and in view of the countless complex decisions of which i've only mentioned a few, numerous senators repeatedly called for a technocarat rather than a political figure. however, the white house chose to ignore calls to emphasize technical expertise and political independence in their search. as a result their nominee failed to be confirmed by this body just a few weeks ago. the white house failed to accept the advice of the senate. today because of a historical rewrite of senate rules, we are now facing another vote. instead, this time the white house and the democrats in the senate chose to break the rules of this body so that they could push through representative watt and other nominees in a partisan vote. i'm disappointed with the white house and with those in the senate who supported this

rewrite of our rules, and at some time we will all likely be disappointed that these are the rules the body follows moving forward. however, i continue to be opposed to this nomination and urge my colleagues to vote no today when the vote comes before us. thank you again, madam president. and i yield the floor. the presiding officer: under the previous order, the senate stands in recess until 2:15 p.m..

>> president obam

laws protect minority and majority rights and pressuring schuss freedom of every

south african. finally mandela understood the tie that is bind the human spirit. >> the president's remarks along with those of other world leaders, will be part of the reair of the memorial service highlights tonight, 8:00 p.m. eastern on c-span2. >> it's a rare constant in american political life, if you look at say congress, in 1901, less than 2% of members came from working class backgrounds. got into politics and eventually wound up in congress. a flash forward to the present day, the average member of congress spent less than 2% of their career doing manual labor jobs, doing service industry jobs. and so this is one thing that really hasn't changed, you know. lots of different aspects of political process of change. broadcast television, cable news, the rise of candidate

centered elections, big money in politics of declines much unions. while all of this is happening, there is, you know, one ever the constants during that, during the last 100 years or so is that, working-class people are not getting elected to political office. >> does it matter that there's a socioeconomic disparity between most elected officials and the citizens they represent? nicholas carnes looks at a white-collar government. in january, in depth with radio show host mark levine. part of booktv weekend on c-span2. on line for december's booktv book club, we want to know what your favorite books were in 2013. throughout the month, join other leaders to discuss the other notable books published this year. >> the financial stability oversight council trade by

treasury secretary jack lew met yesterday on cybersecurity. the council consists of top u.s. financial leaders including federal reserve chairman ben bernanke. fdic chairman martin gruenberg, and consumer financial protection bureau chairman richard cordray. the council was formed by the dodd-frank act to identify risk of financial stability to u.s. markets and promoting market discipline. >> like to call this meeting order. [inaudible] >> again i would like to

meeting -- [inaudible] i apologize. i didn't realize the microphone wasn't on. i would like to call this open meeting of financial stability oversight council to order. before we do to our regular order of business i would like to take note that this is the last public meeting for two of our members. chairman bernanke and chairman gensler. and chairman bernanke will be with us at the january meeting as well. but there is actually chairman gensler's last meeting as a member of the council. and i'd like to thank them both for their dedication and service. i would like to thank chairman bernanke for leadership at the fed during a period of time where his leadership made an enormous difference in the list of millions of americans. in the aftermath of the financial crisis his boldness and creativity were critical to averting a great depression.

with respect to the council's work, ben has been a tremendous colleague and made immeasurable contributions in so many areas. i would also like to thank chairman gensler for everything he has done to promote the smooth financial markets. gary has been steadfast in pursuit of his reform and the ongoing transformation how our derivatives markets operate and it is a test at thatment too his drive and termination that we made the enormous progress we have. on behalf of the council i want to thank you both for your leadership and your dedication. i know, that, chairman gensler's asked to make a few remarks. i would recognize him at this moment for that. >> i just want to thank you you, secretary for those kind words. five years ago when the president-elect asked me to serve the economy that was in free fall and a number of us got

together at the presidential transition but a number of you had much tougher jobs as ben's was sorting through that crisis and marti was there and i guess ed was but since that time i think that we've really come together. the dedicated staffs of the council members agencies have all worked together and i think the economy really is working better. finance is one part of our interconnected economy. the vast majority of opportunity, vast majority of growth and innovation is outside of finance with 94% of private sector jobs outside of finance. so finance has to serve the economy and help markets operate with common sense rules of the road. president roosevelt got that right 80 years ago and many of the reforms of the 1930s are success of the next 80 years. i really think that's what president obama did as well

after the crisis he, you know, took on five years ago. but i think it is through these dodd-frank reforms that many of which are now being implemented. so i just wanted to mention a couple of my, around the table if i can. i have six real quick ones. first i think the heart of reform is insuring that largest financial institutions have freedom to fail. my dad's small business in baltimore, if he didn't make payroll on friday no one was coming to bail him out. i think that is at the core what dodd-frank is. i was pleased last month, the moody's, largest rating agency moved up lift of largest bank holdings that had come to be because of perceived government backing. that works because of title two of dodd-frank and all the work fdic did and fed did and ben and his people and bank regulators supporting everything that marti gruenberg and before that sheila

did. second thing was making sure there is enough capital in hand. i know, where's dan? he is sitting somewhere. i've been in all these international meetings where dan has just been tireless. of course along with tom's people and so forth making sure there is enough capital in the system and the stress test really worked and i think that is really coming into being. we have a new agency finally with the energetic of richard cordray. his key mission is ensuring that consumers are looked at for and we have the mortgage reform and got a briefing on that, which is remarkable all that has been done in the mortgage area. chairman shapiro, who is such a partner and friend of mine and mary jo white took on issue of hedge funds and transparency of hedge fund and getting money market reform done and there is lot of reform in that way too. i think those parts of the sector are outside the banking system directly and that was so important.

fifth, working with the sec all we've done with the derivatives markets. there is 380 trillion-dollars market is now, has some transparency in it. you can see every transaction as it goes through the system. the public can see it. 70% of interest rate swaps are already cleared. it wouldn't have happened without dodd-frank. it wouldn't have happened without the sec and so forth. and sixthly, each of us is been vigorous cops on the beat. we have rigorous enforcement around the table working with the justice department and sec we exposed pervasive rigging inside interest rate markets. all of you have have been doing things around the table that have been remarkable. our annual report highlights it. i think the last thing i noticed, this council itself. i was honored to serve in the clinton administration as well when there was something called the president's working group. through secretary geithner's leadership, jack through your leadership, council has come

together. a place where we can collaborate. we have honest discussions and debates. even when we disagree, we disagree agreeably. and i think the sign of that is just tomorrow, if i can predict, i don't want fingers crossed i think we'll bring an important rule across the line called the volcker rule. i thank you. it is an honor, ben, to go out and be a seat mate and be our last public meeting together. they're clicking because of you, not me though. again, thank you. >> i don't have have statement. i just want to thank you, mr. secretary for those kind words and thank my colleagues on the council. it has been very rewarding, working with all of you. i do think the council has served its purpose of helping us work together better and to better coordinate our efforts, very important as we recognize that, financial system is a system. we can't look at it piece by piece. we have to look at it as a whole. i think the council has been

effective in promoting that holistic approach to oversight and regulation. so thank you. again it has been a pleasure working with all of you. >> on behalf of the council, thank you both for just tremendous service. [applause] >> as we approach the end of the year, it is safe to say recent months, financial period of reform in simply 10tation since the president signed dodd-frank into law. banking agencies put into higher place financial standards. consumer financial bureau finalized mortgage rules. this council designated 3:00 none bank companies for enhanced prudential standards. new requirements for otc derivatives for trading went into effect, to reduce from this large and previously unregulated

market. of course as gary noted we're hopefully on the verge of seeing the volcker rule completed. but as we know there's more work to do to make our financial system safer and more secure. this work includes finishing the final pieces of dodd-frank implementation. harmonizing international reform so there are risks abroad don't pose threets here. creating strong protection from the money market fund industry and moving forward on bipartisan basis with significant housing finance reform to attract more private capital into the market. nevertheless as we get this done the job of maintaining safe financial system will continue. an ongoing effort by its very nature is never finished. we'll have to keep up the tough supervision and oversight. work aggressively to identify and monitor emerging risks and when necessary take decisive action. for today's meeting we have two topics for discussion. we'll start with the very important topic of cybersecurity. it is a question of how the public and private sectors are

working together to combat cyberthreats. and as this council highlighted in our 2013 annual report, cybersecurity and the broader area of operational risk is growing and targeted focus for the financial sector and for financial regulators. it has been an important focus for me and as treasury secretary and as chair of the council. today we'll hear from treasury assistant secretary of financial institutions whose office also serves as the chair of the financial and banking infrastructure committee. we're happy to welcome kelly king, chairman and ceo of bb&t corporation. kelly also serves as chair of the board of directors of the financial services roundtable technology policy council and has been instrumental in organizing private sector efforts to address cybersecurity. cyrus and kelly will review the chief priorities for the public and private sectors and will outline the important

collaborative efforts being undertaken to promote the financial sector's resilience against cyberattack. with that i turn it over to cyrus and kelly. >> thank you, mr. secretary and members of the financial stability oversight council for the opportunities to speak today about cybersecurity, the public sector's role and our collaboration with the financial services sector. our experience over the last couple of years shows that cyberthreats to financial institutions and markets are growing in both frequency and sophistication. the changing nature of these cyberthreats prompted this council last year to highlight operational risk and cybersecurity in particular as worthy of heightened risk management and supervisory attention. in response to these threats, the u.s. government and financial sector have come together to identify financial system vulnerabilities, improve the system's resilience, and refine incident management protocols. i would like to highlight a few features of this collective effort to begin.

