make the politburo look open by comparison. no one in america even knows who they are, and the few open meetings they have they snap their fingers and it is over and they're are all scripted. they treat their information as it were state secrets. to begin to remedy this sad situation is one of the reasons this committee has ordered h.r. 4337, the fsoc transparency and accountability act is favorably reported to the house. this is important because fsoc can designate practically any large financial firm and our nation as a systemically important financial institution and thus render effective control over it and has the authority to render great damage to our economy and set back the dreams of tens of millions of our unemployed and underemployed americans who are counting upon their capital markets to work for them.

recently the former director of the cbo has estimated that designating asset managers could cost investors as much as 25% of their return on their investments over the long term. approximately $100,000 per investor. in other words, as it operates in the shadows, fsoc can take away the seed capitol necessary to launch a small business or to send a child to college. that is both unfair and unwise. and while fsoc seems dead set on trying to find systemic risk where no one else seems to find it, a review of their latest report indicates that it is willingly and willfully blind to the largest sources. at the mention of fannie mae and freddie mac at the epicenter of the last financial crisis and without the of the administration to and permanent taxpayer subsidies, they are

certain to be at the center of the next financial crisis. no mention of the federal government itself, $17 trillion in debt and growing, more debt incurred under the sub ministration than in our nation's first 200 years. our offices are all awash with cbo an independent reports saying that the pace of spending is unsustainable but rather than rein in government spending or prioritize interest payments on debt, the administration regrettably turns a blind eye and has threatened to even allow a default on our sovereign debt. so this committee has also passed h.r. 481 to place a 1-year moratorium on further designations of nonbank. again, mr. secretary, i would call on fsoc to cease and desist with these designations so that congress can have time to conduct effective oversight and get answers his question is that both republicans and democrats have raised about the fsoc decision making process.

i now recognize the ranking member for five minutes. >> inky very much, mr. chairman. today i am very pleased to hear from secretary jack lew, and i welcome you back. i assure you we are not here today to talk about the irs. that is being done in an oversight investigation. we'll have documents, e-mails, the information relative to that issue. we gather here today to receive your annual report of the financial stability oversight that fsoc has required by the dodd-frank act. to what is, i am surprised to see some many of my colleagues on the other side of the aisle given that the fsoc has joined the ranks of the consumer financial protection bureau, that terrorism risk insurance act in becoming the latest

target in a relentless republican effort to tear down the engines of job creation, economic growth, and consumer protection. and my colleagues on the other side of the aisle would have interest in hearing about the council's progress and use of the financial stability of the united states. who just last week this committee approved two measures that under the guise of transparency would compromise the fsoc and erode the important role they play. these partisan bill or nothing more than an effort to derail this part of the dodd-frank wall street reform act. mr. chairman, the economic collapse of 2008 resulted in the greatest loss of wealth and a generation starting with the bankruptcy of lehman brothers. our economy quickly ground to of all leaving the american taxpayers to clean up the mess.

all told, the financial crisis resulted in the destruction of more than $9 trillion in wealth and costs each american household approximately $50,000 while unemployment exploded throughout the country. one problem leading up to the crisis was that no one in the private sector or governments of the big picture or had the responsibility to deal with emerging threats before they cause damage to our economy. that is why democrats created the financial stability oversight council, that is fsoc, the serve as an advanced warning system to identify and address systemic risk posed by large, complex companies, products, and activities before they threaten the economy. in plain english, fsoc is charged with looking at every aspect about the financial system of possible weaknesses and risks, something that did not happen in the lead up to the

crisis. critical to ensuring financial clout riders are acting to identify and respond to emerged threats. it remains a mystery while republicans of spending for the few legislative days we have left in this session, partisan legislation that would hamstring the ability of fsoc to protect homeowners, consumers, and the american economy. republican bills to stop the program even if that means ending import protection for the american people and our economy. secretary jack lew, i look forward to your insight. particularly related to bargain servicing, alternatives.

as we hear additional details from you about their risk identified in this year's report i will be interested to hear whether republicans believe fsoc should take auction said mitigate those risks. finally, mr. chairman, i am looking forward to hearing more from me about how we address concerns that i and the other members of congress have raised regarding the transparency of the fsoc designation process. unsympathetic to these concerns. i would like to hear what steps he had taken in your suggestions on how to increase transparency in a way that continues to carry out the mission of fsoc. an accord to the secretaries testimony and insight on of these issues as well as what the fsoc is currently doing to monitor systemic risk and prod financial stability. >> the gentle lady from west virginia for one minute.

>> thank you, mr. chairman. and thank you, secretary jack lew for being with us today. we will more about the fsoc, which was created by dodd-frank with the mission of monitoring system digress. this can have a significant effect on the institution by requiring increased levels of capital. the cost associated are quite clear. the processes and methodologies for determining a non-bank firms or systemic risks are much less clear. in fact come in the recent designation of credential insurance the one member of the fsoc was significant insurance industry experience argue that there was $0.11 to support the notion that a large life insurer poses a systemic risk. furthermore, we know little about holland institutions as a nation will affect end users. another issue i would like to discuss is the arbitrary threshold's and dodd-frank that determine if the financial institution is significantly --

is a systemically significance? there's been a lot of discussion . >> the time of the general lee has expired. >> thank you. welcome. all speak on behalf of all the yorker's when i say we are so proud of you when your many years of public service. this is an important hearing. the financial stability oversight council was one of the keys of the dodd-frank financial reform and provided a forum for all of our financial regulators to come together to discuss the risks that they each see in the markets that they regulate. but from a broad perspective, from a systemic perspective and requires them to publish an annual report that describes in detail the emerging threats that they see in the financial market

this is him -- tremendously important. the ranking member said 9 trillion. i have seen some that said that we suffered 16 to $18 trillion in lost to our economy. testifying before this congress, the economic shocks we experienced in the last recession or three times greater than the great depression. this panel has testified it was the only potential crisis in history that could have been presented by better financial markets. overview regulation. so fsoc was created to help us prevented other serious damaging economic loss that we could have presented with better financial management.

>> the time of the gentle lady has expired. that chair now recognizes the gentleman from new jersey, the capital markets subcommittee for two minutes. >> thank you, mr. chairman. today fsoc has become a source of super regulators his designation is an implicit taxpayer guaranteed. i believe it will use capital cost advantage to drive smaller competitors out of business. in short, fsoc now picks winners and losers in our financial markets. as fsoc aggressively assert itself over more and more sectors of our economy they of the american people an explanation for what they're doing. despite the 147 page fsoc report , the decision making process remains a black box. citizens whose livelihood is directly affected have little

idea what to make the decisions they do. as a congressman i can be briefed on the most sensitive intelligence and national security information, but i am not allowed to even sit quietly and listen then on a fsoc meeting. companies that have designated by fsoc have only the vaguest notion of what has ex of their operation led fsoc to demint systemically important. they can do nothing to find their a systemic risk. more importantly when republican numbers and ask questions of you had fsoc in the past answers receive have always been bland designed to give us the impression of responsiveness without actually ever answering any of our questions, mr. secretary. in fact, this committee ask you specifically last month for all the documents and all the communication between you, your department, and fsb.

