dangerous city in the world. we got much better it interdicting airplane transport of narcotics into america. they saw a great opportunity through mexico. the overland route took them by monterey. here we are with all breaking loose and everybody is scared. you have a lot of people who are totally innocent and looking for safe haven and they are worried about others because we are arming the other side. the mexican army and police are dying every day to keep the drugs from coming and the bad guys come over here and get somebody to go buy some assault weapons because we did not institute the assault weapons ban. .

. the real reason this anti-

immigrant sentiment -- look at the numbers -- white male factory workers without a college degree got killed in the last decade. manson -- manon -- men in terms of wages killed even worse than women did. the economic downturn was basically on white male high- school graduates and women high school graphics with a couple of years of college that just got hit in the economy. but they will get more jobs with the economy grow. their taxes were be lower. the changes we will have to make will be slightly less draconian if you have more people contributing into the system. i don't think there's any alternative but for us to increase the immigration.

we can start in the areas, basically at the top and bottom, which will not displace more people who are insecure. i do not see any other way out of this. >> says we are talking about what is in the news right now, let me get your general impression. what did you take away from yesterday's when you had goldman executives to basically took the wind that whatever is wrong with the economy, they did not cause a and they sell they really feel no responsibility for that. >> i think they're really mad about the sec. i think they think the timing was such -- they don't believe they violated the law. >> you think there was a connection? >> i am not sure on this

particular sec deal. i brought a lot of material on it. -- i am not sure that they had not violated the law by not telling people that paul's and pick the securities that would be in the cbo, because of the ability of the people on the other side to get information. i think there is a bigger problem here, which is you've got too much of our growth in the last decade in finance, and ever since we went off the gold standard, which was necessary for economic management purposes, if you look at we had a global financial economy before we have a global trade economy, and certainly before we had a global environmental and labor surplus. ever since then, economic inequality has increase. the only time the bottom 20% in

come increased more than the top 20%, since then, was the second four terms of mind -- set four years of my term because unemployment got so tight. and there were some other support things that were done. i think the fundamental problem is articulated by your friend, a good republican, who pioneered the index mutual funds, and he says that people in his business spent a lifetime taking too much out of the middle of the economy, for example -- if you're a farmer in eastern arkansas, you want to hedge against the prospect -- the prospect that you will have a bad crop year.

and you want to hedge against having a great crop year and drive the price down to low. that has a legitimate purpose. what purpose was served by this? and by the way, suppose paulson had lost money and goldman sachs had tmake money? either way, what would have happened? if it loses money, it confirms -- he made a billion dollars, and it confirms people's sense that the housing market going down and leads to quicker unraveling in a deeper 13 on the other hand, if he lost money in the other side made money, what is the advantage? it would keep more people ball rolling in and unsustainable bubble.

-- borrowing in an unsustainable bubble. i think that too much of the stock has no economic purpose no matter who wins or loses. to me that is the bigger problem. this goldman guys are mad because they think they are targeted and they think they did not violate the law. i am not sure they violated the law, but i do believe that there was no underlying merits to the transaction. and that as i -- that is what i think we need to look flat and what we need to structure on the regular site to reduce leverage and increase transparency, we need a clearing house system. >> you set up a commission on entitlement reform. it was very successful in outlying -- in outlining how serious the problem was but it

did not come up with a solution what advice would you get erskine bowles and alan simpson as they start out on this committee? >> let's talk about what happened and what did not. the medicare thing lost game because when i lost -- when i took all the is, medicare was projected to go broke in 1999. social security, the pension fund you wanted, and it never has been a funded pension system. we added only five years to that. the reason we did not get social security reform is, the chairman of the well look -- the ways and means committee and i had just about reached the deal where we would slow down the cost of living increase for social security and make them more in

line with the real cost of living, at least for upper income people, we would do more for that, in return for which we would make available through tax incentives the opportunity to build a savings account top of social security, and we had worked the numbers out. we thought it would take about 75 minutes -- it would take us out 75 years. as far as i could determine, it was the only issue that newt gingrich and dick gephardt agreed on. they told us that neither party one of the full with social security before the 2000 election, and would we please go away? the leaders of both houses. and i got it. they were listening to their members. they did not want to face the heat. i don't think there would of been much heat. i think people would appreciate it. and now the numbers i see on the chart are close to right, the

fix that we had would not be sufficient to take it out to a 75-year life span and take the burden off the budget. >my advice to them is to tell te truth. people are not stupid. the american people know that the average age of our society is going up. there are lots of people in higher income levels who do not need all the benefits that they may be entitled to under the government. if you took a poll, most people at the top 3% would give it back to stabilize the country and give their children and grandchildren a better future. there are lots of options here. the democrats have never wanted to do that, because we were afraid that it would chip away at the universality of the system. and republicans did not want to do it because they did not think it was fair.

since you pay and a percentage of income, and since there was a cow, lower income people pay relatively more. at some point, you have to raise the cap. if you do not want to raise the cap, what is it that now? $115,000? then maybe you should wait until $200,000 to raise the cap. one problem in making policy of all of this, if elected these tax expenditures. the step up of that tape -- a state tax and the biggest one by far is the employer health deductions. one problem you have with all of this, and just the fact of life, is the drastic differences in the cost of living from state to state.

as well as the state and local tax burdens. for example, if you make $200,000 in little rock, you are doing well. if you made to order $50,000 in new york, you're doing well but you're paying fiber six times more taxes. -- if you make $250,000 in new york, your day -- you are doing well but you are paying five or six times more taxes. a young person in new york city making $150,000 may look like an inviting target, but if a young couple is living on that and paying new york city rent and they've got three or four kids, i guarantee they have no disposable income at the end of the year. that's one thing that we have to be sensitive to.

>> president obama suggested yesterday that he all follow the recommendations of this panel. you think he can keep that promise? >> in general, i think that he can. first of all, i don't think you could have two better people cheering this panel. alan simpson voted with me all the time -- voted against me all the time betty told good jokes so i cut him some slack. erskine bowles is one of the ablest human beings on the planet. he served me as the head of the small business administration as the deputy chief staff, my chief of staff, he got the last budget agreement, he got the children health insurance program, the biggest increase in health care since medicare. he'd been great at the university of north carolina and

he ran the effort i did for the un and the tsunami relief reconstruction. these people are release marked the -- really smart and they are able. they will know immediately what pressures the president and both parties in congress will be under. they are good enough to disregard the politics and smart enough to take them into account. if everybody jumps hands and jump together. >> you are better than on the one -- you'd better than anyone will remember the impact of ross perot on american politics. he did meet -- make people aware of the fiscal crisis that this country faces. was the fact that ross perot was in that race, did that cause you

to focus more on fiscal responsibility? what was its impact? do we need another ross perot here these days? >> first of all the answer to that is no, because i was governor of a state that had the lowest budget in the country. i think on balance until the very end he had a very positive impact because the highlighted the problems of the deficit. and what it was doing to the economy and interest rates. that is another thing, people have not felt that because interest rates are so low because the whole world is coming out of a global recession. one of the things that no one knows is that we were able to have very high growth and very low inflation because we had open markets and high competition. but even with the open market

and high competition, the size of our debt and thus fact that so many others have get around the world, as soon as the economy picks up and there is a mad scramble for crash -- cash, there is going to be a brisk interest rate hike, and it will have to pay more to service the debt. i think we took three cents off of that. that is a huge amount -- i believe that is what our budget to. three cents -- 3% off of servicing the debt and that is a massive amount of money. it was able to take something from the past and put it into the future. i think that something will resonate with the american people because they are all paying high interest now, everyone. all mortgages, car payments,

credit card bills, other consumer payments -- they understand that. it's another argument that will do well. one of the problems we've got in this country that is only peripherally related but aggravates the current situation is the physical condition of state governments. while it is true that 39 states have constitutional provisions that prohibit deficit spending, only vermont does not, and for my does not own a printing press either. do not follow that. what they mean by balanced budget in the states is legislature's get together and pass something in the governor signs it, they agree on what it should be, and it fell it turns

out to be 3% then they drawdown for a rainy day fund. that is fine if you just have one day a year and you have four or five good ones. and if the debt is not to madrid but if you do that year in and year out, then you have the type of year that california and new york just said, you run into a brick wall. va has a pretty good system and they still have terrible problems, so i don't want to suggest this is an easy solution. but in my state in 1948, and i had nothing to do it does, nothing, the state adopted an amendment that requires a balanced budget. the legislature passed a bill twice, which is great. the governor consign it you can have your picture taken, everyone is happy as a clam. at the end of the legislative session, of body of the senate

and house this together and organizes all the bills that have been passed, and what you spent last year-what you do not have to spend any more, plus what you do have to spend this year, that is category 8. then you say revenues are going 3%, that would be category be. then they put a savings account and so we will have money to maintain their buildings and things. and then everything else is and category c. everything is funded in proportion as the legislature sets. here's how it works. if you start off and when they go home, two later when the budget year starts, you only have to% revenue growth, then the governor is bound to fund only 67% of category be. every quarter you can cut spending. if you lead more than one day of

two quarters go by, the governor has committed a misdemeanor. i got cited six times in earlier. i had an early retirement program and we never had matches. when never had the kind of prices to face now. my governorship had a 70% approval rating. and this was a state that voted heavily for senator mccain. we ought to try to do what ever we can to get the states on a sounder fiscal footing. stop borrowing from the pension fund and doing all this kind of crazy stuff, that is going to have a big indirect ramification on all of this. >> let me ask you a quick question, because it appears that one of the things that is going to get heavy scrutiny by this commission is the value added tax. the un general -- what is your view of a value-added tax?

i think that any value-added tax has any chance of getting through, you have to exempt groceries properly. -- probably. the was the europeans have used it quite successfully. i think if you did it, you have to readjust the rest of the tax system to keep a progressive. it's also somewhat complex because every state has a production process, but the one thing the blue-collar america should like about it is a revenue source. it does not allow quite so much subsidy of imports, or other countries subsidize their products for export. it is good for exports, so you're not ready to give up on manufacturing, and i am not. i think this is a great time for us to build a manufacturing

sector in america. if we have the right sort of value-added tax and it just the rest of the tax bills to keep the progressivity of our tax system, it could be real good. the real problem of value-added tax is the problem of a single payer health care system. a lot of things are good in theory requiring some must change that people cannot make the mental leap. i am not at all sure that the commission will want of recommending a -- wind up recommending it. it is a big leap, but if you look at it, like any other sales tax, it would be good for exports, and our home market products would be a more even footing with imports if we had one. and we compete in countries that have them all the time.

