its goals and whether or not it should be rewritten. joining us are two of the authors of the 1996 telecommunications act, rick boucher who was a democrat from virginia, served in congress from 1983-2011, jack fields was a republican of texas from 1981-'97. congressman fields, what was your role in the development of the '96 telecommunications act? >> guest: well, i i was actually very fortunate. i was the chairman of the subcommittee on telecommunication and finance, and, you know, telecommunication policy had not been reformed since 1934. so there was really a compelling need in 1995 to begin a process of massive telecommunication reform, and at that time you basically had boxes. you had a box for broadcasters, a box for telephone companies, a box for long distance, you know, cable, satellite, and our view

was we had to come in and try to eliminate the lines of demarcation and from mote competition -- and promote competition, believing there'd be innovation, more investment, more consumer choice, more innovation and, you know, fortunately, i think the result has proven us correct, that that's exactly what's happened. but now we're in a situation, you know, not that many years later that there needs to be, again, i think, a massive overhaul. and out of all the new technology, all the new applications, all the new modes of service. >> host: rick boucher, you've covered, worked on telecommunications for a long time especially as a member of congress. did congress understand what was going on with the '96 telecommunications act, or was it just limit today a few members with expertise? >> guest: well, as is often the case in the committees that focus on particular subject matters took the lead in this reform. jack was chairman of our

subcommittee. other members of our subcommittee had been focused on telecommunications for many years, in some cases decades, and we were certainly well prepared for this reform. there was a larger interested group of members of congress, other members of the energy and commerce committee who were not on the subcommittee. other members of the house and senate who were equally focused on the need for reform. and what was unique, i think, at that point is that we had a large, interested public community. recognizing that fundamental changes had taken place in technology. fundamental changes had taken place in the marketplace. and the laws that were written for an earlier era were actually impeding progress, impeding investment, impeding innovation, prohibiting the kinds of competition that we thought would well serve the consumer interest. so the barriers in that law were taken down. that was the fundamental achievement of the '96 act. telephone companies were enabled

to offer cable tv service in their telephone service areas. cable companies and others were given the opportunity to offer local telephone service. so that market for the first time became competitive. once the local telephone exchange had proven be to be open -- had proven to be open, the local phone companies were given the right to offer nationwide long distance, and they were also given the right to manufacture telecommunications equipment. so markets that had been segregated, markets that were largely monopolies prior to 1996 were made competitive, and decades of innovation and investment were unleashed, and today we stand on the cusp of another reform because we also have fundamentally different technologies today that have outstripped the regulatory environment and created the need for the next comprehensive rewrite of the telecommunications law. >> host: jack fields, so much of

the '96 act was about long distance and local -- >> guest: right. >> host: -- telephone companies. two things we don't even think about today. was the internet addressed? was wireless addressed? was digital addressed? >> guest: you know, we really didn't, in my opinion. and i'll give you the best example. as the chairman of the subcommittee, i wanted to meet with bill gates and try to get a vision of what he thought the future would be, and and i couldn't get him and his colleagues to come to washington. i actually had to go to seattle to meet with them. and if you look at the '96 act, there's only one small provision that deals with the internet. and so, you know, there's a real need to come back and look at where the act falls short and what needs to be done. i will encourage my colleagues when they do this to do what we did not do. we tried to make the act as open as we possibly could so that it

could evolve with technology and everything that we thought was going to happen in the future. and i was very disappointed with what the federal communication commission did, you know, subsequent to the passage of the act. i think much of legislative intent was lost. and so my encouragement is going to be that those who do the rewrite be as prescriptive as they can so there is, you know, a small chance that the federal communications commission will come in and add their own intent to it. >> host: what's an example of the legislative intent being lost? >> guest: well, we came up with a checklist of what the telephone companies had to do to be able to enter long distance and, of course, open same gate to the long distance companies to offer local telephone service. and in my opinion, that interpretation went far too long. i think it went outside of what was originally intended. and so, again, when it comes to writing the bill this time, i think the legislators need to be as prescriptive as possible to

direct to the federal communications commission and anyone else that has to review the act, justice department, etc., so it's narrow. so that we preserve, you know, what lawmakers intended when they pass a bill. >> host: rick boucher, because congress hasn't enacted another comprehensive telecommunications act in the last 18 years, has it fallen to the fcc to take over regulation where they see necessary? >> guest: well, i think to a large extent the answer to that is, yes, because today the world is moving in two very clear directions. one is it's going wireless, and the other is that it's going to the internet protocol for the delivery of information of all kinds. when the '96 act was written, we were largely focused on telephone service whether it was local or long distance, to some extent we focused on cable tv service, and we wanted to take the steps to make that market competitive which we did. but the primary focus was really

just what we call pots, plain old telephone service. and today the landscape is fundamentally different. the fcc has managed as well as it can without clear direction from congress about how the transition from the era of telephone service to the time when everything is delivered over the internet should take place. and in my mind, the fcc's done a good job. let me just cite one example. chairman tom wheeler chaired a task force inside the fcc before he was chairman. it's their technical advisory task force. and this that role he produced a report that recommended that by the end of this decade the old circuit switch telephone network sunset. and there are important reasons for that to happen. that network today is wearing out. it's so old, in fact, and people have moved onioned it to such a great -- moved on beyond it that

the manufacturers in many cases are not even making replacement parts for that old network. and the result is that the costs of maintaining it are just soaring. under current law telephone companies must maintain the old network as if it was the core communications medium used by everyone. but in point of fact, it's only used exclusively by 5% of the public, and it's used by another 29% in combination with a wireless service. so in total about 33% of the public is using that old network and two-thirds have abandoned it altogether. but under current law it has to be maintained as if it was served everyone. and the costs of maintaining it are draining investment from the internet-based services and the broadband architectures that consumers have indicated they prefer. and where they can get dramatically more expanded and

more functional services and do so in a way that modernizes their communications access and capabilities, enabling them to communicate wirelessly as well as by wired means. the investment needs to be focused on that broadband future. and the commission in saying it's time to circuit switch, time to sunset the circuit switch network is forecasting that very clear need and putting in place a thoughtful process based on having demonstration projects and some selected markets around the country to find out what happens, what potentially goes wrong when people are rapidly moved from the old circuit switch network to more modern broadband networks. and then in advance of a national transition prior to the end of this decade, solutions based upon those perceived problems can be put in place. so your question was has the fcc undertaken regulation in the absence of clear statutory direction. i think because the '96 act

really didn't focus on broadband, really did not focus on internet protocol delivery, the fcc has to a large extent been left to its own devices in that area. and in my judgment, it's done a good job. i think chairman wheeler and his colleagues are on the right track in setting up demonstration projects, finding out what happens when you transition people to broadband networks and making sure that core consumer values are protected as that process goes forward. and that is a very substantial step which i think the fcc has handled quite well. >> host: should there be a reclassification of broadband services from communications, into communications services? >> guest: i think that's a question that has to be looked at, but i want to go back to what rick said just a moment ago. tom wheeler is a friend, and i think he is doing an excellent job. and, certainly, his background here in washington, you know,

gives him a very unique position in which, you know, to help fashion the fcc and make decisions. but i still believe that when legislators come up with a comprehensive reform, they need to be as direct and as plain as possible so that legislative intent is preserved. and that's going to be my encouragement to them. >> host: what did you, what do you think you got wrong with the '96 act? >> guest: i get asked that question, and i don't want to be repetitive, but i come back and tell people that i think we should have been much more prescriptive. we made a conscious decision to leave latitude in the legislative language so that it would evolve with technology. and i think that was a mistake. and that's why i would encourage people not not to do that again. you know, going back to what we did, we had a clear cut path

that we announced in early 1995 that we were going to do hearings within a certain period of time, that we were going to be, have our markups and be out of committee by may, be off the floor, you know, by july and, hopefully, be in conference with the senate, you know, in september, october, which we were. and we felt like we had to lead the process. and rick was on our team. it was a bipartisan effort. when you go back and look at the '96 act, there was very little opposition the in the the subcommittee, very little opposition in the full committee, very little opposition on the floor, and we actually had a very good conference. and i think much of that was as rick alluded, that people had worked on this for years, you know? my counterpart was ed markey. eddie and i are philosophically different, but we came together thinking that it was in the best interests of the american people to come up with a new policy framework, which we did. and, you know, policy framework

predicated on competition with as little government intervention and regulation as possible, and i think that's really what's needed again today. >> host: some former fcc commissioners, other people have said in testimony in congress that the act does not need to be rewritten, perhaps some piecemeal legislation, that includes reed hundt, the former fcc chair. >> guest: oh, i think some fundamental things have to be done, and they have to be done legislatively. what defines a rewrite is in the eye of the observer, but there are fundamental pieces that have to be addressed. for example, the current regulatory structure at the fcc is a throwback to the earlier time when cable companies offered cable service, pho.sy8v@ companies offered phone service, you had a wireless entrant, but it was fairly new. there's nothing that speaks specifically to the internet which w% in a very early stage of commercial development at at the time we wrote the '96 act. and because you've got different

bureaus writing different rules for these various companies, you can get disparate regulation. you have to bear in mind that these companies are competing head to head with each other offering exactly the same products. they are offering voice, they're offering data and video, and they're doing so in a very hard-fought, head-to-head competition. and they should be regulated the same way. so realigning the fcc's structure in order to meet the realities of the marketplace where you no longer have silos, but you have serious cross-platform competition is fundamental to making sure that the regulation enjoys parity and that companies are not given an advantage or disadvantage because of the regulatory environment. now, only congress can do that. the fcc cannot realign a structure that is established by statute. so you can start with that as a clear need. we also have a spectrum crunch

today, and is rapidly the spectrum that is available is being outstripped by the demand for mobile services. and carriers are experiencing order of magnitude increases over very short time frames in the demand for mobile data. we have got to find creative ways to get more spectrum allocated from government holders who, in many instances, have an excess of spectrum through the commercial auction process and into the hands of the commercial carriers. the current way we do that just isn't working. it's extraordinarily slow. the allocation process takes forever. and even after an agency is told to vacate a spectrum, it can take years for them to move away from it and make that available for commercial auction. so i think congress needs to be really innovative in the way it addresses this. maybe some incentives should be provided to agencies so that

spectrum is vacated more rapidly, made available for the commercial carriers. some have even suggested that we use a kind of a base closing approach for this. after the cold war when it was clear we had to close military bases and it was hard to do that because members of congress would fight vociferously in order to keep the base open in their district and have their colleagues support them in the process, it was very difficult to do it through the regular legislative process. so congress passed a statute that created a commission, the base-closing commission. periodically, that commission evaluates what bases can be closed, those that can be downsized, and it recommends a list back to the congress. then that list is put to an up or down vote with no amendments being in order on the floors of both the house and the senate. and every time that list has been presented to the congress, four or five times now since the

end of the cold war, it has passed. and maybe we need to have ntia or perhaps an undependent commission value -- independent commission evaluate the spectrum that's in the hands of government agencies and see what's excess, see what could be commercially auctioned and then put that to an up or down vote, that list, as produced by the agency or an independent body of some sort. it certainly worked for base closing, maybe it'll work for this. but, you know, what i'm suggesting is congress be creative in the way it addresses the need to get more spectrum into hands of the commercial carriers. and the majority of the spectrum that really can be made available for that relatively quickly is in the hands of government. >> host: rick boucher, do you see at some point wireless and internet ip becoming, being reclassified as essential communications services rather than information services? >> guest: i'm not going to go there. i don't think it's necessary.

