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 ensuring 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 looked 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 preserve the safety of depositors and to preserve the safety of the taxpayer. so i regretfully disagree with the gentleman from georgia and would strongly urge my colleagues to oppose this amendment. >> mr. chairman, just very 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 eeactly 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. forest 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 to u.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 principles than they are going to be spun out into an affiliate that could be under the bank holding 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

taxpayers 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 from georgia pointed out 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, responsibility, higher 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 needs 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 availability 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 will report

>> mr. chairman, when would we enter that -- to seeing those amendments? this bill is quite technical. >> could 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. [laughter] yes, today. [applause] >> senate staff will be at their

desks at 8:30 this morning. we'll get them as soon as we can. i ask that the clerk 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. chairman? [roll call vote] [roll call vote]

clerk will go to the republicans. [roll call vote] >> mr. hensarling votes no. >> mr. garrett votes no. >> lucas no by proxy. >> mr. barton? >> no, by proxy. >> mr. smith votes no by proxy. >> issa? >> no, by proxy. >> mr. graves? >> no, by proxy. >> madame clerk, mr. schumer votes aye by proxy.

>> mr. schumer votes aye by proxy. >> what is the tally? >> 20 ayes, 11 nays. >> the house sends you its approval. >> let me congratulate you on a terrific job. we will now vote on the senate side. those in favor aye, those opposed nay. the ayes have it. [laughter] i will ask the clerk to call the roll. >> mr. chairman? >> aye. >> mr. johnson? >> aye. >> mr. reed? >> aye. >> mr. schumer. >> aye, by proxy. >> ms. lincoln? >> aye. >> mr. harkin.

>> aye, by proxy. >> aye, by proxy. >> mr. shelby? >> no. >> mr. crapo. >> no. >> mr. corker. >> no. >> mr. gregg. >> no. >> mr. chambliss. >> no. >> the clerk will report. >> 7 aye, 5 nay. the bill is passed. >> i thank my colleagues. [applause] >> with the votes of the house and senate conferees in favor of passage of the bill, i declare the bill passed and the conference committee is now adjourned. [applause]

>> nice to meet you. take care. >> i'm on the cleanup crew.

>> congratulations. >> congratulations.

>> we recognize the tremendous efforts of staff. barney frank and i have worked together for the last few years. it has been nothing quite like this. as is as good as it gets in terms of a legislative effort. this makes a huge difference.

no one thought we could get this done. it is a tough environment to operate in. to establish a consumer protection bureau for the first time in the history of our country, to stop the too big to fail, to ensure that we do not end up with another near financial collapse. we will provide an early- warning system. it is another of the great pillars of this bill. >> how will this work? >> we believe it was needed for a long time. it took us a crisis to get to the point -- it was exciting to bring it to where we could get this done. it is a terrible way to have to do this. we have people like barney frank leading the house effort.

great colleagues on the senate side. we have great people like harry reid and nancy pelosi making a huge difference for us, giving us the space an opportunity to do this. this has been badly needed for a long time. we hope to protect our country. we hope this will bring optimism and opportunity to our financial systems. it is a great moment. i'm proud to have been here. >> i agree with the senator. it is an extraordinary experience, obviously. we hate to have the kind of pain and crisis to have to get it done. we try our best and work together. we hope that the legislature will be ready. if you intend to focus, as you

do, understandably, on the controversy, by definition, controversy over the last little pieces, people will forget how far we have come. the negotiation for the consumer protection agency, the widespreadrule, the reform of derivatives -- those were all unachievable years ago. in every area where we have touched, we have made significant advances. i would also say that it is a tribute to the way american democracy can work. there was a difference in this bill. last year, when we were debating in the house, health care was getting all the attention. it was not as good of a bill as i would have liked to bring out. we were not getting public

attention. people were not -- people with an economic interest were not moving forward. this was a much tougher job than the 60-vote majority. it will be more difficult. with health care, the american public began to focus on this. it has made an enormous difference. this is better than it would have been coming in significant ways, because the american public focused on it. i hope we will give people a sense -- we worry about big money. it is reassuring to know that public opinion gets engaged and can help win. >> i agree. our staff are extraordinary. putting a lot of time in a stressful condition, for far less money than they could have made elsewhere. >> do you think you'll have a

majority? >> i do not know that. we'll see what happens in the next few days. i have stayed in touch with the the republicans in the senate who supported the bill coming at of the senate. i've had daily communication with them as to inform them how things were proceeding. i have asked about their thoughts. i dr. chairman frank about these things and he was a very aware of it -- i talked to chairman friend about these things and he was very aware of it. they were very interested in the proceedings. they were interested in things. it was a very good relationship. i cannot tell you today. i have to talk to them over the coming days. i hope we will see a bill -- a stronger bill than the one we came out of the senate with, with all of the things they're interested in and a bit more, because we were able to prove -- improve some ideas.

some of the more controversial ideas as well. i thank the house members and chairman frank for understanding that. we're in good shape. obviously, i'll reserve judgment until i can talk to my colleagues. >> on the volcker rule, to you expect other major economies such as japan -- >> of the chairman has made the point -- maybe it was not made often enough -- this bill is not done yet. the president may be on his way now to toronto. he is on his way to the g-20. why we have not completed it, the harmonization of our rules particularly with those in the european community and the pacific rim -- it will be awfully important. united states, having completed this work, we open the next -- we hope in the next week, can offer some leadership to the world in what needs to be done to harmonize the efforts we have talked about this evening and

recently. i think it will strengthen the hand of our president going to toronto to make that case. we believe with a passion in this bill. we will make the case to our fellow legislatorswe hope will occur next week. we can make the case where follow -- fellow parliamentarians, union leaders, and others. they could embrace the principles at least of what we have done. adding it levant's the stability -- it will advance the stability and predictability, as well as a kind of wealth creation and job creation that we desperately need. >> first of all, there articles today in the newspaper -- there were articles in the paper saying we would be debating. who heard them and he just happens to have that. >>europeans seek blil -- bailouts. they want to tax their institutions to pay for their recovery. this is what we did today. -- britain, france, germany --

most of the europeans. the british -- the conservative, british government has just beat up to the punch -- be as by the punch -- the us to the punch by -- beat us to the punch by a few days like setting up of consumer protection agency and dissolving their financial agency. it is contrary to what our republican colleagues were arguing about. we need to not separate out consumer, some said, but they did exactly that. there's a great deal of -- we put in the hands of the president of very powerful set of rules. we're trying to get other countries not to -- to stimulate and help us defeat unemployment. i think we're making it very clear that the president is a world leader. you'll see continued conversions. >> thank you. >> senator, are you confident of the derivative language that is central? some of other -- some other folks that concerns. -- some other folks have

concerns. are you going to lose any of them on the floor? >> i am not. i believe there will be a majority. there were some people who voted -- a handful who voted against it from the left. i sympathize with a lot of my democratic colleagues. they're very thoughtful people. i understand their concerns. the amendment as adopted moves in that direction. one of the concerns i had was the amendment of senator lincoln -- what we thought was an inappropriate application of fiduciary response ability. -- responsibility. we heard complaints. we have modified that. with a very strong code of conduct. we have some of the things. i think some will vote no. i'm pretty confident that we have a majority here of house members. unfortunately, it appears in the house that the republican party is going to repeat its pattern of simply voting no and everything and being status quo. we'll have enough democratic votes. >> is july 4 still the goal? >> it is. >> thank you very much. >> thank you.

>> have a good breakfast. >> we win. [laughter] >> take care. >> we wind. -- win. >> next week, watch the confirmation hearings for supreme court nominee elena kagan, starting monday at 12:30 p.m. eastern on c-span and c- span.org. you can watch replays at 9:00 eastern on c-span2. >> the house approved a measure to require disclosure of a political ad funding. here's a look at the debate on that bill prior to the final vote. this is one houu and 15 minutes.

>> the houses and the committees of the whole house for consideration of these which the clerk will report by title. the clerk: a bill to amend the federal election campaign act of 1971 to prohibit forge influence in federal election, prohibit government contractors from making expenditures with respect to such elections and to establish diadecisional disclosure requirements in respect to such elections and for other purposes. the speaker pro tempore: pursuant to the rule, the bill is considered read for the first time. pursuant to the rule, the gentleman rom pennsylvania, mr. brady will control 20 minute, and the gentleman from california, mr. lungren will control 30 minutes and the gentleman from michigan, mr. conyers, will control 10 minutes. the chair recognizes the gentleman from pennsylvania. mr. brady: mr. speaker, i yield myself three minutes. the speaker pro tempore: the gentleman is recognized. mr. brady: i stand with the american people and the house leadership inport of h.r. 5175, the democracy is strengthened

by casting light on elections act, or disclose act. it's designed to bring greater transparency to election spending. it was reinforced by the supreme court decision that reaffirmed the constitutionally and necessity of laws that require this disclosure of political spending. our democracy requires transparency and accountability in our political campaigns. knowing the source of political spending allows us to investigate the motives and better judge the accuracy of the statements of the spenders and candidates. the disclosure requirements for corporations, unions, and other brupes that make campaign-related expenditures for the purpose of engaging in campaign related activity this improvement to current disclosure requirements allows voters to follow the money and ensure that special interest money can't hide behind sham

organizations and shell corporations. the supreme court has recognized it essential to hold people accountable. voters have the right to know who is trying to buy our leches. the bill requires c.e.o.'s and highest ranking officials of corporations that sponsor political advertisements to record stand by your ad disclaimers as well as protest taxpayers dollars from misuse by preventing certain government contractors from making campaign related expenditures. the disclosure act also closes a loophole creebate citizens united to ensure foreign corporations and foreign governments aren't able to influence elections by spending unlimited sums through united states subsidiaries or affiliates. by allowing them to make campaign contributions, foreign players could use limitless

funds to influence the election. the bill is designed to accommodate nonprofit issues advocacy group who have long participated in political activity of which their members are aware. the bill must have more than 500,000 dues paying members in all 50 states, have had tax exempt status for the past 10 years and derive no more than 50% of its funding from corporate or union sources. it cannot use corporate or union money to pay for campaign-related expenditures. the narrowness of the existing law will make it impossible to have a dummm or sham group. those exempted will be required to file publicly available reports explaining their campaign related expenditures and staff will need to appear

in and take responsibility for -- the speaker pro tempore: the gentleman's time has expired. mr. brady: i yield myself 30 seconds. the disclose act ensures accountability and provides prompt and honest disclosure about those seeking to influence our elections. it's been considered by the house and senate with 30 expert witnesses. citizens are concerned about the citizens united decision urging congress to quickly consider legislation that addresses the problems created by the ruling. i yield myself 30 more seconds. this support in the disclose act reflects the will of the american people and commands the support of the -- the support of the representatives. in addition to that, with 140 co-sponsors and a broad

spectrum of support, it promotes open politics. if we don't pass this, the public will be left to wonder who is being served by the negative advertising dominating campaigns. i urge all members to support thregs and i reserve the balance of my time. the speaker pro tempore: the gentleman reserves. the gentleman from california, mr. lungren. mr. lungren: thank you, mr. speaker. obviously if you attempt to speak on the floor and your microphone is not near you, or they have turned it off, you can't exercise your right to represent your constituents here. i yield myself such time as i may consume. that is the problem with this bill. it does not allow the free exercise of the first amendment right to speech.

the constitution of the united states refers to that first amendment and unfortunately, in many, many decisions by the supreme court thaverbing talked about everything other than political speech. yet in the citizens united vvrsus federal election commission case, the court finally got it right. the majority opinion says the first amendment stands against attempts to disfavor certain subjects or viewpoints, prohibited, too, are restrictions prohibiting different speakers, allowing speech from some and not from others. that's exactly what this bill does. benjamin franklin stated, whoever would overthrow the liberty of a nation must again by subduing the freeness of speech. unfortunately, that is what we have here before us. mr. speaker.

or mr. chairman. just because you call something disclose or disclosure doesn't make it so. when you prohibit speech as has been done here, when you have onerous disclosure obligations placed on some but not all, when you make no distinguishing, that is, constitutionally justifiable distinguishing differences between groups, that is you cause some to be subjected to provisions of disclosure and others not, when you specifically have five or six provisions in which you exempt unions as opposed to corporations of all stripes when you've rendered the bill unconstitutional. mr. chairman, i would have asked, if it were proper, to have unanimous consent request

to extend our debate for four hours. but i know that's not in order. the majority has decided to stifle debate by allowing only a single hour on the debate of -- of debate on this issue %% dealing directly with the first amendment. we have spent in excess of 10 hours in this congress talking about the naming of post offices. but we have determined we do not have more time than%% an ho to discuss something as important as the first amendment to the constitution. when we allow ourselves to become an auction house for the first amendment, where some, because of their power and influence, are allowed to exercise first amendment rights, unfettered, and others are not, it is a sorry day. and to do it under the rubric of disclosure is even worse.

but that's what we have here. mr. chairman, in the time given to us, i hope we can explain exactly what thissbill does and what it does not do and why it, in fact, not only is dangerous to the first amendment, but is directed at the heart of the first amendment, wwich is vigorous political speech, particularly close to an election. it may make some members uncomfortable. in some of the hearings and markup of this bill we had members saying, if i had my way, i'd make sure no one could say anything about our campaigns except those of us who are candidates. unfortunately, there's something called the first amendment. i know it's bothersome to some on the other side. i know it's an obstacle to what they want to do. when i came here, i took an oath to uphold the constitution in all parts, not just the second amendment, by way of specific exemption, but by --

of all amendments, the first as well as the second and every other. with that, i would reserve the balance of my time. . the chair: the gentleman reserves the balance of his time. the gentleman from pennsylvania. the gentleman from michigan. mr. conyers: mr. speaker, i yield myself such time as i may consume. the chair: the gentleman is recognized. mr. conyers: ladies and gentlemen of the house, this is the most disturbing debate that i have engaged in in the 111th congress, and to hear what i have already heard from one of the most distinguished members of the judiciary committee is a little bit dismaying to me. let me say this. i'll answer one of his questions. what does the bill do? i agree.

i'd love four hours. perhaps we'll be debating this bill after the vote regardless of its outcome. this bill rolls back the decision, blatant decision of citizens united and the supreme court by using the three tools that the court said that we could do to make their decision different. first, we can increase disclosure. two, you can require disclaimer requirements on advertise -- advertisements. and three, we can limit foreign influence in our elections. one, two, three. now, the danger of citizens united decision, the most

shocking decision i have read and the supreme court and many, many years -- in many, many years is the threat of groups who attack candidates for office wiihout ever having to tell people which corporations are are bank rolling these ads. this is what the disclose act, the bill on the floor, is designed to prevent. this bill permits some long established advocacy groups to follow some of the new disclosure requirements, but if these groups take more than 15% of the money from corporations, then all the requirements. discle sure act kick in. -- disclosure act kick in. and they have to stand by their ads just like candidates do.

