highest percentage of foreign-born population in the nation were right now, 27.2 and the second-highest, 22.2. third highest of florida, 19.4, texas, 16.4 is foreign-born. ..

>> host: how did you come here originally? >> caller: i came originally to the states as a result of my ambition. when i was in asia i was listening to the voice of america, the sound of music, admiring so much of the values of the american people, culture is represented the decency of human beings. and their ambitions of a human being. and then i came here, i was employed and then i'd, you know, i got married that i met a lady, that i love, got married and became a citizen. >> host: you first came on what kind of these are? >> caller: a diplomatic visa. >> host: and as you watched and listened to our country

debate immigration policy now, what are your thoughts about the big debate in this country? >> caller: well, i think it used to be the kind of immigration, the policy that was selected based mostly on business interest, that the laws were supportive of bringing in workers, laborers who were cheap laborers, or those who can work the jobs that the americans, and occasional american wouldn't do. and over the years this has actually effected what i see here, is that the culture of america that attracted so much, so many people around the world,

has been diminishing to a certain extent. and that has actually over the years affected negatively even the national security of the country. not selective anymore based on education or certain factors that would enhance the united states stability, innovative ambition, but all the, or most of the interest based on those economic interests. >> host: i'm going to jump in just because our time is going to run out quickly. thank you for sharing your story. any comments? >> guest: there are 140,000 work related visas allowed per year, and that is an area where there are qualification. there are several different types of visas for specialty, education and for specialty workers, as well as for an

unskilled workers. so that is still a driver. i think one interesting point he brought up was the debate over economics. i think now that you've seen the economy tightened up a bit, what entered into the equation much more in the debate is this idea of our americans competing with these visa workers of the high skill level and the low skill level. so that is driving the immigration today. >> hostspent i'm not sure your staff answer this question on twitter to pass, you have projection that tells when the majority with the minority's, including foreign nationalist citizens. >> guest: we have information on projections on our census bureau list but we don't use immigration status. >> host: let's go back to your chart. what's interesting here as we look at the foreign-born

population in the net states by region, this is the period from 1960-2010, the european population decline but not dramatically so. immigrants coming from europe, but the big influence we said at the outset of latin american and caribbean natives coming into the country, and also a huge growth in asia. we tell us more. >> guest: this is another graph i like because what it says about what is happening in the foreign-born population over the last several decades. as you pointed out the european population has declined but it's stabilized at about four to 5 million by 2010. but you knows in the grandson of a foreign born in latin america and the caribbean and asia has grown rapidly, especially after 1960. so for example, in 1960 there were less than 1 million foreign-born from latin america. and by 1960 there were

21.2 million. analysis tuesday for the asian foreign-born, there was less than one half million in 1960 but by 2010 there were 11.3 million. another interesting thing about this is you can see the proportion of foreign-born from the different regions has changed. in 1960 about 75% of all foreign-born were from europe. i 2010 the proportion was 80% from asia and latin america. so again, what's happening is not so much that change in the size of the european borne by pushpit with the growth in the foreign-born from latin america and asia. >> host: this chart answers the question, with all the top but alex what's the percentage of european immigrants living in the u.s. that's it right there. which is about 6%? >> guest: yes. >> host: question for you, we talk about one contribute to the latin american upkick is the

border question. but look at a jump in asia and their cowardly coming, legally or illegally? >> guest: that is a mix. there does tend to be a large legal immigrant population from age. and again, i'm a broken record but it does come down to the economy. we look at the percentages, when you look at the countries that are sort of economically stable, offer a lot of opportunities versus in asia and latin america, you have a lot of people we live in a global economy, they're looking for opportunities. they are increasingly better educated. it makes sense. immigration makes sense for those populations. >> host: next up is barbara from new york city. >> caller: good morning. three quick points, please. people call c-span all the time and complaint of illegal aliens coming from mexico. but my interesting is that most of the illegal aliens are

students or people who come here on student visas and then simply overstay, and these people come from europe and the middle east and everywhere. it's not just mexico. second point is, i don't understand why we have, while we have put a moratorium on immigration with our unemployment rate at 9%. it seems foolish to me to keep letting people, more and more people come here. and thirdly, the other day the house of representatives passed h.r. 3012, which they were saying on the floor was supposed, he would not increase the total number of visas but it would increase the percentage that each country was allowed to send. but when i looked at the amendment i didn't see the word percentage in there anywhere. i saw increase in numerical limitations. perhaps your guests to talk about that. >> host: thank you so much. the first question was mexican versus people coming in on student visas but actually does this particular chart answer

that aspect that 100%. i would make sure viewers understand it does not collect data on unauthorized or legal status other than citizen on citizen. what this chart will show is the breakdown in the total born. the red bars show the five or the population in millions, and the column of numbers on the right of the chart is a percent of the total foreign-born population. the foreign-born from mexico represents 11.7 million people in the united states, and 29% of the total foreign-born population. the next largest foreign-born group is from china. including, which is about 2.2 million people representing about 5% of the foreign-born pictures of other countries with at least a million foreign-born and the united states including india, philippines, vietnam, el

salvador, cuba and korea. >> host: if we can get the camera and closer, so folks can see these countries, mexico by far, of the largest foreign-born population both in percentage and hard numbers in the united states right now. new york city is up next. this is frank is on our foreign-born life. hello, frank. what is your country of origin? >> caller: germany. >> host: how long have you been your? >> caller: 70 years. i was jewish and i wouldn't be alive if it were not for the united states. >> host: so give us your perspective on the way the country is today and the big debate we are having about our immigration policy. >> caller: i live in jackson heights which tremendous about of new immigrants, and the bottom line, it's still a land of opportunity but, of course, today with the key mutation and transportation, immigrants have

fewer connection to my country, where they came from. to me, i wanted to be an american but i did want to speak anything but english. so the question is, new immigrants, how fast, especially their children, become quote americanized and less concerned about what they consider as i country? >> host: thank you very much. can we move ahead to 13? i think that's the question -- the answer to that question. >> guest: yes, and it shows, this shows the percentage of foreign-born population that speaks either only english at home or speaks another language at home but speaks english very well. and i'd like your views to focus on the numbers at the top of the bar. as you can see, about half the foreign-born population has a pretty good language skills but

they speak only english or another link which at home and speak english very well. as the caller suggested there is considerable variation among the country of first group. so for example, about 73% of the foreign-born from india speak only in which at home or speak another language, but speak english very well, compared to the foreign-born from mexico were only about 20% have english-speaking ability of. >> host: one factor might be the predominance am english and their country of origin? >> guest: yep. >> guest: and vietnam also has a low percentage. >> guest: only about 32%. >> host: as does china, 39%. the next telephone call, then you don't have a comment -- >> guest: just the caller's point of one of these populations become a american but even if you do talk to some of, it does depend on

environment, percentage and how much of the population, but even if you go into these areas of a very high concert for a particular country be to identify very strongly as america's. >> host: saint petersburg, florida, good morning. >> caller: good morning. i'm calling because i am born in venezuela and i have lived here for 35 years. and i came legal. i came as a student and then i got married and i became a citizen, but i made a decision i am a citizen because this is my country and my politics and my country, it's not important anymore. now, my question is, when i decided to bring someone to work in my house, i signed papers with immigration i was very responsible for any expense that that person would occur in the country. like a made. i would have to pay her medical,

and i would be able to bring them legally. what happened is the government is not enforcing this to corporations and manufacturers and farmers. they rather bring the illegals because they don't have to signed that agreement that they have to go to an emergency room our they cause an accident. they get away with benefiting from cheap labor without assuming responsibility. who assumes responsibility, the taxpayers. and the our depleting the funds, the country, this country, all the american hard-working people are having to pay for all these employers of illegal that the government is allowing. so they are bleeding medicare, social security. and i feel why? what is happening here? >> host: thank you. >> guest: well, this is one of the stronger arguments for, comprehensive immigration overhaul on both sides of the argument. this idea that if employers do

have to check more thoroughly for immigration status. basically if you make it easier on the immigrants and on the employer, you benefit society as a whole, that you don't run into these situations where the taxpayer is left on the. now, there are people who argue from one side or the other, but really there is a bit of middleground. >> host: the know, to think congress will ever pass comprehensive immigration reform? >> guest: well, not this congress. it was considered to be sort of come is considered dead in the water right now. the administration is pushing for it. that are groups who wish they would push for it harder but it was considered a very tough sell in the last congress we have a democratic house and a democratic senate. now that you the democratic senate and a republican house, it is pretty much not going to

happen. >> host: we divide our lives differently for this segment. we saw the half hour of the to go and we welcome your participation. we have a line for people who are foreign-born and all other people watching and the people watching outside the united states. we will put those numbers on the screen so you can participate. this is from tony who just wants us to know i am foreign-born. i chose to be an american. i am not an accidental citizen. here is ohio who writes about the first, how apropos to put the state of the highest level of what is clearly illegal immigration in red. anything? >> guest: i'm sure rick perry would disagree, particularly what comes to the employment numbers. when you look at for example, texas which is doing very well. also, when you look at those census figures, that is not

illegal immigration number. that is a total number. of course, there's a breakdown for each side but that's really not what those numbers say at all. >> host: a regular beer census this by e-mail. writing, the melting part is our strength. if it were up to me i would let anyone willing to swear an oath of loyalty to become a u.s. citizen. the oath would ultimately take a few minutes and it would be administered in the immigrants native-language. actually we do have a graphic that talks about what is necessary to qualify for u.s. citizenship. let's take a look at that. this is something i can from the u.s. citizenship and immigration service. you must have agreeing card for at least five years or three years if the green card was obtained for u.s. citizens violence against women act again to be at least 18 years age, demonstrate good moral character. was going to ask advanced chemistry. pass english coming as history

and civics exams, they $680 application fee, and there are exemption for members of the military who serve in time of war. >> guest: to the good moral character question, it does come down to a criminal record. and, of course, i'll immigration cases are watched by cis and had a certain list of qualifiers. that's easiest way to quantify that particular characteristic. >> host: let's go back to our charge. will go to these quickly because it talked about the% of foreign-born population from central america. from 1960-2010, and we can see it has continued to rise each decade with about 37%. the next one breaks down how many of those are from mexico versus other places in central america, and the overwhelming number is from mexico and. >> guest: mexico has been a big driver of foreign-born immigration from central america.

>> host: the other number has stayed fairly consistent through the decade, 6% in the '90s, 7% in the 2000s, and about 8% right now. >> guest: a little bit of growth but not a lot. >> host: let's see what we have next. this was passionate why is this interesting to look at? >> guest: what this does come it looks at, this slideshow as a proportion the foreign-born who told us in 2010 that they arrived in 2005 only. it looks like, came about the last five or six years, about 17% of the foreign-born came to live in the united states in 2005 or later, but there are differences among country of birth groups. so for example, about 14% of the foreign-born from mexico came to live in to the indian estates after 2005, compared to about 20% from india. what this is done as is that

india has a lot more new arrivals and say the foreign-born from mexico post i am going to cause -- cause. the new numbers are that the jobless rate in the united states has declined to 8.6%. we are broken at 9% barrier. the lowest rate and the united states in two years, the number of new jobs on the table in the last month, 120,000. i will let that stand as a fact. let's go back to telephone calls. jacksonville, florida, is on our foreign-born line. where is your country of origin? >> caller: it's lionel. i was born in the dominican republic. >> host: how old were you? >> caller: i was a mistakes and have, about 42 years ago. >> host: and your parents immigrated. under what circumstances? >> caller: my dad, he made a decision to come your for

political reasons. he was a student and activist into banana republic. >> host: you came at the age of six. did you eventually become a u.s. citizen? >> caller: actually no, i'm still a permanent resident alien. >> host: why did you make that decision? >> caller: i don't know. it just sort of happen. i served 20 years in the service. i retired, and now that my dad has finally become a citizen, he did last year, i've decided to go ahead and do it is your. >> host: since you came in at such a young person, do you follow the immigration debate, and do you have an opinion about it that is different from your friends who were born your? >> caller: well, i don't know if it's different. i do resent the term alien, and having served in the military, i

see so me people that are from different places that are more recent immigrants and that are even higher skilled or have advanced degrees they are surfing. and i don't know if people take that into account or gives it any value but i don't hear a lot about it. i was wondering, i called because i was wondering if you had any numbers as far as how many immigrants are currently serving? >> host: thank you so much. i don't thank us for any numbers about people who were certain but would you explain how it works for foreign-born nationals in the u.s. military. >> guest: it depends on how they came into the country. but there is a past for citizenship for all. the military is one of the factors that is considered an

immigration application and really does depend on permanent residence or citizenship. >> host: go bag because this next chart actually reflects our last caller who came and is here legally but never became an american citizen. what are we looking at your? >> guest: this shows the percentage of foreign-born population who are naturalized u.s. citizens in 1970-2010. as you can see in 1970, over 64% of the foreign-born population were naturalized citizens. and by 1990 that number declined to 40% and an increase to about 44% in 2010. >> host: so 20% fewer people are becoming naturalized citizens, is that how you read that? >> guest: not quite. this is stocked a. one of the factors that determined the proportion of

naturalized in the foreign-born population is duration of residence. how long the average ended it -- average immigrant, the more likely the art of naturalized. generally speaking. so for example, in 1964, half of the foreign-born were here 20 years or longer. by 1990, that number had dropped to about 12 years, so about half of the population had been there 12 years or more, have devoted our lives. and then by 2010 that number has gone up again to a 16 years. >> host: francisca is watching us in the washington suburb and is calling on our foreign-born like it was your home originally? >> caller: [inaudible] i can safely say that 80% of all the latin american indian estates come from central america.

reason, foreign policy. some political problems in colombia. by some people don't go to sweden, they come here. they don't go to italy. they don't go to moscow. speak you can see the rest of this in the c-span video library. go to c-span.org. going live now back to capitol hill for a house subcommittee hearing on the proposed xl pipeline to be built from canada to texas. >> mr. booker was next. since mr. booker is not in pla place, and the fumes are already taking over, mr. barnett, do you mind if we start with you? so at this time, mr. barnett, if you would give us your statement. five minutes. go ahead. >> thank you, congressman gary.

good morning chairman, with you, members of subcommittee, my name is david barnett and other special purpose in which an association of plumbers and pipefitters trip is this more hundred 40,000 members in the united states and canada. i want to thank you for laying me to testify today. on a personal note i am a third generation 35 year member of the united association. i began my career 35 years ago on the trans-atlantic pipeline project alongside my father, pipelines is all it ever constructed, and i guess that's what brought me here today. united association is the leading trade union representing piping crescent and pipeline workers in the united states and canada. my home local unit, 798 based in tulsa, oklahoma, is a nationwide local pipelines. which would comprise the largest single craft working on the keystone xo project. as an organization united association invest over

$200 million in training to assure that our pipeline and other members of the best trained and most highly skilled our industry has to offer. the united association strong support the keystone xl pipeline for several good reasons. keystone xl is a project the reference billions of dollars in capital investment in hundreds of mint in tax revenue and approximate 13,000 construction jobs. i cannot emphasize enough how important these jobs are. the construction issue has wrestled with unemployed as high as 27% over the last two years. during this time we've seen countless working families lose their livelihoods, their homes, and in some cases their hope of building a better life. these are not just jobs we're talking about today. they are american families. one of the best parts about this project is that it is funded entirely with private sector dollars. which means that all of these benefits come at zero cost to the taxpayer. accordingly, according to the department of energy energy

information administration, oil and natural gas will be needed to meet over half of our energies needs through at least 2035. for this reason it is critical for us to secure a reliable long-term supply of crude oil. standing in the way of this objective, however, are significant supply-side challenges including middle east instability in key oil-producing regions. as well as substantial growth in worldwide and into a large part to emerging economies like china and india. keystone xl will help us overcome these challenges. our friends in canada commit a third part is our reserves and will and already provide us with more oil than any other country. with keystone will be able to get more of our oil from canada and less in places like the middle east which i think is good for america. a variety of claims have been made about the vibrant impact of the keystone xo. the fact of the matter is that the keystone xl project has been subjected to the most extensive review of any pipeline project in recent memory.

including a careful review by the state department which concluded that it would have no significant impact on the environment. canada's oil sands are going to be developed whether we build this pipeline or not. in fact, it appears that transcanada's next best option would be a pipeline west to serve china. it's hard to set the and private is better off with the oil from canada being processed by china rather than the u.s. as noted the members are united associate professor with a highly trained and qualified pipeline workforces in the world. in addition what type lines are the most of i'm is a safe method for transporting petroleum products, transcanada has pledged the keystone xl the safest of all pipe lines in america. by using function resistant steel, coding python with a corrosion resistant shell, bearing a deeper under the ground and installing 24 outsmarting systems and yes, signing the agreement with the best workforce in the world.

let me make one additional point in closing. there are pipelines in the u.s. that we should be concerned about. across the country are thousands of miles of 50 and 100 years old oil and gas pipelines that are well beyond their useful life. we have seen increasing numbers of these pipelines explode or burst causing senseless deaths and jeopardizing public health. one example, the kalamazoo river, an older pipeline that should've been replaced sometime ago. ..

>> you have five minutes, thank you. yes, turn on your microphone. >> i think that's right. good. on behalf of the half million members of labors international union in north america. i want to thank you and the members for holding ha hearing. this will move oil from deposits in canada to existing refineries in texas, oklahoma and u.s. our union has been involved in this project for three years. we believe the benefits of this pipeline are too many to allowed it to be derailed by environmental extremists. keystone xl will create good paying jobs in the united states and canada. it will increase the nation's energy security by providing a reliability of source of crude oil from a beneficial trading partner. and help provide the needed services to public. for many members of labor this is not just a pipeline it is in fact a lifeline. as you may know the construction sector has been particularly hard hit by the economic recession. unemployment in construction is far higher than any

industry sector with over 1.1 million construction workers currently without a job in the united states. too many hard-working americans are out of work and the key stone xl pipeline will change that dire situation for thousands of them. no one can argue this project will create thousands of good jobs for construction workers immediately and desperately mead massive private cap. transcanada executed a labor agreement will cover all the pipeline construction guaranteeing overwhelming majority of work is high road ememployment that allows workers to earn family supporting wages and benefits. it is clear additional jobs will created in extraction and refining of oil as well and in manufacturing and service sectors. economic experts may disagree to the scale of impacts there is no dispute the construction and maintenance much the keystone xl will have ripple effect of consumer spending that will have a positive impact on states and communities where the pipeline will be located there are many groups outside the construction

industry do not understand the positive impact that the keystone xl pipeline will have for workers. these groups have the unrealistic belief if project is not built the development ever oil sands will cease. over of evidence is overwhelming with or without the xl pipeline there will likely be no effect on production of oil from western canada. many groups resorted attacking nature of work members of unions chosen as career. they believe construction jobs are lesser value by very nature construction project as completion date and that job will come an end to the evently. they call the jobs temporary in order to diminish the importance. they recruit others to endorse a negative activity claiming the jobs have no real value in society. they should be ashamed of themselves. even in the terrible economic times most employees in the construction industry work full-time, many time over 40 hours a week. work weekends and holidays to finish a job. inchreem meant.

construction projects create work for people with many different talents and educational background. managers, clerical workers accountants, engineers and inspect force for instance. i would suggest to those that seek to dismiss the nature of work that my members are engaged in should think long and hard about people they seek to diminish before quickly dismissing nature turf their professions. construction of this pipeline will produce needed government revenue at the federal state and local revenues. these new resources can protect the local governments. they are also considerable environmental benefits with transport of oil via canada the excel pipeline. refineries will seek supplies of heavy crude oil. failure to secure crude oil from canada will force the facilities to continue oil supplied by foreign regimes where environmental regulations scarcely exist. the oil will be carried by oil tankers that employ low wage workers largely drawn from nations other than our

own. the keystone excel pipeline will be safest pipeline built in the world. the 57 conditions voluntary agreed to by transcanada have degree of safety any other domestically constructed pipeline system. 85% that spills from inland pipelines goes to containment around breakout tanks, rather than directly into surface waters. this minimize the environmental i am make compared to discharges or spills that occur at sea. if the keystone excel pipeline is not built they will seek producers alternative to american markets. think will fine ways to move oil to market. several projects are in plan and permitting phases to allow the valuable energy resource to shipment to china and other asian markets. denial of the presidential permit to the keystone increases likelihood american markets will miss the opportunity to secure long term commitments for north american resource which could be lost forever

to china and other asian competitors. without the canadian oil the nation will rely on unfriendly nations to meet our oil energy needs. keystone pipeline will allows you to develop safe and reliableable energy. just last week a poll prepared by rasmussen reports found that 60% of the likely u.s. voters at least somewhat in support of building the keystone xl and just 24% are opposed if the opponents of american jobs succeed in preventing keystone xl to be built second quarter yo economic benefits prove he can will not be realized there will be no additional income to property owners and business along the pipeline route. our nation will continue to import oil from unstable regimes to continue to undermine the well-being of our citizens critically important to our members job thats will be created by this massive private investment will be lost. thank you for inviting us to participate. >> thank you. >> thank you, mr. terry.

