highway bill. the pass passed a temporary extension until december. the highway trust fund runs out of money at end of this month. senate live on c-span2. the president pro tempore: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. lord of the harvest, we continue to seek you, for we desire to do your will. you, o god, are our light and salvation, so we refuse to be afraid. as our lawmakers strive to walk

uprightly, provide them with a harvest of truth, justice, and integrity. may they cultivate such ethical congruence that their words will be undergirded by right actions. lord, keep them aware of your continuous presence, as they find fullness of joy in doing your will. show them the path to life, as your truth brings them to a safe harbor. we pray in your merciful name. amen. the president pro tempore: please join me in reciting the pledge of allegiance

to our flag. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god indivisible, with liberty and justice for all. the presiding officer: the majority leader. mr. reid: the republican leader will be here shortly. i've gotten the word that he's not going to be here right now so i'm going to proceed. mr. president, this past weekend republican presidential hopeful donald trump did what he did best. he said something dishonest and

really distasteful. in speaking about the senior senator from arizona he mocked senator john mccain, mocked his service in the vietnam conflict. he went so far as to say that john mccain was not a war hero mr. president, john mccain and i came to the house of representatives the very same day, both new members of the house, his representing a district in arizona my a district in nevada. we're neighbors. we served together in the house. we came here to the senate at the same time. he's one notch ahead of me in seniority in this body because the state of nevada has more seniors. that is one way you come in, ahead of other ways. john mccain was a naval pilot

coming from a family who served our country in the military admirably for decades and decades. his grandfather his father. john mccain in one of his first missions over vietnam was shot down, badly injured broken back arms hurt very, very much. he was placed in a vietnamese concentration camp where he spent almost six years. about half of that time was in solitary confinement. and many days and weeks of that was spent being punished, tortured rebreaking parts of his body that had been broken. mr. president, john mccain to

me, is a hero. i think he is a person who has represented this country admirably in the congress. he was a republican nominee for president. america knows john mccain, and i personally have some disagreements on policy on occasion or two with john mccain but we've never disagreed about our relationship and my relationship with senator mccain is one where i have great admiration for him for his strength of character for his moral courage in vietnam. so mr. president, in the aftermath of these remarks about john mccain republicans have been falling all over themselves to criticize donald trump but it makes me wonder where all these same republicans when mr.

trump slandered millions. it was only a month ago that trump said -- and i quote -- "when mexico sends its people, they're not sending their best. they're sending people that have lots of problems, and they're bringing those problems with us. they're bringing drugs. they're bringing crime. they're bringing rapists." that's his quote. when trump insulted the senator from arizona a member of his own party republicans couldn't denounce him fast enough. but when trump called immigrants rapists, there was nothing but silence. nothing but silence. there's an ugly truth behind that silence and it's this: when it comes to immigration policy -- and frankly most other policy -- there is no meaningful difference between the republican party and donald trump. consider the facts just on this

one issue. trump rejects a pathway to citizenship for these undocumented. instead he favors a system of merit that creates a road to legal status. he's never ever spent two sentences defining that. we've heard before the same kind of talk from republicans those running for president. i think we're going to have 16 of them now. jeb bush rejects a pathway to citizenship. he claims a pathway to legal status but -- quote -- "not necessarily legal citizenship." scott walker rejects a pathway to legal citizenship. he said -- and i quote -- "if somebody wants to be a citizen they need to go back to their country of origin." the junior senator from texas also rejects a pathway to citizenship. he said -- and i quote -- "i think that it's likely that there could be some bipartisan solution to these who are here

illegally if a path for citizenship were taken off the table." close quote. governor chris christie rejects a pathway to citizenship too. he said -- quote -- "it is an extreme way to go." close quote. trump wants to terminate president bush's executive action on immigration tearing apart millions of families and about 800,000 dreamers. we've heard that before too. jeb bush also wants to repeal president obama's executive actions. on fox news he said, that was on the hannity show, he would repeal obama's executive amnesty. that's a quote. the junior senator from texas also wants to terminate the president's executive actions. here's what he said -- quote -- "if i'm elected president the very first thing i intend to do is on the first day rescind every single unconstitutional or illegal executive action from president obama." close quote. governor chris christie is

actively opposing the president's executive action. in fact, his state joined a lawsuit challenging president obama's actions. the junior senator from florida also rejects president obama's executive action that keeps families together. senator rubio's spokesperson told one news outlet -- and i quote -- "immigration executive orders won't be permanent policy under a rubio administration." close quote. these are the facts when it comes to immigration policy -- and i mentioned sadly most other policy issues -- there is no daylight between donald trump and the rest of the republican field. so while the rest of the republican presidential hopefuls may not engage in the same repugnant rhetoric, make no mistake, they're all on the same page with donald trump. i asked each republican running for president name one difference between your immigration policy and that of trump's immigration policy.

given recent history there will be a deafening silence. when trump insulted mccain, republicans couldn't denounce him fast enough. but when mr. trump called millions of hardworking immigrants rapists and murder murderers nothing but silence. in the meantime democrats will continue to fight to pass comprehensive immigration reform just as we did more than two years ago. we'll continue to fight republican piecemeal legislation that criminalizes immigrant whole communities and will continue to fight for immigrant families who are constantly being scapegoated bid today's republican party. the presiding officer: pursuant to 42 u.s.c. 2159-i and section 601-b4 public law 29 s.

res. is discharged and placed on the calendar, the period having elapsed not including time having spent in adjournment pursuant to s. con res. 19. mr. reid: mr. president, what are we doing the rest of the day? the presiding officer: under the previous order the leadership time is reserved. and under the previous order the senate will be in a period of morning business with senators permitted to speak for up to ten minutes until 12:30 p.m. with the time equally divided in the usual form. mr. reid: i would note the absence of a quorum and ask the time be divided equally. the presiding officer: without objection, the clerk will call the roll. quorum call:

quorum call:

quorum call:

mrs. murray: mr. president? the presiding officer: the senator from washington. mrs. murray: mr. president, i ask unanimous consent the quorum call be lifted. the presiding officer: without objection. mrs. murray: mr. president, i believe that real long-term economic growth is built from the middle out not from the top down. and our government and our economy and our workplaces should work for all of our families, not just the wealthiest few. but, mr. president across the country today millions of workers are working harder than ever without basic overtime protections. that is why i'm so proud to come to the floor today to express my sphrong -- strong support for the obama administration's new proposal to restore overtime protections for millions of workers and families. not only is this the right thing to do, but it is good for our economy. i want to share the story of a man named paul. he lives in massachusetts and is reported in the boston globe paul worked very hard at a discount retail store to provide

for his family. each week he was working 72 hours on average. in one particular stretch he worked for 40 days in a row without a single day off. but his employer didn't pay him one extra dime for the work he did beyond 40 hours a week. that is fundamentally unfair. and paul, believe me, is not alone. there are so many workers like him in states across the country, and these workers feel like they have been left behind in this economic recovery. they need government policies on overtime protections to catch up. mr. president, in 1938, congress recognized the need to set a standard for the 40-hour workweek. and by law when workers put in more than 40 hours a week, their employers had to compensate them fairly with time and a half pay. but those protections have eroded over the past several years, and in today's economy many americans feel like they are working more and more for less and less pay and in many

cases they are. a salaried worker can be asked to work 50 or 60 or 70 hours a week and never see a dime of overtime pay. one of the main reasons is because overtime rules are severely out of date. right now if a worker earns just a little more than $23,000 a year he or she does not qualify for time and a half pay. that salary threshold is shall too low -- is much too low today. the current salary level is less than the poverty threshold for a family of four. workers should not have to earn poverty wages to get guaranteed overtime protection. that salary threshold has only been updated once since 1975. back in the mid-1970's, 62% of the american workforce was covered by overtime rules. today just 8% of our salaried workers have overtime protection. and big corporations have used

these outdated overtime rules to their advantage. they force their employees to work overtime without paying them the fair time-and-a-half pay. that of course is good for big corporations' profit margin but as the union bullet in wall to wall washington editorialized a few weeks back these workers are -- quote -- "working, paying taxes and suffering due to the long hours." mr. president, unlike so many of the challenges we face here, there is a solution to this and it doesn't require congressional action. last week the department of labor proposed to raise the salary threshold from about $23,000 to what it is -- which is what it is today -- to just over $50,000 a year. that will restore overtime protections for millions of americans. and this, by the way is especially important for parents. think about what this would mean for a working mom who right now works overtime without getting paid for it. by restoring this basic worker protection, she can finally work

a 40-hour workweek and spend more time with her kids. or if her employer asks her to work more than 40 hours a week, she would have more money in her pocket to boost her family's economic security. that is so important for strengthening our middle class today. mr. president, i do want to keep working to improve the proposed rule. i believe the department of labor should also update what is known as the duties test, for workers who make more than the salaried threshold but still do what is thought of as blue-color work the duties test is to assure they get overtime protections. but today that duties test is out of date. under the current law big corporations can exploit the duties test to avoid paying their workers time and a half, and i believe that needs to change. when workers put in more than 40 hours a week on the job, they should be paid fairly for it. that's just the bottom line. i've heard from some of my republican colleagues that they

do not want to update overtime rules, but if republicans want to take away this basic worker protection -- basic worker protection -- they're going to have to answer to millions of hardworking americans putting in overtime without receiving a dime in extra pay. they can try but i know that i and many others are going to be right here fighting back for the workers and families we represent. boosting wages and expanding economic stability and security is good for families and it is good for our economy. by the way that's exactly what we should be focused on here in congress: to help grow our economy from the middle out not just the top down. now, mr. president this isn't the only thing we need to do to raise wages and expand economic stability for our families today. in the coming weeks and months i'm going to be working closely with senate democrats to continue our efforts to raise the minimum wage, to expand access to paid sick leave and fair and predictable work schedules and to ensure that

women get equal pay for equal work. but restoring overtime protections is a critical part of our work to make sure more families get much-needed economic stability. and enacting these policies would be strong steps in the right direction to bring back the american dream of economic security and a stable middle class life for mills of families -- for millions of families. for workers like paul who just want fair pay for a fair day's work for the parents who have sacrificed family time in overtime and not seen a dime in extra pay and for families who are looking for some much-needed economic security, i urge all my colleagues to support restoring overtime protections. thank you, mr. president. i yield the floor and i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

quorum call:

mr. mcconnell: mr. president? the presiding officer: the majority leader. mr. mcconnell: i ask further proceedings under the quorum call be vitiated. the presiding officer: without objection. mr. mcconnell: i understand there is a bill at the desk due for a second reading. the presiding officer: the clerk will read the title of the bill for the second time. the clerk: an act to provide an extension of federal-aid highway, carrier safety and other programs ops programs funded out of the trust fund and for other purposes. mr. mcconnell: in order to place the bill on the calendar

under the provisions of rule 14, i object to further proceedings. the presiding officer: objection having been heard the bill will be placed on the calendar. mr. mcconnell: mr. president let me just indicate to all members that discussions continue on a way forward on a multiyear highway bill and we'll have more to say on that later in the day. mr. president, at dawn with congress returning to session we looted flags of the u.s. capitol to half-staff to honor the service members killed in chat nothingaway. what we saw there was a tragedy for our country was a terrible blow to everyone who loved these brave americans. we will never forget their sacrifice and we will continue to keep their families and their memories in our thoughts today. i suggest the absence of a quorum. the presiding officer: the clerk will call the roll.

quorum call:

mr. inhofe: i ask that the quorum call be vitiated. the presiding officer: without objection. the senator from oklahoma. mr. inhofe: mr. president, i ask unanimous consent that khia kauffman a detailee from the environment and public works committee from the u.s. department of transportation have floor privileges for the duration of consideration of h.r. 22, the underlying vehicle for the highway bill. the presiding officer: without objection. mr. inhofe: well, mr. president, this is -- we're going to be moving to the highway bill. in fact, we're going to have the motion to proceed today at 2:15. i think it's important that people realize the significance of this. you know, we do a lot of things

around here that are not really critical, there are some things that are, you can -- you read the constitution sometime when you have nothing else to do and what we're supposed to be cog here are two things, defending america and roads and bridges. that's what it says in article 1, section 8 of the constitution. so any time you're sitting around with nothing to do, you ought to read it and realize what we're going to do at 2:15 today is very significant. passing a long-term transportation reauthorization bill has been my top priority since i resumed the office of the chairmanship of the environment and public works committee and it's probably the second most important thing we do second only to the defense organization bill. now, in the hearing we had a hearing, the first hearing we had in january, we had secretary fox, secretary of transportation who is just really an outstanding secretary, and he is just as

concerned about this as we are. senator about boxer and i brought in secretary fox as well as local government leaders to share the importance of ongoing federal and state partnerships in building a modern infrastructure system. since that time my committee has put forward a bold bipartisan bill called the drive act. it's really -- it really is significant and it is something that -- it's not partisan. there's no such thing as a democrat bridge or a republican bridge or a democrat road or a republican road. and so -- i'd have to say this, though that historically the republicans have been recognized as the kind of leading in this area. it was way back in the -- the -- the -- the very first one, of course was back in lincoln's day but the transcontinental railroad was

spearheaded by lincoln. the panama canal was roosevelt and, of course, the interstate highway system was eisenhower. eisenhower recognized that we can -- weakened defense made our nation vulnerable to the world. he was concerned about it. in 1952 when he first started in on this thing he commented that it was every bit as much for defending america as it was the economy, being able to transport things around the state. and laying out the full data -- interstate system, he envisioned it to be the backbone of the economy fueling the growth of our g.d.p. our cities and competitiveness and all of that, this vision in certainty maximized the economic and mobility benefits of the system. businesses and individuals knew that they could locate somewhere in -- on a future interstate system and be connected not just

to the rest of the country but the rest of the world. i'm afraid that this legacy system which was built 50 years ago had a design life at that time of 50 years it's actually 60 -- well, close to 70 years ago. we're beyond our warranty peered right now. in danger of eroding a half century of investments without modernization and reconstruction. we're on borrowed time with the system that's in full need of restoration. our national interstate system currently has a maintenance backlog of $185 billion and that's in about 47,000 miles of interstate. that's just to bring it back to the design it was in 1956. maintaining eisenhower's vision of the economic opportunity and strength in defense requires a continued partnership between the federal government and the

states which is the hallmark of the drive act. yet due to 33 short-term patches since 2005 -- i have to say this because this is significant. we should be operating on a transportation reauthorization system all the time. the last one we did was 2005. i was the author of it back in 2005. i say to the chair that was a five-year bill. and since that time, we went through some 30 different short-term extensions and a short-term extension it doesn't do any good. you have to have a transportation reauthorization bill in order to get all the reforms that are necessary and to have time to handle the major -- the major large problems that we have to deal with.