first, as is true with other aspects of protecting financial stability, this effort needs to be constant and continue us. there will not be a day where we can sit back and say our job is done. some of the reasons why this challenge will be daily are as follows. rapidly changing technology, increasing and expanding reliance by financial companies on technology, that perform business and customer interaction functions. the creativity and persistence of would-be cyberattackers and complexity of network architecture. while we made progress in our efforts to protect the financial system we will always have much work ahead of us. second, a public/private partnership in this area is not only desirable it's necessary. some of the threats that concern us the most and have potential of creating the greatest harm are deliberate actions with intent to cause damage to the financial system.

as a result, protection of our financial system can succeed only combining the resources an capabilities of government with those of the private sector. third, this endeavor is about protecting the financial sector as a whole from the largest financial institutions and exchanges to community banks and credit unions. accordingly, we work to reach financial institutions of all sizes and business types. each stakeholder has an important role to play in this collective endeavor. i'll share with you key aspects of treasury's on going work on cybersecurity. i will also outline the work to partner with other agencies, regulators and private sector to enhance cybersecurity. treasury serves as the sector of-specific agency for the financial sector which means it play as leading role in policy development and coordinating role in incident response. in this role treasury has sought to increase engagement, improve coordination, and facilitate

information-sharing on cybersecurity issues with colleagues across the federal government, particularly those involved with national security, homeland security, and law enforcement. we communicate regularly with with areas on matters specific to cybersecurity, both in context of incidents and more general operational and policy matters. more specifically over the past year, treasury is facilitated detailed cybersecurity briefings including classified briefings for both financial regulatory community and financial sector. on many occasions these briefings have been conducted by experts from other agencies. and the audience has been diverse. market utilities such as exchanges and clearinghouses both large and small banks, insurance companies, credit unions, and asset managers. briefings have been held across the country through the help of partner agencies who both made their regional offices available

and have assisted us in conducting the briefings. we've also collaborated with other agencies especially law enforcement on incident response. treasury's role during an incident often is to facilitate provision of other government agencies of technical assistance to financial firms. treasury is also focused on streamlining the dissemination of information we receive, notably actionable threat information. to that end we're continuing to improve the communication with the broader national security community so we can efficiently receive threat information and analyze and declassify the information as appropriate, and provide a promptly either to affected firms or to the sector as a whole. this function is performed by dedicated personnel whose task is to share information on a regular, timely basis. they are in continual contact with the private sector which is the critical partner in distributing threat information to financial services stakeholders. this partnership with the ssiac

is an important building block of the public/private partnership on cybersecurity for the financial sector. as i've indicated other agencies in the u.s. government are also active and essential partners in collective endeavor. the basic concept is that the foundation of the president's executive order 13636 on improving critical truck struck -- infrastructure signer security issued in february of this year. the executive order directs executive branch agencies and departments to work with the private sector to take steps to protect our nation against cyberthreats. under the executive order we've been collaborating with other agencies to help the national institute of standards and technology, nist, to protect our critical infrastructure from cyberworks. the current framework is available for public comment and financial regulatory community and the financial sector have been heil engaged in providing feedback throughout the process.

the work under the executive order is vital but not a substitute ultimately for cybersecurity legislation. the administration hopes to work with congress assure our laws keep pace with evolving threats while protecting privacy and civil liberties. in addition to the work to implement the president's executive order we also work daily with law enforcement, intelligence and the department of homeland security on cyber issues. first, we look to the intelligence community to provide us with threat and vulnerability information. we work with the broader intelligence communities to analyze those threats and to share them with the private sector. second, we work with law enforcement and dhs, both to disseminate information to financial firms and to provide technical assistance. particularly in the case of an incident, we as a government endeavor both to be present at the scene and to offer any assistance we're capable of providing. third, we look to the dhs and other cabinet agencies in cases where events in another sector

could affect the financial sector. the experience with superstorm sandy was instructive for cyber matters. a firm will have difficulty functioning, for example, if there's no electricity or telecommunications or if its most important resource, its employees, can not get to work. cybersecurity is also a priority for the financial regulators as this council has helped to demonstrate. in addition to bilateral principled briefings, the council as a whole has been regularly briefed on cybersecurity and other operational risk matters. and this was the focus of the council's 2013 annual report. broadly speaking, the financial regulators addressed cybersecurity through regulation and guidance, supervision, and participation in incident response. financial regulators are providing guidance to financial firms concerning appropriate governance mechanisms, information security procedures and testing, adequate backup systems and emergency business

continuity and recovery plans. an important goal of these activities is to insure that reach firm under supervision has adequate policies and procedures in place to protect itself from cyber attacks and potential consequences. for example, the federal financial institutions examination council, ffiec, established over the years uniform principles and standards for the examination of financial institutions. the examinations rely on manuals that were developed by fsiec for this very purpose and other relevant literature including publications on information security standards by expert agencies such as department of commerce. earlier this year the ffiec confirmed a working group to confirm updating approach to supervision and examination specifically with respect to cybersecurity. another example of activity in this area is the securities and exchange commission's proposed regulation sci.

as the council appreciates cybersecurity is a complex subject. given the nature of the threat and its potential sources, it can be addressed only through a whole of government approach combined with a strong public/private partnership. that is both the essence of the president's executive order and the summation of our collective efforts. we have made substantial progress with our bought and private sector partners to organize our profession of the financial system, however, cyberthreats are here to stay and we must continually remain vigilant towards ever evolving areas. thanks for the opportunity to address this important issue before the council. >> kelly. >> thank you, cyrus. thank you, mr. secretary, for allowing me on behalf our industry to be here today and thank you for all the council members to allow this privilege. if i may take the personal privilege extending our thanks to chairman bernanke and chairman gensler your outassistanting and incredible leadership of our industry for the last few years, we really appreciate it.

so in the area of cyber risk i would sum it up this way. the world's changed. it is not going back. we've made progress but we have a long way to go. cyber risk is increasing and in pace complexity, potential impact. it moved from fraudsters to hacktivists causing disruption to nation states threatening manipulation and disruption. so it's a really big risk. so we have to do all we can to met gait that risk. what has been done? over last 18 months our industry has been coming together to do a number of things i would like to share with you briefly. richard davis, who is the ceo of u.s. bank and i co-chaired an effort to try to raise level of awareness of bank ceos of country from a level all honesty 18 months ago was not nearly as heightened it needed to be to a level i think is far from where it will have to be but much more advanced than it was a while ago. we're making progress. frankly the ddos attacks we've

all heard about have done a lot to raise everybody's attention with regard to this area. so over the last 12 months we've had three cybersecurity summits. treasury's worked very closely with us to pull those together. we had great industry participation from the aba, fsisac, financial services coordinating council, sieve ma and tch and others. sifma. we had support from the ffiec, cybersecurity critical infrastructure groups. they have done a nice job job as well. we've able to develop a comprehensive plan that has 6 deliverables in five areas. these plans are to enhance information sharing, improve analytics inhands crisis management and resiliency, improve core components of cyber, echo and r & d and improve executive communication and advocacy. three areas you may be interested where we're making really good practical progress,

one is what we call internet top level domains. so the ican, which controls the international location of domain names, about a year ago, made everyone aware it would be allocating some new domain, domains that could be controlled. so the fsr in working with the aba has been working very hard to control the internet domains for dot-bank and dot-insurance. may not sound like a big deal but it's a huge deal today. because everybody's bank information and insurance information travels over the dot-com network which is a really, really broad network. think about it like a 24-lane highway with a lot of people going 90 miles an hour. a lot of chance for problems on that type of scenario. this new, much more controlled domain will allow it to be more like a four-lane, well-controlled access highway so that your information will be shared in a much more traveling and much more confidential and