so we get it coming and going, because they have and we do not. >> we ask people on the way and that they had questions for you. i want to get it just one. this is sheila weinberg of the institute of accounting. do you believe that congress knew the true long-term financial consequences of the decision that they would make different decisions? i would answer that. i think that they do not. but i would love to know that they don't have the political will to change those decisions. >> i think it's more complicated than that. i that's why i think the charts are born. the center for american progress, they have a much more progressive group identifying with the democrats, they put out are really interesting plan about what is going to happen if we don't do something to deal with the deficit and what we

have to be prepared to do. they said stuff that you would never expect a liberal group to stay -- to say because they understand what will happen to the american economy if we do not do it. one problem is that the congress is not organized to deal with it. bob rubin said this in passing, about one of the most significant things that we contributed to economic policy and our administration was the establishment of a national economic council on the lawns of the national security council, with all the relevant players in the room, including the commerce department, private corporations, the agricultural department -- we understood that there was a microeconomics tragedy that had to have everyone in there together. look at how congress is organized. i believe that if you have a committee, even if it was a special committee established

for just two years that was organized around this problem, where the members of the committee were influential and respected in both parties and they defined their disk -- the find their success about whether they produce progress, they actually did something. i think it would make it different for the agriculture the farm is not organized -- i think it would make a difference. the armed services committee is not organized to decide what shot me -- should not be done on defense. people do not say, put me on the armed services committee so i can close the base in my district. [laughter] i have a high regard for politicians and most people did. i think most work harder and are smarter and more honest than people give them credit for.

i think this is something we all say is a priority, but here we are having this meeting because there is no committee in congress organized for this purpose. otherwise we would all be out there. >> mr. president, this will be the final question. we've been talking about long- term problems. i want to focus on the short term for you, because you have a big deal coming up this summer. you're about to give away your daughter. i would just as the -- [laughter] our u.s. shape to handle that? >> when she was a little girl, i told her if she did not move out until she was 25 -- and then get married until she was 35, she was my only child. she does not think i am in shape to handle it. dad, the only thing you have to do is what we down the aisle. you have to look good. i said, what is your definition?

she said, oh, about 15 pounds. [laughter] so i am halfway home. i am fortunate. i like my future son-in-law lot and i admire him. hillary and i are delighted. >> thank you very much, mr. president. >> thank you. >> thank you all. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] [unintelligible]

>> today to head the securities and exchange commission was asked about the timing of the agency's fraud charges against goldman sachs. that subcommittee hearing is next on c-span. after that, president obama, and later senator shelby and dog talk about the financial regulations bill. tomorrow morning, a funeral service for civil rights leader dorothy height, who died last tuesday at age 98. preston and obama will deliver the eulogy at the national

cathedral in washington. live coverage begins at 10:00 a.m. eastern on c-span23 later in the day on c-span3, the third and final british debate between gordon brown, david cameron, and nick clegg. live coverage at 3:00 p.m. eastern occurrences -- courtesy of bbc. the election is next week. prime minister brown apologized earlier for calling a woman he met at a campaign stop for races. the remark was caught by a wireless microphone. >> and it is very nice to see. >> thank you, gordon. >> thank you very much for my. thanks very much.

you should never put me with the woman. ridiculous. >> what did she say? >> the bigoted woman, it was ridiculous. >> on microphone pick you up saying that was a very big it woman. >> i apologize that i said anything like that. i think she was raising an issue about immigration, saying there were too many people coming from eastern europe into the country. and i do apologize if i said anything that is hurtful and i will apologize to our personal agree to was someone is handed me the tape. let me see if we can hear it. >> ridiculous.

>> what did she say? >> anything, she was just a bigoted woman, it was ridiculous. >> that is what you said. is she not allowed to express her views? >> of course shias. i was saying that for it the problem is that i was dealing with a question she raised about immigration and i wasn't given a question to answer it because we had press around this, but i apologize if i said anything that has been offensive. and i would never put myself in a position where i want to say anything like that about a woman i met. it was a question about immigration that i think was annoying. >> i've just been talking to gillian. i am mortified by what happened. i gave her my sincere apologies. i misunderstood what she said and she is accepted that there was a misunderstanding as his accept my apology.

i am up penticton center. -- i am a pentitent sinner. i want to come here to say i was sorry and i made a mistake and i understood the concerns that she was bringing to me and i simply misunderstood some of the words is years. -- some of the words that she used. this is been a chance to talk to gillian about her family and her history and most of all a chance to meet and apologize and say so are a and sometimes you make mistakes and you use strong words, and once you use that word and make a mistake, you should withdraw and give profound apologies. >> watch the last british leaders debate tomorrow live on c-span3 courtesy of the bbc.

not to a senate hearing on the fiscal year 2011 budget for the securities and exchange commission for a witness and include the head of the agency. the committee is chaired by illinois senator dick durbin. >> good afternoon. i am pleased to convene this hearing and i apologize for being a few meetings -- minutes later. this is a hearing to consider the 2011 funding request of two are most important federal agencies, the commodities futures trading commission and the securities and exchange commission for it i'm welcoming my colleague. i'm sure you're tired from

yesterday. senator susan collins of maine, who is my ranking republican on this committee, my friend, we've worked together on many aspects of many different laws over the year and this is an important 13 other colleagues will join us during the course of the hearing. i want to welcome. kessler -- when this subcommittee was created and started, i insisted that it bring these two agencies to gather into one appropriations subcommittee, because the parallel one another and the regulatory responsibilities and i felt that the ancient separations no

longer applied, that there really should be considered as a tandem operation to bring confluence to import market places in america. i think the president has chosen well and the people that died these agencies today. the sec is responsible for maintaining orderly and efficient stocks and security markets, and conducting oversight of major market participants. the commodity futures trading commission carries out compliance programs in the futures are reyna, important to our nation and certainly to the city of chicago and the state of illinois. this subcommittee has an oversight responsibility over both of these agencies prepared debating that anyone should have oversight over these two agencies. i believe sincerely that we should. we have dramatically increased the resources and personnel at both of these agencies, and i hope we will continue that

trend, because their responsibilities are growing and we have to provide them the people and technology to meet that challenge, but as we provide these resources, we also need to provide oversight. no agency that comes before this government should be above oversight and review. that is why this subcommittee will continue to work diligently to exercise its oversight responsibility. there some to question that but i feel very strongly that not only will these agencies receive resources, but they will be held accountable for the way they use these resources, and spend them. i want: the detail about the money that has been allocated so far to both of these agencies. we will get into that in the course of questioning. i like to give my colleague, senator collins, an opportunity to make an opening statement before mr. ganz lawyer gensler -- mr. gensler testified.

>> i know that both of us share a commitment to providing these two important consumer agencies with the resources that they need. but like you, i also believe an effective congressional oversight, and if we put the budget of these two agencies off budget, if we allowed them to avoid the annual appropriations process i believe congressional oversight and accountability will suffer. and therefore i'm going to try to ensure that the financial reform bill that passes -- and one will pass -- to not take these agencies outside of the annual appropriations budget. i think it is so important.

and i would say to the two chairman before said that that the subcommittee has been extremely responsive to concerns for more resources. we want to reverse the years to where you had insufficient staff to do effective enforcement. as we began to review your budget request for this year, we should take note of the significant fund and increases that are subcommittee provided for your agencies last year. in the case of the sec, we ran up a budget crest -- we gave an increase of $159 million of the previous fiscal year. in the case of the cftc, and in case of $23 million over the course of the previous year. i have been pushing very hard to make sure that you not only have the levels of stabbing that

you need, but the skilled staff that june 8. i have a feeling that the two chairs are competing for skilled staff in many ways, the experts, the accountants that you need. the roles that you are playing are so important. i will say that i'm very disturbed by the recent press report that senior sec staff were looking at pornography at work instead of focusing on securities fraud. that behavior is the spectacle at any time, but appears to occur at the height of the financial crisis and that makes it even more inexplicable. i look forward to discussing a lot of the important issues in financial reform with our witnesses today. and thank you, mr. chairman, for

your leadership in this area. >> thank you, senator cohen. -- senator collins. >> i do have a question to for the chairman. we welcome you here. everyone is talking about and that's a regulatory system and the changes. in the heartland, we hear and understand that wall street provides critical financial support. we also understand that the changes to the system are necessary on wall street. but if they alter significantly the way that people do business back home, we want to make sure that reform is done right. the derivatives -- yes, some of the derivatives really need to be regulated. but a lot of the small businesses back home are in

commodities, where there are no contracts, no systemic risk, and lumping these into risky derivatives trading, as far as i'm concerned, makes no sense. you're not a speck of the contras but these are contrast between parties to operate normally. -- these are not speculative contracts but these are contrast between parties to operate normally. the high cost of energy for transportation, particularly for farmers, that happens, so i like to ask you about that and i appreciate the chance to raise that. mr. chairman. >> thank you very much, senator bond. let's go to mr. gensler force opening statement. >> i thank you for inviting me here to end testify in behalf of the commodities futures trading commission. i am honored to be here with

chairman bashir of -- chairman shapiro. i appreciate your being at the same table because it took more questions than me. with the help of the subcommittee, the f -- the cftc has risen to staffing levels of 600 people. this is roughly where we were in the 1990's, coming back from 440 people just three years ago. we do believe to fill our mission and protect the american public, we need 745 people bird we also need to get a bit more in our technology budget barry the cftc ensures that futures exchanges and clearing houses that we overseeing work to lower risk to the public and increase transparency. we also oversee all the intermediaries, that dealers who need markets as well. though our staffing level is

only slightly higher than it was 10 years ago, futures trading volume, and i have a chart over here, if i might -- the blue as the trading volume. and as you can see, our staff actually shrunk and we're coming back. one might look at this and say that that as productivity. but imagine the city with police officers that has grown fivefold and you would not want to have the police force shrank and have more productivity, because you cannot investigate cases and protect the public. it is the same thing in an agency like ours. we're the police force that shrunk while the city grew fivefold. with the help of this subcommittee, we of turn the quarter. we have come back to where we were in the 1990's. and this increased funding, if i can tell you what we have been able to do with it and why we think we need more, we've been able to significantly increase our enforcement division.

that enforcement division has 170 people feared we think we need to get to 200 people. we have to started on a program through automated surveillance. we have hundreds of thousands of trades to come into us today. that is very good. but we want to automate the surveillance of those and bring 21st century computing power to the american public. thirdly, we implemented the zero parties, that you granted us under the reform bill in 2008. that was enhanced regulation for the market. we proposed rules on lemons exchanges, planning to put our roles on coalification -- call location in the future. -- colocation in the future. there's technology that we need

to keep up with. starting in 2010, we started a multi-year project to automate our surveillance. it will take us several years and we have included that in the numbers. second, we need staffing levels and resources to conduct annual reviews. when i got to the cftc, are we inside the banks every year? and i found that actually that we have shrunk, that we were not inside the exchanges and inside the clearing houses every year just to do what is called a rule enforcement review. we really need to be there every year. and work with the exchanges and clearing houses to do that. third, our enforcement staff, we really feel we need to get up to 200. a financial crisis requires more staff resources. manipulation cases can take up to two years, two to three years, what does it is putting up for me as our overall funding request and i think my time will

be out. our overall funding which can get us to $169 million, then we are asking for $216 million for 745 full-time employees. much of that is to talk about more space for the growth, the cost of living increase, and technology. but an equivalent -- in addition to that, if congress were to move forward in the next few days, because i encourage -- and i am encouraged by what you said on that, if the senate takes up the full debate on reform, the cftc will have more responsibilities and a party son. this is a eight to 10 times the exact -- the size of foreign exchanges. the smaller number of transactions for the president was good enough to include $45

million request that would get us part way there. we think in 2011, we will need 240 more people and $18 million more in technology to get started on the derivatives oversight. and i know that chairwoman shapiro will have some of those numbers as well. it may be a conditional appropriation and a derivative reform could go through, if you can include it in whole appropriation package. i would be glad to take any questions. >> they're so many question to ask, but i want to reiterate what was asked by senator collins. there substantially greater investments in resources that you have to work with. because for substantially more oversight from our side of the table because there is a certain level of absorption which you can add your staff in a professional manner and increase the workload and then i have

found that it reaches a tipping point or perhaps they cannot be absorbed effectively. there should be a committee of congress watching this, following this, making sure that we're moving toward the same goal and that you are achieving that goal. let me ask you in a specific way about technology. my impression, having worked with senator collin cents 9/11 when we are on homeland security, is that the federal government is like the last to pick up on new technology. we create rules and obstacles for purchasing and acquisition and all sorts of security questions, and we fall far behind the private sector. do you feel that your technology improvements parallel or are consistent with the technology available in the private sector for similar functions? >> i welcome the oversight of this committee and our authorizing committee as well.

