disclosure and then it had all the intended effects of bringing interest rates down. and so i want to thank my colleagues and he's not here now but particularly my friend from tennessee. i read this comments last week suggesting that other members should give up on the idea of mass reprisals over the installation of you, mr. cordray. mr. corker said, quote, i don't think anybody is going to consider that to be very -- a very astute or intelligent thing to do. and i agree with my friend from tennessee and appreciate his remarks. we need to discuss these issues. we don't expect all to have the same views. but the idea of how to protect consumers should be on the table. the only way it can fully be on the table is with mr. cordray in his position. the president had no choice but to do what he did, because we can no longer have agencies closed down, not because people disagree with the views of the nominee, or the ethics of the nominee, or anything else, but simply because they don't want the agency to exist. or have any functioning.

and we all know without a chair, you couldn't do many of the things that we have to do. in terms of issues like pay-day lenders and mortgage brokers and abusive credit card practices. so these are vital issues to the american people, it makes no sense for senators to go awol on these consumer issues. i welcome the debate that we could have here. let's move on. there are -- mr. johanns is right. the courts will decide. i believe they will decide that the agency is constituted properly. i believe they will see that when you just try to block a nominee for the sake of blocking a nominee, you don't get anything done, and i hope we can end this idea of a boycott. i think the attempts to boycott by dug-in opponents are losing steam and i hope we can get on with the debate. people are tired of obstructionism for the sake of obstructionism.

and everyone on both sides of the aisle, no matter how strong their views, participating in this morning's hearings understand that. i hope as the year goes on we're able to convention our colleagues that it would be better to rejoin the debate on the playing field rather than just take their ball and go hole. particularly on such on important issue. so that was my statement. i appreciate your being here mr. cordray and look forward to working with you to bring consumers some rights. >> thank you. >> thank you mr. chairman. welcome to the committee mr. cordray. i, too, am pleased that you are here with us today. i wanted to ask aboutish -- welch of the ability to repay roll under dodd/frank, whether a qualified mortgage should either be a safe harbor or rebuttable presumption. the concern has been expressed that a rebuttable presumption will present an uncertain legal standard that will result in

overly cautious underwriting and less consumer access to credit. can you share with me your views the safe harbor rebuttable presumption? >> sure. so the ability to repay rule, as you know, and as you mentioned, is one of the rules congress has required us to adopt to try to fix what we're seeing as and what were problems in the mortgage market. you would think that you wouldn't really need to have a rule where the lender pays attention to whether the borrower will be able to repay the loan before making a loan. but securitization practices and other things created misaligned incentives in that market. so we are to adopt that rule. one of the issues that we have heard maybe most about, with respect to that rule thus far, and we aren't even to the proposed rule stage, although it is a rule we are going to be working on over the course of this year, we have a statutory deadline at the beginning of next year, it intersects with some other rules that others --

another rule that other agencies are writing so we know we need to move it along. and yet at the same time be careful. one of the things we've heard most about from institutions is they would like to see this rule, whatever the criteria are, that there be some sort of safe harbor, so that it wouldn't create litigation issues and uncertainties for them, as opposed to rebuttable presumption. there are others who take a different point of view on that. it is something that we have received, i would say, hundreds, if not thousands, of comments on already. we're going to be looking at it carefully and trying to weigh those issues. i don't have an outcome for you today. as i said we don't even have a proposed rule at this point. but it is something that is very much on our minds, and we will appreciate any input or thoughts that you and your staff want to give us as we go forward with this. >> we'll continue the dialogue on that. >> yes. >> thank you. >> and i do want to echo the concerns that have been raised today already about the issue of financial literacy and applaud your efforts, and senator akaka

mentioned it, too, i, too was very -- have always been concerned about the lack of financial literacy being taught to our students. so when i was in the north carolina senate i also required that students get that. i think it's just a sound basis that you need to get by in the world today. you have to understand debt. and with that, i was also placed that the cfpb recently released its examination procedures for payday lenders. it appears there are a handful of banks making high-cost payday loans directly to their customers. the center for responsible lending has indicated that these loans are marketed as short-term but often keep customers in debt for an average of 175 days a year. which is an average of 16 payday loans per year. and i understand the rate is somewhere over 300%. can you say a little more about what the cfpb is doing to address this sort of sustained use of payday loans?