secure way. also making substantial dollar investments in something we call information-sharing through fsisac, a organization works to share an analyze information between institutions. what we're basically doing there is dramatically increasing the capacity of fsisac making information to all of the 14,000 banks and credit unions around the country because the today the information is moving at a snail pace when we get it and in the future it has to move real time. so we're really happy about that. we're also simultaneously investing in a lot of money developing what is called a secure cloud whereby in the future your credit card and debit card payments won't be as insecure in some cases as they are today, because while it is fairly complex, effectively your information will never be disclosed to merchant. it will travel through a cloud and no one outside of the banking industry will actually

control that information. so these are three important undertaking are going to substantially reduce the risk and make a nice step in progress towards where we need to go. we made progress in recovery and resiliency efforts. sifma and fsisac develop ad simulation they call quantum dawn two, which is a massive simulation to structure what would be a cyberattack. 500 individuals and 50 organizations were involved in this over a long weekend. fsisac develop ad simulation called systemic strike which simulates a cyberattack in the payments area which is very effective as well. we've made really good progress as has treasury working with the president's executive order and policy directive. very proud of the fact we were the most engaged of the sectors to participate in niast development of the cybersecurity framework that cyrus referred to. so we've also made really nice progress in exposing the ceos

of the banking industry to kind of the threat that is available. secretary of treasury was kind enough to hold a briefing in march here at treasury that really was an eye-opener forethe ceos in terms of the risk that is are really out there. and the roundtable at the fsr conducted a really comprehensive exposure for the ceos in september and so, we're making a lot of progress in terms of pulling the industry together, making everybody aware and frankly investing a lot of money on behalf of the industry to develop mitigating capabilities but we need help. and if i may, humbly ask for some help to the industry, mr. secretary from the council, we need to continue to improve. as cyrus said these risks are huge. they're getting more substantial every day. so we have to improve irv single day. we need help in terms of assuring that the private sector and key government agencies are really cooperating. so we need to have more

coordinated information coming primarily from the intelligence agencies through treasury or could be through fsisac but more likely treasury to the industry to effectively use it in mitt bating these efforts. we need help in terms of declassifying for information so that that the information can be gotten to the banks on a more timely basis. this is by the way, a very important point in the president's executive order when carried out will go a long way to reducing that risk. we need to enhance the support from the telecommunications sector. you, what really happens in these attacks is as all of this information comes in from these attackers it comes in obviously through the internet, through the telecoms and really in many cases the telecoms and to some degree other service providers are the only ones that can filter this malicious data and reduce the amount of data coming into the banks. the banks just can't really shut down because then we would be shutting down our support for

all of our clients. so we really need their help in terms of just filtering out a lot of this malicious data which they have the capacity to do. we need to work with government agencies, particularly treasury and dhs to expedite security clearances. we need more people in the industry that have the proper level of clearances so that we can be given information so we can do a better job protecting our clients and mitigating the risks. we would suggest that we continue and expand briefings to the industry, for ceos and chief information offices of these institutions so we can build a support and have the mechanism already laid in place so that when and if a catastrophe event occurs we'll already have the channels established to be able to take care of it. we need to all work very closely with not only large banks which i represent but also the small banks. as i said there are 14,000 small banks and credit unions out there. they really do not have the capacity today that many of the large institutions have to be

able to defend themselves and so, we need to have a collaborative effort to work with the intelligence agencies, the regulatory agencies and the telecoms and service providers to provide i think a protocol that can be developed that will allow us to somewhat standardize and make effective a way for the small banks to have reasonable defenses because we do not want to expose ourselves to the risk that is a perpetrator could gain entry at the weakest point of the system. so that is really, really important area for to us focus on. we need to continue to support effective cybersecurity legislation. we need to particularly focus on information-sharing that provides liability protection for good faith information sharing. we have today some real limitations from legal point of view of banks being able to work together to share information. that needs to be clarified legislatively. so i want to thank all of the council members and the government agencies. everybody has been great.

everybody has been working really hard, helping us a lot. i don't want any of my recommendations to imply we haven't had great support. everybody is working real hard and given us great support. i would ask that the council consider forming a high level task force team, led by treasury to include the fsoc members and key government age is such as intelligence, dhs, telecommunication regulators that can really help in this comprehensive battle. to say that the world has changed. unfortunately it es not going back. we made a lot of progress. we are a long way to go. we're in this together, we have shared goals and i believe working together with the shared responsibility we can in fact mitigate the risk and make this a safe place for clients to work in the future. >> thank you very much, cyrus and kelly for those presentations. i would also like to thank the staff of the regulatory agencies for their dedication to this issue and the work of the financial, banking and information and infrastructure

committee, the private sector committees that have been working on this. i have been deeply involved in this since coming here. frankly i was involved in cybersecurity issues before i got here. what's striking when one meets with agencies or bankers, doesn't matter if you're small, medium or large. this is an issue that is foursquare on your radar. i think that we have made progress. we have more progress to make. we do need to work on making sure the right people have the right clearances. that we have information flowing smoothly, where it needs to. i think the point you made kelly, is very much the case. we need legislation. some sharing goes beyond what we can do through the executive order. we're trying to work at the limit of what the executive order permits. i'd like to invite for a few minutes for members of the council if there are questions or comments and, tom? >> thank you, secretary lew. as chairman of the ffic, which consists of the federal reserve

system, fdic, the ncua and the members of the state liaison committee i thought it might be helpful to briefly update the council on some of the actions that the ffiac has taken and is directly responsive to some of the issues and needs that have been identified by assistant secretary amir-mokri and mr. king. as cyrus noted earlier this year the ffiac establish ad cybersecurity and critical infrastructure working group and the primary goal of this group is to comprehensively assess, analyze and examine the security and resilience of financial institutions and technology service providers and to provide a mechanism to liaison with the fsoc and other governmental entities on this important topic. one of the primary objectives of the working group is to review current regulatory examination and up advisory guidance to address gaps, one of the key

issues mr. king has highlighted. as you may know the ffiac has a long history in coordinating regulatory and supervisory policies related to information technology, business continuity, planning and recovery and has well-established programs for coordinating the examination work of bank technology service providers. so i, i believe it is particularly well-suited for this important task. other objection tiffs working -- objectives working group include training and identifying relative skills and knowledge needed by examiners and gaps in examiner training. awareness to develop external outreach initiatives to increase awareness among all financial institutions regardless of size. information sharing, augmenting maintaining relationships among member agencies to enhance information sharing and collaboration and incident communication and coordination. serving as communication and coordination channel among our members, in response to domestic

and international incidents, capable of impacting the critical infrastructure security. these latter two areas i think regarding information sharing are areas where i believe we could greatly benefit from treasury's efforts to enroll as overall coordinating body for the u.s. financial sector on cyber issues. and i would also note that the ffiac is committed to assisting smaller financial institutions in meeting cybersecurity challenges. this is why much of the initial focus of the ffiac working group will be geared towards assessing how prepared community banks, credit unions and their critical service providers are to identify threats and vulnerabilities, protecting themselves and their customers, mitigating risks before attacks occur and to respond to and recover from cyber attacks today and into the future. and how well we can assist them in this vital process. the working group is already developing plans for additional

educational materials and training for community banks and conducting the aforementioned risk assessment to help identify gaps where additional training, guidance or resources may be needed. and i also want to recognize and thank my ffiac colleagues and their staffs for the support that they are providing on these initiatives which are in addition to their independent work that they supervising respective institutions in the information technology area. and finally, i want to underscore the observations made by both cyrus and mr. king that cybersecurity is an ongoing issue. that demands close coordination and partnership among all of the agencies and various private sectors including critical role in the link of the telecommunications sector and various financial market utilities. again i think this is another area where treasury and fsoc can play important roles. thank you. >> thank you. are there other comments?

if not i would ask that we move to the next item on our agenda and thank cyrus and kelly for those presentations and for making this an ongoing effort because it truly is an on going issue that we have to deal with and keep dealing with. thank you. next item on the agenda is to have the head of our office of federal research, director, dick burner, provide us with a review of the recent research and analysis. >> thank you, secretary lou. i appreciate the opportunity to report to the council on progress on some of our key initiatives. i will discuss three broad areas of our work. first i will describe tools we use to assess and monitor threats to financial stability. i will report on our assessment of those threats and relate them to key themes in the council's 2013 report that was released last spring. second i'll report on financial data priorities and preliminary research we've done with granular data and last i will report on data standards

initiatives important to us all. first let me focus on the analysis and monitoring of current threats to financial stability. we at the ofar are developing a new tool, a heat map, to monitor threats. today we have version 1.0 of that tool. in it we analyze five functional areas of risk. they are, macroeconomic, market, credit, funding and liquidity and contagion risks. we think this functional breakdown is best-suited to look at risks across the financial system. we quantify these risks with a mix of economic indicators, market indexes, and measurements that we calculate. like any summary measure this one has limitations. the three of them are, first the metric that is we employ in this heat map are largely contemporaneous. we will incorporate new, forward-looking indicators into the framework as they are developed. for example, the connection between volatility and leverage may offer insights to construct

forward-looking indicators. second, data alone may fail to capture emerging risks. so we compliment the monitoring tools with qualitative market intelligence. and last, some risks are currently hard to measure. . . >> third, exposure to shocks from greater risk taking in a low volatility environment.

