was just that you saw just shattering damage to business confidence across the country. people were just too scared to do anything, and they cut back just dramatically because of the fear that they faced a very long period of no demand for their products. and that's going to take some time to heal, but it's beginning to heal. as your colleague said, you're seeing the early signs now, hours increasing, temp employment increasing and that should be -- >> one last short question, mr. chairman. does this recovery look different to you? the gdp growth was greater than expected, but still smaller than in prior recoveries. and the commensurate job situation has improved. why do you think this looks different than -- >> i think in many ways, growth came more quickly, stronger and more broad-based than many people expected. in that sense it's encouraging, but because this is a recession caused by a long period of excessive borrowing, a huge overinvestment in real estate, a huge increase in leverage in the financial sector, there was no way that recovery was not

going to be dampened by those basic forces. so as households across the country save more -- start to reduce their debt burdens, as the financial sector digs out of this terrible mess it was in, any recovery was going to face significant headwinds in that context. . so we're seeing the necessary inevitable consequence of a recession that is born in part of a very damaging financial real estate boom that was fed by excessive borrowing and lending. >> thank you, mr. secretary. thank you, mr. chair. >> thank you. >> thank you, mr. chairman. i heard you talk a lot this afternoon about the importance of bringing down the deficit, of bringing down the deficit, controlling and a appreciate you saying those things.

i wanted to know if you would tell us for the record, could you explain how the creation of the obama health care entitlement will help bring down deficits? they estimate the reforms in prospect would reduce the ten-year deficit and would substantially reduce the rate of growth in health care expenditures over the succeeding decades. >> you are talking about the senate bill? >> well, i would say that you can take the senate bill and the senate bill as with suggested change that's the administration put out a few weeks ago. but the a in the same basic ballpark. you say that a meaningful reduction in the ten-year numbers and very substantial reduction in the succeeding decades.

that's because, as you know, that biggest driver of our long-term deficits is the rate of growth and health care expenditures. it is much more important, than our group is aging. >> but the reductions they see in the future are all based on assumed reductions in health care expenditures and lighter years? >> well, again, doing what they always do, they take proposals congress is considering and they quantify those estimates on future spending by the congress. >> right. >> they're doing what they always do in that case. >> and you recognize the proposals entail six years of spending with ten years of revenue? >> what i said is accurate in their estimates of the fiscal year. >> you're talking about cbo? >> yes. the most important thing to point out as i know you understand is if you care about the fiscal position of the united states, if you're worried about the long term deficit,

there is no way to deal with that without reforming the health care system in a way that reduces the rate of growth. >> those of us on the fiscal conservative side are approaching it from the perspective of focusing on making health care affordable and portable so can you buy it across state lines and shop. i want to be able to buy coverage from a carrier in arizona or texas. that law needs to be changed. on medical malpractice reform, protect doctors from frivolous lawsuits has worked so well in texas on allowing small businesses to pool the ability to negotiate better rates together. quo do those things without -- and bring down the cost of health insurance and make it more portable. that's where the focus needs to be. but, you know, i have to tell you know, they pay attention. and it just defies common sense to believe that we can -- that

as your proposals do, expand coverage to 20 million to 30 million new people, are going to be brought in to this new entitlement which is clear lit mother, this is the mother of all entitlement programs. you're going to bring in 20 to 30 million new people. >> all i'm doing is -- you're going to reduce deficits and it is not credible. >> all i'm saying is that the estimates of cbo, do you believe those estimates are accurate? >> i believe they're the best estimates we have. they have the virtue of being a fair arbitor of the proposals now in congress. but can you challenge those things. those are the not the ones that congress will use. >> we are, as you have said, in an unsustainable position. there is no doubt that we could become greece and -- >> i want to say, there is no risk of that. >> that will not happen in the

united states. >> we're spending money as of june 1st. my office calculatesed and if you look at the available revenue avs june 1st this year, everything we spend beyond that and i have to say that opening remarks earlier, mr. chairman, if i can say quickly, we're kicking the bush administration. you can't just blame others for the scale of the debt of deficit. the deficits that you inherited were way too high. i voted against virtually all of those major issues. but this -- nancy pelosi and president obama managed to spend over $2.5 trillion in one year. that's just a big ticket items. you spent more money and less time than any administration in the history of united states and created more debt than any other administration in your budgets than any administration history of the country. so it just isn't credible. you don't -- you damage -- >> i will be happy to measure

our record on fiscal responsibility with the record of the previous eight years. let me give you one example. i was a career service member in the treasury department. i left in 2001. at that point the cbo projected, future surpluses of $5 trillion. eight years later, those surpluses turned into $8 trillion in projected future deficits. i would be happy to compare the basic records of what we achieved in that period of time in the clinton -- on fiscal responsibility with the record of the succeeding eight years and i'll stand not to make -- it's a fair thing. i think the important thing to recognize is over that period of time when we demonstrate the as a country that we were able to produce surpluses we saw a record of strong private investment growth, strong productivity growth. >> because of tax cuts. >> no. >> no. >> in the -- >> bush administration. >> no. i'm comparing the growth record of the previous eight years. the growth record of the eight

years under the bush administration was -- did not compare faborably. it was worse on growth, worse on any basic measure of basic returns. and, again, worse on the thing you care about a lot which is on basic test of fiscal responsibility. >> obviously my time -- >> you and i can't change the past. i know you voted against a lot of those proposals. but we can't change the past. we have to stand together and admit that deficits matter. tax cuts are not free the we have to pay for stuff we propose to enact and bring our fiscal deficits down to a point where they're sustainable over a period of time. >> thank you. we want you to live up to those words. that's all. >> mr. crenshaw? >> thank you, mr. chairman. welcome back to the committee. i got two questions. one kind of has to do with philosophy of managing these assets and the other is just kind of a quick question about the tax collections. and you mentioned that the

t.a.r.p. funds are being repaid quicker and in a greater amount than first thought. i think that's good news. and i think we ought to do everything we can to maximize those dollars. but it looks like there are two different -- when you look at aig, you know, it seems to be, again, we own -- we're majority, i guess, shareholder. and so i guess we're involved in their decisions. it seems to me i read they sold two life companies last week, $51 billion which will go back to the american taxpayers. that's good news. but if the philosophy there is to sell off these assets, it seems to me sooner or later you'll run out of assets to sell. as a rule a company that's kind of been downsized. and you wonder what kind of capability it will have to make any further payments. i think they have over $100 billion. i think they pay back $15, maybe. so we're still on the hook. on the other hand, when i look

at general motors, as i understand it, if you take general motors, chrysler and gmac, we maybe gave them $80 billion. i think general motors was about $50 billion of that. then i read where you said we're going to lose $30 billion on the general motors deal. but it, i guess it seems like the philosophy there is to gm is kind of -- they reinstated the dealerships. they're increasing the sales. maybe their market share is going to increase. so you would think. that's one way to deal with the situation. you would think if they become an on going entity and grow and increase sales and market share, they'll be even in a better position to pay back, you the $. help me understand the two different philosophies. since we must be involved in those decisions and is it shortsighted on aig? i'm not asking whether we should just, you know, broke it up

early on. but we own it. and we want to get paid back as much as we can. so those are two different case studies. explain to me how, you know, it's working and how you think that works in the long run? >> excellent question. it is difficult judgment. the two basic objectives we try to balance are to maximize the returns to the taxpayer, minimize the risk of loss to the taxpayer and we want to, frankly, get out as quickly as we can. those two objectives will sometimes be in conflict, as you said. so we're going to try to balance them. these companies where you have -- we're reluctant share holders are in dramatically different positions. the precise strategy we adopt is going to differ because of the different conditions. we have to manage these in a way to minimize any risk of loss, maximize the achievable return. but we want to get out as quickly as we can. we don't want to have the american government involved in these companies a day longer than it is necessary. we'll do it as quickly as we can subject to that constraint.

we don't want to go through the risk of unnecessary loss in that case. the board of aig is making remarkable progress in reducing the risk and restructuring the company in a way that is going to reduce the expected loss to the taxpayer very, very dramatically. they came down dramatically. we're still exposed to substantial risk of loss as we are in the auto companies. but we're going to be very careful in managing those in a way to balance those two basic objectives. again, i think we're being consistent in applying them. but where they differ, it's because of the inherent differences in the position of those companies and the opportunities we have to get out earlier. >> and the second question, a brief question. i read in your testimony where there are going to be new initiatives in terms of tax collection. you spend $250 million which will, according to your testimony, that's going to bring in another $2 billion.

every time i read that, i can't help but kind of ask the question, how do you know, how do you determine that spending $250 billion on compliance is going to end up bringing you $2 billion? and then based on that, how do you decide well instead of spending $500 billion, we get $ -- i mean $500 million we get $400 billion? i'm curious. my colleagues know from time to time, members of congress, use the tax gap. it's like a piggy bank and say all you have to do is spend $1 billion you get this and i have always wondered. are there any facts and figures that kind of verify that and how do you decide to limit the $250 billion to $250 million to say that will give us $2 billion and somebody says, well, gee, four times that gives you four times the money. >> we as the same questions. we had a discussion about what makes sense in this area. i think what he'll tell you, he said when we were up here before

and we'll provide in writing, those are conservative estimates based on in the past of putting more resources in targeted areas to generate better compliance. i think they're conservative. i've seen much higher estimates than that. on the same question i asked, why not more? if the return is that high, why not more? the point is just that there is judgment about this pace which they can really bring on capable people to do this. it's amazing how quickly can you scale up the operations. we're trying to be relatively careful given that we don't live in a world with unlimited resources. we're confident you're going to see a high return. that is the bestance i can g.i. i'll be happy to follow up. >> i appreciate that. i guess you've stolen the idea of all the mebdz mbers of congr. we can't spend extra $250 million to get another $2 billion. youmaxed out on that. >> cbo is the arbitor to the

