the people of the rating industries often had not enough information and not even the right software to do their job. everything short of outright corruption is what went wrong with these credit rating companies. they did not properly assess the risk that they were supposed to evaluate. i think they come across looking very culpable in this report. host: how have they changed? guest: it is a complex question. the dodd-frank law with the securities and exchange commission in charge of these >> we will cut away for a live debate from the candidates for mayor of chicago. the chicago tribune has divided the re-has invited the leading

candidate in the race -- has invited the leading candidate in the race, rahm emanuel, the former chief of the top four candidates for mayor, city did i in no particular order ron emmannuel, gery chico, miguel deval, carol moseley braun. welcome, everyone. the format we have all agreed to is quite casual. there are no time limits. bruce and i will cut you off if needed so everyone has time to be heard on the topic. we encourage you to question and respond to each other. it should keep the evening quite likely. the debate is just under one hour. we will start with some big issues are city is facing. bruce as the first question.

>> just a couple of hours ago the illinois supreme court ruled that mr. emmannuel would it remain on the ballot. is that the right ruling? >> i am a lawyer and a former prosecutor. i do not question the ruling of the courts. the ruling stands. the fact is that the field has not spent -- has not changed. we are still in this and are trying to get our message out. i want to talk about job creation in chicago, getting our schools fixed -- i am talking about the issues that affect real chicagoans. >> mr. gigot, is this a distraction to the campaign? >> no. i am not challenged anyone in my career, including rahm. i am had been privileged to serve as chief of staff for the

mayor, president of the school board where we brought our schools but from the brink, parts' chairman or rebuilt parts for our -- where -- parks chairman where we built parks for our children. i will not do what ron emmannuel has done which is proposed the single largest sales tax -- >> do you think politics was at play in the appellate court decision? >> the good news is now that we have the supreme court decision, it is final. a flea this will be the last question for all of us about it. that decision is -- i have always said that the voters will make the decision on who will be the next mayor. i think that what is facing the city is a real debate not about

my presidency but about what the residents of the city of chicago care about which is our schools, our streets, and our economic finances so we can attract businesses rather than seeing companies leave. we can keep those corporate residents appear in the city of chicago. >> we are going to talk about a lot of great ideas you all have over the next hour. none of them will get done at the city does not resolve its financial crisis. we are looking at more than $15 billion in underfunded pension obligations. the city has got to more than $1 billion in just a few years in a parking meter money. we have debts on top of the pension obligations. how are you going to answer this crisis? will you find cuts or will you raise revenue? >> we have to begin by looking

at the entire budget. we know there is waste, fraud, inefficiencies in this city's budget. we need to look at each department. we need to conduct audits. the popular term is a "forensic audit." we have to look at each line line by line and immediately began to cut back those deputies that report to the deputies, those patriot's petitions that have existed in the city of chicago that are protected by the aldermen and other folks -- we have to send a small -- a strong message to the voters that we are going to reform government and we are going to start by getting our fiscal policy in order. that means collecting all of those unpaid waterville's because someone knows someone who works at sit -- water bills because someone knows someone who works at city hall and do

not pay their water bills. we will take the surplus dollars in tip money that should have been going to the district in the first place. we created to meet debt districts in the city of chicago. we have to change the way we pick up garbage, change it to a grid system. we are going to have to patch together a budget to get us to this difficult time. there is more than $1 billion in revenue that we had in 2007 when the recession started. we will get that revenue back as the economy improves. there is a lot of sacrifice that has to be made. it has to be made by those who have been able to get by because of their political connections and because of the big fat contracts they got from city hall. contractors will have to reduce their costs. a lot of pain for a lot of people will be necessary. >> the city will have to come up

with a five under $50 million property tax increase just debate -- $550 million property- tax increase. >> we will have to go back to the general assembly and get a amendment to that all that will allow us to wrap up over a period of years. the property tax is the most unfair tax that we have. >> even if you run to the legislation, you still have the obligation. >> i was just getting to the other part. if we are able to get dollars for the employer contribution, i am, that we get the unions back to the table to talk about increasing the employee contribution. i, as an employee, will not agree to that unless my employer contributes to that fund. >> we have budget problems and

issues to resolve, but i would not go so far as to call a crisis. that panics people. we have to do several things. we have to grow the economy, balanced growth, take into account job creation in the neighborhoods, not just downtown. we have to use what we have -- we have to put what we have to better use. use the efficiencies in the way city government operates. if we modernize some of the back office functions, it is estimated we could save almost $80 million just by doing that. then there is what professor simpson talked about as the " corruption taxpayer "it is $50 million a year that goes to kick to the commissioner and talk to another deputy.

it is difficult for small businesses to get started in chicago. if we roll out the red carpet to them, it makes it easier for them to get started. we can give the medium-sized business is the kind of support they need. we have great assets here. we have all kinds of assets we can bring to bear to help stimulate the growth. continued growth, innovation, and exporting from the city -- we can rise from the ashes of this recession. >> i believe this. i am the only person on this panel this evening that as but a municipal budget together. i have but 16 of them together. each and everyone has a surplus. there is no doubt you have to overhaul the city government operations. you got to have a plan first. we have excess of management in our cd system that has to be eliminated. we have -- we have access management i get are city

system that has to be eliminated. the city clerk's office has become irrelevant. in addition to a number of cuts we will have to make as reshaping downsize the budget, we will have to adopt best practices. propped bill pay debt. right now, we do not pay our bills on time and it cost us money. you have to grow new entrepreneurial sources of revenue. i have talked about advertising. bring the 14,000 lots the city owns that pay no taxes back under the tax rolls. i will not tax people and get a whole new way as mr. emanuel has suggested. we are talking about imposing a sales tax on barbers, child care, car washes, you name it. >> let me answer your first

question. i believe you have to go to the budget and asked of the metal question -- and as the fundamental questions. i propose we spend $500 million on health care in the city. a comprehensive wellness plan white the private sector. if you centralized procurement across all functions -- the corporate fund as well as the other funds and centralize it, $40 million -- $40 million in savings. i have laid out specific ideas addressing exactly that to make these statements and change the way you do business in the city government. also, residents pay water bills,

businesses pay, the nonprofits do not pay. they do not have to pay the same rate, but didn't we subsidize them in the tax code, they can also pay to make up the difference. those are specific ideas with specific numbers on how to solve that problem. >> you were opposed to taxing the nonprofits in the editorial building. >> no, not at all. i was the first candidate to say no to taxes, number one. as for the nonprofits, the water and sewer subsidies we currently provide is one that does not make sense anymore. i think we should end the subsidies. >> she did in the editorial board agree on that point the that right now residents pay, small businesses play, nonprofits do not, and that is not fair. it is not the same rate, but there is a big hole there.

