ty, that's what's speering the new fear in the market, in terms of, what will liquidity be when interest rates go up. >> if i could add to that. i think sort of saying the same thing, the panel is in agreement generally, all of us are expressing it in different ways. it seems to me that the key issue is whether investors are sort of anticipating what the liquidity in their transactions are, that's more important than whether current market depth is high or low or bid spreads are high or low over time, we had large depth in treasuries before the crisis. and much larger depth in other asset classes before the crisis. which didn't hold up during the crisis. so i think precrisis liquidity was not a predictor of what would hold up. currently if measures are somewhat less, i'm not sure that

it's going to predict how it would react under a stress event. and so was the key -- one of the key issues is what -- how are investors anticipating this? is this part of their investment strategy? and do prices reflect it, and do practice risk management practices reflect that? >> i think that there are two issues we have to separate as we address the questions you offered. is there a liquidity crisis? the first is are we in the midst of a transition from one type of market to over. if over night, we say that ever bond dealer who works in a bank can no longer deal bonds, the next day it will be a little harder to buy bounds. no question about it, and sell them as well. but what will happen afterwards, the banks will sell their operations to hedge funds to other companies, to the employees themselves and they'll get reorganized to find the

capital and make money, because there are opportunities to make money when people demand liquidity, by the way, there's no such thing anywhere of free liquidity. liquidity always has some price, sometimes it's low and we'd like it to be low, it's always, always priced. the first issue, is there a question of transition? and if there's a question of transition, how do we get through the transition quickly? maybe we don't want to have banks dealing bonds. the second question is the systemic risk that's in front of us. i think it's worthwhile if we spend a few moments talking about the scenario that people are afraid of. scenario is this. the public has now purchased a massive amount of fixed income. at fairly low rates, and the prices are fairly high, they'll be happy if they stay there, that was their expectation. but if it looks like rates will rise and, therefore, bonds will drop, or there might be

inflation in the future. then we all know that these corporate bonds are going to drop in value, those people who know better than others and earlier than others are going to race for the exit. because they want to get out quickly. the question is, will they be able to get out. and how many will they be able to get out. and more importantly, the question, they will push prices down as they should, because those conditions suggest that bond prices should be lower. will they push them down beyond where they should be? will they overreact? of course, if they over react, there will be plenty of opportunity for those people to step in, but they may not step in quick enough. and these are our fears that we face, as we address those fears, let's also recognize that when the bond prices drop, their yields rise. everybody who was interested in fixed income, because they're concerned about their retirements, looks at it and says, i wasn't so interested in buying it when my perception of bonds, they were return free risk, just the opposite of what we're looking for, right. these high prices are called return free risk.

now all of a sudden, bonds are actually giving me a return that is respectful, maybe i will step in at this point. the question is, how quickly will they go in. is there a potential for volatility? absolutely. wherever there are large correlated behaviors, that are significant fractions of the economy, there's potential for systemic risk. and there will be changes in the future, the question is, can we create systems that are robust enough that when they happen, people respond quickly that we don't get an over reaction that we hurt us all. >> it's my opinion, and i think others have expressed this, the cumulative effects of the series of regulations that have made it essentially more difficult and expensive for certain dealers to act as market makers. these rules, including others, supplemental leverage ratio under the rules.

changes to the cap a tall rules around basal since the crisis, to what extent have banks imposed stricter internal limits on their business units. not from a regulatory standpoint, but in reaction to a regular tear environment and the market changes. have banks changed their risk profiles? >> let's start with some of the changes banks have imposed on themselves. clearly, as everyone here did, so did our franchise live through the 2008 financial crisis. and the pricing activity and the changing liquidity dynamics actually informed our perspectives and views on price activity. as a result, our risk appetite for certain types of trading activities and certain types of risks changed. for example, even if you peeled

back all regulation, chances are, there would be less liquidity being provided into the marketplace, because learning has occurred in some aspects. that's important. that said, regulation and much of it, i would say, the largest portion of it coming out of basal on behalf of the g-20, which focuses on liquidity charges, capital charges and things of that nature, firstly, it's absolutely important that minimum standards were created to create a level of resiliency and reliability into the marketplace, so that's really a good thing. but as you mentioned chairman, one, more work probably needs to be done on what is the cumulative impact of all of those regulations added up. i would also posit, that in many cases each rule is almost written so it wouldn't comply with the rule before it. so, for example, when we think about lcr, which is an extreme stress test that assumes a run on liquidity for

your banking institution. it assures you're holding the right amount of liquid assets and cash to meet those outflows right? for example, precrisis, if you were engaged in short term wholesale financing, that might have been an open position. if you are compliant with lcr, you are not using short term wholesale funding for your inventory management. it's not creating a liquidity risk if you will. that said, the fact that you've raised that cash, you're carrying in liquidity and to give you some perspective, jpmorgan is holding about $600 billion at the end of the first quarter, last reported results. that's an enormous amount. balance sheets are the largest banking institutions are about holding 25% in liquid assets. in addition to holding that in

liquid assets, the supplementary leverage ratio which was created in basal, and implemented here in the u.s., because it's trying to create a consistency around concerns related to risk weighted assets, it's risk agnostic in charge of the 6% capital charge on all assets, including cash, including treasury and it weighs extremely heavy. when you get to u.s. gsib, for example, it assumes you may not be compliant with lcr, so once again, taxes, any activity you might be doing to accommodate client flow in the retail market. right? so as a result if we step back, market liquidity in the u.s. treasury market. we clearly are holding more treasury securities as high quality liquid assets. we are not putting those into the marketplace, because we need to hold them unincumbered on the balance sheet.

we also are not putting out vast amounts that we're holding in excess, why? if we put them out, because we're already compliant with lcr, we would actually be adding to our cash, which would draw an incremental 6% capital charge. and if we transacted in that way under the proposal, it would be charged an incremental gsib surcharge. so i think it's not just about cumulative impact. it's about how the rules work together. and if you're compliant with those that are addressing the systemic risks, there might be room to sharpen our pencils and allow more liquidity to flow back into the system, because i think there's more that could be in fact accommodated in that context. >> thank you. >> in view of the changes in the profile of people that have in the past made markets in those securities, those who have changed, as an issuer and a major player in the marketplace, have you seen the risk profile that some of those players are

willing to take? in other words, maybe people have taken more of your issuance in the past, maybe having a diminished appetite in some ways. >> well, i think the answer to that is after what happened in 2007, 2008 and you would probably know this better than me, i think every asset manager did look at the credit allocations they would give to every single name and also a cross product. and really make an assessment of whether those were at appropriate levels or not. and certainly as -- first of all, what ge capital tends to issue is the security. it is typically bullet securities, carrying a fixed coupon or floating rate coupon. we do issue more in the retail market, securities that have

calls in them. those are in some sizes what they're interested is earning that coupon rate, and they're not really looking to trade or anything like that. but even having said that, i think that we do see more smaller ticket sizes when i look at the benchmark securities that we put out there. and those are dollar globals, which we do once a quarter in terms of, you know, that's the benchmark issuance for that period. the ticket sizes are smaller, i think it's a function of single name exposure, i think it's a function of a lot of the other considerations that every asset manager is dealing with on their side. now, we have also adjusted in the sense that we are actively shrinking our balance sheet, so

that where as before on an annual basis we were putting out internationally on a global internationally on a total of debt, we went down to 25 billion to 25 billion and have even a northeast need to, you know, a strategy which we announced on the 10th of april that we're not going to be putting any debt in the market, long-term debt, that is, for five years as we bring down the size of the balance sheet. now, that's an extreme reaction. i think every intention to adjust the size of what's able to put out the frequent issuers. i think what's an interesting phenomenon the issue is you don't tend to see as frequently this is a historical chance to put off 30-year funding at

absolutely levels that we haven't seen now 1960s. as well as the m&a driven issuance which of course has a very different impetus to it than the ones, people like ge capital who are in there on a regular basis. >> the ge experience is probably worth talking about just a bit because it's a tremendous lesson we've learned from ge about liquidity. in the run up to the financial crisis. ge, as you may recall financed a substantial number of its acquisition using paper for many years and they did this because the commercial paper was carried low interest rate, so the cost of funding was very low.

they had associated with it that they had to refinance every year or so. within that, ge had an enormous liquidity problem and would have failed if it hadn't been for the government stepping in. so now, it's interesting to think about how we should think about this problem. ge, perhaps knew that it was so large that they could get away. perhaps they were just ignorant and they went and did this. but had they funded their operations longer term before, they would have paid perhaps % more interest. their ability to fund short-term and get away with it gave them quite an advantage in the market vis-a-vis their competitors. and so if there is no penalty for this type of behavior, then

we'll see a lot of people doing it leading to systemic risks. so i think it was right what we did in resolving these problems in the financial crisis. but as we now think about what types of instruments issuers -- not just ge but anybody else should be issuing, they have to do it in a way that's responsible so that they don't run into their own liquidity crisis which is associated with the refunding. the only way to keep them responsible, though, ultimately is for there to be a serious penalty when they make a mistake. now the problem is, are we willing, as a society, to bear those penalties if it has an ultimate impact on employment. if we are willing to do that, then we don't regulate them. but if we're too concerned about the employment issue, then we have to regulate them otherwise we're going to end up holding the bill.