passing a long-term bill is crucial to many aspects of day-to-day life in america. more than 250 million vehicles and 18 billion tons valued at $17 trillion in goods traverse across the state every year. the country every year. yet every day 20,000 miles of our highways slow beyond the posted speed limits or experience stop-and-go conditions. the highway system is only 5% of the nation's total roads but it carries 55% of all vehicle traffic, and 97% of the truck borne freight. we're talking about 97% is only 5% of the system. now we have the responsibility to pass a long-term bill. the highway trust fund currently needs $15 billion a year to maintain the current spending. let me go over that.

back when we started out the highway trust fund, that was percentage. you drive up and you pay a tax when you buy your gas that's supposed to be taking care of the highways and it did. i can remember when i was serving in the house the biggest problem we had at that time was we had too much money in the highway trust fund. we had more than we needed. when president clinton came in he wanted to rob the trust fund for all his programs and he got by with it for a while. that's not the problem anymore. the problem now is there's not enough money in it. we have a lot of, you know, -- it's -- the situation has changed, people are not using as much fuel and so we fall short by $15 billion a year of having the amount of money necessary today to continue today's spending levels. that's d 15 billion. this is a six-ier bill. that means $90 billion is going to have to be in excess of the amount of revenue that's derived

from the highway trust fund. the drive act -- that's what we call this -- the drive act will put america back on the map. as the best place to do business. the drive act has several components that support our growing economy. it prioritizes funding for poor transportation formula programs to provide states and local governments with strong a federal -- a strong federal partner. it prioritizes the interstate highway system and the bridges at risk for funding shortfalls. it creates a new multibillion-dollar-per-year freight program to help states provide the efficient transportation of goods. targets funds for major projects. this is the brent spence bridge that goes from kentucky to ohio and actually takes transportation also to indiana.

this is a very old bridge, and you can see that it's going to have to be replaced. these are the huge things you can't do with short-term extensions. you're going to have to have a major bill like the one we're having right now. and lastly, the drive act provides greater efficiency in the project reforms that put d.o.t. in the driver seat during the nepa process by requiring agencies to bring all the issues to the table keeping them under a deadline, eliminating you you eliminating you don't pplication. one of the problems you have with the environmental requirements they end up delaying projects, and so this bill gives exceptions. and let me say that i was very proud of senator boxer. you know, senator box certificate a very proud liberal. i am a very proud conservative. one of the few things we agree on is the highway bill. the highway bill that does require some changes that allow

them to go ahead and keep working in spite of some of the nepa requirements or the environmental requirements. this gives bridge projects special consideration with new exemptions from the section 4-f the historic property reviews for concrete and steel bridges a new exemption from the migratory bird treaty act for bridges in serious condition. now, this sounds kind of off the wall bun of the problems is the -- but one of the problems is the swallows. they go in there and nest this there and they're supposed to be repairing bridges. the swallow is not listed as an endangered species. the migratory bird act does give them protection in this wave of bridge construction. it also enforces greater transparency for federal funds shows taxpayers where the moneys are being spent. this is just a brief overview of the act much as the drive act progresses on the floor i

intend to address a significant -- the significance of each program in more detail. the most important point i must address today is that our bill sets funding levels for the next six years. this is at the very least what the federal government should provide so that states, local officials, and the construction industry can gear up for the large $500 million to $2 billion major highway projects and bridge projects that -- so we can get them off the ground. they have to get ready for it. that's what this bill does. thousands of projects across the nation are currently at jeopardy and construction will come to a halt unless legislation becomes a reality. future projects like -- let's go back-- well you saw already the brent spence bridge in kentucky and there is also the $2.6 billion mobile river bridge in alabama.

this right here is a projection of what it will look like. this is as it is today. this would be impossible without something like a six-year bill. here in d.c. the memorial bridge is literally crumbling into the poo poe mack. people don't -- potomac. people don't understand what happens to these bridges but you can just see in that in our case, in oklahoma, we had a bridge that in 2005 as a part of that legislation, we were able to repair it. in 2004, right before that took plashings one of the chunks came off, just like you're seeing here from the bridge and actually killed a young lady who was driving under it with her three young children. this is the arlington memorial bridge. it was built in 1932, and something has to be done with that. we'll be able to do projects like this.

i think more than just the small part of the economic success enjoyed by the united states over the past 50 years has been the interstate system. but today we literally sit at the crossroads of its future. and the solution is urgent. this is why barbara boxer senator boxer and i are bringing the drive act to the senate floor as a solution. it will ensure that states have the tools and the certainty to make the necessary new investments to build -- to rebuild eisenhower's vision, to fight growing congestion, to maintain the mobility of gooses and services to -- of goods and services to keep the economy going. by passing the drive act congress will be ail to pave the way to shall -- be able to pave the wait for america's infrastructure. the importance of this is that the only alternative is to have short-term extensions. i'm talking about one- and

two-month extensions, but you can't organize your labor. the cost of that -- and by the way i say this to my conservative friends. they're friends and i can say this since i have been ranked as the most conservative member of this body, that the conservative position is not to oppose this massive highway bill that we're going to have but to oppose the short-term extensions. it costs about 30% more for short-term extensions than it does a highway reauthorization bill. and that's why this is so important. later on i'm going to go over many of the other bridges and structures around that are going to have to be addressed. in the meantime, this is something that is -- we're supposed to do and i'd kind of end up where we started off and that is there's no document that nobody reads anymore called the constitution. you read that and you'll find out what we in this body are supposed to be doing.

it's defending america it's providing bridges and roads. so as we progress on this, there won't be time to go into anymore detail now because we have members wanting to come down and use both the republican and democrat time between nowed and the noon hour -- between now and the noon hour. but at 2:15 we're going 0 have a motion that we'll be voting on to move to the consideration of this bill. it doesn't say you have to be for it or against it, you want to change it, if you want amendments, you have to get to the bill before you can have amendments. so it would be to proceed to the bill a motion to proceed will take place at 2:15. now, i want to tell all the members that are out there that if you have amendments, we're going to try to knock this thing out in two weeks. we're going to be down here talking about it for two weeks. but if you have amendments, that it'll -- and you want a chance to offer your amendments, you can offer them.

but bring them down, file your amendments. if you don't do that, we'll pass a deadline and you won't be able to do t so i encourage our members to do that. i look forward to the next two weeks of discussing and passing the second-most significant bill that we'll consider this entire year. with that, i'll yield the floor and suggest the absence of a quorum. the presiding officer: the clerk will call the roll quorum call:

quorum call:

a senator: mr. president? the presiding officer: the senator from louisiana. mr. vitter: mr. president, i ask unanimous consent to call off the quorum call. the presiding officer: without objection. mr. vitter: thank you mr. president. mr. president, i come to the floor today to again bring up a very important issue. it's important because it impacts a major part of our lives, a major law that congress passed several years ago. it's important because it goes to a fundamental principle, what should be a fundamental principle of american democracy that what washington passes for the rest of the country, it should live with itself. i'm talking about the washington

exemption from obamacare and my effort with others to end that double standard. mr. president, as you remember, during the obamacare debate several years ago this issue came up. it came up in the context of a floor amendment and was an important floor amendment, one of the very few that conservatives in the senate passed on the senate floor. that amendment to the obamacare bill said that all members of congress and our staff would get our health care through the so-called obamacare exchange, just like millions of other americans would under this plan. no special rules no special treatment, no special exemption or special subsidy. that was important to say that congress would live under

whatever law passed for the rest of america. and that amendment was passed on the senate floor. it became part of the broader bill and was eventually passed into law. obviously, as you know, i opposed, strongly opposed continued to oppose the obamacare bill p and the law but that amendment was made a part of it. well after it was passed into law, it was sort of one of those cases of what nancy pelosi said. we have to pass the law to figure out what's in it, because after the fact, lots of folks on capitol hill in washington started reading the law more carefully and read that provision and said oh, you know what. how are we going to deal with this? surely -- surely we aren't going to be subjected to the obamacare exchanges the same as millions upon millions of other

americans, even though that's exactly what the statute said. well, at that point a very determined lobbying campaign got underway a lobbying campaign of many members here on capitol hill of the president. and the campaign was simple. people rushed to the administration, rushed to president obama and said oh, you need to change this. we can't live with the statute that's set and the significant section of the statute that says all members of congress need to go to the exchange for their health insurance just like millions of other americans. and sure enough, after months of that very determined and sadly bipartisan lobbying campaign, president obama issued one of his countless executive orders and edicts to essentially change with a stroke of his pen

contrary to statute a significant part of the obamacare statute. he's done that dozens if not hundreds of times and this is one significant example of that. he changed what the statute said and took a lot of sting out of that provision of the law for members of congress. and through an o.p.m. rule, he said two things. first of all, members of congress when you go to the exchange, which is mandated, don't worry you're going to have a big taxpayer-funded subsidy follow you to the exchange. unavailable to every other american at our income level completely unique to members of congress no other american going to the obamacare exchanges enjoys this. but out of thin air we're going to give you a big

taxpayer-funded subsidy that is nowhere in the statute. and then the second significant thing president obama did through that o.p.m. rule is say and members of congress this doesn't have to apply to your staff even though it says it does. you can designate whoever you want on your staff as quote unquote nonofficial and they don't have to go to the obamacare exchange at all. virtually all of my republican colleagues regularly come to the floor and rightly complain about president obama changing statutory law with the stroke of his pen acting beyond his authority. this is a crystal clear example of that. and if we complain about it in other contexts, i think we should speak up and complain

about it even when it benefits us. and so that's what i'm doing. we should not stand for this washington exemption from obamacare. we should not stand for this complete -- complete -- double standard. we should insist that we live by that clear language of the obamacare statute so that every member of congress gets his or her health care on the so-called obamacare exchange just as millions of other americans do. no exemption no special subsidy, no special treatment in any way shape or form. and i've been fighting since that o.p.m. rule to make sure we do exactly that. there will be a floor amendment this week again to pursue that end, and i urge my colleagues to do the right thing to support

that important floor amendment. and it's important to do that for two reasons. one, focused on principle. one focused on real practicality first of all the principle. i think it is a basic fundamental principle of american democracy -- certainly should be -- that what washington passes on the rest of the country it lives with itself. that should be a fundamental principle of american democracy. and so my legislation the no exemptions for washington from obamacare act the floor amendment which embodies exactly that legislation would say that. every member of congress and the president and the vice president and their political appointees get their health care from the obamacare exchanges just like millions of other americans.

no special exemption no special subsidy, no special treatment no special insider deal. and the second reason we should support that is a lot more practical and that is when you make the cook eat his own cooking, it often improves dramatically. when you force the chef to have every meal out of his own kitchen, the product often improves dramatically. and so that's what i want to do in a simple, straightforward way, abiding by the clear language of the obamacare statute itself. all of official washington, every member of congress -- the president, the vice president all of their political appointees should have to go to the exchanges for their health care just like millions of other americans who have to, as their fall-back option.