in order to do that. i agree with jack that congress needs to be very precise in directing the fcc. with regard to what congressional intent is and what the role of the fcc in implementing that intent is going to be. and i think jack is right, when we wrote the '96 act, we were a little bit too generous in terms of trusting the fcc to do exactly what congress intended. we've learned our lesson, and i think this congress can now apply that lesson to the next telecom reform. but i think the fcc as recently with its power recently having been confirmed by the d.c. court of appeals in the net neutrality decision, not to do precisely what was done in that first order, but to do many things that can assure that the fcc funks effectively -- functions effectively as an overseer of internet communications-based

services, it's not going to be necessary to reclassify. that's manager that would only be done as a last resort, and the failure of other authorities. and i think the d.c. circuit has made it very clear that the fcc has the authority it needs to be an effective regulator. >> guest: peter, i think there's one issue that is really glaring out there that, you know, when you talk about, you know, comprehensive reform that a needs to be addressed and that's this issue of must carry retransmission consent, the role of the broadcaster, role of the cable company, the role of the satellite company, the role of the telephone company in delivering, you know, different types of programming, i was the republican sponsor for the must-carry retransmission consent legislation in the '92 act. to me, that's another example of something that was well intentioned that is totally out of whack. you know, today you have a

situation where there were, you know, 12 blackouts in 2010. in 2012 there were 91 blackouts. this year one company has jumped its retransmission consent fees upwards of 17% which ultimately gets passed on to the consumer. i think we have to go back and look at what was originally intended, and i can say as the author the original intent was to preserve localism, to make sure that the localism of the local broadcaster, you know, the local nudes, local weather -- local news, local weather, local sports was on that basic tier. we mandated that. now you have a number of different competitive means, and i think we need to create, again, an environment of competition, an environment of transparency, an environment of openness, and i think having that requirement that a broadcaster is automatically on a basic tier, you know, is not

right. and i think a cable company should have that right to enter into negotiations with a broadcaster. but if something goes awry and there cannot be a good negotiation -- unfortunately, many of these negotiations occur before the academy awards or before the super bowl, before dances with the stars or whatever -- i think a cable company should have the right to go outside of that local market and pull in another signal if they can compete and find in a negotiated sense the ramming that they need -- the programming that they need for the local consumer. i think that would create some balance. so i think what we have is outdated legislation, particularly many that area, that needs to be addressed. and it's interesting, literally within weeks the iowa owe decisions -- aereo decision's

going to be decided. ask is i'm not going to predict what's going to happen, but i think there is a very strong likelihood that that decision's going to go against the broadcasters. and so it's going to be interesting to see how they immediately come back to congress and say, you know, something's got to happen, something's got to give. and i think that could be a real propellant in terms of, you know, another major industry group saying it's time for comprehensive reform. >> host: do the broadcasters, do cable companies, do the now silicon valley companies, do they have a real power up in congress or a real influence in congress? >> guest: you know, members of congress are always looking for information, so i think all of these are purveyors of information. when eddie markey, mike oxley, rick boucher, anna eshoo, when all of us were doing the '96 act, we tried to focus on what

was best for the consumer. and we tried not to think what was going to be in the best interests of a broadcaster or a telephone company, long distance, satellite, etc. we tried to think what was going on in the best interests of the consumer. i happen to believe that you still have people like greg walden, people like anna eshoo, steve scalise, mike doyle, i mean, these people are all looking for what is in the best interest. so i feel that while, you know, special interests have points to make, they also provide information. i think that helps educate members of congress. i think it helps provide the data that is needed to come up with good legislation, and i'm very confident that in 2015, 2016 there will be a legitimate effort to, you know, mount a major reform. and i think that's going to result in a major piece of legislation that will go to president obama. >> guest: i think one remarkable

change just within the last decade is the fact that silicon valley companies have become very much aware of how important it is for them to pay attention to what happens in washington. during the time of the '96 act, we didn't have google, we didn't have amazon.com. that's all pretty new and, certainly, recent since that time frame. in the intervening time, these companies have grown up politically, and they have a very clear sense that they need to have a washington presence, that they need to be involved in the debates and the discussions. jack is right, members of congress are concerned about the consumer interest. but everyone obtains access to information that is relevant from a wide variety of sources. and when companies have a view to express and talk about the way in which particular scenarios that congress may be considering will play out in the

real world, having that point of view is important. and it was critically necessary, i think, for the silicon valley companies in realization of that fact to establish themselves as presences here, and i think they've done that, by and large, pretty effectively. there's one other notable aspect of telecommunications law making that i think deserves mention. congress, perhaps justifiably, has a reputation now for being hyperpartisan. and most issues that are debated on the floor of the house or even now in the senate to a large extent tend to fall along partisan line, and you get voices on different sides of the aisle taking opposing positions. telecom really remains an island of bipartisan cooperation in what is often times an ocean of partisan strife. and our house energy and commerce committee, i think jack would agree, historically has been the most bipartisan committee in the house.

most of the issues we've considered, telecommunications in particular, rarely ever draw partisan differences. there are differences. they can be geographic, they can be differences based upon particular industry points of view, but rarely ever are these partisan differences. so an opportunity really exists to address the challenges we've talked about here today and do so within a legislative framework and have some reasonable expectation that the bill is really going to pass even at a time when you might not say that about tax legislation or other things that often times are inherently somewhat more partisan. >> host: we have one minute left. where do you draw the line to start, okay, now we're going to regulate from this point, or we're going to write legislation from this point forward. how do you do that? >> guest: i think you have to draw from every resource you can in terms of information. i think you have to put the consumer at the forefront.

you have to think about what may happen in the future, and, you know, while i'm an advocate at this particular moment of being prescriptive, i think if you have a opportunity to provide a little latitude feeling that, you know, the federal communication commission, the justice department will do the right thing, then you write that in. but it's very difficult. and, you know, when you look at where we've come from, in the '34 act telegraph, no television, a little radio, smoke signals. the '96 act we had beepers, we -- some of us had begun to have cell phones. no smartphones, no applications. most of the members were not on the internet. i was considered fairly innovative because i was writing my own speeches on a computer. and today it's an entirely different dynamic. but, you know, the greatest success, i think, of the '96 act besides knocking down the barriers of competition, we put the consumer in control, you know? giving this consumer more opportunity to get what they

want in whatever mode of service, voice, video, and, of course, the internet with the explosion of information. to me, that's the greatest thing we did is the consumer now is in control. and i think that's what we have to preserve and, you know, try to create as much freedom as possible for greater innovation. >> guest: just one footnote to that. i think in terms of the starting line and where we go, chairman upton and chairman walden are doing a superb job in collaboration with their democratic counterparts in, first of all, understanding it's going to take some time. we started the '96 act in 1988. i mean, literally, the was introduced a full eight years in advance. hopefully, it won't take that long this time. but the two chairmen have set a schedule that involves this year receiving recommendations from a broad, interested public, perhaps holding some initial hearings. next year drafting legislation,

putting that drafting through the regular process of hearings and markups with the goal of having a law enacted at the end of the next congress. i think that'spz a realistic schedule, and i think they are very thoughtful in starting in that measured and long-range kind of way. >> host: rick boucher served in congress from '83-2011. he is currently with the sidley austin law firm. jack fields is ceo of the 21st century group inc. which is, what, mr. fields? >> guest: we're government affairs agency. >> host: gentlemen, thank you for being on "the communicators." >> guest: thank you very much. >> c-span, created by america's cable companies 5 years ago -- 35 years ago and brought to you as a public service by your local cable or satellite provider. >> just ahead on c-span2, the leaders of the securities and exchange commission and the commodity futures trading commission testify before a

senate subcommittee on their budget requests and market oversight. then florida senator marco rubio on helping young people save for retirement. after that, live coverage of indiana governor mike pence on his proposal to expand his state's health care plan as an alternative to medicaid using private market-based coverage and health savings accounts. and later, former new york times executive editor jill abramson who was dismissed from her job last week. she delivers the commencement address today to graduates of wake forest university. >> also today, missouri senator claire mccaskill will hold the first in a series of round table discussions addressing rape and sexual assaults on college campuses. panelists include current and former student survivors, campus safety and sexual assault experts, representatives of law enforcement and university administrators. the forum will focus on the law enacted last year that imposes

new obligations on colleges and universities to address violence against women. you can watch the event live starting at 2:00 eastern here on c-span2. >> if you go back and look at coolidge, he was a conservative hero, and then his tax rate was a gold standard tax rate that we saw in the video, 25% was what he got the top rate down to. and he fought like crazy. it started, remember, with wilson in the '70s. so that was an epic battle. and when you look at all the socialites said about coolidge in washington, how cold he was, you want to remember they were probably also from families that endorsed different policies, especially alice longworth whose father had a different model of president. t.r. was a bully pulpit presidency, and here was coolidge, prissy and cold and not giving out favorites, so she said he looked as though he'd

been weaned on a pickle. coolidge's silence was cultural. he was from new england, farmers don't talk a lot or wave their arms about because a cow might kick them, you know? if you've lived -- and it was temperamental, of temperament. he was a shy person. but it also had a political purpose. he knew that if he didn't talk a lot, people would stop talking and, of course, a president or a political leader is constantly bombarded with requests. and his silence was his way of not giving in to special interests, and he articulated that quite explicitly. >> amity shlaes on taxes, depression-era presidents and discall policies "in depth" sunday, june 1st at noon eastern on c-span2's booktv of. >> the heads of both the securities and exchange commission and the commodity

futures trading commission testified on capitol hill last week about strengthening financial markets. they talked about their respective budget requests and the additional resources their agencies would need to fully enforce new regulations under the dodd-frank law. they spoke before the senate appropriations subcommittee on financial services. the hearing is about an hour and a half. >> good afternoon. the subcommittee will come to order. i'm pleased to convene this hearing of the financial services and general government subcommittee to consider the fiscal year 2015 funding requests of two key federal regulatory or agencies, the securities and exchange commission and the commodity futures trading commission. i welcome my distinguished ranking member, senator mike johanns, and some of our other colleagues, i think, will join us here throughout the day. joining us today are also the

honorable mary jo white, chairman of the securities and exchange commission, and the honorable mark wetjen, acting chairman of the commodity futures trading commission. they will discuss the critical work of their agencies, their use of resources provided over the past couple of years and their budget needs for fiscal year 2015. the workload for these agencies has grown dramatically in recent years. the sec and the cftc both play critical roles in stimulating and sustaining economic growth and prosperity in our country and protecting the marketplace from fraud and manipulation and in carrying out dodd-frank reforms. my constituents have made clear they support these reforms to prevent the reckless and abusive practices that led to the financial crisis. fortunately, some sectors of our country are recovering, but sadly, many families have not

recovered, ask they continue to struggle -- and they can't -- and they continue to struggle. i believe it is my responsibility to the honest and hard working people of new mexico and to all americans who suffered as a result of this crisis to insure that we work to fully implement dodd-frank. we need a financial system that is safe and sound because what happens on wall street touches every american family. whether they are saving to buy their first home, helping to put their children through college or planning for retirement, they put their in the financial markets being sound. we cannot let them down. and they are not alone. market users, financial investors and the u.s. economy all depend on vigilant oversight by these two agencies. especially in today's rapid-paced, evolving and and often volatile global marketplace. in the past few years, both chairman white and acting

chairman wetjen and their fellow commissioners and their respective staffs, i think, have worked very hard to create a more reliable regulatory structure, to insure the stability and integrity of the futures and security markets. but there is still, i think everyone will admit, a lot of work to be done. we depend on your leadership to implement the reforms designed to strengthen our regulatory framework, to do so promptly, prudently and transparently and help guard against another financial meltdown. as the investors advocate, the sec has an important role in maintaining fair, orderly and efficient stock and security markets. the sec conducts day-to-day oversight of the major market participants, monitors corporate disclosure of information to the investing public and investigates and pursues enforcement action against securities laws violations.