and citizens united, justice stevens, who argued that the much more persuasive -- with much more persuasive reasoning, his position in this case, dissenting, said this, the constitution does, in fact, prevent numerous restrictions on the speech of some in order to prevent a few from drowning out the many. for example, restrictions on ballot access and on legislators' floor time. he stated that corporations are categorically different from individuals. and the context of election to public office, the disticks 2003 -- distinction between corporate and human speakers is significant.

although they make enormous contribbtions to our society, corporations are not aatually members of it. they cannot vote or run for office. because they may be managed and controlled by nonresidents, their interest may conflict in fundamental respects with the interest of eligible voters. then they close with this sentence. our lawmakers have a compelling constitutional basis, if not a democratic duty, to take measures designed to guard against the potentially dilatorious effects of corporate spending in local and national races. mr. speaker, i reserve the

balance of my time. the chair: the gentleman reserves the balance of his time. the gentleman from california. who seeks recognition? the gentleman from pennsylvania. >> mr. chairman, i would like to yield to the gentlelady from california, zoe lofgren, a + valued member of house administration, four minutes. the chair: the gentlelady is recognized for four minutes. ms. lofgren: mr. speaker, the supreme court's decision in the citizens united case fundamentally alters the political landscape as a result of the court's ruling all organizations, corporations, and unions are free to take unlimited corporate money and make unlimited political expenditures. this could allow corporations to simply take over the political system. according to a report late last year by common cause, the average amount spent for winning a house seat in the 2008 cycle was $1.4 million. during the same cycle exxonmobil

recorded $80 billion in profits. if exxonmobil chose to use just 1% of their profits op political activity, it would be more -- on political activity, it would be more than all 435 winning congressional candidates spent in that election cycle. that's just 1% of the profits of one corporation. according to the supreme court, we cannot limit what corporations can say or what they can spend, but we can require them to disclose what they are doing to the american public. i'll read you what the court said in its decision. i quote. the first amendment protects political speech and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. this transparency enables the electorate to make informed decisions and give proper wait to different speakers and messages. that's what this bill does.

it does exactly what the supreme court says that we could do and should do, and that is to require disclosure, to require transparency. in the past transparency has been a bipartisan issue. senator mitch mcconnell was quoted in april saying we need to have real disclosure. why would a little disclosure be better than a lot of disclosure? republican leader john boehner in twetch said, i think we ought -- what we ought to do, we ought to have full disclosure and went on to say i think that sunlight is the best disinfectant. this measure, the disclose act, has been supported by government reform groups including common cause, league of women voters, and public citizens. senate majority leader harry reid and the chairman of the senate rules committee have released a letter indicating their strong commitment to senate action on the disclose

act. the white house strongly supports the disclose act. the president says he'll sign this bill when it comes to his desk. now, i ask my colleagues, will you stand with the american people in calgary for -- calling for disclosure and transparency in the political process? or will you allow corporations to overtake our democracy with the expenditure of undisclosed,% limitless amounts of money? i think that we should stand with the american people. we should vote for t%%he disclo act. disclosure is good. voters need to know who is saying what. i yield back the balance of my time. the chair: who seeks recognition? the gentleman from california. mr. lungren: at this time, mr. chairman, i'd like to yield three minutes to the gentleman from mississippi, mr. harper, a valued member of our committee. the chair: the gentleman from mississippi is recognized. for how long? mr. harper: thank you, mr. chairman. i yield myself such time as i

may consume. the chair: the gentleman is recognized. mr. harper: if there is anything in the hearings on this bill and subsequent discussion taught us, it is that the bill is far from clear. theeauthors of the bill say it does one thing, the experts says it does another. the majority's own witnesses have said it will be up to the f.c.c. to decide what the language means. this conclusion and am big gute would be bad enough in any bill, but it is especially bad here. this bill has implementing language that makes it take effect 0 days after enactment. regardless of whether the f.c.c. has published regulations. indeed one of the majority's witnesses said at a hearing it would be next to impossible for the s.e.c. to promulgate regulations before the november elections. that means as we move toward elections just four months away, and americans consider how to express their views, there will be no guidance to clear up the bill's am big gute, no instructions for how to comply, and no way to participate in the

political process where your speech will not land you in jail. mr. chairman, this bill is going to impose civil and criminal penalties on speakers without them having any notice that their behavior may be against the law. what that means is that rather than exercising their first amendment rights, speakers are just going to stay silent. as former united states solicitor general ted olson statee in our committee's may 6 hearing, so we are saying that you have to guess what the law is because the government can't even tell you what the law is. if you guess wrong, you may be sent to jail or you may be prosecuted. those who seek to challenge this bill's ambiguous and potentially unconstitutional provisions in court are going to be faced with a judicial review process designed for delay and ppfrustration. the procedure in this bill conflicts with the processes created in both the federal election campaign act and the bipartisan campaign reform act. opening the door to collateral

litigation to decide what court to be in before the case is even heard. section 401 of this bill is congressional forum shopping. the only conclusion one can draw from the immediate implementation without regulatory guidance and protracted court process is that this bill is designed to effect the outcome of the 2010 elections. indeed, one need not guess to know that this is true. a letter sent earlier this week from senate majority leadership to house majority leadership pledged to work tirelessly so the bill can be signed by the president in time to take effect for the 2010 elections. there it is, mr. chairman. the proponents of the bill want this house to pass legislation in time to affect the outcomes of the 2010 elections. they have refused our proposals to make this bill effective in 2011 because they want to change the law this year to affect this election, no matter there will be no explanatory regulations and no review to ensure that the

law complies with the constitution. so the end result is -- the chair: the gentleman's time has expired. mr. lungren: additional minute. mr. harper: the end result is the bill's proponents are rushing it into effect before the regulators or the regulated community are ready. doing what they can to delay court review and taking those steps despite their obvious expectation that parts of the bills will not survive judicial scrutiny. the only reason it makes sense has to do with the elections coming up in just over four months. the house should reject this attempt to pass the bill that could alter the outcome of its own elections and let the voters decide this for themselves. i urge my colleagues to oppose this bill and i reserve the balance of my time. the chair: the gentleman from pennsylvania. mr. brady: thank you, mr. chairman. i yield the gentleman from maryland, chris van hollen,

author of the legislation, three minutes. the chair: the gentleman is recognized for three minutes. mr. van hollen: thank you, mr. speaker. i want to start by thanking chairman brady and ms. lofgren and the other members of the committee as well as chairman conyers and mr. nadler and those on the judiciary committee. and to mike castle and the other co-sponsors of this legislation. phich addresses the very serious threats to our democracy, created by the supreme court's decision in citizens united. which in a very radical departure from precedent said that major corporations, including foreign-controlled corporations operating in the united states, will be treated like american citizens for the purposes of being able to spend unlimited millions amount of money in our elections. this bill addresses this issue in three ways. first we say if you are a foreign controlled corporation, if you are british petroleum, if you are a chinese wealth fund

that controls a corporation her% in the united states, if you are citgo controlled by hugo chavez, you have no business spending money in u.s. elections, overtly or secretly. if we don't do something about that now, they'll be able to do either of those things. number two, we say if you are a federal contractor, if you are getting over $10 million from the american taxpayer, or you are a.i.g., you shouldn't be recycling those moneys into elections to try and influence the body that gave you the contracts, because there is a greater danger of corruption in the expenditure of those moneys. and third, we require disclosure. we believe the voter has a right to know. you would think from the comments from the other side of the aisle we are restricting what people an say. that's not true. you can say anything you want in any ad you want. what you can't do is hide behind the darkness. not tell people who you are. voters have a right know when they see an ad going on with a

nice sounding name, the fund for a better america, they have a right to know who is paying for it. they have a right to know if b.p. is paying for it. they have a right to know if any corporation or big bucks individual is paying for it. because it's a way to give them information to access the credibility of the ad. . you vote no on this, tell corporations say what you want, but we're not going to let the voters know who you are. the reason the league of women voters, common cause, public citizen, democracy 21, all organizations that have devoted, devoted themselves to clean and fair elections, support this legislation. because they understand that the american voter has a right to know who is spending all these moneys on these ads and

they don't want foreign controlled corporations dumping millions of dollars into u.s. elections. so my colleagues, i hope%% that we will move forward on this to make sure that the voice of citizens is not drowned out by secret spending by the biggest corporations, including foreign controlled corporations. the speaker pro tempore: the gentleman -- the chair: the gentleman's time has expired. the gentleman from michigan. mr. conyers: i'm pleased to recognize the chairman of the constitution subcommittee, jerry nadler of new york, for two minutes. the chair: the gentleman is recognized for two minutes. mr. nadler: thank you, mr. speaker. i rise in support of the disclose act. earlier this year, the supreme court reversed decades of precedents and ruled that corporations are individuals

like you andd me and can put as much money into elections as they want. it distorts our political process. the very real danger now is that corporations will be able to use vast sums of concentrated money to further corrupt our political process and drown out the voices of everyone else. without objection action as a result of this latest activist supreme court decision, our electoral system will be at the mercy of large moneyed interests. this bill takes several critical steps to reclaim our elections. the most important one is that it would require disclosures of donors providing money for political purposes in certain circumstances and mandate that they appear in political ads to say they, quote, approve this message, just as candidates do. it would set some limits on money in politic, not by limiting the money but by

requiring disclosure of the source of the corporate money to show which interests are behind which advertising. i no many people opposed contributions previously said don't limit the political expenditure the solution is disclosure. let people know who is sponsoring the ads, that will safeguard the elections. i don't think disclosure is enough but it's all the supreme court will a lou us to do. now people who argued for disclosure for years are saying it's a restriction on free speech, it's disturbing. the chair: the gentleman is recognized for an additional minute. mr. nadler: it's important that ads from citizens for a cleaner

environment are from b.p. or the sierra club to know how it affects their decisions. there are obligations to disclose contributors. to limit -- by limiting it to those that have been in existence for at least a decade have members in each of the 50 states and receive no more than 50% of its funding from unions and corporations. we cannot allow the perfect to become the enemy of the gheesmed disclose act would make a vast and substantial difference in protecting the integrity of our elections andky not think of a more important bill. i urge all my colleagues to support this bill despite its imperfections. i thank you and i yield back the balance of my time. the chair: the gentleman from california.

mr. lungren: at thii time, i'd like to yield three minutes to the gentleman from california, mr. mccarthy a valued member of our committee. the speaker pro tempore: the -- the chair: the gentleman is recognized. mr. mccarthy: mr. chairman, just a block away from this building, the capitol, stands the supreme court. like many other courthouses across this country, it bears the image of the goddess of justice. many of you know the statue. she holds a set of scales symbolizing the fairness and equality of law. she wears a blindfold, symbolizing impartiality. unfortunately, this bill does not represent either of those issues. like so many other bill this is house democratic leadership has forced onto the floor this bill suffers from the same taint, the provisions in this bill are the result of backroom negotiations and special deals to exempt erest

groups at the expense of smaller ones. but the unfortunate thing about this bill today is that rather than represent -- than respect the first amendment promise to prooect the speech of all americans, it attempts to use the first amendment as a partisan sledge hammer to silence certain speakers in favor of others. especially unions. mr. chairman, this bill bans corporations with government contracts over $10 million from political speech. the sponsor says that's because those contractors might try to influence decisions by government officials. but this bill does nothing for the labor unions who are parties to collective bargaining, agreements with he governments. even though unions have huge amounts of money at stake and every incentive to influence decisions about the contracts by government officials, it does nothing. we offered an amendment to upheld the fairness and equality but that was rejected

in the committee. a second example, mr. chairman is we all agree that foreign citizens shouldn't influence our leches, whether they are foreign citizens that are part of foreign corporations or foreign citizens part of a union with interests in the united states. this bill requires c.e.o.'s to certify under penalty of perjury that their companies are not foreign nationals. under the newlyy+ expanded standard of the bill. but the bill does nothing to ensure that when labor unions are spending money on elections, that money did not come from people who are themselves prohibited from spending noun influence american elections. again, we offered an amendmeet to treat corporations and unions equally under the bill by requiring the same certify scation of labor union chiefs but again, it was rejected. mr. chairman, a third example. i point to the centerpiece provision of this bill. the so-called disclosure

requirement. the bill requires organizations to disclose information about the individuals who gave more than $600. but the federal election committee asked everybody else to do it at $200. as one of the majority members of our committee -- the chair: the gentleman's time has expired. mr. lungren: i yield the gentleman an additional minute. the chair: the gentleman is recognized. mr. mccarthy: as one member of the committee asked, where did the money come from? it's enough to make unions not have to report any of their dues. the average for a union is $377 in 2004. it treats them different than we treat every other american and every other campaign. 10 while candidates and political parties have to itemize contributions from donors about $200, we have a different rule in this bill. a rule apparently designed for the convenience of unions. we offered an amendment to make

this disclosure requirement the same as how all federal laws long require ared disclosure of donors but it was rejected. rather than spending time today listening to americans and addressing the number one priority in this country, helping to create jobs and grow the economy, again and again i watch this congress mired in its partisan priorities. i listen to the gentleman from maryland. he happens to be the chairman of the democratic congressional committee. the chair: the gentleman is -- the gentleman's time has expired. mr. lungren: i yield the gentleman 30 seconds. the chair: the gentleman is recognized. mr. mccarthy: the back room deal was not done. i started this speech thinking of the goddess of justice and i go through this bill, the blindfold is taken off and the thumb is put on the scale to weigh to one side. this does not honor the first amendment or the fairness of

what this buildinggrepresents. i ask for a no vote and yield back the balance of my time. the chair: the gentleman from pennsylvania. mr. brady: how much time is left on both sides. the chair: the gentleman from pennsylvania has 150 minutes, the gentleman from michigan has 2 1/2 minutes, and the gentleman from california has 17 1/2 minutes. mr. brady: thank you, mr. chairman. i'm pleased to yield two minutes to the gentlelady from california, another valued member of the house administration, ms. susan davis. the chair: the gentlelady is recognized for two minutes. mrs. davis: thank you, mr. speaker. i rise today in support of the disclose act. under current law, yes, it is correct that groups must disclose their name, their name and advertisements and file a disclosure form. but you know, that doesn't tell anyone very much at all.

right now, voters see tv ads sponsored by organizations they've never heard of. groups like the american future fund. american leadership project. citizens for strength and security. common sense in america. and today i'm getting calls from the campaign for liberty. but they will not tell us who they are. does anybody know who they are? in 2008, there were over 80 of these groups and they bought $135 million in advertisements. i for one don't think our constituents should go through another election cycle in the dark. voters want to know who is %% behind that ad? who stands to gain from it? why isn't an actual -- sit an