and we should do it in the same way. no special exemption noing special subsidy no special treatment, no special insider deal. it's important we say this. it's important we do it. and we have an opportunity to do it here on the floor as we debate the bill before us, and i urge my colleagues to support this important floor amendment and to lend support to the free-standing bill that i've introduced. as i travel louisiana, i have regular town hall meetings, i have regular telephone town halls when i am stuck here in washington voting. probably the biggest single complaint that i hear gets under the skin of my fellow louisiana citizens goes to the heart of this discussion. why the heck does everybody in

washington think they're above us? why do they pass laws and never have to live under them themselves? well, this is a crystal clear example of that. and what's worse the statute itself sets out that we would live under obamacare getting our health care from the obamacare exchange just like millions of other americans. if you don't believe that that's what the statute mandates, look exactly at the particulars of how congress and the president are currently getting around that through the special o.p.m. rule that president obama issued. this rule says that congress can get its health care from a special small business exchange in the district of columbia and can have a huge taxpayer-funded subsidy apply even though it's

unavailable to every other american at our income level. what's wrong with that? well, under the obamacare statute itself, that small business exchange is specifically set up and regulated and limited to small business. 50 employees or less. how did congress define itself as a small business with 50 employees or less? it's interesting, if you pull the paperwork that the leadership of the house and senate sent over to allow members to participate in this exchange, the folks who submitted that paperwork on behalf of the house and the senate who signed off on it saying everything contained therein was troupe and accurate -- was true and accurate said how many employees does the senate have? 45. how many employees does the

house have? 45. really? interesting. that is a flat-out lie. it's a flat-out lie submitted in writing by the house and senate on behalf of all of us to shoehorn congress in to this small business exchange to get extra added benefits, to get this taxpayer-funded subsidy unavailable to every other american at our income level. and that proves how outrageous this end run around the statutory language is. so again mr. president, i urge all of our colleagues to come together in support of this fix, to say yes it should be the first rule of american democracy that what we pass for the rest of america we live by ourselves. and that's important and we're going to do it in this case and

in every case. i urge my colleagues to support our freestanding bill, the no exemption for washington from obamacare act. i urge my colleagues to support the floor amendment which is the same as that freestanding bill, to pass it as a floor adam, to pass it into law through that mechanism. thank you mr. president. i yield the floor -- and excuse me mr. president before yielding the floor i would ask unanimous consent that the quorum call be equally divided. the presiding officer: without objection. mr. vitter: and now i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

a senator: mr. president? the presiding officer: the senator from indiana. mr. donnelly: i ask that the quorum call be lifted. the presiding officer: without objection. mr. donnelly: mr. president i rise today to pay tribute to admiral james winifield jr. who retired this month after serving with distinction more than 37 years culminating his career as chairman of the joint chiefs of staff. throughout his service as a senior military leader, admiral win afield has provided this body and in particular the senate armed services committee with valuable testimony and candid military advice. over the last four years admiral winifield has served as the ninth vice chairman of the

joint chiefs of staff. his vast experience, knowledge, outstanding leadership and professionalism combined with his deep respect and consideration for our service men and women, will be greatly missed. during his tenure as vice chairman admiral winifield provided military advice to not only the legislative branch but also to the president of the united states the secretary of defense, the national security council, and the chairman of the joint chiefs of staff on a wide range of complex military and national security issues during an extremely challenging period in our country's history. in a challenging fiscal and security environment admiral winifield led our military through global events and threats to include the rebalance in the pacific, iraq troop withdrawal afghanistan

transition the global threat of isil, instability in syria and russia's provocative actions in eastern europe. in addition, the vice chair played key roles in advising our nation's leaders on various counterterrorism efforts. as vice chairman, he led the development and implementation of the 2414 quadrennial defense review an effort that involved thousands of senior leadership man hours. pivotal to his role as the vice chairman he also chaired the joint requirements oversight council where he worked tirelessly to transform the processes to become more agile transparent and inclusive. admiral winifield focused on the needs of the combatant commanders and the most pressing military issues of the joint war

fighter. as so chair of the defense acquisition board he worked to link the requirements, resource and acquisition communities in developing programs to deliver appropriate capabilities to the joint war fighter at the right time and for the right price. the admiral's effort ensured our nuclear enterprise remain viable and relevant as a strategic deterrent to our nation's adversaries add mirral winnifield graduated from the georgia institute of technology, also known as georgia tech. he subsequently served with three fighter squadrons flying the f-14 tom cat and as an instructor at the navy fighter weapons school. admiral winnifield's tours at

sea included the u.s.s. cleveland and the u.s.s. enterprise. he led the big-e through her 18th deployment which included combat operations in afghanistan, support of "operation enduring freedom" immediately after the terrorist acts of september 11, 2001. as the commander of carrier strike group 2 he led task forces 50, 152 and 58 in support of "operation iraqi freedom" and maritime interception operations in the arabian gulf. he also served as commander of the united states sixth fleet the commander of nato ally joint command lisbon and the comarngdz of striking and support forces nato. his short tours include service in the joint staff operations directorate. as senior aide to the chairman of the joint chiefs, and as executive assistant to the vice chief of naval operations.

as a flag officer admiral winnifield served as the director of warfare programs and transformational concepts at u.s. fleet forces command as a director of joint innovation and experimentation at u.s. joint forces command and as the director for strategic plans and policy on the joint staff. prior to becoming vice-chairman he served as commander of north american aerospace command and the u.s. northern command. as a commander of norad and northcom he led historical advances in the working relationship between northcom, homeland security, fema, drug enforcement administration, customs and border protection, and the national guard. specifically with the dual status commander concept. in addition, he led the u.s.-mexican military-to-military relationship to an historic

level of collaboration and brought tangible results to our nation's important struggle against the fast-growing transnational criminal organizations. through his distinctive accomplishments, admiral wimnifield culminate add long and distinguished career in the service of our nation and his tenure leaves a lasting positive legacy on our armed services. i appreciate his extraordinary service, which reflected great credit upon himself the united states navy, and the department of defense. for nearly 40 years admiral add win winnifield as performed his duty with great dedication. our nation will miss his leadership and expertise. we wish him and his family all the best as he moves to the next phase of his life. personally i want to thank admiral winnifield and say good

job done and godfeed. i yield the floor. the presiding officer: the clerk will call the roll. quorum call:

the presiding officer: the senator from massachusetts. mr. markey: i ask unanimous consent to dispense with the quorum call. the presiding officer: without objection. mr. markey: mr. president 46 years ago yesterday neil armstrong and buzz aldrin became the first people to walk on the

moon. september will bring the 53rd anniversary of president kennedy's speech that launched america on the quest to land them on the moon. he set that goal for the country not because it was easy but because it was hard. i'm here today to congratulate the men and women of the new horizon's mission for making the hard work of sending a spacecraft to pluto look easy. a week ago today what had once been a fuzzy picture of pluto came into sharp focus dramatic transformations inspire everyone. as you can see nasa delivered an amazing "before" and "after" story. until the new horizon's flyby the best picture we had of pluto offered little detail of our neighbor at the edge of the solar system.

but now we can see distinct features on its surface including something that looks like a heart. who couldn't love that? thank you for this great picture. it took the new horizon spacecraft nine and a half years to cross the 3 billion miles between pluto and earth but it was a mission much longer in the making. in the late-1980's a group of scientists came together to advocate for sending a spacecraft to the edge of the solar system. such a mission would tell us more about pluto and once again, push back the edge of the known frontier. many of those scientists are still involved with the mission including the massachusetts institute of technology's own richard benzel. while these scientists pushed to get the green light for the mission, it was only achieved by

the partnership between nasa some of our best united states universities and the aerospace industry and the hard work and innovation of their scientists, engineers, and staff. and from just the initial information returned this week, scientist have to rethink what they thought they knew about pluto, its moons and its space environment. images come back of mountains of frozen water as high as the rocky mountains on on pluto. and on its moon, sharon, we can now see deep canyons a row of cliffs and troughs stretching 600 miles as far as from washington d.c., to atlanta. instruments on the new horizon's probe confirm that the pluto system contains a large amount of frozen water. that is an essential building block of life. and one thing scientists didn't

see: many of the meteorite impact carte craters suggest that pluto was geologically active recently. the discovery from the flyby will continue for years to come. not only will scientists learn more but they will also train the next generation of planetary scientists. i am proud that the youngest member of the new horizon's team is alyssa earl, a graduate student at m.i.t. the new horizon's team is following in the great american exploration tradition. they are pushing back the boundaries of geography knowledge, and technology and in doing so, they are inspiring the world. no matter what you think of the classification of pluto as a dwarf planet, we can all agree that the new horizon's mission is already a massive achievement. i look forward to the further

revelations it will bring as its data streams back to earth and travels to the far edges of our solar system. finally, i would like to note that in the same week of makings to pluto nasa also commenced the continuous monitoring of the sun and the earth the only home humans have known thus far. i hope the events of this past week confirm the importance of using all of nasa's tools to further the exploration of our solar system and universe and better understand our own planet as well. mr. president, i yield back the balance of my time. and i would call -- i would doubt the presence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

wok wick mr. president -- mr. wicker: mr. president? the presiding officer: the senator from tennessee. mr. wicker: mr. president today i rise -- the presiding officer: the senate is in a quorum call. mr. wicker: mr. president i ask that the quorum call be vitiated. the presiding officer: without objection. mr. wicker: thank you mr. president. i'm here today with our senior senator, lamar alex danner, to -- alexander to speak on something very tragic that occurred in our home state and in my hometown. today i rise to honor the lives

of five american heroes. the five american heroes we honor today at the u.s. capital. our community is heartbroken as has been said many times our tate is heartbroken and i believe our nation is heartbroken that these outstanding young men died in the way that they did. but we honor their lives and we mourn their loss we think of the greatness that they embodied. thomas cul son carson holmquist, skip skip wells and david wyatt. i think ass nation has learned about these individuals carrying out what many would consider to

be mundane activities in support of our u.s. military, those are protect us, i think as they have gotten to know these individuals, they understand the greatness that they symbolize. most of them having served in afghanistan and iran -- i mean in iraq. and some of them younger beginning their careers. but all having excellent backgrounds and exemplifying the very best that america has to offer. so our nation mourns, our community mourns, and we have lost five of our greatest. also hospitalized in chattanooga today is a young man named dennis pettigo whose mother and father both served on the chattanooga police department. and i think people have heard all around our country the tremendous heroism that was exemplified by the chat chattanooga

police department who rushed at this assailant and brought him to his end, by the way trained to do so, trained to go at them. this was not a swat team. but these were patrol squads who were trained to deal with this kind of situation and no doubt saved the lives of other people in doing so. so we honor men and women. we honor -- so we honor them. we honor all of them. we celebrate them. but also as a community we have been harmed, and our community has prayed. we had a vigil on friday night that was extraordinary. senator alexander was there with our governor, our mayor county officials and others. extraordinary time of our community coming together around what has happened. and i do believe that the thing that people all over the country and the world have heard about chattanooga strong is true, and i think our community will be even stronger because of what has happened. but our nation must understand where we are in the world and that these types of activities

possibly, possibly will continue. i had a very good conversation on friday with the pentagon to talk about what they are doing. i know threat activity has been rising for some time, and they're looking at what needs to be done to ensure that this doesn't happen again. i had a very good conversation this morning with senator mccain, who i know is leading efforts with house members to figure out in the ndaa, a piece of legislation that we can deal with very quickly here and just in the next few weeks ways of making sure that we have policies to protect. so our community is praying for these individuals. it's my hope that we here will put in place policies to ensure that we appropriately protect these individuals. but in addition to that, there are tangible things that we can do. i know that when things like this happen there are certain

types of federal benefits. i know our offices are working together to coordinate that in addition to outside groups. i do want to say that thankfully our community has come together to make sure that these families have the financial support that they need beyond that. and there's an effort underway in chattanooga now. i hope people in the world will participate to make sure that, again, the financial support that is necessary to sustain these families in light of what happened occur. my friend and a great tennesseean, or at least we claim him as that -- he lives in chattanooga for part of the year -- peyton manning has lent his name to this effort and my sense is you're going to see a generous outpouring to see at an at-base level some of the members of these families will be dealt with in an appropriate way. let me close by saying this, our community has been shocked as has the world.

we have lost five outstanding people and it has shaken their families -- shaken their families. i had the opportunity to meet with the fream briefly of the -- family briefly of the fallen sailor of the last person to pass who was riddled with bullets and fought, the erlanger trauma squad worked with him for hours and hours and hours to try to save his life. and finally after a tremendous fight, he lost his life, again in the line of duty. but the needs of these families are great. and while our community is praying they're going to try to meet the needs in other ways, but how do we join? we have mentioned what comes out of this. the fact is i feel like our community, our community is like none that i've witnessed from the standpoint of its compassion to others.