ranking member rush and members of the subcommittee. my name is jeffrey suth. i'm here on behalf of international union of operating engineers a trade union representing had00,000 men and women in the united states and canada -- 400,000. most of whom work in the construction industry. thousand of iuoe members who operate heavy equipment in the sector hope to build the keystone xl pipeline. oeu is profoundly disappointed by state department to decision to. the decision leaves in question the creation of thousands jobs for operating engineers and other workers. as i of iuoe president said in recent letter to secretary clinton because of unique authority the administration possessed to create jobs almost immediately, without congressional action or a dime of public investment this decision will reverberate throughout the membership of the operating engineers. we believe that the best way to analyze the project's

impacts particularly in light of the state department's recent decision is to consider what will happen without the keystone xl pipe line. that is to say what will happen if the state department's action kills the project. first without the keystone pipeline, the american crude oil from the bakken formation, the fastest growing oil field in the united states, will continue to move out of the region and the most dangerous, most expensive way possible. it will move by tanker truck. trucking is 87% most likely to result in fatality than a pipeline. trucks are 35 times more likely to result in a fire and or an explosion than a pipeline. the rapid growth in crude production in the bakken formation has outstripped the infrastructure to move it. today according to the state department's environmental review, 25,000 barrels per

day of bakken crude move to refinery by truck. the keystone xl as you heard earlier from mr. port will provide on-ramp for the crude in baker, montana, with contractual commitments to move 5,000 barrels at the start of operations for keystone xl and more expected later with the dramatic growth in bakken oil. without the keystone xl this american crude will be transported to refineries in ways that increase risks to the environment and to human health and safety. second, with or with out the keystone xl pipeline there will likely be no effect on production of oil sand from canada. the 30 point related to the second is that if the fiber-optic line is not built the united states may lose a chance to secure long term energy supply from our canadian allies. if the keystone xl pipeline is not built, canadian producers of oil stands will be forced to seek alternatives to american markets likely sending

dramatically more crude to china. for those who think asian options for canadian crude are speculative and unrealistic, i would just make three quick observations. first, the northern gateway project which would move oil sands to british columbia for export is one option to move the commodity to asia. kinder morgan also proposed to expand its transmountain pipeline to export oil sands to china. second, crude tankers are common at port of vancouver facilities. in fact, 71 tankers departed british columbia's west ridge terminal to deliver oil sands to refiners in 2010. kinder morgan proposed to quadruple those, the number of shims. third, state owned chinese oil companies have dramatically increased their presence in canadian oil sands. synepac gone to extraordinary lengths not

only offer equity investment in the northern gateway project but also offer technical assistance. even since the release of the final environmental impact statement an article in the globe and mail in september identified a second chinese state-owned oil company that is taken an indirect financial interest in the project. fourth, without the pipeline gulf coast refiners will continue to demand heavy crude with all of its attendant environmental, economic, and national security consequences, and finally, if the keystone xl pipeline is not built, the socioeconomic benefits of the project will not be realized. there will be no local, state or federal revenue. there will be no jobs created. that means there will be no employer contributions to the health and welfare funds of members of the operating engineer and other craft workers. there will be no contributions to pension and retirement funds for these workers. there will be no investments

in the future of the industry in apprenticeship and training in our labor management training programs for the pipeline sector. with the high rate of unemployment in construction currently at 14%, it is clear that many of these workers will remain jobless, relying on unemployment insurance and other public assistance. it is no wonder why, it is no wonder about why the state department concludes in the feis that the ski stone xl is preferable to no project at all. what makes one wonder why given that finding the administration postponed the decision until 2013. thank you, chairman whitfield and members of the committee for the opportunity to testify. >> thank you, mr. soth. mr. burton, you're recognized for five minutes. >> good morning, mr. terry. ranking member rush and members of the committee. my name is bruce burton. i am an international representative with the international brotherhood of

electrical workers. on behalf of the approximately 725,000 members of ibew i thank you for the opportunity to testify in support of the keystone xl pipeline from he can project. as an electrician who began his apprenticeship in 1981 i have distinct memories of my local union telling stories about their work on the trans-alaska pipeline. members of my local union located in michigan spent months working ons the trans-alaska pipeline which covers 800 miles and carries oil from the north slope of alaska to valdez, alaska. over the 3-year span of the project, approximately 70,000 jobs were created. to this day depending on the season, between 2000 and 4500 individuals remain employed on the trans-alaska pipeline today. ibew members from all across the united states were able to save their homes during the rough economic period of

the late 1970s because they were able to work on the trans-alaska pipeline. the ibew's primary concern in our nation's energy debate is jobs. like the transalaskan pipeline of 35 years ago, the keystone xl pipeline project would create jobs and help our members through this difficult economic period. in his letter to secretary of state hillary rodham clinton requesting a approval of the presidential permit necessary to build keystone, ibew president edwin hill wrote, and i quote, at a time when job creation should be the top priority, the keystone xl pipeline project will put americans back to work and have ripple effects throughout the economy. the shovel-ready pipeline will create 20,000 direct jobs and 118,000 indirect jobs. ibew members look forward to be part of this historic project and pledge to the deliver highest quality of work to make it a success,

end quote. our highly skilled, trained and licensed journeymen electricians linemen, apprentices and instrument control technicians would be working on keystone pump stations which will move oil through the 1700-mile long pipeline. the pump stations are to be located approximately 50 miles apart and built on small parcels of land approximately five to ten-acres each. each pump station contains between two to five pumps which are electrically driven, 6500 horsepower, high voltage motors. initially our members would be working on 15 pump stations with the potential for 15 more stations in the future. each station would require approximately 6,000 electrical labor hours to come pleat. in addition, many of the pump stations are to be built in remote locations. therefore new high-voltage transmission lines must be built in order to get electrical power to the stations. for example, in nebraska, a

new transmission line would need to be built that would be 74 miles long and carry 115,000 volts. this project within a project is valued at $49 million and will provide approximately 55,000 hours of labor for linemen. just like the benefits from the transalaskan pipeline the benefits from the keystone xl pipeline will not be localized. from pipe manufactured in arkansas, pump motors assembled in ohio, transformers built in pennsylvania, to the men and women who will actually work on the pipeline itself, workers from all over the united states would benefit from the project. the keystone xl pipeline would be built under a project labor agreement with the ibew, the labor international union of north america, the international brotherhood of teamsters, the united association of plumbers and pipe fitters, the international union of operating engineers, and the

pipeline contractors association. only the heightest skilled workers will be employed on the project. this will ensure the most well-built, safest pipeline possible. today the united states is experiencing the worst economic downturn since the great depression. the keystone xl pipeline is shovel-ready. as soon as presidentialal permit is granted jobs would be created. jobs that our country, jobs that our members desperately need. i thank you for your time and look forward to your questions. >> thank you, mr. burton. mr. ringo, you are recognized for five minutes. >> thank you very much. my name is jerome ringo and i'm the -- officer of [inaudible] >> would you do me a favor, sir. sorry to interrupt. will you pull your microphone a little closer to you? and is it on? >> is this better?

very good, thank you. thank you, mr. chairman. again my name is jerome ringo and i'm the chief business officer for bard holdings, an algae cultivation, harvesting and extraction project creating advance technologies as alternative energy and pharmaceutical resources. my thanks to the chairman, the ranking member and members of the committee for inviting me to speak today on this most important subject. i spent over 25 years working in the louisiana petrochemical industry as a member of the oil, chemical and atomic workers union both in construction and operations. i spent 13 years on the board of directors of the national wildlife federation where i became chairman of that five million member organization. and i also was the president of the apollo alliance, a 17 million member coalition on alternative energy, and currently with bard holdings. i would like to offer long term perspective on america's energy choices. understanding america's

growing appetite for energy our and our need for economic stimulation it is important that we meet this energy demand with smart choices that rush economy, that are for our economy and while minimizing adverse impact on the safety of the water, the air, the lands we depend on. in fact, american workers have proven again and again that we can create jobs by pursuing environmentally smart path forward. i clearly recognize the job impacts of construction projects. but sometimes the best intentions can deliver negative results. i agree with president obama. he got it right when he said we need to take the time to understand the impact of this project and not rush to build. the obviously destruction and contamination of northern canada, along with the safety challenges, health and environmental risks to the american people of such a pipeline is enormous. the environmental justice impacts on communities,

surrounding gulf refineries have never been adequately examined. and according to nasa scientist james hanson, are tar sands are game over scenario with respect to climate change. the keystone xl pipeline would transfer highly corrosive and toxic tar sands under high pressures along more than 2,000 miles, crossing waterways sensitive aquifers and jeopardizing the quality of lives of citizens along its routes. transcanada and the state of nebraska have agreed to move a small part of the keystone xl pipeline. i'm not as reassured however because i now wonder what part of america are now going to be willing to sacrifice the next spill of a magnitude? according to the state department's final environmental impact statement a spill from this pipeline could reach a worst-case scenario estimated to be 2.8 million gallons. if we pay attention to what is happening in michigan, we can see that the

consequences because it has happened. last year a similar pipeline spilled more than a million gallons of tar sand oil into michigan's kalamazoo river. the river is still closed today. it ruined drinking water, harming health and safety of nearby residents and killing wild life. the ipa recently announced it recovered more than 1.1 million gallons from the kalamazoo and there is no end in sight to cleanup because tar sands is more difficult to clean up than conventional oil. we have no idea how much oil is really spilled. as we continue our dependency on foreign oil with the goal to declare energy independence it is critical we not shift our dependency from middle east oil to canadian oil. our goal is not to switch seats on a sinking ship. the middle ground answer lies in creating jobs to meet america's energy demand while simultaneously improving the state of our environment and our economy. the answer lies in increasing investment in the

research and development of clean alternative energy products. this is win-win, win, on jobs, national security and the environment and that clean fuel strategy as well is real, powerful and underway right now. the new fuel economy standards recently enacted and proposed for cars and trucks together cut merge's need for oil by 3.4 million barrels per day. that is more than three times the proposed capacity of the keystone xl. put differently, that equals oil savings greater than the proposed xl pipeline, plus all the oil that is currently imported from the persian gulf. innovating to build more efficient and alternative fuel vehicles and underpinning the renaissance in auto and manufacturing sector that according to bureau of labor statistics has added more than 125,000 direct jobs in the auto industry. energy investment is a

long-term investment. we need to think long-term, mr. chairman. i urge congress to put long-term interests of the american people as a top priority and not rush to build the keystone pipeline. >> thank you, mr. ringo. >> thank you, mr. chair. >> thank you. representative terry. and members of the committee for asking me to big with you today on an issue that has captivated our state for several years. my name is jane fleming. i'm the head of an advocacy group called bold nebraska. hearings like today give us citizens an opportunity to not only thank you for your dedication to our country but also to ask for your help. president obama made a tough and right decision by asking for more time to study this pipeline. he stood up for our families, our landowners, our farmers, our ranchers who have been bullied by transcanada. i am asking you today to also stand with us as we figure out a path forward.

our broad coalition of individuals and groups speaking out against the pipeline have become much more than a group speaking out on an issue. we have become a family and we are doing everything we can to defend our land and our water. some will try to say because we passed two bills last month in our state that everything is fine in nebraska. i'm here to tell you everything is not fine. transcanada has yet to propose a new route that will avoid the sand hills and our pressure aquifer. landowners are still on pins and needles knowing that the easements that transcanada now owns for land can be sold to other oil pipeline companies today. we have not even started the new state process to study this pipeline and yet are being told by members of congress that we need to rush a decision within 30 to 60 days.

simply put, we are looking to you, our elected officials, and in each of our elected firms back at home to do right by landowners like randy and susan and to do right by small businesses like clear creek organic ins which rely on the clean and abundant source of water from the aquifer. these small businesses are ranchers and farmers produce jobs every day. tax revenue every day. as we as excellent cheese and meat. with the transcanada keystone xl pipeline it is all too easy to turn this into the all too familiar jobs versus the environment frame. we believe this pipeline represents more than one energy project and we think that it endangers much more than any amount of jobs that transcanada or their allies will claim it will produce. we've seen figures ranging from 3,000 to one million. in fact stephen colbert did a funny bit about all the

jobs that would be produced by this type pine. whatever the real figure is, and we still are wondering what that real figure is, i stand with president obama and nebraskans like randy who know we must figure out a way to create jobs while protecting our land and water. this pipeline is risky. it is massive. and we literally no long-term studies on how tar sands will affect our land, water, and health. several elected officials as well as made it clear in other hearings that we literally have no idea how tar sands will affect our land, our water and our health. and we are seeing that play out in the kalamazoo river where hundreds of families have had to have been displaced from their homes. they have had to move because of the tar sands spill that happened in their backyard. i am asking for your help to get a study done on tar sands, so it can be firm and

we can be clear and so industry can also have the answers and there will be very clear answers so we can find a path forward together. while the permit process may seem like it istook taking too long, we still have no proposed route in nebraska and again, we have no study on how tar sands affects us. additionally, if this oil is meant for the united states, then attach that to a bill. make it clear that this oil is guaranteed to the united states because right now there are no guaranties. we know that transcanada and other tar sands companies need to get to our ports, whether it is the gulf, whether it is maine, whether it is other ports, they want access it our ports in order to sell their commodity on the international market. and so, yes, this process has taken a long time. it's been over three years since transcanada has been

bullying our landowners. it has been three years since they have been threatening eminent domain when they have no permit for their project. it has been three years with our state being bombarded with misleading ads about job claims and tax revenue. next week we will be releasing a new report that shows that transcanada has overpromised how much they are paying our counties in nebraska. just because you create jobs does not give you the green light to take american land for your private gain. that is what transcanada is doing. six families right now in south dakota are in court with transcanada trying to protect their land. as a nation we are facing our next moon challenge. energy is our moon challenge. and when i look at my three little girls, i want to make sure that they know that i as their mom did everything i can to fight for sustainable energy, and i know each of you want to do that as well.

we want energy that is revitalizing our communities, not putting them at risk. and i know as americans that we can meet this challenge. we can do right by landowners. we can do right by workers. because we are americans and we can do this together. thank you. >> thank you. at this time we'll, i want to thank all of you for your testimony. very insightful. at this time to begin our questions i would yield to the gentleman from illinois. you are recognized for five minutes. >> thank you, mr. chairman. i appreciate the courtesy letting me go rapidly because i'm going to board a plane and that plane that actually, when i fly from st. louis, it is heavy crude from the canadian oil sands that is already piped down to my conocophillips refinery which is refined there and piped to the airfield. so many times the jet fuel that i'm using to come back

and forth is already established. you see in front of me the, really the works of jobs. already because of this. you know the oil sands is the third largest oil venue in the world. and you talk about north american energy security. this is what you talk about. you have kalator i've been up to the oil sands. these things are massive. they are five stories tall. the tires are one story tall. uaw teamster drivers. this is it. this is what the whole fight's about. oil sands, come see it after the hearing. we mine it. surface mining or get it in situ. this stuff is already coming into the country. going to my marathon refinery in robinson, illinois. good-paying, great benefits, members of organized labor, already benefiting. miss kleeb. how many pipelines go you there the aquifer right now?

>> actually only one crude oil pipeline. >> the question is how many pipelines. >> can i ask the question. the. >> the question is how many pipelines go through the aquifer. >> in the aquifer in the state of nebraska there is one crude oil pipeline. >> yes. >> and what is the other ones? >> there are no other -- >> there are plea pipelines go through the august which fer. >> i'm reclaiming my time. >> i live in nebraska. >> reclaiming my time. ma'am. >> that's final. . .

>> ruby pipeline el paso would be under 680 miles. we performed 2.1 million man-hours on a 680-mile pipeline which generated $24 trillion infringement of the the contributions for our donors. it's actually a 1700-mile pipeline. >> mr. barnett how many jobs you think this would produce? >> we expect this project to create over 1500 jobs for welders, pipefitters -- >> you talked about the trans-alaska pipeline. one thing that is not, you will try to highlight this. my father-in-law was a microwave technician. he moved to alaska for those jobs and that is the side benefits and mr. burton you are talking about the engines that are being built and the high transmission lines. at the same time that my father-in-law moved to alaska

for the high-paying jobs. mr. soth you have a job number for this project? >> are our contractors have shared with us their proprietary estimates for the number of hours that operate and perform on the project, in excess of 3 million hours or estimated from a number of those contractors. >> how much government money is going into this? anyone? >> not a dime. >> is this a show already project in your view? members of organized labor? >> yes. >> yes. >> which sector is the president going to mess over by making a decision? is he going to blow off his supporters in organized labor or is he going to blow off his friends on the environmental left after the election? does anyone have any idea? >> he has got to do one, right? he had there has to take the environmental left or take jobs.

outstanding labor and outstanding jobs and it is a great environment for me because sometimes members of the republican side aren't really considered to be total friends of organized labor and we get that and i do my best as many of you know, but this is not the fight. you want to help the president of the united states win re-election, this is the fight that he should have for jobs, 20,000 jobs. the last point i will make is, the biggest oil spill occurred where? prince william sound. how many gallons? not gallons, how many millions of gallons? 55 million talons of oil from a tanker, so don't come and preach to us about the spills from a pipeline in the biggest environmental damage that can occur is tankers traveling around the world and i yield back my time. thank you mr. chair.

>> thank you mr. shimkus now we recognize another gentleman from illinois, the ranking member mr. rush for five minutes. >> thank you very much mr. chairman and mr. chairman i know that this is an issue on jobs that is constantly being bandied about here and i am extremely sensitive to that issue of jobs and unemployment. in fact my district which is the first -- of illinois the unemployment rate is more than twice the national average and maybe closer to 15% for many of my constituents. i have multi-generation of unemployed people residing in my district. so, the concern about jobs is a concern that i have had for many, many years and one that i

face daily. in numerous hearings on the pipeline reauthorization, as well as private meetings in my office, i have asked many of the experts, those who are proponents of this and from the american petroleum institute to the association of -- to an individual industry representive allowed the participation of those minority-owned businesses and contractors in the pipeline industry and it seems like no one, absolutely no one can give me an answer. i am for jobs. i am for the environment but i am also for jobs for minorities and women owned businesses. i can't find one skin teleof

evidence -- scintilla of evidence that there are any minority-owned businesses and contractors in this entire industry, not one and i have asked until i'm literally blue in the face. the fact that none of the so-called experts can give me an estimate of the level of minorities involved in the construction and operation of pipelines in this country leads me to believe that the numbers are so small that they may be nonexistent. to address this issue and shared more light on it i want to include a comprehensive pipeline safety reauthorization bill that is currently being renegotiated or being negotiated. what i have all my union friends here and i must say some of them are friends and have supported me in the past, but i am really kind of disturbed and surprised

that some of the issues right now. that is why ask each one of you who are representing labor, can you speak to the committee level of participation of allowing contractors or businesses that are engaged in each of your respective organizations and can you give me that information within a few weeks? i want to know how many minority contractors, how many minority workers and how many minority businesses are associated with the pipeline industry? mr. pourbaix, can you answer that question? >> i don't have the figures in front of me. i would be happy to provide them. one, think what i could say, showing the support that we have

for minority businesses and business people and laborers is we have the full support of the hispanic chamber of commerce, the full support of the hispanic veterans association and i think that is just an example that we do have significant support among iron ore descend this country and perhaps some of the other gentleman from labor may be able to shed some further light on that. >> i don't have any specific information regarding the question you asked that we will be happy to forward to your office the conclusion of the hearing. >> we are happy to provide data particularly on our apprenticeship programs where we are systematically tracking the data and can provide you a good look at what we do for people of color and women and the operating engineers union. >> okay. mr. barnett? >> first of all i would like to say we are a membership organization and we are not contractor driven. we do not track that type of information. i can tell you that we have a

large number of minorities in our local union that we are very proud of and everyday they perform their work and those are the people that we go to bat for every day. >> i>> i i know my time is up bt again, it's a song i can't really dance to and i'm sort of disappointed and i think that is an issue that this committee, the subcommittee is going to have to address and for the members of the labor to come before me before the subcommittee, not have good information for me, i think that is atrocious and with that i yield back the balance of my time. >> thank you mr. rush. at this time we will recognize mr. mckinley. he also has transportation issues. you are recognized for five minutes. >> thank you mr. chairman. before we had this hearing i

went back to look at some of the things that were said in the press back in the 70s for the alaska pipeline. affair the criticism was the effects on the tundra, possible pollution, harm to animals, geographic features and the lack of engineering. then they went ahead and they built it, 800 miles long, 48 inches in diameter across three mountain chains, 30 rivers. it seems to have worked, so today, i am just curious, in the last 30 some years since the pipeline is put in the 70s, how much we have improved, and i have heard all of the scare tactics from the friends on the other side, that this is a very corrosive, difficult product to handle. but i think engineers over the years have developed ways of handling that. we can have ceramic line pipes.