>> yes, senator. and as i had mentioned earlier this was the subject of the first field hearing that the bureau conducted. in alabama recently. and the examination pro-seed yours that you mentioned we have put out, they apply equally to nonbank payday lenders, and also to banks that may be now offering a product that is similar to a payday loan in a number of respects also called a deposit advance or some sort of nomenclature around that phrase. we will have the same issues and the same concerns about any of the products in this realm. there is a legitimate need, and we heard a lot about it at our field hearing for short-term credit availability for people. whether they are banked, have bank accounts or unbanked. there are also a variety of products that are offered. includes pawn brokers, includes car title loans. there are lots of different

products. some of which have some real advantages. some of which have some real disadvantages. one of the things we're going to be trying to do is assess those products and make judgments about whether they're in compliance with the law or not. but we also would like to see robust competition in this realm. small dollar loans are needed by people, in a different era and maybe in some places still now they would go to loan sharks. it was dangerous as well as being difficult. nobody wants that. we want to have products be available. we want them to be products that help consumers and not harm consumers. there is a lot of thinking that some of the banking products may be able to be offered on more favorable terms because there may be less risk dealing with their own known customers but we'll see over time how that develops. >> do you have a time frame? >> i do not. >> okay. >> i do not. >> one other question, one practice i'm concerned about is the manipulation of the order in which checking account transactions are posted for overdraft purposes.

consumers consistently state that they don't want their transactions posted highest to lowest. is this the sort of practice the cfpb will be taking a look at? >> it is. >> okay. thank you mr. chairman. >> the epe requires certain levels of participation in the rule making process. i'm pleased to continue to hear comments from stake holders that the consumer bureau has gone beyond that. would you please describe the process that the bureau is following, and how it improves your rule making. >> i'm sorry, mr. chairman, i kind of lost the thread of your question as i was taking notes. >> the epe requires certain levels of participation in their rule making process. i'm pleased to continue to hear comments from stakeholders that

consumer bureau has gone beyond that. would you please describe the process that the bureau is following and how it improves your rule making. >> okay. thank you mr. chairman. and actually, similar to the questions we were addressing back and forth with senator shelby, there are certain requirements in the law as to how we go about rule making. and we obviously are bound to fulfill all those requirements. it includes a very robust notice and comment process. so we issue a proposed rule, then we get notice and comment, sometimes from depends on how many people are interested. sometimes a few dozen individuals. sometimes thousands or tens of thousands of individuals as with our know before you owe mortgage form consolidation project. we are required by law to sift through those comments, to weigh them, to evaluate them, to consider the pros and cons, to address them in our rule making process, and then to develop a final rule. some of the things we have tried

to do, and again the know before you owe is the most outstanding example of this, because mortgage markets are the most important market by dollar figures for consumers, is to aggressively go out and seek lots of comment, even before we proposed a rule. we're not required by law to do that. but we knew it would help us do a better job if we were hearing from people before we even put out a proposed rule. we've done a lot of consumer testing. and there are -- there are apparently procedures and processes that researchers are familiar with that give you a better sense not just your judgment about how things really are, but how people actually respond in fact to these things and to different terminologies and to a shorter form and the like. we are also going to be trying to continue to use technology, so that our -- our rules, and our proposals, and the issues that we're addressing out there. we're going to encourage people

to participate through our website and other means and we're going to be continuing to try to press the envelope for how we can use modern technology to encourage broader participation, therefore broader perspectives, therefore more insight on our rules. not just from consumers, affected by the rules, but from the industry participants who are affected in their operations by our rules. because it needs to work for both sides. and it's something that, i think it's very interesting the work being done by the bureau, and we hope that it will continue to be on the cutting edge. >> in a response to a question i asked your agency a colleague of yours wrote that the cfpb would provide safeguards for consumers and clear guidance for financial service providers without imposing undue burdens. will the cfpb fully consider the costs and benefits to rules ensuring that you take a spartan

streamlined regulatory approach while protecting consumers? >> mr. chairman, we are required by law, and not just by the apa, but specifically in our law, to consider the burdens, costs and impacts of any rule that we're developing. we take that seriously. not only because it's the law, but because it's good public policy. we intend to, and that's why i'm setting up some advisory panels to hear broadly from the financial industry, about how our proposals may affect them, and how they may actually work in practice. at the same time that we're hearing from consumer and groups from across the country about what benefit it might bring the consumer public. we inherited a lot of rules that we didn't write and we have an opportunity to go back and think afresh about them. and there may be occasions where we can streamline those rules losing no benefit to consumers and reducing the burdens on financial providers.

we hope and expect to be able to do that. >> senator sheldon? >> thank you. mr. cordray i'll try to move on, you've been very patient here today. but i've got several questions. we've heard that there is some concern that documents subject to the attorney general/client privilege that are turned over to the bureau will not remain privileged. but under the current law privileged documents remained privileged when they're given to the federal reserve board, the office of the come troller of the currency and the fdic which you served as a member of the board. the drafters of dodd/frank did not include the bureau in this law, which is troubling. would you support an amendment that would apply the same privileged protection for documents given to the bureau as currently exist for documents given to the other federal banking regulators? and if not? why not? >> yes, we would support an amendment to correct what we believe was an oversight.