your promise to supply us with documents. we have absolutely nothing from the when you promise us that you would supply us with that affirmation. mr. secretary, stonewalling by you and this department must not. we have to get real answers from u.s. treasury, and i hope that today with us that begins. >> the time of the gentleman has expired. a chair now recognizes that to come in from colorado for a minute and a half. >> thank you, mr. chair. mr. secretary, it is good to see you here. want to thank you and the administration. says the president took over and dodd-frank was passed, the stock market is up 10,000 points about a billion three. ira is up. repligen million people back to work. we have an age-all debate a few

weeks ago. mr. scalia was here saying that dodd-frank and fsoc had too much discretion. we have members of the banking committee -- communities saying there was too little discretion and to archer lines of demarcation. i have two areas i would like you to talk about today. one is the living well, what you're doing on the major institutions to find out if they fall apart, how you will take them apart. secondly, i want you to talk a little bit about the gst. i am one of those that things that with proper underlying it works very well. and the private market will come and go. at like you to talk about that. >> the gentleman yields back the balance of this time. we recognize the testimony of

the hon. jack lew, secretary of the department of treasury. he has testified before our committee on a number of occasions. without objection is written statement will be included in the record. mr. secretary, you are now recognized for your presentation. thank you. >> thank you very much, mr. chairman. chairman, ranking member, members of the committee, thank you for the opportunity to testify today on the financial stability oversight council of 2014 annual report. nearly four years ago president obama signed into law the dodd-frank wall street reform. as everyone recognizes the stable, driving financial sectors criticality to our prosperity and that is why these

historic save kurds were established. today our financial system is more resilient, confidence in our market is robust, and the agencies charged with protecting consumers and investors are in a strong position to respond to emerging threats that could hurt our economy, damage ministry business sense and destroy jobs schiedam. one of the lessons from the financial crisis was recognizing how important it is to detect and mitigate risks to financial stability. in the lead to the crisis individual regulators focused on individual institutions, fox is the markets. the silo approached about risks to fall through the cracks. congress change that by creating the financial stability oversight council. now regulated to the regulators are allowed to collectively monitor the stability of the financial sector to look up to the verizon for risks and respond to risks and threats that have been identified. not only mandated by law the sound economic policy which is why about defies common sense and ignores recent history that

some have suggested curtailing the council's ability and analyze information regarding particular financial sectors, firms, or activities. the council cannot simply cordon of any sector or activity that could pose a threat. that would be a dereliction of responsibility and a complete disregard for the very purpose of the council. gone so far as to suggest the council should be prohibited from simply asking questions about certain activities are companies that could threaten financial stability. we have to be allowed to ask questions. as everyone here knows during the run-up to the financial crisis regulator should have massed more questions about institutions in the activities, not fewer. to be clear, asking questions does not equal regulatory action sometimes questions result in a conclusion that the council does not need data but needed to examine the issue further or needs to gather more affirmation the council asks questions with an open mind and without a predetermined outcome. in that vein the council

procedures are transparent. it has put in place a comprehensive deliverly approachable value of rest and solicits public input in carefully considering all points of view. in fact, the council's annual report exemplifies the commitment should transparency in collaboration and reflect the collective analysis and conclusions of council members regarding the key risks the minutes of stability to and an important example of how the council shares information about its work with congress and the public. each annual report also provides a road map for the council's agenda for the upcoming year, what areas it will focus on, what areas will likely require additional attention at how the council expects to address them. this year's report focuses on nine areas that warrant continued attention and possible further action from members. these areas include wholesale funding markets, the housing finance system, citing security threats to our risk taking by large financial restitution is and potential interested volatility.

before closing let me point out that says the council's last annual report we have reached a number of key milestones and financial reform implementation. that means that home buyers, retirees, and investors had better safeguards than projections. to that end the volker rule has been finalized and a qualified mortgage standards have gone into effect, tough capital standards are now in place. over-the-counter derivatives are now moving onto electronic trading platforms and into centralized clearing some. fine said been imposed on abusive actions related to manipulation of financial benchmarks, and the international community is making progress on increasing the stability of a global financial system. mr. chairman, i wanted thank members of the council and the staff involved with the 2014 annual report for their tireless work and commitment. as the council fulfills its obligations to strengthen our financial system and limit risk to our economy we will continue to work with you, the committee, and congress to make real progress for all americans.

thank you, and i'll afford to answer your questions. >> the chair recognizes itself for five minutes for questions. mr. secretary, would like to start off with a matter that i left off with during your last appearance for which i did not receive an answer. it is not a got-you question, and when i receive the answer i will be fred -- fair and give you a brief moment to give some context. eleven months ago veggie 20 fsb at which treasury is a plenary member designated three u.s. insurers if as global cities. did treasury support these designations of taliesin a? >> mr. chairman, as i mentioned, alas, testified that fsb operates by a consensus. >> so consenting in the designation. >> we joined in the consensus. it was not a vote. i needed to make the point quite

dearly. action in the fsb and the fsoc are different matters. other national authority. it does not designate institutions, and the fsoc does its determination on a parallel path and may ask and answer questions in a similar way. >> can i financial restitution to impose a systemic risk to the global economy without representing a systemic risk to our domestic economy. >> based on an analysis at that time. in the case of the designation the process goes through a detailed -- >> i understand there may be too different processes, lambasting, and treasuries opinion if one is a threat, a potential systemic threat to the global economy.

must necessarily also be the systemic risk to the domestic economy? >> base of the information and analysis you have at that point, what you go through through a fsoc determination process is a very detailed exchange of deprivation ultimately with a company? >> you are simply telling me that two different processes may lead to two different answers. >> yes. >> the treasury then, you are telling me, could support a designation of the exact same firm and systemic to be risky to the global economy and not systemically risky to the domestic economy. >> well, the action taken does not tell the -- does need a company in the same way that fsoc does. so the only national party that could designate a company for regulations -- >> i tell you what, my time is limited. let me move on. i think you know that bloomberg -- different subjects, bloomberg

reported that when the chairman of the fcc told fsoc that they wanted to release, the office of financial research asset management study, which as you know has been widely panned, bloomberg reported that you personally called the fcc chair to express our displeasure. is that story accurate? >> as the question this way. >> my understanding was that it would be released to the public. a formal way asking for comments by an agency other than that is never questioned. >> should that be onion from public comment?

it was meant to elicit a public debate, and that occurred. so i very much believe that it should have been public, was public, and the only question was, should it be formally put up by one or another agency by comment off. >> last year you said, it is unacceptable to be in a place where too big to fail has not been ended. if we get to the end of this year and cannot with an honest, straight face say that we have it did too big to fail we're going to have to look at other options. i think you may know a few months ago, your predecessor, secretary geithner, was asked if too big to fail still existing. using your words, can you tell this committee today with losses to face that we ended too big to fail. >> we have made enormous progress. musher will know the answer to that question until we have the next financial crisis which is the challenge that we all have

in asking a we gone far enough. i will say there is more work underway to continue to look at the areas where we could have more protection. >> the financial times has reported that the federal reserve is concerned about the potential large-scale withdrawals from investors and managers or corporate trust? concerned about the illiquidity of the corporate bond market? this strikes me as somewhat ironic that the rule which has been touted by you and others is necessary to ensure financial stability is now a part of financial instability that this committee has requested information. regarding the status of his corporate bond markets. conducting an art @booktv

analysis of the systemic risk that can result from a lack of liquidity in the corporate bond market. >> mr. chairman, we obviously are getting into the early months after the final publication of a rule that is final. it has not taken affect in the marketplace yet. it is premature to judge what its impact on the market is. think it is actually quite an accomplishment. five independent regulators just extended an identical rule on the same day providing clarity in an area that badly needed clarity so that would not have uncertainty in the industry. receive quite a lot of positive, that that was the result. >> a ton of the chairman has expired, and the chair now ranked -- recognize the ranking member for five minutes. >> thank you very much. so have criticized the designation by fsoc as having an update process. they also made several recommendations to the fsoc to include transparency. would you please describe how they ingested these recommendations and how they

change the transparency loss. perfectly balanced and the need for transparency against the need to protect the current market and supervise the information. this is an issue of would like to get behind us. to deal with it in rates as it allows them to do its work. , but that you'd not only given considerable thought to this but to have tell us to understand how we can better make sure that you can carry out tradition. given oversight to. i don't want to spend much time on this because i want to get to non-bank marketing servicing. please respond to the first part of the question. >> congresswoman waters, i think that the values of openness and

transparency are very important to all of us. we have constructed a process and fsoc, which i believe this respect and reflects those values. it gives an enormous opportunity for companies through the designation process to engage with fsoc without making public prematurely think that it would not be appropriate to be a public discussion. much of that discussion and designation process involves reviewing the internal information that is the kind of supervisory information that regulators work with. when we get to the final stage of the designation process their is a back and forth that is quite voluminous with a company with a company is sharing proprietary of formation, impression that gives to the essence of their business. so i think what we need to balance is what is a process that requires a certain amount of confidentiality with transparency. we just recently made some changes.