extent that can you actually justify investments on some return like that. we don't get to decide. you get to decide based on those estimates. >> thank you. thank >> the work that you have been doing, it is probably starting to take hold. we had a pinhole of light at the end of the tunnel. hopefully, this will continue to get out there in the next couple of quarters. that having been said, the foreclosure crisis puts a break on the process that we have been able to make. even with those funds. this is about 25%. the home affordable program is

struggling because you have so many upside down homeowners. can you talk about the hardest hit from and how bad is one to start to address the problem the hardest hit fund and how that's going to start to address the problem in a more effective manner? specifically, just to give you an example, the foreclosure crisis, more than 97,000 foreclosures in my three-county area in the last year. i mean we've got to get that turned around. and one of the most frustrating experiences that people have is both with the hamp program and, you know, the banks refuse to work with homeowners. they won't modify loans. they give them the run around. i've dealt with constituents who spent months and months, willing constituents who can afford to make mortgage payments but who the bank will absolutely not

work with. so what's -- why not walk away? what's the point of continuing up side down? >> you're exactly right. i agree with everything you said. it's important to step back for a second and say what has happened over the past year and important to emphasize this before i respond directly to your question. >> a year ago today if you looked at expectations, people thought the house prices would decline across the country. and instead, we've seen more than six months of relative stability in house prices across the country on average for the first time. and that is very, very important to confidence because, of course, houses are such an important source of economic stuart to many americans. the hamp program, as you know, is provided very, very substantial cash flow relief to now one million americans. one million americans are getting now an average of $500 a month in their pockets because of the program. they're not just able to stay in their homes but they're having

very, very substantial reduction in their size of the mortgage obligations. this is a very large, very substantial tax cut. we're seeing very substantial increases in conversions to p m permane permanent. you're right to emphasize there is a huge amount of pain and damage still across the country not just in florida and the other states targeted by this initiative. it's still just devastating damage. and, again, it's fundamentally -- people who did not borrow too much who are very responsible, just the victims of the broader collapse, irresponsibility of everybody else and we have an obligation as a government and country to help those people who we can legitimately help stay in their homes. now this program targets five states where the problems are most acute. the combination of house price declines and employment are more acute. we're providing substantial resources to experiment in the assistance for the unemployed,

for people who are underwater, modifying mortgage programs. we want to support innovation to stay level. and there is maybe lessons in that for other states. but we're also looking at, and we're looking carefully at a series of other enhancements to the existing program to try to reach more people who are unemployed and to help deal with the substantial number of americans still who are -- because they're under water, as you put it, can't refinance, can't sell their homes. so we're looking at ways to try to reach more people. but it is very terrible out there in the housing market and it's important we keep working at trying to make sure we're reaching more people. and i want to end where you ended which is to say that it is very important for the servicers across the country to do a better job at helping these people get help. >> but they're not. >> and it is just -- again, the one thung we do that is very important is you can see now in the public domain every month very, very detailed numbers on how services are doing reaching

the people. you can see how one bank is doing compared to another. the american people can see if their bank and servicer is doing well or poorly. i'll say my view is none of them are doing enough. they need to put substantial more resources in this program. and they need to do a better job of making sure they're reaching the people that we can legitimately reach. >> medically, how can we insure that happens? i tell you, i stand in front of town hall meeting after town hall meet wrg i have constituents, legitimately stand up and say, we all do, legitimately stand up and say we bailed them out. my bank wouldn't even be in business any more. >> exactly. that's why people are so angry about it. we put in place a variety of things. we have a detailed second look to make sure people who are eligible are not denied. we have teams of people that go into the servicers and see how they're doing. we're trying to put enormous pressure on them. we have a long way to go and they can do it dramatically better. >> one more question, mr. chairman. that's on the -- i know you're going to be shocked i'm asking a question about cuba. i, you know, feel a sense of

obligation. in the last week or so we had the tragic death of orlando's person who was on a 8 5-day hunger strike and others continue to protest the abuses of the castro regime. i'm particularly concerned about the pro-democracy efforts on the island and getting the funds that we have appropriated for the last two fiscal years to them. what's being done to expedite the licensing process to insure that direct assistance and aid is being sent quickly to those pro-democracy organizations, the money is sort of being sat on right now for the last two fiscal years. i realize we need to be careful and we need to make sure that they're going to legitimate dissident organizations and insuring that there is a pro-democracy movement. but it is sitting in the treasury in washington isn't going to accomplish that. >> congressman, i share your concern and objective in this stuff. i'd be happy to try to respond

in more detail in what we can do. i'm happy to come talk to you. >> that will be great. >> and walk through that with you. there are strong feelings. >> particularly in this room. >> particularly in this room. >> and we're doing our best to make sure that we're enforcing the laws as written and we're meeting objectivesst congress. >> so can you follow up with me in more detail? >> of course. on the issue as raised by any of your colleagues, i'll be happy to listen more carefully. >> i want to press you a little bit more though. there are funds that we've appropriated for the last two fiscal years that aren't being spent. and -- >> i'm not trying to be unresponsive, i have to talk to colleagues a little bit more to understand what it is. >> the article that i just read the other day talked about how the, you know, your department is making sure that there are safeguards put in place and that we have the accountability measures. but it's an extraordinarily long time to be examining that

without -- >> we have careful people and their obligation is to make sure that they're implemention will law and following the intent of congress. i'm sure that's what they're doing. i'll take a look at it. >> thank you so much. thank you. i yield back, mr. chairman. >> thank you. mr. secretary, as i noted in my hearing with irs commissioner a couple weeks ago, i'm concerned by several proposed cuts to programs that provide important services for low income and working families including the volunteering tax assistant, grant program and tax counseling for the elderly program. do you believe that these cuts reflect the appropriate priorities as we struggle to recover from the economic down turn? and then let me just say that, you know, irs, similar to the immigration department, some of those agencies that -- not that they have bad reputations but

they have a lot of people complaining about them all the time. and so when i saw the irs begin to move in this direction, i said what a wonderful way of not only helping people but also helping the image of the agency. because now you're going to assist those who need help for those forums and everything else. so is it a real saving that's budget and the message that goes out. the people that need help the most are going to be cut out? >> i understand your concerns. i'd be happy to listen to those concerns in more detail. we both believe that these are sensible proposals because they help us to increase resources you're providing to improve tax services generally. and we think that will help the same people that these programs help. but be happy to talk to you about it in more detail. you know, we're making difficult choices trying to make sure how we're using scarce resources as effectively against these things. we're proposing very substantial

increases in programs to improve taxpayer services generally. and we think that will help reach some of the same people that these programs you referred to are designed to reach. >> right. but these programs were created with the intent of both helping and showing that there was a desire to help. aren't you concerned about the message that you're sending? >> the irs is going to continue to work very hard to do the right thing and earn the respect and confidence of the american people. the commissioner has done a very, very good job in helping

improve the record of service, irs employees, too. i respect your concerns. >> you know, if this was a course in legislative politics 101, the professor would say shouldn't come before serrano cutting the programs. it's going to do well. i suspect there are other folks on this panel that feel the same way. this is one statement we can make on behalf of a community that needs help. how big do you think the tax gap is? >> we put out a very detailed report in last year. it went through the latest estimates of the size of the gap and the sources of that gap. and as you highlight in your opening statement, the president

and his budget is proposed a variety of ways to help make some progress reducing that gap. one of the proposals is to reform the tax treatment of overseas earnings of american companies. if you have two companies in your district, you don't want them facing different tax treatment. you don't want to create incestives to shift jobs overseas. we propose changes to the program that help address that issue. but, you noi, there's a range of proposals in the president's budget that will make head way. we're making a lot of progress, not just with switzerland but a range of countries around the world to reduce opportunities for asian and we're committed to working at this. we're going to keep at it. but the report that we laid out last year which we provided the committee again is a very good, detailed analysis of the sources, principal drivers of the gap and the policies that we think would have the highest

return and starting to close that gap. >> well, before i turn it over to miss emerson, let me ask my cuba question. i want to make the one comment you don't have to respond to. so much of what we discuss around cuba is helping people inside cuba. oppose their government for all intents and purposes. i often wonder how we would react to a foreign government funding groups here to oppose our government. even a government i didn't like, i would be upset. that is another issue. last year the department followed the lead of this subcommittee and allowed travel to cuba by cuban-americans visiting their families. the department is also implementing a provision that relaxes the terms under which payment may be received to exports of agricultural and medical goods to cuba. mr. secretary, please update us

as to how implementation is proceeding with respect to these two areas of u.s. transactions with cuba. >> well, i can't do that just in the hearing today. i'd be happy to do it in writing. my sense is that it's going reasonably well. but, of course, there are other perspectives and i'll try to respond to other concerns you have. i'll be happy to respond in more detail in writing. >> we will hold you to that and ask you to write to us and tell us what's going on. and with that, i turn to miss emerson. >> mr. secretary, looking back on the financial crisis, i, like all my colleagues and many americans, are very upset with the lack of oversight, recollect torre oversight that led to the climate in which our entire financial system was undermind. our small banks in missouri survive pretty well. you know, we're tough. we have good people. but life still isn't getting a lot easier

