>> the action taken does not designate in the same way that f-sock does. >> i'll tell you what, mr. secretary, my time is limited. let me move on. the chairman told the fsock that they wanted to release asset management study bloomberg report that had you personally called the sec chair to express your displeasure. is that story accurate? >> my view was that the ofr study was going to be released to the public and the public was going to be commenting on it.

the question of whether it was going to be released in a formal way other than ofr is a different questioned. >> should the ofr report be immurn from public kmeblt? >> no, on the contrary, it was meant to elicit a public debate and that occurred. i very much believe it should have been public chls it was public. >> last year, you said it is un5:00 se unacceptable to be in a place where too big too fail has not ended. i think you may know, your predecessor said is it too big to exist?

using your words, can you tell this kplicommittee today, with honest, striegt face that we've ended too big too fail? >> i'm not sure we'll know the answer to that question until we have the next financial crisis. that's the challenge that we all have in asking have we gone far enough. but i will say what there's mr work underway. >> we have heard from multiple wrnss of the corporate bonds and are concerned about the ill liquidity. it strikes me as somewhat ironic that the vo lrksz ka rule is touted by you around others is necessary to ensure financial stability may now be a part of financial instability.

this committee has requested information regarding the status of our skoorpt bond markets. so has the f-sock kuktsed an analysis of the risk. >> mr. chair map, we are obviously in the early months of a volka rule that is final. it hasn't taken effect in if mashlgts place yets. i think it's actual thrill quite an accomplishment. i've actually received quite a lot of positive comment. >> the time has expired. >> thank you very much.

some have krilt sized the fsoc's designation's process has been opaque. >> is the fsoc aprobe rattly balancing the need for transparency gerns the need to protect sensitive markets? and supervised information? this is an issue i'd like to get behind us and deal with it in ways that would allow fsoc to do itsd work. i'm hoping that you have not only given considerable thought to this, but to help us understand how we can better make sure that you can carry out your mission and not voo those

that you are regular rating too. i don't want to spend all of my time on this because i want to get back to market sfszsing. >> congressman walters, you know, i think that the values of openness and transparency are very important to all of us. we have constructed a process in fsoc, which i blooechl respecteding and reflects those values. and it gives an enormous opportunity for companies to engage with fsoc without making public prematurely things that aren't -- would not be appropriate to be a public discussion. much of the discussion involves reviewing the sbrnl nfrgs that is the kind of supervisory information that regulators work with. when we get tooth fiebl stage of the designation prosays, it is back and forth and quite luminolu

luminous with the company. it's a youk orgization. we're noticing advanced topics to be discussed. we will continue to affect the process. but i don't think the answer is to make it a completely open, public discussion or the inquiry itsz would be stymiied. >> i'd like to ask jowl to make sure that the staff of fsoc gets with the staff of this committee. i would hope that the chairman would agree so that you can walk through whatever changes you is is have made in order to have more transparency.

we need to understand that and allow members of congress to attend. i think this is ridiculous and i want to get off of that. so if you would help us to understand more what you have dope, then hopefully, we can engage with you about what we think about what you've done and maybe have some suggestions for you. with that, do you have a moment to talk about what you've sdoen and taking a look at nonbank mortgage services. >> so the question of mortgage services 1 a very important one. as they moved out of banks into more independent wizes, the challenge is how to maintain consumer protects and oversight and how to make thur that that very important backbone to our medical report fortunes system functions well. if you look at the actions taken

by the cfpb, nay eve taken on the role of consumer protection oversight. and i think it's an area na we have to look to. obviously,the mort gang system is require ds. it is something that we cannot have been fragile. we think that the actions are very positive ones. and we will continue to review the situation chblts. >> lack of understanding, what their jobs really were.

the inability to have a proposed modificatio modification, on and on and on. >> totally agree. >> thank you. and i yield back the of my time. >> mr. chairman, as you know, we've asked for specific documents from you and we did so over a month ago and you assured us that you would provide them. you formally responded only last friday and you did so with a non-response. mr. secretary, this company has to subpoena those documents.

>> are you doing anything to protect those documents that you promtszed and said you would supply? >> congressman, as you noted, i did respond alochk with the chairman of the fe krerks and the federal reserve board to your inquiry. in that latter, we said your staph will work stogt. >> as the letter indicates, our staff will work with your staff. >> are you prekding those documents? >> wae reteenly protect those dochlts. >> we know the routines at the irs, is it a better team than they voo. >> congressman, okay, that's a no. mr. chairman, i would suggest -- that we issue subpoenas earlier. i va a question for you iii home. if the irs is conducting an auds

it and i get this lot over the lst several weeks. the irs sds for documents and they do not come -- they say they don't have them anymore because their hard drive crashed. >> congressman, if that happens to a taxpayer, the practice is for the irs to work want the taxpay taxpayer. >> so we are going to be working with you. that's why i suggest that we i shall shoe subpoenas now because you have not supplies that information that you had promised to in kmitsds tee. mr. chairman, i don't have any kftsd in this panel. and for that reason, i do believe that a special prosecutor should be apoint pd to find the truth as to what

happened there and for us to go forward. now to return to the matter at hand on fsoc and designations, the chairman asked you a very simple question with regard to con sen susz. i think most people watching understand what consensus means. it means that parties consent to something. that's the root word of consensus. so fsb, in that process, said there was a consensus on the matter. and his syrup question was did you con sent. and you did not give an answer. did you say, when they went around the table con figuratively, did you consent? say yes, no, or i really don't know what to answer. >> congress man, the u.s. government represented is joined in if consensus. >> i answered the question. >> so when you made that determination, the chair map also asked the question is it posz for a country to be global

ri designated by not be designated by a stif. >> yes, i said that they're parallel processes, and the fc,which is the national authority, would make its own determination. >> how is that possible? >> the process is one that's not binding on national authorities. >> that's the reason that the fsoc goes through. it's a detailed analysis. >> does that mean that the fsb process is not detailed?

>> i i'm not saying that the outcome would be different. >> so when a jauj has to recuse himself when the same parties are inimvolved, will you recuse yourself from that deliberation proseds even though they are different processes? >> so the answer to that is no? >> i will do my job, review all the documents and all the analysis and we will make a decision based on that. >> the chair now recognizes the gentleman from massachusetts. >> that's my biggest concern right now. >> first of all, i want to thank

you. you've done a grate job. i have a lot of con sitwents that are cop certained about what have not happened yet. i want to talk a minute about the international asosuation of insurance. i want to read a section of that and put the letter on record: we were talking about the capital stan ards being developed by the i aerks, ih. experts will not have any legal effect unless they are implemented in accordance to u.s. law. i say that because i'm not oppose. we haven't cleaned up our own house fully. i'm not ready to pass it on.

>> by doing so, i want to make sure how, in accordance with u.s. law, i want to make sure that this is not some back door way of some treaty with some country i've never heard of to overtake our capital standards and insurance. >> i think it's worth taking a step back and how important our involvement in these international bodies 1. we can do an outstanding job in the yietunited states putting a system that's safe and sound. and we're still exposed to vulnerableties. around the world, the assign't isn't as well. in case like this, it's very much a part of shaping the international debate.

>> i think you should fw at the table and par tis pate and have a strong voice. i just don't have faith at the moment. i may have at some future time. >> the other question, number one, i want things straight forward. i believe in fsoc. i believe in what you're doing. i do believe an internaushlization is coming. >> if we do it, i think we need to do it conscientiously. i don't want to find out that because somebody from lichenstein had a bet ere idea, that now they run our insurance industry. i don't expect that that's going to happen. >> that is not the way it works.

