different institutes, what goes on there. so we can get down and have some real good discussions. but there is a couple of things. this personalized medicine you're talking about is fascinating to me. and i understand that it's the collective use of technology such as genomics, and protein medics, or something like that. that explore cells and organisms. nih, i understand in your testimony you're going to concentrate on cancer right now. obviously it's a lethal disease and so forth. is there any plans to look at broader, maybe not as lethal diseases, or not as serious diseases and the effects that personalized medicine could have in the research in those arenas? >> absolutely. let me be more clear than i was. the precision medicine initiative has two components. an early focus on cancer, because this is so ready for this kind of really expanded effort to understand what causes

cancer, what we can do about it. but the other component which is a long-term ambitious to be sure effort is this cohort of a million or more americans, which we could be studying for virtually all diseases and knowing that you are a dentist i would certainly include in that such things as periodontal disease. we know the environment and genetic risk are involved in those conditions. but we really haven't had a sufficiently large study with appropriate patient participation to be able to get those answers. this should be a way to go there. so that's true for diabetes, for heart disease, for alzheimer's disease, for virtually every common condition with a million people, you're going to have enough events you should really be able to dissect, what were the biomarkers that warned this would happen what were the environmental factors that played a role. we never had that power before we aim to get it. >> that's fascinating stuff, and could really advance the advancement of diseases and cure diseases. i am going to submit some

questions for the record. but one i did want to ask, in our conversations in the past you've indicated your strong support for the nkats. i heard from some advocacy groups several years ago that -- who expressed concern that putting more resources into nkats might come at the research. but you do request the $27 million increase for nkats in fy 16. >> i'm happy to. nkats, now just three years old, was the first new center at nih again, quite a long time and was focused in trying to identify the bottle necks from going from basic science discoveries to benefits. in collaboration with our partners in the private sector. i think initially there were some concerns that nih is

becoming a drug company, that really was never the plan and is not happening now. instead, we are identifying areas of technology development that no single company could undertake, but working with them, we can give you just one example. the effort to try to figure out when you're developing a new drug, whether it's going to be safe in humans or not. has been a real difficult one. we use animal studies, small animals, large animals. it's not that accurate. it's slow, it's expensive. we probably lose drugs along the way because some mouse got a slight liver issue and it probably would have had no relevance to humans but we sort of lose the drug at that point. wouldn't it be better to test toxicity against human cells and not put humans at rirvg. now with the ability to create a skin biopsy from you or me cells that represent liver or heart, or brain, or kidney, or muscle, on a three-dimensional biochip, we can begin to do those experiments without putting people at risk, and get very interesting data about what

drugs are likely to be safe or not at a much lower cost. we're doing this with fda with darpa. nkats is the place where this now lives. pharmaceutical companies are wildly interested in this. because if it works it could greatly improve the likelihood of knowing whether something is safe before you get into that expensive clinical trial. i could go on with many other things that nkats are doing. they're all quite innovative. they probably wouldn't have happened without nih stepping into this place. they're high risk, but i think they're going to be high reward. what's in nkats now is the clinical translation al science centers, which are present in many of your states which is our network of 62 academically based centers that is where an awful lot of clinical research is being done. >> thank you all. thanks for the work that you do. and i look forward to coming out and visit with you. as i've said many years and i'll continue to say it, nih is for good and bad the best kept

secret in washington, d.c. and the american people need to know what happens out there. thank you. >> love to host you. please come out. >> thank you. all of us on this committee knows our good friend miss lee is dealing with a difficult situation with the loss of her mother and she's been in our thoughts and prayers and it's wonderful to have you back here with us today. >> thank you for your condolences and your support and your real expressions of sympathy during this very difficult period. my mother, and i'm so glad to see everyone here today, and i want to thank all of you for your work for your efforts really to save lives, and to ensure the quality of life for everybody in our country. my mother was 90 years old. she died of copd which is what the third largest death -- disease -- death by disease in

this country. and i've spent many a night, many a day in the emergency rooms, and hospitals. but because of you and the work of nih, she lived to be 90, she lived with copd. and my sister has multiple sclerosis. and again, because of you, this work and this committee my sister's 67 years old. and she's leading a very healthy life as a result of nih and the research and the treatment. so i have to personally thank you all so much for the work that you do. and of course, i want to see your budgets doubled so that everybody can, first of all, are free of these diseases. and i wanted to ask you a couple of questions with regard to copd research in terms of prevention and new treatments. also with regard to multiple sclerosis and your brain initiative, how that will impact people with ms. sickle cell. i've been working many years

now, i'm looking at the a-1-c test, and the correlation between sickle cell trait and diabetes and the a-1-c test and how our doctors and labs are fully aware that there could be a false positive. and what you're doing in terms of your research. and your budget with relation to hiv and aids. i want to see if you're coming up, or we're close to a vaccine. what types of new treatments do you envision with this increase of $52 million. and finally as it just relates to the national institute on minority health and disparity, really pleased, once again to see an increase of $14 million in funding. and want to look at how you're focusing on, or looking at social determinants of health care. we know many of the health disparities in the minority communities directly relate to

the social determinants, and how this is being framed and researched within the nih. so once again, personally, i just have to thank all of you. thank you very much, mr. chairman, and members for your support during this period. >> well, miss lee those are great questions. >> i'm going back to medical school now. as a result of my family. >> sure. maybe i should ask dr. gibbons to say something about copd, and we'll try to work through as many of these as we can. >> copd the leading cause of death in this country. one in which we're providing clinical trials that have provided a better course of life life. but we need to do more. the challenge is that we often diagnose and treat the disease toward the latter stages. and a lot of the damage has already been done to a lung that is primarily supportive. this is really an opportunity,

in fact for precision medicine where we can diagnose and start to develop interventions early in the course to really prevent a lot of that deterioration that occurs. we're excited about the opportunities that come from a genomic medicine. we're starting to understand the pathways that are promoting that inexorable disease toward death. and we have some exciting opportunities to develop some new therapeutics in that regard, which is very exciting. >> and maybe i'll ask dr. fauci to say something about a new trial in multiple sclerosis, which his institute supported and maybe say something about hiv/aids. >> thank you, ms. lee, for this question. as you're probably aware just a few weeks ago there was published a very exciting study really, one of the most important studies we've seen in multiple sclerosis, in which 25 subjects were involved in a phase two open label study of stem cell transplantation in

individuals who had rapidly aggressive progressive multiple sclerosis. you would expect by historical control over a period of months would continue to deteriorate. the study was a resounding success. greater than 80% of the individuals survived without any progression for a period of up to three years which is really quite unprecedented. now, it's an open-labeled study that was not controlled in the classic sense. but the historical control is so compelling, because when you get those patients they almost invariably progress and these patients did not. so we're very excited about it. and we're going to move on to the next phase of the study. so i would say of all of the things that we've been doing with multiple sclerosis over the last several years, in my mind this is the most exciting. so that's the multiple sclerosis issue. there are many aspects of hiv as you know throughout the world

and including in this country. we're seeing several countries taking that tipping point where the number of new infections are less than the number of people who are going on to therapy to the point where we're starting to see a deflection in the curve. the thing that would narrow it really down with regard to prevention and treatment of the prevention programs that you're very familiar with in which you can decrease by 96% trans missability from an infected to an uninfected person, by in fact treating them and get their viral load to below detectable levels there were several studies that came out in seattle last week that showed that prophylaxis of people at high risk superimposed on treatments of prevention has provided a substantial decrease in infection rate in certain areas. and finally, in the vaccine issue, there are two major parallel pathways that are being pursued. one is a pursuing of the

follow-up of that very exciting though modestly successful trials from several years ago that i reported to this committee, the rv-144 that was 31% effective. not enough for primetime, but enough to give us some insight into the next stage of what we're going to pursue. we started a trial in africa, and it looks like the response in africans is quite similar to those in the thais, which means that that is a glimmer of potential success in the african trial. and there's a whole bunch of research that is led by our vaccine research center at the nih, as well as a number of centers throughout the world, at looking at the ability to induce broadly reducing antibodies. thank you. >> thank you. dr. collins, you can see your colleagues may be brilliant, but mine are very crafty at loading

up questions. but they're great questions. the chair is going to be as generous as he can with the clock. i move to the distinguished member from arkansas. >> i've got two or three questions. and i, too was one of the people that went up on the tour, and thank you. i'm in awe of the presentations being made here today, just as i was the day when we toured the national institutes of health. i'm grateful that you guys are doing the -- guys and gals are doing the great work here. i want to follow up on a question from the overall chairman from earlier. when you said you need to make sure patients can access new medications and treatments coming out of the nih to combat prescription drug abuse i completely agree with that. but right now, samsa regulations for opioid addiction only push

