estate for development that the credit union priced 400 basis points below my competitive rate. the second is a small commercial loan in the third is a residential mortgage in which the credit union offered a rate in the mid-3% range even though it does not qualify for funding in the secondary market. as 509 but i'll be ncua to approve member business loans up to 27.5% of what the credit unions assets. more than double the current cap of 12.25%. the cap was not set arbitrarily but that didn't tended to ensure commercial and it would surprise no more than a marginal part of lending. the credit unions have portrayed as 509 is an effort to make more credit available for small businesses. the chief is only a small number of credit unions are asked for the current business lending cap. we estimate this number to be about half a percent of the approximately 7400 credit unions. over 70% of credit unions report no business loans at all.

those credit unions that are near the cap are the most complex credit unions and business loans they make our multi-million dollar deals, not small business loans. there is ample capacity for the remaining 99.5% to expand their member business lending. what's more, there are numerous exceptions to the member business lending capital. some advocates of s. 509 claimed the expanded credit union commercial lending would come at no top cost to taxpayers. the joint committee on taxation, the office of management and budget, and the congressional budget office have all identified credit union lending is a tax expenditure. this is why bipartisan policy centers debt reduction tax force chaired by former senator domenici and former omb director alice rivlin recommended eliminating the exemption and it would be appropriate for the senate to hold hearings on the credit union tax exemption. what is the cost of the tax subsidy? the most comprehensive and

sophisticated was done by the nonpartisan tax foundation which values the subsidy at $3 billion a year and $32 billion over a 10 year budget window. the credit union loan i mentioned earlier that was underprice by 400 basis points was surely made possible by this tax subsidy and perhaps also the failure to adequately evaluate the risk. the case for repealing the credit union tax exemption stands on its own. when credit unions seek to expand their business lending powers and become the equivalent of banks, linking expanded lending powers to the repeal of the tax exemption is a matter of tax equity. thank you again for convening this important hearing chairman johnson. as if many banker i feel a direct impact credit union commercial lending so i'm grateful for the opportunity to provide my perspective. icba strongly encourages its committee to reject calls for new powers for tax subsidized credit unions despite assertions to the contrary that will not expand small business credit or

create jobs. i look forward to answering your questions. >> thank you mr. wilcox. mr. lussier. >> good morning chairman johnson, ranking member shelby and members of the committee. my name is mike lussier and i'm testifying on behalf of -- had served as president and ceo of webster credit union headquartered and worcester massachusetts in 1990. webster first is that many credit union with over 44,000 members in more than $570 million in assets. the entire credit union community appreciate the opportunity to participate in this discussion regarding member business lending and allowing credit unions to further assist in the economic recovery. when congress passed the credit union membership access act of 1998 he put in place restrictions on the ability of credit unions to offer member business loans but at the same time asked the treasury department to study the need for such a cap. in january 2001 the treasury released its study and found the

following. credit union business lending currently has no effect on the viability and profitability of other insured depository institutions. in 1998 after established in a business loan a $50,000 above cap. this number was not indexed and has not been adjusted for inflation in nearly 13 years since its enactment. some claim that only limited percentage of credit unions are actually at the lending cap and therefore nothing needs to be done. is fear fails to see the big picture probably cap tax is a disincentive because credit unions that invest in business lending will ultimately reach this threshold. the banking industry argues the credit union business lending cap should not be raised until the credit tax exemption. with the banking industry continually forgets to mention is the large number of banks do not take corporate federal income tax themselves because of their subchapter s mac status.

the value of their tax break is actually greater than the estimated value of the entire credit union tax exemption as reflected in the ministry since budget. webster first has been at the business lending cap for over a year now. at webster first we understand member business lending is not about credit unions but about helping small businesses and the job they create. it is unfortunate that webster first cannot handle the request to help small businesses that we received due to this cap. websurfers is make great inroads in the business lending and his assistant multiple families and businesses and becoming quite successful. for example we helped and individual purchase and older gas station from his parents. is able to upgrade his fuel pumps, computer services and revamp his store. it now includes a coffee shop, a multi-pump service station. his success allowed him to upgrade the unused property behind the station and restored rental units which quickly became 90% utilize. he recently sold the property for the suspension of profit and

is now acquiring other properties to expand his business. as this committee knows business expansion means job creation. senator mark udall introduced a small business lending enhancement act. this bipartisan legislation would raise the credit union lending cap to 27.5% of total assets, up from 12.25. this would stimulate the nation's struggling economy by increasing access to credit for small business owners. in order to see if cap increase the credit union would need to meet strict eligibility requirements before gradually increasing business loan portfolios. this bill is a well thought out solution that includes important provisions to ensure that safety and soundness concerns are addressed. this bill would not only help credit unions but more importantly it will help america's small businesses. ncua as the small business in hansen that be considered by the banking committee and on the senate floor as soon as possible. in summary, the credit union

member business cap established in 1998 is arbitrary and outdated. the need for such a cap was questioned by the treasury department as far back as 2001. while ncua please no statutory cap should be in place, a number of credit unions like mine and the millions of members we serve would benefit from the enactment of a small business lending enhancement act. this legislation would provide a practical and well thought out approach to raising the cap while addressing concerns about rapid growth in safety and soundness. ncua would also support raising the 50,000-dollar definition of a business long as it is not been increased since inception. in conclusion come many credit unions have capital to lend small businesses across the country. and they are in a position to further assist in the recovery efforts. however due to the member business lending cap they are hampered. raising this cap will make available immediate funding to help small businesses create let's needed jobs. i thank you for the time and the

opportunity to testify before you today and i welcome any questions as well. thank you. >> thank you mr. lussier. mr. wilson. >> chairman johnson, ranking member shelby, my name is stephen wilson and i'm chairman and ceo of lcnb in ohio. i'm also the current chairman of the american bankers association. aba is strongly opposed to the recent efforts by the credit union industry to redefine the credit union charter in ways that would effectively turn credit unions into tax-exempt banks. this effort most recently embodied in senate bill 509 would allow credit unions that are within 80% of their member business lending cap to increase this cap and take significantly more business lending. this would allow a new breed of credit unions to move aggressively to pursue business

customers through multi-million dollar commercial loans. it would also serve as an invitation to credit unions that are currently not near this cap to focus on business lending to the exclusion of consumer lending. under current law, credit unions have been aggregate member business cap of 12.25% of assets. however, business loans of under 50,000 do not count against this cap, nor do many other types of business loans, leaving ample room for credit unions to serve small businesses. there is a limitation on business lending because credit unions are tax-exempt and tax exemption is meant to be targeted to people with small names, not real estate developers. said l. 509 would allow the ncua to increase the business lending cap for qualified lending units to 27.5% of assets, more than double the current cap and a

greater business lending authority than that of federal thrifts. a credit union that applies and received authority to increase business lending almost certainly would reduce its non-housing related consumer loans. however, the bill does not require the credit union to notify its members in a clear and conspicuous manner that they could see a reduction in consumer loans, and the bill does not require that members of a credit union approved an expansion in business lending, an action that would essentially create a tax-exempt bank. in contrast, credit unions that seek mutual savings bank charters must mail such a notice and give such a disclosure and have an affirmative vote. make no mistake about it, senate bill 509 would allow a credit union to look and act just like a bank without the obligation of

state taxes or have bank records for a requirements such as the community reinvestment act. members of congress have recognized this fundamental problem repeatedly. senator kerry himself stated from the senate floor, credit unions were never intended to be simply alternative tax-exempt commercial banks. there is a strong legislative history that supports the unique charter of credit unions with very specific restrictions in business lending. these restrictions were put in place to protect credit unions from lending that could pose serious threats to their safety and soundness. in addition they were put in place to assure that credit unions remain primarily focused on individuals, especially of small means. the congressional concern is well-founded and echoed in many within the credit union industry itself. business lending is risky business and should be limited for all credit unions.

however, there is an alternative. credit unions that want to expand business opportunities already have an option available to them. they can switch to mutual savings charters. this charter provides the flexibility credit unions desire, preserves the mutual member focus that is a trademark of the credit union charter. unfortunately the ncua has erected obstacles like what i said they don't have in this bill, making it extremely difficult for a credit union to become a mutual savings bank. i thank you for this opportunity to share a aba in my thoughts and i am happy to answer any questions. >> thank you mr. wilson. a question for mr. wilson and mr. wilcox. over the past several years, there have been many versions of legislation to remove or raise

the cap for business lending and credit unions. last year senator udall made many changes to his legislation to give more control to the regular -- to determine which credit union should be a will to learn about the current cap and to acquire such a credit union demonstrate a history of underwriting of business loans. what do you think about the changes made by senator udall and do they address any of your concerns? mr. wilson? >> thank you very much. i would like to respond to one thing as i begin here that was in the testimony, and that is that subchapter s. banks don't pay federal taxes. i am not a subchapter s bank. i'm a 750 million-dollar for-profit commercial bank that pays taxes, but i pay taxes

twice. i pay taxes at the bank when they make the money, and then i give it did to my owners, the shareholders and they pay taxes on the same income. it is true that subchapter s banks only pay the taxes that is dividend did to their owners but they do pay federal taxes and that is quite a misnomer to say that they do not. so i wanted to clear that up. now, as to your question, no, there is still a great concern on our part, and the concern is, i will just use my bank as an example. i compete as a 750 million-dollar national bank against credit unions that are much larger than i am, i am, ge credit union, and i look at their ads. i look at their billboards and the first thing they say is, if

