supply capital. .. will get the effective corporate tax rate among manufacturers vary widely from about 0% to somewhere in the mid-20s in case is a little higher. i don't think i am burdened by the economics training saying i do believe targeted attack assistance can be effected for

instance in industry is attempting to incubate, you often need public incentives to have those industries thrive. the manufacturing tax credit which senator stabenow mentioned had a great deal of uptake and helped establish better facilities, wind turbine, solar panels. i think we should encourage other energy development, too, including nuclear, but the point is for the sake of an elegant economic corporate tax system and we would make a lot of sacrifices. i think it targets set tax relief for manufacturers making things in the united states instead of the overall income. and the last thing that i would have very briefly and as i think it misses the larger debate which is virtually every other company we are competing with has a value added tax system that has rebates for its exporters. the united states almost

exclusively among industrialized countries does not have a system like that and i've not saying we need to adopt a system precisely why cut but it does put our exporters at some of the competitive disadvantage. >> full circle the way i started which is every time you give the example of a successful government policy on encouraging a particular industry there's four or five that failed miserably and five-year is we sit here and practice what you preach getting tremendous incentive to the various green energy segments and my fear is we are siphoning capital and simply siphoning the creativity away from what actually might be working. we are sitting here today encouraging wind. my concern is by doing so we are drawing resources away from something that might be more productive than wind energy so that's part of the overall debate but to your first point regarding the effective tax rate that's what dr. zandi is getting at is because all of the loopholes and incentives and subsidies in the tax code itself

when you in the up with small companies paying a higher rate than large companies year and up with some industries paying higher rates than other industries and what dr. zandi and folks like myself have been encouraging is a symptom that does away with that so the effective rate is the actual rate at the same time. >> one quick point. >> i think i'm out of time. sorry. >> we want to keep moving. >> that's fine. >> thank you. >> i can speak for three days or three minutes. >> senator klobuchar, senator stabenow earlier. >> i would just end their. >> i have a long introduction of such klobuchar probably another day. >> in any case it's good to be here with you, senator sherrod brown. anyway, i wanted to thank all the witnesses. i'm sorry we have a hearing on the judiciary propertied which is also a piece of this making sure that we are protecting all

of the things that we make but i truly believe the way that we are going to get out of this is by making stuff again by exporting to the world, by thinking again, and so all of the focus of this hearing i think is a very good one and certainly the way that my state of minnesota has been able to while we are not where we want to be we are of 2.6% unemployment significantly below the average test due to instructor in and suddenly realized this year i could sit some of our factories on the weekend because they were going through the weekend. a lot that has to do with exports we have a huge history with three m and other companies with export markets that has expanded down into some of the small and medium-sized businesses because they think it's the way to go, and it's just the community as well which is now doing quite well exporting all over the world from port to sugar beets to yes turkey, number one for turkey.

i wanted to focus on the word and manufacturing. we exported 17.2 billion in goods come increase of 17.3% over 2009 and recently reported 12-month job gains of 7800 outpacing the nation. so i think i will start with you. i know it's not that rosy all over the place. i'm well aware of it. but one of the things i've noticed i was down at agco employee nearly a thousand people now, a lot of work in that area going on, they can't find a welder in that area and i spent a lot of time over our technical schools 96% placement rate our lives alexandre this is no longer your grandpa's the five texas schools they are not just fixing cars they are learning how to run computer systems that run the assembly line at boise and other places, and i would like to see a great emphasis, scott brown and i have a bill called enervate of america, a great emphasis on the

degree and how our business manufacturing can work with these to your community technical college is to figure out what their needs are literally within a year and get kids into those programs and workers whose lost jobs. can you comment on the need for workers trained where there's actually the opening? >> music to my years, senator. if i can just divert for just a second mr. chairman, you did ask earlier what can be done to help manufacturing, and one of these things is to ensure that all the elected officials spend time in the manufacturing facility and see real people in the real world doing real fangs and how it's done, and i bring this up because senator klobuchar is a perfect example of that. she's visited many manufacturing facilities in minnesota, and they have a very personal and good relationship with herseth thank you, senator, for your commitment to manufacturers. i would say that you are right

one of the things i hear from my members of the country decides the 3i mentioned already which are taxes under the policy regulatory burden is the lack of a skilled work force. there are jobs that are open and there are those who are not able to fill those jobs. i mentioned earlier and i think it bares repeating we have a partnership with the administration, the president endorsed the national association of manufacturers, skilled certification program which is a national set of standards to help potential manufacturing workers and ensure they have the skills necessary for the jobs of the future and the jobs that are available today. so i look forward to reading your legislation. but the issue is right on and we are working at that from the perspective and a good public-private partnership with the government i think is very helpful in this regard.

64. another pc focused on as exports of manufactured goods and heading up the export subcommittee commerce but having our embassies around the world making it the major focus hoping when the companies are trying to see the private contracts and government contracts but also not closing the door and the small and medium-size especially manufacturing firms that need help in the foreign commercial service and when you and i got up and down in the small business built some help in that regard because it is worth its weight in gold can you comment on the small and medium-size businesses and their need to be part of the growing export market? >> small and medium enterprises are a fast-growing part of our export platform in this country and at the a&m, we have a loan executive if he will from the department of commerce whose function is to help reduce barriers for export opportunities around the world

for small and medium enterprises so i agree that's an important part of the puzzle as well. >> dr. zandi, appreciate you being here as well and i know you see the export market ascii. one key piece of this is as we look at the market one of the things that becomes clear to me and mr. timmons mentioned this we are competing in these markets against companies and other countries that sometimes our new competitors. the of new rules. they've been able to start fresh, and i am coming increasingly concerned with rules and regulations for look at medical device where a lot of the investment is going now because china is requiring country of origin labeling and now no one even guesses two decades ago so because the european system goes faster, one-third of that venture capital money has been going a year or tourism because it takes so long to get a visa to come to america versus great britain we lost 16% of the tourism market

since 9/11, not necessarily because we put the security rules in place but we have an adjusted in terms of how we handle those applications. so i just wondered if you could comment about the economics of changing the rules and regulations because we no longer compete in a vacuum. >> to make an excellent point it's clear that going forward the key source of economic growth will be exports. from the past century we've relied on u.s. consumers to purchase the things that we produce that to juror of the growth. the economy and global economy frankly, and that's one of the inflection points as a result of what we've been through. we can't count on that. we have to look to what we produce to the rest of the world, and we sell manufactured goods to the rest of the world and the manufacturing companies that survive what we went through i think have to be very competitive, they have to have a good cost structure and market niche so we are well placed but one thing that would help in

their effort to sell to the rest of the world is to be cognizant of these regulatory costs and constraints, and when we think about regulation, you know, there's good reason for regulation though we need to think about them through the prism of what they mean with respect to export growth because again at the end of the day that is our key source of growth long run. >> thank you very much. i appreciate it. >> i want to make sure senator klobuchar has extra time after i refer to senator stabenow. >> we could add more time to read this panel is going to be here all day. i know we have to wrap up. i wanted to pose one more question and then give each of you a chance if you want to ask something but it tells you how closely folks up here listening. our staff came up with a great question based upon with the part of your testimony mr. zandi and brill, part of your

testimony the question of the impact during this period of recovery the manufacturing jobs have had that the manufacturing as a sector has contributed mightily to the recovery about half of the growth, but in terms of the job gains is one in one tent. is that what you said? >> that's correct. if you include the tend jobs manufacturing at most. >> so juxtaposing that or putting that on along with this question or this point mr. brill made about productivity very substantial productivity gains. the question i have is how much when you consider both of those and consider the productivity gains the one-tenth of jobs in manufacturing contributing one-tenth come only one-tenth of the jobs what has happened with

regard to the wages, and it seems that even though we've had a pretty substantial to and productivity i wonder how much workers benefit from that, what can you tell us if anything about the wage growth in 2009 to 11? >> senator, i can't speak to that specific. i can tell you, however, that there is some restriction in this area including staff of the bureau labor statistics. the productivity growth in the manufacturing sector has outpaced the wage growth in that sector. that's true and fairly something legitimately something of this may be concerned with. it is not clear with the expectation for the trend would be. economists are certainly familiar and comfortable with the fact that productivity

growth and wage growth doesn't necessarily move hand-in-hand certainly not in the short run. however, over the long run there should be a strong correlation between the two and a free number of years we have seen a lag and growth. i also note, however, that some of that media attributable to some labor policy burdens and rising compensation costs, rising health care costs and so, we have, for example, a decline in the share of wages and as a share of total confrontation across the entire economy workers are being paid more and more in hmong dollars in benefits and that could be a contributing factor in manufacturing. >> i looked at the the the in preparation and the earnings from the mfg. have gone nowhere since the recovery began. there's other measures of wages but that's the most timely and

consistent that we have. so they've been flat. now, that combined with increase of output means profits are up. so if you look at the profits and manufacturers, they've returned to the previous session levels. so most of the benefit of this proven manufacturing has come in the form of jobs, some jobs and in the form of more hours for the people who are working but most a benefit at least so far has occurred to business. let me say one other thing that's not a typical. that is how it works generally. a recession hits, businesses panic, they cut costs, labor, try to get their margins up, sales growth and it goes right to the bottom line the better profits and stock prices that its businesses to expand and they take a risk and that's where we are right now. and it's not happening and that's the problem we have led the recovery is not in beijing. many veterans across the economies of this is the crux of the matter what is it businesses

aren't acting on the better profitability in coming out and saying my sense is they're going to have to because you can't continue to grow earning profits and maintain stock price by cutting costs. that's done. they've done it. now the need for revenue growth and opportunities. so hopefully we will see it. we just need i think a little bit of luck and some really good park policymaking to make sure we kneeled on this uncertainty with regard to the deficit and the debt and the debt limit and it will come to get on terms of jobs. >> we hear a lot of that from across-the-board. i know we are ready to wrap up. unless senator klobuchar has any more questions? okay. and for the panel if you have a thing you want to say before we wrap up, we are pretty close on time anyway. of course the record will be open not only for individual members to submit questions free to answer for the record but of course if you want to submit additional material.

>> mr. chairman, just briefly, thank you for having this hearing. it's important. one word of productivity which is this a trend dating back to the early 1980's and it's been unique in the post-world war two period. one possible explanation that needs further discussion is the productivity measure itself and the degree to which the inputs especially those that are in ports are seeping into the productivity data and skewing it slightly and some economists at of john and michael reindell who used to be the chief economist business week identified that that's worth exploring much more greatly. but i do think one thing that the recession revealed is that there were some structural impediments growing and factoring in this country even after the acute nature of the decline and demand are the infrastructure with which mr. timmons identified as something that's critical. rebuilding our logistical

infrastructure and this country to move goods is also important access to credit, but life and those are the strong foundations for a manufacturing strategy. thank you. >> that's a good note to indolent. we do need a strategy. we don't have one. one hearing is not a strategy may, but i think we've had a lot of good ideas here. and it's worth repeating, as i sit at the outset, that this will be now one of several hearings we will have in the economic committee to best determine those strategies to revitalize manufacturing and to rebuild the space of our economy. i do want to thank both panels with us today and especially those who traveled a great distance to be here. as i said, the record will be open for five business days for any member to submit a statement or additional questions and the would apply to the witnesses as well. unless anything else is to come before us, we are adjourned.