-- why isn't an actual person, corporation, or union taking responsibility for it? the disclose act will finally put that information in voters' hands with tough disclosure and disclaimer requirements. i want to tell you, because the disclose act also sets important limits to protect taxpayer dollars. i ask those opposed to the bill, do we want ads from banks that still have are tarp funds? do we want subsidiaries of foreign controlled companiesed meling in our elections? well, i would think the answer is clearly no. the disclose act is just like other consumer protection bill this is body has passed. i can think of no single time i've regretted giving my constituents more information so they can make wise and informed decisions. the chair: who seeks

recognition? the gentleman from pennsylvania. mr. brady: i'm pleased to yield one minute to the gentleman from new mexico, mr. teague. the chair: the gentleman is recognized for one minute. mr. teague: mr. speaker, i rise today in strong support of the disclose act, a bill i'm proud to co-sponsor. several months ago in the citizen united case, the supreme court made a dangerous decision to allow unlimited corporate and union money into our elections. the consequences of this decision for our democracy are dimplee until we act, massive corporations can secretly funnel hundreds of millions of dollars through shadowy front groups to influence elections. a foreign company like british petroleum could retaliate against members of congress who want to hold them accountable by secretly funding millions in attack ads. if we don't act to stop this injustice, limitless corporate

money will flood into our political system and drown out the voice of the american people. debates by candidates will be replaced by ads. some people say this is a free speech issue. of course it is. the court decision lets foreign corporations influence our elections. what this bill does is protect the speech of american citizens. the disclose act says free speech is for people. it also says, pick a side. do you suuport protecting the voice of the american people? thank you. i ask everyone to support the dill. -- bill. the chair: the gentleman from california. mr. lungren: i yield two minutes to the ranking member of the judiciary committee. the chair: the gentleman is recognized for two minutes. mr. smith: i want to thank my colleague for yielding me time. in citizens united vs. federal election commission, the supreme court struck down several provisions of federal law on the grounds they

violated organizations' first amendment rights. yet, the disclose act would have more regulations that unduly restrict their freedom of speech. it would do this while unfairly sparing unions and other preferred groups from the same regulations. this legislation is plainly unconstitutional. the disclose act would unconstitutionally ban political speech by government contractors and companies with as much as 80% ownership by u.s. citizens. it would unconstitutionally limit the amount of information that organizations can include in ads stating their political opinion. it would unconstitutionally require the disclosure of an organization's donors in violation of their right to free association. and it would unconstitutionally exempt favored organizations from its requirements. the disclose act is unconstitutional and it should be soundly rejected by the house today. i yield back.

the chair: the gentleman yield it's back. who seeks recognition? the gentleman from michigan. mr. conyers: mr. speaker, i'm pleased to yield to jared polis, the gentleman from colorado. the chair: the gentleman is recognized. mr. polis: people enjoy their constitutional rights but corporations aren't alive, their sons can't be sent off to war. corporations are political zombies only knowing the pursuit. the econommc reason that corporations exist. but in the political context, there is negative civic value to such advocacy, especially without the reasonable

expectations that was tossed out in the supreme court decision in citizens united. when they give them an advantage over their competitors, everyone suffers and it undermines the confidence of liberals, conservatives, all citizens. that's why the disclose act is so needed, the flood of special interest money in our political system and to protect the free speech of individual americans and i yield back. the chair: who seeks recognition? the gentleman from pennsylvania. >> mr. chairman, i'm pleadsed to recognize mr. hall from new york for one minute. the chair: the gentleman from new york is recognized for one minute. mr. hall: thank you, mr. speaker, thank you, mr. chairman. i rise today to strongly support h.r. 5175, the disclose act. the citizens united was disastrous and gave corporations not just the rights of persons but way more rights than persons have.

any citizen has a limit on how much they can donate in any given campaign cycle whereas under the current court decisions corporations have no limit. one of the most important provisions of the bill we're talking about would prevent foreign-owned companies from buying u.s. elections. and i would like to thank chairman van hollen, mr. van hollen's willingness to work with me in including a similar provision in the bill to one that i introduced in my freedom from foreign-based manipulations in american elections act from keeping companies like b.p. deciding who is elected to congress. this is about representing our people. our friends on both sides of the aisle like to say that we represent the people. well, a poll came out showing 87% of republicans and 91% of independents, 91% of independents support this bill. i urge all members to vote for it. i yield back. the chair: the gentleman from california.

mr. lungren: i yield myself such time as i may consume. the chair: the gentleman is recognized. mr. lungren: mr. chairman, there has been a discussion about the different groups that support this bill. interestingly enough as debate started on the rule today we received word from 18 more groups that they oppose this bill. now we're up to 456 groups that oppose this bill officially, including the american civil liberties union, national right to life and the sierra club.

let me quote, if i might, from the aclu's letter that is dated june 17, 2010, because much has been made on the other side of the aisle of groups that support this. but yet why not talk about groups that are known for protecting the first amendment? the aclu says in their letter, "to the extent that restrictions on free speech might be tolerated at all, it is essential that they refrain from discriminating based on the identity of the speaker." and they're referring specifically to this bill. the aclu welcomes reforms that improve our democratic elections by improving the information available to voters while some elements of this bill move in that direction. the system is not strengthened by chilling free speech and invading the privacy of even modest donors to controversial causes. that, of course, refers to the

seminole case on this by the supreme court i believe in 1948, naacp vs. alabama where they showed that revelation of members or donors to certain groups that are disfavored can lead to intimidation. they go on to say here, "indeed our constitution embraces public discussion of matters that are important to the nation's future and it respects the right of individuals to support those conversations without being exposed to unnecessary risks of arrests, embarrassment." own forms that promote speech, rather than limit it, and apply even-handedly rather than selectively will bring positive change to our elections. because the disclose act misses both of those targets, the aclu opposes its passage and urges a no vote on h.r. 5175. i made a mistake earlier when i

referred to the amount of time we are allowed to debate the naming of post offices in this congress. as a matter f fact, 41 hours have been granted by the rules committee or under suspension under our rules to the debate on the naming of post offices, but we could only give one hour to this debate. ironic, isn't it, that they talk about this being the disclose act. the guts of the bill were not disclosed to those of us on the committee. i even asked if i could see a copy. in fact, i asked a member of this house who had received a copy, and he was toll that he was prohibited from showing it to us on the republican side because the leadership on the democratic side did not want us to know what they were doing. the disclose act. they didn't disclose the actual bill we have here until two

hours before we went to the rules committee yesterday. and maybe one of the reasons they didn't want to disclose it is in addition to those exemptions specifically given to labor unions allowing labor unions to be exempt from the disclosure that all other corporations -- not just the major corporations you keep talking about. remember, corporations are the usual associated legal apparatus used by most advocacy groups. so that's who you are talking about. and you keep saying, well, you can have foreign companies and foreign countries under this bill or under this decision by the supreme court, control the message in campaigns, that's just utterly untrue. it wasn't allowed by law before. it wasn't changed by the supreme court decision. at least you should talk about what the law is. it is not true. that's a dog that won't hunt

and you keep putting it up here and keep putting it up here and either you haven't read your own bill, you haven't read the supreme court decision or there's an attempt to not tell people exactly what is happening. but one of the reasons i believe that perhaps we didn't get an opportunity to see the latest version of the bill is because it contains a huge new big union loophole. and it allows the transfer of all kinds of funds, unlimited funds among affiliated unions so long as not a single member is responsible for $50,000. i doubt many members are responsible for $50,000 which means there will be no limitation whatsoever with respect to unions here. so let's get the facts straight. there was an auction in this house behind closed doors, certain groups won the auction, other groups did not. that's one of the reasons that the aclu is against it. that's why we should be against

it. i reserve the balance of my time. the chair: the gentleman reserves the balance of his time. the gentleman from michigan ii recognized. mr. conyers: mr. speaker, i'm pleased to yield the two distinguished subcommittee chairman -- yield to the distinguished subcommittee chairman 45 seconds. i only have two 45 seconds left and i yield him one of them. the chair: the gentleman is recognized for 45 seconds. mr. johnson: let's get right down to it. why are the republicans opposed to restricting campaign donations in american campaigns, both local, state and federal? why? it's because republicans favor big business, and big business favors republicans. with all of these unlimited dollars flowing through, we'll see more republicans getting elected, both local, state and

federal. what it means is that b.p., a corporate wrong doer, foreign corporation -- wrongdoer, foreign corporation, can influence elections. it means that goldman sachs can influence elections. no limit, no boundaries. that's what will happen if we don't pass the disclose act. the chair: the gentleman from pennsylvania. mr. brady: mr. chairman, again, may i inquire how much time is left? the chair: the gentleman from pennsylvania has six minutes. the gentleman from michigan has 45 seconds. and the gentleman from california has 11 minutes. mr. brady: mr. chairman, at this time i'm pleased to recognize the gentleman froo delaware a minute and a half, mr. castle. the chair: the gentleman from delaware is recognized. mr. castle: thank you, mr. chairman. i thank the gentleman for yielding.

i do rise in support of the disclose act. i'd like to thank mr. van hollen, his office, for their work on this as well. i believe that this is relatively simple. i think that all of us in this country have a right to know who is putting forth ads for or against candidates as the campaigns go on. we do that as elected officials. the political parties do that. we also file all those who contribute money to us above certain amounts. in that i believe also should be done. this acttthat we are trying to pass basically is one of transparency. call it disclose, whatever you wish, but it basically indicates that foreign corporations cannot spend dollars in u.s. elections, federal contractors cannot get involved, but those who can, the corporations, unions, not-for-profits must disclose who is paying for it in terms of the c.e.o. coming forward, major contributors being posted so that people know who is paying for it. it does not limit what they can

say. i do not believe it's in any way a violation of the first amendment, as has been stated here on repeated occasions. i will be the first to tell you i do not like the manager's amendment that was in the rule with respect to the exemptions for certain entities, not because there's anything wrong with the entities but my judgment is this should be applicable to everybody who would fall into these categories. perhaps that will be fixed in the senate. but the bottom line is this is a disclosure act so the people of this country will know who is advertising. we've all been subjected to it. you've seen the ads and you wonder who is running these ads. i hope everybody will support it. i yield back. the chair: the gentleman from california. the gentleman from california. mr. lungren: i would extend a minute of my time to the gentleman from michigan who i understand needs more time.

mr. conyers: could the gentleman spare us a couple minutes? mr. lungren: well, let's start with a minute and see where we go from there. the chair: the gentleman is recognized for one minute. mr. conyers: i'm very pleased now to recognize the distinguished senior member of the judiciary committee, sheila jackson lee of texas, one minute. the chair: the gentlelady from texas is recognized for one minute. ms. jackson lee: thank you for your laidership and boldness on this issue. i hold in my hand a version of the constitution that is in this very distinct book of rules and clearly, i think it is important for the american people to understand really the% action items of this legislation. can you imagine a government contractor being paid by your tax dollars? they might be doing the right thing, we don't know. but advocating, with your tax

dollars, for a position you don't want, without you knowing that is occurring. this bill is under the first amendment because it says that we give you more transparency. if we read the constitution in its entirety the opening says that we have come together to form a more perfect union that means if people are discity -- dissatisfied with this bill they have a right to petition tote the courts. we believer erring on the side of rightness, allowing people to be elected or run for office, dominated, slammed down on the basis of big money. this is a good change, i ask my colleagues to support this legislation. i yield back. the chair: who seeks recognition? the gentleman from pennsylvania. mr. brady: i'm pleased to yield two minutes to the gentleman from maryland, mr. van hollen. the chair: the gentleman is recognized for two minutes. mr. van hollen: i thank the

chairman. i want to emphasize, as justice stevens pointed out in his dissent, the supreme court decision did open the door to foreign controlled corporations spending money directly in u.s. elections. if you have a sub -- if you have a u.s. subsidiary of a foreign corporation, when the supreme court said all corporations could spend money in u.s. electton they opened the door very clearly to that and it's an area where it's also clear congress can move to legislate. number two it's no surprise you have lots of organizations on the right and tte left, love what they stand for or hate what they stand for, that are opposing this bill because they don't want voters in many instances to know who is funding their ads. that's not a surprise at all. that's why those organizations who are devoted solely to clean

organizations and clean campaign elections like the -- like the league of women voters and common cause, are for this bill while all the others are against it. let me say something with respect to unions there is no such thing as a u.s. subsidiary of a foreign union, this is a red herring issue. second, under u.s. law, we have never defined collective bargaining agreements as federal contracts like the contracts that go to corporations themselves. number three, i draw to the attention of the body a statement that was made by trevor potter, president of the campaign legal center, who was the republican commissioner on the federal election commission from 1991 to 1995, who said this. this bill requires funding disclosure for all advertising, union and corporate, and goes on to say, based on the legislative languages, equality of treatment, claims of union favoritism seem to be

unsupported efforts to discredit the bill and stave off its primary goal, disclosure of those underwriting the massive -- that's the republican commissioner. thank you, mr. speaker. the chair: the gentleman from california. mr. lungren: i yield myself five minutes. the chair: the gentleman is recognized. mr. lungren: mr. chairman, i find it instructive that one of the members on the other side of the aisle, when she got down here to talk about the constitution, said, i have this version of the constitution. as far as i know, there's only one version of the constitution. except if you happen to be on the majority side dealing with this bill. why do i say that? because the constitution very clearly in the first amendment said congress shall make no law

no law abridging free speech. what is it about no you don't understand? i would say rhetorically, because i can't address the majority on this floor. but i would say if i could, what is it about no you don't understand? it says no law. now some would say, wait a second. the courts do allow some laws in the area of campaign finance and disclosure and so forth. yes they do. but what are they predicated on? they say the countervailing principal -- principle or concern about corruption or the appearance of corruption. that's the only basis you can create the laws. they therefore say you cannot %% distinguish between two sets of groups where that same analysis would come forward. in other words you can't say, we're going to fare -- favor unions but disfavor + corporations who stand

essentially in the same shoes in the area of potential corruption. they say if you have a government contract over $10 million, they went from $5 million, up to $10 million to include certain group, we're not sure who they are, there have been some whispers as to who they are. but the argument is there's a potential corruption between those wwith government contract and those who have influence in giving those contracts. we aid, ok, what about unions that represent the workers for those companies who pay -- whose pay comes from the taxpayers by virtue of these contracts? it's the same argument. they said, we can't do that, that would be unfair to unions. what about the fact that you have union bargaining agreements with government entities? twhoont be the same -- >> no, no. that's different than corporations. what's the basis? there is no basis. what they do by the terms of the bill is rend they are bill unconstitutional because the

courts say you can't distinguish among different groups unless you use the same basis. and they use the highest level of scrutiny, strict scrutiny, why? because it involves an essential right protected under the coostitution. that's what's so disturbing here today. not because we disagree on legislation, because we do that often. but the fact of the matter is, we are so cavalierly dealing with the first amendment, we're so cavalierly dealing with free speech, we're so cavalierly dealing with essential political free speech, particularly when it's involved in elections. ppthat's when it's most important. yet we have seen a bidding war here, an auction, not on the floor, because it took place behind closed doors. and yet we're told, just look at the title. look at the title. you know if you put the nnme cadillac on a ugoh, it would

still be a yugo. if it can't drive, putting another name on it won't make it better. to say this is a disclose act when you refuse to disclose the parts of it to us until two hours before the rules committee yesterday undercuts everything you argue that this bill is about. this is not sunlight. this is putting some in the cellar where there is no light and others get the light. this is allowing some to be involved in the debate and others not. our founding fathers did not think the ant dote to bad speech was to prohibit speech. it was to encourage robust debate and give others the opportunity. we can't agree on disclosure but not when you bring it in this form because it isn't disclosure that is fairly imposed on all parties. i am sure of this. this will be declared untugal. but the dirty little secret in

this, you have put in here the appellate process so it won't be decided until after the election so that these who %% should be able to exercise their first amendment rights will be afraid to exercise them for fear they might make a mistake. what a tragedy. what a travesty. we should do better on this floor. we owe it to ourselves and if we don't think we're worthy, maybe the constitution is worthy. maybe our constituents are worthy. to hide behind the words disclosure, disclose, when in fact that's not what you're doing, is the ultimate in insult to the constitution. the chair: who seeks recognition? mr. conyers: mr. speaker. the chair: the gentleman from michigan. mr. conyers: i'll use the balance of my time. members of the house, i've been on the judiciary committee longer than anyone in the house

of representatives. sand save one other court decision, there's been no decision that they have ever rendered that i consider more abhorrent and more onerous than the results that will flow from this measure of the citizens united decision. i say that because what we're doing is a matter of whether corporate control in the body politic now goes completely, totally without any halt or reservation whatsoever. so please, support this measure. the chair: the gentleman's time has expired. who seeks recognition?