we also discuss a related fourth risk, that is from a sudden shock to market liquidity. these risks are, obviously, closely related x they often occur together. our analysis is aimed at identifying not just their symptoms, but also their causes. let me conclude this section by briefly mentioning our work on asset management. as you know, we delivered a report requested by the council on the activities of the asset management industry. this report is intended to be an overi view. -- involve you aimed at informing the council's analysis of how that activity could create threats and of the data gaps in measuring those activities. next, i want to give you a broadway update on how we are filling gaps and mention results of our data research. our process for addressing data gaps has three parts; first, to identify data needs, second, we catalog existing data to determine where the gaps may be and, last, we prioritize and

fill those gaps often in collaboration with council member organizations. examples of that partly reflect the needs for monitoring some of the risks that i just described. repo markets and other security financing transactions including securities lending. i'll mention preliminary results in three areas of research using recently-available, highly-granular data. these results, as you might expect, largely confirm your intuition. first is economy metric analysis of money investment in eurozone names which suggest that portfolio manager rebalancing, not investor redemptions, drove the decline in exposures over the past three years during the european sovereign debt crisis. second, analysis of activity in the sovereign credit default swap market suggests that banks generally are market makers and hedge funds are buyers of protection, but more work is needed to assess both sides of that market. last, we analyzed hedge fund

leverage using the data collected under form ps. this suggests that hedge fund leverages are proportional to their assets, that is, those that are considered level iii under accounting rules, so that's a good thing at least on a preliminary basis. let me conclude with brief comments on promoting data standards. i know you all agree that data standards are important. and we are making needed investments in their development and implementation. i focus on them today because much more work both on development and on implementation is needed and deserves your support. as you know, data standards are essential to compare be, aggregation, link and analyze data. their adoption will improve data quality and reduce collection costs and duplication. we've developed a framework for creating and promoting data standards. not surprisingly, a key conclusion is that to be effective, standards should be adopted universeally.

that's worth repeating. we all need to use the same standards or translate one set uniquely into another. two key data standards initiatives are well underway. first, the global legal entity identifier initiative is a signature effort in that regard. the lei enables precise identification of parties to financial transactions. with collaboration from primary regulators, some of whom are members -- most of whom are members of the council -- we are seeking and from the industry we are seeking broader implementation of the lei in u.s. financial reporting to sync with efforts going on abroad. second, a universal mortgage identifier or umi has long been needed. an interagency collaboration on that initiative is now paying off. with input from industry and substantial help from several agencies here, we've just published a concept paper. the paper discusses the characteristics a umi should have and the criteria for implementation. in both cases industry

participants strongly favor the use of standards to help make their internal data and their reporting activities coherent and efficient. our standards initiatives cover a range of other data quality issues. two with other examples involved extensive collaboration across council member organizations. first is an adoption of best practices for classifying and applying like controls to like-sensitive data so that we can better share them. and second, to collaborate in this case with the cftc to use standards to improve the quality of data collected from trade repositories and swap data repositories that also extends to the sec for securities-based swaps. those are my remarks, and i'll be happy to take any questions. thank you. >> well, thank you, dick. i would ask if other members of the council have questions for dick on the ofar work. i think it's important work that ofr does.

it's a new body that was created out of dodd-frank, and the report that is going to be issued we look forward to, and we'll be reading it with great interest. i guess i would ask just one question. to the extent that you've now got a body of work behind you, does it give you a different view in terms of what the kinds of risks that we need to be analyzing are? ofr was designed to create a mechanism to support this council's work in kind of thinking a little bit outside of the box, looking ahead at the risks that might not come through each of the independent bodies independently. so i would just ask you the question what are the things that you take away from the experience you've had with ofr as being the most important takeaways? >> well, as you know, there's a lot of important work going on across the council to assess and monitoriesings, and --

monitoriesings, and i think our job is to fill in the gaps between the work that's going on among the agencies and to look across the financial system along with other council member organizations. and agencies. so some of the work that we're doing that relates to these granular data and looking at interconnectedness, i think, is really important. looking at the, some of the risks in operational risks in the plumbing of the financial system are important, and we're starting to do some work in that area. along with others. and looking at how the connections in liquidity and funding, i talked a lot about those in what i just mentioned, i think that the connections between and among institutions and market participants are really important. so it's the connections across the financial system that i think we need to focus on x that really enables us, i think, to look at the system as a whole. >> well, thank you. and if there are no further

questions, i would just close with a matter of kind of housekeeping business. i'd look for a motion to approve the resolution of the minutes from the last council meeting on october 31st. >> i move. >> second? all in favor? >> aye. >> the minutes from the last meeting are approved. and with that, i -- unless there are other items that anyone would like to raise, i would ask for a motion to adjourn. >> so moved. >> second? >> second. >> okay. i look forward to seeing everyone at the next meeting of the council. thank you. [inaudible conversations] >> the u.s. senate this morning confirmed patricia my let to be a judge on the u.s. circuit court of appeals for the district of columbia which is considered the second most

important court after the supreme court. her nomination fills one of the three vacant seats on the court and represents the first judicial confirmation in the senate since the chamber changed its filibuster rules last month. the senate right now is in recess, but when they return, they'll continue work on the nomination of mel watt to head the fhfa. the democrat was tapped by president obama in may to lead the agency that regulates mortgage financiers fannie mae and freddie mac. final vote is possible later today. you can watch live coverage when the senate returns 2:15 eastern right here on c-span2. both chambers still with a number of legislative items on their agenda before heading out for the christmas recess. earlier today we spoke with a capitol hill reporter for more on what lies ahead. >> host: thanks for joining us this morning. >> guest: thanks for having me on. >> host: so what is the latest? when are we expecting to hear

the details of this budget deal? >> guest: well, this morning patty murray, the senate budget chair, and paul ryan, the house budget chair, are set to meet, and they're hoping to put the final touches on putting together a deal. by all accounts, they're fairly close. the real question going forward is whether they have struck, just the two of them, the deal will actually pass. we've seen over and over in the last year or two years that any kind of agreement is kind of hard to get through the house of representatives. paul ryan probably has the most sway of any individual member on house republicans, but already there's some unrest about a package that's going to set spending for the next two years, especially because it's going to include a higher level of spending than under current law as well as a little bit higher revenues through fees and the like. so that's going to be really the thing to watch. once they come up with an agreement, can it actually get through the house of

representatives. >> host: and that agreement, it's expected to be a two of of year deal? >> guest: yeah. they're looking at trying to basically set a top line figure, how much the government can spend over next two years and change a little bit the rules of how it spends it. so under the current law called is sequestration, sort of across-the-board cuts that are rather blunt, this would be giving agencies and the like to be a little more flexible on how they spend that money. there are some sticks points still. one of the big questions is what to do about unemployment insurance, long-term unemployment insurance which is going to expire at the end of in this the year. that's been a priority for democrats to put it in the law because otherwise they're not sort of a vehicle trying to get through the congress. but republicans have been opposing that, and, you know, it's not clear that that will actually get included in this package. >> host: we're talking about $26 billion for that unemployment benefit extension. is there any word right now as

to where that money would come from? >> guest: you know, they haven't, they haven't come up with the specifics yet or haven't released them. but, again, that's not an issue that is necessarily going to be included in this package. and, frankly, if it's not included in the package, it's going to be extremely hard to get it through. $26 billion is a hard number to offset to come up with money or cuts to put that into place, and there aren't that many things that move through this congress. and so if you don't jump on a moving train, it's not clear when the next one's coming. >> host: shane goldmacher is a congressional correspondent for the national journal. thanks for getting up with us this morning on the "washington journal." >> guest: thank you. >> secretary of state john kerry is on capitol hill right now testifying before the house foreign affairs committee about the latest in the nuclear negotiations with iran. this as officials from iran along with the world's major powers are meeting today if

vienna. you can watch live coverage of secretary kerry's testimony right now over on our companion network, c-span3. also want to mention that tonight here on c-span2 we'll bring you highlights from today's memorial service in johannesburg for former south african president nelson man dell la. we'll have remarks from president obama and other world leaders. that's tonight, 8 p.m. eastern, again, right here on c-span2. >> it's a rare constant in american political live life. in 1901 less than 2% of members came from working class backgrounds, got into politics and eventually wound up in congress. flash forward to the present day, the average member of congress spent less than 2% of their career doing service industry jobs, manual labor jobs. so this is one thing that really hasn't changed, you know? lots of different aspects of the political process have changed,

broadcast television, cable news, the rise of candidate-centered elections, big money in politics, the decline of unions. and while all of this is happening, there are, you know, one of the constants during that, during, you know, the last hundred years or so is that working class people are not getting elected to political office. >> does it matter that there's a socioeconomic disparity between most elected officials and the citizens they represent? nicholas carnes looks at a white collar government, sunday night at 9 on "after words." and in january, "in depth" with mark levin. he'll take your questions for three hours beginning at noon eastern, sunday, january 5th, all part of booktv weekends on c-span2. and online for december's booktv book club, we want to know what your favorite books were in 2013. throughout the month join other readers to discuss the notable books published this year. go to booktv.org and click on "book club" to enter the chat room.

