identifying in the foreign relations committee an issue which has -- could have grave consequences in the future. i believe africa is an emerging continent with an emerging middle class, and holds great economic significance of the 21st century. china discovered that quite a few years ago, and the question now is what we do as a nation to compete on the continent of africa, and i know there's discussion here about particulars, and i thank you, mr. chairman, for bringing us together. ..

count on their support and regional and international forums. third, increasing significantly chinese exports to africa and last, ending taiwan's's official diplomatic presence in africa and replacing it with recognition

and iran are and other minerals. there's a lot of confusion surrounding china's investment in africa in terms of the numbers and in terms of the

definition. suffice it to say it is probably somewhere in the vicinity of almost $40 billion. it's possible that today china is investing more in africa than any other single country. large chinese loans often with concessionary terms are what are grabbing a lot of the headlines about china, africa interaction. in the case of angola china signed about $14.5 billion worth of these concessionary loans. with ghana recently 13 billion. china stepped up its efforts on soft power in africa. what are the implications for the u.s.? a heightened engagement and africa by china since the mid-1990s is very important implications for the united states certainly if you look at relationships with countries like zimbabwe and sudan, it provides an option for china that did not previously exist but even countries that have good relations with the united

states find themselves in a position they can be a lot more selective in terms of the advice that they accept from the united states because they might be able to obtain support from china. on the commercial side, a company like boeing continues to do well in africa and has no chinese competition. on the other hand the electronic giants like hewlett-packard, motorola and erickson are increasingly losing business to chinese companies such as zte. veazey financing offered by chinese state banks, lowered bids on projects by chinese state-controlled construction companies and the fact that companies now have a ubiquitous presence on the african continent for companies to compete chinese growing interest in african materials should not pose a problem for the united states exit to the extent chinese demand pushes up the global commodity prices. china's's growing use of soft power in africa should be brought to the united states to

do better for the time being china poses no security threat to the united states and africa and probably will not do so for at least the next five years other emerging powers are also playing a critical one africa and attention needs to be given to them india is becoming a significant competitor of china on the continent and brazil, iran, turkey, saudi arabia, united emirates, indonesia, singapore and cuba are all returning more engaging for the first time in a major way. areas for cooperation with china include in the health sector particularly the programs also the tropical diseases like hookworm, the agricultural sector and the u.n. peacekeeping operations. in terms of coordinated diplomatic engagement, i think there are areas where the countries can collaborate and even in controversy all places like south sudan and sudan

whether today there are some mutual the interests. while the united states and china will continue to have important differences from their approach to africa is in the district of both governments to seek out those areas they can cooperate. thank you very much for your time, mr. chairman. >> thank you. investor. doctor? >> thank you very much for the opportunity to speak with you today. i appreciate very much and i'm going to start by telling you a story. once upon a time there was a very large poor resource rich country just emerging from a period of vince sent to the contents conflict and decided to focus on investment. we need to modernize our infrastructure they said. we need to develop our port and soon they had a visit from a wealthy asian country that had already become a major consumer. and the country said to them we will make the bargain. we will give you a line of credit worth $10 billion, and you can use that credit to develop your parts. our companies can help you develop your power plants and modernize your mind. many in the country were very

sufficient on this power but nonetheless the agreed to this bargain and the work began. if you are listening to this or you're probably thinking which countries? china and a angola, sudan and the drc. actually china was one of these countries because the large poor country with oil and the line of credit to be repaid with oil was offered by japan in the late 1970's. why am i telling you this story today. i'm telling you the story because for several different reasons. one is this arrangement wasn't based on aid. as a market rate line of credit that they offered to china and the second is china's all this as something that can be used for its benefits for its development. this is something the benefit of the japan they could sell goods and services to china and it benefited china because they couldn't put things they didn't have an international credit rating to borrow from. china operated africa out of the

framers that it had learned by being an asian power and some of those relationships with japan and it's a different level of engagement and budget this does not actually involve official development. it's closer to japan's pattern of engagement and asian countries so what does this involve? there are a lot of different tools and instruments the chinese have to engage in africa that we don't have or that we have a much smaller level. so, for a simple, they have resources back infrastructure loans. the interbank offered rate. these allow countries with poor credit ratings to border today and put to mars export their setting up overseas economic zones that are attracting chinese companies to set up manufacturing in africa as the costs become expensive and china davis five the labor cui fund to encourage chinese investment and joint ventures and africa and

1 billion-dollar fund for small and medium enterprises. studying the agricultural demonstrations interest to get chinese agribusinesses involved in africa said most of these are not official aid the art about development and more importantly they are responding to the requests the african leaders over and over again in assistance for health and building infrastructure and creating jobs and africa what we did you two stories. in liberia when liberia he emerged from the war the johnson said her main prayer he was roads and infrastructure to the international donors were not providing roads and infrastructure that they said they will build roads and the other donors became interested in the roads. when we look at the millennium challenge corporation, for african governments that are doing well and what to make their own decisions how to spend their money they're investing in infrastructure. china is not in a laughter in

africa as the investor has told us. many of the things they are doing in africa are non-transparent. we do not have information about them that is a legacy of many things partly because it is mainly business. we don't know a lot about how our own companies operate even though we do have better data on that. but the figures i can talk about more and the question and answer period about what we know about the actual dimensions of engagement but i want to make three final points. one is that about realism verses alarmism gereed china's rise in net to should be seen in context. china is still the developing company that has the norms and standards of a developing country and has much more in common with other developing countries than it has with us that means it presents a love challenges. india, brazil and the other countries the ambassador mentioned present the same kinds of challenges. the have the same level of corruption, they offered in some other kind of ways so this is a broad challenge and shouldn't be seen of context. the second is we need much

better information to make good policy to read information is not good and we are not doing a good job of collecting better information and we need to engage multilaterally we have a problem in the arena for engagement that sets the rules and the norms of to engage internationally is the oecd and we have to figure out a way to deal with this. thank you. senator lugar is great to see you here as well. i'd like to speak more from the private sector point of view and as i noted in my written testimony i want to deal to provide testimony. much of my life has been built around both china and africa relations with the united states and certainly to the to certainly the corporate counsel brought together my interest in those regions of the world. for the corporate counsel and

africa this issue is of higher urgency. it's nearly two wondered companies represent about 85% of all u.s. foreign direct investment in africa. as we attempt to expand u.s. trade with and investment in africa the relationship with china becomes increasingly important to the american economy china's interest in africa to go beyond economic and include a wide political influence on the global scale as those hours. the global marketplace china is and will continue to be an aggressive competitor to the united states and other nations including those in africa. degette every right to be such. no one should challenge the right to be engaged in africa. both china and the nations of africa are free to seek any and all trading partners. neither is china alone increasing its investment in africa. the emerging economies of brazil, russia, india, south africa as a group are outpacing u.s. investment in africa. however, does enjoy certain

advantages over the united states and other nations following rules and practices of the oecd. those rules provide as well as limiting predatory practices on export credit financing. chinese counterfeit goods flooded african markets only undercutting u.s. companies who have created the product, some of the products driving them out of the market but also creating health risks with counterfeit medicines. international patent rights and has implications for supporting the people the kind of new products and manufacturing and africa as well as exporting nations. chinese populations also increase throughout africa with major social and economic implications for the continent. while this is the business of the african host nations and china it does bring up questions of future stability of nations as well as create questions about the use of local versus imported labor. the u.s. strategy towards china

should be twofold. the u.s. government should do more to help american companies compete in africa. for greater u.s. private sector engagement in africa will not only help the african development but also help rebuild the manufacturing base in america. our aid program should be shifted towards of building a vibrant sector throughout africa and u.s. aid should recognize the u.s. private sector as a partner in african development. i think our competitive the advantage in this regard will be if we can compete and work with a vibrant private sector in africa than private sector to private sector is more in our line and we can develop that i think that is the emphasis that we should be placing. in this regard, many of our members reflect the legislation being developed by senator durbin that don't make it possible for the companies to compete on a more even playing field and china offers an opportunity also for america in

terms of economic partnerships. cooperation will require time and the stock bush and the trust but there are some business partnerships already to the u.s. and china and africa but there are also areas that professor shinn noted we can cooperate in such a corner africa. much of the cooperation will be built through the joint ventures in the u.s.. the u.s. and china can't find common ground in africa not only will the u.s.-china relationship strengthen, but so too will benefit to africa. in this regard of the corporate counsel and africa will be leading a delegation of businesses to china and feb to meet on possible cooperation and africa. thank you. >> i'd like to think all three of our witnesses and i will begin a first round of questions if i might. first, let me follow-up on your

concluding point. given that the trends shown in the charts and in your testimony all three of you, what specific policy recommendations would you make for u.s. government action that would make american business more competitive with regard to china and what are the areas you see we might have some potential for cooperation? >> i think that there are still several areas. one is the export and import bank. i think it has played a less than stellar role in supporting u.s. business in africa. i think that there are an attempt to change that, but certainly legislation as well as a cultural change within the bank i think is required. the amount that the chinese ex-im bank's support its own businesses and china does have a private sector. but its own businesses are phenomenally high gear by many times than the u.s. support of its businesses. it can make decisions quickly. the xm brank has brought document so it takes a long time

to make decisions and hurts american business. we can give you one horror story after another. why won't go into that. i think that the u.s. aid should shift its development towards a private sector and again towards developing the private sector in africa. most of its work is in other areas. i think that it could help a great deal in developing the private sector. if we can develop a middle class the country is going to be more stable and we will have more reliable business partners. i also think we ought to be linking more business organizations in africa. in terms of cooperation come in terms of cooperation certainly we have china has common interest in seeing south sedan as a stable areas of that is one area. the second area, those areas where our companies can cooperate where china may be lacking certain areas, certainly

we have seen general electric cooperate with chinese companies and africa. so there are those areas of cooperation particularly on infrastructure. the reality is to be our advantage to work with chinese companies as well as others because they have an advantage already and it is a way of getting in more active in china and africa. >> thank you. investor shinn, you mentioned in your testimony that african states under pressure from the u.s. and from the west to improve their governance practices for human rights record are less likely to do so and they know they can rely on china for support and to cite a i think zimbabwe and sudan among others. has chinese economically driven aid policy undermine u.s. policy goals in terms of promoting democracy and human rights and good governance and is there any evidence that the increased investment in the political engagement may in power or entrench undemocratic or oppressive regimes first and then send what you see as the long term benefits broadly for

the average african of the increase to chinese investment engagement has exceeded fighting poverty and its impact on the ground and then doctor if you would address the same questions, please. >> the short answer is chinese investment in africa has to some degree undermined western goals generally of trying to improve democratization, good governments and human rights. i don't think the was the intention its trust they have a different philosophical approach to dealing with countries around the world and as the united states and having said that there were sometimes inconsistencies with u.s. policies i could identify a couple african countries that are autocratic and the united states hasn't done more to improve the human rights situation but in terms of chinese policy is across-the-board is a policy of

aid and investment without political conditions other than the chinese principle and that is just not the way the dress approaches the situation. the two major examples are those i cited earlier zimbabwe and sudan. there are others that don't stand out quite as much as those countries but even a country like ethiopia for example where the united states has good relations on the one hand would like at the same time to see better human rights practices and because they have a strong relationship with china it's easy for ethiopia to say wait a minute, we know where we can get additional help if we needed and of course the united states has other concerns in terms of its policy but it does certainly complicate the ability of the united states to its pursuit of the improvement in the human rights policies and practices and good governance. in terms of chinese long-term investment or its investment in the continent and its impact on