my sense is the way our community is going to respond to this is much like i would refer to in genesis 12 where god said to the jewish people that they were blessed to be a blessing. i think that most people in our community believe that in our community and in our state in our nation we've been incredibly blessed. and my sense is that in addition to responding to the specific needs that need to be dealt with both here in washington and back home and certainly at the state level, my sense is that our community is going to rise up and ensure that because we have been blessed we continue to be a blessing to others. that is my hope. that is what i'm seeing happen. i've never seen such an outpouring of compassion anyplace in my life. i'm proud to represent tennessee. i'm proud that my hometown has responded in the way that it has

in spite of the deep mourning and grief that we have for these outstanding men who lost their lives in the line of duty. and with that, i'd like to -- by the way we'll be introducing senator alexander and i will be introducing a resolution later today that my sense is the entire senate will want to be a part of. with that, i turn to my distinguished friend, my great colleague, one of the greatest senators our state has ever had lamar alexander. mr. alexander: mr. president? the presiding officer: the senator from tennessee. mr. alexander: mr. president i thank senator corker for his eloquent and obviously heartfelt comments. he mentioned the word that we've heard the most often since last thursday. when he and i first got word of this tragedy and the word is heartbroken. heartbroken for the lives that were lost, heartbroken for the families who are remaining heartbroken for the community of

chattanooga. senator corker, you can see the deep emotion that he has as a resident of chattanooga former mayor of chattanooga that's very special to that place and that community. on friday at 5:30 in the mount olivet baptist church there was a memorial service. nearly 1,000 people attended. senator corker spoke. our governor, our governor spoke. others spoke. the police chief. i know most people in the country know about what happened that day. most of them would have liked to have been there to do what you can do at a time like this. you never know quite what to say. sometimes all you can do is just is just be there. this is especially hard because these were young men young men in the service of our country young men whose lives were filled with happiness young men who had the expectation of a

long life for themselves, young men who were filled with duty and with service. and they were living in a strong community. in chattanooga faith is strong. in chattanooga the help of -- the sense of helping one another is strong. chattanooga is a place of good neighbors. chattanooga was recently named the best big -- mid-sized city in america. everything in chattanooga seemed to be going the right direction and then this. so it's especially heartbreaking in the community of chattanooga. and i said on friday that i in trying to think about what i could add to the words that were being said, i thought of the time in 1985 when 289 members of the 101st airborne division lost their lives in a plane crash in newfoundland and president reagan came to fort

campbell to meet with the families and talk about it. i was governor then and i drove up to here what he had to say. he spoke of those men and women then as these five were, as peacekeepers, there to protect the lives and to protect the peace, to act as a force for stability and trust for our country. their work, president reagan said at the time of those 289 which can as equally well be said of these five, their work was the perfect expression of the best of the judeo-christian tradition. they were the ones of whom christ spoke when he said blessed are the peacemakers for they shall be called the children of god. president reagan said of the 289 who lost their lives 30 years ago what could be said of these five this week. what a poet said of soldiers in another war, they will never grow old. they will always be young. and we know one thing with every bit of our thinking

they're in the arms of god. chattanoogaans said last friday the two words: chattanooga strong. they were repeated by senator corker, by the governor, by most of the members of the community people standing up supporting each other supporting the families who had been heartbroken by the loss of their loved ones. i'm enormously impressed with the people of chattanooga and with their current leaders the mayor, the governor, their senator who is also their former mayor. and i believe that chattanooga will be strong, but i think it's important that we reflect here in the united states senate how much we grieve with chattanooga with not just the families, not just the people who knew the five but as we honor the five we honor the city and its response to this terrible tragedy. and i will pledge to continue to

work with senator corker to do all that i can to help those five families and to help create an environment that can keep chattanooga strong. i thank the president. i yield the floor.

quorum call:

mr. mcconnell: mr. president? the presiding officer: the majority leader. mr. mcconnell: i have five unanimous consent requests for committees to meet during today's session of the senate. they have the aprofit of the majority and minority leaders. i ask unanimous consent these requests be agreed to and printed in the record. the presiding officer: without objection. mr. mcconnell: so, mr. president, after literally months of discussion, and a lot of cooperation from chairman and ranking members and staffs and members from both sides of the aisle, i'm happy to announce that senator boxer and i have an agreement for a multiyear bipartisan highway bill. we hope to be able to discuss these agreements, this agreement at our conferences shortly. this is a six-year highway

authorization that will allow planning for important long-term projects around the country. and the bill provides three years -- three years -- of guaranteed funding for the highway trust fund. senators from both parties know that a long-term highway bill is in the best interests of our country, so we'll continue working together to get a good one passed. thanks to the dedication of both republican and democratic senators and their staffs, i'm hopeful that we will. i want to thank some other people who have been involved in getting us to where we are. in particular i'd like to thank chairman jim inhofe chairman orrin hatch chairman john thune, and chairman richard shelby for their efforts to reach a bipartisan accomplishment. mr. reid: mr. president? the presiding officer: the democratic leader. mr. reid: mr. president if we

haven't -- have an agreement i'm sure a we do because i have great respect for senator mcconnell, senator boxer and, of course, senator inhofe. we have this issue though, -- we haven't seen the bill. there can be an agreement but until you put these things in writing it's a lot different. we have a number of committees who need to look this over in in addition to the p.e.w. committee, we have the finance committee we have to deal with and the banking committee we have to deal with. i want a highway bill. i've been -- had the good fortune of being chairman of the e.p.w. committee twice i've worked on a number of long-term highway bills in the good old days when we did that and i hope we can have a long-term bill again. but we can't go forward on a bill until we've read it and until we've seen it and studied

it. this doesn't mean a study for several days, but we need to look at this document. i need to have a caucus so we can look at it. i would hope that my friend, the republican leader, would be patient and wait until we get something we can study and i will have a caucus of my caucus and we'll sit down and decide how we should move forward on this matter. i repeat, i am -- admire all the hard work that that be done by everybody to this point but we have to make sure that we move forward this in the right direction. i understand all the issues, probably more than most, about all the time involved in a bill like this. there are all kinds of potential ways to stall this. we're not going to do that on our side. we're going to be as expeditious as we can and once we get something we understand and can read and as i said, study

before we can understand it. the presiding officer: the senator from california. mrs. boxer: mr. president before my leader leaves the floor, i want to thank him because he and senator durbin senator schumer, and the rest of the leadership team has been pushing hard for a bill. and it is a my leader knows i've been negotiating in good faith with the republican team headed by leader can mcconnell -- leader mcconnell for a long-term robust bill. i agree with leader mcconnell, we have an agreement in principle. i also agree with my leader, we've got to look at the details. and so my work now turns to get ting those agreements up on the internet so people can read for themselves the various titles. it's my understanding that we'll start to see that language

momentarily. i know we're working hard with my chairman inhofe to make a couple of changes to e.p.w. but we have -- we have reached an agreement on principle on a six-year bill with three years of funding and the text will be printed shortly. i believe it is a breakthrough. the highway trust fund goes bust in ten days, and this is what's happening across the country. unreal that in my state we would have this bridge collapse, i say to my friends now we can't get -- commerce can't move between california and arizona because we've had this collapse on interstate 10. and how strange this would be that this -- thank god no one lost their life in this but this bridge was rated structurally obsolete. so we knew it couldn't bear all

the traffic. it's a huge amount of traffic. so this is my poster child for why i'm working so hard on this. but i do want to say to my republican friends, thank you because we have really worked hard. and, of course i'm looking at betina and neil, i was talking to them at 11:30 last night and in the leader's office resolved the last couple of issues, with his help. but we have to see the text because it's not right my friends on the other side want to see the text of the iran agreement. this isn't exactly the same but we do need to see the text. so i'm urging everybody to get the text up as fast as possible so we can vote as soon as possible. this is a breakthrough, but we need to see the details. i want to thank leader mcconnell because this has been a difficult negotiation but i think one that is going to bear fruit in terms of millions of jobs and thousands of

businesses in much better shape. thank you very much. the presiding officer: the majority leader. mr. mcconnell: the cloture vote that we were originally going to have at 2:15 will be pushed back several hours to 4:00 p.m., and i would just add in in addition to the comments of the senator from california, to thank senator inhofe, who was in the room -- right here -- nobody has been a bigger advocate for a multiyear bill than the senator from oklahoma and despite the dramatic philosophic differences between the senator from california and the senator from oklahoma when it comes to a transportation bill they have been a remarkable team over the years and so i want to thank my chairman as well for an extraordinary contribution to

all of this. i yield the floor. mr. inhofe: mr. president? the presiding officer: the senator from oklahoma. mr. inhofe: yeah, mr. president, i appreciate very much and i would say working in concert with the senator from boxer has been a pleasure. a lot of times philosophically in this room here we'll disagree with each other on things but then when it he gets down to what we're supposed to be doing here i have to remind people right often if you read the constitution what we are supposed to be doing here -- i'm talking about members of the united states senate -- we're supposed to be defending america and roads and bridges. that's it. so these -- this by far is the most important thing that's going on now that we have the defense bill behind us and i look forward to making this a reality. the idea of a six-year bill is very significant because you can't do the big projects. this morning on the floor i was -- with charts i showed all the different big -- the spence

bridge between kentucky and ohio these bridges and projects that have to be done. it has to be a long-term bill in order to do that. also shared this morning the experience i had i-35 bridge that we put into the last major bill that we had was 2005, we put that repairs that was in october, we -- oklahoma city, we had a death of a lady and her three children driving under a bridge with concrete falling off. so we've got to repair america. this is the first step toward that repair. it's very important that we proceed to the bill and i'd suggest to people that if you don't like it, if you plan to volunteer against it, that's fine but bring it out here so we can discuss it, we can discuss the merits, the demerits and we can also start working on amendments. and by encourage any member listening right now to bring amendments down. bring them down because when we proceed to the bill i'm going to

be down here on the floor, as long as we're in session and wanting to get to these amendments. so it doesn't do any good to wait until the last minute and then show up and say i have an amendment on the day of passage of the bill. we will have deadlines to get germane and nongermane amendments up for consideration we have to have them down here and if you miss a deadline you won't have that opportunity. it's up to the members now to make sure that happens but before we can get to that, the one thing that has to happen is we have to proceed to the bill, that has to be passed at 4:00 today. with that i yield the floor and suggest the absence of a quorum -- let me withdraw that. i ask unanimous consent that the senate stand in recess as if under the previous order. the presiding officer: is there objection? without objection. morning business is closed.

under the previous order, the senate stands in recess until 2:15 p.m.

>> at some honest as if they were a matter. >> freedom breeds inequality. >> always to the right and almost always in the wrong. anything complicated or confusing. >> there's not someone in their

ear. and now today i believe someone is saying the numbers are dwindling, talk about hot topics, topic number two whereas i don't think that was the norm in tv at the time and i don't think these guys needed that. >> as you mentioned the moderator of the distinguished ms. mann who i think he was moderating and disappears or sometimes five or four minutes. today they would not the moderator jumping in every 30 seconds. everybody at abc just stood back and let the fire burn. >> president obama stopped in pittsburgh to talk to the veterans of foreign wars national convention when cbs

tweets president obama said 100% of americans must honor the sacrifice in service of the 1% in the military. late this morning the white house saying flags across the country at half staff through saturday. republican leadership in congress ordered the flags on capitol hill at half staff, to come and to honor those service members killed in the chattanooga shootings. john boehner tweets this picture. for more of the white house can we take a look at this morning streamed to you. >> host: looking at the white house and congress talking about specific issues. join us for that discussion kristina peterson with "the wall street journal." she covers congress with that publication. also jeff mason of writers come other white house correspondent. good morning. just go good morning. >> host: i can't think of any event in washington that feels that these iran nuclear deals. kristina peterson, what has been

reaction since the amount that the passage of the deal, specifically where congress acts on the deal. >> guest: republicans were stretching on in vienna and it became clear that they were probably not going to like this still very much and that has been reinforced and has been released. there has been no outbreak gop support that i can think of him adjust people discussing deep skepticism very doubtful this will stop iran from being able to produce a nuclear weapon. democrats have been a lot more guarded. they said they want to take time to read the bill and talked to experts in the hearing that her thumbnail. what we start to see his democrats starting to decide one way or another if this is the deal they can support. so far we have seen some encouragement but a lot of questions people say they have about the deal.