>> until the u.s. senate returns at 2:15 eastern for more work on the mel watt nomination to head the fhfa, here's a look at congress can' end-to-session to do list from today's "washington journal." >> host: and with the house expected to adjourn for the rest of the year on friday, congress is spending this week trying to move several key pieces of legislation and find agreement on a new budget deal. joining us at the table to provide his take is congressman john garamendi, a democrat from california. congressman, appreciate you coming on. >> guest: good to be with you, john. >> host: you're a member of the armed services committee. we talked about the deal announced yesterday on the defense authorization bill. what's your take? >> guest: ing got to get it done. we don't have a choice. we've got soldiers in the field. we've got very, very important projects that have to be done, and we can't dither. we've got to get this thing done. that's slimmed down, some of the things that many of us would like to see in it are not going to be in it, but the essential pieces are there.

let's get it done. >> host: according to the washington times, some thoughts on that legislation. it sets aside $632 billion for the defense be budget, includes more than 80 million for the ongoing overseas operations in afghanistan and elsewhere, it also includes provisions aimed at curbing sexual assault and loosens some of the restrictions on transferring prisoners to foreign countries from the detention facility in guantanamo bay, cuba. you said just now it doesn't include some things. what was left out of this bill? >> guest: well, some of the things that are left in it are troublesome to me. $80 billion for afghanistan when we can't build the levees to protect our own cities here in the united states? so we have some questions, i have questions about this particular piece of legislation, about some of the priorities. we actually have about one-third the number of soldiers in afghanistan we did last year, and yet we're spending actually as much money, a little bit more. big question, what's going on there. so those are the kinds of things and the details that we really needed to get into in this bill.

nonetheless, what's left out of it? some of the details about how we use the money that's been available. it's a huge program dealing with issues of acquisition of various types of weapons systems. those kind of things. not clear if the final bill is going of to have the language we worked on so long and hard in the committee, because this is a strip down. >> host: can you talk about how it impacts the air force, specifically two big air force bases out in california, travis and beal. >> guest: well, beal is what's called isr, intelligence, surveillance, recon advance -- recon advance. so these are the drones. not the drones that are active sending hellfire missiles into various places, but rather, those that are watching what's going on around the world. there's continuing questions about the use of some of those pieces of equipment, whether we're going to have the global

hawk or not. that's a big issue. travis air force or base, well, beal you find out what's going on in the world, travis is how you get there, so you have the big c-5as, the c-17s. there's talk depending on what happens with sequestration and the budget whether one of the key pieces of equipment which is at that, which is the big tankers, aerial tankers, whether they'll be disposed of or not. so it's a big question for the people at my base, and sequestration has really hit the bases hard. >> host: you talk about how this deal came together and the timing for it. senator levin, chair of the armed services committee, yesterday talked a little bit about this in announcing the deal that came together. here's a bit of what he had to say. >> now, the reality is that the house of representatives is going to adjourn on friday. there is no way to get a defense bill passed this year except the way that we are proposing. there is no way we can bring up

or bring back the bill that was on the senate floor, consider amendments, pass a bill, go to conference with the house, get a conference report written and have a conference report adopted by the house of representatives before friday. now, under these circumstances the only way that we're going to be able to pass the defense bill is by reaching agreement -- which we have -- with our house counterparts on a bill that at least has a chance to have getting passed -- of getting passed without amendment in both houses. that is the best hope that we have. and again, it's happened a couple times before. it's not the way we, obviously, desire to legislate. we would have much more than a week to offer amendments if we could. but that's not the world we now live in, and the world we now live in has our troops in harm's way, has their families that

need our support, has all the other provisions that are in this bill that are so critical to our security, has a number of authorities that will expire. >> host: that was senator levin, democrat from michigan and the chair of the armed services committee in the senate, talking about the deal that was announced yesterday. we're joined at the table by congressman john garamendi, a democrat from california, member of the house armed services committee. and, congressman, some senators saw this deal as a place to push for new sanctions on iran, as a place where possibly to start that effort to move it. do you think that is the place that it should have been, or do you think we're going to see sanctions through another route down the road? >> guest: well, hopefully, through another route. and i think at this point it's not a wise thing to add to the sanctions. keep that in reserve. we can do that at any time in the future as the iran negotiations go on. but senator levin laid out the problem, is that the senators -- some of them -- wanted to use a

must-pass piece of legislation, in this case the house armed services defense authorization act, and put all kinds of riders on it using it as a point of opportunity. to get around that, we're playing what sometimes is called ping-pong. we pass a bill over to the senate, we leave, and they go, hmm, now what do we do because those guys are gone, and we have to pass the bill as it is. there are things in this bill that are absolutely essential, and the senator mentioned some of those; the ongoing missions, combat pay, pay for the various personnel and the like. all those things we've got to do. there are things in this bill that probably i would like to see and that the house would like to see in it that are not because they've been controversial. the senate didn't have a chance to work those out in a conference committee. >> host: we mentioned the iran nuclear deal, should note that the house foreign affairs committee today is going to be holding a full committee hearing on that deal, and the witnesses

include secretary of state john kerry. you can see that live on c-span3, that starting at 1 p.m. you can also share your comments as you watch that hearing with, using hashtag c-span chat and also on facebook at facebook.com/c-span, of course. but we've got congressman john garamendi for about the next 35 minutes or so, he's taking your calls and questions on end-of-year legislative agenda. our phone lines are open, the numbers are on the screen. we'll start with charlie from hayward, california, on our line for republicans. you're on with congressman garamendi. >> guest: hello, congressman, charlie peters. i've had the pleasure of meeting you before. >> guest: hello, charlie. >> caller: i have a question as to whether or not the issue of the corn ethanol, the british petroleum effort with the military at putting a lot of renewables in our military's

energy, if that issue's going to be taken up before the end of the year and if it's an important one to you, sir. >> guest: well, the ethanol issue is right now a issue of the epa and the regulation that they're now working on. i don't believe we're going to see congress dealing with that unless somebody finds a way to tack it onto one of the must-pass bills. i don't think that'll happen. with regard to renewable fuels of all kinds, the military has always throughout the history of this country been one of the first implementers of new ideas and new ways of doing things. i recall a conversation that in one of the hearings with the, one of the admirals talking about whether they wanted to use renewable fuels, and he said, hey, listen, we used to use row boats and then sailboats and then steam, by wood and then coal and then nuclear and, by god, we're going to always look for something new to fuel our fleet so we can go where we need

to go and not depend upon some country providing us with oil. so i think we're -- it's good. the military's always looking for new ways of doing things. the renewable fuel's pushing that along and also looking at ways to provide energy in far-out places. for example, if you're in the hills of afghanistan, you don't have a gas station nearby, what are you going to do? how are you going to power your laptop or the radio equipment that you have? so they're very innovative, all to the good, perhaps providing us with some new technologies and new opportunities for manufacturing in america. thanks, charlie. >> host: caller brings up corn ethanol, should note you're also a member of the agricultural committee. that farm bill is one that's being watched as a possible movement before the end of the year. what's your take on the status of the farm bill? >> guest: i talked to senator stabenow last night at the white house christmas party. she's determined to get this thing done -- >> host: one of the lead negotiators on the conference committee.