[inaudible conversations] [inaudible conversations]

oscar-winning actor kevin kline testified on capitol hill to declare the food and drug administration to advance the research and review of artificial pancreas systems which could help those with type i diabetes better manage the disease. mr. speed coachers the juvenile diabetes research foundation advocacy program and as a parent to child diagnosed with type won a disease that affects about 3 million americans. this hearing hosted by the senate government affairs committee is about two hours. >> thank you very much for being here. this is one of the afternoons and days we look forward to and i will say that the younger people here in front are much better behaved than the older people who usually filled this room. [laughter] so i really appreciate it. as a point of personal

privilege, i do want to note the presence of the secretary of war edwin stanton from the lincoln cabinet -- no, no, that's kevin kline. [laughter] [applause] >> if you haven't seen the movie the conspirators it is an extraordinary movie, and kevin is brilliant in the world secretary war stanton, so i guess it's not a violation of our senate ethics rules to plug a good movie. by historical content. [laughter] today as i have traditionally done with a good cause, going to turn the german's cowal o2 senator collins and recognition of her longstanding leadership on behalf of diabetes research particularly for children, and her truly passionate advocacy

for federal support for that research. so, without further ado, i give the devil to my friend and colleague, the great senator from the state of maine, susan collins. [applause] thank you. thank you so much, mr. chairman. i am particularly grateful that you are allowing me to conduct this hearing. this issue is near and dear to my heart, and this actually represents the sixth hearing of the children's congress that i've been privileged to conduct. i very much appreciate the opportunity to hold this hearing to examine what is often a devastating impact that the juvenile diabetes has had on an

estimated 3 million american children and their families. i also want particularly to welcome our distinguished witnesses and the more than 150 children who have traveled to washington from every state in the country and from around the world to tell congress exactly what it's like to have diabetes, just how serious it is and why a this so important that we work together to fund the research necessary to find a cure. and i want to give a special welcome to the delegate from maine who is here, 14-year-old caroline jacobs.

she will be testifying later. i want to also recognize senators shaheen who has joined us this afternoon and i think senator lautenberg is going to becoming as well. both of them have a longstanding commitment to issues affecting children with diabetes and their families. senator shaheen is also my co-chair on the senate and diabetes caucus, and her daughter has been the chair also with the juvenile diabetes research foundation to help put together the children's congress. so we are very delighted she could join us as well as our colleague, senator akaka and senator brown. there will be others coming in and out today. senators have so many different duties and obligations but the daycare a lot about this issue and others will be dropping by

as well. i do also want to acknowledge someone who was not able to be with us for the first time since the children's congress and that is mary tyler moore. i talked to mary yesterday and she sends her best wishes. she's recovering from some surgery. she's doing really well. but i know we miss her but she's here in spirit and she's delighted that another famous american, kevin kline is joining us today. thank you, kevin, as well. diabetes is a lifelong condition, and it's one that does not discriminate. it affects people in every age, race and nationality. it's the leading cause of and not what updated medical problems. moreover, it says to me taibbi these accounts for more than

$174 billion of the nation's annual health care cost and one out of three medicare dollars. medical cost for a child type 1 taibbi these are six times higher than the cost for a child without the disease. these statistics are overwhelming. but what really motivated me to devote so much energy and time into this issue was meeting with families whose lives have been forever changed by diabetes. i will never forget has a new center in 1997 meeting with the family whose son had diabetes. this was the first time i really learned about type 1 diabetes and this one little boy looked out to me and said he wished he could just take one day off from

having diabetes. just one day, his birthday or christmas. but of course, for those who have diabetes, you can never take a day off. but it doesn't mean that you cannot accomplish great things. and i am delighted to learn many of you yesterday had the opportunity to meet with supreme court justice sonya sotomayor and hear of her personal story. but it's so important that to travel to washington today to tell your story. you put a human face on all of the statistics and helpless better focus on what congress can do to better understand and ultimately find a cure for this terrible disease. in the individuals with type i diabetes, the body's immune

system attacks the pancreas and destroy his the shells that produce insulin to read an average child with diabetes will have to take more than 50,000 insulin shots in a lifetime. our particular concern is the fact that the incidence of type i diabetes is increasing particularly in children under the age of four. while the discovery of insulin was a landmark breakthrough in the treatment of diabetes, it is not a cure. people with type 1 diabetes face the constant threat of developing life-threatening complications and can face the reduction in their quality-of-life. but thankfully there is good news. since i founded the senate to diabetes caucus in 1997, funding

for diabetes research has more than tripled, and now approaches more than a billion dollars this year. and as the consequence, we have seen some encouraging breakthroughs. and we are on the threshold of a number of important discoveries. i talked today with several of you who have insulin pumps for example, advances in technology like continuous glucose monitors are helping people with diabetes, children control their blood to glucose level which is key to preventing complications. we are also moving closer to our goal of an artificial pancreas. it would revolutionize diabetes care. an artificial pancreas is an external device that people with

type 1 diabetes could use to do with their bodies will not come in and that is automatically control both high and low blood sugar levels of around the clock. this new technology has the potential to dramatically improve the health and quality of lives for individuals with diabetes. and we are going to hear from federal officials today who will tell us about the important clinical trials that are going on that are so promising. the fda has played a pivotal role in moving this research for word and making the artificial pancreas one of its critical paths initiatives. we are making progress in the battle against diabetes, but this is no time to take your foot off the accelerator. we have two choices.

we can sit back and continue to pay the bills and endure the suffering, or we can aggressively pursue a national strategy aimed at touring this disease. thanks to your efforts and you're coming to washington, there is increasing understanding and support in congress for diabetes research funding. last year we were able to pass legislation to extend the special diabetes program for two additional years and that program represents more than one-third of our federal commitment to diabetes research. as such it is critical to our efforts to find better treatment, a means of prevention and ultimately a cure. so welcome to washington.

we are glad that you're here. senator lieberman, thank you. thank you, senator collins, and really what i want to say is amen to everything you said. so i will be brief. use it at the beginning i look forward to these hearings every session, and i do because they are so constructive in a city in which in a government in which too often too little happens that's constructive these days, this is a cause that unites people across party lines and has enabled us certainly in recent years to come together to be supportive of diabetes research and to help facilitate some of the really miraculous

advances that have occurred in dealing with diabetes and our time. the fact that you children are here, young people are here is the most important thing of all because you are the best advocates for this cause. first off, you show how well you were doing triet to show everybody how well you're doing dealing with diabetes but the second thing is you make us all want to make the investments that are necessary to make sure we not only better treat diabetes but really, in your lifetime to have a cure for diabetes, and it's with that sense of optimism but i'm really honored to welcome you and ought of the witnesses here today, and thank the chair, senator collins. >> thank you, mr. chairman,

mr. chairman, madam chairman. [laughter] cementer akaka? >> thank you very much, senator collins. i deem it an honor to join you hear and to say thank you very much for sharing this important hearing again on type 1 diabetes and to share a commitment and passion in trying to move this along to improve the lives and quality-of-life for young people and people of the country and i also want to welcome you and our distinguished panelists to this hearing who have been so committed to this issue and a very special aloha to those

children's congress delegates waiting to testify and those an audience all of you seated here. these are courageous young ambassadors who have traveled from all over the country and the world to educate us to share their stories of their own experiences to bring a human dimension to the policy debate. this shows how critical research and support is for diabetes and the hope for a cure. maybe it is a significantly held a problem in my home state of hawaii, and it is an increasing challenge for the nation. it is an issue that we will look at in the indian affairs committee.

will be part of the legislation that i plan to introduce, and it is a subject of the ongoing budget and regulatory policy debate. in this context, i am proud to support the development of the artificial pancreas, and i will continue to support funding for research at nih which gives the chance for better detection and treatment and hope for a cure. all the more reason i am so pleased to see the children here every two years. they remind my colleagues and me about the struggle of living with type 1 diabetes and the importance of supporting diabetes research. and i would like to extend a special thanks to aaron, a child

away from honolulu with his mom to meet with me today. if you are sitting here please just hold your hand. there you go. yes, thank you, aaron, from coming of the way from hawaii. i look forward to continuing to work with all of you to improve the lives of individuals with diabetes. glad to be with you and joining you in this. think you very much. thank you, senator. [applause] senator brown? >> thank you, madame chair, mr. chair good to see a lot of the kids here and their families coming out and supporting i had the honor of having to have met before young people from massachusetts jackson savage, john thune deals and joshua fish who i see some of them out there in the audience and give a lot

of good information i've been aware of our families have been working on long before i got to washington so i want to thank you for your leadership and i look forward to hearing of our witnesses and what you're to be bouncing back and forth but i look forward to staying as long as i can. >> thank you, senator. senator shaheen, i mentioned senator shaheen is the co-chair with me at the diabetes caucus and the head of the special connection to this particular congress, and we are delighted to have you here. >> thank you, madame chair and to senator lieberman and both of you for holding this hearing today. i have a statement i would like to support for the record but i know we want to get to our panelists, so i just want to take a minute to introduce my granddaughter, a,i was a delegate at the children's congress, thank you and her mother, stephanie and father, craig cochairing the children's congress this year and also want

to recognize abigail and her mother jeneane from merrimac hampshire. thank you both for being here as well and to all families and all the delegates who are here today. i'm very happy and proud and be happy to join you and advocating for research for a cure for juvenile diabetes and also moving forward as quickly as we can at the development of an artificial pancreas. so again, thank you all very much for being here. thank you. [applause] >> senator lautenberg we are delighted that you could join us again this year i mentioned in my opening statement that you to have a personal connection in leadership in this area. estimate a granddaughter also i'm fortunate enough to have come and to the chairman and the

chairman for inviting me today. and i appreciate the chance to work with you, senator lieberman but particularly with susan collins the colleague from maine. she has been so diligent, so persistent, so determined to help our country by making sure those with diabetes can conduct their lives with a decent attitude of participation in all of the activities, and i learned it when i heard the news a couple of years ago that my granddaughter who was here during the obama commemoration for the inauguration, and i saw that she looked pale. i saw that she seemed tired, 13 years of age, 12 actually, and i said to my daughter and there's something wrong with maddie and she said i don't think so, but

some signs tell me we have to get to the doctor, and therefore who they did that come in and her look from thai year and pale , we visited her in the hospital a day after she got back to florida and she had first insulin she was bright, positive, hopeful, and i thought of this devastation that came upon us when we learned that she had diabetes, and i can tell you that kid of mine is on a soccer running for the state championship in florida she's never too tired to take on it and she's been an inspiration to my life just as all of you are an inspiration here. you don't know how much you do for us. you know we try to do things for you but you do more for us when we see your faces and smiles and see your parents and know that life is good for you and we are going to keep working to make it

better and i think our friends here and all of my colleagues for participating in this hearing. thank you, susan collins. >> thank you, senator. [applause] >> senator pryor, welcome. >> thanks for having me. i think everybody understands this now but we want to make sure everybody in the stands the trend is adequate you haven't the guts get one more hand. [applause] and i really just want to say one thing. i know davis more from arkansas is here. thank you for being here and all of you in the blue shirts, if you are making a difference. thank you for coming to washington and fighting a good fight. it is certainly a fight worth having and thank you for all the things you represent and are going to accomplish.

thank you. >> thank you, senator. [applause] >> leading off the first panel this morning is academy-award winning actor maaskant long time jdrf advocate kevin kline. one of our country's finest films and stage actors as senator lieberman mentioned mr. kline may have been virtually unrecognizable in his recent appearance as edward stanton of the secretary of war in the movie the conspirator. but he is no stranger to us he testified before our committee ten years ago at our 2001 hearing, and i am delighted that he's made a return performance and encore i guess i will call it, and because i look forward to hearing his perspective on

the progress that has been made during the past decade and the road ahead. so welcome. we are delighted to have you here. >> [inaudible] hello? talk, he says. time remaining? [laughter] a bitter talks quickly. senator collins, thank you, senator lieberman, thank you and for the mice mention of the conspirators and my performance as a historical figure. members of the committee, thank you all for inviting me to appear today with this distinguished panel and a mixed this collection of such remarkably policed self possessed quiet but ultimately very vocal delegates. ten years ago as you mentioned i had the honor of joining mary

tyler moore and the 100 plus delegates at the 2001 jdrf congress. since then, i am happy to report that we have made remarkable progress in understanding this disease. we are many steps closer to a cure and even as we are gathered here today, new tools are being developed to improve the day-to-day management of type 1 diabetes but we still have a way to go which is why we are here now. not only championing the science, but pushing to accelerate programs. today these great young delegates are getting the attention that they so richly deserved. but i would like to take a few moments to recognize all of the parents and siblings and other special people that these young advocates have brought with them today. they know firsthand the challenges we face as we shepard

our children and loved ones through life with the added burden of diabetes. when a child is first diagnosed with type 1 dalia these the parents are thrust immediately to the additional role of doctors, nurses, nutritionists and even psychologists. they are on duty 24 hours a day, seven days a week, 365 days a year monitoring the child's blood sugar levels, physical activity counting carbohydrates in their meals and snacks, calculating insulin dosages, giving injections as well as managing the emotional stress which come from dealing with the daily rigors of this disease. each day, as i am sure these children will testify, brings its own unique challenge to control blood sugar levels. even with the best of plans and the use of the latest technology, it's not unusual for parents routinely to wake up in

the middle of the night to check their children's blood sugar to make sure it didn't become too high or too low to result in a seizure or a coma or worse. these blood sugar emergencies are all too common and a number of parents here have had to call 911 to save their children's lives. many parents have become their children's advocates in the fight to cure diabetes by joining jdrf. as jdrf's national walk to chair person i have a great pleasure of rallying people across the country to join me the jdrf walk to cure diabetes and i am happy to report things to the outpouring of enthusiastic support, we have raised millions of dollars worth of a walk and jdrf has put this money to work in a direct and efficient manner to support research for better treatment, prevention and ultimately for a cure for type i diabetes. the federal government has also

played a critical role in the fight to cure diabetes in particular with a strong bipartisan support for the special diabetes program. i thank you, senator collins, for your leadership and your colleagues in the senate and the house who recognize the great return on the investment from the special diabetes program and supported the two year 300 million-dollar extension this past december. together, jdrf and the federal government have made and will continue to make powerful partners in advancing research to cure, treat and prevent type 1 diabetes. since i testified here before this panel ten years ago, more than 40 of the jeans have been discovered which put people at risk of type 1 diabetes. numerous therapies to halt the autoimmune attack which causes type 1 dalia these are being tested in human clinical trials.

