attention to what counselors in academia are telling you, the accuracy of those seat of the pants estimates leave something to be desired. host: got to leave it there. out of time. guest: well, i think only part of the story is about college and you're are the. there's still a wage gap and a lot of discrimination and partly my hope is if you recognize the workforce is dominated by women things start to seem like a dinosaur era. host: on newsstands now. how women are taking control of everything. also want to point out if you want to see more of hannah rosen you can watch her on book tv this weekend. she talks with sharon lerner about her book the war on moms. that will air saturday at 4:00 p.m. and if you go to book tv.org you'll find full 48 hours of books on c-span 2 schedule available. the journal will be back tomorrow morning at 7:00.

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>> next week, what the confirmation hearings for supreme court elena kagan. that is on the cspan networks and watched replays of each day's hearing each night at 9:00 eastern on c-span 2. >> this weekend, alerx heward recounts the 1945 death penalty trial of willie mcgee and the several -- civil-rights movement. jerry van dyke and his guide spent days in a dark cell after being caught by taliban fighters. he writes about it in his book. a veteran wall street journal reporter will of an inside account of the report murdoch purchase of "the wall street journal ball. find the entire schedule at book-tv,org. >> at the white house a short

while ago, president obama and spoke about the financial regulations built. house and senate negotiators worked throughout the night to work out a compromise with their versions of the measure. the vote was along party lines and the senate could vote on the bill next week. >> good morning everybody. in a few moments, i will depart for canada to take part in the summit with the d eight and g20 nations. this is the third g20 nation i have participated in since i was sworn in. in our first meeting in london with the world in the grips of the worst financial crisis of

our times, we acted boldly and swiftly to bring our economy back from the brink. at our second meeting in pittsburgh our recovery beginning to take cold, we agreed to work to get a balanced pattern of growth and prepare for our financial systems. this weekend in toronto, i hope we can build on this progress by coordinating our efforts to promote economic growth, to pursue financial reform, and to strengthen the global economy. we need to act in concert for a simple reason -- this crisis proves and events continue to affirm that our national economies are inextricably linked and just as economic turmoil in one place can quickly spread to another, safeguards in each of our nations can help protect all nations. i am gratified we have made progress toward enacting these safeguards here at home. because of the incredibly hard work of chairman dog and chairman frank and the storm --

and a strong leadership of chairman lincoln and peterson and the members of both parties who were up very late last night, we are poised to pass the toughest financial reform since the ones we created in the aftermath of the great depression. early this morning, the house and senate reach an agreement on a set of wall street reforms that represent 90% of what i proposed when i took up this fight. let me be clear -- our economic growth and prosperity depend on a strong, robust financial sector. i will continue to do what i can to foster and support a dynamic private sector. we have all seen what happens when there is inadequate oversight and insufficient transparency on wall street. the reforms making their way through congress will hold wall street accountable so we can help prevent another financial crisis like the one we are still recovering from. we will put in place the

toughest consumer financial protection in our history while creating an independent agency to enforce them. through this agency, we will combine under one roof the consumer protection functions that currently are divided among half a dozen different agencies. there will now be one agency whose sole job will be to look out for you. credit-card companies will no longer be able to mislead you with pages and pages of the fine print. you on the longer be subject to all kinds of hidden fees and penalties for the predatory practices of unscrupulous lenders. instead, we will make sure that credit card companies and mortgage companies played by the rules. you will be empowered with easy to understand forms so you know what you are agreeing to review of clear and concise information you need to make financial decisions that are best for you and your family. wall street reform will also strengthen our economy in a number of other ways. it will make our financial system more transparent by bringing the kind of complex

deals that helped trigger this crisis like trades and a $600 trillion derivatives market into the light of day. we will enact the blogger role to make sure the bank is protected by the safety net of the fdic. this is so they cannot invest in risky trades for their own profit and there will be a resolution authority to wind down firms whose collapse would threaten our entire system. no longer will we have companies who aretoo big to fail. we passed an economic recovery act, health insurance reform, education reform, and we are now on the brink of passing wall street reform. at the g20 summit this weekend i will work with other countries to promote global economic growth while ensuring that each nation can pursue a path that is a sustainable for its own public finances.

as the main forum for international cooperation, the g20 is the right place to discuss such issues and over the last few days, i hope we can build up our past progress and strengthen the global economy for a long time to come. thank you very much, everybody. >> president obama this morning making comments on the financial regulation bill. he is now on his way to canada for the meeting of the g8 and g20 summit which is taking place this weekend. house and senate negotiators gave final approval to the financial bill a few hours ago after staying in the entire night. it is the largest rewrite of the role since the great depression. the bill has to be voted on by the full house and senate. we believe that may happen sometime next week. on c-span, we will show you that vote on the financial regulation bill shortly before 6:00 this morning.

>> we expect a vote in the house on tuesday. the clerk will call the roll. >> when will we do the conforming and technical amendments? >> can i ask the staff -- as we produce them, some tomorrow -- i would certainly object to any staff member who came in here

before noon tomorrow, guest today. [applause] >> staff will be at their desk at 8:00 to do this morning. [laughter] >> having slept there for the past couple of hours. we will get there as soon as we can. i ask that the clark now call the roll on passage of the financial reform bill. all members of the house are entitled to vote on the final bill. mr. peters notes aye, mr. peterson votes aye proxy, mr.

boswell votes and aye proxy, mr. rush votes aye by proxy, mr. conyers boats aye by proxy, mr. townes votes aye by proxy. mr. velazquez votes aye by proxy. >> the clerk will go to the republicans. >> mr. back as the votes no, mr. royce boats no, mrs. capito boats no, mr. hensheling votes

no. mr. barton votes no by proxy, mr. smith the its no proxy. mr. issa boats and no by proxy. >> madame clerk, i have a proxy for mr. schumer and evokes aye by proxy -- and he votes aye by proxy. there are 20 ayes and 11 nays. >> the house send you its approval of a financial reform bill. >> thank you very much, chairman frank and let me thank you on a traffic job. house members will vote on the senate side and all those in favor said aye debate ayes appear to have it. [laughter] i will ask the clerk to call the

roll them mr. chairman, aye, mr. johnson aye, mr. reid, aye, mr. schumer aye by proxy. . licoln aye, mr leahy aye, mr. ahrkin aye by proxy, proxycorker no, mr. greg no. the votes are seven ayes, 5 nays, the bill is passed. >> i thank my colleagues immensely. [applause]

>> conferees in favor of passage of the bill, i declare the bill passed and a conference committee is now adjourned. [applause]

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>> we have consumer protection for the first time in this country. we don't want to end up with the same situation that brought our country to near financial collapse.

we believe we needed this before the crisis. it is nice that we could actually get this job done. chairman frank leading the house effort is a great college. -- colleague. they have done some plant that the needed to do for a long time. [unintelligible]

[inaudible] ñxu>> senator dodd and i triedr best to get this done. as things happen, we got a lot of legislation prepared. if you intend to focus [no audio] [inaudible] risk retention requirements, but the volcker, the widespread use of derivatives, it is not everything we would like.

in every area we mentioned, there have been advances. there was a difference in this bill. when we were debating this in the house last year, house -- health care was getting all the attention. it was not as strong a bill as i would have liked to and been able to bring out because we were not getting public attention. my initial thought was that it was a much tougher job. once we passed health care, the american public began to focus on this through the media. this is a better bill than it would have been because the american public focused on it. in addition to the substance, i hope people will get a sense that we worry about big money.

it is reassuring to know that when public opinion gets engaged, it will win. our staff is full of the most extraordinary people, i agree with the senator. they put in an enormous amount of time under stressful conditions. the majority? we i ñ with the republicans on the senate floor and0f6a who supported the bill coming out of the senate. there was daily communication with them to inform them as to how things were perceiving. -- proceeding. if they had thought about this, i stayed in touch with chairman frank about this and he was aware of the interest in these members and there were very good about it as well.

there were not demand that you might have expected. they want to know how things were proceeding. they want to make sure that things they were concerned about remained in the bill. it was a good relationship but i cannot tell you today -- but i can tell you today that there is a strong rebel then became out of the senate with with everything that they wanted and we improved on their ideas prism of the more controversial ideas that want to thank the house members and chairman frank for understanding that. i feel like we are encouraged should. i will reserve judgment until i have upset chance to talk to them. >> -- have a chance to talk to them. oddé,hvze=d>> [unintelligible] >> the president leaves for to

wanted -- for toronto to meet with g-20. : there that will be very important. we can offer some leadership in the world as to what can be done to harmonize these efforts. over the last two weeks, i think we have done that. this will strengthen our president going to toronto to make that case. azpçp"e](y3dr?e];÷w$[)ma>> thee

boston globe," it said the europeans seek fees for bailouts. it says they want to tax their financial institutions to pay the cost of recovery, exactly what we)(jdid today. this is in wednesday's "boston globe." the conservative british government has begun to the punch by a few days in setting up an independent consumer protection agency. they have dissolved their financial oversight unit. as the senator said, we put in my hands of the president a very powerful set of tools to reassert american leadership and the world. we are trying to get other

countries to stimulate and help us all the feed unemployment. i think you will see continued conversion. >> the compromise on the derivatives language, was that a concern? >> i believe there will be a majority. there were some people, five or six, who voted from left. i sympathize with many of our democratic colleagues who are thoughtful people. the amendment as adopted moves in that direction. one concern i have with the amendment of senator lincoln was what we called inappropriate application for advisability. we heard complaints and have modified that. we have a strong code of conduct.

there are some other things that some will vote no against but i am confident we will have a majority of house members. unfortunately, it appears that the republican party in the house will repeat them sells a voting no on everything. i think we will have enough democratic votes. >> [unintelligible] >> great breakfast. >> chris, we have worn them out. [laughter] >> take care. [chatter]