>> you also talk about trarns parn sill. other insurance companies are not subject to federal regulation. i want to make sure that there's not some back door way to expand jurisdiction. they're not here yet. >> it's definitely not any kind of back door into a federal regulation ininsurance. there is a debate as to what the right balance is. >> that's what i wanted to hear. i also want to talk a little built about transparency. up unstill now, it's been give and take. for me, one of the things when

it comes to designating siffies, they know what if measurementeds are. my argument is let the blue plight spins. let them know 245 there's a cop on the highway. i'm not interested in catching someone to a siffie. if they want to avoid it and can, if only way that can happen is if fso krerks is going to tell them here's the measurements you're gorge to have if you clooz not to participate fween now and six months fwr now, you can take action to avoid it. whooi is that not possible. >> i think the standards that

are used are put out pretty early. when it gets to the point of endwajing with the company, there's an enormous amount of giving them the ability as to how they want to organize. >> i think we'll have to follow up! the time is expired. the chair now reck fliezs the genting lady from w w >> as i mentioned in my opening statement, it's just arbitrary cutoff points, for instance, the 50 billion dlars level. and then we have another level, $10 billion for the consumer supervision. and what we're finding, i think, is, and this sort of pivots a little bit off with the prooefgs questioner, if you have these arbitrary deadlines at 50 billion dlarsz, you could have a financial institution that is

maybe at 35 billon that's much riskier than somebody who's at a 1u7b bimon because of their business plat forms and the way they structured their business with less and fewer risks. folks who are falling in those thresholds are having difficulty. how do you feel about that? >> the threshold does not link your designation automatically. it's only done if there's a risk that determines that it's systemically significant.

i think the number of designations reflects the fact. >> i think in the case of the banks. >> i thought you were talking about the fsoc designation. the tlesh hoods. >> i'm talkble about that in conjunction with the other designations of significant ly systemic risk. >> the burden was on us. and as we duothrough that process and as the regulators go through their more-detailed reviews of the -- both the financial conditions of those banks and their systemic risks, i think it's a discussion that we can continue to have. but i think, officer the time being, you know, we have to look back and ford forward.

we weren't where we needed to be in '20, '0 '507 and oh another 08. and as far as the designations go, the same standard, i think, applies. we're not looking to designate for the sake of dez ig nates: we're only looking to identify where are the areas of systemic risk. >> i think that, in the case of prudenti prudential, they would argue this is a slightly different question. they would argue that if themp to file, their business model would not drag down the entire financial system. what kind of melt riks were used for that? . and how does that -- yeah, what did you august use to make the determination when the insurance had. >> there were detailed analysis done.

and,you know, i think that the kind of questions that you ask when you're looking to make a determination like this, don't have to do with what happens if the company fails in good times. it has to do is what happens if there is a nnl crisis and the company fails? what happens if it's a system of great stress. >> mr. meeks and i have a bill out that would modernize the financial regulatory framework. we're hering consistently, particularly from our community banks, but others that the piling on of the regulatory burden is really becoming a chiller in terms of being able to move forward with business.

you mentioned once every ten years, there's an analysis of this. i think ten years is too long a period, else specially since a lot of these have gone into effect over the last four years. so what efforts are you making in that? >> you know, i have a certain amount of background in this. when i was only b director, i conducted a review of all of the executive branch agencies to do a look back. we didn't have the authority to direct them to do that lookback. i think that, at the moment, with a ten-year review coming up, the regulators have indicated it is their sbexz to do that kind of lookback. that is a very important thing. >> chair now recognizes the gentleman from txz. texas. >> thank you, mr. chairman. and thank you, secretary lew, for your testimony today. >> before the crisis, the u.s. had many financial regulators.

yet, none took up a comp rehenszive look at the economy as a whole. we were caught off guard because no one was tasked with looking at the big picture. it serves a critical function. so, secretary lew, prior to that passage of dodd-frank, what dwovt agency was responsible for looking at the usz financial system. >> i think one of the things that they learned was that there's no single agency for looking at the system and identifying issues of systemic risk. one of the reasons was to make sure that in the future, agencies collectively and a body shared would be charged with that responseblety. i think it's important.

i don't think it would be responsible for us to go back to a world where you don't have that kind of ablt to look across the different silos chlts that's not to say that the regulators weren't regular lating the responsibility for. that's kmaktly what fsoc does. it's why it was kraetsed. it's why we need to be able to ask questions. it's also why we need to be able to ask dwells when we don't know what the problem is. we have to be able to turn over a lot of stones and have the good judgment to only designate if the analysis warnt it. >> last week, the skplit tee passed the fsoc transparency and aaccountability act. this bill would subject the fsoc to the sunshine act.

exz up and down protocol for skmigs and board members. it would allow members of congress to attend and participate in fsoc closed-door meetingings. glf in addition, it would be a non-bank, sifi including talking about the possible tip of the designation for one year. we undermine our ability too avoid a future crisis like we jursz experienced. secretary, how do you view the bills last week? >> congressman, i think that transparency is important. and we are trying to twop policies that make that very clear. i altsz think that there needs to be a space about confidentble

information. i think the notion is possibly something we reflected in the fsoc procedures. i think it's the right balance for now. we need to work to strive the proper balances. the participation of members of congress, i would just point out the executive branch meetings happen every day, all day long. it's not considered the norm or appropriate for there to be congressional representation. i don't think it would be appropriate here, either.

the banks and credit unions have increased risk-seeking behavior such as extending the duration of assets and easing lending stand arts. so let me ask you this question, how much does the risk of increased interest rats concern you? i look at all of the different moving pieces. obviously, interest rating do produce a certain tendency. we've seen a narrowing of yield curves that address that. where we've come in our economic recovery and the poi sillicies,e left in a place where this is a place where the fed and others have to look at.

>> the time of the jentle man has expired. the chair now recognizes the gentleman from texas. >> thank you, mr. chairman. atypical to a fundamental and seasoned understanding of the business of insurance. insurance regulatory enviernt. and the state and guaranteed fund systems. do you agree with mr. woodall's statement? >> obviously, it was one i participated in. i thought the designation was approach rat. >> so just for the record, mr.

sex secretary, what is your background in regulating insurance companies? >> i don't pretent to have been an insurance rglator. i think the responsibility that each of us has is to look at a detailed analysis of the staffs of the fsoc. it is quiet volume ousz in detail. i participated in the hearing. and then you make your judgment based on the rourd that's prepared. >> so whemn you don't have a brk ground in thoo intus ri yourself, i gesds one of the reasons that congress decided to put these insurance people on the fsoc prosays was, obviously, a lot of the registrationlators that, for example, the fed and the frurk ri and others koent really have much background or experience in regulating snurnsz companies.