-- surviving banks continue to do their best to serve their customers. i hope that the treasury and the fdic will give every consideration to the rest that they face. i would also hope that, looking at the ultimate analysis of the financial crisis, something would be done in the future to allow the fdic to get more involved and offer guidance to american banks that identify increasing risks by putting the banks on the right track, we could eliminate banks that must close their doors there is a very obvious lack of consumer confidence in financial products. fibril that's my real question

is, do you all look at the financial statements of failed banks to see if they misrepresented their financial condition? banks to see if they've misrepresented their financial condition, if executives took unreasonable compensation or bonuses out right before the bank failed? can you all at treasury call bab excessive compensation from such a bank? because obviously the alternative is that the deposit insurance fund ends up making up the difference when they tried to make depositors whole. and i think there is a senate effort on this. but i am just curious if, in fact, you can claw back under those certain circumstances. >> congressman, i think i'm correct in saying, but i'll be careful and correct this if i get it wrong, in the recovery act, i believe that congress passed a series of provisions to provide greater constraints and encourage reforms in executive

compensation in institution that's took financial resources from the government. as part of that, if i'm not mistaken, the government was given the authority to claw back compensation if there was clear misrepresentation of financial data. but i'll take a more careful look at the way the law is written and happy to respond in more detail in writing. it's a sensible provision. i, of course, fully would support that basic objective. you know, we are trying to make sure we're bringing about fundamental reform and competition practice as cross the financial industry. we want to make sure in the future, not just -- well in the future we want to make sure you don't see a repeat of the set of compensation practice that's provided huge returns for taking lots of risk and no exposure to down side. >> i appreciate that. i'll be grateful to get a written response. let me can x. you about too big to fail. our banks control 80% of the u.s. deposits. and i guess that winds them the

mondayicer of too big to fail. >> i'm sorry. >> am i incorrect on my banks control 80% of the u.s. deposits? >> keep going. i'll be happy to give the details. i think that is a little high. it may not be. >> i'm going to support your concerns. so let me -- >> so the financial crisis pretty well proved that too big to fail is a misnomer without the guarantee of huge amounts of capital from the u.s. government. and we keep borrowing money at the present rate, we may even test the hypothesis of whether the u.s. treasury is too big to fail. but let me ask you, is it good to have institutions like these dominating the american market for our savings? you know, it makes me think about the old ma bell, if you will, which was dissembled in 1984. could you unwind those big bank that's are too big to fail without government taxpayer

assistance? >> critical issue, critical tests of the financial reform plan, whether we fix this or not, whether we address this problem of too big to fail, you can't have a financial system where the management of the firm, the boards of directors, equity holders expect the government to come in and save them from their mistakes in an event they manage themselves to the edge of the cliff as we saw happen to so many institutions in this crisis. that is something we need to fix and end. the only way to do it is to make sure, first, you have the ability and the authority to constrain risk taking by those institutions ahead of the fall. that means much more conservative capital requirements, constraints on risk taking, applied more effectively, more evenly across the institutions. that's necessary. it's not sufficient. you also want to make sure that if they get themselves to the point where they can't survive without government assistance, you want to make sure the government has at built and tools and the authority to take them over temporarily, break

them up, wind them down, sell the businesses off. and make sure that taxpayer is not exposed to risk of loss. this is the third thing that is important as we proposed. if the government is exposed to any risk of loss in doing that, that we recoup that loss in the form of a fee applied to the financial system over time, as we proposed in the president's proposed fee on banks. so you need the ability to limit risk taking ahead of the crash. you are need it to prevent the future crisis. but in the event that they're able to mismanage themselves, the ability to step in and put them through a quasi bankruptcy regime and do that in a way that doesn't leave the taxpayer exposed to any risk of loss. those are the things we cannot do that today with the existing authority that the executive branch has. >> no, i understand that. i appreciate that. but i guess what i'm saying is -- and perhaps you don't want to directly answer my question and i won't be offended if you don't, which is if we have to

take apart those banks today, would we have to use taxpayer funds to do so? >> well, i don't -- i'm not -- >> if we have to unwind the big banks? >> like i say, i'm being responsive to your question which is right now, and this is a tragic failure of government in the united states, we still do not have the authority to deal with the potential failure of a major firm, a future aig. we don't have that today. and it is -- we can't fix that without legislation to give us the authority to do that. so if we get that legislation and we can meet your test. we have the ability to manage its failure safely without leaving the taxpayer exposed to risk of loss or a bunch of innocent victims xpaexposed to damage. >> the analogy with ma bell rings pretty true because back in 1984 the congress said, hey this is anti-competitive. and let's just, you know, let's just go ahead and break it apart. so, to me, five banks having,

you know, even if it's close to 80%, to me is a monopoly and obviously i don't think it's healthy for this country. and i say that, too, because i don't even know if the fdic, if one of these banks failed, i don't know if the fdic will be able to hold the enormous liabilities of deposit insurance. i don't think they could. >> i'm agreeing with you which is that a critical comparative of financial reform is to make sure we have the tools and the authority to do just what you said. >> so what authority -- >> without the taxpayer being exposed or businesses failing across the country being exposed to the collateral damage of their failure. >> instead of even allowing all become too big to fail maybe we should give somebody the authority -- >> to limit their risk taking. >> exactly. >> you read it in january. right now we have a cap on the share of the nation's deposits, any individual bank can hold. that is a necessary constraint.

it's a good idea, a good thing for just the reasons you said. but it has this following effect which is unfortunate. you can become bigger over time as long as you fund yourselves with other sources, more risky sources of funding. it's a well designed constraint but has the effect of allowing size and concentration but in more risky forms. we propose to complement the cap with additional cap on total size so you don't have a level of excessive concentration, consolidation over time. for some perspective we have a system of 9,000 banks in this country. a great strength of our system is not only do we have a set of large institutions that operate globally, much stronger today than they were two, three, four years ago. but we have 9,000 banks across the country meeting the needs in their communities. that provides a great source of competition, resilience and strength. we very much want to preserve that.

>> i appreciate that. mr. chairman, i have to leave for about 20, 30 minutes. i'll be back. thanks. >> thank you, mr. chairman. mr. secretary, i want to go back over -- not go back over, but deal with some issues that have been raised. first of all, i heard the greece finance minister yesterday on cnbc. he was asked a question about goldman sachs. what he said was that the activities that goldman sachs were involved in were perfectly legal at the time and were a part of the interactions that were taking place on behalf of a number of countries. i don't want -- you know, to have on the record allegations of violating any opportunity for a response because i'm actually

appreciative on the small business lending side. they have taken some $500 million and created a fund to try to aid in providing credit to small businesses. and i appreciate that, along with the point that you made earlier about bank of america's decision on the debit card overdraft charges. i think we ought to be careful as we go forward that we delineate, you know, where appropriate criticism should be levied and where it shouldn't be. but i wanted to get to a couple points. we have had a number of dialogues over mortgage foreclosure. the program that i created in pennsylvania, the housing emergency emergency foreclosure program run through the housing and finance agency which provides actual relief in terms of payment of mortgage payments for people who are unemployed

through no fault of their own. it's helped over a couple decades tens of thousands of families in our state at no loss to the taxpayers because it tags onto the back end of the mortgages, those payments or as a small percentage of ongoing mortgages. there is no loss, it worked well. we have had a moment in time in which many of the mortgage foreclosures were because of lending practices. the vast majority of the foreclosures we face now are related to unemployment. there's no ability for someone who's unemployed to pay mortgages. if we want to keep them in their home there has to be some effort. that's why i'm happy that the house agreed with me and we passed some $3 billion in the reform bill that you complimented us on earlier in your statement and you urged the senate to act. i hope you are urging the senate

to keep the $3 billion in place. i was pleased to see the billion and a half provided to what were termed to be the hardest hits states. now, states are a geographical place, but they are hardest hit. there are a lot of ways we could delineate where people need the most help. i'm for us helping taxpayers who have been law-abiding, hard-working, who saved enough money to buy a home and are making mortgage payments. if they lost a job because of a recession that they have had no fault in, for us to take on the other hand, tens of thousands -- i think it's close to $90,000 it costs the taxpayers to foreclosure on a home when we could intercede to help. we have a record of doing that in pennsylvania to the tune of an average of $6,000 a family we have been able to maintain people in their homes, not ruin their credit rating, destabilize neighborhoods. so i wanted to mention that again and put it in thor record

and ask -- the record and ask you to comment on that and comment on the new lending effort for small businesses, whether or not credit unions and cfis are quasi public in cities like philadelphia maybe could also be involved. because there you will get actual lending. you won't have to worry about the question of, you know, how much they keep for capital and how much they lend out. they're in the business of lending. so i would like to have your comment on that. >> i have heard great things about the program you described. >> it's all true. >> everybody says what you say which is that it has a very good record, good experience and i compliment you for the design of it. it's a good example of how initiative at the state and local level is a good thing for us to encourage and reinforce. we will support the efforts you described in the house bill to provide more oxygen resources

for the programs. you're actually right. one of the most effective ways to get small business lending to increase in communities where credit is through the cdfi program. and we have, as you know, we have not just put substantial additional budget resources into the new market tax credit program but we announced recently that we would give capital to -- we provide a program for cdfis to get capital from the treasury at attractive conservative dend rates. i think it will be ane if he can tif program. we are putting it in place right away. that's under the t.a.r.p. and we think it will have a good return in communities where typically what happens is investment dries up quickest, credit flees most quickly, comes back latest. this is a very good economic case for trying to make sure

that we're getting resources targeted to the communities, the decisions that could do a good job. you and i were in philadelphia together highlighting one example of the kind of program. we're committed to that. >> last question.@@@@ >> these deals are still being gay. is there any thought about how we might go about not having foreclosures when we do not have to have them. >> it is still going to be a big

challenge. them in the commercial side? >> it's still going to be a big challenge. i think commercial real estate challenges, it will take a while to work through the problem. we have put in place a series of programs and i know you're familiar with them, to help ease the process, but it will still be very difficult. one of the reasons we proposed the small business lending fund is to make sure we are getting capital to small community banks that are among the hardest hit by what's happened in commercial real estate. we think the nmix of programs t get capital to those who need it and getting securities markets more liquid again is the best thing we can do to ease the transition. it will be difficult for a time. happy to talk to you about it. >> i have an idea. i would be interested in whether there could be dialogue about what we might be able to do in that area. thank you. >> mr. chairman, i want to end where the congressman began. i think it's important to recognize that, of course, banks

are different. not all institutions were the same, but i would say across the american financial system you saw banks and finance companies doing things that caused a dramatic loss of trust and confidence in the american financial system. and i think they all need to work much harder to earn back the trust and confidence of their customers, of the americans, the investors and of people around the world. i think they have a long way to go. i'd like to see them all doing more to help restore basic trust and confidence in their customers and the american people. you highlighted examples of things people are doing. we could see more of it. they have a lot more to do. one thing they can do is help make sure we get financial reform passed that puts in place a level playing field of strong protections, deals with the too big to fail problem. that is a good thing for the country. i think it is a good thing for the future of the american economy. it's a fair thing to ask them to support. hopefully they will work with us to get a strong package of

reforms in place as the house has already passed. >> with my $3 billion emergency mortgage fund intact. >> so far you have proposed seven bills. i like it. >> this has already passed by the house. it's in the wall street reform bill. >> the other one is on the way -- >> thank you. the secretary promised a rigorous examination of the idea, pros and cons. >> to tear apart, but we will do a careful, balanced analysis. >> i think any idea should be able to with stand analysis. >> thank you. >> thank you, mr. chairman. mr. secretary, the bailout bill which passed in the last months of the bush administration which i strenuously opposed did contain language that had a requirement that t.a.r.p. money repaid to the treasury be used for deficit reduction, which i wanted to ask -- do you agree that's important? >> absolutely.