the long term, i think i would have to basically give them a positive response. they have gone heavily into the infrastructure, but they've done that because that is precisely what the africans have requested and the africans are requesting an improvement in infrastructure at the time when the the west basically opted out. and angola is a classic example following the civil war in angola at the beginning of the century when it came to an end they wanted the west to come and invest a lot of money and rebuild their infrastructure and the west to essentially said know we are really not interested at this point. they went to china and china said we would be more than happy to do it. of course we expect you to pay back the loans by sending oil to china and by the way we chinese companies the will build these

for you and we have a component of chinese labor that will come and help to construct the products projects. it is a good deal for china, but china was the only one offering to do this sort of thing and the analysis the countries don't have much improved infrastructure they will never improve their economy. they cannot continue the level that they were at say ten years ago so china has done them a favor and i think across the board of the effort china has done to invest on the continent with some exception has generally been a plus. >> dr. brautiga and about of time for my first round. what impact has it had on the dalia budget to have an expensive chinese expression? >> thank you. i just did a paper on this recently, and i actually looked and there is no evidence continent that political rights and freedom have declined in

general between 2,000 the present and in countries where the engagement is larger there is also no evidence that there has been any systematic impact on human rights or political liberties and freedom. so, we have an impression that there's been a negative impact and i think it's largely comes from the case of sudan and zimbabwe where the impact has been negative but by and large don't think we see it as negative across the continent and we can see the examples quite recent. in sudan and the country's broke up and they have a referendum to enshrined in the law the chinese sent a delegation rather than try to fight to keep the parts together. we can see this in guinea where there was a to and people fought on the chinese presence was going to make it so that they wouldn't have the new election and bring it into the government and that didn't happen to they didn't have the election the most frequent in the history although it isn't perfect so we can see this where the leader that was quite heavily favored

by the chinese did not win the election and they moved smoothly into the relationship with someone that was opposed to their presence. by and large they are moving it is less than a negative direction than we usually think. in terms of impact, i would add to what the professor shinn said. i see a lot of interest in manufacturing investment and people employed by chinese companies. this is again the conventional wisdom that they don't hire africans. the longer a chinese company is present in africa, the more the proportion of labor day higher attempt to be african and this makes economic sense for them and so what we can find is the problems tend to be not hiring local people but treating them well and they do not generally treat them at the level of an american company would. but labor standards, protection safety standards, all of these are abysmal and they are roughly at the level that they are in china. >> thank you. senator isaacson?

>> thank you mr. chairman. in ambassador shinn's comments regarding the time and making the investment in the west backing away from a lot of that the points made of wood stephen hayes said i've observed we need to do a better job as a government of facilitating the u.s. competitive business and investing in africa and china and business aligned our kind of blurred the they are quite clear in the united states and i know that i've been to the ecuadorean guinea where they built the gas liquification facility was really has transformed economic development in that country. what kind of things we need to do from your perspective, mr. hayes to facilitate the business investment as a government standpoint in africa. >> in addition to what i already said in response to senator kunes as i always think we need a far stronger commercial presence among the embassy and the government in africa. we are cutting back or commercial offices at the now

exactly the wrong time. we are actually diminishing our presence on africa and commercial offices. second as i mentioned in the paper they're written testimony i think at least johnny carson is place by putting more emphasis on economic knowledge by investors because we are beyond traditional diplomacy if we are going to be able to compete and strengthen our own political interest in africa and our indices are going to have to be far more in tune to the economic realities, so i think that there needs to be far greater emphasis on that those are two things i think need to be done right away. >> in other words do a better job through the ambassadors of promoting the u.s. investment by the private sector company. >> certainly that and certainly a greater support to the private sector nationally. we need national leadership to tell the american people why africa is important. i don't think that has been

explained. >> you're talking so quickly i can't write as fast as you were talking. you made a great statement about realism versus alarmism with regard to china and american perspective, and i think what i heard you say is we should be realistic to understand china is a lot like africa it's still a developing country, did i hear that right? >> yes. islamic we should not be alarmed tell me what that alarmism part was. >> think you for your question. the realism the rise needs to be seen in context that it's a far smaller plater than the west. it's not although the dimensions are quite large comfort to anyone western countries by and large it's smaller than the west combined in the other economic powers savitt is on helpful to

single them out as the chinese have low labor standards of the chinese have a lot of corruption as india, brazil and the other emerging market players that are also operating in africa and also a challenge so this is a common set of problems and it's helpful to address them commonly to be all for ford of the diplomacy as well. >> i don't know which of you said that what you said sudan is an option for china whoever said that would even fly on that? >> i would be happy to come as a matter i think you have a situation in sudan today both north sudan, the khartoum government on the one hand in south sudan are the government on the other hand and we're both of these regimes, if they don't make a lot of changes for the positive soon are on track for becoming field states for and the dolphins about north sudan

it's not often said about south sudan. neither country wants to have that happen neither china nor the united states. there is an interest in both china and the united states to see the peace agreement achieved success to ensure there's a good relationship between the north and south all of the oil infrastructure for exporting and refining oil was located in the north 75% is now in the south and probably most new finds are in the south for the time being the south has no option other than sending that oil out through the north using the refineries and therefore they are still basically joined the hipaa and they cannot allow china and the u.s. cannot allow for them to let the situation break down into some sort of conflict again and i think it is an ideal situation for the two countries and others not just china and the united states to

try to work with both khartoum to ensure that the cpa works. you could argue china has greater interest here than the u.s. does because china built and owns much of the oil infrastructure in the northern part of sudan. >> u.s. made a critical point. the cpa is critical and the short term interest to the united states and i'm glad to hear your observation about china making sure it works and the country store separate. not only is it critical in the infrastructure, but the border close to proximity and kenya and somalia and expansion of what is already a situation in somalia and northern kenya and it can blow up like a powder keg if you got back in the civil war situation. you know of our embassy and is a department is doing enough to reach out to the chinese to partner in ways to keep them together? >> i don't know, senator. i'm not in the government now so i am not privy to that kind of

relationship. i have no doubt that there are contacts. i visited khartoum in the last five years and met with chinese and the american embassies and at that time there was a contact not as great as i would have liked to see that there was a number of years ago. >> to add to that because it is germane the anniversary has been to china to discuss sudan and i talked to him while he was in china on south sudan. >> this is one of the great points to come from the ceiling and incumbent on senator kunes and myself to engage the state department in a meeting to make sure we are falling on this because i think it is a very cogent point. thank you for your testimony. >> thank you, senator. >> mr. chairman, thank you for holding this hearing. it's an extremely important area to explore. obviously we need to do a better job ourselves and our relationship with africa on trade. in my own state of maryland we have established an african

trade office with the help by the way of the federal government and the small business administration. we have a natural high between many of the countries in africa and the business community particularly in the washington suburban areas and we have built on that and build relationships i think would be very beneficial for business growth here in america but also helped develop the african economy which is critical for the market for u.s. goods. i think that's the most important thing we can do is to enhance our own relationship with the continent africa. i want to ask the question though of concern to me about china and africa. china is interested in their own goals that have little concern about the government's issues at least that is the impression that i have. when we deal with particularly

foreign assistance, we deal with issues such as conditionality making sure women's rights are protected dealing with transparency and with senator lugar we work on the transparency which is a big issue dealing with the resource not being the course of an advantage to the country and africa certainly is a continent that is very much involved in those issues and we do with anti-corruption issues and i guess my question to you is is there any indication chinese participation in africa has been a negative influence on those issues such as advance and color transparency, anti-corruption, those types of issues that we see any indication of chinese involvement of offers an avenue for some of the repressive regimes to get a type of

commerce the need without having to deal with the conditionality of western power. >> i would be happy to respond to that. before you arrived the connection between human rights and democratization and the chinese impact might take is although not intentionally it does have a negative influence on american desire to see the practices on the continent. if you to specifically what for women's rights and corruption and break this down and various sectors of becomes a nuanced situation. i don't see any negative impact in africa of chinese activities on women's rights for example if it's there i haven't observed it. corruption their traditionally has been a problem in that area but i also see changes in how china deals with corruption. i think increasingly they are

finding that that is not the best way to do business around the world and that it's costing them and i see a willingness to perhaps reading the concept of engaging in corruption. they are not there yet but the trend is in the right direction. but i think you have to break these down into their individual issues and there will be some areas where the chinese influence is not helpful. there will be others where is he essentially neutral and even a couple where it might be helpful corporate social responsibility is another they are beginning to show an interest in improving their policy in africa and around the world and that is where the cooperative area with the united states and we have a much better record on the corporate social responsibility and the a willing to be helpful on that item. >> do you see any indication china is importing technology to africa that could be used repress human-rights advances such as cell phones or internet

access or that type of technology which china certainly has used in its own country is that being exported to china by the repressive regimes? >> it is definitely occurred in zimbabwe a number of years ago even ethiopia where they've been involved in the negotiations sector ethiopia has a very restrictive policy on the handling of the internet is a government controlled internet and of leased until recently when i was here last july of last year i want to access my own to all get the hotel i couldn't access it and i asked some of my eeob and friends what's going on here i can't even get to my own blog and they laughed and said you didn't know anything on the blog spot is blocked in ethiopia and that that is thanks to the technical assistance of the chinese. in the last several months i have been able -- i see that the on the accounts of my blog of

the ethiopians are accessing get something apparently has changed the there has been evidence of chinese assisting certain governments and restricting information flow. >> you have any suggestion how the international community could try to counter those types of activities? >> they're probably are some technical ways to define just not knowledgeable about the only other way to approach it is simply continuing to raise these issues with china and with the african governments. in the first instance this is a problem with the african government concern because they are the ones authorizing the more restrictive practices and i sure we do have these talks all the time with the africans. i don't know whether we are having the discussions with the chinese were not. >> of course it also says that we should be more aggressive in africa. we have more time is it avenues

to be able to exercise of influence than we could have a better way of dealing with the type of relationship with china that are counterproductive good governance to is the matter i would agree to be more aggressive and africa, but not to the point where we are pushy. i think there's a fine line one has to draw between being aggressive on policy and then overstepping the bounds and looking like we are trying to boss everyone around the latest in a gaudy agree that we have had many hearings on this. the u.s. particularly in the need program has to have a very strong position on anti-corruption women's rights, because if not then what do we stand for? >> i would agree. >> thank you mr. to manipulate >> thank you. senator lugar >> thank you. i think you and senator isaacson again for bringing about this hearing with three great witnesses. this i think is important in

terms of what all of you pointed out and that is the degree of knowledge on the part of the congress and our constituents and what have you about africa on these improvements to the extent we have improvement with our businesses it will largely come about because there is support of business in america for making the investments in the risk-taking but also support by the stockholders and their constituencies because people would say why africa? why that market? the fact is we as a nation have not been as competitive as we might be because we don't know about africa the basic facts of life about the country's and much of the information that you've given us today will be news to many people and hopefully be conveyed by the media. but i am hearing, however, is

this oversimplifies we do have as senator cardin was pointing out a very strong ideas and they are good ones about human rights and we tend to approach foreign policy in that way and we should to reply will contrast that with the chinese who have a business attitude that there continuity depends on having energy resources in particular for their growth and what it might come to the chinese people, likewise increasingly we have reports about the amount of farming, agriculture and food coming out of china to feed the people of china. in other words, there are existential problems with regard to the continuity of the nation states, so as a result, the chinese may or may not care for

any of the governments there but these are the people with whom they do business. we look at those governments and find corruption, like of democracy and what have you portend and ceased to want to fix its, to try to move people around in this fashion much less attentive me to the business aspect, and i am not suggesting we follow the chinese model, but just two different situations sort of passing in the same continent and we shouldn't be surprised i think the testimony that you are giving. what i am curious about down the trail, however, is are there reasonable estimates as to how much oil and natural gas are in reserves in china? this is a great problem always asked about the world, and again and again the time of reckoning is pushed back to a later date because more is found, curious literally has to what happens at

the end of the trail when these resources are more expensive to whoever is going after them or as a matter of fact in some african companies might use some of these resources themselves. it is no longer an option. likewise with agriculture it would appear that we have been inhibited in the united states by the european ideas on a modified seed and so forth so that african countries still love very low production rates. whatever the chinese are taking out and what ever met did they use, not withstanding, the fact is africans are going to find an increasingly difficult to find themselves quite apart from what is being extracted. this from the standpoint of africa what is our resource? are the boundless? it does it depend upon, is a degree of development by somebody or how would you predict the future of the market's? however we approach them, the united states or china.