>> we did have sufficient blinds to cover the ct program and, you know, one of the things which maybe not everybody is familiar with is that back then, in u.s. dollars, euro and sterling we were our -- we placed our own paper. we actually did not use dealers and we continued not to use dealers in the dollar market. what was very interesting was that we were rolling the paper, but other people who were having redemptions on them actually couldn't sell asset backed commercial paper issued by frankly other vehicles and all of that. and they were actually coming to us asking to sell us back our commercial paper and we always did buy back. you know that was the standard policy so that they could create liquidity because, quite frankly, the dealer community wasn't able to accommodate the

flood of requests. and that, i think ultimately created the difficulty for us because while we could handle our own program, we certainly weren't in a pog to be providing liquidity for, you know, the greater system. that was just not something that we could do. you know were we maybe a little bit too much in cp or not -- we could debate that. that is certainly an open question. but i think at that particular time, there was a nuance to it and we did learn from that in the sense that we ultimately reduced the size of the cp program to about 25 billion and then we're going to take it down to five by year-end. and the other issue is that ever since '08, we've been running a liability portfolio where the average life is around seven years on a blended basis versus an asset portfolio where the

average life is, say, three to four years, so much longer liability. but it is at a cost right? and we also have a liquidity buffer and everything else like that. and the decision made in april to shrink down the size of the balance sheet and ultimately just focus on, you know, three core businesses rather than many of the others is based on an assessment of ultimately can you meet the hurdle rates that you would like? and the answer was probably no, other than he knows business. so where we're pulling out is middle market lending where, you know, we've been there for many, many years. it's a, you know, business decision. there's no valuable judgment of is it right or wrong, but it is a logical next step implication of many of the policies that came before. >> larry summers recently said that, you know, we might not

have been such a good idea to go out there and shrink all the financial institutions a little bit because when you shrink all of them a little bit then, you know, who is going to make up the difference? i guess my question to you is with the fact that we've seen in the banking space a reduction in the dealer space a reduction in capacity how does that impact, you know, your thoughts on liquidity, both on the buy and the sell side? >> absolutely. so when we think about the cumulative impact both the regulation but also of the learnings from market participants that sandy alluded to earlier and the business model that's resulted from that we look at the -- the new status quo where there are less dealer inventories and less available liquidity, less market depth as the new environment in which we need to collectively adapt. for us at blackrock what that's meant is looking deeply at the

market structure and fixed income. and one of our observations is that the infrastructure of the market over-the-counter market based on firms taking principal risk and keeping securities and inventory and finding the other side at a later time feels what dated. freshly in the context of the rapid growth of the fixed income market. we talked about the issuance over the past several years. so what we've then done is look at many other securities markets and ultimately we believe that better use of emerging technologies such as electronic trading, such as broadening the types of trading protocols that are used in fixed income allowing all market liquidity where buyers and sellers can create more points of potential transactions rather than the traditional client to broker

dealer single attraction collectively, we believe that all of those depths can incrementally enhance liquidity. i would echo earlier what was said each of those are incremental. one of these single steps is very easy to be a little bit dismissive of it and say, that won't help that much. market participants recognize that. there is a great amount of realtime development in the electronic trading space, both being undertaken by new emerging firms as well as the large income bunt global investment banks investing heavily in technologies and thinking of the next stage of evolution of their businesses. >> chairman, can i jump in on that before we lose the train of thought? i think a critical point we need to debate or at least get out on the record is what i view as a

recent push by some policymakers in washington certainly within some constituent members of the fsoc if not the fsoc itself is to attempt to vilify in this context electronic trading specifically as the cause of the lack of liquidity, which to me is turning the world on its head. i listened to dr. harris and i'm intryinged by his notions when i've been following for while, maybe a thousand chutes will grow from the chaos of all these rules that have decreased liquidity. maybe it will be a hedge fund or maybe it will be a broker dealer that trades fixed income. but employing new technology, new business models, electronic trading is happening in the aftermath of all of these other changes yet being pointed at, blamed for this lack of liquidity. and we can't let this narrative

go unchallenged. you've seen it in the fsoc annual report. there was a drive by of it in the multi agency report that came out last october. and i've been around this town long enough there always has to be a boogeyman somewhere when you're trying to misdirect. i think this is an area that we need to encourage and not run away from and not vilify, not accept the standard pushback that we're getting. and the second point, too which is this notion of the aggregate impact of regulation. and your question, which i think is a good one, how much of it is standard post crisis and how much of it is regulation. i was listening closely to sandy. i think we've reached a point where we've seen historically 2008 to maybe into '11 where there was a lot of prudent risk

management undertaken in response to a crisis. i don't think you can parse them out any longer. you can't say it's basul, it's dodd frank, you go down the road and then it's prudent risk management because what risk is there to manage when you've been told to derisk everything? so there is this burning need, i think, and i know dr. langston hash doing some work, i know the new york fed has been looking at this. but it goes back to your introductory remarks which i think you politely didn't call out jamie dimon for asking that question of ben bernanke and he was the one that did it. it inspired me to look at this exchange where he said no one is looking at the aggregate impact.

i've identified after committing my own staff resources, 300 or so regulations that apply to a hypothetical u.s. financial services holding company since dodd frank. not only related to dodd frank, some international measures too, but since. and if you look at this chart, it just reeks you know, impossibility. how do you do it? if you're not too big to fail how do you pay for the compliance costs? how do you provide liquidity in a situation where you have all of these rules and if you're lucky, the cost benefit has been analyzed rule by rule. it's something we policymakers have to look into. >> can i quickly say something about the hft question. the hft has a really bad name and they're not the boogeyman in the room if you will. in fact i think the report that was just released today will show that the hfts provided liquidity during the window when there was increased volatility.

but i do think the report does say we need to look at the issue a lot more closely in terms of that trading strategy and whether it creates unintended consequences. i just want to put that out there. >> so i appreciate going back to, you know, not just regulations being a factor for changes in market liquidity. there really are a number of factors. they deal in risk management and coming back to electronic trading. i don't think -- and i'm not going to speak for fsoc. i can only speak for myself through the fed on electronic trading. it's not viewed as a -- not meant to be vilified i don't think so. i think it is an unknown. it's very new. and there's not as much information about it to market participants or to regulators about it as much as perhaps,

and i think the inner agency study, staff study on october 15th was actually a nice step forward. on this issue. it doesn't try to identify a cause, a single -- i mean it certainly was looking for whether there is an error or something. it does not find an error. and so it took a step of, let's provide as much information to the public about what happened during that window. and there's an enormous amount of information in that report that i think people will now be able to look and evaluate and each individual participant may be a little part of that whole piece and by seeing it altogether they may learn something more about it. but i think it was quite careful to not vilify. but a couple of interesting things is it is a very big part of the treasury market. and an even bigger part of the treasury futures market.

are all investors and market participants and banks and ccps, are they managing this risk add a adequately. so it may be adding liquidity. they're probably all unique firms just like banks are. but when markets are transactioning at milliseconds within it's important that we look at the questions around that. so i think that is one of the key take aways from the study. >> recently, federal reserve governor jerome powell said there's no doubt that liquidity has been reduced in certainly markets, but he also indicated he was not too worried that a decreased market liquidity would cause big problems when the fed starts lifting interest rates saying i'm not particularly concerned that a return to higher volatility will leave much of a market on the u.s.