they're a piece have also been shown on only to halt the progression of dietetic disease to improve the vision in those who already suffer from it. and finally, the artificial pancreas has gone from being merely a theory to a cutting edge technology that has been shown in early trials to prevent dangerous low and high blood sugars. apart from finding a cure from the artificial pancreas represents a watershed moment in the management of diabetes, and happens to also be the parent's dream come true. imagine, if you will, going to bed at night without having to worry about dangerous night time high or low blood sugar levels. or knowing that your child will have a great day at school without the burden of pricking his or her figure come accounting carbohydrates, taking the right amount of insulin and treating high and low blood sugars or just getting so caught

up in being a kid and forgetting to do some of these things and coming home from school dangerously ill. this will come imagine knowing your child will live a long and productive life. since these artificial pancreas technologies have the potential to keep him or her healthier longer, forestalling or completely circumventing the devastating complications until a cure is found. i know the food and drug administration has made the artificial pancreas a priority, and i commend the commissioner for her leadership. but there is more that the fda needs to do. many of these children here today are in fact wearing the components of what would ultimately comprise an artificial pancreas, namely insulin pumps that deliver insulin as well as continuous of glucose monitors, which give sugar readouts every few minutes. the challenge that we face now, however, is to control -- to get

these devices which don't yet work together automatically, to get them to sort of talk to each other and to control blood sugar levels. in other countries there are devices now available that take the first step in this process buy automatically shutting off the insulin pump when someone is going low. this is an important step, one that we need to take in the united states right now. and we can do more than jdrf and federal law funded research have in hospital settings tested artificial pancreas technologies to automatically turn insulin both on and off, and the results have been overwhelmingly positive. the next step is testing these artificial pancreas devices and real-world settings.

to do this without delay, however, the fda needs to provide common needs to provide clear and reasonable guidance. many of the world's best diabetes researchers and leading clinician organizations have joined together with jdrf to propose artificial pancreas guidance to the fda. and the majority of the senate and house urged the fda to get this proposal immediate consideration. we now need the jdrf fda to act. parents out every night worrying every day about their children simply cannot afford to wait any longer. it is past time for the artificial pancreas technology to be tested in the real world settings. we urge and implore of the fda to issue a draft guidance for public comment on the artificial pancreas so that our outpatient trials can begin and the burdens of type i diabetes can be lifted

from the millions of americans as soon as possible. thank you for the opportunity to participate in the hearing today and i would be pleased to answer any questions. [applause] >> thank you very much for that excellent testimony. we are going to do questions for the whole panel after we hear from the rest of the panel. so next, we will hear from dr. griffin rogers who is the director of the national institute of diabetes and digestive and kidney diseases at nih. he will be able to bring us up-to-date on the advances and researchers, and i also hope that he will provide some examples of the research that is

specifically supported by the special diabetes program. dr. rogers, thank you. >> thank you very much. tester chairman, senator collins, members of the committee, as the director of the national institute of diabetes digestive and kidney diseases or niddk i think you for testifying ought to be to this hearing on diabetes and on behalf of niddk and the other institutes on behalf of an ideal for the national institutes of health, i am pleased to report that we are vigorously pursuing research to prevent, treat and ultimately cure type 1 diabetes and its complications. through collaborative and coordinated research efforts with our partners, including the juvenile diabetes research foundation, with the support of the special statutory funding program for type i diabetes making critical studies and

critical steps towards these goals that i outlined. before i highlight some of that exciting advances, i would like to acknowledge the important contribution of my fellow witnesses. here in spirit near you continue to motivate us with your unwavering devotion to improve the lives of others with type 1 diabetes. kevin kline, you raise awareness of the disease and to promote efforts towards the cure. i am also pleased to share the table today with dr. zimliki who will describe the complementary efforts of the fda to at the of the artificial pancreas. i also like to acknowledge the children, parents and families who will testify and proudly representing their states and the many other americans with type 1 by moody's. many of you have participated in clinical trials to help improve diabetes care not only for yourself, but for future

generations. we are inspired by your dedicated efforts and your enthusiasm. now, research and type 1 diabetes has made a tremendous impact on the health and quality-of-life of people with this disease. i will reference to the handouts during my testimony to illustrate this point, and of these handouts are attached to the copies of my written testimony. on the first hand out, a bar graph shows the survival rates for people with type i diabetes has dramatically improved over time where people diagnosed flexible in the 1950's represented by the blue bar on the floor level on the side of the graph to read only about 70% survived for 25 years worth of the disease. this number has dramatically increased so about 95% for people diagnosed in the 1970's represented by the purple are on the far right side of the draft.

look at even brighter for today's children due to improvements in diabetes care and technology. still, of the burden of living with diabetes, as my colleagues mentioned is enormous comes of it is critical to build on progress to find ways to prevent and cure the disease. on the second hand out, you will see that even before type 1 had diabetes becomes apparent, the immune system of people who will develop the disease are destroying their insulin producing beta cells, leading to a decrease in the data cell mass, and i will describe how the in on the beach is focusing our research on different stages of the disease progression. now, as indicated on the far left of this graph, understanding the causes of type 1 diabetes is essential towards preventing the onset of immunity. preclinical sign of the disease and other diseases itself are significant progress has been

made in unraveling the genetic cause of the type i diabetes as was mentioned just a few years ago we only had three genes we understood contributed to the risk of the disease. today due to the efforts of the type 1 diabetes consortium and other researchers, nearly 50 genes have been identified. but we know that there are likely factors that exist in the environment that interact with these genetics to turn disease risk and to disease reality. and because of the genetic risk for type deacons type 1 dalia visas well characterized we can identify those at risk and follow this. this has allowed us to embark on bold, longer-term systematic studies to identify these environmental factors. this study has enrolled over 8600 newborns with high genetic risks for the disease, and we plan to follow them for 15 years.

we will be collecting biological samples and information about their lives, identification comfortable, of an infectious agent that triggers this auto immunity could lead to a vaccine to protect against this disorder. ..

is conducting trials of promising therapies in newly diagnosed patients. now, the third handoff continues along a spectrum of disease progression and this next age of disease research shown in green focus is on people with established type one diabetes. and a high priority for this stage is a development of new tools and technologies to help people improve their blood glucose control because they can reduce diabetes complications by up to 70%. this is certainly an artificial pancreas that automatically links with close monitoring with insulin delivery to make a positive impact on people's

health and their quality of life. and i.d. decay is supporting innovative, innovation and technology critical to the development of an artificial pancreas working closely with our partners at the fda. we are pursuing testing pancreas technology and ensure that they are safe and effective. in a recent advance scientist develop and are testing a by hormonal artificial pancreas. a counterbalancing hormone to more finally reproduced the activities of the human pancreas. another recent study cometh researchers looked at overnight closed loop insulin delivery country -- following two different real-life andrew scenarios, testing close loop technology in real-life situations. it is really a key step toward moving this technology out of the clinic and into the real world. a major goal of research at the next stage shown in purple is to

investigate ways to replace the destroyed data cells and restore and to eyelid transplantation. in a clinical islet transplantation contortion misconduct king trials. science is like those of a beta sale biology consortium are pursuing strategies to replace islet cells by either growing cells in laboratories or for transplantation into people or by expanding their remaining beta cells or by posting other types of cells in the pancreas to become beta cells. finally, tilt prevention of our cure for type one diabetes is possible research towards preventing, resting in reversing the complications of the disease is critically important. shown on the far right of that graph, just recently we sell the saw the biggest advance in

diabetes in 25 years. at landmark study from the retinopathy clinical research network found that patients who received a combination of a drug and standard laser therapy shows substantial visual improvement after one year. advances like these in diabetic complications also benefit patients who have type ii diabetes who were at risk of these complications as well. hundreds of thousands of individuals have participated in research supported by the special diabetes program irca remarkably, nearly 30 years after one pivotal study began, about 95% of the participants in the muslim arc trial showed that glucose control to radically continue to participate in a follow-up study known as edict and as a result of their commitment as long-term investment in research continues

to identify ways to improve the health of people with diabetes. i'm grateful for the opportunity to share with you just a few examples of the many recent advances in ongoing research in type 1 diabetes. we continue to be inspired by the dedicated efforts of the individuals affected by type 1 diabetes and by the organizations like jdr app that represent them. we look forward to continuing our partnership with the jdrf and her sister federal agencies on research to combat type 1 diabetes and competitions and we will continue to be diligent in our fight against type 1 diabetes to help all the children here and the many americans whom they represented a and we will strive to improve their quality of life with an ultimate goal of hearing this disease. thank you mr. chairman and senator collins for your leadership and calling for this hearing to continue to bring attention to the importance of type 1 diabetes research and for your continued support of nih

research. i will be pleased to answer any questions that you might have. [applause] >> thank you dr. rodgers. our last witness on this panel before we hear from the children is dr. charles zimliki. he is the chair of the food and drug administration, artificial pancreas critical path initiative. as you can see there is tremendous interest and excitement about this research and technology and i look forward to hearing your statement. >> i share that excitement as well. madam chairman and members of the committee, i am dr. chuck zimliki located within the center for radiological health of the fda. i would like to think of the committee for the opportunity to

discuss the artificial pancreas system and what fda is doing to assist in the development of these critically needed and potentially life-changing devices. as a person living with type 1 diabetes, i am personally committed and professionally committed to seeing this important novel medical device approved in the u.s.. i just want to go off-line and say mr. kline i furley support the postal and issuing guidance i believe the fda will submit guidance for all types of artificial pancreas before december of this year. [applause] [applause]