>> guest: chairwoman on the senate side of the ag committee, and she's determined to get it done. she's a little perplexed that the house is leaving on friday. gives her very, very little time to get it done. i think we're ready to do this. there's some tough negotiations. some of the commodity groups have been at war with each other. it appears as though that might have been settled. but we're -- this bill is a dramatic departure from the past. the way we used to subsidize agriculture's changing, we're moving to a insurance-type system moving forward. still plenty of subsidies, but nonetheless, it's a big change and a very, very important one. >> host: what do you think's going to happen with the food stamp program, one of the big roadblocks in the negotiations right now? >> guest: there'll be a small cut. there's not going to be anything like the house did. the house passed a bill 40 million -- $40 billion over the life of the bill. that's a huge cut. that's going to leave a lot of hungry people in america. it's not going to happen. there'll be a small cut, but the way to reduce food stamps is to put people back to work, give

them a good job. raise the minimum wage to $10, people can then afford to buy food. so that's the best way to do it. that brings it down in both the most humane and most sensible way, and there are things we can do to get the economy going. one of them is to end the uncertainty in the budgets and the kind of things we're talking about here, get our work done so the country -- so the businesses know what to expect. >> host: we're talking with john garamendi, democratic congressman from california. he's in his third term, elected in 2009, represents california's 3rd district. he's taking your calls and questions this morning. johnny's up next from woodbridge, virginia, on our line for democrats. johnny, good morning. >> caller: morning. i'd like to say they turned -- i wonder what's wrong with how much money they're spending in afghanistan, halliburton is the problem. because a as long as they are there, the money going to pour in, and vice president -- ex-vice president cheney, he was

collecting money before, during and after. and he still is right now collecting money from the government. >> host: johnny, did you have a question for the congressman? >> caller: why these, somebody don't say something about the work habits of congress. congress want people to go out there and find jobs 20 hours a week. congress don't work 10 hours a month. >> host: congressman. >> guest: well, we actually work at least 10 hours a month, but this in recent times with republican leadership, the amount of work being done in congress has been very, very slim. and the hours worked has not been anywhere near what it was during the pelosi period. but the real failure is we're not getting these major bills done. you did raise the question of afghanistan. we know that in afghanistan the reports by the various inspector generals have been consistent. the amount of fraud, the amount of waste is extraordinary, and

for myself $80 billion for what? one-third the number of troops and even those are going to be reduced over this coming year? so what are we spending all that money on, and who's going to get that money? it is the most corrupt nation in the world. and right now the president of afghanistan is really thumbing his nose at us as we look to the future. we may have an unending military commitment in afghanistan, and i'm really quite concerned about this. the afghan people had a major conference on the continuation of the american presence in afghanistan just a couple of weeks ago. we have yet to hold a hearing on that very same issue in the house of representatives. it's something we ought to do, the american people ought to be very much aware of what is currently being negotiated with afghanistan and the commitment that the united states with is making -- united states is making to continued military and

quasi-military operations in afghanistan for years to come. >> host: how long do you think that commitment should last? >> guest: i think we should have been out of there a long time ago. >> host: we'll go to mary ann now from pittsburgh, pennsylvania, on our line for independents. mary ann, good morning. you're on with congressman garamendi. >> caller: hi, congressman garamendi. >> guest: good morning. >> caller: hi. my question to you is you're talking about the budget and everything for the, um, basically the defense department. and i was wondering that when the americans died back in, what, a couple months ago when the shutdown occurred, why didn't the president sign an executive order right away so the -- [inaudible] didn't step in? and i think you're treating our soldier -- our air forces, navy, marines, the whole group, i think these are very

disrespective. the democrats are very disrespective towards the people that fought so hard for this country. and as the president, he should have signed that executive order bringing them american bodies back. and yet he did nothing. >> guest: well, i'm not at all sure he could do anything. during the shutdown, there was really no authorization to spend money in, many different areas. i'm not exactly sure the way in which the money would be available or not available on the specific issue that you had. but the president does not have any authority to spend be money unless congress -- to spend money unless congress appropriates that money. so the government shutdown that we endured during the month of october was not caused by the president, was rather caused by the recalls trance of some members of congress to deal with reality. if you recall, the republicans in the house of representatives wanted to terminate the affordable health care act. and certainly, the democrats and the president said, no, we're

not going to do that. eventually, it got down to something very, very simple, and the appropriations were made, extended until january 15th. now, there's a big issue on january 15th. are we going to have another shutdown or not? right now it's not at all clear. have to start with a budget, with a framework for how much money we're going to spend. that has not been done. we've got about three and a half, four days of work on the house of representatives before friday and we leave. so we'll see. it's going to be tight, and we could be headed for another shutdown, and that would be tragic. the last one cost this country at least $24 billion of economic activity and the kind of problem that you so well described. >> host: several folks on twitter have taken on this subject of this end-of-year rush on bills. monica writes in: why wait until the end of the year to slap bills together? could you put in more hours and get the work done? >> guest: well, the answer's clearly, yes, we could.

but congress isn't really, doesn't really act much different than most of us did when we were in high school and college. when the final exam comes, well, the night before you cram, and you get it all done in the last minute. >> host: congressmen cramming right now? >> guest: should be. congress should be cramming right now. we really, we're kind of like human nature. you wait until there's a deadline, and then you're up against a deadline, you don't have any more time to talk, you don't have any more time to avoid making a decision. we have to make these decisions, and the deadline's here. >> host: but that deadline and that rush concerns some people. danny writes in: must-pass bills all without oversight of ideas by us, the people. this is tyranny. the oversight of some of these bills that are put together at the very end. >> guest: a terrible problem. it's ongoing. in fact, it's been going on forever. and as i say, it's kind of like human nature. that doesn't make it right, but i think it does explain. the pressure builds.

people don't want to make a decision until they absolutely have to because they're looking for that advantage, they're looking to get that one additional thing into the piece of legislation. and so time goes by and pretty soon, bam, the deadline is there, you've got to make a decision. at that point, yeah, over the years many things have been done that don't make a whole heck of a lot of sense because they haven't had the time to be reviewed by, certainly, the public and sometimes even by members of congress. >> host: let's go to christine from hampton, virginia, on our line for independents. christine, you're on with congressman john garamendi. >> caller: good morning, congressman and, again, thanks for c-span. you're the main reason i have cable tv still. >> guest: good, glad you do. >> caller: yeah. look, i'm looking at this unemployment, you know, ending unemployment insurance and ending food stamps and these sorts of things, and, you know, you just mentioned that, you know, at the end of, you know, at the end of the year people start cramming to, you know, get some things done. um, infrastructure investment

would help people who are getting kicked off of food stamps. it would help people who are, you know, potentially losing unemployment insurance. people -- i have worked with groups of people who, you know, got hit with unemployment and, you know, just needed mentoring and coaching and help, you know, practicing up on interviewing and assessing their skills. maybe they really don't have the skills anymore because of technology has and so helping them to decide what to do, and it is so empowering for people to own their own life and not be dependent on, you know, these resources. but, you know, there's work to be done out there -- >> guest: well, you raised a really, really good point. last friday in fairfield, california, i had a job fair. and what we call a boot camp, a jobs boot camp can. about 150 people showed up to the boot camp to learn how to write their resumé, how to present themselves and how to analyze their own skill sets.

another 971 people stood in line in 35-degree weather just to get in to talk to 50 employers. they wanted to go to work. these were not derelicts, these were not people that were lazy, these were people that were willing to stand in 35-degree weather in a line that stretched more than 200 yards to have a chance to get a job. now, many people did get a job, perhaps maybe 50 people got jobs at that particular work, at that job fair. but i tell you, it was the most satisfying and saddest day i've had in a long time talking to people in the line. they wanted to go to work. they wanted a job. one fellow was, just left the army, army ranger. said he had four purple hearts, was a, obviously, had skill cans beyond being able to -- skills beyond being able to shoot a gun and defend this country, and as i was talking to him, what did you do, what kind of skills do you have? i think he got a job that day,

and he was delighted. young men, women, divorcees trying to get out there and get a job. we've got to get this economy going, and you mentioned a way which is to build the infrastructure. and we're working now on a piece of legislation called the water resource reform act, and that is about building the water systems of this nation, the levees to protect us from floods, the other things that go into the water systems that we have, dams, reservoirs and the like. that also is in the final stages of negotiation. hopefully, we'll get it done early next year. not much chance of getting it done before the end of the year though. >> host: want to transition to talk about the affordable care act. >> guest: sure. >> host: subject that we talk about quite a bit here on the "washington journal," something viewers are very interested in. health and human services secretary kathleen sebelius expected to be back on capitol hill this week for another