economy. what's your response to that? >> a return to higher rate? i don't know if that's going to happen anytime soon. we've heard them talking about it for a while. but if there is an exit by, you know, the music fund group, the insurance group, the foreign investors, the three investor groups that have issued the majority of the corporate debt that has been issued over the last decade, if they all decide to exit at one time, which we all flow we're going to see a dramatic drop in prices. i'd rather go back and talk about a minute about electronic trading, if i might. talking about their global issues and how they've seen the size of the orders for global issues go down. i saw a presentation by will rose of the rhodes group about a year and a half, two years ago, and it was specific to specific trading. he likened it back to how we saw the number of transactions and equities go up and the size of

the transaction go down. and he put a graph up of what was going on with global issues in the fixed income world. and we saw the same thing happening. the volume of transactions was going up dramatically and the size of the transactions was goc down. and when you talk about electronic trading in the treasury market, you know i suppose the high frequency traders can take place. we don't trade in the treasury market. when you get off into the corporate world, there's a number of global issues that could be traded in that fashion but the majority of the those in the fixed income world are so limited in scope to their size that you can't have a high volume of transactions. if you're on a particular platform and there's a million bonds being offered at a particular price and you lift a million bonds, that's what you get. you can't go out and do $100 million worth of that bond because there's only a million bonds there. so i think the adoption of electronic trading over the last number of years has been tremendous.

i think it lends itself well to the treasury market and global issues. but when you start to get off the majority of the fixed income market, it works but the fear of high frequently trading on that type of security which is the majority of the market just doesn't exist. >> >> just to add, we've been spending a lot of time talking about liquidity as we perceive it today. more importantly, we need to look at what our expectations are for market depth and the demand for liquidity in the future. and i think we look towards the horizon it's probably important to know and not pick on regulations and i agree completely there are lots of other factors. in our control is about 40% of the rule writing is still yet to happen. it will further decrease the level of market liquidity. and i would ask that is it the

opportunity right now to take a pause from the base that we are at higher capital, higher liquidity, reinforcing testing, higher standards broadly to determine dmrts condition text of what i mentioned earlier. the balance of safety and soundless in the balancing of functioning markets. our goal collectively should be the resiliency of the u.s. financial economy and it's comprised of those two items. so i think here might be the opportunities, again, not about rolling back what has occurred not about being concerned because i agree with governor powell to the extent that we have a marketplace and i believe markets are resilient. they will eevolve, there's no doubt. but we see further market decline and we are at the precipice of the potential for changing monetary policy and the unwind of quantitative easing which will very likely present

an skresed demand for that same liquidity. >> that is really great. that kind of queues up the last segment of our time together. the last segment was designed as we talked to the panelist, about the road forward for ensuring that we do have market liquidity. and if there are -- if we say some space is shrinking, then where is the space that we can increase and embracing technology and embracing some of these ideas because one of the things particularly from my perspective is the last thing you want to do is let congress stick its foot in. who needs to fix liquidity is the marketplace and we need a robust marketplace and we need a

marketplace that has some space to be innovative. and if we tend to try to fix the activities of the marketplace, so what are some of the ideas that people have out there in -- >> let me go to you. >> sure. when we look at the market and think about ways to improve the liquidity situation from the status quo i touched on some of them. one of our set of ideas falls under the broad category of modernizing the market structure. what we mean by that more specifically is in fixed income the evolution in certain products were appropriate. the more fixed income products, the treasuries and large

investment corporate bond we believe those could very suitably be traded on platforms and exchanges over time rather than the over-the-counter contegs. what that means is the finite balance sheet capacity that there is would then be freed up for less liquid products that are never going to be suitable for exchange trading. secondly we believe that a construct called open trading or ultra all trading where rather than looking for bilateral connections between firms and broker/dealers, you have a broader pool where those connections can be made and essentially increase the network. we'll uncover some latent liquidity, some latent buying and selling demand. in addition, we think those previous two steps are logistically and practically only scalable in an electronic

trading context. so already we've seen in the u.s. credit markets over the past decade go from zero percent to about 15% to 20% market share right now. and we do think there is ram for significant growth. to state, electronic trading has been an efficiency and productivity tool. it hasn't change the infrastructure of the market. we do think that electronic trading and the adoption of new hybrid trading protocols can actually help to uncover liquidity that's not currently being tapped. and all of these have in common that collectively they would reduce the capital intensity of the market making business. one of the constraints to new strands in the market is that it's a capital intensive business to buy and hold balance sheets waiting for the other side of the trade. by making it more information

intensive rather than capital intensive, we do think that will allow new providers to emerge and just make it a more heterogeneous market. as a large user of liquidity and a large customer of broker dealers, it's in our interest, obviously, to have a broader network of providers. so we think that helps posture that growth. >> does that shift the risk then to the broker dealer? >> one of the comments made earlier is that in a way, one of the impacts of regulation has been to shift investment risk from the leverage bank ss whether that's an intended or unintended consequence, i think that could bear some of the more transaction risks. moving from a principal to an agency market would de facto

occur in changes over time. exchanges collect, buy, orders and sellers and match them together. they will work and they already do work in treasuries and they work in many equities not all.

but they're not going to work in some of the bonds that these panelists have talked about where they really only trade by appointment. but that said, there's still room for electronic markets or electronic facility toes help the trading of those bonds. so in particular the development of an order displaced facility a facility that would allow people to say i have this bond, i'd like to say it and here is the price at which i'd like to sell this bond. we already sort of have systems like this, but the problem is people regularly trade through those prices. by trade through, i mean if the market is offered in one of these systems, said 101, people would be arranging a trade at 102. so the buyer would have preferred the 102 price. that's not necessarily an evil thing. it's possible the broebler didn't even know about the 101

price. and finally, we have to make sure that people don't violate their agency obligations to their clients and trade through when they do know about these prices. so just to give you an interesting statistic, inter active brokers gave me a lot of data. they collect the bit bids and offers. some of them are firm, some of them are just indications of the prices at which people have indicated they're willing to trade at all sorts of different venues. and they combine it into a single series. and i ask the question given the report of all trades that took place in the i'd during the time i had this data, how much do we see trade throughs? and the trade through rate was 21%. there was a buyer or a seller who could have done better presumably if they could have accessed the prices. if they could have accessed the

prices, maybe they wouldn't have been there but still, this shows the incredible potential. what's needed is an order displaced facility. it doesn't have to be mandated by the government, bit has to be something where private entities can create these things where the price res made public, not necessarily through a consolidated system. but if not reuters or others will consolidate the information just as incident either active does. but most importantly, a system where you're not allowed to trade through those prices because you're not doing your client a service by failing to pick up the easy to pick up trade. there is one additional complicate. if you say you can't trade through that price, you must make that price available so it can be taken. but if anybody can take a price, then it has to be the case that the trading system has to be an all to all system where if i grab it i can settle the trade.

we do this all the time in equities. why should it be so difficult to do it in another system. they're just securities. so let's settle them up that way. these are the order handling rules that i referred to before that made equity trading so incredibly effective. it won't be the same in bond markets because there are so many bonds. but to the extent that it makes the bond markets better, it will make the -- somebody else better off. and so the total value of those 48% that traded through -- oh, i had it here somebody else. the difference between the trade price ta they received and that they might have received times the -- not the full size of their trade, but only the displayed size that total value adds up to $600 million,ed 700

million per year and that's just on the limited daddy that i had available to me. so there is huge potential for change here. if we save that money for investors, how much more willing will they be to buy ge securities or investors. >> if you had had access to platforms like that, would that have been a benefit to ge? >> well, i think the platforms are -- first of all, i think there is a role for electronics platforms, absolutely. i think i think the key to it is -- and dr. harris touched on it. how do you make it so most buyers and sellers use the platform as the means of choice for buying or selling

securities? and if that were the case, and to the extent it removes the inefficiency and truly security transactions are transed at the best levels then, you know i think for an issuer, it does start to set a true secondary market level that potentially is tighter than what might have been and then that new issue premium is probably a tighter one than people would ask for when they're trying to build a buffer in as occurs nowadays. and i think the key question is how do you encourage people to make use of this so that the majority of transactions do occur on certain selected platforms because then people have access to that information. i mean, in some ways, we're talking about information transparency because a logical buyer would not allow a price