islamic i don't have data on the depth of resources and effort and i'm not sure anybody does. we do see as the prices go up and the researchers are found and that's the case a long, long time and so now we are finding oliver west africa and along the coast there countries that never thought they had oil resources have suddenly found them and our companies are very active in that and the companies are trying to break into that without so much success. i want to say something about agriculture. there is an idea that the chinese are out there leading the land grab in africa. it's one of the areas of the looking at the international food policy research institute and what we are finding is that there is actually no evidence of very large chinese engagement and africa to grow food to ship back to china at all. it doesn't exist so it is a small exception of sesame seeds which is a vital resource. there is a chinese investment in

agriculture for the local consumption. in zambia this 25 farms will produce the zambian market but they are not doing it speculative land investments. what we see is american and european firms largely active there and for investments in agriculture for feeding people with home it's the gulf states and the arab world that is doing that in india but not so far china, so one other point about our different concerns about government's, and that is the i think as has come up in this hearing earlier we both care about stability. that is important and what china and its friends in africa see is that the united states and europe are engaging with china and china doesn't have a good human rights records and yet we are all they're investing in the trading quite actively and china, the chinese people seem to be doing better be. they're becoming more prosperous so that is something important for framing the conversation as well. a small anecdote about the chinese engagement on the

government's and sierra leone after the war there were some elections and the presiding government lost, they didn't want to give up power and a group of ambassadors met to talk to them to the president to say you've got to step down and let your opponent come in. this kind of engagement of the ambassador loveless something we need to do a lot more of and we are not doing enough of this most of the country's i'm familiar with. it needs to be addressed and the united states needs to press that more could i also think china is open to that so there may be another area china and u.s. can cooperate in breaking what i think is an essentially european blockade of american agriculture. i don't think that there are many u.s. agricultural companies and africa. but it is a major problem and i think it is a major opportunity for u.s. business. there is an enormous opportunity for agriculture and the u.s.

especially still leaders in the world in that area. that's absolutely right. >> senator if i could speak to the question, 10% of the world's oil reserves are in africa today. the experts think as we look to the future, the continent it's going to come up with the largest percentage of new fines will be africa because it has been so relatively unexplored so far. the experts also say that china's percentage of oil imports is going to continue to grow at a significant rate. that may be because of increased demand and it may be also to the decline in domestic production or a combination of both, but that trend, those trends suggest that the china africa link is going to become increasingly important in the years ahead. >> we are counting on 25% needs

to be met by africa by 2020. that is going to be an increasing competitive environment although there is more oil being discovered. >> thank you, senator lugar. senator durbin. estimate of last year i went to ethiopia and met with the president. we had a 30 minute meeting at 25 minutes into the meeting i asked the president incidentally what is the story of the presence of china in ethiopia? the meeting went on for 35 more minutes and basically is message was pretty straightforward. we think the united states has given up on africa. china hasn't. china is invested in a way that nobody has ever seen before. and we've noticed it, she says, in terms of the chinese in their interest in our energy, our raw material, cheap labor, the opportunity for a growing middle

class to buy their products and he said they come with concessional loans many times saying we will give you 100 million just payback 70 million but of the project is so long as there are chinese engineers and contractors and the workers are chinese and so there's a pretty substantial presence in chinese ethiopia and in other african countries so they clearly have a plan and they are executing it. one foreign minister told me as i described this he said there is one other factor you've missed the will do business with anybody. the rules are very relaxed as long as it meets their economic needs. what i put together is a bill senator kunes joined me on to talk about how we can improve our exports to africa and business in africa and investments in africa and try to coordinate this agency that we have that don't seem to work as well together as they should. but as i listen to this hearing i think the most significant

thing to come out of the hearing goes beyond what i just said and started with senator coons presentation with this chart behind which tells a story here about the fact we are spending a significant amount of money in africa for different things than the chinese. they are building potential for economic growth. we are investing in people and health care so i asked my staff to take a look at the global fund. most of us know the global fund. that is a group of nations around the world trying to find ways to alleviate human suffering from aids, malaria, tuberculosis all around the world. in recent years the united states is given a billion dollars annually to the global fund, one of the largest donors read china between 2003 to 2011 received $550 million from the global funding grants. another $200 million is pending.

china's global fund contribution over recent years equaled $16 million. our contribution was $5.5 billion. so, we are clearly putting money into africa, and we decide we want to focus at least part of our commitment to africa into the alleviating human suffering and death. zantia has been talked about and there's an article in my notes talking about the recent election and they can a backlash against the chinese economic presence in the zantia and the chinese ambassador ridiculed the writer saying you said the election judges we build hospitals and roads. it turned out we spent $400 million a year in zambia keeping 300,000 of life with the antiretroviral drugs so we are spending money there in different ways and i guess virtue is going to have to be its own reward. the last point i want to make before every time that you say

oecd on to the shorthand which says no bribery. what you're suggesting is if we can get china to play by the rules we think we are pleading by we might have a better competitive situation and if they are not going to play by those rules we may not have as good a chance. so how do you overcome this? we are not just strictly mercantile here. we are trying to alleviate human suffering and played by the rules on corruption and human-rights. we have our hand tied behind our back, ambassador shinn? >> senator, one of the problems we face and you mention your meeting with the prime minister and had several conversations with them as recently as several years ago, ethiopia is one of the major recipients of the global fund. it's also one of the major recipients of the bilateral hiv/aids support from the united states government. the problem is a combination of hiv/aids money in emergency food aid is probably two-thirds of

all american assistance to africa today. it's taken for granted by the africans. we don't get the credit for it that we deserve, quite frankly, whereas the chinese can go in with a loan that has to be paid back, albeit its concessionary financing, building a road or a dam or a bridge, and it's all of a sudden the chinese road or the chinese dan or the chinese bridge and everyone in the vicinity knows about it so you get all sorts for that. it's very smart on their part to do that and it puts us in a very difficult position because we are simply not getting the credit we rightly deserve even from someone as sophisticated as the prime minister and he knows the numbers better than any of us in this room but i don't know how you deal with that issue. it may be just the nature of the beast and we don't have an answer to it. i would like to make a pitch for one organization that hasn't been mentioned in terms of what the u.s. government can do and that is support for the overseas private investment corporation.

it's a small organization i used to deal with it when i was ambassador and i found it to be an effective organization on what they did but it's very small. >> you said we should be shifting towards a private sector to read that seems to say to be spent less on health care, spend less on educating young women, more on establishing mercantile business relationships. >> i think we've got to look at the greater balance and how we use that and then also there are other ways beyond simply training, capacity building and so forth, so i think yes, i do say that we need to put more emphasis on building a middle class because then i think it makes the of the money that we are spending less needed ultimately. with hiv retrofire will drugs cutoff in the name of

establishing the relationship. >> i am not convinced that is an either or. >> with this budget is to reduce to writing the the issues of commercial office, stronger commercial presence. for god sakes said the secretary of commerce to africa once every ten years. it's been ten years since the secretary of commerce visited. there are other ways to develop those ties. >> i want to give you one last word if you would like. >> africans in the future are going to have to pay for their own health care in the long term and how are they going to have the foundation to do that? the have to build the business sector and have to be able to tax them and get the revenue. i think what the chinese approach looking at the infrastructure, looking a business engagement is moving towards that kind of future whereas our approach which is laudable and many of ways the amount we are putting into africa we are keeping a lot more people alive but we aren't doing anything about providing jobs

for them. >> thank you, senator thurmond. our last questions will come from senator udall. >> thank you, chairman coons into both of you for holding this important hearing. i want to focus a little bit on -- and i think it was very important we got into the human rights issues and corruption and all of the issues that senator durbin raised. i wanted to focus a little bit on the environmental issues. you mentioned, professor shinn, in your testimony that china has for hard interests in africa, and you mentioned as one of those on one of the four energy, minerals, timber and agricultural products. and obviously if you are talking about and we would like to see our policy of the sustainable economic development we do these things you can develop energy and minerals and timber and

agriculture in such a way that you do it sustainably, the you do it where you don't harm the environment, where you mengin dams coming to build dams and such a way you don't dislocate people. i know there is a dam that has been mentioned recently in the news that the chinese are funding where 300,000 kenyans would be deprived of the water needed for agricultural and fishing, so my question is looking at how western countries and mainly the western developed countries participate in africa and how their practices compare with the chinese and when you see there. what are the things that we can do about it there is a disparity and they are not practicing

sustainable practices what can we do to try to encourage them to do so? the other witnesses also may have comments on this, so please, why don't you lead off? >> thank you, senator. that's an interesting question and it's also a very timely one. if you were to go back five or six years and look at chinese projects in africa i and the environmental consequences of those projects coming he would have a fair amount to criticize. there was, flexible, a plan to develop iron ore, the problem is that in order to do so, they would have to largely ripped up a local game park in order to achieve that project. there was so much opposition from the local and environmental groups that the whole thing was scrubbed, and it's being revisited in terms of how you deal with it. the -- china does not have a great record obviously on environmental issues. western projects i think across-the-board must have

environmental impact assessments with them. it's certainly true in the case of american projects and i think most western governments that it is traditionally not the case with many of the chinese projects. but, and this is the good news story, i think you are starting to see a change in the chinese approach to how the deal environmentally, not only with their projects overseas, but with what is happening in china. i think that the three largest dams has been a wake-up call for them. they are seeing a negative environmental impacts from the construction of the project, and it is causing them to rethink how they deal with the environment in china and that also is impacting how the deal with projects outside china, and you are hearing more and more about chinese actually employing outside western companies to do environmental impact statements for their projects and that i think would have been unheard of five or six years ago. >> you see that as a real improvement for them weighing in

on these issues of how you balance sustainability and still get what you need for your country. >> i do see it as an improvement but they're still well behind the western countries and giving to the point where the need to be, but the trend is in the right direction. >> is there more that we can do to encourage them to do this kind of thing clacks >> again, other than having these conversations at the senior levels with appropriate chinese officials and also the african officials who are signing these agreements with china, the need to understand that there has to be an environmental impact statement and assessment before you go ahead with a project and i think that is what is happening with this project in ethiopia the impacts in kenya that's probably the project you are referring to and it's raised a firestorm of difficulty and even among at

least some ethiopians who would be displaced as a result of the construction of the dam. on the other hand the and regent knees hydropower so there have to be offset severe, but a better environmental studies are clearly needed by the african countries and in terms of the chinese who are doing a lot of these projects. .. >> it comes from a lot of angles from the u.s. treasury department, from civil society,

and from informed analysis, and so that's -- but i think the pressure's not coming from african government, and the chinese standards surprisingly for environmental assessment are higher in china than in most parts of africa, so that's part of the challenge now that we have a new actor here, but we can see what's changed amongst the chinese in other areas as well. a few people realize that the chinese have actually made overseas bribery into a crime in china, so that was never the case before. it's just happened recently. it's part of the responsibilities under their signing of the u.n. convention against corruption. they do not have good enforcement for that. it's new. a lot of our partners in europe are not enforcing this either, but this is a change and things we can see signs of, and it's up to us to know about them and encourage them. >> great. dr. hayes, do you have thoughts on this? >> well, i have thoughts, but it's not too different from what