in terms of technology, we have had with your help the ability to get that data resources. we can ashley taken all the transactions on the next day and all the positions at the end of the day. that is very helpful. we rely on the exchanges that they have a lot of that technology as well. what we're trying to do is 21st century software to actually do -- consider flags and alerts so that our staff can then see whether it is a wash sale, a position women, a concern, and then go back to the exchange were to see if there's a violation, work with the division of enforcement if something has to be followed up on. hundreds of thousands of trades that we need to do that on. we are not there yet. i think the average trading experts -- we need to get some of that expert into the government. >> is there any built-in obstacles to you acquiring the

technology that you believe is available and that you need? >> the good news is that we have the legal ability. we do it for procurement laws and so forth. but we have the legal ability to acquire. it is usually just resources and in the past we did not even have the hardware to store all the data. we've been taking care of the storage side, but now we have to build some of the software. >> is the answer know? are there obstacles? >> i am not aware of obstacles other than dollars and the human time to actually do this. >> one other aspect of this is how much of this is made available to the public. to review your work and the activities that are not proprietary, obviously. the exchanges which monitor. >> there is a great deal of information that we make available in the aggregate data, and about derivatives

reform, if derivatives reform moves board, there would be a lot of information about that market as well on real time reporting. i think that answers your question. >> i am wondering if there is more and more disinformation made available to the public. >> in the last year we have ashley made more information available about and that -- indexes in the market, for years we've put out reports every friday about the market, we've broken that down, you can look at swap dealers and money managers or hedge funds are doing in the market in aggregate. we do not break out the individuals. >> i'm going to yield to senator column. >> thank you, mr. chairman. mr. gensler, i had a great interest in seeing the commission established position limits to apply to the energy markets. senator lieberman and i held hearings looking at the price

spike in the energy markets a couple of years ago and position limits can potentially help prevent those kind of abrupt price movements were market disruptions. could you update us on what is being done by the commission to establish position limits for energy markets? >> i thank you, senator, for your leadership on this issue. we publish proposed rules in january and ask for public comments, and that period closed yesterday. to reestablish position limits, there were position limits in the energy market with the exchanges through 2001. we are looking to reestablish them. we have over 8000 comments and what we will do as an agency is review those, and we're just embarking on that, and then bring those recommendations up

to the five commissioners and we will see how best to proceed based on those recommendations. >> the second issue that i wanted to talk to you about in this first round has to do with the regulation of derivatives. this is such a complex, important issue. we clearly need more transparency. one of the debates, however, it is the extent to which end user manufacturers, grocery stores, should face increased costs for commodities essential to their prize, and they will face increased costs if in fact they have to go through the clearing houses. help us understand the debate on derivatives and whether there should be exceptions for end users, whether you see the

agricultural bill providing eight cents cents and whether or not they do -- educate as a bet on that issue. >> i thank you. one of the key ways to lower risk in the derivatives market isn't clearing house. they have existed since the 1890's, they have been a well regulated since the 1930's by us and there are other clearing houses as the sec. they stand as middlemen between the two party spirit of one of the parties fail, then they stand behind the contract. that fundamentally low-risk and their clearing houses that have been very strong and have not had access to the discount window. i think he should probably keep it that way. we should not expand the safety net to them. what we're recommending is that

there would be clearing on those products that are standard enough to be brought into a clearing house. some people think that maybe 75% of the market, but the chairman of the senate agricultural bill, merged into the banking bill, will have an exemption. it will be for non-financial entities. if i might call them, commercial entities. it could be some of the commercial entities that senator bond referred to. if they are hedging whether for corn or wheat or an interest- rate or currency, if they are not a financial entity. on the other hand, an insurance company or a bank or a hedge fund, it would have to use the clearing house for their standard product. the customize things, they could still do. >> thank you, mr. chairman. >> senator bond. >> thank you very much, mr. chairman. chairman gensler, i am glad you

said it would not require an end user to clear hedging. if a community bank want to have a large portfolio of loans and wanted to offset part of that risk by going short or buying some form of blood, who would be the appropriate person to regulate that? would it be the bank regulator, the cftc? >> the bank regulator would regulate the bank. >> the cftc would not be more and ball than that. >> we would regulate the exchange's if it was the standard -- if it were so standard that was bought and sold on an exchange, as we do now. we do that now on the chicago mercantile exchange's third we do not regulate the banks.

we regulate just the exchanges in that example. for the clearing house. >> so they would not have to pay a separate fee if they were doing that. they would pay the fees that are already built and to the existing exchanges? >> i believe that that is correct. that community bank could do a customized tailored transactions that might not even come to a clearing house. but if it is the standard that the clearing house was there, they would bring it there. >> i understand that you and the secretary of treasury should say that the customize transactions, two parties that have worked together have adopted a customized derivatives for hedging operation where it cannot be cleared, do you agree

that there is no reason for two parties who have developed a complex contract be cleared? >> it is customize, it would not be brought to a clearing house and that is the recommendation. we're recommending that the swap dealers themselves, the dealers, large banks be regulated, and that the banking regulators be able to lower risk to the american public by setting capital and margin requirements for those big financial houses that are the swap dealers themselves. the customized transactions could occur and not be brought to the clearing house. >> would they have to post margins on that? >> what we have recommended is that the banking regulators, what is called for in regulators, would have the authority to ask for those large what dealers to either post or

receive margin purred margin also protect the other party, but we think the large swap dealers should be able to fail. republicans and democrats alike, they sit in the office and they get it all and they say can i let the company failed? well if i let it fail, it is going to bring down the community banking system or the farm credit system. the thought is to have them post margin as well. >> on these requiring margins, if the small bank hedges its risk, would it have to put up the margin or would that be up to the financial -- the provincial regulator to determine whether it was appropriate to make the transaction? >> accustomed -- a custom,

tailored products, it would be up to the bank regulators. it is the regulator regulating the swap dealer that would have that authority if this bill were to go through congress. >> if you are a major energy producer that has lots of contracts, coal or natural gas company that has lots of contracts with lots of energy companies, would these be major swaps dealers to would be under the new regulations? .

>> blair by doing that, it would fallen to a major category. >> some more, some do that. they have registered trading entities and so forth. >> thank you, mr. chairman. >> this whole conversation we're having about the future of derivatives, what will be regulated and what will not be regulated, what is standard, what will be custom -- the have any projection if we move into this new world of the volume that we would be talking about? we talked about the number of contracts versus the size of the contracts. could you give us some estimation of what we're looking at? >> is such a dark market, it is hard. it is about 600 trillion dollars, 12 times the world economy. it is estimated that half of

that is in the west. about 20 times our economy. we use more than we receive. in terms of the numbers of transactions, we don't have an actual estimate. it is probably not a multiple. the market that we overseen now, the numbers are about $34 trillion. that is nine-one, or something. the transaction numbers are less, probably in the hundreds of thousands of trades a day. this new market is smaller than that, but we don't have an exact number. >> if we embark on this brave new world, d.c. demand for more staffing and more activity? >> i do. our best estimate from the congressional budget office for 2011 was 238 people.

what the president's budget did is say let's do half of those people in 2011 because we would be growing through the course of the year. i know the securities and exchange commission has their numbers as well. this is a really important market to the american public, but it means little if congress authorizes it and we don't marry it with the appropriations. >> you talked about audits. what funding levels would allow the ctc to look at derivatives as well as annual examinations of commodity pool operators, trading advisers, and futures commission markets? >> we believe in the funding we have passed for four days $216 million, we can do much of what you just said. the trading organizations, i did not listen closely. some of those you mentioned are

done by the self-regulatory organization. the ones we do, we think that is the level. >> my last question is kind of historic. over 25 years ago, they still were clinging to their early image as protectors of the agriculture sector in terms of the trading that was going on on the floor. they were just starting to branch out to new worlds, a new futures. now when i take a look at the activities, the financial commodity futures options contracts make up 79% of the trades that you regulate. other contracts like metals are about 13%. only 8% can be characterized as agricultural in nature. what kind of challenge does this present to the agency that has this kind of mix moving toward a

much different -- and objects that are at the heart of the futures trading markets? >> you are right, is a development that has happened over 25 years. there is a uniformity, a consistency of during this period is based on some underlying commodity. what we have to do with the agency is have experts that have expertise, and we have other experts for the financial products. as these products continue, we try to build separate expertise. we have some uniform expertise around during this and some product expertise. it is very different than what goes on -- we build expertise across the product cents.

as we take on more responsibilities possibly in what is now the swaps market. >> are those going to be so unique by contract that they are going to put the special burden on your regulators to try to understand the nature of the transaction? >> humility suggests that there is going to be a lot that we are going to learn along the way. because we have not, as a nation, regulated these products. i think interest-rate derivatives is where the cftc will take over. there are a lot of similarities of where we oversee -- there will be things we are going to be learned along the way. we will hopefully be sharing that with you. >> i think you said in response

to the chairman's question that the futures market was something like 34 trillion dollars -- $34 trillion. that raises a question in my mind. under senator dodd's bill, is the cftc a member of the systemic risk council of regulators? >> i believe the answer is yes. >> let me ask the next question, should you be a member? >> i think so. thank you. >> if you are not a member of the council, i am going to offer an amendment to put the future trading commission chairman on that council. i think it is really important that we try to be as -- >> i could not remember what it was called. i know there was a council, it may have different names in different bills. >> it does.

the chairman confirms it. how do you plan to help monitor and mitigate the potential for systemic risk arising from the concentrations or interconnectedness of risk that are related to derivative products? >> derivatives do this sort of spiderweb between the financial system, and one of the reasons we have been fighting to lower risk for the american public is to bring derivatives into clearing houses. again, they stand between buyers and sellers. our system today does not just have too big to fail, it was thought years ago to be too big to fail, but we have banks that are too interconnected to fail. that was the central lesson of aig. tens of billions of dollars of

our money, all went through it aig to other financial institutions. i believe we really need to stand. there will be stress, pressures, and amendments to offer other exemptions. i would advocate that we not have those exemptions for financial entities. we have them for commercial, but not for financial, hopefully. >> can you give us an example of the kind of transparency that will be helpful to you that would come about because of moving derivative trades to a clearing house? let me ask this in a better way. what would you know that you don't know now if more of the trades come through a clearing house? >> there are two types of transparency, when the regulators, one of the public.