i had the same issue on sales tax. i propose a 20% reduction in sales tax. we have the highest sales tax in the city. i do not think it is fair for a single mother with two kids who is trying to buy school supplies to pay higher sales tax to people probably do not pay. people who rent a limousine do not pay. i think a single mother or a family buying school supplies should pay less and the retail merchants will report a 24% reduction in tells tax. it will provide $200 for working families while -- i think a 20% sales tax cut for the city with the highest sales tax in the country, it is time to give working families a 20% cut in

the sales tax. >> it is not a 20% cut. it makes no sense to call this a luxury tax if the way it is described right now as far as i understand it is to charge the same single mother for child care. to charge the same single mother to take your pet to the grimmer to get clipped -- 9% more. i do not understand it. >> can i say one thing? when we were at the wttw, you said you're for cutting sales tax. here, you're taking a deposition. that's ok. i proposed exactly how to do it. a 20% cut in sales tax, because i think a working mother should not been paying more than a person who rents a limousine or a corporate jet. >> here is a place we will have to spend a lot of money. discuss how to get rid of crime

in the city. >> if i may, it is not just a matter of taxes. it is a matter of fees as well. we pay more to park in downtown chicago then they pay in manhattan. we are faced with giving away the right to collect those revenues for the next 25 years. i think that -- first, no new taxes. take a look at how the policy decisions that have been made before and correcting some of that can move the city in the direction of balanced growth so that making men and women can be encouraged to stay in chicago, refit -- -- rick locate here to the city. >> you're saying you would reverse the parking meters? >> absolutely. it was a bad deal for chicago in every way. they -- the city sold $100

million. that is what the inspector general was worth $3 billion to $5 billion. i think we need to renegotiate its, bring the parties to the table. there have been two lawsuits. if we do have to pay it back, we will have the benefit of the revenue coming to the city. right now, it is revenue from the parking meet -- right now, the revenue from the parking meters do not come to the city. >> there has been a very oppressive climate created in the city of chicago as a result of all the fees, tickets, red light cameras, and the parking meter deal. there is a need to review the entire revenue structure in the city of chicago and to make modifications. we give people big issues over

two tickets. we need to collect our revenue, but it is time for us to be sensitive to what is happening in the neighborhoods where people have had it up to here with the city. it is time for us to do a total revamping of the revenue structure. that means all the fees, all the fines -- and come up with something that makes sense that allows us to be able to implement our walls, but not in an impressive -- not in an aggressive way. we see people coming into the clerk of this -- office with a hardship cases and we give them the cold shoulder in the city of chicago. we need to be more sensitive

while at the same time making sure we watched that bottom line. we cannot continue to stand and raise revenue on the backs of the middle class who are trying to survive. it is tough out there. because it is tough out there, government has to change. >> miguel is right. people feel nickeled and dined on the taxes and fees across the city. i have proposed a 20% reduction in the sales tax for the city. i have also proposed eliminating the employee a head tax. the number-one reason some plants are not competitive is because of the head tax. i have also opposed the way we tax natural gas and utilities. the fact is, people across the city filled nickeled and din

med. we can provide sensible and balanced tax cuts for the working families. it will help companies and people -- help companies add people. >> an elegy modified the chicago police department? mr. -- >> was to put more officers on the -- mr. chico wants to put more officers on the street. >> i think the number one issue on the minds of people is public safety, without a doubt. yesterday i proposed a crime and safety plan. standing with me was a woman by the name of gloria patron. she had lost her 13-year-old son to gang fire. she was struck six years later.

i promised her i would do everything in my power to bring the right amount of police to our city so per side -- so her son or any other child would not have to get through that again. in 1993 we brought 1000 police officers onto the force. i think i am the only person who brought officers to the force. >> you cannot take credit for what mayor daley did. >> i recommended it. we let our manpower drop down to a point that is dangerously low right now. we have ravaged our caps program. we are using one-man cars. we are not able to have the right amount of foot-patrols. we can hire 2000 police officers i get a budget of $6.50 billion. that amounts to about 2.5% to

3%. anyone who cannot modify a city budget to come up with 2000 police officers, which is the number-one issue for people in the city, should not be mayor. >> i helped president clinton passed the assault weapon ban -- the brady bill. the simple strategy for 1994 which was novel than about putting more police on the streets and getting guns off the streets. i know how to find 1000 additional officers. second, a comprehensive after- school program. two-thirds of juvenile violence occurs between the hours of 3:00 and 6:00. we have to prosecute the gun laws we have on the books. i think jerry reese needs to go.

the philosophy should not be about adding more bureaucrats to the central office. it is about understanding the beat officers are the backbone of the police department. my father was a police officer for 25 years in the city of chicago. all but also like to know it that the after-school program is essential. i was down on the south side pd i was preaching -- on the sell side. i was greeting visitors. a young man stopped me and said, ", like to show you something." people out a contract. he said, "i started my own after school con -- after-school program.

the parents sign a contract involving them in our academic life." that is the academic approach we should be taking. >> this is not just about adding more police officers. it is about building communities. you do not build communities with a program here and a program there. you build communities by addressing the issues that are confronting them on a day-to-day basis like unemployment and the lack of a quality education. we need community learning centers at each school, which is what i have opposed, where the entire family is engaged in learning and building communities. when the school because the anchor of the neighborhood, small businesses are developed. we still have small businesses that cannot get started because they are waiting for the city council to approve a permit. that takes two months.