dodd-frank dramatically expanded the sec's responsibilities. the sec was thrust into the driver's seat for issuing nearly 100 new rules, creating five new offices, issuing more than 20 studies and reports, overseeing the over the the the -- over the counter advisers and security-based swap market participants and setting up a new whistleblower program. the jump-start our business start-ups act of 2012 added more to sec's plate for further rules and studies on capital formation, disclosure and registration requirements. turning to the cftc now, the cftc carries out market surveillance, come license and enforcement programs -- compliance programs in the futures and swaps arena. it detects, deters and punishes abusive trading activity and manipulation of commodity prices

helping to prevent negative impacts both on consumers and is on the economy. four years ago the cftc's mission was substantially expanded to include new oversight of the swaps marketplace, the vast, once in the shadows world of over-the-counter derivatives. it is a significantly transformed can highly diversified marketplace, one that is globalized, electronic and round the clock. the enactment of wall street reform in 2010 also added to the job of the cftc. cftc now has oversight of the once-unregulated $400 trillion over-the-counter u.s. derivatives market to protect and benefit end users and the broader american public. this complex swaps market has a notional value of nearly eight times the size of that of the futures market. now, the forecast for 2015

looking ahead for fiscal year 2015 for the sec, the president seeks funding of $1.7 billion, an increase of $350 million, 26% above the fiscal year 2014 base enacted level of $1.35 be billion. it is $236 million above the sec's $1.464 billion currently operating level. the $1.7 billion requested for fiscal year 2015 will support 5,143 permanent positions and an increase of 639 positions over the current 4,504 permanent positions for a 14% growth in staff. and for the cftc the president's budget requests $280 million, an increase of $65 million above the fiscal year 2014-enacted

level of $215 million. this is a 30% increase in funding above the current level. the proposed fiscal year 2015 level will support 920 staff or 253 more when compared to the current staffing level of 667. a 37% increase. congress probably exercises its most effective oversight of agencies and programs through the appropriations process. permitting an annual check-up and review of operations, of activities and spending. today's hearing provides a valuable opportunity to ask some important questions. are the, ec -- are the sec and the cftc keeping pace with the developments in the markets? particularly with more complex financial products which are emerging? do these agencies have the right mix of talent and specialized

expertise to be vigilant watchdogs? do they have the state of the art information technology to augment and support their human capital? what are the top priorities for use of the resources proposed for 2015, and what are the likely consequences of continued budget shortfalls and reduced resources? i know senator johanns and i welcome the opportunity to conduct critical oversight of these two agencies, and i now turn to my distinguished ranking member, senator mike johanns, for his opening remarks. >> mr. chairman, let me just start out and say thank you to the witnesses for being here with us today. thank you, mr. chairman, for holding yet another important hearing as we work our way through the various budget requests under our subcommittee's jurisdiction. i do look forward to hearing from the witnesses today regarding the details of your request as well as your plans to

carry out core missions and implement dodd-frank in a responsible manner. there are three areas that i would like to highlight looking forward to your testimony and my questions. first, the sec's implementation of the jobs act. where is that on schedule? i am concerned that it is not on schedule, and i want to learn more about that. i do encourage the sec and your team to move with all appropriate speed in finalizing regulation a in the crowd-funding rules. second, i'd like to get both of your thoughts on technological advancement in the marketplace and what your agencies are doing on the technology front to adapt. and finally, i ask you to be persistent in trying to work together and coordinate with your fellow regulators. any conflicts between sec and

cftc on cross-border swaps and lack of coordination between sec and department of labor over fiduciary standards continues to cause uncertainty and confusion. derivatives markets and effective oversight of those markets matter a lot. from farmers to homeowners and to small businesses, we all benefit from a system that promotes fair and orderly markets, so i am concerned when certain agency rules seem to bragment the market -- fragment the market and push businesses overseas. ..

to cross-border implementation swath regulation. cftc's guidance, the delays, the lack of coordination with other regulators have led to confusion and concern for market participants, foreign government finance ministers, and investors here and abroad. no doubt that both the cdc and sec have an important job of protecting investors. we look to the markets help secure their retirements, pay for their homes, send kids to college. your agencies have an obligation to protect consumers, hopefully from the next bernie madoff, mf global, or stanford. as we look at both of your

budget requests, two things come to mind. first technological solutions are important to keep up with next generation trading platforms that operate at lightning speeds. number two, staffing levels have to be carefully considered. we also have to make sure that they are sustainable. all agencies have to make strategic decisions on how best to allocate resources. as we all know, simple increasing funding doesn't necessarily ensure that the agency will successfully achieve its mission. so to the chairs, you both have difficult tasks before you. we ask a lot. we ask that you improve transparency in our securities markets and cover fraud and deception without overregulating our markets and hindering economic growth. chairman udall, again i look forward to working with you as

we consider the fiscal year 2015 budget request of the cftc and sec, and i look forward to the testamentestimony and the opporo ask questions. thank you, mr. chairman. >> thank you very much, senator johanns. and at this time i would invite chairman white to present estimate on half of the sec followed by acting chairman wetjen on behalf of the cftc. to each of five minutes. i know you have very thorough statements which will be put in the record and you can use your five minutes as you choose. please proceed, chairman white. >> thank you for inviting me to testify in support of the president's fiscal year 2015 budget for the securities and exchange commission. now more than ever investors in our market need a strong, vigilant and adequately resourced sec. to put the sec's extensive responsibilities and its 2015

budget request into context, from fiscal 2001 the fiscal 2014 trading volume in equity markets more than doubled to a projected $71 trillion. the complexities of financial products and the speed with which they are traded increased exponentially. assets under management of mutual funds grew by 131% to $14.8 trillion. and assets under management of investment advisers jumped almost 200%, to $55 trillion. there are today over 25,000 sec registrants including broker-dealers, clearing agents, transfer agents, credit rating agencies, exchanges and others. during this time of unprecedented growth and change in our markets, the sec also has been given significant new responsibilities for over-the-counter derivatives, private fund advisors, municipal advisers, crowdfunding portals, and more. the presidents $1.7 billion

budget request would enable the sec to address critical core priorities, including enhancing examination coverage for investment advisers and other key entities who deal with retail and institutional investors. protecting investors by expanding out enforcement programs investigative capability and strengthening our ability to litigate against wrongdoers. deploying and leveraging cutting edge technology to better keep pace with those we regulate make our operations more efficient and to through our ability to identify a variety of market risks, including emerging frauds. the sec's funding as you know is deficit neutral which means the amount congress appropriates is offset by transaction fees and does not impact the deficit, the funding available for other agencies or count against the cavs in the cbo framework. nonetheless, i fully recognize my duty to be an effective and prudent steward of the funds we

are appropriate. i believe our a published once in the past year should give congress and the public confidence that we will fulfill this responsibility. while certainly much more remains to be done, since the arrival in april 2013 the commission has adopted or proposed more than 20 significant will makings including many mandated by the dodd-frank and jobs act across the spectrum of our jurisdiction. page three of my testimony details these. we are also now more aggressively enforcing the securities laws requiring for the first time admissions to hold certain wrongdoers more publicly accountable. in fiscal 2013 we obtain orders or penalties of $3.4 billion, the highest in the agency's history. we have intensified our data-driven disciplined approach to analyzing and appropriately addressing complex market structure issues such as high-frequency trading and dark pools, implement a powerful new

analytical tool called midas. we've begun a comprehensive review of the sec's public company disclosure rules to make disclosures more meaningful to investors while at the same time making them more cost effective for companies. i want to make clear that the significant progress i'm talking about was due to the incredible commitment, talent and expertise of the sec staff. the fiscal 2015 budget request would permit the sec to increase examination coverage of investment advisers who everyday investors are increasingly turning to for investment assistance for retirement and family needs. while the sec has made the most of its limited resources we nevertheless are only able to salmon 9% of registered investment advisors in fiscal 2013. in 2004, 10 years ago, the sec had 19 examiners for $120 in investment advisor assets under management. today in 2014 we have only

eight. more coverage is needed in the industry itself has acknowledged that. very importantly this budget request would also allow us to better leverage technology across the agency to support a number of key initiative. this budget request also allows us to continue augmenting our division of economic and risk analysis by adding financial economists and other experts to assist with economic analysis in rulemaking, risk-based selection for investigations and examinations and structured data initiative. i firmly believe the funding we seek is fully justified by our important going responsibilities to investors, companies and the market. your continued support will allow us to better fulfill our mission and to build on the significant progress the agency has achieved which i'm committed to continuing and enhancing. i'd be pleased to answer any of your questions. >> thank you very much. acting chairman wetjen, please

proceed. >> good afternoon, chairman udall, ranking member johanns and members of the subcommittee. thank you providing the today to the hearing on the president's fiscal year 2015 funding request for the commission. in my written remarks i respond to the subcommittees requested details of the commission is use its resources in the previous two fiscal years. my goal this afternoon is to provide this subcommittee with context to the important role for the commission place in the financial system and the economy as a whole as was the role this committee play place in helpingr agency achieve its mission. the commission was directed by congress to place religious market which includes futures options and swaps. to see if he has continued its effort to government the new regulatory framework for the swaps market report under dodd-frank. the operation integrity of the derivatives markets are critical to the efficient functioning of the global financial system and a economies it supports. without them a farmer can not want any price for his crop come

a small business cannot lock in an interest rate that would otherwise fluctuate, rats raising its costs. a global manufacturer cannot lock in a currency value making it harder to plan and grow its global business. a lender cannot manage its assets and balance sheet to ensure he can continue hunting. the derivatives markets better enables enterprises to do what they do best, create jobs and grow the economy. we know improperly failures of firms or other regulators in the markets can severely and negatively impact economy and cost emetic losses for individual participants. this is why funding the commission is so important. measured in percentage terms, the commission's funding level today is substantially larger than it was through much of the last decade. previous funding increases were necessary and appreciated. nonetheless, the growth of the commission's responsibilities including under dodd-frank have significantly outpaced the growth in the agency's budget. consequently today the commission is underfunded.