done at a worser level if they knew the better level potentially existed. but because they don't have that information, they just think they're getting the best price and they do it. and i think that's a very big question. how do you ensure that it becomes the systems of choice or the platforms of choice and that there is this free flow of information that hits you know, 80%, 90% of the players in this market. >> our regulators, how do we -- i think transparency is definitely key in our slots and futures market. we were mandated under dodd frank to have such a trading platform. and i think with that, the markets will be transparent and why wouldn't necessarily say we'll work for the income market given the number of bonds that

are there. i do think some of the suggestions that were put out in terms of mandating the more liquid benchmarks for the securities. saying it's a good idea. and i think for the most part, if we continue to share data with the regulators, i think that will create an incentive for the market to come up and be more creative, as well. >> so moving from big to small, it occurs to me this whole conversation -- believe to me it's occurred to me before, but we were and having talking about systemic risk. i think dr. lang was talking about it in that context. sandy was, too. and kind of interesting that of all the things dodd frank did, it created a financial stability oversight council to find and address pending systemic risks

and here is one we're having a big conference about and talking about and it's been written about for years and not real obvious action being taken. i guess they're busy designating insurance companies. so i think we should expect and demand more out of any council given the type of power that fsoc has been given to this issue. they have, of course access to the ofr, you know, a supposedly independent group with some really smart folks who are supposed to do this kind of research. they can research these issues and get the data. larry can help them if they need it and they can report up to fsoc and it would be nice to know more of that is going on. maybe it is. i'm famously not a member and every now and again i read in the journal what happens. or bloomberg or whatever. so i just think not enough is

happening on these issues, the actually liquidity crisis itself and looking at the aggregate impact of regulation and its role of the liquidity. both of those should and could be happening at ofr. moving down the scale, then, within the fixed income markets that we oversee, because we have authority there, i view it as kind of two main issues. market structure bigger picture and microstructure issues like dr. harris was getting at. but they're so intwined that you have to look at both at the same time. we still have, as i said earlier, markets that look like they did in 1950 guys named vinnie and joey are still trading tens of billions of dollars on the phone and it's very opaque. before, you would have no idea what the prices are and those price res post trade. and we, as an agency, we as i

think a government need to decide, is that the right market structure? and if not, the worst possible thing, as we've all said, would be for congress to come in and do a title seven on that market and say all of a sudden, let's have central clearing and staff exchange like trading. it sounds great, it's an equity market like or a future market like construct. it was laid over with derivatives, a formerly otc market and it hasn't gone all that great. we'll see how it turns out 10 to 20 years from now. so i think that's a huge issue and one we need to wrestle with. but at the same time, we recognize the retail participation in these markets. it's 75% rev tail given the tax advantage that makes sense. in corporate, it's getting close to 50%. and half of that 50% through

aets managers is half direct. it's certainly close to dunl double digits if not 11. that's a huge number and a huge notional and if we can bring, as commissioner bowen said, more transparencies, if investors un, a, what they've just paid to do a trade, whether it's a buy or sell, if they understand what the prevailing prices are before they do the trade as opposed to after, and if they get the pricing and information that i think is being inflicted upon them today, they might go get those pitch forks and, sorry dan, go after their dealers and demand a change in market structure that provides more efficiency. and i think dr. harris's idea which if you didn't see it he ran in the "wall street journal" a couple of moss ago is hugely important. one that i admittedly hadn't thought about. but i'm not a ph.d. economist. this notion of handling is an apt one. you can get major market changes coming from the grassroots.

if you provide this more transparency at the retail level, you might get more liquidity and other changes and i hope and expect that we can do that. so i think the commission is actually -- you know as joking as i've been i think on this front of retail transparency pushing the sros to do more. i still think it's not enough. i think the commission should change its own rules on confirmations to show customers how much they've paid on a trade. i think that would change a lot. and then on the larger fixed income issues, that's why i think we need to commit our staffing resources, start thinking bigger picture and entertain at the ideas from the industry that hopefully don't require being rules but that can make big shifts. we've done a lot of talking about it, but it's time to really put it in motion. >> you brought of an interesting point about fsoc and their role of being the coordinating entity. and this is a very important

subject. is this dialogue going on within fsoc to your knowledge? >> my interesting isn't really great with respect to fsoc because they don't tell us much. and i read the annual report and in the annual report this is something they're looking at. i think it was on about page 117 and it talk ss real quickly about the context. so i don't know. i hope more citizens of this country when they sit back and hope that we in washington are doing things that i know we're not, i hope that they're doing this as opposed to spending all their time figuring out whether to make institutions that should be able to fail too big to fail and designating them. i hope they're going to commit to that. but i honestly, chairman don't know. >> this report that's a joint one is any indication in terms

of how our agencies can work together then i'm pretty excited about what they will do for us. >> so there is something in the annual report. that is something that the principals of the council have discussed. and, again this report is an interagency effort which is -- the cftc and the fed and the treasury, it is not simple -- i think what the fsoc try toes build on is the expertise of each of the agencies. this report requires the expertise that the federal reserve system can bring to it and understanding treasury market transactions or the cftc can bring to it in the futures market. the data are immense. transactions are being done in milliseconds. it doesn't take very much days before you get into billions and billions of transactions and

identifying parts. i think it's a pretty good example of some ways this council can be effective. >> and just one related point, not that you don't have enough to do, mr. chairman, but in this context, i'm not going to disagree. i think the report is good quality staff work and you do know, of course, ta given the exceptions and the law, there is no regulatory authority in the treasury markets by either the fed, the cftc or the sec and quite honestly, i think that's something congress should look at. >> our time is drawing near and we still have so many questions left. is there anybody that wants to make a comment of something that you thought we would talk about but we didn't get a chance to talk about and dr. harris? >> sure.

very very briefly when the trace data first became publicly available, mike piebar now a commissioner of the exchange of the s.e.c. and i and another woman named amy add ward did a tudy of transaction costs and bonds. and that study showed something that very few people have appreciated. and it's a shame that they don't. it shows that an issuer who has lots and lots of issues that are very complicate that those issues trade in less liquid markets than the issuers who have few issues outstanding and issues that are very simple. and so we should somehow try to figure out how to great the issuers, which they are municipal issuers or whether they are corporations to issue fewer bonds. they can reissue existing bonds.

the states can form municipal bond banks. so the mosquito -- distinct doesn't know anything about it. if we could just beat down the number of names these markets would operate more effectively. they'll be liquid again and it's according to the demand. one other very quick comment, mr. leland said something that really bothered me. which is that he -- there is a story that you had about holding a bond that you would be forced

to divest of because the period in which you had to hold it would be too long. >> right. >> so that is really a concern. unless there is a really good reason for a regulation like that, he's at a disadvantage to his competitors. and i really hate to say unbalanced playing fields. we really need to sur vale va all our regulations and make sure there's good reasons for it. where reasons like that aren't present or they're reasons that date from times past it's not fair that his firm shouldn't be able to adapt to a changing world and that he ends up losing his business to people who, you know, hedge funds or otherwise that aren't similarly regulated not because they aren't regulated, but simply there's no reason for it. >> well, there has been a great

discussion. this is a discussion i think it's not just a one-time event, but it's something that should be ongoing. i'm hopeful that more of this kind of dialogue will go on. i want to ask our audience to show the appreciation for the thoughtful presentation. and i personally appreciate all of you participating in this. i know that these are very busy people and i've found this to be very simulating. with that, we are adjourned.

operations. later, financial experts discuss fixed income markets and concerns over liquidity. democratic members of the house energy and commerce committee held a forum on climate change at the u.s. naval academy in annapolis, maryland. speakers included naval academy superintendent walter carter and foundation president william baker. this is an hour and 45 minutes.

