to the needs of investors. provide an approach a level of accountability to investors requires the credit rating agencies be subject to liability to investors for poor performance and poorly managed conflicts. as you might expect we were disappointed by the committee on financial services of last week in support of house resolution 1539. as you are aware, that bill would amend dodd-frank to provide those nrsros that directly contributed to the multi-trillion dollar global financial crisis, a shield from accountability to investors. we note a similar shield from liability is not provided under the federal securities laws to any other financial gatekeepers. however, pera and the council stare to work with this subcommittee, the sec and other interested parties to better ensure that credit rating agencies post-dodd-frank will, to the extent possible or effectively and efficiently serve the needs of investors,

and all participants in u.s. financial system. that concludes my prepared remarks. i look forward to your questions. thank you. >> i think the panel. and we will start with question. i recognize myself for five minutes. i want to put up a chart, and i know it's hard to read. so that chart is being passed out and will make sure the panelists get one as well. basically, one of the things, where i'm going with this, one of the things i feel like dodd-frank does, it makes the big get bigger. and it's not, what we've heard his testimony here, even in the rating agencies space, but also what i think dodd-frank has also done, what's going on in the rating agencies is there complicit in the fact we're helping the big financial institutions actually stayed bigger and actually getting many of those an unfair advantage. so basically what you have here is a chart that basically shows

the ratings of four banks. so there's kind of a before the uplift and after. basically what you see is to banks, suntrust and trustmark, have a before uptick ratings of 83. million bank of america and citigroup has a be doubleplay 2 rating. and using bank financial rating see but when you look at the upkicks that they're getting, for example, bank of america is getting five-point uptick so it takes it up to aaa three and citigroup gets an uptick 4 to a one. so the concern here, what i'm hearing over and over again, is that we haven't cured this too big to fill perception out there among the rating agencies. in fact, the rating agencies today are getting the system of

important financial institutions advantage over other financial institutions that may impact from a core standpoint -- may, in fact, from a core standpoint may be a better financial risk on a standalone basis. so my question is, is where are we in this process of removing this too big to fail advantage for these large financial institutions? mr. sharma, i would start off with you. >> thank you, mr. chairman. in the spirit of objective of transparency and clarity we have recently also clarified how we're going to rate banks in the future. we start with looking at the standalone credit risk assessment of a bank on a number of factors, that includes

business position to risk exposure, funding and liquidity. but then we do, after we do the standalone risk assessment we do look at what external support it may be provided by holding company or by a parent institution or by government support. and in that context we have created a very simple framework that looks out different governments based on their policies and regulations and history as to whether they are supportive or supportive uncertain or interventionist. and we look at different institutions as to how important they are for the economy. the size, the concentration, the interconnection across the different market participants. and based on that we have determined how much support we believe the government may provide to these institutions when there is crisis or a situation. so in that context we do you believe, given the situation, recognizing that dodd-frank act

has very clear to bring stability and raise the capital of the banks, and the fact that the banks should not require any support. but our role is to provide investors with a forward-looking view. and in that context our analysts have said what are the institutions to exist based on history, based on the size of the bank and connectivity, that there may be attempts at changing the policies to support the banks in the future. >> based on a statement that was recently issued by your company, you question whether the too big to fail issues actually have been settled. >> chairman, that is my -- my copanelists company, movies, but we have also recently published a research that highlights the fact that we recognize that dodd-frank act and aim of the dodd-frank act

sort of takes this too big to fail support away. we recognize some of the connectedness, the high concentration, the importance to the sovereign, that in a similar situation that they may end up, policymakers may end up looking at changes to the law to give support to the institutions. >> just for the record, the statement though that is there is a statement from -- these are ratings, the table are from moody's but the statement is from standard & poor's. >> yes. we have recently published similar. >> quickly, mr. rowan. your response because your company does the very same thing. >> mr. chairman, as the head of the commercial growth i'm completely removed from the rating analysis, rating committees and the formation of the methodology. so i'm not the person that can speak authoritatively on the

question, the point you're asking. >> may i ask you a question? do you think he gives financial unfair advantage that they get anywhere from two to four upkicks for being considered a financially, a risky financial institution? to think that is a bit unfair advantage in the marketplace? >> mr. chairman, as i said i'm not involved in the methodology and i know where the methodology incorporates -- >> i'm not talking about methodology. i'm talking common sense. do you think it's an unfair advantage for an entity to get upticks just because the federal government has not sent a clear signal whether it will bail that entity out or not? yes or no. >> mr. chairman, i'm not the right person that can give you a yes or no answer, but i can arrange other right people speak to you and your staff if that would be helpful. >> so you don't have an opinion on that? >> as a representative of

moody's, that's not my specific area of expertise. i wouldn't want to mislead you. >> okay. ranking member, five minutes. >> thank you, mr. chairman. mr. sharma, just to clarify. your understanding of current law, current law a little can you don't think we've made any changes? [inaudible] expect what you said is based on what you think we might do. that's what you think. but based on current law, you think the too big to fail still exists? >> the current law clearly states that, and it's very clear about that. >> clearly states what? >> it would not provide any -- >> so it does not provide, therefore your opinion is based on your opinion that we might act. as a matter of fact, i wrote it down i think pretty clearly, that your opinion is based on the fact that you think we maybe

will attempt to change the policies, which means the current policies. so your opinion is based on the fact that you think, your professional opinion which you're entitled to, that we would change our current policy to react to a new situation. >> yes, ranking member, that's exactly what our analysts have said. there's a future view of how things may happen. >> that's a very fair statement. i just want to be clear about that. you don't think we do it now. you think we would react to it, and that's, as long as a statement of your opinion of what we have to do. we would have to change current law and current activities in order to do this again, which, of course, we could change a lot to do anything we want. i mean, that's all it did of why congress exist, to change laws. i appreciate that. i just want to make clear. mr. boone, though you're not the perfect person to answer this is my understanding moody's has officially said they think that too big to fail has been into.

is that a fair reading of what -- not yours, not asking for your opinion. i recognize you said you're not the guy here but i hope you would know a movie set as a general statement. >> i'm not sure that is moody's official statement. i can arrange to have the individuals that are responsible -- >> that's fair enough. i think you should arrange to have them come up with their official documents on the record because it's my understanding moody's has said the. i'm not going to hold you to it. maybe i'm wrong. i've been led to believe moody's has said that, therefore i would like moody's to go on the record. what you think about too big to fail. shifting to another thing. i want to push a little bit. you said you would agree with mr. geller and everything. yet your comment to the first amendment that you may not agree. as i understand the reason that we had to change some of the laws to take away, or to limit the first amendment defense of the credit rating agencies, we

put in knowingly and recklessly. knowingly or recklessly. which is now under the law, under the dodd-frank law the new standard as to credit rating agencies. it has nothing to do with the first amendment. the first amendment has been used up until now to prevent that from having any liability whatsoever. do you disagree with that, first of all understand? and do you think we should get rid of the new standard of extending liability to rating agencies under a knowingly and reckless, or reckless standard? >> not sure what your question is. >> question is, i want to make sure i understood it. i'm under the impression you said we should get rid of the first amendment defense. >> no. what i said was the rating agencies should be accountable like lawyers, like auditors, like investment bankers, not hide behind the first amendment. >> the court to stay the first amendment protects them.

so, therefore, the only way around is to provide a different standard and a different standard in dodd-frank is to say they are now subject to in knowingly or reckless standard. there for opening the door but it does exactly what i think you suggest we should do. >> i think doing surgery instead of with a laser, doing surgery with a meat cleaver. i believe that, i believe that the attempt to rectify the behavior can be done very simply and create the same standard, the same standard for rating agencies as every other professional in the financial marketplaces. that would solve the problem. >> i would just you talk to lawyers because i'm pretty sure it is the same standard that applies to everybody else. if anyone else has a suggestion of how we could have done it surgically to get rid of -- >> i'm a lawyer. >> how could we have circumvented a long-standing series of court decisions that have said they are protected by

the first amendment? >> if you look at the recent ruling of the second circuit which is very favorable to the rating agencies, very favorable, -- >> but not based on the knowing or reckless standard which is a different approach which is a stupid approach. >> if you're saying knowingly or recklessly that's a separate issue. if you're talking about having an absolution from general behavior and liability, that's what i'm focusing on. i think under reckless, reckless behavior, anybody could be found liable if that could be, that could be proven. >> i would be interested to hear because knowingly or recklessly, you know this, has been a long-standing standard that is applied to virtually everybody. it's actually a relatively, a very common standard. first amendment defense i thought it was a very unique defense brought before the court many years ago. surprising the courts withheld it. i'd be interested in pursuit if you or your lawyers at a later time any other way to do it.

because i'm not stuck on knowingly or recklessly. i just couldn't find one that -- >> it's real simple. it's really simple. there are standards that bankers, auditors, lawyers, other people in the financial process system are susceptible to, and they are liable for. there should be -- the rating agencies wielded enormous power. we see every day. they are decided which country should be upgraded or downgraded, including our own country. they are doing all sorts of things, and they're doing it without any in effect legal responsibility. >> they have responsibility now. and knowing that knowingly or recklessly is the standard that is applied to virtually every health. it is another stand i would like to know what it is. >> if you want me to keep going on this i will. >> just tell you what standard it should be. >> i just told you. the standard should be the level of liability that every other

professional has in the securities process. >> as a lawyer you know that's not a legal answer. that's a generic answer. what is the standard that other people have come and answer to me is that it is knowingly or recklessly. >> well, if you have, for example, if you have an investment banker or an auditor or lawyer who acts negligently, you are going to be liable if you can prove that's the case. >> knowingly or recklessly -- >> good luck. >> that's the new standard i do wish you good luck. thank you. >> thank the general and now the vice chairman. >> thank you, chairman vitter want to thank all the witnesses for the test whether this is very helpful. mr. rowan, the question i have you relates to, the written testament of mr. mr. gellert, he's propose an initiative that would apply to all nrsros that would require them to file on a

quarterly basis essentially confirming the ratings. i guess he believes it would provide confidence to the public that the rating agencies are standing by the ratings and their opinions. is moody's prepared to file quarterly and would moody's stand by the ratings on an ongoing basis going forward? >> congressman, moody's on a regular basis reviews and maintains its credit opinion. our willingness or capacity to sign on a quarterly basis is something that i can't answer for you today. but i do know that we regularly review and monitor our ratings on all of the instruments that we have ratings on. >> mr. rowan, how long have you been with moody's? >> for about 15 years.