the important thing to recognize is that we have now taken back replaced with private money more than two-thirds of the investments that my predecessor had to make, and he did the right thing. that was a necessary thing to do. we have back more than two-thirds of that. i think more than $170 billion of the american people's money and under the law that goes to reduce the deficits and the debt. >> and should not be reallocated for another purpose? >> again, congress under the laws of the land can decide what it does with the resources, but we have saved substantial resources for the american people and would like to make sure we are devoting those to the right priorities for the country. of course we face two priorities now which is getting the economy back on track and digging out of the fiscal hole we inherited -- >> wait, wait. you inherited some -- you inherited a fiscal hole. >> that's right. >> but you dug the hole three times deeper.

>> that's not true. you know the fact in this is when we came to office -- >> you dug the hole much deeperer. >> no, no. all we did was try to rescue an economy in collapse, a financial system at the edge of failure. we did that in the most careful effective way we could. those actions, as you have seen, have had a very substantial effect in restoring growth. >> set aside whatever your intent was in spending the money. it is a fact that the annual budget of the united states in 2007 was about $1 trillion. in 2008 was $1.1 trillion. in 2009 it was $1.2 trillion. and yet in a little over 12, 13 months that the obama administration has been in office, your administration and the pelosi/reid-led congress have managed to spend in the course of a single year, you signed $3.3 trillion worth of

new spending into law. >> congressman, i would be happy to go through the numbers. >> you have spent less time than any congress in the history of the united states. it defies common sense for this administration to pretend that you're paying attention to deficit reduction. it just doesn't square with reality. >> congressman, faced with the worst economy in generations, the president and congress acted. if we had not, the economy would have fallen off the cliff. the economy would be declining still. our deficits would be larger. if you care about fiscal responsibility there is no way you could have argued that the response for the government should have been to stand b back, let this economy collapse, let the system collapse. that would have been far more costly, not just the fiscal position of the united states but to people across the country. there is no fiscal responsibility in a crisis that would have justified standing back and not acting.

>> let's set aside the bailout because that was under the bush administration. the stimulus bill, $780 million. the omnibus, $439 billion. supplement supplemental, consolidated appropriations bill 446. the level of spending is unprecedented. the level of debt that you have asked our kids to pay off is unprecedented. >> no, i -- >> the deficit is unprecedented. >> again, i -- >> it is important. we want you to live up to what your words are. >> great thing about this country -- >> we have not seen it. >> we get to debate what makes sense for the american people. you can look at the actions we proposed, congress enacted and said you would prefer we do nothing or more in the form of tax cuts but we put in place a set of well designed targeted measures that were absolutely essentially to break the back of the worst economic crisis in

generations. we are at the beginning of the process of healing the damage that was done. i completely agree with you that we have to recognize, make sure the american people understand that we are going to have to dig our way out of this hole. >> by spending more money. >> that's not -- again, in this budget, the president's budget proposes specific measures on the tax and expenditure side to bring our deficit down dramatically over the next four years. >> you agree the bush tax cutses should be allowed to expire and -- >> that's not true. as congress legislated we propose to allow the tax cuts on the most fortunate 2% to 3% of americans to expire as scheduled in 2011. now, we have also proposed a freeze on nondefense discretionary spending for three years and also other cuts over that period of time. some of those proposals will cut our deficits to below 4% of gdp in four years. now, you're going to propose

different ways to do it. you may propose more aggressive ways to do it, but the basic imperative we share is to recognize as i think you do that deficits matter. we have to bring them down. >> i appreciate your vigorous defense of the proposals of the administration, but this is why the country is upset. what you say doesn't square with your actions. >> no, you can measure it by exactly what we are proposing -- >> you spent more money in less time than any administration in history. you have driven the deficits to unprecedented levels and you're trying to sell a bill of goods claiming you will create the mother of all entitlements, ensure 30 million more americans and save you money. no one believes that. >> don't expect you to agree, but the great thing in our country is we can have a national debate on what makes sense. >> that's true. that's why the november election will be a tidal wave. >> thank you. everything that went wrong started in january 20 of last year. >> oh, no.

>> i need a chance on the house floor to pull out of afghanistan, let's see how fiscal conservatives vote on that. i must take issue on something. you threw into the package the omnibus bill. >> yes. >> if i recall that was the regular appropriations bill that has to be constitutionally passed every year. >> right. >> i guess you were saying we should shut down government. >> i had a problem, mr. chairman, with the 85% increase in nondefense discretionary spending over the course of the last two years. that's what worried me. >> mr. chairman, could i say one thing. this is fun for both of us. >> we are enjoying this friendly debate. >> my chairman and i get along well. that's what makes it a great country -- friendly debate. >> with all respect to both of you, this is quite an accomplishment. he didn't blame anything on immigrants today. >> congressman, i want to point out one thing about this. it's important for people to recognize, in the president's budget.

we propose to leave nondiscretionary -- nondefense discretionary expenditures, a measure of the discretionary government four years out at the same level in real terms that we inherited at the last year of of the bush administration. so we are proposing enough restraint to make sure the temporary things we did to save the economy from collapse go away and we bring ourselves down to the size of government, taking out defense and security, that is where it was in real terms when we came into office. >> four years from now. >> yeah, but if you would like to get there overnight, happy to work with you on that. but we are going to try to get there by restraining expenditures in a way that is careful and balanced and allows us to come out and heal the damage cause bid the crisis. i respect your views. i'm glad that here you are making a vigorous case for fiscal responsibility. we need more people to do it. it's a good thing for the

country. >> mr. chairman, you will enjoy this. one quick follow up with your permission. >> yes. >> do you still have the zimbabwe bank note in your wallet? >> i don't carry my wallet anymore, but i remember our exchange from last year. but as you recall you showed me the pink version. i had a better one. >> i had a 50 billion dollar bank note from zimbabwe. i was impressed that the secretary had a trillion dollar -- ten trillion dollar bank note from zimbabwe. we're going to help you get the deficit in balance. >> good for people like you to make the case of the country that deficits matter. >> thank you, mr. chairman. >> what i learned about capitalism is every so often you have to invest to make things happen and banks and other folks were not investing so government invested some. i think at the end of the day we'll get a good return.

mr. secretary, on march 4 of last year you stated that the administration had laid out a clear path forward to helping up to nine million families restructure or refinance mortgages to a payment that is affordable, now and into the future. unfortunately the latest treasury report on the program shows only 116,000 homeowners received permanent mortgage relief. the result has been millions of homeowners forced out of their homes through foreclosures on short sales. can you take a moment to please explain what happened between your optimistic forecast and the reality of what has instead occurred. >> the program we announced initially to help modify mortgages for a set of americans facing the risk of losing their house, we thought over time would it reach perhaps up to three and a half million americans.

they have provided substantial relief to families across the country. almost $600 in lower monthly payments to reduce mortgage obligations. now we are seeing a substantial number of those converted to permanent modifications. but the number that matters now is a million. the million is growing. we're going to reach as many as we can. >> what was the 116,000? >> that's the number of permanent today. but remember, when you get a temporary modification your mortgage obligations get reduced substantially, right from that point. now, of course, we want to see people eligible for permanent modifications get permanent modifications. for people who got -- and it's now a million family ace cross the country, they are seeing an immediate substantial sustained reduction in their mortgage obligation so they have a chance of staying in their homes. of course we'll make sure we are reaching as many people as we

can. as many of those temporary modifications are converted into permane permanent. we are seeinging the numbers increase, and we'll g@@@ 'r'@ >> we did not claim that we would reach 9 million americans. we thought that it would reach up to 3.5. we may not reach that, but that was over a unique period of time. we are on track to meet those objectives. >> in the 2011 budget proposal, the proposed two existing programs. it is also the capital magnify

and for construction and acquiring affordable housing in low-income neighborhoods as well as other economic development projects and communities where the housing is located. would you please explain why the administration made the decision not to request funding? >> what we did making choices among competing priorities with scarce resources. what we did and you need to expect us to do is to take a careful look at these programs and make sure we are allocating resources where they have the highest return. after careful reflection with the knowledge that many people like these two programs we proposed to cut funding on we thought the resources would be better used in supporting the signature cdfi program which has so much support across the country, such a good record of

success. we took a careful look and we thought those resources would be better used in support of the signature cdfi program. i think i'm confident that's the right judgment. again, we're making choices and trying to demonstrate to you that we'll use resources you allocate to us carefully and take a look at programs that even if they help may not provide high enough return for the resources we are providing. >> okay. just for the record, you know, it doesn't sit well with me or other members of the congress that the first page of my questions to you, i asked why cuts to the program serving low income taxpayers and on this the one i'm asking you similar questions. so it would seem either that i'm asking all the questions that lean on one side or we are taking hits again, directing hits at the low income parts of the country. >> on balance we have proposed a significant expansion in these two signature programs which are

cdfi and new market as the tax credit program for reasons that we both agree, these programs have a great record of reaching some of the hardest hit communities in our country with a very good record of success leveraging private money to help make sure our taxpayer dollars are used effectively. they go to institutions with a good record of lending in their communities. so my own view is that we are increasing investments and reforming how we use them in ways to make them more effectivement. >> -- effective. >> i have one last question. she said she wanted to come back but we're getting to crunch time here. in the last year banks reduced their credit outstanding to commercial and industrial businesses by almost 20% or $300 billion. when businesses lose access to credit they cut back jobs and prolong the efforts at economic recovery. the financial press reported