it is a gang organization that is continuing to evolve where we are noticing in advance topic to be discussed, but not minutes of meetings, notes from meetings afterwards, and where we will continue to try to perfect the process. of think the answer is to say is shall be completely open public discussion. >> mr. secretary, would like to ask you to make sure that fsoc gets what the staff of this committee. i would hope that the chairman would agree -- so that whenever changes you have made in order to have more transparency, we need to understand that. you know cops, as you know, h.r. 4387, this bill would assist -- expand and change voting protocols for commission and board members and allow members of congress to attend and participate in fsoc proposed

board meetings. i think this is ridiculous. i want to get off of that. .. i think if you look at the actions taken by the cfpb they have taken on the role of consumer protection oversight in a very important way and i think it's an area that we have to continue to look at, understand

and if we need to take more action discuss what that is. obviously the mortgage system requires that there are servicers who are reliable, who were there to handle the transactions between the borrower and the holder of the mortgage and it is something that we cannot have the fragile so it's something we are very much watching and we think that the actions taken by the cfpb are very positive ones and we will continue to review the situation. >> let me just say one of the things we discovered with the sub-prime meltdown with a lot of the problems were with service servicers. the loss of paper, the lack of understanding, what their jobs really were, the inability to make a determination to whether or not people had have sufficient income to meet a proposed modification on and on and on so this is a serious area. >> a very important area i

totally agree. >> thank you and i yield back the remainder of my time. >> mr. secretary some members of this panel the chairman and myself have asked for specific documents from you and we did so over a month ago and you assured us he would provide them. you formally responded only last friday and he did so with the nonresponse. your response contained none of the requested documents. mr. secretary this committee has to subpoena those documents. can you promise here today that any e-mails that make up those documents or files that we have requested will not fall victim to any mysterious or unexplained crash and are you doing anything now to protect those documents that we have requested and you promise promised that you would supply but after a month you still have not done so. >> congressman as you noted i did respond along with the chairman of the sec and the

chairman of the federal reserve board to your inquiry. in that letter we sent our staff -- said our staff would work together. >> will you protect those documents because you did not provide any documents that you requested. be has indicated our staff will work with your staff. >> are you protecting those documents? >> they know -- congressman. >> okay that's a no. >> mr. chairman i would suggest. >> i would suggest we consider issuing the subpoenas in our rather than later given how fast e-mails are disappearing within the treasury department. i have a question for you from palm this is sort of off-topic but if the irs is conducting an audit of a law-abiding law-abiding citizen and i've gotten us a lot over the last several weeks in the irs asked for documents and they do not. they say they don't have them anymore because their hard drive

crashed. the irs in your response doing that would be that's okay because that's the routine system? >> as the commissioner testified last week if that happens to taxpayer the practice is for the irs to work with the taxpayer based on documents that are available. >> i will take that as suggesting issue subpoenas now because you have not supplied that information that you have promised to this committee. mr. chairman i don't have any confidence in this demonstration to get a fair and impartial and thorough investigation into that matter want you to supply information this committee has requested repeatedly and i believe the special prosecutor should be appointed to find the truth for us to go forward as quickly as possible with regard to subpoenas. now to return to the matter at hand, on fsoc designations the chairman asked you a very simple

question with regard to the census. i think most people watching understand what consensus means. it means the parties at a table can consent to something. that's the reward of consensus. so the fsb on the processor there was a consensus on the matter and a simple question was did you consent and you did not give an answer. can you say whether they went around the table figuratively did you consent, did you say yes or no or didn't know what to answer? >> i answer the question. the u.s. representatives joined in the consensus. >> you answered yes. >> i answer the question. >> when he made the determination the chairman asked the question is impossible for a company to be globally designated but not to be designated by nationally and the answer to that one is also yes? >> as i said they are parallel parallel processes of the fsoc

which is the national authority would make its own determination based on the process conducted at fsoc. >> so a company could be globally important but not here in the united states collects how is that possible? >> the process of the fsb designation is one that is not binding on national authorities. obviously. >> is not a weather -- matter buying it but whether it's important systemically. >> that is why fsoc goes very very detailed analysis. >> the fsb process is not a detailed analysis? >> i'm not saying it's not a detailed analysis and i'm not saying the outcome would be different. i'm just saying there's a parallel national process that takes place. >> in a legal legal matter what the judges made a decision among case and oftentimes faster recuse itself on the same parties and and issues come up they have to do that all the

time time. will you repair issues -- recuse yourself from these companies come up for designation? even though they are different processes. >> to review the information based on information and fsoc practice which is what i will do. >> the answer to that is no. >> the time of the gentleman has expired. mr. capuano the chairman of th the -. >> i do want to talk about a couple of concerns that i want to thank you for the job you have done. give them a great job like everything else there details have to be worked out. i have a lot of constituents were concerned about questions that have not happened yet and not happen with what fsoc is done and i have concerns that the second shoe hasn't dropped.

i want to talk a minute of the international association of insurance supervisors up which you are participating and i got a response from your letter we had written and i want to read a section that at the letter on record to respective of the capital standards developed by the iai asked in response to the capital standards being developed by insurance experts will not have any legal effect in the united states unless they are implemented by u.s. regulators in accordance with u.s. law which of course is the answer that i wanted. i appreciate the answer but i need to push a little further. i say that because i'm not opposed to it. it's going to happen. i just think we should put the cart before the horse. we have to clean up our own house and i'm not ready to pass over 10 international standard. i want to make sure i understand this correctly though, that by doing so i want to make sure i understand the importance of u.s. law peter want to make sure this is not some backdoor way to allow some section 4807 the sum

treaty with some country i've never heard of to overtake our capital standards and insurance and say well we have a treaty that we signed 400 years ago and we had to therefore give it up. i presume you are not looking for that. >> congressman i think it's worth taking a step back and talking about how important our involvement is in an international bodies. we can do an outstanding job in the united states in putting a system in place at a safe and sound for financial institutions and we are still exposed to vulnerabilities around the world if the standard as it raises well. we simultaneously participate in international discussions and in a case like this are insurance is very much a part of shaping the international debate. >> as i think you should. i think you should be at the table and i do think you should participate in i do think you have a strong voice. i just don't have faith at the moment. i may have that at some future time that the international standards will be any better.

>> the international process often leads to a result there reflects our judgment of what the outcome is. we retain us to all national authorities there right and in the case of insurance for states that have authority. >> the .. is that one thing straightforward. i believe in fsoc and i believe what you're doing. i do believe in international -- is coming but i don't want to find out the day after the somehow we gave up our entire system of insurance regulation without knowing it. i think when you i think we need to consciously and i don't want to find out some treaty did it and somehow that because somebody from lichtenstein had a better idea than now they run their insurance. >> that is not the way it works. >> you also talk about transparency and as far as i'm concerned but may backup one second. i also want to find out under dodd-frank as i understand that it the fed and others have

oversight on insurance companies that are sifis or have savings and loans holding companies. other insurance companies have not been subject to federal regulation and i just want to make sure it's not some backdoor way to expand jurisdiction. though i do believe federal optional charters will come someday. they're not here yet and i want to made sure we are not doing that in a backdoor way. >> it's not any kind of backdoor into federal regulation of all insurance though there is debate to be had as you know as to what the right balance would be. but that has to be done directly. >> that is what i want to hear. i also want to talk about expands and you think transparency is important up until now there has been give-and-take. you get get transparent and many don't get transparent and for me one of the things when it comes to sifis is the sifis know what the measurements are worth the potential sifis know what the measurements are. my argument is like a traffic cop. if a traffic cop sitting on a