>> fifteen years. so certainly you remember six or seven years ago enron and worldcom went bankrupt. moody's had rated both of those entities as investment grade five days before the filing for bankruptcy year had moody's been stand by its ratings and filing quarterly updates, investors would have had better information about what was coming down the pipe, would they have not? >> i believe that moody's had continuously reviewed and monitored those ratings. and that as information becomes available, it is incorporated into the rating. and those ratings, and issues surrounding those events, i fairly well documented, congressman. i don't know whether or not a quarterly would have changed those ratings. >> mr. gellert? >> thank you, congressman. rapid ratings had enron at below investment in the mid '90s.

rerating things on a quarterly basis is an accurate perspective of the credit quality as it changes. companies do not maintain one single quite -- credit quality for decades at a time. and one of the fundamental tenets of the traditional ratings process from the big three is the concept of reading through this cycle, rating for the cycle is essentially putting the rating on the security and having it be good for some period of time that is undefined and indefinite. and the concept is that it's fine and do we say otherwise. the problem is that's been proven to be incorrect over and over again. >> can't guy, congressman, my former company ran enron in bankruptcy for four years and we studied every single fraudulent act in that company. going back historically with all the legal liabilities.

what we are doing with structured projects, something that moody's and standard & poor's fail to do, which is a key part of this crisis. they stop doing something called surveillance in a structured products area. what does that mean? it means for years, for years when we thought they were watching the ship, they weren't. they were not conducting surveillance. now, it forces you to do that. we have committed to investors that we're going to provide surveillance every month. whether we get paid for it or not through the life of the bone. i think rating agencies need to be held accountable and put on the record, that's a very interesting way to do it. >> i thank the gentleman. mr. carney is recognized for five minutes. >> thank you, mr. chairman. i really just have two basic questions. one goes to something mr. sharma, did you sit in your

remarks, refer to look back reviews. and looking through your testimony, that is part of the action you've taken to ensure integrity and independence. could you tell me a little bit about what that means in that context? and then i would like to ask it in another context as well. >> congressman, as part of our number of actions that we have announced in early 2008, to make changes in the business, to improve our governance and check and balances, include, including our independence, one of the things we looked at was looking at people who would leave our organization to go to an issuer, and then examine all the ratings that they may have been involved with when they were at our organization into ducking the ratings for -- >> so as a look back at personnel and where they moved. >> and the ratings they have performed. now that has become a part of

the regulation but we have adopted that an announced we would adopt that in 2008. >> if you go to the next section on actions taken to strengthen analytics, it doesn't use the term look back reviews. but do you do look back reviews, you talk about great an independent model group which is some ways could be validating models that were used. did you look back at some of the structured products that you had rated that fell apart, rated aaa and it turned out to be less than that, let's just say? >> congressmen, like many other parties, we reflected and learned many lessons on this. but just in context also, clearly there were many lessons learned of the regulation mortgage-backed security. >> what would you mention as the most important of those lessons? >> part of it was looking at analysts and making sure some of our ratings are completely comparable, looking at the sections would apply to them,

and enhancing surveillance. but we've always conducted surveillance, and we have enhanced them, strengthen our surveillance program. >> what do you mean? >> when the ratings, once the rating is issued on new issuance, they we can continue to monitor it, we get month reports from the services to we review it. we look at it. what we have not done is gone one level below. really at the underlying lateral that makes up the structure security. so we i have really expanded and enhanced the surveillance. the surveillance program was always in place, that we would look at this on a quarterly basis. >> so you discovered through this process that you had rated securities that were not, that didn't perform? >> we learned why did the ratings sort of behave the way it did, what were some other things we learned and observe. another aspect was information quality. not only have we done that, we're looking at the rating a different information that we receive based on the credibility

of the source of information. and so we've sorted to apply that framework against it, and it's also been introduced as part of the regulation. >> so changing gears, what does it mean to you, and i'll ask the others as well to stand behind your rating? >> first of all, we are accountable. we are accountable to the regulators to make sure that what we do follows the process, policies, regulations as appropriate. secondly, we are accountable through market scrutiny. and at the end of the day it the reputation of rating and the fact of the matter is that our independent reports, for example, imf recently came out and looked at the sovereign credit ratings and performance in the sovereign ratings and how they performed. >> so mr. rowan, part me for interrupting, but how about mideast? >> mr. congressman, the credibility of mr. sharma just mentioned is an integral part of the business of rating agency.

and putting the brand and franchise behind the rating is important. the uses of ratings look to moody's long-standing track record of credibility and consistency of performance of our ratings in many areas outside of residential mortgage-backed securities'. we had a big discussion earlier and you were all here about 99 g. and the liability section. what is your view of that provision? >> congressmen, i'm not a lawyer speed so we'll go to mr. sharma because you can't answer. >> do you mean for hundred 36 g.? >> 939g as i understand there's a section opposes the provision for stricter liability standard. >> sorry. yes. look, as i mentioned we are accountable and we recognize that dodd-frank act changes leading standard, and, which is

ashley unique to rating agencies unlike any other market participants. the standard has now been changed. but otherwise we are sued. we are sued and cases have been filed on us, and other laws that are in the books. >> mr. smith i think i heard you articulate a different view of that. >> well, we believe that in our view of the credit rating agency line of case law that ranking member is correct, that the standard that has been imposed by dodd-frank is exactly the standard imposed in every other participant in the financial markets. certainly the lawyers, the accounts, on knowingly or recklessly standards. it's knowing and reckless stand but it's one that banks realize what they have done is wrong or that they were so reckless in their disregard for whether it was wrong that they should be held accountable for it. i think that's the correct

standard and it's the standard flies across the board. >> i thank the gentleman extra time. >> i thank the gentleman, and now the chairman of the capital markets committee. >> i think he. i thank the panel. the pentagon are the earlier panel, some the questions with regard to the larger issue that is affecting the country right now and that is the debt limit. there are certain questions there. also, mr. sharma, could you come on the evaluation of the potential for downgrade on the president's position or a solution to the problem when it goes to get a downgraded? >> congressmen, the way our sovereign analyst look at is, they look at the five variables to start a test period the commercial debt. we look at the fiscal aspect. we look at the monetary. we look at the economic strength of the country, and look at liquidity and funny and that, of course, -- liquidity and

funding. >> i don't have -- i realize the five-point announce it on this point of analysis is what structural changes that the congress is going to pass. are you able to look at what the president has presented and able to get an evaluation on that weather that is sufficient? >> what we have, our analysts have said has to be a plan to reduce the debt burden as we reduce the deficit level? >> i understand that i serve on the budget committee and there's the infamous statement from cbo would they say we do not if i were speech at the was is something you could if i would with the guts to get ministry as whether plan is credible? do they have a plan you can look at? >> have been a number of plans announced by the administration. >> have you been able to look at the? >> we think some of the plants reduce the level, could bring the u.s. debt burden at the deficit level in the range of a treasure for aaa rating your we have analyzed it a willing to

see what the final proposal is for our sovereign analyst really analyze and currently and then -- >> so the story is, at least one of the stories out there with regard to the harry reid plan is that it would be a better plan to ensure that we would not get a downgraded according to some of rating agencies. is that story true? is this better or satisfactory? i say that with regard to your own analysis of july 14 this is what we really need to have you in order to avoid a downgraded is a 4 trillion-dollar structural change. as far as i know the harry reid plan does not reach that level. would that be satisfactory to? >> congressmen, i think we were misquoted. we do not comment on any specific plan or political choices, policy choices being made. we are just commenting on what is the level of debt burden, what is the level of deficit that must meet the threshold to mean aaa. the never before by a number of

congressmen and administration, our analysts were just commenting on those proposals that that would being the thresher within the range of what aaa rated sovereign debt spent watching my time, firstly, is something under that in potential still be able to maintain a aaa rating? >> i would leave that to our analysts to determine that, and it is a decision is made by the ratings committee and by our sovereign analysts. we have a criteria on sovereign that we have published. it is out in the public domain. >> i know the original plans, so-called grand plan was in the 4 trillion size. the transit is essentially under that so you have not made any other pronouncements since july 14 letter announced saying what has 4 trillion would be satisfactory, we have seen these other potential plans out there and they would or not, yet not

produce any of the document in that regard, is that great? >> we have not. >> does moody's want to chime in on this? >> congressman, i'm not a ratings and as. moody's has placed the rating for the us government under review for possible downgrade. looking at two dimensions, one being the short-term risk of a disruption, and the longer-term issue, the level of debt in relation to the overall economy. >> and so, and i know you're not the analyst, so to the plans that we have seen, either from the white house which i haven't seen anything on paper, or from her greed which come under the 4 trillion-dollar level, do they satisfy those criteria? >> to my knowledge moody's has not published anything in regard to specific policy issues or specific parameters decorating committee will consider action. >> mr. kroll, do you want to chime in?

>> i do think rating agencies have the wherewithal, the intellectual range, the experience to be doing ratings on hundred countries around the world. i question whether this is the job of a private sector entity to be looking at the united states government, or frankly any other government, and reaching decisions on their levels of credit worthiness. and what we've seen throughout history is a constant activity of being a day late and a dollar short. and running around in front of the parade. so, is this new news? what makes these organizations -- we cannot make the scum we are too small. but a question whether private enterprise should be in this business for pay.