that the financial services sector paid out more than $100 billion in bonuses in the last couple of months. what do you think will be required to resume business lending in this country? do you agree that the obscene amount of money handed out for bonuses could have been retained and used to increase credit in our struggling economy by hundreds of billions of dollars? >> mr. chairman, what you have seen happen in terms of credit is a mix of two different things. one, as you saw, demand for credit fall very sharply as the economy growth slowed, the economy contracted. you have seen a substantial reduction in banks who were short capital. both those things are happening, but it's starting to ease. the best measure of whether credit is getting easier or tighter is the price of a loan. and the cost of credit has come down dramatically across the country for a business, a family, a municipal government. that's a measure of progress we have achieved in trying to heal damage cause bid the financial

system. now i completely agree what you have seen happen in compensation practices is unacceptable, outrageous. we are working very hard using the authority congress provided us to make sure we are bringing about durable reforms in how financial executives are compensated so they don't have the incentives to take a bunch of risks that leave the american people holding the bag. it's important. we have seen some progress, but not enough. we're going to keep working, making sure we encourage reforms that will make sure we don't get in this mess again. >> right. i know you realize that part of the lack of public confidence in what we are doing is when we continue to see this happen. >> absolutely. >> one last point and i won't make all the comments that go before the question. with the whole issue of t.a.r.p. and the public feeling that the money is not going to the right place, with 20/20 hindsight, what more do you think could have been done from the onset of

t.a.r.p. to ensure greatest transparency and accountability in hthe way the t.a.r.p. dollar were being used? >> mr. chairman, it's hard to say that even with the benefit of hindsight. but let me tell you what we are committed to and what we did. we made sure we put the precise financial terms of all the investments we made in the public domain on our website for everybody to see, right from the beginning. we have adopted a whole range of proposals by the various overseers, congress put in place to improve transparency of the program. we put in place a dramatic improvement in the access to information the american people and the terms to which they were provided. we'll continue to work on ways to do is that. the important thing to reflect on as you look at how the program was run is we have now got back more than $170 billion

from the financial system. we have reduced expected losses by more than $400 billion from where they were just a year ago. we saved substantial resources for the american people to devote to long-term fiscal challenges and not just near-term priorities. we have done it at much lower cost than people expected and have seen a dramatic improvement in credit conditions across the country. the american people can look at that record and see the detailed numbers on the return, on the risk of losses and they can see the benefits. but we all recognize there are a lot of challenges ahead of us still in small business credit, housing markets and commercial real estate. this is not over yet and we won't make the mistake many countries have made over time which is to pull back too quickly to stop before we have healed the damage. and this crisis caused a huge amount of damage. we have a lot of challenges left.

>> i would like to ask about freddie mac and fannie mae if i c can. >> one more. i have to go speak against the war, save some money. >> that's always good -- to save money. >> o okay. >> thank you, mr. secretary. i want to ask about fannie mae and freddie mac. the congress put records on the liability of the taxpayers and treasury had the authority to do so and lifted, i think, the caps on the amount of the exposure. but we have not yet seen a reform proposal out of the administration and the scale of the losses, of course, at freddie mac and fannie mae are immense. this is a scary situation. as a fiscal conservative i don't like to see the taxpayers put on the hook for this, particularly in an unlimited way. if you could, would you tell us what the administration's time frame is, why we are still waiting to see reform for freddie mac and fannie mae and what will it entail to protect your kids and mine?

>> what we have suggested, congressman, and we will put it in the public domain and i will testify on some broad objectives and principles to guide reform. we'll put out questions on strategy for public comment. this is a complicated issue. we want to take a look at the entire set of government agencies that act in the housing market and policies that contribute to this crisis. our expectation as we go through hearing and public comment will put together reform that we put forward to the congress next year. you asked a legitimate question which is why not now? i'll be honest. we are doing a lot of things. we thought to do it well and carefully, do it right we wanted to go through a process of more careful reflection. if we rushed it, the risk is we would not achieve enough and not get consensus. my personal commitment is we are

going to need fundamental reform on the housing market, not just on fannie mae and freddie mac but a range of other policies and instruments. what we allowed to happen was a national tragedy. it was avoidable. we should never have let those institutions get themselves in a situation where they took on that much risk without credible oversight, capital to back them. it's a terrible thing and it will require comprehensive reform to change it. >> the sooner the better. also, mr. chairman, it's important to ask about -- we haven't touched on the commercial market. we are about to see a tremendous number of resets on commercial mortgages and a lot of the properties have been dramatically devalued. the valuations have plummeted for a lot of the properties. they have a lot of vacancies, businesses that have left and the banks are so spooky, of course, about real estate loans.

and we've got potentially another tidal wave coming. what is the administration doing and this is an important question. what is the administration doing to attempt to mitigate the size of the commercial reset tsunami which we see coming which is conceivably as big, if not bigger than the residential mortgage problem? >> you're right. it's a challenge. it will be a challenge for the country to work through. again, as i said to your colleague earlier, the two things we think are most effective are to make sure we are getting capital to banks which could be small community banks which face exposure to losses but we want to make sure we are helping provide liquidity to the securitization markets which are helpful in this context. the programs put in place have been helpful so far. they have made impacts so far, but there is a challenge still ahead. happy to hear suggestions from

you. >> the chairman has been gracious giving me extra time, but the regulators are being unnecessarily aggressive in attempting to force banks to get real estate off their portfolios. it's not a good idea. the regulators, i think, are a part of the problem. you want to make sure the loans are prudent, that they will be repaid. in houston, i know of a tremendous number of blue chip borrowers with very long stable credit histories that never missed a payment and banks are turning down loans because the banks are hammered by regulators to get real estate off of their -- do you know what i'm talking about? what can you do about it? just giving breathing room to the banks on the regulation side. if it's a safe investment, the guy's always paid his bills. you have seen reduction in the valuation, but come on. you know, keep learning money.

what can you -- loaning money. what can you do there? >> it's a serious concern. this is a matter for the fdic, the occ, ots and the fed. what we are doing is encouraging them to continue to provide more care and balance and n the guidance to examiners across the country so they are not overdoing the tightening. not contributing to it. they put out guidance in november to help clarify how examiners should treat loans oh to eliminate some of the risk. i will certainly carry the message to them. >> ms. emerson and i and other members will submit questions for the record. we thank you, mr. secretary, for your time. we thank you for your direct answers. we want to work closely with you to make sure the recovery is strong and that the things you inherited january of last year are dealt with properly. we thank you for your time. >> thank you very much. >> the meeting the adjourned.

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. >> in congress this week the house returns monday at 12:30 for morning hour followed by legislative work at two.

>> next, a senate commerce committee hearing on the proposed merger between nbc universal and comcast. we will hear from brian roberts chairman and c.e.o. of comcast. the deal would reportedly be worth $30 billion. the hearings are two hours. >> welcome to the committee. >> could we have order please and everybody take their seats rapidly?

senator dorgan is going to chair.ç >> first of all apologies to you. we have the f.a.a. billç that this committee has written on

the floor of the senate, so a number of us are will and other hearings as well. i appreciate very much the witnesses on this panel coming to the committee to testify. we have mr. brian roberts chairman of comcast. i believe senator rockefeller has properly identified all of those on this panel so i will not do that again. why don't we begin with you, mr. roberts. as has been the case with all witness witnesses, the full statement will be made part of the permanent report and we would ask the witnesses to summarize. mr. roberts, you may proceed. >> thank you, mr. chairman. it is a privilege to come here today and talk about comcast plan joint venture with g.e. regarding nbc universal. my father ralph started comcast almost half a century ago with a single small cable system and we have been able to build a national cable broad band and communications company employing nearly 100,000 people.

i'm proposing to combine with nbc universal we are taking the next step in our improbable journey. i'm proud of what we have been able to accomplish and proud my father is here to share this with me. let me briefly summarize the transaction. under our agreement comcast will be the 51% owner and manager of nbc universal. g.e. will still own 49%. electric was the lone 49%. we will have a new venture creating a theme park business is with comcast limited theme- park channels. it puts the companies under one roof, helping to deliver more diverse programming, helping to accelerate a truly amazing digital future for consumers. together we can help to accelerate the delivery of multi-platform video experiences. the combination will be a more

creative and innovative company, success stimulating investors. this will be good for consumers, innovation, and competition. there shall be no doubt of the new benefits. we have made a series of public interest commitments in writing, detailing how we will bring more local programming, children's programming, and diverse programming. we have made agreements to our competitors that we would act fairly in the marketplace. first, we volunteered to have key components applying to the reach transmission negotiations, even though they have never applied before. second, we want independent programmers to understand that we are committed to help them. we have added new channels to the system every year beginning in 2011. bringing them together is a

vertical combination. there's no significant overlap of the company assets. a vertical company poses fewer concerns, with no massive layoffs, facility closures, nothing to produce synergy. this is why some on wall street did not fall in love with the deal right away, but also why we believe that washington can. we will grow these great american businesses over the long term, making themor congress has recognized the benefits of voter calendar integration before and adopted rules in 1992 to address potential risks. at that time there was almost no competition to cable, more than half the channels were owned by cable companies. so congress created program access and carriage rules to ensure a company which owns both cable content and distribution cannot treat competitors unfairly.

those rules have worked in the past and will work in the future. we are willing to discuss with the f.c.c. having the program access rules bind us even if they were to be overturned by the courts. in the past decade comcast has come to washington twice to seek merger approvals. when we acquired cable systems from at&tç and adelphia. each time we sphraepd how consumers would benefit and in each case i believe we have delivered. we have spent billions of dollars upgrading cable systems to make them state of the art. we created on demand which customers have used 14 billion times. from a standing start four years ago we now give millions of americans their first real phone choice. we have created thousands of jobs and promoted diversity in our workforce. once again we have described how consumers will benefit and i want to assure you we will deliver. mr. chairman, we are asking for the opportunity to make one of the great iconsç of american broadcasting and communications part of the comcast family.