>> shortly after this vote, secretary of the treasury tim geithner put out a statement supporting the effort and calling for congress to move ahead with a final vote in the house and senate which could take place next week. here are some of the components of the bill which would establish anxym] independent consumer protection bureau inside the federal reserve. it creates a new 10-member oversight committee to look out for major problems at financial firms and throughout the financial system. it aims to make it traded derivatives more transparent forcing most derivatives to be bought and sold on clearing houses and exchanges. there is a debate between the house and senate negotiators on the derivatives portion of the bill. title six. >> altadis gay couple of minutes. the senate agriculture committee for a longer response but let me take a

few minutes to give a general response to a title seven in the counter offer. a lot of work went into this last evening this is not just all happening the last few minutes over 110 proposals for the conference based text and literally all night by staff state of with others to the evening to go through the 110 proposals we accept 85 of them. 15 of which we modified and their 25 proposals and we do that barely quickly for any further comments. let me go through the high points it will strengthen

the margin requirements were a swap execution facilities for cleared and done cleared swaps. it will tighten the definition of major swap purchase offense vs. what is clear and done a clear. to ensure that the end user will be exempt from exchange trading requirements to mitigate conflicts of interest with other entities and clarify the bank's that they may be permitted to push up the businesses and to affiliate's to provide a transition period. very importantly the package imposes on parties to violate the clearing

requirements mandates and regulators t prevent or e-bay as well. r the tyra this work of chairman blanket and her staff and others very imrtant contributions are made by reid, a senator mendez, tom harkin, senator feinstein, senator cantwell. now all negotiations of course, areimply some say that one side or the other have a hard time excepting. this process is no different and as i mentioned before there are some things we could not accept. have made the offer on foreign-exchange swaps that presumes these contracts are regulated unless the secretary treasury makes a written determination they should not be regulated as

structured to evade the act. we have listed criteria that the secretary of the treasury must consider to make the determination. many colleagues believe strongly this is a more responsible approach to regulating the market that is so large and complex. second the respect we reject the house proposal regarding cftc and the federal energy regulatory authority preserving language many colleagues believes it provides more clarity about the authority of these two agencies. third day we rejected the number was lower provisions some colleagues believe will weaken the cftc whistle-blower protection program and rejected the house offered for what is known as the lynch amendment imposing strict ownership

caps on dealers and other investments and clearing houses and related entities. requiring regulators to write rules to mitigate conflicts of interest which may include numerical limits on control and ownership of clearinghouses, exchanges and other entities and also add the language requiremenns that requires the regulators to consider any complex that may arise th a single investor now other proposals which three rejected of maurer are technical in nature. title seven over the last couple of years was possibly the most complex of all of the titles we grappled wh. the financial reform bill at many colleagues have spent countless hours grappling in dealing with a very strong

point* the financial sector staged services sector. a difficult job and literally spent hours to increase transparency and accountability. with the derivatives mkets these are profoundly important. i went to think you and chairman frank for all of your hard work i want to think chairman petersen for his hard work i know the magnitude of this has not

been lost on anyone over the last few months not myself. we have talked about risk your job loss or stability to cover common ground but more importantly how do we avoid the kind of circumstances that our constituents have suffered from in the financial crisis we have gone through what do we need to do we need to ensure that banks should the banks and risky business should be dealt with differently than it has over the past two years. the senate counter offer has been a very well described by chaman dodd and it is a testimony to the importance of working together and pulling together a good ideas there is a solution

that the nation has raised. to negotiate a complicated bill finding a way forward manages to take the best of all sides and make it work prepared financial system is complicated and integrated and our times zero ltd we nn afford to dig in our heels bumust do something. i would note to my colleagues in this conference that much attention has been focused on section 716 but i would also point* to my colleagues to look at the rest of what has been done in this title. preventing future bailouts. >> it will have banks to g back to the banks for those of us who grew up across america we know what that means and how important it is for those across the nation who want to create

jobs that their traditional banks want to offer and will continue as destabilize the economy. lower systemic risk it lowers risk and makes the entire financial system save two that is why removed in that direction. we bring 100% transparency which is of so critical we have dealt with the dark market and what we know what is behind us because we look into a rear view mirror it gives the opportunity to see what we're dealing with and what we see ahead of us we protect municipalities to have a fiduciary duty to put the interest of municipalities and pension funds as well as retirees

and others first insuring that wall street does not take advantage of main street or taxpayers. but they will be regulated wall street firms were knowingly helping clients to defraud third party or the public for the wall street banks with that deal. it is so important but not for specific spots i believe we found a way to regulate the financial system while protecting the main street businesses that are lifeblood of our economy. we looked at and users to use, use the swaps we're the managementf risk to be able to manage the risk of

100% of the commercial rest. that means it is not allowed for speculation about four commercial risk. . it is important that we remain an exemption that had is that important risk. we provide flexibility to the regulators and increased anti- fraud and manipulation authority. we tighten up our definition of

major swap participants and swap dealers so we target who we mean to target. we focus our capital and margin regimes on risky behavior and not activities. >> i am sorry senator but i have been asked by members who are ving trouble hearing if people in the realm would keep more quiet. thank you senator. >> i appreciate that. we do know that risk is something that has to be managed by industries and businesse across this country and we know that is an important rule and we want to maintain that. we take a stand against big speculative money in the mob commodities market. we balanced the critical need to deal with complex of interest in the need to encourage free-market, and mt portantly, we listen to those who would be impacted and adjusted accordingly maintaining the strength of the two bills without harming our economy. mr. chairman to all of you all,

mr. chairman and colleagues, this is such an important task and i know everyone here takes it seriously. i certainldo and in listening to my constituents who have approached me about the serious nature of the economy that they have experienced, whether it is losing their children's college fund, whether it is retirement or other things, they want us desperately to get this right. i look forward to the discussions we have, certainly finding a olution and moving our financial regulatory system forward. as always, i come at this from common ground and more importantly looking to do what is right, and certainly with an open mind. thank you mr. chairman. >> well, let me invite our colleagues here. senator chambliss do you want to be heard on these matters? >> i don't have a comment.

i just have an amendment when the senator is ready. >> senator reid you want to be heard on this? let me turn to senator chambliss for any comments. >> thank you very much mr. chairman and while i appreciate the comments of both chairman peterson as well as chairman lincoln with respect to section 716, you know we have just passed a very strong volcker rule. the volcker rule that came out of the senate was in and of itself pretty strong rule but here tonight, we have according to the chairman himelf, we have strengthened that rule even more. the end result of the volcker rule is the exact same end result that sought be achieved by section 716 and that is to eliminate the speculative risk-taking associated with proprietary derivatives trading by banks.

what section 716 does is it moves outside of tanks the swaps desk. the volcker rule in effect does that by eliminating the ability of banks to trade in a proprietary way. since the volcker rule specifically does not allow banks to use their capital to engage in proprietary derivatives trading this means the speck of a risk-taking associated with oprietary trading is thereby eliminated. 716 is bad policy. it is good policy to promote safety and soundness. banks need to be able to hedge their own exposure. it is also good policy to promote responsible lending. bank should be allowed to do direct hedging of a customer's business transactions. 716 prevents both of them, eliminates the bank's ability to hedge a customer's business

transaction. so mr. chairman, without further discussion i uld simply say that 716 is unnecessary because of the volcker rule and it will result in banks not being able to appropriately hedged their own and their customers risks, and i would urge the adoption of the amendment. it is my amendment number two which i understand has been distributed. >> it habeen distributed a i returned to my colleague. >> as always i thank the gentleman from georgia and my ranking member on the ad committees for his thoughtfulness and offering amendments and is always ying to reach common ground, but i have to believe that, as we look at what we have done here, the volcker ruledoes-- it eliminates that proprietary trading and provides us again more stability, but it does not deal with the market making that also happens and i think our

section 716 is all about getting banks back to being banks. aig failed in the u.s. government had to pony up $182 billion. for five largest bank accounts, over $200 trillion. clearly swap dealing is a risky activity. and it is something that we need to deal with. more investment banks and commercial banks. bank should be making mortgages and small business loans, and not playing with swaps and their hope is that as we have looked at what we do, in moving as much as possible the risky nature of business out of banks, allowing banks to be banks, and euring that, that the riskier nature of businesses are put into an affiliate where they can be dealt with accordingly. we have looked at how to move these banks, and we have looke at what has traditionally in the

past been permissible. for bank activity, and that is how we have lined it up, a little over the last decade. we have seen on permissible for bank principles being taken up in banking, and that is not in my opinion a place where it should eat. banks should be banks, and so we look back to what those core principles of banking are and we make sure that those at committees that have been on permissible as core principles and banks are taken out of the banks and put into an affiliate to preserv the safety of depositors and to preserve the safety of the taxpayer. so i regretlly disagree with the gentleman from georgia and would strongly urge my colleagues to oppose this amendment. >> mr. chairman, jusvery briefly if i might.

derivatives trading is a part of banking, and we need to keep banking activity inside of banks. we also need to provide 100% transparency which the base bill does. chairman lincoln is exactly right that there had been some dark trading, some dark traits that have taken place out there that probably participated in the cause of the financial collapse. aig may have been one of those institutions that participated in that, but all of the trades that aig did under the base bill would now be required to be reported to the regulators. that has not been the case before, and what this amendment is going to do, it is going to require additional b. fore outside the banks into another entity, capital that could be

used to loan to businesses to expand, to create jobs and now they are not going to have that capital both available for that in those entities that want to trade in the dark are still going to be able to do so. there is nothing to prohibit any entity from continuing to trade in derivatives on overseas markets. those transactions do not have --to be reported tou.s. regulators. what we ought to be doing is incentivizing every single american derivatives trader to trade on u.s. markets and what this provision does is incentivizes those folks who don't want to have the expense of having their trades cleared, those entities who want to continue to do business as they are doing today to trade overseas versus trading on u.s. markets, where transparency would take place, so mr. chairman, there clearly is not the soundness and this rule

that is being proposed. so i would urge the adoption of the amendment. >> senator lincoln? >> again mr. chairman i do appreciate my colleague from georgia and i would stay banks are still allowed under our bill or under this piece that we have received to be able to trade in derivatives. they are just simply going to be swapped and derivatives that are traditional and meet the core principles of banking if they are going to be traded in banks. and if they don't meet those core priiples than they are going to be spun out into a affiliate that could be under the bank holdi company to be dealt with with additional capital. the gentleman is right, that capital probably would be taken up but the fact is, if he is doing riskier business the whole problem with what we have this just that risky business was not appropriately capitalize. and i think that is essential.

so i hope we will look at what we are doing and put some common sense to it because i do think the riskier nature of businesses do need to have the additional capital-- capitalization and i think it is only fair to the taxpayyrs and only fair to the depositors and others of that business come out and it be appropriately capitalize away appreciate the gentleman and certainly appreciate chairman dodd. >> is there further debate on the chambliss amendment on the senate side? senator gregg. >> the goal here is to have. >> speak up into the microphone. >> the goal here is to have a robot market that does not have systemic risk in it to the extent we can accomplish that. the way you get to that point of course is by having transparency and by moving as much as you can onto clearinghouses and exchanges, which this bill attempts to do.

is spinning out of the swap disk basically does very little in the area of putting more soundness and safety into the system. and is the senator fromeorgia pointed t it will probably lead to a fairly significant contraction in credit and derivatives that a nobody in this country. for no apparent gain. i mean it is not going to make it safer, does not going to make it sound or. state ian soundness in the derivative market will come from higher margins, responsibili, hier liquidity as a result of clearinghouse activity for having these instruments on exchanges. so there really isn't a substantive gain in this proposal. there is obviously a political gain. you can use this phraseology, how banks to banking business, but what you are going to end up with is having banks doing a heck of a lot less credit. in and you are going to have

less credit in the system and that is going to lead directly to main street finding it more difficult to get the credit it eds to pursue entrepreneurial activity which will create jobs. so i don't think there's any question that if we pursue this with action we will see the contraction of the availality of credit in this country and we will see a significant shift to the overseas markets and derivatives which would be, which we could address without having to force them overseas and make them a safer and sounder instrument. i think the senator from georgia is amendment makes sense so far than anything we have heard on this issue. >> is there further debate on the chambliss amendment? if not, after the roll call votes, the clerk will call the roll on the chambliss amendment. i can see my clerk [roll call]

[roll call] [roll call] >> the clerk wil >> the bill itself was approved by house and senate negotiators early this morning along party lines, the vote 27-16.