you can have a three-point plan or a four-point plan, but if you are not organizing committees said that they become strong communities, you will continue to have public safety problems due out the city of chicago. we are not headed in the right direction right now. >> my brother is a police officer as were my uncle and my father. i was a former federal prosecutor myself. law enforcement cannot just the top down, it has to be bottom up. you have to do with prevention. -- you have to deal with prevention. i have unfortunately have to take the blame for the three strikes and you're out. if all enforcement -- what we

have now is a dearth of attention to prevention. a lot of these young people are hanging out on street corners in getting into trouble. my grandmother used to say, "i do not like the devil's workshop." we are not giving these kids anything to look forward to. they do not have music and physical education in the schools. that gives rise to the sky high dropout rate we have in our city. they also do not have jobs to look forward to when they leave school. >> the chicago unemployment rate is 9.5%, much higher in some neighborhoods. when wal-mart wanted to bring jobs into the city, the city council existed and block the expansion of wal-mart. >> the answer comes not with the

giants like wal-mart, but with dr. been worse. if we encourage entrepreneurship in the communities to create jobs these young people can take, wheat will be able to adjust the balance growth issue for our city as well as give young people opportunities. if the giants want to come in, they should come in. you cannot have people working for less than minimum wage and expect to have the help the city. it costs $5 an hour to park at the movies. it is $4.50 to take the bus to go somewhere. people have expenses that the less than minimum wage will not cover. we cannot have a tale of two cities. we have to have a city that works for everybody. that means job creation, focusing on neighborhoods, focusing on under a partnership and innovation. >> i think you -- i think to

become a small business friendly city, we have to concentrate on job creation. we have not released that created an entrepreneur will spirit that can lead to innovation, that leads to the development of new products, and can happen because chicago has done that before. our history shows that. we do not have that kind of climate in the city of chicago. what we talk about? changing the residency rules that allow police officers, firemen, and teachers to live outside the city of chicago. we are training the city of the middle class that is needed to provide balance and economic growth throughout the city of chicago. we need our role models in our neighborhoods for our kids. we need teachers. we need firemen. we need police officers. we the city employees. we needed to keep their tax dollars here. the contract dollars are paying their salary.

>> i think after 40 years we may entertain the topic of residency in the city. i think the city is strong enough to do that. i am not worry about losing the middle class. this is something that rahm and i can talk about. the issue of jobs is absolutely critical. i was at a press conference yesterday in a small coffee shop with three people. right next to it was a sandwich shop with five people working in it. that is a jobs. 80% of business in chicago are small businesses. just this morning, i was with a group of hardware store owners. there was a guy he wanted to open a new hardware store on the north side of the city. he was waiting one year for permits. that is unacceptable. that is outrageous. we can change this. i put forward a jobs plan that calls for a recent court -- we

orientation a city hall to get it behind businesses that want to expand. we are losing opportunity after opportunity. we have 14,000 parcels of land in this city that they never taxes. we should give those away if necessary to bring companies and jobs on to those parcels. we need to write down the rest for a short period of time to bring people to these abandoned storefronts, picks them up, and give small businesses going again. it is important to realize that a 3, 4, 5, or 10-person company really defines what chicago is. >> within the first two months if i am elected mayor, i would call not only the big box stores, but regrets street store owners into the office. it is cheap economic

development. it is good, stable jobs. i have talked to walgreen's where they are bringing in fresh tertiaries to their sales in parts of the store. there are parts of this city where if i was on roosevelt, people are driving all the way down. that is crazy. i will bring them in. i would like to them the facts of life. there are areas of the city that should have pressed restores. target, wal-mart, the the other stores like walgreens -- get them investing in those neighborhoods and economic development. number two, the university of chicago is an example. they are talking about a new biomedical program. let's move that forward and give them exactly what they need out of zoning. there are other companies that

want to turn it into a biomedical campus to bring the types of jobs necessary to chicago. the university of chicago's research facility can bring the -- can be a leader in the biomedical space. >> must talk a little bit about schools. >> i am the only person on this panel that has actually started a small business. i started -- we are talking law firms. that is a slightly different conversation. we can talk about law firms if you want to go there. [laughter] my little company is in a food desert. i have an organic beverage company. i know what small businesses have to confront try to do business in the city. it is very difficult because of all the different steps and changes. our city government all too

often operates like a criminal. you do not know where to go. >> how would you be as a steward of the city? >> given that we are coming to a recession and i get a business going -- i can my employees. i did not fire anybody. i think we could do a lot with a little. >> what we're taxes consistently late? >> because of a strike to keep a small business billing that was a start up in the middle of the recession. there are other novels of this panel who pay property tax -- there are other members of this panel that pay their property taxes late. i created a job in the inner- city within organic -- in the inner city at the start of a recession. we are still in business. hopefully we will be able to

grow now that the economy is turning around. >> i paid it was late. i moved to washington to work as president obama's chief of state. out of 24 times, i was on time 23. >> mine was when i started my new company. there was a reason for it, but they were paid. all my taxes were paid would never supposed to be paid. i paid penalties for paying later than the first day for payment, but i paid the penalty and i was able to balance my company's budget and we are doing fine. i started a business in the inner-city in a food desert to try to get attention to the food supply and the toxic chemicals in our food supply. i was on a mission.