>> i thank you. >> i thank the gentleman, and other gentlemen from texas, mr. canseco for five minutes. >> thank you, mr. chairman. mr. sharma, deeply the amount of debt held by the states poses a systemic risk to our economy? >> our sovereign analyst in the publications have highlighted that debt burdens and the growth rate of the debt burdens is something that does need to be addressed. for us to continue to assess the credit worthiness of the sovereign commercial debt spent in the political discourse that we're seeing today, do you think that it is the job of a credit agency to get involved in trying to make a decision one way or the other on a political basis? do you think that is interference on the part of the credit rating agencies to be stepping in at this stage and making an assessment? >> congressman, sovereign debt is a large asset class that many

around the world investing. and our role is generally provide an independent view and a future forward-looking view for investors as to what the risk levels are for those assets that they invest in. and that's what we're doing today. we are really for the benefit of investors giving them a perspective and a point of that says what do we believe, whether here or europe or anywhere else. we are doing the same thing that we do in any part of the world, speaking to the risk that investors invest in. this is a large asset class that investors investing. they are going to determine what to pay for those risks. >> do you honestly believe the united states could default on its debt? >> our analysts don't believe they would. and by the way, changing a rating doesn't mean it would befall. aaa, means it is a low probability, very low probability of default.

that's all it means. and it could change the rating cut it means the risk level have gone. it doesn't mean it's going to default. if you believe that it would change it to a default. status. >> thank you. mr. gellert, is there information to which moody's and s&p have access to that year from cannot access the? >> a significant amount actually. and in addition, there's a lot of information that they have that didn't nrsros like kroll bond rating's can't access. i think it's 17 j-5 that is the rule that created last year and ability for structure products for data that is being used by a paid for rating to be shared and accessed by another nrsro for unsolicited rating.

as a non-nrsro we don't have any access to that. as a nrsro what role would not necessarily have is access to things like the underlying data that goes into a collateralized loan obligation. security. clo's are very, very close. they are not covered in asset-backed secure these that i really covered under 17 g5. the sec doesn't have purview over the loans themselves, the underlying collateral for those types of securities. there's a whole world of information that none of us have access to, that really would open up the space to competition as well as providing the investor community information that they directly could use if the information was available to them. >> mr. kroll, would your answer be the same or different? [inaudible] >> as a nrsro which is one of the reasons we became a nrsro,

we do have access to most of the information. so for example, we have just in the last 30 days rated three, and in two weeks it will be five commercial mortgage-backed deals. we are privy to the same information that the over lockerbie gets come if there on those deals. >> mr. gellert, were you disappointed are pleased with the provisions of dodd-frank related to created rating agencies? >> i think by and large i was disappointed with them. i think the idea behind dodd-frank and my understanding was to create transparent to emigrate accountability, increase competition. in fact, i think what happened was a lot punitive directive initiatives towards the big

three with unintended consequences that hurt the variety of us who would consider being nrsros or the strength of our nrsros, ultimately innovation and competition in the space of what's going to evolve. and i don't think dodd-frank as a whole helps contribute to that mission. >> as a non-nrsro flare, and an entrenched feel, what is the biggest challenge your firm faces? >> well, i think, you know, they're still a certain amount come or a decent number of institutional investors that are paying attention to the nrsros before they'll pay attention to a non-nrsro come in part because of the information structure in the predatory environment that continues, although it may be evolving but continues to support. for us we don't mind the hard work. we are in this for the long-term and where in this to grow our business. and doing the hard work and explaining our ratings to a variety of potential and current users is very much a part of what we do.

but we are trying, this example of the quarterly ratings affirmation. we believe even as a non-nrsro we are leading the field in best practices in certain areas and will continue to try to do that. so we are prepared to compete but it becomes harder with certain folks. given the entrenchment. >> i see that i am out of time. >> in consultation with the ranking member, we're going to provide members another round of questions. and so i will start out. mr. sharma, in the last six or seven months, have you had a conversation with secretary geithner about the ratings of the u.s. sovereign debt? >> chairman, like we do for all

entities that issue debt, we meet with the management, in this case, the treasury is management for us. so our sovereign team has had ongoing dialogue. we do this not only with sovereign governments around the world, we do that with companies. we meet them regularly, and sometimes quarterly and have new update information or to our sovereignty has been meeting and discussing and dialoguing with the treasury and other parts of the administration, and some members of the congress, to just better understand what the situation is, what the policies are being popular, how credible with those plans be. so they have been having a regular ongoing dialogue. >> so let me restate my question. had you and secretary geithner had a conversation about the rating of u.s. sovereign debt? >> no, chairman. i have not had any direct conversation. >> what about, you know, i know

this often debt thing is not just a u.s. issue right now but it's a global issue, particularly in european union and european central bank. have those entities, been having ongoing dialogue on how you might be rating their debt? in the same respect. >> congressman, first of all our sovereign analysts meet with the central banks, finance ministers, treasury and other policymakers around the world on a regular basis. we rate about 126 countries. so they're meeting with all the people around the world. all the time. and from time to time yes, i do in my roll it with central banks and financial indices and treasures around the world, just a change of you. but not on their ratings per se. >> and so here's a question,

what about countries that can monetize their own debt, like the u.s. and other countries? would a country that can print money get a higher credit rating the country that doesn't have that ability of able to get? >> chairman, yes. in our criteria we explicitly say that. countries can have their own currency, and in this case the u.s. is a global reserve currency so does get a list. i'm not exactly sure how much left but yes, they do get a left. >> it would be interesting i think for me at least i made some i members to know what that is a countries that can print money. >> we may have published it. we will make efforts to get to you. >> another question here is we are looking at the potential, what the rating is, the potential for what you think the risk of default is. what percentage of a countries

government expenditures attributed to interest would begin to cause you to enhance the potential for default? in other words, some countries, their interest is 5%, 10%, some countries are 25% interest. at some point in time, squeezing out the amount of government expenditures and forcing either additional taxes or -- but, what interested kerry be a factor that you wouldn't -- >> it is. and cost of debt is an important factor, as is the total debt level, as is the deficit, as is the economic growth prospects. because they all include the trajectory of the growth of the debt levels of the country. so they are clearly we have thresholds for each rating category against many indicators that we look at. at this point in time i'd don't

know explicitly what the threshold level for aaa debt servicing, but we can look at our published document to see if it is in there and send it to you. >> last point. i country -- a country, the interest care is increasing at a faster level than the gdp, the growth in the economy. once the pathway for that country? >> it's a function of that plus a function of, the total debt level is a function of the deficit, a function of the economic growth. and then, of course, what steps are going to be taken to address all these things so you can change the trajectory while using a number of other very most. and as you mentioned the dollar also brings benefits, also to

the credit worthiness. >> would you say this is a fair assumption that the comments recently made about u.s. debt was not whether we're going to default or not, but whether we were going to actually address the massive deficits that this country is running? >> congressman, that is exactly. the main more important issues really the long-term growth rate of the debt that is driven by the debt burden. so that is a more important issue at hand. and to your point, that is the more important issue. >> thank you. i think my time has expired. >> ranking member. >> thank you, mr. chairman. mr. chairman, i just want to point out i've got the bloomberg news report on the opinion that it deals with underwriters. apparently moody's and standard & poor's, i can't matter -- year in the business of making thoughtful professional opinions, not underwriting. i actually, i guess they made no

other legal claims but i'm glad you won the case that i would want to get into this mess but that has nothing do with other cases that make them. mr. smith, i wanted to pursue another area and i'm not sure whether colorado pera is considered in the class as a mini type of bond. are you in that category? >> as part of an issuer? no, sir. >> so you don't get tax-exempt status? >> no, we do not issue bonds. where a pension fund that pays benefits but we're not a part of the state. we are an arm of mother's day but not a part of the state for purposes of issuing debt. >> i appreciate that. that's why went as because, guys, i've been chasing the credit rating agencies for years before this problem, and it had to do with, because i'm a former mayor. and i was kind of giving you a taste of what i got for my nine years as mayor. i didn't like it. when you guys came in the door i had to jump through hoops that were ridiculous to get ratings that were below what i deserve.

and then i got here, i realized that i did get ratings below what i deserved because my risk of default which is really the only basis which i thought anybody worked, was significantly in a different standing. dodd-frank was supposed to address some of these things, and i guess i'd like to pursue as to whether it has. do you come in the last couple of years, i have never speak for me but up until 2008, i have not updated in. prior to 2008 the historic ratings of all rating categories, all of them, aaa and the non-investment grade, muni by moody's standards were 97% times less likely to default than corporate bond. yet were rated lower. by s&p standards a were 45 times less likely to default, yet rated lower. have you changed your ways? are you now reading municipal and other government agencies as if they were corporations? based on one thing in on one

thing which is the risk of default. mr. sharma. >> ranking member, we have always had one scale, consistent scale that we've tried to adopt across all our asset classes. and as result you have seen our municipal rates are generally higher than corporate and other types of institutions, financial institutions. and we have made vigorous attempt to really make our ratings very comparable, whether it is munis or carpet over the financial institutions, whether it's in u.s. or in europe. so we are striving to get comparability of our ratings across all asset classes, across all geographies. >> the reason i ask him in 2008, again, not updated but i know it is change a bit, my guess is, let me ask a basic question. are you aware that munis had

defaulted at any higher rates than corporate bonds of? >> mr. ranking member, i don't have that data exactly but as a mention coming we are aiming to get comparability. >> that would mean basically that you would now start rating what was once rating 2008 as may be up be a or b. b., up to a aaa. they had approximate same default rate as a corporate bond. i would argue that since default rates are three matter, and a rugged and i think matters is paid? based on historic data, absent individual items, then munis should be rated aaa. so are you telling me have addressed that issue and not at all munis address kabul to corpus of? >> we are working to where we are recalibrating, in fact recalibrated treachery or across many areas including structured

finance, sovereign governments, and we are also recalibrate our criteria on municipals with the aim and objective sort have comparability of ratings across all sectors, asset classes and geographies. but this is a forward-looking -- >> mr. rowan, has moody's make progress on this as will? >> yes. i wear that since 2008 moody's has recalibrated, formally recalibrated all of the u.s. public finance ratings to move them onto a scale that is comparable to incorporating financial institution. >> based on historic default rates? >> there was a research piece and a lot of analysis around the recalibration that i can assure is provided to you. >> my staff will be in touch with a few to catch up on some of the day mr. gellert, do you do governmental issues of? >> we do not. but i would point out and i'm not sure that data that you're referring to, but i will point out of course a lot of the municipal issuance were injured.