it creates a financial protection agency, allows regulators to break up too big to fail financial and agencies that are in trouble and it puts restrictions on the trade of derivatives. lawmakers are hoping to have the bill on the president's desk for his signature by the july 4 holiday. we have more on the financial regulation compromised and its cost and how it will be paid for. >> about $20 billion is not from

the stabilization but for it -- from the administrative cost for this bill. we get from the cbo $8.7 billion in revenue gains from raising the fdic amount and raising the rates of the reserve of the fdic and let me double check -- i apologize --sec funding attributes. that leaves us with $14 billion that we have to raise to meet the house paygo requirement. we propose to do this and we work with the ways and means committee. they have assigned to us for these purposes money that comes

from increased exchange trading of derivatives contracts and as $1.3 billion. the rest we authorize that the fdic -- this is not to go to the general revenue but to offset the cost of this bill -- to use what we originally used for our fund. we are authorizing the fdic over the five-year period to assess financial institutions over $50 billion in assets, heads bent -- hedge funds over $10 billion. there is a risk matrix which says that the ones who are involved in riskier trades will pay more. we will get to an amount of about $15 billion.

the cbo gives you -- you have to raise one and 1/3 to deal with revenues. the fdic is mandated to raise up to $19 billion. we don't believe they will have to go that far. that is about a little less than $4 billion per year for the wealthiest financial institutions or roughly their bonus pool. perhaps a less. we think the rationale is clear. it was the collective errors of many in the financial industry that led to this set of problems and we think it is legitimate to ask them to contribute to this. our bill was going to be $150 billion. this is 1/10 of that. goldman sachs and j.p. morgan

taste and blackstone and the other large hedge funds and they're making a small contribution and we think that is reasonable. $1.5 billion goes to help the unemployed to pay their mortgages so they can get their jobs back. the bulk of the cost is from the administrative reforms increase regulation in the bill. that is over a 10-year period. that is $22 billion. we would pay it all off with this in the first five years so there would be no deficit contribution over time, but we would get an advance payment on this so we will be ahead of the game for the first five years. i recognize the gentleman from california. >> thank you, mr. chairman. my first point is that this bank

tax acknowledges that the truly massive bureaucracy that will be built here will cost billions of dollars. over time and this bank tax will siphon those billions of dollars out of the financial system to fund yet another government bureaucracy with a very vague mandate. . . >> thank you, mr. chairman.

i will finish with this. those billions of dollars, i think we all know are dollars that could have been used to fund lending, to create jobs, to grow the economy, and ultimately these costs are going to be borne by americans in the form of higher prices, in the form of less credit. we're going to constrict credit as a result of this. we're going to have lost jobs and lower economic growth. we have an alternative still to this. it is enhanced bankruptcy, and it is the process we should be taking rather than increasing moral hazard that we would under this provision in the bill. the bill that frankly would lead to some of the same problems that created the crisis in the first place. i yield back. >> is there further debate? if not, the question is here.

>> thank you, mr. chairman. i am not surprised to see yet another tax on our economy. the dividend's tax will go up 150% at the end of the year for many americans. capital gains, 33%. many small businesses that are owned in sole proprietorship subchapter pick s will see their taxes going up maybe 20%. marginal rates, we know the new health care investment tax means small businesses will be caught up in that. that is another 3.8%. to finance this spending spree with this additional expenditure is part of a spending spree, ultimately taxes would have to go up 60% just to balance the budget at the end of the 10-year budget window. again, how we think by adding new axes to banks that somehow they are going to make credit in

their more available or less expensive is beyond me. it is not going to happen. at a time where we are seeing some of the worst unemployment in a generation adding yet another tax on the economy on top of the dividend tax, the capital gains tax, small businesses tax, investment tax on small business. i respectfully submit, this will hurt job creation even further. yet, we know that, at least in the last budget, we know we have no budget now. no speed bump on the road to national bankruptcy. but our last budget at $3.60 trillion after $1.20 trillion stimulus plan, two omnibus spending plans, $700 billion in tarp fines. the tar program that should have gone away by now. it is interesting yet again

after this explosion of spending, we cannot find any reductions whatsoever in the $3.60 trillion budget and the unused tarp funds and unused stimulus funds. but instead, there havs to be at a new tax on the economy to destroy jobs again. i respectfully submit i know of no society in the history of mankind that has been able to tax, spend, bailout, and sue their way to prosperity. this society will not be different. it should be rejected. i yield back the balance of my time. >> gentleman from new jersey. >> briefly, and an additional problem with the tax that is abbut to occur at this late hour is that it is the disparate tax and treated individuals and entities differ from each other. there's no public policy reason for doing so.

there is no reason that he would tax one fund that has received no taxpayer support whatsoever greater than you will treat another fund. that you would treat one fund that has ever received any applause and government guarantees are access to lines of credits different than other funds. when you which read one fund that has never saought or taken tarps money different from other funds or has never been bailed out different than other funds. these funds invest assets with institutional investors. this is the last thing. you will be taxing funds that basically take pensioners monies and invest through these funds and then tax them. why on earth, during an economic downturn, will we be putting an additional burden on our pensioners? that is what this bill does, and that is what you do when you

have a disparate treatment between $10,000,000,000.- 1539607552 dollars. i will close with the thought that someone else had behind me a moment ago. i look and see that it is 3:00 in the morning. why is it that congress always feels the need to raise taxes on the american people in the dead of night at 3:00 in the morning? and why do it in the disparate manner like we are doing it here? >> [inaudible] you always want to be heard. has anybody ever figure that out? the question now is on sending this offer to the senate, which they await with great glee. all those in favor? opposed?

the offer is sent to the senate. with that, we are in recess pending the last few minutes -- i guess we have a piece in the title line. we have responded to title 8. we agreed to that. we are -- we will have some for you, within 20 minutes i hope, our response to you on title 7. >> and let me say that i believe this has to be miscellaneous amendment as well. there are some issues that cannnt quite fall into the category of conforming and technical. my response to senator corker and others earlier, i do not want to keep you longer than you have to be here. these a noncontroversial amendments, but they are not purely technical reforms. so we have to stay around a little longer while we do this. unless you decide whether or not you want to stay. but the fall into that gray area. they're getting listed together.

that miscellaneous list -- >> members on both sides have been invited to submit to that. not terribly controversial. i would think within a fairly short time span we could come up with a -- i guess, by the time -- the chairmen and i will attempt, knowing what the members have as a priority, to take the remaining small number of items that we did not fully agree on the miscellaneous list and try to work them out. after which we might qualified to be made the swap participants by the process we will be using. [laughter] but i am ready to be cleared if you are, senator. what remains is senate response on what we just send them. and in the miscellaneous title and our response on title 7. i think the covered bonds is in that miscellaneous business where we disagree. >> mr. chairman, the amendment,

could we not dispose of that? >> the purpose harkin eminem? >> on the fixed income? >> yes, i thought that was accepted. it has been accepted. >> how about the student loan provision? >> that has been rejected. all those other items have been -- >> i have to confess, i have not read all the amendments. >> it was in the base tax and nobody moved to strike it, so it was automatically accepted with the title was accepted. the consequence of this is that the effort to start a futures derivatives business will now be illegal. it was in the base tax the nobody moved to take it out. members should know, it was in the base text and nobody strike did, we are effectively enacting it or sending it to the house. we will now be in recess of perhaps 20 minutes to bring this

together and get cleaned up. >> senate conferees will come to order. we received -- >> order in the chamber. seriously, please. wood members -- with members take their seats? they are about to vote on an important part of this bill. >> first, we will consider over here and i presume the maybe some discussions on the provisions submitted by the house conferees. let me say to my colleagues, this is obviously a requirement the house has to comply with. as someone who was an earlier advocate, along with several of us here on a bipartisan basis,

which this will be dedicated to a certain purpose, and that came out in the senate bill and obviously came out in the house proposal that we debated and considered over the past several days. we have had to try to come up -- the house has the resources to pay for this in the absence of that fund. without doing all the mathematics exactly, as i understand it, it is about $8.5 billion that comes as a result of making permanent the $250,000 fdic provision. there's about another i think $4.5 billion as a result from increasing t from 125 to 135. do not only exactly to that. and as a result of the funding issue which provides an additional source of revenue under the cbo, and then there is a gap, as i understand it, being

made up by what the house is offering here to have an assessment on hedge funds in excess of $10 billion and banks in excess of assets in excess of $50 billion. those resources will be held at the fdic. they cannot be used for bailouts are any other thing of all. so there's no danger of this money creating some sort of a tiny plot, as some talk about it, to be used for other purposes. it is a fraction of what the bonus payments have been that these major institutions over the last couple of years. when people tell me about the money that could have been used for lending and for the means to that argument was not terribly appealing i guess for the leadership of those institutions who decided to take bonuses in the face of everything else that was going on. they have to meet the

requirements. nothing we come up with is necessarily going to win across the states. these are difficult choices. but we have to meet the obligations. what the house has come up with is a combination of what we're able to keep without proposing any additional burden on any institution and dividual. except in those cases were we're asking the most well-off financial institutions that have demonstrated the ability to provide massive bonuses to top employees and therefore the ability to share some of that the meeting our financial obligations, in a very important bill to reform the financial system of the country. and not easy choice. no one suggests there are easy choices. but we have an obligation to meet the requirements of the law that has been established. that is our jobs coming here. we have to make those choices.

and would urge my colleagues to accept what the house is offered as here. the difficult choice, but the choice of doing nothing is even worse. and that is an unacceptable choice. we cannot go back to our colleagues and ask them to accept a gap in this legislation financially. my hope would be that we can support this proposal. >> mr. chairman, i have to note the irony that we're taking yet another $15 billion or so of capital basically out of the system at a time -- in a bill that is supposedly intended to address the credit crisis in the issues we're facing in our economy. in in a provision that is basically being air-dropped into the bill, and i guess will have to deal with that issue when we get into the senate on the legislation. but i have to agree with some of my colleagues in the house who

have expressed their concern -- frankly, about the fact that here is yet another tax on the financial world taking capital for growing government. and admittedly, we have some strong differences of opinion on this legislation and on whether the response in this legislation was in targeted at the problem in a proper manner. but to sit the very last minute, again in the dead of night, but i realize that happened coincidentally because when we entered this conference. but to see us yet once again resort to more taxes so that we can grow government is really, i think, just putting an exclamation point on the concern. i think we should not accept this provision. if >> let me respond to my colleague and friend. this is about $4 billion a year

over four years but on average, the institutions we are asking to share the cost of this were ditching a $20 billion a year in the bonus pay. money that could have gone to credit. these major executives, if they're willing to forgo about $16 billion of the bonuses for the next couple of years, this is an obligation that can be done without further deterioration of providing credit to anyone. what is the choice here? to get the reform obviously and to forgo the bonuses. one of these companies, by the way, i have waited for them to say thank you to the american taxpayer for bailing them out in the midst of all this. never once did any one of them ever citywide to the american public for doing what they did to keep them alive. they are alive today. they are employing people, and they're making money because the american tax payer wrote a check for $700 billion. at the very least over the next four years, for go some bonuses

in order to meet our financial obligations. it ought not be a lot to ask. my hope would be that we can vote on this and move on. the clerk will call the roll on the house proposal for financing our obligation here. >> now joining us from our studio in new york is a senior writer with the bloomberg news. what happened at 5:40 a.m. this morning? hostguest: could morning. i did not stay with it all the way until the end. many colleagues did step. 5:00 a.m., unfortunately. the congress in the conference committee, the senate conference committee, they finally hammered out an agreement on at a financial reform bill, which has been taking a while, but we're almost to the end of it i guess not. host: according to this article

in the politico, it says this is the broadest rewrite the nation's financial regulation since the great depression. do you agree with that? guest: i do. i think everybody agrees with it. of course i speak to a lot of analysts, and because we had the big reform after the great depression, which really kept the financial system pretty healthy for 40, 50 years, and then we start deregulating. since hen, it has been really in the other direction, the regulating. so this is, you know, 30 years later, the first attempt to re space regulate. it is the biggest bulk of change for the financial regulation that we are doing. host: what is the broker rule and what was the final outcome on that? -- the volker rule?