two medications. can you follow up on what the nih is doing to make sure patients can access these medications? are you working with other agencies such as samsa to make sure they're not detracting from, but complementing the efforts of the nih? >> yes, indeed. thanks very much for your question. and for us to succeed we have to work in partnership with our sister agency samsa. so we have mechanisms by which we actually bring together the researchers and clinicians to ensure that the developments in the area of medications for opioid addictions are implemented in the treatment setting. having said that, there are always problems in terms of ensuring that patients have access to the medications, and that's why i have made the point before, including the need to

ensure that the insurances will be covering and providing access to them. there's a third medication that is also available, which was also developed through the nih, with very good outcomes. and as of now, we know that not only are these medications effective in treating substance abuse, they're also effective in preventing overdoses and preventing hiv. >> you can expect i'll have a question about idea funding. because arkansas is one of those states that benefits. we have a lot of underserved population, and i know a lot of our applications go wanting, and we would like to improve that. we are pretty much a rural state. places like durmont, arkansas dr. gibbons, in your fy 16

budget, you ask for a 3% increase over fy 15. however, theu requests level funding of $273 million for the idea program. i would like to know why the program that helps states like mine, the other 22 states that help secure this funding are not prioritized. can you kind of walk me through that process? >> nih is a big fan of the idea program. and i appreciate your question. certainly the things that have been accomplished through this program in states like arkansas are truly exciting and a great opportunity for research and for training. in terms of the budget issue, there was a $50 million increment that the idea program received in 2011, which means that it actually over a five-year period has grown more rapidly than the rest of nih. this particular year, it did not change in its total dollars but over that five-year period idea has been doing pretty well. i do want to ask dr. walsh because idea is now managed in

nigms to say something about this program which i know he's quite enthusiastic about. >> thank you very much, mr. womack, for this question. as dr. collins said, the idea program is now housed in gmis, and we're very proud to have it housed this. and we're committed to the goals of the program. whatever the budget we're going to do whatever we can to make sure that those goals that is increasing the geographic distribution and ensuring that all 50 states in the union have cutting edge biomedical research going on are met. i recently traveled to arkansas, to little rock and saw some of the amazing research going on there, and in the southeast region of idea, including in your district. the university of arkansas, we have a center there center of bio medical research center. and developing drugs to treat a variety of different diseases.

we'll continue to push the goals of this program forward the best we can. >> i know i'm out of town. let me just finish by saying this. as i said in my opening i am grateful for the work that's being done by this agency. and it gives me a great deal of pleasure to be associated with a panel of experts like we have here before us. mr. chairman i yield back. >> thank you mr. womack. next we go to my good friend from pennsylvania. >> thank you mr. chairman. and let me thank the panel. let me ask first about the joint programming, neurodegenerative disease commission. they have participation from canada and israel. i know there have been some discussions about american participation. could you tell the committee whether you plan on engaging in broader clinical trials in degenerative diseases? >> i really appreciate your strong leadership in

neuroscience neuroscience. >> thanks very much. and thanks for all you're doing in this area. this is the joint program that we talked about they reached out to us and recently it's something that will be sitting under the g-7 authority around dementia more specifically. that's really the piece we've become most involved with. we do have a series of joint meetings. i suspect there will be some joint initiatives. that hasn't happened yet, but that's very much in the discussion that we're looking forward to working closely with the other g-7 partners around the dementia. >> i know prime minister cameron initiated that. met with world dementia council. i would like to get a particular review of the program if we are

or not going to join. you can provide that later. >> we'll do that for the record. >> let me ask a question right in your alley while i have you. we put some additional dollars in for the samsa mental health block grants and direct that samsa work with your institute to help states implement programs that have proven effective in terms of preventing the first episode of psychosis. so i understand that in this way, research funds in your institute have come to be called rise, after a schizophrenic episode, and readily applied in communities where patients are benefiting quickly. can you tell us where we are right now, and what the future holds? >> sure. thanks for that question. the recovery after initial schizophrenia episode is a program that has been going on actually originally really bolstered by the era funding

from 2010. the study was completed in terms of its feasibility only in december of 2013. and this committee saw fit soon thereafter in january of 2014 to ask samsa to implement the findings of that study in all 50 states. it's an extraordinary story of science-to-practice. usually it takes longer than six weeks. but in this case it happened in 2014. there are pilot programs that were developed in collaboration between nih and samtsa in all 50 states. we're watching that now as it continues to grow in 2015. what we'd like to do now is to build on that in a very specific way. we want to be able to create sort of a learning health care system out of these kinds of programs that would be really not so much research-to-practice, but now practice-to-research. learning from the experience in

where the care is being delivered, how to improve outcomes for people who have a first episode, and most importantly, how to prevent that first episode. we're trying to actually move earlier in the cycle to make sure we -- >> this has a great potential of preventing some of the tragedies we've seen around the country. and i know the committee will have a continuing interest as we move forward. i know you co-chaired the agency working group which i established through language in the commerce justice science bill. i'm a ranking member. here i'm in the junior chair. but the fact that i can just be in the same room with tom, i'm happy. [ laughter ] you co-chaired the working group, and the brain initiative is a major inspiration thereof. but there are a number of other things in terms of imaging, in terms of the pharmaceutical industry. i know dr. collins, you launched

the pharmaceutical partnership and there's just a lot of things that are germinating. if you could help us understand the budget requests, dr. collins, in terms of the brain initiative this year and how those dollars will be meaningful in terms of you moving forward, that would be helpful. thank you. >> sure. i'll take that on. i should say at the beginning that every time i go anywhere, i find that congressman fattah has just been there, stanford, m.i.t. i suspect you'll get an honorary ph.d. here pretty soon in neuroscience. the brain initiative is -- when it was first set up, we asked a group, or dr. collins asked a group of experts to sit down with us and to give us the best idea of how to develop this. and they created this ten-year plan. in that, there is a budget. the budget will grow to roughly

$500 million a year by 2019. and will ultimately over 12 years be about $4.5 billion. very much like the human genome project. we're not there, we're just in the -- at 2015, we'll be around $80 million. with the president's request next year of another $70 million, that will take us up. but i have to say that the question that gets asked for us over and over again seeing how spectacular the scientific opportunities are, people say, they look at that report and say, you've got a great road map, is there any gas in the car. people are really concerned in the community that we have this opportunity that's unprecedented, that may be underfunded. so we're hoping that with the funds that we've got now, that we'll be able to do ten rfas this year. we did 58 projects last year. we'd like to have another 50 or so come out this year. but going forward, whether we'll be able to build this in the way we had originally envisioned will depend a lot on your

support. >> thank you, mr. chairman. americans are counting on your work in this regard. i thank the chairman. >> the gentleman's gracious compliment gave him extra time but it may not give him extra money. i go next to my good friend from tennessee. >> thank you, mr. chairman. and dr. collins, and to all the directors. i just want to say thank you. you all fight maladies that face so many millions of americans. and your research and your commitment to medicine and science is incredible. so i thank you very much. as you all know i have been a very vocal outspoken advocate with the fight against cancer. lost both my parents to cancer. my mother when i was very young. and i thank you for all your endeavors in that regard. but one of the particular sad things about cancer is children with cancer.

and my question today, and i hope you can help me, a little boy came to see me. he was blind. he had had a brain tumor. he and his dad came to see me and sat with me. i was not even his congressman. i believe he lives in maryland or virginia. but i sat with him and i spoke with him about his cancer. so i hope you can help me with this. pediatric low-grade astrocidoma is a slow-growing children's brain cancer that affects over 20,000 children every year and there's over 1,000 new cases apparently diagnosed every year. existing treatments for plga brain cancer are invasive highly toxic, and so far relatively ineffective. the treatments themselves can cause serious permanent damage, and are often life-threatening. what research is being currently

conducted by the nih on plga? what treatments and therapeutic alternatives are on the horizon for plga patients? and are there any clinical trials currently being conducted by nih for plga? i would really like to respond back to this little boy. >> thank you for the question. the doctor head of that department is currently out of the country, but i'll see what i can do. i'll agree, plga is one of those pediatric cancers that we definitely need better answers for, that it is slow growing it doesn't respond particularly well to the kinds of approaches as cancers that are growing rapidly. clearly, there's a connection here between what we were discussing a little bit ago in terms of a cancer focus of the precision medicine initiative, and as part of that the cancer institute aims to enroll

something like 1,000 pediatric patients in this earlier stage of trying to understand what drives malignancy. i would be very surprised if some of those are not in fact plga patients. to try to understand more about the disease. obviously one of the real difficult problems is access to tissue here. because it's not an easy thing to imagine just doing a biopsy of a tumor growing in such a vulnerable place. but there are potential ways that one can begin to look at that, actually by looking at dna that's floating around freely in the blood circulation. we're learning that cancers because they do turn over, release their dna. and one can discover it by looking in the circulation for free dna that's not inside a cell, and in a cancer that may tell you what's going on without having to do a needle biopsy, a so-called liquid biopsy. that would be one area focused. in terms of clinical trials for plga, i do not know right off the top of my head what's there.