you work, worship, in essence breathed in my market area, you were there members the first of all this whole idea that they have a common bond is not through. so they are competing directly with me. i am awash in the quiddity. my normal loan to deposit ratio is between 75 and 80% of that is pretty conservative for a bank. i am down to 60 to 65%. i want to make loans and i want to make loans bad. i would fall all over any small business person that comes into my office and wants to have a loan because i need those loans. now there are only two reasons i'm going to lose a loan to a credit union. number one they are going to use their tax-exempt status to underprice me. you must realize that when i make a dollar, i only keep 60 or 70% of that dollar. when they make a dollar they

keep 100% of it. so they have quite an ability and advertise that ability that they can pay more for deposit in charge less for loans. so they use their tax-exempt status. they don't have a common bond and so i can lose a loan because they can underprice me, or i can lose a commercial loan because i wouldn't have made it in the first place and they are willing to make of loner take more risks than i'm willing to take. i don't know that is in the best interest of the credit union. eyes like the credit union charter. aba is for credit union charter choice. it is the absolute foundation of the dual banking system. but a charger has, different charters have different restrictions and these business lending caps should stay in place. >> mr. wilcox? >> the changes that you inquired about simply don't go far enough

first of all, but i, like mr. wilson, compete directly with credit union to my market that are in some cases for five times the size of my 230 million-dollar bank. they do use their tax-exempt status to very selectively target the loans that they would like to take and in a fashion that i simply cannot compete with on price and in many cases we do see increased to risk and loans that are not able to be underwritten in a safe and sound manner, taken on in some cases in the credit unions and the restrictions that are in place are there for a reason. they would like to enjoy their tax-exempt status and continue to do so, those goods -- restriction should remain in place that i would be the first to say, i would welcome all credit unions to make a

subchapter s election to pass those taxes onto their members just like i pass on subchapter s community bank and our shareholders do pay the tax. we do not pay tax at the corporate level but our shareholders they that same federal tax them in our case at quite a high rate so i would encourage you to make that election and go ahead and support that tax and if they want to do that than engage in commercial lending as they see fit. >> thank you mr. wilcox. mr. cheney and mr. lussier, it appears that the level of illiquid member business loans and charge-offs have increased. does the current economic climate dissuade you from underwriting member business loans? mr. cheney? >> yes, thank you. it is true that member business lending delinquencies increased

with charge-offs during the economic crisis but recently we have seen those numbers come down and interestingly as is reflected in our written testimony, credit union member business loans actually perform much better than bank loans. i will say that underwriting standards as i'm sure in all financial institutions have got another book from a management perspective because of the crisis but credit unions have a strong track record and safe and sound business lending. >> mr. lussier? >> yes, sir. the first of all when you look at this link would see seize on the business loans we have to take into consideration that the real estate loans, consumer loan portfolios, credit card pope for lives have been increased with his downturn in economy. the economy. one of the things i will say is that the link the loans we have had in our portfolio and i can only. >> for western out that are delinquencies are 2%. our losses are nearly no. i believe there is one substantial and we had taken a

loss on which represented $100,000 in loss of which we basically regain some of that loss from the property when it was resold so speaking on behalf of an institution that rights will underwritten and secured loans in the business loan portfolio, i find the delinquencies are here. i think we are okay. we are able to continue writing loans. we are maxed out like i stated in the beginning and we are at the cap. we continue to look for the opportunity to serve the business people in our community, regardless of the present illiquid see status. >> mr. lussier, how do you manage the risks associated with business loans at your institution during this difficult economic times? >> first and foremost, a couple of comments were made about the big multi-million dollar loans. we have a couple of loans that are sizable. i think the largest one is probably 3 million however a majority of our loans are

diversified among small-business owners who are pretty much looking for the 50,000-dollar to the 250,000-dollar loan. i would say that 80% to 85% of my loan portfolio fits within the national average of approximately $233,000 on average. we basically diversified amongst collateral station for real estate, equipment, heavy equipment, very few on receivables. we are pretty much conservative on who we had a right to but we actually look at all the businesses that come in and request their lending. we give get them all in a tendency today and we try to ensure it is possible that he can lend them the money to enhance their businesses and we do so in the best fashion possible but we also make sure that we are not giving away money. so, we follow the rules and regulations that are set forth by ncua and they also come in to make sure we are diversified and we don't have a high concentration in any area. that is how we reduce our risk. >> senator shelby. >> thank you mr. chairman.

mr. lussier, in mr. wilson's testimony he argues increasing the business lending cap would allow credit unions to look and act just like banks as you heard, without having to pay taxes and bank like regulatory requirements. how do you respond to those concerns at the playing field is not level because credit unions are tax exempt and so forth? >> we could talk about this all day. >> it is an important subject. >> and i agree with you. thank you rescue me. i will say this. there are major differences between the credit union in the bank and without going through the whole platter of differences the majority of the differences are we run volunteerism. institutions are run under more regulatory restraints and the banks can be and that the banks are. >> now you say the credit union is under more regulatory scrutiny than the banks? >> we are under more regulatory

restraints than the banks and here's an example of what we are trying to basically increase our limitations on business lending. we have more restrictions on what we can offer because we are credit unions and now we are asking that we need to be able to increase these limitations slightly in order to better enhance our services to the members. >> camel's ratings, camel's ratings are an important indication of the safety and soundness of any financial institution, credit union. would you support requiring a credit union to have a camel's ratings, one or two before its business lending cap would be increased? that goes to safety and soundness. >> there is no doubt. it definitely shows you an institution is safe and sound. camel rating three does not mean an institution is failing and is not safe and sound. >> it doesn't mean it is failing

but it is an indication of might not be as strong. >> i would agree with you. i would agree with you. a camel rating one into institution moving ahead to have the possibility of increasing these limitations i support 100%. >> mr. cheney in your testimony you argue as i understand it, that the cap on business lending disproportionately hurt small credit unions. you have also indicated that raising the cap to 27.5% would change these, it your word, change the economics significantly, make it possible for credit unions as small as $20 million to reasonably participate in this market. those are your words. what is your basis? what is the basis for determining that increasing the cap to 27.5 will be sufficient for small credit unions to participate in business lending? >> thank you senator.

it allows more credit unions to be able to justify the investment necessary to set up a business lending operation. you have to hire people that have experience in the field. you have to set up procedures and systems and safeguards in internal controls so that is really the basis for that statement. >> you also in your testimony mr. cheney, point out that nearly 70% of credit unions do not engage in is this lending currently. why do so few credit unions currently make business loans and for those credit unions that do business lending, what are the most common types of loans that they make? >> we think that the cap is a reason that so few credit unions do business lending, because the restriction is so low in by the way before 1998, there was no restriction on credit union business lending. there was no cap. but the cap, if you are a 20 million or 50 million-dollar

credit union it can't justify the expense so we think raising the cap will encourage more credit unions to get involved. in terms of the types of credit unions the average member business loan is less than $250,000. most of your small business loans, not all that but most credit unions make loans to small businesses as mr. lussier said. >> mr. wilson, you probably were here earlier when chairman maths testified. she noted one way to deal with the credit crunch would be to increase the business lending cap. she noted also that access to credit remains difficult for many small businesses and entrepreneurs that depend on financial institutions for funding. why do you think that many small businesses are facing a credit crunch? >> because of the state of the economy. their cash flows are down. their collateral has been

diminished. there are a number of reasons. there are people that we would have lent it landed to in the past that we cannot lend to today and hopefully we will be able to lend to tomorrow. and i think it wise that we don't from a safety and soundness standpoint. you know, one of the statements that was made that kind of mystified me was that credit unions are more tightly regulated than banks and particularly in the commercial lending. that was an interesting statement. you know, they made the statement in testimony that way they do a better job because they have had less charge-offs than then we have had as banks. and so i was curious about that and i went to the ncua site and gather some statistics. it seems we are not comparing apples-to-apples here, because i would say that my regulator, the

office of comptroller currency is much stricter. i was amazed at the reason that they avoid charge-offs and that is because they allowed to link quincy 12 months and beyond. they have a great bucket of loans that are delinquent more than 12 months. banking regulators would have had us write those off well before they get to 12 months. so that is not really a fair comparison. the other thing that is such a misnomer, that even those tax exempt and having the requirement to serve people of modest means, you probably are aware that gao did a study on that and in fact, banks serve more to -- low to moderate income households and credit unions do. that gao found that a low to

moderate income service and banks was 41% of the household and credit unions it was 31% of the households. let's get rid of this tax exemption. let's compete head-on and let's take care of small businesses and let's create jobs. >> mr. wilson, has the dodd-frank legislation, and other regulatory burdens, had an impact on the ability of banks to make loans to small businesses? >> oh absolutely, absolutely. the time we spend on regulatory burdens, the uncertainty that all of these regulatory environment and the tax environment has created has caused many of our good business customers, those that would normally be expanding buying plant equipment and creating jobs, not to pull the trigger on projects. i don't think i have ever had a larger pipeline of loans where the individual businesses are

not willing to pull the trigger because of the uncertainty of taxes and regulations etc.. >> mr. wilson, both -- and i think he went into this a little bit earlier but for the record i want to go back into it. both mr. cheney and mr. lussier note in her testimony that about one third of all banks in subchapter s corporations are exempt from federal income tax. they argue that puts many banks on a more equal playing field. you talked about that earlier. just again for the record, how does the tax treatment of subchapter s corporations compare to the taxation of credit unions? am i wrong? >> that is correct. >> if you are subchapter s corporations get passes to the owners and they pay the tax. so the taxes paid one or both

ways, that right? >> that is correct. it is paid, if you are a c corp., you pay it twice. you pay it when you make it and your owners pay it when they receive it in the form of dividends. in the case of subchapter s mac they only pay out once a day payette. they are taxpaying entities and i don't have a problem whatsoever with a c corp. competing against a subchapter s. >> mr. wilcox, and your testimony you also noted that your bank has lost business lending opportunities with established customers to credit unions. you argue that the credit union tax exemption creates an unfair advantage and distorts the market. just again for the record here, how does the credit union tax exemption undermine your ability to offer competitive rates? is it because your tax -- you are taxed and they are not? >> that is correct.