>> host: after denouncing the u.n. had passed his plan for tehran as well. >> guest: just go down with lawmakers really resented. they felt the white house was not respect dean the fact they had fought quite hard to get the legislation in place and give them 60 days to review the agreement. the u.n. first in and around them. it is my understanding they are still 90 days before the u.n. agreement will take into effect to conduct its review. we didn't really see democrats saying this is the reason i'm not going to vote for it. it was more the irritation that this is not necessarily a dealbreaker. >> host: with all of that reaction, jeff mason, what is the white house has raised wants? >> guest: the white house knows congress needs to look at and try to put on a show of patience for that. wanting to answer questions, wanted to get out there with

lawmakers and say this is what is in the deal and this is why the deal is good. behind the patients there's also some impatience coming already about look, we spent a lot of time on this deal. it is a good one. don't question it. not so much don't question it but don't question her motives behind it and don't question the fact that the something good for the american people. >> i don't think the white house wanted this 60 day review period. there was a lot of resistance when it came out and it seems it is ultimately allowed it to go forward and became clear there was likely a veto. >> it became clear they had to accept that. it is interesting to hear the white folks say the men and women will take a 30 day recess. i spend a lot of time on the golf course in the next 30 days. >> host: you also see secretary of state kerry on capitol hill. it is a hard sell by the administration.

ask out it is a hard sell. you have kerry, moniz not only appealing to people in congress but to the allies across the world. you have defense secretary carter going to israel and saudi arabia. so it is a hard sell both at home and abroad. clearly it is especially important because in many ways it looks like it would lose faith and much more than that if congress did not deal with it to go through to work together. indeed the sanctions regime helps give the united states and its allies a lot of credibility while a ramble fall apart. >> host: kristina peterson, have you ever seen the effect to be on a specific obama administration matter? >> guest: we thought in trade when it was clear that was a typo. what is interesting is the administration has been working

with lawmakers for a month keeping him on the negotiations and they've really been trying to do the groundwork to build support. one of the most effect players as energy secretary ernest moniz. democrats and republicans say is really knowledgeable, does have a background in nuclear physics. they feel he's very credible on the front and believe he's not spending them. >> guest: fascinating player, moniz. it was interesting to see him looking unusual compared to the others with longer hair. somebody who really knows what he's talking about and i'm not surprised the administration is trying to use the credibility. >> host: we will talk about more issues besides this one. our guest with us to talk about congressional white house issues this weekend as we head towards the great. kristina peterson of "the wall street journal," "wall street journal," transfer of writers. (202)748-8000 republicans.

if you want to ask our guests questions about this a rather issues facing congress or the white house you can also tweet your thought as c-span wj or on facebook.com/c-span. specifically legislators that the administration targeting the iran deal. >> guest: the big dog is senator charles schumer. he is in line with the next democratic leader in the senate and he has not tipped his hand how he is going to come out on this deal. because there are some powerful pro-israel groups that are opposed to it, that could be a factor for lawmakers from new york and new jersey who have large jewish can issue is and it's not clear yet how that will play out. he would certainly be an important person in the state. he also had the top democrat on the foreign relations committee. ben cardin at the top democrat

on that panel. also chris cairns. these are people that lawmakers look to see how they are reviewing foreign policy matters. president obama recommended he is to be the top democrat on the panel and has been the most critical if any democrat on the hill so far. he hasn't said he will oppose the deal yet, but sharply questioned many provision so there are some bellwethers aside from the centrist democrat senator heidi heitkamp, senator joe donnelly and on the house side israel has been extremely skeptical of the new york new jersey florida democrat sorted key to watch. it will be interesting to see if any republican proposed this deal. there is very little evidence that will occur. >> host: we basically see forums going on as well and that is specifically the white house. >> guest: that is part of the heart so we talked about earlier. you saw the president in his news conference last week began

by saying take a look at this deal study it closely. i want my staff to be available. we are available to mentor. is what you're doing. the stakes are so high for the administration politically it's a legacy for the president as well, so getting support, particularly from his own party. getting a nod of approval from some republicans would also be in there. post it plays golf as part of a strategy or something else going on. >> guest: it sure looks like it was part of the strategy. yesterday the white house briefing room josh was asked about this and he said this had been in the works for many months and tonight they had anything to do with iran and that is a pretty hot day probably they would've preferred to be in an air-conditioned room if they were speaking about

iran. on the other hand, the president doesn't play with members of congress very often. almost never appeared many calls on saturdays and sundays, which he does nearly every weekend, it is with his aides are his friends. it is hard not to raise the question why these guys and why now. >> host: kristina peterson the president spent a lot of time on capitol hill and members of congress. the issues come up and it's got a team doing that for him. just go there was a reception for democrats a week ago before the agreement was signed. you can tell when there is something the white house wants to see happen on capitol hill, there is an uptick in social activity and it seems hard to believe it would be a total coincidence. >> host: let's hear first from scott in san antonio texas. democrats whine, scott, thanks for calling go ahead. >> caller: hi, christina i think i would like to get a response to you regarding this.

all we witnessed since the republicans have been in office against the president is that they've gone totally against everything he's tried to do because they don't want him to have any kind of a positive legacy. they want to see him leave his office. i understand these people are politicians and everything, but you would think that they would put the country ahead of their politics. you know because simply you know, they want his legacy to be something that is totally negative. and so i would really like to hear you address that particular question please. >> guest: share i think you are right there is a fair amount of hostility between congressional republicans and the president. there has been at least one big exception to that which is

heated seats top chambers only happened because there was support of a large number of republicans given that so many democrats were opposed to this. certainly on the iran deal you are singing prolactin from republicans to endorse a big part of what could be the president's foreign policy legacy, but on the domestic side one counterexample and potentially some more minor things i could get bipartisan support like cybersecurity legislation. >> i would add to that the president realizing republicans or in many cases not giving him support he wants for his legacy is brushing that aside and take initiative to work on things that will affect his legacy that he doesn't need support for her. what is done in cuba yesterday he saw the flags go up again. the cuban embassy here in washington and also the cuban

flags at the state department. also this iran deal. he and his congressional support, but the fact he pursued the negotiation again as a way of him showing us is something i can do and something i'm going to do. not just for his legacy that because that is something he believes in him once his presidency to stand for. >> guest: unlikely that storks more gop opposition and executive orders and the fact the every india was not as a treaty but an executive agreement designed to go around congress to some extent. that worsens the tension. >> host: from missouri, mike you are next. go ahead. >> caller: -- president obama and political people. he must have one -- [inaudible] yesterday on the news i heard the white house is floating some

type of legislation to allow certain social security recipients not to own a firearm. what a great political move. now this would have been newspapers social security bike myself from a vietnam veteran. this will blow up other presidents trying to take away firearms. this will overshadow the iranian deal, the iranian issue. whoever came up with this idea. what a brilliant idea. thank you. >> guest: looks like that as a compliment and criticism couched in one comment. i would tell you the president does have political strategists working in his white house along with the policymakers and they are working on both domestic and international foreign policy strategy out of time. i am not sure if these two issues are connected the way the

caller suggests. for sure they've got people working on both of those things and gun control is an issue they care about although not something i think the president expects to make a lot of progress on. >> host: george from west virginia, hello, good morning. >> caller: good morning. thank out for c-span and fox news. that is how i get all of my news. you know the thing is i can't understand. i'm a retired sergeant in the united states were in court and army and the korean war and second world war. i can understand in this administration because i'm a conservative democrat in this administration went so far enough to do some illegal bold. it'll take years to come back to the senate democratic party. they are showing what happened in past elections, how they got wiped out of the congress in the senate and everything.

i can understand where their brains are. then they learned the lesson 50 some years ago with the korean war deal. it is the same thing all over again. iran is worse than north korea. you cannot trust iran even while they were negotiating they had marches and banners all over the place, dumbest americans, kill americans. and yet this president and john kerry of all people to negotiate with his steel of the vietnam war. the way he downgraded our military in the hearings and everything. i'm going around the country to entice all veterans to call their congressmen and senators and go against this deal 150%. i am going to make it -- >> host: we appreciate the call. on the every of the outcome of the trade deal, talk about the

president and the attitude or stand towards these last years. >> guest: it does seem like that is encouraging lawmakers to support the iran deal but the base is going to want to see the president's foreign policy legacy affirmed in something that could stretch well into the administration with no support for it with lawmakers that do have a large chunk of that left side of the base. just go there are times when his key supporters felt like he was not far enough to the left. the caller disagrees with that. he has made some moves that help shore up the space on. we will see more on climate change this year that people on

the left care about a lot. as far as foreign policy is concerned, is one of the promises barack obama made a senator and presidential candidate in 2007 and 2008 the united states should be open to negotiating with enemies and that is what he has done towards the end of his president day. with cuba and iran. it is not something the presidential candidates be they republicans obama does somehow another election to run for. i think he feels pretty comfortable where he is. >> guest: as you mentioned, trade is the one sticking point this year. the deep backlash from union groups and democrats supporting

trade could pay the price in 2016. >> host: tony is up next for a guest. go ahead. >> caller: good morning, c-span. you're really not getting anything done. this is constant every day every month, every year. but let me say this. it is real. israel controls are congress as a democrat than republican. it's an important deal because i'm against war. i'm a military veteran. i served in service for 21 years. to me say this. i don't understand why they avi. saudi arabia is a state sponsor of terrorism. not iran. if you sell israel it doesn't

matter if you have terrorists. if you don't it does matter. just thought i would say it's an interesting issue in both israel and saudi arabia are important allies. their allies the president has decided particular secretary carter to speak to after this deal because they're very critical in the region. clearly there are differences the u.s. has with notes of them. the president's differences with prime minister benjamin netanyahu particularly on the every and deal has been very clear and played out very publicly both here in washington when the prime minister came to speak to congress. saudi arabia, there's many issues from human rights to this deal as well. he saw saudi arabia and other allies through washington to

talk about further cooperation between the two sides because of the agreement over this. they are important allies. though there are differences they are they are critical allies to this administration in going forward to washington. >> guest: i think it is interesting you mentioned israeli prime minister benjamin not do -- that yahoo! earlier. it is plain towards is plain towards the every deal right now. there are lawmakers have felt that was a political moment. they felt that they would be used in some sense. some lawmakers felt this way ahead of the israeli elections and there was some frustration with the lingering at israel's angry reaction that being discounted for lawmakers who otherwise might feel more sympathetic. just got now is seeing a rise in specific groups and they will be met as well.

>> guest: we do see a variety of responses supportive of the deal for aipac is vehemently opposed. we see the battle play out on the hill the next week. >> guest: those groups are very important and we all know we are approaching the 2016 election and those are very important voices. >> guest: we could also see a shift in public opinion of the deals because they are not to vote on this until they come back for their recess in early september. the environment and public opinion could be quite important in the groups have an opportunity to raise their point. >> host: especially how much they hear about it. >> guest: absolutely. >> host: washington d.c. john. thanks for holding on. good morning. >> caller: i just wanted to make a quick comment about

implying jewish leaders go to israel first and not america. i think aipac has america's intentions first. i think one of the biggest names is they have talks about the icbms and the only reason they have is to put a nuclear weapon on it. in regard to the last caller does somehow israel controls congress, if that was true all of these groups with the opposition in israel and the leftists in israel, everybody is united and it's not only because israel is being hurt. i just wanted to clarify that and thanks for your time and have a good morning. >> guest: to many people on

capitol hill and white house agrees with the caller said. >> guest: i would add industry the concerns aipac is raising are convinced lawmakers are raising independently of them. there are questions over whether obama would produce a nuclear weapon after the first decade. there are concerns over raising the arms embargo after five years. there are concerns about whether the inspections would be done. they would have anywhere anytime access. so the concerns raised by the pro-israel groups are being found in many other places on capitol hill. >> host: you heard from tranter at "the wall street journal." also jeff mason joining us from reuters. 2,027,488,002 for independence. i suspect is the iran deal goes on other issues play out through the administration. jeff mason what else is the

white house at the bonn besides the every deal? >> white house does get focused on certain things at certain times. we heard of all-consuming staff members at the white house tonight is really all they were working on. i read applies right now as well that going forward after their recess and after people get back from their vacations you'll see some action on climate change coming up. there are international talks on climate change coming up in paris in the fall that the administration to be active trying to get an international agreement to reduce greenhouse gases. it has not gone away. he obviously got what he at. they still have to get appeal with the asian countries and at some point i think we can expect to see both of those issues highlighted in the coming

months. >> guest: congress has another way on trade. >> guest: in light of what is going on with iran. >> guest: a couple other issues have to be done before congress goes on its august recess. mainly the highway trust fund will run out of money at the end of the month but lawmakers take some action. what is interesting is that the houston then it does seem to be on the same page yet. they are both controlled by republicans that they have a different game plan for how this will play out. the house has passed the highway bill that would extend funding through mid-december with the idea that would tie them time to have a larger corporate tax overhaul that would generate enough money to pay for a much longer highway bill. there's a lot of skepticism in the senate that could actually work runners expected to be a vote in the senate today on the competitive highway bill but

it's still not clear what that would be. we think some are longer than 18 is what they are hoping to produce and eventually they would like to do a six-year bill but it is not clear if they can find ways to pay for that. riding along as part of the highway bill we expect they would have some sort of amendment to reopen the export import bank which has been a big target of conservatives in congress and they did successfully -- they were not able to reopen it when it closed its doors on july 1st that there is the expert patient in the senate and likely in the house to reopen it at some point this year. >> host: the highway infrastructure being a big push by the administration so i suspect they are behind the scenes to get this done. >> guest: that is another issue why they care very much about the question as an open

one for sure. the white house is also very eager for a longer-term deal. they have been put in shooting congress to do that and having to rededicate debate every few months or years so that is something they care about. one other issue we haven't talked about that you don't hear any people talking about that it keeps getting put off. but it's lingering and talking about obama space as something people on his face care about very much. it is still unclear when the decision will come up that it will come up eventually. i have an interview with the president earlier. are you going to make a decision for the end of your term and he said yes. many people thought it was going to be much earlier than now, but eventually a dataset. >> host: are we waiting for them to weigh in officially? >> guest: we are.

the state department is running the white house. once they officially make their calls, they will go to the white house and the president will make the final decision. .. >> predictable feature of financial cycles is that after a crisis, there is a political and regulatory overreaction always.