>> paul volker used to be the fed chairman in the 1980's and 1970's and inflation. that rule had several goals. one of them was to sort of scale down the risky trading activities of big banks. in the other one was to sort of stop them from running and investing in hedge funds and private equity firm, which are also riskier activities. riskier activities. at the end, there was a lot of compromise because that was a very contentious rule. so, a lot of this, the strength of the role has been weakened. it is still there. the restrictions on trading with their own money that the banks could do in the past remain, and

the regulators won't have as much say on what those limits might be. so it is written into law, which is the good part. the negative part that was sort of that they can compromise the a little bit, was how they can run and invest in hedge funds. it was aimed to not let them do any of that activity. now they can continue to operate hedge funds in private equity firms, and they can invest up to 3% of their capital, which is small, not too much, but it really opens up the risk that when, during the crisis, for example, bear stearns hedge fund, when they came to their aid. goldman sachs did the same. so, that danger, the reputation risk and how the big banks need to rescue their hedge funds, that was not really fixed so

there was some compromise. host: so, the volcker rule, was this contentious and opposed by the big banks? the guest: yes, it was, because the biggest bank -- j.p. morgan, goldman sachs, bank of america, all of them have huge operations of hedge funds. j.p. morgan is actually -- it operates the largest hedge fund in the world, according to some rankings. so, they would really be forced to spin off their hedge fund operations, separate them from their main businesses, sell them off. and the also have major investments in those funds and the private equity, especially their private equity. they invest heavily, along with their clients. they still have to scale those back, but it is not going to be as much as they steer it was going to be. host: 202 is the area code if

you would like to talk about the regulations deal that was reached at 540 -- 5:40 a.m. by the conference committee of the house and senate. all the democrats voted for it at all republicans voted against it. yalman onaran from bloomberg, another contentious issue was the issue of derivatives and senator blanche lincoln of arkansas had a big role. what happened? guest: senator lincoln, who faces reelection this year, at the last minute really -- this bill has been going on for about two years now starting at the house and the senate. she proposed that the derivatives operations of the big banks would be completely walled off -- it would be in the

units that would not have anything to do with it, because it insured banking institutions. -- deposit insured banking and petitions. it would mean banks would have to set up separate companies that would capitalize separately, which would increase their costs and lower their profit. the last-minute compromise -- and there was some much pushed back by banks -- and the administration was not so excited about it, either, so they kind of or siding with the banks a little bit on this. and the final compromise is still some of the derivatives activities will be put into a separate entity that the banks have to capitalize independently, but it is not everything. it is only the riskiest of the derivatives. credit default swaps, and the like. and especially credit defaults what not traded in exchanges. the derivatives build that is

going to pass hopefully -- it is not at all finalize -- is already going to force a lot of derivatives to be traded on exchanges or cleared through clearing houses. what that does is really reduce the risk because everything is -- you have to set up margins, which means you have to put up money. if the bill goes down, then that money is taken away. so, the risk would be curtailed any way. but senator lincoln's proposal would go further, and now does a little bit what she intended at the beginning, but some of it she agreed at the last minute that that would be fine and they don't have to separate all the derivatives business into separate entities. host: before we go to calls, another issue was the issue of a consumer financial protection bureau. how did that come out? caller: that one had several ups and downs while this debate was going on in the house and

senate. it came out strong and it weakened and then it got strong again. i think the final outcome is good for consumers. there will be a consumer protection bureau. it will be housed within the fed but it will be pretty independent. the systemic council that is made up of all banking regulators, including the fed and the fdic and others, will have veto power over some of its decisions. if it threatens the financial stability -- which is not an easy -- it is a high board to set. -- high bar to said. the agency will be independent and it -- another compromise was that it will not regulate the smallest banks directly. that the bank regulators will be looking at their consumer products. but all of those -- the consumer

protection bureau is coming to life. and it idea behind that one is that the subprime products, the heart of the crisis, will not be any longer allow the because a different regulator will look at how these consumers are being tricked into such products and will stop banks from doing so. so, it sounds like a good thing. host: yalman onaran from bloomberg is our guest. the topic is the deal were reached on the financial regulations bill. of the first call comes from palm coast, florida, jackie. caller: first of all, i enjoy your show. it is really sad -- yes. first of all --

host: we are listening. go ahead, turn down the volume and go ahead with your comment. caller: i, is that it is sad. -- my comment is it is sad. it has to be more art government and less people. you have to regulate -- it has to be more government and less people. you have to regulate the banks. the deregulation of the oil company. you have to regulate them. look at the mortgages and everything that is going on. you have people going in, and know they cannot afford homes and get them and know the banks who knew they could not afford it and all the way around it a downward spiral of crooks, the american dream. host: yalman onaran, two things. re-regulation, and as jackie pointed out, does this affect mortgages and the way mortgages are handled at all? guest: yes, it does. the consumer protection agency

that we were talking about will look at how banks sell any products to the consumers, and mortgages are financial consumer products. .

by the government right now. we had to adapt album out during the crisis. but what to do with them going forward. will they still buy the mortgages that are out there? they own the majority of the mortgages outstanding in this country. how their connection to the government is, whether they continue to be, you know, private/public, how they do things, that really has not been tackled. it has not been as discussed really. but i guess we're going to look forward to that one coming up next. host: marietta, georgia, republican line. caller: the morning. i am curious about the bill, how that will play out next year when the currency goes online floating against the other currencies? guest: i am not sure i

understand that question. host: do you want to try again? caller: yes, from what i understand is that the currency will start floating against the other currencies probably late next year -- host: what is going to float? guest: chinese currency? caller: amero. host: what is that? caller: the new currency for the north american union. host: ok, we're going to move on to georgia in long island, new york, independent line. on to long island, new york. caller: i would like to ask, these banks. they are making the rules for these banks. i want to ask you, what's the rule for the consumeer? host: when you say rules you mean the protections, george?

caller: yeah. host: mr. yalman onaran? guest: that's the consumer protection agency we talked about and it's supposed to look how the banks target the consumers. so when you get a credit card and there are hidden fees in your credit card and you're not aware of them, the consumer protection agency is supposed to see that and try to protect the consumer and tell the banks, no you can't charge the fees unles onoka you tell the consumer clearly what they're getting into. similarly, with mortgages if you're getting no down payment mortgage and your interest rate jacked up after two years and you're not aware, the consumer protection agency is going to prevent the banks from selling products that the consumers don't understand. also, the financial regulation before the packet was completed, there were several pieces of

smaller legislation that passed house and the senate and were signed into law by the president that have really put down harder rules to - in credit cards and other stifts that the banks do to reach the consumer so there have been rules in this. host: including a limit on debit card fees, correct? guest: that's part of the current packet making it's way through, yes. there's going to be limits on the cards that we use. the debit cards we use to make purchases. host: next call for yalman onaran of bloomberg comes from florida. bob on the republican line. what's the name of your city? caller: home of the barefoot mailman. host: go on ahead. caller: i saw probably back in the late 70's or early '80s and

they changed fannie mae and it used to be a conservative loaning process of three per tenth and ten then 10% for the next 10,000 and 20% for the next 10,000. when they departed from that and they raised at least on the government corporations for that are owned by the federal government and they upped it from maybe, a maximum of 70 thousand on up to 125,000 and then it just kept getting worse and then what we had, we had, we allowed some of the savings and loans to invest more than 3 percent of their money into real estate and we had the savings and loan crisis. i think if we pursue a safe conservative policy in the future for home purchases, that

would be in a lot better shape and i think the building industry is a large industry throughout the united states and i think that's where the country is taking their hit on the chin and i think we need to put the people back to work and the best way to do that, i believe, is to rehas been all of these old homes that have led paint on them, through some form of government assistance and get the led out of the pipes and the lead out of the paint. host: we have a lot on the table. mr. yalman onaran, anything you want to respond to? guest: um... i mean i don't hear a question, but there is discussion about what to do with fannie mae and freddie mac as discussed earlier and there's debate whether there should be a second stimulus bill and that hasn't gone too far. depends on what the economy does in the next few months. the practice in euro might

effect the u.s. economy as well. if that happens and then i'm sure congress will start debating more closely whether or not we should have a second stimulus bill and if that, maybe some of the things the caller might mentioned might be in there who knows. >> any new taxes placed on banks or hedge funds in the compromise deal? >> i'm not so sure about that one. i think there was debate until the last minute but i didn't wait until everything was finished and when i looked at thing this morning quickly, i don't remember that part exactly but there was debate on a bank tax which the u.k. just recently passed and france and germany said they supported and u.s. was also saying they supported but didn't make it into this one. i didn't see it this morning and

i'm not so sure. host: how will the fm stocks react when the mark et opens? guest: it's very hard to know. there are some pretty harsh rules in here. nothing unexpected. new most of the rules that against that would curtail activities of the banks. they've been in discussions for months so that they were probably priced in. there have been some compromised that soften some of the restrictions. but they, we kind of markets knew those were coming as well. overall, i don't see surprises in what happened last night. it seem as long the lines of what market prices were expected but then the mark et has a brain of it's own and you never know whether it'll react negatively or positively or not do much.