the gentleman from pennsylvania. mr. brady: i'd like to reserve the balance of my time. the chair: the gentleman reserves. the gentleman from california. mr. lungren: mr. chairman, at this time, it's my distinct honor to recognize the gentleman from ohio the distinguished leader of the republicans here in the house, mr. boehner for one minute. the chair: the gentleman from ohio is recognized. mr. boehner: i want to thank my colleague for yielding. congress shall make no law abridging the freedom of speech. we all know that that's part of our first amendment to the constitution. and it's first for a reason. because freedom of speech is the basis for our democracy. but today, the majority wants to pass a bill restricting speech. violating that very first amendment to the constitution. oh, no, they don't want to restrict it for everyone. they want to use their majority

hear in the -- here in the house to silence their political opponents. pure and simple. for just one election. is there any other explanation for this bill? is there any reason under this bill that small business -- businesses get muffled but big businesses will be fine. -- fine? labor unions won't have to comply with this, they're exempted from it. they get their right prospected. why is the national rifle association protected, but not the national righttto life organization. -- organization? obviously no one wants to answer. the national rifle association is carved out -- the national rifle association is carved out of this deal and given a special deal. they are big defenders of the

second amendment of the constitution, the right to bear arms. but yet they think it's all right to throw everybody else under the table so they can get a special deal, while requiring other% to comply with all the rules outlined in this bill. frankly, i think it's disappointing. why does the humane society of america get to speak freely, but not the national farm bureau. why do aarp get protected under the bill? yet if you belong to 60-plus, no, no. you've got to comply with all of this. since the supreme court's decision to uphold the first amendment, democrats here have maintained their bill would apply equally across the board to corporations, labor unions and advocacy organizations alike.

instead, they've produced a ppbill that is full of loophole designed to help their friends while silencing their political opponents. we in this house take an oath to preserve, to protect, and to defend our constitution. anyone who votes for this bill today, i'll tell you, is violating the oath that they took when they became a member of this organization. i yield back. the chair: the gentleman yields back. who seeks recognition? mr. brady: i'm prepared to close, i have no more speakers, if the gentleman is prepared to close. the chair: the gentleman from california. mr. lungren: i understand the gentleman is going to close, so i will use the balance of my time. the chair: yes. the gentleman is recognized. mr. lungren: i yield myself the balance of my time. mr. chairman, i've been privileged to serve in this house for a number of years. during that period of time, i

have had the opportunity to vote probably thousands of times on many, many, many different issues. sometimes the results of the votes, collective votes of this house and the senate and the signature of the president, during the course of time i've been here, has resulted in legislation which subsequently was ruled to be in part or in whole unconstitutional. and i have had conversations on the floor of the house that said, i'm not concerned about the constitution. don't let me worry about that, the court december side that. i've always said to them in response, we have an obligation when we take the oath of office to uphold the constitution and we ought to do it as we consider legislation. but i'm not sure that i have ever seen a frontal assault on this constitution as this bill is. why do i say that? i say that because this deals

with the first amendment. it deals with political speech. it deals with political speech at its most effective. that is in the context of a political campaign. and we ought to deal with that very, very carefully. i will say to my friend from michigan, if he was so concerned about the constitution, why did our committee waive jurisdiction here after having this bill only for a day? other times we insist on dealing with constitutional questions, but yet we gave it up. you look at this bill and you see that it violates the contours of the decision by the supreme court. if you want to amend the constitution, bring an amendment to the floor. it violates it in so many ways. and it's a continual violation as the auction block was established on the other side of the aisle. we kept hearing day after day,

week after week they don't have the votes, they don't have the votes. they are going to make this deal, they are going to make that deal. what did they do? they expanded -- they expanded the exemption. they said, yes, the national rifle association gott a specia exemption. the aarp did. the humane society did. they changed it from a million members to half a million members. but we know most groups won't be exempt. just a privileged few. that violates the decisions of the courts going back decades tell you. you cannot discriminate among groups. you cannot have disfavored and favored groups. and that's what we're doing right here on the floor. not just about something dealing with the -- dealt with by the constitution, but the essential of the first amendment. i am surprised that my liberal friends are not down here on this floor condemning provisions of this bill.

and they say it's not a perfect bill. no, it's not perfect. it's unconstitutional. it is unconstitutional by its very terms. and in the last two weeks and even yesterday it became more %% unconstitutional because they carved out exemmtions even further for unions and for selected groups of large size. mr. chairman, we should do better than this. we should do better than this. if we're not concerned about protecting the constitution, who is? you know, as was said basically by our leader, we take an oath to protect and defend all parts of the constitutioo. the first amendment as well as the second amendment. the fact of the matter is, we take an oath to uphold the constitution. to only allow an hour's worth of debate when we give far more time to naming post offices is a disgrace in this house. a disgrace. to not allow amendments that deal with some of the very subjects that my friends on the other side talk about is a

disgrace. the chair: the gentleman's time has expired. mr. lungren: mr. chairman, i ask for a no vote on this bill. the chhir: the gentleman from pennsylvania. mr. brady: thank you, mr. chairman. mr. chairman, first, let me thank the staff of house administration, jamie fleet, matt pinkas for the hard work they've done on this bill. it was a lot of moving around, a lot of moving parts and to be able to put it back together they were able to have us here today. i appreciate all the help. despite all the rhetoric that we heard about this bill, the simple purpose is, mr. chairman, who's saying it, who's paying it? all i want to know if i run or somebody runs for re-election and somebody runs an ad against me i'd like to know who that is or if somebody runs an ad in my

favor i'd like to know who it is. the unions pay dues and they have a checkup to go to a pack fund. they can say, i don't want to spend any money to a pack fund. but if and when they do they now vote. they sit and vote for every single candiddte that that union is supporting, whether or not they want to support that candidate or not, and every union has a tagline who they're supporting. and corporations, if you're a stockholder of a corporation, i could be a member of a stockholder in at&t and they can run an ad against me and i don't even know it. all i want to know, again, is -- and also those corporations don't vote. i'm a stockholder, i can't vote. i can't vote what they do with my money even though you spend money for an opponent against me. all we're saying is who's saying it and who's paying for it. with that, mr. chairman, i thank you and i urge my colleagues to support this legislation.

i yield back the balance of my time. the chair: t >> coming up, treasury secretary timothy geithner on home loan modifications and new by metro regulations at a tarp over site meeting. -- new regulations at a tarp over site meeting. >> now, supreme court nominee elena kagan on the lingering effects of the glass ceiling. >> i think you would like to see women at the top of every sphere. if you look at law firms, or if you look at general counsel's for the fortune 500 companies, or schools, or non-profit organizations, in each of those places you felt there really were an equal opportunity for women to rise to the top of them.

i do not think we're there yet. i think we're pretty close in on profits and governments. the problems are much more problems with respect to the business community and law firms. i think they would say the same. they know it is a significant problem in their ranks. women are not staying in of law firms or businesses. there seems to be a real glass ceiling kurt >> next week, watched the confirmation hearings for supreme court nominee elena kagan live, starting monday, at 11:30 a.m. eastern. >> trash secretary timothy geithner took questions about home loan modification -- treasury secretary timothy geithner took questions about home loan modification at 8 tarp over site meeting.

he also announced that over 75% paid to banks has been repaid. this portion is about one hour and 15 minutes. >> since your last appearance, the panel has issued six more reports. our latest reports have covered a great deal of territory, from the government's intervention in specific companies, and its broader efforts to shore up markets like a small business lending and housing. the reports reflect your ambitions. under your leadership, treasury has launched at least one dozen

distinct programs. it seems these efforts have had an important impact. markets have calmed greatly. the size and scope of these programs also reflects the variety of severe strains on our financial system. about 3000 banks, 6000 -- six of our largest institutions are dangerously exposed to the real- estate market many more have still not digested the toxic assets on their balance sheets, and are now facing new demands to pay off that mortgages they sold to fannie and freddie. the financial problems of these banks arestraining the ability to lend to small businesses. finally, it seems clear, the treasury's efforts to reduce mortgage foreclosures is not working. as tarp's end date approaches, the panel must know if potential risks have been

assessed. we must also evaluate if the impact has been measured, using credible metrics to measure the success or failure of programs. has the treasury department targeted the highest degree of accountability and transparency. reasonable people might approved or not approve of the plan, but no one questions that the progress should be measured against clear benchmarks for success. reasonable people might define financial stability in different ways, but everyone agrees we can best gauge the stability by measuring the stability of our banks. treasury has called for additional stress test. reasonable people might disagree about how to help small businesses gain access to loans, but no one doubts that the solution must begin with a

clear understanding of the problem, yet treasury has collected only sparse data on the small business credit crunch. without more handedness -- handedness, the shape and depth of the risks facing our economy remains hidden. without a willingness to separate the programs that have worked from those that have not, it is not possible to build the best defenses. the problems in commercial real estate, where mortgage foreclosure -- home mortgage the day. your office will lose the capacity restructure programs, or deal with the programs. i will be very glad to see tarp end, but i realize that the time is running out to make sure that we have used the money to assure the stability of our

financial system. time is also running out to make sure that tarp money is used to help families and small businesses the way it was so street. i would like to offer my counterparts on the penultimate opening remarks. mr. mcwatters. >> thank you, elizabeth warren. it is my hope that secretary timothy geithner will assist the panel in addressing a number of significant questions, including the contemplation of the application of additional tarp funds to new programs, or the application of additional tarp funds to existing programs? will they be applied to any financial or non-financial

institutions such as aig, gm, chrysler, or anc? will the investors received dividends in cash? what is the exit strategy with respect to these institutions as well as the other tarp recipients? has tarp enshrined into our law of the concept of too big to fail? have established an implicit guarantee for the benefit of our largest financial and non- financial institutions? will the pendinn legislation ratify and codify the existing standards? we will treasury yet again allocate additional funds to goldman sachs, citigroup, bank of america, and a group of other significant firms if they

notified treasury today that they were experiencing a severe liquidity and solvency crisis? how would the answer change if the date approached treasury and the new york fed after the financial legislation is enacted? would the ftse liquidate these institutions -- would these institutions be liquidated? is this not what we were told with respect to goldman, aig, citigroup, bank of america, among others, that simply certain institutions were too big to fail, and could not be permitted to liquidate? is a resolution of 40 included in the pending financial reform legislation -- is the resolution included in the pending financial reform legislation, dressed up?

aig was regulated by approximately 400 regulators. most professionals completely missed the best systemic risks that were percolating. how will the addition of a systemic regulator proposed under the pending financial reform legislation help to solve this problem? where did treachery, the fdic, the sec, and the cftc expect to find these super-regulators who are competent to call out systemic risk that others have missed? super-regulators who are competent to call out systemic risk that others have missed? even though systemic regulators have timely call about risk, how will they convince other regulators, the global

financial -- the global financial community and congress that the worries are significant and could be a great cost to taxpayers and the financial community? why it former federal reserve chairman paul volcker in an interview state that the resolution authority provided in the proposed financial package is a "workable proposition for anything short of the biggest banks." does chairman volcker believe it will be all but impossible to liquidate in an effective manner? does he believe that tarp, too, will be required? why did treasury released a press release and pine that the tarp program has been profitable, -- implying that the tarp program has been profitable, even though the

congressional budget office expects taxpayers to lose approximately $109 billion. why it had whitaker implied that gm has replaced all of its tarp funds, even the taxpayers have yet to receive payments in cash? the congressional budgetwill%% lose $34 billion of the tarp- fund investments in gm, chrysler, and gmac. thank you, mr. secretary, for joy in the. and look forward to our disk of -- discussion. >> thank you. damon silvers. >> i wish to express my appreciation to secretary geithner for his willingness to appear before this panel and a

regular basis. today, i think the treasury department and secretary geithner deserves considerable credit for the overall performance of the assets the government has acquired through tarp. as my colleague, mr. waterss pointed out in a different tone, the cost of -- mr. mcwatters pointed out in a different tone, the cost of tarp continues to fall. while it is hard to know exactly the full cost, the public should be aware that the real cost of tarp is not at this $0.700 billion, or even the three and a billion dollars that it was thought to be. it is falling pretty consistently. however, there remain three significant questions that have been with us since the inception of tarp. the first is, is tarp working to achieve economic goals, reviving

credit markets, stabilizing the economic system, and providing relief to homeowners facing foreclosure? projections of long-term -- digit unemployment suggest that we might not have prepared our credit system or are will housing market. are we continuing to manage tarp's assets effectively? i am here, particularly addressing aig, citigroup --i am accused from -- i am recused from ottawa. -- auto. i am particularly mindful of the lessons of our panel's detailed examination of the collapse of aig in our june report.

that report is a powerful brief for the wisdom of keeping government-insured liabilities away from highly risky assets, and for the need of a strong resolution of 40, and need which you have championed much to the public's benefit. it is a challenge to evaluate tarp in two different metrics, which are both important. tarp is literally a set of investments in the financial institutions and certain other firms. the second is really the purpose of tarp, which was to ensure the financial system did not take our economy down. we have moved from an

environment where the threat was a cute, too, i believe, where the threats are chronic. that is what i hope to take up today, in addition to the other two subject to i'm mentioned. again, my thanks to the secretary for appearing before us. i look forward to a testament. >> thank you. dr. troske. >> thank you. i would like to start by thanking the treasury secretary dieter for appearing before us. as the newest member of the panel, i am looking forward to hearing your thoughts about the crisis we have been through, and what we couud expect going forward. i would like to focus on why financial markets have not paid

eight -- not behaved, as i believe they should have if they were a well-functioning competitive market pared their -- market. there are several aspects that i find that both surprising and confusing. i would not have expected to see the events if they truly were a a well-functioning, competitive market. while i have not closely studied the sector, you, secretary geithner, have played a key role in dealing with the crisis, and try to understand in preventing a similar crisis. i feel one of the purposes is the effect of tarp on limiting the financial crisis. and the aspect -- one aspect of the financial crisis that i find confusing is the existence of

too big to fail firms. the argument has been made repeatedly that the government had to bailout firms because the standard bailout process is slow and destructive. had they been able to enter, it would have resulttd in enormous disruption. numerous companies, both large and small, have entered bankruptcy. the participants should have been well aware. they should have faced increasingly higher costs of capital because of the cost of potential bankruptcy rest. by imposing higher costs, there would have been a limit placed. instead, it appears that the large financial firms face both -- face lower costs than smaller firms.