>> let me first say i'm congressman frank pallone. we have some members of our committee that are here today joining us, as well as one member who joined us from maryland who's not on the committee, but we are the committee that has jurisdiction over the issue of climate change and we are apressurepreciative of the fact that the academy was willing to host us today for this field hearing on climate change at the water's edge, as we are terming it. first of all, i want to thank -- each of them will make an opening statement but i want to thank congressman john sarbanes

to me left who represents annapolis and is member of the energy and commerce committee and did most or all of the preparation with his staff to bring us here today. to his left is congressman paul tanko have new york who is a ranking member on our subcommittee on the environment and the economy and to his left is congressman chris van holland, who's not on the subcommittee but in our house leadership and is from an adjoining congressional district. so that's the four of us that are up here today that are conducting the field hearing. then of course i want to thank vice admiral carter, the superintendent for hosting us here at the academy. i had the opportunity as i mentioned to you, admiral earlier this morning of having a wonderful tour bay couple of your staff. i shouldn't admit that after 27

years in congress that i had never been to the academy before, but i couldn't take -- i couldn't miss the opportunity to do the tour today. it was really interesting. thank you for hosting us and making all of the preparations. we also have the mayor of annapolis. of course mr. baker and dr. ekwerzel. yesterday the national oceanic and atmospheric administration noaa released its report on the statement of the climate in 2014. this authority taytive report was based on contributions from 430 scientists from 58 countries, using data from around the globe. the noaa report confirmed what we already know, that manmade climate change is real it's happening now and the evidence for it is indisputable. according to noaa and i quote,

"four independent data sets confirm that 2014 was the warmest year on record and that the warmth was widespread across land areas. further more 17 of the 18 warmest years on record have occurred in the last 18 years. the noaa report also noted that sea surface temperature were at a record high and global upper ocean heat content was a record high. global sea level was also at a record high. the arctic continued to warm and there was an above-average number of tropical cyclones. so the scientific consensus is clear, record-setting climate change continues unabated. record surface temperatures, record ocean temperature s, record sea level rise all happened in 2014. this is no coincidence. and continued from our emissions of green house gases. noaa noted in the united states 40% of the population lives in relatively high population dense

coastal areas where sea level plays a role in flood ing shore erosions and houses from storms in new jersey my home state, hurricane sandy hit with devastating intensity causing extensive damage and loss of life. in annapolis tidal flooding is increasing at an exponential rate and annapolis is preparing for the next extreme storm like sandy. vice admiral carter can tell us about the efforts the academy is taking with extreme weather and flooding at its facility here. there are many who argue that the climate change is not happening or that it is not caused by human activity. they argue in the face of sign tichk fact. they speak only on behalf of those who want to profit from inaction. while some may find it economically advantageous to ignore climate change, in fact the cost of inaction fall upon all of us, and they are enormous. they range from flooding and sea level rise to drought and impacts on food production to

increases in disease and increasing security risks. and equally important when we ignore climate change we miss valuable opportunities to move forward toward a more economically sustainable future. one in which we are more competitive, more energy independent and more energy secure. we risk losing the lead on new technology and innovative energy solution and risk losing jobs. we need to heed the advice of the scientists of our best thinkers of our mayors and our military advisers and take action now to combat the ongoing threat of climate change. so again, i want to thank all the members for their participation. i look forward to the testimony of all of the witnesses and now i yield to your hometown congressman john sarbanes. >> thank you, congressman pallone. it is great to be here at the naval academy. i want to thank superintendent

carter this is a perfect place to bring this to climate change and local communities what you are doing here to combat the affects of climate change. what is undertaken to address that. i do want, at the outset, want to acknowledge the tragic shooting that happened yesterday in chattanooga. that i know that you have mid shipman that go on to become part of the officer corps of marine. so this community is probably feeling that loss, particularly acutely today and our thoughts and prayers go out to the families of the victims of that shooting that occurred yesterday. i also want to thank my colleagues for being here, paul tanko who serves on the committee, congressman pallone, are focused as our whole committee is on this issue of climate change and chris van hold land who's a ranking member on the budget committee within the democratic caucus.

from that position understands that addressing issues of climate change is about the values that we infuse in to the budgetary documents that we create in washington. i also want to thank the witnesses who. we will come back in a moment and introduce them i want to acknowledge there are a lot of people in the audience that care deeply about this people. familiar faces who have worked long and hard. not just on the broader issue of climate change but in particular on the issue of the fortunes of the chesapeake bay, which marylanders hold very dear to our hearts. obviously there are many that are part of the solution when it comes to the chesapeake bay since it begins up in new york actually. and there are 17 million residents within the chesapeake bay.

watershed, 64000 square miles and we have a special responsibility when it comes to leadership to make sure we are protecting and preserving the chesapeake bay. as was made clear i think yet again by the comments of congressman pallone with respect to this recently released noaa report, the consensus from the scientific community is overwhelming that climate change is happening and that human activity is the most significant cause of that. whatever debates we're having, whatever the issue may be, it's all happening inside of this larger reality of what's happening in toe planet. and every issue we grapple with, that ought to be the baseline effort that we are undertaking to address climate change. so all of those other things don't become irrelevant over time. we're here in annapolis today, beautiful city of annapolis. we're going to see -- we're

going to hear about the local effects of climate change on coastal communities. annapolis is really on the front lines when it comes to that. unfortunately sometimes in washington politic s take over this conversation. it's good to be able to get out of washington and out in to the communities that are grappling with this issue where you do find, i think, a real consensus that this is a priority that has to be addressed. we've assembled a very strong panel of leaders on this issue that we're going to hear from today. there's no question this is the challenge of our generation, addressing climate change. and the american public is as focused on it as our witnesses are and as we are. there's recent polling that shows that 70% of americans favor stronger limits on the amount of carbon that's emitted by power plants, over 80% of

americans think the united states should take action to address climate change. so the public understands this. the experts understand this. the scientific community understands it. i think the united states congress needs to catch up with that. for a time there we thought we were going to be able to put in place a super structure to address carbon emissions with economics being kind of a driver in that. that opportunity was missed. stepping in to the breach has been the environmental protection agency, the clean power plant, other efforts they have under take on the address carbon emissions are really important but congress has to get back to the task of being a leader when it comes to addressing this very, very important issue. we're going to hear testimony as well today, that the lives, this notion there is a tradeoff

between a strong economy and doing the right thing when it comes to the environment and climate change. in fact when you look at the chesapeake bay the best way we can drive the economic engine of maryland and of this region is to make sure that the bay is healthy. so there's a direct link there. further more, if we develop clean power technologies because we're looking ahead to the future, and learn how to manufacture and produce those tech noj nothing technologies in the united states that will create a tremendous amount of jobs. we have a wonderful panel assembled here. again, thank you superintendent for hosting us and with that i'll yield back my time. >> thank you, congressman sarbanes. next we have congressman paul tanko who is a ranking member of our environment and sub commit teechlt good morning, everyone.

it is a pleasure to join with you here at this beautiful setting. so thank you a, superintendent carter for hosting us and thank you mayor for welcoming us to this wonderful city. i had a chance to cruise around town hit the state house and visit the campus here. wonderful, warm with feeling and beautiful, beautiful space. thank you for all the good work that you do at the academy. we're thrilled to be working with you to appoint nominees to the various academies and it's a nice partnership. to all of our witnesses thank you for being here. mayor, we talked about the role that cities play in our resouthern jens and superintendent for the tradition that is part of the academy and the great work done to keep us a strong nation. thank you very much. your strengths are valuable. i am proud to represent a state that is part of the watershed

community of the chesapeake bay albeit a slight part but we love being part of that watershed and thank you for the work with that you do through the chesapeake foundation and doctor thank you for offering your information our way so we can move forward in an academic way. i represent a district that is the confluence of the hudson and mow hawk rivers the capital region of new york from saratoga to albany troy and west in to the erie canal territory. our coastal communities are plenty and they have been impacted by mother nature over the last years in very significant ways. so i think that this work that we're doing here today is very valuable to the outcome of public safety, economic stability and economic growth. certainly an environmental agenda that is positive and strong and reflective of our stewardship with our partnership

with the environment. i amening a engineer by background . i enjoy these technical assignments. i enjoy working with our rank of energy and commerce colleagues and i'm tlooel thrilled to be sitting with three colleagues who get it. they are stallworth in their efforts to make a difference on behalf of our environment and that's refreshing. as an engineer i enjoy the technical assignments of energy and commerce. my rancorship on the subcommittee, the environment and the economy and i sit on science, space and technology an i'm amazed constantly about the kickback when it comes to science. people reject science that ought to be advancing the best policy that embraces science and what science is telling us. if not listen to mother nature. she may be speaking more forcefully than science itself. we need to move forward with a gresive agenda, based in academy

aics and understands, as representative sarbanes just mentioned stewardship of the environment and growth of the economy do not fight each other. they go hand in hand. and great jobs come about when we understand that partnership. before my days in congress, i served as president and ceo of the new york state energy and development authority. we did all sorts of inknow valgs and invention as it relates to energy and the environment and i learned firsthand that great things were happening and we were growing jobs of the green type thatten able us to strengthen the foundation of our economic recovery. i also believe in accepting the notion that 97% of the science community said look, climate change is real and a human factor is very much a part of that concept. so that we can make fundamental change based on human activity.