>> j r. >> do they have a background. >> for the most part, they have bark grounds that they are in. be i think if you look back, the sneerns industry was very much part of the cause of a systemic clapsz. so i think that the question the -- >> the snumpbs industry -- >> parts of it, yeah. >> the inquiry is where you know where you look at all of the activities and whether or not it has transmission trans. and i kobt to think that it's very high quality. i just point out thoo there was not an appeal of the judgment, either. >> one of the reasons for dez

igniting is to relate to fsoc's liquid as set anal isz. it assumes that sigh mu sigh mu tanl yous runs and a significant number of other con tract holdersin holdersings they isn't whether something has happened, or if it's going to happen in the future. the scenario is to avoid having financial crisis that you could avoid. >> the only problem with that is trying to forecast cataclysmic events.

really, i don't know anyone thoo has any financial institution. the problem is once you start going down this road, you imp t impact. >> when you ignore, dha's one of the reasons that ewe hear so many of us questioned, you know, the mythology that's being used in this process. >> congressman, i don't disagree that the scenarios that you look at are not the likely scenarios. but that's not our task. our task is to see if there's

fchbl substantiatety. we know what the great depression looked like. there are scenarios that we've gone through in our history. it's not just pulling scenarios out of the air. the yes is in a time of great stress, is there risk. if there's risk, it doesn't mean that you're changing the business mod em model all that dprastically. >> thank you and welcome. i want to first of all ask for a little help that you could give for me and my constituents in georgia. are you familiar with the hardest hit program? >> yes, i am. thanks to the hard work of this kplit tee, i would deeply appreciate if you could assist us: we've got an issue in which my state was about a year late in dpeting this money out to

help the hardest hit. sub sell sub sell subsequeseque we've released people and their houses are being closed on and mortgages. so within the next couple of months, in august, we're putting a big event together down in at lan that. in order to get movings on this, your predecessor, mr. time geitner and the asisz tant treasury secretary under who started this was mr. tim who did excellent work.

so who we need to do is remiepd them that because of that one-year delay, we only have dwoo u three years level. by 2012, 17, as you know, if we don't get rid of thoo money, it's gloings. it would be a shiem that we have veterans coming home, seeking pliemt. this is targeted just for them. just a call down would be very helpful asking if there's any assistance treasury can give them. if it wrrnt for tim coming down with thoo event to light a fire down in georgia, we would not be moving as we are. i don't want a dime of that money coming back when we have some jers coming home who are living on the fie sdulgts because they kshlt get that kind of help. i aappreciabluate your doing this.

now, to another point. i want to get to the emerging threats to our financial substantiate on the internooshl stage. you just returned from an internarnl visit and worksing on this issue with some of our other counter marts. also, treasury is the enforcement arms. six months is coming up. can you give us in a nutshell where we stand. relative to the impakts and what are the emerging threats, international. >> congressman, first, i would welcome the information and tim bowle rerks is running thoo office.

i will have him follow up as appropriate. >> the sankszs have been extremely effective. they have had a dramatic effect on iran's economy and braught around to the negotiating table. the joint plan of action was very limited relief. it was several billion dlarsz of relief u not enough to reverse the harm that the sanctions does to aran's economy. so the immaterial pact is building up. not reducing. third, we've made it clear that we're committed to these negotiations. to deal is better than a bad deal.

we're in the final month. >> so we're at that final mark which is the apex of my question. where do we go from there. back to square one orr will there be an extengsz asked for. i think we'm have to see where we are at the end of the month. we will look for tougher ongss. >> the chair now recognizes the gentleman from north carolina: >> hi, secretary lew. thank you for reappearing. we had a hearing for asset manager report.

former assistant tech tear quote was not splg i would hang my hat on. would you hang your halt on the as sets mampbager report. >> the report was one step in the process. it was something that fsoc asked for. we've done a lot of other work, as well. we had a public session. i believe the day before your hearing, where we had brought participation, including michael, who testified. i think that one of the porpt things to remember is fsoc has made no decision to designate fsoc managers. i think it's really important to ask the question. >> the answer could be that

there's some other course of action that's advised. and we will continue to pursue that. >> and to that end, the sec has all the authority necessary. no new authority would be needed for the sec to regular late the also set management industry. do con colonel with that assessment? >> i'm not going to pre-judge the out come 06 something that's not completed. >> do you believe the sec has the authority necessary to regular lite the imsdus ri. >> i believe they do have authority. yeah. whether it's the precise authority, it dpinds on what the mode of regulatory response is. >> yes. and thank you for clarifying. that is helpful and very forthcoming. we've got a number of questions, obviously.

but with the fsb, a number of us have questions about the process. >> many of us have complaints about how nontrarnsz parent nsoc is. so when the fsb does his sif furks ies within that category of investment companies, it becomes problematic for us to judge or what or the nsoc will take that sablgt from the fsb. so, to that end, in order to help us better understand the policy-making process, would you help us with better disclosure of what sthoez sdis kuxs are like? and what the disskugss are at

the fsb just going forward. i think that would be helpful. >> our staff does try to keep congressional parties inforled. >> we try harder to do better when it comes to transparency with the frksz s berks. >> i try harder to do better at everything i do every day. >> that's a fantastic commitment. so no hats and try harder. to that end, let me ask you another question. if we can get to this. we passed a couple of major pieces of that some help credit unions and others helped kbhoounty banks. basically, a bit of the over reach in congress has shown.

one is the swaps push out bill and the end-user push out bill. so there's a way for us to pass bipartisan legislation. >> frankly, there's been an issue for the last four years where the question is do you just make technical fixes? or do you go back and make broader changes. there's also a chance whether you give agencies to overlay with us.

>> time of the gentleman has expired. the chair intends to call a 5-minute recess. the chair now retch zebts the man from missouri. >> thank you, secretary, for being here. we also receive your thanks for send i sending may yor white to the oversighted coup sill. . >> we appreciate your sharing him. >> do ewe believe that as a result of fsoc, that we do have an authority that is accountable and responsible for monitoring

the financial ability. >> do you believe that withoufs >> i believe we have a much higher level of instability. we have relationships between regulator that is are stronger and deeper than they were r they ever were were. and we have the can tasz pill, if question need to, for dpeem people to clachl rate together. i think all of that leaves us much stronger than before and to give that up would put us back where we were in '07, '08 when regulators worked in their silos and it was very hard to work through to look at the broader financial stability? . >> that ice interesting. i'm wondering how comfortable the members of this committee

should be that the expectations, an american financial institution is still too big to fail. these huge, inter-connected bank holding companies and all the non-financial giants, i mean, how comfortable should we feel that too big to fail has been either dramatically reduced or eliminated. >> congressman, i think we made enormous progress. we have much more capital in our bankss. we have resolution authorities that are now in place and being exercised. so institution, if they hate a failure, think a way to unwand without kaudsing the skiend of systemic riszing that is we saw in '207 u '08. we have living wills for the

largest stulgts thoo have very defailed plans of who they would do if they got swo distrez. and i, think if you look at if question that's often asked about the implicit sub subsidy for large banks that's a reflection of the markets' belief that there is a willingness to step in. we're seeing that way lower if not eliminated. it has been reduced by academics who study it. it's been reduced by imf looking at it and rating agencies looking at it. i wish i could tell you that too big to fail is a thing of the past. but we've made enormous progress. we'll continue network at the kinds of sensible ongoing policies that will make our system even stronger. and the test, unfortunately, only comes when you have a financial crisis which, you know, i hope we don't experience. >> i was going there. we won't know for sure as we

didn't -- i mean i was in the committee when secretary paulson and others came in if we didn't do anything before the asian markets opened the following monday the world could fall into a depression. i'm assuming you're saying we could have a degree of greater comfort but that comfort should be measured because we don't really know and won't know unless we hit another >> i would add, congressman, many of the authorities that existed at the time have been changed in dodd-frank and we don't have the tools that secretary paulson had at that time. designee didn't have the tools. he made the tools up by his own admission. >> there were changes made in dodd-frank, you know, that limit what both the fed and treasury do. we have less ability to step in and would require -- dodd-frank as a matter of law ended too big

to fail. so, there is an obstacle and that's a change in the law to step in to exercise some of those authorities. >> thank you. i yield back the balance of my time. >> gentleman yields back the balance of his time. the chair recognizes the gentleman from missouri for five minutes. >> thank you, mr. chairman. mr. lew, welcome and quick question for you with regards to mortgage servicing assets. fsoc seems to be intent on trying to implement new capital standards on these folks. and i guess my first question is where is the problem? and what problem are we trying to solve? where is the risk? >> congressman, could i just ask for clarification. what capital are you referring to? >> fsoc capital rules on