highway is most of the time i want the blue lights to be flushing because i'm not interested in someone going over three miles of this that limit. i'm interested in keeping them at the speed limit in the best way to do that is letting them know as their top on the highway. unadjusted and catching someone into a spiffy. they wanted to avoid it and can avoid it the only way that can happen is if fsoc and others tell them are at the measurements we are going to happen if you you choose not to participate between now in six months from now you can take action to avoid it. why is that not possible? >> a brief answer mr. secretary. the standards that are used in fsoc are understood and detailed rules early on in the process there is snow norma's amount of give-and-take back and forth which gives them the ability to make judgments as to how they

want to organize. >> we will have to follow up on that. >> the chair recognizes the gentlelady from west virginia. >> thank you mr. chairman pitt as i mentioned my opening statement i believe the process will designate financial institutions. that process should be based on activities of the institution as opposed to just arbitrary cutoff points. for instance the 50 billion-dollar level and then we have another level, it $10 billion for the consumer supervision. what we are finding i think and disorder pivots a little bit off of the previous questioner is if you have these arbitrary deadlines at 50 billion you could have a financial institution that is maybe at 35 billion that is much riskier than somebody say who is at 100 billion because of their business platforms, their business in the way they have structured their business with

less and fewer risks. so i guess what i would ask is, and governor julio talked about this about a month ago and mentioned just kind of throughout $100 billion to raise it up because folks that are falling into those thresholds are having difficulty. how do you feel about that rather than arbitrary asset limitation to look at what their risk profile is an based designations on that? >> the threshold does not lead to a designation automatically. there's there is only a designation if the analysis that is done suggest there's a risk that determines that is systemically significant. and i think the number of designations reflects the fact that we have seen utilities designated. we have seen to insurance companies designated. it has not been. >> in the case of the banks if they raise the threshold that

is. >> i thought you were talking about the fsoc designation threshold. >> i'm talking about that in conjunction with the other designations of significantly systemic league being important. >> as far as the banks i think after the financial crisis the burden certainly was on us to take a closer look at systemic risk in large institutions and as we go through that process, as the regulators go through their more detailed reviews of both the financial conditions of those banks and their systemic risks, i think it's a discussion that we continue to have but i think for the time being we have to look back and forward. we weren't where we needed to be in 05, 06, 07 and 08. we need to make sure we have visibility into any of the institutions that could create that systemic risk and as far as the designations fsoc the same

standard applies. we are not looking to designate for the sake of designating. we are only looking to identify where there are areas of systemic risk that if we look back up the next financial crisis we would say why didn't the patch that -- catch that? >> in the case of provincial and this is a slightly different question they would argue if they were to fail their business risk model would not drag down the entire business system. what metrics are used for that and how does that -- what kinds of metrics did you use in the insurance expert on fsoc? >> there were detailed analyses done and there was a hearing where prudential came and exercised its right to ask for a hearing. the kinds of questions that you ask when you are looking to make a determination like this don't have to do with what happens if the company fails in good times. it's what happens if there is a

financial crisis at the company fails? what happens if it's a situation of great stress on the system and that's not necessarily what regulators previously did but we saw what happened in a seven and a weight. in a time of great stress in the financial system system things do happen that don't happen at other times. that's the kind of inquiry that we went through. >> on the regulatory i have asked you this before. mr. meeks and i have a bill have a bill out that would modernize and streamline the financial regulatory framework. we are hearing consistently particularly from our community banks but others that the piling on of the regulatory burden is really becoming a killer in terms of being able to move forward with business. you mentioned that once every 10 years there is an analysis of this. i think 10 years is too too long

for period especially since a lot of these have gone into effect over the last four years. what efforts are you making in that? >> i have a certain amount of background on this because when i was on the church i conducted a review of all the executive branch agencies to look back and we asked the independent regulators to do a similar look bad. we did have the authority to direct them to do that look back. at the moment with the tenure review coming up the regulators have indicated it's their intention to do that kind of look back and that's a very important thing to. >> the time of the time of the gentlelady has now expired. the chair now recognizes mr. hinojosa for five minutes. >> thank you secretary lew for your testimony today. before the financial crisis that caused the great recession the u.s. had many financial regulators. yet none took a look at the comprehensive economy as a whole. we were caught off guard because no one was tasked with looking at the bigger picture. congress created the financial

stability oversight council that is the cornerstone of the dodd-frank act. it serves a critical function for emerging financial threats. secretary lew prior to that passage of dodd-frank what government agency if any was responsible for looking at the systemic risk in the u.s. financial system? >> congressman one thing we learned it as there was no single agency that had responsibility for looking across the system and identifying issues of systemic risk. one of the recent fsoc was created to us to make sure that in the future agencies collectively chaired by that treasury secretary would be charged with that responsibility. i think it's critically important i don't think it would be responsible for us to go back to a world where you don't have that kind of ability to look across the different silos. that's not to say the regulators weren't regulating the industries they had responsibility for.

they weren't looking at the the interconnections and away the entire systemic risk profile developed. that's exactly what fsoc does and that's why it was creative. it's why we need to be able to ask questions. it's also why we need to be able to ask questions when we don't know what the answer is. it taught got not to be that we have to have certainty that there's a problem in order to ask a question. we have to be able to turn over a lot of stones and have the good judgment to only designate if the analysis and the facts warrant it. >> secretary lew last week the committee passed h.r. 4387 the fsoc transparency and accountability act. this bill would subject the fsoc to the sunshine act, expand its membership and change voting protocols to commission board member senate would allow members of congress to attend and participate in fsoc closed door meetings. in addition this bill h.r. 4881

would prevent the fsoc from any further actions related to the designation of a non-bank sifi including talking about the possibility of the designation for one year. in undermining fsoc we undermine our ability to avoid a future crisis like we just experienced. secretary how do you view the bills passed last week out of this committee and what is your primary concern? >> congressman i think transparency is important and we are trying to develop policies that make that very clear. i also think there needs to be a space where financial regulators can have a conversation about confidential information that is a protected space. the balance is an important one to strike. i think the notion of complying with as much of the sunshine act

as possible is something we reflected. much of the sunshine act is reflected in the fsoc procedures but because of the balance i think it's the right balance for now and we need to continue to strive for striking the proper balance. the participation of members of congress and i would point out the executive branch meetings happen every day all day long and it's not considered normal or appropriate for there to be congressional participation in executive branch meetings. i don't think it would be appropriate. >> in looking at here annual report, the fsoc delineates recommendations to improve the financial health of our markets. interest rates have been kept to a historic low-end order to encourage lending and spur economic growth to offset the effect of low interest rates. the banks and credit unions have increased risk seeking behavior such as extending the duration of access and using lending

standards to let me ask you this question. how much does their risk of increased interest-rate volatility concern you? >> i look at all of the different moving pieces in our financial system to keep track of them. obviously low interest rates do produce a certain tendency in for there to be a kind of rush to yield. we have seen a narrowing of yield curves that suggest that. i don't think we have to balance where we have come and our economic recovery. the policies that have led the their, i think we are in a place where this is a question that the fed and others have to look at. >> i dillbeck. >> the time of the gentleman has expired and the chair recognizes mr. neugebauer. >> thank you mr. chairman.