this allows them to purchase riskier assets. in a well-functioning market, they should not have occurred. another aspect that i found surprising was that while the market was sending clear signals that the mortgage-backed securities were risky, as basic financial theory teaches us that there is no such thing as a free lunch. it is a formulation of something mothers tell their children. if something seems too good to be true, it is. unfortunately, they ignored that. since these securities were earning an above-market returns

risk, people purchasing them should have realized that the historic returns were not supportable. over time, people learned these assets were risky. many of these assets are now worth much less than what was paid for them. in addition, managers seem to have done a poor job of assessing the risks, yet few of them have been penalized. they're essentially purchasing boxes with residential mortgages, boxes that were stamped by the rating agencies. they through the boxes in the corner, and what it to cash dividend payments. it is not apparent that they opened any boxes to see if there was an accurate representation of what was that -- stamped on the box.

in other sectors, these managers would be out of the job. in the financial sector, they seemed to still be working. this is hard to understand. this all leads me to conclude that it is not a well functioning, competitive market i'm trying to understand why the government h. the government has long backed.+ >> thank you, dr. troske. superintendent neiman. >> thank you for being here, again to speak to the public on important issues. it has been over one year since our first hearing with you in april of 2009.

it is sticking to take stock on where we stand in comparison. first, it goes without saying that progress has been made in restoring financial stability. although difficult challenges remain, the crisis levels of last year have receded, and capital markets are beginning to funntion more normally. second, a significant amount of tarp funds had been successfully repaid. this is impressive, as many banks have been able to privately raise capital and increase earnings in a market that is constrained by recession. finally, many of the causes of the crisis that put many taxpayers on the hook on -- in the first place, are being addressed in congress, as we speak. however, in other areas, needed change has not come as quickly as desired. unfortunately, these are some of the very areas where americans are hit the hardest. i may be the virtual broken

record on foreclosure prevention. it is clear that families have auctions at work. i am equally concerned -- particularly concerned that there are more families whose trial modification has been canceled rather then converted to long-term further, i think we all believe small business lending is key. we continue to hear the viable small businesses are unable to access the credit they need. this was a recurring theme. the house recently approved a fund that will provide capital to regional banks that are at the heart of small-business lending. our like to explore small business access and other lending issues with you this morning.

finally, with a financial reform work near completion, the united states finds itself in a unique and precarious position. as you are more aware than anyone, there are challenges we face in the global community between balancing our role as a leader of financial reform with the future of our international competitiveness. time permitting, i would like to discuss this challenge with you so the public can gain your perspective. i look for to your testimony. >> thank you, superintendent neiman. secretary geithner, i would like to recognize you for five minutes. secretary geithner. >> thank you. thank you members of the panel. as you know, in the fall of

2008, as we confronted the worst financial crisis this country has seen in more than 70 years, congress and the previous administration mobilized extraordinary financial response. their action started the process of stabilizing a system that was on the verge of collapse. when president obama came into office, he took the necessary steps to start to finish the job, to start to save the economy from what could have been a second great depression. last december, outlined an exit strategy. i want to update you briefly on the progress and the ultimate cost. first, because of the actions we took, alongside actions of the federal reserve and the recovery act, the economy is growing again, exports are rising, manufacturing output is

rebounding, businesses are investing, and so far, this year, the economy has treated half of 1 million jobs in the private sector. economy is in a much stronger position to the cost of credit for homeowners,,consumers, and businesses has fallen considerably rates for all those up -- of all loans, for which it considerably. rates for auto loans, for example, are considerably lower. second, we are now in the process of ending our emergency programs and recouping our investments. as you know, we have shut down most of the programs that characterized that initial phase of the of emergency response -- the capital purchase program, treasury's guarantee for money markets, and the federal reserve has wound down the vast majority of its lending programs. all of those programs are on

course for significant profit for the taxpayer. more than half has been repaid. when president obama took office nearly $240 billion had been invested into our nation put the banking system. today, we have recovered -- recovered three-quarters of that money, and we are making progress getting out of aig, gm and chrysler. third, the overall cost of car continues to fall. last august, we projected potential losses at 340 billion -- $340 million. it is expected to fall further. the present is expected to impose the fee to insure that

the largest institutions bear the cost, that way the american people would not have to pay one penny of their hard-earned dollars to cover the losses we might still face. we are on track to shut this program out as scheduled, and we expect to do so without using hundreds of billion dollars of authority. we will return it to devote to the medium and long-term needs of the country. it is important to recognize that they did what they were supposed to do. there is no job growth without economic growth. no economic growth without access to credit, and no access to credit without a stable functioning system. our emergency plan started that process.

the damage caused is still in affecting the lives of millions of american families and thousands of businesses across the country. those struggling to find a job, making mortgage payment, or divans their jobs or education -- or advance their jobs or education. we will continue to promote and maintain stability in the housing market and improve access to credit for families and small businesses. that is why we are working with congress, and are quite close to getting congress to adopt a small business lending facility. we are urging the congress to enact quickly to -- to act quickly to enact financial reform. taxpayers should never again be asked to bail out a financial

system crisis. the house and senate are close to enacting the strongest set of reforms we have seen since the great depression. i would be happy to talk about those in more detail. it is time to provide clarity and detail. that will help make sure this financial system does a better job of meeting the needs of main street business and families. it will help restore confidence that our financial system will be a source of stability, not3 you began with excellent questions. i will be happy to spend some time with you walking to the challenges ahead. >> thank you, mr. secretary. the point about the accomplishments of tarp is quite .ignificant your emphasis on the importance of a stable, functional

financial system is what i would like to talk about. we have made an enormous progress. tarp oversight is where the problems still lie. in just over three months, treasury will no longer be able to initiate or redesign programs. what we do not not -- what we do not now, we cannot do in the future. i wanted to start with small bankss this panel has written about the upcoming troubles in the commercial real estate. about half of the $1.40 trillion loans held by banks will be held by -- will be held under water. that will make lending almost impossible. about 3000 of the 8000 intermediate and small banks have portfolios that are heavily concentrated in commercial real estate. we estimate that banks could be

facing a $200 billion or $300 billion in losses on these loans. it means that hundreds or thousands of more -- more small banks could capsize. what is treasury doing to prepare for this coming problems? and do we need to be reworking any of our programs? >> that is an excellent question. we will be living for a long time with a lasting effect of this crisis. the damage was extraordinary. it reached car and brought across the country. if you are in the real-estate business, parts of the country that have been exceptionally high unemployment rate, if you run your business on access to credit that washed out, it is still an enormous the challenging environment. you are right to point out that small banks came into this crisis, much more conservatively

managed and their wall street competitors, but many got into a position where they had an exceptionally, regrettably, and unacceptable high levels of exposure. they face difficult adjustment ahead. we have a set of programs stiil in placc. that will last beyond the expiration of tarp. my view is that the most effective thing which could do for the credit problem still facing small businesses and small banks is for congress to enact this set of credit programs for small businesses. the way these programs are designed, they do two important things. they provide a modest amount of additional resourcessto states across the country that have

programs in place to provide support to small banks and small businesses, but, alongside that, we propose a new lending facility that small banks will be able to access. the more they increase lending, the lower the rate they pay on those investments. >> mr. secretary, if i could stop you there -- emphasized -- i want to emphasize a different part of the question. the question is that 3000 of our 8000 banks across the country have heavy concentrations in commercial real estate as i read the new initiative on small business lending, that is money that is not designed to go into banks to help them repair balance sheets. it is money to go to healthy banks that do not face the

serious problems. the question i want to sk, and press on, is when you talk about the stability of the american banking system, we have a 3000 banks at serious risk that they might not survive. what is treasury doing about that, or is the answer, we will let them go? >> as you know, i cannot associate myself with your basic numbers. that is an issue where the fdic's basic framework is the most reliable resource we have had. >> so we are all clear, the numbers come from the bank's examiners. they're not numbers we generated. >> i am a great about the challenges, i just did not want my agreement to be about the

numbers. we have a very elaborate the country for dealing with the challenges facing our nation of 9000 community banks. that process was designed in the wake of a series of past crises. that gives it government the ability to help those banks manage through, and help facilitate the restructuring ahead those banks that are uuder pressure have a lot of options. they can raise capital. they can shrink lending. you also have to point out that the programs we designed from the beginning are only available for banks that we believe would be viable. these are important programs because they will help the banks face less need for

shrinking balance sheet. >> i am over. i just want to make sure that there is no reason to change anything, we will stay steady on the same course? >> i am a very careful, pragmatic person, and i am open to any ideas, but, at this stage, i believe that the programs we have within the tarp, and the existing programs with the fdic and the new small- business lending initiative is the best mix of solutions that we have found. >> thank you, mr. secretary. mr. mcwatters. >> i will start with an easy question. a soft ball over the plate. does the administration plan to

test congress to extend tarp beyond october, 2010? >> no. this hearing should be a eulogy for tarp. we're working very hard to put this program to rest, put it out of its misery. it will not solve all of the problems facing the country. it was not designed to. we will not use it that way. we use it carefully. it has come the essential thing we designed it to do. -- it has done the essential thing we decided to do. you said one thing in your opening statement that i wanted to correct. you referred to a press release where we implied the overall programs would be profitable current we have never done that. we were explicit that the latest cost estimates were in the hundred billion dollar range. for the bank piece of the

program -- for many americans the program was defined by the incredible act of the commitment of the united states putting capital in banks that represented three-quarters of our nation that was a focus of the deep outrage where we had to put money in the hands of destitution that played an important role in the crisis. it is hard -- and every estimate that i have seen, they will return a positive investment for the american taxpayer. every time we said that, i always make clear to say, and our numbers always show, ww still face a substantial risk of loss on a range of other programs, including the ones we inherited from the previous administration i want to make sure that we never made that

mistake, and i will never make that mistake. we are still exposed to substantial risk. >> but, but export sort of curious -- but the metrics were sort of curious. to a lot of people it looks like you're trying to say there was safe for the million-dollar profit, when at the end of the day, there is it $500 billion loss. >> one of the important things about the way we have done these programs is that we put out regular estimates, including by independent analysts, of the potential costs. it is hard to find any country and around the world that has explicitly identified and provided regular independent estimates of the ultimate cost the taxpayer. i am committed to that. judgments.

life is uncertain. these programs will cost a fraction of what the critics feared and what the architectss of the program thought was likely. a very small fraction. the best way to measure this is to look at the projected costs relative to, for example, the crisis in the 1990's, which was simple to solve, still more%- devastating for the communities effected, but dramatically higher costs from a much smaller crisis. >> at the end of the day, $105 billion is a lot of money. >> a absolutely. -pthat is why we're working so hard to bring those costs down. >> let me as to the. is treasury contemplated the allocation of funds to any new programs before october 3?

>> at this stage, we are not contemplating any new programs using this authority. we have an obligation of care and prudence. we are very reluctant to do things unless we think there is a very, very high return on the taxpayer's investment. we think this is a set of programs today thht strikes that balance. >> how about additional tarp funds to existing programs? >> no. we have no plans of adding to the current estimates that we have put out. again, first of all, for perspective, most americans think we went and spent $700 billion, and we will never see again. in fact, we actually put out half of that, we got more than half of that back already, and we have substantially reduced the estimates that we started with about how much these programs would ultimately commit

to. >> ok. my time is up. >> mr. silvers. >> mr. secretary, i hope i conveyed in my opening remarks my sense that the analysis you went through is ethically correct, and i think you and your team are to be commended for getting where we have gotten. with that introduction, i want to shift to the question of the interaction of tarp with a larger. i will ask our staff to give us an updated loan level measure. as our chair noted, we think there is some deficiencies. my question is this -- given that datt, at a time when i think the administration's view

is that we re unit and economy mode, it appears that the private credit system is acting assa light on the growth of the economy. that would appear not to be what we are trying to get at. can you give us an analysis of that and what steps you think need to be taken to address it? >> it is a complicated question, and it is gephardt of heart of any evaluation. at the if you look at most measures of the cost of credit of overall financial conditions, they do not suggest the the financial system today is a source of weakness for the overall economy. in fact, i would say the opposite there is not a chance that this economy would have started to grow again in the second quarter of next -- of last year, and this early a

return into a the economy started to add jobs again, without the dramatic actions we talk, however unpppular to bring down the costs of the fed and stabilize the system. this is not something we can know for certain. it is absolutely the case in the housing market. in the context of small businesses that were unlucky in their banks. i do not think that on the available evidence today, you could say that the financial sector itself is operating as a significant drag on the i will finish quite quickly. one of the reasons we decided we decided -- was wanted to make for that the system would be

able to finance recovery. i think we are in a good position to achieve that outcome, a notch in there is still a lot of damage out there. >> -- acknowledging the there is still a lot of damage out there. >> i do not think you are confronting what i asked head- on. i do not disagree with you that we could have been much worse. the situation in 2008 and 2009 is significantly worse than today. my concern is that the situation today is not what it should be at this moment of economic recovery in terms of the behavior of the private credit system. that is not so much in housing. it is clear we have a private credit system in housing at the moment. it is more on the business side, where the job growth needs to come from. that brings us back to my opening statement about a chronic problem replacing an

acute one. >> the best measure we have about whether the financial system is a constraint on growth is what is the price of a loan? if you look to the price of municipal borrowing mortgages, business credit, in almost any sector, there are very low. another example is if you look at the balance sheet, how much cash businesses have on hand across the american economy, the business sector as a whole has very, very strong balance sheets and is sitting on a lot of cash. i completely agree with you about the basic risk. we did not want to have a recovery constrained by credit that is too tight, and it is still too tight in significant parts of the economy. on those measures i would say i

do not believv we face the risk of a chronic, although i don't think i would use that word, but we are continuing to make sure that the economy is growing as fast as we can. >> i think most economists would say that the fact that businesses are sitting on a lot of cash is not necessarily a good thing in relation to our recovery. >> that i would agree with, but as a measure of financial had once, it is a good measure. -- head winds, it is a good measure. we still have roughly 8 million americans out of work. people are still living with a basic level of financial insecurity that they had not experienced in decades. you are absolutely right about that. we are still at the early stage of fixing what was broken in this economy. >> the chair was kind enough to give each of us the same time

she talked, so i'm going to use -- what i am pushing on is if you look of those reserves in cash, i believe they are weighted toward the companies that have access to markets where the recovery has been more -pdramatic. if that is not so, i would appreciate hearing about that. our reports suggest that if we have to deal with the banks as your source of credit, you have a much tougher situation as a business person. the testimony we have heard from small business people is that the bank might post a rate out the window, but it is not available to them at that rate. that feels like a serious problem turned >> i agree. that is why we have asked congress to enact legislation that would help mitigate that

problem. i would say that on your basic question about whether on the available evidence you ave a financial system today that is a source of restraint, i do not believe that would be a fair evaluation. in parts of the country, in particular sectors, that is the case. it would be surprising if it was not the case appeared >> thank you, mr. secretary. dr. troske. >> thank you. i'd like to start off by getting your thoughts or having you respond to concerns expressed by many that the large financial institutions and their creditors, for them, the federal government has publicized profits, and privatized rest.

