quorum call:

he. the presiding officer: the senator from kentucky.

mr. paul: i ask unanimous consent that we end the quorum call. the presiding officer: without objection. mr. paul: i rise today to discuss gas prices. gas prices have doubled under this president, so today this body will consider new legislation which the other side, i assume thinks will make the situation better. but the other side's solution is to raise taxes on oil companies, raise taxes by $25 billion. any of you who have a business know that when you raise taxes on a business, it's simply a cost to doing business. when your costs increase from making your product, what do you do? you charge your consumer more. so i'm not sure what person is advising the other side, but i don't quite understand how raising $25 billion worth of cost on the oil industry is going to help gas prices. in fact, i think it's going to send gas prices even higher. now some on the other side say

this is a matter of fairness. everybody needs to pay their fair share. well, oil companies actually pay $86 million a day in taxes. the oil companies in the last ten years have paid over $100 billion in taxes. the people who say we just must punish them. they're making too much money, let's punish them. the oil companies employ 9.2 million people. they're 8% of our g.d.p. do we want to punish the people who are creating jobs, the people who are trying to make us energy-independent in our country? it makes absolutely no sense. some will argue we need to make the tax code fair and the oil companies have special exemptions. guess what? these exemptions and business deductions apply to other businesses, but they just want to take them away from one of our successful industries. it seems to me if an industry is

successful and creates 9.2 million jobs, instead of punishing them, you should want to encourage them. i would think you'd want to say to the oil companies, what obstacles are there to you making more money and hiring more people? instead they say, no, we must punish them. we must tax them nor make things -- we must tax them more to make things fair. the thing is this whole thing about fairness is so misguided and gotten out of hand. the rich in our society do pay the vast majority of our taxes. do not let them tell you kwroer wise. those who make over $200,000 pay 70% of the income tax. those who make over -- 47% of our public don't pay an income. so those who are saying the rich are not paying their fair share are trying to use envy and class warfare to get you stirred up, but it makes absolutely no sense. we as a society need to glorify

those who make a profit and those who employ people. we need to encourage more business in this country, and the oil company employs 9.2 million people. we don't need to heap punishment on them. we need to give them encouragement to employ more people. i will have two amendments to this bill that i think will actually make it better. while the president talks about people not paying their fair share, he's actually giving more than their fair share to his friends. i don't think the government should be used as a loan agency to give money to your contributors. this is unseemly. the conflict of interest is, i think, undeniable. we have companies like solyndra. this is a company that received $500 million of your money and went bankrupt. just so happens that the owner of the company is the 20th-richest man of the united states and a big donor of the

president. it just so happens that this company, solyndra, the person who approved their loan was related, was the husband of a woman who worked for solyndra. another company, a company called bright source out of massachusetts, is owned by one of the kennedy family. they got $1.8 billion, and guess who approved their loan? a guy that used to work for the kennedys who is now in president obama's administration. it doesn't pass the smell test. what we have is crony capitalism, or crony governmentalism, where the government is picking out their friends and giving money to their friends. and so we come here today to raise taxes on big oil. meanwhile we're giving money to millionaires and billionaires, and it doesn't seem right that your tax dollars should be sent to companies simply because they were big contributors. another company, fiska karma got

$500 million supposedly to make a company in the united states. guess where they're making it? in finland. we sent money to solyndra through the ex-im banks. we sent money to first solar through the ex-im bank. you have know what their money was for? given to them so they could buy their own product. the company bought a subsidiary in canada. we gave money to the company in the united states and let them buy their own product with your money. it makes absolutely no sense. so i have two proposals. one amendment to this bill would say, look, if you think that some companies are getting unfair deductions, let's get rid of all deductions. let's just have a flat tax. let's make the corporate income tax 17%. currently it's 35%. if you want to encourage business, you want to encourage employment, you lower taxes. you don't raise taxes. canada has an income tax for their corporations of 17%. most of europe is in the low

20's. and we're at 35%. we wonder why we can't get business started in this country. we wonder why there is billions, even trillions of dollars left overseas that won't come home because we want to charge them 35% tax when it comes home. our bill would also say if you've already paid taxes overseas once, you don't have to pay again when you come home. if 17% flat tax, you would see a boom in this country like you haven't seen in a generation. you would see millions of jobs being created if we would just learn the basic facts of economics. if you punish a company, you'll have less jobs. if you encourage a company by giving them more tax breaks, you'll have more jobs. taxes are a cost. if this bill passes, not only will your gas prices continue to rise -- they have already doubled -- but you'll see your gas prices going through the roof. but then again, there are people in this administration that don't even drive a car. they don't understand the price

of gas because they don't have to drive a car. someone picks them up in a limousine. the thing is they need to go to the pump. they need to see how much we're spending on gas. they need to see what they're doing to this country and what they're doing to the job market. i have a second amendment to this bill that would take all of this money, all of these loans that they're giving to their buddies, the solyndra loans, the first solar loans, all of this money that is being dispensed to people who are large contributors of the president, we would take that loan program and eliminate it. when we eliminate that loan program, we would save nearly $30 billion. the g.a.o. has said as much as $6 billion is at risk for loss now. if we were to eliminate that money, we could put half towards the debt and then put half towards rebuilding our infrastructure. the president says toepts rebuild our -- he wants to rebuild our bridges. he came to our state and i stood

on a bridge with him and said i would help. the way you help is by not passing out dollars to your friends that are being lost by the billions of dollars. you can't simply create the money. let's find the money. so i propose to end the department of energy loans and take that money, put half of it against the debt and put half of that into repairing and replacing our bridges. this is how government should work. you should pick priorities. there is not an unlimited amount of money. so let's take it from an area where it's being prone -- where it is prone to corruption and where it is prone to a conflict of interest, these alternative-energy loans that seem to be going mostly to the president's friends and political campaign contributors. let's take that money and put it to repair the bridges and to pay down the debt. this is what responsible government should do. but what we are doing in this body, what will happen in the next 24 hours as we discuss this bill is -- and everybody in

america needs to be very clear about this. when you go to the gas pump and you pay more every day for gasoline, you need to real where the responsibility lies. the responsibility lies with those who are running up the debt. and as we pay for the debt, we print new money. your gas prices rising means the value of your dollar is shrinking. that's why your prices are rising. you need to realize who is to blame for your gas prices. it is those who are running up the debt. but you also have to realize that it's even worse than that. it's not just the running up of the debt. you have to realize that these people today now want to add $25 billion to the gas prices. that's what happens. when you raise the taxes of the oil companies, you will add $25 billion in taxes, but you will increase their cost by $25 billion and businesses that sell products simply pass that on to the consumer. so what we'll hear about, and

they should retitle their bill; we are willing to by this legislation increase gas prices. it should be called "the bill to raise your gas prices." so what i would ask this body to do is to consider two amendments that would actually lower the debt and take money away from crony capitalism and another one that would reform the tax code to eliminate deductions and discrepancies within the tax code but to do it by lowering the tax rate, flattening the tax rate and allowing business to succeed in our country t. gets down to who do you want to represent you in washington. c.c., do you want a party that basically wants to punish business, those that are creating jobs? or do you want a party that wants to encourage business? we're in the midst of a great recession. until we understand this fundamental fact, we're not going to recover as a nation. thank you, mr. president. i yield back the remainder of my time. the presiding officer: the clerk will call the roll.

quorum call:

quorum call:

quorum call:

mrs. murray: mr. president, i ask unanimous consent the quorum call be lifted. the presiding officer: without objection. under the previous order, the senate stands in recess subject to the c they will take the official senate photograph today and they're expected to gavel back in at about 2:25 eastern when they return they will continue working on a bill rolling back tax breaks for the five largest oil companies. live coverage of the senate here on c-span2. a live picture now of

the supreme court where justices today heard day 2 of oral argument in a series of cases about the health care law. today a look at the constitutionality of the individual mandate portion of the law which is scheduled to go into effect on january 1st, 2014 and would require most americans to get health insurance or pay a fine the court will relies same day audio of the oral argument today. it is expected 1:00 p.m. today. we'll have it for you as it is released on our companion network c-span3 and it will be available on c-span radio and c-span.org where you can listen and add your arguments. coming up in on c-span2 in 15 minutes or so remarks from federal reserve chair ben bernanke returning to his former profegs as a teacher this month. he is teaching four classes at george washington university. today's class is the third in a series. it will focus on the 2008 financial crisis and the great recession. we plan to have live coverage on c-span2 starting

at 12:45 eastern. until then a portion from his last class where he talked about is in takes leading up to the collapse of the housing market. >> the fed made mistakes in supervision and regulation. i think too, i would point out, one would be in our supervision of banks and bank holding companies we didn't press hard enough on this issue of measuring your risks. i mentioned before that a lot of banks simply didn't have the capacity to thoroughly understand the risks that they were taking. the supervisors should have pressed them harder to develop that capacity and they didn't develop that capacity, should have restricted their ability to take these risky positions. i think the fed and other bank supervisors didn't press hard enough on this and that turned out to be obviously a serious problem. another area where the fed i think performed poorly was

in consumer protection. the fed had some authorities to provide protections to mortgage borrowers that would have, if, used effectively, would have reduced at least some of the bad lending that occurred during the latter part of the housing bubble but for variety of reasons that wasn't done not nearly to the extent it should have been. in 2007 when i became chairman we did undertake some of these protections but that was obviously too late to avoid the, to avoid the crisis. so where there were authorities and powers, they weren't always effectively used and that obviously led to some weaknesses. and then a final, perhaps more subtle point, the way our regulatory system is set

up individual agencies like the fed or like the occ or the office of thrift supervision typically had as their responsibility just a specific set of firms. so the office of thrift supervision was only responsible for thrifts and similar institutions. unfortunately the problems that arose during the crisis were much broader-based than that. they transcended any single firm or small group of firms. they transcended the whole system and so essentially what was missing here was attention, enough attention being paid to things that could affect the system as a whole as opposed to just individual firms and so nobody was really in charge of looking to see whether there were problems related to the overall financial system or the relationship between different markets and different firms that could create stress or even a crisis.

so those were some of the vulnerabilities in the public sector. and we're going to come back to, we're going to come back to these vulnerabilities and how they played out next week. let me conclude here by talking about a controversial topic which is another aspect, which is the role of monetary policy. now, many people have argued that another contributor to the housing bubble was the fact that the fed kept interest rates low in the early part of the 2,000s following the recession of 2001. so when the economy got very weak and there was very slow job growth in 2001 and subsequently and when inflation fell very low the fed cut interest rates and in 2003 the federal fund rate got down to 1% and there are people who argue that this was one of the reasons that house prices went up as much as they did

and in fact it is true that low interest rates, one of the you were s of low interest rates that the monetary policy achieves is to increase the demand for housing and thereby to strengthen the economy. now as i say this is very controversial but it is also very important because not only because we want to understand the crisis but because going forward we want to think about, you know, what, what should we take into account when we look at monetary policy? to what extent should we be thinking about things like housing bubbles when we make monetary policy? we've looked at this in great detail in, inside the fed and done a lot of research outside the fed. let me just warn you that there is no consensus on this and you will probably hear didn't points of view but the evidence that i've seen that we have done within the fed that suggests that monetary policy did not play an important role in raising house prices during the upswing.

let me just talk a little bit about some of the evidence on this question. one piece of evidence is the international comparison. people don't appreciate that the united states, the boom and bust in the united states was not unique. many, many countries around the world had booms and busts in house prices and those booms and busts were not very closely related to the monetary policies of those particular countries. for example, the united kingdom had a house price boom that was, as big or bigger than that of the united states but monetary policy was much tighter in the u.k. than it was in the united states. so there's a bit of a puzzle for the monetary theory of the house boom. another example which is not on the slide, as you know, germany and spain are both share the euro. so they have the same central bank, the european central bank, the same monetary policy. germany's house prices

remained absolutely flat throughout the entire crisis. spain had an enormous house price increase, considerably larger than the united states. so the cross-examination snags evidence raises at least some, some concerns. second issue is the size of the bubble. it's true that changes in interest rates and mortgage rates should affect house prices and demand for homes as i said and there is a lot of history, a lot of evident to look at that over a long period of time but when you look at the, how much interest rates changed including mortgage rates and how much house prices moved, based on historical relationships you can only explain a very, very small part of the increase in house prices. in other words the increase in house prices was way too large to be explained by the relatively small change in interest rates associated with monetary policy in the early part of the 2,000s. the final, the final piece of evidence i would raise is the timing of the bubble.

robert shiller, an economist who is well-known for his work on bubbles, including the housing bubble, argued that the housing bubble began in 1998 which of course is well before the 2001 recession and before the, before the cut in federal reserve interest rates. moreover, house prices rose very sharply after the tightening began in 2004. so the timing doesn't line up particularly well. now what the timing does suggest might be a couple of other possible explanations. one is, obviously '98 was right in the middle of the tech bubble, the tech boom and it could be that again the same psychological optimism, the same mentality that was feet -- feeding stock prices may have been feeding house prices as well. another possibility is that has been pointed out by a number of economists is that

in the late '90s there was a very serious financial crisis called the asian financial crisis that hit a number of asian countries and other emerging market economies as well. after that crisis was tamed, one response was that many countries, emerging market countries, began to accumulate large amounts of reserves. means they had to acquire safe dollar assets. there was big increase in the demand for assets including mortgages that came from abroad as countries decided they need to acquire more dollar assets to serve as reserves. i think interestingly, probably the strongest correlation across-countries that you can find to house price increases is capital inflows, the amount of money coming in to buy mortgages and other safer or at least perceived to be safe assets. and that timing would also fit with the ninth eight or so beginning.

those are some arguments against the view that monetary policy was a big source, an important source but i emphasize economists continue to debate this issue and it is a very important issue because going forward we also have to think about the implications of our low interest rates on the economy and on the financial system and in particular, currently, just, out of caution, we, we're doing a lot of financial oversight and a lot of regulatory oversight to make sure that, or at least do the best we can to insure nothing is getting unbalanced in the financial system. here are a few references just to take with you if you want to get into this more. the bottom one is the speech i gave a couple years ago which summarizes some of the evidence. my speech is based very heavily on the second paper which is the result of all the internal federal reserve research. there's a paper there by

carmen reinhardt and vince sent -- vincent reinhardt make as point that interest rates didn't move enough to raise house prices and they make the point about capital inflows. and kenneth kutner has a recent survey which comes to the conclusion again there was no connection. but again, i emphasize this is something that continues to be debated. well, what were the consequences of the crisis? we'll talk more about the crisis next time but the economic consequences were severe. here's a measure of financial stress. it's just an index which combines variety of financial indicators that indicate that the financial system is under great stress and you can see what happened in 2008, 2009. sharp increase in financial stress in the financial markets. stock market plunged. we've been talking about the first decline there where it says, 2000, the 2001

recession, that was the very large decline in tech stocks but notice the decline in the stock market in the more recent recession was even bigger than the one in 2000, 2001. here's home construction. you see the very sharp decline there. home construction fell before the recession because of course it was a trigger before the crisis. looking to the right you see it really hasn't begun to recover. finally unemployment rose very sharply, peaked around 10% and is currently fallen down to about 8.3%. >> those remarks last week from federal reserve chair ben bernanke teaching a class at george washington university. live coverage now of his third class, today focusing on the 2008 financial crisis and the great recession. he is being introduced right now. >> chairman bernanke?