mortgage servicing assets and what we're seeing is that the small banks, even large banks are selling all their mortgage servicing assets to nonbanks as a result of the capital rules that are being implemented. >> we are definitely seeing that there are higher capital standards for banks. you know, in general for banks. you know, to the extent that banks choose to change their business plans and get out of one line of business or into another that's obviously something that we need to keep an eye on. >> i guess -- let me back up. the run will is impacting this. again, something that's concerning me from the standpoint that we're allowing the foreign rules and regulations which to my knowledge they don't have mortgage servicing asset

activity in foreign countries so we're the only one that does, that does this sort of activity and yet we're allowing the basil 3 rules. what's the risk, what's the problem and why are we allowing the entities from other countries to regulate a business that is basically american in nature? >> well, you know, the capital standards that our regulators have put in place are actually in some ways tougher than basal 3. our national authorities had to put our capital requirements in place. we have driven basal 3 to a higher standard. one of the things we worry about is a risk that we face is that other countries don't have the capital requirements that we have and their banks are not going to be as sound as they need to be. >> this is about mortgage servicing asset. where is the risk with the

servicer, somebody who services loans? >> i think the question actually is a broader one in terms of -- >> no it's pretty specific. where is the problem that entities that service loans need to have more capital? where is the connectivity to our financial system that causes a greater risk that they have to have -- >> the capital requirements are on all the banks assets. so that, i think, is really tissue. but i'm happy to follow up with you on the specific question of mortgage servicers. >> it's interesting because, you know, as we go through this process, i think the previous question, one of the folks i think was talking, maybe mr. mchenry, you know, we're talking about some of the stress tests that banks are doing and the big banks modelling is allowed to be different than it is from smaller banks and yet when you allow them to design their own modelling you come up with a

completely different capital ratio as if you use that same modelling for smaller banks. so i think, again, you're using two different sets of rules with regard to the big guys versus little guys and i have a real problem with that and it continues to be rampant through all of the things that the treasury does. two sets of rules. >> the regulators have gone to great length to show the special circumstances around small banks and community banks. it's not the banks that set the standards for stress tests it's the regulators that conduct the stress test. >> mr. secretary, you're allowing the banks to determine their own models on how they determine their capital and that's not right. because you have to have the same set of standards for everybody. you can have two sets of standards. and, you know, it goes back to -- well, i just have a real problem with that particular -- let me just -- i got 24 seconds

left. your comment a while ago that insurance companies were a part of the cause of the collapse of 2007, 2008 which i wrote down here. it's stunning, absolutely stunning. i defy you to give me an example of one insurance company that their part of the business was the cause of the collapse. was it insurance policy, insurance rate, insurance lack of claims processing. was that a cause of 2008, 2007? >> i used aig as an example. >> you know as well as i do aig the financial portion of that company was not the insurance portion of the company it was the financial portion of the company. i yield back. >> time of the gentleman has expired. chair recognizes the gentlelady from wisconsin for five minutes. >> thank you, so much mr. chairman and mr. secretary very nice to see you. thank you for coming to speak with us today. i guess i was looking through

your testimony and i couldn't agree more that the formation of the fsoc was an important strategy towards having all of these senior regulators and principals look at the system across spectrum because i was here, again, when mr. folsom came with this four page bill saying give us $700 million. i don't want to go through that any more. but my question is, i think that a good process leads to good policy. so i guess i saw mr. roy woodhall the fsoc insurance expert dissent from prudential and yet they were designated. then we saw the sec push back against fsoc on asset managers

an aspect of money market mutual fund reforms and the sec is the expert on these industries. so i guess i would like -- think it would be helpful for us to how you see the role of the primary regulators in these discussions. is there any deference to them? did they just dissent from the decisions so that they could -- so that they wouldn't be on record as being against their industry? what are we to learn from, from the experts of the fsoc seemingly having less than a voice? >> congresswoman, i actually think all of the members of fsoc have a voice they are listened to. ultimately not everyone will agree on every issue. i think if you look at those issues, you know, separately,

i've spoken at some length on the review of the insurance companies before the designations were made. i believe the record was a robust one and it warranted the decision. obviously not every member of the, you know, counsel agreed. but, you know, the decision stands and the company has not appealed it through the courts as could it have and i actually think the process was one that reflected rigor and analytic quality and i encourage the judgment that was made. as far as the issues that were raised with regard to the sec obviously fsoc spoke to the money market fund issue before i was chair of fsoc. it is an issue that was again at the heart of the financial crisis in '08. and there was, i think, an urgency felt by fsoc to

underscore more action on that and other issues relating to shadow banking was important. sec has direct regulatory authority. they are working on a rule. i'm hopeful they will complete a rule this summer. >> mr. lew thank you so much. i don't have much time. do i think the sec did push back on aspects of money market. that was resolved. finally i guess you heard the complaint that prior to designation, which is a big deal if you're designated, not an opportunity at all for the designee to present their case to the full board of principals of fsoc tore directly address the final information charges that are being presented to justify the decision. this seems to be just a little bit contrary to what we, we know

as due process. i just want to know what your response to is that. >> first let me go back on the money market fund issue. i want to remind everyone on this committee there was a real money in money market funds in the financial crisis and the challenge to solve that crisis fell not on the sec but fell to the fed. so it was quite appropriate for fsoc to take a view and frankly it very appropriate for us to continue to take a view to make sure good action is taken. >> i have 20 seconds so i do want you to answer that other question. >> remind me. >> the people don't get a chance to present their case. >> that's not correct. there is extensive back and forth between a company and fsoc during stage three process. >> stage three. >> extensive. there's no designation until the end of it. the end of the stage three process they have a right for a hearing. only one company sought that. they have rights to judicial appeal after that.

>> thank you so much, mr. secretary. >> time of the gentlelady has expired. the committee will stand recess for five minutes. tonight on c-span 3, songwriters, performers and broadcasters testified at a hearing on copyright and music licensing in the british house of commons david cameron answers questions about hiring a former newspaper editor. the house examines the $48 billion merger of at&t and directv. the house hearing today looked at music licensing and copyright, in particular the legal issues surrounding broadcast music over the radio. roseanne cash testified along with paul williams and executives from pandora radio

and national association of broadcasters. this house judiciary subcommittee hearing is just under three hours. >> ladies and gentlemen the subcommittee of intellectual property of internet will come to order. the chair is authorized to declare recess at any time. we welcome our witnesses today. let me get my chair adjusted here. thank you. good morning and welcome to the second of two hearings on music

licensing issues. two weeks ago this subcommittee heard from your fellow music industry representatives about their concerns with the state of music licensing copyright laws. look around the room i think we can conclude that you all have more than a passing casual interest in this issue and we welcome all of you here today. at the earlier meeting i mentioned my fondness for old time blue grass country. i don't know that has bolstered the popularity across the country. probably hadn't but i'll don't try to do that and make my opening statement very brief because we have a long day ahead of us. although the witnesses on this panel may not agree on everything, i believe they all agree that music enriches the world in which we live. since this is part two of the music licensing hearings i won't repeat all of the outstanding music issues that congress needs to address. i simply hope that the effort to improve the music licensing system we don't lose sight of

the fact that creators need to be paid for their work just like everyone else in this room. although our creative industries are the envy of the world, i'm not sure that our music licensing system is. it may well be time for a change. and that will be exposed perhaps today as we go through this may maybe arduous journey. i yield back the balance of my time. >> thank you, mr. chairman. thank you for holding this second hearing on music licensing under title 17. at the first hearing two weeks ago we flared a diverse panel of witnesses. although there are varying points of view about the specific problems most in need of legislative solution it was widespread agreement that the system is in need of comprehensive reform. as i stated at the first hearing, the current music

licensing system is rife with inconsistent rules. satellite and radio compete against each other under different rules. several of the service providers who play an important role in the music system are with us today. local broadcasters provide critical programming. often form strong public service partnerships with the communities they serve. we also have representatives of digital radio making music available to consumers in new and innovative ways. i look forward to productive discussion about how to come together to improve the music licensing system. as i noeptd at the first hearing our current scheme is so haphazard because in part large

pieces were developed at different times in response to different innovations. rather than continuing to adjust the system in a piecemeal fashion i believe we must take a comprehensive approach. i'm not alone in my belief that a comprehensive approach is needed. at this year's grammy on the hill event, ceo called for the industry to coalesce behind a single bill. it was later echoed by house majority leader and nancy pelosi who agreed the time has come for congress to address these issues. that's why i pledged our first hearing of music licensing to develop a comprehensive omnibus bill which some people have dubbed the music bill. the law should be platform neutral and old music created should receive fair market based compensation for their work. there's a growing consensus the system is in need of reform.