so you have a skewing of default status and statistics. >> actually these are based on not injured. that was my basic argument that i believed then that munis were being changed into insurance that they didn't meet. >> just to clarify. >> mr. kroll, do you do munis? [inaudible] >> yes, we do munis. we are just starting. we released a study in september of taking the 200 most liquid muni issues, involving states and cities and looking at the actual financials. so we will not be using dated information, sometimes you come here and have dated to come up with our ratings of the. so stay tuned for september. >> looking forward to a. thank you all very much. appreciate it. >> thank the children. now the vice chairman, mr. fitzpatrick. >> mr. sharma, i want to follow up on one question of the

chairmen earlier. in a letter sent to the subcommittee dated june the 13th, secretary geithner acknowledged that he along with deputy secretary, omb director, met with s&p personnel on apri april 13, actual meeting. are you aware of what was discussed at that meeting? >> no, i'm not. i know our team as i mentioned regular needs with them, and as of the process on trying to get a better understanding, and they met with the treasury. i wasn't even aware that they met with the members that you just said but i know they had a meeting. they met with them. and because i am not privy, i don't have, privy to people to meet once they're in the ratings process. >> according to documents obtained by this committee, two days after that meeting on april 15, david beers reached out to undersecretary goldstein to let treasury know that rating

committees outcome. do you know what was discussed on that call? >> know, congressman, i don't are normally the would be once we may, once the rating committee makes the decision, we write up the decision. we also and form the issuer of the rating action if there is a change, or if there is an affirmation. and if there's any publication that we're going to do, we do share it with them also. >> so he would have informed the issuer before the public would find out the out of? >> we let them know we would be taking a rating action, yes. >> shortly after that, mary miller reached out for draft press release on the outlook change. this was three days before the actual press release occurred. what would be the purpose of sharing a draft press release with the issuer? >> it is to give the issuer a chance, if there are any factual errors or anything else in the press release, then there's an

opportunity to correct that. so that we want to give the public a completely error-free information. and so that is the opportunity for them. >> and that is standard practice? >> yes. >> do know whether or not the department made any changes to the press with a? >> i don't know that. >> the next day, which was two days before the actual press release another official reached out to john chambers and asked if there's a commune occasions director that treasures press people can connect with, it appears that they call did take place to do you know what happened on that call, what might've been discussed the? >> i don't know specifically come but generally there is, they may have to coordinate when will be releasing our information so they can plan their own releases affirmation that they may have intended to do so. that is a normal process that a corporation when we read, when

dave announced their reading material, and they may want to cornet with her own to medications group as to what we want to say to the public. that's going on the timelines when we release it. >> you don't know what occurred on the telephone call? >> no. >> you don't know whether not treasury asked for any changes to the press release in the days before the issue? >> as i said, the purpose of that sharing the draft release is only if there's a factual error on the rating committee decision that's made, we proceed along those lines. >> and do you believe that's an appropriate process because we believe it's inappropriate process because it allows any errors that may occur by mistake or for any other reason, but once the rating action is done, we follow the process and it's been followed very rigorously in our organization. >> mr. chairman, i would just ask that the secretary's letter dated june 13 and the attachments been a part of that hearing record. >> without objection, so order

ordered. >> mr. chairman, if the gentleman would you for a minute? >> yes. >> mr. sharma, again, i want to declare, as i said as a former mayor, i got phone calls from your agency before you became -- its, throughout the entire, everything you do come is that a fair statement? >> every rating you to come you get the individual that are being read an opportunity to correct factual discrepancy? >> yes. >> mr. rowan, does your company to the sinking? >> our company has the same policy for the same purpose, to ensure that there isn't a madrina statement of fact or an inadvertent disclosure. >> mr. gellert, you're a little different but you don't do public stuff but do you do something similar? >> we have no contact with issuers at all. >> you don't make public statements of any kind? >> that's correct. >> mr. kroll? >> on the issuer side of our business, we also have a sub scratch in business, on the issuer-paid agencies, which is done our first five transactions, we do the same thing.

it's only about correcting any factual errors that we may have spent so it's a standard practice in industry. >> correct. >> thank you. >> go back back to the gentleman's time. >> well, i want to thank this panel. it's been a very good hearing, and we appreciate your time and your thoughtful testimony. and just want to remind the members have additional questions for this panel, which they wish to submit in writing, without objection the hearing record will remain open for 30 days for members to submit written questions and to place the responses into the record. it is no further business this hearing is adjourned. >> thank you, mr. chairman. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations]

>> is thinking of choosing a drawing down risk with specific purpose of assuring the persons of a particular race will be elected. and the circumstances that's invalid. >> listen to c-span radio. >> the u.s. senate is about to gavel in on this thursday morning. senators will begin the day with general speeches. about an hour from now senate democratic leader harry legal come to the floor to explain the schedule for the senate. senators are waiting for the house to pass the new republican debt reduction plan offered by house speaker john boehner. final vote is expected early this evening in the house.

and now to live coverage of the u.s. senate here on c-span2. the presiding officer: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. holy god, who inhabits the praises of your people, look with favor upon us today. lord, you have been our god from the beginning, so stay close to us

and save us from ourselves. in times of tension and strain, keep our lawmakers calm in spirit, clear in mind, and pure in heart. empower them to perform faithfully and well the duties of their calling. inspire them with love for you, as you give them the wisdom to do justly, to love mercy, and to walk humbly with you. we pray in your wonderful name. amen.

the presiding officer: please join me in the pledge of allegiance to our flag. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. the presiding officer: the clerk will read a communication to the senate. the clerk: washington, d.c, july 28, 2011. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable tom udall, a senator from the state of new mexico, to perform the duties f the chair. signed: daniel k. inouye, president pro tempore. mr. reid: mr. president? the presiding officer: the majority leader recognized. mr. reid: following leader remarks, the senate will be in a period of morning business for one hour. the majority will control the first half, the republicans will control the second half. following morning business, i will be recognized. mr. president, h.r. 1938 is due for a second reading i'm told.

the presiding officer: the clerk will report. the clerk: h.r. 1938, an act to direct the president to expedite the consideration and approval of the construction and operation of the keystone xl oil pipeline, and for other purposes. mr. reid: mr. president, i would object to any further proceedings at this time on this legislation. the presiding officer: objection having been heard, the bill will be placed on the calendar. mr. reid: i now ask unanimous consent on behalf of senator bingaman that his interns shannon simpson, brook jordi and tray dubrey be granted floor privileges during today's business. the presiding officer: without objection. mr. reid: i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

the presiding officer: the leader is recognized. mr. reid: i ask that the call. quorum be terminated. officer sphe without objection. rioted reid mr. president, we have five days remaining until a few extremist republicans drive our economy off the cliff because they're too radical and inexperienced to compromise. mr. reid: financial experts are begging copping to come toon agreement and avert the first-ever default on this nation's financial obligations. this is what one financial analyst said yesterday about the need to avert a default crisis that would spark a global

economic depression. this is a quote. "the market is saying we need a deal here. default is starting to seep into the marketplace." close quote. it won't be long, they say, before financial markets severely react to continued subimportantness of the tea party republicanson tany. wall street had a very bad day yesterday, its worst in months, largely based on the news that congress has still not found a path forward that. doesn't only affect big investment banks or wealthy investors. all around the country ordinary americans with 401(k)'s and college savings accounts lost money yesterday. their life savings took a hit because a small group of radical republicans who don't represent mainstream america have refused to move even one inch towards compromise. yesterday'default will lock our financiarock -- will rock our fl

system to its core. many republicans urge time is running out. they've urged their colleagues to compromise. yesterday on the senate floor john mccain, the republican senior senator from arizona, and president obama's opponent in the last presidential election, asked his own party to return to reality. it is not fair, he said, that the american people hold out and say we won't agree to raising the debt limit. he called the radical republican approach -- he called the radical republican approach saying "up is down and denying the sky is blue unfair and bizzaro -- b-i-z-z-a-r-o. he further said, "it's time we listened to the market. it's time we listened to the american people and sit down and seriously negotiate."

he was talking to his fellow republicans and in particular to a tea party that doesn't seem to realize that republicans control only one half of the branch of government. that faction of the republican party is holding our economy hostage, and that's an understatement. my counterpart, senator mcconnell, also urged a republicareturnto reason. "we cannot get a merkt solution. prosecute from my point of view, controlling only the house of representatives, so i'm prepared to accept something less than perfect because perfect is not achievable." close quotes from senator mitch mcconnell. both sides know that neither side will get everything it wants. that does not mean we should not come together to find a compromise that gives each side something it needs. republicans have drawn the line at ending corporate tax breaks for corporations making profits. democrats have vowed to protect senior citizens who rely on

social security and medicare benefits. we will not allow them to suffer while republicans protect tax breaks. the billionaires. a compromise plan we're considering here in the senate protects both of those parties, both parties' priorities. whether you agree with the priorities or not, the legislation that i have on the floor in the form of an amendment protects those priorities. democratic priorities and republican priorities. unfortunately, we didn't ask millionaires and billionaires to contribute their fair share. we would have loved to have done it but the line has been drawn by the republicans and we followed it. but it does protect seniors. it would also avert a default crisis while cutting $2.5 trillion from the deficit. that's twice as much as the boehner plan. yet house republicans refuse to support the senate compromise. i'm happy to talk to any of my

republican colleagues -- i've talked to several of them -- to listen to reasonable suggestions to make the senate compromise even better. the legislation, mr. president, is the art of compromise. they need to learn that. a significant number of house republicans have said their party would rather see this nation default on its financial obligations than cooperate with democrats. that says it all. it's hard to comprehend that but there's been a spate of the numbers of the house of representatives who have said they would rather see the nation default on its financial obligations than cooperate. this kind of thinking is roundly rejected by the american people. nearly three-quarters of americans want congress to compromise, even if neither side gets everything it wants. the american people know we can't get everything we want. this thinking has also been rejected by reasonable

republicans. i have the good fortune of serving with a very famous american, fred thompson from tennessee. he was famous before he got here as a movie actor. he served here in the senate admirably, went back to do his acting. former senator fred thompson, by the way, is a republican, urged his own party to recognize a good deal when they see it. that's what he said. i quote, "i respectfully suggest that you rake in your chips, stuff them in your pockets and go home." the proposal on the table would cut the deficit by $2.5 trilli trillion. if their goal is to rein in spending, they've already won. that's what thompson said, "if their goal is to rein in spending, they've already won. declare victory, leave." republican"republicans should kt take their chips and walk away."