[applause] >> hello. welcome back. so, professor ford says today we want to talk about the federal reserve's response to the financial crisis. now let me, in the last couple of lectures i've mentioned a key theme of the lectures which is the two main responsibilities of central banks, financial stability, and economic stability. let me turn it around just a bit and talk about the two main tools for financial stability, the main tool that central banks have as lender of last resort powers. by providing short-term liquidity to financial institutions or replacing lost funding. central banks as they have now for a number of centuries can help calm a financial panic. for economic stability, the principle tool is monetary policy. of course in normal times that involves adjusting the level of short-term interest rates.

now, today i'm going to be focusing on the intense phase of the financial crisis in 2008, 2009 and so i will be focusing primary on the lender of last resort function of the central bank. i will come back to monetary policy in the financial lecture when we talk about the aftermath and recovery. now last time this is just to repeat from last time, i talked about some of the vulnerabilities in the financial system that transformed the decline in housing prices which, by itself, seemed no more threatening than the decline in dot-com stock prices but because of these vulnerabilities that decline in us whoing -- housing prices led to obviously a very severe crisis. the vulnerabilities i talked about last time were private sector vulnerabilities including the excessive debt taken on perhaps because of the period of the great moderation. very importantly the banks inability to monetary their

own risks. excessive reliance on short-term funding which as a bank in the 19th century would tell you makes it vulnerable to a run as short-term funding is pulled away. increased use of exotic financial instruments like credit default swaps and others that concentrated risks in particular companies or particular markets. so that was the private sector. the public sector had its own vulnerabilities including gaps in the regulatory structure. important firms in markets did not have adequate oversight. where there was adequate oversight at least in law sometimes the supervisors and regulators didn't do a good enough job. for example there wasn't enough attention paid to forcing banks to do a better job of monitoring and managing their risks. and finally, an important gap that we've really begun to look at since the crisis is that with individual agencies looking at different parts of the system, there was not enough attention being paid to the

stability of the financial system taken as a whole. let me talk just a moment more about another important public sector vulnerability and these were the, so-called government-sponsored enterprises, fannie mae and freddie mac. now, fannie mae and freddie mac are nominally private corporations. they have shareholders and a board but they were established by congress in support of the housing industry and known as government sponsored enterprises or gses. now fannie and freddie as they're called don't make mortgages. you can't go to fannie's headquarters and get a mortgage. what they do instead is they are the middleman so to speak between the originator of the mortgage and the ultimate holder of the mortgage. so if you're a bank and you make a mortgage loan, if you like you can take the mortgage that you made and you can sell it to fannie or freddie. they will in turn take all the mortgages they collect, put them together into

mortgage-backed securities, so-called mbs. so a mortgage-backed security is just a security which is a combination of hundreds or thousands of underlying mortgages and then sell that to the, to the investors. that's a process called securitization and fannie and freddie pioneered this basic approach to getting funding for mortgages. in particular the gses, fannie and freddie, when they sell their mortgage-backed securities they provide guaranties against credit loss. so if mortgages go bad, fannie and freddie make the investor whole. now, fannie and freddie were permitted to operate with inadequate capital. so in particular they were at risk in a bad situation where there were a lot of mortgage losses. they didn't have enough capital to pay off, make good the guaranties they promised. while many aspects of the financial crisis were not well anticipated, this one was. going back at least a decade

before the crisis the fed and many other people said that the fannie and freddie just didn't have enough capital and they were in fact a danger to the stability of the financial system. what made the situation even somewhat worse was that fannie and freddie besides tell selling these mortgage-backed securities to investors they also purchased on their own account large amounts of mortgage-backed securities, both their own and some that were issued by the private sector. so they made profits from holding those mortgages but again that created an additional, to the extent that those mortgages were not insured or protected, they were vulnerable to losses and again without enough capital, they were at risk. now an important trigger, and i will come back to all these issues, but an important trigger i talked about last time, say a little more about it, again it wasn't just the house price boom and bust but it was the mortgage products

and practices that went along with the house price movement that was particularly damaging. there were a lot of exotic mortgages by which i mean, nonstandard, standard mortgages, 30-year prime, fixed-rate mortgage. there were all different other kinds of mortgages being offered and offered to people with weaker credit. now, one feature that many of these mortgages had was that in order for them to be repaid, you had to have ongoing increases in house prices. so, for example, you might be a mortgage borrower who would buy an adjustable rate mortgage, an arm, where the initial interest rate was say, 1%, which means you could afford the payment for the first year or two. now after two years the mortgage might go up to 3%. after four years, 5%, and then higher and higher. so in order to avoid that you had to at some point refinance into a more standard mortgage and as

long as house prices were going up, creating equity for homeowners, it was possible to do that refinance but once home prices stopped rising and by 2006 they were already declining quite sharply, borrowers were finding themselves rather than having building equity, they found themselves underwater. they couldn't refinance and they found themselves stuck with these, with these increasing payments on their mortgages. here's some examples of bad mortgage being pra is it is. i won't go through all of them but they all have the charactertic, take, for example the second one, an option a.r.m.. that is adjustable rate option, is borrowers option to vary how much they pay. they could pay less than the full amount and what they didn't pay got rolled back into the mortgage. most of these mortgages had the feature they reduced monthly payments early in the mortgage but allowed mortgage payments to rise over time. the other aspects of bad

mortgage practices like no-doc loans for example, there was very little underwriting which means very little analysis to make sure that the borrower was credit-worthy and was able to make the payments on the mortgage. here's some advertisements from the period that can illustrate some of the issues. i like the one on the right. we took the name of the company off. but let's look at the features of it that they're offering here. 1% low start rate. start rate. that is what you pay the first year. we don't tell but the next year. stated income. that means you till us what your income is, we write it down. that is all the checking we do. no documentation. well, that's evident. 100% finance. no down payments in other words. interest-only loans which means you pay the interest but don't pay any principle back. debt consolidation which is interesting. you could go to the mortgage

company and say not only do i want to borrow money to buy the house and add in all my credit card debt and everything else i owe and put that into one big mortgage payment and pay that one a one% start rate. there are obviously some very problematic practices here. so now the mortgage companies and banks and savings and loans and variety of other different kinds of institutions made these mortgages but where did they go? how were they financed? some of them were kept on the balance sheet of mortgage originator but many, or most of these exotic or subprime mortgages were packaged in securities and sold off into the market. so, for example, some of these securities were relatively simple. if the mortgages were sold to fannie and freddie and had to meet fannie and freddie's underwriting standards, fannie and freddie would combine them into mortgage-backed securities and sell them with a guaranty as i described before.

those were relatively simple securities made up of just hundreds or thousands of underlying mortgages. but some of the securities that were created were very complex and very hard to understand. an example would be a collateralized debt obligation or a cdo. this would often be a security that combined mortgages and other kind of types of debt together in one package and it could be sliced in different ways so you would sell to one investor the most safe part of the security. and to another investor the most risky part of the security. they were very complicated. took a lot of analysis. now one reason that many investors were willing to buy these securities were because they had the comfort of the rating agencies whose job it is to rate the quality of bond and other securities, giving aaa ratings to many of these securities. essentially saying they're very, very safe and therefore you don't have to worry about the credit risk of these securities. so, again, many of the

securities were sold to investors, including a pension fund, insurance companies, foreign banks. even in some cases wealthy individuals. but also the financial institutions that, that either made these loans or created these securities often retain some of them as well. for example, sometimes they would create a accounting fiction. off-balance sheet vehicle which would hold these securities and finance itself by cheap, short-term funding like commercial paper. so some of these securities went to investors. some of them stayed with the financial institutions themselves. in addition we had companies like aig selling insurance. they were using various kind of credit derivatives to basically to say, well, pay us a premium and if the mortgage in your mortgage-backed security go bad we'll make you good. make you whole. that makes a aaa rated.

of course these practices made the underlying securities no better but what they basically did was they created a situation where risks could be spread throughout the system. so here's a little bit of a diagram showing how a subprime mortgage securitization might work. on the left, where the box says low-quality mortgages, you might have a mortgage company or a thrift company making the loans. the thrift company or the mortgage company doesn't care too much about the quality of the loan because they're going to sell it anyway. so they take the mortgages and they sell them to large financial firms. who take those mortgages and maybe other securities as well, combine them into a security which is essentially an a amalgamation of all the underlying mortgages and other securities. now the financial firm that created the security might negotiate with the credit

rating agency to say, well, what do we have to do to get a aaa rating? there would be negotiations and discussions. in the end the security would be rated aaa. the financial firm would then take the security, could cut it up in different ways or just sell it as it is, sell it to investors like a pension fund or some other type of investor, but in addition, again, financial firms kept many of these securities on their own books or in related investment vehicles. finally you had over here on the right you had credit insurers like aig and other mortgage insurance companies that for a fee provided insurance in case the underlying mortgages went bad. so this is kind of the basic structure. in actuality i've seen some diagrams of the complete flow chart and they're incredibly complex. this is a very simplified version but the basic idea is here. okay.

now, remember, what is a crisis? a crisis or a financial panic occurs when you have any kind of financial institution, think of a bank which has illiquid assets like long-term loans for example. . .

bank setting but in a broader financial market setting. so in particular, as house prices fell in 2006 and 2007, for the reasons i described, with house prices falling, people who had borrowed on a subprime mortgage were not able to make the payments. it was increasingly evident that more and more were going to be delinquent or default and that was going to impose losses on the financial firms, the investment vehicles they created and also on credit insurers like aig. unfortunately, the securities were so complex and the monitoring of the financial firms of their own risks was not sufficiently strong that there was -- it wasn't just the losses. i mean, i think the very striking fact is that if you took all the subprime mortgages in the united states and put them all together and assumed they were all worthless, the total losses to the financial system would be about the size of one bad day in the stock market. they just weren't that big.

but the problem was that they were distributed throughout different securities and different places and nobody really knew where they were and who was going to bear the losses. so there was a lot of uncertainty created in the financial markets. and as a result, wherever you had short-term funding whether it was commercial paper or other types of short-term funding, we had all kinds of funding that was not deposit insured. it was so-called wholesale -- it came from investors and other financial firms whenever there was a doubt about a firm, just like in the standard bank run, the investors, the lenders, the counter-parties would pull back their money quickly because the same reason that a depositor would pull their money out of a bank that was thought to be having trouble so there was a whole series of runs which generated huge pressures on key financial firms as they lost their funding and were forced to sell their assets quickly.

and many important financial markets were badly disrupted. now, in the depression of the '30s, there were thousands of bank failures. but the great -- almost all of the banks that failed in the '30s, at least in the united states were small banks. and there were some larger banks that failed in europe. the difference in 2008 was that there were many small banks that failed in the united nations but there were also intense pressures on quite a few of the largest financial institutions in the united states. and the next two pages are just a short list of some of the firms that came under intense pressure. bear stearns which is a broker-dealer came under very intense pressure in the -- in the short-term funding markets in march of 2008. it was sold to jp morgan with fed assistance in march. things calmed down a bit after that and over the summer there was some hope that the financial

crisis would moderate but then in the late summer, things really began to pick up. in september 7th of 2008, fannie and freddie clearly were insolvent. they didn't have enough capital to pay the losses on their mortgage guarantees. the federal reserve worked with the fannie and feddie's regulator and with the treasury to determine the size of the shortfall and over the weekend, the treasury with the fed's assistance came in and took those firms and put them into a form of limited bankruptcy called conservatorship at the same time, the treasury got authorization from congress to guarantee all of the fannie and freddie obligations and so if you have held a fannie or freddie backed security the company was in parti bankruptcy had to be done or else there would have been an enormous

intensification of the crisis because investors all over the world held literally hundreds of billions of those securities. famously, the middle of september, lehman brothers, a broker-dealer -- and i'll talk more about this. i have a case study on this coming up had severe losses. it came under great pressure. it couldn't find either anybody to buy it or to provide capital for it and so on september 15th, it filed for bankruptcy. on the same day, merrill lynch, another big broker-dealer was acquired by bank of america, again, basically saving the firm from potential collapse. on september 16th, the next day, aig with the largest multidimensional insurance company in the world had -- what you remember had been selling the credit insurance, came under

enormous attack from the people demanding cash either through margin requirements or through short-term funding. the fed provided emergency liquidity assistance for aig and prevented the firm from failing again i'll come back to this as well. washington mutual was one of the biggest thrift companies, the biggest provider of short-term mortgages was closed by regulators later in september after parts of the company were taken off. jp morgan acquired this company as well. october 3rd, wachovia, one of the five biggest banks in the united states, again, came under serious pressure. it was acquired by wells fargo another large mortgage provider. this just gives you some sense of -- these are some of the -- all these firms i'm talking about were among the top 10 or 15 financial firms in the united states. and similar things were happening in europe. so this was not a situation where only small banks were being affected. i mean, that was a problem too, of course, but here we had the

biggest, largest most complex international financial institutions at the brink of failure. now, the lessons from the great depression going back are two. first, you remember the fed did not do enough to stabilize the banking system in the 1930s and so the lesson there is that in a financial panic, the central bank has to lend freely according to the rules to halt runs and to try to stabilize the financial system. and the second lesson of the great depression -- the fed did not do enough to prevent deflation and contraction of the money supply so the second lesson have the great depression is you need to have accommodative monetary policy to help the economy avoid a deep depression. so heeding those lessons the federal reserve and the federal government did take vigorous actions to stop the financial panic, worked with other

agencies and worked internationally with foreign central banks and governments. now, one aspect of the crisis that i think maybe doesn't get quite enough attention is the fact that this really was, first of all, a global crisis in particular europe as well as the u.s. was suffering very severely from the crisis. but it was also a very impressive example of international cooperation. and one particular date that i've singled out here is october 10th, 2008. as it happened on that day there was a previously scheduled meeting of the g7 industrial countries that happened to take place here in washington. the g7 are the seven largest industrial countries. and the central bank governors and the finance ministers of those seven countries came and met in washington. now, i'll tell you a deep dark secret which these big high profile international meetings are a terrible bore.

[laughter] >> because much of the work is done in advance by the staff and we have a discussion but there's a communique which had been written already by the staff and, you know, it's simply fairly routine in most cases. this was not one of those boring meetings. we essentially tore up the agenda and we sat down and we talked about what are we going to do? how are we going to work together to stop this crisis which was threatening the global financial system? and in the end we came up with a statement that was written from scratch based actually on some fed proposals. and was circulated and there were a number of principles and statements involved in that. but among those were first that we were going to work together to prevent the failure of any more systematically financial institutions this is after lehman brothers had failed. we were going to make banks and other financial institutions had access to funding from central banks and capital from governments. we were going to work to restore

depositor confidence and investor confidence and then we were going to cooperate as much as possible to normalize credit markets. so this was a global agreement and subsequent to this agreement just in the following week the u.k. was the first to announce a comprehensive program to stabilize the banking system. the u.s. announced major steps to put capital into our banks and so on. so a lot really happened in just the next couple days after this meeting. now, just to show you that this worked, this shows you -- this graph shows you the interest rate charged on loans between banks. this is the interbank interest rate. so bank a lends to bank b overnight. this is the interest rate that was charged. now, normally the overnight interest rate between banks is extremely low. way less than 1%. because banks, you know, they need a place to park their money

overnight and they need to have confidence that it's safe to lend to another bank overnight. as you can see starting in 2007, banks lost confidence in each other. and that's shown by the increase in the rates they charged to each other to make loans. so, for example, in 2007 you begin to see the pressures as how prices began to fall and there were increasing concerns about the quality of the mortgage securities and the quality of the firms. in march of 2008, you could see another little peek there which is around bear stearns and that was it doesn't look much in comparison it was a tough period. it was a period of quite sharp movements in financial markets and in funding markets. now, look what happened when bear stearns happened. there was just an enormous spike in these interbank market rates. and probably not much lending was taking place even at those high rates.

what this was indicative, there was no trust whatsoever even between the largest financial institutions because nobody knew who was going to be next, who was going to be -- who was going to fail, who was going to come under funding pressure. look what happened after the international announcements. within a few days, you began to see a reduction in the pressure and by the end of the year, in early january, there was an enormous improvement in the funding pressures in the banking system. so this -- i think this is a great example of international cooperation and illustrates the point that this was not just a u.s. phenomenon. it was not just u.s. policy. it was not just the federal reserve. it really was a global cooperative effort, particularly, between the united states and europe. now, the fed played an important role, however, in providing liquidity and making sure that the panic was controlled.

let me just talk briefly about this in general and then i'll do two case studies that will illustrate some of the -- some of the issues. now, the federal reserve has a facility called the discount window which it uses routinely to provide short-term funding to banks. maybe a bank finds itself short of funding at the end of the day. it wants to borrow overnight. it has collateral with the fed. based on that collateral it can borrow overnight at what's called the discount rate which is the interest rate that the fed charges. so the discount window which allows the fed to lend to banks is always there. is always operative. no extraordinary steps were needed to lend to banks. the fed always lends to banks. we did make some modifications in order to reassure banks about the availability of credit. and to get more liquidity into the system, we extended the maturity discount window loans which were normally overnight

loans. we made them longer term. and we had options of discount window funds where firms bid on how much they would pay and the idea there was by having a fixed amount that we were auctioning we would at least assure ourselves that we got a lot of cash in the system. anyway, the point here is that the discount window which is the fed's usual lender of last resort facility lending to banks was operative and we used it aggressively to make sure that banks had access to cash to try to calm the panic. but our financial system is a lot more complicated than the one that existed when the fed was created in 1913. we have many other different kinds of financial institutions in markets now. and as i said, the crisis was like an old time bank crisis but it was appearing in all different kinds of firms and different kinds of institutional context. so the fed had to go beyond the discount window. we had to create a whole bunch of other programs, special liquidity and credit facilities

that allowed us to make loans to other kinds of financial institutions, again, on the badge of principle that providing liquidity to firms that are suffering from loss of funding is the best way to calm a panic. now, all these loans were secured by collateral. we weren't taking chances with taxpayer money and i'll talk about that when we come back. but the cash was going not just to bank but more broadly into the system. again, the purpose of this was to enhance the stability of the financial system and get credit flows moving again. and just to emphasize, this is the traditional lender of last resort function of central banks that has been around for hundreds of years. what was different was that it took place in a different institutional context than just the traditional banking context. here are some of the institutions and markets that we addressed through our special programs.