the markets the commission oversees and agency related responsibilities have grown by a variety of different measures. for instance, the notional value of derivatives cleared by clearing houses was estimated to be $124 trillion in 2010, and it's no approximate $223 trillion, nearly a 100% increase. now more than ever a clearing houses failed to follow the commission's regulations designed to ensure proper risk management could have significant consequences to the economy. the amount of customer funds managed by clearing houses and futures commission merchants was $177 billion in 2010. it's now over $218 billion in nearly 40% increase. the commission's rules are designed to ensure customer funds are safely kept by these firms. a failure to provide appropriate oversight increases the chance of risky practices placing customer funds at risk.

by one measure the total number of registrants and registered entities overseeing drug by the commission has increased by at least 40% in the last four years. this includes 100 to swap dealers, to me just while participants in more than three dozen registered entities which include clearinghouses, trading venues. the cftc also receives more than 4000 advisors and operators of managed funds. some of which have significant outward exposures across financial markets. additionally, the commission directly or indirectly supervises approximately another 64,000 registrants. the agency's current on board step is just 648 employees. the registered entities the commission oversees are by and large well-run firms to perform important services for the customers. nevertheless, those relying upon them as was the american public deserve assurance that the rest of the firms both are being mitigated by an agency capable of meaningful oversight. this years budget request is a

significant step toward a longer-term funding level that is necessary to fully and responsibly fulfill the agency's mission. it recognizes the need for appropriation of $280 million approximate 920 full-time equivalents which is weighted towards examinations, surveillance and technology functions. the request balances the need for more technological tools to monitor the markets, tech front abuse and identify risk and compliance issues for staff to analyze make use of the data. without additional funding the consequences are plain. the commission will be forced to perform fewer and less thorough examinations, including those being systemically important or that stewart customer funds. there will be less able to develop analytical systems to perform surveillance of markets becoming increasing automated. it will be deterred in its mandate to collect and analyze the swaps bid to enhance market transparent and less able to time and investigate and prosecute cases to address customer harmed or threats to market integrity. thank you inviting me today.

i'd be happy to answer any questions. >> thank you both for your testimony, and we will now proceed on the seven minute rounds of questions. chairman wetjen, the cftc budget justifications made it to the committee suggests that the fiscal and a 15 request, and i quote from the budget justification, quote a significant step towards the longer-term funding level that is necessary to fully and responsibly fulfill the agency's core mission, closed quote. what do you consider to be the optimum funding level necessary for the cftc to fully and responsibly perform its work? what functions with the cftc not be able to adequately address if the funding level enacted for 2015 is less than the full $280 million requested? >> thank you chairman for the

question. this request is especially focused on three key areas for the agency in common with regard to the agency's mission. the commission activities are enforcement, surveillance and examinations. and as i just said in my opening statement, we are not going to be able to do as much as we should i believe in each of those key areas. not going to be able to do as many examinations of some of these critical entities and intermediaries in our marketplace. i mention clearinghouses. there's a tremendous amount of risk that's now being housed at clearinghouses. that's increased quite substantially in recent years. we have 15 clearinghouses under our jurisdiction and we are able to annually examine two of them which have been deemed systemically important. we have with current staffing been able to get around to some of the other clearinghouses as well, but we are not in a position with the current

staffing to examine all 15 of those on a regular basis. so the staff has been forced to make judgments about which clearinghouse might be a little more risky than others and focus attention in that way. i think ideally just focusing on the category of clearinghouses, you would have examinations of all of them on an annual basis. >> how about the optimum level? have you a thought on that? >> well, the $280 million request i think it's is very, very close to optimal based on my judgment. the request this year is slightly below what was asked for last year. primarily that was because we wanted to be respectful of the direction congress gave us in passing the budget resolution, which called for a very modest increase in overall discretionary spending. so in light of that it seemed appropriate to adjust the requests this year accordingly. >> thank you. chair white, sec is seeking 1.7 billion for fiscal year

2015. this would be a 26% increase in resources compared to the level enacted for the current year. what are the top priorities for which these additional resources will be devoted? what consequences can be expected if the funding level approved by the sec is less than the amount requested by the president? >> the priorities are to fund our exam program, our enforcement program, really our core areas including our division of economic and risk analysis. i don't think we can overstate the importance of sufficient funding, what we request in the this budget was for technology. we are at a critical juncture at the sec with a number of our systems, enhancements, a number of our risk-based tools that allow us to be smarter and more efficient in detecting problems in the marketplace, including emerging frauds.

the one area this doesn't go station i alluded to this in my oral testimony as well is our 11,000 registered investment advisors now under the sec's jurisdiction. and under current levels we were only able to cover 9% of those last year, and that's using very smart targeted risk-based tools to go to the areas where we think the highest risk is. but there are 40% of those investment advisors who have not been examined. so that's a very, very high priority for us, as it was in the 2014 request. we did not receive funding for that. strong enforcement of our federal securities laws is always at the top of our highest priority list, along with others. this budget request does seek 126 additional enforcement staff, including market experts which i think is enormously important for us to do our job better and more efficiently.

so if we were not to receive funding at that level, clearly all of our functions really across the board would suffer. i've tried to illustrate the areas of greatest need and certainly our request is intended to be quite targeted and surgical to those coordinates. we have the new responsibilities that you alluded to in your opening remarks to implement the reforms and the over-the-counter securities-based swap markets. we have new advisors we are responsible for. all of that needs become limited as well as obviously the rules now put in place. >> thank you. in a couple of months we will mark the fourth anniversary of the enactment of comprehensive wall street reform, aimed at strengthening the oversight in the wake of the financial crisis in 2008. and recent analysis by outside monitoring entities reflect that of the 398 total rule makings

required under dodd-frank, 95, 24%, are under the jurisdiction of the sec, and 60, 15%, are under the jurisdiction of the cftc. a report by davis polk analysts issued last month indicates that of the 95 rules under the sec, 42, 44%, have been finalized, and 11% have not yet been proposed. of the 60 cftc rules, 50, 83%, have been finalized and three, 5%, have not yet been proposed. both of you, i'm interested in hearing how the independent progress reports square with your agency's own internal tracking of your implementation timetable. i think the best thing for me to do is come back to the question. let senator johanns question

because every couple of additional questions on that, if you could keep that in mind i may end up repeating some of it. senator johanns, i'm going to go to you for questioning at this point. >> thank you, mr. chairman. chairman wetjen, let me get started with you. if you look at the budget control act, and then the ryan-murray agreement that was reached last fall after come as you know, some very, very difficult negotiations, total discretionary spending is due to increase this year by about $1.4 billion, or in the next budget year i should say. that's less than 1% increase over last year. so i think that bipartisan message sent to everybody is that this is going to be very tight, very challenging, very difficult. however, in the budget request we get from cftc, you are asking

for a 30% increase. now, i think by anybody's definition that's significant, but it's a special high when you recognize what everybody else is faced with across the federal government. so i ask you a couple questions. one is, how do you justify it, recognizing that colleagues across the federal government with very important missions, like yours, are also going to be held to this agreement? and then secondly, what if it doesn't happen? do you have contingency plans as to how you would deal with that and how you get your budget in line with what the ryan-murray agreement calls for? >> thank you for the question. the request was based on a number of different factors, but first and foremost, what are we

responsible for doing under the law. and again i go back to three key areas of our agencies mission. enforcement, surveillance and examinations. those are the key mission activities but meanwhile, the number of entities we oversee has increased by a variety of different measures that are just recently went through in percentage terms that are even higher than the percentage increase we have sought with her budget requests here. and so i think our first responsibility, or my first response billy in my capacity at the moment is trying to make my best judgment and best case for the kind of funding we need to make sure we are compliant of the law. so that form the basis of this. as a said before we recognize the passage of the budget agreement last year and so we tried to be more modest this year in the request, but we have to make sure that we are executing on these key mission

activities. otherwise i worry that we are not fulfilling our responsibilities to the american public. there is quite a bit at stake as i tried to lay out in my test but because there's enormous amounts of risk being managed by the firms that we oversee. that's why we have fulsome rules sets that they're required to comply with. it's primarily for that purpose to make sure that managing risk in an appropriate way. and, unfortunately, we've seen over the past number of years the sorts of outcomes that can happen when they fail to do that. or when they fail to follow our rules. so that's the basis for the request to your second -- reminded again. >> the second part of the question is, what if you don't get there? how are you going to -- describe for us how you're going to do with that if your argument isn't adopted and to request isn't granted. >> i think we will have to

continue doing them we be forced to continue doing what we've been doing and that is using our best judgment about which entities to examine, which ones will have to take a pass on in a particular year. make judgments about which matters to pursue by way of investigations, once some incident comes to light, whether by referral from another division within the agency or through some other way outside of the agency. judgments will have to be made there. and as far as those cases that are already under development, enforcement cases under the public, again, judgment will have to be made about how to allocate resources. do we devote more to some cases based on certain risks of success -- or risks of not succeeding and so it might involve an assessment of litigation risk in that way. so these are the sort of judgments you prefer not have to

make given the responsibilities we been given under the law. >> in this general vein let me ask you a question about the technology piece of your budget. cftc technology spending has grown less than 7% since fy 2011. the overall budget is up by 12% during that same period of time. my concern is that the cftc is operating with selectric typewriters, while the industry is operating with the latest technology. and i just worry that you are getting behind. it seems to me that what we are trying to achieve with your agency is a faster, more technologically advanced agency and we have today to keep up with what's going on in the

marketplace. not necessarily a bigger agency. bigger doesn't necessarily solve the problems that you're dealing with out of there. to tell us why the commission has come it seems to me, downplayed technology investment, while spending in other areas of the budget. it would seem to be technology would be critical for you to keep up. >> you are absolutely right. it is critical, and by no means should this year's request be viewed as downplaying the importance of technology. it's critically important. but what we've had to do it again is given the fact there are finite resources and in trying to be responsible in our request, and in light of the responsibilities of the agency, we just had to make a judgment about how much is appropriate to allocate the technologists in right now, and how much is

appropriate to spend on these other important mission activities. and as important as technology is we still need human capital to use it and deploy it. and as important as technology is, we need to be doing our level best on these key functions such as examinations. i hate to beat this drum continually but these entities that we oversee our critically important, and the amount of risk that a house is very, very significant. and some of these intermediaries also manage billions and billions of dollars of customer money. and we've seen instances of mcms, they are called, villagers and in the case of mf global with more than $1.5 billion tied up in a bankruptcy proceeding. there's a variety of different reasons why in the global fail but the point is oversight is important and the rules we have are designed to prevent this sort of incident from taking

place. so $50 million is a slight increase as you said above where we've been spending currently. i would like to spend much more than that but in the context of an over all budget request that has limitations, that was the best judgment about where we should be in the short term. >> mr. chairman, i will yield back to you and i anticipate another round. >> yes, yes, of course. thank you, senator johanns. i outlined a little bit on that davis polk, the the analyst and the nose of their and going back to that question. the independent progress report squares with your own agency in tone tracking of the foundation timetable? yes, for both. >> yes. essentially, i don't know the particulars much of precisely but essentially they do a thing. the sec as you mentioned in your opening remarks was given nearly