american writer albert hubbard said, "it is easy to get everything you want, provided you first learn to do without the things you cannot get." that's imha this is all about. "it is easy to get everything you want, provided you first learn to do without the things you cannot get." there are things that neither side can't get. accept that and move on. republicans cannot get the short-term band-aid they have vote on in the house today. all 53 members of the senate democratic caucus wrote to the speaker last night -- it was hand-delivered to him -- to tell him why we won't vote for t the economy needs more certainty than the speaker's proposal would provide. we must not be back here in six weeks doing the saiment thing that i have been involved in for seven or eight months. we don't need to do that. washington has been locked down with this debt crisis debate. the white house isn't doing all

they need to do. we're not doing the things we need to do. we cannot come back to this in just a few short weeks, and that's what would happen. we must not be back here in six weeks or six months debating whether we'll allow our nations to fall in default on its financial obligations for the republican right wing that seems to be controlling so much of what they're doing in the house. it would be easy for the republicans to get nearly everything they want if only they embrace the senate's true compromise plan and stop, as senator mccain put it "deceiving the american peep people." thinks words, not mine. the question remains, will my republican colleagues be ice enough to end this stalemate? -- be wise enough to end this stalemate? i ask unanimous consent the senate proceed to h.r. 2608. the presiding officer: the clerk will report. the clerk: h.r.2608, an ajt to provide for an additional temporary extension of programs under the small business act and

the small business investment act of 1958 and for other purposes. the presiding officer: is there objection to proceeding to the measure? without objection, the sna will the proceed to the measure. mr. reid: thank you. i ask that a landrieu substitute amendment which is at the desk agreed to the bill as amended be read a third time and passed, the motion to reconsider be laid on the table, with no intervening action or debate, and any statements relating to this matter appear in the record at the appropriate place as if given. the presiding officer: without objection. mr. reid: #eu also ask unanimous consent that the period of morning business be extended until 5:00 p.m. with senators permitted to speak for up to ten minutes each during that time. further, at 5:00 perjures i be recognized. the presiding officer: without objection. mr. mcconnell: mr. president? the presiding officer: the republican leader is recognized. mr. mcconnell: mr. president, the complok i clock is tick tic.

so i was shocked last night when 53 senate democrats issue add letter saying they intend to vote against the only piece of legislation that has any chance of preventing all of this from happening. even more shocking is the fact that democratic leaders and the president himself have endorsed every feature muc of this legislation except one and that's the fact at that it doesn't allow the president to avoid another national debate about spending and debt until after the next presidential election. every other femme feature of the house bill -- every other feature of the house bill that was slings agreed to earlier, except for one -- the president wants to avoid having another discussion em deficit and debt before his election. that ashorn's is th assurance ig they're holding out for now. they can claim they're worried

about a stalemate six months from now. they can ignore the fact that 31 times congress and the president have raised the debt limit over the past 25 years, 22 of those debt limit increases lasted less than year. president reagan in 1984 signed three bills in the course of his election year that raid the debt ceiling. what's unusual to ask for $2.7 trillion in debt limit increase. that's unusual. that's unprecedented. so what's worse, mr. president, a default now or a potential default six months down the road? because if those 53 senate democrats follow through on their threat to filibuster the house bill, that's what they'll be doing. they'll be ensuring default now rather than working with us to prevent it later. why would you want to do that? to make the president's reelection campaign a little easier is the answer.

now, it's inconceivable to me that the president would actually follow through on this threat. after all, the president's first responsibility to do-to-do what's best for the country, not his reelection campaign. the same goes for our friends on the other side of the aisle. it's inconceivable to me that they would actually block the only bill that could get through the house of representatives and prevent a default right now. inconceivable. it's inconceivable to me that they would do this for no other reason than to help the president avoid having another debate before his election about the need for washington to get its fiscal house in order. because that's precisely what we may be headed for this weekend. guaranteed default or a bill that takes the specter of default off the table while giving us another opportunity to address the very deficits and debts that caused this crisis in the first place. senate democrats are playing

with fire here and it's hard to conclude that they're doing it for any other reason than politics. so i would urge our friends on the other side of the aisle this morning to rethink their position and join republicans in preventing default. the presiding officer: under the previous order, the leadership time is reserved. under the previous order, senate will be in a period of morning business for one hour with senators permitted to speak therein for up to ten minutes each with the time equally divided and controlled between the two leaders or their designees with the majority controlling the first half and the republicans controlling the final half. the clerk will call the roll. quorum call:

a senator: mr. president? the presiding officer: the senator from north dakota is recognized. mr. hoeven: i ask that the quorum call be dispensed with. the presiding officer: without objection. mr. hoeven: thank you. i rise this morning to speak to the need to come to an agreement, a need to come to an agreement on how we handle the debt ceiling. we need to come to agreement on addressing our nation's deficit and the debt. let's just review where we are right now. if you look at our fiscal situation, right now the federal government takes in revenues on an annual basis of $2.2 trillion. $2.2 trillion a year. but, at the same time, we're

spending $3.7 trillion. that's a shortfall for a deficit of more than $1.5 trillion a year. lookality these young people here in this chamber, these great pages, from all over the country. i think about what that means not only for us today, for our economy, for our standing in the world, for the security of our country, but i think about what it means for future generations. what is it we leave them? do we leave them a country that was founded on the concept of freedom and liberty, that people could pursue life on their own terms, raise their families the way they wanted to raise their families, live the way they wanted to live, do the work they wanted to do, have an opportunity to start a business and build a life and to be successful and pass something of

value on to their children? i think that's what we all want. that's the nation that we have, the nation we've had for over 200 years. that's the nation that we want to pass on to these great young people. so we've had tremendous debate here for extended period of time, for a long time, many good ideas have been brought forward by both sides of the aisle. by republicans and by democrats and how we should address this debt ceiling agreement, how we should address the deficit and the debt. and nobody has a corner on good ideas. there have been many, many good ideas brought forward, but now is the time where we have to realize that we've got to come to agreement. the american people want us to come to an agreement. so today the house is

considering the budget control act of 2011, referred to as the boehner proposal. they're over there working on it right now. and as with any agreement, somebody can certainly find something to criticize. that's always true. no agreement is perfect, but it does represent many of the ideas that both sides have brought forward as a way to come to agreement on this debt ceiling. and more importantly, as a way to start to get our fiscal house back in order. let's talk about it for just a minute. under the proposal, first there would be a reduction in spending -- savings of more than $900 billion. and that would also provide for a $900 billion increase in the debt ceiling, to get us past this immediate issue. and then at the same time it appoints a committee -- not a commission, but a committee of

senators and representatives, 12 members -- six senators, three republican, three democrat, six house members, three republican, three democrat -- that are required to find another $1.8 billion in savings -- another $1.8 trillion, excuse me, $1.8 trillion in savings. and those savings have to be found before there's another increase in the debt ceiling. that's the right way to do things. that's getting the horse in front of the cart, not the reverse. so they have to find those savings in a bipartisan way, and they have to bring those concepts back to the house and to the senate, and the house and the senate has a straight up-or-down vote. the elected representatives of the people doing their job for the people in an open and transparent way. and think about this committee for a minute. think about it.

again, 12 members -- six republicans, six democrats, six members of the house. they can bring forward all these great ideas that have been debated in recent months. they can bring forward ideas from the simpson-bowles commission that have gained support. they can bring forward ideas from the gang of six that people feel are meritorious. they can bring forward ideas for savings. they can bring ideas forward for reform. they can bring ideas forward for tax reform that doesn't raise taxes but actually eliminates loopholes, reduces rates, creates a progrowth environment and the revenues come from a growing economy, not from higher taxes. they can come forward with all of these ideas and more. but the important point is they must come forward by november with $1.8 trillion in savings that help get us back on the right path, the right path to good fiscal management.