in his his dissent or a woodall who is the fsoc designated insurance expert stated the underlying analysis for the prudential use scenarios quote a typical to the fundamental and seasoned understanding of the business of insurance, insurance realtor environment and the state insurance company resolution guaranteed funds systems. do you agree with mr. woodall's statement? >> congressman obviously the fsoc decision was one that i participated in and i thought the designation was appropriate and the risk analysis warranted it. >> so you disagree with the statement? >> and is going to comment on what important my judgment in terms of the decision being made. >> mr. secretary bush or background as far as experience in regulating insurance companies? >> i don't pretend to have been insurance regulator. i have worked on insurance policies as a policymaker from

time to time but i think the responsibility each of us has his fsoc members is to look at detailed analyses prepared by all of the staffs of the fsoc. it is quite voluminous and detailed. in a the case of the prudential designation i participated in the hearing and you make your judgment based on the record that is prepared. >> so when you don't have a background in that industry yourself i guess one of the reasons the congress decided to put these insurance people on the fsoc process was obviously a lot of the regulators that for example the fed and the treasury and others don't really have much background experience in regulating insurance companies, do they? >> congressman -- can. >> do they have experience in doing that? >> for the most part they have backgrounds in the field that they are and whether banking or securities. i think if you look back at the financial crisis of 06, seven

and 08 the financial system must bring much for the cause of the systemic collapse. >> the insurance industry? what part was that? >> aig. >> i was not the insurance aspect of their business. >> while the inquiry about systemic risk is one where you look at all the activities of a firm and you look at whether or not it has transmission channels and if there's a problem in other parts of the financial system. i think and i continue to believe the analysis done was high-quality and warranted the determination. i'll just point that there was not an appeal of a judgment either. >> one of the reasons for this prudential sifi is relates to liquidation analysis. are you familiar without? >> yes. >> simultaneous runs against separate counts by policyholders

in the significant number of annuity and other contract holders for products with cache rendered value, this assumes a scale for which there is no precedent. in other words was there anything that in prudential that indicate they had ever experienced a catastrophic liquidation of policies or surrendering policies? >> the question is not whether something has happened at whether there is a systemic risk in the future and i think the scenarios that you look at tend to be scenarios that have not been experience because your goal is to avoid having a financial crisis they can avoid. >> the only problem is that mr. secretary is trying to forecast cataclysmic events. really i don't know if anybody has any expertise in doing that the trying to come up with these what if scenarios. you would want to put your money in any financial institution but the problem is when you start

down this road that you impact the business model and the customers that rely on these financial products. something you are not sure it's going to happen in the future and is not happen in the past and so i think to ignore the expertise of people that have been put on fsoc to add guidance in that area. so many of us question the mythology used in this process. >> congressman i don't disagree that the scenarios are not the likely scenarios that our task is to put look in a crisis situation as their risk of financial instance -- financial stability be underlined -- under bind and we know at this session of 08 in on line look like a winner of the great depression look like. there are scenarios we have gone through history and it's not just pulling scenarios out of the air. the question is in a time of

great stress is their risk and if there is risk it doesn't mean you are changing the business model all that dramatically especially if there's greater oversight and greater scrutiny. >> patona gentleman has expired and the chair recognizes gentleman from georgia mr. scott for five minutes. >> thank you and welcome. i think you are doing a fantastic job. i want to first of all aspira will help that you could give for me and my constituents in georgia. you were familiar with the hardest hit program. thanks to the hard work of this committee and i would deeply appreciate if you could assist us. we have got an issue in which my state was about a year late in getting this money out to help the hardest hit. subject to that we have unleashed or unloaded a number of veterans who happen to be one

of the fastest-growing groups of homeless and that is because they are coming home and their houses are being foreclosed on and mortgages. ..

this was just a cold download the verbevery helpful to the det of community affairs asking if there's any assistant treasury could give them, because if it were not for tim geithner to light a fire in georgia we wouldn't be moving as we are. i don't want a dime of that money coming back. back. when we have soldiers coming home who are living under viaduct because they can't get that kind of help so i appreciate you doing this and we will get the information to your office for whom to call. now i have another point. i want to get to the urging threats in the financial stability on the international stage. you've just returned from an international visit and working

on this issue with some of our other counterparts. also treasury is the enforcement arm for their ranks. six months is coming up. can you give in a nutshell where we stand relative to the impact of where we are on the sanctions and what are the emerging threats internationally? >> first i would welcome the information and tim is running the office and i will help them follow up as appropriate. scenic as far as the sanctions go and the negotiations that are taking place, i think three things. first, the sanctions have been extremely effective. they've had a dramatic effect on the economy. they've crushed the economy and brought iran to the negotiating table.

the joint plan of action was limited relief. it was several million dollars of relief, not enough to reduce the harm to sanction does to the economy and in fact the ongoing impact of the oil restrictions in the sanctions does more damage than the relief granted. so the impact is building up, not reducing. there we have made it clear that we are going to commit to these negotiations but not connectivity all unless it is a good deal. no deal is better than a good deal. we hope there is a good deal. we are in the final months. i think that it will be an important month to determine whether or not various seriousness othere isseriousneso satisfy its nuclear weapons. >> so we are at that final mon month. my question is where do we go from there? do we go from square one or will

there be an extension? >> i am not going to judge what the month is. there've been no discussions to date of an extension. there is also not going to be pressure to take a bad deal because we are hitting a deadline. we have to see where we are at the end of the month. what we have said is if it breaks down and iran isn't willing to make concessions we have taken no option off the table to make sure that iran doesn't get weapons. >> the chair now recognizes the gentleman from north carolina of the oversight and investigations subcommittee. >> secretary, thank you for appearing. and we had a hearing for the asset manager report and the former assistant secretary testified that the report was not something i would hang my hat on. would you hang your hat on the asset manager report?

>> i don't hang my hat on reports, congressman. the report was one step of the process. it is not a decision by fsoc. we've done other work and in ... out slowly and we had a public session the day before the hearing where we had brought participation by the industry and experts from academia who testified. i think one of the important things to remember is fsoc has made no decision to designate asset managers. all they've done is ask the question. i think it's important to ask the question and the answer could be there is no need to designate. there is another course of action that is advised and we will continue to pursue that. >> to that and the chair testified a few weeks ago before the committee that the fcc has all of the authority necessary, no new authority would be needed

to regulate the asset management industry. do you concur with that assessment? >> it depends what the answer is and what is the appropriate step to take. i'm not going to prejudge the outcome of the inquiry that isn't completed. a >> let me try that again. do you believe the fcc has the authority necessary to regulate the asset management industry? >> it does have authority to regulate the industry. whether it is the precise authority depends what the mode of the response. >> thank you for clarifying. that is helpful in a forthcoming. and so we have a number of other questions obviously that with the ss fp a number of us have questions about the process and you've answered this to some degree, but many of us have complaints about how long

transparent the fsoc is that the fsb is even less so. so when the fsb designates all of those in that category of investment companies are only u.s. registered investment companies that becomes problematic for us to see to judge whether or not they will take that same attack. so to help us better understand the policymaking process, would you help us with better disclosure to put those discussions were like and what the discussions are just going forward. i think that would be helpful in terms of the transparency and in terms of making sure that we are asking appropriate questions. so you don't have to enter the same questions over and over again. >> our staff does try to keep the congressional parties and

fun. informed. we will continue to do that. >> currently i would say that it's not sufficient. what you try harder to do better when it comes to transparency with fsb. that is a fantastic commitment. so no hats and try harder. let me ask another question if we can get to this. we've passed a couple of major pieces of legislation for the committee and in the house floor that are bipartisan in nature. some credit unions and others help community banks. basically lightening a bit of the overreach the large bipartisan vote in congress has shown. one is the bill that passed 292 to 192 on the house floor and the end user bill that passed for 11 through code 12 so there is a way for us to pass the

bipartisan legislation. give us your view. what's your encouragement to undertake the bipartisan regulatory changes? >> in principle i endorse the bipartisan legislation as a general matter. >> but in a specific matter it should help us with this process. >> on the question of dodd frank there has been an issue for the last four years where the question is do you make technical fixes or do you go back and make broad changes. that's an important question. we don't think there should be a broad review. there is also the question whether you give agencies the chance to implement things before you legislate again putting an overlay on top of it but i'm happy to continue the conversation with you. >> the chair wishes to announce to all members at approximately 11:30 the chair intends to call a five-minute recess and recognizes the gentleman from missouri for five minutes.