you heard from the two witnesses. i think our diplomacy, particularly with the african governments in this case, needs to be strengthened. >> the one thing i would note, and then turn my time back here is apparently in dr. shin's -- correct me if i'm wrong, but i think china ignored the eis in the world bank with the three case having to do with the dam; is that correct? there was an eis done by the world bank, and then they gist went ahead? i don't know if they -- >> i don't know the answer to that whether they did or not. >> okay, okay. >> i would be better not to comment on it. >> okay, okay. well, as you noted, i mean, this is a -- i have a report here that says, you know, this is responsible for 90% of the water heading into lake, a major dam

blocking the river would drain most of the lake depriving 3,000 kennians needed for agriculture, cattle, herding, fishing, and the river could affect the changes in it that we're talking about, and i think that you mentioned it could affect 70% or more of an important species around the lake, so, you know, that's major damage done by their major part of their effort in terms of the loan they put out there, so thank you, mr. chairman, really appreciate you holding this hearing. >> thank you. unfortunately, it's 3:30, and as i shared before we began, we have a briefing to which all senators need to turn now. i want to thank you for sharing your sights and expertise for these futures of the united states, china, and the people of

africa. there's so many remaining interesting questions i wanted to get into about intellectual property protection, the role of the other nations, multilateral means for more effectively engaging with china in ways to develop shared standards for everything from labor protections to environmental protections to advancing human right, and then ways to diversify the economic opportunities of africans going forward, but we have to wait for a future opportunity. with that, i'll conclude today's meeting. i thank the witnesses, and we'll keep the records open for any senators to submit statements for the record until thursday, november 3. thank you very much. this hearing is thereby concluded. [inaudible conversations] [inaudible conversations]

>> now, a hearing on the

financial hardships that affect military families and how service members should be helped by consumer protection laws. the senate banking committee lookedded at so-called preed -- looked at so-called predatory lending, financial education, and how families are affected by the housing market. witnesses include holly petraeus, wife of the cia director, david petraeus. she's with the consumer financial protection bureau. this is a little more than an hour and a half. >> good morning. good morning. i'd like to call this hearing to order. earlier this week, it was reported that fannie and freddy were scheduled to receive bonuses totally more than $12 million. given the current economic times and continued challenges in the housing market, i want to assure my colleagues that fha director

to report to the committee as soon as possible. the details are still being worked out and my staff will be in touch with your staff. as a conservative of fannie and freddie, fhfa under the leadership was responsible for approving the conversation and maintaining etiquette in internal controls to oversee the day-to-day operations at fannie and freddy. this committee, the congress, and taxpayers need to be confident that those controls are in place, and the conservator is having responsibilities. as we approach veteran's day and prepare to welcome home the last american troops from iraq this

year, it is important for us to understand the unique consumer financial challenges members of the military, veterans, and their families face. i take special interest in the matter, not only as the father of a soldier, but as a senator from a state that has over 72,000 veterans and more than 3500 military personnel at ellsworth air force base. at today's hearing, we will examine how young personnel officers, veterans, and military families manage their financial needs whether through mainstream financial products or products marketed to the military community. we will also learn about the important role financial readiness plays, and we will

look at the tools and protections available to help military consumers navigate their complex consumer financial market place. it is important to remember our military consumers differ from the average consumer. this population is predominantly young and are in the military without financial education. the military lifestyle where there's relocations, finding new employment, and families sell their homes if they are chosen to live off base. their mobile lifestyle also means they need banking services that are accessible throughout the country in the world. when a service member deploys, he or she must be certain families have appropriate access to handle bills and financial

needs. it was with those needs in mind that congress created the office of service member affairs at the consumer financial protection bureau, and i'm pleased to welcome the first head of the office, assistant director holly petraeus. as a military daughter, wife, and mother, she is very qualified to lead this office that will educate and empower members of the military and their families to make the best financial decisions for themselves. as importantly once the cfpb has a director in place, the agency will finally be able to monitor the non-bank financial institutions which are often at the heart of the military's communities' financial hardships. i would also like to welcome bonnie spain from my home state

of south dakota. bonnie runs the rushmore consumer credit resource center in rapid city. bonnie will explain some of the work she does and assistance she provides to families stationed at ellsworth and the national guard. general steve abbot, thank you very much for your service to our country and for being part of today's hearing. we look forward to your testimony and the importance of financial readiness and the work of the navy marine corp. relief society. we're also joined by retired navy general, kevin bergner of usaa and mr. thank you for your

service to the country. both the usaa and the federal credit union serve our members and do an outstanding job in meeting the committee's these. thank you, both, were being here for today's hearing. i want to recognize our veterans and military and the thousands of military personnel who continue to serve in harm's way in defense of our country. i'm grateful for their service, and throughout my time in congress, it's my highest priority to assist our service members and veterans. as chairman of the senate military and construction and appropriations subcommittee and the senate banking committee, i continue to work to ensure service members and veterans have the resources they need and protections they deserve.

i look forward to today's testimony. now i turn to ranking member shelby for his statement tennessee. >> thank you, thank you for calling this hearing. first i want to respond to your statement that you're calling up the head of the finance agency, and i think that's a good idea regarding high salaries, these salaries at fannie and freddie, but i ask you bring up the treasury because they, the federal housing finance -- that's a mouthful -- they have to consult with treasury on this, and we need them both here to have a proper and thorough hearing, so i hope you do that at the same time. if you do that, that, i think, will have a good -- >> i'll take that into conversation. >> sure. i don't know how you can have a good hearing without doing both. >> yeah. >> but anyway, i have an opening

statement here, mr. chairman, i'd like to give. the issue of consumer protection for military service members has long been a priority for this committee. during the 109th congress, while i was chairman of the committee, the committee examined reports of predatory lending practices aimed at members of the armed forces and their families. this examination identified the steers -- theories of financial tactics to sell products to military personnel, and it also identified gaps and lack of coordination among regulators in handling military consumer protection issues. based on the investigation by the committee, the committee ultimately passed the military financial protection act of 2006. this law protects members of the armed forces from certain unscrupulous sale practices regarding the sale of insurance, financial and investment products. it also improved the ability of our regulators to enforce our

consumer protection laws and with respect to the military. service members and their families have unique needs with respect to their use of financial services due to the special circumstances caused by the military service. for example, military personnel moves regularly making purchasing a home a very risky endeavor. in addition, military personnel are often very young and have been away from home for the first time. they have to make important financial decisions without being able to consult with family or with trusted advisers. congress in the states have sought to address these problems through a variety of legislative and regulatory initiatives. as a result, at least nine federal regulators and state regulators in our 50 states currently have varying levels of regulatory supervisory and enforcement powers 234 this

area. at the federal level, this includes the department of defense, the fdc, the federal reserve board, the scc, the occ, the fdic, the department of education, the department of justice, and most recently, the bureau for consumer financial protection. accordingly, i don't believe there's any shortage of regulators. the real challenge is making sure that regulation keeps up with change in technology and changes in the marketplace. in particular, i would like to hear today whether new forms of lending to our military such as online lending present any new difficulties for enforcing consumer protections for military personnel. i want to know whether more can be done to ensure our military personnel and their families receive the information they need to exercise all of their rights available to them under federal laws such as the service members civil relief act or

scra. recently, several banks settled claims under the servicemens civil relief act because they currently fore closed on members of the military while they were on active duty. in my view, that's the sort of problem no military member should have to worry about while fighting overseas. mr. chairman, while there appears to be little our republickive sides agree, there's -- respective sides agree, there's complete agreement on supporting our men and women in uniform. i look forward to hearing from you today. i believe this could be a constructive hearing. >> thank you, senator shelby. are there any other members who wish to make a brief opening statement? senator? >> i want to thank you all for being here, especially you, holly, but specifically, i thank you, mr. chairman, for the hearing you announced on fhfa. i think ultimately in the end we have to have the people here to get to the bottom of why those

bonuses were given out and get some accountability, but i appreciate you and your staffs scheduling that hearing. i think it's critically important. >> anybody else? >> mr. chairman, i just also want to put in a request. i think we're in a very dynamic situation with regard to u.s. exposure to the european banking system. i think you should probably call for an update on that because i am concerned that we may see a fairly bleak prospect of the current european stablization facility meeting its goals. i'm concerned about reports that u.s. bank exposure now is considerably more than it was, and activity and transparency led by this committee would help u.s. markets. >> mr. chairman? >> senator akaka. >> thank you, mr. chairman. i want to add my welcome to our witnesses today. i look forward to their testimony on the matter that

many of us in the senate are deeply concernedded about. making sure that our service members and veterans are economically empowered to make the best financial decisions possible. for years, my colleagues here on on the banking committee heard me talk about financial literacy and economic empowerment, and my colleagues on the armed services and veterans affairs committees know i'm concerned about the unique challenges confronting military families and our veterans. prolonged deployments and more frequent relocations create unique banking and budgeting challenges. our veterans come home from fighting to the highest unemployment rates in the nation, and our reserved forces

are feeling the financial impact of sustained active service. it is clear our men and women in uniform now more than ever need to be educated in financial matters both before and after they complete the service to our country. chairman johnson, thank you very much for convening this hearing on such important topics. for many of our military families, financial education and protection is tied to their readiness, and service members, veterans, and their families have sacrificed for us. now, it is our turn to do all we can to help them return. thank you very much, mr. chairman. >> thank you. senator brown. >> thank you, and i appreciate all the panel being here, and mrs. petraeus, thank you, especially for the work you are doing and will be doing.

i sit with chairman akaka on the committee, and the stories we hear with financial predators especially with places at the patterson air force base in dayton, and the scams sites, mailings masked like they are run by the government and look like they come from the department of defense or va, but they come from a dot-com operation thatments access to the -- that wants access to the veteran's information. it's packed with legal fee, and you know all of that. it's so important that we're on the side here of people who have served or are serving their country, and i appreciate your focus on that. thank you. >> senator hagen. >> thank you, mr. chairman. i, too, appreciate you holding the hearing today especially being close to veterans' day. it's appropriate. in north carolina, we pride

ourselves on being one of the most military friendly states in the nation and having such a huge number of active duty and veterans living in our state, and i'm also very concerned about the high rate of unemployment that returning veterans from iraq and afghanistan have. it is about 11.7%, and we also know that many of our military families are targets for predatory lenders, and given these trends, we have to be sure these returning heros are not subject to predatory practices, and that they also possess the tools and skills that they need to make responsible financial decisions, so i thank the witnesses for being here today, and i look forward to your testimony, and mrs. petraeus joined me recently to really talk about these issues, and i think it was -- she can bring

such important light to the topic for so many young people in our military today, 10 i thank you for doing that. thank you, mr. chairman. >> thank you, all. i want to remind my colleagues that the record will be open for the next seven days for opening statements and any other materials you'd like to submit. mrs. petraeus, you may proceed with your testimony. >> chairman johnson, ranking member shelby, and distinguished members of the committee, thank you for the opportunity to speak with you today about the office of service member affairs at the consumer financial protection bureau or cfpb. as a lifetime military family member, i've seen firsthand the devastating impacts financial scams and predatory lending can have on our military families. i also spent six years as the head of the better business bureau's bbb military line program, and that was an education for me about the consumer issues and scams that impact the militariment