>> also mr. wilcox, mr. cheney states in his testimony that business loan net charge-off rates for credit unions have been roughly one fourth of the average of banks since 1998. accordingly, he argues that credit unions can provide business lending any more safe and sound manner than banks. why to credit unions appear to have lower net charge-off rates for business lending than banks? is there a reason here? is it the way they are regulated? is it the way they are approached, or what is it? >> it could have to do with some of that and i think mr. wilson spoke on a few of those facts. banks are under very strict regulatory requirements, especially as it pertains to charge-offs. we have hard caps on days the language and then depending on the type of credit that it is, it is demanded to be charged off. if not, you do face them pretty

severe regulatory scrutiny. all of the federal regulators as well as state regulators and in my case i see both, as a state-chartered bank to look at that on a very regular basis. each examination, they are looking from a safety and soundness perspective to be certain that the banks are not only managing their going doing pretty but not hiding it. it would be inconceivable for me to have a loan that is severely delinquent and be able to carry a continuous lamb at oaks were 12 months and not charge it off. i would be criticized and could possibly face enforcement orders or other things of that nature if that was a routine practice in the bank. >> would that be what we would call toxic assets? >> i would mt. them on my looks. >> senator might i comment on that as well? i'm sorry. in terms of charge-offs versus liquid seas, credit union charge-offs are lower than banks. the credit to link quincy is lower than banks too. don't think it is a set -- it

has got to be in there somewhere. is one or the other. in terms of loans that are delinquent that have been on the books for long period of time those are easily discernible as mr. wilson said from credit union reports and something the regulators tried very closely. if there's a loan on there for more than 12 months i can assure you there's a reason for that and while i have the microphone if i could comment on subchapter a status. when craig and his sister the earnings to their members in the form of dividends their members were the owners of the credit unions pay taxes on those dividends. the tax credit union is nothing more than a tax on a. >> if i might, senator? that this person the credit union is paying the dividends to the members. >> i am a subchapter s bank. i was a c corp. before we are allowed to take that election. with the election comes many restrictions and we chose to operate within those confines.

however, whether or not subchapter s makes a dividend distribution to its shareholders the tax must be paid. period. so even if the holding company or the bank does not make that. >> up at the earnings, would it not? >> that is correct. whether or not there shareholders receive a dividend check from a subchapter s bank the shareholder pays the tax. >> thank you mr. chairman. >> i would like to thank the witnesses for this testimony and this issue. as we are seeing, the views on these issues are very and i think today's hearing deals with some good information as far as the review and reconsider this issue going forward. thanks again to my colleagues and our panelists for being here today. this hearing is adjourned.

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>> house republicans marked the one-year anniversary of president obama's sister, dubbing the summer of 2010 the summer of recovery.

the gop lawmaker said that the economy is still not recovered and they blamed administration policies for hampering economic growth and contributing to the over 9% unemployment rate. in the q&a part of the briefing, reporters also asked about ella terry operations in libya. this is 25 minutes. >> our new majority from the beginning. started with their pledge to america now we have built on that pledge with our plan for america's job creators. you can check the details out out of jobs dutch gop.gov. our plan is designed to promote private sector growth, the kind of growth that the stimulus promised but failed to deliver. in fact it turns out that federal regulators have been hiring at a rate of more than three times that of the private sector, so taxpayers are footing the bills for more bureaucrats while small businesses are afraid to hire. washington democrats say the only economy and this is there economy looks like.

we invited the president to work with us on jobs but instead he downplayed the 9.1% unemployment as bumps in the road and last off the stimulus failure. here we are on the anniversary of his administration's recovery summer that started a year ago and americans are still asking the question, where are the jobs? the american people deserve some answers but when it comes to this administration, it is clear that they don't have many. you have heard you say this before. it is time to get serious and i hope the president will change course. i will listen to the american people and work with us to help enact real job creation ideas and to get this administration from continuing to lock the recovery with all of their regulations and calls for higher taxes. >> good morning. yesterday the head of the democratic national committee

said that their party owns the economy. and she expressed some frustration as to questioning why businesses didn't embrace their agenda. i think that shows you how out of touch they are. the reality is most people in this country are employed by small businesses and what small businesses see is a myriad of overregulation, of unfunded, unfair taxes and of mandates, new mandates that keep coming down the pike. again, where is the realization that we have got to create an environment where small businesspeople and entrepreneurs are going to take some risks? you know economic growth is not a government program. it is high time that this administration realize they should join us. we put together a plan for america's job creators. central to that notion is we have got to empower

entrepreneurs, people who are willing to open new businesses, people who are willing to commit their capital to grow jobs, grow value. and that is how we are going to get this recovery going again, not through insistence by here in washington that we know how to grow this economy. thank you. >> good morning. less than a year ago it was the summer of recovery. we are now 28 straight months with unemployment above 8%. yesterday congresswoman debbie wasserman schultz said they own the economy and what are the facts of owning the economy? since the stimulus, 1.9 million americans have lost their jobs. since the president has taken office gasoline prices are up more than 100%. health-insurance premiums, up more than 19, food stamp recipients up or than 39%. the only two major factors that go down our home values and

startups. the difficulty is when you look forward to the future, what does it say? startups in the last 12 months are at its lowest point in a decade. i want to stress that. the lowest point in a decade. you take the end of the last recession from 2001 to 2007. small businesses, once with 500 employees are less created 7 million jobs. there's a fundamental difference between and not nor and a government job. and entrepreneur does not take a job from anyone. they create jobs. this environment, these democratic policies, have crushed it to a new low. that is why the republicans have a plan to unshackle america. reform the regulation, create a tax atmosphere that actually allows you to compete with the rest of the world and invest in

american jobs and american energy. there has to be a fundamental change here and we challenge the senate to take our fills up as we move them off the floor because america can no longer wait. >> as kevin said this is the one-year anniversary of the president summer of recovery. another summer, no recovery. 9.1% unemployment, and 28 months of unemployment above 8% and americans are asking, mr. president, where other jobs? the bureau of labor statistics recently announced that it now takes on average 10 months to find a job if you are unemployed this is the longest in recorded history that americans are asking mr. president, where are the jobs?

business starts entrepreneurship at a 17 year low and american are asking mr. president, where the jobs? one and seven on food stamps and americans are asking mr. president, where are the jobs? and with all due respect to the president, a $1.1 trillion stimulus program, the latest study showing that it either killed off or forestalled a half a million jobs, mr. president, that is no laughing matter. it is no laughing matter to the people that remained unemployed in the fifth district of texas that i represent. this is why republicans have announced a plan for america's jobs that has everything to do with making our tax code fairer, flatter, simpler more competitive and has everything to do with putting america on a fiscally sustainable trajectory to give confidence to our

employers, to create jobs and has everything to do with eliminating our modifying regulations whose benefits do not exceed the cost of jobs in america and had everything to do with making the cost of energy reasonable to our job creators and our families and of the senate would take it up, and if the president would get out of the way, we would actually have a summer of recovery. ..