the copyright office is conducting music licensing study. just this week it concluded a series of round-tables held around the country in nashville, los angeles and new york. the commerce department issued a green paper for the digital age. the department of justice is conducting a much needed review. two of the performance rights organizations responsible for collecting and distributing royalties. i hope the doj review will be completed quickly as time is of the essence. today's hearing is another important step in this larger effort to review and update the music licensing system. i'm interested in hearing from today's witnesses about the specific issues they believe should be addressed and about how we can enact meaningful reform. i have no doubt that today's discussion will be just as informative and useful as a discussion in our first hearing. i thank you and yelled back the balance of my time. >> i thank the gentleman.

chair recognizes the distinguished gentleman from virginia. >> thank you, mr. chairman. thank you for holding this hearing and thank you for your diligence in the number of hearings and impressive array of hearings we've held on copyright issues and i can see we have another full house so good morning to you all and welcome to the subcommittee's second music licensing hearing. i see the size of the witness panel has grown with interest in this issue. two weeks ago a number of problems in the music licensing system that currently exists were highlighted. in reviewing the written testimony submitted in advance of this hearing, there does seem to be agreement that a morrow bust copyright ownership database is needed. there seems to be an interest by many in simplifying the diverse rate making. disagreement remains on whether all those who use music should pay for it and what specific rate standard should be used

among other issues. as i mentioned two weeks ago as we consider challenges and potential solutions to the copyright laws relating to music we should keep in mind ideas that incorporate more free market principles. we should be mindful of the tremendous role that digital music delivery services play in the music eco system for consumers and creators alike. i have long said that the content community and the technology community need each other. it is my hope that we can identify improvements to our copyright laws that can benefit both groups as well as consumers by maintaining strong protections for copyrighted works and strong incentives for further innovation. thank you and appreciate you all making time to be here this morning and i yield back, mr. chairman. >> i thank the gentleman. the distinguished gentleman from michigan, the ranking member is recognized for his opening statement. >> thank you, chairman and

welcome to our distinguished panel. i see faces that i've worked with before. and we welcome all the supporters of this subject matter that are here in the judiciary hearing room this morning. since i agree with everything that's been said by my predecessor, the gentleman from new york and the chairman himself i'm just going to put my statement in the record. it would be largely repetitive. many of you know where i stand. i've supported music as an important and vital source in our national interest and it's in that spirit that i welcome you all to the judiciary committee this morning. i ask unanimous consent to put my statement in the record and yield back the balance of my

time. >> i thank the gentleman. and statement from other members will be made a part of the record without objection. let me introduce our panel of witnesses as we proceed with the business at hand. our first witness this morning is miss roseanne cash. singer, songwriter, author and performer. i can hardly see you because of the impediment miss cash. she completed heresy dency at the library of congress in december of 2013 and was given the lifetime achievement award for sound recording in 2012. miss cash is testifying today on behalf of the american music association and miss cash your late dad also appeared before this subcommittee and we enjoyed having him here. our second witness, i can't see you either because of the

impediment but i'm hold you harmless for that. mr. carrie sherman is chief executive officer of the recording industry of america. in his position mr. sherman represents the interests of the 7 billion u.s. recording industry. he received his b.s. from cornell university and j.d. from harvard school of law. our third witness is mr. charles warfield senior adviser of wmf media. he's a 31 veteran of the broadcasting industry and here on behalf of national association of broadcasters. he received his b.s. in accounting from hampton university. good to have you with us, mr. warfield. our fourth witness is mr. darius armon. he's testified today on behalf of the american association of

independent music also known as 821 m. he attended the university of virginia. our fifth witness is mr. ed christian chairman of the radio music licensing committee. he teaches courses in media management, broadcast programming, and radio operations at central university of michigan -- central michigan university. he received his b.a. in mass communications from wayne state university and his m.a. in management from central michigan university. our sixth witness is mr. paul williams president and chairman of the board of american society of composers, authors and publishers. mr. williams is an oscar grammy and golden glove winning hall of fame composer and songwriter. mr. williams you'll be glad to know your friend, the congressman from texas

admonished me to be easy on you today. we'll be careful to adhere to that request. our seventh witness mr. chris harrison vice president of business affairs and assistant general counsel of pandora media. he's an adjunct professor, used to teach music law at the university of texas of law. mr. harrison received his j.d. from the university of north carolina. i'm pleased to say. his ph.d. in political science also from university of north carolina. pleased to have a fellow tar heel. our eighth witness is chief executive officer. he's responsible for establishing long term strategic plan and vision for the organization. he received his b.a. from the university of virginia and his j.d. from the harvard school of

law. our final witness is mr. david frear. gentlemen, before we begin hearing from you, i would like for each of you to stand if you will. i'll swear you in. do you hear by testify that the testimony you say will be the truth, nothing but the truth, so help you god? let the record show that all responded in the affirmative. we will start with miss cash. folks, i'll remind you if you can try to comply with the five minute rule. when the timing light on your table goes from green to amber, that's your warning that you have a minute to go to reach the five minute opinion cal.

you will not be punished if you don't comply with that. we try to comply with five minute rule. i don't think there will be a vote until afternoon so we won't be interrunted by floor votes. miss cash you're recognized for five minutes. >> thank you. chairman, ranking members, members of the subcommittee, thank you for the opportunity to testify on behalf of the americana music association. i want to address a few obstacles to making a living as a songwriter and recording artist today. everything i say is guided by one principle, all creative people are entitled to fair market compensation when their work is used by others regardless of the platform. i have been both a professional musician and songwriter for 35 years. i grew up in the music industry.