so with the dodd-frank act which, as you know, engendered a truly remarkable flores sense of growth t-cricketing regulatory -- cricketing regulatory bureaucracy and deadweight cost along with anti-democratic grants of unchecked and unbalanced authority to bureaucrats. all the while, of course, utterly failing to address the government's own housing finance blunders which were so important. are we stuck in the bureaucratic mire of this act forever? or can we fix it? and if so, how? in particular. you're about to hear how from our expert panel. let me introduce them in the order in which they'll speak, and as we proceed through the panel, we'll be approximately

working our way through the various titles of dodd-frank. first will be my colleague, peter wallison, who is the arthur f. burns chaired fellow at aei. peter co-directs aei's program on financial policy studies was cochair of the pew financial reform task force and served on the financial crisis inquiry commission where he wrote a very enlightening and highly controversial dissent. previously peter was white house counsel to president reagan, general counsel to the treasury department and practiced banking and corporate law at gibson dunn and crutcher. financial crisis was spawned -- the financial crisis spawned dodd-frank, but do you understand what spawned the financial crisis? buy peter's book "hidden in

plain sight," in case you haven't yet. [laughter] >> [inaudible] [laughter] >> our second speaker will be chris, senior director of local government affairs strategy and public policy at bloomberg where he covers policy issues in europe, asia and the u.s. equity, fixed income and derivatives markets and the impact of capital, or the lack thereof i assume on market structure. chris was special counsel and policy adviser at the commodity futures trading commission, including the time of the implementation of title vii of dodd-frank. he's also worked for the house committee on financial services and its subcommittee on capital markets and government-sponsored enterprises. next will be j.w -- [inaudible] who is assistant professor of law at george mason university. scholar at the her cay da center

working group on financial markets and also directs the corporate federalism initiative. previously j.w. was on the staff of the financial services committee in washington d.c. he's written extensively on corporate law with his academic work appearing in the al journal on regulation, the delaware journal of corporate law university of pennsylvania journal of business law and other journals. our concluding panelist will be mark calabria, the correcter of financial regular -- director of financial regulation studies at the cato institute. mark spent seven years on the staff of the senate banking committee where he drafted significant portions of the housing and economic recovery act of 2008. that's the act that established a new regulatory regime for fannie mae and freddie mac just in time to put them into conservatorship. mark also worked at the department of housing harvard's joint center for housing

studies, the national association of home builders and the national association of realtors as well as the census bureau. as you can see, he is very experienced in the government housing complex. and, therefore, well prepared to reform it. each panelist will speak from 12-15 minutes after which we'll give them a chance to react to each other's comments or clarify points. after that a we'll open the floor to your questions until about 2:30. of at that point peter wallison will introduce our keynote speaker, chairman jeb hensarling, of the house financial services committee. so on to our panel and peter you have the floor. >> thank you very much alex. i'm going to start with just a little bit of background on the act and then cover titles i and ii, all in 12-15 minutes. reforming the dodd-frank act

will be difficult because most of the public has never heard of it and continues to believe that the financial crisis was caused by insufficient regulation of wall street. in reality the financial crisis was caused by the government's own housing policies which forced a major reduction in mortgage underwriting standards. by 2008 more than half of all mortgages in the united states -- that was 31 million loans -- were either subprime or otherwise risky, and of those 76% were on the books of government agencies, primarily fannie mae and freddie mac, the two government-sponsored enterprises that dominated the mortgage market. that chart, which some of you who are close enough can actually see gives you a visual representation of what it looked like. everything on the left blue is fannie and freddie. above that is fha the federal housing administration, and then

just above that, other agencies also doing the same thing the v.a. and some of the agricultural credit agencies also make loans. and on the right black, is the private sector's contribution which is about 24%. and we'll get to that in a minute. the remaining 24% and that's the black on the right of these mortgages were on the books of the private sector, and when all of these mortgages began to default -- that is the ones that fannie and freddie made or bought and the ones that the private sector bought -- when all of them began to default in unprecedented numbers fannie and freddie became insolvent as we know, and many of the financial firms that had bought these mortgages also got into trouble and some failed. now, instead of reforming the government's housing policies which would have seemed to have been the right way to proceed

here, the obama administration sought to punish the private financial sector with the dodd-frank act which was one of the most restrictive regulatory laws since the new deal. in effect, the administration and congress were attacking the symptoms rather than the disease. i don't have time to discuss all the details, but if you have any interest in really understanding why we had a financial crisis -- as alex suggested -- it is in my book which is called "hidden in plain sight" and was published in january by encounter books. the result of all this unnecessary regulation is an historically slow recovery from the the recession that followed the financial crisis, and we can see the slow recovery here. again, if you can see it from where you're sitting, you can see that the red line which is the recovery from the 2009 recession that followed the financial crisis is a real outlier in terms of all of the

other recoveries from financial crises we have had before. now, why would this be? supporters of the administration's policies argue that slow recoveries generally follow a financial crises. but recent academic work has disproved this. two respected academics recently looked at all 27 recessions the u.s. has encountered since the 1800s and found that those that followed financial crisis -- crises actually recovered faster than those that were originated for other causes. there were three exceptions to this rule; the great depression the period from 1989-1991 when the s&l industry collapsed and the most recent period which, of course followed the great financial i crisis. these three periods had much in common and we ought to study them carefully. they were all periods when the

government adopted many new regulations and controls over the economy. those in the new deal are, of course legendary as is the seemingly endless depression they produced. those in 1989-1991 included two major regulatory laws the financial institutions reform, recovery and enforcement act known to us officionados as firrea and the improvement act known as fdica. and now we have the granddad city of them all, the dodd-frank act. this history strongly suggests that the dodd-frank act is responsible for the slow recovery from the 2009 recession just like its predecessors. moreover, because of the huge costs that it has imposed on the financial system, it's likely that the dodd-frank act wet blanket will stifle economic growth in this country for many years to come.

unfortunately, dodd-frank seems to have become something of an icon for progressives led by elizabeth warren. they will not agree to any changes, even small ones. now, most lawmakers have heard enough from their constituents to know that the act has been destructive and impeded economic growth. but democrats are very reluctant to support any changes for fear of rousing the progressive base. in today's conference, my colleagues and i here on the platform will discuss some of the most problematic provisions of the dodd-frank act. not all but the most problematic ones. the title i authority, for example, of the financial stability oversight council which i will call fsoc and that ability to designate systemically important financial institutions which most of you if you follow this know as sifis. the orderly liquidation

authority in title ii, the volcker rule of title vi, the regulation of derivatives in title vii financial market utilities in title viii enforcement powers for the sec in title ix and the qualified residential mortgage rating agencies and the consumer financial protection bureau in titles ix and x. but i will start with titles i and ii. title i gives the fsoc authority to designate certain large nonbank firms as sifis. the sifi idea is based on the notion that all large financial firms are interconnected. you'll hear this all the time. you'll read it in the papers. they're all interconnected. and if one fails -- this is the theory -- it will drag down others. that's why sifis have to be specially regulated by the fed under dodd-frank to reduce their risk of failing. however, we can see from looking

at what happened after lehman brothers -- and this may seem counterintuitive -- after lehman brothers failed, that this idea is wrong. no other large financial institution failed as a result of lehman's failure. and this is true even though lehman was one of the largest than bank financial firms and -- nonb bank financial firms and a major player in the credit default swap market. and also its bankruptcy occurred at a time when market participants were very worried about market instability. this shows that large nonbank financial firms are not dangerously interconnected, and if one of them were to fail, it would not drag down others. so there is no need to designate nonbank firms as sifis and no need to save them when they fail. since designating firms as

sifis is unnecessary and extends the too big to fail idea to other areas of the economy beyond banking the fsoc's designation authority should be repealed. title ii of the act is called the orderly liquidation authority and provides extraordinary power for the fdic to resolve large failing financial firms including banks and nonbanks. from what i said earlier about lehman, it should be clear that there is no need for a special system for resolving or rescuing nonbanks. they can fail and be resolved in bankruptcy without harm to the rest of the economy. lehman's bankruptcy caused chaos, to be sure, but that was because it represented the government's complete reversal of a policy of rescuing large firms that market participants

thought the government had established with the rescue of bear stearns about six months earlier. million the sunday before -- until the sunday before lehman filed for bankruptcy, the treasury and the fed thought they had a buyer for the firm. when that fell through, the government had no plan b. it refused to put up the necessary funds even debtor in-possession financing, so lehman's bankruptcy became inevitable. although lehman's bankruptcy lawyer was contacted earlier in the preceding week, he was not authorized to draw any papers until late on sunday before the filing on monday morning. because of this government bungling any opportunity to keep lehman operating under section -- chapter 11 of the bankruptcy laws was lost. still, while chaos resulted from lehman's bankruptcy, i want to repeat no other large financial

institution failed. now, there is one group however, whose failure could cause a systemic event and these are the very largest banks, say those in the trillion dollar category. because of their role in the payment system the fact that they hold payrolls and perform other essential services in the financial area, it could be important to keep the largest banks from failing. the fdic has suggested that it would do this through a process it calls single point of entry spoe and which i will pronounce as spoe. under its spoe strategy, the fdic said it would use its dodd-frank powers to take over the holding company of an operating bank. and use the resources of the holding company to recapitalize the bank; thus, the bank would keep operating and would no longer be a danger of creating some sort of systemic default. the idea has attracted a lot of

favorable attention, but there's one big problem. as paul coupe yak, my aei colleague and i have showed in a recent paper, it doesn't work for the largest 12 banks, the very ones that might actually be too big to fail. the fdic may have assumed that if a major bank fails, its holding company would also become insolvent. so the fdic can then take it over under dodd-frank. unfortunately, unfortunately none of the holding companies of the largest banks becomes insolvent if its subsidiary bank is wiped out completely. if its investment in the capital of its subsidiary bank is completely wiped out. all of them have other subsidiaries and activities that keep them solvent. and if they're not insolvent title ii of dodd-frank does not authorize the fdic to take them over.

so the fdic's spoe strategy will not work. now, this is important because the fdic will then have to take over a failing bank in the old-fashioned way and resolve it in the only way the agency apparently knows how, and that is by selling it to a healthy bank. the trouble with that is that in an era when people are concerned about too big to fail, that won't work either. it will just make the buyer bank that much bigger. thus dodd-frank does not do the one thing that its proponents have claimed it would certainly do and that is eliminate too big to fail for the very large banks. there is a way to solve this problem. the largest banks can be made virtually fail-safe by loading them with contributions to equity capital from their holding company. that's the best solution to the

tbtf problem too big to fail problem. but to put it into effect, title ii would have to be, essentially, replaced. even elizabeth warren and president obama will have to recognize that dodd-frank must be amended in this way if it is to accomplish its most important purpose. thanks very much. >> thanks, peter. chris? >> [inaudible] >> thank you, alex and peter very much for inviting me here today. it's a pleasure and an honor to be here. so i'm going to briefly discuss the volcker rule and the new derivatives rules and i want everybody to have a political context, because both were highly politicized. getting through congress and then once they were put into implementation in the agency process. dodd-frank directed regulators to make substantial changes to the structure of the capital

markets without understanding the consequences of those actions. some consequences have been good, and some consequences have been bad. some of the good is that you have risk management procedures that have totally changed the industry and the way that it operates, which i'll go into later. the bad was that dodd-frank is micromanaging trading behavior, and that is impact liquidity. as a result, we no longer have freely-functioning capital markets, but what we do have -- and i hope to demonstrate this to you today -- is a capital market that has been centrally planned by washington regulators who are terrified of risk. the volcker rule was put into place by a third-degree amendment on the senate floor, and the actual text was negotiated in conference committee. there was no hearing to discuss what this would actually do to our capital markets. the policy, although it might be designed to achieve good, is to prevent banks from using deposits backed by the fdic and cheap credit from the fed to

finance speculative risk taking, also known as prop trading. when you hear the term casino gambling mentioned by washington regulators or the president this is what they're talking about. but after 950 pages of rulemaking what we have is a rule that prohibits prop trading in corporate bonds asset-backed securities and investments in serb funds. but it permits market-making by banks for customer accounts through a myriad of rules. and what we have to ask is if the policy was designed to stop prop trading, then why are banks still doing it? it's because the volcker rule allows prop trading in u.s. treasuries agencies and muni debt. now, you have to step back and say is that good for the system? if the idea was to prevent people from using taxpayer funds to trade then why is it that you can invest in a detroit municipal bond and not an ibm corporate bond? we should think about that. it's a good question. but the practical impact of rule goes to the heart of what market making is. and when washington chooses to

micromanage trading decisions it makes compliance very, very difficult. there's no reliable way to distinguish between trading for customer accounts and trading for a bank's own account. and because of this any rule that limits prop trading must eliminate market making and customer liquidity. the ambiguity of this rule is forcing people to err on the side of caution and pull back. this has led to a reduction in corporate bond inventory, and it is impact liquidity. so much so that blackrock has come out and said that the corporate bond market is broken. if the corporate bond market has de vriesed 77 -- decreased 77%, and that's been aided by the volcker rule and other rules put in place by dodd-frank. title vii was the derivatives rule. this again, was highly politicized in congress and then when the implementation period occurred. title vii requires reporting of derivative transactions, clearing of these transactions at derhode islandtive

clearinghouses trading on swap facilities which are an entirely new registered entity and margin on unclear trades. these rules were rushed. they were put through and forced down everybody's throat at five rules a week just because the only way that you can implement an ideology is to overrun people with all of the policy that's set forth in 200 and 500-page rule makings. this also led, it also revealed a tension b that is there to this day which is that the chairman at the time, chairman gensler, wanted to overlay the swaps market in the mindset and the mold of equities. but the staff only understood futures. equities are a horizontal market with many trading platforms. futures is a versal market. so there is a disconnect in the rules which made it very confusing, which caused over 100 no action letters to be issued and, basically forced people to pull back from the market when trading first happened in 2012. now, trading has gone up a