i can certainly get for you for the record an indication of what kinds of trials are not only going on but what might be planned for this terribly difficult condition. and we share your concern about needing better answers for that boy who came to see you. >> thank you, doctor. i have some additional time so i'll ask a follow-up question on something else. >> please. >> our country prides itself at being at the forefront of research and development. you've expressed some concern about the amount of money going toward international research. can you please share with us why, with the budget the size of nih's, you have these concerns, and let us know in an effort to maintain american competitiveness while working to make the largest strides possible to find the funding -- to finding cures for the diseases that have the greatest impact in our population? what are you doing to take advantage of the rmp being done in other countries? >> that's a great question. science is an international effort and certainly many major

programs, including the human genome project that i had the privilege of leading, was international. six countries were involved in that. and all the data was made immediately accessible. but it's very clear that the country that leads biomedical researches, especially in terms of commercial sinpin-offs, america's leadership has led to the fact that we're not only great in academic biomedical research, we also have the most vibrant community of small businesses biotech companies and pharmaceutical companies. we would not want to lose that benefit. and yet when you look at the trajectory that our funding is on compared to other countries, there are deep concerns. we've lost at the nih about 22% of our purchasing power for biomedical research since 2003. a very substantial downturn in what we can support. and other countries on the other hand, are going the other way. china in particular increasing their support of biomedical

research by 20% per year, over multiple years. the consequences of that, i would refer you to an article by an economist hamilton moses in jama published just about a month ago, has a lot of data in it pointing out a number of things that are alarming in terms of the u.s. maintaining that leadership. china is now filing more patents in biomedicine than the u.s. absolutely, more patents. and the consequences as you can imagine are going to be significant. final conclusion of this article, and i think this is a distinguished group that wrote this, that given the international trends, the united states will relinquish its historical international lead in biomedical research in the next decade unless serbcertain measures are undertaken. we can turn this around. what nih desperately needs and what would be such an inspirational moment for our community, especially the early

stage investigators you were talking about, is a sense of stable trajectory that we have the chance to be able to plan, to take risks, to do innovative research without the uncertainty about what will happen one year or the next. maybe a doubling would be actually a nice thing. but what would be even better would be an opportunity to see a path forward that keeps up with inflation. and that we can count on, and that people could basically then flex their innovative muscles and take advantage of this amazing talent we have in this country. >> thank you, dr. collins and everyone. mr. chairman, i yield back. >> thank you very much. i november >> thank you, mr. chairman. first of all, let me just associate myself with the comments that were made by my colleagues about the tremendous work that you all do and what a positive impact rá's had on the quality of life of so many people. not just in this country, but throughout the world.

but i do have some concerns that i would like to address. dr. collins in 2000, this congress authorized the national children's study to investigate how the environment flnssinfluences a child's development in health. over the past 15 years congress has appropriated over $1.5 billion to plan and pilot this study. given the huge investment congress fully expected that the study would be carried through to its completion. and in fact, in almost every fiscal appropriations report from the year 2000 to 2014 there have been specific instructions from both the house and senate directing the continuation of the study. and in march of 2013 congress requested a review of the revised study designed by the institute of medicine. and the iom concluded that there were conceptual -- i'm having

trouble with that word you know what i'm trying to say, right? and administrative challenges, that must be addressed. but that the ncs still offered, and this is their words, enormous potential. the iom also concluded that when the study was completed it would, and again i'm quoting add immeasurably to what we know about children's health in the united states. so after reading the iom summary report and given the $1.5 billion that has been set, i was frankly very very surprised by your announcement canceling the national children's study. and i'm sure i'm not alone in believing that a better outcome for the $1.5 billion investment should be a completed study. so my question is by what

authority did you use to disband the study whose authorization is still in current law and for which congress has spent $1.5 billion over the last 15 years and for which this committee in fy '15 in the omnibus bill put in language said, and i quote the nih director is expected to use this framework meaning the framework coming out of the oim report, to make sure the mission and goals are realized for the anticipated returns of the taxpayer support. so i just would like an explanation as to what happened here. >> i appreciate the question. this has been one of the more difficult decisions since i've been nih director for almost the last six years. the national children's study was designed in various pieces over quite a long period of time. and i think as that time passed

some of the design issues in retrospect maybe were not serving the need of getting the information, which we all agreed was crucial. that is to understand environmental impact factors that occur both during pregnancy and beyond that influence child health. we all agree those answers need to be found. the problem that increasingly seemed clear was that the design "tjt the children's study which carried with it a certain historical legacy was not fitting with the way in which technology was developing over the course of the last almost 20 years. the iom study that you mentioned was in fact quite critical about those issues, and about administrative issues, and because of that, i asked a working group of my advisory committee to look closely at all the aspects of the children's study and to make a recommendation to me about whether it was still feasible. they came back and said, frankly, they did not believe that it was. and that it was more responsible at this point to try to make

sure that what the data that had been collected through the vanguard studies which were the pilots for the children's study were made available and kept in place for those who could learn from it. but that we really ought to think about coming up with a new strategy to get the answers to these same questions. the congress in the omnibus bill basically gave us the opportunity to take the $165 million that's in the fy '15 budget and think of new ways that we could in fact obtain answers to these questions about environment in pediatric health. and we have been vigorously engaged in that effort over the course of the last two months. and we will in the very near future announce what the programs will be in fy '15, which i think you'll find to be quite innovative. i believe the silver lining here is that this gives us the chance to step back from the legacy of the last 14 or 15 years and say okay, now in 2015, with all the technology that's advanced in the interim, what could we do that would get better answers

perhaps for less cost than what was originally contemplated for a 21-year study. so look at the next things we put forward. we're quite excited about it. the institutes have all gotten very engaged in this opportunity to rethink this. and ultimately, i think we will get to where we need to be but in a different way than imagined back in 2000. >> it was my understanding according to a bloomberg business report that dean baker who was a researcher at the university of california irving, who ran a pilot and was one of the lead investigators of the study, said that the iom and i quote, that they did not conclude that the enterprise was beyond saving. and that that was a decision by nih. and we know a study of this nature is feasible and even identified a pathway. so that was a decision that was made by nih not based on the

outcome of the iom report. so just very quickly, i know my time is up, but what is the period of time and the amount of funding now that would be needed for nih to address the recommendations that were made in -- >> i would ask the gentleman to be -- >> if you could do that for the record. >> if you care to make a quick comment. >> quickly, in terms of the process. if you read chapter 5 and chapter 6 of the iom report, not always well reflected in the executive summary, it's actually very critical of some aspects of the study. my advisory group led by the former dean at stanford and a pediatrician, and a distinguished epidemiologist and computer scientist came to a very strong and unanimous conclusion that the children's study was no longer feasible. i had to accept their conclusions because they were so well founded. in terms of where we go please look at the next proposals which

will be coming forward very shortly about how we will address these issues. we do have a lot of things to talk about in terms of going forward, where should this kind of research go in the out years, and we need to have that conversation. >> i'd like to follow up. and thank you, mr. chairman. >> you're welcome. now, i want to go to the one member on our team up here that might actually have the intellectual firepower to stay with your team down there, dr. collins, recognize dr. harris. >> thank you very much mr. chairman. thank you all for coming and appearing. first i'm just going to start with a rhetorical question first. since the last time you were before this committee you probably know, my wife passed away from heart disease three days before her 58th birthday. the nih, and in general was really underfunded research into heart disease on women over the years. so i went back and looked at the chart of the disease breakdown, what the nih spends on.