>> we will also express and receive your thanks for sending no water from this committee to the oversight council. mr. secretary, i've got two questions. do you belief that as a result of fsoc that we do have an authority that is accountable and responsible for monitoring the financial stability of the u.s. economy essentially? do you believe that without fsoc the dangers would be increasingly more ominous? >> ibb ivv that we have a level

of the financial risk and relationships between regulators that are stronger and deeper than they ever were before. and we have the capacity if we need to put people to collaborate together in a much more effective way. i think all of that leads us much stronger than before. to give that up would put us where we were in no seven and 08 when regulators worked in their silos and it was hard to break through to look at the broad financial stability. >> that's interesting. i'm wondering how comfortable the members of the committee should be that the expectations that an american financial institution is still too big to fail. these huge interconnected bank

holding companies and all of the non- financial giants. how comfortable should we feel that too big to fail has been either dramatically reduced or eliminated? >> i think that we have made enormous progress. we have much more capital in our banks. we have resolution authorities that are now in place and being exercised so that institutions if they had a failure they have a way to unwind without necessarily causing the kind of risk that we saw a new seve in n and 08. we have living wills fo are the long-distance traditions that have a very detailed plan of what they would do if they got into distress. and, you know, i think if you look at the question that is often asked about the positive subsidy for large banks that is a reflection of the market

belief that there is a willingness to step in. we are seeing medway lover if not eliminated. it has been reduced by academics who study it and the imf looked at it and rating agencies. so, i wish i could tell you with absolute certainty that too big to fail was a thing of the past. what i can tell you is we've made enormous progress and continue to work at the kind of sensible ongoing policies that will make our system even stronger and the test unfortunately only comes when you have a financial crisis which i hope we don't experien experience. >> we won't know for sure. i was on the committee went to several others came in and told us essentially that if we didn't do something before the markets opened the following monday that the world could fall into a

depression. i'm assuming you're saying that we could have a degree of comfort but that comfort should be measured because we don't really know and won't know unless we get another -- i would add many of the authorities that exist at the time have been changed in dodd frank and we don't have the tools the secretary had at the time. >> he made the tools up by his own admonition. >> there were changes made to that limit what the fed and the treasury do. so we have less ability to step in and require dodd frank as a matter of law and did it too big to fail so there is an obstacle and it would be a change in the law to step into exercise some of those authorities. >> i yield back the balance of my time.

>> the gentleman yield back the balance of his time and we now recognize the gentleman from missouri for five minutes. >> thank you mr. chairman. mr. lew, welcoming quick question with regards to the servicing assets. you know, fsoc seems to be intent on trying to implement new capital standards on these folks. my first question is where is the problem. and where is the risk? what can i ask for a clarification with percentage are you referring to? >> there's fsoc on the mortgage servicing assets. and what we are seeing is that the small banks and even large banks are selling all of their mortgaging servicing assets to

the non- banks as a result of the capital rules that are being implemented. so we are definitely seeing that there are higher capital standards for the banks in general. to the extent they choose their business plans that is obviously something that we need to keep an eye on. >> did something that is concerning to me to the standpoint that we are a lying olying onthe rules and regulatih to my knowledge they don't have mortgage servicing assets activity in foreign countries so we are the only one that does this sort of activity. yet we are allowing the rules to impact our way of doing business in this country. number one what is the problem

and why aren't we allowing the entities from other countries to regulate a business that is basically american in nature? the capital standards the regulators have put into place are actually in some ways tougher. tougher. so it isn't that it took the capital requirements in place. the national authorities have to put the capital requirements in place. we have driven to a higher standard to cause one of the things we worry about is a risk that we face that other countries don't have the capital requirements that we have and their banks are not going to be as sound as they need to be. >> this is about mortgage servicing assets. where is the risk for the service or that services the loans? i think the question is broad in terms of -- >> no, it's specific. where is the problems that the entities need to have more

capital? where is the connectivity to our financial system that causes a greater risk? >> capital requirements are on all of the bank assets. so that i think is the issue but i'm happy to follow up with you on the specific question of the mortgage servicers. >> it's interesting because as we go through this process i think in the previous question one of the folks was talking about some of the stress tests the banks are doing and the big banks modeling there is a lot to be different than the smaller banks, and yet when you allow them to design their own modeling, you come up with a completely different capital ratio as if he would use the same for smaller banks and so i think that again, you are using two sizes for two different set of rules and i have a problem with that. it continues to be rampant

through all of the things the treasury does in the two set of rules. >> the regulators have gone to great lengths to try to reflect the special circumstances around small banks and community banks and it's not the banks that set the standards for the stress test it's the regulators that conduct the stress test. but you're allowing the banks to determine their own models on how they determine their capital. that's not right because you have to have the same set of standards for everybody. you can't have two sets of standards. and it goes back to -- i just have a problem with -- i have 24 seconds left. your comment that insurance companies were part of the cost of the 20th seven and 2008 it's absolutely stunning. i would defy you to give me an example of one insurance company

that has been an interest of the business that was a cause of the collapse. was it insurance policy and insurance rate was that a cause of 2008 and 2007? >> you know as well as i do that because the financial portion of the company it wasn't the insurance portion was the financial portion. >> the chair now recognizes the gentle lady from wisconsin for five minutes. >> thank you mr. chairman and mr. secretary it's nice to see you. thank you for coming to speak with us today. i guess i was looking through your testimony and i couldn't agree more that the formation of the fsoc was an important strategy towards having all of these senior regulators and principals look at the system across the spectrum because i

was here again when mr. foss and then came with his four-page bill saying about $700 billion. don't want to go through that anymore. but my question is -- i think a good process leads to good policy. so i guess i thought he insurance expert in the decision to designate provincial. and yet they were designated as a city and then we saw the fcc push back on the asset managers in the aspect of the money market mutual fund reform. they are the experts on these industries, so i guess i would like -- do you think it would

helpful debate could be helpful to see the primary regulators of the discussion? is there any difference to them? did they just dissent from the decision so that they could -- so they wouldn't be on the record of being against the industry? what do we learn from the experts seemingly having less of a voice? i think all of the members have a voice and they are listened to but ultimately not everyone will agree on every issue. i think if you look at those issues separately either spoken at some length on the review of the insurance companies before the designations were made. i believe the record was robust and it warranted the decision. obviously not every member of the council agreed.

but the decision stands and the company hasn't appealed and the court ain thecourt as it could i think the process was one that reflected analytic quality and i'm comfortable and conquer with the judgment that was made. as far as the issues raised they spoke to the money market fund issue before i was the chair. it is an issue that again was at the heart of the financial crisis in 08 and there was i think an urgency that was filed to underscore that more action on that and on other issues that relate to the area of shadow banking is important. they have the direct regulatory authority and they are working on a rule and i'm hopeful they will complete the rule in the

summer. >> thank you so much. i don't have much time but i do think that they did push back on the aspect of the money market that was result. finally, i guess you have heard the complaint bu that prior to e designation, which is a big deal if you were designated this isn'hashad an opportunity out to present their case to the full board of principles of the fsoc or even to address the final information charges that are being presented to justify the decision. this seems to be just a little bit contrary to what we know as due process. let me go back to the money market fund issue. i want to remind everyone on the committee that there was a problem in the money market funds in the financial crisis and the challenge to solve that

they'll not only fcc but it fell to the fed said it is quite appropriate for them to take the view and quite appropriate for us to continue to take the view to make sure that good action is taken. >> i do want you to answer the other question. >> reminded me the second question. >> is if people don't get a chance to participate -- >> that's not correct. there is extensive back and forth between the stage three process and there is no designation until the end of that. at the end of the process they have the right to the hearing and only one company sought after this and then we have the judicial right after that. >> the time is expired and the committee will now stand in recess for five minutes.

in mississippi incumbent senator cochran is in a runoff with chris mcdaniel. the new york congressman is running for a 23rd term in the state's 13th district and with oklahoma senator tom coburn choosing not to run again, candidates are biting for his open seat. tonight after the polls close on c-span2 we will bring you live concession speeches from senator cochran following the results of the mississippi runoff and also

remarks from the congressman in new york. what shall i coverage along with your phone calls tonight on c-span2. next a look at campaign spending and the growth of the super packs from today's washington journal. >> you've tracked the role of hs unlimited money in politics since the 2010 citizens unitedhe decision and offer a look at the si new world of the campaign financ the rhe recently published book big money $2.51 billion suspicious vehicle and a pimp on the trail of theoe altar of rich hijacking ofultran american politics. the subject of the super packs id donors discuss the conservatives, the gop presidential politics.nt i want to talk about your story from yesterday and politico inside of the vast liberal conspiracy is a headline from the peace. what is the democracy alliance that you focus on a piece? on? >> the democracy alliance is a

very wealthy club of liberals that get together twice a year to discuss how they can spend their big checks to pull the cag democratic party to the left bus also the sort of broad body of. politics to the left. it's very similar to the network of the donors that the coke brothers but of course like to talk about. to but it's very similar to what the coke brothers do. some of the money that we arey y able to direct the politics isay significantly smaller than the coke brothers., but theless, they've had ae big impact over the years in shaping the democratic party. >> taking credit for steering $500 million of donations to thd paoups in 2005 this is acratic democracy alliance in comparison, the networks at $400 million in 2012 alone, but in your story you talk about them sort of using pages.