9.1% unemployment, lagging and nagging and the white house seems to think that this is somehow a punch line this is something to be laughed off and shrugged about. i think it is important to clear to most americans they look at this administration has absolutely an obstacle to job creation and so the question i would pose and most house republicans pose is when is it going to be the white house will recognize that it is their policies that have to change in order for us to move forward. >> good morning. i'm from wisconsin district. back in january, the representative from virginia and i saw the caucus of job creators, men and women had created jobs and own their own business on the commercial working company in wisconsin the

last 35 years and as we began to talk the policies we put together to actually begin the process of having the economy grow we came to the common conclusion, and the common conclusion is of this, government must get out of the way, some new programs and stimulus, some big government idea is not going to solve the problem. we need to begin to remove the obstacles and two weeks ago we had provided for the american people a plan that would begin to do that, begin to remove the obstacle this government is putting in the way of job creation and address regulatory reform, tax reform, permitting and patent reform and do the things that have put obstacles in the way of job creators and that is exactly what the summer of recovery didn't do what needs to be done now. thank you. islamic across this great land

are reeling from the effects of unemployment and recently the president said this about the jobs report. people in the markets are skittish and nervous so they pulled back because they're thinking about the trauma of two and a half years ago. as an entrepreneur and a person who knows the great joy of being able to look someone in the eye and say you're hired. i know america's small-business owners are not looking to the past. by our very nature we want to look to the future and be optimistic. we want to invest and what we see are so many obstacles and i want to speak darkly to the job creators this morning. here's what you're faced with because the administration policies. would you like to create green jobs off the coast with a wind farm? be patient because it's going to take about seven years to get a permit. would you like to get assistance on a new construction project be patient because it's going to take about a year for you to get an initial review of your application.

and you wonder why your local banker isn't coming by to make a house call and say house your business doing? can i learn and use some money? they are not coming out because they are back there trying to grasp the enormity of dodd-frank and the implications of that, the regulations still coming out and they are out there hiring regulatory analysts. this is not in this view and to all of our job creators i want to look you in the eye and tell you we are fighting for you and we know what you're up against these good men and women behind me and so many sent to congress as an elected officials we get it, the american people get and get our country back on track creating jobs. thank you. >> i have the privilege of representing new york district 19 and for 16 years in that district i had the great privilege of caring for patients as an ophthalmologist, and one of the ways in which american medicine has distinguished itself over the decade is we've

been key to medical innovation. the greatest innovators in the world with new pharmaceuticals and devices and just recently some of our device manufacturers have come to me and said you know, we can't do -- a week can't afford to do what we have been doing in this country. we are going to have to move our research and development overseas where regulations are less oppressive, where we don't need tax for creating and providing to our patients who need them, new devices and innovation. in january, the house of representatives passed the appeal of the affordable care act which included a tax on our medical innovators. unfortunately, the senate did not follow suit. so we have a problem in this country, and closer to home we have a problem among our business is as we all know in

district 19i had the privilege of visiting p.j. which manufactures various types of construction projects, and he said you know, nan, even with all of the burden placed on us by these new laws and regulations over the past couple of years we are nearly ready to go. we need customers, we need an economy that works. and our employees are willing to roll up their sleeves and get to work and what i want to assure all of his employees of is that we in the house republican conference are also rolling up our sleeves and getting to work to relieve those burdens and make sure they have the jobs and opportunity that they deserve and that they are ready to run with. >> good morning. i'm from the 17th district of texas and would like to thank you for joining us this morning. too often when we talk about job

creation it's a little abstract. but i want to do this morning is talk about two things. one is a real world firsthand example and then second let's talk about some parallels in history that should guide us and that the administration and democratic leadership of the congress should be thinking about public number one, the real world experience, and in 2005, individuals and i got together and we decided to create a new oil and gas company has started plain sheet of paper and build a business plan within a few months we have raised the appropriate capital we gave. within ten months we made an acquisition of for $100 million. by 2008 we had a $6 billion payroll with more than $100 million. if you ask the five of us to sit down today and make a decision to do that again, the decision would be different. we wouldn't. why? epa, offshore drilling moratorium, dodd-frank,

obamacare, osha, you name the seven initials or the law and he will get an answer as to why. it's because those agencies and those laws create uncertainty and reflect hostility towards business, job creators in this country. one of the things the would be interesting is what is history telling us? if you go back and look at the great depression, we had to dips in that depression. one in the early part of the depression, that we had another one in 1937 were 48 that could have been avoided. now what happened to cause the second dip? federal debt grew by 150% between 1929 to 1938. what's happened here between 2006 until today? 150% increase in debt. federal spending grew 77% between 1932 to 1934. what happened?

between 2008 and 2010? federal spending grew by more than that. tax rates increased by 24% to 79% and federal revenue fell by half. we just read through one uncertainty about tax rates six months ago. fortunately we kept them low. 18 months from now we have got the same old debate again. you look for work and don't know what your tax rates are going to be as a business person. and then there was great hostility. the roosevelt administration issued more pages of regulations and executive orders than the other presidents holding that the administration through bill clinton combined. and this sums it up. the secretary of the treasury in april of 1939, henry morgan fall said it this way. he summarized the policy to the house ways and means committee and said not gentlemen, we've tried spending money.

we are spending more than we ever spent before and it does not work. islamic after eight years in this administration, we have just as much unemployment as when we started and an enormous debt to deutsch. with the solution, stop the spending, stop the deficit, get the government out of the way of america's job creators. thank you. [inaudible] are you aware he might resign from congress? >> nope. >> speaker boehner, he's telling friends he is planning to retire today [inaudible] >> when i become aware of that i will let you know. >> what impact do you think this episode has had on the house? >> it's been a distraction. the american people want us to focus on job creation. this was just a distraction that was unnecessary. >> can you talk about your

concerns on the documents last night the administration -- where do you think the answer the questions and didn't answer the questions? >> the administration gave its opinion on the willpower resolution but didn't answer the question in my letter as to whether the office of legal counsel agrees with that. and so i'm looking forward to an answer on this by tomorrow. the white house says there are no hostilities taking place. yet we have got drone attacks under way which spending $10 million a day or part of an effort to drop bombs on gadhafi compounds. it doesn't pass a strict test in my view that we are not in the midst of hostilities. so four weeks since the president has talked to the american people about this

mission and it's time for the president to outline to the american people why we are there with the mission is and what our goals are and how to be exit this. >> raised this question of what we thought is the question what are you prepared to do if you do not like what you read? and don't get the satisfaction that you have asked for. >> the house has options looking at those options my guess we would be prepared to move on those options. >> one of the things the white house seems willing to consider is extending this to% payroll tax holiday. do you think about that policy has helped the economy measurably and what is your view? >> there's a lot of options out there. i've heard of this one not

really prepared to give you an answer as to whether it ought to be continued or not. >> i would like to follow on that. >> to what extent as you know well the bipartisan tax cut water it's the payroll tax, is it your tax strategy to wait for a tax overhaul? >> most changes in the tax and yet i believe ought to be part of the changes to lower the corporate tax rate in and the individual tax rate and flat in the tax code but to the other part of your question uncertainty that's out there is not going to be overcome by a short-term gimmick this administration are causing great uncertainty and look at every regulatory body in this town is going after the private sector as if there's no tomorrow does

need to stop the regulations to provide more certainty from america's job creators. estimate what to cut the purse strings for libya that seems to be the only option the house has what could you do next week? >> i've got a number of options i think we are looking at but the ultimate option is the house in fact the congress has the power of the purse and certainly that is an option as well. thank you. >> leader in the senate john mccain also spoke about libya and the work powers act.efore i >> yesterday the administration made an announcement that i ame believe most of my colleagues rs and the americans as they represent is a confusing breach of common sense.

lawyers claim that the u.s.n libya is not in breach or causes for a war power resolution.eliee in other words, they believeary that our activities, military reire a activities in libya do not pow require a war power resolutionse because the united states is not engaged in a state of hostilities in libya.uzzling undercut by the very report that the administration sent to congress yesterday which makesrd it clear the u.s. armed forces c continue to fly limited missions to suppress enemy air defenses e to operate armed creditor drones the are attacking gadhafi's to forces in an effort to protect e libyan civilians and provide the overwhelming support for natoopm

operations. sta the amount to a full-scale state of the war but i but certainly - grant i am no legal scholar. sch i find it hard to swallow the u.s. armed forces dropping bombs and killing enemy personnel in a foreign country doesn't amount to a state of hostilities. to this adds more confusion to our libya. our policy objectives stated by the president correctly is to yt compel gad ihafi to relinquish power, and yet that is not our. military ought to active. the administration claims tohave have turned the operation and libya over to nato and alliance in which the united states makes up three-quarters of the collective defense spending as s the secretary gates recently pointed out the administrationt sought the blessing of the

united nations, the arab leagued and nato before using force in r robya and does not the f authorization or state approvald from the elected representatives of the american people. that's wrong.ay, is the results of this i would hatf to say is plain to see in the actions of our colleagues on the other side of the capitol in the house there is massive and growing opposition to continuing the u.s. involvement in libya. there's one piece of legislation that binds the authority as commander in chief. and there can likely be a vote n soon to cut t out funding for tt entire operation.umulated in short the accumulateday, consequences of all of this ouss delay, confusion and wholesale revolt inco congress against the administration taken policy. this

i take no pleasure in pointing digreed this out because though i have h disagreed and disagreed strongly at times with aspects of the a e patrician policy in libya, i rit believe the president did the right thing by intervening to stop a looming humanitarian disaster in libya. the gadhafi was at the gates of thet nazi. t's i our arguments aboutations, legal and constitutional interpretations we can't forget in the midst of the most ground breaking geopolitical event in two decades as peaceful protest stratocracy were sweeping theas, middle east with gadhafi's force is ready to strike a rt the gatb and arabs and muslims and libyad and across the region pleadingag for the u.s. military to stopshi cte bloodshed the united statesa and our allies took action and prevented the massacre that proe gadhafi promised to commit in a

city of 700,000 people. and by doing so, we began creating conditions increasing theo pressure on gadhafi to givw up power. bee yes progress towards this goald, has been slower than many hope and the administration is doing less to achieve it than i and others would like. but the bottom line is we are ml succeeding.itders and gadhafi is weakening.associes ae his military leaders and closest associates are abandoning him. nato is increasing the temple od its operations and degrading ton the military capabilities and th command-and-controle. the transitional national council is gaining international recognition and support and performing more effectively andi though their progress is notorcs even, opposition forces in libys are making strategic gains oned the ground.rom i know that many were opposed to