84 million americans have heart disease. and yet the amount we spend per death is 100 times less on heart disease than it is on hiv/aids. 100 times less per death. that kind of discrepancy just needs to be justified. this is going to be a rhetorical question. it is stunning what that discrepancy is. and how the fact that we dedicate as little as we do to heart disease, the most prevalent disease in the country. you know, how that will affect the population. anyway, rhetorical question on that one. dr. volcker, i'll ask you a question about drug use. obviously there's an ongoing discussion about a dangerous addictive drug marijuana. many people don't think it's dangerous or addictive. but it is. it affects a lot of things that are probably not good for people especially our youth. do you know what the economic impact of marijuana use is,

including its effect on work force preparedness on education? do we have these answers? are these important things to study? and do you have the resources to study these things before we go willy-nilly into legalizing a dangerous addictive drug? >> thanks very much for your question. and indeed there's been many studies that have evaluated specific consequences of use of marijuana among teenagers vis-a-vis the educational achievements. they have consistently shown that it actually decreases -- smoking marijuana, it decreases the likelihood you will finish school and that you will get a degree. with respect to its impact in the work force, the data there is much less clear. the studies have not been done extensively, as far as education. we know in general, that the use of drug in the work force is responsible for 30% less productivity on an individual

that takes drugs. but that has not been distinguished whether it's marijuana, cocaine or methamphetamine. we really do not have a precise number there. >> sure. just very quick follow-up. you would imagine since marijuana actually affects motivation something that might be important when you go to work, i would imagine it might actually have quite an influence on the work force. >> i would predict so. and what is shown is that the productivity are absenteeism. you're there, but not really working. the same as lack of motivation may account for the very poor outcomes in education. >> we should probably answer these questions before we go on -- we should expect scientific answers, i imagine. >> i completely agree. >> dr. collins, let me follow up with you again about some things that are being said about internationally what's going on and what's going on in our biomedical work force.

you actually, i think sent something around your article in jama, i guess in january of this year. suggesting that perhaps china will overcome the united states in 2022. which, yeah i guess if you assume exponential growth continuing, things like that, but what's interesting is the growth in china is actually in the private investment, the industry investment. there's a little bit of growth in the public investment. the real growth is in the private industry. as you also noted, one worrisome trend in the united states is that the industry investment in biomedical has gone down. that's not your -- that's not where you have the ability to directly impact maybe maybe you don't. but i think that that's an important key in this, that we're not talking about. there are certain policies that do impact that. for instance, we're undergoing a tpp negotiation where patent

protection of american manufactures byiologic will be hindered. it will actually hurt our biomedical industry. we can go on ad infinitum. the administration in spending $35 billion additional that we don't have decided to send only $1 billion to the nih. only a 3% increase. i think that's a drop in the bucket if we don't get the picture of the larger picture of the entire biomedical research picture in the united states. so what can we do or what can you do at the nih to implement a strategy where we can promote industry investments? so we're leveraging nih dollars, greatly leveraging, as it appears china is doing. >> again, to be fair, i would remind the questioners let's not jam them up against the end

of the time and leave them hanging. that's a tough position to put our guests in. >> very quickly. i agree that we have a responsibility and an opportunity to bring together the public and the private sector investments in biomedical research like never before. one example is the accelerated medicines partnership that i spent three years working with a number of heads of rnd in big pharmaceutical companies particularly michael dollston at pfizer, which now has shared expenses covered 50/50 by the private and public sectors. doing something never attempted before, for alzheimer's disease, for diabetes, rheumatoid arthritis and lupus putting the scientists around the same table, designing the experiments, holding themselves accountable with milestones and making all the data accessible to those who have good ideas about this. i'm looking for all those opportunities that i can find where those traditional firewalls that sort of got in

the way of making progress weren't really making any sense. we have to be clear about conflicts of interest, and we are. that shouldn't be a reason not to think about creative endeavors that fly in the face of such great opportunities that we now see in front of us. >> thank you. >> thank you very much. i'll go to my very patient friend from virginia who was here early, and has waited a long time. >> thank you, chairman cole. i appreciate dr. collins and your colleagues being here today. i'm learning a tremendous amount. i, too, respect the work that you're doing. i want to first bring this not as a question because i'll get to a question but i did take note of your comment about how helpful it would be to have confidence in continuity of funding. i transitioned from house armed services to this committee. i was struck in my service on that committee where our senior uniformed and civilian officials would say the same thing about just how beneficial it would be for us to be on regular order.

i know chairman rogers, and chairman cole, and really all of us on the committee, have been strong advocates for this. so i'm going to continue to fight for that. i know my colleagues will as well. i just took note of what you said and i wanted you to know that. i have an incredible district highest concentration of men and women in uniform in the country. and by the nature of the commands that are there, a disproportionate loss. so i want to talk for a moment about the ptsd. now, i know that there is some funding for it included in your budget. $79 billion. and i believe it's to go to $81 billion -- excuse me million. i better get that right. okay. all right. but my point is this that help me to understand -- by the way from the president on down, the first lady, this is a shared american value. i do not question -- i do not

question for a moment anyone's commitment to this. that said, i didn't see it mentioned, and your budget justification. i know the department of defense and also the va is working on this as well. but help us to understand where this falls in the priority level, and is it getting the attention, even within your own internal documents that i think it merits? >> i appreciate the question. let me ask dr. insol who is working on the ptsd. >> very quickly. our institute was founded in 1946. and charged in '49 to deal with the problems of veterans. it's something we've been at for a long time. it's part of the dna of the institute to try to figure out what causes ptsd, and how best to treat it and prevent it. we've been working really closely with dod. we were talking about the

relationship with industry. this one we've really taken on in a very joint way, especially with the department of the army. the army and nih worked together on the stars initiative 100,000 soldiers partnering with us to try to understand over time what causes not only ptsd but depression, high-risk behavior and suicide. which is the worst outcome here. and i must say that having worked as closely with dod as we have over the last three or four years, that's been a great inspiration. that study has now just completed its first phase, moving into its second phase. already i think we're getting some insights about both the cause and best interventions to make sure that people who develop mental health problems don't go on to suicide. >> the question of allocation generally, how much is allocated to one disease or particular challenge that we face, dr. collins, could you help me to understand especially when things need to be reallocated? because, you know, whatever your

own maybe experience has been, and we like most american families, we've had loss due to alzheimer's, and cancer and things like this, but how do you -- how is all that structure, because i'd like to see a higher allocation for the topic just mentioned, what our service members are facing, how is that process unfolding? >> that's a question that many people ask and they should. it is an ongoing organic process of looking at what is the public health need, what are the scientific opportunities what's the current portfolio look like and do we have gaps that we need to fill? and we are constantly doing that kind of analysis. we have more tools now than have more tools now than we used to. a whole series of ways to look at our portfolio and figure out whether we have the balance out

of we'll be right back in termhere we have it out of whack. we would probably neglect the real disease other diseases. the cost of society is so daunting that we feel we have to push even harder as long as the scientific opportunities are there. all of this would be easier if we were not in a circumstance where we are underfunding everything we do versus what we could be able to do given the talent out there. >> thank you for your comments. >> we do have time constraints this morning. i want to let you have an opportunity to ask your questions.

>> thank you for receiving us a few weeks ago. it was an interesting program. the live cancer rates increased by more than 300% from 1.6 to 4.9 cases per year. in fact, live cancer hasn't seen the second largest percent increase of any cancer in the u.s. other than thyroid cancer. it's been pretty dismal. yet, the nci has no dedicating

specialize program for research excellence on the live cancer can you tell me why. >> live cancer is a condition that many components of nci are involved in working on whether there's a specific division focused to it. there's attention to it. live cancer is to be with those infected with hepatitis c. it should reap some rewards.

i can fill you in where that work is going on if that will be helpful. >> that will be very helpful. i met with cdc director, and one of the issues we discussed with the outbreaks of antibiotic resistant bacteria across the country, including my home state of pennsylvania, this threat posed by antibiotic resistant bacteria referred to super bugs is so serious that last september president obama issued an executive order declaring that combatting super bugs as a national security priority.

>> we are very involved with clan ration with the cdc. with the president's strategic plan and the executive order and the program is a multi-agency u.s. government involving the cdc, fda, department offing a. >> caller: agriculture and hhs. our mission in that agency approach is fundamental basing researched to stay in with the new high frequency capabilities. number two we started a few years ago and have comply fayed with the president's request for $100 million for antimicrobial resistance in the budget, what we call a antimicrobial leadership group, alrg which is

part of our brad network of clinical trials to be able to do some studies that you can't do in an individual given institute because of the fact that the incidence of outbreak of one or two cases is very difficult to get good clinical data. so we now are collaborating with the cdc, they're doing mainly surveillance, and we're doing fundamentally the research. and additionally finally we're doing work on developing vaccines for some of these very difficult microorganisms that are highly susceptible when you think in terms of people, for example, who have transplants who are immunosuppressed. not only mrsa but some of the others such as cre. so the nih in summary is very heavily involved in this in

great collaboration with the cdc. >> and so you have a request for an additional $100 million, and that will be sufficient to -- >> in the president's 2016 budget there's $100 million request for anti-microbial resistant research. >> i will submit the balance of my questions for the record. thank you. >> thank you very much. now for our last round of questions go to the gentle lady from ken set. >> thank you, very much. and let me just follow up on my colleague mr. dent's questions on antibiotic resistant bacteria. there is a significant increase in the budget. and can you take a moment to talk about taxo bactin as a new technique discovered to deal with us. and also there is some misunderstanding of how long it's going to take to be able to use that. can you give us an idea about how long a time line for this potential availability of did and i don't know if i'm pronouncing it right, and recently i was in haiti and i

met a doctor who described the devastating effects of the antibiotic resistance tuberculosis. are there any drugs in the pipeline to treat a drug resistant tb? and that and again finally, i understand you're dealing with looking at a database. for this effort, antibiotic resistant infections. but there are many of them. to put it simply in my simple language on this, but if the data base is going to hold all jen i'm sequence data for the ten deadliest antibiotic resistant packages what kind of an effort would that entail? >> okay -- >> i want to get you on -- >> what's happening in liberia. >> so the nih is very pleased with this because this was an entirely funded nih effort to the tune of $20 million and we now have a new class of

antibiotics that was developed from the soil, and the issue is we've got to be careful. it's not going to be tomorrow or next month where that's going to be available on the market because we still need to continue to do preclinical studies, in the animal model before we can get into the human situation. so i'd like to say it's going to be around the corner but it likely will be over a year before we do that. the good news is that it's a brand-new concept of an antibiotics. that essentially skirts the resistant mechanisms that other types of microbes use against the common antibiotics.