unfortunately, there is still too many young troops learning financial lessons through hard experience and years of paying off expensive debt. in january 2011, i was asked to join the cfpb and head up the office of service member affairs. the job is to educate and empower service members to make better informed decisions regarding consumer financial products and services, to monitor their complaints about consumer financial products and services and the responses to those complaints, and to coordinate the efforts of federal and state agencies to improve consumer protection measures for military families. in support of our mission, we've already signed a joint statement with the judge advocate generals with all the services how to coordinate exchange of information between us concerning military complaints and the action take to protect members. we have a working agreement with the department of veterans affairs and now referring any military personnel or veterans

who call the cfpb's hotline claiming they are in danger of foreclosure directly to the home loan program. it is important to get out and hear from military families about the issues that concern them the most. i visited bases all over the united states since i started my job. i've also met the national guard in oklahoma, ohio, illinois, and indiana. what are the issues that have come up? first, the housing melt down hit military families hard when they receive orders to move. often, they cannot sell their home enough to pay off the mortgage our represent it out or can't get a short sale because they are not late, and they can't refinance for a good rate because it will no longer be considered their principle residence once they leave. we heard of a number of cases #wr the service member opted to go alone to the new duty station, and that's tough when you consider he or she may have just had an overseas deployment

and now the family faces another separation. this time for financial reasons. we are starting to see positive movement on this issue. the department of the treasury issued new military related guidance for its home affordable foreclosure alternative program and fannie and freddie are tweaking their guidance as well. another big issue we've been hearing about concerns military education benefits and for-profit colleges. there are even -- have been cases of for-profit colleges targeting military members and their families of expensive student private loans. another issue is car loans. service members are often sold clunkers with inflated prices with high financing charges, and when it breaks down, they are urged to roll the existing debt into another loan for another clunker. there's a yo-yo financing where service members drive away thinking they qualified for financing to be told later the financing fell through, and they

will have to pay more. although the cfpb has supervisory authority over auto dealers who write their own loans, the federal reserve is required to coordinate with my office on automobile issues, and we have started to do that. a continuing issue for the military 1 the general issue of indebtedness. service members don't make much money, but it's a paycheck and subject to garnishment outside the normal court process. that led to a lot of businesses looking to lend them money. it can be the mall selling high priced electronics at higher financing, the rent-to-own furniture store or the loans that manage to exist just outside the military lending act definition of payday loans. when they are behind payments, it's turned over to debt collectors. we are concerned about potential violations about the practices act. we heard reports of debt collectors calling units 20 times a day threatening them with the uniform code of military justice and telling

them they'll get them busted in rank or have the security clearance revoked if they don't pay up. they also call the parents and spouses of deployed service members in an attempt to get them to pay the debt. there's a debt collector telling a widow she had to use the money from the combat death gratuity to pay the debt immediately. i have to educate service members about their rights under existing consumer financial laws and give them the information they need to make wise financial decisions, and i'll continue to work with you and other federal and state agencies to help identify effective consumer protection measures that will work on their behalf. thank you for the opportunity to testify before the committee. >> thank you, mrs. petraeus. ms. spain, you may proceed. >> chairman johnson, ranking member shelly bi, committee members, thank you for the opportunity to speak to you

today about what we see happening with the military in our area. our organization serving western south dakota for 37 years providing housing consling and other programs and create programs used by 1.4 million consumers across the nation. our agency serves military personnel at the air force base. the airman family readiness center invites us to provide financial education programs. they refer individuals to us struggling with housing issues or if they have financial issues for our debt program and they come in for debt education. the military has housing issues they don't. when they have orders, they have to move. siesmians have choices to move or not move and when to move. the military cannot. if they take their family with them, it creates financial stress.

if they leave their families home, it creates financial stress. it's a difficult time. agencies such as ours providing counseling can help military members and families while they serve our country in these difficult times. we helped one 21-year-old discharged for medical disability. he was told to short sale his house. he couldn't find a realtor to list the house. they told him the lenders are not accepting short sales because it's too much work. get the lender to agree first. he came in, talked to our counselor who was able to get the lender to agree to the short sale and the realtors are now listing the house. another military family was retiring from the military. he was having difficulty selling his home. he came in and contacted our consumer credit counselor, certified, and she helped worked with the lenders to get the short sale through. the lender refused to forgive the second mortgage, and the

military member repaid $10,000. even though they struggle through the ushes, there is -- issues, there is support for them. military personnel are always under the pressure to keep finances and credit good because collections or bankruptcies can cost them their career. they are vulnerable to lenders charging high rates of interest, and they continue to target the militariment one young man had five payday loans, all charging over 36% interest; four were received online, one locally. he went to the legal base and was sent a letter saying that's all right. these are open-ended transactions. we are not changing the interest rate. at that point, the military member has the choice of hiring an attorney, which they can't afford to do. the lenders know that. they also know that people don't ask enough questions. online, you can find different sites that don't tell you where

they are located, not in the disclosures, contact policy, or privacy policies. they don't tell you what the rates of interest are, but the first question they ask the military members are what is your social security number? we had one client that had got a payday loan, but didn't realize the funds were from croatia. they had to close their bank accounts in order to stop this company from pulling money out. another one -- another issue that we see the military struggling with is debt settlement. debt settlement can do more harm than good because people don't understand how it works. one young woman paid $1500 to find nothing being done. another one, another family paid $6,000 in fees to have $600 set aside to settle their debts. our demographics are shifting, and we're seeing people across

the board of all ages struggling with their finances and multiple issues. we had one young man who came to us after leaving the military that was filing for bankruptcy because he made every mistake he could getting payday loans while in the military, went through divorce, caused additional problem, and then he trusted, when he went overseas, a little nice old lady to pay his bills, and she didn't. when he got out of the service and moving home, he represented a car. he fell asleep, so the friend took the car, got an in accident, and the insurance company sued him. there he was, filing for bankruptcy. financial education is key to helping people not be taken advantage of. it's important that the information be relevant to their personal situation. we also develop programs that are specific for rapid city. we took our united way funding providing direct assistance to homeowners who were behind that

needed a loan modification and often have to come up with money. with $68,000, we helped 32 families save their homes. our financial education programs are used by bases across the united states including mountain home, fairchild, tinker, shepherd, shaw, randa, and the virginia international guard, florida national georgia, tennessee national guard, and virginia national guard. we reached overseas. marines ask us to send programs overseas this year. in 2007, we received requests from the army to send some programs over to northern iraq. in wrapping up, i'd like to recommend the following actions. just close the loopholes payday lenders use to charge military members over 36% interest. require businesses to post locations and range of interest rates, strengthen regulation for the debt settlement companies that target individuals and are

abusive, apply the same for for-profit agencies 245 non-profits adhere to, support education for our military, and allow the bases to use the funds to purchase materials that they know are good for their agencies and their military, require home buyer education for first time home buyers. it's vital we help people seek homes to revitalize the troubled economy, and to support housing counseling and home buyer education. military families need the assistance of trained foreclosure specialists and individuals who tell them what to watch for in their areas when they are buying a home. in conclusion on behalf of rushmore consumer resource center and more importantly the servicemen and women that we see, thank you for the opportunity to testify today. >> thank you, ms. spain. admiral abbot, you may proceed. >> thank you, mr. chairman, senator shelby, senators, i appreciate the opportunity to be with you today to discuss what

our service members are encountering in the financial market place. in 2010, navy marine corp. relief society, we saw 73,000 individual sailors and marines in our offices around the world, and some of them, more than once. that's 100,000 cases or what amounts to one-fifth, one out of every five sailors and marines, 20% of the force in a single year, so it's still a tough financial environment out there, especially for the junior troop. the financial assistance that we provided in 2010 was the greatest that we provided since the end of the cold war when the military services, including the navy and marine corp., were substantially larger than they are today. i would like to say up front

there's good news. senator shelby referred to it, and it's the effect the military lending act that became effective in october 2007. it's dramatically curtailed payday loans, and we are grateful for the far sidedness and effectiveness of that legislation. to prove that point, i can say that our annual assistance to those who have become stuck in the payday loan trap has decreased from $1.4 million in 2006 to just $168,000 this year, and virtually all of that smaller amount went to retirees not covered by the military lending act. we credit both the military lending act and improved financial management education and training for this welcomed development. the military lending act was implemented on a limited scope.

financial institutions have found loopholes in the regulations, and new predatory lending practices have arisen which continue to vick mize our -- victimize our clients. before my visit this morning, i contacted all 51 of our offices around the world to ask what practices they are seeing that send their climates into the downward spiral of debt, and so here are a few ill los illustrations of the problems facing young service members. in fort worth, texas, we assisted a retired navy e5 with rent, food, and utilities because he used his retirement check to repay a payday loan. he had borrowed $950 at an annual percentage rate of 277%, and the finance charge was over

$216. in the interest of time, i'll skip over a couple of others of these and ask that they be included in the record, but i would like to focus on those that deal with the use of overdraft charges. at camp june in north carolina, we recently helped a marine lance corporal with food and ewe utilities because his paycheck was entirely consumed by overdraft charges and associated fees. in virginia, a navy e2, who we saw one month after his 21st birthday with a wife and a child, had overdraft protection payments due at every payday, and when seen by our office, the member had six credit cards, one loan consolidation debt, and one personal loan. the society helped with a no interest loan for food, gas, and diapers, and provided him some

on the spot financial counseling and sent him to other sources for in-depth counseling. a similar story in texas where we saw an active duty e5 with a wife and two small children. they were in a cycle of payments for overdrafts exacerbated by a high interest internet loan, and the family had gone into the overdraft condition when the child they had required medical care at a facility in another town, but the distance was not far enough for tricare to cover the travel expenses. by the time the couple sought assistance, they had suffered four back-to-back paydays when $500 was taken by the bank to zero overdraft funds and fees. here are the trends that my director reports. banks and credit unions on a

near military basis continue to charge large fees associated with overdraft protection. with an overdraft protection plan, the bank agrees to cover transaction despite lack of funds in the account and takes a fixed fee from the next deposit from the members' account before other transactions can take place. common overdraft fees range from $25-$35 per transaction. i mentioned earlier that i polled all 51 of our offices, and all but four of them listed this overdraft protection penalty as the top of their list. it's already been mentioned about online lending. it's hard to monitor. it's predatory. they evade stake regulations by being overshore, and they hide

behind anonymous domain registrations. the financial industry is adjusting its practices. by structuring loans for a longer pay back period and making them open ended instead of close ended and for a larger amount, banks and other lending institutions offer installment loans that avoid the 36% annual percentage cap that was instituted with the military lending act and can legally charge as much as 500%. a few recommendations. first, we need to continue to improve financial education and consumer awareness for these technically savvy, but not necessarily financial savvy men and women in uniform. two, legislators and

administrators should plug the loopholes in the laws and regulations governing predatory lending practices. three, the need for credit won't go away even with better education and better laws, so we should stimulate additional responsible low-cost alternatives to predatory loan practices. fourth, we should encourage direct dialogue between senior military leaders and banking and credit union executives including at the local level. fifth, the protection of the military lending act should be extended to retirees, reservists, guard, and to veterans; and sixth, they should be held to a higher standards of service offering military families including military

retirees lower fees and better protection from predatory lending practice. they should also offer financial education to inexperienced consumers before they commit to loan contracts and agreements. adopting better business practices would go a long way towards fixing the problems these service members are experiencing. some institutions are moving in that direction, and i applaud those steps. i sincerely appreciate the opportunity to appear before the committee today. >> thank you, admiral abbot. general bergner, you may proceed. >> chairman johnson, ranking member, and members of the committee, thank you for your commitment to protecting our service members and their families. i thank you for this opportunity. i grew up in a military family. my father served in korea and

vietnam, my brother served for 30 years, as did i, and i'm the proud father of a son who just returned from iraq serving in the united states army. the issues important to me both permly and professionally, and i appreciate the chance to represent usaa in this discussion. i had the privilege to serve with general david petraeus in iraq in 2007 and 2008, and i knew him well in 2005 serving in iraq as well, and during that time, we were honored to live down the street from one holly petraeus, who we first came to see as a wonderful advocate for our soldiers and their families, and a wonderful friends to my wife, carla, throughout my deployment, and so i want to take a moment to say how much i'm appreciative of her service; willingness to continue to serve, and be an advocate for our service members and families. our nation is so well served with her. i'm humbled to represent the 22,000 employees of usaa today.