this from the beginning.act i respect their conventions. but the fact is whether people like it or not we are engaged in libya, and we are succeeding. my so i would ask my colleagues iss this the time for congress to begin turning against this policy? dime to rise to the calle rescue of the man president eas reagan called the middle east? congres is this the time for congress to declare to the world to gadhafi and his inner circle to of the libyans sacrificing to force are gadhafi from power and to ouro r nato allies carrying a farfar heavier burden in this military operation than we are, is this the time for america to tell all of these different audiences out heart is not in this, we've nei neither the willth or theo capability to deceive this

mission through.st that we will abandon our closest friends and allies on a whim. these are questions every member of congress needs to think about long and hard, but especially mn enpublican colleagues. fri many of us remember the ratele some of our friends on the other side of the ogle savager, how president bush over the iraqo war. i wish i could do everything inp the power to tie his hands andft tll america out of that conflict with far too little acs care for the consequences thatoi their actions would have on our, friends from our allies, our w interests and moraorl standing p the world'sow leading power.vior we were right to condemn this tp behavior now, and we wouldra be wrong to practice it now ourselves simply because the leader of the opposite party occupies the white house. last week gadhafi wrote a of personal letter of thanks to read a letter of thanks to the

members of congress who voted tr send to the president and and the nation's involvement in ask libya. republicans need to ask themselves whether they want toy be part of a group earning the o grateful thanks of the murderoua tyrant or trying to limit an american presence of devotee to force the tyrant to leave power. the goal for all of us here in this body, democrats and republicans alike should not be to cut and run from libya. from but to ensure that we succeed id a very near future senator kerrw and i along with a strong and senior bipartisan group of limit colleagues will introduce any authorization for the limited use of military force in libya. the administration may assert hostilities inte sho libya. but the senate should go on record as authorizing these o we are in a state of

hostilities. and the only result of the further delay and confusion over the, chris's role in this debatu would be to continue seizing ths initiative that the strongestin critics of our actions in libya. we plan to introduce the the moy authorization soon, and i would urge the majority leader to schedule a vote on it quickly.c. the senate has been silent forgn too long. invo and our military involvementlv e libya. it's time for the senate toieliw speak. when that time comes, i believen we will find a strong bipartisan cjority that is in favor of our maintaining our current course in libya. seeing this mission through to success and that is willing toeh continue standing in the breach with our allies until the job is done. >> would talk with dennis kucinich about military action in libya. he discussed the lawsuit filed by members of congress against

the president and defense secretary robert gates. this is 35 minutes. >> host: representative dennis kucinich of ohio is our guest and yesterday he was the head of a coalition of congressman of democrats and republicans who he aled suit against the obama administration because of the o u.s. operation in libya. in this is the headline fromm yesterday.erday. wall street filed against obama on the f u.s. operation in liby. congressman kucinich, why did kucinich, why did you follow suit in several court? guest: ne constitutional issue has to be brought to the federal court if they are -- any constitutional issue has to be brought to the federal court if you want to get any issue resolved. in this case it is our contention that the president of the united states violated article 1, section 8 of the

constitution when he proceeded to order an attack against libya absent a vote by the united states congress. furthermore, we say he violated the statute of the war powers act which requires him to come to congress within 60 days for approval once initiating possibilities. we also say that even though the president had approval of nato and of the u.n. security council, those two institutions cannot trump the united states constitution and the fact that the president has to come back and get approval. finally, peter, the issue of cost. where is this money coming from? we have not appropriated money for this war. and what the united states of being in the so much fiscal difficulty, it really becomes imperative we raise the issue of this -- the cost of this war and others. host: how is your loss a different from john boehner's letter to the president saying in five days you will be in violation of the war powers act.

guest: i am glad to play a role in bringing the bringing forward his action. i think he did do the right thing requiring the president to come forward with information, which, frankly, he should have done back in march. where we are now is this -- this lawsuit is the only way that we can reset the imbalance that has occurred constitutionally, where the founders and the beginning intended the war powers be placed in the hands of the people's representatives, the congress, and not in the hands of an executive, who, when we were under england, could wage war wantonly at the expense of the country and the people. what happened is this administration and others, frankly, decided to appropriate the war power and therefore create a constitutional challenge. this lawsuit is really aimed at trying to reset our system of checks and balances, and attempting to restore congress's right foot wall as a coequal branch of government and to make sure we are not prosecuting wars willy-nilly around the world at

a time of great turmoil and at a time of great financial distress. host: congressman kucinich, do you know what federal judge will be looking at the case? guest: i don't know. host: can help take action on its own -- on its own? can congress take any action to prohibit the u.s. from being part of the nato forces in libya? yuko yes, you can cut off funds. giglio -- guest: yes, you can cut off funds. there have been initiatives to limit the extent. no ground troops in libya, for example. we need to know we are moving toward the place that that might be necessary. but in the meantime, this constitutional issue looms above everything because the competition is the roles we play by. and if we ignore the

constitution, it is not only at peril for this moment but it sets precedents about what shall be the united states policy in yemen, sudan, in syria, any place around the world. we cannot be global cop. we have to realize there are limits to power. and will also do have some things we should start taking care of, like getting people back to work, helping people say their homes, making sure everyone has health care, protect the retirement security and making sure our children have a chance for a decent education. these are the kinds of things we need to focus on. but this constitution, which i carry with me, if we don't pay attention to this, if we don't contemplate the wisdom of the founders in dividing the power within the government, then we are in danger of losing our country. so this is not a small matter. host: there was a support -- report about military and cia drones taking out al qaeda

personnel in yemen. does that come into play in your court decision in the sense of military action against a sovereign country like that? guest: yes. if we decide that we can take that fickle finger of fate and hit the button and 8000 that the -- 8,000 miles away and in separate someone, that is an astonishing use of power to be able to do that. and one can say, well, okay, there are no troops on the ground. look, if you don't have that person pushing the button, the drone doesn't operate. if you do not have a drone and there is a person sitting in the chair, nothing happens. we have to realize that technology has changed the rules of war. and the extension of our power still fixed within the constitutional imperative that congress makes the decisions whether or not to protect another country.

we cannot continue to escalate these wars. we are in danger ring -- i believe, peter, we are endangering our country so that is why i go back to the constitution and the coalition that includes some of the more liberal and more conservative members, really are a testimony of the fact that there is a broad base of support now for taking a different direction. i think the american people by and large want us out of libya and i think the american people by and large are fed up with the escalation of war around the world. we can't afford it. and there is this question of the constitution. host: finally, congressman, before we go to calls, do you see similarities between the obama administration's actions and the bush administration's actions? guest: president bush did come to congress for approval to attack iraq back in october of 2002. i laid out the case why it was wrong and why i felt there was no proof that iraq had any weapons of mass destruction. but he did come to congress. president obama did not feel he

needed to come to congress. that is why we need to go to court. article 1 established the congress. article two establishes the executive, the president, and article 3 establishes the judiciary. in this case we are going to the judiciary and saying, look, this is a constitutional issue that needs to be resolved. it does article one, section 8, really mean only congress has the ability to declare war and can the president basically override the constitution of this? host: we are talking with congressman dennis kucinich, who led a coalition filing suit in federal court over president obama's policy in libya. members of the coalition -- roscoe bartlett of maryland, dan burton of indiana, a democrat of massachusetts, a republican of north carolina --

got to say, that it is a coalition when you get john conyers, ron paul and denver and on the same team. guest: the american eagle spread its wings over the capitol -- it needs two wings to fly and. host: the first call comes from north carolina. don, democrats' line. caller: good morning, peter. congressman, it is an honor to speak with you. just quickly let you know where i am coming from. i am for medicare for all, strengthening labor unions and the dream act. my seven questions are -- what do you think about the news that came out that gaddafi is running out of money and maybe we can get him, that we are close to getting him out of there?

my second question is, what do 112do youchaka fatah's hr 5, a debt-free america tax plan -- what do you think of chaka debt-free american tax plan? guest: i am not familiar enough with his proposal to be able to discuss it. whether or not colonel gaddafi is running out of money it is beside the point. my question is, are we running out of respect for our constitution? host: and this tweet for you, congressman. does not our treaty obligations, and nato, factor in to the libyan action? guest: nato's treaty obligations under nato, they did not trump the constitution of the united states. if you look at the treaty, it observes that all member states

have to go back to their fundamental basis of legal transactions, their own individual constitutions. nato was not created as a vehicle by which the constitution of the united states or the constitution of any other country could be nullified. our constitution takes precedence over the nato treaty and, frankly, over the u.n. security council. host: the next call comes from palm springs, california on the republican line. hi, dennis. caller: good morning, and thank you for c-span. we basically all saw this coming. basically getting in and out of libya and handing over to nato i thought was very far-fetched. we are a strong power and a force in the military -- it was not going to happen.