clearing out at something called a trade repositories will give traded irregulars and we will know lot. i know the sec will be able to better enforce the police for manipulation and fraud. so much now can be transferred. we can look it wheat futures, somebody can move the same trade over the counter interest rate or complex credit defaults what. as enforcement agencies, we get the following across to those other markets. there is also public market transparency. it really only comes from reporting the transactions on a real-time basis. for that, every end user will actually benefit because transparency leads to lower cost, lower spreads, and it shifts the information it vantage away from wall street. wall street is not happy with

the proposals the administration has made, but it lowers risk. remember, we were debating toxic assets. it lowers risk to the public. >> that is very helpful. >my final question to you is one that i have raised in my office. i have been hearing from some home heating companies that are worried that if they have to go through clearinghouses, they will jeopardize their ability to enter into contracts with their customers that would be fixed price contracts for the upcoming winter. do you see any problems created for them? >> your effort from them because there's been a variety of bills, and even i have advocated for no exceptions.

senator lankan, senator dodd, and all the people that i've worked for those committee bills to come out, there were be an exception for commercial hedging. the home heating oil companies would be exempted from having the transactions come through a clearing house as long as they worked speculating. >> they are not. >> the bill, i think, accommodates that interest. commercial entities make up 9% or 10% of the market. we don't know precisely what it is, but the exemption that is in the senate agriculture and banking bill is the balancing of interests. it is exempted that 9% or 10%. >> thank you. >> senator cochran.

>> chairman, i am curious to know about the new authorities which you are suggesting cftc should have. what is the status of the legislative authority? has that been enacted into law, or is that just a proposal at this point? >> it is a proposal. it came up here, because if it went through, funding levels would be different. the house of representatives have passed a strong bill, and the senate hopefully in the next few days, you would tell me better. >> i am not the chairmen anymore. you forgot to have an election. >> the agricultural committee and the banking committee have emerged products and they have a very strong during this portion that i believe is getting

merged into the overall reform bill. i am hopeful that with congress's deliberations, we will get something to the president's desk. >> this has a budgetary impact, because it will cost more to enforce the authorities. or the other funds the your expecting will be needed or useful? >> we have estimated that in 2011, we would need about 240 more people and about $18 million more in technology budgets. there is a lot of it for nation -- information that needs to be stored and assessed. >> ok, thank you. >> there plenty of other questions that we would like to share with you in writing and

help you be able to respond. other members of the committee may have questions, but we think you for being here today. we will continue to work with your agency. >> i think you chairman, senator commons, and chairman shapiro. >> block, mary. >> thank you for the opportunity to describe how the president's fiscal year 2011 budget request will allow the sec to better pursue the mission of protecting investors. when i joined the commission, we were emerging from an extraordinary economic crisis. the markets are still trying to regain a firm footing. in the sec specifically was badly shaken. things to the strong support that the subcommittee has provided, the sec has begun to rebuild that confidence by

making changes to virtually every aspect of our operation. we have streamlined procedures and performed operations. we initiated one of the most significant investor focused rulemaking agenda is in decades. we undertook a top to bottom review and a complete restructuring. silos were torn down, a layer of management was eliminated, and we created specialized units that will bring a deeper focus to critical areas such as market abuse and structure problems. these have already paid dividends to the support of this committee. among the highlights of the first year, we sought twice as many asset freezes in 2009 than in 2008. we issued twice as many formal orders of investigation. penalty orders more than

doubled, and we saw 10% more actions overall, including twice as many involving ponzi schemes. >there is a similar review that we expect he'll similar improvement. we created a new division of risk, strategy, and financial innovation. we are staffing it with people that bring new perspectives and expertise. we have made real progress, building the trustworthiness of track -- and financial institutions will require a regulatory commitment. fyi 2011 will be a critical year to reinvigorate the mission and its program. >> the challenge we face grows every day. it has increased by nearly 50%, and assets have grown by $12 trillion.

4000 individuals monitor more than 35,000 regulating entities. it was this year that the staff members returned to the level of 2005. tight budgets forced us to cut investment in information technology by more than half. this has allowed us to reverse the harmful trends, and i think he deeply for that. the president's budget will allow us to continue on this path. more staff with a deeper pool of institutional expertise have hired a specialist with today's markets and products. the staff will also mean more investigations, trials, and a smaller gap. and a greater capacity to respond to emerging trends. the president's budget will also provide an increase in information technology. our top priority is completion of a new system.

there are investigative leads provided by whistleblowers and other sources. creation of a single searchable database. we will at risk analytics, and quickly and efficiently identify patterns across the data. we're also collecting analysis and distribution of a disclosure document. this will allow us to monitor macro trends. well supplant to complete improvements to the case available to our enforcement and examination program. while we will never match the technology available to the institutions reregulate, the ability to search the data we collect will make our team much more competitive. new technology will be accompanied by comprehensive training, allowing staff to navigate the financial environment.

and we will also continue our pursuit of rulemaking that looks after the interest of investors in response changes in the american financial marketplace. key goals include a thorough review of a rapidly evolving equimark the structures, helping shareholders effectively exercise their right, and giving investors better information to make sound decisions regarding securities. i am pleased with the progress, but we recognize that much work remains to be done to restore investor confidence in our market. the levels and the president's budget requests are critical for us to do increasingly complex financial world. i would be happy to answer questions. >> i just finished michael lewis's book, and it is really an eye opener of what is really going on. one of the areas that i had

heard about many times that he made reference to was the work of credit rating agencies, the fact that some of the credit ratings given were misleading, to say the least. since the beginning of the credit crunch, these agencies have come under fire for inflated ratings that did not reflect the financial stability of the borrowers. i asked you questions last june about what the sec was doing to restore confidence. and what improvements were needed. in your material submitted in february, you indicated that the fiscal year 2011 budget will enable the sec to carry out more robust oversight function for credit rating agencies and conduct examinations. half of the recognized statistical organizations next year.

you explain that in 2006, the sec took on a major responsibility with the agency reform act that gave the agency the authority to regulate internal processes of nationally recognized statistical rating organizations. you contend, and i quote, "to carry out these responsibilities, it has been forced to divert positions from other programs." i am puzzled by that statement. in fiscal year 2009, $57 million more than the present request was given. and in fiscal year 2010, congress provided $1.10 billion.

$85 million above the president's request. if it is a high priority, why were you not able to devote some of the increase funds we provided to this function in fiscal year 9 and 10. >> i don't have the statement right in front of me, but we are committed to aggressive oversight of create -- of rating agencies. there is an examination branch for credit rating agencies, and the goal is to try to examine all of them on a regular basis. we're quite committed to solving the problems that we see with respect to credit rating agencies. >> is this a typo where you start to work next year? it was in the budget justification materials given to this committee. >> i can assure you this work has begun. we have a new head of our office

and compliance. rating agencies are working in that office. >> we have justification materials, and i like to share with you. when you have just said is not consistent with the committee. in the wake of the massive ponzi scheme perpetrated by bernie madoff, the sec has taken steps to reduce frauds. among the actions in sec materials as advocating for a whistleblower program, is part of the financial regulatory -- at a reform legislation. the request they expand the authority to reward russell blowers that bring for substantial as it -- evidence about violations. the current law prevents the sec from providing a reward to those who helped tip information to an inside trader or a person that directly or indirectly

controlled inside trading. a few weeks ago, the inspector general issue a report on how the bounty program is working. the sec noted that while they have had a bounty program in place for more than 20 years for rewarding whistle-blowers for insider trading tips, there's been very few payments under the program. likewise, the sec has not received a large number of applications seeking a bounty. they also found the program is not widely recognized either inside or outside the agency. the inspector general indicated that although the sec has indicated expanded authority to reward whistle-blowers about significant federal law violations, the current bounty program is not fundamentally well designed to be successful. they called for a long list of improvements by your inspector general. make it more user-friendly, establish policies and procedures to assist staff.

in to make about the war determinations. routinely provide status reports regarding about the applications. track the applications. that the sec has begun to take steps to correct deficiencies in this bowed to program including consultation with the department of justice, the irs, and other agencies. this inspector general report about your whistleblower program is troubling to me. it indicates that the level of energy that we expect in response to madoff and the embarrassment he brought to your agency and to our government would create a whistleblower program to try to save some of his investors that can be exploited. >> i would very much like to address that. when i arrived, i asked that we build a more robust program

because the insider-trading program has not been effective. that is in part because insider- trading is rarely brought to the sec by tips. it is usually discovered as a result of surveillance done by the exchanges or by the sec itself. we needed a program that covered much more that insider-trading. it is a small portion of cases every year. the whistle blower with it -- legislation that we think would be far better raises issues and we think will allow us to really leverage the information to the sec in a broadway -- a range of potential violations. >> you are asking for expanded authority. if your discounting what they can do, why are you asking -- >> i think we can make tremendous use of tips and complaints from whistle-blowers. in a narrow context, insider- trading is the only place a

program can be applied, it has not been an effective program. it will allow us to be able to have a more meaningful recovery on their claims and will cover more insider-trading. it frequently isn't the result of a whistle blower coming to us because the insider-trading tends to be protected from abnormal trading activity. or an acquisition that is detected by a surveillance system, prosecuted by us. the program is flawed in many ways, which is why we asked to expand the program and make it more robust. >> is the inspector general's report on the right track? >> at a good inspector general's report is on the right track. it is really the result of talking extensively with the

staff on how to make the program better. >> there have been three issues with the sec that i would like to deal with today. to get your answers on the record and put an end to some of the speculation about one of the issues is the first one. there has been speculation that reported in the financial press that the sec's case against goldman is somehow motivated by the timing of the financial reform bill. is the action against goldman in

any way to go we don't time our enforcement actions by the legislative calendar or by anybody else's wishes. that is exactly what happened here. >> i share your view on that issue. i think it is important for me to ask you -- >> i appreciate the opportunity. >> the second question i wanted to ask you has to do with the disciplining of the sec employees that were involved in the porn case. i really am so appalled that those findings by the inspector general. . .