banks, of course, were covered by the discount window, but another class of financial institutions broker-dealers which are financial firms that deal in securities and derivatives were also facing very serious problems that included bear stearns, lehman brothers, merrill lynch, goldman sachs, morgan stanley and others. and we provided cash -- or short-term lending to those firms on a collateralized basis as well. as i talked about commercial paper borrower received assistance as did money market funds i'll come back and do a case study of the two and the asset-backed security market, in the modern economy, modern financial system, a lot of the funding that you get for not just mortgages but auto loans, credit cards, all different kinds of consumer credit are funded through the securitization process. that is a bank might take all of

its credit card receivables, bundle them together into a security and then sell them in the market to investors, much the same way that mortgages were sold and that's called the asset-backed securities market. the asset-backed securities market pretty much dried up during the crisis and the fed created some new liquidity programs to help get it started again which we were successful in doing. now, i should mention that while the banks lending through the discount window was totally standard lending through the normal discount window these other types of lending required us to invoke emergency authorities. there is a clause in the federal reserve act called 133 which says under unusual and exigent circumstances, basically in an emergency the fed can lend to other types of entities other than just banks. and this authority had not been used by the fed since the 1930s. but in this particular case,

with all these other problems emerging in different institutions and different markets, we invoked this authority and used it to help stabilize a variety of different markets. so let me give you just a little bit of a case study here that will help you understand, you know, what we did and how it helped the economy. so i want to talk a little bit here about money market funds. now, money market funds are basically investment funds in which you can buy shares and the money market funds take your money and invest it in short-term liquid assets. money market funds historically have almost always maintained a $1 share price. so it's very much like a bank actually. and they're used frequently by institutional investors like pension funds. so a pension fund with $30 million in cash probably wouldn't put that into a bank because that much money is not

insured, there's the limits as to how much deposit insurance covers. what a pension fund might do instead of putting the cash into the bank is mutt the money into a money market fund promises $1 for each money including a little bit interest for each top and invest in very short-term safe liquid type assets and so it's a pretty good way to manage your cash if you're an institutional investor of some kind. so this diagram just shows investors putting their money into money market -- money market funds. now, as i said, money market shares are not insured. they do not have deposit insurance but the investors who put their money into a money market fund expect that they can take their money out at any time, dollar for dollar, so they treat it like a bank account basically. the money market funds in turn have to invest in something and they tend to invest in safe

short-term assets like commercial paper. commercial paper is a short-term debt instrument issued typically by corporations, short-terming that it's 90 days or less typically. a nonfinancial corporation might issue commercial paper to allow it to manage its cash flows. it might need some short-term money to meet its payroll or to cover its inventories. so ordinary manufacturing companies like gm or caterpillar would issue commercial paper to get cash to manage their daily operations. financial corporations including banks would also issue commercial paper to get funds that they can then use to manage their liquidity positions and they can use again to make loans to the private economy. so here's -- here's the picture a little bit more completely and the left again you see the investor investing their excess

cash in a money market fund. the money market funds buys commercial paper which is basically a funding source for both nonfinancial businesses like manufacturers and for financial companies who lend it on to other borrowers. okay. so now, what happened to this very nice arrangement? well, lehman brothers was created a huge shock wave as i'll describe. lehman brothers was an investment bank. it was a global financial services firm. it was not a bank. so it was not overseen by the fed. it was an investment company. it held lots of securities. it did a lot of business in the securities markets. it could not take deposits not being a bank. instead, it funded itself in short-term funding markets including the commercial paper market.

lehman invested heavily in mortgage related securities and also in commercial real estate during the 2000s. now, as we know, as house prices fell and delinquencies on mortgages rose, lehman's financial position got worse and they were also losing lots of money in their commercial relation so lehman was becoming insolvent. it was losing money in all of its investments. and it was coming under lots of pressure. indeed as lehman's clients lost confidence they started losing funding for lehman. for example, investors refused to roll over lehman's commercial paper and other business partners said we're not going to do business with you because we're afraid you're not going to be here next week. so lehman was increasingly losing money and increasingly finding itself unable to fund itself. it tried with federal reserve and treasury help to either find somebody willing to put more capital into the firm or to acquire the firm.

at which enable to do that so on september 15th as i mentioned it filed for bankruptcy and this was an enormous shock that affected the whole global financial system. now in particular one of the -- one of the many implications of the failure of lehman brothers is the money market funds. there was one particular fairly large money market fund that held among its other assets was commercial paper held by lehman. when that failed, that commercial paper was either worthless or at least completely illiquid for a long time and so suddenly this money market fund could no longer pay off its depositors at $1 per share. it lost money. now suppose you're an investor in a money market fund and you know if you can ask a dollar back you can get it but you know they don't have enough money to pay everybody off a dollar, what

are you going to do? same thing a 19th century bank depositor would do if they heard their bank lost money so investors in this fund and in other money market funds began to pull out their money just like a standard bank run. and i'll show you the data on that in just a second. but we had a very intense bank run or in this case money market fund run in which investors npr funds began to pull out their money just as quick as they could. now, the fed and the treasury responded very quickly to the situation. the treasuriry provided a temporary guarantee that said, you know, we guarantee that you'll get your money back if you just don't pull it out right now. and the fed created a backstop liquidity program under which we lent money to banks in term to use assets of the money market funds and that gave the money market funds the liquidity that they needed to pay off their depositors and help to calm the

bank. and just to show you a sense of what was happening here this is the money outflows from the money market funds this is a $2 trillion industry. this is daily data so you see the lehman bankruptcy, a couple days later you see the money market fund breaking the buck meaning it was unable to pay its investors a dollar a share following that announcement you can see that for about 2 days there, about $100 billion a day was flowing out of these funds. within two days, the treasury announced a guarantee program. the fed came in to support the liquidity of these funds and as you can see the run ended pretty quickly. so absolutely classic -- classic bank run, classic response, providing liquidity to help the institution being run provide

the cash to its investors, providing the guarantees and that successfully ending the run. but that wasn't the end of the story 'cause remember the money market funds were also holding commercial paper. and as they began to face running, they in turn began to dump commercial paper as quickly as they could. and as a result, the commercial paper market went into shock. this is a really nice example of how financial crises can expand in different directions. we had lehman failing and that caused money market funds to experience a run and that in turn led to a shock of the commercial paper mark and everything is connected to everything else. and it's really hard to try to keep the system system stable. so there was -- as the money market funds withdrew from the commercial paper market there

was a shopper increase in rates in the commercial paper market and lenders were unwilling to lend for maybe one day to commercial paper borrowers which in turn affected the ability of those companies to function and the ability of those financial institutions to fund themselves. once again the federal reserve responding in the way they would have had to respond, established special programs -- basically we stood as backstop lenders. we said make your loans to these companies and we'll be here ready to backstop you if there's a problem rolling over these funds. and that restored confidence in the commercial paper market. and there's a picture here -- this is commercial paper rates, again -- and once again you can see the panic phenomenon, a sharp sharp increase in rates, which really understates the

pressure because it doesn't also include the fact that for many companies there was no price in which they could get funding. or if they got funding it was for only overnight or very short-term periods. the fed's actions restored confidence in that market and you can see the response, rates came back down in the beginning of 2009. okay. one other type of activity which is the last thing i'll -- i want to cover -- so a lot of what i've been talking about is probably stuff you didn't hear too much about when you're reading the papers. it was working with these critical markets and working with these -- providing broad-based liquidity to financial institutions to try to bring the panic under control. but we also -- the fed and the treasury also got involved in trying to address problems with some individual critical

institutions. in march of 2008 as i mentioned before, a fed loan facilitated the takeover of bear stearns by jpmorgan chase chase avoiding a failure of that firm. the reason we undertook that action was first that we at the time -- the financial markets were quite stressed and we were fearful that the collapse of bear stearns would greatly add to that stress and perhaps set off a full-fledged financial panic. moreover, it was our judgment at least that bear stearns was solvent at least jp morgan thought so, they were willing to buy the firm and to guarantee its obligations, so that by lending to bear stearns, we were consistent with the proposition that we should be making loans that are likely to be paid back and we felt we were well secured in making the loan that we did. in a second example in october of 2008, as i'm sure you all

well-known, aig was very, very close to failure. this again was the largest insurance company, perhaps among the largest in the world. let me just talk a bit about that case. aig was a complicated company. it was on the one hand a multinational financial services company with many constituent parts including a number of insurance companies, global insurance companies but it had a part of the company which was part aig financial products that was involved in all kinds of exotic derivatives and other types of financial activities including as i mentioned before the loans -- sorry, the credit insurance that it was selling to the owners of mortgage-backed securities. so when the mortgage-backed securities started going bad it became evident that aig was in big trouble. and its counter-parties began demanding cash or refusing to fund aig and it was coming under tremendous pressure. the failure of aig in our

estimatetation would have basically been the end. it was interacting with so many different firms. it was so interconnected with both the u.s. and the european financial systems, global banks. we were quite concerned that if aig went bankrupt that we would not be able to control the crisis any further. now, fallen from the perspective of lender of last resort theory, aig was taking a lot of losses in its financial products division but underlying those losses was the world's largest insurance company so it had lots and lots of perfectly good assets and as a result, it had collateral which it could offer to the fed to allow us to make a loan to provide the liquidity to stay afloat so to prevent the collapse of aig, we used aig assets as collateral and loaned aig $85 billion.

obviously, a fairly serious amount of money. later the treasury provided additional assistance to keep aig afloat. and, again, while it was highly controversial it was both, we thought, legitimate in terms of lender of last resort theory because it was a collateralized loan and the fed is, in fact, fully paid back and secondly because it was a critical element in the global financial system. over time as i said aig has stabilized. it has repaid the fed with interest. the treasure still owners a majority share of its stock but it has -- aig has been paying back the treasury as well. it's been in the process of doing that. now, i'd like to emphasize that what we had to do with bear stearns and aig is obviously not a recipe for future crisis management. first of all, it was a very

difficult and in many ways distasteful intervention that we had to do on the grounds that we needed to do that to prevent the system from collapsing. but clearly, there's something fundamentally wrong with a system in which some companies are, quote, too big to fail. if a company is so big that it knows that it's going to get bailed out, even putting aside the fairness of that, it's not at all fair to other companies, but even beyond that, obviously, they have an incentive to take big risks and they say, well, we'll take big risks, heads i win, tails you lose. if the risks pay off, we make plenty of money and if they don't pay off, the government will save us. that's too big to fail and that's the situation in which we, you know, cannot tolerate. so as i'll describe more next time, the problem we had in september of september of 2008 we really didn't have any tools, legal tools, policy tools, that

allowed us to let lehman brothers and aig and these other firms go bankrupt in a way that would not have incredible damage -- create incredible damage on the rest of the system and, therefore, we chose the lesser of two evils and prevented aig from failing. but being said going forward we want to be sure that it never happens again and we want to be sure that the system has changed so that if a large systemically critical firm like aig comes under this kind of pressure in the future, that there'll be a safe way to let it fail. so that it can fail and the consequences of its mistakes can be bourne by its management and shareholders and creditors but in doing so, it doesn't bring down the whole financial system and i'll talk more next time about the progress we've made collectively in instituting a system that will i hope eventually at least end too big

to fail. so finally, let me just say a couple words about the consequences of the crisis. we did stop the meltdown. we avoided what would have been, i think, a collapse of the global financial system. that was obviously a good thing but to give you a sense -- one thing i was always sure of and i think the federal reserve was always sure of was that a collapse of these big financial firms was going to have very serious collateral consequences. there were people arguing even as late as september of 2008, well, why don't you let the firms collapse? a system can take care of it. we have bankruptcy code, why don't you let them fail? and, you know, we never thought that was really a good option particularly if the whole system had collapsed we would have had extraordinarily serious consequences. as it was, even though we

prevented the total meltdown, there were still obviously as you know very serious collateral impact on not just the u.s. economy but the global economy as well. so following the crisis, even though the crisis was brought under control, the u.s. economy and much of the global economy went into a sharp recession. the united states gdp fell by more than 5% which is a quite deep recession. there's some other statistics, 8.5 million people lost their jobs. and unemployment rose to 10%. so very consequential impact. and as i said, this was not just a u.s. situation. the u.s. recession was, in fact, kind of an average recession. there are many countries around the world that have had worse declines particularly those with dependence on international trade so it was a global slowdown and as this was all happening, fears of a great depression, a second 1930s

depression, were very real. so nevertheless, the great depression was much worse than the recent recession. and i think the view is increasingly engaging acceptance without the forceful policy response that stabilized the financial system in 2008 and early 2009, we could have a worse outcome in the economy. there's a couple to graphs here. i think this is an interesting graph this shows the stock market. the blue line starts in august 1929 which is the peak of the stock market before the great depression. the red lines is the more recent stock prices. it starts in october of 2007. and then the graph shows you the evolution of stock prices in the

depression period in the blue and in the more recent periods in the red and the thing which is pretty striking here is that for the first 15 or 16 months, stock prices in the united states behaved pretty much in this crisis as they did in 1929 and 1930. but about 15 or 16 months into the recent crisis, which would have placed it in early 2009, about the time that the financial crisis was stabilizing, look what happened. in the depression era the stock prices kept falling as i mentioned in the end stock prices lost 85% of their value. in the united states, by contrast, stock prices recovered and began -- began a long recovery and now they're more than double than where they were three years ago. this is industrial production, the measure of output, again, the red is the more recent data, the blue is the depression era

data. you can see in this case that the fall industrial production was not quite as severe, quite as fast as in the depression but you get the same basic phenomenon that about 15 or 16 months into the episode about the time that the financial crisis was brought under control, industrial production bottomed out and began a period of steady recovery; whereas, in the depression, the collapse continued for several more years. okay. so that is a very rapid overview of the crisis of '08, '09. in lecture four we'll talk about the aftermath, the recession, how did monetary policy respond to the recession, why has the recovery been relatively sluggish? what has happened to financial regulation to try to make sure that this never happens again and what lessons has it is fed taken from this experience?

okay. questions, yes. >> [inaudible] >> so there were a couple of reasons. one reason was simply the fact that firms were probably too confident about house prices equipment. house prices will probably keep rising in a world in which house prices are rising these are not

bad products. people can afford to pay for a year but then they can refinance to something more stable and this might be a way to get people into housing but, of course, the risk was that house prices wouldn't keep rising and, of course, ultimately that's what happened. the other aspect of this was that the demand for securitized products grew very substantially during this period. in part there was a large international demand from europe and from asia for high quality assets. and the ever-ever u.s. financial firms figured out that they could take a variety of different kinds of underlying credits, whether it would be subprime mortgages or whatever and through the miracles of financial nearing it would be high quality and rated aaa and then sale abroad to other

investors, unfortunately, that sometimes left them with the remaining of bad pieces which they kept or sold to some other financial firm so there were trends in the financial markets i think including overconfidence about the ability to manage those risks. a belief that house prices would probably keep rising, a sense that they could -- even after they made thorough mortgages they could then sell them off to somebody else and that other person or other investor would be willing to acquire them. there was a big demand for, quote, safe assets. for all those reasons it was actually a very profitable activity while it lasted. and only when the house prices began to fall did it become a big loser. yeah. [inaudible]

[inaudible] >> well, the volcker rule is part of the dodd-frank financial regulatory reform that i'll be talking about in more detail on thursday and the fed and other agencies are tasked with implementing. the purpose of the volcker rule as you said is to reduce the risk of financial institutions by preventing banks and their affiliates from doing, quote, proprietary trading which means doing term short term trading on their own account so for taking those kinds of risks.

now, the law recognizes that there are legitimate exceptions to for why banks might want to acquire short-term securities and those include, for example, hedging against risk but one particular exception is to make markets, to serve as intermediaries who buy and sell in order to create liquidity in a particular market. and that's exempted from the poker rule and one of the challenges of implementing this rule is trying to figure out how to set a set of standards that allows the so-called exempted or legitimate activities like market-making and hedging -- while ruling out the proprietary trading and that's obviously very difficult and we're working on that. we put out a rule. we've gotten house of comments and we're looking at that and trying to figure out how best to do that. the point you raise is that liquidity in markets is important. during the crisis it was much

worse problem than just a little bit lack of trading volume. you had big financial institutions unable to fund themselves, enable to find the funding to support their asset positions, the assets that they held which left them with one of two possibilities which either defaulting because they didn't have enough funding or the tack many of them took to start selling off assets as quickly as possible which in turn spread the panic because if there's a huge seller's market for, say, commercial real estate bonds, that's going to drive the price down very sharply and then anybody else who was holding those bonds find their financial position being eroded and that creates pressure on them so one of the -- i didn't use the word contagion my discussion, a contagion in an unless context is the spreading of bank,

spreading of fear from one market institution to another and contagion was a problem in many financial panics and certainly this one and that was one of the mechanisms that led the funding pressures to jump from firm to firm and created such a broad-based problem. anybody have -- [inaudible] [laughter] >> a question specific about global collaboration during the financial crisis. you talk about the g7 in 2008 specifically as we saw multinational corporations begin to be on the brink of failure, what pressures came from the

international community when the decision to bail out aig was being debated? well, there weren't any real pressures. everything was happening too fast. i think, in fact, you know, one area where collaboration was not as good as we would like was exactly dealing with some of these multinational firms, for example, there were problems between the u.k. and u.s. over lehman brothers failure, for example, and inconsistencies for some of these creditors of lehman. so one of the things that we're trying to do under the dodd-frank financial reform legislation which includes as i mentioned before includes provisions for safely allowing large financial firms to fail -- one of the complexities there is many of the firms that would -- this would be applied to are multinational firms maybe not two or three countries but maybe

of dozens of countries so collabnation other countries in figuring out how we would work together to help a large multinational firm is what's going on as we work internationally. we tried during the crisis to cooperate and mostly an ad hoc way we were in touch with the u.k. and elsewhere but given the time frames and the lack of preparation, you know, we didn't -- didn't do as much as we would be able to do with a lot more lead time. so i think that was a weaknesses of international collaboration. for the most part, though, countries cooperative in dealing with the financial institutions that were based in their own countries. aig was an american company and we dealt with that; whereas, a company like dexia which was a european company was dealt with by the europeans. also, there was a lot of

cooperation between central banks and i may have a chance to say a bit more about this, but there were a lot of european banks that used dollars that needed dollar funding and they used dollar funding on dollar assets and they made dollar loans and they made loans to support trade which is often done in dollars so they needed dollars. the european central bank can't provide dollars so what we did was what was called a swap where we gave the european central bank dollars and they gave us euros they took the and lent on their own recognizances and easing dollar pressures around the world so those swaps which are still in existence now because of the recent issues in europe were an important example of collaboration. we also in october of 2008 right

before -- right as these crisis was intensifying, the federal reserve and i think five other central banks all announced interest rate cuts on the same day and so we coordinated even our central monetary policy so we did our best to coordinate. there were some areas where like working on multinational firms where, you know, a lot more preparation was needed and we are still working on those cooperatively today. noah? [inaudible] >> and sort of why they were allowed to, you know, keep that much information off their books? >> well, it has to do with accounting rules basically. you create this separate vehicle and the bank might have

substantial interest in that vehicle. it might, for example, have a partial ownership. it might have some promises to provide credit support if it goes bad or liquidity support if it needs cash. but it doesn't have -- under those rules that existed at the time, if the amount of control that the bank had on this offbalance sheet vehicle was sufficiently limited then according to the accounting rules it could treat it as a separate -- a separate organization so to speak, not part of its own balance sheet. and that -- that allowed the banks to get away with somewhat less capital, for example, than they would have had to carry if they had all these assets on their own balance sheet. now, one of the many developments since the crisis is that these rules have been reworked and many of the offbalance sheet vehicles that existed during the -- before the crisis will no longer be allowed. they will see have to be

consolidated meaning they would have to be brought back on the balance sheet and be made part of the bank's balance sheet and have appropriate capital and so on those practices are not completely gone but the accounting rules have greatly toughened the situation, circumstances in which a bank can put something off its balance sheet into a separate investment vehicle. max? [inaudible] >> you mentioned several large firms in 2008 -- [inaudible] >> my question was, where do you draw the line between bailing out a bank and allowing it to fail? is it arbitrary or is there some sort of methodology that the fed goes by? >> oh, a great question. so first of all, i want to resist that word "doctrine" a little bit. [laughter] >> these firms proved to be too big to fail in the context of a global financial crisis.