these outside groups like themoc democracy alliance into the networks have become so important it's been a migration politiitical power and money away from the parties and theway fr campaign to these outside grouh' groups.ing to it sets up a shallow b partyavea structure. building the databases and get out the vote mechanisms andvote, building groups that network and reach out to specifically swing the demographics and thehe elece electorate hispanics and so the democrac y similar in the extra party infrastructure that they sought to build. >> speaking of the brothers you have a story lashad a story lasy

launched a new super pack for the midterm fights. they cannot get a say vote for so and so were such and such and instead what they've done is this issue-based advertising. most of them say call the senator from north carolina and ask her why he does she support the job killing obamacare versus the ad that says vote against kay hagan. they stayed very much on that issue aside until now this new super pack allows them to come in much more overtly and acute if they vote against the opponent.

are there different rules that they are working on for the specific advocates as opposed to a certain issue? >> this company have to disclose all of their campaigns. there are ways around full disclosure including rallying a contribution through the company or the secret money nonprofits. however i think it is significant they do have to disclose and that that kochh have this vehicle because one of them just click on the democracy is that they are secretive and they try to conceal where their money is coming from and how it is being spent. with the super pack you can't do that. so it is a partial move towards increased transparency by the koch brothers operation. >> in your book you get into the evolution of the two parties taking up these mega- donors and

super packs. if the impact of big money and democracy and the ballot box in the midterms help them get over their qualities. the federal election commission and the big-money groups to disclose, they are totally beating republicans at the top levels of the super pack. they've created the industry. they are anxious and skittish about the role of big money and the politics and it's interesting to note that some of them are getting the same big money to candidates that they think are then going to get elected and take the money out

of politics so they are giving the big-money. ultimately i think the effect is the same. whatever your motivation is its more money into this process and it really perpetuates this new big-money sort of political industry that has become increasingly significant in the terminate who wins the primary nominations and even more general elections. >> the book big money $1.2 million on the trail of the old char rich hijacking american politics you want to talk about big money in the super packs in 2014 here is the number for the center of responsive politics on 2014 outside spending $234 million is the total raised for the 2014 cycle. 73 almost $74 million of that already spent so far. and you can be sure that's going

to increase in the coming months. if you want to talk to ken about the super packs and the era of the big donors and big money into campaign. catherine is waiting in alabama on the line for democrats. who owns our present system. there is another book -- >> are you concerned about the spending in the campaigns which the subject we are talking about here in this segment? >> no. i think everybody is waking up in america. >> everybody is waking up to what? who is spending more? >> two who is controlling

everything. >> that is katherine. let's go to clark in wisconsin on the line for independence. good morning. >> i understand exactly what that lady is saying. i understand exactly what she was saying. why would these companies put the money into politics? >> that is a very good question i think certainly the motivations are something i whipped up quite a bit in the book. as far as companies giving money in politics, you know, i still think that for the most part the biggest corporations, publicly traded corporations are the ones that are players in our economy sort of shy away from this new big-money outside spending that we are talking about in the book and, you know, they do so because they are very able to navigate the political process

through getting regulated sums of money to members of congress who oversee and sit on the controlled committees that have oversight over their interest and through lobbying they are able to spend a lot of money in those ways, but that money is sort of more inside of the system where it is this new big-money bets flowing and that has a real potential to cause upheaval and chaos in the political process that isn't going outside of the system to the new super packs and outside groups. >> james asks on twitter is there a chapter on unions in your book? >> guest: the unions are referenced repeatedly. i would say that the most part they fit into this sort of old style of politics where they are spending a lot of money through the regulated means to get out the vote to motivate their members. they are to some x-band playing increasingly in this big money. see them playing the role in the

democracy line actually which we talked about earlier this liberal big-money organization. the actual new chair of the democracy alliance is the executive director of the national education association, the big teachers union and this is one way in which the unions are trying to exercise political power at the time when some of their ranks and the amount of money that they take in are actually on the decline. in the country's old church have lined up in the game. we see folks like peter angelos is a big player in the big-money

politics on the other side and the owner of the new york jets is a big mega- donor. i think what the commonality is these are folks that have made a ton of money doing whatever it is that they do whether it is all your manufacturing or hedge funds. they have these vacation homes that they could possibly want and what's next for the? if you are a sports junkie and have all of that money maybe you will go and spend a billion dollars for a sports team or $2 billion in the case of the guy that just put in the bid for the los angeles clippers who was in my book and president of was personally quoting him in the run up to 2012. if you are a political junkie maybe you think we try to get a

candidate that i have a long-running friendship or loyalty to elect the president as is the case. they are trying to get rick santorum elected. a lot of the times the aptitude and the expertise that allow them to exhibit 20 and make somd business doesn't apply to sports and politics. the mega- donors issue should be in the super pack. you see the super packs that have these big sugar daddies who

pursue a political strategy that backfired and is totally ham-handed. >> in this segment of the washington journal lets go to junior waiting in harrisburg virginia on the line for independence. good morning. >> i would like to ask why he's bringing up the koch brothers all the time. warren buffett donated 5.9. he donated a $2.6 billion. if you look up george soros i think that you are going to find out he has 193 tactics in the companies he needs to funnel money down into and what about the big climate control very strong. how much has he donated? >> host: tom is the sort of increasingly prominent democratic donor who is spending

his money in a way that is an effort to back the candidates to support climate change legislation. but the caller makes a good point. there certainly ar are a lot of very wealthy at liberal donors and they getting a lot of attention. in my book warren buffett is not among them. i'm not sure but the figures you cite that he hasn't been a major player in even more generally i would say that there are a whole class of very wealthy liberals who do not give as much money as a percentage of their income into politics as do the very wealthy conservatives like the koch brothers. you could look and say sheldon hamilton is worth $40 billion why do you only give $100 million to defeat barack obama but that $100 million out of the $40 billion is still a much higher percentage of his income than bill gates for instance who by all accounts is basically a liberal and democratic causes warren buffett

is another example. warren buffett gave as much as a percentage as koch to the democratic outside groups and super pacs. in my book i do get into these efforts to court these very wealthy liberals who just have not dissipated and come off the site low to participate in this big-money politics in a way that republicans have. >> how is that looking forward in 2014 or 2016? >> guest: there are folks that have come through in a big way including i think the caller may have referenced the retired san francisco billionaire who committed to spending $50 million of his own money in the 2014 midterm. >> host: just on seven or so races. >> guest: they support climate change legislation. that could be huge. if you push that forward he isn't worth as much as the koch brothers were sheldon said that is a big percentage of his

network relative to these other guys that if you spend that forward to 2016 that's where i think it gets really interesting where we saw the potential of 2012 with just a handful of these rich conservatives to throw the republican party primary process into chaos. if he is willing to spend 50 million or 100 million, $200 million on a democratic candidate who is a more aggressive advocate on climate change and say hillary clinton and any of the other democratic donors, that could be a recipe for a really chaotic, exciting and expensive democratic primary in 2016. >> on the line for republicans good morning. you are on with kenneth vogel. >> caller: i just want to save the kocsaythat koch brothers are ones that started spending a ton of money on campaigns. the unions have been doing it for years and years and years.

so i say thank god for the court ruling and the koch brothers because i think they've helped make it a more equal process. the unions -- i would like to know and i don't know if you have this information but take last year or the election how much have the unions contribut contributed? and then the unions for years have given so much money to the democratic candidate. they get the perks back in return. the teachers unions and all these unions take taxpayers money in return from these people that they get voted into office.