if we think carbon emission isn't a problem, wait until methane hits us. there are all sorts of efforts coming foreer ward that need to address emissions in our society. the growth in the economy that can come, the impact we can avoid, you know, the orders of prevention are difficult to sell at times. we know that, just as an act of human nature but it is important that we move forward with those preventative measure. why, my district and all of new york primarily the metro area are hit hard by mother nature with super storm sandy. before that, irene and lee ripped damage in to my district and the nomenclature of 100 year and 500 year storms were embraced every other year. multiple times within a decade. so the nomenclature doesn't even fit. it's out moded, it's outdated and we see time and time again threats to our waterfronts erosion of prime farmland,

closing of businesses from very small to larger housing stock wrecked if not totally abandoned. and the most impacting human lives that have been lost because of these storms. so we kneadow there is a way to come back and speak to a sound agenda that grows jobs, speaks to the environment and allows us to anchor it can i use that word here, superintendent, anchors it in policy and put together, mr. budget man resources that we need. it is my pleasure to be here today and thank you to my fellow colleagues and our panelists and for all for showing your interest in this issue. i will close by saying this, i hit the ice cream shop downtown. i'm not embarrassed to say i had a cone at 10:00 a.m. an i talked to a very young man at the counter, very young man and he said what are you here for and i said we are going to the academy. for what for discussion on climate change and he said please do something. so maybe that young generation

will push us. whatever it takes, let's do it. thank you. >> thank you. let me now yield to congressman chris van holland who is mentioned as the ranking member of our committee and house membership. >> thank you mr. pallone and that ice krooelt cream cone was melting way too fast because of the climate change. let me join my colleagues in thanking you superintendent carter and the witnesses for joining us this morning for this very important discussion. superintendent carter, i want to also, as my colleagues have done, thank you for your stewardship of this great institution that helps train and raise men and women who are serving our country. thank you for that. mr. mayor thank you for your leadership and look forward to your testimony about this very important issue in the immediate impact climate change is having right here in the city of

annapolis. to mr. baker, will baker, thank you for your incredible leadership on protecting the chesapeake bay. we have, as our motto here in maryland and surrounding areas, "save the bay." and mr. baker's head of the chesapeake bay foundation has been leading that effort here for a good long time. so thank you. and doctor, thank you for your great leadership your contributions to the scientific debate but also translating that scientific analysis in to sound public policy. i'm grateful for your efforts. i want to thank the leading democrat on the energy and commerce committee for bringing us here. thank you mr. pallone for your leadership on a lot of issues but very much with respect to climate change. to my good friend john sarbanes

who's been a leader on a lot of issues, but we have worked so closely together on chesapeake bay protection, he's worked very hard to encourage young people to appreciate the great outdoors because the more they can appreciate their surrounding environment, the more they will understand the importance of protecting it. to john, thank you for all of your leadership. and paul who's helping new yorkers recognize that they are also part of that chesapeake bay watershed. one of the challenges we have had in maryland, frankly is we understand what a precious resource we have here in the bay. but as mr. sarbanes indicated that bay watershed extends over multiple states, all the way up to new york and the drainage basin, you know the ratio of land mass to water is huge. that's why it is such a challenge to make sure we continue to protect the bay.

i just want to underscore a couple of points that have been raised and then add a couple of observations. look, i wish all members of congress were at the same level of understanding of the challenge and the threat as the american people clearly are. we do continue to have science deniers in the united states congress. people who somehow can stare the evidence in the face and still put their heads in the sand. the good news is that the american public is way ahead of the game because they recognize this is not some distant threat but it's here and now. they see it in the form of these disruptive weather events that are increasing the costs to the american public, to the citizens of the city of annapolis. they recognize that its putting lives at risk, as mr. tonko mentioned.

so they are able to see with their own eyes what the scientists are telling us that the data is indicating. and so we all know the cost of doing nothing are huge. we are going to hear testimony because of the lack of action the costs are piling up. i'm especially pleased we are here at the academy because the u.s. military has been at the forefront of trying to explain this challenge and this threat. for all of the people who deny the evidence, you know i think they should ask the u.s. military who's charged in many ways protecting this country about this threat because the military is -- has said this is a threat multiplier. climate change is a threat multiplier. it takes existing threats and intensifies them around the world and obviously piles on the costs on top of that. rather than do nothing and allow the costs to pile up we should

take action. the president has put forward his climate action plan. and i salute him for doing it but the president would be the first to acknowledge, like all of us in this room, that there are probably better, more efficient ways of addressing climate change. including a legislative route. there have been proposals put forward on the table in the past. i put forward a cap and dividend proposal that i think would take us in the right direction. i'm pleased the union of concerned scientist have been supportive of that as have other organizations but the bottom line is we have to act. it's not just a question of cost avoidance. it's actually also a question of huge economic opportunity, as my colleagues have said. by investing in a clean energy economy, not only do we avoid the costs of the damage from climate change and save lives,

we also create huge economic opportunities for the country in the process. so hopefully -- and i'm sure the testimony today will number one highlight the cost we're facing in the here and now and also highlight the opportunities we have as a country if we address the challenge in the right way. so thank you very much. mr. chairman? >> i'm going to turn it back over again to congressman sar banes to introduce the panel and then we will have each of the panel members make a statement starting with the mayor on the left and then going to the right where with the doctor. congressman. >> thank you very much. our first witness today is mayor michael panalietes. he was elected in november of 2013 as most recent mayor of annapolis. the city's first republican mayor since 1997. i mention that because as i

indicated earlier, i think when we get outside of washington, we're sometimes the politics can be aggressive and out where people live you find republicans and democrats working together on important issues like the ones we are going to be discussing today. the mayor is an member of the fishing and sailing hall of fame and board member on the visitors bureau, on the legislative committee for the maryland municipal league where he has a leadership position. he has rallied the people of annapolis around this very important issue, recognizing the threats that tidal flooding in particular are presenting to the city. there are every ever episodes every day. we were talking to the superintendent. even today we had an event close

by that punctuates what the topic is for today's hearing. admiral carter is a native of rhode island. he graduated from the academy here in 1981. was designated a naval flight officer in '82 and graduated from the navy fighter weapons school top gun in 1985. he completed air command and staff college course in the armed forces staff college in 2001. he completed the navy's nuclear power program. if i told you all of the various awards and recognitions that he's received, we wouldn't be able to hold the hearing today. needless to say, he's excelled

in everything he has attempted. i will mention this -- admiral carter flew 125 combat missions in support of missions in bosnia, kosovo, kuwait, and aflg, accumulate ed 6150 flight hours in f-4, f-14 and f-18 aircraft during his career and safely completed 2016 carrier arrested landings which is the record among all active and retired u.s. naval aviation designators. so that's quite an achievement. [ applause ] we look forward to your testimony today. will baker is a man on a mission. he beegan his career at the chesapeake bay foundation as an intern. obviously decided at that point in time he was going to take this operation over which he

did. becoming president in 1982, leading now the largest nonprofit conservation organization dedicated solely to pro serving and protecting and restoring the chesapeake. i want to thank him in particular for his efforts to help us spread the word on how we connect young people to the environment, promote environmental literacy across the country, and helped immensely in building a coalition behind the no child left inside act which i have been proud to author during my time in congress. we are blessed that will made the preservation of the chesapeake bay his life work. it has made a tremendous difference. i will say the chesapeake bay foundation has received many many awards but that includes the nation's highest environmental honor, the 1992

presidential medal for environmental excellence in recognition of its environmental education program. but that in many ways is a recognition of will baker and his commitment to these issues for so many years. we're looking forward to his testimony about the effects on ecosystem of the chesapeake bay of climate change. our last witness, dr. brenda -- is a senior climate scientist with the climate energy program at the union of concerned scientists. she is leading ucs's a climate education work aimed at strengthening support for sound u.s. climate policies. prior to joining ucs, she was on the faculty of the university of arizona department of high drolg and water resources with a joint apoint in the geo sciences department. early in her career she was a hydrologist working to protect groundwater sources at the connecticut department of

environmental protection. she holds an phd from the department of earth sciences at columbia university earth observatory and conducted post doctoral research at laboratory in california. in other words she's an expert. we're looking forward to hearing from her today. with that i will yield back. >> thank you, congressman. so we'll start with the mayor. thank you. >> good morning. congressman van hollen, congressman sarbanes congressman pallone, thank you and welcome to nachls we appreciate you choosing our city to show the impacts of climate change on local communities and for using today's discussion to create policies for congress. it is a pleasure to work alongside vice admiral carter will baker and dr. brenda -- from the union of concerned scientists. for being here. annapolis annapolis saw the

greatest increase in nuisance flooding in the last 50 years. nuisance flooding measured average nuisance floods per day increased by 925%. from an average of four floods per year to more than 40. of the top ten areas based on emergency increases, annapolis had the largest number of nuisance floods at 40 a year with washington, d.c. a distant second at 30. of the -- to this end the city of annapolis has been meeting with local and state entities since september of 2014 to address flooding in our historic city. the city of annapolis recently presented a weather together town hall focused on protecting our important seaport. i will go off script for a second. as congressman sarbanes said you have to rally the community around this. we sent out postcards and typically in a city council meeting not many show up. one person on the budget and 140 for this town hall meeting.