we promise to be reliable stewards for the national treasures of nbc and nbc news. it is aç breathtaking and humbling moment and we hope to have your support. thank you very muchment >> mr. roberts, thank you very much. mr. wells, nice to see you. you may proceed. >> thank you, mr. chairman. i'm honored to represent the members working in film, television and emerging media markets including online video content. virtually all of the entertainment programming and a significant portion of news programming seen on television and in film is written by our members and affiliate writers guild of america east. the wgaw is has had a long association with nbc aoubç virile. i have written e.r. and west wing and most recently south land. the wgaw is concerned that the impact of the merger of nbc

universal andç comcast and wha it will have on w.g.a. content creatures and workers and consumers. we have consolidated from dozens of independent entrepreneurs and suppliers to a handful of large conglomerates controlling content from start to finish. this has not been good for writers who face fewer creative and economic@-aa=iuies which has had a negative impact on other entertainment workers. the industry may point to the growth of channels and platforms as evidence of opportunities for independence and diverse content but the reality is that a handful of multinational companies control what viewers watch. wgaw analysis of prime time series in the fall of 2009 network schedule found only 16% of series were independently produced across the five broadcast networks with only 10% independently produced on nbc. syndication regulation 78% of

prime lineup was independently produced. with the integration ofç nbc universal's cable networks comcast will have the incentive to bump other channels out oo the most popular tiers in favor of the newly acquired networks. this new superpower could deny consumers the ability to select channels through the marketing practices of bundling, channel position and tier placement. this proposed media consolidation also promises to have a significant impact on news programming. diverse news sources are necessary for our democracy and this merger will concentrate a significant amount of local, national and online news programming within one company. we do not want to see a repeat of clear channel's consolidation of the radio industry while comcast says it plans to preserve nbc local news we fear this is a promise that could be forgotten in pursuit of corporate cost efficiency. the greatest danger is its effect on the developing online internet video market.

we believe that comcast may be tempted to use its position as the largest provider of residential internet service to favorites newly acquired content and content byç other companie in reciprocal or monetary arrangements. this be could be in the format of faster access or other content that it favors to the detriment of all other content now available to consumers over their comcast supplied internet connections. comcast service in conjunction with the merger raises horizon competition concerns as comcast attempts to lunch the come damages to control online internet video e. it could stifle competition between providers and strengthen the company's market control of video distribution by requiring the consumer to have a comcast cable subscription to accessç online video. we have seen nbc restricting online access to some 2010 winter olympics to authenticated subscribers of cable, satellite

or i.p. tv service. control over the content will only enhance the anticompetitive efforts. wjbw has serious concerns about comcast and nbc universal as the gate keeper. in addition, comcast would acquire 30% of hulu and would likely put it behind an authentication wall. they would not be be able to watch without a subscription which could reduce content. the internet is quickly becoming our town square to ensure a free and open internet we must require companies like comcast to remain neutral in the delivery of content through its online service both in the speed of delivery and cost of delivery. as the creatures of intellectual property we believe in strong copyright protection and privacy must be addressed all the while maintaining a free internet. comcast is said it would like to use the control over nbc universal content to establish a model that can be replicated

with other third parties. we are concerned below market transfer prices may become turnarounds for third party suppliers t. is imperative that the interest of content creators not be sacrificed to enhance the value of comcast distribution business. the guild shares the concerns about lane practices that have been voice bid the communication workers of america and the c.w.a.'s experience with comcast has demonstrated a poor track record of respecting worker rights. if approved the merger of comcast and nbc universal will lead to a further consolidation of distribution and programming and any publicç interest commitment should be legally binding and enforceable and regulators must require cbs comcast universal not discriminate in favor of or against content on the internet by agreeing to network neutrality rules on the internet access service. this merged entity shouldn't be able to use market power to deny program on alternative services that might compete with their

platforms or video on demand services. to promote independentç programming comcast must go beyond their offer of two independent channels which will have little impact in 500 channels and be required to allocate 25% of programming to independent programming. the definition of independent programming should beç craftedo ensure maximum diversity of voices and artists on such programming not to just provide more programming space for other media conglomerates. local news and public broadcasting should be preserved to preserve opinions and it should be required to promote them. thank you again for the opportunity to testify today and i look forward to answering any questions. questions. ou very much. dr. cooper, welcome. you may proceed. >> thank you, mr. chairman and members of the committee. when comcast claimsç there is little for antitrust authorities to look at in this merger they must think we're still living in the don't worry be happy don't nothing eraç of antitrust and

regulation. thraeuflly for consumers as you heard this morning, that is not the case. officials who understand that concentration in vertical integration can be bad for consumers and the economy, who understand that public interest principles are good for citizens and civic discourse are in office and not a moment too soon. this merger is uniquely anticompetitive across a number of markets and threatens to restrict consumer choice, reduce programming diversity and raise prices. comcast and nbc compete head to head in local distribution of video content in a dozen of the nation's most important local markets. they compete head to head in the production of video content for multichannel distribution with comcast sports and news lined up against nbc's sports and news. they compete head to head in the distribution of video content online. indeed, nbc is a major partner

in hulu, an internet based multichannel distribution platform. in addition to the outright elimination of direct competition with nbc and comcast in these markets, the marriage of the nation's largest cable operator with one of the nation a nation's premier video producers will give them an immense amount of vertical leverage to use against competing video programmers and distributors. favoring its own content with access to cable systems that reach one-quarter of the mvpd market and denying competing programmers access to those systems place as heavy thumb on the scale of competition in the video content market. withholding must have content on competing contributors undermines contribution for eyeballs in distribution. the merged entity will have the incentive and ability to raise prices for the large suite of programming or to force this programming on cable systems which raises consumers' prices

as the bundles get largered a more expensive. the history of the cable industry since the passage of the 1996 act has beenç a histo of consolidation and higher prices. we are all familiar with the faculty that cable profileses have increased twice as fast as the rate of inflation since 1 6 1996. it is less widely known that the operating cash flow of the cable operators, that is the cash left over after all operating expenses, including programming, has increased four times at the rate of inflation. that is where comcast gets $6.5 billion in cash during the worst recession since the great depression to buy a 51% interest in nbc. many of these processes have operated to push up prices over the last decade. this merger will reinforce all of those prophecies,

perpetuating the problem of rising price. the most ominous threat is to the internet as a platform for video competition. comcast has already signalled the intention to extend the ugly cable business model to the internet by proposing a market division scheme with the second largest cable operator, time warner. comcast is seeking to prevent local sports teams from making their content available online. nbc moved its olympic coverage behind an internet pay wall. the marriage of the largest broad band service provider with one of the nation's premier content producersç heightening the tkaeuplg of the threats. geography is not supposed to matter on the internet. there are no franchises, no rights of way, no regulatory impediments to entry. few if any construction costs. there is no reason cable operators don't compete head to head on the internet for every

eyeball. but their proposal, called tv everywhere, would restrict that competition tying the internet product to their physical cable product. in the lexicon of the cable industry. tv everywhere means competition nowhere. federal authorities must do more than just preserve the industry structure which is riddled with anticompetitiveed a anticonsumer institutions and practices. they should seize this moment to implement the over ddue reform over local markets, affiliate relations, cable program access, internet distribution and independent programming. if policy makers allow this merger to go forward without fundamental reform of the underlaying industry structure, the probgs for a more competitive consumer friendly competition friendly multichannel video marketplace will be dealt a fear blow.

thank you. >> dr. cooper, thank you very much. mrs. abdul louisiana >> i appreciate the opportunity to represent wow and the 900 small and medium sized companies who are members of the a.c.a. wow is a broadband competitor in qño million of our households compete directly with comcast in michigan and illinois. we differentiate ourselves through our customers experience we provide and customers appreciate having a choice. they recently recognized us with as the number one cable internet and phone provider in last month's consumer reports. they have recognized us with 10 j.d. power awards. our merchant secentric approach works. we know how to compete. we are not here to ask for favors from you or government assistance for special advantages. we are here as a buyer of

content those cable apnd online. the prospect of having comcast nbcu combine their program much of which has been deemed by the f.c.c. as must have will give them significantly more market power and i believe that should concern you on behalf of consumers. we are going to pay substantially more for the programming that we distribute today if this merger is approved without conditions. and we will have no other choice but to pass that on to consumers. let me explain why they will have more market power after the deal goes through. comcast is not just a large cable operator. it is also a significant owner of programming including 10 must-have regional sports insurance. you can imagine how hard it would be to compete in our markets without local sports. then nbc has 10 broadcast networ networks, also must carry. they own popular cable networks

we need to compete. comcast owns cable channels. you combine all of that and that is increased market power and post-merger we will be negotiating with one psychological indicated entity with much greater leverage to extract higher prices and broader distribution of their programming. and i know this because it happens today. sudden link showed when they had to negotiate their rates were 20% higher than in markets where sudden link negotiated on a station-by-station basis. our experience at wow validates this experience. these fees and higher. and i'm told that the d.o.j. find a proposed transaction as anticompetitive if prices are likely to go up by more than 5% after a deal closes. so, here are the harms that will

result from the merger if it is not conditioned. operators like wow are charged higher prices, as a result consumers will pay more. comcast will use its increased market power to demand that operators like wow carry additional networks not watched or wanted by customers. mr. roberts hems was quoted a few weeks ago that services like comcast g-4 channel would enjoy the benefit of nbc u scale. to me that means more bundling more tying of low value networks with high value networks and charging more. for direct competitors to comcast they will have every incentive to deny us both online content and advanced services. in defense of my concerns, comcast has offered to abide by little more than the existing program access rules. these concessions are meaningless since the program access rules fail to remedy abuses today and will continue