>> next call from last crew sis new mexico. >> i just wanted to ask, i don't know if this pertains to credit cards or debit cards, while this in any way low tear interest rate on those kind of cards when you use them? or what do you think? host: mr. yalman onaran? guest: to low tear interest rate? i'm not so sure. the interest rate - excuse me. the interest rate is dependent on the interest rates in the country part i which is very low now, but there still is termed by different ways. does the legislation restrict the rate? >> it makes sure that they're not - hmm... the consumer

protection agency i think will look at those rates and make sure that they're not unnecessarily high. but is there something specific that will try to lower them? i don't think so. i think they're still set by if banks and you know, if interest rates go up in the next couple of years as economy improves, if the fed starts to raise interest rates, then i'm sure, credit card rates will go up and know one will try to prevent it but i think it's whether or not those interest rates, the fees charged by the banks are fair and reflect economic realities, then they are costs and they can't do just anything they want. that's the only thing i know. host: mr. yalman onaran, did you find that new york legislators were pushing for different things since a lot of financial companies are located up in new york?

guest: not that much. the biggest defender of some financial companies that emerged at the last minute was senator scott brown, who is the new messenger or massachusetts senator. he fought really hard for the state's street ann a couple of custodial banks based in boston and that was related to the volcker rule. when he was doing that, i heard that some new york senators, senator gillbran was looking at the issue and sort of involved in the discussion but she wasn't really such a strong voice in the debate. so i haven't really, not that much. host: what a custodian bank? guess guess great question. i've asked that myself after couple of times.

but a kus doed ya'll bank is not the type of banking we understand typically. the commercial banks that lend out loans or not a message bank that under writes security. custodian banks keep the securities assets of mutual funds and other institutional investors like pension funds that deposit that managg our savings and that you know, they do the back office for those funds, so they really, it's not their own deposit or their own assets they hold, but the pension funds and other institutional investors. that's what they do. host: doug. republican, virginia. please go ahead. caller: guess my question was answered about fanny and freddy. why did we let them kick the can down the road until after the

election? and when are we finding out congress involvement in the housing problem. when we drill down and figure out what they did or didn't do to hurt or help the problem? host: mr. yalman onaran? guest: again, why is it being kicked down the road? i'm not so sure. again, there have been many issues to tackle and administration has chosen not to tackle that one. i think the biggest reason for that is the mortgage or housing market which has already gone down. prices have gone down is still very sensitive if you really try to dismantle fanny and freddy right now or do something differently it could spook the mortgage market more and the practice could go down more and it could really, bring the

reception or rec resession back and that's the fear on capitol hill so they have sort of been waiting for the economy to recover is my suspicion. and the second part of your question, i'm sorry, i forgot. host: housing markets kicking the can down the road is that caller said. think that's where he was going. mr. yalman onaran, he is a senior write wear bloomberg news, born in istanbul and got a masters degree at colombia. he's been with bloomberg since about 1998, prior to that worked for theap. we have this tweet that just came in. a little off the topic but i'd love to get your response to it. too many americans think the dollar should be strong verses other currencies because, well,

strong sounds good. guest: [laughs] i didn't realize that too many americans wanted the dollar to be strong. but i mean past administrations have slow kateed a strong dollar, and i don't always understand the debate on weak verses strong dollar and high we should have one or the other. i haven't followed it that closely but weaker dollar would help boost exports and stronger dollar, probably helps us pay our debt easier. i think those are the true debates and i'm not sure. it's always something positive and negative for on both sides. hard to figure which one is better. host: another tweet if the big banks would buy back all the toxic assets it sold to freddie

and fanny they could then dismantle them. any response? guest: well, i mean, i don't think the big banks really sold all the toxic assets to fanny and freddy. they bought mortgages from all the banks in the country, including the thousands and thousands. we have 8,000 community banks as well as small mortgage lenders that are not even banks, not even regulated u like banks so it's not as simple as the big bank that's sold them toxic assets and most of the toxic mortgages and those that have gone bad in the last five years, is really started going bah bad after 2005 were not done by the big banks but by smaller institutions. the big banks help package them into securities. mart fwaj backed securities, we call them but still it was a

widespread effort. not just a handful of banks. host: pennsylvania, go ahead? caller: a couple of callsing an a woman said we need more government and regulation. it's my thought that, the government started telling these banks that they were going to start lending money to the people that couldn't afford their mortgage. what role did the clinton administration and bush followed it up also, but what role did they play in this whole mess that we're in now? i mean u, wasn't government involvement the reason why they loaned money to these people. how much has that played the down fall we've experienced? guest: it did play an important role. you're right. democrat and republican

administrations did encourage banks to lend to groups of people who perhaps couldn't afford it that way. and congress pushed for it as well. there were several pieces of legislation passed and again, both sides of the aisle were encouraging the mortgage lending. home ownership to expand to more of america. it looks good. when you know, in theory that the wonderful thing. more americans should own homes but as you said, it's riskier when people who incomes don't allow them to do that, if you lent to them, eventually it's going bad. for some years when the economy wasn't doing well and asset prices were rising. officially housing prices were rising that was okay because even if you have income that doesn't make you help you with

the payments then the rising housing price helps you refinance and you stay current with your payments but when we hit a plethora and prices started decline and the economy stopped growing, then everything came tumbling down. yes, the dpovpts and congress, that is they encouraged wider hope ownership. without realizing and paying attention to what that meant, how risky loan where is being made. they did play a role too. host: next call from mississippi for yalman onaran. john, hi. caller: how you doing? i have a comment. you know, this country has really been self destructing for a while. basically for money. for the war lords. my thing is, what does the luminac

luminachehave planed? host: republican line. carol? caller: good morning. how you guys doing this morning? yes, sir. i wondered i was watching a special that had this last year on,c nbc with house of cards that explained how every thing happened and it showed that they would take these mortgages and rate them so they could sell them over seafoods so seems like most of the bad debt where is sold overseas. we didn't hold themmed because new they were not good to begin with. the way it looked as they sold them fast as they could make them. they wouldn't keep them here and maybe that's why some of the overs is having some financial problems they're having now? guest: there's partial truth to that. a lot of the mortgage debt was

packaged into mortgage backed securities and that was sold everywhere. not just overseas but here. in investors and pension funds bought them too. that's our 401k and our retirement funds. so yes, it did contribute to the recession. not the current european crisis but when we tumbled two years ago and the u.s. economy and the financial system came to the brink of collapse. europe and asia were effected because of the banks and government and local governments holding some of the debt. the losses that are bourne by u.s. financial institutions and non-u.s. financial institutions, since the carry sis starts, are roughly the same. the total is 1.7 trillion

dollars. these are on mortgage related securities that we're talking about and it's about half of it in the u.s. and the other half is the rest of the world. we did ship some of the toxic overseas but had enough to hurt us as well here. the current europe crisis is a different issue. it's based on their similar things. you know the spanish real estate market was over valued. the uk market was over valued and those came down and greece borrowed too much and spent money without really paying attention to it's finances, so in some ways it's similar but it's really not because of the u.s. and what we did in our housing market. now they're sort of in the second phase which is their own problem. host: just to build off the last two callers. what internattonal provisions

are included in the financial regulations deal struck at 5:40 am this morning? guest: what do you mean why i want independent? host: anything you can speak to that deals with inteenational financial? guest: not that i can think of. well, i mean there's sort of discussion of resolution and sort of how to wind down systemically important banks and institutions and that, those are all international active stuktss so that addresses some of the issues. but there is, there are separate efforts to set up regulations for all banks globally that would be international and you know there's a committee on banks supervision that really

brings together all the regulators of european asian and u.s. together and they're discussing rules but that hasn't conclude yet. that's another addition to the rules we're trying pass here. and then there's the g20 meeting this weekend in toronto, and they have several other bank related financial related regulation topics such as compensation limits or, again, the resolution authority that some sort of international resolution authority that would tackle if an international bank went under such as when leyman bros. collapsed it had so many subsidiaries in so many countries, no one knew how to handle it. the bankruptcy court here didn't have jurisdiction in london or tokyo.

those have not been tackled. host: next call from deer park, washington. independent line. joshua? caller: good morning. i was going to take a completely different tact. i find how very nervous your guess got with international provision. we're not dealing with fractional reserve banking. some say the credit default swaps were one kwa drquadrillio. we see a collapse that might be created on purpose. i know nine people that have not paid a dollar. not paying property tax or mortgages and no one is even coming after them. our system is going to collapse. i want to ask you a personal question. can i ask you a personal

question. host: josh , go ahead. caller: does your guest have and advanced college degree and in what? host: mr. yalman onaran? guest: yes i have two masters. one in international affairs. >> any response to his points regarding mortgages and international finance that he discussed earlier? guest: he pointed a good thing i hadn't thought about which is the derivatives regulation that in the financial reform back set very international. all the derivatives and the mark set very international. it's about 600 trillion dollars of derivatives out standing an according to the bank of international settlement and the rules that u.s. is about to finalize and pass, do really address the derivatives issue

and force them to exchange and clearing houses and forcing more capital and collateral to put up when trading them and these, the derivatives rules that we're passing are actually going to be serving as an example to the rest of the world. europeans, asian countries. they're all looking at the same type of ideas and they're probably going to follow in our footsteps to regulate derivatives in a similar way in away this does have international repercussions. host: dan, you're the last caller. go ahead. caller: yes, sir. i wanted to make a couple of quick comments. your guest had mentioned that government or congress had a lot to do with encouraging loans that were, you know, low income and i wanted to flush out more detail on that. the - if you go look at the laws

passed the last couple of details. specifically the code of regulations. title 12 you find congress passed lo laws that made 50% of their loans low income. banks tried to comply with that. in the end of 202008 when we had a tremendous failure that occured the fall of that year, we had 54 million mortgages throughout the u.s. and at that time, 26 million of those, had been made to low income families and 11 million of the 26 million were held by fannie mae and freddie mac. now, those banks tried to comply with those 50% requirements in the title 12 code of regulations and the reason they did is congress put in there tremendous requirements on the banks.

they currency had the authority to look at the activities to of the bank and to be able to refuse them things like expansion and putting new branchs in place. host: dan, you seem knowledgeable about this. what's your profession. caller: i'm an engineer but the banks tried to come my with those. can i make one other comment? the other thing i want you to do is put yourself in the position of the banks and say if you had all these assets sitting on your books that were poor, what would you do about? it they couldn't get rid of them so their way was to then combine them and make other assets with some good loans so they ended up putting the proverbial bad apple in the bunch and tried to sell the whole bunch. host: mr. yalman onaran? guest: i mean he points out

some of the problems that - it's correct. that's we said earlier, that congress did encourage lend together low income families. but of course, it doesn't have to be this way. you can lend to low income families as long as you stick to proper banking standards which is you look at how much they make. you look at what the value of the house they're trying buy and see if their income can help them and help them make the payments. if you stick to good lending standards. it doesn't have to blow off this way. there's always 3%. 2%. defaults, people with pay. although they thought they could. they lose jobs or their income goes down. but they were really the banking

system and not just the banking system but all the mortgage lender that were not even bank the shadow banking system that we call it. they really stopped sticking the standards that had been around for decades for. hundreds of years off good banking and that's why this all happened. congress did play a role by pushing them to make more loans but still, it >> before heading off to canada this morning for the gathering of g-8 and g-20 leaders this weekend, president obama took a moment to speak about the financial regulations built it up house and senate negotiators work through the night to work out a compromise. the vote was along party lines, and the full house and senate could vote on the bill next week.

