credit score, you may get one number from the credit reporting firm or when the financial institution asks for what interest rate is appropriate to set four, they may get a different set of data or it may be affected by the fact that you've made the request that may be taken into account to set the score. lot of little things that might not affect us. >> i'm going to cut you off there. i now recognize i'm over my time. i'll read your report. i'll be interested in understanding -- >> happy to follow up with you or your staff. >> thank you, mr. chair. >> senator schumer. >> thank you, mr. chairman. i want to thank our witness for being here. i'm happy to see he's fulfilling his duties as first director of this historic new bureau. one that i and several members of the committee fought hard for and will be one of the lasting legacies of dodd/frank with a real chance to directly impact the lives of virtually every person in america.

mr. chairman, i can't help but note we had a healthy attendance in committee this morning and a healthy debate. with strong views on both sides of the aisle. i heard comments from my colleague of nebraska. there was a discussion last week on the other side to consider a boycott of the hearing. a few members appeared to have followed through on the boycott and are absence from the hearing but the plans of a mass protest appear not to have gone over with many members on both sides of the aisle, of course, including the other side. and that strikes me as a good thing. but also an admission continuing to hold this nomination hostage until we agree to gut the bureau, that we just passed, not notwithstanding a few of the, you know, the comments for instance of my colleague from

nebraska, means that my colleagues have dialed down some of their opposition on this issue. it's a losing fight politically for them. many on the other side don't want to continue the fight because they know it's on the wrong side of consumers. the bottom line is, we need an agency to guard the rice of consumers. i learned over the years in trying to get credit card disclosure, even though the fed had the best of intentions, they were so busy with so many other things that they never got around to doing it. it took me ten years to get disclosure. and then it had all the intended effects of bringing interest rates down. so, i want to thank my colleagues, and he's not here now but particularly my friend from tenness. i read his comments last week. 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. i agree with my friend from tennessee and appreciate his remarks. we need to discuss these issues. he 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 close 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. we all know without an acting -- without a chair, you couldn't do many of the things that we have to do. in terms of issue like abusive credit card practices, mortgage lenders, 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 we could have here. let's move on.

mr. johanns is right. the courts will decide it. i believe they will decide the agency is the right -- 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 are losing steam. 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 convince our colleagues that it would be better to rejoin the debate on the playing field rather than just take their ball and go home. particularly on such an important issue. so, that was my statement.

i appreciate you're being here mr. cordray and look forward to working with you to bring consumers some rights. >> thank you, senator. >> senator hagan. >> thank you, mr. chairman. and welcome to the committee, mr. cordray. i'm pleased you are here with us today. i wanted to ask about -- well, much of the debate to repay rule under dodd/frank seems to center under whether qualified mortgage sh either be safe harbor or rebutable presumption. the concern has been expressed rebutable assumption that will result in overly cautious underwriting and less consumer access to credit. can you share with me your views on the safe harbor rebutable 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 and what were irregular

problems in the mortgage market. i mean, you would think you wouldn't really need to have a rule where the lender pays attention to whether the borrower can repay the loan but securitization practice and other things created misaligned incentives so we're to adopt that rule. one issues we've 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'll be working on over the course of the 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 type 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 would be safe harbor so it wouldn't create litigation issues as to a rebutable

presumption. others 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'll 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 appreciate any input or thoughts you and your staff give as we go forward. >> we'll continue the dialogue on that. thank you. i want to echo concerns that have been raised already today about the issue of financial literacy. i applaud your efforts. senator akaka mentioned it, too. i too was very -- have been concerned about the lack of financial literacy being taught to our students. when i was in the north carolina senate, i also required students get that -- i think it's just a sound basis that you need to get by in the world today. have you to understand debt. and with that, i was also