so it will likely be good against microbes for which there are multiple resistance. so that's the good news. tb, good news here, also, because we partnered with drug companies with several of them, particularly gensen to develop now new drugs that are good against some of the multiple and extensively drug resistant tuberculosis. so we do have at least one and now two in the pipeline. if you had asked me that question last year i would say we really don't have anything new. data base and this is something we do very well we have phenomenal sequence abilities now. that's one of the things we put as a high priority is to be able to use our technologies to get databases of essentially all of the various versions and iterations of antimicrobial

resistant microbes and be able to share them. as we do it's always open access. everything we do is open to the general public. [ inaudible ] >> right. right. vaccine trials started february 22nd in liberia, in monrovia. my deputy is there now overseeing the trials. we started off with a phase two for 600 individuals where we'll access slowly to make sure it's still safe and immunogenic and by the end of the following week we're going to go to the full total of 29,000 people. so it was the vaccine that you mentioned was developed by nancy sullivan in the vaccine research center together with the dsv vaccine which we collaborated with the department of defense

getting back to the other question about our collaboration with the department of defense. so those two are ongoing. it's up and rolling. zmapp is again zmapp was very, very favorable in animals. we don't know if it works in humans. we started a comprehensive protocol that was announced three days ago by the ministry of health in liberia, actually at the same time that the president of liberia was meeting with our president here right here in the united states. it started a few days ago, and what it's going to do is to compare standard of care, namely inva venus replenishment of fluid against standard of care plus zmapp. and as you know, zmapp is a cocktail of three separate antibodies directed against the ebola virus. and as i said it looked very good in animals but we need to prove definitively if it will work. as i said both of those are nih driven trials and both of them are ongoing in liberia right now. >> thank you. just first of all dr. collins, thank you very much and your colleagues for being here this morning. i have no doubt this is not only the most brilliant panel we'll see all session, it's the most popular panel we'll see all session long. so thank you very much. >> we need to have a group hug.

this week the supreme court heard oral argument in lawsuit challenging government subsidyies from people who buy insurance on the federal health exchange. the court releasing audio from the argument. you can listen friday evening on c-span at 8:00 p.m. eastern time.

comments from kathleen when the federal federal health exchange was set up and we'll hear from the lawyer who argued against the high courts against subsidies. >> you would argue this is a matter of semantics? >> i think it is. as established by the state seems to be the hinging language in the plaintiff's case. there's nothing else in the frame work that would suggest this was meant to be a two country visit.

i read the briefs. why this could not have been the intent and the notice provision was strong. >> you've had these conversations with governors? >> no no. i said we had conversation with governor's starting day one from the time the law was passed. it was never a sense i sat through a lot of congressional testimony. i worked with the five committees. no one ever suggested that the state establish an exchange with the citizens. you say the intent is clear.

this congress that passed the bill intended for national program. nationally insurance companies have to play by different rules. nationally citizens are entitled to subsidy and nationally there's an individual responsibility. >> i really have to go. i'm sorry. >> i argued on behalf of the plaintiffs in this case. very gratified. obviously i believe our case is very compelling. i'm hopeful and confident that the court will recognize the merits of our statutory interpretation and not let the irs rewrite the plain language.

>> many of the justices talked about reading the law as a whole as opposed to reading four words. >> as i said approximately four times i very much want them to read the statute as a whole because it dramatically reenforces our point that the clear purpose of the statute was to encourage states to establish their own exchanges which is dramatically undermined and frustrated by the irs rule which provides subsidies regardless of whether the states do that required task. >> how concerned were you about justice kennedy's question about your rating of the law would be the federal government coercing the states into creating exchanges? >> right, but after the conversation it became clear in everyone's mind that this reading would be far lescoersive than the medicaid statute that

they just upheld and it would be a greater intrusion on state sovereignty because this would allow the federal government to unilaterally impose the other employers in this state. >> you made different arguments about a year ago when you were here. [ inaudible question ] >> last year we were arguing that affordable care act is not the law of the land and here we're arguing it should be the law of the land and it shouldn't be dramatically altered by a non-elected bureaucracy. >> do you see a contradiction in that? >> i think it's perfectly consistent in both circumstances. i have to accept the court's decision that it's the law of the land and now that it's the law of the land we need to firly interpret it and that's why we are here to interpret it. >> could this be a death knell to the affordable care act? >> oh, not at all.

as was pointed out, you see the popular press and it seems the leaders in congress are well prepared to deal with any transition issues and i assume the states if they don't will have every incentive to go ahead andy kroo create the exchanges, but for the irs' -- how do you argue about the subsidy? >> if you argue that there is a compelling policy reason and i'm sure that the elected officials at the state or federal level will listen to that and the court is not prepared or equipped to argue that they make policy. >> what about the issue of notice that states did not clearly feel that they had this absence as they put it to us? >> literally bizarre. >> they had three years and read the statute and the only reason they were confused about it was because the irs pulled a bait and switch on them. if it hadn't gotten in the way and if they'd implemented the law then the states would have

known what the deal was in the statute. it's a little -- it takes a lot of chutzpah to say since we changed the statute and since we caused two-thirds of the states not to have state exchanges and that's an argument in favor of our regulation which is essentially what the government was saying today. >> were you surpriseded by what the argument went today? >> i'm never surprised by vigorous questioning by very well-informed and very articulate justices because that's certainly the norm. >> are you at all concerned about this causing the insurance system to collapse? >> if the theory is that insurance premiums will skyrocket for everybody, that simply confirms my political point. that would mean that not only people are receiving subsidy, but people at all income strata would demand that either congress or the states do this, but the difference is that it would be done through the

legislative process rather than the irs hijacking the legislative process. >> thank you very much. >> you can hear the supreme >> you can hear the supreme court oral argument on the case on subsidies for americans buying healthcare coverage on the federal insurance exchange friday on c-span at 8:00 p.m. eastern. sunday night at 8:00, scott taylor argues that the obama administration is hurting our national security. on american history tv on c-span3 a commemoration of bloody sunday with 50 years ago voter rights advocates began a march and were met with violence

by state and local police on saturday beginning at noon eastern. we're live with your phone calls followed by the ceremony with president obama and congressman john louis. on sunday our live coverage continues with the historic brown chapel ame church. find our complete television schedule at cspan.org and let us know what you think about the programs you're watching. e-mail us at comments or send us a tweet at cspan hashtag comments. physical us on twitter. alabama senator chaired this

2:10 hearing. >> this week the committee here on banking begins an examination of potential changes to the current regulatory structure. today we will focus on regulatory relief for smaller financial institutions. in the near future, we will continue this examination by focusing on unnecessary statutory and regulatory impediments across the financial services spectrum. while there are some who

continue to argue that current law is beyond reproach, there are many on both sides of the aisle that believe improvements can and should be made. today we will hear from regulators on some of the lessons they've learned and how best to overcome some of the challenges that they've encountered. and although we may not agree on many things i believe that we can all agree that community banks and credit unions play a vital role in our local economies. 629 counties in the united

states are served only by one single, single community bank. 6 million u.s. residents defend on small financial institutions for their daily banking needs. these financial institutions use their knowledge of local communities to lend a small businesses which are the engine of job creation in america. a recent survey found that community banks provide 48% of small business loans issued by u.s. banks. 48%. that number is even higher in rural areas where small financial institutions account for 52%, yes, 52% of small business and farm loans. these financial institutions are able to forge relationships with local consumers that enable them to develop products tailored to the specific needs of their communities. unfortunately we've heard that innovation tailored for main street has been smothered by unnecessary regulations originally designed for wall street. some of the regulators before us today have testified in the past that small financial institutions did not, yes, did

not cause the financial crisis. nevertheless added regulations have caused hundreds of banks and credit unions to simply stop offering certain products. they're instead forced to spend valuable resources on compliance. a conference of state bank supervisors found that compliance costs have increased for 94% of community banks. i believe it's time to reverse this trend. today we expect to hear recommendations from regulators on ways to provide regulatory relief for smaller financial institutions. past committee hearings on this issue have demonstrated bipartisan understanding that something must be done here. discussion here will build upon these efforts by providing specific recommendations from both regulators and congress to implement. i believe that we're long overdue for regulatory relief for small financial institutions. and i look forward to the hearing today. i'll now recognize senator