in the age of major record labels and brick-and-mortar record stores. i've been signed to major label since 1978 and am currently on the esteemed blue note label. the climate among musicians at the moment is disspirited. we feel marginalized and devalued although our passion for our work remains unchanged. every artist i know says regarding their work they have no choice,er with don't create out of whimsy. we are fueled by an artistic sensibility that can be ruthless in its demand for discipline and in some ways we are in a service industry. we are here to help people feel, to inspire, to reveal the secrets of the heart, to

entertain and provide sustenance for the soul. creating music is a collaborative effort in the creation of recorded music co-writers, producers, fellow musicians, recording engineers, background singers and various support people come together with the single purpose to create one work. i am a fan of new technology. and i'm excited about the potential in see and the new ways of distributing music that are being offered to music lovers. my enthusiasm is tempered, however, by the realization that these new services are all cast against the backdrop of crushing digital piracy. and licensed under out dated and byzantine laws which stand in the way of creators being paid fairly for their work. among the problems facing us are, one, the lack of a public

performance right for terrestial play for recording artists. the united states is one of a few countries including china, north korea and iran that lack a radio performance right for artists. the failure to recognize this right means that performers cannot collect royalties for their work even when it is broadcast in countries where the right exists. because the treaties the u.s. has signed are reciprocal. two, issues concerning how rates are set for licenses that songwriters offer for their work. currently the law prevents courts from considering all the evidence that might be useful in setting the fare as straight for license performing rights organizations offer and royalty rates are not set on a fair market basis. this makes no sense. the songwriter equity act introduced by congressman

collins and jeffries would address these issues and i thank them for that. three, the lack of federal copyright protection for pre-'72 sound recordings. there is a gap in copyright protection for sound recordings created before 1972, which digital services use as an excuse to refuse to pay legacy artists. i thank ranking member conyers and congressman holding for derogatory the respect act to treat the work of legacy musicians fairly. for example, if my father were alive today he would receive no payment for digital performances of his song "i walk the line" written and recorded in 1956. but anyone who re-recorded that song today would receive a royalty. the injustice defies description. these are a few of the many challenges we face as performers

and songwriters and i understand ranking member is considering legislation to comprehensively address these and additional concerns. thank you, congressman. bottom line copyright law should not discriminate among individual music creators. each should be fairly compensated for their role in the creation and delivery of music to audiences. i see young musicians give up their dreams every single day. because they cannot make a living doing the thing they most love, the thing they just might be on the planet to do. they deserve our encouragement and respect. musicians and artists of all kinds should be valued members of american society. compensated fairly for honest hard work. i believe we can find solutions so that artists and musicians can succeed together with both new and existing music services and i thank you for this time. >> thank you, miss cash.

mr. sherman. let's start with you. recognize you for your statement. >> chairman and ranking members and members of the subcommittee my name is car sherman. i represent columbia, motown, capital, atlantic to name a few labels. our members have worked hard over the past two decades to balled viable, diverse and consumer friendly digital music market place. millions of music lovers can find whatever they want whenever they want it. digital models account for two thifrds our revenue and that number is growing. before the music market place can realize its full potential there remains serious systemic issues to address. records are the economic engine that drives the entire music industry. it's the recording in vested and marketed and promoted by record

labels that produces real revenue for the artist, digital music service. record labels invest not just their financial capital but human capital, years of experience and expertise from the likes of clyde davis, and others who work with artists to bring out their very best resulting in music that not only captivates fans but drives revenues for the benefits of everyone. yesterday we released a report on the investments in music made by major record companies. in embracing digital distribution record labels have revolutionized the business and streamlined their operations, all while revenues have plummeted even in tough times, however as a percentage of u.s. net sales revenue over the last decade major label paints for artist royalties have increased by 36%, mechanical royalties for song writing have increased by

44%. impediments to licensing impact the ability of record labels to sustain the investments that benefits the entire music eco system. today's antiquated, complex and time consuming licensing regime undermines that system and that's why we believe music licensing must be fixed because behind the seamless experience provide to consumers lurks an inefficient and frankly broken system. we've got to rethink it. here's what we suggest. first, grant performance right for sound recording. frankly inexcusable that the u.s. still provides a special interest exemption for the benefit of am/fm broaders, a subsidy which is taken out of the pockets of artists and their record labels. it's time for that to end. second, make sure artists who recorded before 1972 are paid. because sound recordings are covered by federal law after february '72 and state law before that date some of our most cherished artists are not

being paid by businesses who take advantage of the compulsory license. third, allow rights to be bundled and administered together. owners of every other type of copyrighted work are able to license all the copyrights necessary for all uses. movie streaming service doesn't have to go to one entity to license the performance and a different enat any point to license the making of a server copy so it should be for musical works. it goes without saying every one deserves fair value market rate for their work. finally, consider a one stop shop for musical work license. we filed with the copyright office one possible way for it

network. ate potential path towards simply figure the complicated way music must be licensed. but we understand as we stated repeatedly no vision to the music licensing regime can move forward unless all the relevant stakeholders in the music community come to a solution on which they agree. the goals of any solution should be to align the economic interests and incentives of music creators. ensure songwriters and publishers receive a fair portion of licensing of the sound recording. avoid competition between record labels and music publishers. speed the licensing process making it quicker and easier for consumers to enjoy new music services and make royalty payments to songwriters and publishers more efficient and transparent. we welcome with the opportunity to engage with our partners on our idea as well as any other ideas they may have to improve the status quo.

the music business has reinvented itself but our work is not done. we hope by working together with our music industry colleagues we can find the consensus necessary to simplify music licensing and ensure all creators are paid fairly. thank you. >> thank you, mr. sherman. mr. warfield. mr. warfield, pull your mic closer to you. >> my name is charles warfield and i'm the joint board chair of the national association of broadcasters. over my 37 year career in and around broadcasting i served as president of one of the country's first wholly minority owned radio station groups. i ran day-to-day operations and i even worked as an executive at a record label. over that time i learned broadebroad e

broadcasters in many ways. we're local, involved in our communities and serve the public interest. for those reasons i'm proud to testify today on behalf of the thousands of free local over the air radio stations across the united states. the supreme court has held that the core objective of copyright laws is for the public good. not the creator's interest, user's interest but the public at large. unfortunately in testimony before this committee some are asking to fix a copyright law that serves a different goal. that their constituencies receive greater compensation. they don't emphasize the need of balance. anyone of which would promote the public good. in contrast stepping back from any one piecemeal legislative proposal it is clear taken as a whole the time tested laws that govern the relationship between music and broadcast industries promote the public good in three

important ways. first, the existing law has enabled locally focused radio industry that's completely free to listeners. anyone with an am/fm antenna can access our programming free of charge. radio is unique among entertainment mediums and there's no subscription, no broadcast package or expensive wireless data connection needed for access. second the resulting popularity of radio has significantly contributed to usa recording industry that's the envy of the world both in terms of size and scope. while u.s. copyright law macon taken critical differences from its international differences it has also fostered one of the largest recording industries in the world. our unique system of free air play, free promotion have served the broadcaster and recording industry for well for decades. the fact is in all 37 years of

my career i have never had a record executive come to my station and say why are your playing all of my music. i've never had a promotion department refuse to provide with us their newest record on the day it comes out. they see the value and realize that we're the greatest promotional tool for their artist and we're happy to provide them with that. third and most importantly the community based nature of local broadcasters driven our industry to extra levels of public service. for example in the wake of hurricane sandy new york city's wqht, hot 97 put its music on hold and broadcast steadily through multiple power outageses, providing life-saving information. it provided critical information about disaster relief locations and assistance. further hip-hop has heart foundation provided blankets, clothing, hd radios to residents in the afflicted areas.