we all saw this coming. representative, could you explain to the viewers of c-span what the lawsuit would ultimately achieve, besides more bad pr for the president and the democratic party? could you give us a reasonable time line on how you are going to pursue this, how long you are going to pursue this? host: got a point, thanks. guest: we are asking the courts to rule that the constitution requires that the president has to come to congress. so, in fact -- in effect, it would be rolling the action was illegal. the whole point of the lawsuit is to reset the balance within our government, which is now imbalanced because our chief executive and other chief executives have determine for themselves the power to declare war, which the founders of a nation said should be in the hands of congress. so, we are trying to get the

court to rule on that. as far as the public relations aspect of this, this isn't anything you do to appeal to a gallery. the constitution, which i take an oath to defend, requires that at this moment in the history of our country, we have to protect that constitute -- constitution i am not doing it for some kind of publicity stunt. host: if the federal judge rules in your favor, what happens? guest: the first thing we have to do is get standing. in 1999 i was the second on a lawsuit. host: for kosovo? the court ruled that

the congress has the power. if we get standing this time, i thinks we are on course to resolve one of the great constitutional issues of whether or not any president -- it's not just about this president -- i would prefer to keep this almost impersonal -- whether any president has the ability to take this country toward absent the approval of the directly- elected representatives of the people. he is not directly elected. he is chosen by electorates in the electro college. founders had been used to be able to determine that those who are directly elected, to have faith in their hands. this involves the lives of our men and women sent to a theater where they might be put in jeopardy in one way or another. this is a very callous important moment. if the court is willing to entertain it.

what we hold in this lawsuit is that this relates solely to congress. the founders were very careful in describing in article one, section 8, the whole range of responsibilities that congress has. one of them is the power to be able to take us into war.l -- -- war. we hope the court will decide to take the matter. court iny did the 1999 will get you had no standing in kosovo? guest: we are saying that anything executive engages in with congress is a political question. this goes to the heart of something that is written in the constitution. we are trying to get a decision as to whether or not the federal courts believe that when the founders put that language into

the constitution under article one, section 8, saying that the congress of the united states has the power to declare war as well as the power to raise and support armies and to provide and maintain a navy. this is quoted right from the constitution. the article says that the congress shall have power. so it empowered an institution. is this foundational document. that is what i am going by. that is what we are hoping that the court will understand this is more than a political question here this is the question of the viability of our system of checks and balances. host: dennis kucinich is our guest. chris in rockville, new york. caller: i'm little nervous. i consider the president is our

commander-in-chief and that he has information that the rest of congress does not and that if he had to go to congress to get permission, nobody can agree on anything now, how would we ever get anywhere? it seems like you are leaving or democratic party lately, mr. kucinich. thank you. guest: i am a democrat, but i am a constitutional democrat. the constitution, article one or rather section 2 of article 1 says the president shall be commander-in-chief of the army and navy of the united states and of the militias of several states if when called into the actual service of the united states. so congress determines whether you go to war. we have to understand why the founders made the distinction. it did not want the president to be the individual who would not

only say we are going to war, but to say that before you go to war and congress has to make that decision. at that point the president who has this moniker of commander- in-chief, then it really achieves its full effect. >> congressman kucinich, i was going to the second question that was asked of you, do you foresee another presidential run and what is the status of ohio redistricting and you're talking about moving to washington? guest: i am not a candidate in 2012. i hope to continue my work in the house of representatives. ohio is in the middle of redistricting. it's been reported that my district will be substantially unchanged. i may have to look elsewhere beyond ohio and i am looking beyond ohio, not precluding running in ohio.

there are other areas in the country where i have had a pretty good response for the work i have done behalf of working men and women and on behalf of peace and on the environment. i will see. i don't really know yet. i don't know where i might end up. i hope to continue to serve. i don't have the final choice on that. it will be a to whatever if constituents we have. >> what is your take on the obama administration going into its third year? guest: a little bit too close to wall street and to the pentagon. not enough focus on getting people back to work. 14 million americans out of work. that's a national disaster. if the private-sector does not create jobs, the public sector as a moral responsibility to do

so. i'm looking for that leadership from president. i hope to be in a position where i can support president obama. what i'm looking do here is what is he going to do about protecting people's jobs and retirement security and medicare and medicaid? these are fundamental issues that have to be regarded. what is he going to do about this penchant for american involvement in other nations' affairs? i want to see more about what this white house is doing. did he inherits a difficult situation? yes, but it is is now. i'm willing to support him. i need to see something done about the jobs situation. host: dennis kucinich is our guest. chris in london a, england, on the line. caller: two comments.

i find it hypocritical of the u.s. in libya not there to protect civilians appeared to dictate which group will govern the country. second, it's hypocritical that they are even in libya because when the united states went into iraq and afghanistan to removed the taliban and sadaam hussein, they killed hundreds and perhaps thousands of civilians and there was ofnato or united -- there was no nato or united nations to say anything. this idea of protecting civilians is a farce. guest: i agree. i've raised the issue about civilian casualties in libya and afghanistan and pakistan and iraq. most people would be shocked to learn that years ago a study in the lancet said there were over 600,000 deaths in iraq over the

course of the year. joseph stieglitz extrapolated on that in his book and came up with some figures, that there could be a number of deaths in excess of what that report indicated. we are at a point where we have to start thinking of the consequences of our actions. to say that there is such a thing as humanitarian war, the civilians being killed as a result of our intervention are hoping for peace as well. we have a real obligation in the use of military power. i have a great deal of respect for those serving in the institution of the army, navy, air force, marines, coast guard. those of us in civilian authority have to be very careful before we commit those men and women into combat and be have to take care to observe

there will be consequences for the people and the nation's who are being visited by our actions. host: this is an e-mail for you, congressman. yesterday it was said on cnn that the courts will likely not will in your case because they don't like to -- guest: is a very good constitutional analyst. we also have an analyst who is our attorney, also a commentator on constitutional law issues, as name is jonathan. we feel that if we get standing, that we can win, but the court has to say at last that congress does have a position here. constitution protected from any executive who decides to appropriate for himself in the future the power

to wage war? this is a very serious question that relates to whether or not our nation is going to be safe. whether or not america will continue to remain a democracy. or whether we will become something else as a result of more and more power in the hands of a single individual. host: mlk wants to know -- guest: something more than that. i propose that president bush and vice president dick cheney should be impeached for not telling us the truth about going into iraq. i did not do that with any great enthusiasm. iraq had no weapons of mass destruction and nothing to do with 9/11. iraq did not have capability of

attacking the united states. we have waged a $3 trillion war against iraq that we will be paying for and the people of iraq will pay for with horrible casualties, destruction of their nation. i would say, i led the effort in the house of representatives and right from the beginning in challenging the bush administration marching towards war. this is not a partisan matter. whether it is a republican president or a democratic president, this constitution has to survive and prevail. i am a democrat. i like to support my democratic presidents. i am not going to shirk my duties to uphold the constitution if i feel that someone who happens to be a democrat is going beyond what the constitution permits for a

chief executive. host: another e-mail for you, congressman kucinich. guest: it does, but it still does not trust the constitution. the un security council cannot determine for the united states when we go to war and neither can nato. this constitution has presidents over all of it. that's what this discussion is so important. these are the first principles. when the founders came together, they were not talking werenato or the un -- there were not talking about nato or the u.n. these principles were designed to america big a to adapt in the future. here we are in 2011 deciding whether or not the founders when they drafted the constitution and said congress shall have the

power to declare war, that statement that and did not mean some executive later on determines that he or she can appropriate that power and that's ok. no, it's very clear that based on their experience dealing with the king of england that they did not want to repeat that experience in having an executive or a monarchs waging war without any consent. host: lawmakers suing to end the u.s. role in libya, this is the front page of the wall stre -- of the washington times. roscoe bartlett is a republican from maryland. dan burton, from indiana. michael capuano, of maryland. john duncan from tennessee, --

all the congressman filing suits. also, would you consider running on the united ticket with ron paul, that's in an e-mail. guest: on foreign-policy we have been closely in alignment. i am not. running not. i am not running for president. what i cansee continue to do it to continue to insist that congress' rightful role as a directly elected representatives of the people is affirmed through our constitution. host: a tweet --

the next call comes from safety harbor, florida. mike, a democrat. caller: good morning, c-span. representative kucinich, a pleasure to talk with you for the second time. first, i want to thank you for being a true american and not a partisan. your job is to serve the people and not to play partisan games. you are obviously doing so. your track record speaks for itself. it would be a sad day when you're not serving the people anymore. if you moved to florida, you would have plenty of support. we have been betrayed by obama. i don't think he has done anything different from george bush. he does not have my vote. i see the ron paul votes in my future. i am a democrat. i voted for al gore, john kerry,

obama. hopefully, it will be ron paul. i'm disappointed in obama. it's not the direction i thought our country would go. guest: it is important we look at what is happening in washington in the last few years as a lesson about where the levers our control are in our economy. i was against the bailout. i saw wall street gaining more and more momentum while people were losing their homes and their jobs and their retirement security. and wall street has extraordinary influence in our government. that is a fact. it's because of money and the economy, and main street is not getting enough attention. the 2012 election will really determine -- determined by whether or not people on main

street feel that they are getting some of the benefits of the country, that they are getting a chance for jobs and decent wages, but they're getting a chance to protect their retirement security, and getting a chance to have decent health care, getting a chance for their children to have a good education, the pair environment is being protected. all these issues will be brought to the forefront, including others. the 2012 election has not been decided yet, by any means. i do hope that the administration, which is in its third year, will have the opportunity to address some of these pressing economic issues with solid programmatic choices. it's not going to be sufficient for us to say if the republicans will not let an agenda be passed. it is important for democrats to propose solid economic reforms and then we have to debate. we cannot just say the republicans are doing wrong by medicare. they should not be massive amount with medicare, bucks we

have to say what's we stand for and come forward with proposals and then we can restart the debate. host: in new orleans, eustice, on the republican line. caller: congressman, you sound conceited and you don't sound like you really want to help our administration in the next election. the things that you are saying, a lot of people are saying, it does not really make sense. it is confusing, what you are saying about medicare and it seems like all the negative stuff the republicans are saying about the president, you are saying the same thing. are you a true democrat? guest: i don't know if you have listened to the whole program, but i have led the effort to create a national health-care

system. i work with john conyers on that. i have been a leader in trying to make a transition to a new place where we can create jobs for all, put america back to work with good paying jobs, be -- by rebuilding roads, water systems, sewer systems. i have been leading the fight against illegal wars. this has led me to become a candidate close to the democratic nomination. i am a democrat, but not a democrat in lockstep with the white house. we have to maintain in congress a certain amount of distance so that we can make our own decisions. that is what our constitution does. created by article 1 of the constitution is congress and the executive, the president, is created by article 2. i have said nothing this morning that would be disparaging of barack obama. i take issue with his economic policies which tend to favor wall street. that is a fact.