>> it has to do with criticism of the failure to uncover the madoff ponzi scheme. has the sec taken any disciplinary actions against employees as a result of the ig's findings in the madoff

case? >> in the first instance, it was the agency's own filters that detected the activity that was reported by as to the inspector general. there were 32 persons cited in the report over a five-year period. that said, a completely share your discussed with his conduct. it is unacceptable of the securities exchange commission or anywhere else. we will deal very swiftly and severely within the laws with anybody who abuses sec resources. last week, i put out a message to all employees making it clear that anyone who abuses sec resources are misused them will be subject to termination. so we will deal with this very swiftly and severely, and all employes are clearly on notice with respect to that.

many of these actions were a number of years ago and disciplinary actions have already been taken at one level or another. we have significantly ramped up the potential penalties. with respect to your last question, as a result of the inspector general's investigation of the agency's failure to detect the madoff rot, the recommendation of considering discipline. in the enforcement division of the 20 employees who were involved with madoff investigations, 15 have already left the agency. with respect to those who are left, we have put in place a disciplinary process in accordance with the federal rules that apply to all federal workers in all situations like this. that process is intended to be fair and deliver to, but appropriate, and we are going through that right now.

it is well underway, and i cannot really comment on specific actions, but i can assure you that a disciplinary process is underway. >> mr. chairman, thank you, and ask whether or not any of the findings and recommendations of the inspector general in the case that senator collins raised have been implemented, or have those who were found to have violated regulations or laws in this connection, have they been punished? you mentioned that five are still working there and there were others who resigned, as i understand it. >> the inspector general issued his report in august and october. between them they included about 69 different recommendations for the staff. as a result, very probably the

offices involved, are inspections and enforcement group issued corrective action plans which generally require that corrective actions in response to an ig report be taken within a year. as of march 31, between four 0.5 and six months after those reports were issued, the art treasures have completed corrective actions on 35 of the 69 recommendations. we are awaiting the inspector general's concurrence on 19 of those. the rest are substantially well under way and i think we are making very significant progress. with respect to the employees, as i mentioned, and never of them have already left. we are looking -- a number of them have already left. we are looking at whether or personnel action should be taken. there is an established process we are legally required to follow, as we would in any employment issue involving a federal worker. that process is well under way

and we will be happy upon completion to report back to the committee. >> i have several constituents from mississippi who called and came up to washington to visit with me and other members of congress in the senate to tell us about their experiences and really serious financial dislocations that have been caused by this scheme. it is really heartbreaking to realize that these people were really innocent victims of somebody screed and corruption -- somebody's greed and corruption. i want to be sure that anything can that can be put in place to prevent this from happening in the future is acted on and done quickly. can you assure the committee that that is the step and the

intent of the sec in this case? >> senator, absolutely. as soon as i arrived last january, i put into motion a number of things that we hope will reduce the chances of a tragedy like this ever happening again. we changed leadership across the agency. we restructure our enforcement division. we are in the process of restructuring our examinations group. we are bringing people who have new skills that are better able to understand some of the information that mr. madoff managed to so expertly fool the staff with. we are doing much better. over 500 employees have undergone training. we have put in place new rules that will allow us to leverage the work of accounting firms when an investment adviser -- that are now required to have a surprise audit by up dca are

registered accounting firm and allow us to have access to that information immediately so we can look for suspicious activity. as i mentioned in my statement, we put in place a system to try to better track ships and planes and referral so that the kind of information -- tips and complaints and referrals so that kind of information will not slip the the cracks. we worked day and night to do everything we can to minimize the chances of a terrific event like this ever happening again. i share your deep concern about it. >> i appreciate your response and your obvious interest in helping to change things so that it will be less likely, not likely at all for something like this to happen in the future. i wish there were some way we could provide some kind of restitution or through a request from the administration, congress could provide you with some authorities to help do

something to compensate these victims for this terrible scheme. >> victims aren't held to recovery. it will not come anywhere close to replenishing -- victims are entitled to recovery. i believe at this point the trustee has paid out somewhere around $680 million, and the trustees have gathered about $1.5 billion for distribution to victims. it is a long and difficult process, but is well under way. >> thank you very much. >> congratulations on the earnestness with which you have taken over this assignment.

it is desperately needed because people not only lost money, but they lost faith in government at the same time. it is a subject of interest of mine. i still sit on the board of the columbia business school. in 2001, i was able to establish a chair at columbia. it called for better business ethics in corporate government. while i claim some clairvoyance, the fact of the matter that is having come from the corporate world, i saw a situation developing that was very discouraging.

we have seen it in the last years when looking back at testimony, given the people who served earlier, the criticism that there was responses to questions that we just did not know, we were not aware, that whistle-blowers were sending fairly significant evidence on the part of the sec. is that still a source of information -- what happens when you get something like that? >> we get hundreds of thousands of tips and complaints a year. one of the problems i discovered when i ride last year was that that came in from many different sources. -- when i arrived last year. investments, other regulators, other regulated entities, and they come in all over the sec.

there was no mechanism to centralize this information, connect the dots that might provide useful information about a trend or growing problem with a particular product or trading strategy or a particular firm. so we spent the money that this committee very generously gave this agency last year in technology dollars to begin to build a centralized repository for all the tips and complaints and referrals that come into the agency. the next phase is to add risk analytics to that and create an office of market intelligence in our enforcement division that is charged with responsibility for knowing the data that is in there, understanding what creates the highest level of risk for the investing public, following up on those leads, tree ossian follow up and making sure that we act on them -- tree iristriage and follow up.

>> it was a pathetic response to what action was not taken in one case. i see that your budget request clearly identifies enforcement as to a top priority, and obviously it has brought about -- was brought about by the years of neglect. how you stimulate your people to go after these things when the

culture before was so neglectful? are you able to keep track of what is going on there? rex is a great question. i do not mean to sound like pollyanna, but the culture of the agency was maybe submerged a little bit over the last several years. there is tremendous enthusiasm again for our enforcement role. we took the handcuffs off our enforcement division. within a week after i arrived, we told step they could issue subpoenas without waiting for the five commissioners to vote on it. two months of the investigative process. we enabled our staff to go ahead and negotiate corporate penalties with public companies in enforcement cases, instead of getting permission in advance from the commission. again, speeding up the process and empowering them to do their job. we created five specialized units of people with deep

expertise and are having tremendous success in recruiting people that will focus on specific areas and get the and knowledgeable about structured products, asset management, insider-trading and market abuse and so forth. we have specialized units that will be far more efficient in bringing cases. we took a layer of management of the enforcement division and put hundreds of really talented people back on the front lines of doing investigations and bringing cases. we have done the most significant restructuring of the enforcement program in 30 years, and i think we are already seeing it pay dividends in the level of complexity of cases we are bringing. if you look at the major cases over the last, they are quite extraordinary. in a number of cases, for example, in 2009, we shut down twice as many ponzi schemes over 2008, far earlier than the madoff schema have ever been shut down.

>> if i might take a moment for a musing and say that as you look at executive compensation, which i know is one of the things that you see, and i ran a pretty good sized company before coming here. i was very conscious of things that we did to stimulate attitudes within the working population of the company. when we put any money into the outside world to try and help as we have effectively, to meet, a year end -- a termination notice ought not to be the market's based on the stock price, but based on what good individual did for the company.

instead of paying a bonus immediately, the it out over a five-year period. after a certain point, that is when the big bonuses come. i don't know what right have at the sec to make recommendations, but -- >> i do not think we can dictate the terms of compensation arrangements. we did approve new rules that require the board of directors to explain to shareholders how they compensate risk taking within the corporation, and whether there are compensation programs broadly for all employees might incentivize short-term risk-taking, how the board handles risk within the organization. it is disclosure based, as much of our rules are. is forcing courts to really think about what they want to say about their compensation

programs, and how did they want to explain the linkage between compensation and risk which we see over the financial crisis to be a strong link, and one that had very deleterious effects at the end of the day. >>+"g you announce the appointmt of a new chief compliance officer to service an internal watchdog to monitor security holdings and transactions by your employees. you said this had to be a world- class compliance program. there was an article that follow that decision once they found out where this compliance officer would be standing in the pecking order of the administrative stairsteps of your agency. there was a concern that this person really did not report --

was in the ethics counsel, did not have independent status, and did not report to you or another high-ranking official. the question was raised as to whether this really was a world- class attempt to deal with a serious problem that might involve some conflict of interest within your own agency. >> let me address that. the article was quite off the mark. when i arrived at the sec, i was surprised to learn that there was not a system for monitoring employee stock transactions. i had come from an organization where we had quite rigorous one. i immediately got in a contractor to help us develop a system that requires every employee to enter all of their stock holdings and all of their securities accounts into a centralized system. it enables employees to pre clear any trades and ultimately it will receive directly from brokerage firms do with the

copies of employee statement. at the same time, we are working with the office of government ethics to bolster the existing rules that apply across the government's so that no employee will be permitted to trade in a stock in any company under investigation by the sec, whether or not they have any knowledge of it at all. that will also require pre clearance and certification that they have access to note nonpublic material information about those companies. we are negotiating those rules out of the office of government ethics right now. the person hired is responsible for that system. we have an entire office of ethics within the sec. i meet with them regularly. i met with them this morning. it is not achieve compliance officer in a sense of one in a brokerage firm, which i think that article was trying to equate. >> can this person report directly to you? >> she could carry in fact, i

met with her yesterday and she knows my door is open to her at any time. it made sense to put her in office of general counsel. i would have no problem in changing the reporting line. i think she will get more attention and focus their and she knows she can come to me anytime. every employee does, on any issue that is of concern to them. >> let me ask about report was released on april 16 in the inspector general's office about the stanford case and the fact that this case -- allen stanford was indicted last year on a $7 billion fraud case, accused of fleecing more than 21,000 people. the sec's forward office was aware since 1997 that robert

allen stanford was likely operating a ponzi scheme. as the report states, no meaningful effort was made by enforcement to investigate. agents began looking at his companies in 1998, 2002, and 2004. the ig report also says sec supervisors were more interested in quicker turnaround cases that time, not the kind of examinations needed to look into complex entity like stanford. to make it worse, the former chief of enforcement in the fort worth office to help quash the increase later went to work for stanford in 2006 before he was told by the sec to stop because it was improper to do so. like the case of madoff, the report offers another reminder of potential breakdowns of regulatory oversight. i recognize these circumstances preceded your arrival, yet cases like this can fester and in public to the surface it years

later. what controls that the snc have in place now to insure that a disturbing mess like the madoff and stanford cases do not recur? what else should be done to make sure that they do not? >> let me speak specifically to stanford. i have taught what a bit about all the changes we have put in place with respect to madoff. with respect to the conduct that was discussed by the inspector general in the sanford case, there were many missed opportunities without a doubt in that 1997-2005 time before the agency to stanford up seriously and earnestly to have done something. i was not there, so i do not truly understand what happened. i will tell you that we have new leadership across the board in this agency, in the inspections program as well as the enforcement program. we have created escalation committee so that if an examiner

believes they have found a real problem and they are not getting a response when they refer it over to the enforcement division, they will take it to an escalation committee and that will go all the way up to the senior ranks of the organization. we have new management reporting metrics put in place in the enforcement division and a regular review of open matters in examinations group and the enforcement group that we can be sure things are not sitting for a long time. decisions will be made sometimes to shut down a matter because there is not sufficient evidence, and we could miss something by doing that. but it has to be a conscious decision based on the evidence in front of people at the time. it cannot because of neglect that something has not been pursued. between the leadership changes, the structural changes within enforcement and those i anticipate we will be announcing in the inspections group before long, the creation of the escalation committees and the new reporting mechanisms within