that was a judgment we made at the time based on their size, their complexity, their interconnectedness and so on. it was not something we ever thought was a good thing. and, again, one of the main goals of the financial reform is to get rid of it because it's bad for the system, it's bad for the firms. it's unfair in many ways. and it will be a great accomplishment to get rid of too big to fail. so it's not something we advocate or support in any way. we were just forced into a situation where we were having to choose the least bad of a number of different options. now, it's a good question. i mean, i think in the case of the of the -- during the crisis we basically had to make judgments on a case-by-case basis and we were trying to be as conservative as possible. i think the case certainly of aig there was really no doubt in

our minds that there was a case where action was necessary if at all possible. lehman brothers was in itself probably too big to fail the sense that its failure had enormous negative impacts on the global financial system but there we were helpless because it was essentially a insolvent firm. it didn't have enough collateral to borrow from the fed. we can't put capital into a firm that's insolvent. this was before the t.a.r.p. or capital that the treasury could use so we really just had no legal way to do it. i think if we could have avoided that, we would have done so. so it was somewhat ad hoc although i think the two case where we intervened, banner and in aig i think the case was pretty clear given not only the firms themselves but also the

context, the environment that was going on at the same time. now, interestingly, we've had to get much more into this issue since the crisis because there are a number of different rules and regulations which actually require the fed and other regulatory agencies to make some determination about how systemically critical a firm is. for example, the new basel iii capital requirements require the largest most systemically sustainable firms have to have a capital surcharge which hold more capital as firms that are not systemically critical. and as part of that process, the bank regulators have worked together to set up a criteria relating to size, complexity, interconnectedness, drives, a whole bunch of criteria to help determine, you know, how much extra capital they have to hold. likewise, the fed now when it approves a merger of two banks it has to evaluate whether the merger creates a systemically

more dangerous situation. so we had worked hard and we have put out criteria that describes some of the variety of criteria including some numerical thresholds that we look at to try to figure out if a merger creates a systemically critical firm if it does we're not supposed to allow that merger to happen. so the science of doing this is progressing. it's still very in its infancy, but again in the crisis our actual interventions were limited to -- well, the principal interventions were bear stearns and aig along with other agencies. we also provided assistance to a couple of other institutions but nothing nearly to the extent that the aig situation involved. but we are looking very seriously at this and indeed now that the fed has become much

more focused on financial stability we're -- you know, we have a whole division of people working on various metrics, various indicators, both to try to identify risk to the system and also to try to identify firms that need to be particularly carefully surprised and maybe hold extra capital because of their -- the potential risks that they bring to the system. >> thank you, mr. chairman. my name is david pomeroy, one vulnerability you mentioned was that the credit ratings were assigning aaa ratings to securities that carried much more risk than perhaps a aaa rating might warrant. was -- it seems like the incentives would be aligned for the buyers to seek out ratings that were more accurate because they would be taking on more risk. was there a systemic problem as far as how incentives were aligned with the credit rating system that allowed these faulty ratings to propagate throughout

the system. >> you have some incentive problems and you identified with one of them that you would think that instead of the seller of the security being the one who hires and pays the credit rater you think it would be in the interest of the buyers who after all are the ones bearing the risk to band together somehow and pay the credit rater to give them the best opinion they can about what the credit quality is of the security. unfortunately, that model doesn't seem to work. there's very few examples of any where it works and the problem is what economists call a free rider problem. basal, if -- if five -- five investors get together and pay standard & poor's to rate a particular issuance, unless they can keep the completely secret, anybody else can find out what the rating was and they can basically take advantage of that without the -- having to pay -- having to be part of the consortium that paid so there

have been a lot of ideas out there about how you can restructure the payment system to create better incentives for credit raters. but it is a challenging problem because again, this obvious solution of having the investors pay only works if the investors collectively can share the costs and somehow keep that information from being spread among other investors. okay. 2:00. i'll see you on thursday to talk about the aftermath of the crisis. thank you. [applause] [inaudible conversations]

[inaudible conversations] >> that was federal reserve chair ben bernanke wrapping up the third of four classes at george washington university. his next class will be thursday of this week. in the meantime, on capitol hill, the supreme court has just finished its second day of deliberations on the nation's health care law. focusing today on the constitutionality of the individual mandate to purchase health insurance. the debate is closed to cameras, of course. however, we are getting tape play back of each day's proceedings. fed back during the afternoon. right now c-span3 is airing the deliberations. it is also available on c-span radio and at c-span.org.

the senate is in recess for their weekly party lunches. right now, senators have been debating a bill that would repeal tax breaks to oil companies in light of higher fuel prices. they'll also stop to take the official senate photo this afternoon. live coverage of the senate continues when members return, at about 2:25 eastern here on c-span2. and as the supreme court grapples with the health care question, senators have offered remarks about the debate during general speeches earlier today on the senate floor. here's west virginia nelson rockefeller as he talks about the need for the health care bill. >> mr. president, this week there's plenty of drama unfolding at theis supreme cour. the stately buildingcr across - whatever it is the mall, where we now -- where we now stand. so the justices are deliberating inside the building. there's a lot ofut shouting and

clamoring outside, that's to be expected but i'ml here today t encouragein all of us to pause r a minute and to step back from the hype and to really think about what the broader health care reform means to so many americans, not just the citizens that the a presiding officer ani represent but americans across the country. i do think because i believe strongly that the rhetoric surrounding thebe issues has become so polarizing many people people routinely overlook the profound ways made life better for so many americans. let's remember why we started down this path of health reform at all. and lamar odom say for the record that this was a path that has been well trodden over the years by both democrats and republicans. in fact, over the last century but we had never managed to

isn't that correct meaningful reform in our system. yes, w e added on some extraordinary things like medicare and social security and medicaid but reform of the system we had not done. and so we rejoiced in what happened in the mid-60s but that didn't help us in terms of the overall disposition of this system. when we renewed this debate to make sure how everyone in this country can get the health care they need, we actually at the time, as we started had 46 million uninsured americans. uninsured is not pleasant. is a fearful condition. employers have been dropping coverage for a decade due to skyrocketing health care costs. people were losing their jobs and with them their coverage. even those who had coveraged were being saddled with horrendous bills and they were thrust int to bankruptcy even though many of them thought they

had coverage that was protecting themut financially. they didn't but i thought they did. and some of those with preexisting conditions couldn't get backt into the system atny costee, whatsoever. preexisting conditions is something you have tens and tens of millions of americans have those. americans thought that our system was broken and unfair and they thought it was time to finally achieve our shared goal of access to care at a more affordable system, that was sensible. let's start by looking at part of the law that protects those with preexisting conditions. as i've just mentioned, there are about 133 million americans, individual americans, they live every day and they live with chroni c anything else illnesses or they fail to live with chronic illnesses. what happens when their insurance companies refuse to pay for? those illnesses even

when insurance companies are getting paid for them.su it's called rescission. it's a dirty dribbling that the insurance companies have been years through the years and this law stops that. before health reformdi millionsf americans including children could be denied the health care they needed due to a preexisting condition. they may have had asthma. i had asthma until i was 12 years old. i wasn't worried about insurance or maybe i didn't get stick or maybe i couldn't get insurancet in those day bs because i had a preexisting conditions. if you have a c-section you have a preexisting condition, you have. acne you can have a preexisting condition. you have almost anything you can have a preexisting condition. if the insurance company decides you do so then they can cut you off. it's called rescission. they cut you off even though you are paying premiums and that's sort ofnt unfair. i want to talk about what this has meant to real people every day. it meanse that people have live

in fear of losing their employer-sponsored coverage or even leaving a job to start their own business, for fear that they couldn't get coverage, admit that if somebody double digits coveragare the insurance company could just carve out their condition. in other words, t just get rid them, dump them. what's the practical implication of this insurance company? abuse. -- consider this you could get coverage if you had cancer but the cancer wouldn't be covered. not good. and a preexisting condition doesn't have to be as complex as cancer. before health reform, insurance companies could even e den coverage to a woman if she was a victim of domestic violence and had to be treated. that's unimaginably cruel but it is a fact, it was a fact. well, president that is no more.

under the health reform law, preexisting conditions will no longer be a barrier to quality of affordable health care. that's over. they can't do it. it's against the law. the law that so many people are trying to repeal. is there anyone here who would like to go back to the old days, thosenc good old days when individuals including millionsi of children were punished they couldn't possibly control and they were subject to devastating medicalur costs without the benefi of insurance their families were and i don't think people would want to go back thereil but, of course, that's what will happen, if we abandon all of this. now, let's talk about another piece of this great effort that also is often overlooked and it's the coverage of young adults over the age of 26 and i know that's a particular matter that the presiding officer likes about this bill. in the past many young adults in my state and wrench have gone

without health insurance as thee make their way into the world after graduation. that's ahe tough time. most of these young adults are notd slackers as they have sometimes been called. many simply start out in low wage or part-time jobs that typically don't offer health coverage. and because they're over the age of 18 and, therefore, technicallyo adults they were nt able to maintain coverage under their parents health insurance plan. well, this meant that many young adults would forfeit basic things like checkups oroc put o seeing ae doctor when they had health problems in the hope that it would go away but n that's n way to live, particularly, not when 15% of young americans, mr. president, suffer from a chronic health condition like depression or diabetes, yes, that young. not when a staggering 76% of

uninsured adultsee report not getting needed care because of cost. before health reform young one-third of nted our nation's uninsured population. t people always think of young people as healthy, not so. they take risks. they end up in the emergency roombo often. think aboutul how many young adults and their families are so much in a better position. now, why is that? that's because the law now allows young adults with no coverage of their own to pay premiums and to stay on their parents health insurance policy up to their 26th birthday. even if you no longer live at home, if you're no longer a student and you're -- or you're no longer dependent on your parents' tax returns. in other words, you are covered. you are covered, up to the age of 26.

as a result, the results already over 2.5 million young adults have gained coverage who did not have it before. that is a factmo today. including more than 16,000 young in west virginia. now, those families have the t peace of mind that their families will be financially protected should an injury or an illness occur. it's important to know that young peopleh suffer a lot of mental health conditions. maybe a little bit more than the rest of the population. we don't think about that because they're young and, therefore, alwayso ebullient. no they're young and often troubled. trying to figure out what life holds for them. and these conditions can cause them problems. they need health insurancew and now they can get it. so right off the bat, parents like sam hickman from west virginia were able to get young

adult coverage. isn't our country really a better place it would seem to me when peoplvee have the securityf knowing they're covered in case of illness and injury. to me it kind of just makes sense and even more importantly to the people it brings peace of mind. it's not all. the law provides access to free preventive healteh services and easier primary care as well as increased financialnd assistanc for students through loan scholarships to build a stronger health care workforce. it's a major part of this bill. in west virginia the presiding officer knows and all across the particularly in ruler areas we have a shortage of various kinds of necessary physicians and health care providers. one of my favorite parts of this law -- the significant new financiaivl incentives it creates to encourage young adults to go into primary care, dentistry,

pediatrics, nursing and mental health, to precisely address thoseil shortages. it's in the bill. it just kind of makes sense give cn the shortage of skilled health professionals in this m country to make it easier for young people to get into those well paying stable jobs health care job growth continues to be a major stabilizing factor in our economy creating additional job in local communities is something many in this body have fought for i, in many ways, tax credits, planss, and all kinds meantime, health reform tackles that problem, too. health care jobs continue a to grow year after year after year. most of them private obviously. just look at the numbers from the month of february of this year, the health care sector

once again led the nation's job growth month adding about 59,000 jobs which was the same as the month before. health care is the economic engine, in fact, mr. president, the kind of undergirds our economy. it's silent. it's relentless and it will not stop. because health care is something people cannot walk away from. the receiving of or the providing for. another important group helped by health reform on our nation's seniors starting with lowering the costs of their medicare prescription drug coverage.pt that's very importantge in west virginia as the presiding officer eaknows. thanks to the new health care law, almost 40,000 people with medicare in west virginia received a $250 rebate. they've already got it to help cost of their prescriptiont drugs when they ht that famous donut hole in 2011. i won't bother to explain that,

2010, in 2011, more than 36,000 west virginians with medicare received a 50% discount on their prescription drug program when they hit thed donut hole. that's very good news and we go to close the donut hole entirely. so this discount that i'm talking of resulted an average savings of $653 per person. andnd a total savings of over $23.5 million in our state of west virginia, mr. president. by 2020, the law will close the donut hole, completely. and i think that's ratheher sensational news for seniors. but closing the donut hole is not all that this law does for seniors. under the new law, seniors can receive recommended preventive services. we talk about that all the time and we always think it's not in

a bill. preventive services such as flu shots diabetes screenings as well as new annual wellness visits, all things that seniors should do but often decline to do because of lack of access or thinking they have to pay for it and they don't have the money. so now they can get all of these screenings for diabetes and flu shots and all kinds of other things free, free. so far more than 32.5 million seniors,de mr. president, nationwide have already received one or more free preventive services including the new as i indicated annual wellness visit which is a very good idea for any person. they received free preventive services such as mammograms and

colon oscopy and 4 i like americans with private health insurance gained preventive service coverage with no cost-sharing including 300,000 people in our statete of west virginia. now, the new law also provides new grants and incentives to improve health careua coordinatn and quality as well as a new office on there federal coordinated care office. we have to have that. i kind of wish we didn't have to but we do. because it's a new science. this is trying to get away from the health care system as usual. .. little addition, and sort of managing care for seniors and managing care for individuals with disabilities and importantly, eligible for both medicare and medicaid. that, obviously, is known as our dual jibleses which --

eligibles, they're poor enough to be on medicare and old enough to be on medicare so they can't life so to speak. they need help, they need health care under this bill they get that. there are about eight, nine, ten, 11 million of them in this country. many doctors, many hospitals, many other providers are taking advantage of new options to help them work better as teams to provide you the highest quality care possible, that's called coordinated care. it's new, it's important, and it's going to be really helpful. that's good news because many chronic illnesses can be prevented or managed better through this coordinated care. it means doctors doctors actually talk to each other. they don't -- you know, you get your -- an x-ray taken by a dentist or by somebody else. the way it is now you have to carry that x-ray with you if you manage to get your hands on it to go see another doctor as

opposed to a system where through telemedicine and all the rest of it you just -- and, you know, the technology it can just shoot right over the internet and the doctor you're going to see next already has that. so he's thinking about what he's going to do or some of his people are. so important. you know, talking to each other. we don't. doctors and hospitals often operate as in a vacuum. sort of taking a case-by-case basis. it's bad for patients. now, the health care law, mr. president, also helps stop fraud with tougher screening procedures. and stronger penalties. and new technology, new technology can catch all kinds of things. thanks in part to these efforts, we have recovered -- please listen -- $4.1 billion in taxpayer dollars in 2011.

that was last year. the second year recoveries hit this record-breaking level also. west virginia tax dollars shouldn't go to pay for criminals who are defrauding the system and the administration is cracking down on this, believe it or not it is. and i'm not done. in just over 18 months a new competitive health insurance marketplace called the exchange, so it has everybody nervous for no reason at all. for no reason at all. it's great news. and it will be up and running in west virginia and all across the country where individuals and small businesses can shop for coverage. in the private health insurance market. this is not government. it's all private. all of it. an estimated 180,000 west virginians will be eligible for $687 million in premium tax credits to help cover the cost of private health insurance in

the year 2013 when the exchanges start. and families all over the country will finally have more power when it comes to buying the health insurance that works for them. having more power is a big deal. if you're trying to shop for insurance. thanks to a clean, transparent summary of benefits -- yes, you actually get to see the choices that you can pick from. got to list out all the services they're going to provide, required by law, can't cheat, can't just say we'll take care of you. sign up with us. we're a big company. insurance company. so they get the transparent summary of benefits and coverage that will let them compare benefits on an apples-to-apples base which will come standard with every single private insurance plan which is what makes up the exchanges. then they will go through that, they will pick out what best suits them.