>> i still have six minutes ago here. [laughter] diabetes is a disease that affects the entire family, especially when a child is diagnosed. i know this because i was diagnosed with diabetes when i was 13 years old. when i was diagnosed the technology was a great deal different. they were just coming out with glucose meters and it took much longer than it does today to obtain a blood glucose measurement. technology has come a long way and i'm very grateful for that. but even now, today's technology, we still must prepare fingers to test for blood multiple times a day in overtime that can really hurt. i am sure you kids can attest to that. we must also calculate insulin doses administered necessary insulin via syringes or infusion pumps to lower blood glucose and as always we have to be prepared

for the inevitable lows and highs associated with diabetes. i admit, it is really tough being a diabetic. paul great strides have been made in diabetes management current treatment is consonant pervades all aspects of a persons life presenting a particularly arduous burden for children and their parents. an artificial pancreas system is an innovative device for treatment of type 1 diabetes that once fully developed will automatically monitor blood glucose and administer appropriate insulin doses. this life-changing technology will positively impact diabetic patients health and quality of life. as a person with diabetes i'm acutely aware of the benefits and artificial pancreas system will provide. i say well because i'm highly optimistic that industry, researchers and fda will bring this device to market. and artificial pancreas system will allow people with diabetes, especially children, to live an active life without the constant

need to address glucose levels. pauline know the potential benefits are enormous and artificial pancreas is a significant device many presents the potential for serious risk to the health, safety or welfare of the patient. if not properly design, use of an artificial pancreas device in an outpatient setting can place patients at significant risk because the device controls the administration of insulin. as such an investigation exemption or ide from fda is needed to allow the investigation device to be used in a clinical study. currently fda has approved over 17 clinical studies for artificial pancreas systems at various levels of development and we have seen promising results. fda is helping advance the development of an artificial pancreas system by prioritizing their review of ide studies fostering the discourse and, shortening study began with the

times and providing clear guidelines that passed the market for industry. in 2007 fda created artificial pancreas critical path initiative bringing together a multidisciplinary group assigned to clinicians from fda and nih. one of the major goals of this initiative is to identify roadblocks and possible solutions to streamline the regulatory process. a shining example of this effort was how fda worked with the developer of a software program so that researchers working on an artificial pancreas system could test control rhythms and use the results to support the regulatory submissions. this important software tool enables researchers to quickly test artificial pancreas control algorithms and is accepted in places of costly and time-consuming animal studies. this effort saved investigator six months to a year and expedited the transition of human trials. fda also encourages researchers to contact the agency early to discuss clinical study lansing

get an informal feedback to improve their studies and to facilitate the review process. this quick informal feedback and help investigators develop better and more complete study plans for fda review. when investigators submit their final study plans, fda gives the submissions these submissions the highest priority. and works with investigators to move them and efficiently through the review process. questions in research challenges are resolved helping researchers start their studies and there. fda guidance and industry standards help manufacturers and researchers understand the minimum requirements for making a device that is safe and effective. this helps them make the best use of resources and streamlines the regulatory review process. we agree with jdrf another set guidance in the industry is useful for product development. on june 22, fda issued draft guidance that will help advance development and approval of an artificial pancreas system to

treat type 1 diabetes in the u.s.. this guidance documents an early version of an artificial pancreas system known as the algeo system. they'll just system can help reduce or lessen the severity of hypoglycemia by temporarily reducing or stopping the delivery of insulin. patients using the system still must test their glucose levels on a regular basis with the glucose metering. the draft guidance provides recommendations for those planning to develop and submit for fda approval an application for a system. fda is seeking input from industry researchers and clinical community on the draft bill specifically the agency is interested in feedback about the types of clinical studies that should be conducted and what their target outcome should need to demonstrate safety and effectiveness. your input is very welcome. fda is also working on the second guidance as i had earlier

discussed. fda has been working with research communities such as jdrf to expedite this guidance and we promised the publication of the draft guidance by the end of this year. early december. finally, fda is working with nih and other interested parties in developing the next artificial pancreas workshop which will focus on developing better technology for creation of a more accurate and reliable artificial pancreas system. these are assisting kids that -- you can put it on and not worry about it and i can't wait for that day. if he is fully committed to the development of an artificial pancreas to meet this critical help me. is the goal of the agency to provide a clear path for manufacturers to provide people with diabetes with innovative safe and effective medical devices to treat their disease. madam chairman this concludes my formal remarks and i would be pleased to answer any questions the committee may have. [applause]

>> thank you so much for your testimony. we are going to do a six minute round of questions so that we can get to the next panel. we could keep you here all day. dr. zimliki it is great news that you have given to us today and i saw the guidance on monday about the draft guidance. in early may, 59 of us wrote to you, signed a letter that i spearheaded, that encourage then encourage the fda to move forward with issuing guidance that would enable clinical trials for testing the artificial pancreas to move from inpatient to an outpatient basis. does this guidance help us along to achieve that goal of moving to the outpatient guidance?

>> yes, indeed it does. this is the complete package guidance. this will help investigations, get them approval for the clinical studies in the clinic and it outlines what type of information the fda needs to assure safety as we transition from the in clinic to the outpatient settings. >> and on a related question for you, i have heard, and there are some delegates from canada here today, that the low glucose suspense system technology is available now in canada and other parts of the world. could you explain to us, and i'm not trying to put you on the hot seat, though maybe i am trying to put you on the hot seat -- but, why isn't this available here if it is available next door in canada? >> well, it is hard to draw a

comparison across the various regulatory agencies, actually across the world. the fda has to operate within u.s. law which states medical devices must be safe and effective. i will give you an example. the european union said medical devices need to be safe and perform. that might not sound like a big deal or a big difference but there is a significant difference between the two. i will use this as an example. this is going to be a long answer, i am sorry senator collins. to evaluate the performance, all you need to do was show that the insulin pump shuts off when the sensor reads low. now that is a perfect engineering question that can be tested on the bedside and it is an easy thing to do. fda agrees that type of performance is needed. what the fda also need for effectiveness is to know what happens to the patient when the pump actually turns off.

that information is critical because it allows the prescribing clinician to look at the information that is provided in that clinical study and determined whether or not their patient actually can use this device beneficially. so with regards to the deo system i will say medtronic and fda has been continually working together and and i believe the ongoing study right now provide sufficient safety data within the u.s. and it is the hope of the fda that the safety data will allow the transition to an outpatient and finally approval of that device. >> thank you. dr. rodgers, last year congress passed legislation extending the funding for the special diabetes program through september of 2013. how important is it for congress to do multiple years as opposed to year-to-year renewals of funding? does that have an impact on the

kinds of studies that you can fund? >> senator we were very pleased to see the multiyear renewal of special diabetes program grass through fiscal year 2013. the multiyear renewal greatly improves the planning process that goes on at idd k.. for example many clinical studies take multiple years to perform and it would be very difficult if not impossible to start such a multiyear clinical trial without knowledge of whether the funds will exist in future years to continue those types of funds. one area that we are absolutely looking at is to bring new people and new talent into this field. for example in the artificial pancreas, we have obviously very dedicated and talented clinicians and we have people in the industry but what needs to link them to her as my colleague

dr. kevin kline says to actually put it together are bioengineers. so with this multiyear funding where trying to put in training efforts to bring bioengineers into this field and training occurs over a long time horizon and there for multiyear funding is also critically important. one final thing that i would say is that, as we move towards artificial pancreas, clearly we would recognize that there might be some issues related to compliance so now we are trying to get people give people who have been previously engaged in behavioral science to tell us what particular challenges we might face. we are trying to get them involved in research in diabetes. so, training and bringing in new talent is critically important in multiyear funding greatly assists in that regard. >> thank you. mr. kline, you mentioned in your statement that when there is a diagnosis of type 1 diabetes, it affects the whole family and

involves involve the whole family. you also talked about the very different challenges at different ages. could you, having lived with this for quite some time now, elaborate on the impact on the family and the challenges of different ages from toddler to teenager? >> well, it affects the entire entire -- transforms the entire family and it changes with the vicissitudes of the degree of the age and the various vicissitudes that the disease can go through. suddenly in the teenage years, with the hormones being what they are, there is chaotic glucose levels. >> people are agreeing.

[laughter] >> and, as it is a vast improvisation of figuring out how you react to this. it is this the real high number? is this the hormones? not unlike life in that way, trying to find ways for the absolute cause for any particular symptom. but obviously when a child is diagnosed as six months, he can't tell you he is feeling low or feeling high. it is too horrible to imagine. it does get easier all things being relative and given our human nature and our marvelous adaptability. we can adapt to a surprising number of things. and kids get more and more used to it. get more and more top of it

depending on the nature of the child. there are are some type a personalities that are all over their diabetes and can really control them and there are others who are more in denial of that who don't want to be bothered with it, and those days of not having diabetes he spoke of earlier, just one day and sometimes they will take that day even though it is not an officially appointed day for such behavior. but they will take it upon themselves to. it gets easier and harder, but the thing i find most of all, it doesn't stop. when your child gets over and goes -- older and goes off to college you are still calling incessantly. you were still checking out. you are still worried.

you are still make him trips at strange hours of the night to deal with the insulin emergencies. it is moment to moment, hour-by-hour, day to day. it is ongoing which is i think dwight jdrf wants to stress the urgency and the need to keep the research going and gets the artificial pancreas done. i think is these marvelous children can attest, it is tomorrow. what is going to be here sooner than we would like and we would like it to have it tomorrow or yesterday. >> thank you. senator brown. >> that happens regularly with me. [laughter] it is a conspiracy.

[laughter] >> you are not in massachusetts. >> i asked for that. >> that was very dramatic, yes. [applause] >> that is what this button is. >> that was a good stage trick, mr. kline. [laughter] >> senator brown. >> that was perfect. certainly, -- everyone is awake now. >> how do you follow that? >> mr. kline thank you very much for coming and offering your star power to a cause for just this i think everybody i know has some type of experience whether it is in their own family or their friends, soap really thank you for taking time out of your schedule. i think we all respect you -- your acting ability and what you do with philanthropic causes the thank you.

dr. zimliki i have 225 medical device companies in massachusetts and i visited medtronic's and others in the biggest challenge, and i've met with obviously director pam borg and you know my feelings on that. the fact that there is a tremendous amount of delay and inefficiency within the fda. i will say she recognizes that and she's make great efforts to try to streamlined, consolidate and eliminated a lot of duplication. the number one issue i find in massachusetts and i traveled throughout the country as you have a company trying to make a difference for people like this and marching along with a checklist in the middle of the checklist i have to go back to square one at tremendous cost. i look at those devices improving in ireland and canada and other parts of the country and they are saying to me as a u.s. senator senator why are we being approved here in massachusetts and the united states? [applause]

on the one hand, i've been very critical of the fda and its delay in the fact that it is costing. there needs to be consistency, stability and certainty in the process because it is putting at what lank it on development and the ability to find cures. on the other hand i've also been very public in saying thank you to her and the agency for finally realizing that there is a problem in trying to fix it. so i wanted to let you know that and i'm wondering how are you finding the new leadership and that new process? is it moving along as expeditiously as you would like? it is a softball. [laughter] >> i am due for a promotion too. [laughter] absolutely. yes, absolutely. i believe we have a new leadership and dr. sher and has

certainly said that there is room for improvement for the review process by increasing predictability, consistency and transparency and there is an entire action plan associated and didn't place regarding the improvements in the review process. my focus here today is about the artificial pancreas and i am very happy and pleased to know that doctor hamburg and dr. sher and give me the fullest support and we are going to make sure this device gets approved. we are hopeful that this guidance outlines or four improves the transparency so a company like you reference doesn't go halfway through the development process and have to start back at square one. >> that is a tremendous job killer in my state and brought the country. i think you stated that you want a device that performs precisely and as a unit. what steps are you an taking to

ensure the quality of the systems and the clinical trial in your face to guidance? >> just give me one second second here. >> okay. you thought you are going to get easy questions. >> well the face to guidance is really sort of adopting some of the information from jdrf. granted they're face to ideas which i will call the morgue vance artificial pancreas guidance is using some of the information that the clinical panel's recommendation by jdf submitted. is a three phased approach and the idea would be to understand the device and the clinic and then transition into a more realistic version of home life, except under mitigation or supervision such as the diabetes can. i'm sure most of these people here up into a diabetes camp echo is that correct?

thank you. i like you too. and then the last would be the transition, from the transition study to the outpatient and certainly that is the recommendation associated with some of the jdrf recommendations as well as most of the medical community. it is still under development and we will be finalizing finalizing that and you will see the publication december of this here. >> dr. rodgers what is the role in supporting the fda in this process? how do you foresee the role, nih's world changing in the current month and will you be facilitating the transition to clinical trials with the translational research? >> yes, under the auspices of the diabetes interregional chordata committee we have regularly meet with not only our colleagues at the fda and the cdc and other federal agencies that other institutes within nih that have a role to play in diabetes research.