little bit between -- from last year and this year, but there still isn't substantial amount of liquidity that people were hoping for. and what you've seen is a bifurcation of liquidity pools. the euro/dollar swap market, interdealer swap market is totally bifurcated. liquidity is in europe, and you can't find it here. so some of these rules that were put in place were done outside of the apa, like i said. staff letters on the eve before a rule was going to come into implementation were put into place. that totally changes behavior, and it causes come compliance officers to stop their traders from doing anything in the marketplace. one of these rules was -- or one of these policies was actually a good idea. it was called straight through processing what that did was as soon as you execute the trade flows right through to a clearinghouse, and there's no operational risk in the system. it's a good idea, but it should not have been put forth in an e-mail to clearinghouses telling them that they had 60 seconds

with which to accept the trade. and then the day before trading goes in place, staff issues guidance on this same topic which just caused confusion all over the market. so there are ways to follow the apa and have public comment and prepare the public, and not a lot of that was done in this situation. then there is the sef rulemaking. that is any means of interstate commerce. you may have heard this term, under court law it means any means of interstate conference; fax, phone e-mail, etc. but what the chairman thought it meant was order book trading. but for my boss' amendment at the last hour, we would have just had a sef with order books. now, order books have not taken hold in the swap market to this day. even though there was a false narrative that said, oh, just put products out there, we'll trade them don't worry about it that hasn't happened. so what you end up with is we have an rfq system where a person requests quotes, gets them back and then executes, and

you have an order book. the order book is empty. i commend to you commissionery january car low's white paper, because it goes into a lot of depth on this very topic. so where did that leave the cftc? there is a provision in there that allows for a cross-border representation of derivatives trade, and the idea was the u.s. will lead and everybody else will follow. well, that's not true. and the commissioner termed it properly when he said regulatory details are being used as the weapon of choice. the u.s. actually claimed that we have to extend our rules into the e.u. and elsewhere because we know best how to regulate and other regulators will not act in our best interest to prevent risk from flowing back to the united states. well, i can tell you i've gone to europe numerous time over the last three years, and each time i go there they laugh at me and say, oh, yeah, wasn't it you guys who imported your mortgage crisis into europe? we have to think about these

things before we make policy like that that interferes with international relations. a couple more things i want to talk about there's been basis risk that's been created in the swaps market. basis risk basically is when you have a risk, you want to hedge that total risk. in order to do that, you need a swap product. or you could use a futures product. but the future could leave you with almost 85% of your risk hedged, and then 15% just sits there, and you absorb that risk. you pass that on to consumers you pass that on in your prices. also it sits there on your balance sheet. so we don't know how much of that is out there but that is starting to happen. the other thing that the derivatives rules did was they really put a hurt on futures commission merchants. they caused prices to go up so much that the business became unprofitable. the only person that are offering those services now are large banks. another thing we have to question and we can look at later. one good thing that these rules did is they did bring some price discovery through to the marketplace, and there is a

product, one product, that is trading 93% of the time electronically and that's a cds index investment grade. so that's very good, but the uptake hasn't been what was sold in congress or during the implementation period. so where does that leave us? central bankers took this time to watch and see what happened. the politicians didn't break up the global banks. they just didn't do it. but as time has passed, prudential regulators have become embolden ped. they're now using a complex web of trading, capital margin, liquidity and leverage rules to discourage risk taking in the capital markets. the global banking model was predicated upon holding companies being able to transfer risk among affiliates and servicing large clients all over the world. prudential regulators don't like that, and the view is based on this simple fact: they believe that they can contain any risks in their own jurisdiction, and they can't regulate them outside of their borders.

so all these rules are designed to create that shift away from global branch banking to fully capitalized individual subsidiaries under a holding company. this resulted in an internal bifurcation of collateral functions. it forces a pre-trade transaction analysis which makes you not just look at a screen and click and then be done with the trade and it goes to the back office but to think how am i going to collateralize that trade? do we have that collateral? how do i source that collateral? what's the cost of it? this has fundamentally changed the way fixed income desks work. fixed income and derivatives are intertwined, so it's reshaping the entire industry. it's good because you understand the cost of the trade and the transaction all the way through and there's a little bit more risk management discipline. it's also good because you're analyzing your customer relationships and your product offers and some product offerings are disappearing like single-name cdss but this is bad because you are analyzing your customers, and some of your

customers -- not the big ones -- are being told you don't have access to liquidity anymore. the regulations flowing from dodd-frank have also forced market participants to use only u.s. treasury and agency debt to collateralize their trades. they force banks to hold u.s. debt as capital and they permit u.s. debt to be prop traded. why? why is it that u.s. debt gets the sacrosanct level? i'm not 100% certain but i think we should question why regulators decided it was necessary to create an artificial demand for u.s. debt. it is designed to appease -- is it designed to appease the housing industrial complex by creating a permanent spigot of liquidity to prop up the housing market? i don't know, but we should ask. is it because regulators were directed to create an incentive to buy our debt because of a political need to continue to finance deficit spending? we should ask. is it because regulators believe that the debt is not subject to -- that the u.s. debt is not

subject to market forces? it's a question worth asking. whatever the reason, one thing is clear; the health and stability of our financial system is now dependent on price movements of u.s. debt. and if markets move against u.s. debt or we have another flash crash that causes foreign investors to reevaluate our treasury markets, we could have a very big problem. and i would commend to you that our debt is hardly risk-free. going forward, market participants have been incented to take risk in and hold u.s. treasury and agency debt. this regulatory-planned market system is dangerous because it concentrates form, one form of debt on everyone's balance sheet across the system. and if markets move in an unexpected way, everyone will be holding the same wrong-way risk at the same time. now, that should ring a bell here because that's exactly what happened in 2007 and 2008 with the mortgage products. and i doubt i highly doubt that the fed and congress will sit by and do nothing. as for the dodd-frank rules

capital, margin and volcker rules will continue to exacerbate volatility in the fixed incomes markets. the basis risk that i referred to in the derivatives market will only become a concern when prices move against market participants, and they cause losses and forced selling through margin calls. but one thing is clear to me: margin calls and large price movements will become the new normal because government rules are directing trading decisions in the capital markets and they're decrease liquidity in other asset classes. the net effect of all this forced change has been a decrease in sustainable sustainable liquidity in the u.s. swap and the corporate bond markets and now even in our u.s. treasury markets. thanks. [applause] >> thank you chris. you made a lot of point toes, but i want to comment on one of them; that is, the testimony of the financial history is quite clear that governments always promote and the employees of governments, that is to say regulators always promote

government debt or the sponsored agencies of government. i think it's a big problem. j.w. >> all right thanks. i'm going to talk about title viii and title ix in 15 minutes which is a challenge. because i think there are hundreds of pages long together. start with title viii -- >> the chair is sure you'll meet your challenge. >> title viii is a provision that is, i think probably inspired by some of the central clearing provisions in title vii. title viii provides for the designation of financial market utilities that are deemed to be systemically significant by the fsoc. these financial market utilities or platforms that provide for the settlement clearing or payment system, so a wide variety of types have been used here. everything from dtcc which provides a settlement system for the trading of securities to the clearinghouse's chips program

interbank payment program. title viii does two things, essentially. it's said that when god closes a door, he opens a window. so here the regulators when they close a door on you through regulation, they open a window. in this case it's the discount window at the federal reserve. so what designated fmu is deemed -- once deemed an fmu becomes designated for special a special regulatory regime from either the federal reserve or in some cases for the sec and cftc, and they also have automatic access to the discount window. that sort of access has been heretofore limited to commercial banks. there could have been another way to, i think, run this railroad. i think if title vii and the rulemakings under title vii had allowed for more freedom in ownership of clearing and settlement systems i think that you would have firms more

willing pony up to provide the liquidity needs of these firms. but the way title vii was implemented, there were, i think, some very dangerous restrictions placed on the ability of these entities to -- the ability of private parties to take an ownership in central clearing entities. i also have some concerns generally about the notion of the federal reserve as a regulator, particularly of payment systems. because think about this, okay? the federal reserve is the primary regulators of its primary competitor, the chip system run by the clearinghouse association. the federal reserve is also the primary regulators of the clients of both chips and the federal reserve. so the federal reserve competes with, is a primary regulator of its competitor and is the primary regulator of many of the clients of it and its competitor. i think that's what hayek meant when he talked about central

planning. i don't think the federal reserve manages those conflicts particularly well, and george sheldon is here from cato, he's written about the fact that we don't need a central bank to really run a wholesale payment system. the private sector has done it for a long time, actually, competing with the fed. and i think on a per-transaction basis, does it much more cheaply that the federal reserve. and to see that, just go take a tour of one of the regional fed banks there, like the houses. they're pretty nice places with private cafeterias that are even better than aei's if that's possible. [laughter] and by noting that my colleagues have both written about a dairmings provision tucked away in title viii that allows for activity-based designation. and that under their read -- which i think is a very reasonable read of that provision in title viii -- it could allow for potentially unfettered regulation of industries not intended to be regulated directly by dodd-frank like, for instance, credit

unions like -- it could be used as a method to regulate asset managers on an activity-based basis. so i would think very carefully about those provisions in title viii. let me move on to title ix. title ix in dodd-frank is sort of a grab bag of securities and corporate governance provisions and a number of other things. if you've never been to a kids' party, i've been going to a lot of those recently, at the end you always get a grab bag and it's a bag full of junk -- [laughter] items that make no sense to each other. nobody knows what to do with them, and i think that's the best description i could -- >> [inaudible] >> right right it's a lot of sweetener in title ix. so just to run over a couple of them, there are new enforcement powers for the sec and particularly with respect to civil penalties. i have some concerns about those powers, particularly in the hands of the current enforcement regime at the sec. look at the recent stories about what i would call a scandal a

due process scandal at the sec in terms of moving cases internally to administrative law judges, making the appeals process much more difficult for litigants. by the way the administrative law judges, not surprisingly, are a forum in which the sec enjoys a much better win rate. so i have some concerns about those powers in the current regime's hands. whistleblower award provisions in title ix that, for those companies -- and most companies, i think, have internal compliance regimes that want to fix problems as soon as problems are reported -- the incentives instead are to go to the sec for that award. i think there are some unintended problems resulting there. and speaking to the corporate governance provisions in title ix, let me point anyone interested in this to a book that came out around 2000 called "working capital," and it's a play on words. working capital's an accounting term, but this was funded by unions to look in how to

leverage their investment funds their social welfare agenda, sort of the working man's capital at work. it has a number of ideas that were included in title ix. so this is a 10-year-old idea, and they sort of saw a window to implement these particularly pay ratio disclosures. and they took it. and i think that's evidence enough that title ix had very little to do with the financial crisis. so in terms of particular corporate governance provisions, we have an advisory vote, advisory vote on the executive compensation. we have disclosure of the ratio ceo pay to the pay of the average worker. what does that have to do with the financial health of the firm? i don't know. in fact, it has -- in fact, presidentially damaging -- potentially damaging to the health of the firm because it's intended, i think to discourage firms from metering executive compensation to financial, you know results. it's -- to implement a social

welfare agenda on behalf of the unions. there's no other way to describe that. i think it's very dangerous. and if you want to have that debate, have it in another forum than the securities regulatory system is my view. there's also a proxy access provision in title ix of dodd-frank. this was the first rulemaking the sec chose to do, and it was quickly defeated in court on the basis of a lack of sincere cost benefit analysis which resulted in, i think a more robust cost benefit analysis commitment at the sec. so in that sense i guess it was good. but generally i think proxy access is another very dangerous provision. i've done an empirical study of the proxy access rule with my colleague at george mason, tom stratman where we look at the -- we do an event study of proxy access implementation and find that it costs billions of dollars in shareholder losses.