in fact, it's quite telling that little-known provision i've just talked about is the single most popular one in the entire law. i didn't know that. 84% of americans think that's really good. they like the idea of being able to choose what they are going to get in health care coverage. and the insurance companies, of course, hate it and have been fighting it with everything they have bun but we've been beating them back, mr. president, as you would expect us to do. that tells me that people are frustrated and fed up with confusing information they've been getting from had their health insurance companies and they're tired of guessing games about what's actually covered. they have a right to know. now they can. so i look forward to september of this year when every health insurance company finally has to come clean about what benefits are actually covered in the products they are selling. come clean.

it will be there in black and white. you can read it. and families have, obviously, therefore much more purchasing power in their hands. what is wrong with that? another point: while opponents have gotten used to talking about how the law costs too much, in fact, it has great provisions that not only improve the quality of care but also save hundreds of billions of dollars. oh? yeah, that's true. that's true. it's a fact. like the average, for example, $2,500 discount that thousands of west virginia small businesses received last december as a result of the medical loss ratio rule. that is what followed the public option. everybody so loved the public option, they throt it was wonderful. but couldn't get votes in finance company so didn't get down here so we invented something called the medical-loss ratio.

totally ununderstandable, right? but it's not a question is it understandable, it's does it work, does it help people, and it does because it says that insurance companies are required to spend at least 80% of small businesses and 85% of large businesses, health insurance premium dollars on actual medical care. not on administration, not on marble pillars, not on c.e.o. calories, they've got 20% or 15% to do all that. but if they fail to do that, they have to rebate to the consumer, to the patient who has -- who has been paying the premiums the fact that they haven't been abiding by this 80% or 85% law, and that is probably going to be several billions of dollars. at the very least hundreds and hundreds and hundreds of millions and that's kind of like

billions and it starts this year. i'm delighted. now, the independent payment advisory board or ipab is another example. ipab is not well understood and therefore is not well received because what is not understood is generally not well received. that doesn't mean it isn't good. ipab will be made up of smart doctors, nurses, other health care experts and others who will figure out ways to improve the quality of medicare services and make sure that the medicare trust fund stays strong. stays strong. and ipab is legally forbidden in this law that the folks across the street are now considering from recommending cuts to medicare benefits or in any way increasing cost sharing on the part of medicare recipients. that's in the law. cannot cut benefits, no cost sharing. and yet the house just last week rallied behind an effort to

repeal ipab. they didn't know what it was. or they had really bad dreams about what it was and so they repealed it and felt better. the house vote is a good example of what happens when special interests win and seniors lose. the independent -- the independent payment advisory board was created to protect medicare for seniors by improving the quality of medicare services and by extending the life of medicare. for years to come. instead of making medicare better, house republicans want to decimate the program forcing seniors to pay much more and giving private health insurance companies and other special interests the authority to raid the medicare trust fund which they will do in order to pad their bottom line, which they love doing. this would take us exactly in the wrong direction every single senior in america should be outraged. even simple things, mr. president, like better

information about private health insurance. you know, you can get that, you dial up on your web site, healthcare.gov, helping people to shop for better coverage today. information is out there. there's so much more that has already happened and more to come, things like the nearly $70 million in grants that west virginia has already received for things like community health centers. we put aside $10 billion in the bill for maybe up to a thousand new rural health care clinics across america. and you know very well the presiding officer like the lincoln county -- you know, so many in west virginia, people don't want to go to hospitals but they'll go to clinics happily because they're the first floor, tend to be in buildings that used to be stores or whatever, and they get good medical care right there. so, in closing, why would we

want to throw this law out the window? knowing at least just these facts. think about it. the reforms here are the most significant reforms of health care in several generations. it's an effort that 50 years from now history will record the same way as we do social security or medicare as programs. as an essential part of the implicit promise to care for its citizens, to allow people to age with dignity and define -- to find ways to make our society a better place. so as we mark the two-year anniversary of the health care reform law becoming the law of the land and the folks across the street will decide if that stands up or not -- i think when thil -- they will -- i for one am proud of my role in passing it and grateful congress came together on such an historic issue. historic issue.

he was on the senate floor earlier today. the senate will return shortly from the party caucus is. while you wait, more in health care what your march on senate minority leader, mitch mcconnell and others. [inaudible conversations] >> at afternoon, everyone. i happened to have been an occasion before the supreme court about 10 years ago and we all thought it was a really big case because they give us two hours of oral argument instead of one. after three days of oral argument i sat to take a look at the recent past and we believe

you had to go out the way back to brown versus board of education to find a case in which the court had granted so much oral argument. so we all understand this is a very, very significant lawsuit. these attorney general is, some of who are litigation. i think we all believe the federal government under the commerce clause canard he defied a product to tell you what kind of product to buy is not much left of the commerce clause. and listening to the questioning of the judges instruct me that the former liberal judges were mainly peppering the plaintiffs counsel and the other five were largely, although not exclusively peppering counsel for the government. what that leads to ultimately we don't know, but we note the extent will be over in june.

let me finally say regardless of how the supreme court rules on the constitutionality of what i believe is the single worst piece of legislation has been passed in the time i've been in congress is still a bad idea. and if the senate republicans become the majority next year, the first item on the agenda of the new senate republican majority would either repeal of ovonic air and the replacement with something that makes more sense is targeted at the problem that we actually happened american health care. that i would like to turn it over to my friend and colleague, senator mike johanns from nebraska. >> well, thank you, leader. just a few impressions if i could of what i observed during the arguments today. i think leaders thoughts on this are right on target. but i was watching justice kennedy very close. well, i guess everybody was.

he came right out, very quickly and argument and asked some very, very fundamental questions. the first thing that he pointed out is that if this is really going farther than any other case, which i believe all sides knowledge that it is, that there is a substantial burden, a heavy burden on the part of the government to justify their actions, to find the authority within the constitution to do what they are doing. that seems to be right to the heart of what we are talking about today. the second observation that i would point out also came from justice kennedy. he said, you know, this fundamentally changes the relationship between the people and the government. and that is one of the points that we have been making all along this notion, that somehow

congress believes it has the power under the commerce clause to force people into commerce for whatever reason choose not to be in commerce is a stretch beyond anything that our country has ever done. so, you never know. i mean, these are only arguments. they are asking questions to try to figure out where they are going to settle in here in terms of deciding the case. but i would say today the government had a tough day. that would be my impression. with that, let me turn the microphones over to my colleague, senator cornyn. >> well, the reason this case is so important, as you know, and senator johanns points out is because this legislation does grow the size and the role of government in ways that are really unprecedented in our history. and as we all know, as government grows, individual freedom shrinks.

and that is what this case is basically about, is whether we as individual citizens can choose our own health care options or whether the government is going to impose a tall on all of us. and by the way, taking money from medicare, which is already on a fiscally sustainable path to create a new entitlement program in creating a health care plan that costs will explode dramatically in 2014 as the individual state insurance exchanges are created. so this legislation is not only unaffordable, it makes matters worse when it comes to current programs like medicare, which are already in bad shape. and it is going to result in a contraction or shrinking of individual freedom in making health court she choices that are unelected bureaucrats will decide whether you are medical care is worth it or whether the

federal government will simply choose not to pay for it because of the cost-benefit analysis of those bureaucrats simply isn't worth it. i will turn it over to senator hutchison at this point. >> well, thank you. i think we have seen the early arguments. yesterday especially, where we were arguing into the attack of the mandate. and i thought justice roberts certainly said, while course we all know that the attacks may congress had the capability to do it. but she basically said that it looks like a duck and walks like a duck and it? like a duck, it is a duck, which means it is a mandate. it is an unconstitutional mandate that will make this whole lot unconstitutional. and i think when you put that what it is doing, it is telling

every business in america that they have to subscribe to a government run health care plan or they can't offer the premium. it is a mandate that is unsustainable in the constitution. and i think the justices are beginning to get enough and are a nation that we hope they will come to the right decision. there is no question that two thirds of the american people believe this is an encroachment on their freedom. and i hope that we can exchange sunday by law, but i hope we can start all over and have a good health plan for more access by americans to an insurance that they can afford and that they want. and now i will turn it over to senator marco rubio from florida. >> thank you for the opportunity to talk for a few moments. first of all, and very proud to

state of florida has taken the lead on challenging the constitutionality. we are hopeful the supreme court will see the way we do that this violate constitutional principles, particularly in terms of what the role of federal government should play. we don't know exactly how the case will turn out, although we are hopeful the turnout in the side of constitution. but we don't obamacare has been a disaster for american financial. there is no doubt that our country has to be confronted. this is the wrong way to confront. this is the way that undermines and takes away the ability of our economy to grow and prosper. there are thousands upon thousands of small businesses across the country that are free to grow and hire new people because they have no idea how the law will impact them. so we know for them it is a bad idea. other americans are beginning to lose existing health care coverage, breaking a promise made by the advocates and a first pass the bill. there're others for any difficulty accessing existing plan that will take it as a result of the changes that have been made here the result is

what we do not know how the case will turn out, we are to know how obamacare is turning out and that is it is a job carried initiative that will set us back in the hopes of arriving at the host insurance problem in the united states. i hope i can be part of an effort here to not just vote to repeal obamacare, but to replace it, to replace it with initiatives that increase the private market and free enterprise and a brief individual choice and at the same time allow us to address the significant public policy issue we are facing it comes to health insurance. [speaking in spanish]

[speaking in spanish] and now it is minor to introduce to our attorney general from florida who is in a phenomenal job in leading this effort, pam bondi. >> thank you papers so blessed to have senator rubio in so many great members of congress here today to support a myth and stan appeared to continue this fight for us. i can tell you've been in the courtroom for two days and we feel very confident. we feel very so pleased to the questions the justices have been asking and as we have said from day one, this is unconstitutional. this is a government overreach like we have never seen before in our history. and we have got to stop it here

and that is why we are here this week and that is why we are in front of the united date supreme court. we feel very calm that tomorrow we will hear two days -- another day of argument on the severability issue as well as medicaid expansion. but what we can tell you today as we felt very comfortable with questions that were asked and we firmly believe this is unconstitutional and as the justice has said him and this would be such an overreach. if the federal government can do this, they can force us to do anything. and that is why we are fighting this with everything we've got. i would now like to introduce my colleague, attorney general john burning in south dakota and the next united states senator. >> well, first of outcome i want to stay thank you to my colleagues, pam bondi of florida and alan wilson of south carolina. with managing committee of six to eight managing states and litigation we started this 13

states. back plumley across the country by all professors is that this case will never end up in the supreme court. you have no opportunity to defeat this legislation in court. here we stand now assists per in court and i can say i feel a lot better after witnessing two hours of argument i saw when we started. and the reason i think senator johanns said clearly. always when justice kennedy. justice kennedy was skeptical of the mandate and the constitutionality of the mandate and that makes me feel better about our chances. it's hard to predict when you stand outside the supreme court as to what they are going to do. in keeping with justice kennedy's right decision making in cases where we've seen him make the decision, he is very skeptical of unlimited congressional power under the commerce clause. and so my colleagues and i have been managing this case day today. we so great about the questions we heard from the justices here we feel very positive and mandates will possibly be struck down. and if it is tomorrow is going

to be very important to talk about severability because we believe that the mandate start down the entire lot that's all. so with that, i will introduce my colleague from texas, greg abbott, the attorney general. great. >> thank you. today we are one step closer to bringing great disappointment to the united states and others who spoke here earlier. those senators as well as leader mcconnell have talked for two years now about revealing and replacing obamacare. i think after today we will have have to worry about crossing a bridge because we are getting closer and closer to the court striking down obamacare altogether. when the states filed this lawsuit, we knew that it was going to be a battle between individual liberty and current government. and we knew that if we could get the court to agree to focus on whether or not obamacare unprecedentedly infringed upon individual liberty, we had a

chance of winning. we were pleased to walk out of the courtroom today, knowing that five of the justices on the united date supreme court focused their powerful questions against the united states government on that very issue and that is the unprecedented encroachment obamacare poses on individual liberty. today is a very positive step in the right direction, not just for the states and losses, but all americans who cherish liberty, believe in the united states constitution and want to see the rule of law enforced. i am now proud to introduce my colleague from south carolina, attorney general wilson. >> thank you so much. first off later today in accord with the member of the supreme court, justice kennedy say that if the court upholds the slider will fundamentally change the relationship by which the government relates to the people. the government at that point tried to make the argument that we are doing with the health care market.

justice roberts made the point this could be a slippery slope and that if we can regulate the health care market, then we can pick and choose in the future but congress can and cannot regulate. it's an open door. pandora's vox, a slippery slope. that is very concerning to me. the drafters of our constitution never intended, never gave this congress the power to create commerce by forcing people into contract. they gave congress the power to create or coin money and gave congress the power to raise armies for the navy and congress the power to regulate money in the military. they never gave congress the power to create commerce. they don't have that power and that is exactly what the health care law does is create commerce by shutting people into contracts they don't want to be had or may not choose to be in the sole purpose of regulating them and that his son and we have to stop. back to a justice alito said.

this fundamentally changes the relationship between the people and their government and that is why at this case so important. at an affair time for any questions. >> we are going to be in the florida house were 2:00 p.m. for media. all the attorneys general sewer here curators approximately 20 of us and you're welcome to come over there at 2:00 and will take any questions come even if you have individual questions for interview requests. >> republican senate lawmakers earlier today discussing the health care lot and now back to. the senate floor business is closed. under the previous order, the senate will resume consideration of the motion to proceed to s. 2204, which the clerk will report. the clerk: motion to proceed to the consideration of s. 2204, a bill to eliminate unnecessary tax subsidies and promote renewable energy and energy conservation. mrmr. president,mr. reid: mr. pk

that the time until 3:30 be twieded between the two leaders or their designees. 359:30, the senate adopt the motion to proceed to vote on the motion to invoke cloture on the motion to proceed to s. 1789. the presiding officer: without objection, so ordered. mr. nelson: mr. president? the presiding officer: the senator from florida. mr. nelson: mr. president, with all of the very well-deserved statements that have been made about our colleague, senator barbara mikulski, i wanted to raise my vote in support of that milestone she has achieved here in congress. a personal word i want to add, and that is that she has been so supportive and such a leader in

our nation's space program as the chairman of the appropriations subcommittee, she has to be intimately familiar with the details and the appropriate way to allocate the funds in order that this nation's civilian space program can go forward in the visionary and frontier-breaking manner that it always has. and i am extremely grateful for her leadership, and i wanted to add this to the accolades that she so well deserves and has already had from so many of our colleagues. mr. president, i yield the floor. the presiding officer: the republican leader. mr. mcconnell: mr. president, what we're seeing in the senate this week is exhibit a in what

the american people just don't like about congress. gas prices have more than doubled under president obama and the democrat control of the senate. this is an issue that affects every single american, drives up the cost of everything from commuting to groceries. and what's the democratic response? well, it's legislation that even they admit won't do a thing to lower the price of gas at the pump. we've got seven democratic senators on record saying this bill doesn't do a thing to lower gas prices. one of them has actually called it laughable. yet, that's what they're proposing here this week at a time when gas prices at a national average are nearly $4 a gallon. this is what passes for a response to high gas prices for washington democrats, a bill that does nothing about it. i can't think of a better way to illustrate how totally out of touch and irresponsible the

democratic majority has become. look, democrats know they have to say something about this issue. so what they're doing is they're taking a page out of the president's play book and blaming somebody else. that's what this entire exercise is about: blaming somebody else. and, frankly, the american people are tired of it. if democrats don't want to do anything to lower gas prices, just go ahead and admit it. if senate democrats don't have any interest in lowering gas prices, then just say so. but don't waste the public's time by using the senate floor to talk up a piece of legislation, the only purpose of which is to convince people that you do. if the president doesn't want the keystone pipeline, why doesn't he just admit it. but don't insult the public by showing up at a ribbon-cutting for one part of it that you had nothing to do with while lobbying against the most important part of it at the same

time. americans are tired of the political games and the double-talk on this issue. they're tired of the constant campaign. they sent us here to actually fix problems, not avoid them. and on this issue, there's a lot we could be doing to make things a whole lot better. and so republicans are happy to use this opportunity to talk about some of those things. who knows, maybe more democrats will decide it's long past time they joined us in actually supporting and improving some of these proposals. but we're never going to solve the problems we face if democrats insist on using the senate to make some political point instead of actually making a difference in the lives of working americans at a moment of urgency like this. and we're certainly not going to make a difference if we keep flitting from one issue to another. we're now hearing that the democrats want to move off this tax hike legislation. maybe it didn't make the intended political point as

forcefully as they wanted. to move on to postal reform e. dentally the senate schedule is driven not by the needs of the public but by the democrats' perceived political needs. we seem to change from minute to minute around here. well, i would suggest the democrats learn to prioritize. let's stick with one thing and actually do something. stick with one thing and actually do something. as i said, there is much we can do to address gas prices. why don't we stick with that? this is something that matters to every american. postal reform is important, but we all know nothing is going to get done on it until after we return from the easter recess anyway. let's make that the pending business when we return and put first things first. we were sent here to solve problems, not avoid them. and the refusal to come together on commonsense solutions like the ones we're proposing on gas prices is precisely the kind of

thing people detest about washington. and they're perfectly right to do so. so i would suggest that our friends on the other side rethink the strategy of theirs and join us. why don't we just try doing the right thing. mr. president, i yield the floor. ms. klobuchar: mr. president? the presiding officer: the senator from minnesota. ms. klobuchar: mr. president, i ask unanimous consent that for the next ten minutes i will speak for two minutes, senator boxer for eight minutes and then senator murkowski for ten minutes. the presiding officer: without objection, so ordered. ms. klobuchar: mr. president, i rise today to stress the critical infrastructure needs across our nation and urge the house of representatives to act quickly and pass the surface transportation bill that we passed in the senate with an overwhelming bipartisan vote. the fact of the matter is that we've neglected the roads, bridges and mass transit that millions of americans rely on for far too long. i know that. a bridge collapsed, mr. president, just a few blocks from my house. it wasn't just a bridge.