the division, i am hopeful we will never have a repeat of that incident didn'. >> the questions i have asked that they have been pointed, and all issues that are important and controversial. is part of my responsibility on this side of the table that the oversight of your agency to ask those kind of questions. there are some in the senate now to what must be taken out this process. they do not want these questions to be asked, and i think that is wrong. we have a responsibility to make sure you do your job and do it well, and provide you with the resources to accomplish your goals. the notion that the oversight of the appropriations committee is unnecessary is just plain wrong, and i hope we can continue the positive, constructive relationship, providing you the resources and support you need, and you can count this as long as this appropriations committee is involved. each year you will face questions they get to the heart of your activities, and be held

accountable as we are held accountable. >> senator, i appreciate that, and i have always endeavor to be completely transparent about what is happening at the sec, what i see that is wrong, and how i am trying to fix it. this is an institution that must always learn from its mistakes, and that is my commitment to you. >> i still have confidence in your leadership, but we have a responsibility on our side of the table as well. >> i understand. >> let me wholeheartedly agree with the statement you just made. i am going to bring up one of those kinds of questions right now, too. in 2004, at the direction of congress, that sec established the office of global security risk management. this was created, and probably the chairman was involved, because i know this is an issue -- it was created to protect

investors from the risk associated with investing in companies doing business in nations that are designated as the state sponsors of terrorism by the department of state. but the office within the sec has failed to vigorously carry out the mandate to ensure that all companies that are sold on american exchanges that operate in those countries are disclosing their activities to investors. i know the chairman and i have supported legislation that has allowed state pension funds to divest their holdings in such cases. why hasn't the sec been more aggressive in following through by issuing regulations to

ensure that corporations do disclose information about their activities in such countries to their investors? >> center, the office of global security was created in 2004, and that time between then and now, that office has reviewed about 800 corporate filings that his clothes and doing business on some level what iran, sudan, or cuba that are on the state department list. disclosure requirements are based on materiality. that is something we could change. but there is not a separate line item disclosure for any level of business with one of those countries. we look at materiality, both quantitatively and qualitatively. the amount of business done with one of those countries' relative to the size of the company the -- is the humanitarian are

potentially business that could have a military application, for example. is the business continuous or isolated? is there just one instance, and so forth. we do a materiality analysis. if the staff determines that the contact with one of these countries is material, then disclosure is required. we are looking at whether this should be line item disclosure without regard to materiality of the business conduct between the public company and one of these four nations that are currently on the list. >> let me follow up on that, because i am told that in november 2007, the sec issued a concept release seeking comment on whether to develop a better mechanism to allow investors to have better disclosure in this area. the comment period ended in

january 2008, and the sec has taken no action since that time. is that correct? >> that is the history as i understand it, and i have asked the staff to go back to that. again, we are looking at whether a line item disclosure as opposed to our normal -- >> why has there been no action for two years, or more than two years? >> i think there has been a general view that our disclosure system is about disclosure that helps people make investment decisions about purchasing or selling of financial asset. . .

gensler gensler two mutual funds have relied on that safe harbor to divest themselves of stocks doing business and the sedan -- in the sudan. >> yesterday's i asked what i

thought was a pretty straightforward question to several of the bankers. i ask them whether they considered themselves to have a duty to act in the best interest of their clients. the kind of fiduciary obligation that investment bankers have. and to say that they danced around and evaded that, answering my question, would be an understatement. but the fact that a lot currently does not impose -- balal -- the law does not currently impose that kind of fiduciary obligation on broker- dealers. should it? >> at actually should and we have been strongly advocating for the regulatory reform bill to require -- and we've

discussed that in a retail context, not with respect to the discussion this week about large institutional investors -- but at a minimum, when you're dealing with the retail public, they are entitled to know the financial services professionals sitting across the table from them puts bair, the customers, interest before the run. there are conflicts that some -- that can be disclosed in some that cannot be disclosed the way. it does not exist on the broker- dealer side and we need to make this a uniform fiduciary duty. i am very hopeful that the senate bill, which does not have the provision right now, will merge with that provision in place. right now we are required to do a study. we're happy to study this issue of though the sec contacted with the rand corporation to do a

study of this issue several years ago. there is lots of work out there. we will do it again, but we hope it will trigger our ability to write the rules that will trigger the fiduciary duty if the studies suggest that is what is necessary. out of the box, i would say that that is necessary. >> and in writing this new rule, should we distinguish between individual retail investors for whom having that obligation is protected and more important because they are less sophisticated, arguably, than most institutional investors, or should apply across the board? >> this is really a disgraceful situation in many ways. i would also note that in the senate agricultural committee bill, there is a fiduciary duty ford dealers of pension plans and municipalities, and that seems to be a very good idea.

i think we could set this up over time to be broader. i would start very clearly with retail. >> thank you. if you would provide me with a copy or provide this subcommittee with the copy of the reagan committee study. mr. chairman i apologize for exceeding my time. i am going to submit a question on capitol, the case which would satisfy the ided for the record as well as some other question. thank you for the additional time. >> senator collins, thank you very much. i believe that you are barely touched on something that is absolutely essential. -- that you have really touched on something that is absolutely essential. i am glad that the chairman believes that it is a wise undertaking. maybe we can build on that. the record of the subcommittee will be open for how many days?

until next wednesday. we may submit some written questions and other members may join as. we thank you so much for being with us. keep up your good work and the committee is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> earlier president obama talked about the financial regulations bill that the senate agreed to move forward. that is next on c-span. after that, all for more on the federal budget forum and the national debt.

on tomorrow morning's "washington journal," and economists will give an update on that debt channel shows. later, a look at arizonas immigration law. and later, brad sherman on financial regulation. washington journal each morning on c-span. >> the people who are coming to us for risk in the housing market want to have the security that gave them exposure to the housing market, and that is what they got. >> the senate hearing with goldman sachs executives when almost 11 hours. see the key moments. see every moment. it is washington your way at the c-span of video library, every program since 1987 free online. >> next, president obama on regulating the financial

industry. this was in quincy illinois, and the remarks are 30 minutes. >> it is good to be back in quincy. thank you, everybody. thank you. it is good to be back in quincy. [applause] we've got some special guests here i want to and knowledge. the outstanding governor of the great state of illinois, patrick quinn, is here. your fine mayor, and john spring -- give him a big round of applause. attorney general lisa madigan. treasurer and soon to be senator, alexi giannoulias.

secretary of state and tumbler supreme, jesse white. so i missed you guys. you know, now, being president is nice. [laughter] you live above the store, so it is a really short commute. [laughter] there is a nice plane. but one of the toughest things about being president is i do not get a chance to come home as much as i would like and visit with all of you like i used to. i see a lot of familiar faces in the crowd here. now part of the problem is, is that when i travel now it kind

of causes a ruckus. [laughter] i do remember the last time i was here, i think it was in this building that we were filling up sandbags, weren't we? and i still remember that day because it was a picture of what america is about. you had people from all different walks of life, the whole community coming together. everyone was working hard, everybody knew that there was a challenge coming from the potential flooding, but we've handled this before. and that is the american spirit on display, and that is the spirit of quincy and the spirit of illinois. so it is just good to be reminded of that and come back and spend some time with you all. we spent a couple of days in iowa and missouri and now back

here. yea, missouri. how about iowa? have we got some iowans here? we've got a few iowans, but we are in illinois. but over the last couple of days, we have talked to workers who are busy building wind blades for these big wind turbines, and a biofuel plant. families and small business owners trying to navigate through a tough economy. talking to farmers about what is happening to family farms in the region. and because it is folks like all of you and towns like quincy that give america its heartbeat, and that is why it is so important for me to be able the visit.

it is towns like this where working men and women built the american dream with their bare hands. this is where our roots are. i just met a young man coming in -- he says he is my cousin. the areas, right there. [laughter] seriously, it is, what is it, fourth generation? four generations back? i told him he was a little better looking than me. [laughter] but all of us trace back to this experience of parents, grandparents, great-grandparents building this american dream, not having much to begin with. and that dream is shared by every illinoisan and every american -- the chance to make a good living, to raise a healthy and secure family, and most of all to give our kids opportunities that we did not have ourselves. now the truth is, is that

sometimes it feels that that dream is slipping away. times are tough in quincy. times are tough all across america. we have gone through the worst economy since the great depression. even though our economy is growing again, even though our markets are climbing again and our businesses are finally beginning to create jobs again, there are a lot of folks who are not feeling that recovery in their own lives. i've heard their stories across the country. i have read it in the letters that i get each night. a lot of them are worried about whether or not they are going to be able to sustain their dream for a better life. many felt that way even before this most recent crisis, even before the economic storm of the past two years. both were living up to their responsibilities as best they could, working hard, looking after their families, giving back to their communities, but they kept on finding themselves getting hurt in this economy in ways they did not expect. and part of that was because washington and wall street were not living up to their

responsibilities. [applause] that is why i ask to be your president. that is why some and then you joined the campaign. -- so many of you joined the campaign. you join me because he believed we had it within our power to change things. you figured we could solve the problems that had been holding us back year after year after year, and focus on working americans again. you believed we could keep the american dream alive in our time, and for all time. and so that is what i want to talk to about -- talk to you about today. when i took office, we were in the midst of this historic financial crisis brought on by reckless and irresponsible speculation on wall street.

that in turn had led to a recession that hammered main street across america. and you saw lost jobs and lost homes and lost businesses, and downscaled dreams. the first thing we had to do then was mount an aggressive response, the make sure that this terrible recession did not turn into another great depression. and let's face it, that required some tough steps to stabilize the financial sector. and some of those steps were not popular. i knew they were not popular. i've got pollsters. [laughter] they told me, boy, that is really going to be unpopular. [laughter] but we made those decisions anyway, because the well-being of millions of americans depended on them. even if they did not fall well, they were the right thing to do. it was the only thing we could do to take those steps.