>> okay. >> i have told the banking trade association that. and we're happy to work with them and you to get that fixed. >> thank you. senator moran brought up abusive, you know, definition of abusive, the word and so forth. during the discussions that led to dodd/frank, it became clear that some people wanted to ban some nonbank products and services. are there are any particular products that exist now that you would ban? or is this too early? is it possible for an identical product to be abusive for one consumer, and not for another? is that possible? and how would you make that determination if you saw that? >> so let me try to address both those questions. i don't think in terms of banning products. that's not how the statute speaks to it for us. it talks about us addressing unfair, deceptive and abusive

acts or practices. >> okay. >> which i think is maybe a better way to look at it. in terms of whether -- >> you don't think you'll be in the business of trying to ban products, but to make things stronger and more transparent and so forth? >> that's the approach and the vantage point i take on it, senator. >> okay. >> yes, right. >> basel. by virtue of your position on the fdic board of directors, you will have to make some important decision about the basel capital regime. both basel iii and the dodd/frank act eliminate tier one capital treatment for trust preferred securities. while dodd/frank provides a measure for grandfathering trust preferred securities for small banks with assets of less than $15 billion, basel iii has no such exception. because many small banks have trusts preferred securities, this issue will impact banks and

their communities throughout the country. how do you plan to resolve the divergent approaches of small banks taken by dodd/frank and basel iii and have you gotten into that yet? and would you give your views on basel iii, including whether it effectively prevents another economic crisis, and prevents banks from being undercapitalized? you know the whole thrust is for banks to have more capital, which makes sense to me. and also to have liquidity. which makes a heck of a lot of sense. >> i do think that the recapitalization of the banks, and the provisions that we've made domestically here in the united states, as well as what basel is trying to accomplish are healthy to the overall system. the american banks now have more capital that they're keeping on hand than european banks, by comparison, for example. >> well, perhaps not enough, huh? >> well, that's a hard thing to measure in the abstract, and

people are working on it. i'm now a member, as you said, of the fdic board. i have great colleagues on that board. they've been working with me to get up to speed on these issues. i also happen to be fortunate because the deputy director of the bureau rank date who's been up here to testify is a banking expert in both investment banking and commercial banking. and he's working with me on these issues. so, we will -- we will address them as they come. but these are fams naturing and important issues not just for this country, but to the world. and we want to make sure that our banking system is strong. i know you want that. we want that, as well. >> mr. cordray do you know of any financial institutions you recall that have been well capitalized, well managed, well regulated that have failed? >> i think that only happens, senator, when there is some extreme dislocation in the country at large. that may have happened -- >> it would be very unusual,

would it not? >> i would say the great depression and the financial melt down we suffered through in '07-'08. that may have happened to some banks that did not deserve it. >> the "washington post" recently reported that a program by the district of columbia government and local community groups to subsidize mortgages for first time home buyers in the district of columbia resulted in mortgages that many buyers could not afford. i know they meant well, but the article found that nearly one in five borrowers participating in the d.c. program are now behind on their mortgage payments. do you believe that the lending practices used by nonprofit entities, although meaning well, that helped put consumers in mortgages they cannot afford, are within your purview? and are you looking into this particular program? because, i'm not saying it's abusive, but maybe it's lack of, i don't know how you define all that, but lack of judgment,

because you want to help people, but sometimes if one out of five is failing, they've got to be reviewed. is that part of your deal? or is that not in your purview? >> that's the first time the program you mentioned has come to our attention. >> sure. well, it's -- >> -- local d.c. programs. but i will say we had a lot of problems in the mortgage market in the last decade. we had a lot of practices that in retrospect weren't very -- weren't very sustainable, even though, as you say, many of them were well intentioned. although some of them, some of the practices out there were not well intentioned at all, they were just fraud and greed. but we need to be careful about what we're doing. i know the congress is now requiring us to do a number of things to try to clean up practices in the mortgage market. we take that role very seriously. and we will continue to be glad to have your input and counsel as we do that work, and as you're hearing from your constituents, we're often hearing from many of the same people.

but that helps us with our perspective. >> thank you. thank you mr. chairman. >> note >> i will note for the record that senator reid of rhode island would have been with us today but he is away at a funeral. mr. codra ymeny, i thank you for testimony today and your willingness to serve our nation. regardless of whether everyone agrees with the president's decision to recess appoint richard cordray, the fact of the matter is that he is now director of the cfpb. his time for us all to put politics aside and work together to protect consumers and make sure there is strong financial marketplace. this hearing is adjourned.