>> you are absolutely right. market discipline failed. the market failed to constrain risk-taking by financial institutions. that had two causes. one was classic moral hazard risk -- the expectation that the government would insulate private creditors from losses. that was acute and conspicuous .n the case of the gse's the crisis had another cause that was much more powerful in a moment. the market had financed a huge growth in leverage in a set of institutions that were allowed to operateeoutside of the constraints of capital leverage. for example, in many of our investment banks, in a vast range of non-banks and venture

companies, some of which call themselves thrifts, those institutions were able to operate without a history of government support. that is not something you can attribute to moral hazard. that was a classic act of judgment that we might face a recession with a huge losses. -- with acute losses. we have a set of reforms that will address that risk? this is important. those institutions, that essentially operate like banks, whatever you call them, and take risks like banks, are important to the functioning economy. we will constrain their risk- taking. whether you call them aig, goldman sachs, or j.p. morgan, we will constrain the leverage

and risk that the take on. if they get to a pooition where they could not survive on their own, we will step in and dismember them safely. we will minimize the risk of loss to the taxpayer, and make sure they can be broken up in a quasi bank like mechanism. that is what this does. the absence of tools is what forced us to take those exceptionally offensive measures in the fall of 2008 and the first half of 2009 it to put up >> the example of long-term capital management will be one where that was not a bank, and the government came into backstop. they did arrange a rrscue that

would lead one to think that that is what the government is quick to do for the other ffrms. rescuing became an expected norm. there are zero entities out there, presumably credit holders' equity holders that are supposed to be regulating these firms. the creditors, who did not experienced the upside, were the ones that had the most to lose. it is not a large stretch to think that they were failing in that role because they felt they were a point to be guaranteed a return regardless of what happened. >> i think you're right that all financial systems have this risk of moral hazard, this expectation in the extreme event that it is possible the government will act. that is the job of oversight, policy, and government, to make sure that because of that risk,

you have tough, well-design constraints on leverage that are enforced across the system ahead of the crisis none of us run the system, and no country runs the system on the expectation that market discipline alone is adequate to constrained rest- taking. all companies -- all countries restraint risk. some do better than others in some parts of the system, but did it partly -- poorly in large parts of our system. that is what we need to change appeared . >> you mentioned the systemic risk regulator, or whatever you want to cut. under the current system, we're supposed to be assessing systemic risk to the economy. you would know more about it than me. what is the difference between what we are setting up going forward -- because it is the

same players -- what powers to have that were different than they have currently? >> that is an excellent point. we are not we to design a system that depends on the foresight and wisdom of officials sitting in washington in those agencies to come in and preamp -- preempt, act preemptively to diffuse future crises he's. we hope that will happen, but that does not the promise. what we are doing is making sure there are clear, public, and forcible constraints on the types of risks that could imperil a system. we think that is the most realistic way to make sure the system runs with much greater cushions against future sources of lost stocks and distress.

i agree very much with the promise of the -- the premise of the question where if we designed the system to work only if regulators are pre-emptive, that is not the reform we are supporting. i grieved for skepticism. -- i agree with your skepticism. >> ultimately, if the government is faced with another crisis in which several institutions are facing simultaneously -- is there anything that will prevent them from enacting a tarp two? nothing that i have seen what change anything from what happened in the past. >> excellent system. that issthe system we had. that is what put the government

in the outrageous situation of having to commit an extraordinary amount of resources. that was necessary given the system we have pared the reforms that are not -- that are on the verge of enactment help to fix that problem. did did not have the ability to constrain risk taking because they did not call themselves banks. it fixes that problem. it also make sure that if in the end, and individual firm gets itself in the mess, we will be able to let them fail, ensure they fell, dismember them safely, and not give them a chance to operate again, putting them out of their misery without the taxpayer being forced to uxor these losses, or --

absorber these losses, or left with the liability. you want to be able to make sure you can draw a line around that fire. that is what this reform does. >> mr. secretary. thank you. >> too wet. -- thank you. >> thank you. superintendent neiman. >> in the treasury report from just yesterday, trial modifications nearly tripled from march to may. the number of families that have received permanent modifications has now surpassed -- been surpassed by the number that has been pushed out of the program.+ it is deeply troubling that the

homeowners relied and trusted this government program, that they might be left out of the -- left out in the cold. over 70% of those individuals have been making timely payments for six months or more. first, we need to really understand why these hundreds of thousands of modifications were canceled. . . >> the overwhelming reason is that they were unable to prove income and therefore on eligible for the program. we made a conscious choice -- ineligible for the program. we made a conscious choice that we would do everything we could to maximize the number of families who were potentially

eligible for this program to get immediate cash flow assistance. because of that strategy, we had roughly, at the peak, 1.2 million americans benefit from temporary moment -- loan modifications. we let them do that on stated income, knowing that we would have to go back and be able to demonstrate that they were truly eligible for that. that put us in the position, inevitably, where we are today. by airing on the side of speed, -- erring on the side of speed, we are inevitably vulnerable to the possibility that many of those homeowners who bought and said they were unalterable -- who thought and said they were eligible, have been unable to prove their income. we're in the process of cancelling those now. more than 2/3 are benefiting from other modification programs that their banks offer if we are not supporting them.

that helps temper, a little bit, the consequences of not being able to be in this program. we have a careful balance to strike. we're devoting these scarce resources to people that are able to prove they're eligible for the benefits. >> what kind of verify ability or audit compliance can we provide? we hear anecdotal information about documents being lost in servicer error in verifying information. i can we assure and provide level of comfort that servicers are acting properly -- how can we assure and provide levels of comfort that servicers are acting properly? have done a terrible job of making sure they are doing everything they can to meet the needs of their customers who are facing the possibility of losing their

home, and most importantly, there's financial security. they still have some distance to go to try to make up for that. it is a series of basic -- how should i say it? mistakes, inadequacies. what we try to do is to simplify and reduce document burdens. we have put out. each of public metrics of performance so that people can judge themselves -- we have put out very detailed public metrics of performance of the people can judge themselves who is doing a good ob. and we continue to put as much pressure on them as we can to improve their crops -- their quality of service. >> you have said that the majority of those who dropped out of the program were offered these proprietary modifications by the servicer. but isn't it true that the true test will be whether the bar

work is better off? until we see the statistics -- about the borrower is better oof? until we see those statistics, isn't there a question whether those are truly sustainable? unlike the situation two years ago before the government poured out this basic system for standard modifications, most did not meet that test. they left the ball as dead as coming in. but since then, the government has raised he standard of those modification programs. >> do you expect that the public will be seeing any data? has the treasury requested, even if on a voluntary basis, some of those key elements of of the

modifications? >> we are continuing to do that and we're happy to be responsive about what we think is achievable in other areas. >> another thing we are surprised to find, with his grounders -- with ts grounder -- scrogginbar were short in thm is been that there about -- they are loved with the inadequacies in the program -- the other thing we are surprised to find it with borrowers in this program is that they are left with the inadequacies of the program. one element, a provision that i think would be extremely helpful and have been calling for a while for, would be an extreme

measure with the treasury. i would hope what administrative reports we -- but administration supporter we would see something like what senator menken has been working on. >> we have been working alongside the excellent people of huddy, led by sean donovan. -- excellent people of hudd, led by sean donovan. >> have a process that people can reach out to treasury would be very important, in my opinion. thank you. >> mr. secretary, i want to go back to this question about a stable functional financial systems. we talked about these potentially dangerous concentrations in commercial real estate.

i want to look at the top end. six of the 19 stress tested banks hold real-estate loans that are a big percentage of their capital. with the commercial real estate losses, because of the way they are set up, they're likely to be much larger in 2011, 2012, and on into 2013. how can we be confident about the stability of these financial institutions without rerunning the stress tests to account for leeding troubles in commercial real estate lending? >> as i said, these loans and law sets -- losses and assets are board to be a challenge -- are going to be a challenge. i think it is fair to say that actual losses on the books --

again, this is a question that weelook at all the time on a regular basis. based on what we have seen so far, the losses are better than what we have projected. therefore, the capital is even better than what we thought we had achieved. >> we know the loss is on commercial real estate. those are coming up in 2011, 2012 and 2013 for a major reset. i'm glad that you think the numbers look better than in 2010. are you running in many stress

test? >> -- a mini-stress test? >> what our supervisors have done is put in place a much higher level of disclosure on the u.s. bank system of detains. you are seeing countries move to adopt the basic framework. the virtue of this approach was, we pushed a lot more capital into finances at the early stage. the best way to look abroad whether the markett is judging relative to potential risks -- and i think again, a relative to expectations, it is still better. but there are challenges ahead. >> let me try this again with second loans. big banks are still carrying second liens on their books.

many analysts who believe a large portion of these should be written off. as of march 1, 2010, theefour largest banks held $434 billion in second mortgages and had total capital of only $505+ billion. do you have any concerns about what this means? now we are moving from commercial real estate on to second mortgages. >> of course, banks have on their balance sheets still -- even though they can produce assets to some extent -- they still have challenges. how much they will win against -- how much assets are they holding against the challenges?

the general sense is the projected losses are less than they expected, and therefore, more capital is now held against those assets than we thhught would be their year ago. >> let me try one more. the fannie and freddie are pushing mortgages backe to these financial institutions because they say the mortgages sold to penny and freddie are not of the quality that they were represented. fannie does not disclose po requested -- danny does not disclose requested by? -- fannie does not disclose requested buybacks. are there requests from these larger institutions to buy back these mortgages?

>> i think the major banks of the company -- country now old a cap of the larger risks. and that goes to reach of the things that you pointed out, each of the potential sources of lost still ahead. again, this is still an unknown. we want to be conservative in making these assessments, as we were a year ago. our supervisors will continue on a regular basis -- one of you said in your opening remarks that rew do not contemplate stress tests along this -- that we do not contemplate stress test along this basis. i hope we do. aggregator lee, quarterly, difficult challenges and assessments -- regularly,

quarterly, and difficult challenges and assessments. carta are you saying that will be ongoing or quarterly? >> -- >> are you saying that will be ongoing or quarterly? >> both. >> you have said that there will not be a new taye are p program. -- t.a.r.p. program. that no money going to gmac. but we do not anticipate at this stage putting more money into those existing programs or to the institutions. >> in the same way that would apply to chrysler and gm. >> on the underside of your question, we are now on a path to exit those companies much

more quickly at a much lower estimate of losses than we anticipated. at gm, we are drink -- bringing down the risk dramatically. we will continue as aggressively as began to get the government out of those investments -- as we can to get the government out of those investments. those are commitments that we inherited. we are trying to reduce them as quickly as we can. and fdot low a risk as we can. >> -- and at as low a risk to the taxpayers as began. >> if one of these institutions came to your office and said, we are experiencing liquidity crisis, would you advance the money -- a them money?

>> i do not ever has to as questions because that this kind of impossible. if financial reform is in place, then we have a very well- designed process. and instead of emergency measures than we have in place in the fall of 2008, we would -- i would assume we would make better choices. you're talking about the 12 weeks remaining in this program? >> yes. >> our job and my responsibility is to be sure the we are safeguarding the basic strength of the american financial's system. again, our system because of the actions of we took is still in a much larger -- noa much better position than we were. >> if financial reform is in

place, the same people come to you and say, ttere is a systemic and regulator. the systemic regulator is supposed to look into a crystal ball and see stuff. >> i will say it again. we are not designed a financial reform program and -- we are not designing a financial reform program that looks into this and -- we are born to force the system to run with less leverage, less risk of finding, less exposure to cash risk, and that is the best protection we have against systemic financial crisis. >> the problem with that is that aig was not a mystery to people. most people under -- on wall

street understood that aig was writing trillions of dollars in credit and billions of dollars in mortgage-backed securities. the problem was that even though people recognized it, they did not recognize that as risky behavior. >> i do not agree with that. i think this crisis is littered with people feeling to see risks that cause catastrophic damage. aig is a more simple failure. there was nobody responsibll with the authority and capacity to restrain risk taking by that institution. as you said, there were tens of billions across the country, but none of them were responsible for onsidering the risk that aig took on and i was ahead mistake easy to avoid. -- and that was a mistake easy to avoid.

>> you are saying there is one mooe. >> we're not adding regulators. we are reducing the number in our system. all we're oing, quite frankly, is making sure that the people whose job it is to manage financial stability for the country have the authority to constrain risk thinking -- risk taking when it could cause damage. that is what caused the crisis. aig is the perfect example, but not the only example. you could look of bear stearns or merrill lynch or a whole raft of companies that were taking on systemic risk. nobody have the tools or respond slowly to constrain those risks ahead of time. and when they mess up, we did not have the choice to let those failures happen without catastrophic damage.

the great virtue of capital constrained leverage is to recognize the fact that we live in an inherently uncertain world. no one will know with confidence what the response is or the probability is. neilon thing you can do is to force these institutions -- the only thing you can do is to force these institutions to run with less risk. that is an effective tool of concerning risks. -- restrrining risks. >> if you define risk appropriately and you enforce the rules appropriately. >> again, we think the basic lesson of this crisis is possible, objectively

measurable set constraints on leverage. banks should fund more conservatively. they should not be exposed to the possibility that overnight, people will withdraw tens of billions dollars and put huge pressure on the system. i do not know any credible argument that there is a more effective basic tool then capital constraints on the equity funding as a safeguard. it will not prevent firms from failing. we will create a system where firms can still fail. that is an important part of thh system. but i do not know of any other alternative. i do not know any other feature that does not begin with well- designed, measurable risk

taking. they will not keep companies from taking risks, but they will protect the system. " i'm not sure that with -- >> on not sure that with more regulators -- i am not sure that with more regulators that problems will not come from the investment and banking community. they will derive new types of instruments that 10 r 15 years ago we did not see. >> maybe we agree more than you think. but again, the future of our system was not that aig was crawling with the supervisors with the authority to restrain and control risk taking. are right.s present, then you changing the deck chairs -- it

is important is it institutions take risks that play this fundamental role in our system need to be subject to conservative restraints on the system. aig was not. we will make sure it is. >> thank you, mr. secretary. mr. silver's? >> i cannot resist continuing this line of discussion. mr. secretary, i think that your fundamental of observations about this set of questions are all absolutely correct. our report on aig showed a two fundamental things. one was that the lines of business that we lead -- had led to aig. the unregulated numbers is just an in-depth vacation of the impact of aig was just a global