. to work to pursue a balanced pattern of global growth and repair our financial systems. this weekend in toronto, i hope we can build on this progress by

coordinating our efforts to promote economic growth, pursue financial reform, and to strengthen the global economy. we need to act in concert for a simple reason -- this crisis proves and events continue to affirm that our national economies are inextricably linked. just as economic turmoil in one place can quickly spread to another, safeguards in each of our nations can help protect all nations. i am gratified we make great -- made great progress enacting these safeguards at home. because of the incredibly hard work of chairman dodd and chairman frank and a strong leadership of chairwoman lincoln and chairman petersen and the great efforts of the conferees and members of both parties who were up buried in it -- late last night, we are poised to tough -- passed the toughest financial reforms since those we created an aftermath of the great depression. the house and senate reached agreement on the set of wall

street reforms that represent 90% of what i propose when we took up this fight. let me be clear -- our economic growth and prosperity depends on a strong, robust financial sector. and i will continue to do what i can to foster and support a dynamic private sector. but we have all seen what happens when there is inadequate oversight and insufficient transparency on wall street. the reforms making their way through congress will hold a wall street accountable so we can help prevent another financial crisis like the one we are still recovering from their we will put in place the toughest consumer finance the protections in history while creating an independent agency to enforce them. through this agency, we will combine under one roof the consumer protection functions currently divided over half a dozen different agencies. now there will be one agency whose sole job will be to look out for you. credit card companies will no

longer be able to mislead you with pages and pages of fine print. you will no longer be subject to all kinds of hidden fees and penalties for the predatory practices of unscrupulous lenders. instead we will make sure that credit card companies and mortgage companies play by their rules. you will be empowered with easy to understand -- understand forms. you will have clear and concise information you need to make financial decisions that are best for you and your family. a wall street reform will also strengthen our economy and a number of other ways. it will make our financial system more transparent by bringing the kind of contract -- complex deals that helped trigger the crisis -- like trades in a $6 trillion derivatives market -- in the light of day. to make sure the banks protected by the safety net of the fdic can't -- canton gays in a risky trades for their own profit. and we will create a resolution

authority to help wind down firms rose collapsible threaten our entire financial system. the longer will we have companies that are "too big to fail." over the last 17 months we have passed an economic recovery act, health insurance reform, education reform, and we are now on the brink passing wall street reform. and that the g-8-27 this weekend -- g-20 summit we will work not only to promote financial reform efforts, promote economic growth while pursuing -- assuring each nation will pursue a path sustainable to its own public finances. as the main forum for economic cooperation, but g-20 is the right place to discuss such issues and in that next few days i hope we can build of the past progress and strengthen the global economy for a long time to come. >> president obama sign that the health care bill into law in

march and federal and state regulators now turn to implementing provisions. right now we are bringing you live coverage from the center of american progress as they look at the next stages of health care reform. >> as president obama said tuesday in an address at the white house, we've got to make sure that this new law is not being used as an excuse to simply drive up costs. what we have to do is make sure that the affordable care act gives us new tools to promote competition, transparency, and better deals for consumers. the paper we released today outlined how we seek to do that. both through the use of three tools. the development of health insurance exchanges, developing standards for clear, standardized information so that consumers will not be subject to the opaque information and will be able to make informed choices. and then finally, reining in rate increases. we are going to focus on rate

increases today. i am really pleased to have these panelists join us. i don't think we could've done a better job of getting a group of people who are just exactly the right people to address this issue. to my right is joe adario, commissioner of insurance for the state of pennsylvania -- joe ario. i once called them the troy pal -- of insurance -- enforcers when he challenged a health insurance merger. i should mention, after the department of justice cleared it. [laughter] the prior justice department. gov. rendell nominated him, highly qualified and seasoned administrator with a strong and proven record fighting to protect the rights and needs of consumers and i think his record really demonstrates that.

next is diane holder. we are not just bringing together the regulators. we are smart enough to know that it is essential that we hear from the people will make the market work. a great example of that is the university of pittsburgh medical center, one of the key providers of medical care in western pennsylvania, which also has a health plan, and as such, is an integrated delivery system. we focused on the negro of integrated delivery systems and how they are crucial to help control health care costs. diane holder, president of ceo of upmc health plan is joining us. leadership positions in a number of health care carriers -- areas and one of the founding ceo's of community care behavioral health organization. she is going to be the moderating influence on this panel of regulators. next to diana is steve larsen.

after a career as insurance commissioner in neighboring maryland where steve was one of the luminaries in insurance regulation, one of the key things he did was an action that stop conversion of nonprofit blue cross plan to a for-profit plan. steve went on to become the head of the managed-care company serving medicaid and medicare beneficiaries. when the office of consumer information and in some assurance oversight was formed, he was appropriately picked as the director of oversight, one of the key positions. he is here to tell us, at the beginning stage of what opiio is going to do to bring about health care reform. we couldn't do this without having a good antitrust enforcer on the panel. we have a good antitrust enforcer. cheryl arnold pozen is chief of

staff of the antitrust division at the department of justice, where she helps the assist attorney general what actions making antitrust enforcement is strong component. there was not a lot of discussion of antitrust in the congressional debate. i am sure that is only going to be for a short period of time because we are starting to see a lot more enforcement of antitrust division. cheryl has a long record at the federal trade commission, a little while ago, -- we were both attorney advisers to different commissioners. my first question for the speaker is is, -- from your agencies perspective, how are you going to go and try to perform the mission. what do you see as one of the major initiatives you must undertake. let's start with steve. >> david, what, let me just

explain our role. you mentioned the office of consumer information and insurance oversight. that is a mouthful. we are referred to internally as osio, pronunciation of the ackerman. our office is charged implementing the reforms contained in the health care reform act. we referred to as aca, accountable care act. the provisions that require review and justification of what are called on reasonable rates increases, regulations that we are developing now, that is one of the provisions -- review of medical loss ratio requirements that are in the reform act, working with states -- which i know we will talk about -- to implement and enforce the market reforms, and by that, patient protection provisions, regulation of that many of which have been released.

we are charged with alternately implementing the exchange's coming up in 2014, too high risk pools -- working with states to do that -- and the web portal, which is to your point about transparency and accountability. we are going to be working on that, and it is going to be rolled out soon. >> great. ok. sheriffs, talk about the role of antitrust and how it assist the efforts -- sharis. >> first, i have to say thank you to david. we have known each other a very long time, from our days back of the federal trade commission. i think all of us are grateful to david's contribution to enter trust, which started back then and continues. it also grateful for the opportunity to speak here at the center for american progress. cap is a favorite of the front

office of the antitrust division. this is where the assistant attorney general gave her first speech right after her confirmation and certainly made news when she withdrew the section two report. we are very pleased to be back here at the center for american progress. i think i just have to state the obvious, competition is the bedrock of the work of that we do in the division. we think with competition comes all kinds of great things. innovation comes high-quality and lower prices. we see our job as ensuring competition is maintained, that the playing field remains open and fair. i just want to say that from the beginning. having been around for a little while, i know back in 1990's, when managed care started emerging, there was a lot of discussion about, should there be anti-trust exemption, some health care be exempted from antitrust. i think the answer of the

antitrust division today is like then as well -- no, there should not be exemption from antitrust laws. competition brings in invention, higher quality products at lower prices. health care, like other industries, this very complex. it has a lot of attitudes providing a variety of products, intermediaries, and regulations. all of these things have to be taken together when we think about the application of antitrust laws to health care. but it is the same as many other similar industries. i think, as the assistant attorney general said recently, the speech about health care, that she is going to continue -- she has been there a year now -- but she will continue going forward, focusing on health care and ensuring competition is held -- maintained and health insurance market and providers. we think that is important as we go forward, and particularly important as we think about

health care reform. as the president has said many times, for many of us, our health insurance won't change. i think what it says to me, as an antitrust enforcer, is we need to maintain our vigilance in the markets that exist today. the health insurance market and the provider markets as well. in the past year we have really tried to apply it -- again, the vigorous antitrust enforcement in a responsible way. i will provide examples. when it was brought to our attention where in michigan, blue cross/blue shield was buying its next closest competitor in lansing, michigan, and we looked at that closely and ultimately decided we would challenge it. the parties abandoned. one of the issues being examined was not only the fact that blue cross/blue shield of michigan would have 90% market share, but the question of entry became very important to us.

we had an on the link project internally to think about health insurance markets, and what is the key, where there is concentration, why don't we see more entry. we examined the issues. we talked to a number of people and got a variety of views. but it has informed our thinking on health insurance markets. the same goes for providers. if you look at a recent consent agreement where physicians in idaho had joined together, and what we believe to be an agreement of sec's -- agreement against the sherman act, they would not treat workers' compensation and also boycotting those insurers. we entered into a consent agreement. we are very active in the day today in antitrust applied to health care markets. the question that david says to us, what do we do when the of --

in the affordable care act era and we are thinking of new and interesting innovative ideas of the legislation put forth. from our standpoint, as mentioned, the exchanges are quite interesting. health insurance market, given what we have learned and the matters we challenge, we look forward to working with -- or i should say, continuing to work with, hhs on the issues to make sure the exchanges are competitive and offer high- quality products at the lowest prices, and competition is maintained. the other area from our standpoint is creation of aco's. no question that integrated health care -- as we see from pennsylvania -- is going to be very important as we go forward. of course, antitrust comes into play. again, as the assistant attorney general pointed out, we are very open to innovative ideas. we do not want anti-trust to be

the in hitter. we want and to trust to be a team player, working together to make sure that we follow -- that parties followed the antitrust laws but it doesn't inhibit innovation going forward. that is the message i carry here today. certainly we will continue the vigilance, that is clear, that as we go forward in a new era we will work closely with the stakeholders and partners at the federal trade commission to ensure that this is infused with the thinking about competition. >> thank you. just emphasize one point sha ris made, challenging the michigan merger was really the first time the antitrust division in quite some time had said no to a health insurance merger. over the past decade -- as president obama noted during the campaign -- that had been hundreds of health insurance mergers with a really relatively little enforcement.

from why don't you tell us your perspective how you see your role in working with federal enforcers and bringing about these health care reforms? >> let me pick up where sharis left off -- the states are another important part. it is great to have people like steve and jay at hhs -- the partnership between the federal government and states to make this work. you and i got to know each other, david, over the proposed consolidation of the two largest insurers and pennsylvania. i did say no to that. we didn't get that much help from the bush administration doj, but to put it on the record, i believe we would have gotten more help had we been in the obama era when that merger was proposed. but we took a careful look and that input from diane holder and her group and a number of other smaller insurers from pennsylvania and ended up saying no to that merger. we continued to look at those

issues are around the blues and the competition. frankly, the passage of the affordable care at has become the new priority in terms of how to get the market to be more competitive. because i agree with everybody here, that competition is the name of the game. we have to succeed because we increase and enhance competition in these health care marketplace. something steve mentioned, the first reforms going into effect. as the president said this week -- patient protection reforms. it turns out when people buy health insurance they want a product that covers the basic needs they have in that area. a lot of things so the marketplace today don't help the average consumer it shot and pick the best products. we have a new floor of consumer protection. as of september, no more lifetime maximum and freight existing exclusions for kids --

no more pre-existing exclusions for kids. the next thing is race. i would say that insurers have been very cooperative on the first point -- building up that product. in a way, it is good for their bottom line. a more robust product. we have gotten a lot of cooperation. then we turn to the second issue, david mentioned -- meeting with the president on tuesday, he harped on wanting a better product but we want fair rates, too. some in the marketplace don't suggest a fair rate. and then to bring in the governor has been involved in an investigation of health insurers because we move toward reform, and the end of discrimination based on health status -- we no longer want insurers competing for the best business for them -- that is the business that doesn't really need much health care and trying to exclude the

business that is the worst business for them, the one that does need healthcare -- we want everybody in large pools. we want our market to move in that direction. i have to try and a low bid -- one of the companies that uses medical questionnaires, small group market, invasive questionnaires to ask about health history -- not only setting it based on past claims but they can also predict future claims activity and rate the group on that basis and it tends to segment the risk pool in ways that will make it difficult to put the risk pullback to gather in 2014. we see some issues are around that set of concerns about large pools. think about where insurance works best. large group works best because it is a broad pool. insurers compete for the business. covering a large risk pool that

has some healthy and unhealthy. they have to compete to deliver quality care -- they cannot exclude bad risk and keep the good risk. a large pool, more leverage, so there is more fair negotiating position. the products tend to be better. 99% of employers, over 200 employees, provide health care. if you get especially to the individual market and the value proposition for the consumer is not good today. that is where reforms need to go. then we get to the last and most important under the affordable care act, which is creation of these insurance exchanges in 2014. there we are going to add the essentially, i think of it as like research department of a large insurer or business. they go out into the market with a large pool of people in the exchanges. they can negotiate with insurers.