>> host: i'm going to let him jump in and respond to your questions and comments. >> they will probably spend a couple million dollars in the elections and then the koch brothers do but it's true that they've been very effective at a particular type of retail level politics for years and years. that is going up to their members and going out into the communities into getting people to go out to vote, making phone calls, knocking on doors. this is an area where the left has had an edge over the right and the caller is right tha bute citizens united decision and this new wave of money flowing into politics has been sent or has been seen rather by conservatives as a chance to sort of catch up to the union when it comes to the ground organization and when it comes to getting out the vote there's some frustration i've heard from my sources on the right about

the degree to which this money has been spent on the type of political activity as opposed to being spent on these flashy television ads that we see and people get sick of the donors like to see and be able to tell their friends you see that big ad a republican paid for that. they have a niche in american politics and they are in some ways fighting against, fighting a sort of uphill battle. and again as the membership declines and the union to dews decline. >> without overturning citizens united, the notion that the corporations are not people, neither side would unilaterally disarm. >> are there any efforts currently underway to go back to go back for citizens united again? >> at the press conference they

got a press release in the way and from this senate democrats rolling out a new reform the set of proposed reforms that would attempt to buy a back the amount of money and politics. i just don't see a lot of promise for anything like that. it's always difficult to pass campaign-finance reform and it takes a major scandal like watergate that was the impetus that we see today. the clinton fund-raising scandal and the contributions led to mccain-feingold and the 2002, there was the jack abram off scandal and how the wallabies could give money into politics. since then we've seen the supreme court dial back some of those as unconstitutional on free-speech. and i just don't see the type of scandal out there right now that would generate the public will to put pressure on congress and create the political will in the

certificate campaign finance reform. we are in a situation now where you have the folks that want to get money out of politics because they see it as corrupt and as a scandal in and of itself this much money is allowed to flow into our process. they are secretly praying for a big explosive scandal, a quid pro quo so they can then put pressure on congress to pass the campaign-finance reform. i don't see that pressure right now. >> postcoital 15 or 20 minutes left with the author of big money to $.51 billion suspicious vehicle and a pimp on the trail of the ultra rich hijacking of american politics. you want to explain part of the title? >> guest: long subtitle. first you can thank mark for the trend in the long subtitles, but the two characters are the two sort of things i mentioned. the suspicious vehicles and the

pimp we get inside of these big contracts playing an increasing role in our politics. if you have the situations now where as these big groups that they support sort of complete the parties they were essentially holding their own conventions where they get together a couple times a year to talk about which candidates and which groups should get their money. these are secret meetings and so they are hard to get and i need an effort to get into some of them. at the suspicious vehicle was an instance where it was actually my own rental car i drove onto the ground of the seminar in april, 2013 in indian wells california and i was quickly ushered out of the car and escorted off of the press. someone at the hotel, the koch operation or hotel security recorded my car to the riverside county police sheriff's office as the suspicious order they abandoned.

they wanted to know wha but i ws getting this close to how it the pimp is on the democratic side where he crashed the fundraiser that the democratic governors association was having on the democratic national convention in 2012. really nice affair with a tuxedo passing hors d'oeuvres and i was ushered out by the private security and these are folks that perhaps we see on the riverside county sheriff's office and the one explained to me that these democratic dignitaries deserve the right to congregate in private with wealthy donors. and how dare i try to crash their party. it turns out i looked them up later and called them on the phone he had been a police officer. he'd been running the ring out of his squad car. so if you want a strong armed security at your fundraiser to take out reporters, go look in

the retired pimp. >> david is in concord new hampshire. david, good morning. >> i would like to ask about california. isn't it true that the great majority of the wealth was the accumulated in the purchase of oil that was hedge fund and the people in the unions are compelled to pay the dues. a lot of people don't want of political money going into. they are forced to and within the unions and that was incredible amounts of unfunded liability for the pensions. so when you compare the brothers who are using their own money and unions and who are using other people's money mandated.

>> unions do accumulate fast money but they are primarily from these dues. that is a distinction. that is a good analogy. they've tried to cast themselves as the democratic counterpoint and the caller makes a point that a lot of conservatives i think have risen on the radar that i think is a good point a and. there's a tendencthere is a tenf look for the bottom line but additional these big constitutions and the democrats including harry reid across the street has made an effort to suggest that the koch brothers political advocacy and political spending is motivated by a

bottom-line interest. so they planted areas in which the koch brothers business interest in the industries that are bot multinational industrial conglomerates overlap with the causes of the candidates that they advocate for. if it's fair to look at data then it's also fair to look did in fact make a ton of money through investments in energy, some of which overlap with the types of advocacy that he is doing now. so that is something that i think we in the media and voters are right to look at in an effort to discern the motivation to determine if there is an effective self interesin facta . i found it kind of difficult -- if i could take a step back to draw the direct link between the bottom-line interest between the advocacy. sure there are over the last that may be in the interest.

in some cases they got the gotto the business areas in the first place. i tried to discern the motivations. we are writing all causes are not equivoca equivocal and are t motivated by the same values. pollution, workers rights and regulatory bodies such as osha and consumer financial protection, privatizing prison, privatizing education, donating universities and then determining who the faculty are. how can the democrats alone compete with the republican big money without the patronage of the big-money democrats?

>> guest: they can't. that's exactly right. coming down to that realization and including barack obama who i have been in the opening scene of my book talking to some of these big donors including bill gates, the costco founder saying i cannot unilaterally disarm almost the exact words that the viewer wrote. and it's true. with barack obama we start hearing him as they did that and to see through the big money because he has come up through politics and his earlier days back in the '90s and the southside of chicago as a campaign-finance reform on the idea that he was going to reduce the role of money into politics and fast forward a few decades and here he is embracing this big-money endorsing the super pack to raise big money you

can't unilaterally disarm is certainly justified and i don't think that anyone would bludgeon that however there are a lot of folks that we've even had as a campaign reform and to see him as a total hypocrite on the issue. >> we will try to get to as many calls as we can. in the last ten minutes or so but go to clara in murphysboro tennessee. good morning. >> caller: good morning. first i think influence and money equals about the same thing. so that's why in calling that organized religion. how much influence does organized religion have in politics and especially in light of the leadership of the presbyterian calling for israel to give up its land for the palestinians. i don't know enough about death to comment, but i don't think that organized religion should play a part in a politics with h

their influence. so i think that is as much a problem as the money part of it. and i would like to know the irs werirsor does somebody go into e organized religion to look how much money they take in? >> host: we will let him get to your question. >> guest: i interact with at churches and other religious groups that are organized as nonprofit groups under section 501 c. three of the tax code. and whether the churches have sort of crossed the line, the churches are barred from political activity from their registration and tax status and there have been some questions about whether churches and other religious institutions have sort of crossed that line into politics. whether it is a preacher giving up on the pulpit and urging the

congregants to vote for someone. they have the power and influence over their members and it's not an unfounded question as it is certainly a place the irs occasionally look to determine whether there is full compliance with these tax laws to be a >> has been on twitter offers his thoughts on what we've been talking about. the messages to campaign-finance reform is dead. how reassuring. >> i wouldn't disagree with that. and it's like i said. we are in a weird situation where you have folks that are almost praying for a scandal because they think that's the only way that we can get real reform. the interesting thing is because of the way the money is migrating its not just migrating from the parties to these

outside groups. it's going further into the secretive outside groups that don't disclose the donors so it may actually become harder to prove that there is one of these sociable scandals where a donor was donating that got something in return from a politician as a result of their largess including the transparency. so that was my effort with this book is at the dawn of this big-money age while some of it was still sort of visible to us to getting into getting into the room and a sort of revealed the character, some of the folks who were writing big checks and some of the operatives who were taking the big money and spending it in elections and looking at them as people and what their motivations are and what the impact is on the political process. ..