-- was an indication of the fact that aig was just a global firm. as a panel, we may disagree with where you did with the choices you had. but it is very clear that the choices that you diddnot have -- in your current role of the bank of n.y., of the treasury. you did not have the ability to pick and choose with the systemic crisis. i would take it a little further from there, though. and we learned as a panel, and it is reflected in our report on the day -- on aig, what a

powerful force they exerted on the torrez is available during the crisis. in particular -- on the choices available during the crisis. in particular, those tied to the regulated guaranteed subsidiaries of aig. that is, the insurance companies pupport were tied together by credit rating agencies and the firm. that seems to me a powerful argument that making sure in the future that those that have guarantees behind them are also tied up with risky lines of business. derivatives, proprietary funds, hedge funds and the like. does, -- the irst is the vocal

world. the notion that we ought to say banking companies can outdo proprietary trading, cannot invest in hedge funds, -- cannot do proprietary trading, can on invest in hedge funds because there is a problem. it essentially requires that derivatives dealers not be within a bank holding companies, barack and leased -- but at least there be somebody at the banking lobby -- bank holding companies. could you explain the position today? >> members of the committee, including chairman lincoln and chairman daud, or carefully going through these provvsions to be sure we come to an appropriate balance perido.

we want to follow our key objectives. one is, as you said, the banks are unable to take risks like proprietary trading. or if they use derivatives for proprietary trading, they could imperil the stability of the bank, or allow them to benefit from the access to the safety net that the bank enjoys and extend the benefit of those activities that we do not believe are essential for baking. the other thing to point out -- for banking. the the thing to point out is that an essential part of banking is helping customers hedge their risks, whether those are. we want to make sure that the

banks are able to hedge their risks. i think it will come to a very good balance. this bill will do an excellent -- an exceptionally important thing, bring restraint to the derivatives market. we would still present enormous risks if we were unable to enact these reforms. >> there are reports being made with respect to both measures i indicated. to essentially weaken them. you spoke a moment about the area in section 17 of derivatives. can you speak to the question of whether banks will be allowed to put meaningful amounts of capital into these

and defense experts are not goinn to comment on the etails -- into these hedge funds? >> i'm not going to comment on the details. i am very confident that this bill will do the necessary >> i would just observe, and my time has expired, but i would just observe that when you're talking about hedged investments under a bank logo, that a diminutive exception could easily blow up the capital structure. it would seem to me that the lesson of our aig report would be to not allow that. >> we are not going to create risk.

we also do not want to support the basic balance of risk taking that we saw in the system. there was no capacity to restrain those risks and abbas not a good outcome for the system. >>zuj] -- and a that was not a d outcome for the system. >> i would like to hear your rationale for why liquidity was invested innthis part of the banking system, what the goals were from this program. >> i'm sorry, for the -- ? >> the use of the small funds for the non-banks. >> excellent question. the first just dreaded everything that we did in the crisis. -- guided everything that we did in the crisis. we made sure that credits that

did not exist at that time would be open again to american businesses and families. without that, there would be no recovery. for that reason, small banks, as you know, get about half their credit -- small businesses get about half their credit from small banks. for that reason, it seemed fair to make sure that they have the same access to the poor -- to the capital programs. for the reason of fairness and the pragmatic reason that they play a role in these businesses, we thought it was important that they have access as the major institutions did. >> staying with the smaller banking sector, -- and i did not read the panel's report. it eems like many of these

banks -- and small banks also made decisions with these programs leading them to scramble to get out of the program. this is something to be -- that is important to be able to do in a financial crisis. looking forward, if we ever have another ffnancial crisis, have these programs impaired our ability to inject liquidity into the system given no reluctance -- given the reluctance of the banks to participate in this current program? >> i hope so. the central challenge that you face in designing reforms or the financial system -- the

government will be there to protect your future. that is where these bills are so important, because they give us the tools to definitively all of those expectations. that is very important because of the things we had to do in the crisis. >> i guess, the difference between injecting liquidity into the system and sort of providing for failing institttions, i think it is he to inject liquidity into the system. >> i completely agree that the necessary part of the tools in the financial crisis are those that the system can find. without that, the the system

will crash, and our system almost did. and that gambert 2008, we work on the verge of a crash -- in september 2008, we were on the verge of a crash that the banking system had not seen since the great depression. we need to make sure that the government has the funding needs -- meets the funding needs of all solvent into -iistitutio. but in doing that, you have to make sure that people do not make judgments on how much risk they take on the assumption that the government will be there again if they are in prudent in their judgments. that is the classic, vital challenge of getting reform. >> let me turn to the housing market, which was mentioned before. almost 30 years between 1965 and 1995 tte housing is tree was stable. starting in 1995, it grew dramatically for a variety of

reasons. my own view on the how to market is that we return to a rate of 65% of houses are people who own their own homes. honassuming we get back to a rae that is sustainable, we wouldn't a better program the one in which you design people into and a corporate housing program? >> i think you are describing the objectives that exactly shaped this program, which is why it got so much criticism. our program was designed exactty as you said, to make sure for those americans who can afford

to stay in their home, but they have the option to do that. but this program is not designed to be sustained at a level that would be imprudent. >> i would like to come out to your recent remarks about communnty and regional banks as a key source for credit or small businesses. much of the public focus and our prior reports have been focused on the largest t.a.r.p. recipients that were part of the stress test. our july reports that we're working on at the moment are a unique window into the performance and health spof hundreds and to assess the

bank's program. to help in assessing we have to have clear goals. one thing you just said about accessing capital to large banks, do you want to expand oo that? opposed to too large to fail? >> one of our basic strategy is is to make sure that we are safeguarding the bases security of many americans and we have a financial system that is able to meet those objectives. as you said, we have 9000 banks,

not 12,000 and, not 24,000 banks. most small businesses get most of their credit from small banks. the drugs we have bout 2700 community banks -- >> we have about 2700 community banks participating in the program. >> exactly. we have assets remaining in bank's federal $10 million or below in assets, we did that for the simple reason of fairness because they showed the same access that we gave the major institutions. we thought it would be important to make sure there was access to credit on affordable terms. it is a simple process. as you said, it is still a challenge for many of those banks and, therefore, many of

their customers. >> would be the -- what would be the goals involved in the, how they utilize the capitol? >> if you compare small banks that to occur t.a.r.p. capitol as opposed to those who did not, the spaull bank is lending at about twice the rate as those that -- the small bank is running at about twice the rate as those that would not take capital. and of course, for many banks, access to t.a.r.p. capital meant that they did not need to do any lending. having said that, fundamentally, this program did not meet our

objectives because as many of you have pointed out, because of concern about the conditions that might come with the future. we have banks that did not want to be subjected to either to the sigma or the fear of conditions, which is why we have legislation pending before the congress that has been pending for six months. it has very carefully funded programs to help banks get through this. when compared to the whole range of alternatives, this seemed like the best process for a set of constraints. >> we have a program in new york

days at the fed.member from your it is comprised of member banks that not only provide equity, acts as an lending consortium to small businesses. it makks loans that the individual funding banks may not have made. we are for it to you as a suggestion. maybe consider it at the national level. because we're nottonly looking at loans passed up by a particular banks, but also the lending. i do not think it is clear under blf that the banks are lending under the consortium. >> if you look at the state+

option provided to the small business facility, that option is provided to executive programs. again, the virtue in the will we designed this is that if you increase lending, the dividends and go down. that is a great incentive, but also, providing assistance to states across the country that have those programs. we are in a sense, enhancing a greater diversity of programs as well. >> thank you. >> i was surprised by your answer about the metric for success on the home mortgage foreclosure gramm. -- foreclosure program. but i want to come back to this.

over the 15 months that the program has been in effect there have been 330,000 so-called modifications. about two-thirds of those are going to fail. aad that means over 15 months -- and correct me if you have a better estimate -- but over 15 months, that means the hemp program is permanent modifications. that is about 186,000 every month that are newly possed the faults and foreclosures. i'm caught in the question of what is your metric for success here? >> let's step back and look at the basic strategy that the president put in place alongside the fed.

first, we put down a floor on mortgage prices. we made it more possible that millions of americans would be able to refinance the world to take advantage of lower interest rates. the courts are unfamiliar with -- >> i am familiar with what you have done overall. the problem is that what -- more than 1 million families this year will lose their homes to foreclosure. hampstead is it. >>. -phamp -- what's hamp hamp doesy to make sure that a set of foreclosure have the chance to

do that. and again, the members are -- the numbers are 1.1 million will try for modifications and 1.1 million will see modifications. >> as superintendent neeman said, we will find out what the consequences are of that. one of the early modification programs acttally got people in more trouble. it raised overall payments and got them in more trouble than they started out with. what do you have to show for it? >> we have 1.2 million americans that have a reduction in their payments, had a chance,

therefore, to keep their homes.+ >> and passed up other argentines that they might have had to deal with their foreclosures. -- past of other opportunities that they might have had to deal with their foreclosures. and the point is that they've lost their homes. what is it to say that a family -- how do we decide when the program is working? >> you look at its results family by family, foreclosure by foreclosure, a change in monthly payments by change in monthly payments. in looking at that, these programs could not have been designed responsibly to try to prevent a set of foreclosures that were probably unavoidable.

>> help me with the metric. arr you saying preventiig one foreclosure would have been enough for $60 billion? >> zeyno. did you have an estimate when you start of this? >> the virtue of the program that we have laid out is that we have given everyone detailed numbers they can look at. >> you say we designed the program from the beginning and in effect you are saying, not to save everyone. i understand that. you have designed around servicers. servicers have done a terrible job. you have designed it around3

we economy of hundreds left to prevent thousands of foreclosures. -- we only have hundreds left to prevent thousands of foreclosures. >> these proggams will outlast tte expiry of charge. as you have seen, we have added to this basic framework of loan modifications games a series of programs. we will keep working on that. i will never stand before this body or any other body and over going to do. -- and over-claim for what this program is going to do. >> we must stop.

i am running over and it is not fair to my colleagues. mr. make walters. >> mr. secretary, if you could turn back the last quarter of 2008, what changes would you make to the t.a.r.p. and be said? what did you learn from your experience? >> the best i can tell you is that the forms we proposed for managing the future, we're doing is giving that enaated in past -- and passed so that we can again tell the american people thht we have a reasonable chance of preventing this from happening again. that is what i am working on at

the moment. the basic framework in the reform bill for rescue programs is much better. >> y unanimous vote of the battlpanel, it was a four-vote . the government's failed to exhaust all options before committing $787 billion in t.a.r.p. funds to help aig. throughout its rescue of aig, the government failed to address perceived conflicts of interest.

even at this late stage, it remains unclear whether taxpayers will be repaid in full. i think it is only fair that you be permitted to respond. >> i do not agree with those conclusions, except perhaps the fourth. which says, and i say all the time that the carrot is still exposed to risk with aig. -- the government is still exposed to risk with aig. this hamp in the peak -- this mess in the hamp in the peak of the crisis, this has come darnell a tiny fish -- come down now a tiny bit because we

have been so careful in managing the risks we're going to be continually selling off the risk to minimize lost and we are working hard to make sure that there are a set of financial reforms to make that happen. the basic package of these protections will be in a position to both prevent and better manage mistakes like that. >> on a slightly different, but i think related note, when does the administration returned fannie and freddie to the private sector? >> i'm not sure when it is framed quite that way, but let

me answer it this way. we are deep into a process of examining what set of reforms should replace the current system that we have in the housing and finance market. those required -- those would require somethiig well beyond the basic problems then prevented the gst's. -- the gse's. i have said publicly that we expect to recommend senate broad reforms sometimes -- sometime next month. a and i would point out that thh losses that we still face in these institutions are losses that we inherited.

at our assistance, they have put in place much more conservative underwriiing standards. they're bringing down risk and restitution quite significantly. institutions today are being run much more conservatively, as you might expect. i think we're going to find -- i hope we will find broad >> but next, house majority leader steny hoyer talks about the federal budget deficit. also, weekly addresses from president obama and house republican paul ryan. and later on the "communicators" republican don shimkus and democrat mike doyle on broadband internet service.

>> of course, the lottery is prescribed by law if demand outpaces supply -- by law. if demand outpaces supply, you have to do a lottery. >> this issue is not just about race. it is about class. >> sunday, the lottery producer on the family she chronicled hoping to attend the harlem success academy and the anti- charter schools sentiment facing that school. sunday, at 8:00 p.m. eastern on c-span's q&a. >> next week, watch the confirration hearing for supreme court nominee elena carrigan, live starting monday at 12:30 p.m. eastern on the c-span network and at c-span.org and watched replays of the hearing at night on c-span2. >> house majority leader steny hoyer talks about the federal deficit at an event hosted by the washington d.c.-based film

tank. a panel discussion follows and includes remarks by u.s. comptroller david walker. this is an hour and 35 minutes. >> i am appreciative of that introduction. they're setting up more chairs over here. i will wait while you trances from your left to my right or my right to our left, depending on what your perspective is. i am particularly pleased to be here with the dog picks beat and bob green son. bob and i have worked together -- with bob? be -- bixby and bob greensun.

david walker has not only been doing in his present position, but in his prior position, where he brought a clear and honest analysis to some of the issues confronting our country, particularly from a fiscal standpoint. this month, we were us to ask americans the fittest -- the greatest threat facing our country. two top the list. one was terrorism. the other was dead. this is a remarkable moment -- the other was debt. this is a remarkable moment in our country's history. our powerful debt troubles americans as much as the most critical -- parole attack on our country. -- brutal attack on our country. americans understand the danger of the state of the economy, a hobbled government and a weak national defense.

more than ever it is possible to imagine a government of, for, and by interest payments and entitlements. debt is a dominant part of the political landscape now. that will not be ignored because if there is one thing we understand in washington, it is political incentives, political imperatives. the real question is how we respond to those incentives. there is the easy way, live slogans about spending, solutions of our more about confronting political power than confronting the scope of the problem. and answers from decade-old dogma and set of hard reality. and then there are the correct ways. the correct way start by recognizing that our problem is structural. it is the product of

generations-worth of decisions. our problem is now in the short term. when the heritage foundation wrote in response to my last fiscal speech that "is congres'' out of control spending that is causing major deficits." that kind of language makes for good attack ads, but have little basis in reality. it ignores the effects of massive regressive tax cuts, two dead finance wars, -- a debt- financed wars, a recession, and the 2008 emergency response that both republicans and economists agreed it was necessary to stave off collapse. and if out-of-control spending refers to the recovery act and other jobs programs that are responsible for more than 2 million jobs and only a small fraction of our deficit, i would ask what the alternatives were.

one alternative, of course, was to do nothing. that would have resulted, as economists now know, in millions more out of work, gdp growth of 24 points lower than it has been and -- up to four points lower than it has been and an even deeper recession. another alternative was to make tax cuts and uneven -- an even larger portion of the recovery act, which was already comprised of tax cuts for families and businesses. a fat little known to taxpayers. but whether we are spending for creating jobs in this recession, it means adding to the recession in the short term. it is what every industrialized country did in the face of global recession and would have been, in my opinion, a dereliction of duty not to do so. to measure someone's seriousness to see whether they point the finger at so-called out-of-

control spending, or whether they face in real danger to our future, the structural deficit. overreacting to a short-term deficit while we are still feeling the affects of the recession -- the effects of the recession will send our economy into a tell-tale spin, in my opinion, put even more americans out of work, and increase the very deficits we are trying to reduce. it is a mistake that the made ingúzñ 1937 when we cut off recovery from theji(bhodqñ dep% repeat.