they can ensure that the product offer for the exchange that are transparent and clear -- and we should get into this more in the discussion -- because transparency is not a minor point. if you could actually look and compare products effectively, the massachusetts connector, their ambition is in 20 minutes to make a decision looking at the different choices and have good standardized comparisons -- that helps, and then the leverage and exchange can bring in negotiating with insurers, that would help the marketplace, too, and ideally would that make this work right through these exchanges. we can provide the same value proposition for individuals and small businesses that and large business gets in its negotiations with insurers. it will make the business of little tougher for diane, margins may be lower, but getting 30 million customers is part of the deal, too, so it would still be a good opportunity for the health- insurance industry, i think, and i think it will lead to improved competition but we have a lot of work between now and 2014 to get

ready. >> diane. you are the one non-enforcer here. new i like the parents make sure we don't get into things we should not be into. what do you hope for from regulators and would you are worried about? >> this is a great panel you put together. i feel privileged to have been invited. i also feel a little anxious since i am the only insurer. and we are a different kind of insurer. we are an integrated delivery system. i really don't represent the same kinds of things, i think, that are there with the national environment. consequently, some of the things that i say may be more idiosyncratic to organizations like ours. but i have to say that as an integrated delivery system that actually operates virtually a

health plan across populations and the kinds of services and products -- medicaid and medicare commercial, a children's health insurance. we have for quite some time seen some big differences in terms of how regulation matters, what regulation can and can't do. what kind of opportunities there are when risk adjustment is done well and what kind of problems occur when risk adjustment, for example, is not done well. i'm very excited actually about health care reform. i think there is a lot of opportunity not only to improve access for people, improved affordability, change the way things become more transparent, help us really to improve quality. i have been very pleased to be able to be part of an integrated delivery system that has the kind of plans that really are usually in top tiers of health outcomes, that have

always and invest the dollars more heavily in the medical expenditure, have always kept administrative costs really low. i don't say that to advertise a us. there are many organizations that have done that and done it well. but i think there are the other extremes of organizations that have not done this well. a part of what i see when i look at our markets is that it is important that as the regulations occurred -- especially as we get to the exchanges -- unintended consequences could be that if regulations don't go in certain directions, that plans like ours won't be as viable because you could do something like, say, you have to be able to offer something across the whole state. well, plans like ours would have difficulty with that because you can't get the same kind of discount. plans that are in markets where there is a monopoly-like environment by a given player would have much more difficulty in terms of provider

negotiation. they always do. or distribution channels. increasing competition would be extremely helpful, but unintended consequences could be more consolidation, both pair and provider. i would ask regulators to say, what are the high risk problems that might lead to more consolidation and not less? what can we do, because we see -- we were very pleased to save the state of pennsylvania take an unprecedented position and prevent a merger that we think, as was stated by the state, was not good for the consumer. and we believe very firmly that not only would that not be good for the consumer because it would eliminate potential market entry, it would eliminate competition that already existed, or at least diminish it significantly. i would ask that when we look at

these things, we look at how do we assess risk, high risk pools will be very important. we ran a medicaid program for years in the state of pennsylvania, that it wasn't that manipulation of the competition was done necessarily through rates, the manipulation to be able to avoid at worst -- adverse risk was in a network and benefit design. because if you offer and medicaid plan that is a good enough network but it does not have the leading hemophiliac provider, but you have an alternative. you still get licensed. nobody takes your plan that is sick with that particular problem, right? so, if you are a plan that is known perhaps for doing more significant medical care -- maybe you are attached to a medical center on by a provider -- you can begin to see some people who are attracted to your name.

so, one of the things that happened in pennsylvania is when they put risk adjustment in -- because we were 20% of the market and away 50% of transplants without adequate risk adjustment -- when they did put risk of judgment -- adjustment in high risk pools, it was fine. we have made -- not big margins, but reasonable margins -- small margins. but what i would say is that, that really would be very, very important. so in some rates, what is the requirement in the exchange, what is the criteria considered to build affordable, and what is the actual way what that we would do risk assessment and adjustment. >> thank you very much. well, the first question i've got has to do with the question of rate increases. there was an incident a couple of months ago involving a rate increase by wellpoint.

secretary sebelius personally got involved. i checked schedule, she is too busy to get involved in every rate increase. could you tell us about the status of where you are in the regulatory process on dealing with regulations about rate increases and what you envision as some of the principles that ociio to abide by. >> let me just say -- i think that the rating process by insurers and a review of those rates by, until now, the state insurance commissioners, and in the future, i think a partnership with hhs, is one of the most opaque parts of what carriers do. consumers, all of a sudden they get a bill that they've got a 15% or 20% increase that is due on top of what they got last

year. it also can be and should be one of the most important parts of what state insurance departments do. and again, moving forward, as i mentioned earlier, one of the key parts of the reform bill is this a requirement that insurers submit, in advance of a proposed rate increase, an unreasonable rate increase, that we will talk about, a justification to both hhs, to the relevant state commissioner and a post that on their website. we are in the middle of a regulatory process to flesh out both of the definitions and the process are around that, so i'm not going to comment on specifics. but as you mentioned, i can talk about a couple of issses and principles that i think are embedded in that discussion. one is, what is the definition of an unreasonable rate increase? the statute left it up to the regulatory process to define it.

without getting into detail, there are options in terms of having a narrow definition, which would capture, say, relatively few rate increases, the very large ones. there are, as you could imagine, it interesting part is that are proposing we set a very narrow band or high threshold. or a lower level. ideas that have been thrown about i just the medical component of the consumer price index -- medical cpi, which is starkly, which may surprise some people, are in the single digits even though they have been getting rate increases in the double digits. you could set it at that level, a high level. those of the issues we are sorting through. the implications of where you set the threshold, carriers in advance will have to file the justification, which again, at this transparency to what historically has been an opaque process. another key issue is what is and

the justification. the national association of insurance commissioners has a process of going to help hhs sort through some of these issues. they have been experts so far in looking at some of this stuff. as a general matter, in order to bring the needed transparency to the process, we are looking at things like, what are the cost drivers for the premium increase -- and having worked in a health plan, there are many different things that can drive rate increases. you can have a rate increase just because you did not have one for the last four years. for any number of reasons, competitive reasons. all of a sudden you need to play catch-up. it may depend on the cost of your hospital contracts or your doctors. a lot of it may depend on what your profit margins are and what you're trying to achieve, and whether you are backing into a rate increase because you've got profitability targets. all of those types of things are things we are looking at to see in what can be included in the

justification, and working closely with naic on that. and how easy the coordination between the federal government and the states -- >> how do you see the coordination between the federal and state and the provisions for awards? >> i think it is very much a partnership. the federal process that i just described is really like. on top of existing state processes that jewel and other commissioners run now. i am glad you mentioned -- secretary sebelius recently announced the first round of grants, and million dollars for states who can demonstrate that they can put the million dollars in good use and bring some greater accountability and accountability to the review of rates. some states do a great job today, either because they have very strong state laws or they have the resources in our budget, or they have the will or the commitment -- light joel and

the governor of pennsylvania. for other reasons, states may not have that. funding for state insurance departments very. the availability of the grant that the reform bill provides is a great way to jumpstart and enhance the ability for states to do that primary role, but it doesn't -- it is not in place of this over arching federal requirement that there be these justifications. >> i can't help but jump in and just make a plug for the repeal of -- >> waiting for you later on. then and this context, the idea of rolling back -- ferguson, exempts insurance from antitrust laws. something the administration has been supporting. we are quite hopeful that that will shed some light, as it were, on some of these issues. >> joel, how you see states

working with ociao? >> partnership is operative word. the opaque need of the process -- one of my priorities has always been more transparency in my process. i was chief regulator in oregon and we had a crosses their making all of the rate filings fully public on the web page from the day it was filed. did not get it done when i was there but my successor got it done. so that all of the rate filings in oregon are on the web page today -- the day they are filed. literally all the material behind the rate increase as well. we are working toward that in pennsylvania. you would be surprised at the arguments sometimes made by the insurers to resist this. but we are moving in that direction. the affordable care act gives us a big boost because the

essentials device in that bill is to shine a public spotlight. not a lot of regulatory teeth and what hhs has an terms of, can't say no to a rate increase. it does not give the states new authority to say, no, but it does require this spotlight. in my experience, that sort of thing often times works effectively. california did not have authority over the rate increase, but when the public spotlight was shown, it turned out the rate increase was withdrawn. that is a critical part of the process. the basic standards are the same in every state. rate increases cannot be excessive, inadequate, or unfairly discriminatory. not too many cases are -- of inadequate. not many cases of excessive across the board. what you often have is unfair discrimination, which is the rates that are set by chopping up the pole into little segments

and charging people a lot more than other people, and that raises questions, aren't they rose fair or unfair forms of discrimination. that is where most of the rate activity is, where it was with me and some case. and states have mixed authority. we have good authority in oregon to address those issues in individual and small group markets, not so much in pennsylvania. the governor and i are fighting for that still and the legislature. we are hoping we can shine more public spotlight -- spotlight on the rating issues so we get that authority. >> let me just say a couple of words about state regulatory authority. a couple of things we have done here at cap. the question of stage -- during congressional debates there was a strong course that you should just rely on the states. careful examination of what the states do would strongly suggest that if you want good health insurance plans, you should live

in one of five states. states insurance commission enforcement varies tremendously. the resources very great deal. we found that five states brought the vast majority of consumer protection actions against health insurers. a full one-third brought no consumer protection action. in a study we are about to release on rates review, we found a similar result, with a small handful of states bringing enforcement actions against unreasonable rates, and the vast majority really lacking the fact of tolls. >> i am not going to defend states across the board, but i believe there are more than five that do a good job. [laughter] >> we won't put a number on it -- [laughter] >> i wanted to go back to steve.

how do we see a role -- the role of greater transparency? you are providing for greater transparency, sort of assisting the efforts of the states in this regulatory process. >> again, the justification, the format we are working on now that will be filed, that alone it is going to help people understand what is it that is driving health-care expenses for their policy and the state. you know, my hope, and i think the hope of the secretary, through the accumulation and review of these justifications, to have much better insight into what is driving the health insurance market and health care costs. also not just for systemwide but for individual consumers to understand what is it -- where are their rates and where are the rates of perhaps the other companies in the marketplace and what has been historical rate of increases.

again, the consumer end up seeing this through a very narrow soda straw. they don't know the history of rate increases with respect to other policies. so, information is power, and i think people will be about to make more informed choices. i think what we saw in the case of california where, with additional resources and the review, which is hiring an outside consultant and finding basic things like mathematical errors. i think one of the benefits of these rate review grant is, what ever the existing resources today that a state has come up with an additional resources -- you know, the companies have a lot of resources. they have a lot of smart people will make a lot of money. the use that money to help them achieve their business purposes. this kind of helps level the playing field with state regulators and gives them the tools to hire outside people, to do the analysis that you need to find to make sure that everything is right and proper and appropriate and justified.