what's a better way to run a railroad here? what's the alternative? i would suggest that state-based competition and corporate chartering is the alternative. and it's not perfect. a lot of corporate law scholars have suggested there are problems in the state-based system where states compete for corporate chartering. delaware has been a dominant player there. delaware takes a very dim view of the market for corporate control as a disciplining device on agency costs. i don't think delaware's perfect. i clerked in the delaware courts. believe me the fact that they hired me means delaware's not perfect. [laughter] but i think a better way to run a railroad is to get rid of the federal overhang in corporate governance. i think you can make the state is-based system more competitive if you eliminate things like corporate governance provisions in title ix, in sarbanes-oxley, and i think you have to eliminate the williams act as well which is a constraint on the market for corporate control. i think if you do that or, at a minimum, change those provisions for optional for firms to opt

into. there are some provisions in dodd-frank that are optional like the notion of a mandatory independent chairman. number two you recognize the right of firms to provide for mandatory arbitration of shareholder claims, which i think the federal arbitration act already provides and court interpretations of that act already provide, but the sec hasn't gotten the memo, and they still refuse to accelerate your registration if you have such a provision. carlyle found that out recently. but i think you need some federal recognition of that right. and then thirdly a a federal codification of the internal affairs doctrine as a binding constraint on the sec from using its discretionary regulatory authority to impede innovation in state corporation law. if you do those three things, you get a much more robust state chartering system. and then, i think when you combine that with a very exciting world of crowd funding that is coming pretty soon -- and as a free market securities lawyer, i think this is the only

exciting thing i've seen in the last 75 years of securities regulation -- i think that you need a new way of doing corporate gore nance a new way of -- governance, a new way of doing state chartering competition to innovate at the scale and speed that crowd funding is going to require. so i think that these three provisions will sort of encourage the kind of innovation we need to see in corporate governance. and i think crowd funding is going to be the first forum where we see that happen, if we can do that. and i think the one experiment i would point to in how innovation in corporate law can work if you have the free.com to do it from the federal overlay, there's one very small exception for master limited partnerships that trade -- generally they're energy companies that get a special tax code exemption. the nyse exempts these publicly-traded firms from a couple of the listing requirements including some board committee requirements. as a result, what we've seen is an incredible amount of heterogeneity in corporate governance structures for master

limited partnerships. and one of the trade-offs i think we see is rather than fiduciary litigation and particular structures for committees, we see a regime in which mlps just distribute all of their excess capital every quarter to their shareholders. shareholders don't need participation, corporate democracy, they just get their money every quarter. and if the mlp needs new hundred, it has to raise it from the public market. that's a much more powerful disciplining mechanism. i think the less federal overhang we have the more innovation we'll see, and i think the mlps is an experiment that shows us why. and i'll close with one last thing i think we could see if we had incentives to innovate in corporate governance which the federal overhang inhibits i think we could see cities getting involved as well as states. why not cities? why not silicon valley corporations? i think that the silicon valley bar is more motivated than anyone to come up with whatever

innovations, i can't even think of them because, you know, that's how innovation works. you can't always predict what innovation will be. but i think the silicon valley board's best equipped to deal with particular needs of those kinds of firms. so i think it could be a very interesting world. it requires a couple of things, codification of a doctrine that's already in the law just make it a constraint on the sec recognition of an arbitration right that's already a right the sec just hasn't gotten the memo about the faa and then thirdly, a switch to optional for provisions in socs and with respect to the williams act. that's already an approach that some parts of title ix have taken. so i think it's perfectly reasonable, i think it's exciting. i think in these sort of uber, you know, lift crowd-funding world, we need a modern corporate governance system, and getting rid of the federal overhang will be key there so -- >> thanks, j.w. mark?

while mark is getting up there j.w. mentioned the unpredictability of future innovation, of course, but surely financial stability oversight council can predict all this innovation and know what to do. >> right sure. [laughter] mark. >> got a comment, i think i now have heard a new phrase, free market securities lawyer. sounds like a -- >> me and hester, the only ones. >> just two. hopefully, a growing trend. first, let me thank peter and alex i really appreciate the invitation. as was laid out, we're going to be taking different sections so i'm going to take parts of title ix that j.w. did not talk about and i'm going to talk about title x more specifically the credit rating agencies moody's, standard & poor's, fitch. the consumer financial protection bureau, and then i'm going to end up talking about the qualified residential

mortgage rule. before i start, i would like to quickly bat aside what i think is a common strawman i hear, and i'm sure many of the rooms in this town today and across america we hear that, you know skeptics of dodd-frank want to go back to bubbles and financial crises. that's ridiculous. i've never met anybody who actually likes financial crises. [laughter] certainly, i've seen people who enjoyed them, quite frankly i'm not sure i ever saw barney frank happier than when they were doing the t.a.r.p., but all that said it's a strawman. the concern is whether these things work or not, and i the we can, hopefully put aside all the strawman spin we're going to hear today. before i talk about this, i do want to associate myself with what has been said by my colleagues. stated two weeks -- i stated two weeks ago before chairman hensarling's committee that i do not believe dodd-frank has made us safer nor do i believe it has ended bailouts. it's not just an issue of reducing burdensome cost

regulation, it's also an issue of bringing stability to our financial system and again, i don't think dodd-frank does this. the rating agencies dodd-frank tries to go in the right direction. unlike previous housing booms and busts like the savings and loan crisis, the recent one was particularly tied to our capital markets, and i think it made it much more destructive in the same way -- not forgetting, of course, that the savings and loan crisis was expensive and we did have a recession. and as peter mentioned, one of the three recessions that took longer than usual was the post-savings and loan crisis. to me, one of the things that was special was securitization and the way that our housing and mortgage markets were linked to our capital markets. quite frankly that would have been impossible without fannie and freddie but also without the rating agencies. we witnessed an outsourcing of due diligence by regulators and investors to the rating agencies. and, of course, let me first say that i think the rating agencies provide valuable insights, they

certainly have an important role but i also believe that modernity works best when it incorporates a diversity of perspectives, we don't rely on one particular viewpoint. so section 939 of dodd-frank gives a nod to this problem. it says you should remove statutory references to the rating agencies. unfortunately, that removal ended there. dodd-frank required, of course regulators to do a study. i forget the number of studies as many of you know, it'll almost 400 required rulemakings and almost a hundred studies. but that aside, what is required from the regulators and the rating agencies -- agencies is do studies about reliance on ratings. there's no requirement for the regulators to reach a certain conclusion, for the regulators to reduce that reliance and sadly, the regulators have largely chosen to continue that reliance and increase it in many instances. that would be not a big deal if most of the reliance on our laws came from statutory rather than regulation but that's not the

case. the vast majority of reliance on rating agencies comes from the decisions of regulators, and dodd-frank doesn't change that. so to me, where we have a fig leaf where we needed a forest. we needed serious reform of the rating agencies. the first thing we needed to do was to prohibit regulators from actually outsourcing their job to the rating agencies. the notion that a bank regulator would go into a bank and say, well, this is aaa rated, my job is done and end there to me, is just ridiculous. the supply side of rating agencies is just as bad and sadly, dodd-frank gets this wrong as well. whereas we should have ended the system that create cans barriers to entry, dodd-frank actually increases barriers to entry in the rating agency such as those found in section 936. so let me say i give dodd-frank a very small amount of credit for recognizing the problem with the rating agencies but unfortunately, they completely missed the ball and fell far short of where they needed to go.

an area, however, that dodd-frank gets completely wrong, in my opinion s the role of consumer protection in the crisis and the subsequent creation of the consumer financial protection bureau. so while, of course, there was fraud, i don't think anybody would deny that, of course, there was abuse i think it's more likely the case that asset bubbles generate fraud and abuse more than the other way around. i think it's also important to might think about it in this way asset bubbles historically come from credit being too cheap not too expensive. and, essentially, the argument behind the cfpb is credit was too expensive. let me walk you through quickly an example, if you assume expanding monthly payment when you bid for a house what the problem was borrowers were having fees and interest rates added on that means they could only bid less for the same amount of house and stay within the same monthly payment rather than the other way around. so again, if consumers were actually being gouged, that would have pushed housing prices down, not up. so again i think we need to

think critically about that. i also mentioned the turn in housing prices, the inflection point many housing prices preceded the inflection point in defaults by about a year. so again the temporal evidence is pretty clear that housing declines caused the defaults at that rather than the other way around. again i would emphasize we saw as peter mentioned a coordinated federal effort to lower underwriting standards across the board. let me also quickly set aside i think we can all stipulate that most of the nonbank lenders targeted by the cfpb had nothing to do with the crisis. i don't even think joe stiglitz or paul krugman that payday lenders and auto dealers and debt collectors caused the crisis, yet that is who the cfpb is going after. you don't see them going after the real estate industry, after fannie andbredty. you see them going after all these unrelated industries that had zero to do with the crisis. that's not to say those industries may or may not have

needed different levels of regulation. but, again, what we saw -- and j.w. touched upon this -- most of dodd-frank was a bait and switch. it was an, okay we're going to end bailout toes or protect the system, but don't look while we put all this unrelated stuff in here that has need tool with it. sometime i hear the argument that we needed to create the cfpb so banks would have a level playing field with nonbanking. there's not a level playing field anyhow. these small consumer guys like payday lenders, they don't have access to insured guaranteed deposits. they're not going to get bailed out. the argument that poor little citi bank is going to have to compete with cash america strikes me as ridiculous. so again let's emphasize a lot of focus on people who had nothing to do with the crisis. i'll also say quickly to me one of the more dangerous precedent is the the funding mechanism of cfpb. for those of you not aware the consumer agency's off budget, it is funded essentially, by the earnings of the federal reserve.

quite frankly, i think every federal agency should be on budget. i also think this is a direct violation of article i, section nine of our constitution that requires appropriations to be done by law. the notion that we would allow an agency to set its own budget and determine its own funding to me is really offensive to our good government structures and what congress was elected to do. this might come as a surprise given our current budget situation, but members of congress were elected to make hard decisions about spending. a dollar that goes to the cfpb is a dollar that doesn't go to health care, education, tax cuts whatever. the notion that we would put an agency on autopilot and, of course, what is to stop us from, you know why don't we defund nsa or whatever, and then we don't have to worry about raising taxes ever again. i've occasionally heard we need to take cfpb out of the appropriations process to protect it from bank lobbies. i actually think what this means is they're trying to protect it from democrat accountability. every agency gets lobbied.

if you don't think that defense contractors are knocking on the door of the defense appropriations committee every day, then i encourage you to go up there sometime. but no way would that provide justification for taking dod out of the appropriations process. let me also note to me one of the more troubling aspects of cfpb is it's engaged in a massive data collection effort. quite frankly, you know, it might put nsa to shame. the cfpb is working towards coverage of almost 90% of credit card accounts. let me quote that great defender of free speech justice william douglas. quote: a checking account may well record a citizen's activities, opinions and beliefs as fully as the transcripts of his phone records. and and, of course, today's checking accounts are our credit cards and debit accounts. and, of course, the notion that cfpb is not going to look at that data, i will certainly say as an organization that accepts donations from credit cards, the last thing i'd want to think about is cfpb looking to see who gives to cato institute.

i certainly think that is troubling. and, of course as justice marshall observed, unfortunately, there's been a long trend in this country of using bank examination records to abuse political opponents. so i'd be sad to say this would not be new if it does happen. hopefully, the cfpb's not listening too closely because i don't to -- i don't want to give them ideas. i don't think there's any bigger threat than the cfpb given that this financial collection also leafs consumers -- leaves consumers very absolutely potential to data security breaches. i assume i'm not alone in the room as a former federal employee who got a letter about my data being potentially hacked. the cfpb is, unfortunately doing hackers is a great service by consolidating all that credit card data in one place. unfortunately, i think that would, you know, be a very real risk and, of course, gao has recognized this in some of its audits of the cfpb, that it leaves consumers at risk of

having their consumer financial data hacked. so again to me, dodd-frank missed what was an important opportunity to rationalize our consumer finance laws instead of those laws transfer today an unaccountable agency whose bureaucrats can force their preferences on consumers. i fear that the agency will do for consumer financial products what has the federal government has done to our mortgage market which which as peter demonstrated, royally screw it up. let me spend my last few minutes talking about the qualified mortgage and the qualified residential mortgage rules. so this is something that i think there's great agreement on. even if you look at peter's disscent to the financial crisis commission, you look at the other dissents and the majority opinion, there's actually one consistent observation from all the committee members, and that's problems in underwriting in the mortgage market. that's agreed upon. what's not agreed upon is why. so dodd-frank does recognize the special role the poor quality

mortgages in the crisis. unfortunately, dodd-frank and the regulators in this instance screwed that up too. the qualified mortgage is an extension of the truth in lending act whereas the qualified residential mortgage rule is an amendment to the 1934 securities act. both contain substantial liability. the qualified mortgage is targeted at helping to generate consumer class action next time around. i will note with the qm for my friends in the industry who thought it was hard to foreclose this time around, you ain't seen nothing yet. it will be very difficult if near impossible, to foreclose in the next down downturn. the only avenue is to meet the safe harbor provisions in the qm and qrm. one way, of course, is to sell your loans to fannie, freddie or have it insured by fha. so to me, one of the really twisted ironies of dodd-frank is that one of the reasons for the public demand for action and passage was that the american

public was asked to bail out the mortgage market. but what do we have today as a result of dodd-frank? over 90% of the mortgage market is directly on the backs of the taxpayer. the taxpayer is more exposed to the mortgage market today than ever in history. so again these things could have worked out well. i will note that barney frank said about a year ago on the last anniversary that he saw the qm as the most significant parts of dodd-frank. the liability was always going to be an issue but these provisions could have done something that reduced mortgage default. but as the regulators started along that path, they certainly actually started out well including things like down payment and credit standards but, unfortunately the regulators caved to pressure and what ultimately ended up was a gutted qm and qrm that even barney frank says was mishandled. why is that necessarily? so one of the debates around the financial crisis is what exactly mortgage products caused the crisis. some of my friends in the consumer advocacy world and proponents of dodd-frank will

tell you it was caused by low documentation and prepayment penalties and exploding a.r.m.s. i would poimed -- point you to a number of analyses gao has done as well as empirical studies in the results are quite clear. the main drivers of default -- i guess i should say you could even look at the studies by organization like center for responsible lending. their own studies show that the main drivers of default are loan-to-value borrower credit score. everything else is literally a rounding error. and so, of course the final dodd-frank qm and qmr rules essentially abandoned the things that actually drive default. and, of course giving qms obstacles to foreclosure and endless servicing requirements, again, making it near impossible to foreclose my opinion is that the qm rule will actually increase foreclosures next time around rather than decrease them. of course, as we know the harder it i