if it were a republican president, it would not be any different. but it means as a democrat i have the right to have a president with a solid job creation program. there's still time to do that. there's still time to put america back to work. that is the issue, domestically, get america back to work. help increase the level of wages, help create jobs security, do something about the trade wars that are causing jobs to be shipped out of the country, do something to temper corporate america that's like an octopus reaching into periods and destroying communities for profit. if we have to remember why we come into politics. it is not just to promote a party. i am a democrat and i have supported my party's nominee every single time. but we also have to say when we are in advance of election what we stand for and aspire to that and root for that. host: back to the issue of libya and your lawsuits. this is a tweet.

host: what authority do you see the president having if your lawsuit goes through? guest: you can find the data on the web site that they have put together. they pointed out that as of may 5 the united states 12,909 people, all countries involved in nato coalitions, involved in the libya action, 3500 came from the 90 states. of the aircraft, 309 total. 153 from the u.s. of the aortie aircraft, 2000 of those are from the u.s. the cruise missiles, 248, and

228 from the u.s.. we have airplanes dropping bombs. if someone dropped a bomb, if another country dropped a bomb on a u.s. city, what we call that war? if another country flew into our an attack weapith plane, would that be seen as threatening? we have been the dissipating in the bombing of libya. orwell wrote about the inverted meaning in 1984 in which peace was war and war was peace. we have to be careful we do not degrade this meaning of war and just say that it is a kinetic action. this is war.

it pertains the meaning of war to mean that someone can -- if we change the meaning of war to say that we don't tablets on the ground, then how would you explain prom harbor on december 7 many years ago? was that war? of course, it was. it is a war in libya. in the federal

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>> today the house financial services committee held a hearing of banking regulations overseas and how they compare to rules in the u.s. members heard testimony from hazardous federal deposit insurance corporation. the security exchange commission another financial regulators. this feature by alabama congressman, spencer bachus is

two hours. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> gurgle come to order. without objection, all member statements will be made part of the record. the show of recognizing so for opening statement. when president obama signed the effect into the last summer summer comedy set in motion the most ambitious changes in financial institution regulation since the great depression. while american regulators and financial institutions or through its 2300 pages to find

out what the new legislation means for them and to base to meet its deadlines, the international implications of the law have garnered relatively little attention, receiving even less attention has been the work of the basel committee. they said nine.did the recommendation for basel iii, the minimum account against losses for golden state. these complex matters are too significant to ignore. during today's hearing, we'll examine the implementation of these new bank regulations and the implications for the competitiveness of our financial market. we need to know if we lead, will others follow? doesn't matter? it has been said that if banks impose cost and risk i'm a country's economy, the country

is better off with rules that limit the risk and cost, even if others are not doing the same. that may be true to form at the risk and cost risk and cost to the country where the risk and cost of big failure. but there are other threats and dangers. if we over regulates the what the plans of the rest of the world, then i fear we will push capital industry and jobs out of the country. at a time when each new release of government that it seems to underscore the sensitivity of our economic recovery, it is fair to s. treasury and other agencies representing -- represented on our first panel whether they have carefully considered cumulative effect that is a synonymy of regulatory band-aids unleashed by todd frank as having on the real economy. we will be discussing for critical issues during this hearing and raising important issues. i hope our panelists will

address. first its capital and liquidity. will those basel iii both make the financial are more stable and if so, what cost? is the banking system awash in capital with the potential trade-off of economic growth, less innovation and diminished credit availability. regulation of sifi. it's congressman said seven -- governor tarullo proposal for a capital requirements on the sifi reflect the amount of sifi will inflict on the rest of the financial system to rate it broach or will it just make u.s. financial institution significantly important financial institutions less efficient and less competitive without taking the system safer? f3 title of the capital and liquidity constraints on the

regulated financial sector, do we run the risk that more activity will migrate to the shadow banking system and the jurisdictions offering a later regulatory structure? three, derivatives regulation or should respect the participants a derivative smart associate to non-us friends at other countries refuse to follow our lead a march in capital requirements. how should we expect u.s. firms to compete if they face higher costs than their foreign editors? four, regulation of proprietary trading. not even paul volcker claims proprietary trading caused the financial crisis in 2008, but dodd-frank poker rule or have its banks and non-bank financial companies from engaging in trade for their own gain. now that the rest of the world has rejected the call to impose

similar proprietary trading bands on their institutions, what effect will unilateral u.s. application of the volcker will have on the capital markets. these are important questions i am pleased we are to distinguish panels of witnesses with us today to answer them. i look forward to the discussion and we now recognize the ranking member. >> mr. chairman, how much time to have quick >> with 12 minutes on a side. >> and i will yield myself five. >> i appreciate -- ask her if that the testimony of mr. zubrow the wheel here later. i was pleased to hear him say in its first case, certainly the financial crisis post a response and u.s. regulatory system, particularly the dangers of unchecked labor and arbitrage. most of the reforms in the week of the financial crisis by market participants in the congress will improve the

soundness of our system of allowing u.s. firms to allow competitive. i appreciate that because that's the framework in which we operate. within that framework there are several things you might do, first of all to make sure the capital is adequate. secondly, not that american institutions at a competitive disadvantage. there are a couple points what to make about this verse. i say to my friends in the financial industry, you do understand we have to separate to the extent that we can, to important desires that you have. one is not to be regulated in a way that puts you at a disadvantage vis-à-vis your foreign to editors. too, is a desire not to be regulated. i understand that. that doesn't make you bad people. everyone at rather do what he or she wants and not be told what to do by others. and we will always be able to make that clear. i do have to say we have had a history and i was pleased.

that's why mr. zubrow mentioned, the chief risk officer of jpmorgan chase, the dangers he said we learned of unchecked leverage and regulatory arbitrage. now, regulatory arbitrage is one of the factors we have to deal with. what we have an part is a problem in which the desired american institutions not to be regulated in the desire of european institutions not to be regulated can reinforce each other and it is important to s. to single us out. the second point at which makes my friends my friends in the financial community. i think another important distinction we have to keep in mind that msa to be honest, they don't always than i can understand that. they are the means to a sound financial system. they are not the end. their profitability and another self is not important to anyone other than themselves. that doesn't make it unimportant. they have that right.

their role in the financial system is to be the intermediary. there will the financial system is to help us gather enough capital in the system from a variety of sources and make it available of people who do things productively. the fact that a particular financial institution may or may not be making a good profit is really not a matter of public policy. now, that does not that we should set out consciously to try and reduce the role of the financial sector in the economy, although there is a very interesting paper from ted turner risen some of these questions. it does say to me that if as a consequence of regulation that we think deserves the safety and soundness of the system, the simple fact production and profitability from profitable institutions from well-paid executives is not a problem. it is a problem with that meets the point where it interferes

with their ability to have capital formation. i want to look at that. now, we also have the question of what comes first, the chicken or the egg. and that is a particular problem here. there is a danger that various financial institutions in each country will lobby to the point where there is a new for a reduction. i am told by some of our regulators that when they talk to the european counterparts in particular, they are told they hear the same things that they hear. if you don't stop i'm only moving elsewhere. i knew for example in the compensation they receive strong argument from europe and i heard it myself for michel bernier, that the extremely maxwells in america on comp patient for chief executives puts europeans at a disadvantage that affect europe has much tougher rules on

compensation. that doesn't drive me to do anything differently, but i do have to note that. i understand people talk about a level playing field. we are told we won't have a level playing field here if we are to tell if. i have noted something extraordinary about the level playing field, which would defy logic. and obviously i've heard people complain about the level playing field, i have never heard of any in which anybody was at the top of the level playing field. it is a constantly declining playing field. like a constantly declining -- i.e. it myself another minute. we had a constantly declining playing field much everybody is is at the bottom and no one has ever been at the top. i worry that we get into that same situation in which all the financial institutions in the world will be able to prove to the regulators they read a disadvantage vis-à-vis every other financial institution in the world and the result will be enough already. there are reasonable points to be made. i knew nothing that requirements

on sovereign entities are a good idea. maybe your colleagues point out the very particular case where there might be just at the edges. i do believe and i'll be interested if the regulators have a different view that the law as a doctor gives them the flexibility to take that into account. i do not think the cftc with the mandate to do things that put people a disadvantage. the general framework is we had a problem of unchecked leverage come a problem of not being a terrible financial crisis because we haven't an appropriate regulation. as we do the regulation, it's important to keep in mind to things you throw the financial institution is not to make money for themselves, but to be the intermediary between the various phases of capital and people who will put it to good use and they need not to allow a competition to be used simply to denigrate, but rather to get cooperation