100 rule makings by dodd-frank and in some additional ones under mandated to making and an additional ones under the jobs act. and i did from the beginning of my tenure and continue to prioritize the completion of those will makings under both dodd-frank and the jobs act. i'm pleased with the progress. we have proposed or adopted about, over 80% but we clearly have ways to go. among those that we have adopted since, adopted or proposed since i've been at the agency for about a year now, i think there are 20 quite significant once. among those adopted, the volcker rule is obviously one of them. a bad actor which very important to investors with certain offerings should not be exempt if you associate with bad actors. we have proposed all of the title vii will makings under our jurisdiction, some adopted but it is a very high priority for 2014 for us to complete those. we have adopted the municipal advisors rule, a number of

others have been adopted. and again we've completed on all of the mandated studies that were assigned to us under dodd-frank. it's that important these will makings are done, obviously probably at that certain one of my commitments and one of the commitments i made at my confirmation, ma but also to be done well and to be done after careful and appropriate economic analysis. and so we are all very closely focused, as one of our highest priorities in completing those mandated will makings under the dodd-frank act and under the jobs act. >> do you feel you have the necessary expertise on staff to adequately issue and enforce the rules required by dodd-frank? >> i think we have the necessary expertise on staff. some of our rule makings are also done jointly or in consultation with our fellow regulars, both domestically and internationally.

but you make an excellent point, which is we're talking about not just adopting those robust, strong rules but also implement in an following the adoption. that's when my significant resource concerns that we actually do have the resources to adequately and robustly implement and enforce those rules once they are adopted. >> and the have staffing plans adapted to bring on more expertise in areas that contributed to the financial crisis? >> again, a very high priority of mine since i began was to bring on more economists so you'll see that prioritize in a budget again this year as it was last year with expertise, certainly in areas where we're involved in a financial crisis. also modern-day issues with respect or equity market structure. and we've done that in the enforcement space as well. so there's full understanding of the rules we are enforcing with

the requisite expertise. that's one of the important things we are seeking funding for in this budget request. >> chairman wetjen, how are you coming out on the rules that you're promulgating, the ones that are in the pipeline? does it square pretty much with the independent analysts, or do you take issue with their numbers? >> no, i believe it does. the private rule makings that come to mind when he think about those that we were required to do under dodd-frank, but have not yet finalized, it's the rulemaking for margin of requirements for unclear to swaps, capital requirements for those firms entered in an include swaps, and in the third one would be a final rule on position limits, another rulemaking required under dodd-frank. so i believe that davis polk study had the same, they might've mentioned one more, but those are the three that i think of in terms of unfinished business. on position limits we proposed a

rule their last fall so staff is working on the common file to create a response to the proposal. on the other two, staff is working on a reproposal but those are rule makings that were proposed a couple of years ago but in light of significant international work done for the auspices of a number of different key international organizations, a decision was made to actually we proposed the rule. those two rules. so we are to have something in circulation for the commission very soon on those too. >> how would you characterize the efforts to harmonize rules among multiple regulators? why don't you take a stab at that? >> thank you, senator. it's difficult. everyone has their own responsibilities and obligations to their own country and to their own legislative bodies.

but there has been considerable effort through some of the same international organizations. i mentioned a key when it comes to mind. there's another group that was formed specifically related to derivatives reforms. the oh, gee rg group it's called. so those groups meet on the radio basis. all an effort to try to get comes to adopt reforms that are sufficiently comparable and competence in nature. >> chair white? >> yes. again how pretty we have both domestically and internationally to try and even on will makings are not required to be joined by there's very close consultation and coronation to try to make them as robust as consistent or at least compatible as possible will around the globe. when you talk about the title vii will making and the over-the-counter derivatives market, that's a uniquely global market and so we need to get that right. i think we're all working it

hard to try to do that. i think the fact that the agencies charged with implementing the volcker rule actually worked together and came out with a joint rule, including the cftc and the sec, was enormous important both to the strength of the rule and the consistency and certainty for the marketplace. >> thank you. senator moran, would you like -- >> mr. chairman, thank you very much. senator johanns was, this may be based upon the relationship i've had with other cftc chairmen, telling me that the presumption exists that is your a cretin grad you can do no wrong. chairman wetjen can think of her much for joining us today. i appreciated the conversations that we had in my office yesterday. you've indicated to me, and i've seen evidence of it the desire to work hard and did a good, solid relationships with congress. and i'm very grateful for the. i look forward to a coaching

that as well with you. let me just ask a question that in part we discussed yesterday. implications of rule makings mandated by dodd-frank, what are you able to do to mitigate what is always described as unintended consequences? you and i have been touched in regard to real-time reporting rule which may unintentionally identified swapper dispense transactions. and indicated this is something you're looking into. would you bring it up to date, and maybe can put on the record the conversation, the nature of the conversation we had just and where you're headed. >> thank you, senator. we did has a rulemaking that plays a real-time reporting obligation of swaps activity, and depending on the entity or

the counterpart in the trade, there's a timeline by which the party has to report their trade to the public. and the matter you and i discussed as you know relates to certain instruments that are not terribly liquid. there's not a lot of trading activity in some of these products. and because of that fact, it becomes easier to identify the identity of what are the counterparties. and so this is a problem and a challenge for the agency because the statute does say, one of the considerations that has to be made is that in his reporting obligation the identity of the party not be revealed. on the other hand, there's tremendous public benefit in having information about a trade available as quickly as possible. it's a very useful in terms of price discovery which is one of the key functions of our marketplace.

so that's where the tension is. so i directed the staff at the cftc to examine this problem, to look into it, and to see whether or not we can confirm that this is, in fact, a problem. the analysis here is again, i think we need to review what the statute says and look carefully at that and determined what was meant when we were cautioned not to have a reporting obligation that could reveal someone's identity. it's not like anyone says, hey, it's so into. it's again so many people -- so punitive or trading in a particular instance the market place can see figure out relatively easily who those parties are. so the staff is looking at this. i actually had a conversation after you and i spoke yesterday, a follow-up conversation with staff. they're doing any type of analysis that wasn't aware of when you and i spoke so they're looking at another way to see if they can confirm some of what has been reported by the parties in these particularly illiquid

slots. we will keep looking at it and keep you up-to-date. >> together much. let me turn to the sec, chairwoman white, thank you very much for your presence today. pleased to see her as i sometimes do on the banking committee as well. to asset managers were recently graduated to stage two of fsoc's review process for systemically important financial institutions. and unconcerned that asset manager to simply administer customer accounts may be proceeding down a path of additional regulation that come in my view, may be inappropriate for that industry. can you give me a better sense of how this designation process for asset managers is progressing? at the fsoc, and given the understanding that the assets in question are not owned by the companies in question. and then i have a couple of follow-ups i think based upon what you say.

>> i think although there have been media reports i think to the effect of your question, i don't think there's been a public announcement of the precise status, if any, with respect to specific asset managers which is the protocol of the fsoc with respect to any company that might be considered. >> that's encouraging because what i would ask is because i understand there's a roundtable discussion to occur in the next couple of weeks, in support of my concern is why we making designation now when there's more work to be done? >> again, i think some of the treasury officials, the secretary of treasury, obviously the chair of the fsoc, there is a process of learning about and gathering data on the asset manager industry. again, i can say publicly about the process of the ways. i think there's a good development that there is the asset manager conference on monday, and it's a public forum.

so that representatives of the fsoc, staff of the agency member agencies will hear from industry, and other interested parties and knowledgeable parties. i do think it's important, and agaiagainst the fsoc is given te power in general, if it finds -- well, a responsibility decide whether you are systemically important institutions that aren't banks, art insurance comes, et cetera, and if so if they threaten to send grist to the financial system. one of the powers congress gave the fsoc was to designate. that doesn't say what that process should be, what the data should be before one does that. i think those are very important questions. i think it's also very important and actually the ofr study which came out in september about the asset management industry, not specific parties, pointed out that very fact that you mentioned, which is the asset manager business is an agency

business. and so when you are considering what, if any, systemic risk it may or may not post, you're not talking about a balance sheet of positions. you're talking about an agency model. i think it's important that be understood by all who are considering this. and that's the right expertise be brought to bear on that analysis. >> in your analysis was the significance of the agency relationship? how do you personally or how do you at the acc as chair see this issue within your role at fsoc? >> again, as chair i am a member of fsoc as you know. i think eviction important factor. eventually if you're looking to what kinds of entities and, me great systemic risk. if these assets are not yours and not on your balance sheet that's a very different situation before you to assess in terms of whether suc such an entity, if it were to fail, fails in any sense similar to a bank, you know, does kerry's

position on the balance sheet as i think it's a critical fact. not the only factor look at but a critical distinction between asset managers and 70 other entities being considered. >> thank you both. my time has expired. >> senator johanns. >> chairwoman white, if i could turn to you. if you look at the history of the sec budget, even predating the obama administration, going back to the year 2000, the budget has grown from $377 million, at 1.35 billion in 2014. very, very significant growth by any definition. but despite this tremendous growth in resources, the sec, and i acknowledge, this was prior to your time, but it failed to detect ponzi schemes

like madoff, stanford. didn't sound the warning on the collapse of the u.s. financial system, or near collapse. that describes to me a very serious problem within the sec. you may disagree with that. you may agree with that. but i would like you to spend some time since this is a great opportunity for oversight to talk to a on the committee about your view of what needs to be done to avoid a future madoff, a future ponzi scheme. what are you doing at the sec that change the culture of the dynamic of how people look at the role and responsibility in terms of dealing with characters like that? and in terms of do with a natural system of the united states.

>> i think several points. i mean, one is that, and agencies acknowledge this, that there were weaknesses and issues that i think before my arrival the agency had made significant progress on addressing. very important that that did happen. for example, in terms of a ponzi scheme, today one of the items in our budget request that we are seeking to enhance even further is a tips complaint and referral system whereby we get about 15,000 complaints at the sec every year. 3000 plus of those come into our whistleblower office, let 15,000 in total so speak. those were now all centralized, automated, processed electronically, quickly and sent out to where they need to be set out. one of the enhancements that we weren't able to do last year because of the funding was to actually automate the triage of those complaints.

no question that that feature which did figure in those incidents are mentioning is now quite different in the sec. a number of other changes were made, both in the exam program, enhancements, improvements, and the enforcement division as well. one of the things i think he's enormously strengthened the enforcement program, for example, is a specialty units were you not have expertise reside in different market strata that he sec is responsible for. and again, i think nothing more important the sec that we have a very strong compliance function, very strong enforcement function. on the examination side, also enhancements improvements have been made. very significant ones. we've been helped by, you know, our technology there. we have been helped by our economists as part of that effort. which is basically we now have technological tools that allow us to analyze, assess, access massive amounts of data much

more quickly. for example, one of our newer tools in the examination program is called need which is national exam analytics tool i think that basically allows our exams when they go into an investor advisor to examine, to look at all of their trading basically. so we have one instance recently what i think 17 million transactions were accessed and analyzed in 36 hours. the sec of yesterday could not come close to the. and what do we do when they get when we get that data analyzed, we look for patterns of insider trading, look for ponzi scheme, look for front running, other kinds of patterns that may suggest wrongdoing. it's a much stronger sec in those respects i think. no one can respond we sit here and say that any law enforcement agency will never miss a scheme going forward, but it is an extraordinarily strong enforcement exam function today.