it was an eight-lane highway. 13 people died, dozens of cars submerged in the river. as i said that day a bridge doesn't just fall down in the middle of america. well, it did that day and i am committed to passing this highway bill. this is important for jobs. this is important for congestion, for drivers who sit in congestion. americans spend a collective 4.2 billion hours a year stuck in traffic at a cost to the economy of $78.2 billion. the solution? pass this highway bill. it reduces the number of highway programs from over 100 down to around 30. it defines clear national goals for our transportation policy. it streamlines environmental permitting. i spoke to 75 highway contractors today. they are ready to go. they want this bill to pass. companies like caterpillar employ 750 people at its road paving equipment manufacturing

facility in minnesota. i visited that company in august. caterpillar employees are the kind of people who are out there on the front lines of american industry, who want to build these roads, who are building the products when we talk about made in america, that's what they're doing. i would also say, mr. president, with the short construction season for states like minnesota, my friend from california may not quite have the situation, but for winter states that have a short construction season, we cannot delay, delay, delay on this highway bill. we cannot stop these construction projects in their tracks. we cannot stop these jobs in these tracks. it is time to pass the senate highway bill, bipartisan support, 74 out of 100 senators voted for that bill. i ask the house of representatives to quickly pass this bill, to get this done without delay. it means jobs. it means safety. and it means a future for

america. thank you, mr. president. i yield the floor. mrs. boxer: mr. president? the presiding officer: the senator from california. mrs. boxer: i want to thank my friend from minnesota. i want to say to her that her leadership when she was on the environment and public works committee was amazing. we miss her leadership there. but she's working so hard on other committees. but she still carries in her heart a great understanding that if anything is bipartisan around here, it's the highway bill. it's the transportation programs. we proved it here. i want to talk a little bit about it. so i thank her. i want to talk a little bit about big oil and this crying about big oil by my republican friends here. and then i'm going to segway to the tpwaolgts pass a transportation bill -- to a battle to pass a transportation bill and the three million jobs that hang in the balance. first i have to say i listened very hard to the republican leader, senator mcconnell, talk about what a useless thing it is to try and say to big oil,

who's had these big subsidies for so long, decade after decade, started when they were young companies, that what a terrible thing it would be to take away those subsidies, billions of dollars, when they are making multimultibillion dollars, and they're robbing us at the pump, pocketing the profit. and we would like to see that money be used for alternative fuels, for energy-efficient cars so that we don't have to worry so much if the price of gas goes up a penny if we're getting 50, 60 miles to a gallon. i drive a hybrid car, and i could tell you that i don't visit the gas station that often because we get about 50 miles to the gallon, so the shocks that come with the increase in gas are a little bit muted. but here's the story. americans have made sacrifices.

they are paying more at the pump. they are told by big oil, we are so sorry, americans. you have to pay more at the pump because there's instability in the world. you have to pay more at the pump because our refineries are down. and we're really sorry. what they don't tell you is they're exporting the oil that they find in america to other countries. what they don't tell you is they are pocketing the profits that you are paying. they are pocketing the profits. in 2010, the five biggest oil companies made $80 billion between them. in 2011, they made $140 billion between them. so no one can stand here, not even the esteemed republican leader, and tell me that big oil is making sacrifices just like

ordinary americans. the people who are running away with our money that we're paying at the pump are big oil and the speculators on wall street who are playing around with the instability in the middle east on futures. on commodity futures trading. so if you want to do something, let's take away those subsidies from these big oil companies who are just making life miserable for the american people. but oh no, our friends on the other side put up a fight, and they cite a couple of folks on our side who agree with them because they come from big-oil states. i understand that, but let's stand up for the american people. now another way we can stand up for the american people, mr. president, is to speak with one voice and ask the house to take up the senate bipartisan transportation bill that passed

this senate overwhelmingly. the clock is ticking toward a shutdown. and extensions are dangerous. so my story on the transportation bill is a beautiful story of compromise, working together here in the senate and a very ugly story about what the house is doing, which is dithering around, playing with fire, and i telling you extensions are death by 1,000 cuts. he they think they shall just send -- they they think they can just send over an extension and feel they've done their job. let me tell you what we found out today from the american association of state highway and transportation officials known as ashto. these are folks in on the grounn our states. i spoke to the departments of transportation today from north

carolina, nevada, maryland, and michigan. i think most people know i represent california. and i'll be back with all the details. senator feinstein is talking to the transportation officials today. but the reason i'm talking about these four states is because they have already calculated the job losses that have already begun, because the house is dithering and will not pass our bipartisan transportation bill. north carolina, it is not a blue state. i spoke to jean condy, secretary of the north carolina department of transportation today. you know what he said? he has delayed the remaining 2012 project awards totaling $1.2 billion in projects that employ 41,000 people. now, the house is right down the hall. i had the honor of serving

there. i hope they're hearing this while they debate an extension. an extension of this program is not benign. an extension of this program is damaging. an extension of this program means job losses. 41,000 in north carolina. i spoke with scott rawlings today, deputy director and chief engineer of the nevada department of transportation. he's holding up advertising for federally funded projects until there is a reauthorization bill committing federal funds. he is required he is required to slow down future projects and he will not consult prior agreements without reauthorization. and right now today, ashta, the american association of highway and transportation officials, tell me 4,000 jobs are at risk

in nevada today. now, what the nevada people tell me is that in the good old days when they were in a boom, the state could come forward and take these extensions in stride. they had the funding to frontload their projects and not worry about the federal reimbursement. they thought that reimbursement would come. a, they're very worried about reimbursement.and, b, because of the recession, it has hit some of our states very hard because of construction slowdown in housing, they do not have the funds to fast forward any of these projects. so north carolina, 41,000 jobs at risk. nevada, 4,000. i spoke to caitlyn raymond in maryland. she talked about the uncertainty and she went into four or five different things she's trying to do now she cannot do because the house is dithering and they won't take up the bipartisan senate bill and pass it.

4,000 jobs are at risk in maryland because projects are being delayed. michigan, i spoke to the director in michigan, kirk steidel. he says several large construction -- the presiding officer: the senator has consumed eight minutes. mrs. boxer: i would ask for just 30 seconds and i'll turn it right over to my friend. the presiding officer: without objection. mrs. boxer: thank you. michigan, same story, 3,500 jobs. so i am saying to m the house today -- and i encourage my colleagues -- i know the senator from new hampshire is here and she's going to speak a little bit later about this. come to the floor with the stories about your states. these extensions are dangerous. they will lose jobs. tell the house to pass the bipartisan senate bill. and i yield the floor. a senator: mr. president? the presiding officer: the senator from alaska. ms. murkowski: thank you, mr. president. what a good discussion on the floor today.

i will join with my colleague from california in urging that the house also move on the transportation bill. but that's not what i'm rising here this afternoon. i would like to speak on the legislation that is before us. this is the menendez proposal to raise taxes, raise taxes on american energy companies and inning inevitably prices to american consumers. it has been described as something else, but i would suggest to you that any effort to increase the taxes on -- on the energy companies that are providing a resource so us is -- is nothing more than a tax on our energy companies. and as we tax those energy companies, it's sure not going to make them produce things that are more affordable, moribund not. in fact, it will -- more abundant. in fact, it will have the negative result, it will impact prices negatively to american consumers. this legislation we have before us, this is not a new idea.

this is something we have seen before. i think that the numerous times that we have rejected it leads me to the conclusion that it still remains a bad idea. it's a messaging bill that has failed over and over and over and i think it deserves to see that same fate again. this very congress just a little less than a year ago rejected this same tax hike. anybody who's curious to see what it is that we did back then just needs to look up vote number 72. this was back in may of last year. just to see how all 100 members of the senate voted. now, some have accused republicans as using this opportunity when -- when gas prices are -- are high to push our cause, if you will, to push our cause for increased supply and -- and that somehow or other we welcome the aspect of -- of higher gasoline prices. and it was actually the president himself who said that

some see a political opportunity to call for greater domestic energy production. and with oil sitting at over a hundred dollars a barrel, i think we all recognize that there is impact out there. but i can tell you for a fact, mr. president, that my constituents don't view this as a political opportunity. i get a weekly summary of what's happening with gas prices around my state. right now, the average price of a gallon of unleaded here in the u.s. is -- is just a little shy of -- of $4. well, in -- in my hometown in anchorage, we're paying $4.14. in juneau, which is our state capital we're, paying $4.24. in barrow, top of the world there, they're at $5.75. bethel is paying $6.33. they long for the day they would be paying closer to $4. we are so far beyond the national average. they don't view higher gasoline

prices as any kind of a political opportunity. what they are asking for is that they do more. in fact, there is an imperative that we here in congress do more to -- to address prices. and i believe that there is no question, there is no question that we can bring additional resources on-line, that we can bring several million additional barrels of american resources to market. and there's no question but what it would do. it's going to help to create jobs. we know that for a fact. it will absolutely generate revenues. it will better insulate our nation from the instability that we have with the global price markets. and that's -- we know that's what's happening right now. every time iran is mentioned, everything gets a little shaky out there. and we know that this -- so much of this is due, in fact, to the fact that there is little spare capacity in the global markets. so let's -- let's look closer to home. what do we have closer to home?

the president has suggested time and time again that we've only got 2% of the world's reserves. well, in fact, this -- this myth about the u.s. scarcity is just exactly that. when we talk about proven reserves, in fact, it is a much smaller piece of the pie, 20.6 billion barrels of proved reserves. but what needs to be understood, and unfortunately it doesn't make a good bumper-sticker, is that what we have as a nation demonstrates incredible, incredible national reserves. 205.6 billion barrels of technically recoverable resources. we don't even count the 800 billion-plus bill barrels of oil shale that are out there. so you might ask the question, why aren't we going after the rest of the pyramid, the part in blue. the problem that we're facing is that so much of this is put

off-limits, it's not accessible. and it's not accessible because of our government policies. now, i recognize that there is more to a -- a policy when it comes to an energy policy than just drilling, just increased domestic production, but it must be part of the solution and it must be a significant part of the solution if we're going to talk about true north american energy independence. we -- we must do more when it comes to conservation and efficiency. we need to build out toward the renewable energy sources of the future. it -- if you want to have the bumper-sticker, it's "finds more, use less." it's pretty simple. and the chart lets us know that we truly can find more here. but what we're facing with the menendez bill that's in front of us takes us in a completely different direction. what the president and the democratic leadership are proposing cannot, by its own definition, reduce our gas prices. if anything, we're just going to see them pushed higher.

and my constituents back home just can't -- they can't afford to see them pushed higher when you're paying above $5, above $6 per gallon at the pump. we know that some pretty basic economic principles are at play here. taxing something does not make it cheaper and more abundant. and we know from past experien experience, due to a failed experiment with the windfall profits tax that harmed domestic oil production, collected far fewer revenues than was expected. we know that this has taken us in the wrong direction. now, again, our problem is high fuel prices and their effect on average americans. i have yet to hear anyone explain to me how raising taxes is going to lower prices. and even when you look at the subsidies that are -- are extended in the menendez bill, not even half of these are related to the transportation fuels. the first section here in his

bill is extension of credit for energy-efficient exist being homes. well, i'm all for that, but tell me thousand ties in somehow or other to our transportation fuels, in terms of costs, it's even more unbalanced. so i'm -- i'm left at a loss here to understand how porm nent tax increases for oil and gas producers in exchange for another year of subsidies for efficiency and renewable energy is -- is going to make any kind of a reasonable or meaningful difference. it kind of says so the american people, well, that -- that $4 that you're paying at the bump, too bad about that. but how about a governmen government-subsidized dishwasher? i'm just -- that -- that just doesn't work. some will also come here to argue that increasing taxes will have no 0 effect on production. and in response to that, i'd like to submit two news stories from last week for the record. these are new stories, these aren't editorials. one is from platte's energy.

the other is from 9 "wall streel street journal." and both detail an announcement from the british government that it is going to reverse its own taxes on the oil companies. last year, england decided to do essentially what is being proposed here with the menendez bill. they were responding to high oil prices. and so what they did was they moved to increase taxes on the industry. well, the result, mr. president, is not going to -- to come as a surprise. when the government made it less economical to produce oil by hike their tax rates, companies stopped producing and the they e making their investments elsewhere. in the year since great britain imposed its tax hikes, its production decline has tripled, from 6% to 18%. now, let me just repeat that. in the years since great britain imposed tax increases on oil producers, production declines accelerated from 6% a year to

178% a year. and now britain is in process of doing absolutely an about-face. they're likely going to offer $5.5 billion in tax relief to the oil companies to try to bring the prescription drugs -- the production back. now, i'm sure that some here would refer to that tax cut as a subsidy and ignore the inconvenient fact that higher tax levels lead to lower production. they don't lead to cheaper fuel, they lead to lower production. and yet even in the face of high fuel prices and compelling empirical evidence, the proposal in front of us is going to take us down the exact same path that great britain went down last year. it would make the clear mess stick of driving production away when i think we need it most. the outcome in england just helps produce this is a seriously defectsive yesterday i think and a dangerous one. so you just need to look at what has happened across the pond there. if the senate was really serious

about address bass lean prices, we'd be taking the long overdue steps -- the presiding officer: the senator has consumed 10 minutes. ms. murkowski: mr. president, i -- i don't see anyone in the queue. iqueue. if i may have another minute to wrap up. the presiding officer: without objection. ms. murkowski: thank you, mr. president. if we were really serious here in terms of what we're doing in terms of increasing our long overdue requirement to up our oil resources, our oil production and supply, we know. we've got opportunities from our neighbors to the north in canada with the keystone pipeline. we clearly have opportunities in alaska from the outer continental shelf, from the rocky mountain west. we still import about half of our oil supply and about half of that is from opec. and one last chart, mr. president, if i may.

right now, about 47% is opec. non-opec is 53%. if we were to add to our mix here in this country what we could get from keystone, that's the middle pie. lebut look where we would be asa nation if we were to plus up our activity with domestic production, bring on keystone and with our existing -- existing resources, our imports from opec are reduced to such a minimal amount. we could -- we talk about energy independence, north american energy independence, and we truly could be in that position where we are not vulnerable, not vulnerable to the volatility of the markets, not vulnerable to the volatility that comes from opec setting the prices as they do. not in a situation where we are spending millions and billions

of dollars to import a resource that we need but that we have as a nation. i can't fathom why the congress -- why the congress would want to drain our economy by raising taxes on the very businesses that help minimize our foreign dependence, help create good-paying jobs for our families, and have truly helped to make a difference to -- to americans around the country in the long run. with that, mr. president, i yield the floor. the presiding officer: the senator from california. mrs. boxer: i'm going to yield in just two minutes because i know senator sanders is here. i really feel i need to respond because it's very important to note that president obama under his leadership for decades we haven't drilled as much as we've drilled now. we have more wells pumping than at any time in recent memory.

and i think it's a really important point. of course we're not going to drill off the coast of some of our precious areas because we have to support initialing industry, we have to support recreation industry, tourist industry. but all this argument about drill, baby, drill, and we'll solve everything, doesn't work. because you threaten jobs when you go to certain areas that are pristine and a very important source of economic income for our states. plus if you ask my colleagues on the other side, they will not support keeping the oil here in america. they will not. and we are exporting more oil than we ever have before. so this thing gets very interesting when you really look at it. and still in all, the big oil companies as we all make our sacrifices at the pump, they're bringing in record, record, record profits, and they ask us to make sacrifices because this instability in the world, but they're pocketing those increases.

and yet our republican friends cry bitter tears because we want to suggest that subsidies they got decades ago should keep on undisstushed -- undisturbed, billions of dollars when we would like to these those funds go to make it easier for america's families to buy more fuel-efficient cars, to find alternative fuels, etc., etc. when i come back to the floor after this discussion on postal reform, i'm going to talk about more about the highway bill. the house is about to vote on a 60-day extension. let me tell you, that's dangerous. and i hope colleagues over there will not do that because i got to tell you every day we extend the highway trust fund, every day we extend it for a short period of time we lose jobs and we need certainty. thank you, mr. president. and i'm happy to yield the floor at this time. the presiding officer: the senator from vermont. mr. sanders: mr. president, later this afternoon, actually

in a fairly short while, we're going to be voting on whether to proceed with the postal reform bill, and i hope we vote yes. i hope we have a strong bipartisan vote to go forward. i will tell you why. mr. president, about nine or ten months ago, the postmaster general came up with a proposal for the post office, and in my view, that -- that proposal from the postmaster general is an unmitigated disaster for our country and especially for rural america. and this is what his original proposal outlined. what he proposed was the shutting down of more than 3,600, mostly rural post offices. and if you live in a rural state like mine, one knows how important rural post offices are

and their function is beyond being just a post office. in many small communities throughout this country, post offices are the center of the town. it's where people come together. it's what develops a sense of community. in some cases, it is what that small rural town is all about. you shut down that rural post office, and in some instances you are literally shutting down that town. and we should also understood that -- understand that in the midst of the serious financial problems facing the postal service, shutting down 3,600 mostly rural post offices would save the post office one quarter of 1% of their budget. so the original plan, which has since been modified, was shut down 3,600 rural post offices, and i would suggest whether you are a conservative republican or a progressive independent, that is not good for your state, not good for america.