brown, our ranking member. >> thank you very much, mr. chairman. i appreciate that you've invited both federal and state regulators to continue the conversation that why had last fall about regulatory relief for small banks and for credit unions. they have made changes to benefit the smallest depository institutions and i thank you for those changes. to highlight a few in january the ncua reproposed its risk based capital rule to be responsive to concerns legitimate concerns raised by small credit unions. a few weeks ago cfpb announced changes to its mortgage rules, a win for small lenders particularly those that underrural areas and the rural areas, the fit proposed to eliminate quarterly consolidated reporting financial requirements for certain bank holding companies and savings and loan holding companies under a billion dollars. since our last hearing last fall congress has also acted. we passed the president signed

into law bills that were discussed at the september hearing an supported by those who will be before this committee on thursday. these bills included a bill introduced by senators king and warner and tester that doubled the threshold for the small bank holding company policy statement, a bill supported by senators king, jack reed on this committee and senator warren sapper to allow insures for credit union members in a bipartisan bill or authorized by senator more ran and me to permitle institutions to offer prize link savings accounts. all are law. also as a result of congressional action led by senator vitter, the president's nominated a community banker to serve on the federal reserve board. there are also relief proposals i supported that did not cross the finish line last year. i'm pleased that senator moran will reintroduce that act. it had 7 asenate sponsors. this is ready for action. we should move on it. there's no question regulateers in congress have been responsive to the concerns of small

institutions. we've acted where legitimate problems have been identified and members and stakeholders have come together to find compromise. i thank the witnesses today for helping in that process. i do not believe, though, that ovary bill intended to provide regulatory relief to small institutions is a good idea. some proposals could threaten the safety and soundness of individual institutions. others could remove important consumer protections that all customers deserve no matter the size of the institution -- of the lending -- of the bank. we must not forget that more than 400 banks with less than a billion dollars in assets failed as a result of the cite cyst. the cost of the deposit insurance fund exceeded $26 billion. lending, of course, is inherently risky and we must make sure we don't encourage unsafe practices in our efforts to tailor regulations.

we need to establish a process to evaluate the merits of the proposals being suggested today and those we will hear about on thursday. we'll not be successful this congress in providing regulatory relief if we -- if our proposals do not have broad bipartisan agreement and are attached to unrelated must pass legislation. our prospects are even less likely if we try to pair regulatory relief with attempts to roll back wall street reform. i'm open to solving real problem as affecting community institutions as evidenced by our actions over the last couple of years. we can find common ground if our goal is to provide meaningful relief to the smallest institutions while not compromising safety and soundness or consumer protections. today's witnesses can help us evaluate programs they've done significant research to better understand the characteristics of community banks and small

credit unions. they also understand our panelists also understand why and how small institutions fail. this can help us target regulatory relief to the smallest institutions, for example, in ohio 80%, 80% of the community banks in my state are under500 million in total assets. these are the types of institutions that feel the impact of burdensome regulations the most whether providing another report to their regulator or needing to hire another employee for compliance. last, mr. chairman, i look forward to hearing more about the gripper review currently under way. the fed, the occ and fdic are required by law to review these -- to review regulations and identify those duplicative, outdated or unnecessary, the state regulatory agents and cfpb participate in this exercise voluntarily in addition to the three that are required. this review supplements a significant analysis of impacts that the agencies also do while writing a rule. i appreciate that you've already held meetings in los angeles and dallas and planned ahead and

hold meetings in boston, chicago, washington and rural areas later in the year. i would encourage you to consider a meeting in ohio, as well. this review will be completed next year, any actions we take in congress should complement, not complicate the process currently under way by the agencies. mr. chairman, i thank you. >> all members opening statements will be made part of the record. i under stand senator tester has another committee hearing. >> i do and i want to thank the chairman and rank members for holding this. in a rural state like montana credit unions and community banks are the lifeblood for capital of businesses and personal families. and i would just like to say this state where personal relationships still matter and wall street did behave badly. some on wall street behaved badly a few years back and i think community banks and credit

unions have felt the pain of their behavior when they did nothing wrong. i would just ask that this committee and the regulators match the risk with the regulation. that's really where it needs to be and i think if we do that we'll have succeeded in making capital accessible to folks that live in rural america and across this country. >> thank you. our witnesses today are doreen eberley, she's the director of risk management supervision for the federal deposit insurance corporation, maryann hunter is the deputy director of the division of banking supervision and regulation for the board of governors of the federal reserve system. mr. toney bland is the senior deputy comptroller for midsize and community bank supervision for the office of the comptroller of the currency. larry fazio is the director of the office of examination and insurance at the national credit union administration and candace franks is the commissioner of the arkansas state bank department. she also serves as chairman of the conference of state bank supervisors.

i would like to ask all you -- all your witnesses -- all the witnesses, written testimony be made part of the hearing record and if you could such up your oral testimony by five minutes, it will give us a chance to have a dialogue with you. we'll start with miss eberley. >> thank you. chairman shelby, ranking member brown and members of the committee, i appreciate the opportunity to testify on behalf of the fdic, on regulatory relief for community banks, as the primary federal regulator, the fdic has a particular interest in the opportunities they face. they provide traditional relationship based banking services to their communities. although owe hold only 14% of assets they account for 45% of all of the small loans to businesses and farms made by

insured institutions. while more than 400 community banks failed during the recent financial crisis, the vast father majority did not. institutions that stuck to their core expertise whether the crisis are now performing well. the highest failure rates were observed among noncommunity banks and those that departed from the traditional model and tried to go rapidly with risky assets often funded by volatile broker depot sits. we are keenly aware of the impact the regulatory requirements can have on smaller institutions which operate with fewer staff and other resources than larger ones. therefore, the fdic pays particular i attention to the impact regulations may have on smaller institutions that serve areas that otherwise would not have access to banking services. the fdic and the other

regulators are actively seeking input from the industry and public on ways to reduce regulatory burden through the economic growth and regulatory paperwork reduction act process which requires the federal financial regulate attorneys review their regulations at least once every ten years to identify any regulations outdated, unnecessary or burdensome. as part of this, the agencies are jointly requesting public comment on our regulations. we are also conducting regional outreach meetings involves the public, industry and other interested parties. in response to what we've heard in the first round of comments the fdic already acted on relief suggestions where we could achieve rapid change. in november, we issued two financial institution letters responding to suggestions we received from bankers. the first financial institution letter released questions and answers about the deposit insurance application process. commenters are told us a clarification of the fdic's existing policies would be helpful. the second addressed new procedure that's eliminate or reduce the need for applications by institutions wishing to conduct permissible activities through certain subsidiaries subject to some limited documentation standards. this will significantly reduce application filings in the years ahead.

the fdic takes a risk based approach which recognizes community banks are different than large banks and should not be treated the same. every fdic examiner is trained as a community bank examiner through a four-year program. each of them gains a thorough understanding. they live and work in the same communities served by the banks they examine ensuring they're knowledgeable and experienced in local issues important though those banks. institutions with lower risk profiles such as most community banks are subject to less supervisory attention than those with elevated risk profiles. for example, well managed banks engaged in traditional noncomplex activities received, periodic point and time safety and soundness and consumer protection examinations carried out over a few weeks. this contrast the very largest fdi. supervised institutions receive continuous supervision and ongoing examination carried out through targeted reviews during the course of an examination cycle.