that mission, so far, has been successful. >> he made $320,000 in 14 months. you had an accounting scandal on your watch. did you earn the money? >> first of all, i was appointed as vice chair to the housing authority. secondly, that was the reason that president clinton appointed me over 20 other people. third, the report that you talked about does not mention me at all. the reason i was on there is because we were doing innovative things in the city of chicago. that is why i got the appointment. >> you have an advertisement that says politicians should not get rich off the backs of people. >> $320,000 is what they pay at the time. >> do you feel bad about it? did you earn it? >> i was the vice chair of the

chicago housing authority. we were doing something innovative here. the reason i was asked by president clinton is because he wanted somebody's approach on that as it related to freddie mac. >> mr. chico, -- >> i did not hear an answer to your question. >> you were one of the main partners at a law firm. had you explain what happened to the farm and the role you played in its collapse? if he could not manage that, how can you manage the city of chicago? >> i am not happy about what happened, but there is a vote of about 57 partners to close our business. we welled up our affairs and moved on. i did too. i started my business after that with two people. in the middle of that same recession, i have grown it to about 40 people. i am very proud of it. >> if i may, i have in my career

never profited from public service. i have no government contracts with my little company. i took no government loans or anything like that. let's be honest, most of your clients are people who do business with the city of chicago. you have gone from one government -- one revolving door to another. quite frankly, rahm, you have gone from one government appointment to another. there is a difference in public service for the benefit of the public's versus public service for the benefit of your own pocketbook. that is the distinction in this race. how d.c. public service? is it something to profit from personally for yourself, your friends, or your family? or is it something you allude to the trust of the public as a whole? that is a distinction that should not be overlooked when you talk about my small business

versus a business that depends on people doing business in the city of chicago. >> each time i have been asked to serve as the mayor's chief of staff, school board president, park board president, i stepped up and never has there been a suggestion that i did anything but pursue the public interest. i just want to state the facts. >> you had 89 clients that either lobbied the city arts discussed business with the city. will they step back -- that either lobbied the city are discussed business with the city. >> is a duet long memory for this kind of thing. >> -- you seem to have a long memory for this kind of thing. >> we will start with then empowered inspector general. right now, the inspector general is to water down.

we should just have one. i proposed that -- i propose the and it to no bid contracts. we do not need banking and lawyer contrast handed out to people. i said i would and the revolving door practice that people find so wrong. if he worked for the city where you are appointed for the city, which you leave for two years, you'll be unable to do business with the city of chicago. >> i said clearly i would not accept of late -- campaign contributions from businesses contrasting with the city. that is the only way we will be able to separate money from politics. it has to happen. we are known as the state of "pay to play." we have millions and millions of dollars that had been brought in by rahm and gery. they influence the decisions that will be made at city hall.

that this the neighborhoods at the real disadvantage because they will not have their telephone calls returned. the telephone calls will be returned to those who've contributed millions and millions of dollars to these campaigns. we need to level the playing field so that neighborhoods pilot have a voice in the election, where we have to except the fact that it will be business as usual in city hall and we will not get the kind of reforms we need. you are not answering the questions about the connection between politics, campaign contributions, and contracts. >> the polls show you trailing the other candidates. how would you be able to stay in this race? >> i just talked about the distinct disadvantage in have because i am sending a bit that -- i am is sending a message to the voters that i am ready to reform chicago politics s

chicago government. i am talking directly to the voters. thank goodness we had these kinds of debates. we need more of them because, otherwise, the voters would never see me. if they receive the fancy 32nd spots that rahm emmannuel can't afford any fancy -- that rahm emanuel ancan afford. we have to do it the old- fashioned way. it is time to put the people back into the definition of liability for the candidate. that means being out in the neighborhoods. it does not mean raising millions and millions of dollars and having a campaign that will cost $12 million. >> we gave you a chance to ask each other questions. we learned a lot for the questions as well as the answer. >> i think i will just wait. thank you. [laughter]

>> mr. chico? >> i have a question for rahm. this does concern me ever since you proposed it. that is the single largest sales tax we have ever seen. i am very concerned about that because i care very deeply about the working men and women throughout this city. i cannot see handing another 9% on common services -- barbershops, child care, pet clippings. i do not know how you can do that. >> what i propose is that the wttw -- a 20% cut in sales tax is a 20% cut in sales tax. i believe a burnley says we are talking about working families that a mother who is buying school products or clothes for

key is to start school is paying the highest sales tax of any city in the country where people who rent and shorter private jets, limousines -- are not paying anything. i do not think that is fair. for a working family, it is a cut of about $200. ford motor co. is thinking of a third shift. they put it as the number-one reason they are at a disadvantage. i propose another change in reform of taxes. as the price goes up, you pay more. it forces energy efficiency. i would note that the retail merchants on sales tax support this proposal.

it would be a big win-win situation for the basic, working, middle-class family. that could change where you actually have a tax code because finally some of the people coming in and out of this city would actually pay the corporate tax. they would hire the people and pay a sales tax. we would see working families get a 20% reduction in their sales tax. they deserve that. the people that i sleep -- >> that is not a cut to go from 0 to 9%. >> i have a question for gery. i talked to someone today to was laid off by at&t. the individual said they are going to go back to school at a community college so they can

get new credentials and be able to find another job. when you were with the community colleges for a short time -- it was about seven months -- you proposed eliminating the development of courses in training those for community- based organizations. i would say there is not enough to offer that service, but in the process of eliminating the development of courses, you are looking out a huge population that is in need of a second or third chance to be able to transition to college-level courses that will allow them to be more competitive out there as they are struggling to find employment. why did he propose that? >> it is simple. as the government, we have to take fresh looks at things. we felt that 100 students beginning to pursue sac's degree, only seven ever got one. it told us there was something wrong with what we were doing. we never ever wanted to lead a

student behind. what we wanted to examine was how we were providing the service. here is what was happening -- and i agree with you. many students do need developmental courses. we want to help them. what was happening in the situation we saw was that students were burning through basic recovery courses and their pell money ran al. we wanted to see what we could do more effectively to help people. there is a wonderful committee- based organization that does a better job of its nursing program that we did at the city college. i think that is important to allow for community organizations, which i know you come from, to let them have a role in educating our kids. >> because i developed one of those programs at the community level and spent 20 years in

dealing with education policy, i know that the capacity to do what you are proposing is not there. those students are going to be let out on the streets. >> i think that is a bright line. the attitudes toward privatization of education, both elementary, secondary, and college level -- and there is an attitude that says we are going to privatize the community colleges instead of keeping them public institutions that are open to everybody. we are going to have a charter schools instead of focusing on the neighborhood public schools. that attitude is one i am against. gery has embraced over the year and i do not want to speak on rahm's record, but i know for a fact that might view that public education is a public good is

something we should all be concerned about. >> if you oppose charter schools? >> i do not oppose charter schools, the ones we have already. i would not focus on developing more of them. i think the issue is to develop and bolstered our neighborhood schools and to improve public education. public schools have to take everybody. they cannot decide what to do that they want. they cannot cherry-pick. the charter schools can cherry pick students. the question is, how many kids are we going to wind up having left behind because their parents do not have the ability to provide otherwise for them or they are children that have other issues that a charter school does not want to deal with? what happened in the neighborhoods? when i was going up in the city, i could walk to school in my neighborhood and get a quality education. we have to get back to that in the city of chicago. the schools serve everybody.