hearing on the affordable care act. but want to go back to last month. you were one of 39 democrats who joined republicans in voting for fred upton's measure that would allow insurers to sell existing plans through 2014. this was a piece of legislation that nancy pelosi said weakens the affordable care act, she said it was a step towards unraveling its protections. why would she feel the need to vote for that legislation? >> guest: actually, there were three things going on that particular day and the day before. one, the president said we have got to expend these policies. in fact, the democrats put a bill on the floor just before the upton bill, and every democrat voted to extend the policies. and the upton will was very -- bill was very similar to their requests with one additional factor and that was that people that didn't have a policy could buy an existing -- could buy a policy outside of the exchange. bottom line is that there was a problem, there was a way of dealing with it. but the real problem was to get

the exchange working. last night talking to the president's chief of staff they're moving quickly, and we've seen some significant improvement in the national exchange. very difficult to put that in place. i don't think the public really understood the difficulty of putting in an exchange in 34 states whose governors didn't want the affordable health care act to work to begin with. however, california, california's working. our daughter went online to buy a policy, she said it's easier than getting an airplane ticket. you get to choose, get to do that. the policies, the program here in washington that we're required to sign up with like every other individual in the district of columbia, actually worked. worked very well. took me a half hour to sign up, bingo, got my policy. >> host: you're a former state insurance commissioner, so you know this subject very well. >> guest: yes. >> host: i wonder, did you ever think when the president made his comments in years past that if you liked your health care plan, you'd be able to keep it, as a former state insurance

commissioner, did you ever think that he would actually be able to keep that promise? >> guest: i think there's a great deal of misunderstanding about the nature of the promise that he made, about the way insurance works. insurance is a one-year policy. it's not something like a life insurance policy that you have and go throughout your entire life, make your payments and you have it. it's one year. at the end of every year, every insurance policy is canceled, often renewed by the same insurance company, usually renewed with changes. different deductibles, different co-pays, some things being covered, others not being covered. so you have an annual renewal of every policy, and most americans that have been able to buy insurance -- now, that's not the 40 million that are uninsured that have not been able to buy insurance before the affordable health care act came along -- but people who had insurance every year, they go through this period in the fall of renewing their insurance policy. it's called the sign-up period or open enrollment, different names for it. and in cases, they don't even

know that their policy has been changed. literally, their former policy was canceled, a new policy put in place. life goes on. a lot of that was going on, but there was a difference this year. we're in a political environment. we're in an environment when that normal change that occurs every year becomes a big political thing. and we have now the affordable health care act. we have the exchanges all across america, some working well, some not so well. gives people an opportunity for the first time ever to actually be able to shop for insurance. hadn't been able to do that before. if you are working in a company, the employer did the shopping for you. now, a lot of that's going to continue on. but if you're in a small company or ininsured, you can shop for insurance, compare prices and quality and coverages and who's providing the doctor and the hospital. never before was that available. >> host: last question on the subject, and folks are waiting to talk to you as well, but there's been a lot of questions

on whether democrats can run on the affordable care act in 2014. republicans say they want to target your district next year. can you run on the affordable care act, and will you? >> guest: i have been a supporter of health care reform for 35 years in california, leading, developing new ways of providing insurance for people. the affordable health care act is working across this nation, it's actually working in california very, very well. and next year i think the republicans are going to run away from the affordable health care act because it is working. it's going to work in california, it is today, and it'll get better a as time goes on. there'll be improvements across this nation. i'll bet right now you're going to see the republicans find a different issue next fall because this one is going to be good for democrats. >> host: jason's up next from fort drum, new york, on the line for congressman garamendi. >> caller: good morning,

gentlemen. i have two questions. why doesn't congress or the house pass a bill that opts military pay into -- without a last minute passing of the bill to make sure the military gets paid in case of a shutdown so it's one less thing for them to worry about during their last minute cram session. and my second question is why is it that the va is having issues paying back vets? because my sister, she's been on for about four years, but when the shutdown occurred, one of her statements was being reviewed, and she was supposed to be getting paid in 2013, but instead, when the shutdown occurred, it pushed her review back to 2016. >> guest: well, you've just stated two of maybe hundreds or different kinds of problems that occur because of the shutdown. the va was working diligently to get the backlog down. i know that i and i think most every other member, democrat and republican in congress, was putting pressure on the veterans administration to get those backlogs down. and they were making good progress.

they shut down. they shut down for two weeks, so guess what? the backlog didn't get taken down and, actually, was increased. and i'm sorry to hear that, i guess, your sister is one of those that has suffered as a result of the shutdown. with regard to the military pay ongoing, budgets are almost always year to year, and the military is also. there were, as you said, a special piece of legislation passed so that the military pay would go on, similar pieces of legislation bit by bit did go forward to continue the operation of some of the critical areas. but the bottom line is there was no need for a shutdown. it's all about the republicans trying to kill the affordable health care act, and they were not going to succeed. by all accounts, they suffered some political trouble because

of the shutdown and, frankly, they deserved it. not necessary, not wise, and certainly not over the affordable health care act which will and is working. >> host: will's up next from pennsylvania. you're on with congressman garamendi. >> caller: thank you, gentlemen, e appreciate it. >> host: go ahead. >> caller: i'm hearing a lot of folks, the talking heads using the term shutdown in january. i'm suspecting that the democratic party is -- and i'm using the term government shutdown and trying to gain political points for it. it's really -- i'm suspect. and everyone's disgusted with what's happening in washington, d.c. now these days. but i'm really suspect that the democratic party's just looking for political points using the term "shutdown." >> guest: well, we certainly had a shutdown, and i think we know who was responsible for the

shutdown. but going forward, i can assure you that there's no democrat that i've talked to -- and i've talked to most of them -- that wants a shutdown. it's a very serious problem to shut down the government. we saw that just a couple of months -- well, less than two months ago. and we don't want it, period. we're up against the time clock, we know that january 15th the funding for most all government services runs out, and could we have a shutdown? yes, we could with. what will the issue be? hard to say right now. right now the issue seems to be over the budget itself, over where and how much money is going to be spent. so we'll see what takes place. right now we don't have a budget in place that tells us the framework for the expenditures of the federal government. maybe that'll get done this week. there are some real serious issues about what that budget would look like, and these are profoundly important issues to

the american public whether on the conservative side or progressive side. issues about unemployment insurance, a discussion on c-span just before i aarrived, will there be an extension? as i said a moment ago, 971 people stood in line trying to get perhaps 50-100 jobs that were available in fairfield, california. they want to go to work. they can't now. what are they going to do? where are they going to get the money to rent their room, buy their food, take care of the children? so the unemployment insurance issue is a very big issue more those people that stood in line trying to get a job. and there are millions more across the nation in a similar situation. that's a profoundly important issue, and that's what we're going to be ager, over in the -- arguing over in the next one month. >> host: we're talking with california democrat john garamendi, former lieutenant governor for the state of california, former deputy secretary at the u.s. interior department, a current rancher.

and as we said, a former insurance commissioner for california -- >> guest: and, john, as you said, you and i are both eagle scouts. >> host: and on the subject of being a former insurance commissioner of california, wild and wonderful writes in: as a former insurance commissioner, would you please explain to people the problems with buying insurance across state lines? >> guest: yes. the state of california and many of the states have very important consumer protection laws. these laws deal with the financial ability of the insurance company to pay a claimant someday in the future, and they also provide mechanisms for prompt and fair payment of claims. not every state does. there are some states that have very weak laws, and in my view, almost no allow -- no law at all about the financial stability of the insurance company. so a company that's operating in one of those states that has very weak consumer protection

laws selling insurance products into a state like california could -- no, wrong word, is a real serious consumer problem. one that i dealt with for many, many years trying to get a claim paid from a company that was out of state that did not have the kind of financial wherewithal to pay claim or even a desire to do so. so we're talking about consumer protection here. now, we're seeing a change taking place. the affordable health care act is changing this entire regulatory system, and in the process over the next few years we will see national companies selling products nationwide. and we're probably already seeing -- probably, we're definitely seeing that in those 34 states in which there is a national exchange. those policies will be similar. now, the underlying financial integrity of the companies that are selling those products, that continues to remain the responsibilities of the to individual states. of the individual states.