the fdic considers the size, complexity and risk profile of institutions during rulemaking and supervisory guidance development processes and ongoing basis through the feedback we receive from community bankers and stakeholders. where possible we scale policies according to these factors. as we strive to minimize the burden we look for changes that can be made without affecting safety and soundness and believe the current $500 million threshhold for the expanded 18-month examination period could be raised. in addition we would support congress' efforts to reduce the privacy notice reporting burden and also think it would be worthwhile to review longstand statutory regulatory thresholds to see if they should be changed. the fdic will continue to pursue reduction which achieves the fundamental goals of safety and soundness and consumer protection in ways appropriately tailored for community banks. we look forward to working with

the committee in pursuing these efforts. >> i appreciate the opportunity to testify on the important topic of community banks and reducing regulatory burden. having begun my career more than 30 years ago as a community bank examiner at the federal reserve bake of kansas city, eventually becoming the officer in charge at the reserve bank i've seen firsthand how critical it is that we balance effective regulation and supervision to ensure safety and soundness of community banks while also ensuring undue burden does not constrain the capacity of these institutions to lend to the communities they serve. i last testified before this committee in september of 2014 and at that time i testified that in the wake of the financial crisis the federal reserve has spent the past several years revising our community bank refining training

program and developing automated tools for examiners to focus their attention on areas of higher risk reducing some of the work at low risk while managed community banks. furthermore we developed programs to conduct more examination work offsite such as the loan review to reduce the time the examiners spend physically in the bank. we also have an initiative under way to use forward looking risk analytics to better identify high risk areas within community and regional banks which would allow examiners to focus their examination final on the areas of highest risk and reduce burden on the low risk institutions. in january of this year the federal reserve responded to legislation passed by congress in december of 2014 related to the scope of the federal reserve small bank holding company policy statement. specifically the federal reserve board issued an interim final

rule and a proposed rule to implement the public law 113-250. effective immediately the interim rule adopted by the board excludes small savings and loan holding companies with less than 5 million in consolidated assets which meets certain requirements from the board's consolidated regulatory capital requirements. thus putting them on par with similarly situated bank holding companies. the federal reserve board also issued a notice of proposed rulemaking that would raise the asset threshold from 500 million to 1 billion for determining applicability of the small holding policy statement. and expanded its scope to include savings and loan holding companies. it facilitates the transfer of ownership for community banks by allowing holding companies operate with higher levels of debt and that's lower levels of consolidated capital than would otherwise be allowed. additionally the federal reserve board took immediate steps beyond what was required in the

legislation to relieve regulatory reporting burden for bank holding companies and savings and loans that have less than a billion in total assets and also meet the requirements of the policy statement. the board has proposed to eliminate financial requirements in the report for those institutions and instead require semi annual parent only financial statements. the federal reserve immediately notified the affected institutions so they would not continue to invest in system changes to report regulatory capital data for only a short period of time. the changes in the threshold for the small holding company policy statement and related reductions in reporting have significantly reduced consolidated capital requirements and reporting burden for more than 700 small institutions. more than 40% of the institutions that were required to file the 60-page console the dade report will only file an eight-page report. a second key development since september is the beginning of the interagency review of regulations in accordance with

the economic growth and recovery paperwork reduction act or also known as the egrpra process. we seek public comment and hold outreach meetings to get feedback from bankers and community groups about ways to reduce burden related to practices. to date the meetings held in los angeles and dallas yielded some useful and specific suggestions for consideration and review. let me conclude by emphasizing we are committed to listens and considering ideas for reducing burden through the egripper process and want to ensure that our activities are tailored appropriately and we strive to balance our safety and soundness objectives with the need to reduce unnecessary burden to ensure small institutions can continue to meet credit needs in their local communities. thank you for inviting me to share our views on these matters and look forward to answering any questions you may have. >> mr. bland. >> chairman shelby, ranking

member brown and members of the committee, thank you for the opportunity to appear before you today to discuss the challenges facing community banks and federal savings associations. and the actions the occ is taking to help these institutions address regulatory burdens. i have been a bank examiner for more than 30 years and seen the vital role community banks play in meeting the credit needs of consumers and small business as cross the nation. at the occ we're committed to supervisory practices in a fair and reasonable way and fostering a climate that allows banks to grow and like. we tailor our supervision to each situation, take into account the products and services it offers as well as its risk profile and management

team. given the wide array of institutions we oversee, the occ understands that a one size fits all approach to regulation does not work. therefore, to the extent to allow laws we factor the differences and rules we write and guidance we issue. my written statement provides several examples of the commonsense adjustments we had made to ago eight community bank concerns. guiding our consideration of every proposal to reduce burden on community banks is the need to ensure that fundamental safety and soundness and consumer protection safeguards are not compromised. within this framework to date we have developed three regulatory

relief proposals that we hope congress will consider favorably. we are also undertaking several efforts to identify and mitigate other burdens through a regulatory review process. the first proposal we submitted to congress would exempt some 6,000 community banks from the volcker rule as the vast majority bank under $10 billion in asset do not engage in propriety trading that the statute sought to row anybody bit we don't believe they should commit resources to determine if any compliance obligations of the rule was applied. we do not believe this is justified by the nominal risk that these institutions could pose to the financial system. we also support changing current law to allow more well managed community banks to qualify for a longer 18 months examination cycle. raising the threshold from 500

million to 700 million for banks that would qualify for this treatment would cover an additional 300 community banks. we also support providing flexibility for federal thrifts so that those thrifts that wish to expand their business model and offer broader range of services to our communities may do so without the burden and expense of a charter conversion. under our proposal, federal thrifts could retain current structure without unnecessarily limiting the evolution of their business plan. as a supervisor of both national banks and federal thrifts, we are well positioned to administer this new framework without requiring a costly and time consuming administrative process. i'm also hopeful the ongoing efforts to review current regulations to reduce or eliminate burden will bear fruit. i just returned from the second public egripa meeting where they heard ideas from a number of interested stakeholders. the agents is currently evaluating the comments and from

the public comment process. while this pro less will unfold under a period of time they will not wait till it's completed to implement changes or to submit legislative ideas identified through this process to congress. separately the occ is in the midst of a comprehensive multiphase review of our own regulations and those of the former ots to reduce duplication, promote fairness and supervision and create efficiencies for national banks and federal savings. we're receiving comments received on the first fade of our review focusing on corporate activities and applications. finally we are continually looking for innovative ways to reduce burden. last month the occ published a paper that focused on possibilities for community banks to collaborate to management regulatory requirements and we believe there are opportunities for community banks to work together to address the challenges of limited resources and acquiring the necessary expertise. in closings occ will continue to squarefully assess the potential affect that current and future policies and regulations may have community banks and we will be happy to work with the industry and the committee on additional ideas or proposed legislative initiatives. again, thank you for the opportunity to appear today. i would be happy to respond to

questions. >> thank you. mr. fazio. >> good morning, chairman shelby and members of the committee. thank you for the invitation to discuss regulatory relief for credit unions. while we regulate 6,350 credit unions with $1.1 trillion in assets over three-quarters of these have less than $100 million in assets. because these credit unions have fewer resources available to respond to marketplace technological legislative and regulatory changes, we've aware of the need to examine our role. as a result, ncua scales the supervisory texass when it's sensible and within the agency's authority to do so. where regulation is needed to protect the safety and soundness of credit unions the savings of members, and the share insurance fund, this cua uses a variety of targeting strategies. they include fully exempting small credit unions from rules

using graduated requirements as size and complexity increase and incorporating practical compliance approaches into agency guidance. thus we work to balance maintaining standards with regulatory burden. since 1987, ncua has taken a rolling three-year role of our leglations and although not required by law we are voluntary participating in the current egrpra review. these reviews conduct analysis with an eye towards streamlining modernizing or even repealing regulations that are not necessary over the past three years. we have cut red tape. these actions include easing eight regulations including modernizing the definition of a small credit union to prudently exempt thousands of them from complex role, streamlining three processing, and facilitating

more than 1,000 low income designations and increasing blanket waivers and allowing more flexibility in credit union operations. next week the board will consider a proposal under the regulatory flexibility act. if approved, this change would provide transparent consideration of regulatory relief for a greater number of credit unions and future rule makings. going forward, this. yua board chairman debbie matz considered plans for streamlining the lending role, finalized regulatory relief on holding fixed assets and simplify the process for adding some types of associational groups to credit unions. ncua is revising examination process to provide relief through our small credit union examination program we spend

less time on average in small well-managed credit unions. ncua has further working to reduce the time spent on site conducting exams and improve consistency in this process. concerning legislation, ncua has lawyer trust accounts and enable federally insured financial institutions to offer link savings account. ncua would advise congress in writing rules to implement new laws such flexibility would allow us to scale rules based on size and complexity to effectively limit additional regulatory burdens on smaller institutions. ncua supports several targeted regulatory relief bills for credit unions. these bills include legislation to allow healthy and well-managed creditings to supplemental capital, permit all federal credit unions to grow, raise the cap on member business lending to support small businesses and except 1 to 4

unit nonowner occupied residential loans from the member business lending cap. finally, parallel to the powers of the fdic, occ and federal reserve, ncua asks for the authority to examine and enforce corrective actions where needed at third party vendors. ncua would close a growing gap in their authority to work directly with key infrastructure vin dores like those with a cybersecurity aspect. this would allow us to maintain necessary information to deal with any problems at the source. in closing ncua provides committed to streamlining examinations. we also stand ready to work with congress on related legislative proposals. i look forward to your questions. >> ms. franks. >> good morning, chairman shelby and distinguished members of the

committee. my name is candace franks and i serve as bank commissioner of the arkansas state bank commission. i'm chairman of the conference of state bank supervisors. it is my pleasure to testify today on behalf of csbs. i would like to thank congress and this committee for your focus on community banks. in my 35 years as a state regulator i have seen firsthand the positive local impact of community banks. these banks are critical to providing access to credit and urban as well as rural areas and they are important to building and maintaining consumer confidence in our financial system. one out of every five u.s. counties has no physical banking offices except those operated by community banks. in my home state of arkansas a very rural says, there are 96 towns that have only one physical banking location. for these small rural towns, the community banking system is the banking system.