to be meaningless if the merger is approved without conditions and reform. here are the problems that need to be addressed specifically. program access rules provide no automatic right to carry carriage of the network while the case is spending and we a all know the impact that has on customers. program access rules are rife with loopholes that allow for discriminatory pricing. there is no price transparency to allow the f.c.c. to resolve program access disputes. finally, the current arbitration process is limited only to must-have sports programming and broad consist stations and it is time-consuming and costly, so much so is it beyond the means of any a.c.a. member to utilize. in closing, i believe companies lake wow are just the kind of competitors sought in the 1992 and 1996 acts. i'm not here to suggest the merger not be approved but i'm here to say that the f.c.c. and

d.o.j. need to consider structural and behavioral relief such as stronger, more effective program access requirements. the goal has to be to prevent increased consumer pricing, preserve competition and most of all set a positive precedent for future mergers of this type. thank you for having me. >> finally, we will hear from professor yue. >> thank you. my written testimony contains a complete analysis of the likely consumer impact the proposed merger will have. rather than rehearse the arguments here i would like to use my time to emphasize two basic points. any antitrust analysis begins with the principles embodied by the decisions of the supreme court this congress antitrust regulatory and f.c.c. the starting point for the analysis is typically the merger

guidelines issued by the federal trade commission and justice department. those merger guidelines of the analysis that lays out indicates the proposed merger is unlikely to harm consumers. the guidelines also indicate that the markets affected are competitive enough to protect consumers against anticompetitive effects. on horizon integration the decisions by this congress, the courts, and the f.c.c. recognize that local broadcasting and cable operators constitute separate markets. despite repeated attempts by the f.c.c. to enact measures to prohibit combining television stations and cable operators under the same corporate umbrella, those rules were invariably struck down by the courts as arbitrary, capricious and inconsistent with the statutory obligations established by congress. the f.c.c. has abandoned all efforts to reinstated rules. merger conditions limiting this type of cross ownership would constitute a form of backdoor regulation that would allow the

f.c.c. to impose restrictions through the merger process that it was unable to enact through regular administrative processes. on vertical integration the decisions of the supreme court and merger guidelines established that the proposed merger is unlikely to have anticompetitive vertical effects. any arguments must take into account the industry has under gone massive vertical disintegration the past 15 years. during that time the level of vertical integration has plummeted from a high of 56% in 1994 to a mere 6% in 2009. this effect becomes starker if one focuses on the most highly rated television networks. the lateral -- level of vertical cons traegs among the most highly rated is a from a high of 93% in 1994 to a low of 13% today. moreover, the past that careers have witnessed the tkedissoluti of the two highest.

in 2008 news corps the owner of the fox television properties reversed et cetera 2004 acquisition of directtv. in 2009 time warner the owner of such leading networks as pbs and hbo spun off the cable operations into a separate company. in hortshort while vertical integration may have been a concern in the past it is hard make the case in the current environment. anyone suggesting that this merger will harm consumers bears a heavy burden. they must justify deviating from the standard established by the congress, supreme court, f.c.c. and antitrust authorities. they must then refute the facts indicating that the merger is so unlikely to hurt consumers it should be approved without further analysis. rebut being the arguments requires more than opinions and conjecture but reasoned analysis and empirical research. this makes the recent commitment to fact based decision making particularly welcome. the second point i would like to

make is focus attention on the recognized problems associated with using merger reviews to make regulatory policy. traditional regulatory processes address problems on an indust industrywide basis. guaranteed public participation and are subject to meaningful judicial review. each of these leads to better decisions and ensures policies are enacted remain fair. the same cannot be said of conditions imposed through the merger review process. opportunities for public participation are more limited and even when public participation is permitted they tend to focus flair on the issues raised by a particular transaction instead of how the issues affect the entire industry. merger conditions are also less likely to yield clear statements of regulatory policy and are immune from scrutiny by the courts. conditioned on this merger would necessarily only address 26% of the industry and will leave the vast majority of the problems unaddressed. the use of company specific

adjudication to address issues that confront the entire industry threatens to skew the landscape and raise issues of fairness. this is not to say that the current regulatory regime is perfect. many industry participants have identified what they see as flaws and have sucked possible reforms. the best course of action to confront with regulations that are imperfect is not to rig a solution because. the best practice is to open a general proceeding to address any problems that may exist on an industrywide basis. as the chairman said the f.c.c. has exercised oversight authority in the past and stands ready to do so in the future. in the wake of an era where the f.c.c. was criticized by it congress for failing to follow good administrative practices, maintaining the integrity of regulatory process would appear to be particularly important. any other solution turning

merger review into backdoor regulation that hurts consumers, skews, competitive land scape and undermines democratic values and integrity of agency process. thank you. >> professorçççbyoo, thank y much for your testimony. i indicated to senator rockefeller that i would come back and share the second panel and i would just make a very brief statement and then ask some questions. i have a history on this committee with senator lott, the dorgan-lott provision, i think we were the first to exercise what was a legislative veto on the media ownership rules of the f.c.c. some years ago. i have long been concerned abouç concentrati concentration, particularly in media ownership. i don't think that big is always bad or small is always good. but i do think that we should always ask the question what does this mean to the free market. the free marketç looks best wh

you have robustç competitors competing around price differential. so i would have some disagreement programs with çyo professor yoo. i think the burden is on those who come to us with the proposal to combine, for themç to descre why this combination is not going to harm the free market system, why it is not going to be destructive of the believe interest and why it is not going to retard competition. i think that burden exists qn i would expect mr. roberts probably agrees he has that burden.ç there are a smaller number ofç interests in the country -- i agree with mr. wells -- that really determine what we see and hear and read each day.ç so, we should be cognizant of that and understand what that means in terms of future concentrations. i have been here longç enough and mr. case sit at that table

and tell because anç unbelievae wonderful ideaçç it was to coe time warner and a.o.l. i'm telling youççç if they w missionaries on a missionç completely convinced it was not only inç the public interest b ]uzf course answer as lot of of those questions and it certainly answered that in a very aggressive way. i'm concernedç about a funnel thingsç that i will ask questis about and i think what we want toçñr doçç here isç learn. we have differences of opinion on this panel. we have differences of opinion on this panel. independent programming is an interesting issue. i'm concerned that we have seen such diminished activity with opportunity for independent programming. i fear more of that. i think it is a very important question and i will ask mr. roberts about that. mr. yu, i will ask you -- i did

not quite understand if you were saying that the sec should decide yes or no, but in any event should not establish conditions because you do not think there are appropriate. you think should be approved or not approve but you do not support conditions? a fair piece from what most of us would expect with conditions attached to a fair number of mergers recently. i will turn to my colleagues in a moment and we will have ample opportunity to answer. we have heard much testimony about what you are trying to do and the request for testimony over the issue of the smaller enterprises. the contention about the worry over hulu. give us your response to the

questions that have been asked in terms of the kind of leverage and what it will mean for the consumer. >> i would start with your point about time warner and aol. the people where i was sitting at the time had many fears about that transaction. as you pointed out, history proved that they made a mistake and they paid a heavy price. many have said, as we heard, time warner and time warner cable have separated. they both feel we are approved through similar process these -- processes. i would begin by saying it is not a sure thing. what is your principal motivation? in my opinion, a principal motivation is an opportunity, a time when our economy has

release suffered in last year or so, to make a bet that we will see a rebound. that this is a good time to bet on america, on advertising coming back, and on consumers wanting more content. one of my answers to mr. wells is that you do not purchase the fourth place network that was once the no. 1 network and want to do harm, but rather you want to invest, grow, and restore. one of the reasons general a electric has picked us to partner with his they think of the bill be more focused and more committed to wanting to see innovation and investment. we know, and as was discussed with the internet, consumers are looking for more ways to get more content on more devices. this is a very nascent market. i have repeatedly said that video over the internet is our

friend and we are trying to find ways to accelerate that. we have invested billions of dollars to upgrade the speed of our capacity so that we can find applications -- three dimensions, high-definition, or whenever great engineers are dreaming of. i have no desire to not see that trend flourished for. i think that our company has been in the content business. some of these things are industry-wide. if the process has made her frustrated in the past, i am not aware of a specific complaint she has had until this transaction, but to me the chairman had an opportunity to

do reform and look at that on an industry-wide basis. i would certainly welcome a process like that, but i do not see how it relates to this merger. >> i will have plenty of time to answer questions when everyone has left, i guess. [laughter] let me ask this question again of you, mr. roberts -- if this merger is approved -- and i have no idea if it will be or not, that is something that will be investigated substantially, but if it is approved it will have conditions. but i believe that comcast is actually, even now, contesting the fcc's authority regarding and neutrality. tell me, is that a conflict for you? >> that has been raised and i appreciate the chance to try to

address it. i think it is an important issue. certain parts of some of the rules that have been placed for review, in the past the sec had policies that had been overturned against the industry and about our company in specific. there is always that issue. what we try to address here, voluntary commitments to be prepared to sign in a binding way, such as program access, such as free broadcast television remaining free and issues discussed in prior panel's. so, no, i do not believe that in the event that they are overturned by the courts, we are prepared to have them apply to us. we will have that conversation. >> i have other questions for you.

i will ask this question of you when we are done. why should this merger be allowed? do not answer at the moment. let me say this. i will ask you all questions. you have all raised a lot of interesting issues. i think that the purpose of this hearing is to explore those issues. you have all contributed something substantial, but i would like to give my colleagues the opportunity to ask questions. in order of arrival? [laughter] >> way back when, thank you, mr. chairman. i appreciate you all being here. i guess you have a different view of the world. .

joha >> i think we have concerns that there will be reserve shallow financial given and with the costs that are associated with the difference between bundled content that might come from an nbc universal comcast company together, and also arrangements where others would be record to get that higher speed deliver ryy. so we are concern about the equal access in speed and cost through everything that is available that you internet connections. >> let me dig a little deeper on that. i don't use the internet a lot.