>> i wish i could do this over the dinner table with my kids. it would be helpful. community colleges have made life blood -- are the lifeblood of our economy in the sense of training workers who want to move on from one job to the next. you have touched on an important topic. to many of our kids coming out of high school are going to committee college. they are borrowing money, paying loans, and repeating what they should have learned in high school. we have a good model of a pilot project in the city of chicago where high school students get up to the level where they end up going to community colleges. during the high school years, they are already getting the training they need. we need to scale back up as part of the proposals made last month.

we need to make sure that high schools to -- i schools and community colleges are linked up to these kids are not borrowing money and getting behind. the second thing is there -- that is something we ought to challenge the for-profits to do for our kids. if you do want to go on to wait for their education, have the skills and knowledge ready. >> you are referring to dole- credit -- dual-credit. >> this is an essential point. 47% of the kids in the city of chicago are dropping out of high school. they drop out rate in committee college is higher because they do not have the basic skills.

i propose we get a new curriculum that teaches towards college or career training. 53% of disputes to go to college end up going to committee colleges. i am am a strong supporter of charter schools. i believe in constitute -- in competition and choice. when you take out north side and you take out walter payton, the best performing high schools or charters. they are not the solution, but the choice they provide is a solution to the problem. >> i am happy to ebb ushered in charter schools in 1995 and 1996. -- i am happy to have ushered in charter schools in 1995 and 1996. they gave parents a choice. that is what this is about. in regards to miguel's question,

we have dueled-enrollment. in the last 10 years, this is don silent. i agree it is wrong. it has to come back. the chicago public schools have lost their momentum. i believe that. things like this have gone into the deep freeze. they need to come back out. >> if you are going to the talmudic again on public education, you can hang up a side that the -- if you are towel on throw in the te public education, you can hang up a sign that says they are close. they do not have to take all the kids at charter schools. if we are going to build a strong city, we have to have balance in the way we approach the issue. i have a friend that has a

charter school for girls at the high-school level. research shows it worse for girls. let's define things in terms of innovation. i have no problem with that. you cannot just throw in the towel and not focus in on rebuilding the infrastructure of our neighborhood schools, making certain that every child, every school, and every neighborhood is one a child to give to to get a quality education. the child should be left behind were turned away. that is the important thing. >> some time ago the decision was made to set up a parallel system of public education in the city of chicago which once had been selected and roulette, and schools, charter schools and the other being neighborhood schools. i talk with families everyday to

struggle with the decision on where to send their preschoolers to school because they do not believe the school down the street from where they live is good. we need to protect as many academic options as possible. the fact of the matter is, until we improve our neighborhood schools, we are going to strengthen the neighborhoods. that is the bottom line. >> we are down to what we are calling the final five minutes of the debate. it went by so quickly. we are going to get each one of you a minute. let's say you are knocking on the door to the people out there, what is or stop speech? why should they be voting for you as a mayor? i do not want to hear anything we have already heard. >> first of all, i think the city, as yogi berra would say, when you get to the fork in the road, take it. we cannot keep doing what we are doing and expect results.

that is true about our schools and investing in the quality of our teachers, giving parents of the sidelines and involved in their kid's education. we also have to do something about crime. we have to have somebody u.s. the strength, determination, brit, and resilience to see that change through. in my public life, whether it was taking on the insurance companies to get kids health care where taking on the and are a -- or taking on the nra -- i have taken on special interest and at the resilience to see that change through. >> thank you for having us. i believe so strongly in the future of our city. i know we can do this. there is no doubt about it, our problems are large financially in the city and public schools. i am very optimistic. it will not be done by wishful

thinking or an idea here or an idea there. it takes planning so that we are following a path to get there. i am very proud of my career of having dealt with these issues and balanced 16 municipal budgets. this is the kind of experience we need to get into these situations, but these budgets back in shape, and give us the tools we need to bring jobs to our city, bring police and other programs we need to get our neighborhoods safer, and to make sure families stay in the city. we do not want to lose people. they will not stay if we do not offer them a quality education, good jobs, and public safety. i am prepared to bring each of those three to our city. people should have confidence that we have a bright future. >> i love this city. this is my home. i stepped forward and not because of any interest to serve myself, but to serve the people

of chicago and to bring to bear the skill set i have developed over the years in local, state, national, and international government to help grow our city in a way that serves every community, every neighborhood. every neighborhood matters. we are all proud to be part of the city. we need to bring each other together as people and tap the rich diversity of our neighborhoods and bring all the talents we can muster to solve at work to our respective problems. we all know what our problems are. they have to do with rebuilding our neighborhood schools and public safety in our neighborhoods. i was on 87th street the other day and gunshots force made to the floor of the car. we have to make our communities safer. our seniors are not hostages in their homes. i am getting close to the end of my minute, right? i want to bring the experience i

have to bear on solving these problems. i am always been a fighter. i had to fight my own party to run for the united states senate when nobody thought i could do it. i intend to bring that determination to working out the issue that -- the issues that our city faces. >> i think the neighborhoods are calling out for us. what type of reform are we talking about? reform that is going to ensure there is balanced growth, balanced development. reform that is going to make sure we eliminate patronage, waste, and corruption in the city of chicago. reform that is going to see to it that we lift that oppressive cloud that hangs over the city as the result of the feast, restrictions, and hassles if people are put through just try to make a living on a day-to-day basis. i say to them that i am the

candidate who is ready. i had the experience -- 20 years in the legislature, four years as a city clerk. i am getting my did message directly to the voters. -- i am getting my message directly to the voters. if they want a my york appealed to special interests and big money, i am not their guy. if they want someone who cares about individual residents and will work night and day to make our city if a true world-class city with world class neighborhoods, then i am the person to work for. >> thank you very much. did you have a good time? [laughter] thank you very, very much. i am hope everybody enjoyed the debate. we are encouraging all of the voters to get out and vote. we are also helping choose to become the next mayor of chicago.