pleased they released examination 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 say they are marketed for short term but 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 tell us the use of payday loans? >> yes, senator. and as i mentioned earlier, this was the subject of the first field hearing that the bureau conducted in alabama. recently. the examination procedures 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, called a deposit advance or some 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 about it at our field hearing for short-term credit availability to people. whether they are banked and have bank accounts unbanked. also a variety of products that are offered. it includes pawn brokers, car title loans. lots of different products. some of which have real advantages, some have real disadvantages. one thing we'll 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 a robust competition in this realm. i mean, 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 to want have products be available. we want them to be products that help consumers and not harm consumers. there is i 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 when they're dealing with their own known customers but we'll see over time how that develops. >> do you have a time frame? >> i don't. >> all right. 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 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. >> they require certain levels of pulpit participation in the

rule-making process. i'm pleased to continue to hear comments from stakeholders that the consumer bureau has gone beyond that. would you please describe the process that the bureau has found and how it improves your role-making. >> i'm sorry, mr. chairman, i kind of lost the thread of your question as i was taking notes. >> depa requires certain levels of participation in the rule-making process. i'm pleased to continue to hear comments from stakeholders that consumer bureau has gone beyond that. >> there are certain requirements in the law how we

go about rule-making. if includes a 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 apparent processes. not just your judgment about how things really are but how people respond in fact to these things and to different term ninologie and the different form and the like. we're trying to continue to use technology so that our rules and our proposals and the issues that we're addressing are 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 were affected in their prayings by our rules because it needs to work for both sides. and it's something that addition i think it's very interesting,

the work done by the bureau and we hope it will continue to object the cutting edge. >> in response on to a question, they wrote the cfpb would provide robust safeguards for consumers and clearer guidance for financial service proi providers without imposing undue burdens. do you take a regulatory approach while protecting consumers? >> mr. xharm, chairman, we are required by law, and not just by the apa, but specifically in our law, to skr consider the burdens, costs and impacts of any rule 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 we're hearing from consumers and groups from across the country about what benefit it might bring to the consumer public. as i mentioned, we've inherited a lot of rules we didn't write. we have the 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. i've got several questions. we've heard there is some concern that documents subject to the attorney/client privilege that are turned over to the bureau will not remain privileged.

but under the current law, privileged documents remain privileged when they're given to the federal reserve board, the office of the comptroller of the currency and the fdic, which you serve 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 with the same privilege protection for documents to the bureau currently given to other banking regulators? if not, why not? >> yes, we would support an amendment to correct what we believe was an oversight. i have told the banking trade associations that. we're happy to work with them and you to get that fixed. >> thank you. senator moran, brought up abuse s abusive, the definition of the word abusive and so forth.

leading up to discussions in dodd/frank it's clear some people wanted to ban some nonbank products and services. are there 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? how would you make that determination? if you saw that? >> so, let me try to address both those questions. first, i don't think in terms of banning products. and that's not how the statute speaks tore it for us. it talks about us addressing unfair, deceptive and abusive acts or practices, 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 for the consumer? >> that's the approach and the vantage point i take on it, senator, yes. right. >> okay.

basel, by virtue of your position on the fdic board of directors, you will have to make some important decisions about the basel capital regime. basel 3 and dodd/frank act eliminate tier one for trust preferred securities while dodd/frank provides a measure for trust securities for small banks with assets less than $15 billion, basel 3 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 diversion for small banks taken by dodd/frank, basel 3, have you gotten into that yet and would you give your views on basel 3, whether it 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. >> yep. 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 basil is trying to trying to accomplish is helpful to the american system. american banks have more capital they're keeping on hand than european banks by comparison, for example. >> perhaps not enough, huh? >> well, that's -- that's a hard thing to measure in the ab instruct. people are working on it. i'm now a member, as you said, of the fdic board. have i great colleagues on that board. they've been working with me to get up to speed on these issues. i happen to be fortunate because the deputy director of the bureau, who's been up here to testify, is a banking expert. and 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 fascinating and important issues, not just to this country but to the world. importantish ushs not just to 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 money. >> mr. cordray, do you know of any financial institutions that you can recall that have been well capitalized, well managed, well regulated and has failed? >> i think that only happens, senator, when there is some extreme dislocation at large. >> that would be very unusual, would it not? >> i would say the great depression and the recession of '07/'08. that may have happened to some banks that did not deserve. t. >> "the washington post" reported a community groups to subsidize mortgages for first