>> would you be confident and has led to the committee today that under the current atmosphere, the current approaches that madoff could not repeat what he did some years ago? >> from what i know of what occurred, and again i wasn't here but i have studied what occurred, i think the systems we're just talking about, among others, certainly at the sec, i believe that would've been detected and proceeded upon. again you can never guarantee that you catch every scheme, every fraudster, every criminal in any agency. but i do think it has been built to prevent that from happening again. >> the budget request your making this year admittedly is sizable. i appreciate your little bit different circumstance. having said that, it's our job to provide oversight were ever the dollar comes from. given recent past experience,

history would probably tell us that we might be facing a continuing resolution. and that she would not receive your full request for some period of time into the budget year. we haven't done a lot of budgets around here, unfortunately. consequently but what did happen is your budget request may be met in january, february, march of next year. under those circumstances would you in that limited period of time between when you receive that and the end of the fiscal year, the end of september of 2015, would you be able to responsibly deal with that, higher up the people you want to higher up, do the things you want to do within an abbreviated period of time? >> i think there's no question that come and we done this in prior years as welcome we sort of take into account the likelihood of the c.r.,

continuing resolution, and how long it may last. that clearly leads to divert spending. we do have no-year funds, however, so we are able to i think more flexibly deal with getting our money somewhat later in the year. but there's no question. one place where it's a particular challenge is in our long-term mission critical it projects. those of necessity we need to know you have the money and then there's a relatively lengthy procurement process. so they do present challenges but i think our financial -- folks i talked at length about those issues as well, argued up to be able to use whenever we get the funding if we would get the funding as much of it as as possible and then carry over and able to use in the following year was having projected the uses for it in this year. >> thank you very much, senator joe sands.

thank you for this answer the -- senator johanns. i went to shift over to the volcker rule, which you all know very, very important one, and one, both i believe -- let's see here. chairman wetjen, on december 10, 2013, 5 federal financial raggedly agencies issued uniform final regulations implementing the volcker rule. first question. how is the volcker rule being enforced, and what is the relevant role of each of your agencies in overseeing compliance? >> i think the rule itself actually became effective i think april 1 of this year, but the compliance period is still out into 2015 and beyond. that is what scaled compliance both in terms of extent and also in terms of timing. what other things, and again i

think i alluded to this a few minutes ago, critical i think the agencies did enact a joint rule. i think it is debatable, stronger role and plainly i think for the marketplace is message to the. one of the commitments and i said this in my opening statement when the sec adopted the rule is that we need to be focused from this day forward on continuing that coordination as we get into the compliance and enforcement period. so that is an interagency working group that all five agencies have very active senior members on the were focused on questions of interpretation, questions of compliance, questions of enforcement. we will try to stay as consistent and in sync as we can. we are obviously independent agencies at the end of the day. with respect to entities who are covered by the rule, for example, broker-dealers, the sec is the primary regulator so we will have a voice as to whether

there is compliance are not in proceed with enforcement but we will still coordinate with each other on questions of interpretation that affect compliance and enforcement. >> chairman wetjen, do you have thoughts on that? >> i like to go what chair white said. i think there's a continued commitment to putting among the agencies, another good example in addition to what chairwoman white shared is we actually issued a rule, i believe late january, and related to a special investment vehicle issue that had materialized, come to the attention of the agencies and to the congress. so all five agencies adopted this interim final rule very, very rapidly. again, i just think that's another example that there's a continued commitment to solve these problems jointly. again in an effort to avoid any kind of uncertainty, not doing so could create for the marketplace. so i expect that to continue.

>> shifting now to money market mutual funds. chair white, as you know, senator johanns and i and so other senators wrote to you at the sec in 2012 highlighting the concerns raised by our local governments on changes to money market and mutual funds. and it hearing from folks back home about this issue. in fact, a little over two weeks ago i had a conference call with constituents representing local governments and businesses in new mexico, and they continue to express concern about possible changes. as you know local governments rely on these money market mutual funds as a kashmir schmidt tool and as an important source of low-cost, short term financing. can you give us an update on where the sec is on the rule, and how do you plan to address these concerns of local

government and others? >> yes. the sec commissioners and staff are actively involved, quite actively involved in finalizing those rules and those reforms of money market funds. i expect there priority for 2014. i expect and relative near-term to proceed to finalizing those rules. as you know when we proposed the rules, we proposed to alternative. one is a floating for prime institutional funds and the other approach, god of thunder actually exempted from the floating in a fee but municipalities work. i think that's the issue that is being raised up without in a lot of comments on precisely that point. the staff has met with a number of representatives of municipalities, expressing that concern. there is in the proposal should they go in that direction of a floating in a the. ithere is an exemption for retal funds which would cover some of

the miscible fund but i think not all. we are very carefully focus on all the comments but the quite focused on the concerns expressed by municipalities. >> great. thank you very much. senator coons. welcome, good to have your. >> appreciate the opportunity to join and thank you both for your service and the opportunity to discuss with you your proposals. if i might first, chairman wetjen, a quarter of your funding request is investment and technology. your fy '2015 request calls for funding and it funny but could you just comment on the risks posed you organization with -- if your it infrastructure is an upgrade and modernize and what role it plays? >> thank you, senator coons your we have a plan developed by our office update technology on how

to use the $50 million it would include some enhancements to current systems we have in place, which are necessary for surveillance purposes. and the once as i would point out is one that tries, track positions taken on by market participants. and so it's a critical tool that we have now but it still needs to be enhanced. if it's going to be as effective as possible. going forward, i think what the agency should consider doing is investing in new initiatives, technology -- technological initiatives so we can get a better understanding of not only consummated trading activity but order messaging which is something that happens a lot in automated markets. you have firms or entities sending in orders that don't always match with another counterparty. so it's important because some firms inappropriately might use

a number of different order messages sent into the marketplace as a way to manage -- manipulative scheme. going forward if were able to get additional funding for it, i think that's the next key initiative we might want to invest in. >> you have a budget of roughly 200 million last year and collected north of 1.7 billion in fines. that's about an eight-fold return on taxpayer investment. so i just wonder if you want to take a moment and explain how that little pays for itself, with enforcement actions you pursued last year and how a more fully funded cftc would benefit the textures as well as benefit the marketplace? >> thank you for that question. i think we initiated and completed around 150, 160 enforcement actions last year that the coming fiscal year '13,

which as you mentioned resulted in over $1.5 billion in fine collections. so it was in that sense a good return on investment when you consider the love of funding for the agency. right now we are on pace to probably have fewer enforcement actions consummate and completed based on numbers midway through the year, midway through the fiscal year. there's a variety of reasons for that. one of which is that we've lost some step in the division of enforcement. so that does give you some indication about what the impact of reduced staffing can have. again, there could be other reasons for that as well. it could just be the nature of incidents that are brought to the attention of the agency this year, different than in years past, but it's one thing you might want to take a look at. so i have some concerns about that. that's one of the reasons why we've asked for additional

attorneys for the division of enforcement at the agency to our request would bring us roughly 50 additional ftes. and again, i think we would continue to demonstrate with that enhanced team and ability to bring a good return to the taxpayer. >> thank you. thank you for what you do, chair white, at the sec. i have the sense that you are charged with overseeing over 25,000 market participants roughly engage intelligence of dollars worth of economic activity. i think what the sec does is critical important to a well functioning capital market that is secure and transparent. as we continue to heal from the financial crisis i think it's critical we take steps to ensure that doesn't happen again. given the very broad range and i think significant expansion in your responsibilities and given as the case is interpreted, you don't cost anything to the

taxpayers net net. i support funding the president request. .. >> i think a strong record they charged, the agency charged over 165, i think it was 169 entities and individuals, 70 plus of those were actually senior

executives, and they -- ceos, cfs. and, actually, i got orders to return over $3 billion in fines and disgorgement. so there's, obviously, value, not only value added there, but it's actually returning under our fair funds provision money to investors. so, you know, we are just about through. we have some additional financial crisis cases that, obviously, we are focused on completing. one of the things that we've done, really two of the things we've done to strengthen the enforcement function, one is to form two new task forces. one is a financial reporting and auditing task force which i think is the core of investor protection, and that's something that's already yielding results, and i think for the benefit of investors and the markets. we've also formed a microcap fraud task force which pee call carly -- peculiarly affects that brand of fraudsters.

i've seen this when i was a prosecutor, too, some of the most egregious frauds you see are what i called the affinity frauds, somebody commits a ponzi scheme or investment scam really against their own communities, and really we're seeing a growth this those, so we're very focused on dealing with those. we've brought a number of different cases. we have also intensified our enforcement efforts vis-a-vis the obligations of exchanges to make sure they're following the various, what i call the market structure rules of our equity markets which i think is important to everyone. and then one final point i would make is just talking earlier about our need for resources to increase the number of examinations we do of investment advisers. and, of course, they are the ones that are really day-to-day dealing with your everyday investor. and we're only able to cover a very small percentage of those under current funding. and when we go to those places and, frankly, when we go to the broker dealers and examine as well, we find a lot of issues.

so it's, you know, that makes us at least understand the critical importance of sufficient funding to be able to carry out those responsibilities for investors. and, actually, by just showing up on an exam. i think it's fiscal 2012. just showing up. those fees should not have been charged to those investors or those funds, they should have been, you know, for your account. we've returned $28.8 million just by showing up. so it shows you sort of across the span, i think, the benefits to investors. >> one last question if i might, mr. chairman. one other area that surprised me seeing your report, i didn't realize you were engaged, you were training non-u.s. regulators, roughly 1700 in fy-13, i think it's 1400 this fiscal year and next. what are the benefits of that program? how does it benefit us to provide training to non-u.s. regulators whose markets may not be as robust or scaleable as -- >> i think significant benefit and has for decades, frankly,

but even more so now. i mean, the securities markets, certainly the securities frauds markets are quite global. i mean, they don't respect borders. and so i think the training that we provide is invaluable to the american investor who may well be defrauded from, you know, any country you could name abroad. if they've got a strong enforcement function, we're protecting the american investors there. and we've seen an awful lot of progress there. much more to go, but i think it's an invaluable service to the american investors. it's also, i think, an invaluable service to the integrity of them. >> thank you. thank you, mr. chair. >> senator coons, thank you very much. senator johanns, please proceed. >> mr. chairman, mr. wetjen, let me ask you a question, but let me also, if i might, lay some groundwork for this question so you know where i'm coming from. i think all of us agree that the

cftc must have smart, forward-leaning regulation. the market changes so dramatically. and yet we still have to be sensitive to the potential to overregulate. we don't want to regulate everything that moves. so trying to be, to strike that balance, i think, is key. one example of regulatory overreach that i've been working on since dodd-frank passed is margin requirements on end users when trading derivatives. i can state unequivocally congress never intended for nonfinancial end users to be subject to margin, costly margin requirements, and yet here we are almost five years later still battling with this. so i've introduced legislation that exempts end users from

margin requirement. this is, this is not a republican versus democrat issue. the measure's gained strong bipartisan support. a companion bill has already passed the house with over 400 votes. this is one of those things that should be done. i don't know of a senator that opposes it. maybe there's one out there that i haven't come across yet. but, again, i think congress is nearly unanimous on this. i asked gary gensler about it one time, and i always felt that he had a pretty aggressive view of regulating things. i think that's what he saw his job as, and he was going to regulate stuff. but he even agreed that nonfinancial end users don't pose a risk to the system. and, therefore, should not be burdened with what i would call a job-killing margin requirement.