community banks excel at relationship lending making them a vital source of credit for small businesses. in fact, community banks play an outsized role in lending to small businesses. holding 46% of loans to small businesses and farms. regulators must improve the way we conduct supervision to insure a balanced approach. this allows banks to contribute to the stability and resiliency of the economy and strengthens the diversity that exists in the banking system. as state regulators have examined various resources for bank regulation we have found community banks cannot be defined by simple line drawing based on asset thresholds. while ss ties are relevant there are other factors like market area, funding sources and relationship lend rg3 characteristics i as a bank regulator understand and witness on a daily basis. we immediate a process that identifies the relevant factors

and provides flexibility in how those are weighed and considered. this new definitional approach sets a foundation for other measures to tailor regulation and supervision to the community bank business modeling. for example, providing that application decisions affecting community institutions do not set precedent for other types of institutions or confirming qm statuses on mortgages held in portfolio. while much needs to be done to right size regulation i want to recognize significant steps already taken. the cfpb proposed changes would give more banks flexibility to make loans to their customers. csbs commends congress for passing a provision requiring at least one member of the federal reserve board have experience either as a supervisor of community banks or are community bankers. they are an integral part of the system. similarly we ask them to confirm the legal requirement that the

fdic includes an individual with state regulatory experience. a seat at the table will not automatically result in a right sized regulatory framework. additionally we must truly understand the state of community banking and the issues they face. this is why csbs partnered with the federal reserve to attract new research on community banking. this research will help us develop a system of supervision that provides for a strong enduring future for the dual banking system. work from the community bank research conference is held by csbs and the federal reserve has demonstrated there is real value in the relationship lending model used by community banks. one study presented at the 2013 conference found that proximity to a community bank enhances the

chance for survival of start-up companies. our hope is this research will inform legislation tiff and regulatory proposals and appropriate supervisory practices and will move us closer to a right-sized regulatory framework. there are significant operational and strategic differences among our nation's banks. these differences reflect the admirable diversity of our financial system, our regulatory approach must also reflect this diversity. thank you for the opportunity to testify today and i look forward to your questions. >> thank you. i'll direct my first question to miss eberley. according to the fdic only two day november very banking charters, two have been approved since 2009. since 1990 we've lost more than 3,000 banks in including 85% of banks with assets under $100 million. equally concerning to a lot of suss that no new banks are being created because of barriers of entry. is the fdic concerned about the lack of new banks and what specific step is your agency taking to address the issue if

you are and what legislative solutions might resolve some barriers to entry but keep the safety and soundness of the system intact which we all want to do? >> thank you. i think the issue is one of where we are in the economic cycle versus one of legislative barriers or even regulatory barriers. as i mentioned in the egripa process we were asked to clarify the application process for deposit insurance and we've done that. our policy hasn't changed. it remains the same. we had one application in 2014. that application remains in process. came towards the end of the year. but i think the numbers of de i think the numbers of de novos are somewhat, it doesn't reflect the interest actually in community banking. and if you look at the dollar amount of capital that has

"t#lowed into the community bank industry since 2008, it's $43 billion. so that indicates that there's investor interest in supporting community banks and belief in the viability of the community bank model. and i believe that's capital at some point that will shift into de novo institutions as the economy continues to improve and as the inventory of small destructibled banks continues to decline. >> do you see any legislative proposals, or do you have any of your own? like what the regulations call for now? >> right. so the regulations that govern applications for deposit insurance, there are two pieces to it the charter as well, which we do not grant, that would come from the state. but the guiding factors are the statutory factors and the fdi act, and we think they're relevant today. >> i understand that if the fdic and occ are currently

undertaking a regulatory review under the economic growth and regulatory paperwork reduction act, this act requires among other things, a review of all regulations prescribed by your agencies, but buried in a footnote in the related federal register notice you've indicated that you will not review certain rules. who decided to exclude certain regulations from this review, and based on what authority? you don't need to tell us why they did it. we just want to know who made the decision? was it made at the very top? we'll start again with you, ms. everett and then go to the occ. >> i believe that, so we work on this through the federal financial institution examination council with the benefit of our legal advisory group. the regulations that were excluded are regulations that are new. so recently enacted. and that's the basis as i

understand it for excluding them. >> okay. >> ms. hunter do you have any comment? >> yes. that is my understanding as well. it's just the newer regulations require more time to get experienced with exactly how they are operating and where they, where the burden might be. so that was really the basis for that. >> mr. againglen? >> i would note while the footnote says that i've attended the los angeles and dallas one. in the spirit of hearing from the bankers and stakeholders we've been open to any and all proposals and thoughts they've had. so the process is to be as open and candid with them on regs that are of interest to them. >> who made that decision? was it the chairman of the federal reserve? >> i'm not aware of that. >> the comptroller of the currency? chairman of the fdic? somebody made the desis. we just want to know who. >> we can find out for you.

>> furnish it for the record? >> we will find out who made that decision. >> this leads me to the cost benefit analysis for regulatory review.ñ% i'm a believer in empirical analysis when it comes to regulations. if a regulation's cost outweigh its benefits i brief it should be thrown out. does anyone disagree? and if so, why? in other words, if a regulation's cost, you weigh that, outweigh its benefits should we keep it? mr. bland? if a regulation's cost outweigh its benefit, should it be thrown out? >> well that, chchairman shelby, the issue of cost, benefit should be thrown out, also, when you enact legislation, it needs time to see what the effectiveness is. >> ultimately if you had time to analyze it and if its cost

to the banking system outweigh its benefits to the public, are should we have it? in other words, it would be weighed in the balance and would beshould it be gone? >> chairman shelby, in the strictest sense, i understand your point. but one of the things that's important -- >> you disagree with me? >> no. i was going to make this point. we have safety and consumer protection safeguards. >> absolutely. >> that has to be weighed. >> absolutely. that would be one of the costs, if the benefit to the public, benefit versus cost. what about you ms. hunter? >> well, i would add to mr. bland's comment that the challenges, it's easy to measure the costs, because they fall to specific institutions. it's much harder to measure the benefits, because they really accrue to a very broad population.

things like safety and soundness of the banks system or confidence in the payment system. so that's really the challenge. in assessing costs and benefits i do think it is worth doing that analysis. i know when we proposed rules we looked at what was the benefit that the statute was trying to achieve, what was the goal. and then try to fashion rules that minimize the cost of achieving that goal as best we can. and obviously, it takes time to understand how it gets implemented in the industry. >> but that's part of the process, is it not? to weigh the costs versus the benefit? that's the job of a regulator is it not? >> it is and it's part of the process we go through when we develop rules pertaining to -- >> what about the fdic? >> i would add what she said the benefits of quantifying a safe and sound banking environment and the lack of failures, the lack of economic

loss. that's the challenge. and it's a difficult thing to quantify when you're going through the cost/benefit anel sis. >> i don't guess agree with you, but you would weigh the cost versus the benefits. if the benefits outweigh the cost, keep the regulation. if it doesn't, it ought to fall. but that's a big debate we have going. because we're talking about overregulating small irbanks, so the cost to them versus the benefit to the public, i guess. senator brown? >> thank you, mr. chairman. thank you all for joining us the four of you who were here on september 6th. ms. hunter question for you. over the weekend a major story broke in u.s. and european media outlets, including 60 minutes about a trove of hsbc account holder data that reveals that

hsbc swiss banking arm collaborated in efforts by sol of its account holders to engage in tax evasion. i understand european tax officials recovered huge amounts of back taxes from and imposed large penalties on some of these account holders. i understand that our department of justice and irs received this information in 2010, five years ago. would they normally share that information, immediately, with the fed? well, in response to your question, i will first say i didn't personally see the piece that was on "60 minutes." but i can say that when, we really can't comment on specific investigations. >> that's why i asked you. would you normally get that? >> in a general sense, when there's an investigation, yes, we do share information when requested with the law enforcement authorities. >> share meaning you give to them. do they give, do they normally give this kind of information to

you? >> it would -- >> quickly? >> it would depend on the case. there would be a dialog about certainly, if they are limited in their ability to do that they would not do it. but we provide information on request, we generally may be aware that there's an investigation going on. >> i want to ask you something. i take that to mean there's a good chance that you have had this, that the fed has had this information for quite some time. i gather investigations of some individual u.s. account holders identified by these leaks have been undertaken by irs. my question is this. hsbc has a history of major u.s. sanctions and money laundering violations. they now have these new charges of facilitating tax evasion. summarize, if you will for the committee what the fed has done with respect to hsbc to pursue these tax evasion allegations, what conclusions you may have reached regarding hsbc's responsibility for these