>> we should probably know that there are bills in both house and senate side -- feinstein in the senate -- to set a floor for state rate regulation processes and then get back to the states the ability to be first in terms of meeting that floor. but if they ultimately can't meet that floor, then they have some federal authority, it backstop. that was under discussion. it might have gotten into the bill that we had in the conference committee process, and so forth. unfortunately did not get into the bills but depending on how this process goes, you may hear more talk. the result of the stage -- again, more than five do the job -- but not all 50 states, certainly, so some federal backdrop that gives the state's first option to stepup the plate -- to the plate might be a reform worth looking at. >> as joel mentioned, the bill

would really give the federal government a chance to reject rate increases as being unreasonable. going back to steve -- how well the new legislation regulation of medical loss ratios, how well that fit into that analysis -- will that into the analysis? >> i think it is part of transparency and making sure the book value. i should not say many, but some states already have medical loss ratios. it is really just a measure, a target to require carriers to spend a certain amount of their premium on activities that benefit their members. meaning, medical claims and the new, kind of twist in the bill, is that they can count in the ratio, expenses for activities that and improve the quality of their members. it is a great addition, because really you want to incentivize companies to spend money for the benefit of their members and not

on excessive administrative expenses, not on efficiency, not on large salaries for their executives. so again, by requiring insurers to report their expenses in these various categories -- a, you did additional transparency so people understand how the companies are operated, where your premium dollars are going. and accountability. and ultimately, the provision for rebates which, if the insurers are not providing the benefits to the consumers, to their members, for every premium dollar they get, the company will have to give the money back. so again, it is very strong consumer protection. we are finding, again, naic is working through the definition of all of the various expenses. you might be surprised. you would not be surprised how complicated ensure finances are.

i think naic developed 40 or 50 different issues associated with defining a relatively simple calculation of how much for every premium dollar is spending on health care. when it is done, i think, frankly, it could be one of the strongest or equally as strong as the other consumer protections in the bill, because it is going to make sure that consumers get value for their premium dollars. >> joel one of the -- i wanted to give you an opportunity to talk more about the answer -- enforcement action you took against the high mark independence blue cross merger and what it might mean for future antitrust enforcement. >> again, i think we have a new face on this issue in washington that we welcome very much. i think this needs to be another area of state and federal

partnership. what we saw were the two largest insurers and pennsylvania, blue cross, blue shield -- merging it essentially. they called it consolidation. it would have given something like a -- probably would have led to consolidation of other blue cross. eventually as we study the matter it became pretty clear that this would create a stronger single insurer presence in one state that existed and any other large state. there are some small states where -- blue cross or blue shield, dominates. michigan blue cross exactly seconds at about 40%. it looked like all tamale building fortress pennsylvania in this one state -- ultimately

building fortress been to bring in one state, the idea was they would be in a position to compete out to the other state. one thing that could be controversial in this audience is there could be synergies to be had through the consolidation. about a billion dollars of the efficiencies that would have been gains -- stuck to the recommendation throughout the process. so, if the consolidation were done in a way that went out into the state into other states and did the same kind of thing at -- as other national insurers do -- united competes in almost every state, aetna, well point, 34 states -- if one wanted to merge out, i think those kind of consolidations merit closer attention. but the idea of building up in one state -- i told them at the end it was like the game of risk. the winning strategy is to have all your army in south america so no one can attack you and you go out to a tax everybody else did not a fair way to compete. it makes for a good game but not for the consumer in real life, either. that is in essence what we said,

is you cannot -- diane already saw what it is and pittsburg -- in pittsburgh. >> diane, you got a chance to testify in a proceeding, a one thing you testified is the issue of the efficiencies that joel just mentioned. i think you have a different view. >> well, economists look at this all which weigh from sunday, of course. but the thing that struck me, whether there were all were not efficiencies to be gained, which most of the literature that we look that over time -- >> i know it is controversial. >> i know, i know. did not show for many consolidations and insurance companies nationwide -- going to create new history -- which could not find any evidence of

administrative savings. the thing i struggled with, quite honestly, insures -- in many years has not exceeded more than 7% admin, all in, and had one of the highest quality rankings are across all of our plans. we do lots of prevention, care management. we do a lot. again, other plans exist like us. their target in what they wanted to get to administrative together is significantly higher than we are today. which -- and we are smaller. it did not make sense to me that you could not achieve those efficiencies short of consolidation. >> i would not dispute that point, but there was -- >> diane mentioned earlier of the concern about exchanges. you are an antitrust enforcer.

you want open markets. but you have steve next to you right now. [laughter] from an antitrust perspective, and what does that you have done with entry barriers, was there any guidance you want to give them in limiting who can play in the exchange for keeping them open? >> 1 minute back on your discussion -- i think one of the things -- as many of you know, carl shapiro joined the office and he is a very renowned economist and he is deputy assistant attorney general for economics. one thing i know he was a challenge star -- on was thinking about efficiencies and consolidation and will it be passed through to the consumer. it was an interesting discussion. i would love to hear your views. going into exchanges and your question, david, as exchanges are formed, again, we look forward to working with hhs on

that and trying to infuse their thinking with competition, advocacy, and understanding where the competitive grubs are as they are formed. one of the things we noticed one way or reviewing and working on the legislation was the requirement that a nonprofit that would be in the exchanges -- i understand that, it is something we will have to deal with, though, because in the some markets -- how you define the markets and everything else -- nonprofit is the dominant in sure. what we do to ensure that those exchanges remain competitive and how do we deal with that dominance in the context of formation of new exchanges. it is those kinds of issues we have been starting a dialogue with hhs on health care reform so that we can really contribute in a meaningful way. >> can you two trade business cards? [laughter] let me go to the issue that

sharis mentioned before. ms. karen-ferguson. we share the same perspective. there are very few industries that have antitrust exemptions, and almost without fail the evidence shows that consumers don't do well with them. the other one is baseball. you know because of the anti- trust exemption baseball, the pittsburgh pirates -- pittsburgh pirates are mired in last place. just kidding. [laughter] anyway, passed the house 406-19. there are concerned -- concerns that eliminating the exemption would stop small health insurers from being able to collaborate and put them at a competitive disadvantage. if you are united, you don't have to worry about the fact

that the exemption gives you the ability -- all they have plenty of information. but if you are one of the small, innovative health insurers you don't have access to the great information. you've got to get together to collaborate. why isn't that a reason to keep the exemption? and i love that question. a variation of what we talked about before. i love it only because it allows me to really -- collaboration is not illegal. and i think that is a point we keep making again and again at the antitrust division, that collaboration in and of itself is not illegal. the antitrust laws and the collaboration guidelines and health care guidelines all speak to this directly. so, legitimate collaboration where efficiencies are gains, new products, innovations, that is what we want to see. competition can provide that. so we think collaboration can provide it. however, when it crosses over

and it becomes a facilitator of price-fixing or exchanging that leads to a competitive harm, then we do get concerns. my answer to that is, you don't need an exemption. you don't need to throw the baby out with the bath water. you could have a good collaboration, legitimate collaboration without a blanket exemption that exists today. interestingly enough, we have a business review letter out and the health-care field where the idea was to collaborate on information exchange regarding hospital claims. we looked at very carefully. we looked at it in the context of our guidelines and decided not to challenge that because proper precautions were taken, third parties were used, and the kind of information they were collecting an exchanges were a program. we have a business review process where you don't have to even a risk going forward and getting prosecuted. there are many mechanisms and safeguards to allow a legitimate

collaboration to go forward. don't need an exemption. >> thank you. joel and diane, i want to go back to something right at the beginning, presenting that insurance companies might be cherry picking. let us be very selective and pick out the extremely healthy people who are low risk. what do you -- it for you as a state enforcer, how are you approaching that issue? and from diane, i would like you to reply on how significant an issue you perceive it is. >> i think it is a critical issue. i first got into this business in 1995, small group reform, the whole idea is to pool risks and large enough pools where there is a cross-section of healthy, and healthy, young and old.

it works and large group insurance. why we have to deal with these issues is most americans get their insurance through these large groups for the risk spreading happens already had a big chunk of the rest gets it through the federal government -- which has community rating for medicaid and medicare. so the small part of market where insurers do what most to, try to this -- pick the best risk and either priced way up or price outgo worst risk. as a society, it does not work in health care anymore. we cannot -- to the industry's credit, they said from the beginning of this reform effort -- not so much in the 1990's -- they say we agree. we want to end discrimination against six people, too. we want to compete on a different value proposition -- preposition. now the question comes in a state like pennsylvania -- which doesn't currently have laws against the cherry picking, will

happen between now and 2014. what we see is a run-up, the insurers incentive moderating their performance in the marketplace and going smoothly and to 20 -- 2014, competing as vigorously as the past to the point where the two largest insurers, the same ones, the villains from before, they don't use these medical questionnaires. everyone else does, but high mark and -- until may were using them, before 2014, which can put the clamps on the hands, but and other companies -- i am not picking on diane -- everyone in the state use of them with the exception of high marks and ipc, but we need to moderate the use of those or eliminate as soon as possible. the house of representatives passed bills two sessions running doing that. the governor is democrat, republican dominated legislature -- i did not know if it will be good for the marvelous, run up

to 2014 -- then tried to put all back together in 2014. then i think you might know my answer. [laughter] which is, we have been in favor of moving to community rating methodology for a long time. the problem, as you know, in a state that already has -- i will not use the word monopoly -- or something like it, in the east and the west, you run into a difficulty that you just can't actually get market entry. one of the issues but comes if your end is big enough, you have the capacity to balance risk. if your reserves are deep enough, you can't put anything you want on the table for a period of time while the other guy goes away. that is one of the things i would ask in terms of the exchange -- i would assume life what comes in the next few years is like before, it will take awhile to get this right. there will be a lot of work to

figure out all of the pieces. i would just ask that as it is been figured out, that some of the things that were available learning's from medicaid and medicare, as it translates to the exchanges, especially around risk adjustment -- because i can imagine a scenario, and a worst case scenario, where you have entities -- it would not just the pennsylvania, but many markets -- entities that have very deep pockets, that have dominance in market share, that have the capacity to wait it out while they figure it out, and others cannot. then you will see consolidation in a way that i think would be quite contrary to everything you are hoping for. i would just caution that, if you could. think about that differently. for pennsylvania, specifically, i think it would be terrible to rush up to4