we can do a lot of things. if we can type hcl, we sure as the dickens can pipe crude oil. so, i am just curious from the panel, from a construction background some of the improvements we have made. i assumed that now 30 years later we didn't have x. 80 tip steel. we now use that. sum of the welding techniques that we have learned about over the years that have developed from our friends in the construction industry with a low hydrogen electrodes that we are using. i assume, can you amplify a little bit about some of the improvements that have happened over the last 30 some years in construction and why we should have a greater comfort level? >> yeah him i would be happy to. if you take a look of pipelines the majority of pipeline incidents come from really two areas. they come from corrosion of the

pipeline and they come from third-party strikes, sort of whether it is a backhoe or some third-party agency acting on the pipe and since the alaska pipeline was built, let's talk about corrosion for example. today, all new pipelines are built of much longer steel. you mentioned x. 80 steel that is far stronger and more puncture resistant. on the corrosion site every pipeline built has methodically protection which is running an electrical current through the pipe to inhibit corrosion and on top of that every joint of the pipe that we will build is coded with fusion bond epoxy coating and when you combine cathodic protection with -- you would expect 50 years and now you would take those joints of pipe out of the ground and they would have no evidence whatsoever of corrosion so that is how far the industry has come upon corrosion. on line strikes, as i said, we are using stronger steel. one of the 57 special conditions

which we voluntarily agreed to with this pipeline is that instead of burying the pipe three feet under the surface, we are airing it for feet under the service which should largely remove that risk and on top of that we have accepted an up addition to continue to maintain that depth of cover over the entire pipeline over the entire time it is operational. and then finally when it comes to leak detection, you heard other people talk about that today. we have 21,000 sensors on this pipeline. they are regenerating data every five seconds. if there is a drop of pressure we will know immediately in the pipeline will be shut down automatically in literally minutes and at that point, you have a cleanup situation. >> what is the ratio, what was that like on this leak detectors on the alaska pipeline? >> i don't know the exact amount but it certainly would be -- >> we have multiple redundant

leak detection. >> there was a -- by the national chief of the danny nation if i'm pronouncing it properly and he made some very good points, some excellent points. one had to do with tailing ponds in years ago back in the 70s, they weren't using dpd on liners. they were using clay liners primarily with it, so our construction knowledge has expanded so much over those 30 years, so are you expecting, you going to be using liners for your tailings? >> we don't produce any oil ourselves. we just move it, but what i would say, a good number to think about that is going forward, approximately 70 to 75% of all future oil development in the oil sands are excellent going to be done through in situ drilling with wellbores and those projects do not even

require tailings ponds. >> are welding techniques have improved. we are now using port 10 steel on areas that we didn't have available 30 years ago, so technology has moved so back 30 or 40 years ago i don't understand unless there is another agenda here, and that is a little bit more sinister about why we are not allowing this to progress and putting our people back to work. i think the technology is fine. it's the other, the political side of it is where we are hung up right now. >> representative can i just follow-up? >> your time has expired. at this time, i recognize the full committee ranking member, mr. waxman. >> thank you mr. chairman. for those who may be viewing this hearing, i think they would be struck, sim, that the only way republicans can deal with

the fact that some people have some questions about the pipeline is that it's a conspiracy. there is some are some hidden agenda. it's all politics. one of the republicans who asked the question said who is president obama going to choose? environmentalists or the labor unions? they only think in these terms and i want to make this a political issue. the question of the decision to go ahead with this pipeline is a serious one and i think we need to fully understand the implications of approving energy infrastructure that is going to last for decades. i wouldn't make light of that just because the republicans want to use this hearing for their own political purposes. i think it's appropriate for the president of the united states to review this matter. i think it's appropriate for the government agencies and people in the state of nebraska to review this issue. the republicans put a bill forward that is arctic and put through the house saying we should decide this issue in a shorter period of time and

decided favorably for the alaska pipeline. they don't really want to know the truth. they just want the pipeline. and my friend who just asked questions on the republican side talked about how there must be this hidden agenda because it is perfectly safe. we do already have one keystone pipeline and it is certainly a lot later in time than the alaska pipeline because it is fitted within a year. and this last year of operation, showed that there were a dozen spills. some of these bills so that it was shut down temporarily. let me go to the question that has bothered me the most and what this impact will be from the pipeline if we see it go forward on the climate problem that we are seeing in this country and all around the world. republicans don't even believe in such a thing.

they deny the science and when they hear scientist talk about it they think it's a hidden agenda, so they can't take another point of view seriously because they are so convinced that they are right all the time. the decision is an important one. it will short-circuit the process. ms. kleeb your neighbors have been fighting for the environmental impacts of this pipeline. do these nebraska law satisfy your concerns with nebraska's laws? >> they are definitely a step in the right direction and i will say the only reason that we have those bills is because citizens and landowners raise hell for two solid years at our state capital to make sure that those bills got past. we still don't have a study on tar sands and i hope that representative kerry blade introduced that on the behalf of nebraskans to make sure any tar sands pipeline that does get approved, that we make sure that

is safe. we don't know how tar sands -- >> the original pipeline route was fine and he was for this project? >> that's right. >> he thinks it's important, jobs, jobs, jobs but this is a lot different than the alaska pipeline because the alaska pipeline was taking oil and taking it through very unpopulated areas. this is a different kind of pipeline because it is going to take the dirtiest source of oil available and it's going to drive a significant increase in carbon pollution. what was your concern about the original route? i guess the original route is not going to happen now. that's not because of transcanada but because of nebraska. what did you consider about the good original route? >> we have no pipeline across this sandhills currently. >> and the sandhills is where the aquifer is? >> the sandhills having a unique relationship with the aquifer.

tiberi intricate ecosystem. it obviously provides water for the backbone of our state's economy and the detection system quite frankly of transcanada's first pipeline we know is not a very good one since a landowner in north dakota had to be their detection system. their sensors did not work in that scenario. >> we are making estimates based on a long period of time. in fact, job estimates assuming this whole thing will operate for 100 years. that is essentially an oil addiction. you'd be locking in higher carbon pollution for 100 years and we can't afford to keep tilting dirty energy infrastructure that is going to last decades. the iaea, the national energy agency said in five years we are going to have to make a significant move towards clean energy to avoid an 11-degree

increase in global temperature. i don't know if that is democratic or republican but i think it is a perfectly important legitimate concern and shouldn't be dismissed by the republicans because they want to wonder whether obama's trying to satisfy one interest group or another. so i just raise these issues and i think this is an issue that is worthy of our serious consideration by all of the appropriate -- and i yield back my time. >> thank you mr. waxman. mr. -- ms. kleeb this committee passed a pipeline safety bill and a request for a study was part of that. i voted for it. mr. pourbaix, on behalf -- you are the representative from transcanada pipeline and the company builds pipelines, right? >> yes. >> if they pipeline was not

built, would oilsands from alberto still come into the united states to be refined and if so, how would it be transported? >> there is some capacity left on existing pipelines that cross the border and those pipelines can get probably a few hundred thousand barrels, incremental oil come into the chicago area. the problem is that there are no pipelines that are in place that can take that oil from chicago to where it is needed, which is the gulf coast. so, yeah, the answer is more pipeline capacity is needed. >> is that the saver mode of transportation as opposed to by rail? >> it's interesting right now and a lot of people have mentioned the formation in north dakota and montana, and it is

rapidly growing in protection and is anticipated to be 800,000 barrels of day in the next five years. right now there were no pipeline options and all of that incremental production is being moved either by truck or by rail car and as you heard some of the other gentlemen speak about both of those, not only are they much more costly, they have several orders of magnitude more risk in terms of risk to the environment and human life. >> in regard to risk, has the risk of the keystone pipeline and why we are here today, has that been studied? >> well, we have environmental impact studies. >> a novice at this year the state department completed their close to 40 month environmental impact review. and that the conclusions of that study, it was the most comprehensive study of any oil pipeline in the history of the united states and came to the conclusion that this pipeline

would be the safest crude oil pipeline ever built and operated in the u.s.. >> so the route was dictated from the environmental study that was done? >> yes and that -- >> your ability to move would probably be restrained from the fact that that was the safest environmental round? >> that was the largest challenge we had in nebraska and until the state department came out with their most recent delay, they had come to the conclusion that the preferred route was the lowest environmental impact and it had to be voluntarily -- had we moved that radley would have created a significant uncertainty as to whether any road could be permanent because by definition would have a higher environmental -- >> that is why it was important that the state department be part of that effort to move it off the sandhills. what is the total investment into the keystone pipeline?

>> including the operating? >> you let's just -- parts, steel and construction costs. >> so we right now are $2 billion into this project. by the end of next year we will be close to 3 billion. the total project cost would be approximately $7 billion. >> $7 billion out of the $7 billion how much would be construction job-related? >> 4.5, $5 billion. >> $4.525 billion going towards worker salaries? >> yes. >> mr. booker have you estimated how many manhours your union would dedicate to this pipeline? >> the roof estimates were well over 3 million man-hours compared to similar projects,

ruby pipeline 680 miles, 2.1 million man-hours on that project. >> let me interrupt because i only have 37 seconds left. do you have an estimate of how many manhours you would supply? >> we have been proving contractor estimates of over 3 million. >> you mentioned that earlier. mr. barnett? >> approximately 2.5 to 3 million man-hours. >> mr. burton? can you hear me? we are probably on the low side. i did some quick math telling up the numbers i talked about in we were around 64,000. we are probably the lowest rate. >> and my five seconds, mr. ringo i want to say i support the research and development and algae and the university of nebraska, and help them get grants do research. i hope you are very successful in your operations. actually have a bill, two, to

allow biofuels under current law. the loan program can only go to gas and oil pipelines and i have a bill. would you agree -- how would you feel about a bill that would allow pipelines to carry biofuels like those made from lg? >> well i think it's important that we first have to give consideration to whether that will have an impact of building any type of pipeline. >> fair answer. at this time i think it is mr. angle, the gentleman from new york is recognized for five minutes. >> thank you mr. chairman and thanks to all the panels were here today. i would really like to encourage my colleagues on the other side of the aisle to organize a bipartisan hearing on jobs related to the fastest growing

energy sector and that is clean energy and renewables. clean energy is creating good jobs all across america and it is most often not accompanied by the harmful impact to, impacts to the water that we drink and rely upon and i think americans are crying out for jobs tied to this growing clean energy sector. in fact the international energy agency recently reported and confirmed what we are all feeling and what we know, that the fastest growing sector is in clean energy. the clean energy sector is now providing one fifth of all electricity global, one fifth of

all electricity worldwide and it is growing. this is where the emphasis in national policymaking should be placed now. think about the divergent views here on the impact. when you talk about clean energy into something that brings us all together. it creates jobs in communities that need those jobs, provides a great shot in the arm for utility companies and others but it safeguards community health. i think one of the reasons it is important to keep those pipelines, to continue to undergo review, is that there are a lot of unanswered questions and there are a lot of serious concerns that have been raised. carbon pollution, clean water impacts and safety concerns. right now we know that extracting tar sands and upgrading it to synthetic crude oil produces roughly three times

greater greenhouse gas emissions and carbon pollution. can we do something about that? do we need to put all of our emphasis on an energy source that is going to aggravate the carbon pollution problem facing our country and the globe? water quality, the testimony we are hearing today is folks are very concerned about the quality of the clean water that they rely on and the safety concerns are really raising a lot of red flags mainly because of the risks that have been uncovered over the past years. michigan, 800,000 gallons, outside chicago a 250,000-gallon spill, 1.3 million-gallon spill in alberta tar sands and on may 7, the keystone tar sands pipeline provided another warning when it spilled 21,000 gallons of crude in north

dakota. that was its 11th and most significant spill so you can see there are a lot of concerns that i think require the administration to continue an all-out review of the impact. on safety, of course one of the major concerns is the transporting of the -- through the middle of the united states. many are concerned that the substance is more corrosive than conventional oil and may pose a greater threat to pipeline deterioration. in the head of the federal pipeline safety agency testified before this committee she said that the agency hadn't get studied whether this tar sands oil post any threats to the pipeline. another question is whether the tar sands oil is more difficult to clean up after a blowout. last year, say mentioned there was a major tar sands oil blowout in the kalamazoo river in michigan and i understand

that this heavy oil sinks to the bottom of the river and it may have made it more difficult to clean up. ms. kleeb you have reviewed a lot of these concerns and you have raised issues of safety. can you describe the safety concerns you have heard throughout the communities in nebraska about the tar sands oil and how do those concerns relate to the proposed route? >> yeah am absolutely. i was born in florida so i appreciate you being on this committee and asking me that question. you know, landowners, ranchers and farmers have a lot of concerns about how the tar sands, this bill happens, they have organic certification for example, the organic certification will go away as soon as there is a tar sands bill on their land because that simply does not go away. the organic certification. i personally met families who have been affected by the kalamazoo tar sands bill. they they're not only facing

from the minor if you will headaches and bloody noses. people are having seizures and are seriously injured from the tar sands bill that happened in michigan and 150 families had to be displaced from their homes because of that oil spill. so these are valid concerns and i think if the tar sands industry and transcanada are confident in their product, they will not mind additional scrutiny and additional studies that we need to do here in the united states. there are two assumptions that are being made. one, the tar sands is safe in two, that this oil is going to be used for united states consumption. those two assumptions do not have and are not backed up by fact and that is what we are asking for. landowners, ranchers, moms are all asking for facts. >> the gentlelady's time is one minute over. thank you. mr. burgess for five minutes.

>> thank you mr. chairman and i'm not going to do justice to your name --. >> pourbaix. >> pourbaix and i apologize if you answered this before and i missed it. what is the capacity of the pipeline in question to deliver a boil, capacity of barrels per day? >> it is around 830,000 barrels a day. >> the that is a fairly substantial amount. how does that compare with other pipelines? >> it is not, it is not different from other large-scale oil pipelines in the u.s.. there are lots of pipelines in that range of 500,000 to 1 million barrels a day. >> the for point of comparison what does the alaska pipeline deliver? >> i'm trying to thing. the alaska pipeline is 42 inches and it is significantly over a million barrels a day. >> the this is a significant contribution to america's energy

needs. >> absolutely. >> energy that is being used in america. mr. ringo it's fascinating to hear your testimony and i'm certainly interested in what can be done with using algae as a source, as a petroleum stock. where's your plant currently? >> we have opened plants in calhoun, georgia and we are about to open a plant in augusta, georgia. we have plans on the drawing board to open a plant in michigan, california and i am in talks with your home state of texas. >> give us an idea of how scalable is this production? for example how many barrels a day can be delivered in one of your plans that is up and running and mature? >> it is scalable based on demand. our process without giving away our trade secret here, the

scalable amount that we can increase our production based on demand, and we have the extraction process in place that we can extract the oil and deliver as a viable fuel feedstock or in the pharmaceutical industry for the omega three's person in the product. >> do you see a point where one of these plants could produce 100,000 barrels a day? >> absolutely. >> how does it go from there to where you need it used? >> normally you can build the plant on site where you have a biofuels plan. you can build an algae manufacturing facility at the plant. but you also can move it out there like others by either pipeline or truck which you definitely would have to do the studies to make sure that in any product that there won't be any adverse impact on communities and on people in the environment in transfer of the products.

>> your company is bard holdings, is that correct? it is privately held? >> a brand-new company. >> the ability for us for example to see the financials -- is that possible? >> not as of yet but soon. >> where's your primary financing come from? >> not from the government. its private funding. >> it was interesting to hit the comments about we have to have hearings on clean energy. we are having a lot of hearings on solar energy and not news -- meant good news necessarily for the solar and she folks i'm glad you are doing this on your own and you have had people that have invested, venture capitalists and put their own money at risk and they believe in the marketability of this project. that is the american story and that is the american way and i am happy to see that happen. mr. barnett, you talked about

transporting fuels overland if you don't have a pipeline. you put it in a truck. >> i think that was mr. soth. >> but i did understand that correctly? we just testified there is an inherent risk to overland transport of petroleum products? >> that's right. the environmental review for keystone xl excel suggested fatalities or 87 times more likely with tanker truck as compared to pipeline and i believe it was 37 times more likely to cause a fire and/or explosion in a pipeline. >> my congressional district in north texas, interstate 35, 35e and 35w run right through the to the heart of my district. probably three years ago we had a tanker truck that jackknifed and buckled and hit the concrete wall in the middle of the freeway, caught on fire and loss

of life. impressive that there were so many people that were suddenly immobile once they got into that mess. they couldn't get out and it was extremely disruptive for a period of days as well as a traffic jam. this went on for a long time. so i can see getting the software freeways. there is a reasonable approach and i'm ahead you chaired -- shared that with us today. >> the gentleman's time is expired and at this time another gentleman from texas, mr. green. >> after both of us you will get used to our texas accident. at a number of questions and i know i'm out of time, but my first one, i want to ask mr. barnett. i know there is testimony and a project labor agreement on the pipeline. does that project labor agreement cover the whole part of the pipeline literally from where it ends in the district i

represent up through oklahoma into canada? >> at the present time the project labor agreement covers approximately 90% of the work. there is a -- we are trying to get their bretton woods transcanada. >> i've met with folks in canada and i hope that would be dealt with because if we have grave projects up north that i would sure like my folks to build to be covered by. >> if we are going to sell the skill and craftsmanship on one of the pipeline we need to develop at all the way through. >> okay, i agree. mr. ringo i appreciate you being here and i appreciate your work for your 25 years in the petrochemical industry. you heard earlier i represent a lot of what used to be oca w. but they are all steelworkers now. used to have steel plant but now they are already primary workers and chemical plant workers. i know you have been on the board of the national wildlife federation and the apollo alliance and bard holdings and i

appreciate what you are doing with the investment because i know some companies in houston actually are doing investment in algae and in louisiana and other locations and that may be something we can do many years from now. but we have her testimony today from a number of folks about the safety issue and right now, like north dakota, they have a attract out, all the crude oil they produce in north dakota because there is no pipeline. is there a national wildlife federation, or the apollo alliance have they ever done anything for safety and tanker cars on the rail or in trucking as compared to the pipeline? we have heard you are 87 times likely to have an accident if you truck it out and i don't know what it is for railcars, but i know from everything i've learned all these years is it is so much safer to be on a pipeline then it is either on a tanker truck on the road or even a tank car on a train. do you know -- because it's not

the first time we have gone over sensitive wetlands wetlands for example. >> i think during my time as leaders of these organizations our focus was to consider other alternative energy solutions that a tank truck or a pipeline was not an issue. when you are talking about extracting oil from algae, when you are talking about growing biofuel products come when you are talking about electric cars and energy-efficient vehicles, you do not face the possibilities of an environmental impact. >> i agree and i only have five minutes but i also understand you know that i was so hopeful because the gm of the chevy volt, obviously we have problems with that but every source of energy is going to have a problem. right now though no matter who is in charge of the department of energy for the next 30 years it will be on hydrocarbons and of course i am prejudiced because i have lots of refiners and chemical plants and we also

have a downstream. so, every energy -- you don't disagree with the testimony that sending it by truck or rail is much more dangerous than pipeline? >> with that mr. green, yes and i do agree with that. there are challenges. >> i only have a minute and a half now and i don't know publica the second round because we keep losing members. mr. pourbaix, i apologize coming from texas, my friends in louisiana are used to your -- but i was disappointed in the decision by the administration. particularly since i represent those refineries. my question is, and it may be speculative, but i know there's a contract signed on 2014 deliveries. are those contracts flexible and that if we delayed it like the president said until 2013, i don't see how you could ever deliver those contracts in 2014.