this is one example. it's the norm not the exception. each of you know this as you see the value of local broadcasters back in your distribution every day. but make no mistake the unique community focus of broadcast radio is only enabled by the current legal framework. i would urge this committee to tread carefully and resist piecemeal changes to law that would disrupt this delicate balance that enables us to serve the public good. turning brief lifr to straemg i agree with others the currents framework poses obstacles on every music eco system that prevents our businesses to serve the public good. today whether you're a large or small broadcaster the revenue again rapisted from streaming does not and cannot offset the cost. so many of our members don't do it. i urge this subcommittee to focus its license review to changes on law that promotes to benefit of song artists and

consumers. in conclusion we stand ready to work with you. now and in the future. that serves the public good. i am pleased to answer any questions and welcome your invitation to me this morning. thank you. >> thank you, mr. war field. mr. tarman. >> thank you for inviting me to testify today on behalf of the small and medium size businesses that make up the american association of independent music. i am dary us a van arman and an entrepreneur. co-founder and co-own of a group of independent labels headquartered in the midwest of the united states. we currently employ 70 u.s. employees. we have multiple gold albums and singles and one much our recording artist from the state of wisconsin has won multiple

grammys. i'm on the board of hym a not for profit organization. of all shapes and sizes from all over the u.s. from hawaii to florida. our sector compromises 34.6% of the u.s. recorded music sales market. first and foremost the american independent sector wants nothing more than a free market with a level playing field. however, there's one thing standing in our way. big companies using their power and resources to take what is not fairly due to them. large technology companies use our music but because of the safe harbors our current copyright laws provide to them artist creators and independent labels are not being fairly or adequately compensated. broadcasters are not paying anything at all to broadcaster sound recording on am/fm radio. this is not only unfair to us on

the creator side but unfair to digital side. within our music industry there's one imbalance that's primary threat to music creative enterprise, market concentration. today just three major label groups exist compromising about 65% of the u.s. recorded music sales market based upon copyright ownership the largest two are subsidiaries of foreign corporations. congress intend copyright would simulate new creative work for consumers. indict not intend for it to enable a handful of private interests the ability to make huge profits unfairly on the backs of creators. while we like the idea of a comprehensive approach to music copyright legislation this music bust must be driven by all members of the music creator company not steered by a few maj major private interests. we need stronger copyright

protections. the shape is subsidizing large technology companies. we need a broad pass performance right. broadcasters must fairly compensate all creators so the process can continue. broadcast performance right will also give us international reciprocity. we need more transparency and efficient is in our music licensing system. our industry can't afford to unfairly take value away from artists creators and those who invest in those creators. finally we need a stronger statutory license for noninteractive performances as it's the best friend of a level playing field. creator pay must be based on actual music usage. current music license system is broken. large companies take advantage of whatever inefficiencies exist in the marketplace to make an extra buck. so we need copyright law

revisions that do the following. increase the value of music. make copyright more equitable. reduce inefficiencies. enable creators to create what consumers desire. we hope to come to these revisions with all participants. the vast majority of small and medium enterprises that compromise the independent sector or american companies employing american employees. almost every dollar owned by independent copyright has a much greater impact on the u.s. economy than every dollar owned by a foreign controlled entity. as a american copyright should primarily to the benefit of american consumers, american creators and american enterprises. in the end all the independent sector wants is a free market with a level playing field. we want to compete to provide

the economic growth and job creation that our american economy needs. thank you. >> thank you. mr. christian. >> mr. chairman, ranking member and members of the subcommittee i'm ed christian and i'm chairman of the radio music licensing committee. we have been in existence for well over 50 years and is a nonprofit that represents some 10,000 local radio stations in the united states with respect to music licensing matters. over the years we have been involved in extensive music licensing negotiations with two largest performance rights organization. the mission has been to provide a competitive market for music licensing in which radio station operators pay a fair price and copyright owners receive equity compensation. we have historically achieved fairly senses. through a combination of industry wide negotiation and

asness federal rate litigation. recently we found ourselves involved in antitrust litigation. in order to curb this company's anti-competitive licensing practices. i'll start by saying that licensing redistribution concepts that rely upon the radio industry for funding are misguided. with particular reference to the recurring demand by the recording industry to be imposed on terrestial radio. the radio industry is not vast that can be tapped for a recording industry that fails to address a decline in its own brick-and-mortar income. congress intended an exchange for unique promotional support afforded record labels and artists, radio should be treated

differently from other transmission platforms. that premise has not changed. local radio station operators are responsible for attending license for the public performance of copyrighted musical works. for the vast majority of operators this is a blanket license that permits a station to air music from a particular repertoire without accounting for actual usage. the administrative benefits of a blanket license that's you outweighed antitrust aspects. given the large scale of the rye industry, the rmlc believes collective licensing the advisable. in this regard the independent and experienced judges have enabled to deliver appropriate rapist setting oversight. a purely free market approach to

music licensing coupled with the absence of consent decrees monitored by the department of justice would invite market abuse and represent a step back ward from a system that has served parties well for decades. indeed the fact that there are currently two antitrust cases in federal court is a testament to what's happened in the absence of government supervision of entities that wield the leverage of aggregated musical works combined with the club of copyright infringement. if congress is dedicated to bold reform and enhanced royalty payment to creators, it might want to explore the prospect of a super licensing collective along the lines of what's been proposed by other stakeholders. outside of brazil, it is hard to identify another country in the world that supports multiple licensing entities that administer a single right such

as the public performance right in the musical composition. this sets up an yes for mousily complicated and redundant licensing system and precious royalty payments due creators are being diminished in their journey from the licenseee to the copyright own. indeed this example doesn't even account for the role of other licensing agencies such as the sound exchange but further contribute to the music licensing morass. we really need to carefully scrutinize the royalty distribution process. it dictates how and what creators are paid relative to incoming license fees.

rmlc is a long standing expertise and stand ready to work with other stakeholders in fashioning a pragmatic licensing regime. thank you. >> thank you, mr. christian. mr. williams? pull that mic closer to you if you will. >> there we go. good morning. my name is paul williams and i am a songwriter, an american songwriter. i have the great pleasure and honor of being president and chairman of the board of american society of composers, authors and publishers. we are ascap. songwriters had an idea. they believed they could protect their rights as music creators more effectively if they joined together rather than going i want alone. so thank god they formed ascap.

today more than 500,000 song write e-composers and publishers trust and depend on ascap to negotiate license, monitor public performances and distribute royalties all on a not for profit basis. i'm honored to appear before you today to speak on their behalf. we're here because technology is changing in wonderful ways. we're moving into a world where people no longer own the music they love, theyit. whenever and wherever they want. at the same time the federal regulations that govern how music is licensed and thus how songwriters like myself are compensated for our work do not reflect the way people listen to music today. in fact they are stuck in the distant past and threatening the very future of american music. ascap is governed by a consent decree greeted in 1941 and updated in 2001. that's before the ipod ever hit

a store. we all know the music marketplace has changed dramatically since then and new music services are finding ways to take advantage of this outdated regulatory system. consider the fact that it takes 1 million streams on pandora for a songwriter to earn $90. one of the most popular songs in 2011 was lady antebellum's hit "need you now." for 72 million streams the four songwriters earned less than $1 $1500 a piece. such an imbalance would not happen in a free market where real competition exists and songwriters have more of a say over how our music is licensed, how our music is licensed. but under the current consent

decree congress writer compensation reflects the true value of our work less and less even as our music is performed more and more. there's now a very realistic major publishers will withdraw from ascap entirely as a result of that voluntarily collective licensing could soon collapse. i want would make the system more complex, more inefficient and more expensive for everyone including music fans, the people that love our music. unless we do something to fix it. now i sit here surrounded by representatives of multibillion dollar corporations that frost our songs and i find it beyond perplexing that american songwriters like roseanne and myself are subject to the heaviest government regulation. i believe all of us working together to modernize the music licensing system will allow songwriters and composers to thrive alongside businesses that

revolve around our music. we want you to be a giant success. you are delivering our songs to the world. to that end we're proposing several updates to our consent decree with the department of justice. we believe these updates can save voluntary collective licensing from the serious risks facing to it the benefit of music users, consumers and creators alike. first, we need a faster less expensive process for settling rate disputes with businesses that use music. one reached in the free market. songwriters need flexibility. we should be allowed to grant ascap to license our music for some uses wild maintaining the right to license the music ourselves. doing so would foster greater come petty show in the marketplace. finally we can stream line the licensing process for thousands by giving ascap the ail built to

license the composition of all rights to operate their music in one transactions. passage of the songwriters equity act is another crucial piece of this puzzle. it is a simple and reasonable fix which will enable a court to consider sound recording royalty rates as evidenced when establishing songwriter royalty rates. working together to make these changes i'm confident we can preserve the immense benefits of voluntary collective licensing. this will benefit businesses that license music and listeners who enjoy it while ensuring songwriters and music publishers are compensated for the true value of our music. the true value our music brings to the marketplace. thank you for the opportunity to share this with you today. thank you so much. >> mr. harrison. >> thank you, mr. chairman.