we work very closely with dr. zimliki and his colleagues in an interagency artificial pancreas working group. in fact just a few months ago we held a meeting in conjunction with the jdrf and we are actually planning to have a follow-on meeting in the fall of this year to develop sort of a working understanding of what are some of the challenges, what are the other groups that we need to bring into the question, particularly bioengineers, mathematicians, theoreticians to try to assist us in moving more expeditiously along this pathway. so, we have an essential role we have been working very closely. this is not only with the fda and nih but the meeting in the fall of this year will also involve a jdrf as is will. >> very well. madam chair, listen you surprise me more and more each day. i wasn't aware until this year

that you were advocating for this cause the thank you for that. there will be an opportunity to submit questions to our panel members because i know a lot of folks are. >> absolutely. >> and i want to also say thank you to all the parents and kids they can. i'm going to be bouncing back and forth as i've done so trying to get back with the kids. >> thank you. senator shaheen. >> cannonmack been in chair and thank you to all of our panel is this afternoon. dr. zimliki, as you are aware i know, i share the frustration that both senator collins and senator graham have expressed about the pace at which the fda has moved on getting the guidance out on the artificial pancreas. i am pleased to hear you say that you expect that to happen by december but i wonder if you could then outlined what the next steps are once that happens

on the way to getting approval for the artificial pancreas? >> can you clarify which artificial pancreas type system you are asking about? >> i would think -- i know there are a number of those systems in development and i am interested in seeing something that can be commercially available on the market that will be approved by the fda and be safe and available to my family on all the families who were here. i don't particularly care who the producer of that system is. >> i was just asking for clarification on the thai. the artificial pancreas have lots of different types. we talk about the deo system which the agency believes is a type of artificial pancreas and that one by far should be on the market sooner than later and i would fully support that. >> i appreciate that. i guess i think for many of the

people in this audience, they don't see that as the artificial pancreas that we are really hoping will be on the market. i agree that is a step in the right direction, but as has been pointed out that device is available on the market and other countries and we would like to see not only that available here, but to go to the next step to have a continuous system available for people. >> and so is the question that you would like to know the timeline? >> i would like to know what steps the fda seized that it is going to require in order to move forward. so you said you expect to see draft guidance on that by december. so then what happens? if you can just outline the steps. >> the draft guidance is out for public comment for anywhere between 60 and 90 days and we look forward to all the comments in the scientific community to help shape and modify that

guidance in the hopes of making a final, so it becomes sort of like the guideline to an approval package. now, the timing and the ability to get get a device approved depends upon a lot of people. it really depends upon fda being transparent and setting this guidance out there so that industry can follow this and actually conduct the studies. that takes time and it takes people like you out here in the blue shirts to volunteer and any part of these studies. so the process is that i probably made to next year it will be finalized and even when it is not finalized, but when it is published in december, industry can start developing their process and getting to an outpatient study and a pivotal bold study that will lead to an approval. in november of 2010 i believe, one of the jdrf investigators that are artificial pancreas

workshop estimated anywhere between 2013 and 2014 getting to a pivotal study. there's a lot of information and needs to be built up to get to that final stage for product approval and it is contingent on the research for glucose sensing. when he better sensors. we absolutely need more reliable, continuous glucose monitor sensors and when he do research to really find out how to make that happen. >> dr. rodgers, you talked about the role that nih has with the fda. can you talk about how nih can be helpful in moving the process forward? >> well senator, in addition to working on a collaborative and coordinating basis, some of the vital research that dr. zimliki is mentioning is something that we see as our major contribution in moving the process forward.

and making it a reliable and practical step. just recently, as i mentioned, for example and they closed loop system not only using insulin but to try to more closely replicate what the pancreas does and scientists who we funded used to hormones, both insulin and a counter regulatory hormone look at gone to see whether one could be more precise blip -- let glucose control over time but again these are done sort of in a clinical setting, ultimately for this to be effective in a row the real world. we have to try to replicate and that is why this more recent study is actually looking at two different meal scenarios particularly at night. that would be a critical step and we could use this closed loop system so you don't have to get up in the middle of the night and the parents to check

your blood glucose. that would really be an enormous benefit. for example these two scenarios, one lesson ian scenario in which 18 ate a modest medium-sized meal to see how well the closed loop system could look at the various levels of the close control and how that occurred over the setting. another was the sort of a second scenario, and eat out, see you caught on replicate a larger meal that you would have if you would go out dining and how well were you able to maintain that level of glucose control? these are kind of both barry and basic investigations we were hoping to do but then in addition and bar practical real-life scenario and in moving this research forward in the clinic to the bedside. >> madam chairwoman my time is up but i wonder if he would allow me to just ask mr. kline one question? thank you area much mr. kline for being here and for being

willing to testify on what we need to do. if you had one comment that you could leave with policymakers after today's hearing, what would it be? what would you like us to take away from this hearing? >> i love the question you were posing because you are asking in simple language to explain what are the steps because so many things get lost along the way in the byzantine labyrinth hallways of bureaucracy. i love that you are asking for a timetable and four really simple explanation of when will this happen and what needs to happen in order to get the artificial pancreas for example that we have been talking about, the one that we have described, that will alleviate for these children and for type 1 diabetics around the world the

constant burden of self monitoring, something that will effectively work as a pancreas works and doles out the appropriate amounts of insulin and glucagon and takes the worry out of the constant vigilance that type 1 diabetics have to practice. >> thank you all very much. >> thank you. senator pryor. >> thank you very chair and i would like to start with you if i could dr. zimliki. you know, great news on the artificial pancreas and some of the really positive encouraging things you have said and the other panels have said about it. but another question that i don't think i've heard yet or an answer i have not heard yet is, but would be affordable for the average household? so tell us what your

anticipation, what your with your expectation is on cost? >> i wish i could tell you that answer. fda or my role within fda does not focus on the cost. we worry about getting the product approved. i will say that we are in collaboration with cms for reimbursement and the hope is one day not only will this study provide approval for marketing within the u.s. but also for reimbursement. >> and you said there are several models that are out there that may be headed to the marketplace? >> several types of artificial pancreas systems? yes. >> and you anticipate they will be approximately the same cost or will there be a big cost disparity? >> again i would have to defer to industry who sets these prices so i apologize that i can't answer that. >> part of your process though you don't fully look at the cost? >> part of my ross as i look for the safety and effectiveness of

the device. >> well we will have to work through the cost may be in another setting the thank you for the answer. dr. rodgers, let me ask you if i may, how does the united states compared to other countries when it comes to diabetes research and treatment? are we leading the world? are we behind? how do we rank out there? >> i believe the research that is conducted in the united states really does -- i think we can be proud in particular nih sponsored research as well as research that has sponsored public groups and diabetes in particular with making great strides in not only understanding the genetic susceptibility as i mentioned in type 1 diabetes. a few years ago we had three genes analogous up to 50 and they know that among these 50 for example there are a small number of genes that contribute

a great, a large amount of the genetic risk and there is a large number of genes that have only a small component. in this country, for the first time and as a direct result of the special statutory funding, we are beginning to see now that diabetes incidence of this disease is increasing and it is increasing at an earlier age. we have to assume over this period of period of time it really isn't genes that are changing but it is actually something in the environment and that is what it is important to undertake bold studies to determine what the czar and the environment that are contributing to accentuating or initiating that autoimmune attack. this is why this study that i referenced in my comments really is going to provide us with a lot of information. early on they beer using new

technologies, for example the human microbiome in which we are looking at the samples that we are collecting from these children over time and it is already giving us information about potential viruses or bacteria or other agents we are exposed to. type ii diabetes although we are not focusing on this, type two diabetes the story is quite similar. just a few years ago we just had a few number of genes and now we are up to 60 or 70. that explains the type ii diabetes. we are understanding a lot more about type 1 diabetes contributing to prevention and potentially treatment of type ii diabetes as well as contributes to that 174 billion-dollar annual cost that senator collins referenced in her earlier statement. >> the united states, as we do research we are sharing that with the world and others are benefiting from that research as well. >> yes. certainly our investigators work

that is performed and funded through the nih is being publicly available so that others can potentially mined the data and ask other promising questions. this is how one can really leverage the investments to get the greatest return on one's investment. >> and haven't we designated a certain amount of funding or a percentage of funding to nih specifically for diabetes research? >> well obviously the special statutory funding is exclusively for that but over and above that, regularly appropriated funds also go to diabetes research. >> and you can see the results of that statutory funding? >> oh, absolutely. i listed just a few highlights to give you just a glimpse of that but over it period of time in which this funding has occurred, we have really made major steps by leaps and bounds both in terms of our understanding but moving forward

eventually at all steps in the progression of the disease. >> the number of cases of diabetes has gone up in this country. are you saying that all around the world? >> the number of cases that have been followed largely, the highest prevalence are in scandinavian countries. finland for example has the highest incidence rate of the disease. the lowest incidence by comparison is venezuela and there are a number of -- so this clearly may be related to racial ethnic differences, perhaps exposure and the environment to factors and diet. maybe sunlight exposure are other things but for the first time as a direct result of the special statutory funding, we have developed a program in collaboration with the cdc to begin to search for the incidence and certain places around the country to begin to determine whether our incidence

rate is static or whether it is increasing. we are beginning to see the same thing that is occurring over in the scandinavian countries that not only over time is the incidence increasing but it is occurring at a much earlier age. >> one last thing if i may add a chair on. you are seeing that same disparity geographically in this country? i think in my state we have a few counties where the incidence rate is over 10% and not true in other counties. it is a more concentrated in the southeast part of of the united states? >> i'm not aware of any predilection and the united states although i would say the search and study with in conjunction with the cda is looking at particular clusters where they may exist. when one sees clustering of the best that has a high possibility or opens a possibility that there might be all environmental factors and that is something we are now poised to be able to look at as the cdc does for other types of clusters of

disease. >> thank you. thank you very chair. >> thank you very much senator pryor. senator begich, welcome. >> thank you very much madam chair one. i know you have a bill on the floor. i know senator lieberman, you are playing tag teams so thank you very much. i want too a statement and then i want to ask a couple questions if i could to dr. zimliki. first first i'm pleased to be am pleased to get the update on the current research and hear from so many folks and also from these young people. i have to tell you, you have been very patient or all of our presentations and discussions. for young people here, we could take a lot of lessons from them so thank you very much. [laughter] mr. pryor just whispered, if only the senate could do that. i agree with him. we have come truly a long way in managing type 1 on a day-to-day

basis. is a matter of fact spent some time with two alaskans, part of the children's congressional delegates somewhere whenever there. we actually went and watched the nationals, the mariners and we are seattle fans. we felt we were winning until the bottom of the ninth and depending -- if anyone watch that game, if you want to see a baseball game that is the one that was well worth it so we had -- they are nodding their heads yes. but we also had a chance to talk reef and we will talk later today but i i know their attendance and their parents, karen and steve, can we want to thank all the families that are here in the children that are here to help us understand better. but it's exciting, particularly exciting to see the development of the artificial pancreas and i can truly transform lives. i understand that we must continue to invest in the tools and help better manage the disease but i also know we all

are really in want and need of investment of research to help find a cure. to this and we must continue to force public partnerships to find a cure. diabetes is common and growing in the state that i represent, alaska. in 2009 nearly 7% of alaska's population has been diagnosed with diabetes. in 2007 the direct and indirect cause -- costs were state was approximately 419 million. we can talk about the caw systems up when you look the other impact, the human impact, the families and the burden of the disease and what families have to do it is significant. this is why and very glad to have so many people here today to deliver the impactful and memorable message. two years ago when i first got here an alaskan team came to visit to me me to advocate on behalf of the special diabetes program. she brought me a photo book of her life and what she has been doing to deal with type 1.

and it was very amazing because you can talk about it but when you see the photos and her life unfold from day one as she went through it, it was pretty impactful and a booklet i still keep in my office to remind me of the impact in stories all around this issue. again i want to think of the parents and the kids that are here. thank you for your advocacy. doctor of i can ask a couple of? questions. i want to swell up on senator pryor real quick. you mentioned cms reimbursement. you said you are working through that and no disrespect but always on a federal folks in frenemy it is always soon, maybe we are working on it and i'm going to ask a very specific, what you think the timetable is for cms to actually respond and resolve the issue of how it is going to be paid for? >> i can speak on behalf of cms but i will tell you the following, is that the first priority is to develop the appropriate clinical studies

necessary for product approval and archiving within the u.s.. we are hopeful that we can -- we have contacted our cms affiliates and they would like to make sure the clinical study proposed can actually kill two birds with one stone don't so to speak so we cannot only have the clinical data necessary for product approval but also reimbursement and we are hopeful that we can work with them. we have also communicated. >> let me pause you there for a second. when you think you will have that? when do you think that will get some results to say we have partners and we are ready to roll? >> i think we need to finalize the draft guidance first. >> so from december to win them? i hate to do this. i do this to every committee. you are not alone. and a christie, they have these common phrases and i recognize it as a former mayor who administrators and local city council.

we use the same phrases so i know that. what i'm saying is after december you are working through this now, but give me a sense. >> i apologize for interrupting but in developing and publishing this guidance it is not a trivial task. this is a huge monumental effort that the agency is putting forward and i would like to say that we would have that information available at the same time as the publication of guidance but i simply cannot guarantee that data and i apologize for that. >> based on your experience for something of this magnitude, is it for cms to say yes we can do this? it will be two years, three years? >> i don't have the experience or the luxury of knowing how long that would take. i will talk to my commissioner. >> and then maybe you can, on issues of this magnitude maybe

you can give me whoever would be the person at the fda experiences of the past and how long it's at. if the think that would be important. the last thing i i will ask very quickly and i apologize, have to depart. how many do you think clinical locations do you anticipate for the trial? do you have a sense of that get? >> it really depends upon how quickly industry wants to do it and how much variability they want to introduce in their clinical study design. certainly it is more than one. but it really is dependent. we have introduced enough flexibility to allow industry to sort of dictate how many sites they need to study and where they would like to study. >> thank you very much and i appreciate the comments and i look forward to what you can do. >> thank you very much. i want to thank this panel of witnesses for excellent and highly encouraging testimony this morning. we will continue to work closely with all of you.

thank you. [applause] [applause] our next panel of witnesses consists of children who know first-hand the burdens of living with diabetes. our witnesses are caroline jacobs from maine, jack schmittlein from connecticut, and kerry carry morgan from virginia and jonathan platt of california. each of these children are jdrf children's congress delegates and we are very very happy to have them here today.