we asked our viewers to stay with us for a special edition of "politics tonight." i am micah materre. good evening. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> i need to say for the record, i philosophically have always been opposed to taxpayer dollars being used for political advocacy of any kind. >> in the house, but oklahoma republican tom cole offered a

bill to reduce federal spending by ending taxpayer financing of presidential campaigns and conventions. follow the final debate on line with c-span's congressional chronicle, with timelines and transcripts of every house and senate session. congressional chronicle at c- span.org/congress. >> no question 9/11 pre-defined presidency because it made abundantly clear that my most important job was to protect the country. i made a lot of controversial decisions to do is that, many of which i described in the book. if i had to do them over again, i would have done them again. >> former president george w. bush talks about his best selling memoir with students from southern methodist university sunday on c-span's "q&a". corey

commission released its report on the causes behind the 2008 financial collapse. the crisis was a result of human action and inaction, not of mother nature or computer model scott haywire. what caused the crisis? >> the report offers of multifaceted analysis. it really can be boiled down to one sentence -- expressly, failures of regulation, corporate mismanagement, a failure to manage risk, a breakdown and accountability and ethics and some macroeconomic forces as well they combine the -- they combine them all together into a very complex and narrative. >> they said the crisis was avoidable. how was avoidable? -- how was it avoidable? >> the sec could have required

banks to hold more capital. did not. the federal reserve could have -- lending standards. it did not. while street executives could have paid better attention to in packaging and assembling and selling these highly complex securities that were based on the shaky mortgages. those executives of failed according to this report it to do the due diligence. >> republicans on the commission wrote their own separate analysis. why? >> that's correct. the republicans -- there were four on the 10 member commission. they had two different dissent. the republicans offered a dissent that was actually not dramatically it the opposite of what the democrats said. they were different in several respects. [unintelligible] it focused attention on failures of accountability and

leadership. the republican dissent, the main one, focused more on broader, macroeconomic forces that contributed to the credit bubble. for example, all built up a savings and asia -- in asia, all the capital that was searching for investment opportunities and that helped fuel the housing bubble in the u.s. there was a separate republican dissent, a single dissent, and he says it was a government housing policies that contributed to the demand for these mortgages that ended up -- he points the finger there. the mainstream views says there was more than one cause and government housing policy was a contributing factor, not the main cause. >> how could the partisan nature of the findings of fact the impact of the report? >> it could. it could have a negative impact. reports have more gravitas when

they are unanimous. this was along party lines. i think the commissioners regret that. but i think it points to the complexity of analyzing the financial crisis and what caused it, that there were not able to reach consensus. >> you're right that there is a stern warning and the report on repeating the crisis -- you write that there is a stern warning in the report about repeating the crisis occurred >> they quote ben bernanke as saying that this is the worst financial crisis in global history, worse even than the depression. even though the effects have not been as bad as the depression. so, basically, the report authors are saying, there will be boom and bust cycles. that seems to be endemic to the nature of capitalism. but they are saying it we can moderate the blunt impact, to make sure we do not have a crisis this severe, this dangerous again in the future through better regulation. not everyone will agree with

that prescription, but that is the policy direction the country is going in with the dodd-frank law that was passed last year. >> we will watch the commissions briefing from today. it is about an hour. host: [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> today, we present to the congress and the american people, this commissions report and our conclusions about the causes of the worst financial and economic crisis since the great depression. the task of this commission was the first -- to first determine what happened and how it happened, so we could understand why it happened. this official report about the

causes of the financial crisis and our conclusions are based on our exhaustive and fact- based investigation which we pursued for more than a year. we hope the american people will read this valuable report because it is our belief that if we do not learn from history, we are unlikely to fully recover from it. now, some on wall street and in washington and with a stake in the status quo, may be tempted to wipe from memory the events of this crisis or to suggest once again that that no one could have foreseen or prevented it. this report exposes facts, identifies responsibility, unravels a mets, and helps us understand how this crisis could have been avoided. it is our best attempt to record history, not to rewrite it, nor to allow it to be rewritten.

this crisis has ben of no small consequence to this nation. all of us are eager to see signs of recovery, but we cannot forget that this financial of people will likely impact our economy for a generation. it has wreaked havoc among businesses, communities and households across the country. more than 26 million americans are out of work, cannot find full-time work, or have given up looking for work. nearly $11 trillion in household and retirement savings have vanished. 4 million families have already lost their houses to foreclosure as a direct result of the economic fallout of this crisis. and many innocent bystanders, people who followed all the rules, fear for their future while our country faces no easy path to renewed economic strength. along our investigative journey,

we met many people from all walks of life who have seen their aspirations crushed by this crisis. there is much anger in this country about what transpired. many of these people look to the commission for answers and perhaps some encouragement that the countries pose a political and financial leaders and all of us will choose a better path down the road to this catastrophe. we kept these people in mind as be completed our work with the hope that we never again need another investigative commission like this, at least not in our lifetimes. over the past two years, there has been no shortage of debate and discussion about the government's decision to provide an unprecedented and massive financial assistance to rescue large financial firms are deemed too important to fail. but our mission and the central question we addressed was this -- how did it come to pass that

in 2008, our nation and was forced to choose between two stark and painful alternatives? either risk the total collapse of our financial system or inject trillions of dollars of taxpayer dollars into the system and private companies, even as millions of americans still lost their jobs, their savings, and their homes. at the end of our inquiry, we reached six major conclusions every commissioner here today stands firmly behind each and every one of them. we concluded that first and foremost that this crisis was affordable. despite the express few of many in the circles of financial and political power that the crisis could not have been foreseen, there were many, many warning signs that were ignored or discounted occurred second, we