>> obviously our shippers who were particularly, those refiners that are in your district, the reason they signed those contracts is because they are traditional sources of heavy crude and their contracts are expiring in 2014. that is their primary reason why they signed up with transcanada. we have spoken to all of our shippers. i think it is fair to say they were deeply disappointed by the decision to delay. >> okay so you can't make those contracts in 2014? >> we are working with them in order to have them stay with it. >> mr. chairman i know i'm out of time but i have those five refiners. they require 1 million barrels of oil a day. >> that's correct. >> one contract in venezuela ran out, a large refinery i had months ago so they are buying it on the open market and literally from the mississippi river down to corpus christi texas is where we refined a lot of our product

and we need that pipelines the thank you mr. chairman. >> thank you mr. green. now the gentleman from new york, mr. engel is recognized for five minutes. >> thank you mr. chairman. i am probably one of the few members of this subcommittee that is really in the middle on this so i've been listening to the testimony and on the one hand i am concerned about the environmental impact. i think mr. waxman made an excellent point, and i think we need to be concerned about that. on the other hand, we cannot just say no to everything, so i for one opposed to drilling in alaska because i thought it was from a environmental point of view, but we can't just keep saying no to everything and then complain that gasoline is $4 a gallon and we are beholden to hugo chavez and the saudi royal family.

i think we have to have a little bit of a balance. i was disappointed in the administration's pushing back of this deadline because i think it's time to make a move one way or the other. we all know what the issues are and we can make a decision. i just think delaying it doesn't benefit anybody. now i am for renewables. i think it's important to have clean energy and sustainable energy but i frankly don't think we can move from step one to step 10 overnight. i don't think it's a matter of you know, moving to sustainability, clean energy and turning off hydrocarbon at the same time. there has to be a transition. one of the reasons why i have fought for legislation to have renewable fuel standards for all cars made in america. i think that we should have them

built so they can run on ethanol, methanol and gasoline as is the case in brazil and which we would be able to do it with $100 or less per car cost to manufacture these cars. i don't think it is a black-and-white situation that is why i'm open-minded to this. my concerns are in environmental. i understand the unions want jobs and i am very for you and i support their wanted jobs, but i think that we need to make sure that the m. bar mental impact on this is something that is not going to be negative. i wonder if anyone on the panel would like to say, ms. kleeb in her testimony said that we ought to put into legislation that the oil is guaranteed to be used in the u.s.. is there anyone on the panel who can tell me why that can't be

done? yes, mr. pourbaix. >> i would be happy to take a shot at that. right off the bat you have to recognize that the u.s., the u.s. produces about 5 million barrels of oil a day and consumes about 20 million barrels a day of refined products. the u.s. is by far the largest consumer of refined products on the planet, so i think it is natural that the vast majority of this product will stay in the region with the highest demand. i would make 1.. the u.s. has a preponderance of need for gasoline to move motor vehicles, and anytime you take a barrel of oil it were produces certain portion of gasoline and a certain proportion of diesel. when you see exports of refined products coming from the u.s., and is largely moving away excess diesel while the u.s.

continues to import what they need more of, which is gasoline. i think if you were to artificially set requirements that would prevent that, you would just prevent the most reasonable allocation of that product. >> thank you. i want to hear from ms. kleeb who raised some environmental issues particularly with nebraska, an opportunity to perhaps review some of the things that you have heard. >> yeah, so essentially the answer is no. as transcanada just told us know, they will not made that commitment. the oil is going to be used by americans. and so we are assuming all of the risk right through the to the heart of our country and not getting any of the rewards of energy. and quite frankly i don't think that's right and i don't think americans when they hear the think that's right either. and we do know that the refineries, that they do have contracts with come are, or ones that are retrofitting their refineries in order to export their diesel that is what he is

talking about. that is an export pipeline. this is about transcanada having oil that they need to get on the market. >> thank you. icy my time is up mr. chairman. >> thank you mr. engel. at this time the gentleman from massachusetts mr. marquis is recognized at this time. >> thank you mr. chairman very much. mr. pourbaix you told us repeatedly that the oil coming through this pipeline would enable us to reduce our dependence on imported oil. in fact transcanada's application for it permit purse -- serve the national interest of the united states by providing a secure and liable source of canadian crude to meet the growing demand by refineries and markets in the united states and in your testimony you post what you said was the key question. do americans want secure, stable

oil from a friendly neighbor in canada or do they want to continue importing high-priced oil from unfriendly regions such as the middle east or venezuela? however, some of question these assertions of energy security benefits siting plants by gulf coast refineries with him transcanada has entered into long-term sales contracts to reexport diesel and other refined products made from the keystone crude to latin america, europe and beyond. in other words, if this pipeline is approved, the united states may just be the middleman for shipping products, some of the dirtiest crude oil on earth to markets around the world. in fact nearly all of the refineries with the keystone crude will be sent, located in port arthur texas which is a designated foreign trade zone. this being said, these

refineries, we export diesel or other refined products they wouldn't even have to pay u.s. taxes on those exports. so, mr. pourbaix would transcanada support legislation that ensures that the product can only move forward if the diesel or other refined fuels from the pipeline are only sold in the united states so that this country realizes all of the energy security benefits your companies and others have promised it would bring to back up that oil from venezuela or from the middle east from the united states of america? >> would you commit to not having that oil sold outside of the united states? >> as i said earlier, transcanada does not produce one barrel of oil.

our entire business is safely transporting that oil. that would be a question that i think would be better put to our shippers or largely refiners and producers and largely american companies. >> would you agree to put a prohibition on the export into your contracts with these refineries to ensure that this export does not occur? you have the power to do that. then to make that illegal part of the agreement and then that would make all of us feel a lot better. would you be willing to commit to making that a petition of being able to use the pipeline and? >> for concern we are talking about is energy security for the u.s.. >> that's right. >> fee if the u.s. government were to put that kind of a criteria on the approval of the pipeline, what i would argue that would actually reduce the energy security benefits to the u.s. because as i said, the u.s. is by far the world's largest

consumer of refined product. >> i don't understand why that would reduce security. what you are saying and you are willing to contractually admit to keeping the oil here. so it's only a redundancy at that point. will you commit to the redundancy of having it he put on paper is a condition? and because you are saying is going to happen anyway, if that's what you are saying, what's your problem with agreeing with that is way it's going to be? we you commit to agree to put on paper what you say is going to happen in terms of keeping the oil here? >> as i said before, in order to get enough refined products needed for the u.s., the refineries produce from time to time more diesel than they used and they tend to export their diesel to europe and and and import incremental volumes of refined product. >> but we do agree that there would be no net difference. the total amount of oil that is transported through the pipeline then has to have an exact

corresponding amount that is imported and any other form in order to make sure that the amount stays exactly the same so that our energy security and the united states, backing up this oil from the middle east, is in fact achieving this goal? would you commit to that? >> once again, i in many ways, i can't do that because i merely the shipper of this oil. >> i want you to make it a condition of shipping if that is your deal with these people. can he do that? >> no, can't do that. we party agree to our shipping arrangements. >> then you can see why i'm very skeptical in and the american people are very skeptical. this'll be a conduit and you say oh our conditions have changed and there is nothing in the free market that stops us. meanwhile all of these environmental concerns have now been overridden. you can see why we are a little bit skeptical. we just want a little guarantee that we do get the national security benefit permit in a

corporation isn't allowed because they are not legally bound to then skirt that commitment. i have very serious reservations about this company and its commitment. its conflicted meeting the national security objectives. >> thank the gentleman. your time is expired and there is no one left to ask questions. a prearranged agreement is on a getaway day we are going to have a second round of questions. so i want to thank all of you for your time and effort in coming to this hearing and you have been very helpful in the process. that means all of you. thank you. >> thank you. [inaudible conversations]

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[inaudible conversations] join us this weekend when our program newsmakers welcomes white house national economic council director gene sperling. he'll talk about how the obama constriction was to boost the economy and tackle the deficit following the joint deficit reduction committee's failure to agree on debt reduction. >> within 90 days of my inauguration, every american soldier and every american prisoner will be out of this jungle and out of their cells and back home in america.

>> george mcgovern's pledge in the 1972 democratic convention came nearly a decade after being one of the first senators to speak out publicly against the vietnam war. the senator from south dakota suffered a landslide defeat that year to president nixon but his groundbreaking campaign changed american politics and the democratic party. george mcgovern is featured this week on c-span's the contenders from the mcgovern center for leadership in mitchell, south dakota, live tonight at 8:00 eastern. ..

>> senators kirsten gillibrand and scott brown say they were both surprised to learn there

are no official loss against congressional members engaging in insider trading. in a hearing before the homeland security and governmental affairs committee on thursday, the senators each outlined their versions of the stop trading on congressional knowledge act, also known as stock. both acts would present representatives, senators and staff from buying or selling stocks and bonds based on previous congressional information. this hearing is about two hours. >> this for some reason, this is the first time in my memory that i have a right earlier than senator collins. there she has. [laughter] >> you still hold the record for punctuality. the hearing will come to order. good afternoon. a recent book by peter schweitzer, end of story on that book are based on it, on 60 minutes have raised very cities question of whether members of congress have been using insider

information to make investments that enable them to make money they could not have made if they were not members of congress. the members of congress who have been specifically accused have denied the allegations. our purpose here this afternoon is not to determine the guilt or innocence of individual cases. our purpose is to determine whether the existing law is sufficient to prevent and punish congressional insider trading. perceptions are very important in public service. that means that if the law seems to allow members of congress to take advantage of their public position for personal gain, the trust that needs to exist between the american people and our government will be further eroded than it already is. so, what is the state of the law

governing insider trading by members of congress. no, it will surprise most people to learn that there is no explicit prohibition in our laws against insider trading by anyone, including members of congress. that is to say, the term insider trading is not mentioned or defined in statute. all the investigation and prosecutions of insider trading over the years by procedures and exchange commission or the department of justice have been carried out pursuant to the product anti-fraud provisions of the securities exchange act of 1934, which makes it in section 10 b., unlawful, and ago, to use employee in connection with the purchase of sale of any security any money to live or deceptive device or contrivance in contravention of such rules but this is like it was written not in 1934 but in 1734. and regulations as the

commission may prescribe as necessary or appropriate in the public interest for the protection of investors, end of quote. the specific rules making insider trading illegal are found in a large body of sec regulatory activities pursuant to section 10-b, that brought anti-fraud statute i just read. and court decisions interpreting those activities. the rules against insider trading now clearly encompass, not just corporate insiders, but others who have bought and sold securities based on material, nonpublic information they obtained and used in violation of a duty of trust. now, i gather that some have said that congress has exempted itself from these insider trading rules, but that is not true. in fact, any statements a bid to our committee for the record, for this hearing, the director of enforcement at the security

and exchange commission makes clear that the commission has authority to prosecute such wrongful conduct, declaring and i quote, trading by congressional members, or their staff, is not exempt from the federal securities laws, including the insider trading prohibitions, end quote. this afternoon we're going hear testimony that a member of congress, or congressional staffer who buys or sells stocks based on inside information they obtain as a result of their job, not only violates congressional ethics rules, but violates the securities laws as well. on the other end were going to your testimony that the law is not as clear as it needs to be. and that congress should specifically proscribed congressional insider trading. i'm with the second school of thought. in my opinion, whether or not there is currently clear and

conclusive evidence that members of congress or staff members have benefited financially from insider information from and what not the sec believes it can act against members of congress for insider trading under its existing authority, there ought to be a law that explicitly deters such unethical illegal behavior by members of congress, and punishes it when it happens. our goal today is to sort out the facts and determine precisely what legal reforms are needed to ensure that regulators and law enforcers have the tools they need to bring to justice numbers of congress and our staffs who defy the public trust by using insider information for personal gain. our first witnesses today who we'll call on a short while will be senators kirsten gillibrand of new york and senator scott brown of massachusetts, a member, a valued member of this committee.

both of whom who have taken the lead in introducing legislation to deal with this problem. and that legislation has been referred to our committee which is why we are convening this hearing today. the point that we're focused on today is narrow. but it touches on much broader values in realities. the fact is that the american people's faith in elected representative is the cornerstone around which our democratic republic was built. when that faith adds, as it now has, to historic lows, we must increase our efforts to ensure that the people who did us the honor of sending us to washington to represent them a, are confident that our only business is their business. i've been reading a lot about george washington lately, and he

said something along ago. in fact, on the first day of our new government, that seems relevant to our hearing today. and i quote, the foundation of our national policy will be late in the pure and the beautiful principles of private or rowdy, and the preeminence of free government will be example five but all the attributes which can win the affections of its citizens and command the respect of the world, end of quote. adopting a new law that explicitly makes insider trading by members of congress illegal would strengthen the foundations of our national policy in washington's words. and i hope in a small way will help to repair the breach that exists today between our government and our people. senator collins. >> thank you, mr. chairman. fortunately i don't have an

eloquent quote to begin my hearing with to take up where you left off today, but i do want to thank you for holding this hearing to examine whether or not current laws are adequate to prevent members of congress from engaging in insider trading. i very much appreciate your advice in our two colleagues, senator brown and senator gillibrand, to describe the bills that they have proposed to address this concern. i'm a cosponsor of senator brown spill which is known as the s.t.o.c.k. act, and i look forward to learning more about senator gillibrand's bill today. this hearing is an apartment step in our efforts to ensure that members of congress are not profiting from trading on insider information.

recent press reports on "60 minutes," and elsewhere, demonstrate why this committee must explore the application of existing laws to congress and identify what actions may need to be taken to close possible loopholes that underline the public's confidence in this institutions. elected office is the place for public service, not private game. as demonstrated by recent press stories, however, there are questions about whether lawmakers have been exempt either legally or practically from the reach of our laws prohibiting insider trading. the recent allegations, at a time when the public's faith in congress is already an extremely

low. a recent gallup poll shows that 69% of the american public has little or no confidence in congress. other polls show that americans rate members of congress at or near the bottom of the list when it comes to perceived honesty and ethical standards. this erosion of public trust is not confined to congress, but tainted the publics entire view of our federal system. why does this matter? well, with so many critical challenges facing our country, if the american public does not believe that the decisions that we are making are in their interests rather than our interests, it will be next to

impossible to tackle the truly significant problem that we face. and we must address the concerns that underpin the public skepticism. we need to assure the american people that we are putting their interests above our own. seven years ago, economist alan zebrowski published a study that shows that the stock portfolios held by u.s. senators in the mid 1990s outperformed the market by nearly 12% per year. mr. zebrowski concluded from his data that senators have quote, a definite informational advantage over other investors, end quote. though he also was careful to point out that his results should not be used to infer illegal activity. in his words quote, current law

does not prohibit senators from trading stock on the basis of information acquired in the courts of performing their normal senatorial functions, end quote. a more recent study by the professor showed similar, albeit less dramatic investment returns, for stock portfolios held by the members of the house between 1985-2001. at the same time, however, not all experts who have examined these data showed the professor's conclusions, or his legal interpretation here so the purpose of today's hearing used to analyze the need for greater clarity in the scope of the insider trading laws, and i'm eager to hear the views and recommendations of the witnesses on the legislation presented by

our colleagues to close any loopholes, and also to explore whether this is simply a matter of insufficient enforcement under the existing fraud laws. what ever the problem is, one thing is certain. we should not be shielding congress from laws that apply to other americans. thank you, mr. chairman. >> thanks very much, senator collins. senator gillibrand, senator brown, thanks for your leadership. you really seize the moment, and as soon as this problem became evident, took your leadership. it's because you introduce the bills we are here. we take the proposals very seriously, and senator collins intent and mind to move to a market as soon as we can. so we welcome you here today. it's always a difficult question your two senators to call on first.

i believe we have research does not enter that senator gillibrand by small amount has more seniority although it's clear senator brown is much older. [laughter] >> and he is a member of our committee. >> touché. senator gillibrand, go ahead. >> thank you, mr. chairman. very grateful for your leadership. ranking member columns, thank you for your leadership. i appreciate you holding this extremely important hearing and invited me to offer my testimony this afternoon. your strong leadership together is a shining example of how important it is to shine light on an issue as important as fundamental fairness. it's a very important step forward on the path restoring america's faith in our government, just as you said, mr. chairman. like millions all across the country i was very surprised to learn that insider trading by members of congress, their families or their staff using nonpublic information gained through their congressional work is not clearly and expressly

prohibited by the law or by the rules of congress. the american people need to know that their elected leaders play by the exact same rules that they play by. they also deserve the right to know that their lawmakers only interest is in what's best for the country, not what's best for the own financial interest. members of congress, their families, staff should not be able to gain personal from information have access to that every day middle-class american families don't. i simply believe this is not right. nobody should be above the rules. i've introduced a bipartisan bill in the senate with 15 of her colleagues, senator rubio, snow, jihad, stabenow, turbine, blumenthal, bill nelson, read, sherrod brown, and baucus have all offered at this bill close the loophole. this is very so much of the legislation that was first introduced in the house by

congresswoman louise slaughter and congressman tim walz. someone to thank them for their long-standing commitment to this issue and advocacy they also want to recognize my colleague, senator scott brown for requesting today's hearing and for his very strong work on this issue as well. our bill which has received the support of at least seven good government groups have basic important principles first. it says members of congress, their families, their staff should be barred from buying and selling securities on the basis of knowledge gained through the congressional service or from using that knowledge to tip off anyone else. the ncc, cftc must be empowered to investigate these cases. to provide additional teeth, such acts should also be in violation of congress is own rules. to make clear, the activities not only illegal but appropriate for them as a congress that members should also be required to disclose the major transactions of $1000 or more

within 90 days providing dramatically improved oversight and accountability from the current annual reporting requirements. lastly, individuals and political intelligence work contacting members of congress, staff or other individuals to gain information and help with investment decisions, they should have to register as lobbyists to provide additional oversight into this industry. there are those who do not want us to succeed to pass this commonsense legislation the american people expect. some critics who say the bill is unnecessary or already covered under current statute. i've spoken with experts in the past with investigations of this nature, and they strongly disagree. we must make it unambiguous that this kind of behavior is illegal. others may say that the legislation is a two week. so let me be very clear. our mission here is to pass a strong bill with teeth in it that will make any and all insider trading clearly illegal

and a violation of our congressional rules for all members of congress, their entire families and their staff. as we move forward, there will be technical changes in the language to approve the bill and to assure that the final product meets this goal. anything less is unacceptable. as my home state newspaper in the buffalo news recently noted, quote the stock act would ensure that its the people's business being attended to. this is a step that we must take to begin to restore america's trust in this very broken congress. thank you again, senators lieberman and collins. i'm very grateful that you held a hearing today. >> thanks. senator brown, it's all your. >> thank you, mr. chairman and ranking member collins. being new here, until the 60 minute piece came out i had no

knowledge that something like this was even allowed. as a result of that wanted to do something about that to try to make a difference. it was a "60 minutes" piece which featured a segment about members of congress and their alleged insider trading advantage which garnered widespread public attention as you referenced. and you know, it's interesting when you even have to hear about things like this that happened apparently in washington. there's clearly something wrong. you referenced it, mr. chairman, dares a breakdown of trust. we need to reestablish that connection and let people know that we are subjected to the same laws and rules that they are. we shouldn't be passing laws and not have to adhere to them. and their trust in congress is at an all time low, and that's disturbing. it's more important than ever to have members of congress affirm that was a by those very same laws that we pass for everyone

else in our country. we should be held to the same, and quite frankly i think a higher standard than the members of the general public and should not be able to profit based on nonpublic information. that's what i've introduced the s.t.o.c.k. act of 2011, and i greatly appreciate you jumping on it. it doesn't surprise me at all that both of you would move quickly to address something that affects our body in such a dramatic way. this obviously affects members and employees of congress as well as the executive branch employees from using nonpublic information that came from the public service for the purpose of investing or otherwise making personal financial gain. consider this, a member of congress is doing a mean, that program would be cut or there's something going to happen dramatically and indigo in india to buy or sell his or her stocks for profit, avoiding losses when the news breaks. under current law the

congressman would likely walk away with a bad investment what anyone else it would mean jail time. and that's not right. arguing that the current law already applies to matters of congress as you referenced in your initial opening, we don't need it, i disagree. if it's in effect and why haven't they done something about these sorts of things? there hasn't been one prosecution. the sec has all this power, why don't they use a quick spin their existence is to show that we must clarify and define the blanket from the duty that we have as news of congress to the american people pertaining to the confidential nonpublic information not defined within actual gap and it is clear has left a gap that invites abuse, intentional or otherwise, it contains a breakdown of trust. that's just not right. this legislation is directly aimed at correcting this problem that academics such as professor zebrowski which you referenced have identified in his work

professors and rescues were, found that members of congress investment may have benefited from informational advantage over members of the general public. in the recent book, "throw them all out," members of congress are making a killing in real estate by improving the use of federal funds to projects that will enhance the value of buildings or land that they actually own and that's not right. as members of congress site, we all know with access to information that the public doesn't. to classified briefings, reports, personal conversation with government officials and all these sources can give those nonpublic information that we can find a significant value and trade accordingly. not only do we have that access, we create information and policy as well and we can influence things that way. when we act on legislation and negotiate legislative language frequently that legislation has real financial consequences to many different industries in this country, and because we

have that access and we create information we must not, actually not betray the public's trust in everything that we do for our own personal gain. i believe and i know you to do anyone on this committee does, diminishing the public trust is why you called the hearing today. i suspect we'll hear from witnesses today that say that existing laws and rules are sufficient. senator gillibrand referenced it. you did, mr. chairman, and i respectfully disagree. really? and once again, why are we here? by has something that been done. basic question. there's been no successful prosecutions of members or their staff and i played the uncertainty that exists around the legal framework provides an excuse for enforcement officials and agency to avoid the politically difficult task of policing congress especially when we control the purse strings of many of those agencies. we must close this loophole.