we were founded in 1922 by 25 army officers finding themselves in the situation where the risk they were exposed to and the mobility that associated with them with their careers precluded them from finding insurance and security, and so they banded together and formed an association that has now grown to 8 million members today, but the founding values and their sense of service and commitment to one another endure and are still at the center of usaa as an association of a member-based organization. our purpose today is a very simple one -- help military families and facilitate their financial security. usaa employees are recognized for their commitment to customer service and manifests itself in how our members feel about their association. about 98% of our members will stay with us. about 94% of them say they will

stay for life, and we have about a 97% member satisfaction rate among those 8 million members of this association. our employee commitment to those members is driven by one simple fact -- we have the very best customers in the world. our members. that's how we refer to them, as our members. they deserve the very best service and protection that any financial services company could provide. in fact, we see their financial security as our national security responsibility to this nation. i want to just share one example of how that commitment comes to life on a daily basis. so, this is an example that took place a few months ago, and it was an army captain serving in iraq who called usaa because she was about to lose her home in the states due to foreclosure. her mortgage was not with usaa, but she's a member of usaa.

she spoke to a member service representative who is named norma, and she understood how important it was for that captain to get back to the important duties associated with her deployment and the special circumstances surrounding that and realized we had to find special circumstances to take care of her. norma agreed and arranged for a short term loan at a competitive rate that would get this captain current with the other lender and got her started on an application to refinance her mortgage at a lower rate and kept her in her home. she's not with usaa, but a usaa member. norma represents the commitment of our association and the other 22,000 employees she receivers with to understand -- serves with to understand the military and special circumstances and support them in those. about one in five of our employees is actively serving in the military or has served or is a military spouse, so that's how

we understand what it means to serve and how we go the extra mile for our members. some of the things that we do specifically unique to their circumstance is we have a deployment kit specifically for those that are deploying to help them get their finances organized. our insurance policies do not have a wartime exclusion. our checking accounts are truly free, and we refund the atm fees that other banks charge our members when they use them. also, in 2010, we adjusted the payment terms on about a billion dollars in credit and loans, loan balances enabling members to continue to meet their obligations on 72,000 accounts to keep them financially secure. we appreciate and share the committee's commitment to supporting and empowering our service members in the financial services sector, and we very much look forward to the discussion today, and thank you for the opportunity to be here. >> thank you, general bergner.

mr. pollack, you may proceed. >> good morning, mr. chairman, and distinguished members of the committee. on behalf of the board of director of the pentagon federal credit union, i thank you for the opportunity to testify today on these percent issues that affect those sacrificing so much to protect our nation. when we think about financial issues within the military community, we believe more can be done to provide financial education and tools for service members to better manage their money. too many service members are ill-prepared to protect themselves from those who would take advantage of their lack of financial sophistication. we would never send the troops into battle that way, but we have not similarly focused on their financial preparedness. i would be remised if i failed to recognize the laudatory efforts of credit unions in general and defense unions specific. because they are owned, we create yiewn knee programs to meet the financial needs of

military service members, and i want to share some of the programs we have and provide to the membership. recognizing the need to address the lack of financial education and in conjunction with the pen-fed foundation, we established relationships with the university to develop financial education materials to assist in teaching military personnel how to properly manage their money. we provide these services free of charge to members between the ages of 17 and 25. all of our materials and legal documents are already in plain english, we do believe that the lack of clear and easy to use disclosures prevent members from compares and thus selecting the best financial options available to them. as a result, in collaboration with the pugh trust, we have a checking account disclosure that's transparent and enables members to understand the fees and costs coshedded with their -- associated with theiring the. we hope to roll out similar

products by 2012. we believe the disclosure format created represents a belter way forward for all financial institutions, and we're proud to be a leader in rolling this out. the fact is that when a service member's fighting in afghanistan or iraq, they should not have to worry about fees and charges on their accounts, even when they do make a mace -- mistake. in 2009, we had a program for active service duty members called warrior's advantage waiving fees associated with insufficient funds up to two occurrences in any rolling three month period. we've also waived atm charge fees at all the atms on military installations and provide free bill pay services to all members as well. in a recent survey of fees by the "military times" newspaper, we had the lowest fees of any institution serving on military bases in the united states. we continue to drive the fees lower as we look to the future. our efforts extend to borrows as

well as savers. because we do not price base on risk, every qualified member receives the same price for a loan. our present rate for used car loan, which is a staple in the military community, is 2.49% apr. we provide a credit card offering that has no annual fees, no late charges, no foreign transaction fees, and the annual percentage rate is market leading 7.49%. in short, we're trying to do everything we can to ensure that the military member has low cost credit available to them for any needs they might have. we do know that military members can and do get into trouble with debt. when they do, some turn to payday lenders for assistance. for the past eight years, we provided an alternative to the members in such circumstances. through our loans, we have a $500 emergency loan for a flat fee of $5. if a rollover is requested, the member goes to credit counseling, free of charge, to develop a plan to get them out

of trouble. we provide up to five rollovers free of charge for any additional rollovers that might be necessary. through our foundation, we cover the losses for 12 other defense credit unions who participate in the loan program. our foundation's dream maker program provides matching grants up to $5,000 for active duty service members seeking to purchase their first home. because we have never done subprime lending or late and losses have remained low. as a result, our collection efforts are focus focused on helping members get out of trouble rather than harassing them. we are one of the credit unions that view this as a labor of love for those who defend our country. the men and women who give of themselveses deserve nothing less at home. we thank you for taking your precious time on an issue of the long term importance to the security of our nation. thank you.

>> thank you mr. pollack, thank you very much for your testimony. as we begin questions, i will ask the clerk to put five minutes on the clock for each member. mrs. petraeus, many of the abuses that have been raised in testimony today are committed by non-bank financial institutions. do you think that the cfpb would be better able to protect service members and their families from abusive debt collectors, for-profit colleges, and unscrupulous lenders if it had a director in place? >> yes, chairman, i do. we have an array of things we can do to help service members. one is certainly education which we are already working on. another would be enforcement, but the third leg, if you will, is supervision, and without a

director, we can want do the supervision of the non-bank entities such as payday lenders, debt collectors, private student lenders, the ones you mentioned. >> yeah. ms. spain, would you please describe for the committee some of the regular financial literacy trainings you and your partners conduct for ellsworth and the south dakota national guard? >> we provide a program called money in motion, and it's a two hour basic financial education program. what it teaches -- what people understand is they know they should budget. they don't know why. they know they should care about the credit score, but they don't know why. we explain the why. you budget to cover your bills. you want your score because it depends what interest rates you pay. what interest rates you pay determines your payments and

what's left for other things. we have a six-hour program called credit when credit is due, and the third program we provide is called make your move: a guide to home ownership, a six hour training program showing them the current forms as well as information they need to know in any community what to ask, and those are the programs we currently provide. we provide programs upon request from the airmen and family readiness center. >> as we have heard, the military lifestyle is different and creates unique financial challenges for a service member and their families, especially during deployment. what tools are available through military consumers to make transitions smoother? admiral?

>> the military lifestyle is one that as mrs. petraeus described in recent years is involved so many rations into -- rotations into needer and back, -- theater and back, and that creates the difficulties for the families that are staying back at the installation and the dilemma that's posed for them whether they are going to, in fact, remain at the installation or, in fact, move to some of the location where they might have other, more family ore yes , ma'amed support -- oriented support, particularly difficult for the junior members, and so so, we, for instance, at the navy marine corp. relief society will see clients, individuals, who have come into us to ask for assistance in dealing with some of those circumstances where the

military member is deployed over a substantial period of time. the spouse is back alone at the installation, and, in fact, may choose to move to a location where she has or he has more family. >> general bergner? >> mr. chairman, one of the biggest challenges our service members face today is the mobility challenge. we sen them hitter and beyond. we send them all over the world, and so their ability to maintain their credit, and at the same time, have access to the financial services that they so deserve is one of the biggest challenges they face, so one of the tools that we have recently deployed is something called auto circle. you can access it on your mobile device, and we've arranged discounts with car manufacturers to provide those to our service members, and on average, they save about $45 # # --

$4500 on automobiles, but it puts facts in their hands and wherever services take them, they have the facts available to them to make a decision that's the right decision for them that's not going to be a car lender or car dealer outside their gate. ..

to start an entirely new office, the office of surface member affairs. how many people have you hired to work in your office, how many

total staff members to you hope to higher and what is your budget and last are you getting their resources that you need? >> thank you for the question, ranking member shall be. we have six employees working for me and small office i don't expect him to have it get much larger than that at least not for the moment. of course everybody has a wish list. if you ask employees they wouldn't say no and i have a wish list of of few to expand their reach but there are other divisions within that we are able to tap for their expertise as well so we don't have to do everything ourselves. as for our budget thankfully for me and my deputy is doing the

numbers, so i'm a little bit removed from that so i can't give you accurate information on that. >> you think he would get the resources over all you need this for? i know you are just getting started. >> yes, although their resources are there but again i think it is a frustration right now to not be able to do everything that people expected us to do. when i first began we got letters saying we are so excited there's an agency that we would be able to do something about these people that prey on the military so i am eager for the day when our nonbanks supervision team if i can use an analogy stop circling the airfield and get permission to land and start their work. >> as you know in 2006 congress passed the military lending act and this gave the department of defense the authority to promulgate regulations to

address on scrupulous lending practices involved in the military band after dodd-frank legislation was passed that continues to have the regulation implementing the particular act. what's your view of the effective act stopping the unscrupulous lending? >> i think we heard from the admiral that there has been success on the classic definition. i think the problem is there's a lot of predatory products that have managed to right themselves a definition that puts them outside of the implementation. i went on line yesterday and i searched the search term military loans and i got 9,980,000 hits and the top to search terms that came up for military loans, bad credit which was almost 2 million military loans, also to millions of there's obviously a ton of people out there who are managing to exist outside of the

protection of the military lending act and it is a problem. >> ms. spain, should the da required first-time home buyers to receive financial the education of some sort before they can obtain a va loan in other words counseling nseries counseling as to the implications of the obligations of the loan? >> my opinion would be yes and the reason that i say that is that body in the home is a complicated process and allows you are a realtor or mortgage lender you can't know everything they need to know. >> and its for most people, isn't it? >> it is the largest purchase that you will ever make. >> admiral abbot, in your testimony among other things you stated that the military lending act, and i quote your words, has dramatically curtailed payday loans to active-duty service members we are glad to hear that. you also point out however that

some financial institutions have found loopholes in the regulations the department of defense promulgated in 2007. they always do this and you have to come back. have you contacted the department of defense on these and if so what has been the response to close some of the loopholes? >> yes, senator. we did in fact in the year immediately after the act was passed and implemented have a period we examine its affect and week reported the results that we have seen to the department of defense and they had already begun to be clear that it was having a positive effect and also the same phenomena you described of the worker rounds. the narrowness with which we saw the act implemented gave us concern at the beginning and now

in light of four years of experience, it continues to cause concern and that is the direction that the financial industry has gone in using the the particular limited application of closed end of loans in certain circumstances to in fact offer new products that were easily new pay the loans. >> regarding on-line lending there, are there additional steps that the dod can take to ensure that the act adequately covers online lending because people will be resourceful to get around anything. >> you know, senator, i believe that education may be the single most important weapon in that particular. would you agree with ms. spain? yes.