so there's going to be a time of adjustment for the next couple of years as this thing works it out, but that's the fundamental reason. thank you for the question. >> host: got about five or ten minutes left with congressman garamendi. sam is up next from rockville, maryland, on our line for independents. sam, good morning. >> caller: hi, thank you very much. i'd like to get back to the issue about getting the work done on time. you know, the budgets are all supposed to be done by october 1st, so i know that there's a, you know, there's a rule, amendments to the constitution that says that you cannot really change your pay even if you guys really wanted to on the day of, you know, during the same congress, but my question is would you support a bill that permitted your own along with the other congressmen and senators, a 1 percent penalty in their own personal income taxes for every week after october 1st that it took to get a bill for all the, all the things that are

due on october 1st? i get penalized in college if i turn in something late. if i have an a paper and it gets turned in late, it gets a b. i think it would be good for you all to take a penalty if you don't get your work done on time. i'll take the answer off the air. >> guest: very interesting concept. there have been various mechanisms that have been discussed over time to get a budget in on time. you're right, the constitution prevents that kind of withdrawal or withholding or even no pay at all during the term of office. however, i will tell you in california the constitution was amended. the california constitution was amended, and legislators in california were not paid if the budget was not and the appropriations -- they're the same in california -- were not on time. guess what happened? they got 'em done on time. for the first couple of years that this has been in place, the budgets have been on time.

previously, there were months before they were done, and there was a shutdown similar to what you saw here in the united states. would it work? penalties work, no doubt about it. the specific one you talked about, 1%, probably not enough to motivate. and you served in the california state senate for 16 years and were the majority leader there as well. >> guest: i've had a wonderful journey. >> host: dawn is up next from greenville, ohio, on our line for independents. good morning, don. >> caller: i have so many different questions to ask. one thing i'd like to set straight, i think you people work about 23 weeks of a year. i think you should at least work 40. >> guest: i agree. >> caller: we've been talking about the tax code for so long, changing it, i think it should be a flat tax. that way everybody will pay. and also campaign finance reform, i really think this country needs that.

>> host: i'm going to let the congressman jump in on those points. >> guest: well, you raised several of them. with regard to a flat tax, we really must reform the tax code. we're letting a lot of extraordinarily wealthy people get off the hook by, you know, sending their money overseas. i think we saw i a presidential candidate that did that the last election. that's not right. that's not fair. the problem with the flat tax is somebody that's making a million or several million dollars a year would be paying the same rate as somebody that's digging a ditch. for $10 or $7.50 an hour. that's not really fair. it has to have some progressivity in it. but clearly, we need to simplify the code. clearly, we need to end the kind of loopholes that allow both corporations -- some of the largest corporations in america literally pay no tax at all, that's wrong. and individuals are able to avoid their taxes by all kinds

of loopholes and various schemes, offshoring their money and the like. all of that should end. we all have a responsibility for this nation, and part of that responsibility is to help pay for it in a fair and appropriate way. with regard to campaign finance reform, we have a huge problem. we have secret money flowing around in terms of hundreds of -- well, billions of dollars. and it is clearly corrupting the process. the supreme court's decision made it very difficult to pass any kind of legislation except for one, and that is full disclosure. full disclosure of every nickel that goes into a campaign and who it goes to immediately up on the internet so that people know what to expect. and right now the internal revenue service is looking at a 50-year-old regulation that is, i think, seriously being abused. and this is the 501c4 regulation

that is supposed to be for social purposes but is now being used clearly to hide very, very large sums of money for political purposes. that irs regulation is extraordinarily important, making it clear that political campaigns are not social purposes. or social welfare purposes. anthony's up next from west orange, new jersey, on our line for republicans. anthony, you're on with congressman garamendi of california. >> caller: good morning, congressman. >> guest: good morning, tony. anthony. >> caller: congratulations on your act of bravery there in voting one of the 39 recently regarding the affordable care act. but one thing i wanted to comment on regarding your statement. all of the, all of the policies were not inadequate policies, okay? i had a policy, it was canceled.

i realize that they're redone every year. but i didn't expect to lose my health insurance. i have a small business. i have about three policies in place, and i'm looking at increases next year of over 50%, 56% going on. so i just wanted to let you know that. there are plans in place that had to be canceled just because they did not agree with the affordable care act. >> guest: well, this is one of the questions that are out there. i understand exactly what you say. it's part of the reason that i voted for, actually, all three of those -- well, not for the president's proposal, you don't vote for that, but for the democrat as well as the republican proposals that were on the floor. there was a problem, no doubt about it. you've described it well. the question i think going forward is that one of the problems we've had in the health care system is that there are really two parts to the health care system. one part is the way in which we

finance it, insurance as well as the medicare -- medicaid programs at the federal site and state site, and the other is the way in which we provide the services. these are two very distinct things that are connected across with money; that is, the payment of money. the insurance policies themselves need to be more uniform. in doing so, you eliminate a lot of the administrative costs which can be up to one-third of the total cost of health care just churned up in administrative costs. so the idea in the affordable health care act of having standard policies, five standard policies across the nation, frankly, is a very, very good idea. but people are caught up in the transition. you may very well -- even though you're paying more -- have a better policy that at the end of the day will actually save you money. maybe, maybe not. depends upon the health care status of you and your employees. but clearly, it was a disruptive change, no doubt about it. got a lot of -- caught a lot of people by surprise and created a

nationwide problem. >> host: we've got just a couple minutes left with congressman garamendi. alan is up from pennsylvania on our line for independents. alan, good morning. >> caller: good morning. thank you, congressman, for being with us this morning. >> guest: sure. >> caller: i would like to just ask that you would take a look at dr. tom coburn's "back in the black," comments that he's had there. specifically, it specifically shows where cuts can be done. and i think this is what we need to do, is to look at what actually can be done. if you look, excuse me, if you look at "back in the black," it would save about $9 trillion, and it's very specific. i've gone through it several times to show where this could be done. so i would ask that you would consider this.

>> guest: well, we need to consider every idea to reform thing system. the affordable health care act has within it the exchange with all of the controversy that we're presently seeing about the exchanges, national and state exchanges, but it also has some very, very important reforms to the way in which medical practice is done across the nation. one of them that's already having a profound effect is that hospitals are not paid for readmissions on hospital-acquired infections. and guess what? they're going, oh, we're not going to get paid? well, we better make sure there's no hospital infections. so we're seeing a significant improvement in the health care of people in hospitals because hospitals across the nation are paying attention to such things as cleanliness and high -- hygiene and infections. so that's just one example of the many different pieces that are in the affordable health care act that are actually having a profound and positive effect on reducing the cost of health care across this nation.

>> host: to alan's point, have you taken a look at senator coburn's proposals, and if so, are there any you agree with? >> guest: i have not had a chance to get into it with detail, but when i leave here, it better be on my desk when i get back to my office. >> host: one more question on the subject of budgeting. old salt writes in: why is it that congress hasn't passed a budget in years? it's dems that propose unrealistic budgets. >> guest: i think that it has to do with the back and forth and the way in which congress operates. this year, for the first time i think in five years, both houses actually passed a budget. however, on the house side the house republicans refused to go to conference until just this last month, and, therefore, there was no budget. you have a senate version, you have a house version, you need a conference. and this is a fact, the house of representative republicans refused to go to conference. we're now in a conference seven

months later, but nonetheless we're in a conference. will it get done? in there are real different views about what the united states government ought to be doing, and that's the conflict that has led to these many years of no budget. without a budget very difficult to decide the priorities for this nation. and that has led to, i believe, a slowdown in our economy. the uncertainty about how much money are we going to spend on transportation, education, the military, all of the other things that the government does. without that knowledge, the private sector, the businesses don't know what to expect, and that is a significant break on the american economy and, frankly, we've got to get past that. we need to have certainty. the public needs to have certainty. and listen, the final exam's coming again. january 15th, another final exam. we've got to meet that deadline not just with the budget and the appropriations, but also with the water resources development

act, the national defense programs, farm bills, on and on. we've got work to do, and we need to get it done. >> host: and that's where we'll leave it this morning with congressman john garamendi, democrat from california. sir, appreciate you coming on. >> guest: thank you, john. >> the senate is coming back in now. they'll continue work on the nomination of mel watt to head the federal housing finance agency, and this morning the chamber confirmed patricia millett for the u.s. circuit court of appeals for the district of columbia.

the presiding officer: the majority leader. mr. reid reid: the matter now be the senate, how much of the time that remains is controlled by the democrats? the presiding officer: 147 minutes. mr. reid: so that's a little over two hours, right? the presiding officer: that's correct. mr. reid: how much time for the republicans; the same? the presiding officer: 130 minutes for the republicans. mr. reid: oh, i see. why don't we yield back 130 minutes of our time. that would leave us -- the presiding officer: the time is yielded back. mr. reid: that would leave us 14 minutes or something like that? the presiding officer: 17 minutes. mr. reid: that's far too much time. i yield back another 10 minutes.

the presiding officer: the majority leader's time is now set to seven minutes.

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