so we took these steps to get america back on its feet. we aimed tax relief right at the middle class, the cornerstone of the american dream. we made sure that we cut taxes for 95% of working families, put money in their pockets because they were experiencing hard times -- fewer hours or somebody in the family being laid off, making sure that they could still buy groceries and pay the bills to keep the economy afloat. we cut taxes for small businesses. we cut taxes for first-time home buyers. we cut taxes for students and parents paying for college. and all of this -- not only did this help those individual families, but it increased purchasing power and spending powers for been this is all across the country. and then we aniks -- we extended

unemployment benefits and we made cobra cheaper for folks who have lost their jobs. and then we helped give help to the state. and pat quinn will tell you, because of the federal assistance that was provided, we averted some massive layoffs of teachers and police officers and firefighters all across the country. so we did what it took to rescue our economy and spark its recovery. and that work goes on. and so i am pleased to see that we were losing 700,000 jobs a month when i came in office, now we're gaining jobs. the economy was contracting. now the economy is growing. the markets are back. we are making progress. we are moving in the right direction. but, keep in mind, i did not run for president just to get back to where we were when we

started. i want us to do better than we were doing. i want folks to have more opportunity. i want people to have more and better jobs. and i want our young people to be getting better educations and more access to college. it is time to rebuild our economy on a new foundation so that we have got real and sustained growth. it is time to extend opportunity to every corner of main street, in every city and every town and every county in america, so that young people do not feel like they have got to move someplace else to make their way. they can stay right here in quincy. they can stay in monroe. they can stay in macon. they can stay in fort madison. it is time to create conditions so that americans who work hard can gain ground again, and they don't have to take out a bunch

of credit card debt. they don't have to endanger their long-term financial future. and that is why it -- that is at the heart of all of our efforts. it is why we made the biggest investment in clean energy in our history, creating middle- class jobs in middle america that harness the wind and sun, and biofuels, that will not be shipped away. the will stay right here in the united states of america and create energy independence so that we do not have to import as much oil. it is why we took on the special interests and reformed the student loan system so that it works for students, not bankers. i do not know if people paid attention to this, because we're having such a big debate around health care. people may have missed this. the way the student loan system was working, the federal government was guaranteeing these loans but the banks were

still taking billions of dollars of profits out of the student loan program. and my attitude is, well, if we are guaranteeing them, then where's the rest? what you getting paid for? so we said we would just lend the money directly to the students. that saved tens of billions of dollars and wasteful spending that we're now reinvesting in making college more affordable and upgrading america as community colleges, so that every young person in america can get ahead in the 21st century. and, yes, quincy, that is why we finally passed health reform in america. reform that will begin and some

of the worst practices in the insurance industry this year. so this year, they are going to -- that will have to stop dropping you when you get said. this year, children with preexisting conditions, they have to be able to buy insurance. this year, some of these lifetime limits that means that you got insurance but you still end up being bankrupt, those practices are going to man. and in a few years, millions of families and small business owners are going to have more choice, more competition, you're going to be of the purchase the same kind of high-quality, affordable care that members of congress get. and you know that is going to be pretty good. you know they are going to give them -- you know they are going to give themselves good insurance. you're going to be able to buy it, too. and by the way, this reform will reduce our deficit by more than $1 trillion. and listen, don't -- this notion -- i know the debate was contentious.

but the truth of the matter is since i have been here, i've already met -- i was in mount pleasant, iowa, met a woman -- [laughter] met a woman at jerry's -- you know jerry's right? this is a restaurant there, and i met a woman and she said, she came up and she said, "my husband is self-employed. i'm a homemaker. we both have preexisting conditions. we need help now." and i told her this is exactly why we fought so hard for health care reform. and then today i met a woman who had breast cancer, and she was wondering how soon can we start moving on some of these programs inside the health care legislation. this is not some abstraction. sometimes the folks who were fighting us, they made it sound as if he just wants big government. nope. -- no, i just want people to be

able to not go bankrupt and lose their house when they get sick. i don't want them to see their premiums doubled. i don't want them to get taken advantage of by insurance companies. i want you to get a fair deal and a fair shake. and that is part of my job as president of the united states of america. >> i love you! >> i love you back. [laughter] now speaking of you getting a fair shake, that is why we need good old common-sense wall street reform. and we need it today. we do not need it next year. we do not need to do another study and examine it. we need it now.

and in case you're wondering, let me just take a minute to explain why it is important to you. the crisis we went through, it was not part of the normal economic cycle. what happened was you had some people -- not all people -- there are some very decent people here who are in the financial sector -- but you had some people on wall street who took these unbelievable risks with other people's money. they made bets. they were making bets on what was going happen in the housing market, and it would create these derivatives and all these instruments that nobody understood. but it was basically operating like a big casino. and it was producing big profits and big bonuses for them, but it was all built on shaky economics and some of these subprime loans that had been given out. and because we did not have common-sense rules in place,

those irresponsible practices came awfully close to bringing down our entire economy and millions of dreams along with it. we had a system where some on wall street could take these risks without fear of failure, because they keep the profits when it was working, and as soon as it went south, they expected you to cover their losses. so sort of those heads, tails, you lose. so they failed to consider that behind every dollar that they traded, all that leverage they were generating, acting like it was monopoly money, there were real families out there who are trying to finance a home or pay for their child's congress or open a business or save for retirement. so what is working fine for them was not working for ordinary americans. and we have learned that clearly. it does not work out fine for the country.

it has got to change. now what we're doing -- i want to be clear, we are not trying to push financial reform because we begrudge success that is fairly earned. i mean, i do think at a certain point you have made enough money. [laughter] the part of the american way is that you can just keep on making it if you are providing a good product or you are providing a good service. we do not want people to stop fulfilling the core responsibilities of the financial system to help grow the economy. i have said this before. i said this on wall street just last week. i believe in the power of the free market and i believe in a strong financial system. and when it is working right, financial institutions make possible families buying homes, and businesses growing, and new ideas taking flight. and i entrepreneur may have a great idea but he may need to borrow some money to make it

happen. it would be hard for a lot of us to buy a house -- our first house, at least, if we were not able to take out a mortgage. so there's nothing wrong with the financial system that helps the economy expand. and there are a lot of people in the financial industry or -- who are doing things the right way. and it is in our interest when those firms are strong and when they are help the -- healthy. but some of these institutions that operated irresponsibly, they threaten the whole economy. and they threaten your dreams coming your prospects, everything you work so hard to build. so we want them operate in a way that is fair and honest and in the open so that we do not have to go through what we have already gone through. we want to make sure the financial system does not just work for wall street, but works for main street, too. it works for quincy. it works for mount pleasant. it works for mason -- for macon

and fort madison. now let me explain to you what this reform should look like, because one of the face you discover when you get the washington is what's black is white and what's up is down and sometimes people will -- i did not say lie, but -- [laughter] that will tell stories about what is going on. so let me just be very clear in terms of what we're proposing on furniture reform. i know this is important you because it is important in may. we're going to make sure the american taxpayer is never again on the hook will all street firm fails. never again. we do not want to see another bailout. that is what this reform does. now you had some who were saying, cynically, just claiming the opposite, that some of that this was a bill that institutionalized bailouts.

what this bill did was say, no, if you have a firm on wall street that fails, but by now much -- the financial industry is going to pay -- not taxpayers. so a vote for reform is a vote to end taxpayer-funded bailouts once and for all. if a crisis like this again happens, financial firms are going to foot the bill. that's point number one. point number two -- we are going to close the loopholes that allowed derivatives and all these other large, risky deals that do not make a lot of economic sense and that could threaten our entire economy -- we want to bring those deals out of the dark alleys of our financial system into the light of day, so that everybody knows exactly what is happening, what risks are being taken -- investors, shareholders everybody knows what is going on. that is the second point. number three -- this reform is going to give you more power because we're going to put in place the strongest consumer

financial protections in history. and the reason this is important -- the reason this is important, this crisis was not just the result of what happened on wall street. it also happened because there were a lot of decisions by folks out on main street who were taking out mortgages they did not understand, credit cards that did not understand, auto loans that were not a good bill. some of -- some took on obligations they could not afford. but millions of others were deceived or misled by shifting terms and confusing conditions and forests of fine print. and your attorney general, lisa madigan, has been fighting on behalf of consumers in this state and she knows how badly we need these protections. in fact, lisa and a bunch of other attorney generals came to testify on behalf of the need for these consumer protection bills because they see this stuff in their offices every day. and it is true all across the country.

now some argue that giving consumers more information in clear, concise ways is somehow going to stifle competition. i believe the opposite. i think that if you know what you're buying, you can make a good decision. and that means that the companies, instead of competing to see who can offer the most confusing products, companies will have to compete the old- fashioned way -- by offering the best product. but that is not going to reduce innovation and competition. you just should be knowing what you are buying. it is like a lemon law, right? you do not want to go into the used car lot and get something where they changed the odometer and put on a fresh coat of paint on some old beater, pretend like it is a new car. it is the same thing with financial products. you should know what you're getting. all right, so that is the third thing.

finally, we're going to give people who own these companies, these financial companies -- mainly investors and pension holders and shareholders like many of you -- we want you to have more say in the way they are run. because some of these firms, they've got these huge salaries, huge bonuses that create a perverse incentive to encourage people to take reckless risks. but if you own stock in these companies, you need to get some say in how they operate. you will get to decide how managers are paid and how those firms operate. and that means that we will actually increase the connection between main street and wall street. they will be more accountable to you. that is the reform that we've put forward. these are the reforms that we're putting for -- accountability, no more bailouts. closing loopholes, no more trading of things like derivatives in the shadows. consumer protection, no more deceptive products. a say on pay so that we give shareholders a more powerful

voice. that is what we're trying to do. now i do not think there should be a partisan issue. everybody -- republicans and democrats and independents -- were hurt by this crisis. so everybody should want to fix it. so i am very pleased that after a few days of delay, it appears an agreement may be at hand to allow this debate to move forward on the senate floor on this critical issue. i am very pleased by that. and i want to work with anyone -- republican or democrat -- who wants to pursue these reforms in good faith. and there can be some legitimate differences on certain issues, but the bottom line is consumers have to be protected. we have to end bailouts. it got to make sure that these trading practices are out in the open. we've got to make sure that

people have a say in terms of how these firms operate so they are more accountable. so as long as we are adhering to those clear principles, then i feel ok. what i do not want is a deal that includes -- a deal made that is written by the financial industry lobbyists. we have had enough of that. we have had enough of that. i want to listen to what they have to say, but i do not want them writing the bill. i do not want democrats and republicans agreeing to a bill written by them, for them. i want a bill that is written for you, for the american people. so we're going to see how this debate unfolds. we are going to get this done. and we're going to get it done because you demand it. it has been two years since this crisis, born on wall street, slammed into main street with

its full for your -- full fury. and what things are nearly back to normal out here, they are getting back to normal pretty quick up there. some in washington think this debate is moving too fast. they think, well, this is kind of the political game. let's see how this whole thing can play to our advantage in november. that is not how i play. i have been calling for better rules on wall street since 2007 before this crisis happened. so i do not think we're moving too fast. i think we have been moving too slow. it is time to get this done. and i don't think you want to see us wait for another year or two years. i don't think you want washington -- i don't think you think washington is moving too fast. i think you want to get this done. you should not have to wait another day for the protections

from some of the practices that got us into this mess. we cannot let the recovery that is finally beginning to take hold fall prey to a whole new round of recklessness. if we do not learn the lessons of this crisis, we doom ourselves to repeat it. and i refuse to let that happen. so the time for reform is now. quincy, let me just say this. for all the noise and the lobbyists and the partisanship -- and i know sometimes you are watching tv and saying, everybody is yelling and hollering, and wires they so mad? this debate comes down to a simple choice. are we going to go down the same road, where irresponsibility of a few can put millions of families at risk and stick taxpayers with a tab? >> no. >> or are we going to put consumers -- protect consumers and strengthen our financial system and put rules in place that keep this from happening ever again?

are we going to give in to the special interest or score another victory for the american people? are we going to stick with the status quo? or are we going to bring about fundamental change that makes things work ordinary americans? we have got the power to do something about this. that is all it comes down to -- the will to act. i still believe we can come together, just like you all came together during those floods, filling those sandbags -- everybody joining together, everybody breaking a little sweat, everybody helping out. that is how america got built. we are not powerless in the face of our challenges. we do not quit when things get tough. we are not afraid. when something happens, we come together. we move forward. we act. we are americans -- our destiny

written by us, not for us. and if we remember that and summon that spirit once again, we're going to strengthen our economy today and tomorrow and restore security to the middle class. that is what we're fighting for -- the american dream right here in quincy, right here in illinois, all across the country. god bless you and god bless the united states of america. thank you. ♪ ♪

>> tomorrow morning of funeral service for civil rights leader dorothy height who'd died at the age of 98. president obama will deliver the eulogy at the national cathedral. live coverage begins at 10:00 a.m. eastern on c-span2. the third and final political debate between gordon brown, and david cameron, and nick clegg. live coverage at 3:30 courtesy of the bbc. that election day is next week. prime minister brown apologized earlier for calling a woman he met on the campaign trail are racist.