[inaudible conversations] caroline, since you are from my home state, you get to go first. [laughter] >> okay. good afternoon chairwoman collins and members of the committee, thank you for asking me to testify before you today. my name is caroline jacobs. i am 14 years old. i'm from the great state of maine where we stayed maine is the way life should be. i am here as a children's congress delegate to talk about living with diabetes. the importance of technology for me and other kids, with diabetes and my cure. i was diagnosed with diabetes when i was 10 years old. a change my life forever. with this disease i must always think and be aware of how i am

feeling. and i've had to grow up fast. i feel the burden on my friends and my family who are always worried about me, always asking me questions about my blood sugar. so i'm getting but i can to make a difference in finding a cure for children of diabetes. i brought a school walk to the cure firm my family swat team for a cure in portland. i also make jewelry and bags to benefit jdrf. i do all of these things so we can continue research to find a cure for diabetes. while we wait for a cure, hope to see that more tech allergies are made available for kids like me. one of the delegates here is from canada and has the kind of insulin pump continuous glucose monitoring system that protects against episodes of hypoglycemia when the patient is ignoring the dropping sugar levels. with this ability to stop insulin delivery, and detect low

blood sugar this pump could lighten the burden and the worry for me and those around me. this technology is approved in canada and in other countries but not here in the united states. it is hard for me to understand how a device like that can't be available in a place just over the border from me. because i will be driving in the next two years, it would be important for me to have access to technology that could help prevent my blood sugar from dropping. having diabetes can make your blood glucose levels go too high or too low and make me feel sleepy or dizzy, confused or have word fish and making it too dangerous to drive. i would invite congress to encourage the fda to move forward on next that's relating to the artificial pancreas, combination of continuous glucose monitoring and an

insulin pump the software that communicates between the two. the device will prevent highs and lows especially at night when those can be most dangerous but it will also keep control of my sugars while i'm driving as well. i hope we will not have to wait too long for this device. that way, but no longer have to worry about others worrying about me. more importantly, my family will feel less of a burden at my friends won't always have to adjust around me because of this disease. and i hope this means that i will have the opportunity to travel freely without wearing about this disease and enjoy the world and those -- after all isn't that the way life should be? thank you members of the committee, especially my home state senator, senator collins. >> thank you. [applause]

that was terrific. you sound like a pro. that was great. jack, we are glad to hear from you next. >> thank you senator collins, senator lieberman and members of the committee for inviting me to testify. my name is jack schmittlein. i'm 13 years all and i've had juvenile diabetes for over six years. on october 4, 2004 my life changed forever with my diagnosis. instead of being a carefree kindergartner, i was faced with sticking my fingers eight to 10 times a day, counting cards in taking insulin shots. managing diabetes is hard work, 24 hours a day every day. ..

passed legislation to remove the special diabetes program essential to help finding a cure for type 1 diabetes. the special diabetes program has research that does lead to the artificial pancreas. an artificial pancreas would help get me into one of my blood sugar gets too high. to check my blood sugar in the middle of the night every night participating in activities i love a whole lot easier. i enjoy playing basketball league football but often have to come out in the middle of a game to test my blood sugar. it would give my life back so i can be a kid again not a kid

with diabetes. despite this incredible technology we need to do everything we can to find a cure and doing my part to continue to push research for word. i've been at jdrf walking for four years. i organized by school to benefit and i've also spoken about life with diabetes at two walks, a school assembly and a fund-raiser has a jdrf to the ambassador. i really believe we will find a cure for titan one diabetes. the artificial pingree as a promising results at a strong investment in research. i look for today i can say i used to have diabetes. until that day an artificial pancreas greatly improved my daily life and the lives of other kids who had type 1 diabetes. i know congress and jdrf are doing all that they can to make this possible for kids like me. just think if we can improve the

lives of the children and adults around the world why wouldn't be? to research conducted all of the country is bringing us closer to secure in the double that of the artificial pancreas to keep us healthy while we wait for a cure. osha senator collins and members of the committee providing me the opportunity to give you a glimpse into what my life is like with diabetes. i look for to answering any questions you might have. [applause] thank you, jack. you did a great job. kerry, we will hear from you next. >> good afternoon, senator collins, lieberman and members of the committee for inviting me to testify. i'm from virginia and was diagnosed with diabetes 13 years ago when i was 4-years-old. unfortunately diabetes' wasn't new when i was diagnosed. my older sister was diagnosed when she was four. shortly after her diagnosis, i

was enrolled in a clinical trial for first-degree people with type 1 to determine if they were at risk for the been the disease. i received daily insulin injections and hope to avoid or delay the development of diabetes. but it didn't work. sometimes clinical trials don't. i was diagnosed with type one diabetes one year later. then what seemed like a flash ten years past. ten years filled with insulin injections, finger sticks, and this carbohydrate counting and worry. ten years of turning around an awful fanny pack containing necessities for everyday life. even with my best effort is still the days of severe high and low blood sugar. my family and i hoped like the millions of people impacted by this disease, too for a better way to control this. i was 14 when i enrolled in clinical trials testing the continuance group of systems. this ingenious advice i named my

little but he gave me instant knowledge what my blood sugar was doing and where was going. it dropped from eight to may 7. this technology made living with the disease not only easier but gave me hope it was truly possible to manage is better. it wasn't secure but it was more than i had before. clutching with diabetes is a daily struggle. it creates a cloud of fear and doubt. blood sugar and carbs are always on my mind and i constantly ask myself and my okay? i have to remember snacks and extra supply to ensure that in case i uncovered because things can get scary quickly. i've had my pump stopped working wife out of town by dropping it or submerging it in water to but i don't just worry about now, i worry about my future. dalia etds never tax breaks and neither can i or my family. then last october i enrolled in a clinical trial testing artificial pancreas technology.

for today's i was in a hospital where they tested the artificial pancreas system. after person bidding in clinical research since i was 3-years-old, i can honestly say the artificial pancreas trial was the most amazing experience of my wife and holds promise for people living with this disease. for today's call my perfect control of my blood sugar levels. today's of living with this technology provided me decision what life could be like. far less complications both short and long term. the creation of an artificial pancreas is within reach. i know it. i've been a part of it and i will do all i can to get it to the hands of people living with diabetes. and i hope you will, too. as a, on the day the artificial pancreas is finally approved and released, people with this disease can see diabetes? ha there's an ap for that. [laughter] [applause]

>> thank you members of the committee for all you do for those living with diabetes and working to make the artificial pancreas technology available to all those living with this disease. >> thank you very much, kerry for the testimony. [applause] jonathan, you're up. >> good evening, chairwoman collins and members of the committee. thank you for inviting me to testify. my name is jonathan, terse and california. i served los angeles. i'm sitting-years-old. i was diagnosed with the juvenile diabetes at age six. i've been losing weight, wetting the bed at night and have extreme first to lead to a thirst. i was tired and emotional. my mom thought i was adjusting to the new school and kindergarten.

my blood sugar was always 650 and i was diagnosed with diabetes. i will never forget the day i was diagnosed. we found out with a doctor in an elevator with us at that had never happened before in this doctor's office to kids i used the same time. i was thinking how did i get this disease? i didn't know what it was. i was a very scared and nervous. i am here as a children's congress delegate to tell how i manage my disease do not let it control life. with this disease i am able to swim, play basketball and bulkeley goes. -- build legos tikrit i have to check my blood sugar eight to ten times a day. everything i need is measured in the free carbohydrate counted. my blood sugar kit goes with me

everywhere i go. it is hard when i go to summer camp or a sleepover or even go to a friend's house. too much exercise not eating all my food can be very dangerous. my parents have had to adjust their lives because my diabetes managing diabetes is a 24a job. we are doing our part to help find a cure by raising money for the jdrf to do your part and from research to find a cure. a cure for diabetes means i can go to any summer camp, sleepovers whenever and wherever i want, and be a regular kid again. and most of all it would mean i would not have diabetes.

it is possible. my life depends on it. thank you. [applause] >> you did a great job. [applause] jonathan, you did a wonderful job. i think this entire panel deserves another round of applause. [applause] now, i know the children here have been sitting a very long time and many of them could use a snack or water or need to test

themselves. so i'm going to ask the panel to each just ask one question and then we will just rap up the hearing because i know it's been a long afternoon, particularly for some of the younger delegates that are here. first of all, thank you all for just wonderful testimony. you really have put a human face on what it's like to have diabetes. that's far more powerful than statistics or than our being advocates for more funding. you're the best advocates we could possibly have. so, caroline, my question is going to be for you. you were diagnosed in the summer, and you had some time with your family to get used to the idea of having diabetes and learn what you needed to do in

order to manage or disease. but i would like you to share with us what it was like when you went back to school in the fall. >> i was going to a new school at a time, so i was teaching. my teachers had a deal with having a kid with diabetes, and teaching my new friends how to count cards and all that stuff, even like at lunch we would try to tear out how many cards my food was together. so it's like we had a lot of support from friends and teachers and my family of course. >> i'm sure that made a real difference. i just wanted to -- senator begich referred to the scrapbook. it's wonderful to go through because i've learned so much more about the disease and about you.

and i want to thank you especially for being here but all of our delegates. senator brown? >> thanks, madam share, for holding this and like in the academy awards i.c.e. kevin kline and then come back to reality and see we are here to discuss something that affects everybody in this room, and each day the wonderful part about being a united states senator is you can learn and grow and understand a new and different things and if you don't understand them you have an opportunity to find out the answers which i find intellectually stimulating. my question is jonathan, i agree, you are too little to have to worry about this stuff, and that being said, what has the biggest challenge been for you since you recently found out what is the most difficult part of everything that you are going through right now?

>> well -- >> is it keeping her, you know, the daily requirement? is a worrying about what happens if you don't do it right? what is the biggest challenge, do you think? you think about it for a minute. i'm going to ask jack what's your biggest -- you're smiling, nice try. >> my biggest challenge with diabetes is that school when all of our friends go to lunch i have to go to the nurse and order for my lunch and stuff and sometimes like if we are in class doing something from my blood sugar might be too low or too high and i have to go to the nurse and miss out on the farm so that's kind of hard for me because it's not fun to miss out on things you want to do with your friends, said that is one of the things challenging for me.