week restored a surplus and combined with what we do, can move our budgets in the same direction. >> [unintelligible] >> i will take questions at the end of my peech. jim, i will say, i carry around

a card on both sides, but something you did not mention -- john boehner said, how does this affect both sides? this was in 1993. and another dick armey " is that the economy will spin around and all of this for deficit reductions of lower interest rates. and as has been pointed out by chin -- by jim, an economist, that has been wrong on all counts. under president clinton, they helped turn historic deficits into a $5.6 trillion surplus. and combined with new growth, it can move our budget in the same direction again.

it affects the fact that the paygo along without exemptions would again and again become toothless. congress has to face strong political pressure to go even further than the current policy exemptions and statutory paygo allows. it simply enforcing paygo as it stands, letting -- let alone taking it further, will face strong challenges on both sides of the aisle. it is the central that when we moved from the temporary extensions to permanent solutions, but we cannot consider those solutions without taking into account our long term fiscal challenges. permanent solutions for the estate tax and the dog? should be developed in the budget agreement i will discuss shortly. and as the house and senate decide what to do with the bush tax cuts in the coming weeks, we need to have a serious discussion about the implications for our fiscal outlook, including whether we can afford to permanently extend

them before we have a real plan for long-term deficit reduction. at a minimum, the house will not extend the tax cuts benefiting taxpayers of incomes above $250,000. despite some suggestions in the senate that they be extended along with all other bush tax cuts. a cbo director recently warned extending all of the ax cuts -- bush tax cuts without making any other changes in policy would put us on oa path = up to 90% of gdp by the end of the dec wait -- decade. it is an unsustainable, a dangerous level. territory, this expert said, is more than any country in recent years. paygo often means, on the zeyno,

policies we like. and for that very reason these decisions are not often reported. they're like the dog that did not bark. and all those bills that never see the light of day because we cannot see offsets for them. they are the decisions committees make to scale back policies they want to fit with the savings they can find. as majority leader, i see the impact of paygo every day in ways are -- that are not always apparent to others. members come to me and to other leaders that -- with bills they want to bring to the floor. every day i asked, how are you going to pay for it? and every day we say no to more spending. for instance, in the american jobs and closing tax proposal outsourcing act, we found offsets for many who were initially advocated for deficit spending. disaster relief, a supplemental

grants that create jobs because paygo requires us to do so. another power of the paygo is the way bush and other legislators treated health legislation. president bush led paygo laughs and then signed a prescription drug bill that added $seven trillion to are unfunded liabilities. president obama refused to finance his health reform bill with debt. as a result, the congressional budget office tells us that it will significantly reduce our future deficits. some claims that those -- some claim that those savings are imaginary. i know my good friend, david walker, has a concern about it. is it correct concern because he is concerned and i am concerned that congress will cave to pressure and revoke the cost cutting provisions. that is a risk that we must avoid. but the people making that argument are the same people burning the political pressure for -- we are supposed to --

bringing the political pressure we are supposed to be afraid of. they're complaining about out of control spending and turnaround and claim that we were cutting their medicare benefits. critics of health care reform simply cannot make both of those attacks and remain, i think, intellectually honest. the house will pass two important bills to reform defense procurement, one for the necessary coding in weapons act provision, which presidenn bush has signed, and one assigned to contract in, which is awaiting in the senate. it has been repeatedly pointed out that paying for reporting for programs that we do not need only make our country weaker. our defense spending cannot be above careful scrutiny and analysis. and in an important speech last month, secretary gates withdrew from the legacy of president eisenhower who said, "united

states can only be as militarily strong as it can be dynamic and fill it -- and fiscally sound." >> [unintelligible] >> i will answer questions at the end. he went on an added, " the proverbial wall has been added to our back. as a result, all of the parts of our defense take a hard and unsparing look at our -- how they operate." any conversation of the deficit that leaves out defense spending is seriously flawed before it begins. the easy way of cutting debt will point to all of these steps and declare victory. the correct way, however, would be to admit that we have barely begun. that is why the house is working to adopt the budget enforcement resolution written by chairman john spratt, which will settle discretionary spending, but require further cut below the

president's budget. it will reinforce our commit to paygo, direct reforms to eliminate waste, and efficiencies within our jurisdiction. and it will endorse the goal of the president's fiscal commission and reiterate the commitment to vote on the recommendations. this budget resolution will enforce fiscal discipline in the near term, while the fiscal commission works on a long-term plan to get our country back to fiscal health. it is not possible to debate and pass a long-term budget until we have considered the bipartisan that -- budgetary -- budget deficit plan. it is in december. i believe congress must take up and vote on the plan. to share sacrifices fairly and to be a vote -- politically viable can only have, in my view, one form, an agreement that cuts spending and looks to revenues when the economy

recovers. on the spending side, we could and should consider a higher retirement age, more progressive social security and more progressive benefits. and a stronger safety net for americans who need it most. we also say the in-depth scrutiny of defense spending, which i alluded to, which secretary gates has demanded. he has stopped funding for cargo planes and an engine for the -- he has to ask for funding for crapo planes and an engine for the -- for cargo planes and an engine for the spending. while his proposals have met with controversy, i wish more of us in public life were as honest about hard budget choices as secretary gates has been. i am also glad that the -- that

chairman ike skelton is directing the armed services committee to scrutinize the defense budget for cost savings. the savings in front of us deserve a careful look and thorough debate. but i fear that if we cannot decide what we can afford to do without, today, we will be forced to make much more draconian cuts in the years to come. we must confront -- conduct such a review with an emphasis on maintaining, and i emphasize a strong and sufficient armed force to deter and defeat any enemy that puts our nation and people at risk. we can and must do both. raising revenue was part of the deficit -- deficit solution. as president did in 1993, he faced predictions of disaster, but he helped unleash the start of prosperity and birgit -- budget surpluses for our country

and he did it without raising spending. i'm glad that president obama has made clear that everything, revenue is included, should be on the commission's table. i am also glad that some of my colleagues in congress are talking seriously about simplifying the tax code to raise revenue more fairly and efficiently and increase economic productivity by cutting time lost in tax preparation. why am i so sure that spending and the new compromise is the only plan that has a chance for succeeding? because a spending-only plan has been on the table for more than two years. it is republican congressman paul brian's roadmap and was introduced in may of tort -- 2008. even though i oppose some of the severe medico -- medicare cuts for seniors, i continue to praise congressman ryan for being the only one in his party

to offer a solution equal to the problem. what have we heard from his own party? crickets, for a vote -- for two years. even though he had expected to rush to embrace a proposal based on spending cuts, as the cato institute, michael tanner observed last month, "the reihan roadmap is a test and right now, the republican party is phthalein." nevertheless, i am still hopeful -- is a feelinfailing." nevertheless, i am still hopeful in large part because we have a success to draw from. in the 1980's, there was and reagan and the chairman agreed on tax reform. in 1990, the first president bush agreed with congressional

democrats on a compromise to raise the marginal tax rate and cut spending. three years later, president clinton enacted a similar spending and revenue agreement even though republicans unanimously said no. spending fell from 22% of gdp to 80%. revenues -- to 18%. revenues rose and the bush tax cuts were eliminated. let's not pretend that what i am proposing cannot be done. it was done within the lifetime of every member of congress. what is standing in the way now? there are two political factors we ought to worry about. one is superficiality. the eagerness of so many to

blast spending in the abstract without offering solutions that come close to measuring up to the size of our challenge. consider the republican you-cut program, and in case you missed it, republicans have a proposal to cut paper-thin slices in the budget. i agree, every dollar counts. this consideration is not without some merit. even when discussing 21 thousands of & -- two one thaousandths of a percentage. sound bites, not sound policy. we have hard choices and fiscal

discipline to face, and pretending that a series of small items will even put a dent in the long term is just a false impression of the real action. where the fans of yopu--u-cut when the house of advice. when will they have the actual power to reverse our slide into debt? hopefully, the present. hopefully, they will have the courage to do the right thing. . .

the bill of '93 was totally partisan. the 97-98 agreement to reauthorize and continue repayment. for the same reason an anti? -- an anti-tax crusader said this about a budget compromise. at some point, conversations about unicorns are tedious. they do not exist in the real- world. he went on to say that budget deals where they actually restrain spending and raise taxes are unicorns. i will only say that a budget agreement is entirely possible between two parties that look at reality as it is, not through the prism of 30-year-old ideologies that lead to

defeatist falsehoods like "budget deals do not exist." as i have pointed out to you, they have existed to good effect. the good news is that after three decades some on the right are realizing what supply-side has accomplished in reality. the administration most committed to the tax cuts left conservatives with bigger government and left all of us in deeper red ink. as kevin williamson wrote in an influential april article in "the national review," tax cuts do not get us out of the spending pickle and growth is not going to make the debt irrelevant. the cannot starve the beast if the chinese and the bond market keeps lending him candy by the ton. even alan greenspan, who during the bush administration advocated for, or at least rationalized, large taxes to

avoid the supposed danger of paying down the debt to quickly -- does anybody remember that the concern we had about paying down the debt to quickly? the bush administration certainly saved us from that alternative. the acknowledged in "the wall street journal" this month that that policy helped wipe out the surplus and lead to higher interest rates. that is the kind of honesty we all need to show it want to head off a crisis. and slowly but surely that honesty is spreading to congress. this month, a senator said that republicans cannot sign norquist;s anti? cash -- anti-tax pledge and take on the debt. that was not a democrat. that was the republican from ohio, a governor.

governors have to make real decisions because their decisions have real confident -- real consequences. that pledge is inconsistent with the oath of office they took when they became members of the united states and a. i agree. it is because i take my own of so seriously that i take our common danger so seriously. so i want to end with this image. there are two clocks. one of them is counting down the time to our debt crisis. the other can wake us up to see our situation as it is. not as we want it to be, or as our ideologies say it should be. the kind of country our children -- my three daughters, my 3 grandchildren, and my one great grand kid will inherit.

and what they will live in. growing or stagnant? on the rise or on a decline? that depends on which clock goes off first. we can keep making easy choices and hoping that the crisis clock just keeps icking but sooner or later if that is what we choose it will be a time when we find that we have hardly any choices left at all. continue to raise your voices to make sure we make the hard choices so that when my children and my grandchildren and my great granddaughter have her a

national security crisis, has her health courses -- she and they have the money and ability to respond in an effective way. that is as much a moral issue as an intellectual issue. let us hope they look back on our generation and say "they were up to the task." thank you very much. [applause] >> i got some time. >> leader hoyer has a few minutes, so we will take questions from the audience. in the back. >> i appreciate your comments about was bewildered by your failure to mention related points. the overall military budgets --

you're continuing to escalate hopeless wars and fund the taliban off the books with emergency supplemental. how could those have slipped your mind? >> your assertion the slipped my mind is incorrect, i want to assure you. having said that, frankly, members of our caucus have indicated not only they ought not to slip our mind but that we need to consider that. in my last comment, as you heard, i think no expenditures can be off the table because we know that a decade from now or two decades or three decades, as much as we hope for catastrophes not happening, national security problems not happening, history shows us we need to be prepared. one way to prepare is to be fiscally sound in our treatment today of those issues. frankly, president bush and those at the white house

concluded that the efforts internationally would cost us, as you recall, $60 billion. we are now in excess of $1 trillion in iraq and afghanistan combined. certainly, they need to be computed within the context of paying for things. in fact, as you know, there are republicans in the united states senate and democrats who are both talking about exactly that objective. i think that needs to be on the table. >> thank you. >> over here in the front? >> do you think that director orzag's departure will have an impact on the way we tackle the deficit? >> i think the president is very concerned about the deficit. the president has taken three very concrete, direct steps. first of all, he made it clear

early on that he was for a reinstating a statutory pay-go. he has worked toward it. he also indicated he was in favor of a commission. we could not get that done statutory lee, ironically, because many of the republicans have said they supported it. the republicans who had told judge gray they supported it in the united states senate ended up not supporting it. the president nevertheless -- we did not get a formal commission appointed, which would have had statutory authority. so the president did what he could do by executive order- created commission. thirdly, as you know from what i said, i hope to reach a resolution, a concrete, substantive, recommendation, report this to the united states senate, and hope the united

states senate deals with them. speaker policy and i have both indicated we will put those recommendations on the floor of the house of recommendations -- the house of representatives, which i expect to happen by the end of the year. thirdly, the president sent to congress a budget that was the first non-defense non-security discretionary spending. the president has made it very clear that he thinks fiscal discipline and fiscal responsibility is a critical component of his administration. whoever is the director, i believe is the policy of the administration to pursue a fiscally-responsible alternative. >> here in the front row, and then we will go before you. -- go behind you. >> you mentioned a resolution regarding discretionary funds. >> i mentioned a budget enforcement regulation. >> to what extent has there been

completion of the spending levels of the party and what other extraneous items to you expect to be in that language? >> i think we are close to reaching agreement on levels that can be supported. i am hopeful that is the case. i hope we will pass a budget enforcement resolution before we break for july 4 break. >> my name is ricardo lopez. why is it in a lot of these discussions there seems to be something which is overlooked, which is the fact that wall street has created a huge burden on the government? i think that has been clearly evidenced since paulson was at the treasury. geithner is continuing the bailout. i find it distasteful that one of the immediate things that we say needs to be cut are entitlements, when clearly i think wall street could use more

austerity. frankly, i think if we're going to have a budget surplus there has to be a real economic recovery, which means systemic regulations in the system. i think we need to return to things like glass stiegel -- like glass-steagal, which is one of the things fdr was able to get through. >> we are pursuing pretty vigorously regulatory reform. and i expect that to be on the floor prior to us leaving for the july 4 break. so i am very hopeful that we will have very significant regulatory reform sent to the president. my view is that the major failures of the bush administration were fiscal responsibility and regulatory neglect.

we saw it in the financial community. we were seeing it with the oil spill. that is in part due to extraordinarily -- extraordinary negligence on the part of bp as well as the negligence of react -- of regulators to vigorously act. i know some of my friends will be here to talk about the pattern of regulatory neglect that has been talked about over the last 30 years, about how government was the problem and ought to get out of the way. there are some who are now saying congress should get in the wake and make sure that regulations that have been adopted, if we need more, are being enforced. >> yes, sir. >> some have suggested long-term spending has been ratcheted up

to 25% of gdp. do you think that is accurate? if not, what would be the right level? >> paul volcker was in my office last week and we're talking about regulatory reform, not the deficit. we had some months ago discuss the issue of debt load that a country could carry without danger. he was not sure what that number was, but he was sure that we were getting close to it and therefore need to exercise the discipline i discussed. while we did not get into your response to the question i do not think there is any doubt that paul volcker shares the view with many economists. let me make it very clear. i think i said this in a speech, but i do want not want anybody confused by this. in the short term, we cannot stimulate and depressed at the