something that surprised a lot of us and on the pulse of the citizens. it is a multi-agency initiative the city of annapolis has to develop a plan and implement a strategy which will reduce the risk and loss of private and public sector properties most vulnerable to the affects of climate change. this is an 18-month planning effort which represents an important collaborative partnership between the city state, federal agencies private and nonprofit partners. i think that's one of the things i have learned in my short time is that anything you do you need to build partnerships and relationships. can't address flooding if we don't have help from congress, the naval academy and our county partners and state as well. in the preliminary survey we asked people who is responsible for reducing flood potential in the historic district? 32% said local government, 32% put it on the state. the good news is we all have

been doing work to address nuisance flooding as well as preparing for the next hurricane sandy and isabelle. we are currently working to develop a cultural resource hazard mitigation plain design which will be a model resiliency in response for our historic properties. along with that, we are working on the regulatory response, the sea level rise and storm surge induction. meanwhile, we are also currently working on a sea level rise strategic plan and designing a cultural resource resiliency plan. these are major projects the city has dedicated money towards and i want to thank the partners who have donated money to these endeavors over time. while we have completed a number of state funding documents, vulnerability assessment, indignation mitigation strategies in the east port area, there's there's more to do which means critical dollars are needed. to follow up i think a lot of people think of sea level rise

and climate change just affecting downtown. there are other areas like east fork affected, not just now but 40, 50 years down the road. still, we all understand -- we have secured funding for $172,398. still we with all understand that more money is needed. the annapolis preliminary planning an design process holds an estimated price tag of $1 million. money for flood mitigation was our number one legislative ask in 2015 when we go to the state and ask for money and lobby we obviously ask for a lot of things and i'm sure that you all are familiar with local municipalities asking for money. it was our largest ask last year and will be this year as well. as we look for opportunities in 2015 we hope for an additional $45,000 for the national center for preservation technology and training and in 2016 we are

turning to maryland emergency management agency for funding to to adopt our mitigation plan and update the natural hazardous mitigation plan. we are seeking assistance from the maryland historic trust an the rockefeller 100 resiliency city organization. part of our goal is to be a model nationwide on how cities deal with this. the city of annapolis is still considered a national model for cultural resource, hazard mitigation planning. that is no other historic district has attempted to develop a full-scale fema mitigation plan to address sea-level rise and tidal flooding. given the importance of the historic district and the waterfront, the annapolis response to sea-level rise must focus on protecting existing structures and infrastructure. future planning efforts evaluate the need and option for

protecting historic structures flood proofing to the extent feasible and preserving the hiss tore tick exterior of the building. throughout my time in office flood mitigation has been a top priority an appreciate the administration's close work with the united states naval academy and the runl county executive. thank you for the opportunity to testify and wish you much success in the future outcome and your hearings. >> thank you, mayor. admiral? >> well, good morning distinguished panel and thank you for allowing us the privilege of hosting this important hearing here today. before i make my prepared remarks, i'd also like to say how saddened and how much we'd like to send our thoughts and prayers to our navy and marine corps family in chattanooga, tennessee after the tragic events of yesterday. congressman sarbanes, thank you for your thoughts on that. as you all know, and you got to walk around as we call it the

yard here at the naval academy today, this is an historic site. we started here on october 10th 1845. this year will be entering in to our 170th year of being a partner here with the city of annapolis. it started out as ten acres. today we represent 338 acres of the upper and lower yard. it's a relatively small campus but one of which we are very proud. as congressman sarbanes mentioned this morning, if you were here early this morning you would have seen the two roads behind me where we are doing our testimony here, we are covered in two inches of water from a nuisance tide, sometimes called a king tide. this is with no rain that happened over the last two days. this is not an unusual occurrence here. you can see the remnants of it still on mcnair road behind me. this is something we deal with. mr. chairman, distinguished members of this committee thank you for the opportunity to appear before you today on behalf of the united states naval academy a.

i'm pleased to report are solid progress with respect to flood prevention response and preparing for the effects of rising sea levels here at the naval academy. before discussing the possibility affects of rising sea levels, i'd like to address our recent an ongoing efforts to manage the combination of heavy rain and high tides. our constitutional agile city in dealing with conventional flooding will directly impact our success in managing more drastic short and long term climate-related events. simply put, we can better handal major storm or drastic sea level rise if we can manage surges caused by heavy rainfall and high tides. to control sioux nuisance flooding we have several projects in various stajs of implementation. first the completed cooper road storm water management project uses underground reservoirs to capture storm water. it remains in the reservoirs until the water table can naturally absorb it.

the cooper road project has been effective at managing storm water that once caused regular flooding and will likely serve as a model for other areas on the yard. next we now jute liez door jambs on buildings in the flood plain. we have installed closure gates on the roads and parking lots and identified existing i exterior building walls for use as flood walls. lastly our upcoming cyberbuilding, currently in procurement will be locate ond the corner yard where we experience nuisance flooding. for awareness, this cyberbuilding will be located just adjacent to us between our library of nimitz center. it will be a 200,000 square foot plus building. this building is going to be designed to act as a flood wall for that corner of the yard. next i'd like to discuss infrastructure improvements we have made in the wake of trorp isabelle. in 2003, isabelle caused

widespread flooding and equipment damage throughout the yard. the total cost to that for repair was $120 million. we have taken several measures to ensure that a similar event will not have the same detrimental impact. we have raised the ground floor elevations of new construction. for example, wesley brown field house was built above the flood level and acts as a flood wall. we relocated our chiller plant and moved our hvac equipment to rooftops where feasible. raised electrical outlets on ground floors and installed valves on tunls and storm lines wrchl suitable we have identified opportunities for quote wet flood proofing unquote where we designate buildings and fields that will be allowed to flood during once in a hundred year type storms. these structures can handle flooding with minimal damage and using resources to keep them dry would not be cost effective. perhaps most importantly, we

have instituted operational protocol for equipment and chemical relocations in classrooms and labs in the event of a major storm. to prepare for future flooding major tropical events and rising sea levels, i recently chartered the navy sea advisory council. the council includes sara phillips our architect at the naval academy and faculties academic research for infrastructure implementation. a council member will ensure coordination across commands. the sea level advisory council will look to better project future sea level changes in the annapolis area and it fay the naval academy's vulnerabilities. from this analysis we have prioritized these vulnerabilities and worked to

define project solutions to inform our resource management in preventing and minimizing damaging effects of innone dags. i our midship man will be responsible for mitigating the sea level rise at the academy and beyond. we offer two courses specifically designed to investigate this issue and educate it inheriters. the first is oceanography 445. global chiemt change. it reviews the source of climate, natural and human factors that impact the climate. we also offer political science 345, environmental politics and security. this course examines the major environmental problems currently influencing u.s. domestic and environmental security policies and includes weekly outside spoke speakers who present material from various perspectives including

representatives from industry, the military and the advocacy community. mr. chairman distinguished members of this committee, thank you for the opportunity to appear before you today. in summary, the naval academy is aware of the risk of heavy rain high tides severe tropical weather and rising sea levels. we are studying adapting to these risks to identify, prioritize and develop effective solutions to future vulnerabilities. i'm prepared to address any questions you may have regarding my testimony. thank you very much. >> thank you, admiral. mr. baker? >> members of the committee and congressman van hollen thank you very much for what you do. distinguished colleagues on the panel and in the audience, thank you. i speak today for the over 200,000 members of the chesapeake bay foundation our board, our staff. chesapeake bay is getting