civic etiquette regulatory scheme that puts no one ever people and international disadvantage. >> thank you. the servers for one minute. >> given by the financial crisis have been covered so far off the radar this reform effort is gone. let's not forget this all started when congress decided to embark on a course of social justice to get everyone who wanted one into a home, regardless of whether or not they could afford it. then came the crisis followed by dodd-frank. let's be clear. another lynch doesn't mean better regulation. the new regulations were simply pass on top of your lungs. lawmaker financial system safer quite unlikely. rather than giving markets more stability, it will weaken the global system by encouraging capital flight out of the most evil micromarkets in the world. period in the new regulations coming down they be a good idea,

such as higher capital standards. unfortunately, the effort is tracked by 2300 pages attempting to micromanage every player throughout the financial system. as "the wall street journal" noted, the most competitive banking system is one with high capital requirements and few rules on the extension of credit, whether to a consumer or corporate derivatives customer. it's up to us to correct the mistakes and ensure the end result is the financial system on market discipline and commonsense regulation. i yelled back, mr. chairman. >> ms. waters for a minute. >> thank you very much comes mr. chairman. particularly chairman bayer whose five-year tenure at the fdic will come to an end at july 8. chairman bayer, i imagine this may be her last time testifying before this committee, swiftly to thank you for your service during this unprecedented turbulent time for a nation's financial system.

it has been almost a year since democrats in congress passed the most sweeping reform of our financial markets since the great depression. the cost of that reform has to closely monitor systemically significant institutions in an orderly fashion and bring transparency to the derivatives. of course the statutory authority would provide it will only be as effective as the rules adopted to implement that authority and the ability to invent another crisis will only be realized if regulators are willing to testify the enforcement resolution powers granted. our hearing today is about employment tatian of dodd-frank as well as basel iii. i'm interested to hear from regulators about how they are cooperating with international partners. i'm also interested to hear from the witnesses on the second panel who are concerned about

their competitive position relative to their international counterparts. i think it is extremely important to caution against engaging in a global raise to the bottom when it comes to financial regulation. if we water down financial reform in order to entice firms to locate the united states, we may find the only thing we've accomplished is ensuring that the next reel out is headquartered in the united states. as i've got consistently, strong transparency in regulated markets at the best way to increase certainty to prevent another crisis and create jobs. i yield back the balance of my time. >> thank you. mr. hand selling for one minute. >> thank you, mr. chairman. this is the one-year anniversary of the administration summer of recovery. we now have one of seven american on food stamps. new business started serving a 17 year low. and now takes 10 months according to the bureau of

statistics to find a job. this is the longest period in recorded history and we now have 28 months where unemployment has been north of 8%, the longest period of sustained high unemployment since the great depression. we now have on top of this, dodd-frank signed into law, which is which intended and unintended is that i believe have impeded and will hurt job creation in america. dodd-frank and was not passed in the e.u. and was not passed by the g-20 in a regulators must proceed with great care. we don't do what the total impact is. we cannot afford greater job loss and i yield back. >> thank you. ms. maloney for 10 minutes. >> thank you, mr. chairman for calling this. i welcome all the witnesses today and thank you for your

service. i join my colleague in thinking she would bear for her extraordinary leadership during one of the most difficult times in our history. he did an incredible outstanding job. i'm interested in seeing what your next goal will be. i'm sure we will continue to have an outstanding career in service to our country. i join the chairman and the ranking member and expressing mike turned for any competitive disadvantage for american institutions in the world economy. i am particularly concerned about a requirement in the dodd-frank wall street reform act, which responded to the worst financial crisis in our country's history since the great depression and socially moved forward with an improved regulatory structure for the financial services that are. it was very clear and the

structure had not kept pace with the development of financial products and services and it was a long needed reform. but i am concerned about one of the features in it that would impose heightened capital requirements on the most u.s. banking entities and financial institutions. i wonder if this surcharge was adopted under basel iii satisfies that requirement, or is this an additional burden that would make our financial institutions with that impact. also come with the implementation of the basel iii and dodd-frank how the implementation schedules are different, how you work with our european counterparties across the world to make sure we are moving in the same direction and hopefully acting similar

regulations. i had raised these concerns with chairman ben bernanke during our annual testimony before he faneuil testimony before a committee. he had indicated he thought nobody could be at a competitive disadvantage. i look forward to hearing what your comments are on the capital requirements, specifically for entities and the complex u.s. entities. >> thank you, ms. maloney. ms. baker. >> thank you, mr. chairman. one of the most important dynamics of regulatory forms is to keep our u.s. financial industry competitive pay without a strong financial sector that can issue loans and create jobs, our economy will continue to falter. more jobs will be lost. if we unnecessarily constrain american financial institutions to a mobile standard bs to their international competitors,

businesses will migrate the international competitors. if we restrict our financial institutions from providing innovative and competitive products to consumers, consumers will look elsewhere. it is counterproductive that the most stringent regulation of the u.s. financial institutions tries businesses overseas and chance unregulated sectors of the economy, we must find the right balance. u.s. jobs in our economy depend on it. i would say just for a moment to also talk about sheila bair. i think you've done a wonderful, wonderful job in the row in this financial crisis and they know that whatever you do next is going to be very important and i know that will also help all of us in this country. we thank you so much for all you've done. thank you. >> mr. scott for two minutes. >> thank you, mr. chairman.

welcome, panel. i'd like to also conveyed my deep appreciation to ms. beyer for her excellent work. i want to talk about the international aspects of this. there is no more important deal for us and our financial system to take care of a pricing issue at home. i want to start off by putting on the table hopefully your comments will reflect i'm assuming against question on our failure of our financial system right here to deal with this extraordinary problem of home foreclosures in a downward turn of home values. our standing in the world is going to go down for failure to address this. we have a problem with phone servicers and banking establishment. they are two people, but we've got to figure out a way to get them in our financial resistant to be more hud issue of home foreclosures. it is the course that will drive our economy down and we are not

responding. i hope as we move onto some of our comments we can get that. i also want to mention that this dodd-frank measure in terms international last x and requirements for increased transparency of derivatives by mandating that they be treated on transparency exchanges and by pursuing legal recourse against banks that violate this condition. although the provisions of the dodd-frank is needed for the jirgas market, parts of the financial industry have expressed concern regarding the application of these regulations in foreign countries, particularly on competitiveness. the rules would require international branch the u.s. thanks to collect margin from financial end-user sprinkler slots, thus potentially jeopardizing their ability to compete with foreign and to tease. and edition, it is unlikely foreign jurisdictions will adopt similar laws is that within the dodd-frank mom since the issue is not addressed as part of the

g-20 accord. i'd like for us as we move forward in the question-and-answer period to address that certainly reflect to your foot tapping at home with foreclosures and particularly as i am putting together a major event in atlanta, georgia this weekend to address that, so your comments would be very much appreciated on those two issues, derivatives and home foreclosures. thank you very much comes mr. chairman. >> thank you, mr. chairman. there are many lessons we learned from the financial crisis. few are more clear that a more interconnected than ever before. on one hand we see technological and communication advances that allow companies from around the world to interact. on the other hand we see the last few financial crises problems in one part of the globe that flowed throughout the entire financial system. whether we supported dodd-frank or not, it is that a new bigotry benchmarks across the entire financial services industry

regulators before the committee today will bear consider burden on rules and regulations. that would encourage you to move forward with caution and work with counterparts from around the globe to ensure america remains the financial leader. we have the opportunity to bring important discussion from the committee about the cumulative effects that transcend the nonfinancial institutions. then to examine the aggregate cost of compliance with dodd-frank could lead to job losses and in the worst-case committee downgraded the united states as the financial center financial center. look forward to hearing from witnesses. i thank the chairman for putting this hearing. >> as far as international coordination and financial reform is earned, i guess we're a long way from solidarity back in 09 in pittsburgh with e.g. 20 where we are today. i guess that's because they're substantial difference is beginning to emerge between dodd-frank finance reform what we see in the rest of the world.

back then it was more like you lead here in the u.s. and will follow the rest of the world. nowadays you need here in the u.s. and will sort of pick and choose what were going to follow it. that's because dodd-frank has a transsexual and they don't. dodd-frank has rules. they have pension funds to type her retirement money as collateral for trades and they don't. that's a few examples. because of that, they risk capital and jobs fleeing this country and going overseas in. our economy and competitiveness. the overreaching policies that were codified in the dodd-frank encourage other to increase what they do come increase basically regulatory arbitrage to the keynote of the impact of these new regulations may be hard to measure, but that's precisely what they must do. but the total cost of the regulation and jobs and economic

growth, which regulations address real problems and which ones simply a cost in this type of economic prospect analysis must be done now because the stakes are just too high to do so otherwise get it from. with that, i. >> 10. mr. meydenbauer. >> i'm putting up a small chair. this is the 50 top firms by market cap. in 2003, the u.s. had 51% of the total capitalization. he moved into 2006 in a draft 35% of total market capital station in the u.s. companies in 2102 to 4% market capital come with china going for 1% in 2003 to 22% in 2010.