>> general bergner, usaa -- i know your organization is unique -- briefly what are some of the ways usaa is uniquely qualified to serve the military? i know that is your focus and the families. >> senator, i think it starts with the best customers of the world coming and we recognize that and it is then followed by the best employees in the world to do that and the combination of those generates a level of commitment that is at the center of how we can truly put their needs first. a couple of ways it manifests itself. we look at every person out there from a member needs perspective, and so that's where we start and finish. last year we saved those members about $165 million through

refinancing mortgages and on savings in the auto purchases specifically. that's a tremendous amount of savings for service members exposed to the kind of threats that mrs. petraeus is talking about, so it is a member focused effort. essey ra is another dixie borut caps 6% at usaa we kept exposure of 4%. so it's going that extra mile for service members. it's the right thing to do. >> mr. pollack, briefly it is my understanding there are nine federal regulators and regulators in all 50 states with the authority to regulate, supervise and possibly in force lending to service members by both banks and non-bank lenders to read in your view have any of these regulators found to properly oversee lending to the military personnel, and if so, which ones? we need to point those out.

the regulators need to do their jobs. >> i'm not sure i could actually answered your question, but i do believe that it is an issue of education. if we properly educate our young people in america, it wouldn't. >> would you agree the worst thing a lender can do is overload anyone but especially a young service member, 19, 20, 21 years of age with a debt they can't carry it? it makes no sense financially and it's exploiting the service member. >> this and i've been doing this for 33 years. we've had that exact problem a young person enters the service and the first thing they do is buy a car they can't afford and second is they take on more insurance they can afford and before they ever get going, they are in trouble. >> thank you, mr. chairman.

>> senator reid? specs before, mr. chairman, and for your wonderful testimony. let me make three points. i want to commend ms. pollack for adopting the disclosure form. that should be the standard for financial institutions throughout the country, so thank you. second, i think one of the most satisfying aspects of the dodd-frank act for me was working with senator brown to create the office of service members affairs and particularly in light of how holly petraeus is leading it so thank you. in the mid 70's i commended the power tripper company and was executive officer of the company which meant every day i got letters from creditors and i thought young paratroopers telling me how they have a 25,000-dollar truck on a 70,000-dollar a year in come. what i heard today at think is even more outrageous than i recollect in terms of what is being done to military personnel

particularly now any time of war whatever we've done it's not enough and we've got to do more. we need to start with that premise. let me focus on an issue to the admiral speed abbot's testimony think you for your service to the mutual aid association, to the marines and sailors and colleagues in the air force. we have the facility to operate on bases and the expectation i think is that the aharoni military base from the individual service member who said they are the sort of gold addition because they've got the stamp of approval, they are sitting there. i know they operate under the operating agreements, so the question that i want to address to his petraeus and ms. spain and the admiral is are the operating very efficient and then i would just say there are some indications in the story that some of these are charging far in excess of the fees for

this payment or failure to pay on time than is normal. ms. petraeus? >> i will say is you mentioned they do have a contract to operate on those and they are expected to do certain things. part of that is to provide financial education. certainly it should also be transparency with what they are charging, and when the contract comes up for review that is an opportunity for the services to decide if they are treating their customers right. i will say that we are taking a look at the issue of what are the special products without the financial institutions are providing service members. we the federal register notice in about a month and a half ago asking for input from the across the field saying let us know what you are doing and we are going to have a forum where we discuss both the issues and then some of the things that are being done that are on the

positive side, and hopefully there will serve to kind of put the word out about what's being done that's commendable, and what are the issues that need to be addressed and we look forward to some cross pollination if you will. i hope we can go back and say why can't our institution do this? i'm pleased about that. >> ms. spain, your comments? >> there is a credit union and operates on the filters and air force base and the support financial the education to the grants that allow us to go to the base to provide the education. the military members haven't had complaints regarding the particular credit union. >> at merkel abbot, if you could elaborate on your comment. >> senator, i know that our service members and i, our clients on each side are grateful for the services that they do get from the finance industry on base that's a great convenience, and we are grateful for that. i do agree the renegotiation of

the periodic contract is spotty quote there ought to be frank discussion about practices and the local leadership should be empowered to discuss those issues with the bank and credit union leadership. we've heard today about some commendable best practices. i personally believe there is an opportunity for a discourse consolidation of those in a way that would benefit all of the military installations that have those facilities. >> thank you. my time is about expired. general bergner, i don't want to upset your -- back in 1971i ensured a very - in triumph with usaa, sports car.

the years have passed and now i indenturing in 1991 ford escort. that's what happens as you grow older. but think you your service and high regard again to the general. >> thank you. >> senator akaka peery >> thank you very much, mr. chairman. ms. petraeus, our guard and reserve forces have been called up to fight alongside their active duty counterparts at a higher up to ensure the nation's safety. what you see as the differences in the consumer protection needs for family of the research component when they are on active duty nurse when they are

in a reserve status? >> i've had the opportunity as i mentioned to talk with a number of national guard officers and enlisted their families on my trips back to the states and i try to do that when i go out because the issues are a bit different. for a great amount of their time, the families especially consider themselves to be civilian families come and some of the challenges preparing them for the change of the circumstance when suddenly become a military family, and they have their guardsman or reservists deployed. they don't have the installations the active-duty force have with the wonderful offices they've been walking to and get information. a great deal of it has to be delivered virtually through the web. i think we've come a long way. there's great initiatives now. the yellow ribbon program provides information before they deploy, and then also circle back around after they come back. the delivery of information is

certainly a challenge for them. and again, just making the family is aware of what is there for them in the way of benefits. and i would add the economy is of course the challenge for those families as well and in plant is a big issue for them when they are not on active duty and also for their family members. >> thank you. this on average -- military members are right to their initial training assignment with $10,000 in debt. this means they may already be behind before they even consider how to manage their finances. in your experience, does this initial debt influence of their reliance on high-interest loans to meet their short-term needs cracks

>> it does affect them because they know they have to make those and if they have anything go wrong, if the car breaks down or whatever happens, they become more vulnerable and that's why fall prey to the searching is exorbitant fees sleepers were allowed to talk to the first term which makes a huge difference and provide them the educations of the than the they have options and ask questions carefully and know that there are assistance available. >> ms. petraeus, i want to congratulate you and wish the best focus on the important topic of financial education and consumer protection for the military families. if there was one thing -- would

you think there would be? >> confirm a director for us. we can use the full array of what's there. i believe education is important but we also need to be able to exercise supervision to look at the red practices of some of the non-bank lenders to cover up their and i also heard from the ceo of the federal credit union in ohio we have a branch of hours near a pawn shop and a paid a lender and the only one that is regulated is us. we need a fair playing field and need to go in and look to these folks and as needed exercise the enforcement capability as we all know. stenberg mr. mister petraeus, at comes to a close of iraq, we will begin see in strength

numbers decrease and veteran's numbers increase. what are you doing now to partner with agencies such as the va when the financial needs or vulnerable these of those countries for the status call is it a different? i was glad in your statement you did mention that you are working closely. >> we are and we talked with them as i said about the distress that may come to us and we might help as of the dhaka as possible education benefits so we will have a lot of the veterans getting out, looking to use the g.i. bill which is a wonderful benefit, yet we want to be be sure to use it for college programs that provide them for the best thing for the buck if you will, and one for shepley the have the marketing

right now because the military education benefits don't count in the 90%. if the chinley get 90% from title xiv the need to get another 95% and they are part of the tech 10% said they are heavily marketed, and we've been talking with them -- to make it more transparent when you look to the challenge what is the track record, what is the default rate on loans for what is its accreditation, and they just put out a financially worksheet which i think is a good step and we all want to see our veterans come out and sign with him and productive to beat could become productive members of the society and with the defense office of transition as

well. >> thank you very much. >> senator tester. -- before. i want to the question to dovetail i think senator akaka, him wrote to the answer but the reason among brank supervision team is using your words it hasn't received permission to land in other words the reason we cannot regulate the non-bank financial folks i think for just about everywhere the the panel referred to as being somewhat of a problem with regard to the military folks because we do not have a director, is that correct? >> that's correct. >> how to back to where you just finished up within the doubles for-profit schools. you brought the attention to us on the on the fickle recruitment as the marketing practice of the did bad actor in this industry. what are you doing about it. is it an education system ration, how are we reaching out

to the military personnel, and are we being successful and that >> it is a work in progress. a lot of it descends to the education and where service members know to ask the right questions. there's too competing priorities when a serve as members on active duty and has tuition assistance benefits they may be looking for a college credits so they want somebody can get a quick and easily on-line 70% of the forces are on line and may not be the best when they want to apply that college to a job. right now it's mostly education. our jurisdiction, if you willis to the private student loner lynndie and market. i have a broad measure to work

with agencies and i will do that on this issue. >> we appreciate all his hard work. we want to talk about the foreclosure for a second and this is a question for you, too, major general. right now the service protected hour under the relief act when it comes to the for pleasure and correct me if i'm wrong on that, can you tell me what is the mechanism for the service to determine if there is a diplomat status, and how is that handled -- what i'm trying to get that is my destiny of there as observers. the restoring the foreclosure while the service members deployed. i do not believe that is legal under the law. correct me if i'm wrong and what is being done about that. i will start with you, holly. >> first half to fess up, i'm

not a lawyer. >> neither malae for the service member to tell their mortgage holder that they are going on active duty and like the interest rate production period you do have to tell them so the protection for the nonjudicial foreclosure is on the lender to determine if you are on active duty and they can do that by going to the defense manpower system and working up and you are right. judging by the recent announcements by the department of justice system at large and the large-scale subtle arguments there are those are not doing that before the foreclosure. >> could you just address that from your perspective. >> i go back to a record high made. probably the best example i could give you of the commitment that watches tv to watch right

here. this was benefit from the training necessary for a member to ensure that we operate true to those and in my recollection this was as even a made, right i guess the question i've got is we have referred a lot jacinta servers and has been good and ill of cases. what do we have, i'm not sure into the stick that the same token you would know this better than anybody in the correct me if i'm wrong you have a service member in theater injury stressful conditions.