at 3:00 p.m. eastern, we'll go to a life hearing with secretary clinton who is going to push the proposal for the syrian president to step down in favor of a national unity government. it's according to the white house official who was not authorized to speak on the record. we'll bring that you meeting today again starting at 3:00 p.m. eastern right here on

c-span3. today is primary day in florida. watch candidate speeches and reaction by phone, facebook and twitter. throughout the day, read the latest from the candidates, updates from political reportsers and viewer comments. that's c-span.org slash campaign2012. this is c-span3 with politics and public affairs programming throughout the week. and every weekend american history tv, 48 hours of people and events telling the american story. get our schedules and see past programs at our websites and join in the conversation on the social media sites. recently a house oversight and government reform subcommittee held a hearing looking at how the national highway traffic safety administration responded to complaints of battery fires last year in the chevy volt electric vehicle. after testing, the investigation

concluded last week that the volt and other electric vehicles like it pose no greater fire risk than gas powered cars. this hearing is about two hours and 45 minutes. the committee will come to order. we'll start with our opening statements and then get right to our first panel. we appreciate you being here today. the delayed public notification of serious safety risk of the chevy volt raises significant concerns regarding the politicized relationship between the obama administration and general motors. the obama administration intervened and forced the company to participate in a politically orchestrated process, results was that gm emerged as a private entity. the government government still owns 26% of the company to this day. in addition to significant ownership stake in the company, president obama has used this unusual blurring of public and private sector boundaries to openly tout the results of this

partnership. most recently this relationship was touted at last night's statest union address. the president backed the support with taxpayer dollars, providing $7,500 tax credits for the purchase of the volt and other electric vehicles. as well as billions of dollars to support the domestic production of batteries and in addition total federal, state and local governments have subsidized the production of the volt to the tune of estimates between $50 and $250,000 per vehicle sold. this administration has approached its duty to inform consume berz the parent risk that gm chevy volt can catch fire. while it remains to be seen whether gm received special treatment during the investigation of the volt fire is clear that the administration has tremendous incentives to protect the political investment it has made in the company and

the vehicle. or delay for six months. a period of time that also coincides with the negotiation over the new fuel economy standards. it is also troubling that during a subcommittee hearing, this very subcommittee in october 2011 where mr. strikland was asked to respond to members' concerns about the safety of the advanced vehicle technologies, he did not inform the committee of the volt battery fire. this information was very jermaine to the questions asked of mr. strikland and would have been interest to committee members. but for a resourceful bloomberg reporter who reported on the fire in november of 2011, it is unclear whether ntsa would have ever made news of the volt fire public. it appears that it was this story that prompted ntsa to acknowledge the fire's occurrence and later to open a safety defect investigation. in addition, the subcommittee is

also concerned about the preparedness of ntsa to regulate electric vehicles. in his 2011 state of the union address, president obama set the goal of one million electric vehicles on the roads by 2015. despite the government's strong encouragement of this technology, there was a fundamental lack at knowledge about how to handle an electric vehicle after it has been involved in a crash. this fire risk associated with the lithium ion technology is known. yet they failed to drain the charge if the battery creating a hazardous situation which let to the explosion. it appears this lack of knowledge was caused by a lack of preparation. according to documents obtained by the committee, ntsa qurd about the post vehicle krosh procedures in september of 2011, four months after the volt fire. this evidence strongly suggests that that's h agency had not paid cl attention to the lithium technology batteries in cars before the volt fire occurred. this lack of knowledge of how to

respond to an electric vehicle fire is unnerving and prompts questions whether or not this administration is promoting the rapid distribution of electric vehicles like the volt before we have done our home work and understand how the risk associated with these vehicles should be addressed. i look forward to hearing the testimony of mr. strikland and i hope that mr. strickland is more forth coming to day than he was when he last appeared brus. i also look forward to the testimony of mr. ackerson. and with that, i now yield to my friend and colleague and ranking member from ohio. >> mr. chairman, thank you very much for holding this hearing. and i always appreciate the opportunity to work with you. today we, again, welcome david strickland, the administrator of the national highway safety administration before our subcommittee. at two recent hearings, we heard testimony from department of transportation officials. first on regulations proposed by the department related to standards for vehicle fuel efficiency.

and then on the number of hours truck drivers can work between mandatory rest periods. at those hearings, the majority criticized the department of transportation for considering stricter regulations claiming they were harmful to business and the economy. today by contrast, the question is whether the department of transportation was strict enough in the regulatory oversight of one product, the chevy volt electric vehicle by general motors. the title to have day's hearing is what did ntsa know about the volt vehicle fire and when did they know it? a very detailed, 135-page final report by the national highway traffic safety administration, ntsa, on its investigation into the volt battery fire incident which was made public on friday provides detailed answers to the question this hearing seems to ask. gm has also provided extensive documentation of meetings and information it provided