found widespread failures in financial regulation. third, our report describes dramatic breakdown in corporate governance. fourth, we detail how the explosive fruit of excessive borrowing, risky investments, and a lack of transparency. our financial system on a collision course -- put our financial system on a collision course. our government was ill-prepared for this crisis in there and consistent response added to uncertainty and panic. finally, this report explains how breeches and accountability and ethics became widespread at all levels during the run-up to the crisis. this morning, each of us will take a few minutes to summarize our findings and i will start by focusing a few remarks on our first conclusion. this financial crisis could have been avoided. let us be clear. this calamity was the result of human action, in action, and

miss judgment, not of mother nature or computer models gone haywire. the captains of finance and the public storage of our financial system ignored warnings -- and the public stewards of our financial system ignored warnings. theirs was a big miss not a stumble. there was an explosion in risky mortgage debt. back in the 1990's, there were widespread reports of predatory lending practices. by 2004, the fbi was warning that a surge in mortgage fraud had the potential to become an epidemic that could have as much impact as the savings and loan crisis. and there were other red flags -- risking trading activities grew exponentially, the unregulated market for

derivatives exploded, as did financial firm's reliance on short-term borrowing. there was, however, and unfortunately throughout this period, a pervasive permissiveness. this report documents the specific instances where the leaders did not take action to stamp out smoldering threats that eventually led to financial crisis. the record is replete with evidence of failures, and you will see these throughout the report. the federal reserve failed to act as our financial system was engulfed in a wave of toxic mortgages. financial firms made, but, and sold mortgage securities they never examined, did not care to examine and new to be defective. from the fall, 2006 on, even as the housing market was in free fall, while st. created more than $1.60 trillion in new mortgage related securities. from 2000-2007, moody's rated

45,000 mortgage securities as aaa. the beginning of this year, there were six u.s. companies with debt rating. in 2006, it gave its stamp of approval to some 30 such securities, each and every working day. the results were disastrous. none of what happened was an act of god. the greatest tragedy would be to accept the idea that no one could have seen this crisis coming and thus, nothing could have been done. if we accept this notion, it will happen again. that me now turn to my colleague and good friend john thompson, the chairman of the board and former ceo of the fortune 500 firm semantac to describe another of our conclusions. >> good morning, everyone. one important conclusion from our commission's work is the widespread failures in financial regulation proved devastating to the stability of our nation's financial markets.

it is clear that the sentries were not at their posts. this was in large part because of a widely accepted belief and the self correcting nature of the markets and the ability of the financial firms to police themselves. is misplaced confidence in the regulation of a highly competitive industry was championed by the former carter reserve chairman alan greenspan and others -- the former federal reserve chairman alan greenspan and others. our report describes how this laissez-faire approach opened wide gaps in the government oversight into key parts of our financial system in which trillions of dollars were at risk. these included the huge trading market in the over-the-counter derivatives and a less regulated part of our financial system that came to be called the shadow banking system. and in some areas, where federal oversight existed, the government allowed financial firms to select their preferred

regulators, setting off a race to the weakest supervisor. we, however, do not accept the view that regulators lacked power to protect the financial system. they had ample power in many arenas and they chose not to use it. and it were regulators thought they lacked authority, they could have saw new powers to fulfill their mission of protecting our country's financial system. let me highlight for examples from our report were strong and effective regulatory intervention it would have made it unnecessary for all of us to be here this morning. first, the federal reserve was the only entity in power to stop out of control mortgage lending by setting prudent lending standards. it had the ability and the responsibility to step up as well as avoid this crisis. but it did not. the securities and exchange commission could have required more capital and halted risky business practices at the big

investment banks, but again, it did not. the federal reserve bank of new york and other regulators could have clamped down excesses' at banks it oberstar, such as citigroup as it dangerously increased its exposures to subprime securities. but again, it did not. and policy makers and regulators could have stopped their runaway subprime mortgage securitization trained as a danger signs emerged, but yet again, they did not. this report also describes how regulators continue to rate the institutions they oversaw as safe and sound, despite evidence to the contrary. and in case after case, downgraded these firms are just as they veered towards collapse. it did not surprise the commission that the powerful clot financial industry would push for weaker or later regulations, but what troubled bus or the failures of the overseers to intervene and enforce the regulations they did

have carried these actions or inactions deprived our nation of strong and independent scrutiny of such a critical sector of our economy. the public leaders charged with protecting our financial system saw and accepted -- sought and accepted positions of responsibility. tone at the top does matter. let me turn the microphone over to our colleague, brooks we early on ne, who identified critical risk to our financial system. >> thank you, as john it noted, 30 years of deregulation and weakened oversight changed our financial system and how financial firms did business. some believe it firms would naturally shield themselves from

a fatal risk taking as a form of self preservation. however, the commission concluded that dramatic failures of corporate governance and risk management at many systemically significant financial firms were critical causes of the crisis. our examination revealed a stunning instances of government's breakdowns and irresponsibility. this report details case after case where top executives and their financial systems they led active importantly, in cluding aig, there stearns, fannie mae, lehman brothers, merrill lynch, to name a few -- bear stearns. the government's hands-off philosophy and financial

firms's increasingly perilous business decisions went hand-in- hand. too many of these firms acted recklessly, taking on too much risk with too little capital and with too much dependence on short-term funding. over time, there was a fundamental change at these institutions, particularly in the large investment banks and bank holding companies, which focused their activities increasingly on risky trading activities that produce hefty profit. many of these profits took on enormous exposures by acquiring and supporting subprime lenders and creating, packaging, repackaging and selling trillions of dollars in mortgage related securities. some financial institutions expanded in ways that left them

too big to manage, let alone too big to fail. too many firms set aside their judgment by embracing mathematical models as reliable predictors of risk. too often risk-management became risk justification. compensation systems in an environment of intense competition and light regulation rewarded the big bet, where the payoff on the upside could be huge and the down side ignored. the biggest financial institutions drove the market in over-the-counter derivatives. after these instruments were fully deregulated in 2000. in the wake of that action, the market for these derivatives spiraled out of control and out