that is what the center of our commitment even when the lesson for our financial institution we will work to protect them from the foreclosure and to everything possible to keep them in their home and finally on to mention the loss requires the substitution for those to put -- >> i appreciate you in your company. unfortunately there's a lot of folks who don't share the same commitment and i don't appreciate them as much to really want to thank you for your testimony. appreciate the work you do. good luck. senator menendez. where senator tester left office as the subcommittee chair we have taken a particular interest to testify who's an attorney who represents the military families

who were illegally foreclosed upon by some of the largest banks in violation of the service members civil relief act and it seems to me from his testimony and from other sources that the act is either not well understood or simply not followed and needs better enforcement. for example, bank of america, morgan stanley and jpmorgan chase collectively agreed to pay $80 million to the hundreds of military families whom they illegally foreclosed on. so ms. petraeus, my question is what can the cfpb to help the problem of service members and their families being threatened with foreclosure and high interest rates when they are on active duty >> i've had the opportunity to talk about this issue and i did hear the testimony in the other

side with our own captain who had been foreclosed weigel he was deployed. i should first point out that is a law the service members that does remain with the justice department civil rights division and its partly because as you said it's a very complicated law and there's a lot of pieces to it, but we did want to take steps so if we got complaints that came in from must first hour consumers would. in our own system people recognize it and the justice department in the same room and really one of the main drivers of that is to make sure essey

are a complaints didn't file that forward we would do if we ever got them and said that they would be addressed. >> i appreciate that because the justice department of sometimes a matter after the fact where you've gone to the nightmare of the foreclosure. the three day sick financial relief body into action to kinard someone ploch -- i hope that while you may not have to get jurisdiction i appreciate this effort and we would love to work with you all to try to have a more vigorous approach that has those who give market products of understand the responsibility that they have here the end of the day. so we can prevent that action versus deal with the aftermath of foreclosure. >> it's better to be productive

than reactive and frankly it's all on the of the site of the phone and deutsch if they don't -- if they are not aware of what they should be done your going to have a problem with the service member. >> does this justice department consider bringing in the largest mortgage entities and giving them a little bit of a primary care with your discussions have led to that. >> i haven't heard that particularly from them but a lot of what they do they don't announce publicly. i did have the opportunity i wrote a letter to the ceo of 25 largest banks saying this has been an issue and i hope you get your own practices to make sure this isn't making sure we have accounts with you. >> we will follow-up with justice. with me ask correct because i know some of my colleagues talked about the military lending act and i want to get a bottom-line answer. it seems like the act which

translates cuts in our credit to military borrowers and 36% including the fees and charges but has been narrowly defined a paid a lender loan and the vehicle title but high-cost credit cards they do not improve for for draft loans and in the form of the mortgages are at a loan if the public policy in one universe. such high interest fees and charges. for the broad service for the service members i'm all about consumer advocacy people projections, so i know the devil

was in the details trying a jury ruled that doesn't have the unintended consequences. >> in the of public-private partnership? spessard winning on the other side but i think there's a public policy reason to extend for the same reason to the original legislation was put into place because of the effect it was having on the service men and women on their conditions on the loss of security clearances on the loss of the readiness to deploy and the morphed have been already in existence and have effectively produced. >> thank you mr. chairman.

senator hagan. >> thank you tester german and i just again want to say how thankful i am for you holding this hearing today. we've got good information and i also think what we've discussed i keep saying it's not rocket science we just don't teach it, and i think so many of our young people in the military could benefit greatly if the had a financial literacy education of course while they were in high school but at some point in time we can accomplish that at the state level and the federal level but i did want to -- general spain asked you a question and i know many years ago in the military bases was in remote locations that there were one based colin this limits the

number of the financial institutions on a military basis. so can you describe. the benefit to the service members both pro and con. and then everybody else. >> we do not operate as a three will produce 4.1 million pieces of material on everything from cybersecurity financial management to car seat safety, things that do matter to service members say they're firmly and the endorsement or even the mention of the company that's produced sponsoring the foundation education which is access to the military service morose to support the requirements and the needs for example we have best and

readiness groups to provide such educational material and support them and because the bourn bank rule because. it's great weekend level that and make those resources available. there is the opportunity for many of those to the service members, many of them to the national guard and reserve, and def part and feige of these are in this scud-b their next opportunity for us to enable, not the profit of two small.

i hope, senator, we knew we clear the overseas environment,. >> thank you triet you mentioned overdraft practices in your testimony. what can be done on this front and the high overdraft fees common on the base financial institutions? >> senator, yes, i would have to ss that are probably the top problem time observing right now in the young servicemen and women who are getting into a

condition that they can't cope therefore they come to see us. it's the magnitude of the fees that they pay. in 2010 work of the fee will be $30 billion, and of course the military. in some cases up to as many as seven each day. somebody that has over truck production and there's $500 worth of it, seven times 25, it doesn't work out real well

number of proposals not only made but implemented by the credit institutions which improve that circumstance. one specific list of them but are encouraged they are being discussed and we think that is going in the redirection. >> i would like to, you know, we agree with that and also add that it's not a two-time inoculation. do you repeat financial management after you pulled on the girl and -- the problems when we were there again. >> i have one more question or should we -- >> go ahead.

>> mrs. abbot they will understand the dynamics of the student loans and so many of our service members in particular in many cases it is the first - generation college students, and they are being offered opportunities for a lot of different areas. can you describe a little bit more about what you are looking at in that regard advising them and giving advice. >> i think that there are such aggressive marketing right now and it's not just the military members but it's their spouses and children as well because the g.i. bill the benefits can be transferred to them. i talked to and irene wife and kentucky and she started her comment that the round table saying i am attending a military attend a college.

as a for-profit but obviously they had marketed themselves here in such a way that she felt they had an official military situation, and they said that when she had lent six ackley in query and they call her ten or 15 times a day until she and melinda and the first. she couldn't find anybody to take her calls because again, they had a running at that point and she ended up not passing the course because she couldn't get logged on the enough times to do so but the money was definitely committed. so, again, i have a real interest in folks being able to make informed decisions than just the sound of a military friendly, they call me 15 times a day. we need to get tools out there to make it easy for people to compare and see what is the

track record is a before profit, is a deck near the extra money and may have to spend beyond which will not cover the whole cost. >> in that particular instance, did she get her money back? >> nope. >> thank you, mr. chairman. >> to the panel, thank you all for your testimony and for being here with us today to read and grateful to those brief men and women who have served our country and to those who continue to serve their families or us the tremendous. i will continue to make sure that the service members and their families have all the tools and protections they needed. this hearing is adjourned.

[inaudible conversations] [inaudible conversations]

energy secretary steven chu says global energy competition is fierce and that the u.s.

should at a comprehensive energy policy. he focused on renewable energy at a conference hosted by the washington post. this is 45 minutes. >> good morning everybody. last year when the "washington post" held its first energy forum, the discussion then was all about the news at the time. there was a spill of will in the gulf and a logjam on capitol hill for energy and climate legislation. today on a day when we've gathered many of the most influential thinkers our country has on energy all in this room, the conversation is quite different and the focus. today the focus is on the economy, listing it, creating jobs and using technological what chances in the field to help do that. but what is with our clean energy smarter uses of energy and energy efficiency?

>> the one their bills for their home and the offices and factories reduced and they want to do the right thing for the plan that. we are asking those in the note to talk about the biggest picture, national security issues, our energy security, the shifting geopolitical map of where the new demand and the new supply is coming from and we are also going to ask our specialists to go into the smallest of detail to help with a decision of the hardware store of what to even in a couple of years. let's start the forum right away on smart energy with the man in charge of the nation's energy department. steven chu is the united states secretary of energy.

his job description, implement president obama to invest in clean energy and then reduce dependence on foreign oil, address the global climate crisis and create new jobs. how was that for a job description? steven chu came to washington that the distinguished scientist and as well known as the winner of the nobel prize specifics. something naturally few members of the cabinet if any have had. he also served as the director of the department of energy national lab where he led the pursuit of alternative and renewable energy technology. please welcome, steven chu. [applause] this set on the future of energy but i want to start with some lessons of america's past three

will take you back to kittyhawk, december 17th, 1903 where the wright brothers launched the world's first airplane achieved human flight and with it were a whole new industry. so the next several years brother led the world will navigation to read what is less appreciated is the united states lost the technology lead a few short years later and the beginning of world war i i although the u.s. military was the first major customer of the wright brothers and their first service between 1908 and the man i deutsch states ranked 12th in lack of purpose showed when we entered it in 1917 we were so far behind the aviation technology lab at the airport

produced for us to design aircraft, and the debt. after the war the united states would say we don't need to compete with europe the leadership in the industry as a national security imperative and an economic opportunity to read and we launched an agency to serve research and development, legislation to provide the company's. the demand from the postal service kept the industry alive during its years and laid the foundation for to read the second lesson i want to give is the history of the automobile. in 1885 the modern got in trouble no one was invented in germany. henry ford is adopted the in centerline which increased worker productivity. americans began to dominate manufacturing force of the world i became the high-quality mass producers.

wind. more were built and more fact this would happen. america dominates the auto industry. my final lesson is about information technology. american ingenuities they're dressed up like. we took steps to foster the growth. the military was an early adopter of transistors and computers. the defense department helped lead the internet technology. the purchasing harcourt of nasa and the other agencies. this made them affordable, widely available, and then amend the world. the lessons from them as examples are clear was almost 9nd effort to promote these

industries. now once again, there's a huge opportunity before us and it's growing rapidly. invective a reasonable argument perhaps people concerned are. there's more than $80 billion a year, $80 billion is a lot of money. it's about as much as we spend of the era of free year. the united states built an early lead in the race so when detroit's and build for the race for the longer these technologies in keeping with the comparison of the year in 2009 we spent $7.30 billion more than our total investment on energy research. history is repeating itself just as we took a line and other

countries have studied and are using it to take the lead from noss to read while some people in washington are debating whether the clean energy economy is real or whether we should compete. others are seeing the tip to more evidence than china. they put together of the sun tech. benefit during of the world. the airport the waste from the united states because electricity requires them to find to cost much less in the u.s.. they had all the high-technology in china in a highly automated factory. sundeck is not only the low-cost leader of the time i visited, but they held the record for the highest efficiency in the solar cells in the world. suntech is trying to do to us what henry ford did. another secret of the suntech

success, the child like many countries, have learned from the united states have the public can support critical emerging industries. last year china offered roughly 30 billion in the government financing to the solar companies including 7 billion. the least ten countries have adopted a renewable and more than 50 countries around the world for some type of the public financing. ferc symbol, germany and canada operate by clean energy learning programs and the last several months to the u.k. kuhl australia and they now have plans to do the same. since i can use the first day in office president obama has been working to strengthen the clean energy. the energy department stimulates the innovation change for using the grants for cutting edge or and d projects and advance the tax incentives like the 1603 program which is supported nearly 20,000 renewable energy products and the innovative

manufacturing requirement of renewable energy. while we make progress, the united states is at a crossroads. many of the clean energy cash incentives are expiring. it's closed september 30th. americans face a choice today. are we going to recognize the opportunity and please, or we might raise a red flag in which the jobs go to china, korea, germany and other countries in asia or europe. the global competition is fierce. the support for the innovative technology comes with inherent risk. not every company, not every product will succeed. but there's no reason to stay on the sideline and continue the leadership and clean energy. some of washington are ready to throw in the towel and let off the clean energy thing. they don't think america can compete or that it's worth trying. others think the best thing we to do this for the government to get out of the way and with the

free-market work. we had this debate in 2008, 2009 about the u.s. auto industry to read a lot of people from the towns that were ready to give up on the use of a manufacturing. president obama received the industry class. today, for the machine, chrysler are creating jobs and quality products. after seven straight years of decline, america's automobile manufacturers extended their output by 35% this year. the president took action because they're much to the economy. the center for the homeland security research found 8 million jobs were impacted by the u.s. automobile manufacturers, suppliers and dealers. this includes jobs treacly connected to manufacturing and older jobs that benefit when workers spend their paycheck. the critics were wrong about the auto industry. i believe they are just as wrong today when they say we shouldn't borrow investing efficient vehicles were clean energy. i recently read a paper, it was

a friend of mine who was one of the 2001 nobel laureates in economics. he wrote about the jobs and looked at the data between 1990 and 2008 and cut employment to the two sectors. one he called the treatable job. these are jobs where you make stuff like airplanes, cars, food, chickens that can be shipped and sold around the world. the second trader is a job like real tech sector, health care professionals, the u.s. secretary of energy, not treatable. but the good news is we have a 27 million jobs in the united states in this period 1990 to 2008. the bad news is the job growth was virtually all in the non-tradable sector