better. but it's still a system dangerously out of balance. i use the word "system" because science has taught us to realize that the chesapeake is a collection of the rivers and streams that feed in to it from the six states the district of columbia, 18 million people in the watershed and of course the main stem. fortunately, there's a plan in place to restore the chesapeake and all of the rivers and sdrooem streams. it's called the chesapeake clean water blueprint or clean water act terms the epa called it the mother of tmdls. it's a heavy lift, though. and global climate change will add to the burden. we're seeing the impacts now

right before our eyes. chesapeake bay foundation has environmental education centers on smith island and tan jeer island. inhabited islands in the mid bay. residents of smith and tangier are losing their homes. they are losing their island. day after day, week after week with inexably losing their home. on a property in the chesapeake bay foundation, in just the last 25 years we have lost an entire pine forest, several dozen acres, several hundred trees to sea level, bay level rise. i've submitted my testimony but let me summarize briefly. the impacts of climate change are multiple, but let me tell you about three for chesapeake

bay. warmer waters have a decreased capacity to hold dissolved oxygen exacerbating the bay's dead zone. temperature-sensitive species like eel grass and many others are really truly at risk. second, the bay region is particularly vulnerability to sea level rise exacerbated exacerbated by land subside dense. approximately one foot of net sea level rise in the chesapeake over the last 100 years is roughly twice the world average. thousands of acres of environmentally critical wetlands and shorelines have been and are now further threatened with innone dags. and third, increased intensity and frequency of storms create

more erosion and runoff increasing the flow of pollutant pollutants pollutants, especially nitrogen, phosphorous and sediment in to the streams, rivers and main stem of the bay. let me give you one very specific example of how global climate change and bay pollution are conspiring to possibly snatch defeat from the jaws of victory of one of our greatest success story s. science said that the chesapeake bay rockfish, striped bass were fully restored species. well, with pollution and increasing dead zones, the bottom waters of the bay are uninhabitable all too often for rockfish. with increasing water

temperatures, 75, 80 degrees and more, the upper levels of the bay are all too often uninhabitable for rockfish. so they are literally getting squeezed and therefore stressed in to a much narrower amount of the water column. to wrap up, let's instead of focusing on the problems let's focus on the solutions. addressing climate change, mitigating the impacts of climate change and implementing the clean water blueprint are more than just two sides of the same coin. we not only need both to save the bay, but each will reinforce and add value to the other. one plus one can equal three. thank you very much. dr. ekwurzel. i hope i'm pronouncing it

correctly. >> it's great. perfect. thank you on behalf of the union of concerned scientists i really thank you ranking member pallone, sarbanes, tonko and congressman van hollen for the opportunity to testify here today before the panel and the panelists and the interested audience. i'm a senior climate scientist at ucs. we are the nation's leading science-based non-profit. we have over half a million supporters who are hoping that there are changing that we're talking about today. so as we all know, burning coal oil and gas are increasing the atmospheric concentrations of carbon dioxide, methane at

unprecedented levels. it is warming the atmosphere and asid acidifying the oceans. we have the ices diminishing. we have many regions that are dealing with decreased snow pack, increasing the risk of wildfires, the list goes on. it's quite depressing, actually. but sea level is what i'm going to focus on today. it's really accelerated and that combined with extreme precipitation really are having an impact on severe flooding which is part of the reason why we are gathered here today in the city of annapolis. the pace and amount of greenhouse gas emissions really determine how much worse things get. what does this mean for maryland and the location of this hearing? parts of maryland are already facing the risk of loss of land. everyone who cares about maryland should care about reducing emissions. the future of key economic

resources and cherished places like where we are right now really depends on these decisions. today the capital, annapolis is one of the most frequently flooded cities on the east coast and as sea level rise accelerates due to climate change the flooding will get exponentially worse. there are other communities up and down maryland and the eastern sea board that are facing similar vulnerable risks. according to a recent usc report, the highest tides that occur each year are flooding further inland causing more damage. and some places are likely to be under water in the lifetime of a typical 30-year mortgage. so recent trends help explain why this is happening over the last 50 years, sea level rise has risen much faster in the gulf and east coast of the united states. and i included a figure and it's

really quite stark. sea level at annapolis has risen over a foot in the last century and the global rate is 8 inches. to give an idea of the accelerating sea level rise. if we stay in our current business as usual which is the highest trajectory of emissions annapolis would likely see another 8 inches. it took that much over the last century for the globe in just 15 years from now. and just the lifetime of 30 years, we could see 17 inches here in annapolis. instead if we embarked on a low emissions scenario, annapolis could prepare for 3 inches in 15 years and 6 inches by 30 years a little bit more manageable. today the popular city dock, it's a gathering place in the

water front of annapolis that is central and sees around 50 times a year flooding. annapolis is expected to experience 262 flooding events by the year 2030 and roughly over 380 by the year 2045 if we stay on this high emissions trajectory. this means that likely half the days of the year will have flooding at annapolis. other coastal communities in maryland are similarly vulnerable. ocean city is vulnerable. tide flooding occurs eight times per year today. and in we continue on the high emissions path way they could have 411 per year by the year 2045. the floods would be far more extensive than the limited flooding seen today. the case for emissions reduction

could not be more direct. if we limited it to a low pathway they could prepare for 42 flood events per year by 2045. tidal floods will be more severe. today tidal floods typically last a few hours or less. several locations in the chesapeake bay area including baltimore and its flood-prone inner harbor are projected to be under water for more than 875 hours per year, that's about 10% of the year by the year 2045 if we continue on the high emissions. even when a hurricane forms naturally, conditions brought about by climate change are contributing to the power and destructive capacity of hurricanes in the north atlantic through more severe storm surges and more intense precipitation.

the latest science suggests that hurricanes typhoons and cyclones are shifting poleward and higher lad tuesday and that means more to the north which puts mid atlantic states more at risk. damage can be expected to be raised as the increase of storm surges. the u.s. and the global community must start rapidly reducing emissions to slow the level of sea level rise the future welfare of maryland, new york and other coastal communities depend on this. >> so what we're going to do now is have questions from us and the congressman. we're going to try to limit it to five minutes from each of us. i -- we don't have a -- mike is

doing this manually. we're not high-tech here even though we're the high-tech committee. but you'll be fine. i wanted to start with the admiral. but you actually answered most of my questions, admiral. i was going to issue questions about what is happening at the academy and the courses that are offered at the academy so i'm not going to repeat that. but can you give us an idea how much it has cost the naval academy to repair the damage caused by severe storms or what you estimate the cost will be for some of the things you mentioned. >> it is difficult to put in an exact dollar figure. i mentioned the damage from hurricane and tropical storm isabel. that was well over $100 million. that was actually more than just

repairing the costs. it actually gave us more protection. we used some of that money to build berms and to build some of these flood doors as well as build some internal pumps. so we were able to get that money to make the naval academy better and safer. as you see here at the academy grounds the majority of the structures are over 100 years old. many of the buildings here were built at the turn of the century by earnest flagg. there is a cost to maintaining them and making sure they can handle rising waters and major events. we do within the budget that we work within the navy have currently enough money to handle some of the upgrades we are planning for the long term.

you heard me talk about the cooper road project and some of the others. i would tell you we are able to the those things within the construct of the funding that we have. but i have not gone to congress to ask for more particular moneys just as we build more structures here, the cyberbuilding that will serve as an new academic building but as a source of flood protection for that part of the yard. to say i have a specific number this is what we are spending on just flood protection it would be very difficult accept to say that there are moneys that come to naval facilities that support us in that effort. >> all right. thank you. let me ask the mayor according to a special investigative report historic downtown

annapolis experienced at least half a foot of flooding at high tide no more than four times last year. how has this increased flooding impacted local communities and businesses? what are they saying to you about this and have you heard from mayors of other coastal towns who have to deal with impacts of climate change. >> i serve on the maryland municipal league. a lot of the cities are close to the water. it's something that we talk about and something that the other mayors effect. and there is consensus built upon. out of the 157 cities in the state of maryland only four have partisan elections. the other ones you just run on your name. in annapolis it's a big deal. people talk about it all the time. a lot of concern from business owners and what are we doing to address it. but we have a plan in place. we just need the funding