i believe a vast majority of the members and staff of congress are here to serve their constituents best interest. they are good people. they are not here to line their pockets. but by explicitly braving the use of material of non-public information for personal gain, will vastly increase the transparency everyone talks about here but sometimes it just doesn't get done. the legislation i've introduced this summer to the bipartisan legislation that has been introduced in the house for many a year now. back in the 109th congress i know that congresswoman slaughter, congressman bayard actually filed and no congress in slaughter and walsh have continued their effort in this regard and is getting more and more support. so i want to thank them for their efforts. media attention as brought a good eye to this. the american people are watching what we do. they watch more than ever, especially with all the new

media opportunities out there. i'm not afraid of acting in the publics interest and that's why i introduced this legislation. it's critically needed and there are differences between our two bills. mine does not amend the ethics rules. it needs 51 votes. makes it a lot easier to get it through. we can do the senate resolution side-by-side. i would suggest and request that you take the best of both bills, put them together, have us all join together in a clearly bipartisan, icann will manage and get this thing done. the american people deserve it. we'll see if politics will play a role in it or not. it's up to us i look for to get in on that committee chair right there and asking some questions, so thank you. >> thanks very much, senator brown. and thanks for your closing comments about the process, and i will note for the record that senator gillibrand was nodding her head affirmatively, is there are some differences between

your two bills but there are many more similarities, and i hope to to view will be up to work with senator collins and me to come up with a joint bill. we may want to separate them, as you said to provide want to have a separate resolution on the senate rules so that it will be separate from the legislative proposal. but i'm going to set a standard may be hard to meet but if we work intensely, it would be great if we can bring this before a markup fo for the committee in the summer before we break for the holidays. we will tentatively scheduled a markup 4714th or 15th. let's set that as the goal. see if we can put this together. thank you both very much. thank you. we will now call the second panel, melanie sloan, executive director of citizens for responsibility and ethics in

washington. donna naki. i struck out twice. okay. donald. the professor of law at indiana university, more school of law. john coffee is a professor of law at columbia law school. i'm having flashbacks to those terrible days at law school. i'm fearful. but remember, you are the one who asked the questions. it wasn't that way in law school. and, finally, robert walker of counsel at former chief of staff treasurer both the house and senate ethics committees. thanks to all of you for being here on relatively short notice. you bring in various ways a wealth of experience and

information. so ms. sloan, we will begin with you. your organization has one of the best acronyms in washington. clue, citizens for responsibility and ethics in washington. i know you work together with a number of other public interest groups that advocate legislation to deal with this insider trading problem. please proceed. >> thank you. chairman lieberman, transit and other members of the committee, thank you for inviting me here today to join such a distinguished panel. so no disrespect to any of your antenna person but the fact is america doesn't trust you. a full 46% of congress -- americans believe congress is corrupt. stories like the one on "60 minutes" a few weeks ago become such big news because they confirm what so many people already believe. that many of your colleagues used their position not for the public good not to better -- feather on this. my organization,

c.r.e.w.comments focus on misconduct for many years. we have seen and complaint of numerous legislators abusing their positions, earmarked projects to increase the value of the personal real estate holdings, buy into companies that soon there after surging in value, urging agencies to take actions to financially benefit themselves, family members, and pushing through legislation and a parent exchange for campaign contributions and finally even trading on inside information. as others have said at no time in history as the public's view of congress quite been so dismal. jobless rate is sky high and a wide swath of the country is suffering severe economic hardship, but mayors of congress have never been richer. 66% of senators and 41% of house members are millionaires. members have significant stock portfolios that only some maintain the assets in blind trusts. whether or not it's accurate to say widespread public perception that members of congress are abusing their positions to enhance their personal wealth members are willing to accept

benefits like generous pensions and health care coverage that most americans only dream about. while at the same time congress exempt itself from loss like those governing whistleblower protections, workplace safety and press insider trading that are applied to everybody else. notably presidential appointees requiring senate confirmation often have been required by the senate to divest themselves of interest in companies they will oversee a part of the executive branch, but senators are under no such restriction. for example, the "washington post" found between 2004-2009, 19 of 20 senators on the armed services committee held assets in companies that do business with the pentagon. the senate has refused to acquire surged about campaign finance reports electronically. all the better to stop the media and watch dogs from competing campaign contributions with legislative action. congress, particularly the house counsel's office, has been advancing a very aggressive interpretation of future debate

clause that allows members who have an agency's crimes like bribery to go unpunished. congress recently refuses to enforce even its own ethics rules in to police the conduct of members except when it is so egregious it becomes fodder for sensational wall-to-wall 24 hours news coverage. i'm not an expert on securities law so i will leave it to all the other panelist who are leaders in this field to discuss whether and to what extent insider trading law on the book applies to you. given that has been no prosecution of a member of congress for insider trading, one member of the house with that in 1976 has ever been disciplined for even any remotely related conduct. it is imperative congress pass the s.t.o.c.k. act stupid members of the need to demonstrate to america that you take our concerns about your ethics seriously. undoubtedly there are changes in which the clause of the constitution might prevent a prosecution such as were a member traded on confidential information, receive pursuant to

committee inquiry. as result not only should the s.t.o.c.k. act provide a role for the sec and the department of justice in addressing such conduct, but the house and senate should also amend the standing rules to make clear such conduct is prohibited and subject to specific disciplinary action. perhaps including a financial penalty of three times the amount of a profit obtained or loss avoided. disclosures of trade also must be a key component of any legislation. and 90 days permitted under the bills we have seen is carte blanche and should be cut back. after all, electronic confirm confirmations of trade are often instantaneous making such significant time delay is unnecessary. members of congress should post information about trade in electronic searchable databases. further, as with personal financial disclosure reports, the willful failure to disclose this information should be punishable under the false statements act. the bottom line is that americans are becoming increasingly frustrated with

congress, more concerned with presuming -- been working to improve the standard of living of the remaining 99%. passing a stock at would be a first step towards changing the image. thank you. >> thank you, ms. sloan. and now ms. nagy from indiana school of law. 's. chairman lieberman, ranking member collins and members of the committee, i am honored with invitation to testify. my name is ms. nagy and i am a professor of law at indiana university. in my 17 years as a professor i have co-authored a treatise on insider trading and i've written many articles, including one published last may on the precise topic of today's hearing. the article sought to debunk what at the time was becoming an urban myth, that congress had exempted itself where was somehow immune from the existing law that prohibits insider trading.

congress in the which is not to immunize or exempt itself. beyond that, the article concludes that congressional insider trading is already illegal under existing law. based on my research i would expect a cordial the member of congress liable for any securities trading that is based on material nonpublic information obtained through congressional service. if the sec or doj successfully proved facts alleged, i acknowledge, however, that many distinguished security law scholars, these shades of gray, and some believe a court would rule likely the other way. the controversy surrounding the application of existing law to congress stems from the fact that congress has never enacted security statute that explicitly prohibits anyone from insider trading. a s.t.o.c.k. act would only address one manifestation of this much larger malady.

in the absence of an express statutory prohibition, the offensive insider trading has been prosecuted as a violation of section 10-b of the exchange act and rule 10-b five. these provisions prohibit fraud in connection with the purchase or sale of any security. the department of justice owes prosecuted as a criminal violation of either rule 10-b five or the federal mail and wire fraud statute. in the vast majority of instances insider trading is illegal only in so far as it can be deemed an act of fraud. because the term fraud is not defined in these statutes, the path of the term in illegal insider trading has defaulted to the supreme court and lower federal court. and in literally hundreds of cases courts have imposed liability by the traders were decidedly not insiders of the

issuer security for trade. for example, courts routinely impose liability in so-called outsider trading cases involving any members who trade on information entrusted to them by spouses or relatives. other outsider cases would include federal and state officials who trade on information obtained through government service, including an fda chemist who pled guilty last month and now awaits a likely prison sentence. and misappropriation cases such as in all insider trader? come to light the linchpin is a security street who has breached a fiduciary like duty of trust and confidence by secretly profiting on the use of material, nonpublic information that rightfully belongs to somebody else. the constitution refers repeatedly to public offices being of trust. members also take it off of

office to faithfully discharge their duties. so there should be little doubt that members self-serving use of congressional knowledge constitutes a misappropriation that would defraud the united states and the general public among others. for a court to conclude otherwise it essentially would have to be a nonpublic congressional knowledge as a perk of office belonging to an individual member to do with as he or she wished. such a view would be strikingly inconsistent with the tenets of representative democracy. i recognize that a member of congress has never been prosecuted for insider trading based on nonpublic congressional knowledge, but the doj has used the federal mail and wire fraud statute to successfully prosecute congressional officials of defrauding the united states and the public through the undisclosed misappropriation of congressional funds and tangible

property. and the supreme court has dictated that material nonpublic information constitutes in tangible property. in some congressional insider trading violations abroad and at the front rule 10b-5 in the mail and wire statute. my final point relates to one possible consequence of a staff act. i applaud and endorse the motivation behind the proposed legislation, but i am concerned that in the absence of a modification to its wording, a s.t.o.c.k. act could be viewed as the only insider trading law that applies to congress. this is troubling because the proposed legislation fails to reach a host of possible insider trading scenarios that would almost certainly fall within existing law. make you very much for giving me this opportunity to share my thoughts. >> thanks very much, professor. that is very hopeful and we'll come back to question.

next, mr. langevoort, thanks very much for being here. >> thank you, chairman lieberman and ranking member collins, and members of the committee. my testimony today strongly supports legislative efforts to explicitly prescribed insider trading by members of congress and their staff. as intended by the various s.t.o.c.k. act to build recently introduced in the house and senate. there is no current exemption from the main thrust of u.s. insider trading law for either members or staff. in many forms of trading on done by such persons are adequate prescribed. indeed as professor nagy just told you, it is possible the court would rule the current insider trading law adequately prescribed all abusive trading. insecurities on capitol hill. i hope they would. there is sufficient doubt especially in light of how courts have been reading section

10b and rule 10b-5, the primary weapon against insider trading in cases like this, misappropriation theory, requires a showing that the trader with a fiduciary like relationship, the true owner of information, and deceptively stole information entrusted to them. as applied to legislative activities on capitol hill, concept does not fit neatly. if the idea that members of congress or their staffs and three step ahead of ordinary investors to profit from information required as a result of their legislative role, is disturbing to say the least. congress should therefore act to eliminate any doubt and particularly that all trading and tipping apply to members and staff to insider trading case against a member or even a powerful staff person will always be a matter of the great political sensitivity. likely to be brought only to the extent of the case factually and legally is very strong.

the external pressures to bring such traces -- cases are not resemble the great when any suspicions arise, leaving any ambiguity as to the question of whether and to what extent the insider trading on capitol hill is unlawful is hardly an encouragement to those matters that deserve to be courageously investigated and pursued it would be extremely unfortunate for the sec a process to bring an action and has a member or staff person raise the defense which they surely would that service and congress carries with it no fiduciary like duty with respect to government conferences. that would be the last headline congress should want to see. i fully support the intent behind the s.t.o.c.k. act bills, the legislative language must be carefully crafted to assure that legislation does not create the very problem it seeks to address. the perception that congress is exempted itself from insider trading law. if read as an exclusive

statement of congress is insider trading restriction, it is at times genaro, at times over brought. i am more than happy to work with the committee and its staff to resolve these problems which i do not believe that all reflects the true intent of the drafters. thank you. >> thank you, professor. let me immediately accept your offer of assistance. truly, this is a field, we have a purpose. i think most of us on the committee, but this is a field of law with a lot of precedent and a lot of complication, so in trying to fix this problem we don't want to create other problems, or create other experiences, as you said. i look forward to the question and answer period. next, john coffey is a press for those are -- is a professor of law. >> thank you, chairman lieberman and ranking member collins, other members of the committee. i'm delighted to be here because

i agree almost completely with my predecessor, professor, i'm going to edit out much what i was going to say, and made just four points. .1, i believe congress should act but nearly. and i want to underline the words but nearly. while reasonable people and reasonable professors can disagree, and reasonable professors almost always do disagree, i think there is clear enough and the duties in this field that you teach legislative action. senator brown as this point further, why hasn't there been enforcement? i think even the responsible u.s. attorneys would not prosecute criminally, would not indict if there is any uncertainty in the law. you don't indict any case where the law is 50/50. so that is a reason they may have restrained in cases where they could have gone forward. i think you should act. point to which he alluded to what i want to say more fully, the proposed legislation has

language that does not quite work. i want to say this respectively but one of the key concepts in this proposed, both the proposed bills is that the information that you receive has to relate to painting or proposed legislation before there is liability. unfortunately, that's not the most common case that we're likely to see. i could imagine a department of defense official, a congressman and saying you know that bill you been pushing as for two years to pass to get that defense contract to the contractor in your district, that defense contract will be announced tomorrow for $5 billion. there's no legislation, nothing under the existing language would make that criminal. frankly, congress spends much of their time exercising oversight. that oversight function doesn't fall within a penny or proposed legislation. flaw number two, there's a reference that you can't trade securities. the most one is futures our

stock products which are not securities of an issue. they are issued by financial dealers of the market. they're not particular companies you're buying into it you can play with that language. i think there's a difference in the two bills with regard to whether keeping as opposed to yourself receiving information. tipping by the congress that is covered. i think that should be reconciled that there are several places where you need to talk about directly or indirectly because there could be a chain of four or five people and it could a distance distance between the congressman and i think you want to cover those situation that these are all small points. let me go to my third point. doing less is more. rather than attempting to write a detailed code that would codify terms that have well-recognized judicial munis like material and nonpublic it might be better to write a very simple one sentence statute. for example, such a one sentence statute could say a member of congress is a fiduciary with respect to all material

nonpublic information that such person acquires in the provence of such persons duties or that such person receives because of his or her status as a member of congress. that one sense does it and it doesn't require you to define terms like material or nonpublic that it would just say that the interpreting statute, the court should do the existing mean under the federal securities laws of these terms. if you attempt to do more, ambitious as it is, and have universal legislative statute, congress has tried that before and proven to be a disaster i testified in this field 30 years ago in the 1970s, 1980s. congress wisely backed off of our universe statute and just change the penalties of insider trading section but i think that's wiser because if you adopt legislation with new terms, the federal courts will spend 10-15 years resolving what those new terms mean. there'll be conflicts in the circuit. none of us needs that confusion. also if you try to adopt comprehensive legislation, i'm

afraid that every specialist group and united states will want a safe harbor for what they do. you will find the statute will go from short to page after page of proposed safe harbors. you don't need to do any of the to do with the real problem that concerns you which is merit of congress i think you should keep it short and simple. okay, last point. members of congress will face some illiquidity if such a statute is adopted. i want to advise you that i don't think the problem of illiquidity is as great as you might think. there are some special rules the sec has. most know be a rule called team b. 51 that permits anyone and cleaners of congress to adopt what's called a 10b-5 one trading plan. is a tip from a blind trust. you can give very detailed instructions to a fdicia, a broker or a bank. advising to broker a bank exactly what you want done if stock prices fall, if given things happen. i think those on most of these problems.

in addition they would instruct sec and find i think that you could run on the advice of counsel that if you get an opinion from a lawyer with experience in the securities laws that you're not engaging material, nike changes in nonpublic information either that no imports will proceed against you where you have a reliable defense of counsel. thank you. >> thank you. again, very helpful. we are not accustomed to drafting legislation as brief as you suggest. [laughter] but it's a very constructive recommendations. robert walker as a nation at the outset comes to us with the unusual and very helpful expense of having been chief counsel and staff director of both the senate and house ethic to me. banks are being a. >> thank you, chairman lieberman, and thank you, ranking member collins, and members of the committee. thanks for the opportunity to address the important issue of insider trading and congressional accountability.

i am not here to advocate against or for any version of the s.t.o.c.k. act. i will say, however, the images current federal federal insider trading prohibitions apply fully to members and employees of congress under the misappropriation theory. and i'll also say in my view as a former federal prosecutor, the law is more than 50/50 on that. there are substantial proof problems in making out and insider trading case end of the congressional contest, however. in particular, proved that information trade up on was to nonpublic, may be an obstacle, probably would be an obstacle given the continual swirl of information in and around the capital. there is also a unique complicating factor to prosecuting insider trading cases. at least some insider trading cases in the congressional context has already alluded to under the speech or debate clause of the constitution certain congressional actions and activities cannot be cited or used as proof in legal

actions against members brought outside of congress. but even the most sweeping conceivable legislation against congressional insider trading could not drop constitutional speech or debate privilege. within congress itself, existing standards of conduct do capture him to provide the basis for sanctioning a congressional individual for profiting from securities trades based on material, nonpublic information gained through his or her official position. most directly, paragraph eight of the code of ethics for government service states that a person in federal government service should never use any information coming to him confidentially in the performance of governmental duties as a means for making private profit. insider trading based on confidential congressional information would be a clear violation of this provision, and a mechanism for enforcement would be the congressional ethics process. having said this it cannot be

said as clearly exactly what information would be considered confidential within congress for purposes of enforcement of this code provision. under the rules of the house and senate there is no blanket duty of confidentiality on the part of members and staff. senate rules, for example, basically leave it to each committee and office to determine what information he for them is confidential. but relatively few committees of the senate or of the house actually have specific rules imposing duties of confidentiality on their members and staff. so paragraph eight of the code of ethics does not provide a systematic tool for addressing allegations of congressional insider trading. use of this provision for pursuing insider trading allegations within congress requires a case-by-case analysis. the current focus on insider trading in congress does provide the opportunity for the senate and house and each of the committees to take a hard look at the rules with respect to the

definition, scope and duties relating to confidential information. a part of paragraph eight of the code of ethics, allegations of insider trading in congress may be addressed under the failsafe standards of conduct which enjoins members and staff never to engage in conduct which may reflect discredit on the house or senate if credible allegations of securities trading by a member or employee based on material nonpublic information were to come before the senate ethics committee, the house ethics committee or the house office of congressional ethics, and these allegations were more than mere simulation can the allegations would be pursued by the ethics committee as potentially conduct reflecting discredit on the institution. and they would be so pursued in investigating regardless of whether any of the specific law or rule were applicable. finally, let me turn to the issue of whether members of congress may trade or holds a series of companies or

industries that fall within the jurisdiction of the committee assignments. as you know, recusal and investment argued in congress as extraordinary and disfavored remedies to potential conflicts of interest. the preferred approach to monitoring and policing potential conflicts in the legislative branch is through public financial disclosure. the provisions of the proposed s.t.o.c.k. act that would require public disclosure of security transactions within 90 days is consistent with and would extend this approach. they would of course be a compliance burden on members and staff. but there would also be a substantial increase to the accessible pool of information based upon which a memphis constituents could form their own ultimately conclusive and unavailable judgment as to the appropriateness of the members financial transactions and as to the propriety over all of the members conduct. thank you.

>> thank you, mr. walker. we will go forward with questioning now and will have seven minute rounds for each sender. -- senator. based on the research i did before again interfering today, i have reached a tentative conclusion, informed by the acc opinion filed before, or the testimony filed by the committee today, that under existing law, the acc would have the authority to pursue and prosecute members of congress or staff for insider trading. based on the testimony that the witnesses had given, i think, now i can do different kind of conclusion, which is that there is genuine ambiguity in the law. this is, my original theme was we should legislate, to make clear that members of congress are included within laws against

insider trading because the existing state of the law obviously as we said earlier, insider trading is not mentioned or defined in law. you have to take it two or three steps job to get there. but now you convinced a that there is ambiguity that has to be resolved. if i'm hearing you, particularly professor langevoort and professor coffee, it goes particularly to this question of fiduciary duty. and as i understand, as you mentioned, the supreme court really have set the wall here because it's required that interpretation, a person can be found to have committed insider trading if the person trades on the basis of material, nonpublic information. but only if the person is breaching a judiciary committee, which as i understand it normally is to shareholders over

the source of the nonpublic information. so the normal reaction, but it's not necessarily, no reaction does not necessary prevail in courts of law. in other words, there's a separate vocabulary would be well of course members of congress have a fiduciary duty. we have a duty to our constituents, to the law. but your testimony leads me to now feels that that is ambiguous, because members of congress and our staffs are in such a different relationship to this nonpublic material information. so i want to ask, well, particularly the two of you, professor langevoort and coffee and professor nagy, too, if you want, to weigh in on the nature of the duty that must be established. is it a fiduciary duty? if so, how do we define it?

or is it a broader duty of trust and confidence which is the kind of language that we normally would use, or that we think we have? professor langevoort, why don't you go first? >> sure. the courts are still working out the energy to that question. the supreme court established a misappropriation theory. in the context of a case involving a partner in a law firm who misappropriated information belonging to the law firm and the firm's client. that is the quintessential fiduciary relationship. a firm has a right to sue a partner for breach of fiduciary duty, duties of loyalty and duties of loyalty and care. as you move away from settings in which there is an employer, a principal they would be able to take, reach a fdicia action

against the person in question, the ability to make the kind of argument that the misappropriation theory only applied, grows weaker. .. and the more it was equal, it wasn't a relationship that was fiduciary in character. the ftc partially or world that with respect to husband and wife but that definition of that they fiduciary relationship only exist when there's discretionary authority of one-sided

dependency on the other's a high standard and neither professor langevoort or i want to see it applied but that is why there's this ambiguity and we think because there is ambiguity there is no upside, no downside and passing the legislation and a considerable upside or goes the right, so if i remember your one sentence proposal, it dealt exclusively with discretion, am i right? [inaudible] >> advantage of that is only if you start defining in legislation what material and nonpublic means. they're going to be efforts by defense counsel who say that's different or wasn't satisfied in this case. so it would not be enough for instance if we avoided the issue of fiduciary duty altogether forward of a reason and simply declare an law that members of congress may not trade on the basis of material, nonpublic

information, which they obtained only because they were members of congress? >> we could possibly do it that way but what you just said wouldn't cover the tipping problem. he walked to cover both the tipper and the tippee who is a member of congress. >> professor nagy do you want to get into this? >> the securities and exchange commission is the second circuit on bond had unduly narrowed with the supreme court had set out in chiarella as the relation ship of trust and confidence and in direct response to the case the securities and exchange omission promulgated a rule and professor coffee mention one aspect of that rule creates a rebuttable presumption that family members, parents, siblings and spouses bow duties of trust and confidence to each other but the rule has two other provisions and one talks in terms of

histories, patterns and practices of exchanging confidences can create the requisite duty of trust and confidence. the other point i would have is that if courts routinely were applying the now discredited chessmen analysis to insider-trading prosecution that the securities and exchange commission or the department of justice praying, we would see far fewer with the securities and exchange commission as a department just as in far fewer settlements. there've been cases involving within relationships, where one partner misappropriated information from the other, clearly not a spousal relationship and the result was a prison term for the boyfriend who was misappropriated from his attorney girlfriend. certainly the chessmen standard, very high standard of fiduciary relationship would not have supported a prison sentence in such a case.