ranking member. chairman. other members of the committee. pandora appreciates this opportunity to testify at this important hearing. without question pandora is delivering listeners, artists, song writers and the music industry. 77 million listeners tuned into pandora last month and listened for an average of 22. . every month pandora performs more 1.5 million socks, 80% of whom were not played on radio. pandora contributes hundred hundreds of millions of dollars. we celebrate a major milestone. $1 billion in total royalties paid. as this committee considers opportunities to improve music licensing, pandora hopes the committee will appreciate the central aspects of our current system of statutory blanket

licenses including the consent decrees which encourage innovation through simplified licensing procedures, protect music users from the anti-competitive behavior of big copyright owners and make sure supreme their royalties. in today's highly concentrated music industry with fragmented and opaque copyright ownership, statutory blanket licensing is the most efficient means for digital music services to license the millions of copyrights owned by tens of thousands of copyright owners and are necessary to offer a compelling service to consumers. as the future of music coalition recently stated ", the incredible growth of internet radio would have been inconceivable had fledgling web casters been compelled to negotiate with all the music publishers individually. without an easier way to obtain permission of songs, internet radio might never have

happened." that being said, pandora's recent experience reflects the very real and continued anti-competitive behavior of major music publishers of societies reflecting a continued need for government protection. as concluded by the federal judge who oversaw pandora's proceeding withes a cap, "the evidence at trial revealed troubling coordination between sony, universal music publishing, and ascap which implicates a core antitrust concern underlying the ascap consent decrease." statutory blanket licenses provide important transparency into how royalty payments are calculated and enable direct fiemt recording artists and song writers. without them, the royalty payment process would be controlled by record labels or music publishers who where unrecouped advances are dedetectived and a smaller percentage of the royalty -- if any -- is passed through 2

artist. while pandora believes it should remain a central feature of copyright law, congress can improve the efficiency of determining the reasonable fees for such licenses. for example, several respondents to the copyright office's recent notice of inquiry noted the expense and burden of the current copyright royalty board rate setting process highlighting, number one, the need for the application of the federal rules of civil procedure and evidence. two, the establishment of a unitary proceeding with ample time for discovery and presentation of evidence, and, three, the application of the so-called 801b standard. we would also recommend in order to foster greater transparency the creation of a sung l database of record hosted by the copyright office and housing all relevant copyright ownership information. participation need not be mandatory but congress could incent robust participation. for example, just as chapter 4

of the copyright act prevent answer copyright owner from seeking statutory damaging unless the work is registered, congress could include a requirement that entitlement to statutory damages would be contingent on registering and keeping accurate ownership information in this database. this would help prevent copyright owners from holding services such as pandora hostage during negotiations, something we experienced directly in 2013 when a handful of major publishers threatened our business with massive copyright infringement penalties while refusing to disclose their repertoire. in addition to enabling services to quickly ascertain who owns which rights to a work, a single datas by of record would also enable services to identify the owners of the songs it performs which would encourage real competition among owners for distribution across all platforms. it's important to note that while transparency would help mitigate anti-competitive behavior, it would not alleviate such abusive practices in entirely. that's why the protection of statutory blanket licensing and

consent decrees must be preserved. thank you and i look forward to answering your questions. >> thank you. >> mr. chairman and members of the subcommit tee, i'd like to start by telling the committee something you probably don't hear very often -- congratulations to congress on getting it right. for over ten years now, sound exchange has administered the statutory license for sound recordings on digital radio that this committee created in 1995 and that decision shines as a true legislative success story. it provides transparency and efficient they makes possible the digital radio services enjoyed today by over 100 million americans. it has led to a critical and growing revenue stream for sound exchange's 100,000 account which is represent featured artists, back ground musicians, labels and rights owners large and small. and the statutory license has provided a huge commercial ben pitt to the 2500 services who have used it to build their businesses -- some of america's

best-known and fastest-growing companies with household names like pandora, sirius xm, providing them easy access to the product they needed to get off the ground. congress greased the tracks, removed the barriers to entry and a burgeoning multibillion dollar industry grew. and while you've heard many parties discuss problems elsewhere in the industry, mr. chairman, everyone, everyone connected with the sound exchange world, which includes the entire recorded music side of the business, artists, labels, union, even the digital services themselves, everyone uniformly supports the fundamentals of the system. but as we move forward, there's one core principal that should guide everything we discuss and this is this -- all creators should receive fair pay on all platforms whenever their music is used. period. everyone who has a and in the creation of music deserves fair market value for their work and i mean everyone, mr. chairman, song writers, publishers, studio producers and engineers, the

artists who give compositions life and record companies who help artists full their creative vision. pair pay would ensure justice for creators whose contributions formed the soul of these services, fair pay would level the playing field for radio services and fair pay would ensure a healthy, vibrant, ecosystem for listeners and fans. with that guiding principle, i'd like to propose a few modifications to make this good system work even better. first, congress must address the current royalty crisis facing legacy artists with recordings made before 1972. the refusal of some radio services to pay royalties for this era of music makes no sense as a matter of policy and is surely not what this committee ended when it created the digital radio license. it's wrong to pay nothing to artists who created the most iconic era of music in american history. on behalf of sound exchange and all of the artists we represent i extend our thanks to congressman holding and ranking member conyers and all of this

committee who joined them in supporting the respect act. i urge the committee to act now on this critical piece, pre-1972 artists simply cannot afford to wait. second, congress must ensure that all radio platforms pay all creators. this means eliminating the ancient and unfair loophole that allows the $17 billiona.m./fm industry to pay nothing for the source of its lifeblood. fm radio draws the crowd and ignores the performers at the center of its stage. fm's tired and stale justifications for taking advantage of artists rings hollow and are unfair to other services seated with me here today. and third, mr. chairman, once all platforms start paying creators, they should pay according to the same fair-market standard. it makes no sense that similar radio platforms played by different rules, especially in

today's world where those platforms may compete against one another in the same places over the same speakers to the same listeners. to quote ranking member nadler's opening statement, the government must get out of the business of picking winners and losers in this industry. if we want innovation, the law shouldn't give favorable rates to some companies or breaks to older formats. stated another way, mr. chairman, these businesses should compete based on their legal appeal and economic value, not on the strength of their legal loopholes. so, mr. chairman, what would success look like for music licensing going forward? it would be a system where many of the challenges we're talking about here today would fade into the background where the back office would work seamlessly and invisibly. where we are focused on business models and consumer offerings rather than rate standards and inequity. success would mean a system where the entire music community worked cooperatively to address these issues for the collective good and most importantly

success would mean a system based on the guiding principle that i set forth earlier -- all creators receive fair pay on all platforms wherever their music is used. in closing, mr. chairman, the american music industry represents some of our best talent and our most cherished assets. all we're asking for is something pretty simple -- that those responsible for bringing these treasures to life be treated fairly when someone else profits off of their work. thank you, mr. chairman. >> thank you. >> chairman goodlatte, ranking members conyers and nadler and members of the subcommittee, thank you for the opportunity to testify today, my name is david frooer, i'm the executive vice president and chief financial officer of sirius xm. sirout xm is one of the largest radio providers in the united states, we have over 25 million subscribers. subscribers residing in every congressional district in the continental u.s. and we employ 2,100 people around the nati