i would like you -- i know this is, this is an issue now in the fed's hands, but i would like your thoughts personally as the acting chair of the cftc on what i'm trying to get done here. >> senator, i agree with you that dodd-frank tried to, if i can use these words, hold harmless as much as possible the end user community as it related to title vii in particular. >> right. >> and we have a number of rules that provide exemptions from clearing requirements for end users, and we've taken a number of different actions as well. to build out that general principle. and one specific area has to do with trades between companies that are not swap dealers. and so we have done a considerable amount of work there.

so i agree with you in principle that that was the message and intent behind dodd-frank, at least as it relates to title vii. end users are supposed to largely be left out of the grip, so to speak, of the new rulemakings implementing title vii. i'm not familiar with the details of the fed's proposal, and i don't recall exactly where they are this in the process, b, yeah, i agree this principle with what you're saying as it relates to end users and title vii. >> mr. chairman, the creighton education kicks in, and good, practical, common sense stuff comes out. thank you. i'll yield. >> senator coons, did you have additional questions? okay. chair white, one of the key components of dodd-frank was a mandate that the sec adopt a number of new rules relating to credit rating agencies, and all of us remember what a key role

credit rating agencies played in the kind of meltdown that we were in back in that time period. and of these new rules, we -- including annual reports on internal controls, conflict of interest with respect to sales and marketing practices, various disclosure requirements and consistent application of rating symbols and definitions. what's the status of the sec's efforts to comply with the mandates under dodd-frank relating to credit rating agencies, and what further developments can we expect from the sec on this? >> very important area, very high priority for the agency. the agency did in january 2011 adopt, actually, a new rule requiring nrsros to disclose, you know, representations on warrantees and how investors

might enforce breaches of those. in may 2011 the agency proposed, i think, the rules you are alluding to. i think the 11 be amended to accomplish the objectives you listed and five new ones. we are moving those forward quite actively, and they're a priority to complete this year. >> you, do you believe there are additional reporting requirements or controls necessary to prevent another crisis? >> i think -- there's no question in my mind that the credit rating agency issues played a significant role in the financial crisis, and i think the issues you've identified are ones that do need further reforms, and that's the objective of these rule makings. >> okay. and i know that some of the, some of the critics have kind of come at this and said we should start over again. i assume that isn't the position of the sec at this point. >> we are certainly listening to

all comments. i mean, the comment, the formal comment period is closed, but we are listening very care friday to those who think -- carefully to those who think certain aspects perhaps should be proposed or should be different and not require reproposal. we're trying to come out with very robust rules, and we're continuing to listen to all critics and all supporters and really all ideas on it. >> great. thank you very much. senator johanns, do you -- >> [inaudible] >> do you have -- and senator, it looks like senator coons has completed his questioning here. let me thank both of you. we really appreciate having you here today, appreciate this frank discussion and exchange of ideas. we want to thank everyone who participated in prepare aing for this hearing -- in preparing for this hearing. you have excellent staff, we do also, and we very much appreciate their help.

today's discussion, i think, is pro-- has provided helpful insights into these, your operations, and i think shows us what the challenges are that are ahead of us. this information will be instructive as we further consider the budget proposals and develop our fiscal year 2015 bill during the coming weeks. the hearing record will remain open until next wednesday, may 21st, at 12 noon for subcommittee members to submit statements and/or questions to be submitted to the witnesses for the record. the subcommittee hearing is hereby adjourned. [inaudible conversations]

>> just ahead, florida senator marco rubio offering his plan to change the nation's retirement system. after that following a brief senate pro forma session, we're live as indiana governor mike pence talks about his proposal to expand his state's health care plan as an alternative to medicaid. and later, at 1:00 eastern, former new york times executive editor jill abramson, recently dismissed from her job, delivers a commencement address to graduates of wake forest university. and at 2:00 eastern, live coverage as senator claire mccaskill holds the first in a series of round table discussions addressing rape and sexual assaults on college campuses. >> over on capitol hill today, the house is in at noon eastern for general speeches. at 2:00, members will consider suspension bills awarding the

congressional gold medal to a number of recipients. no votes scheduled until after 6:30 p.m. the senate has a brief pro forma session today at 11 a.m. even with no legislative business. members return tomorrow at 10 a.m. for general speeches before recessing at 12:30 for weekly party lunches. at 5:30, senators are scheduled to vote on the u.s. circuit court judge for the fifth circuit. they'll also have a procedural vote on the nomination of stanley fisher for board member of the federal reserve. you can watch live coverage of the house on c-span and senate here on c-span2. >> last week senator marco rubio outlined his proposal for retirement security. part of his plan includes changes to federal entitlement programs like medicare and social security and making it easier for young workers to save for retirement. finish senator rubio outlined his ideas at the national press club.

this is about an hour. >> good afternoon. and welcome. hi name is myron, i'm an adjunct professor at the george washington school of media and public affairs, a former international bureau chief with the associated press and the 107th president of the national press club. the national press club is the world's leading professional organization for journalists committed to our profession's future through our programming with events such as this while fostering a free press worldwide. for more information about the national press club, please visit our web site at www.press.org. op behalf of our members world wild, i'd like to welcome our speaker and those of you attending today's event. our head table includes guests of our speaker as well as working journalists who are club

members. if you hear applause in our audience, i note that members of the general public are attending, so it's not necessarily evidence of a lack of journalistic objectivity. i'd also like to welcome our c-span and public radio audiences. you can follow the action on twitter using the hashtag npclunch. after our guest's speech concludes, we'll have a question-and-answer period, and we'll ask as many as time perms. now it's -- permits. now it's time to introduce our head table. i'd ask each of you to stand briefly as your name is announced. from your right, jonathan salant, political reporter for bloomberg news and a former national press club president. pablo sanchez, washington producer, correspondent for univision. robert schlesinger, managing editor, opinion, "u.s. news & world report". andrew biggs, resident scholar,

american enterprise institute, and a guest of our speaker. marilyn thompson, washington bureau chief for thomson reuters. ilk nas show sanchez, partner and co-chair, government affairs practice group, dale a. piper and a guest of our speaker. donna -- [inaudible] vice chair of the npc speakers committee, correspondent for "usa today" and a past president of the national press club. skipping over our speaker for a moment, matt milnacek of the speakers committee member who organized today's luncheon. thank you very much, matt t. charles blahaus, senior research fell, her cay da center. dan balz, chief correspondent, "the washington post." betsy fisher martin, senior executive producer or and

managing editor of political programming for npc news. susan page, washington bureau chief, "usa today." and larry litman, executive editor for state news at the aarp bulletin and a past npc president. [applause] marco rubio has served as florida's junior senator since january 2011. a native of miami, he previously served in the florida house of representatives from 2000 until 2008 during which time he served as majority whip, majority leader and speaker of the house. first-term florida senator marco rubio is one of the many republicans positioning themselves for the presidential primary. indeed, this past sunday on abc's "this week" when asked

whether he thought he was ready for the presidency, he said: i do. but i think that's true for multiple other people who would want to run. analysts point out an obvious advantage for rubio, his potential as the son of cuban immigrants to appeal to hispanic voters who broke for president obama nearly three to one in 2012. and he was involved in passing comprehensive immigration legislation in the senate. the immigration pill did not endear -- bill did not endear rubio to the tea party wing of the republican party. he has been outspoken on issues that are important to conservatives. for instance, rubio declared the war on poverty a failure. he would subsidize private businesses to pay higher wages and do away with the earned income tax credit. internationally, he supports an activist u.s. role, a stark contrast to the isolationist viewpoint of another potential

gop presidential contender, senator rand paul. at a speech to conservatives in march, rubio said the united states should be more involved in china, north korea, venezuela and cuba, more involved than the obama administration is. and he said the united states should punish russia for its actions in ukraine. today he will discuss retirement security, including his suggestions about changing social security and medicare and how to make it easier for young americans to save for retirement. please join he in welcoming to the national press club -- please join me in welcoming to the national press club senator marco rubio. [applause] >> thank you. i appreciate it. thank you to the national press club for having me. it is my first time here in the three and a half years i've served in washington, and depending on how it goes, it may

or may not be my last, so we'll see. but i'm honored that all of you would be here to talk about an issue that's important to me. let me begin by speaking about the night that i was elected on. my mother turned 80 the day i was elected to the u.s. senate. so for me, that night was the culmination of a year and a half and what was a pretty difficult campaign, one that many people, including myself on occasion, had doubts i could win. but for my mother, that night wasn't just an election, it was a living affirmation of the promise of the country he had come to love. when she and my father came to america in 1956, they came with little more than their dreams of a better life. but even with the constraints of their old lives removed, they struggled off and on throughout the years. the service jobs they took were not glamorous, but their hard work was dignified because it allowed my parents to earn what they wanted most; a life of security in the great american middle class. so that night as she stood on

the stage with me, what she saw was promise of america. because just a few decades removed from her poverty and struggle, her son had been elected to the senate of the most important nation in the history of the world. that night would have never been possible without america, and it would have never been possible without the years of sacrifices my parents made for me. sacrifices that allowed me to pursue my dreams. because they sacrificed so much that i could pursue my dream, they both worked well past their retirement age. my father still worked late nights as a banquet bartender until i graduated from law school and got my first job as an attorney and was finally able to help them with the monthly bills. and even then he still wanted to work. so he worked as a crossing guard at a grade school. now, they never earned enough to have significant savings or a pension. it was social security and medicare that allowed them to retire with comfort and security.

my father passed away a few weeks before my election. and the last months of his life, medicare allowed him to receive the palliative care he needed to die with dignity and surrounded by the people who loved him. my mother, fortunately, is still with me. but in recent years her health has declined as well. it's medicare that pays for the care she now receives. that's not only extended her life, but also preserved its quality. and social security continues to provide for her financial needs, as she now lives with my sister and her husband in the very house my parents moved us to almost three decades ago. my mother was blessed to have come to a country where a life of hard work could be rewarded with a dignified retirement. now almost four years into my service in the senate, there's a question that enters my mind from time to time.

what would life have been like, what would life have been like for me and for my mother if she had arrived in america as a young woman in 2006 rather than 1956? could my parents still have found good-paying work and made it to the middle class? and would social security and medicare still be solvent by the time they were ready to retire? i believe the american dream my parents lived is still possible, but among too many of our people there is now this nagging sense that achieving it has become more difficult than ever. financial security has faded for millions of americans, and with it the hope of a stable and secure retirement. the troubles of the last few years have forced millions to put retirement on hold indefinitely. it's even forced some to cut their retirement short and reenter the work force. each of the three legs of our traditional retirement stool -- personal savings, pensions and

social security -- is wobbling. and if we do nothing, these things will likely cease to exist as we know them well before my generation retires. the instability of each is caused by a variety of factors, and yet they all share one common cause of decay, the lack of sustained economic growth. this stagnation prevents wages from keeping pace with costs. affecting the ability of our middle class to save. it also affects the ability of states and companies to fulfill their pension promises. and as earnings stall and unemployment and underemployment spread, it contributes to the erosion of the tax revenue needed to finance social security and medicare. economic stagnation has dealt an especially staggering blow to the retirement prospects of those middle-aged and younger. americans born after 1955 have a good deal more debt than the

generations before them. and late bloomers and generation xers who already had low levels of assets suffered significant losses during the great recession. now, we hear financial experts talk all the time about how we should save for retirement. i remember not so long ago i would read about people my age who were, quote, maxing out their 401(k)s and saving for the future. and back then i used to wonder how they could afford to do it. between my student loans, my car and mortgage payments, plus the groceries and the kids' school tuition, at that time we were living paycheck to paycheck. i took comfort knowing that at least my home was rising in value and that we could one day sell it and use the profits to provide for us in our later years. but now we have homes that have lost much of their value. in fact, 9.3 million americans now owe more than their homes are worth. and even for those able to put

some money aside for retirement, persistently low interest rates have made savings accounts about as useful as piggy banks. for in their only hope is that social security will give them enough to get by. but the startling truth is that with an aging population, a sluggish economy and chronic fiscal irresponsibility in washington, the social security trust fund is drying up. it will be insolvent by the year 2033. for medicare the moment of truth will arrive even sooner. is taken together -- so taken together, these factors have created a real and a looming crisis. now fortunately, it will spare current retirees like my mother. but for my generation and especially for my children's generation, the future of retirement in america is very much in doubt. now, i turned 43 -- i turn 43 years old later this month, although i feel 44.