in addition, the postmaster general's original he proposal talked about shutting down 2,200 mail processing facilities all over this country, that's approximately one half of the mail processing plants, and if he did that, that would end overnight delivery standards for first-class mail. mr. president, at a time when the postal service is facing extreme competition from email and the internet, in my view the last thing you want to do in this country is to slow down mail service. and i think i speak for many members of the senate who say that you move in that direction, making mail delivery slower, you are beginning the death spiral for the postal service, many businesses, many consumers will be saying sorry, i'm going to look elsewhere to get my packages, get my mail delivered. furthermore, the original

proposal from the postmaster general was to shut down saturday mail delivery, and in the process reduce the work force of the postal service in the midst of the worst recession since the great depression by over 200,000 jobs. now, what i want to say is that senators lieberman, carper, senator collins, scott brown, the ranking members of the committee, came together and made -- put together a bill which was significantly better than what the postmaster general had proposed. no question about it. some of us felt that the lieberman-carper-collins-brown bill did not go far enough, and we have been working with the chairmen of the committees to try to improve that bill, and i think we have made some success. and i think if you look at the

manager's amendment, you'll see stronger guarantees to make sure that we are not shutting down rural post offices all over america, that if we shut down processing plants, they will be a significantly smaller number that was -- than was originally proposed, and that also we would maintain strong mail delivery standards, if not as strong as i would like, at least stronger than what the postmaster general originally proposed. now, if -- here is my fear, mr. president: the postmaster general is raring to go. now, if he proceeds and the board of postal commissioners perceive that the united states congress cannot act, they're going to go forward and bring forth a proposal which will not be as strong in protecting post offices and workers and the american people as we can do.

so what we managed to do back in december is get a five-month moratorium to prevent the shutting down of rural post offices and processing plants. that expires in -- may 15. i think it is important we begin the process we vote to proceed within the next hour, that we bring that bill to the floor, that there is an open process by which people, including myself, will bring forth amendments to make the bill even stronger than it is right now. i would point out to my colleagues that in terms of the financial problems facing the post office, clearly they have got to deal with the serious problem, the very real problem that first-class mail has gone down very significantly, being replaced by e-mail. there's no question that is a real legitimate problem. but what is not a legitimate problem is that the postal

service uniquely in america -- not in local government, state government, federal agencies, or the private sector, the postal service alone is being asked to put $5.5 billion every single year into their future retiree health benefit program. according to the inspector general of the u.s. post office, given the fact that there are some $44 billion in that fund already with interest rates accruing, we do not need to put more money into that fund. there is widespread agreement that the postal service has overpaid into the federal employee retirement system, some $10 billion or $11 billion into the civil service retirement system, at least a couple of billion dollars, and perhaps a lot more. so bottom line here is this: if we are serious about protecting rural america, if we are serious about protecting 3,600

rural post offices, if we believe that the post office must continue being an important part of what america is about, so important to our economy and to small businesses, and we do not want to delay mail service, slow down mail service, we do not want to shut down half of the mail processing plants in this country, i think it's important that we begin that debate and vote for cloture. and with that, mr. president, i would yield the floor. a senator: mr. president. the presiding officer: the senator from connecticut. mr. lieberman: i thank chair. mr. president, i rise to urge our colleagues to vote for cloture to proceed to the postal service bill. and i'd just speak very briefly. this is a great american institution, right there from the founding of our country. in fact, in the constitution to provide post offices. and it is an institution that is today in trouble.

last year, it lost almost $10 billion. why? part of it is the economic recession, but the real explanation is that mail volume has dropped 21% in the last five years, and mostly that's because people are using the internet and email instead of traditional mail. and yet the postal service not only itself provides a great service, but it facilitates investigators -- various sectors of our economy that employ seven million people, mailers, mail order catalogues, and the like. our committee when confronted with this crisis and the statement from the postmaster general don ahoe if nothing was done, we have to begin curtailing operations sometime this year because we essentially run out of enough money to operate the post office as it is. we tried to get together and

work on a balanced program. we reported out a bipartisan bill. some people said it was too much, some people said it was too little. we think it was just about right. there's been a lot of dialogue with senator sanders and others, people on both sides of the aisle. when we take this up, and i sure hope it's when and not if because i don't know how we could just turn away from this problem and essentially say to the postmaster we're not going to provide you any help, you're going to have to handle this, and what he's going to do is close a lot of post offices, in my opinion, close a lot of mail processing facilities, raise prices to the extent he can under existing law. this is a balanced program. it creates some protections for small and rural post offices before they can be closed, it creates new standards of delivery of mail so that the

postmaster will, in his wisdom, be able to thin out employment at some of the mail processing facilities, perhaps close some of them but nowhere near what he wanted to do earlier. the postmaster asked us for authority to go from six details of delivery of mail to five days of delivery of most mail, and we essentially said you may have to do that, mr. postmaster, but don't do it for two years, see if the other things we're authorizing you to do enable you to get the post office back in fiscal balance, but if not, after the two years with the process we ordain, they'll have to go to five days of delivery. here's the bottom line: we're trying everything we can to save this great institution. it really isn't a relic. it's a fundamental part of the modern economy. and it has some great resources. first is its presence all over the country, and one of the things we are doing, we worked

on this with senator sanders and others, in the substitute we will create a -- an advisory commission, a new commission which will be charged with the responsibility of not only reviewing the operations of the post office to make sure it's being managed and run most efficiently, but for looking -- for a new business model. for new ways to use the great assets of the post office. one, that it's all over the country, and the post offices, and two, that no one else can cover the last mile of delivery to everybody's house or business in the country, regardless of where you live, including the iconic burros who deliver mail in the grand canyon and mailmen on snowshoes who deliver it in rural parts of alaska. right now fed ex, u.p.s. and others use the service of the last mile to complete their --

their delivery to their customers, and we want to see if we can figure out how the post office can make more money so it can stay alive. this is a great american institution, which i believe has a great future but it's not going to have it unless we help. here we're challenged again. are we going to fall into ideological rigidity or partisan conflict and let this great institution slide, and fall into a deep crisis, or are we going to work together as i believe our committee has, to prevent a bipartisan solution which will guarantee in a very different time in american history that the post office, the united states postal service, can play as vital a role as it has throughout all the rest of our history. i -- i thank the chair and i yield the floor. i suggest, mr. president, the absence of a quorum. the presiding officer: the clerk will call the roll.

quorum call:

the presiding officer: the majority leader. without objection, under the previous order, the motion to proceed to s. 2204 is agreed to. mr. reid: mr. president. the presiding officer: the majority leader. mr. reid: i ask unanimous consent that if cloture is invoked on the motion to proceed to s. 1789, which is the postal reform bill, and the motion to proceed is later adopted -- mr. president, could we have order. the presiding officer: yes. the senate will be in order, please. mr. reid: we'll start over. i ask unanimous consent that if

cloture is invoked on the motion to proceed to s. 1789, the postal reform bill, and the motion to proceed is later adopted, the senate resume consideration of s. 2204, which is the repeal big oil subsidies act, at a time to be determined by the majority leader following consultation with the republican leader. the presiding officer: is there objection to the request? mr. mcconnell: reserving the right to object. the presiding officer: the democratic leader -- the republican leader. mr. mcconnell: i share the majority leader's view that we ought to turn to the postal reform bill, so what i intend to do is to ask the consent that we modify the consent that the majority leader just offered, modify his request so that on monday, april 16, we proceed to consideration of s. 1769, the postal reform bill. that would give us an opportunity to further debate and discuss the menendez proposal which we just invoked cloture on yesterday for the balance of the week.

so i object. mr. reid: mr. president. the presiding officer: the leader. mr. reid: reserving the right to object. mr. president, i think most people know i worked here as a police officer for most of the time i was going to law school, but i also worked for a period of time in the post office. i'm not an expert at the post office, but i know the importance of post offices, and i know what's going to happen in the state of nevada if we don't make some arrangement to help the postal service survive.scor, there will be distribution centers that may not exist after a few months. so i want to get to the postal bill as much as anyone in this chamber, having worked for the postal service through the house post office. so i want to -- i want to move to the postal bill, but i'm not going to be forced into doing it at a time that may -- in a time that may not work out fo for our

schedule -- that the senate. so i will move to that as quickly as i can after the recess. but i object to the modification. mr. mcconnell: and i -- the presiding officer: the request for the initial -- the request for the initial modification is objected to. mr. mcconnell: and i object to the initial request. the presiding officer: objection is heard for the initial request. the clerk will report the motion to invoke cloture. the clerk: cloture motion: we, the undersigned senators, in accordance with the provisions of rule 22 of the standing rules of the senate, do hereby move to bring to a close debate on the motion to proceed to calendar number 296, s. 1789, the 21st century postal service act, signed by 16 senators. the presiding officer: by

unanimous consent, the mandatory quorum call has been waived. the question is, is it the sense of the senate that debate on the motion to proceed to s. 1789, a bill to improve, sustain, and transform the united states postal service, shall be brought to a close? the yeas and nays are mandatory under the rule. the clerk will call the roll. vote:

vote:

vote:

the presiding officer: are there any senators in the chamber wishing to vote or wishing to change their vote? hearing none, on this vote the yeas are 51, the nays are 46, three-fifths of the senators duly chosen and sworn not having voted in the affirmative, the motion is not agreed to. the majority leader. mr. reid: i have a motion to reconsider the vote by which cloture was notvoked to proceed

on s. 1789. the presiding officer: the motion is entered. mr. reid: would the chair be kind enough to announce the pending business. the presiding officer: s. 2204 is the pending business which the clerk will report. the clerk: calendar number 337, s. 2204, a bill to eliminate unnecessary tax subsidies and promote renewable energy and energy conservation. mr. reid: i have an amendment at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada mr. reid proposes an amendment numbered 1968. mr. reid: i ask the yeas and nays on that amendment. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. mr. reid: i have a second-degree amendment also filed at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada mr. reid proposes amendment numbered 1969 to amendment numbered 1968. mr. reid: i have a motion to commit the bill with instruction which is at the desk.

the presiding officer: the clerk will the clerk will report the motion. the clerk: the senator from nevada mr. reid moves to commit the bill to the committee on finance with instructions to report back forthwith, with an amendment numbered 1970. mr. reid: i ask the yeas and nays on that motion. the presiding officer: is there a sufficient second? the yeas and nays are ordered. mr. reid: i have an amendment to the instructions at the desk. the presiding officer: the clerk will report. the clerk: mr. reid proposes amendment numbered 1971 to the instructions of the motions to commit s. 2204 to the committee on finance. mr. reid: i ask the yeas and nays on that amendment. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. mr. reid: i have a second-degree amendment at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada mr. reid proposes an amendment numbered 1972 to amendment numbered 1971. mr. reid: i have a cloture motion at the desk. the presiding officer: the clerk will report. the clerk: we the undersigned senators in accordance with the provisions of rule 22 of the

standing rules of the senate hereby move to bring to a close the debate on s. 2204 a bill to eliminate unnecessary tax subsidies and promote renewable energy and energy conservation signed by 16 senators as follows -- reid of nevada, -- mr. reid i ask unanimous consent the names not be read. the presiding officer: without objection. mr. reid: i ask unanimous consent the mandatory quorum call under rule 22 be waived. the presiding officer: without objection. mr. reid: i now move to proceed to calendar 339, the paying a fair share act, which is s. 2230. the presiding officer: the clerk will report. the clerk: motion to proceed to calendar number 339, s. 2230 a bill to reduce the deficit by imposing a minimum effective tax rate for high-income taxpayers. mr. reid: madam chair, i note the absence of a quorum. the presiding officer: the clerk will call the roll.

quorum call: a senator: madam president. the presiding officer: the senator from delaware. mr. coons: i ask unanimous consent proceedings under the quorum call be vitiated. the presiding officer: without objection. mr. coon: madam president, -- mr. coons: i rise to address an important issue about what our path forward is to building a stronger and facer america. i was deeply frustrated to hear that the transportation bill which was passed by overwhelming bipartisan consensus in this

chamber has gone over to the house and they cannot find a way forward to respond to this bill from us or find any clarity or certainty about whether to simply take up debate, amend or consider and enact hopefully our bill from the senate or ask for short-term extensions of 0, 60, or 90 days. as you know as a former governor executive, when investing inunty things as important as bridges d highways, roads that make infrastructure, transportation, and a reliable predictable future for our economy possible, nothing is more important than certainty. financing major highway projects, buying major pieces of equipment, hiring the crews to do the work is exactly the sort of thing where certainty is critical. and so i have a simple question to our friends in the other chamber, which is when they will take up this bill that passed this chamber by such an overwhelming margin and when they will take seriously the broad bipartisan input from every imaginable group in support of this. i was active in my previous elected role as county executive can with with the national association of counties, the u.s. conference of mayors, the

u.s. chamber of commerce, the afl-cio have all weighed in -- in fact, if i remember correctly the u.s. chamber of commerce wrote every single office in the senate in support of this legislation calling for specific action, specific action that both the congress and the administration can take right now to support job growth and economic productivity without adding to the deficit. this bill came out of the committee after remarkable work by senator boxer of california and senator inhofe of oklahoma. two senators who are widely viewed viewd as being at the opposite end of our -- ends of our political spectrum in this chamber. when i go home to delaware i hear folks say over and over again, why can't you work together, why can't you iron out your differences and put america on a clear, straighter track towards stronger recovery? this is exactly the sort of bill that will accomplish that end. a two-year reauthorization, $109 billion that in my small state of delaware would create

6,700 jobs now hangs in the balance. it will expire the end of this month and rather than take up and consider and hopefully pass this lilg bill --, this bill, folks in the other chamber and sadly, largely folks on the other side of the partisan aisle here, are refusing to do so and will instead take a short-term chip shot of an extension. i simply wanted to say if i might, madam president, that certainty is something i respect from my years in the private sector, certainty is something i hear from the other side of the aisle in the other chamber all the time and this is a moment when certainty can be served by the house taking up and passing the senate-passed bill. a senator: will my friend from delaware yield for a question? mr. coons: absolutely. i yield to the senator from qea scea. mr. begich: you were a county executive, i was a mayor of a community. we had a deal -- had to deal with the real-life aftermath of what happens when it comes to extensions and what happens,

and i know in my city when i saw these extensions from that end of the table, we also had to stop projects, slow them down, didn't have the money to finish them, winter shutdown, all it did was add cost, increase the capacity -- or decrease the capacity of roads, and literally take products off the list. in your community, had you to deal with this probably like i had to, did you have the same kind of impact where you had to tell contractors i'm sorry, we don't have the money because the federal government hasn't done their job they said they would do 20-some times before and never completed it? is that a similar situation situation? mr. coons: madam president, the senator from alaska is absolutely right. in my county role, we didn't do roads, the state does the roads but we do sewers and heavy capital sphrus fraws fast that in our little county would cost tens of millions of dollars. we'd be on a project, off a

project. we were fortunate in good times we had enough surplus, enough money in reserve we could go ahead and authorize the bond issue and authorize the project. but as the economy turned and as our balance sheet got tougher, we had to wait. we had to put things on hold. we had to put key projects off. and i know the good senator from alaska as a former mayor of rank raj saw that in -- anchorage saw that, was it not that certainty was an enormous challenge when you were relying on a federal partner who was unreliable? mr. begich: i know in alaska i chaired the metropolitan planning organization, the m.p.o. which had this money that came from this legislation, it would come to us and if they delayed it here or they had these crazy continuations because for some reason couldn't get their work done and now we're seeing that on the house side, they've had months, months to work on this, i think they actually bangdz that we -- banked that we would not work

together, democrats and republicans and get something done. we actually did and a significant piece of legislation about infrastructure that's crumbling in this country, 74 votes, bipartisan, from all spectrums of the political super situation here and i think they banked that we would fail. but we didn't. five weeks of work, a lot of compromise because we know what the impacts are on the street if don't want do this. and i can tell you back home because if the house doesn't take action on a very reasonable bill, a bipartisan bill, what will happen in he ask -- in alaska these projects will deobligate or not obligate the funds which means they will delay them. the contractors who expected to do work this summer will not and in alaska because we're a winter climate, a lot of northern states have a similar situation, the asphalt plant that lays the asphalt down closes usually the first part of october so you have a window that shrinks very rapidly and if

you're not careful, the net result is you have no projects and you pay more which means the delay the house side is doing is going to cost taxpayers more money, there will be less jobs. in alaska we have 18,000 jobs at risk. 18,000 jobs at risk. and at the end of the day again, you get less product, less roads. so i can only assume the experience i have here, your state government that works with your county when you were county executive, same thing they had to go through like you explained on your water and sewer projects. but as you said, times are different. you can't supplant local money like it used to be because we don't have it. the economy is struggling and starting to come back, but here we are at a moment, the economy is moving the right direction, and what are we doing? the house over there is just waiting. i think that's the example that you were looking for that we're doing and that we're suffering through.