>> i noticed jonathan when you said 650, was it, and i learned something today the average is 100 or below. i find that amazing that you're able to really function and still -- now obviously have you thought of something challenging yet for you? >> yes. every time i feel low there's no nurse at the school and when i met the library and there's something fun if i feel low i have to go to the back of the class and check my blood sugar with the teachers. >> so you're missing out on things? >> yeah. >> thank you. thank you, madame chair and panelists. >> thank you, senator brown. senator shaheen? >> thank you all very much for your testimony. you're great advocates for the need to do more to address research. kerry, since you have to answer the question, my question is for you. we still have dr. zimliki and

dr. rogers here, and there's been a lot of discussion today about the artificial pancreas. since you participate in one of those trials, is their anything you would like to tell them about the trial you hope they will bear in mind if they go back to the nih and the fda and continue work, trying to get an artificial pancreas that can be available to people? >> first it's awesome, so keep that in mind. and being on the artificial pancreas was so different than just living every day with the etds because for that time i didn't have to worry. i didn't have to think about it. and there was a new experience for me because i've had this since i was so young i don't know anything else. sinnott having to do that was the weight off my shoulders, and i think that everyone here could use that. so bear in mind i think we need it and we need it soon so keep working, keep funding and

research and hopefully it will be out soon. >> thank you very much. [applause] >> thank you, madame chair for holding the hearing and all of your work chairing the diabetes caucus. as we can see it really is making a difference. >> kerry, i really think that your final words summed up why we are here and what our purpose is. but i do want to take this opportunity to thank everyone for coming to this hearing. it's wonderful witnesses that we've had, the delegates who are chosen to testify to read all the delegates that are sitting in the well and around the room, and their families because diabetes truly is a disease that

affects the entire family i want to thank the juvenile diabetes research foundation for working so closely with us. it merely tyler moore since a letter and some testimony that we are going to put into the record, and we will have the record open for an additional 15 days in case anyone else has any words of wisdom for us or additional questions. but most of all, i want to thank the children who are here today. when you come to washington and you meet with your senators and members of congress, you make such a difference. it's because you are willing to come here and tell your personal story is that we've been successful in tripling the funding from research that goes for diabetes, and i know that

with your help, we will one day soon have better treatment, the artificial pancreas that we've talked about today, but also ultimately it'll of all of us here and that is a cure. thank you all for coming to washington for being here with us and for being such great advocates. this hearing is now adjourned. [applause] [applause] [inaudible conversations]

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chairman of the federal deposit insurance corporation, the lawmakers to implement higher capital requirements for banks this hearing before the house oversight subcommittee is expected to be her last on capitol hill and overall head of the fdic. she recently announced that she is stepping down when her five-year term expires next month. this is about 50 minutes.

>> the committee will come to order. today's hearing on the t.a.r.p. financial services and a bailout public and private programs subcommittee is entitled to the changing role of the fdic. we have before us the 19th chairman of the federal deposit insurance corporation, sheila bair who served honorably and drinks of the nation's toughest times and the tramp bair, we realize this is your last hearing before congress and to have had quite a career in the service to our government and to our people and i want to thank you for that. and through, you know, some of the most challenging times in the nation's history and you also served on capitol hill, and we appreciate your service their. what's that? well, we forgive you for that. serving on the senate side, but

certainly understanding capitol hill as you, we thank you for your time, and it has been the tradition of this subcommittee to read the oversight government reform committee is mission statement. the oversight committee mission statement begins we exist to secure to fundamental principles first americans have a right to know the money washington takes from them as well spent and second, americans deserve an efficient and effective government that works for them. our duty of the oversight government reform committee is to protect these rights to read our salles response on these are to hold government accountable to taxpayers because taxpayers have a right to know what they get from their government. we will work type aarsele in partnership with citizen watchdogs to deliver the facts to the american people and bring genuine reform to the federal bureaucracy. this is the mission of the oversight and government reform committee. i now recognize myself for five minutes for an opening statement.

>> as i said we are pleased to welcome the chairman of the fdic, sheila bair for her last testimony before the united states house of representatives. we certainly appreciate your role and your hard work and we wish you well in your future endeavors. today's discussion allows members to better understand the role of the fdic during the financial crisis the new regulatory authorities issued by dodd-frank and the fdic insured banks. since 2007 the fdic has called upon -- called upon to reserve 370 banks in its risk. these efforts have cost the fdic an estimated $83 billion depleted the balance of the deposit insurance fund, pushing it into the red ink to the tune of a billion dollars. but chairman bear has taken steps to replenish the fund, and i think the american people should know that this is not a cost to the taxpayers time.

that in fact this is self funded by the banking industry. due to the fdic's role in the safety of some as regulator for most of the world's largest financial institutions, the dodd-frank act positions the corporation as a key player in preventing a future financial crisis. dodd-frank requires or authorizes the fdic to implement 44 new regulations and grants to the various enforcement authorities. many become directly from dodd-frank hoped to end to big to fail. among the regulations are risk retention rules that will dramatically impact the secondary mortgage market and other areas of securitization as well as increased capital standards set out under dodd-frank and being negotiated under basel iii.

the risk retention rules could reduce the lending to an already crippled housing market. while extreme capital standards may jeopardize the global competitiveness of u.s. financial and institutions. just yesterday acting, comptroller general -- unsury comptroller of currency john walsh stated additional capital requirements for large firms should be, quote, modest, noting, quote come capital levels are now extraordinarily high by historical standards. he specifically cautioned that come up with, higher capital fosters a senior banking system but if carried too far, the economy suffers when banking activity is not sufficient to support the desired levels of real economic activity. i think we all share those concerns and finding that balance is of course part of today's hearing to understand your thought process on that. each member of the subcommittee hears from constituents and

businesses that are struggling to access capital. thus before instituting a regulation compared that regulators can consider the flexibility is in the small and community banks need to serve our communities. i look forward to chairman bair's regulation to avoid one-size-fits-all regulations that would deteriorated job growth in our economy. additionally, while some insist the fdic regulatory authorities under dodd-frank would put an end to too big to fail it appears the opposite is true. the special inspector general for the troubled asset relief program reported to the congress even after dodd-frank, quote, the largest institutions continue to enjoy access to cheaper credit based upon the existence of the implicit government guarantee against dillinger. ironically, dodd-frank has actually made big banks even bigger. but the largest financial

institutions in the country are 20% larger than they were before the crisis. now this is not directed at the fdic. rather, many are designed failures and the legislation we passed. and i will have some questions about that and how you see that implementation and perhaps some legislative relief on the things you don't think are quite appropriate going forward. even secretary guice noted the possibility of the future bailouts when a month ago he stated federal government might have to do, quote exceptional things again. i know you've been questioned about that before but the implicit and explicit guarantees cannot be overstated. the concerns along with others chairman bair and i both have spoken about part of critical importance to the economic future in the wellbeing of the united states and its citizens. getting the balance right is a struggle and in terms of capital

requirements, we've like to hear your thoughts on that and i recognize the ranking member mr. quigley of illinois for five minutes. >> thank you mr. chairman and thank you for holding this meeting. chairman bair, thank you for attending and for your years of service. the fdic please a central role in navigating the 2008 financial crisis specifically overseeing two of the largest bank failures in u.s. history washington mutual on the andy bank and in addition in the aftermath of the crisis chairman bair has actively engaged in implementing the necessary reform to prevent another financial crisis. as the chairman's tenure comes to a close i believe the inside perspective will be invaluable to the subcommittee's oversight of the defense that comprise the financial crisis as well as the implementation of dodd-frank and other reforms to bring greater transparency and stability to the financial markets.

where there were multiple causes of the financial crisis what we acknowledge regulatory failure through gaps and oversight insufficient tools and bank regulations with a significant factor. the film is like reading the financial stability oversight council to ensure coordination among the multiple banking regulators it also extends the fdic resolution authority for failing to depository institutions to large non-bank financial firms. and requires stronger capital standards for the largest financial institutions. these and other provisions that have significantly altered the authority and responsibility of the federal banking regulators including the fdic. i was heartened by the chairman's past statements that through the orderly liquidation of floridian capital requirement provisions the regulators have the tools to end to big to fail. concerned by the fact that in 2009, bank of america, chase,

citicorp and wells fargo kunkel 56% of domestic banking assets up from 35% in 2004 the top ten u.s. banks controlled 75% of domestic deposits up from 54%. i hope today's hearing will provide an update on the implementation of the too big to fail provisions. there's also a number of fdic related provisions under dodd-frank that are critical not only to ensure financial stability, but also leveling the playing field between the largest financial institutions which have only expanded since the crisis and the community banks and credit unions. these provisions related to capital standards as well as the manner in which the fdic is assessed and i look forward to hearing from trenberth regarding the status and implementation of the reforms. last, chairman bair praise -- lescol chairman bair has been praised as guiding the fdic to, quote come a greater prominence through her tears efficacy not

just for community banks but also consumers and in this regard, i commend you for your tireless efforts to hold accountable the nation's mortgage servicing industry. this is an industry that continues to engage the systemic abuses and the conduct against homeowners across the country. in your own words, the mortgage servicing and documentation problems are yet another example implications of lax underwriting standards and misaligned incentives in the mortgage process. despite numerous investigations and regulatory actions taken by federal and state regulators and law enforcement officials against the mortgage services more allegations and misconduct surfaced. therefore i look forward to hearing from the chairman regarding further steps that can be taken by both regulators and policy makers to hold the servicer is accountable and protect our constituency in the communities from wrongful for closure. again thank you and the chairman for appearing before us today and your service to the country.

thank you. >> i thank the ranking member, and with that, chairman bear is the tradition of the oversight government reform committee and policy of the committee that all witnesses be sworn in so if you will please stand and raise your right hand and repeat after me do you solemnly swear or affirm the testimony you're about to get will be the truth, the whole truth and nothing but the truth? >> you may be seated. let the record reflect the witness answered in the affirmative. and again, thank you, chairman there you served under republican and democrat presence. you had a distinguished career in government service and we wish you the best going forward. with that, we recognize you for five minutes for an opening statement and we know you know the drill with of the lights and we look forward to hearing your testimony. >> thank you very much, chairman mckenrick, ranking member and members of the subcommittee. thank you for the opportunity to testify today on the changing role of the fdic. my testimony to the is focused

on to giving an important lessons learned from the crisis. first, in order to restore discipline in the marketplace, a large complex banks and other financial companies must without exception be allowed to fail. the problem of the financial companies perceived by the market has to fail unfortunately has been around for decades. the bailouts of the several badly managed systemically important financial institutions during the crisis about their implicit government backing. these bailouts are necessary to the absence of the fdic style resolution power for the non-big financial institutions and bank holding companies and non-bank affiliates. the massive disruptions caused by a lehman brothers dillinger make clear the bankruptcy process is ill suited for the resolution of large financial entities. forcing bank holding companies to bankruptcy process wasn't a risk of the government was willing to take. the bailout of consequences. they undermine market discipline, and had the restriction of the troubled financial coanies

recognition of losses and keep the substandard management in place and preserve the suboptimal allocation of the economic resources. in contrast smaller banks are exposed to the discipline of the marketplace some 370 fdic insured institutions have failed since i became the fdic chairman. this is how katulis are supposed to work. the companies get free to successful companies and the remaining assets and liabilities are structured and returned to the private sector. bailouts are inherently unfair. they violate the fundamental principles of limited government and which the free enterprise system is founded. that's why the fdic is determined to press for the more robust and more effective resolution from work as a centerpiece of the financial reform legislation we were early advocates for the sifi authority that operates on the one we applied thousands of times to ensure banks in the past. we push for liquidation plans by the sifi the ticket be broken apart and sold in an orderly manner and agreed oversight and

capital in the relationship to the company's post to financial stability. while the proposals were ultimately enacted in dodd-frank, there does remain skepticism as to whether the sifi can be made resolvable in a crisis. for the largest institutions will be difficult, but the of many important tools which can't and too big to fail. under dodd-frank we will have more information about these institutions on an ongoing basis from a stronger requirements, with the authority to require if necessary organizational changes could rationalize business and legal entities to assure the can be broken up and sold back to the private-sector in an orderly way. i hope this is an area where the industry will work collaboratively with the government. the expectation of bailouts for the week large banks creating a competitive disadvantage as not only for smaller institutions but also the better managed larger institutions. most importantly, the reputation of the entire industry is

damaged from the poorly managed institutions bailout by taxpayers and escape response to the for their own actions. because of the bailout popular resentment and cynicism toward the banking sector remains very high. the second lesson of the crisis involves the dangers of the debt and leverage. the single most important element of the strong stable banking system is its capital base capital is what allows the institution to observe losses while maintaining the confidence of the counterparties and its capacity to lend. after the last banking crisis in the early 1990's, congress passed a number of important banking reforms that included stronger capital requirements. capital requirements will water down over the years rules the committee passed forward that encouraged banks to move assets of the balance sheet and regulatory capital thresholds based on internal risk models. the result was an increase in financial system leverage particularly bank holding companies and non-bank financial companies that weaken the ability of the industry to

absorb losses during the crisis that has led to the dramatic deleveraging of the assets and its weak. the problems of the leverage extend far beyond banking. our tax system rewards the use of finance a for equity for businesses and households like making them more vulnerable to the financial distress. and they rely on debt to postpone the cost of paying for services to the constituencies reluctant to do without. but as the crisis has shown come over reliance on leverage in the short term strategy with a big downside over the longer term that's why the fdic has been so committed to following through on the capitol reforms taking place through the basel board. it's also why we have been such strong supporters of others to enhance capital, putting the amendment to dodd-frank elimination of the securities and capital surcharge. since 1933 public confidence on the financial stability have been the core missions of the fdic. we understand the economic cost