[laughter] if nothing changes, by the time i reach full retirement age at 67 social security and medicare will be insolvent for years. this is not a scare tactic. it is not a doomsday scenario concocted to spur action. it is a mathematical certainty if things remain unchanged. and the longer we wait to address this, the harder it will be to fix and the more disruptive those fixes will be. yet there appears to be no you are -- urgency about any of this. instead, too many politicians, quite frankly in both parties, lie in wait for their opponents to raise their truth so they can pounce, so they can accuse them of wanting to take away medicare or social security. i have no doubt that my suggestions here today will be used against me to try and convince seniors that i would change the benefits they worked so hard for and paid into all those years. it wouldn't be the first time that such attacks have been hurled in my direction. so let me take a moment to

address those here and now. first, my mother depends on medicare and social security. i would never and will never support anything that will hurt my mother or retirees like her. and second, anyone who was in favor of doing nothing about social security and medicare is in favor of bankrupting social security and medicare. and with these two things in mind, i've come here to share a few ideas on what can be done to avert our retirement crisis. at the outset, i would mention that an ageneral da that cuts government spending and spurs economic growth is the singlemost important step toward stabilizing the three legs of the retirement stool. and all of the reforms i've proposed so far in this year aim to create dynamic economic growth. and and as such, they combine to form step one of my plan to insure secure retirement for 21st century seniors. what these reforms have done is

they've targeted our federal anti-poverty programs, our higher educational system, the factors inhibiting a secure retirement and the policies keeping us from innovating and creating modern jobs. all will lead to growth which will help americans earn more and save more. no plan to avert a retirement crisis will work without robust and sustained economic growth in the years to come. but while growth is essential, growth alone will not be enough. for the retirement system we have in place simply does not line up with the needs and the realities of our modern, postindustrial economy. in this new century, most people will live longer and voluntarily work longer. and many people will change jobs countless times, often in business for themselves or working for companies that do not offer retirement savings plans or pensions. therefore, our retirement programs must be modernized and restructured to address the new economy that is here to stay.

and today i am proposing that we do so by pursuing three broad reform goals. the first is to make it easier for people to save more and to work longer. the best way for americans to guarantee security in retirement is to gradually build a nest egg of savings. if planned carefully and started far enough in advance, there's simply no substitute for this method in insuring a comfortable retirement. social security was never designed to be the sole source of retirement income. it was designed to serve as a supplement. an important supplement for people in my generation and younger, this will not simply be the design of social security, it will be its reality. so calculating how much we need to save for retirement, took be tricky. ask -- that can be tricky. and with wages stagnant across many industries, finding the financial latitude to start putting away that money can be even trickier. of as growth has slowed and

millions have been left to languish, saving has started to look like a luxury rather than a standard practice. in fact, 36 president of americans -- 36% of americans have less than a thousand dollars saved up for retirement, many of them with nothing saved at all. and this problem, by the way, is especially prevalent among african-americans and hispanics. and even those who have maintained steady employment often do not pay enough or often do not make enough to allow for savings. one study last year found that 76% of americans are living paycheck to paycheck. making matters worse, the nature of work in america is rapidly changing. and yet our retirement programs and savings plans have failed to adjust accordingly. throughout most of the last century, you could leave school or go work at a local company or a factory. you'd stay there for 50 years, and then you'd retire with a pension. and our retirement programs were originally built with this sort of reality in mind. but times have changed.

today there are 75 million americans working for employers that do not offer a retirement plan. and those that do have access to a plan probably won't for their full career. that is because the average worker today stays at each job for only about four and a half jobs, and that's only the average worker. 91% of the millennial generation says they only expect to stick around each job for two to three years. this means they could have 15 to 20 different jobs over the course of a career. many americans figure the unpredictability of modern careers has made employer-sponsored plans a thing of the past. even with these plans, even when these plans are offered, many employees are not made aware or choose not to go to enrolling. so given this, it is no surprise that 80% of people ages 30-54 believe they won't have enough

in the bank when it comes time to retire. but ironically, and i believe unfairly, there's one group that does not have to worry about this problem. members of congress and other federal employees have a retirement savings and investment plan called the shoplift savings plan or tsp. the tsp, which is similar to a traditional employer-sponsored 401(k), allows federal employees to save, pretax money, for retirement. and it is one of the most efficient savings plans in america. it charges fees which are a fraction of those in most private defined contribution plans. that allows beneficiaries to save more. so here's the twisted irony. members of congress who are employees of the citizens of the united states have access to a superior savings plan than many of the american people who are often left with access to no plan at all. and that's why i propose we give americans who do not have access to an employer-sponsored plan the option of enrolling in the

federal thrift savings plan. and opening congress' retirement plan to the american people will allow us to bring the prospect of a secure, comfortable and incompetent retirement into the reach of millions of people -- into -- we need to insure that older workers have the ability to work as long as they need or want without being punished for it. as the tax code currently is written, those who keep working past retirement age continue to pay social security taxes while receiving almost no extra benefit in return. this encourages some seniors to quit the work force before they would otherwise. in order to remove this disincentive to work, we should we eliminate the 12.4 percent payroll tax for all individuals who have reached retirement age. these seniors have already paid their fair share, and we shouldn't punish them for choosing to keep working rather

than immediately cashing in. eliminating this tax will also help seniors accelerate their savings by letting them keep more of their own money, and it could also make older workers more attractive to employers since the employers' half of the payroll tax would also be eliminated. eliminating the social security payroll tax for seniors will likely result in older americans choosing to work longer which in turn will lead to an increase in federal income tax revenue. and seniors who choose to keep working, it will decrease their dependence on federal assistance programs. this payroll tax on older employees isn't the only way we discourage seniors from continuing to work. those who choose to claim benefits early are subject to what's called the retirement earnings test. under this test benefits are reduced approximately 50 cents for every dollar a person between the ages of 62 and 65

earns in excess of $15,000 a year. this essentially equate toss a 50% tax on benefits on top of all other taxes being paid such as the payroll tax. the result is americans work right up until the age of 62, and then they enter retirement before they start incurring this penalty. and here's what's even more puzzling about this policy, it sunt save us niche money. pause when a senior hit by this tax finallyç retires, their benefits are hiked way up to make up for any lost cause in the test. the benefits end up being mostly the same over the course of a retirement, with or without the retirement earnings test. but many people aren't aware of this. so many leave the labor force when they turn 62 to avoid paying the 50% tax on their success benefits. we should eliminate this test altogether. one economist estimates that

abolishing the retirement earnings test would raise employment among early retirees by 5.3%. a significant increase for a reform that has no long-term budgetary costs. i've heard some suggest with unemployment so high and jobs so scarce, why should we be pumping the labor force with more workers? they reason that if seniors stop working, we won't have enough jobs for younger workers. it's an interesting theory, but it's not how it borks out in practice. studies have shown that an increase in older workers booth boosts the number of job wheres for older workers. that the employment rate for1l!d or worker rises, youth employment rises by.21 percentage points. and this will foster a balanced retirement and leave fewer

americans solely dependent on social security. but while social security should not be our only source of retirement income, it must remain a significant supplement to our postretirement income if we are to prevent a retirement crisis in america. and that's why our second reform goal for guaranteeing a secure retirement for 21st century seniors is to enact reform for social security to be saved for future generations. this has changed enormously since the passage of social security. rather than pass reforms, many in washington think the answer is to double could be on the current program and simply infuse more money into it p but failing to modernize social security will eventually lead to an outcome we cannot buy our way out of. my answer is to build this outdated system into something

that's worthy of the 21st century and that's designed to sustain all seniors and last for generations. it requires taking into account modern realities. take, for instance, the retirement age. many now choose to work well past the age of retirement. if you have any doubts about that, i encourage you to come see the united states senate at work. [laughter] that's not going to go over well. [laughter] therepeople are working longer because people are living longer. if you turn 21 in 1940, your chances of living up to the retirement age were only about 55 will-60%, but if you turn 21 today, your chances of reaching retirement age are around 80%. what this means in practical terms is that we now have a record number of social security beneficiaries, and these beneficiaries on average are living another 5-10 years longer than social security's earliest recipients. but in the past 80 years,

congress has only increased the retirement age by be two years. it won't work. the answer is to gradually increase the retirement age for future retirees to account for the rise in life expectancy. and if we act soon, we can do this without changing the retirement age for people who are currently over the age of 55. we also need to look at how we calculate initial benefits. social security needs to provide a stronger safety net for those at the bottom of the income scale. when my parents retired, they didn't have a nest egg. they leaned heavily on social security to help them through. in fact, my mother still does. but we need to make sure that seniors like my parents aren't consigned to poverty in old age. on the other end of the spectrum, our retirees were very high incomes, their monthly security benefit is a less

significant portion of their monthly finances. the answer is to reduce the growth of benefits there are those upper income seniors while making the program even stronger for low income seniors. this isn't a cut. it is simply a reduction into how fast the benefit will increase for wealthier retirees. doing this is going to add years to social security's solvency. it is one of the best ways to save the program for high income and low income beneficiaries alike. our third and final goal is perhaps also our most difficult, and that is saving medicare. as i stated earlier, medicare deeply personal to me. when my father got sick, medicare paid or his numerous hospital visits. and as rereached the end of his life, it allowed him to end his comfort and dignity by paying for his hospice scare. and like most 83-year-olds, my

mother has self-age-related ailments. but without the quality health care that medicare pays for, i simply cannot imagine what her life would be like. so when i'm talking about medicare, two facts need to be made clear from the outset. one, the program is absolutely potential to maintaining a secure, healthy and effort bl retirement for sires. and, two, if we to nothing to reform it, medicare hospital insurance will go bankrupt in about 12 years and simply cease the exist. again, this is not a scare tactic. it's simple math. in 2012 medicare spending grew by 4.6% to about there are 585 billion, and between now and the year the 23, it's expected to accelerate to around 7.4% a year. by 2026, the medicare trust fund will run