and the debt ceiling is not increased in that second step until they do. that's making sure that we fulfill our responsibility and do things in the right order. and then this bill also provides that we have a vote on a balanced budget amendment, and that vote on the balanced budget amendment must be sometime between october 1 and the end of the year. myself and others have cosponsored a balanced budget amendment, and i strongly believe that's what we need. i understand there are differences of opinion, but when you look at the situation, you recognize that we need that fiscal discipline here in washington, d.c. and if you think about it, if you just think about it for a minute on a balanced budget amendment, how does it work? it works in a way that gets everybody involved, not just here in washington, d.c. but throughout this great nation. because what are we really

doing? by passing a balanced budget amendment in the congress -- which we have to do with two-thirds of the senate and two-thirds of the house -- what we're really doing is starting that balanced budget amendment on its way traveling throughout this country and saying to the good people of this country: what do you want to do? what do you want to do? why not ask the people? that's how our democracy works. why not ask them, do you want to make sure we have a balanced budget that requires congress to see that year in and year out we are living within our means? 49 states have either a constitutional or a statutory requirement to balance their budget. 49 states, to live within their means. cities, counties, families, businesses. so we'd say to the people, because three-fourths of the states would have to ratify that balanced budget as well. so we go out to the people and

we ask them, we say, look, we think we need a balanced budget, and we're going to make sure that you have an opportunity to say what you think. i believe that's exactly what we should do. i bring experience as a governor. i served as a governor for ten years, and we were required to balance our budget every single year. and we went to the people and we talked to them and we said here's the plan; we don't have the dollars right now to fund all the things you want. this was back in 2000, 2002, when we actually had to reduce our budget, make reductions across the board. we said you know what we're going to do? we're going to make sure we live within our means and create a progrowth environment that will enable business expansion, business growth, entrepreneur sh-rpbgs private investment -- entrepreneurship, private investment, get this economy going, get jobs, get economic growth. and then with that growth we'll make sure we each kwraour fund

our priorities, that we set some reserve aside for a rainy day and we do our best to continue to reduce the tax burden on our hardworking citizens. it doesn't happen in a week, a month, a year, two years. it takes time to build over time to the position that you want. but we can do it. we've done it before. if you look at the late 1980's, coming out of the stagflation of the 1970's and early 1980's, late 1980's we had stagflation meaning high inflation, high employment, people weren't working, a growing deficit. but by creating a progrowth environment and good fiscal management in the late 1980's, over the decade of the 1990's, we not only put people back to work, we eliminated that deficit, we built a surplus. and we can do it again. it's all about the right approach. so here we are today.

today we need to take that first step. i come back to where i started. it may not be the plan exactly the way everybody wants it, but it's a plan that we can approve and it brings together concepts that people on both sides of the aisle have brought forward. and so now we need to come together and do our work for the american people. we need to come together and pass this agreement. mr. president, i yield the floor and note the absence of a quorum. the presiding officer:

the presiding officer: the senator from texas is recognized. mrs. hutchison: mr. president, i i ask unanimous consent to lift the quorum call. the presiding officer: without objection. much hutch mr. president, i rise today to speak about the looming august 2 deadline. this is when the department of the treasury estimates that the federal government will officially hit the $14.2

trillion debt ceiling. mrs. hutchison: we all know that we are at the point where we are because we have a fundamental difference in principle on how our government should be run. at the same time, most agree that our country cannot go into default. so, we are in a very tough situation with a very short time period. that's why i am concerned about the delay that has happened on this issue. delay means harm. harm to americans and harm to our economic recovery, especially as we grapple with 9.2% unemployment rate, which is the elephant in the room. we must address employment, if we are going to have an economy that is thriving and say that we are in a recovery period. a jobless recovery is not a recovery.

the administration's reluctance to resolve this crisis has brought the very real potential of a downgrade in our country's aaa bond rating. as we get closer to next tuesd tuesday, standard & poor's and moody's and other rating agencies await the details of the final debt agreement. then they will determine if our nation's aaa credit rating will be downgraded. the implications of the rating could affect consumers at a very bad time. it could include a rise in interest rates on home loans, on small business loans, on student loans, and credit cards. yesterday the stock market fell nearly 200 points, a 1.6% drop. that was the third straight day of stock market decline. it leaves the dow jones industrial average down 3.3% and

nearly on track for its worst week since august of 2010. the threat of a downgrade is also hurting our dollar. the dollar's value fell and hit a new 2011 low against the japanese yen and a record low against the swiss franc. two things are clear. first, uncertainty and anxiety are prevalent domestically and in the global markets. second, this ain anxiety underss the fact that we need to address our debt ceiling and deficit reduction small. while the fundamental principles on which we base our solutions to this crisis are vastly different, i do believe that both sides of the aisle in congress and both houses in congress share the same goal. the senate majority leader and the house speaker have put

forward plans. i believe that we must find a common ground between the house and the senate with the proposals that have been put out by the group of six, by the majority leader, by the minority leader on our side as well as on the -- the speaker on the house side. there have been a lot of proposals, and there are good parts in several of these proposals that we need to come together and find the best parts that we can agree on, knowing that we are a divided congress and a divided government, and move forward to a conclusion. we can get meaningful, immediate spending cuts as well as caps on future spending. that would be very, very important. it would be an important achievement. it would be a major step forward because that's not where we were when we started.

spending cuts and caps on future spending would be a major step in the right direction. we can allow the debt limit to increase in proportion to the cuts, the real cuts. we can do this without tax hikes, because the fact is, the idea that we can tax our way out of debt has been completely repudiated. so we can cut spending, we can cap future spending, we can raise the debt limit in accordance with those caps, and without any new taxes. that is a significant achievement as well because certainly the president was talking about increasing taxes, increasing taxes, increasing taxes when this whole negotiation began. but we have, on our side, stood firm against new taxes, knowing that this is a very fragile

economic time in our country. and if we want people to be hired, if we want the unemployment rate to come down, we cannot saddle our small businesses with new taxes. so, mr. president, we can send a clear message to the markets and to our debtors. that we can stop spending too much, we won't need to tax anymore, and we certainly do not want to overborrow and have the drag that we see on our economy. americans know that in washington we are spending too much, we're taxing plenty, and we are borrowing too much. but there is more that we can do, and that's what is in the plan that is going to be voted on by the house tonight, and it

is in the plans that have been come before the senate and probably will come before the senate sometime this weekend. and that is entitlements. mr. president, we will not get to a balanced budget without looking at entitlements. because the discretionary spending is such a small part of our total budget. our entitlement programs are the major part of the need for reform. our entitlement programs are nearly bankrupt. if left unchanged, our promises to current and future beneficiaries will be broken. mandatory spending is the long-term driver of our debt problems. for example, according to the congressional budget office, the federal government spends approximately $2.1 trillion a year on entitlement programs, about two-thirds of our total

federal budget. i have introduced a bill -- the defend and save social security act -- that would put that program, that very important program for seniors, on a fisc fiscally sound path, without cutting core benefits and not raising taxes on the people who are paying in right now. my proposal will cover a 75-year shortfall and anyone who is currently 58 years old will have no effect whatsoever in the gradual increase in retirement age. the beginning of the increase in retirement age would start by people who are under 58, and then it would be only three months a year. so if you're 57, you would only retire three months later. and if you're 56, it would be six months later to start on

social security. the senate majority leader, the house speaker have offered proposals that call for a bipartisan, bicameral congressional committee to fix the fiscal imbalance in our nation's finances. it is imperative that this committee, if it is passed by both houses of congress, confront entitlement reform. entitlement reform is at the core of any long-term solution to our nation's financial problems, and if we act now we can make progress in a very gradual way. and if we wait, it's going to be much more stark and much more problematic for people who depend on social security or medicare. the opportunity to raise our debt ceiling is a defining moment in the future of our government. let us today confront the problem and not delay the

inevitable. the more we delay, the harder it is going to be, and we have seen how hard it is already. we know this has not been an easy process because the talks between the white house and members of congress have fallen apart. talks between members of congress on both sides of the rotunda have fallen apart. we know this has been hard. so let's try to act now to stop it from being harder in the future, which it will be if we don't address these entitlement reforms with our problems. i support a two-step approach. let us take the first major step, the almost $1 trillion down payment. that is the first step for all of us to cut spending about $1

trillion. and then the second step is the more long-term deficit-reduction program that would look for the ways to cut more spending over a ten-year period and to address entitlement reform that would gradually cut some of the increases in entitlements that could be done in a gradual way but without touching the core benefits. that can be done if we act now. if we don't, it will not be able to be done. the financial viability of our country is at stake. the time is here. it is past here to take the necessary steps to get our fiscal house in order. and i implore my colleagues to take those steps now. thank you, mr. president. and i yield the floor.

mrs. boxer: mr. president? -- mrs. feinstein: mr. president? the presiding officer: the senior senator from california. mrs. feinstein: thank you very much. i ask unanimous consent that two fellows in senator rockefeller's office, dale orps and janet phillips be given floor privileges during consideration. the presiding officer: without objection, so ordered. mrs. feinstein: thank you mr. president. i have served in this body for many years and i have never been more dismayed, more frustrated than i have been these past few days. and every day it gets a little bit worse because day by day our country grows closer to defaulting on our sovereign debt, something that has never ever happened in the history of this country. and the repercussions of this protracted and public debate on whether our government will honor its financial obligations are already evident.

so this is what we know for sure. the stock market has seen several days of decline as investors sell off securities. the united states is at high risk of a credit downgrade. gold prices are climbing as people try to protect themselves from a ratings downgrade and a drop in the value of a dollar. in short, default may well have catastrophic economic consequences domestically and internationally. and what is the message we are communicating to the world? secretary clinton told me in an evening conversation i had with her -- she had just returned from visiting five countries -- and she said everybody was asking her, what is wrong in your country? what are you going to do? so this is now a worldwide crisis and one that we must address. what we are seeing here is in a

sense a broken government that can't take care of the affairs of its people in a prudent and practical way. it is absolutely amazing to me that 20 to 70 members of the house of representatives believe they can run the government of the united states despite the fact that the presidency and the majority in the united states senate are controlled by another party. essentially they appear willing to allow this great nation to default rather than compromise and reach a practical solution. so what are the consequences of default for american families? for sure default would raise interest rates, driving up costs for everyone. for sure the cost of owning a home, buying a car, buying food, filling a gas tank, sending children to college will even become more expensive.