mr. coons: what strikes me most about this, madam president, and to the good senator from alaska is that all the sectors of our economy that have suffered since the financial collapse of 2008, all the sectors in the entire american economy, at least in my home state, construction was hit the hardest. we already knew that we were far behind in investment. we have got tens of thousands of bridges that are out of compliance with basic engineering standards. half of our roads are below the standards we would expect for a modern economy. this is money that can and should be invested in putting people to work, in construction which has suffered from the highest unemployment where it's got support from the chamber of commerce to the afl-cio, where we wrestled through the tough processes here over several weeks, as the senator says, and we have got a strongly bipartisan bill over, sitting, ready to go. there are other things that we debate in this chamber that maybe will create jobs, maybe won't, there is no question. even those that have the strongest concerns about the federal role in our economy can't disagree that federal

highway projects put people to work, strengthen our economy, make us more competitive. this bill is ready to go. why you would not take it up and enact it today, i can't imagine. and to the good senator from alaska, i might say you may have a somewhat shorter summer season than we do, but if you have got 18,000 jobs at risk, i can only imagine the kinds of calls you're getting from your home state as i'm getting from my state urging that the house of representatives take up this strong and bipartisan bill and pass it so we can all move forward and create some real jobs. mr. begich: the last comment i will say, and i'm sure it is more of a question, i'm sure you had the same situation as you just described. yes, getting those calls, and they are not just -- people say well, this is a union thing. no, it's union, nonunion, chamber, environmentalists, neighborhoods, community councils. it's everybody you can imagine because these are real jobs about real people, about real communities. over there, i think they think it's some theory that, oh, if

they delay it, nothing really will happen. they're wrong, because you and i have lived on that other side and have had to live with the consequences of inaction. this is one of those bills you look for where there is bipartisan support, all the groups that are out there from all walks of life support it, and everyday people understand it. when i was back in anchorage and i was getting some petroleum, some gas at the gas station, someone would come up, they would ask me, because why? we are just about to start our season in the bidding process because you have got to take 30, 60, 90 days to get the bids out and then you actually construct. i think they sometimes think over there in the house that it's some fantasy land that whatever they do has no effect. this does. you say it very clearly. i appreciate you allowing me to ask a few questions and more commentary at times here, but it seems the most ridiculous thing with the american people, alaskans are telling me every day work together, create a

bipartisan legislation, whatever it might be. here is one we have done successfully, and now we're ready, but over there, they are just playing politics. they have now tried twice to do something this week, and they still can't get it moving. so i would encourage them on the other side to just move forward on the bipartisan bill that the senate has passed that i know they were banking on. we wouldn't pass it. the american people are waiting for these jobs. the contractor community is ready. the communities are ready. it's time to move forward. so thank you for allowing me to ask a few questions and give a little commentary. mr. coons: thank you to the senator from alaska, and thank you, madam president. as we both know from our former roles, when you have a short-term extension, there are costs. it means that folks who are getting mobilized, getting organized, getting ready, you have to pull them back. when the state coffers, the county coffers, the municipal coffers don't have the ability to float and put in place for the federal funds that they're

waiting for, it means projects get canceled, people lose their jobs, opportunity and optimism that were moving forward get pulled back. we have got folks all over this chamber and the other, former governors, former mayors, former county executives, former business leaders who know the importance of a strong and reliable federal partnership in strengthening infrastructure in this country. i just want to congratulate again senator boxer and senator inhofe for working together so well to craft a tough, strong, capable bipartisan bill, and it is my plea that the members of the other chamber would promptly take it up, consider it and pass it so we can get america back to work. thank you, madam president. with that, i yield the floor. a senator: madam president. the presiding officer: the senator from california. mrs. boxer: madam president, before they leave the floor, i really -- i want to thank senator coons and senator begich and you, senator shaheen, madam president, for your very important words that you gave today on behalf of the house taking up and passing the

bipartisan senate transportation bill. and it's interesting to note, we also had the senator from alaska, the senior senator, senator murkowski, also speak out in favor of the house picking up and passing the senate bipartisan bill. i also served in the county as a county supervisor a long time ago, but i think we all understand that what we do here makes a difference. you know, this is one nation, under god, indivisible. you can't have a circumstance where one state puts their funding -- their own funding from their state into highways, but the next-door state does nothing, and you can't really have commerce, and that's why i thought dwight eisenhower, when he was president, republican president, in the 1950's, said it well. he was a logistics expert, and he is the one who started the national highway system because he knew from his experience in war that you've got to move

goods and people, and he also knew as his role as president that in order to be a strong economy, we have to do the same thing here at home. so for me to see this house dither as they are doing, they are dithering on a bill. all they have to do is take up the bipartisan bill. for goodness sakes, they got three quarters of the senate to support it, and all we need is 218 votes. when i served in the house for ten years, what did i learn? you needed 218. and tip o'neill never cared where he got his votes. he just got the votes for the american people. so i have written letters to congressman boehner, speaker boehner, and leader cantor, and i have begged them to please work with us on this bill, and all we get back are statements from their staff, well, we're going to do it our way.

and as congresswoman pelosi, the democratic leader, said today, when you say my way or the highway about a highway bill, you really don't get much done. i also wanted to thank senator klobuchar. we also held office at the state level. she was a district attorney, and she understands what happens when we work together, federal government, state government, local government, all of us working together for jobs, and that's what this bill is about. so i'm going to call today on the house to immediately take up and pass the bipartisan boxer-inhofe bill. i'm going to ask them to abandon their goal of a series of extensions. you know, madam president, when you go to buy a house, your constituents and mine, they need a mortgage. maybe it will be a ten-year mortgage, 15, maybe 20 or

30-year mortgage. if the banker looked at them and said we can only give you a mortgage for 60 days or 30 days, it would be very difficult, to put it mildly. it's disruptive. you don't know how to plan. you don't know what it's going to cost. you don't know if you're going to ever get the money for the house. so the house by taking up these extensions, they have to understand the impact, and today i called a press conference to let the press know what the impact is of these extensions. the extension means job losses, and we started to put together a list from -- that are coming to us from the state of job losses already happening in the field because of the lack of action by the house. north carolina, i spoke to the secretary of transportation there today. he has delayed the remaining

2012 projects totaling $1.2 billion that would employ 41,000 people. so 41,000 people do not have work as we speak today because the house is dithering and not passing the bipartisan senate transportation bill. i spoke to the officials in nevada. thousands of jobs there lost as we speak because the house is considering an extension instead of passing a bill such as our bill. maryland, i spoke to them, same thing. thousands of jobs. i spoke to michigan, same thing. and right now, we're putting together a list from all across the country of job losses in all of our states as a result of the house failing to take and pass the bipartisan senate bill. i mean, what more bipartisanship do they need than to have 75 senators support the bill -- one

of them was absent due to a funeral, so we got 74 votes to 22 against. okay? what more do they want? anyone watching the senate today sees how paralyzed we are. we haven't been able to do a thing. there is filibusters on fixing the post office. there is filibusters on making sure that big oil doesn't keep ripping off consumers at the pump. filibuster, filibuster, filibuster, filibuster. but we were able to get over all that and pass a transportation bill. why wouldn't the house be thrilled about that? why wouldn't the house embrace what we did? why would the house instead stand up again today and say we're going to have a 60-day extension? guess what? they pulled it, madam president. they are not having a vote on that today because of the uproar it is creating in the states and on the house floor.

the house has not delivered on its promise for a bill. all they do, the leadership, is complain about our bill. today, i couldn't believe it, chairman mica said this bill isn't paid for. when senator baucus and senator thune and others worked across party lines to pay for our bill. it's 100% paid for. and guess what it does. it protects 1.9 million jobs and creates another million. that's what our bill does. so they're pulling this vote. they're pulling this vote today. good. i'm glad they're pulling this vote because they ought to instead pass the bipartisan senate transportation bill. i want to tell you a story about what's actually happening out there in the economy. if we do nothing, 1.9 million jobs are gone.

1.9 million jobs. on march 31. if we do an extension, then you have death by a thousand cuts. a proportion of these jobs are lost, and it keeps getting worse with every extension. so it's the end of these jobs but slow, torturous end of these jobs. i want to show you, madam president, how many unemployed construction workers there are. 1.4 million. why is that, when the unemployment rate is 8.3%, the unemployment rate among construction workers is 17.1%? why that? because we were having a very tough housing crisis and we're not out of it yet. so all of these workers who are building houses now were hoping to be able to build highways, build freeways, fix bridges.

and our bill does that. our bill will take these people and put them to work. we could get this unemployment rate down to 400,000 because we'll take a million off this with the expansion of the tifia program, which stands for transportation infrastructure financing which upfronts the money for cities and states and your state and mine and others and gets projects built faster. so i want to show you what it would look like if you put every unemployed construction worker into a football stadium. this is a super bowl stadium, and it's filled. imagine each and every one of these seats is filled by an unemployed construction worker, and then close your eyes and imagine 13 more stadiums, for a total of 14 stadiums. 14 stadiums full of unemployed

construction workers. that's what we're facing. and yet, still the house will not take up and pass the bipartisan transportation bill. and they are flirting with extensions, which is just the end of these jobs, but slower and more excruciating. now, we talk about gorks but we have to talk about business -- now, we talk about jobs, but we have to talk about businesses. these jobs are private-sector jobs. and these businesses, over 11,000 of them, are construction companies who would be adversely impacted. i met with business owners. one man was teary-eyed. he said, senator, i've had to lay off 1,000 people because of the indecision here, because of the constant extensions we've had on the highway bill. we need your bill now. and i said said i understood.

he said, i captain loo can't lor worker. stefntionextensions are like hao mouth. if you know you shall onl you ag to get 90-day extensions, how can you plan for a year? we have to remember we're not just talking about workers; we're talking about the businesses that support those workers. i'm going to show you a series of editorials. they have run in red state stat, they have run in blue states, they have run in purple states. madam president, i am going to make a statement here and i'm going to stand by it. everyone in america gets this except the house of representatives. everyone in america gets this except the republicans in the

house of representatives, save a few of them who are courageous. four of them have broken off, one of them from your home state, two of them from illinois, one from north carolina. they sarks we stan say, stand u. good for them for showing that kind of courage. i say to you now, it is 4:45 in the evening. if any of them are tuning into this little discussion, listen to what these newspapers are saying. house should pass transportation bill. the number-one priority for the house should be passing a bipartisan transportation bill. as the senator already did on a 74-22 vote. the senate has done its job. house speaker boehner should drop the notion of passing an extreme republican-only bill and do as the ar the?

-- as the senate did. this is from "the fresno beat," the redest, most republican part of california. they're asking the house to pass the senate bill. then we have the michigan detroit news. "congressional waffling hurtds state roads." "the u.s. senate has approved a bipartisan two-year plan. while imperfect, it's better than another reprees of another outmoded transportation act that has already been extended eight times. the disarray hardly gives states the kind of revenue certainty they had gate from a federal plan but if boehner and house members can't agree on their own plan, they'd probably be wise too take what's politically possible and pass it." pass the senate bill. newspapers all over the country. look at this one. "road to compromise." you would think the house would embrace this. what are the american people telling us?

we are viewed -- in the congress -- as fighting constantly. our approval rating is 10%. madam president, i don't know who that 10% is, but it's probably your family, my family and the family of my colleague from missouri. why is it? because we can't work together. we proved it today on two bills we can't get together. but we proved a couple of weeks ago, after five weeks of debate, we could do i could do it on transportation. when senator inhofe and i agree, my good in that's a day. we don't agree on so many things, believe me. we're struggling on anything that has the word "environment" in it. he's fighting to overreturn the e.p.a. -- overturn the e.p.a. clean air rules.

he says i don't do enough oversight on things he wants oversight on. listen, we argue. we respect each other. we like each other. we disagree with each other. but on this we came together. what more does boehner want? what more does cante cantor wan? speaker boehner is putting at risk 55,000 jobs in ohio. doesn't he care about the businesses and the workers there? this is the road to compromise. this is the ohio "akron beacon." from the heartland. on wednesday, "74 senators, republicans and democrats, joined together to approve a two-year bill. the timing couldn't be better. what will the house do? it should take the cue of the senate and quickly approve the legislation that won bipartisan support."

couldn't be more clear. that's ohio . madam president, i will tell you, i've never seen such an array of newspapers from all over the country. this one is "the "chicago sun-times"." for a better commute pass the frptiotransportation bill. the senate just delivered a gift to the house, a bipartisan transportation bill at a time when america really could use a lift. here's hoping the republicans don't mess it up." wcialtiowell, hope against hope. so far i feel very worried, very, very worried. the whole program expires on friday, and all they can come up with is these extensions, and then they don't even have the votes for that. how bad would it be for them to give me a call, give senator inhofe a call and say, you know, we're going to come over and sit down, and bring the bipartisan leadership of the committees -- there are four of them -- bring the bipartisan leadership of the

senate and let's hammer something out. what is happening over there? speaker boehner is the speaker of the house, not speaker of the republicans. he needs to work with the democrats. i don't expect the they'll loveh other. my good in we don't expect miracles. but we should expect them to work together. i remember fondly my days in the house. tip o'neill and bob michel, couldn't have better friends. did they agree on everything? no. did they work on everything? yes. i remember -- i remember those days. i was a quhip a whip at a certat in the house. they used to call us together and they'd come back and say, there's 25 democrats who can't sphroart this democratic bill. and you know what tip o'neill would do? he'd say, fine, i'll call bob michel and see if he has 25 votes for me. and they saw that they might have had 20 and they didn't have 25 and they had a compromise on the bill. they did it. that's why i decided i loaf

legislating. i loved working on this bill with my friend senator inhofe. i loved working with my staff and his staff. our staffs became almost like family. and i would encourage speaker boehner to take a page out of this book. i see the senator from louisiana on the floor. he and i go at it on a number of issues. we worked together. we even put on this bill the restore act, a bipartisan piece of legislation that is going to make sure that the gulf can rebuild and gets paid back for the suffering that went on there. now, did california get a lot out of that? no. but the country will get a lot out of that because the gulf is a region we care about. it's where we get a lot of our energy. it's where we get a lot of our seafood. we need to work together. so senator vitter and i don't

agree on a lost subject, and we -- on a lot of subjects, and we go at it pretty hard in the committee. but on this we agree. so let's look at a few others and then i'll yield the floor, after we go through the rest of these. "highway bill would boost stafnlt" this is mississippi. mr. president, this is one of the redest states in the yiewfnlt i beg speaker bainer to open his ears and hear me. "a two-year, $109 billion highway bill that passed the u.s. senate this week buoys the hope of road builders and the travel industry that the house can be prodded by the senators' action to pass its own bill before a march 31 expiration date. this bill has no earmarks. mississippi could derive major benefits." i am just saying, when you have editorials from mississippi for a bill, you know it's a

bipartisan bill. let's take look at some others, david. a solid transportation bill. this comes from oregon, "the register guard." "by an impressive bipartisan vote of 74-22, the senate on wednesday passed a two-year blueprint for transportation." "the house should move quickly to approve the senate measure. "because it a transportation bill is not approved and signed into law by april 1, the government will lose its ability to pay for federal transportation projects." so now you have mississippi, oregon, illinois, ohio -- i don't remember all that i read -- "bipartisan in senate moves transportation bill." this is oklahoma, another deeply red state. "with rare bipartisanship, the u.s. senate on wednesday passed a much-needed and much-delayed national transportation bill that could create jocks and fund road projects."

"the country's infrastructure has been ignored far too long and is in dire straits. this is an important and necessary extension of the transportation bill. it will make needed improvements to our infrastructure. and it is a real job-creator." mr. president, i am telling you that these editorials -- i am buoyed by them because these editorials from republican papers, democratic pairntion they're nonpartisan. they're all your honoring us to act. "transportation funding held hostage in the house." fort worth-star telegram texas. another red staivment "what answer site thing to see the senate pass a surface transportation bill last week on a 74-22 voavment such bipartisan support for maintaining and improving this crucial part of the national infrastructure makes it almost seem like the good old days in washington."

well, at one point house speaker boehner said he would put the senate bill before the house. earlier he said republicans might go for an 18-month extension. it's beginning to look like boehner doesn't have a clue what the house will do." "does this sound familiar? does it remierchth you of the congressional failies of last surge the reality-tv drama and brinksmanship of the debate over raising the federal debt." mr. president, i can't reach speaker baron. he doesn't answer my letters. cantor doesn't answer my letters. what's wrong with talking to each other? what happened to those days? it goes on. and i'm going to go through these. "pass this transit bill." this one is the hemaheard railed. "in an all-too-rare display of

bipartisan shrng the senate by a vote of 74-22 passed a bill of vital interest to south florida and the rest of the country." "boehner's 56boehner's approachy public approval b by stands at 0 punish or lower. mr. boehner should urge his colleagues to set aside the -- so here's the thing. i will wrap up. there is a clear path to success here. and it is not painful. it is not painful. speaker boehner and leader cantor should are abandon their idea of these endless extensions. we have proven today through the state organizations and by talking to state officials in all of our states that jobs are already being lost because of

the uncertainty, the dithering -- that's my word -- and the fact that they're talking about extensionsextensions. extensions are no good. extensions mean job losses, 41,000 jobs already lost today's a, as of now, in north carolina. and thousands in other states. because states do not have the ability to up front the federal share. they are counting on us. our bill is fully pai paid for a bipartisan way. our bill has not one earmark. our bill takes 90 programs down to 30. it is streamlined. it is made efficient. we have in a bipartisan way added the restore act. we added ways to fund rural districts for their schools by the timber receipts. mr. president, this is a really good bill. and this is a bill that is truly a product, a work product of