the financial crisis and one of the most important lesson cetron from my experience has been the need for regulators to have the courage to stand firm against practices and excessive risk-taking in the good times. my regret is we didn't have better information and better resolution tools in place at the heart of the crisis to prevent the bailout of a number of the nation's largest financial companies. yes bailouts were necessary and limitations were faced but they spurred a recovery, undermine support for government in all forms country is the reputation of the bank's and the competitive balance for the mega banks. our support for the more robust sifi resolution regime and a stronger capital standards in the week of the crisis speaks to the determination that this experience never be repeated. thank you. i would be happy to take your questions. >> thank you for your testimony and i recognize myself for five minutes. >> as i sit in my opening statement, the acting comptroller of the currency john

walsh stated in an interview the other day that additional capital requirements for large firms should be, quote, modest. noting that capital levels are now extraordinarily high by historical standards and higher capital fosters a senior bank system but if carried too far the economy suffers when banking activities are not sufficient to support the desired levels of economic activity. so, chairman bair, we've noted that you and the acting comptroller of the currency had disagreements on capital levels. is there a capital level requirement that is too high? >> why think there certainly could be but i don't feed the numbers we are talking about really come anywhere close to that. we are working through the sifi committee process. it's important to get international agreement on the standards and the basel committee has done and a little cool work on this looking at the cost of the crisis, the amount

of losses on financial institution balance sheets and how much additional capital would have been needed to absorb the losses to avoid the massive deleveraging that we've experienced. it's also tried to weigh the costs against increases in lending from higher capital standards. and so the numbers i think had very much tried to strike the right balance. the 7% basel free which i don't think he has a disagreement with has been agreed to but it's part of that agreement there was broad based consensus on the basel committee including with mr. walsh that we would be looking at a higher absorption capacity for the institutions and that is a process now and i have been on record thinking of the three injured basis princeton% of the standard would be right. that is actually a moderate but you can look at the studies that have been independently done by academics or the government actually the studies generally support higher capital levels

based on the type of analytics i describe it with "the wall street journal" in a recent editorial endorsing the higher capital standards throughout 10% and i thought was interesting the benchmarks they were using on the market demand had a smaller finance company which has no government support whatsoever and the market demands 15 per cent capital requirements. so, i think 10% actually is moderate by all the analytics we've looked at. i would also add this will go out for comment whatever the number this will go for comment and explain the analytics and people will have the chance to provide public comment. >> how are your metrics different? >> well i don't know. i haven't had a chance. i really haven't seen -- if they've done independent analysis i haven't seen it but i would welcome looking at perhaps he's looking at historical numbers both historic week there is probably a case this financial system has not had sufficient capital which is why

we continue to have these cycles recently. also if you're looking at the risk assets unfortunately it is a lot of subjectivity in the base of the assets. i don't know the review is i think he would be happy to take a look at them. >> i'm not asking about the help of the european banks the international competitiveness isn't it important we are harmonized globally with the capitol requirement levels so we are not disadvantaged? >> i think strong capital is a competitive strength and weakness and european banks are having trouble now because they do not confidence of the market. i think also the problems are having with grease and other distressed companies with their sovereign debt and the inability to restructure that is related

to the high levels of leverage in their banking system and their inability to withstand the right down on the debt if there was the restructuring. so why worry about capital levels and i worry about the impact on could have coming back to the united states so international agreement is important to get the capitol levels up and running. >> finally, i want to ask in terms of the dodd-frank wall as its proposed by congress, are there items we should address as you are walking out the door, are there items we should address to correct and improve and change? >> right. >> it's intended to be an open-ended question. >> i think that it's not a perfect law. there were things we would have liked to have seen differently, and we can share those with you. it's a law that we can work with. on the title ii authority we

feel like we have tools we need, and so i do believe that it is a good law better than having it and the good parts the fdic has a mandate we can work. >> see you didn't take the bait? >> i didn't. [laughter] >> perhaps another month we can have a conversation and you can tell me your thoughts. i recognize the ranking member mr. quigley. >> thank you. coming from illinois, small banks, community thinks. you talked about the competitive disadvantages. what else can we do? >> the good news the banking sector is healing. it is and it's all about the economy now getting the economy on a stronger footing so we want to start borrowing more money again, you know, smaller banks are seeing their raising capital. a lot of them are actually coming off because the of raised their capital. so i think there are some very positive improvements in the

community banking sector. it's been tough for them, but if you look at the number of community banks in trouble as a percentage of assets as well as numbers it's smaller than we saw with the larger institutions, so most of them actually managed to see this very well. they manage the commercial real-estate concentration pretty well and we are actively trying in the supervisory process to take lessons learned from the successful community banks and fine-tune our supervisory process burton is an issue. chairman mchenry mentioned this. i have introduced a regulatory approach i think regulatory requirements that may be driven by problems we've seen in larger banks if you apply them across-the-board to small banks even if they don't have much to do if the business model and small banks can make it very expensive for small banks. the altar of a huge compliance department, excuse me, so the two-tiered regulatory approach is important and the consumer

rules and disclosures would help consumers and community banks. a lot of community banks have gotten out of lending because the rules are complex and complicated the don't of the compliance capability to deal with it. >> and that is another point that we hear quite a bit about the regulatory process. the terms we are using, hirsh pachauri examination, depressing impact of the practice on their ability to lend and support the fragile economic recovery comes as some very specific stuff comer irregulars in d.c. that keeps saying they are properly instructing their field examiners and bankers are singing the field examiners aren't following the rules. and we hear that there's inconsistencies in the decision. the high europe are saying plans are not being implemented locally. the examiners are telling the bankers the decisions are being

changed up above but there's a time lag how the decisions to get back to banks which create inconsistencies and a problem moving forward. >> i do hear this a lot and i can tell you the measures we've taken i'm beside myself to figure out what else to do we told directly because collateral has gone and to make the loan the collateral has gone down it still is alone. we haven't acquired new appraisals on till more credit is being extended obviously we do want to get an appraisal. isis said this specifically and in writing we disseminated disinformation to banks so they know and feel the examiners are doing it and consistently they can tell that to the examiner. we told the examiners the need to be independent to banks. their job -- they have a job independent of the bank but need to listen to bank management and hear their side of it and discuss starkly with the concerns are.

we've done all this and set up hot line numbers for bankers who feel the policies are not being applied. we have an ombudsman program will keep it confidential if they don't want their names to be used to get i frankly -- we worked hard on this. i think we are not perfect. we have more banks than anybody so the challenge of getting all the communications after examiners is more pronounced for us in the sheer numbers. on the upper hand when we have received complaints we have drilled down into its sometimes examiners are being blamed for bringing the bad news and it's not always realistic about the extent of their troubles. sometimes the complaints are not coming from the community thinks but borrowers who are not able to get a loan and in the construction industry there's a lot folks that are not credit worthy anymore. so, we do try to go down and get to the truth of the matter and we've made mistakes and try to correct that, but in some of the case is this just may be a bad

situation the examiners are being blamed. estimates before. mr. chairman never been going to new area, i will yield back. >> thank the ranking member. in this point i will recognize south carolina for five minutes. >> thank you mr. chairman. thank you for the service to the country and i would yield back the remainder of my time to chairman mchenry. >> i thank the gentleman. that is quite kind and gracious. now, we mentioned -- you mentioned ombudsmen programs that you have a hot line. you know, i will be very honest with you. we are going to have a second panel and we've reached out to different associated inns in town and invited bankers want to appear on the second panel discussing -- >> how should i take that? [laughter] >> and that is the question, and it's not personal, first of all. but it is either that the

complaints that i want to hear publicly. so why is that? that's one potential. are they so fearful of the regulator, or are they fearful of what the public thinks of them complaining or is it one of those things they will grumble but they really don't want to get into the specifics. so i mean, and it may just be washington politics. who knows. but i thought i was a little odd, and, you know, so wrestling with that concept, because i am concerned about regulatory overreach as we discussed privately, but there is a balance. so we look at our banks and community and mr. quickly mentioned this as well. we don't know the health of their balance sheet or if they have over exposure in wild land for instance and so they are telling their customers the

regulator that won't let me do it. when in reality it is an imbalance in the balance sheet. or they have a capital problem challenge. so, you know, do you have any comments about that? >> i do. i've been dealing with the somewhat, and listen, we want a high quality examination process. the leadership feels that way and it's important for that process to be one where there's an issue that prestige hasn't been so what appropriately and in a way that we encourage and don't penalize. it's frustrating to me because i get a lot of generalized complaints tell me what it is the second fix you in it and let's look into it if it's fair and i don't get any specifics and so i don't know if maybe

people just want to grumble or it may be a little bit of both. all i can say is it's my policy to be the will be the vice chairman's policy and it's a policy of the leadership and our risk management division to encourage and accommodate and look into every single complaint and not the other way around. it doesn't mean i'm always going to agree. we do look into them and find the examiner was doing things appropriately and we've taken appropriate action but i don't know what else i can do and if people don't want to look forward there is just not much i can help with. >> thank you for commenting on that. it's one of those things we all deal with and we want to fix problems where we can fix them. now, there is another question that kind of goes hand in hand with it. use of the news last week or the week before with jamie dimond's question of chairman bernanke.

a serve the cumulative effect of the regulations and the impact it will have on the cost and the availability of credit. has there been a holistic review by the regulators or the fsoc level about the cost of the regulations? because certainly we agree and i think it is economic fact they do have an impact, additional council does cost, but there's a tipping point for safety and soundness by which you have to be there and over the long term it could be a net positive, so can you comment on that? >> i don't think there has been at the fsoc level. with regard to capital there's been a lot of cost-benefit analysis and for the rules we do and actually the as you just looked at this we follow all the requirements and cost benefit analysis. we have a lot of economists. we encourage that type of

economic analysis. we've also started looking at community banking impact and for the will or guidance we put out we have a separate line that says the community think will be. so i think on an individual agency basis it is occurring and 40 interagency basis to look at this. i do think there are relationships especially with what we are doing with the derivatives rules. and so of the restrictions on the proprietary trading, what kind of impact that will be and how they relate to capital would be helpful in the agency and also just in terms of raising capital i am very confident that there's been good analysis and the numbers to talk about now are more than justified. >> i recognize mr. meehan of pennsylvania for five minutes. >> thank you, mr. chairman and chairman bair for your service to the country doing what w >> thank you, mr. chairman and chairman bair for your service to the country doing what was certainly a challenging time for the nation. and i'm sure you were looking for an opportunity to enjoy a

life thereafter. but again, thank you for your service. there are so many aspects of the impact of what we tried to do in response to the many problems that occur. but all i see it back to the eyes of many of the people in my district who are facing issues locally and i was intrigued by your comment so many of the smaller banks are the ones competing now in a disadvantage because of the rules that have been focused on the large banks. and i hear a lot in my community particularly in the housing sector home builders, realtors, bankers, and they're seems to be a game in which they are all pointing to the other one and saying they are the ones responsible for not allowing us to get going. and everything that i have studied certainly indicates that a robust housing market is the key to getting out of economic slump. obviously with such an amount of

underwater mortgages we will not see robust, but i also see small community bankers with responsible institutions who have weathered this area very well and builders with very good reputations who have proven their capacity to analyze the market and right now some are actually looking and saying it's a great time to take risk if you understand your market. and yet my understanding from talking and meeting with my home builders is that many of them are up against what they are concerned about as hard caps for construction lending and development lending and what i really need to understand is whether or not this 100% hard cap is an advisory or creating a hard-line the standard that locks or creating a hard-line the standard that locks in. the in the devotee for local bankers and local builders to do with these been doing for generations which is to make

sound judgments about each other >> if you look at the failures we've had for the smaller institutions, they've been almost heavily driven by the losses and the construction development funding and high concentration. so, yes, it's a benchmark. it's not a cap the general rule was 100%. one of a particular need to have special risk management process these in place with the level involvement managing those risks. so there is a lot of scriven tea in the lending. it's not a hard cap but there is a lot of scrutiny and justified given the number of things we have seen that failed because the heavy concentration in that area and again it depends on the local market. but obviously some areas are heavily overblown already. and so probably the last thing you to do is start a housing tract. but that's based on the local