time hold buyers resulted in mortgages that many buyers could not afford. i know they meant well but the article nound found that nearly one in five borrowersin the d.c. program are behind in their mortgages. are you looking into this particular program? because i'm not saying it's a busive but maybe it 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 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. it may be a local d.c. program.

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 sustainable, even though, as you say, many were well intentioned, though some of the practices were not well intentioned and were just fraud and greed. we need to be careful about what we're doing. the congress is now requiring us to do a number of things 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. >> i would like for the record that senator reed of rhode island would have been with us today but he is away at a funeral. mr. cordray, i thiank you for

your testimony today and for your willingness to serve our nation. regardless of whether one agrees with the present decision to recess a point richard cordray, the fact of that matter is he is now director of the cfpb. his time for us all to put politics aside and work together to protect american consumers and have a strong and fair consumer marketplace. this hearing is adjourned.

coming up, a senate hearing on u.s. defense production. and two fcc commercialers talk

about the national broad brand plan and the allocation of broad band spectrum. douglas elmendorf testifies about the economy and the federal budget. a cbo report released on tuesday repredicts a $1.1 trillion budget deficit this fiscal. we'll have live coverage of his temperature beginning at 10:00 a.m. eastern here on c-span3. >> we as explorers of literature, we as readers of literature have a responsibility. for those of you who are discovering the creation of literature, you have a responsibility, do you not? can you create anything you want in the world that you create in literature reflecting history or not and feel comfortable in that creation or must you presensor yourself? >> this weekend from lectures in history, professor william foster on the n word's place in

american literature and culture saturday night at 8:00 eastern? alsoon american history tv, he changed the reading habit for american. a look at the influence of time incorporated founder henry luce publisher of "time" o, "fortune" and "life" magazine. >> and the oil boom hits and makes texas a leading oil state. visit the streets of beaumont, texas. this weekend on c-span3. regulators and energy industry executives at the senate hearing said the u.s. oil and gas industry is in the midst of a major revival. the energy information administration estimates that domestic crude oil production will increase by more than 20% in the next decade. the eia released its 2012 report

last week. this hearing is an hour and 40 minutes. >> why don't we get started. the hear will go come to order. thank you all for being here. this is an oversight hearing on the u.s. and global energy market outlook for 2012. as many of you know, we often start the year by holding a broad overview hearing such as this.lot health insurance happened since last year, since the last time we had an overview hear of this this time. many countries the middle east, north africa, the key oil producing reej oochb the world had popular uprisings resulting in new governments taking charge in what is now r as the arab spring of 011 as a

result libya spent much of the year with oil exports near zero. with libyan export now almost totally restored or mostly restored, our focus on that reej oochb the world has new compl complexity because of the multi-lateral sanctions against iran. which also is one of the largest oil exporting nations. though the u.s. has sanctioned iran since 19830. iran remains an important source of asian and european oil imports. so as europe now works to implement its own sanctions against iran, we can anticipate dislocation in crude oil flof as the world adjusts to this new situation. it serves as a reminder that oil

markets and prices are an important factor in our economic security. that's why it's so important to fully understand the kebs between u.s. and global oil markets. the oil market outlet -- our oil production is up, our production of alternative fuels is up by about the same amount. our reliance on imported petroleum is down. at the same time our cars and trucks are using that oil more efficiently than before. the united states has successfully reversed what seemed to be an inevitable trend of becoming ever more dependent on imported oil. so this is an accomplishment we can all be grateful for.