squeezing already tight family budgets and damaging this fragile economy. many people predict a second-dip recession. but in essence, default causes an immediate tax increase in the face of rising interest rates on families. the talk of default is disrupting financial markets and will trigger a sharp fall in the stock market, causing huge losses in retirement accounts and wiping out the gains of two years. this morning i saw a tv story about a man who was selling his mutual funds because he has no confidence in our ability to resolve this crisis. not a good thing to do. higher interest rates will also drive up costs for both the federal and state governments because every 1% increase in

interest payments for the federal government means an additional $100 billion cost to the government. default will be devastating for state governments that would see their borrowing costs dramatically increase because their ability to borrow is tied to the interest rates paid by the federal government. the cost of borrowing for states for municipalities, for local water districts will all rise. let me give you an example. my own state of california recently took out a $5.4 billion loan from five major investment banks ahead of a possible default to ensure itself against rising interest rates. here's the sixth-largest economy on earth worried that their interest rates are going to

jump, so they take out a $5 billion loan from investment banks to be able to meet any increased interest on obligations owed. for the broader economy, default would mean hundreds of thousands of jobs lost every year, according to the federal reserve. chairman bernanke has said -- and i quote -- "the economy may be thrown into reverse and employers would start cutting jobs if congress fails to raise the nation's legal borrowing authority." now i've heard some say that on august 3 the treasury will still have enough money to meet our obligation and avoid default. that is simply false. according to the bipartisan policy center, the united states government has $306.7 billion in

payments due in august and will take in an estimated $172.4 billion in revenue for the month. that's a $134 billion shortfall for the month of august. so, the treasury will not be able to pay its bills. in other words, 44% of united states government bills will go unpaid if the federal government fails to raise the debt ceiling by the august 2 deadline. treasury would be forced to spend all income inflows, covering just six major items: interest, medicare, medicaid, social security, unemployment insurance, and defense. that would mean entire federal

departments would have no funds, including justice, labor, and commerce. it would mean no funds for veterans benefits, active-duty military pay, i.r.s. refunds, special education, pell grants, and more. there is simply no way to escape it. let me give you an example. on the next day, which is august 3, the treasury will take in $12 billion in revenues. but it will still owe $32 billion in revenues. let me tell you what that includes. it includes $23 billion in social security payments. i understand 45 million checks are ready to go out during these days. it's $2.2 billion for medicare. it's $1.8 billion for education. and it's $1.4 billion for

defense. if the debt ceiling is not raised by august 2, or if we only reach an agreement for a short-term extension, the already spooked credit rating agencies could react unfavorably. and this is the problem. you want to go back to this same situation in six months and go through this all over again? it makes no sense. and if the marketplace wants stability and constancy, they're clearly not going to get it knowing that this is going to be coming up in six months again. moody's has said it's possible our credit rating would go down with a short-term increase and warned that an agreement should get us through the year 2012. all right, don't pay attention to it, but that warning is out there. it's going to take getting through the year 2012, according

to at least one of the rating houses. fitch has said a deficit deal must be credible and sustainable, or united states ratings could still be downgraded. does anybody believe it's credible and sustainable to do this thing for six months and be right back where we are today? i don't think so. standard & poor's has said it may lower the country's long-term credit rating if it concludes that future adjustments to the debt ceiling are likely to be the subject of political maneuvering. not my words. their words. you want to go through this in six months again with the same results and creating all of the uncertainty for the six months between now and then? i don't think so. in other words, these rating

agencies have very real questions about the willingness and ability of this congress and the administration to timely honor scheduled debt obligations. now, i have to say this, and i've been here for nine years, i have never seen a time when republicans just do not want to come to an agreement with this president. the president, i think, by any standard, has bent over backwards, and still republicans walk away from the negotiating table. well, let me tell you, i've done a lot of negotiations in my time. big labor strikes and work stoppages. i would ask unanimous consent for five more minutes. the presiding officer: is there objection? mr. corker: givens an 11:10 time and saw we were alternating.

i've got a conference call that starts. i'm glad for you to finish, but if you could make it shorter than that. mrs. feinstein: 3 minutes. the presiding officer: is there objection to the unanimous consent request for 3 minutes? without objection, so ordered. mrs. feinstein: there have been two months of negotiations with the vice president and majority leader cantor walked out. there were negotiations with the president and speaker boehner. boehner walked out. house republicans do not like simpson-bowles, nor do they like the gang ever six plan. these are the two big plans which offer a solution for the future. instead, they want massive cuts to medicare, medicaid, social security, and discretionary spending, and absolutely nothing from those americans who are doing very well in this economy -- actually you the top 1%. well, i represent 37 million people. california is bigger than 21

states and the district of columbia put together. 15 million to 20 million people in my state depend on programs that the republicans want to take a meat ax to, not a scalpel but a meat ax: s.s.i., social security, medicaid, and medicare. we've gotten these numbers, we've looked at them for overlapping, and i can truthfully say the number is 15 million to 20 million. well, look, i want to know how a cut is going to affect these programs? we could do this if we agreed to take six months, draft in bill language the gang of six, mandate the hearings, fast-track a bill to the floor of the senate. every member of this body knows it's bill language that spells out what you need to look out for. i need to look out what happens

to the medicaid -- medicare provider tax because so many hospitals in the state depend on it. if it lasts until 2014, it's okay. but i don't know. so i very strongly believe there is a solution and that reasonable people can work it out, and i hope the leadership of this body will talk with the leadership of the other body. i thank you. senator corker, thank you for your courtesy. and i yield the floor. mr. corker: mr. president? the presiding officer: the senator from tennessee is recognized. mr. corker: thank you. mr. president, it's interesting, i have some of the same concerns, maybe with different outcomes, from the senator from california. but i agree, we haven't -- we have not done our work. over the course of the last -- little over a wean year, year,n traveling i thintraveling the sf tennessee, making people

waimplet aim sure people on the other side have been doing the same thing. after town hall meetings all acrossing our state, in every form you can imagine -- i'm sure the presiding officer has done the same -- people are very aware in my state, as they are across the country, with the fact that we are on an u unsustainable course. "the wall street journal" this morning wrote an editorial about no matter what we do regarding the action proposals before us today, it's likely that our country is going to be downgraded. so here we are faced with a situation where the types of legislation that we're looking at in both chambers, i might add -- in both chambers -- probably will take us to a place where our countries debt is grown graded. i want to first applaud both leaders, senator reid for bringing forth a proposal today -- over the last few days;

representative boehner, the leader of the house, for doing the same on the house side. what i want to say about that is while to me they don't meet the goals or don't meet the tests that our country needs to have met at this time, at least we're finally talking about proposals that will reduce spending in this country and put us back on a sustainable path. so i appreciate the leadership of both bodies finally, after many, many months, we're finally on the right topic. what i have said all along is that as we approach the debt ceiling, we need to dramatically change the character of spending in this country. my concern is that our work is not quite done. the fact is that there's no question, the deadline that's coming up, that everybody agrees sat least the minimum is on august 2 -- i don't think there's any do dispute that we e until august 2 to deal with this

issue. i don't think we've come up with the solution that we need to come up with to dramatically change the character of spending in this country. and so what i would say is, look, our work is not quite done. the house has a bill that basically reduces spending over the next decade, $1 trillion. candidly, mr. president, i think we all know that that's not a solution that is going to prevent a downgrade in this country. it does have the goal of kicking this to a select committee of some kind that's going to try to incorporatincorporate another $8 trillion in cuts. i think that's a step comeback to where i think we were a weekend ago where at least on the coted side -- even on the cut side, even the president had agreed to at least $3 trillion in cuts. that's our understanding. so what we have coming out of the hoys house right sununu bill that doesn't cut as much as the president had agreed to last

weekend. and so we have on this side a bill that cuts about $1 trillion after it's been scoardz. and again i applaud the leader of the senate for putting forth a bill that at least begins moving us in the right direction. but again it's $2 trillion short of where the president had been with leaders a week ago -- or at least that's our understanding, and i'm pretty sure that that understanding is correct. we also know that the general mantra that's been adopted by wall street and by people who are looking at our country around the world is that we need to do something that is at least a $4 trillion solution. so i would say to the senator from california, who just spoarks i couldn't agree more. we have not addressed this situation as we we should. the vast majority of this body does not want to see our country default on its obligations.

i don't know of anybody want this to do that. i've wanted to see dramatic changes in the character of spending for our country and many people have sought that. our work is not yet done. so what i would say is let's have a short-term extension. there is no question that we do not want the sovereign debt of this country to be downgraded because we default. nobody wants to see that happen. we're at least finally on the right topic here. we're talking about spend reductions. we certainly haven't done the work necessary to achieve the goal that we need to achieve in this body. but i couldn't agree more. let's have a short-term extension. let's extend it another week or two weeks or three weeks. a lot of people say, well, you know, the fact is that that will royal the markets. what i would say is i don't think it'll royal the markets. i think they're waiting for us

waiting until an hour before the deadline to work out a solution. i think that's become customary, if you will, in the united states senate and the house of representatives. what i would say is, if we don't do the work now, we have an historic opportunity right now -- right now the whole world, the whole country, all of our citizens are frustrated, the house and senate are all focused on one thing and that is what kind of package can we put forth to actually cause our country to be more solvent at this time? we're finally on the right topic and yet we haven't even in these aspirational bills that are laid out, we know that with all the actuarial assumptions that exist, with medicare and social security and medicaid that if we don't touch trying to make them solvent for the longer haul, that we really haven't even done our work. and the bills that are before us don't even have as an aexpirational goal -- for instance, the house bill that's

coming over with the select committee that i know senator reid and senator mcconnell have been involved in -- and i thank them for their work -- but it doesn't even lay out that one of the things that we're looking at there is ensuring that social security is actuarially sound and i think the future of these young pages who potentially down the road -- not potentially, hopefully will benefit from social security, i think they'd like to know that during this historic time we're actually looking at the real issues. so, what i'm afraid of, mr. president, is we are missing the opportunity for this to be the seminal moment that we all thought it was going to be because we don't yet have a product that solves the problem. the product that we're looking at in both bodies -- and i thin- and i thank the leaders for bringing them forth -- that product does not meet the test. it doesn't dramatically change the character of spending in washington. it doesn't even stave off a