trust and confidence is where the securities and exchange commission has put the emphasis on the duty. i would ask you to imagine a situation where district court is faced with this hypothetical case. at the district court were to conclude that a member of congress does not owe a duty of trust and confidence to the united states and to the american people, i would be shocked and we could all anticipate what the headlines would be on that, to which i would say the district judge would likely find the requisite duty of trust and confidence under existing law. thank you. >> okay, very interesting. obviously this is important because we want to get this done but we are not, if i can use a metaphor from a different area of activity, we are not painting on a blank campus. there is a lot on the campus in existing law the supreme court rulings. the other conclusion i have senator collins is more

personal. i have actually understood what the three law professors have said today which says to me that i'm more prepared to go to law school now than i was when i went. senator collins. >> thank you mr. chairman. professor coffee, you made a very important point that members of congress do more than just legislate. we act as advocates for our constituents. we have public funding through grants or contracts. we seek the expert advice on public policy in order to reach the right decisions. i am thinking of how many of us during the financial crisis in the fall of 2008 reached out to financial experts for advice. so i think this is a more

complicated issue than it first appeared, to make sure that when we do act, that we are not having a chilling impact on the responsibilities of members of congress to their constituents. so with that preface in mind, let me suggest a completely different way of looking at this issue, and you actually started to touch on it and your testimony or besser coffee. what instead of trying to put into law a band that works to prevent what we would all think was the improper and should be illegal behavior, if we instead said that the members of congress cannot trade in the individual stocks themselves, but must either limit their investment to mutual funds or do

as you suggest, the mechanism approved by the fcc to allow trading pursuant to a written plan that gave detailed instructions to a person overseeing the investments but the members cannot make the trade, or another opportunity for those who would have enough assets, but what if we got at it from that perspective? what would be your opinion of that? i am going to ask the whole panel. >> i think that kind of 10b-5 plan is a means of protection. i think many congressmen would find it an imposition if they were told they had to use blind trusts or 10b-5 plans even when they had no information at all. they might in some cases do this as a matter of pure precaution but i think they would find it an unnecessary bit of overbroad

regulation to say you can't trade at all because you are congressmen. i think if you recognize that you were going to regularly come into contact with material information you would be well advised to use a 10b-5 plan but the reason you are using it really is that it might be criminal if you traded in your own name based on your own decisions so i think these two things fit together. you have the prohibition and then you have safe harbors. the safe harbor would be attend the planned orrin opinion of counsel which i think could be obtained in many situations by cliff lee's i think you need both of them together. >> does anyone disagree with you professor want to add anything to that issue? >> let me add something besides the reference to 10b-5 -- 1. you mentioned at the outset of your question the possibility of moving members of congress away from single stocks to other forms of financial instruments. that is very difficult because we have discovered insider trading is possible with respect to nearly every form of

financial instrument including mutual funds, which we are aware. with respect to 10b-5-1, it's important to know that is simply a rule and congress would have to face up to this if it were to go that route that says as long as you execute those instructions at a time when you did not possess material nonpublic information, then the fact that the trade was executed after you came into possession of such information does not make you liable. it simply moves the time where we are looking at what did the person know, when did they know it, and that doesn't make all that many hard issues go away. >> professor nagy i'd would like you, but i want to get to a different issue for you so if you could answer that quickly so that i have time for a second issue. >> i think blind trusts might well be an effective solution to much of the difficulty here. i will leave it at that.

thank you. >> mr. walker. speeches prepay your rights senator collins. my dresser really a mechanism basically only for people who have substantial assets because there are ministry to cost and they are only blind insofar, they are not blind us to what you put into them initially. they are only blind really if you are putting cash or have prepared a time if the assets have been sold on a particular level, you are notified you don't have that anymore but they are really not lined as to what you put into them and as to limiting investment opportunities for members of staff, i would be concerned that you would be her haps making it harder to attract the best in the brightest who are really even pretty good and fairly smart into government service. >> i will try not to be offended by that. there are those who could never qualify for a blind trust. >> i don't mean to blind trust

aspect. i mean limiting trust. >> understand. i understand. professor nagy you testified that you feel confident that congressional insider trading is already illegal under existing law. even if you are correct, is there an advantage to congress make being its crystal-clear bypassing such a law? i mean i realize we have to be careful how we drafted, etc. but -- >> well one potential disadvantage, so i can see this could eat cured by careful drafting. one risk i would fear is by legislating directly. that would be taken them as an indication that the stock act is the only insider trading law that would apply to members of congress and as professor

langevoort testified that could be cured by a statement that says they stock act builds on top of existing law such that rules 10b-5 in the federal mail and wire fraud but he there at the floor and the stock act would be on top so i think that potential risk could be solved and solved easily and i would be happy to help in that effort. there is though another risk that i think we should think through. and that comes from public perception as well. the controversy surrounding the application of the federal securities laws to members of congress stems from the fact that congress has never and acted in a statutory provision -- row addition of insider trading for anybody so everybody else has to navigate through what is often been described as the maze of decisions. the boyfriend has to decide,

kenny trade on information based on whether he owes a duty of trust and confidence? sometimes that might be hopelessly confusing and what i could see potentially happening with an express statutory prohibition applying to congress and federal employees is, when all the dust settles from all of this, everyday ordinary people saying, why did they get the express prohibition and we have to suffer through the maze of what it means to defraud in connection with the purchaser of the security and i think that is a risk that might not be on the table now, but potentially could be. >> a valid point and in the next round, for the record, a question instead i want you to be thinking of is whether we should have a law if we are

going to venture into this area that applies to the executive branch officials as well explicitly, since frankly i think our treasury secretary has access to far more confidential, nonpublic information than any member of congress. >> thanks senator collins. in order of appearance, we will go to senator brown, senator begich and then senator tester. senator brown. >> thank you mr. chairman. i appreciate all of the examples of boyfriends and girlfriends and relationships. we are not talking about that. we are talking specifically about members of congress. if i'm in a top-secret meeting and i find we are going to drop a weapon system and by doing that the company stock is going to go down dramatically and i walk outside and i'd look at the floor and i say hey sell xyz company stock. that is what we are talking about. we are not talking about the classroom examples you are using. we are talking very specifically

about real-time real-world situations at them and brought to our attention, so while i appreciate, listen i went to law school too and it reminds me of the law school class and quite frankly i want to start do something. you indicated that the courts you know still haven't decided what to do. well, if not now when? that is why we are here. that is why the chairman and ranking the ranking member asked for this very important hearing. i was wondering, and i want to go to ms. sloan. she has been kind of left that out of all the fun. if you are looking at this type of situation, would you think it would be a good idea in our ethics disclosures to just be more specific as to maybe a more of periodic update as to the stocks we own and the stocks we trade in when we bought them, when we sold they sold them and the exact amount of monies we purchased and sold them for? that way come anybody who is in

the media or whomever, the government agencies are looking at say all co-well, senator so-and-so is on the armed services and he or she bought x amounts of military arms stock. when he or she found out that company was going to be, contract was put going to be terminated. that is i think certainly the initial information that would be used to establish the prima facie case in saying there is an issue we need to look into. would you think that is a good suggestion? >> i do think disclosures a great way to go because i think there would be a lot of repercussions if you you have quick disclosure and again i think 90 days is far too long. i think there are people who will be looking at these kinds of trades very frequently especially if they are searchable in an electronic database. 12-point out this an area in the example you gave, you gave were

you learn something at a committee and you immediately when out of me to call, that is the exactly the speaker debate clause makes very difficult to prosecute and because it is something he learned in a legislative committee, no grand jury or prosecutor would be able to use that information that you would obtain the senate committee either to obtain an indictment or to a trial so -- >> that is why we are here. bottom line i think the fiduciary responsibilities to the american people and that is the relationship that we have. professor langevoort the supreme court has -- to end trade -- inside trading laws saying it was with within congress's law not to expand 10b-5 as i think you touched on. if we choose to do nothing today wouldn't congress come today or in the near future wouldn't congress be sending a strong message to the supreme court that we do not want to clearly articulate the rule to hold

members of congress liable for trading on this material nonpublic information? >> you are absolutely right senator. the supreme court in a number of cases admittedly largely involving private securities litigation has said repeatedly it is congress's job to push on the statute to expand it, not the courts job in the absence of clarity. that is language that worries me the most in terms of a cord coming out the other way. i think you can accomplish a lot by that explicit statement. >> thank you in ms. sloan back to you, in order to rebuild america's trust in your congress in your opinion, as you are where no members of congress have been successfully prosecuted for insider trading. strengthening the ethics rule be a sufficient deterrent and this helper bill they confidence that members are held to the same standard and face the same consequences as everyone else? >> no. i think people have very little confidence in the ethics committees in the house and

senate. they have done a pretty lousy job over the past years and they rarely hold members feet to the fire except in particularly egregious cases that have had press attention. so i would say that is not a solution and i think you need a dual solution of going to the ethics committee if the debate clause is going to kill your prosecution but also having a very clear prohibition and ability of prosecutors to go after you. >> repressor copy, in the written testimony the fcc indicated it has all the tools it needs but yet we have never seen any prosecution as we referenced in the members of congress or staff for insider trading and given that the sec recently lost a string of insider trading cases as you state in your written testimony why wouldn't the sec wanted legal standard that without a doubt creates a clear, crystal clear framework for the fcc to prosecute members and staff to. >> they should want that and i think both professor langevoort

and i say clearly we are talking about the tweaks and with the language should be. >> and mr. walker, if the ethics rules provide a framework because i think maybe a vindicator for prosecuting members who trade on material nonpublic information why haven't we ashley seen any prosecutions than? >> well, first of all, you do want to say that there is the study that suggests that this practice of insider trading is somehow in debt in congress. there is the ackerson study that i think says otherwise and says that in fact, members portfolios performed below the market and particularly when you look at the average member's portfolio. they do not exceed the market and they do not need market performance. and so to the question of why haven't there have been prosecutions, is based on the premise that somehow this is happening everywhere.

another aspect of the answer is the ethics committees don't have audit functions. they don't know from office to office, to investigate what people are doing that hasn't otherwise been reported either to a complaint or through the media, and so it is not a matter of complaints and allegations coming before the committees that they are not paying attention to it. >> i have one more question for professor langevoort and professor coffee. it would be an easy solution that could be done to a senate resolution. do you agree with that, both of you? >> i think that passing the statute along the lines you have suggested the possible tweaks in the language would be an effective solution. >> senate resolution though? >> no, no, no, that payment legislation. >> no, the senate resolution. >> it's like a a motherhood

salute. i don't think it accomplishes that much. >> i agree. >> it takes you one step for but only one small step. >> i appreciate all your testimony mr. chairman nye appreciate you and the ranking member for bringing this forward. i have to get down on the floor for the armed services we are working on. >> thanks senator brown, take us for your work and we look forward to working with you to move this us to quickly. >> thank you mr. chairman and ranking member for having this hearing. let me first say my view, remember when i was on the right to ethics code and at the end of the day i really came to the conclusion you are applicable are not. you can provide all the rules you want, but if you are against it you are going to cheat so keeping that in mind one of the abuse i have is disclosure, disclosure, disclosure. for example you go on my web site, you can find every single disclosure form i've ever filled

out since 1988 in any office, any public facility that i have participated in. the challenge we have here and this is the question i have for you and mr. coffee, i know it's hard for us to do several things around here but actually sometimes it blurs. i like your approach so i'm going to ask her questions and comments from people but first, in the senate a constituent of mine in alaska, to get a copy of my disclosure form, thank god i have it on line because they have had to come to washington d.c., perhaps someone here go down to the clerk's office and get a copy of it, copy it, and then get it to me or give it to them in alaska. neither one of these bills requires electronic, searchable database. i agree with you that you can find these things very quickly. i have done trades and that is

all public disclosure and that is why i disclose it. so i want your comment on all of these bills or any legislation. should it be required that any trade, any action should the electronically available to anyone at any time via the internet and searchable so i will go down the list and then i have a question for you mr. coffee. >> while well in this day and age other than perhaps a shortage of resources in the office of public records that would be needed to manage it, it's not clear to me why it should not be on line. >> it actually causes more to do it by hand processing when people send in their forms. some of these people around here that are very wealthy, have big thick disclosure forms. >> the fact of the matter is that there are nonprofit and outside groups that are on line already so the question is why

shouldn't the senate put them on line? >> correct. >> what you propose is on page 14 of my testimony and that should go to web site. a journalist could immediately find this. constituents to -- >> they're the best enforcers. >> i think journalists are affected too. i have seen a lot of people lose office because of ethical issues but you are right. >> agreed and if if you are high-ranking executive of a public corporation, today you have 48 hours electronically to file a. >> that's right, which we are required to do. >> that's right in that immediately -- see you are making my point. >> i say yes as well. >> yes, i agree. >> the reason i ask this was because i say we collectively are so resistant to this for some reason so i look at the two members here who will do the markup with members sitting here. this is going to be consistent my part and i will ask for an

expansion not only on forms but are disclosure forms because they have the annual reports of stock trades and if someone wanted to search through that now, you can't. it's the most ridiculous system i've ever seen so mr. chairman i'm just putting that on the record here that you know, if we don't do that we are passing another law that will go out somewhere. we will fill out the forms that we handwritten in somebody, the good government groups will be out there, constituent who is mad at you and your opposition. it will be the searchable database people. second to mr. coffee your idea of a one-liner, and going to turn to the rest of the floor to ask them to comment on your idea. i know it's hard for us and i'm not an attorney. i didn't go to law school so no disrespect to all the folks here, but simple is better. the more detail, the more how

causes people have is my view. i won't say what my brother says about the bigger the bill the more times you'll get and i will fill in the blank later. that is of little concern so let me ask what people think of mr. coffee's comment or his idea? >> of the idea you are talking about is a one-liner that says members of congress have a fiduciary or fiduciaries with respect to information they learn in committees, and he placed. >> and he placed. >> i think you need to be careful and you need to think about the potential consequences to what you do as senators beyond financial transactions. for example the privacy act does not apply to congress and you are therefore able to do certain things with information that you receive from constituents and others that may not be constant with the privacy act at any rate. so you have more freedom to use information than the executive

branch. if you create a blanket fiduciary obligation with respect to congressional information, i think you do want to be concerned about how it could affect your representative functions and your oversight function and her function of communicating with others beyond the financial transaction area. >> i have not seen professor coffee's precise and i propose what was just said. i think it has to relate specifically to what insider trading is, which is profiting from that information without talking about all the other fiduciary possibilities that could be associated with that information. >> that's good. i see mr. walker nodding but not yet acknowledging. >> i would support one sentence. [laughter] >> it's amazing that lawyers get

down to one into statements. >> i wholeheartedly agree that simple is better, and i would encourage avoiding the concept of fiduciary altogether, such that the sentence would be for purposes of a misappropriation theory, duty of trust and confidence expand whenever a person is a member of congress or a federal employee and has learned that information through a government service. one possibility would be congress could authorize the securities and exchange commission to add that subsection to existing rules. >> to existing rules, that's five. >> rule 10b-5 two leaves out three exclusive situations in which an insider is presumed to be in a relationship of trust and confidence with the information. that is the family prom, working backwards. the history pattern of practice prong and he has promised to

maintain information and confidence. if congress were to authorize the securities and exchange commission to add a fourth section there, i think that would improve the clarity but going back to my point and senator collins before, it would apply the same law to everybody else. i think that's a very important principle that should come out of any legislative action congress takes in the senate. >> i have to defer differ to the law professors about insider trading but i would caution you that really wouldn't fall to your problem of the speech or debate clause which would not allow the prosecution prosecution and off a lot of these cases so i would still go back to as much as i don't love the ethics committee. sometimes they are really the only option left. >> thank you mr. chairman and ranking member. i'm a big supporter of the concepts of this legislation and again disclosure to me is really critical but also how easy it should be and accessible is how

we create more enforcement because the public and media become the enforcers in a lot of ways of thank you very much. >> thank you senator. senator tester. >> thank you duscher chairman i assume senator begich you are on my bildt sure the campaign disclosures are filed electronically? >> i believe i am and if i'm not i will be, i'll tell you that. i like a. >> that's good. first of all i want to welcome all panel members and i appreciate your perceptions in your comments. i can tell you that i'm not as good as a chairman i didn't understand everything you said but that's okay. >> i wasn't under oath. >> no, that's good and it's ironic because about three or four hours ago mr. coffee was on the banking committee. it wasn't you, it was her brother because you look an awful lot like. this is a day of your testimony and we appreciate, we appreciate all your testimony today. you know what i did here, as people talked about the stock act as we need to be careful because there is potentially

some unintended consequences. whatever we do, and those unintended consequences may be something that really limits our ability to legislate and create policy and do the things we need to do as senators are house members. so i want to approach it from a similar way that we discussed earlier here today and that is from a transparency standpoint. if we did things like make financial disclosures transparent, if we did things like make our schedules transparent and on line in the searchable database, guys has to be done that way. if we required ethics of senate and house offices and then i got to thinking maybe there are some unintended consequences there. can you guys think of anything that we do where it shouldn't be transparent? i actually come from -- i believe in transparency. i believe in sunlight and i believe we should do the maximum

of what everybody thinks we are doing in that way cleanses all the problems. i believe our forefathers were right when they said we need to have a citizen legislature. all that stuff. is there any area that you guys can think of where transparency might be inappropriate? we will start with you. >> no, can't see anywhere where transparency would be inappropriate. i think more transparency is required and i think the ethics committee needs to have the ability to audit members routinely. they get all these disclosure forms but there is no auditing to compare them with perhaps a tax return to see if they are in fact jiving together and if we samore saw more that i think we might define the problems. there was a situation in the house where a member had a lot of financial disclosure form and return included a far different scenario and that member resigned rather than face the consequences. >> i cannot think of a downside to transparency that would be

specific enough to articulate at this time so i'd be in favor of transparency. >> i agree also. if somebody is spent on acting unethically they are going to violate the disclosure rules as well as the substantive rule. insider trading often takes the form not of transacting securities in your own account because it really is so transparent already, but establishing a friendship in a foreign country with a foreign bank account, laundering money, laundering ideas. >> it that was ever found out by one of us, we would be nodal. i mean really, don't you think? i mean i agree with you. >> i have seen clever enough insider trading schemes that very successfully avoid detection for a long period of time. all i'm saying is, trying to be responsive to your question, if

we try to expand transparency not simply to trades but to the dedication of information to others, which is the route by which profit often comes, you will run into difficulties with respect to the work you do on the hill. 's beheading some law professors smarter than me probably can think of some problem is transparency. the way to deal with that is to give the ftc exempt of authority. you could say we have this obligation and we find out there are problems and the fcc has given rulemaking authority to carve out -- >> i wanted to go on record that i'm not smart as professor coffee coffee but i do see some concerns with across-the-board transparency and everything that the senate and congress does. if that is what you are asking. >> that's what i'm asking. >> i mean certainly there would be many sessions and executive closed sessions that could not be transparent. there would be many deliberations if u.s. committee

members behind the scene said probably out not to be transparent. and i think there is even less room today for negotiation for trade-offs between members of different parties and there has been in the past. there would be perhaps even less so if everything were transparent and you know if everything were televised. as far as audit function for the ethics committee, i don't think there is anything, think it is a good idea in principle but obviously it would require a vast increase in resources by the ethics committee and whether or not these days of tight budgets that would be possible is a real question. and also i would be concerned that if all communications, congressional communications, with whoever were to be transparent, and to think there is are some serious chilling effect. >> got you.

a fair point by all. i don't think either one of these bills deal with personal real estate that you brought up were a person would increase the value of their own personal real estate by advocating for policies that would help them regardless of what that would be. it seems to me that is much more, much easier to track down than insider trading. it is that a fair statement? go ahead. i don't deal with insider trading so i have very little knowledge of it. i wish i had enough money to even buy stock, but i don't. go ahead. >> one possible scenario from that example would be essentially insider trading and real estate, taking nonmaterial information using it in a real property purchase as opposed to a securities purchase. >> or purchasing property in

enhancing it with policies. >> that's also -- that could be another problem as well. that is not the same problem is using material, nonpublic information that was learned in government service. it's actually purchase physical real estate. that would be prosecuted under the federal mail and wire and -- and there is precedent where a government official actually a chicago politician, used information that we came upon in connection with his aldermen service and he was prosecuted under the federal mail and wire fraud statute under the department of justice. >> did he use that information to buy land? >> i believe it was an interest in an apartment building that was going to receive a tax abatement. >> what about if you own land and you advocated for an appropriation to build a highway over it or something along those lines that would add value to

that property? >> well and one could imagine a similar situation on the security side where one takes a favorable legislative action to a company whose stock you own so again that could be a problem. >> but, this bill would not cover that. >> not that i see. >> okay, very good. thank you mr. chairman. >> do you have more questions? >> i have got some questions but i think i have one hammered out. i appreciate the panelists perspective and thoughtfulness and as we look forward, think as i might just say something mr. chairman. i think it is very difficult to take a look at ourselves and say do you know what, people think we are crooked. when you don't think you are doing anything wrong and there is no intend whether that is dealing with policy with the farm program were talking to one of your neighbors about which

may impact the price of wheat or god knows futures or something like that. on the other side of the coin i think it is critically important that we operate in a way that is totally clean, totally cleaned and if there is any way we can do that, we should make those policies quite honestly mandatory. transparency important and i get your point robert. i mean i do get your point. but as far as come as far as the forms we fill out a dot suball be on line in searchable databases or schedules ought to be lied. we should be letting people know everything that they should reasonably know on line in a way that they can access. not just on line but i think we need to be aware of this. we have eight or 9% rating? that is probably do much more to this but i don't think this helps to and by the way of somebody in the senate where somebody in the house do something crooked, it reflects

on everybody whether they are honest or not and that is just awaited so i think we need to address it but we need to address it in a commonsense way that gets to the problem and doesn't create more problems than it fixes. >> thank you very much senator tester. senator mccaskill, welcome. >> thank you. i apologize. i have been presiding in the senate so i haven't been able to be here. i think it is pretty important we clarified that this loss applies to congress. i know that there is one of those good old-fashioned legal arguments that is great for the hypothetical for a law question that the purpose is in clarifying to the public i think regardless of what the fcc says. i think it would be very helpful for us to pass legislation and make it crystal clear that the rules that applied in companies and to ceos applied just as much to congress in terms of their ability to have been used information not available to the

public. and you all may have covered this comment if you have don't answer the question so i can move onto another one. have have you all characterize why you think it might he a challenge to prosecute these cases in congress? has that been covert? >> senator i think i talked a fair amount about the debate clause that will lead to prosecutions being difficult which is why i think in addition to federal law you also need to have enforcement over that too. >> and i think we address certain other practical problems as well and enforcement in the congressional context. >> while the interesting thing is, the former prosecutor it seems to me that one of the things that makes it easier to prosecute these cases in congress is that it's much clearer what is a public record and what isn't. i think it is more -- and private companies what is in the public domain and what isn't.