i may turn on the computer, i look at a half dozen sites because i'm interested in what they are doing there. if i spend an hour a day on the internet that would be a lot for me. there are others that spend most of their day. they download things and they are watching movies or whatever they are doing. should the two of us pay the same for that? >> i think that everyone who wants to access material should be paying the same amount. so, my question isn't so much what the consumer is paying although i think that is a concern. i think the concern is will the speeds with which things that move through the internet because video use and the band that video uses, which is why there is such a substantial amount ofkoççthgb3ñrçoç inv) requiresçç largmhn and large amounts. the problem with that is people who do not have the financialko resources to give that preventionçççççw3ççç pt

particularly asççy3okw3÷çw2 diminution in local news whether newspapersñr ory3o]ñpe/a the of what will many of us believe will end up happeningçyç wkthç local broadcasting that everyone have theoiç same opportunity a through entertainment as well. ortunity, and for entertainment as well. i am just saying that we are concerned that if it takes -- if you get a very quick connection and an immediate feed on the news, or if you want to see huffington post or another blog that loads much more slowly, their questions about that. >> mr. roberts, let me turn to you. your family epitomizes what has happened in this arena. i am old enough to remember the

first tv being locked into the living room. i grew up in northern iowa on a farm, and our method of changing channels was somebody had to be out back@@@@@ @ @ @ @ @ @ @ @ åá >> you would constantly adjust to get the picture. so, if you wanted to change channels in the dead of winter somebody had to run around to the back of the house while somebody was screaming inside. now i look at what we have done and, you know, i have to tell you there is probably a cost difference between the old system that i grew up with and today east system. but it is remarkable what we have the ability to access. so i want to ask you, with the criticism that you have gotten he here, how do you anticipate you

will serve your consumers bet r better, and what about this merger will allow you to take yet the next step and the next step and the next step by -- i read pretty soon i will be able to sit in front of my tv and have a conversation with a video link with my grandchildren back in nebraska. tell me how you think you can benefit consumers. because there are some here that are raising criticisms about what you are heading out to do? >> senator, i appreciate really putting it in historical concept -- in historical context. as i think of what my father's generation of entrepreneurs and what i have been doing for 30 years now is all about, people forget where we were and we have liberated the viewing experience. not always for the better, you know. some of the points that are

made, not all content is perfect. but in reality, it is breathtaking what has changed in such a short period of time. an what will happen in the next five to 10 years i dare try to guess. what i'm trying to do for our company and our customers is to, in this transaction, try to associate ourselves with some of the most creative and talented creators, try to find the technological ways to create successful businesses for them and to make it great for the consumer to take this technology like wide band, which is beyond broadband so you can do the videoconference in high definition back home, and it is tremendous risk. there is absolutely no assurance that this is right or that this will work. but that is what american business is all about. and what i would suggest to some of the criticism is, sure, there is always the potential you might do this, you might do

that. first of all, it is a very visible industry. there are many regulatory oversight agencies and we have a track record of wanting to innovate. our goal was not to get into cable to slow down innovation but to speed it up. and as i look at this merger i see that as a once in a lifetime opportunity, really, to try to associate ourselves with the best content that is not doing quite as well in a company like general electric that today has other business opportunities unique to them all over the world and for us this will be a defining opportunity. >> my time has expired. thank you, mr. chairman. >> senator johanns, your description makes us sound like fossils but we didn't have individual television sets. in my town of 300 we had only one and that was at the car dealership. and since it was 125 miles from the nearest television station the only television we got were skips and we occasionally would get a skip signal from somebody

broadcasting professional what i guess was wrestling, not professional wrestling and the whole town would come down to see that for about eight minutes and then snow. [laughter] >> you can see why they are so productive in north dakota. i'm the only center on both judiciary and commerce and we remember that well. so i thought i would start with you, mr. roberts. i actually did some follow-up questions after that hearing and i raised this issue at the judiciary hearing about the price of expanded basic cable that has gone up faster than the rate of inflation since 1995, four times faster. and and customers are concerned in the tough economic times with

what assurances can you give that theç mergerç won't resul higher fees for customers? >> well, first of all, we are always focused on that çquesti. i don't thinkç anything specif to this merger would incentivize us or cause us to want to raise cable rates. we compete against mrs mrs. abdoulah, against directtv, against dish, against verizon, fios, it is a very different business than it has ever been and very much on customers' minds. today, for instance, in washington, d.c. we start as low as $15, we have 14 different levels of service. we are much more competitively sensiti sensitive. we are trying to improve with on demand and other technology. and i still believe digital video, for which comcast by the way is not the highest cost, i think there are many providers who charge more than we do, but

as a group the number of hours and what you get versus just going to a movie continues to be starkly different for the number of hours of 300 hours a month that the average cable household watches, in excess of that. it turns out to be 33 cents per viewing hour versus $15 to go to a movie for an hour for a family of four. so, i think we still have a great value. that is why the industry has been healthy. we have been able to reinvest and create jobs. but i don't believe this deal will cause that to khaeupchangee have to stay focused and make it competitive. >> i know there will be a lot of lawyers looking at the deal but i thought i would run through a few things i have heard that people have raised about concer concerns.ç one is that nbc and its affiliates have succeeded by getting its programming to as many viewersç as possible and providing this content. we talked about this at

judiciary for free over the air over the internet. will comcast use nbc's 30% stake in hulu.com to restrict the selection of nbc programming that is available on hulu.com or nbc.com? >> i never even personally met with the hulu team. we own about 31%. it is aç noncontrolling stake. we have no intent of changing nbc's relationship with hulu. and hulu itself, from what i have heard in the trade press, is going that you business model reviews and how to fund it and what its future will be we are not at that table. and i look forward to learning more about that business once we get together, if we do get together. >> do you expeb] comcast to block any nbc content from the internet? and what about charging subscriber fees? >> i don't -- comcast does not want to block nbc content or

block any content on the intern internet. and i don't think that -- as i said, i think that my vision is the content creator in different windows has different business models. sometimes they wantç to beç pay-per-view like going to aç movie in a movie theatre. sometimes you doç that in your home. sometimes it is ad supported only. times it is part of a subscription. ed a who knows what other business models will come out in the future. from a comcast perspective my vision is to technologically try to create platforms and making sure that the content is not pirated, that it is authentic, and finding a way to let the content companies create their own business models that work for their businesses into the future. >> mrs. abdoulah has raised this issue by small and midsized cable operators and they have

long objected about how they are compelled to negotiate programming both with cable channels and broadcast affiliates. concerns about the leverage that you would have over both your video distributor competitors, program distributor competitors. and i'm going to ask her this, too. what protections do you think should be in place to make sure comcast doesn't have unfair advantage over competitors in these negotiations? >> well, as i believe that we have had an ability to resolve because we want her carriage and other competitors' carriage. you don't spend what has been written to be $30 billion overall transaction or some number very substantial to not want when you are about 24% of the distribution marketplace you are hoping to get the other 76%. so it is very much in our interest as a business matter, as was referenced in some of the other testimony with antitrust laws. in addition to that, there is the competitive reality that we

all won't have a very vibrant channel if you are not distributed. then you go to the program access rules, which we've talked about and if there is not complete satisfaction with those, there's hopefully an opportunity for the f.c.c. to make it more attractive across all companies, not just our own. we have also seen other video distributors, directtv and time-warner cable, be separated from their parent companies who were making content because they didn't see that there was some advantage. so i think there is a lot of answers to that question. >> could i just get -- mrs. abdoulah, what protections -- and dr. cooper, do you think would most help with this? >> you asked the question about will prices go up for comcast customers. and mr. robertsç answered that. i would like to answer it. i can say it might not for comcast but i can tell you it will for us because of the

reasons i mentioned in my testimony. the issues for us are cost and carriage as a competitor, and all people who compete for the product. in sense, your çwholesalers, ao your retailers. so, here i'm buying product from these two large companiesç and the remedies you talked about -- where do we go if we can't get what we need and can't represent our consumers' wants appropriately? >> what protections would help with that? >> it is the access rules. get them revised and reformed. >> they are set to expire in twelve and you find them inadequate? >> if we are going to approve this merger about of that that is inadequate. for comcast to say we will adhere to the current access rules, which are not effectual. they are not -- they don't help protectç us in the ways we nee to from a competitive standpoint. then that is meaningless. so, we would ask that the

conditions be placed especially very specifically if we have an iss issue, give us the right to make sure that that network stays on the air while we are negotiating. put a time sensitive on it, which i notice comcast put in their conditions they would be willing to put a time on it. but also make sure that the network has to stay on during the time of the negotiation. otherwise you see what happens with the customers. we witnessed that with the academy awards recently. >> i wanted to know what happened with the academy awards. i will ask later. i'm way over my time so could we talk about this later? i will call you and you can put the answer in writing for me. >> thank you very much, mr. chairman. just some very quick questions if i can. mr. roberts, if i can walk through there, what is your current comcast gross revenues? >> about ç$35 billion. >> with nbc what will it be?

>> ç about $50 billion. >> what is your customer base for comcast? >> about 24 million. >> about 24 million? >> cable customers. >> let me walk through a couple questions that i have. in the purchase agreement, are you personally financing it that you equity and debt in is it a combo or is it -- >> it is a joint venture. 51% comcast, 49% g.e. we are contributing some assets of some of our cable programming assets as well as somewhere around $6.5 billion in cash. we will borrow that cash plus cash that we already have on hand. so, the equity -- >> that gives me -- >> g.e. remains 49% of the equity. >> so it is a combo. >> combo. >> in your investment can i ask

the expected rate of return you are expecting? >> what we hope -- we don't have -- we haven't made a public forecast. what we have said is we are hopeful to have positive and hopefully double digit rate of return. >> low? high? 12 or 13 or 17 or 18? >> no, high single, low double digits, made mid double. depends on your view of the economy and the strength of -- >> i have your faith that we are in the right move and that is why aware moving down there path. >> we are also long term. so it depends on what time period you would ask the question. >> with that information, are you anticipating that to be all recovered through your rate structure both for residential and commercial rates? >> no. >> do you anticipate more than 50% of it to be recovered? >> the rate of return for this would be not related to