downgrade in u.s. sovereign debt. and so we're on the brink of actually doing something great for our country, and because we now have our country's focus -- and everybody in these bodies are focused on this problem -- let's have a short-term extension. i agree. let's don't default. let's move back a week or two weeks or three weeks. but let's don't miss this historic opportunity to do something great for our country, which is exactly what we're doing now. it's hard for me to believe, seriously that what we have before success a $1 trillion down payment. it is also hard for me to believe candidly that we're going to set up a select committee that's going to report back in four or five months when all of us know what the issues are. we understand the math. i know we get ridiculed a lot for the way we act in this body,

but i think most of us, candidly, pretty well understand what the solutions are. and we all know that nobody really gets to work on anything around here until there's an eminent deadline. so even with this committee that's being potentially set up by mutual discussion down the road -- i know there's a lot of negotiations -- to me, they should report back. i agree with the senator from california. let's report back at the end of this fiscal year, september 30. there's no reason to wait. and let's see if that type of bill were to pass, where you have a two-stage process, let's go ahead and get the work out of the way. but toipght back to the bigger -- but i want to go back to the bigger picture for just a moment and will conclude momentarily. we have an opportunity right now -- we've never been focused in the way that we are right now in the four and a half years that i've been here on something that is important as this, as it

relates to us getting our house in order. we have never been this focused. and what i'm afraid of, in the name of political efficacy, people saying, hey, look, let's take what we can get and get on out of here so would don't mess up our potential, on both sides of the aisle, for the 2012 elections. take what you've got on both sides. i mean, basically let's think about it. for the other side of the aisle to weigh all the proposals that are before us -- the way all the proposals are laid out, there's no way to make the entitlements sustainable. so they can run in 2012 on the entitlement issue. and with all the proposals that are laid out right now, we really don't deal with spending appropriately. and so, you know, our country probably is going to have its debt downgraded. so republicans can run on fact that we haven't reduced spending

enough. and so if you really look at it, this really works well for everybody except the citizens of our country. again, we're finally on the right topic, which is a rarity here. we're finally focused on the problem. we have two bills that don't go far enough, and again i applaud both the democratic leader and the republican leader for putting forth proposals. we all know it doesn't do what it needs to do. either proposal. we know the aspirational goals of each proposal don't take us far enough. so what i would say to all -- i agree -- let's don't default. let's don't bump up against august the 3rd. let's pass a short-term time extension, let's take us through the end of august or the first two weeks in september, or least take a week. but let's finish our work in this body.

let's don't miss this seminal opportunity where everybody in this country and everybody in this world is looking at how undisciplined we've been and the opportunity that we have before us to actually be disciplined and send a signal to the world that our future is not the future that greece is seeing today. our future is the continuation of american exceptionalism, all around this world, and we are squandering that opportunity right now in this body at a time when we're finally focused on the right top iefnlgt mr. president, i yield the floor. mr. corker: i nlts the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

a senator: mr. president? the presiding officer: the senior senator from west virginia is recognized. mr. rockefeller: mr. president, i ask unanimous consent that the quorum call be rescinded. the presiding officer: without objection, so ordered. mr. rockefeller: i thank the presiding officer, as i always do. tom harkin is on his way.

senator harkin is on his way from the meeting you and i were just at because we want to talk more about this national mediation board crisis and also the fact that the f.a.a. is on hold, that we can't do anything with it,. what the house did -- one of the revelations of the modern era which hopefully will last only a couple of years is that the folks in the house are willing to say no to the very end. there was a question i would raise is that my plan is to raise the stakes on the airlines doing quite dreadful things to them in hopes that they will engage with the house members to say that we have to have an f.a.a. bill. as i said yesterday, all i seek is a clean bill of extension.

that's been done 20 times just on this f.a.a. bill. it's taken us four years and we haven't been able to reauthorize it. there's some things that need to be worked out but they can all be worked out. so the house sent over a message saying that they didn't like what we're doing on the essential air service. well, the presiding officer knows what the essential air service means for rural communities. we have to have that in order to have communities have any kind of an economic future at all. on the other hand, we've been willing to make reforms. in fact, the reforms we suggested are more dramatic reforms the house suggested. put a cap on the number of airports, things i absolutely hate doing in order to try to get agreement on that subject. but what's more interesting, mr. president, is that's not really what they care about.

mr. micah, who is my counterpart in the house, has often said he doesn't have a dog in the essential air service fight. and so yesterday i was meeting with him and secretary lahood, who is completely with the senate in our desire to get this done and to break the intransigence of the house. you know, my counterpart simply said -- i said why did you send that over when that's not what you really care about? he said sometimes it's just a little political thing. i wasn't shocked by that because that's why i knew he had done it, but what it says is that they are willing to tank the federal aviation administration unless the senate caves to their position on the national mediation board, which would undo 75 years of labor law and which would take an

extraordinary situation, which senator harkin when he gets here -- if he gets here -- is going to talk more about. but the principle that they want and that they like is the fact that if you have an election -- let's say it could a union election, an economy election, but let's say for the sake of this it is a union election and people don't show up to vote, as is always the case, and those people who don't show up to vote, their vote is automatically characterized as a no vote on the idea of certifying to get a union. now this is purely the work of delta. most of the legacy airlines are unionized. delta is not. delta has, their c.e.o. makes $9 million a year, their top management another $20 million a year. they could practically pay for the whole essential air system

themselves but they don't want to fool around with this language to protect their antiworker ambitions. so, they've had four union elections in the last years. the airlines prevailed in all four of those elections. but they still want this language changed so that if you don't vote, that you're put down as a "no" vote. that is not to be able to organize. that's un-american, it's unprecedented in american history, and it goes against, as i said, 75 years of labor law. that's a very, very dangerous thing. so what we have to do is to try and make it clear -- frankly, the other airlines have been rather tepid in their support of my position on this. airlines are a close group and

they tend to stay together. they've got to stop that. they've got to make the house understand that if they persist in this rule, that we will really have a federal aviation system that will shut down altogether. i'm talking about air traffic controllers. i'm talking about the whole deal. it's not a long process. it's a horrible process. it's an antiworker process, which they are dumping in our laps. they want to see that happen. they're willing to see that happen. they will not compromise on national mediation board. they will not compromise. they've said that. and i've so often talked with my counterpart over there aepbd said -- and he said i don't make those decisions. those are made at a higher pay grade. he uses that word. why does somebody run for public office if they simply take orders from other people? well, that's sort of the way they do things over there in the house. but it's extremely dangerous.

you know, the truth lies in the fact that the house provision that cuts the essential air service program by $16 million; that's what it does. and at the same time the house has been willing to let $150 million drain from the airport trust fund in less than a week. every day we do not get this bill resolved, $25 million drops out of the airport trust fund, which is flush for now but is becoming very unflush very quickly. the f.a.a. extensions are very necessary. they're not something which people walk around here talking about all the time. but if they find they don't have flights to get to their homes on the west coast or in the south or anywhere else, they will be very angry. the people will be very angry. i don't know of any alternative but to ratchet up the pressure

to make those who, you know, who are blocking this understand that they are causing a national disaster, and they need to back off from that position. they've said they will not. well, will that be the final solution? it may very well be, and we have to understand that. but you cannot negotiate something which is so antiworker. you cannot negotiate that. the president has said he will sroe tow it if -- veto it if it appears in a bill in any form. the house has voted for it. the senate has voted against it. we've been very clear that it cannot pass over here. it will not pass over here. so why are they playing that game? the airlines are not now even paying for their use of the national airspace system. the carriers also appear to not care about the impact of the

dedicated f.a.a. workforce that serves them. once again, 4,000 already having been furloughed. and most of the airlines are not even passing any savings on to the customers they serve. why do i say that? because they're having a tax holiday now because our extension ran out, so all of a sudden they don't have to pay taxes on jet fuel and a number of other things, so they're getting a lot of money. what would you do with that money? would you keep it for yourself or would you turn it over to the trust fund or would you keep ticket prices the same and not raise them? well, they'll -- they keep it. frontier airlines, i think alaska airlines, virgin, i think, all have kept their fares exactly where they were. they are trying to protect the consumer. delta and the other airlines are raising ticket prices as fast as they can even though they're getting, because the time has run out on the agreement,

they're getting endless millions of dollars. they're choosing to keep it and make a profit for themselves. that's unconscionable behavior in terms of national policy. what are the real benefits to delta from what they're doing? how badly were they harmed by the decision, the n.m.b. decision? after the change, several unionization votes were held on components of their workforce. none of those voted to organize. what is their game? it's politics. it's theology. you can't let that stand, mr. president. you cannot allow people to get furloughed who are serious about their jobs, who are engineers and technical people the first 4,000. many of them will not come back. they will choose or figure they'll never get this thing settled.

they'll go out and find other jobs, and they'll be able to get other jobs. it's unconscionable. it's almost you can't believe you're in this situation; that you're in some disney world somewhere where people just don't take life seriously and don't take policy seriously. so i just want to reiterate that the senate appointed conferees, which is sort of necessary to try to reach resolution, on the very day that the house sent over its f.a.a. package for us to consider. we appointed conferees. more than 100 days later, 1-0-0 days later, the house still drags its fees. the house has not named any conferees. so what am i to make of that? they're not serious about this. so if they're not serious about it, do we then buckle because they're not serious or do we stand up for what is right and what is fair for the people who work for the federal aviation and also, frankly, for consumers of aviation all over this country? i mean, i tell you, you wait

until some of these air traffic control systems shut down, the towers shut down because there's nobody to man them. and then business, american business and these airlines are going to understand how bad it's going to be. that's the only policy i know how to adopt, mr. president, is to try and drive home to them what they are actually doing to their own futures. they will shut themselves down if they continue on their course. now we can still get this process working again, but we need to get the f.a.a. stable first. we should pass a clean extension. all extensions are clean. senator corker was just talking about a clean extension on something else. we should pass a clean extension and then get to work finding a compromise on our remaining differences. mr. president, i would yield the floor and await the presence of

senator harkin who will be speaking on this subject. thank you. i note the absence of a quorum. the presiding officer: the clerk will call the roll.