here we have the hearings in the record is available to the public. we pass laws and they are available to public and then it is publicly available. there is a great deal of information that prosecutors could easily see whether or not this is something that someone who looked into it could find was some great deal of ease or whether it be more difficult. so in some ways, would anybody disagree that in these cases might be easier to prosecute because of -- i mean it is very hard to have inside information in congress. i mean, this place is pretty open in terms of what gets out to the public that even in a formal context, a great deal of our work is publicly done. >> i wouldn't disagree senator mccaskill, but i do think, because so much is open in congress, that it does become difficult. the issue of someone being

nonpublic, nonpublic information, that would be an obstacle to overcome and if that were alleged in any given case, i think you would find some pretty, pretty rigorous defenses and attempts to prove them probably successful to prove that ultimately the information in question was public. >> right, right. i have five things that i've been meaning to do better in legislation and probably some of them have been mentioned that i want to make sure there are agreements on any of them that we need to expand the covered information, because we need to also talk about regulatory action, grants, earmarks, contracts obviously, shorten the timeframe of disclosure. i feel like that's important and i feel like 90 days is way too

long and we do have a measure of transparency now that allows some of the things to be written even though a lot of the things that were written were inaccurate which is flat wrong. certainly, the fact that purchases were made and so forth, was available to the public because of of the rules we currently have her go expanding the types of securities that are covered, explicitly stating to members and finally specifically laying out in the legislation of members cannot get insider tips. okay, those are the five things i think we need to put in a the legislation and i think you know we have got a significant amount of problems out there with the public right now. i think mr. chairman to more quickly we can pass this legislation and demonstrate to the public that none of us, frankly, you know i'm not sure i have met anyone who has gone into this lundberg because they thought they were going to

receive a great deal of money for it. i'm not arguing that there may have been some people that abuse their positions in a properly. certainly there've been people who have gone to jail in congress, but i think all of us want to make sure that the public knows that we are not using this position in any way to gain personally from it. the more we can do to reassure them in that regard, the better and i think we need to write this legislation in a way that does that. the last thing i would ask about is about earmarks. you know, earmarks are a tricky area and we have a current moratorium on earmarks and i'm cosponsoring legislation that, very permanent moratorium on earmarks but i think that knowing that a member of would have the ability, single-handedly, to put public money in a project certainly could lead to the kind of

information that would allow someone to benefit from that knowledge, since there is absolutely -- there is nobody who has any say as to whether it is good, better and different other than that individual member. have any of you discussed how earmarks might also lend themselves to this kind of activity that the public would obviously disapprove of? >> we discuss it but if i understand what you are saying you would be a kind of internal nonpublic information. do you know that you are going to earmark resources for a particular project and it will benefit particular companies when you buy that stock? that falls neatly under the category of misusing material nonpublic information. >> there've been thousands of earmarks done for research and development into certain types of technology and a great deal of that knowledge is worked itself into the marketplace. so, think that is one area that we need to make sure that we cover because that is the

essence of any insider information. somebody single-handedly can provide the resources to a company to make that research and development reality. >> i would certainly agree with respect to earmarks. as you listed off your five fixes, i would encourage you to think of a sixth or to list a sixth would be a clear statement in any legislation that it delves on the floor of existing law, and so that it should not in any case be read to displace rule 10b-5 of the federal securities law and the mail and wire fraud statute in connection with government employees, congressional official members of congress, securities trading. >> at the root of these these are good old-fashioned fraud cases, right? >> exactly. >> i think i would be important because we don't want to start a whole new precedent.

not that we don't want all the lawyers to stay busy. >> in that light it is rather important to not try to redefine established terms. they are redefined in this legislation that would raise questions about whether congress has different information that in ordinary cases so if you say are adopting the existing case law with respect to all the terms that going to the prosecution and you have done that before i think that gets greater certainty to the courts. >> i think that's a great idea and i will share that with other co-sponsors of the legislation. i think there are three or four of us that are working on this and hopefully. we will look or your input as we further get it drafted and try to improve and make it as strong as possible and we appreciate all of you being here today and helping us with this. we want to do this right. thank you mr. chairman. >> thank you senator mccaskill. i mentioned before you could be here that ideally we will get something drafted that we can get a majority of the committee before we depart in december.

i have a couple more questions. i think we have gone over pretty well, very helpfully to the committee, what we should do in response to this problem in making clear in law the unambiguously if i may say so, that members of congress and their staff are covered by insider trading laws. there are two other responses that are possible here. one deals with senate ethics and i want to come back to that in a minute but the first thing i want to talk about his disclosure which you also talked about. and this is more in the way of prevention or of course it may accelerate the discovery of a problem. so i want to start with you ms. sloan and talk about ideally, how would you alter the requirements in the ethics in government act for disclosure?

we have talked some about obviously senator begich focused on the electronic filing, our filings and i think that is a very good idea. you talked a little bit about requiring that we filed more than once a year, presumably after transactions because i wanted to invite you to spend a little more time about how you would ideally have this change the ethics in government act with regard to filing? >> the personal financial disclosure form has very broad ranges of assets and i think that they could be narrowed substantially. you wouldn't actually have to, if you didn't want to, change the ethics in government act which would therefore change the form for everybody by house and senate rules if you chose to so you would have to go through that but the ranges are so wide it is often impossible to tell what a person's assets really are and how much income they

have had with those assets. in addition to that, i understand that they are filed once a year and they are filed even then six months after the previous year and so they are pretty far down the line. those forms who are not in a form that is searchable so if somebody, spoke with a porter for example who want to see if its members had any specific asset and you can't search them for that kind of thing. in this day and age the technology that is available there is no reason that these forms aren't put on the web quickly and in searchable form so that the information is easily accessible so that if there is wrongdoing it can be ferreted out quickly and often the support of public opinion would be helpful here. >> i agree, so one alternative here and i presume i will ask you to respond to it, is either instead of or in addition to having us fill out the whole form is here that there could be some requirement to file

amendments after stock trades at a certain amount. >> i think we have something separate for stocks so that you do that form once a year but i would say rather than the 90 date period that's included right now, i would get it down to something like 10 days because again i don't think it needs to be soap verdon some that the information can -- so somebody only has to hit a button to transfer into the speaker database that the senate for example could maintain of all such information so doesn't need to be burdensome what it set up. if that was set up, and also as i said i would make clear that lying on those kinds of forms, failing to willfully failing to disclose that information that could aid a false statement to congress and those kinds of false statements or by the way much more easily prosecuted than anything else we have been talking about. >> before i move onto the ethice

same and change by the senate in this regard. do any of you have any other ideas on the panel about how we might alter the existing senate and house disclosure rules to prevent insider trading or at least make it more discoverable if it occurs more quick way? >> well i do agree that the provisions in the stock act that would call for public disclosure of stock transactions within a specific period of time would go a long way to deterring insider trading, wherein, where it may be occurring. i am not sure i agree with the ten-day period for doing that simply for the reason ms. sloan mentioned, failure to provide information could be prosecuted under the false statements act. i think 10 days is a very short

window. maybe 90 days is too long, but i do think that kind of frequent, more frequent periodic disclosure does make sense. >> okay, let's spend a moment in my last series of questions about our ethics, the rules of the senate. your concern ms. sloan about the impact of the speech and debate clause of the constitution on prosecution of members of congress for insider trading using insider information. so, how would you change our rules to deal with this problem? >> so the speech or debate clause only applies if a member is being prosecuted. this doesn't have any implications at all for the ethics committee which is why that looks better in some ways. >> for the ethics committee and for congress itself. >> writes of the ethics committee while a prosecutor can

easily be able to obtain and sift through for example committee files to see if somebody really had inside information the ethics committee absolutely could review that material and so that is why that would be so significant to make sure that the ethics committee does have jurisdiction but i think that the ethics rules are not clear enough and the house ethics committee two days ago issued guidance, but again, i think it is imperative to make it crystal clear and lay it out. the other problem we have seen is the ethics committee are very soft frankly and members of congress. someone is only going to get a mild reprimand or letter of admonition for doing this, that doesn't hurt very much and there's a lot of disincentive and if you include something, include some kind of financial penalty that money were to be turned over to the treasury that some significant amount like i gave you three times, but it would be open or about the profit or loss, that too would be a disincentive. >> so what you would do here is

made clear in our rules that insider trading is a violation of the rules? would it be as simple as that? >> , and there are certain penalties for ghosts be okay, based on your experience would he think of this idea? >> well, as i said in my statement i do think there are rules that address this. i think the big problem here in the senate and in the house with respect to use of paragraph 8 of the code of ethics for government service is that they are just isn't across the board from committee to committee and office to office they are not specific obligations and rules and policies regarding what information is confidential, and i think getting added at that level is important. i think there are rules in place. i think that there were a rule crafted that mentioned insider-trading specifically, as part of rule 37 on complex of

interest, that would not be harmful provided it were crafted in a way as you are carefully considering. it would not have other chilling effects. let me just say that as to the notion of the ethics committee's actions, perhaps not having force, i would perhaps want to ask certain members whose careers were ended by receiving letters of admonition whether they think that is a soft action. the ethics committees to pursue allegations that come before them. they are not criminal enforcement agencies, but i do think if you chose to strengthen the rules regarding insider-trading within the congress, that would be a reasonable approach. >> could. a final question bringing to parts of this together if i may. ms. sloan just mentioned this fact. two days ago issued me know the house ethics committee released a memo to all house members and

staff stating in part and i will quote here, house rules prohibit members and employees from entering into personal financial transactions to take advantage of any confidential information obtained through performing their official government duties and of quote. so i wonder to what extent if any extent that kind of statement by the house ethics committee establishes the necessary fiduciary duty that we have talked about as a condition of a successful insider trading case against a member of congress. >> i think you are going to get different responses from the three of us because fiduciary duty is the kind of property right. it is the relationship between the director and the company, the employee, master principle etc.. an ethical duty is far more general reaching. look at it this way.

the boy scout oath is an ethical duty. i don't think he gives rise to the kind of relationship that would support criminal prosecution. >> i share much of that you. i think to a judge, predisposed to the fiduciary duty on capitol hill, that simply adds to the case. to a judge not inclined, there are all the ways in the world. ..

for prosecution as well as justice department prosecutions are based on such a mesh, where everyday ordinary individuals will be prosecuted. they are not and exclusive fiduciary relationship and what is included in the sec's complaint or the justice department indictment is fair optical language sounding code like a boy scout code. and that is put an end as a paragraph in the indictment or the complaint. so to answer your question, this would be another paragraph getting a complaint if it comes to that. >> thank you. you've been very helpful.

senator mccaskill. >> i just have one question. how do we address sales in terms of disclosure, purchases and sales within a message found. in other words, if a member has a farm that they buy, which is a large index fund or some kind of fund coming to you believe that the duty to report, would we be creating a new duty for the manager of that fun to have to let this particular member know when they're buying a selling stocks within assigned? or whether only be a duty and your mind to report the purchase and sale of the overall fun. do you understand the question i'm asking? [inaudible] >> correct. >> it will influence the fund

manager. it'd be different. >> right, right. so obviously there could be no information going from a member of congress to the manager, but whatever it questions the manager had the legal authority to make internally at the member had no control and i would not have to be something reportable every 10 days. okay, she's curious i'm not. thank you. >> senator mccaskill, thanks very much beside the view. it's been an extraordinarily helpful panel and in some sense it's like we've been sitting around the table, which all of us acknowledge, how can we best solve this problem legislatively i think you thought the committee very substantially doing that. and you also made the mistake of offering to continue to be available to review the work we do, so take advantage of that. i said earlier that i hoped we could do something on this before we leave. december 15 is two weeks from

today. but we can do that. i think we have to find a balance here to make sure it because this is important and complicated that we do as much as we are confident that we've got right and if we hold parts of this over and sale of january when we come back, that is not terrible either. but we will leave the record open for 10 days for any additional questions and statements. i think the witnesses again very much. and with that, in the hearing adjourned. [inaudible conversations] [inaudible conversations]

>> within 90 days of my not duration, every american soldier and every american will be added this hostile and back home in america where they belong.

>> members of the house financial services committee looked into the fiscal health of the federal housing administration yesterday. earlier this month each in a released a report to congress on the concurrent budget situation and revealed as the housing market continues to worsen the agency is at risk of meeting federal health. in testimony, housing secretary

sean donovan said there's no need for bailout of the fha that spark or the the reserve fund is being monitored closely. risks are being assessed to protect taxpayers. this is just over four hours. >> the actuarial study of the fha mutual mortgage insurance fun. i welcome secretary donovan, acting fha, commissioner gallant and other witnesses today and i'd like to take this opportunity to express to you, secretary donovan on behalf of the people of alabama very cards and appreciation for your effort during the tornadoes that struck alabama. the response was excellent. we appreciate your professionalism. two years ago this committee met to your disturbing is that the fha capital reserve ratio, which is the primary barometer for

measuring the fha financial solvency had deteriorated to a level of .53%, which is well below the statutory requirement of 2%. since then, things have gotten worse. the capital reserve experience further declined 2.5% in 2010 and then on november the fifth candidate this year, the independent actuarial study revealed the capital reserve ratio had fallen more than half that now stands at .24. having said that, we should also acknowledge that we have witnessed an historic housing market correction with the largest drop in home prices in history and the worst economic downturn since the great depression. with this background, it is not surprising that fha capital reserves have suffered. we also need to recognize that a substantial part of the problem results from legacy loans originated during the housing

bubble prior to the economic downturn. current loans have much higher credit scores and a markedly better performance. i'm encouraged that the fha has implemented some incremental reforms to shore up the insurance fund reserves and reduce risk of including hiring of a chief risk officer. however, and i think our witnesses have acknowledge these reforms are not enough. i share the concerns expressed in a november 7 gao office report that fha has yet to implement a comprehensive risk assessment strategy. a separate gao study released last week on cheney may, which guarantees the payment of principal and interest to investors and securities by fha insured mortgages. now that jenny may face the risk of financial loss due to inadequate orfield internal processes because of limited staff a substantial reliance on

outside contract yours instead of jenny may employees and the need for modernized information services. both the east gao reports coupled with an independent actuarial study all released within the last month to not pay a picture of a government agency prepared for the 21st century, let alone the immediate housing financial crisis. finally, mr. secretary, let me reiterate and i share door in the administration opposition to any increase in fha loan limit. the new levels of $729,500 at 100% government guarantee passed recently by congress was not the right course of action for creating an environment where the private sector can compete on a level playing field with government-subsidized entities in the housing markets. i look forward to your testimony as well as that of other witnesses. this time i recognize mr. gutierrez for four minutes.

>> thank you, chairman bachus for holding this human and i welcome secretary donovan and their other witnesses. i look forward to our discussion today in the federal housing administration, the help of visiting the family insurance home in the role that it continues to play in the housing market. we're going to get into details today, talking about actuarial studies and capital reserves. these are important issues that we must understand. what we notice the fha capital reserve ratio has fallen and continues to below the level required by statute. that is the fact that we have to deal with. the real question we have to ask her why is it is the case from a committee to ensure that the sun stays in the blood going forward. i think we can dismiss some theories pretty quickly. for example the idea that the fha has acted irresponsibly under this administration or

that it's actively trying to grow its way out of the problem. those ideas are simply absurd despite the talking point of some of my colleagues. most of the loans that are hurting the fha were made during the bush administration. the fha with the help of democrats in congress has tightened its underwriting standards, raise annual insurance premiums and increased down payment requirements for borrowers with lower credit scores. if anything, these are all policies that have reduced the fha's potential footprint in the market. those are just facts. the fundamental problem is that we are still in the grips of a foreclosure crisis that is hurting american homeowners. the fha balance sheet and indeed our entire economy. i think we have to discuss -- i think we have to focus on the fundamental issue in order to have a useful conversation about maintaining the help of fha into the future.

we also have to talk about where this congress is putting resources. are we spending the money to ensure that americans have access to housing counseling to avoid foreclosure? i think not. i would adequately requiring lenders to provide for modification for borrowers who are delinquent on their mortgage? i think we need to ask that question even more. are we doing more to ensure principal reduction is on the table of modification process? all of these things would improve the health of our housing market and improve the health of the fha and most importantly improve our economy. but i can't say i think we've done enough to help american homeowners threatened by foreclosure for underwater on their mortgages. the more laws we modify, and the healthier the fha funds will be. i hope that we spend time today talking about what the fha and other agencies can do to hold servicers -- services and i want

to have the secretary specifically about this, servicers accountable encourage more successful loan modification to keep families in their homes and get our housing back on steady ground. i look forward to hearing the testimony discussing how we fix the problem in a thank you, chairman bachus and yield the balance of my time. >> thank you, mr. gutierrez. at this time i recognize the vice chairman of the full committee, mr. hunt selling for two minutes. >> thank you, mr. chairman. sha is likely a disaster in the making and if we are not careful it may become cne and freddie to sql. a 400 to one leverage, 10 times the leverage that was employed by lehman brothers when they filed their bankruptcy, something is amiss. capital reserve ratio is almost 90 purse and less than the statutory required minimum. third-year -- working under third-year where the mortgage

fund has been undercapitalized. fha was a private financial institution, likely somebody would be fired or fined in the institution would find itself can receivership. instead what we have seen is an agency that is undertaken in annex dictionary strategy whose aggregate insurance in force is now more than tripled since 2008. we have an agency that now guarantees mortgages up to roughly twice what they did just a few years ago. certainly an example of extraordinary mission increase. it's estimated more than half of fha's current insurance in force is on mortgages taken out at owners who have negative equity in their homes. fha seriously delinquent rate first number was 8.7% up from 8.2% in june at a time when many

believe that we will see further erosion in home values. in february 2011, when the menstruations report to congress with a quote, fha should return to its pre-crisis role as a targeted provider of mortgage credit access for low and moderate income americans and first-time homebuyers. before the taxpayers get soaked yet again, and hope the administration's actions will match their rhetoric. i yield back the balance of my time. >> mr. scott, recognized for 3.5 minutes. >> thank you from its pre-secretary donovan, good seeing you. first of all want to start off by thanking you and hide for the very valuable assistance he gave to me in dealing with our home foreclosure situation in georgia. georgia is the epicenter of home

foreclosure. and my district which represents a suburban areas of the atlanta metropolitan area were so many of the huge home subdivisions are particularly headed, that comes almost two years after we had the great flood. so i housing situation in that area is very serious. and in that regard, we put together her home foreclosure event with the assistance of hud. and i really want you to stay thank you, express might thank you to a couple people understaffed, audrey crutchfield. i think you may know her. and also at jennings who is a regional person. and when you think them, i want you to encourage them to do it again with me because this problem is still there. we were able to help save over 2500 homes, but that is just a drop in the bucket. we need to get help down there

very seriously. if we start early enough as we want to start this year, we can save 10,000 homes. we are particularly serious with that area is the combined impact of high unemployment, people without jobs. with a severe problem with a lot of elderly. there is the reason for us to have to put 90 and 100 year old elderly people out. power they going to get help? we were able to save one of those fellow georgians just last -- this week as you know and we cut them in the home thanks to the good graces of one graces of undershirts. this fha was put together as a result of the depression. 34 when it was put together and it was put together for these very pressing reason and we need to do that despite the efforts last april, where i think the

congress cut $88 million. that is devastating to your department. so there is a row that we are playing in this cavalier budget cut that goes straight at the heart of where the greatest needs is for the problem. if there ever was a need for us to look very gingerly and avoid these massive budget cuts that helped to exasperate the very problems that i'm talking about. and so we are going to get into that today and i hope we can get the message loud and clear that we need to reverse this rather disturbing trend to try to balance the budget. on the backs of those areas of our service to the american people where they need the help the most and call upon those who can afford it, those multi-billionaires and millionaires who are not paying their fair share to help. this is a primary example of where we are.

america is a great country and just as they rose out of the ashes of the depression and four in the fha at that time, surely this is the time which we can serve its great sterling purpose and string them the funding for hud. so i appreciate your being here. thanks again for your work and let your folks to look forward to working with them again next year. we put that on for closer together we speak. hopefully we can contact your office. thank you. >> thank you. mr. royce, did you want a minute and a half? >> thank you, mr. chairman. i will yield back a minute. very good. thank you, mr. chairman. in 2008 and 2009, some of us are warning about the potential risk of the government agency headed towards their statutory old mandated 2% capital reserve ratio and we had hearings like

this and we were told at the time not to worry. that testimony with the fha was fine and the reforms they are going to to prevent a taxpayer bailout. i remember we had in october of 09 fha director at the time stevens was here. he became before the committee in his words were these. they were we will not need a bailout. secretary donovan, it and reviewing your prepared remarks, it is clear you are laying out a different scenario here. and given the actual roller report from tony levin i can see why. and not report the reserve ratio is now one quarter of 1%, which is a fraction of the statutory old mandated 2%. this leverage ratio is really -- i mean, it's about 244 to one. that would give pause i think to any regulator at this point.