>> good to see. and it is very nice to see. >> thank you, gordon. >> take care. good to see. thanks very much. you should never put me with that woman. whose idea was that? it was just ridiculous. >> a month and go without one. >> they will go with it. everything, she was just a bigoted woman. it was just ridiculous. >> the microphone pick you up saying that that was a very bigoted woman. was that what you said? >> i apologize if i said anything like that. it was an issue about

immigration, saying that the work too many people from eastern europe in the country. i do apologize if i said anything which has been hurtful and i will apologize to our personal it. >> someone has handed me the tape. let's see if i can hear it. >> whose idea was that? it was just ridiculous. >> they might not go with that one. >> they will go with it. everything, she was just a bigoted woman. >> that is what you said. is she not allowed to express your view? >> of course she is allowed to express your view. the problem is that i was given an impression of what she raised about immigration and i was not able to answer because of the press all round. i would never put myself in a position where i wanted to say anything like that about a woman i met.

it was a question about immigration that i thought was annoying. i have just been talking to gillian. i am mortified by what happened. i've given my sincere apology. i misunderstood what she said, and she is accepted that there was a misunderstanding and she has accepted my apology. if you like, i am pentitent sinner. sometimes you say things by mistake and sometimes when you say things, your corrected very quickly. i wanted to come to say to gillian to say that i was sorry and i made a mistake and i understand it concerns the issue is bringing to me and i simply misunderstood some of the words that she years. i made my apology. i have come here with a chance to talk to gillian about her family and her relatives and her home and what she has done, but

most of all a chance for me to apologize and say sari and to say that sometimes you make these mistakes and you used the wrong words, and when she used those words and you are corrected, you should issue profound apologies and that is what i have done. >> watch the last british leaders debate tomorrow on3 on courtesy of the bbc. the peterson foundation hosted a form on the federal budget deficit and the national debt. speakers included 4 -- former president clinton, bob rubin, and former federal reserve chairman paul volcker. we will also hear from several members of the national debt commission.

[inaudible] >> i look at the great minds around this room and i'm truly humbled, although i know there are many that doubt such a thing as possible. [laughter] it is our hope that we can come together in this summit and make progress on making consensus in three main areas. first, the nature and magnitude of our fiscal challenge. second, the future -- the nature and general direction of a solution. and third, how we educate and activate american citizens to do something about it? but got all kinds of ideas and ideologies represented here today. while we may not agree on a whole lot else, most of us agree on one thing -- our present fiscal course is unsustainable. at a time of multiple bailouts,

one uncomfortable all lenders in the back of our mind. who is going to bail out america if our policies continue to stumble down this unsustainable path? as some of you know, this is an issue that is close to my heart. i have written four books on it, i have been boring people with that for decades. in fact, one person said of my books, once you put it down, you will not be able to pick it up. [laughter] but i believe the issue we address today has become more urgent with time. the real purpose of today's some is to listen to you, but before that, i simply would want to summarize some views of our foundation. first, it is important to clarify how we define the problem. we make the very bottom --

important distinction between current budget deficits and are longer-term structural deficits. contrary to to some perceptions, the short-term deficits are not my primary concern. we understand the urgency of people's economic hardships, the painful effects of unemployment, and an urgent need to create jobs. it is the longer-term structural and unsustainable deficits that are pushing those of us in our foundation of the fiscal richter scale. we had the economist herb stein, though some of you may find the term humorist an oxymoron. he used to say that something is unsustainable, it tends to stop. if your horse dies, i suggest you dismount.

we keep acting as if we can ride this horse indefinitely. with the foundation think it is time to dismount and address this challenge before crisis occurs. another concern we have our ballooning interest cost. in only 12 years, interest cost would consume 100% of the projected revenue. these huge interest costs would buy as nothing and would crowd out critically needed investment in a much more competitive world. i am speaking of more r&d, education, and desperately needed infrastructure. in fact, what we would be doing is spending our children's future rather than investing in it. it is also important to recognize that by addressing these issues in, week in may decisions fairly, thoughtfully, and with compassion. in a crisis, the government

could be forced to make changes urgently, and gain during important social programs on which so many americans depend. has the very lucky son of immigrant parents, i decided not to focus on the fact that there were greek, given the current financial situation. [laughter] i am deeply concerned about come -- preserving the social safety net for those in need. and make no mistake about it, no so-called safety net can be considered safe in times of genuine fiscal austerity. college generation of that or even fiscal child abuse, what would these burdens mean to our kids and our grandkids? we need ask ourselves not just get this sustainable but is it

moral? what does it mean to burden our kids to an unconscionable doubling of their taxes, and we're not talking here about the money. dad's this large could bring about a radical change in this nation. a change in the very idea of america and what it is all about. but the first time in our history, generations of americans could be facing a future less bright than the past. for our kids, there would be fewer jobs, greater burdens, more insecurity, and diminished dreams. and what of the american ideal since the first explorers set foot on this country, americans have believed that this is an exceptional place with exceptional possibilities in store. we of lived on the basis of ever expanding horizons. without that, what would america be? politics in this democracy of

ours, it has always been a tough business. imagine how much more brutal our politics will become when their fights among faction simply the hold on to their peace of the shrinking economic pie? him one of america's leadership in the world or to mark for a century now the world does look to america to light the way and to keep it safe. how can we lead effectively when we are more and more in hock up to our eyeballs and higher, to nations that may have a very different interests at heart? there is an old saying they're running into dead is not so bad, it is running into creditors that hurts. for those of us that genuinely believe that the world needs america's leadership, for those of us who truly care about leaving a better country to our

kids, we have no alternative but to get our economic house into order. if america can no longer be america, who can be? how do we end the this whole we find ourselves in? with the foundation believe that everything should be on the table -- week at the foundation believe that everything should be on the table. some have the tax aversion centrum. they have meant -- never met an increase they did not hate and do everything in their power to stop. to me that is simply untenable position, both physically and politically. dear to the sheer magnitude of the imbalance that we face, addressing this without any revenue increases simply does not add up. doing so would devastate the important social insurance and other important government programs. there needs to be adjustments,

but the social contract is part of the fabric of our society, and any set of solutions recognized that the core of these programs must remain in tact, particularly for those who need them. meanwhile, some to say -- some seem to have entitlement fixation. they have never met a universal entitlement program they did not fall in love with. but with the rapidly exploding population of the elderly who are living much longer than ever before in human history, we have to ask -- if all of us on the wagon, who is going to pull it? we keep being told that social security is "solvent" for another 30 years or so because of the $2.40 trillion assets in the trust fund. you did not hear, but i put quotation marks around the word assets. they have been spent for other purposes.

even in washington, you cannot spend the same money twice. i believe there are approaches to reforming social security that are compassionate, fair, and reasonable. and if we act before a crisis occurs, reforms can be implemented that will preserve this indispensable safety net to those who depend on it. for example, we suggest for consideration some combination of gradually increasing the retirement age, indexing that the longevity, and reducing the benefits for the well-off, to what i call an affluence tax. then one could left the payroll tax cap. if we would address social security reform, it would provide much needed confidence to our lenders so that they do not wish that it -- faith that we cannot manage our own fiscal affairs.

but dress it -- but addressing social security is only a small part, 10%, of the overall fiscal problem. health-care costs in the u.s. on a per-capita basis are double those of the rest of the developed world, with no appreciable differences in outcomes. health care costs could bankrupt our economy. they deserve the highest priority on the fiscal agenda. now nor did have a major impact on the newest cliche, bending the cost curve, we believe we must address many basic health care cost drivers that have hardly been reformed at all. take the fee for service pay for an system. if you hired a room full of economist and told them to come up with a highly incentive -- highly effective incentive to inflate costs, i don't think

they could come up with something this perverse. there are other largely ignored health care drivers, the disproportionate amount of spending occurs, are counterproductive malpractice system, and how to expand the use of integrated clinics which have both -- both improved outcome and improved cost. the reason health care legislation put into place two mechanisms that have the potential of foster much-needed implementation of those reforms which have been tested, and provide much needed research and experimentation for those that have not. the independent payment advisory board and the innovation center. but the real question is -- will we have the political will to tap the potential? in the culture of health care america, can it be transferred to one focused on value?

there are few other reforms that we think should be on the table for consideration. a consumption tax that not only increases revenue but also increases saving. increasing our savings is a national imperative. and energy carbon tax to reduce dependence on foreign oil and respond to the anbar men of talent so-called tax preferences, which aggregate to about $1 trillion a year. i can also understand why the american people believe that there are significant savings to be found in the defense budget is larger than europe, china's, russians, japan's, and much of the vote rest of the world combined. finally, budget controls like the paygo rules and the spending caps of the 1990's. once this recession is behind this and more americans go back to work, we need to immediately

begin to implement these kinds of reforms. in sum, we believe in timely action. if it because we do not want to be our future diminished, because we do not want to force radical disruptions in our way of life, because we do not want to see that safety net crash, that we believe we must act now with moderate fiscally conservative and socially compassionate reforms. but how do we get there from here? this after all is a nation whose enthusiasm for shared sacrifice is rather restrained. i have heard it said that we sound like socialist but tax like libertarians. our policy seems to operate on one imperative -- give us more. it is part of the culture, i won

it all, i want it now, and i do not want to pay for it. we believe that there are other constituencies that can transcend the more common now syndrome. there the growing ranks of those that do not identify with either party and for now -- and for whom spending is now the number one issue they go to the ballot box. the young have the greatest say in the future. the status quo is a raw deal to them. right now to many are like the student and a philosophy class, when asked which is worse, it ignorance or apathy, he mumbled, "i do not know and i do not care." our ceo dave walker will talk about engaging other constituencies. all some people see me as dr. doom of the jet set, i am

actually still hopeful. america has faced worst challenges before. in the aftermath of world war ii, our nation confronted a debt of over 110% of gdp. twice of what it is now, and a world economy in shambles. nevertheless, that generation manage to reduce the public debt to less than 30% of gdp while simultaneously launching and paying for the g.i. bill, the marshall plan, the un, and building the interstate highway system and other major infrastructure. they did it with courage and commitment and a positive vision of a prosperous nation at peace. and so can we. we need a positive, optimistic vision of what's an economically healthy and growing america would look like and what it will mean to our kids and grandkids.