and so the obvious question that i think we hope to get answered as you lay out your plan is what is next, mr. secretary? what is your solution for preventing a taxpayer bailout of fha i think that banking on a quick turnaround in the housing market, the rebound is not the safe way to bed. i think you need to lay out a scenario where we have got a plan that mrs. back from the brink that could lead to a bailout. i very much appreciate looking forward to your testimony here today and i yield back the balance of my time. >> mr. green for two minutes. >> thank you, mr. chairman. thank you for having a hearing. thank you, mr. secretary for appearing today and i am hopeful that what you will present to us

for help us understand how the housing market can bounce back with the help of fha. your credit scores have gone up to 700 average credit score. you have been assisting in areas where the market in general does not receive a lot of help from other institutions. i think we have to concern ourselves with the housing market in terms of the recovery. and i see fha is a part of that recovery effort. so i thank you for appearing nhs that when you have completed your testimony, we'll have greater insight as to how fha will play a meaningful role. i'd i'd balance of my time. >> thank you. mr. miller for a minute and a half. >> thank you, mr. chairman. mr. donovan, thank you for meeting with this morning. a nice conversely shiny to look for ways to shore up the fha insurance fund and falling home prices are a major reason in the situation you're in.

until we reform the and system they will continue to falter and people lose money in this economy will not turnaround. the housing market is a very, very complex marketplace. there's no doubt we need to try to bring the private sector back to fill the void has been created out there. and so we do that, somebody has to step forward and make sure there's liquidity in the market place that was the recently formed the fha and the gse to do that. many times will we do is very local. i told you about the situation, she knows about the people suffering from edison power reserve behind their homes. i was nothing to do with them, nothing to do with edison. the sid of california mandated renewable energy must be provided the state of california said they installed 200-foot towers behind homes. the problem is fha does not lend in certain areas. others many fha loans within that area right now because the homes are out of there right away. the towers had doubled in size

and now they are within a fall. i know it is a great area for you, but it's a very serious area for the people impacted. i want to thank your staff are working with the sums issue, but it's something we to look at and say what is right? the people bought in good faith. they are not in the right away but because of the state of california's has mandated us put them in a very difficult situation and the impacted them in the pocketbook. not only has the marketplace had a negative impact as falling prices has, but now it is sent to them for the betterment of the state so-called has had a real impact on their finances and they're angry. they have a right to be. we have an opportunity to go do we need to look at that. i just would encourage you to see which you can do in that area. whatever help you provide, these people appreciate it because through no fault of their own they bought in good faith have lived there for years in good faith and now they are impacted. i went to thank you. it's a huge issue in whatever you can do we appreciate.

i yield back. >> mr. lynch for one minute. >> thank you, mr. chairman. i want to think what this appearing before this committee, helping us with their work. i want to hearken to the remarks of mr. royce of california. i was on those meetings as well when i raised concerns about the capital ratio back in 2008 that we receive direct assurances from fha that not to worry we got her arms around this. we're going to handle this. were not going to go below the statutory minimum. but then we called you back in eight meetings in my office. we agree assurances again that you are going to handle this. and here we are and how you take yourself in such a deep hole that you are going to need some funding. you need a bailout for some drastic measures to dig yourself out of that hole. and that is a problem. there seems to be a pattern of denial that things are going to get better and were going to turn this thing around. and we didn't hear a peep to

reverse this decline. and that is a problem because now the problem is significant and it's going to be more difficult dealing with it now because we have allowed this shortage to accumulate. so you know, i'm just disappointed that we didn't have the acknowledgment that we had raised appeared, that we saw happening that doesn't reflect at the agency. there were things that could've done that would've been less disruptive several years ago in the hand we've got to play now. and there's a lot of people in this country -- a lot of homeowners that are -- >> mr. lynch is recognized for additional 15 seconds. >> thank you. we have to work together. we can't have recent concerns and the agency blowing assassins and there's no problem with them at the mass numbers got to do something drastic to correct it. we need to work better together

i guess. i'll be interested in hearing how you're going to come up with this money, all these resources to fill in the shortfall. thank you. i yield back. >> ms. capito for a minute and a half. >> thank you like to welcome mr. donovan back and thank the chair and ranking member for the hearing today. having sat through many of these hearings over the last several years, i actually -- as the speaker before me sad when a red flag is in front of us, we need to pay attention and we see a major red flag here with the decline in the capital ratio. the secretary's defense i would say some of -- he has begun or attempted anyway like improvements to the program like raising the annual premiums and other things that can be done, but we need to work hand-in-hand both legislatively and through regulation to try to improve what is the seriously declining and i think situation.

with the actuary report saying that the mandated reserve ratio is down to .24%. as time to take you more than pay attention. it's time to take action. a pledge to work with you. be given fha reform bill last year. i believe it didn't make another through some of the ideas in the bill contained would be useful in helping to alleviate the situation. changes current and prior is like tightening the standards and increasing premiums enhanced enforcement i think they are in a declining situation and asked if heard how it acco my voice a bailout to the fha is something intolerable to the american people in this congress. are are they to thank the chairman for holding the harriman. >> thank you >> ms. maloney for two minutes.

>> thank you, mr. chairman. and ranking member. i am really honored to welcome all of the panelists today and particularly to welcome secretary donovan and say that new york is so proud of you. thank you for your public service to our state and city and thank you also for your public service for a nation. the fha represents a critical leg of this tool is housing finance and i think it is safe to say in the wake of the most recent financial crisis we are all concerned about the fha's ability to continue to insure mortgages. over the last year, the fha housing short 218 billion single-family mortgages. helped more than 362,000 families avoid foreclosure through authentication and

helped 440,000 families refinance their mortgages to a lower rate. some of the live in the district and honor to represent and they are very grateful. but the importance of fha's role in the housing system really must be underscored. fha is really the only game in town right now because the private sector has largely disappeared from the market. however, i am concerned and i join my colleagues that have expressed their concern that the actuarial report indicated that the fha's neutral mortgage insurance fun capital ratio fell from .50% in 2010 to 24% in 2011. and i do know there are very few reasons that led to that decline, including the decline in home prices i hope will see

an uptick in that raid is the market stabilizes. i believe the arterial report with a lot of hard work and help from the economy that we can move towards the level of 2% by 2014. in the meantime i understand fha is undertaken important steps to ensure the health of the fund by strengthening risk controls, underwriting controls and enforcement increasing premiums and expanding loss mitigation assistance to avoid unnecessary claim. so i look forward to your testimony. i particularly would like to hear your take on the legislation on fha reef warned that has been presented by the republican majority and again a thank you for your efforts to help americans stay in their homes and finance their homes. thank you very much. i yield that.

>> mr. garriott, one minute. >> i thank the chairman for holding this important hearing on fha and its future viability and latest in a actuary report that just cannot resist real concerns. unfortunately as you know congress just decided to expand the role of the fha before they had the opportunity to study that reported death. mr. secretary but in your position for three years. be sure the report comes out. featured things sure deterioration guy gets worse and worse with regard to capital position. as mr. lynch has indicated prior to that easter you come here and basically your subordinates say that things are fine, good financial conditions and projection shows include a better year after year. however as i say if you look at reports that come after you speak to us, things continue to deteriorate. they get worse and not improve. they erode. so when you come here now and tell us no hurry, be happy, things are okay and improving, i've heard that record before

and i really wonder why we should believe that why we should not anticipate in a few from now to spring you will be coming to mr. lynch and i and the rest seem you need to be bailed out. i had to this one other comment. i have heard some comments out there for mr. volante that even with this alarming situation, the fha is not really point to make any other additional significant policy changes. rather the answer is simply to grow its way out of it. i really wonder then whether or not growing your way out of this problem is doing more damage to yourself, but also more damage to the earth freezing out private mortgage guarantors and the rest of the private sector by doing so. so i have a lot of concerns as to the track record up to date and also where we are going with this. and i yield back. >> thank you, mr. garrett. mr. ackerman for two minutes. >> thank you, mr. chairman. the secretary, thank you for the great job you're doing under under difficult circumstances.

i don't think the sky is falling. unlike some of my colleagues, i think you ought to be congratulated, not criticized for the fact that your market share is expanding for some people is that excluding. your agency has been designed for that purpose, to be countercyclical, to pick up the slack when there are no other lenders. that is your job and that is your role and you are doing it in your doing it quite well despite the fact or point out the highlight of the fact is the quality of your borrowers has increased as the audit indeed shows for the first time been over 700 on this course. that is a very good sign in a very positive sign in a very troubling times. there are some reasons to be concerned anything your

testimony that we have seen so far is very, very realistic and we have to figure out what to do if indeed the housing market continues to decline and prices decline anyway. my second point is basically here in the years the bush administration the kind of branded themselves as the ownership of her not to own something especially their house. people found ways to market houses to people who are really no sub timelines. they were tricky and some tedious, but the bars were subprime. how do we've highlighted that i thought we had gotten away from some of the causation of the problem. but i find but i find an ad in a see many like it. this is from one of the major newspapers in my region in new york. cambria heights, foreclosure.

one family close prior at driveway, full basement asking $163,000. bad credit, no credit, okay. won't last. why are we still selling and marketing to people who have no credit and bad credit? this is not advertised as being out of your shop in anyway. i don't want to advertise. this is still going on. people are being induced by lenders, not your agency, but by lenders to buy houses when clearly they are marketing of the people who afford it. no credit, bad credit, who are they asking to buy houses to? what do we do about it? and i will yield back the balance of my time because they do have some specific questions for you in that moment comes. >> thank you, mr. ackerman.

ms. beckenbauer for 10 minutes. let me at this time it knowledge that ms. carol volante, who is the acting federal housing administration commissioner is seated at the witness table with secretary donovan and is an accompanying him today. and we appreciate your presence and you'll assist if needed the secretary. and i have enjoyed our conversations over the past few months. so we welcome you to the hearing. >> thank you, mr. chairman. >> we are having long opening statement defending as those members who wish to make an opening statement do so. >> thank you, mr. chairman. mr. secretary is good to have you here. i mortgage a fun of report

issued issued. because it didn't paint a pretty picture. the summary said it was actuarially sound. and i was pretty sure if we went to webster's that an entity that had less than 1 penny of equity. in fact it is not just less than one. it means less than a quarter with such a huge book of christmas would not be an entity that was probably actuarially sound. i think the other thing troubling about that and our good friend mr. garrett made the point is when we go back and look at previous reports in the out years we have missed those every year. and i am looking that way new look at the single-family book of business.

it is .12%. i was trying to say how much of a penny that would -- that you could show that flake 86 to one leverage any company is regulated would be in some kind of bankruptcy or conservatorship how do we fix this one of the problems is the fact that you're not below being out of money at this particular point in time is the fact that because i've would credit the private market out of the system here, you're getting the majority piece of business and so it's almost a self-fulfilling prophecy here and if we had to take actions to reduce the amount of business as a case to a producer market share to traditional levels, you wouldn't have the new income levels to support the act to reduce right now. so it is going to be interesting

to year from you how we bring fha backed to more traditional levels as far as market share and at the same time keep you from having to dip into the taxpayers fund. so i look forward to our question-and-answer period were you when i can discuss that. thank you, mr. secretary. >> thank you. mr. hayworth for one minute. >> thank you, mr. chairman. mr. secretary, you may know i am the cochair of the nonpartisan hurricane irene coalition here in the house. and my priority as is there is to ensure that we had the fullest possible access to the federal funds that we need to recover from hurricane irene tropical storm lead. over $400 million in disaster has been made available to the community development block grant program. as you know, my home county is denied this health as well as

the cg funding due to an ongoing dispute with hud over what can reasonably described as punitive terms for a settlement that was made before the county executives took office. that is despite the fact that westchester has a funny and in good faith for over 700 unit of affordable housing in a county that has a limited amount of land. we have a lot of open space, which is good for the environment. so mr. secretary, asking as a member of the hurricane irene coalition and as the representative for a good part of westchester county that you please work with westchester county to provide the critical recovery funding that the county needs and deserves any thank you, sir and look forward to your testimony mr. chairman i yield that. >> i'd like unanimous can send to for the record to reflect that there is a nonpartisan caucus on capitol hill. [laughter]

thank you. mr. dole. minute now. >> is certainly one of thank you for what in the hearing. secretary donovan, thank you for being here. we usher, objective which is more sustainable and effective mortgage finance system. regardless of political party, most would agree that such an improved system should have three primary components. first we to promote the private dirt as their primary mortgage financing source. second be to restore long-term stability to that in fact there and third would be to protect taxpayers from future bailouts. afterward he paid over $100 billion in fannie and freddie losses and with potentially hundreds of billions more in the coming years, taxpayers also remain exposed to large fha losses because the fha guarantees over $1 trillion of mortgages while maintaining only a tiny fraction of that number

in insurance reserves and other resources. solving this problem is absolutely critical for taxpayers for current and future homeowners and for our economy as a whole. so i am concerned when i see you additional solicitations coming out and there's one over here that i just thought talking about trying to get additional loans with the fica score of only five a.d., these very concerned for me and what we have to do is come together to make sure we sure this up for the american taxpayer and future homeowners. i look forward to your testimony today. thank you so much for being here. i yield back. >> thank you. are there any other members on the minority side or any other baby ranking members in waiting that would like to make an opening statement? already. at this time, mr. slacker for one minute. >> thank you, mr. chairman.

mr. secretary, i look forward to your testimony. i'm operating under two premises. one died a shock in the fha loan system would be horrible to the real estate market, particularly from arizona. but the second part of the premise is you are in violation of the law. looking at the statute that you shall maintain a 2%, i look forward to learning why i am wrong in the way of reading the statute. second thing is going to the actuarial reports and please forgive me if i missed it. i am trying to get a good definition of breakdown of properties and mortgages on your asset side. what is the breakdown? how much is actually held and properties? how much is held in paper? and ethnic good friend mr. dole just mentioned, this probably new this is a correspondent lender. when you get an e-mail soliciting an fha loan with the 580 fica score, and makes you a little nervous if you're going

to grow your way out, to grow your way out with higher risk loans. thank you, mr. chairman. i yield that time. >> mr. canseco, recognized for a minute and a half. >> thank you, mr. chairman. and thank you undersecretary for being here today. yogi berra once said that two all over again. the latest actuarial report on the state of the fha insurance fund is reminiscent of warning signs we saw from friday night -- fannie mae and freddie mac. even no fha has been below with statutorily required capital ratio for three years, and now has expose taxpayers to over $1 trillion in liabilities and the agency now guarantees almost one third of new mortgages in the united states. even a cursory look over the latest report brings into question many of fha's

projections about the health of the housing market and its ability to cope with future losses. putting taxpayers in such a risky position is on except the ball. and it is a stark example of the consequence is that the decade-long foray of government meddling in the housing market. today's hearing is of extreme importance and i look forward to hearing from eyewitnesses on this matter and i yield back the balance of my time. >> thank you. if there are no further opening statements -- [inaudible] [inaudible conversations] >> we could get additional time during the question part. at this time, i would like to welcome secretary donovan and ms. gallant. the secretary has a hard staff of 12:30, but i understand that

the commissioner can stay longer if members have questions. mr. secretary, you're recognized. well, without objection, anyone else -- members that want to submit written statements will remain a part part of the record. and so at this time, mr. secretary, i yield to you seven minutes or eight minutes. >> thank you, chairman bachus for the opportunity to testify on the status of the fha and then my son and the fy 2011 actuarial report. but before i begin i want to say a quick word about ranking member frank who announced his retirement this week. given that he has never been exactly the retiring type, i am sure that the congressman will continue to be a passionate and effective advocate for families on main street that he has always been.

mr. chairman, this report arrived in a significantly different environment from the one we faced upon taking office here than our economy was shedding over 800,000 jobs a month, housing prices fall in for straight months of foreclosures were searching to record levels month after month. today nearly 13 million homeowners have refinanced their mortgages and april 2009, pretty nearly $22 billion a year into the hands of families in our economy. and with recent changes from shf bay, where refinances are on the way. today because we provide responsible families opportunities to stay in their homes, member of families going into foreclosure is down 45% since early 2009. more than 5.3 million mortgage modifications have been started since that time. central to this progress has been the fha, which has

undertaken a mission that congress up for it after the great depression by taking over 1 million loss mitigation actions to help families keep their homes and healthy 2.25 billion first-time homebuyers realize the dream of homeownership. 56% of all first-time homebuyers last two years and 60% of african-american and hispanic home buyers last year alone. as the actuarial report we discussed today finds, while we've been through the second worst housing downturn in the history of the country, fha unlike many other institutions retain the positive fund balance in the current book of business is strong. specifically the actuarial reports insurance downloads books since january 2009 posted estimated that economic value of $18 million with the new 2012 but the business six update two at $9 billion alone. it reports although the capital reserve account is $4.7 billion, fha's total reserves stand at

$33.7 billion, $400 million more than in 2010. the fha has been able to weather the fort stormed us are just as it is no accident. indeed with partnership of congress and this committee, we been able to put in place the most sweeping reforms to credit policy or risk management, lender enforcement and consumer protections in fha history. reforms of the actuarial report makes clear that it produced real results. with your help, we been able to increase premium rates three times under this administration coming yielding significant added revenue to the fund. we've also put in place a two-step fica for, which required those that credit scores -- low credit scores to contribute a minimum down payment of 10%. only those with stronger credit scores have remained eligible for fha insured mortgages with the minimum down payment. this approach is based on fha

data that clearly shows the success of the firework depends on a combination of that tours that include the loan-to-value, but not alone. the changes we've made significantly improve quality and performance of fha loans were nearly half of fha borrowers has scores below 622,007. today the average fha credit score across all barbers is over 700 for the first time in fha history. for home purchase loans originated in 2011, early payment default rates are less than one sixth what they were in early 2008 and for streamline refinance loans, they are one 12th of what they were at the peak of our president obama took office. we've taken other steps to protect the fund as well, including critical enhancements to lender enforcement powers trying to prove a little over 1600 lenders to participate in fha programs. more than four times the number during the entire tenure of the previous administration. with these actions we are sending lenders a very clear

message that if you don't operate ethically or transparently, we won't do business with you and we will not hesitate to act. mr. chairman, they cannot be overstated. indeed were it not for reforms, many of which the committee thought that possible, fha would be seriously in the red today. on the strength of these new books of business, not only does the actuarial report find the fund retains positive capital today, it projects that fha should deal to rebuild reserves to the congressionally mandated 2% threshold quickly once markets across the country exhibit sustained growth. indeed using base case projections based on these analytics forecast, the actuary expects capital reserves to reach 2% in 2014 sooner than was projected last year. of coarse, for all this progress, very serious challenges remain. like any other organization in the housing finance sector, the

actuary finds fha's finances are very closely tied to home prices, which had been broadly stable since we took office, but weaker than expected in 2011. in particular find fha's older books of business underwritten during the bubble years will continue to produce losses of more than $26 reports half of high risk loans in the peak of the housing bubble will ultimately result in a loss for the fha with more than one out of every four loans insured in 2007 resulting in insurance claims hamas is opposed to $10 million for the 2008 book of business alone. that is why we continue to pursue additional reforms to protect the taxpayer, support the housing market in the the fha historic mission of helping underserved borrowers. in the very near future we expect to publish an indemnification multiple lenders

in fha's wonder insurance program responsible for loans that were improperly originated or in which fraud or misrepresentation were involved. in addition will soon publish a rule that reduces allowable seller can actions to protect the mmi funds from risk associated with inflated values. now that we have this actuarial results, were carefully examining a range of additional steps to further strengthen the fine, including enhancements to last mitigation protocols and whether additional premium increases are necessary. we expect to announce the next steps in our proposed fy 2013 budget and will work with congress as we have throughout. we must also continue to shrink government a prank on a key goal of the administration's white paper in the future of housing finance in a processing pleased to report has already begun in fha or premium increases increases and underwriting changes. indeed while fha's volume grew dramatically during this crisis, in 2011, fha loan volume was down 34% from its peak in 2009.

fha's current market share of mortgages is 14% and declining for the first time as 2006. during these uncertain times, as they carefully manage the balance between helping the market recovered and working to bring private capital back, this represents important progress. and so mr. chairman, while none of us can predict what the future will hold, what we do know is these new loans we are making are the strongest in fha history. given continuing fragility of the market, we must continue to be vigilant and prepared to take additional steps to protect the taxpayer. as it has been since the outset of this administration that remains our goal today. thank you. >> thank you, mr. secretary. mr. secretary, the obama administration's white paper and you referred anything to that without naming it, reforming america's housing finance market that was relation february indicated that the goal to encourage the return of private

capital and reduce the risk of american taxpayer. the lucky not to actuarial report from fha, it assumes that the fha market share -- it assumes a market share of no less than 20% all the way to ask why 2018. do you know why this is? and won't that elevated level of fha participation in the housing finance market discourage return of a private capital to the housing financial or? >> mr. chairman, you're exactly right. the report laid out a series of steps, not just for fha, that fannie mae and freddie mac as well to shrink their market share. the most critical steps that are were to increase the cost of fha

insurance and the guarantees that see any man freddie mac provide to encourage more private capital to come in. we have begun down that path. as you know with authority granted by this committee, we have raised premiums three times. they now stand at the highest level in fha history in fact it's begun to have result. as i just mentioned him always in our market share shrink from 17% last year to 14% this year. the latest quarter shows a continuing to shrink. in addition, we proposed in the president's proposal for the budget compromise reached this summer to increase premiums for fannie mae and freddie mac. i know that you supported that as well and that is the step we are working with fha on. in addition and we continue to propose and believe that loan limits, not just for geocities which have come down, but for

fha need to come down and return to their more historic levels so we can ensure that private capital does return. that was begun on those steps, but we'll continue to take steps going forward to make sure we do everything we can to bring private capital back to the market. >> thank you. you know the fy 2012 funding bill that the president just signed and of course the congress passed reinstated the higher loan limits for fha. and of course i did not support that. and i don't think the president or the administration supported that. but like your comments on not. and second, it didn't include danny and freddie. so my real concern or another concern ihop is what effect will that have to business flowing