of sight, growing to $673 trillion in notional amount by 2008. we concluded that over-the- counter derivatives contributed significantly to the crisis. the report explains the on limited leverage, the lack of transparency, the lack of capital requirements, and the concentrations of risks that prove so disastrous. it also lays out how credit derivatives fueled mortgage securitization and amplify losses from the collapse of the housing bubble. after that collapse, derivatives were in the center of the storm. millions of derivatives of all types, between systemically

important financial firms, were unseen and unknown when the financial system nearly collapsed. the obligations hidden from view added to the market uncertainty and escalated the panic we saw in the fall of 2008. leading to government rescues of financial firms. let me now turn to my colleague, byron georgia. he is a nevada entrepreneur, and he has spent much of the last decade protecting investors from securities fraud. he is also a member of the advisory board of the harvard law school program on corporate governance. >> thank you very much, brooksley.

closely linked to what my colleagues describe the belt failures in regulation, this commission concluded that a combination of inadequate capital, risky investments, and lack of transparency were critical of our abilities and important enough to warrant a separate attention. in the years before 2008, to many financial institutions anbar extraordinary sums -- too many financial institutions of borrowed extraordinary sums. from banks with excessive leverage to participants in a deeply flawed mortgage securitization chain, nobody had enough skin and the game. for example, the major investment banks, bear stearns, goldman sachs, lehman brothers, merrill lynch, and morgan stanley were operating with thin

capital. by one measure, as of 2007, their leverage ratios were as high as 40 to one. for every $40 in assets, there was only $1 and capital to cover losses. so a modest 3% market moved against them could consume their entire capital reserve. and to make matters worse, much of their borrowing was short- term in the overnight market. that meant the borrowing tens of billions of dollars had to be renewed each and every day. the kings of leverage or fannie mae and freddie mac, the two behemoths government sponsored enterprises. their combined a leverage ratio grew to 75 to one. the leverage was often hidden, in derivatives positions, in an off-balance sheet entities and through what is called window dressing of financial reports are made available to the investing public. our report details instances

such as those at lehman brothers and bear stearns were the true leverage was masked. the heavy debt taken on by some of these financial institutions was exacerbated by the nature of the assets they were acquiring with that debt. as the mortgage and real-estate markets churned out riskier and riskier loans and securities, many financial firms loaded up on them. but these firms were not alone. households took on more debt as well. from 2001-2007, national mortgage debt almost doubled, and the amount of mortgage debt per household rose 63% to $149,500, even while wages were essentially stagnant. within the financial system, the dangers of all this debt grew more ominous because transparency was not required or

desired. massive, short-term borrowing, combined with the liabilities on seen by others in the market, heightened the chances that the system could rapidly unravel. the shadow banking system that had evolved over the past few decades did not have the protections of this country built in the early part of the 20th century to serve as bulwarks against runs on banks. by 2008, the $13 trillion in shadow banking network had become larger than our nation's traditional banking system. as it turned out, we have a 21st century financial system with 19th century safeguards. when the housing and mortgage markets cratered, the lack of transparency, the debt loads, and adequate capital, and risky assets came home to roost. what followed was panic. in sum, we had reaped what we had sown.

next we will hear from bob graham. after spending 38 years in public office, he left the senate in 2005. in addition to his service on this panel, he was the co-chair of the national commission on the bp deep water horizon oil spill and on oil drilling. senator, it has been an honor and personal privilege to serve with you on this commission appeared >> thank you very much. let me say it has been an honor to serve on this commission. i have had the privilege of serving on a presidential commission in december -- and several congressional inquiries. iowa been impressed with smith corona's -- i have been impressed with the thoroughness of this commission. as part of our charge, it was appropriate for the commission to review the actions taken by government in response to the developing crisis and to

determine if any of those responses contributed or worsened the crisis. we concluded that government was ill-prepared for this disaster. it's inconsistent responses added to the uncertainty and panic we saw during the course of the crisis. this report describes how the treasury department, the federal reserve board, and the federal reserve bank of new york, which were best positioned to watch over financial markets, were caught off guard by the events of 2007 and 2008. other agencies were also behind the curve. they were hampered because they did not have a clear grasp of the financial system they were charged with overseeing appeared particularly as it had evolved in the years before the crisis. the lack of transparency in key markets was an impediment.

policymaker is believed it risk had been diversified when, in fact, it had been concentrated. time and time again, from the spring, 2007, onward, policy makers and regulators had to scramble as the contagion spread. they responded on an ad hoc basis with specific programs to put the programs -- the fingers in the dike. they did not understand their risk in the interconnections of the financial markets. even some of the regulators now conceded to these errors. the commission concluded that senior public officials failed to recognize that the bursting of the housing bubble could threaten the entire financial system. in june, 2007, when bear stearns

a hedge funds that were heavily invested in mortgage securities imploded, they were thought to be relatively unique, although many other funds were exposed to exactly the same risk. in another example, the federal reserve bank of new york was still seeking information about the exposure is created by lehman brothers more than 900,000 derivative contracts just a month before the firm collapsed. the government decided to rescue bear stearns. if followed quickly by the decision to let lehman brothers collapse into bankruptcy while aig receive government assistance. this inconsistent approach stoked uncertainty and panic in the markets at the heat of the

crisis. it is my pleasure to turn the microphone over to have their murray -- to heather murren. she co-founded the nevada cancer institute's. >> thank you, bob. as we have witnessed, the integrity of our financial markets and the public's trust in those markets are essential to the well-being of our country. the sound as chance to say -- sustain stability of our economy rely on notions of fair dealing, responsibility, and transparency. americans expect businesses and individuals to pursue profits and at the same time to produce quality products and services and to conduct themselves well. but after careful research, we concluded that this crisis was fueled by a systemic breakdown

in accountability and ethics. these failures were not universal. but the breeches stretched from the living room to the board room. they resulted not only in significant financial consequences but also in a loss of confidence on the part of investors, businesses, and the public. examples of these breaches included are worse to defaulted on their mortgages so rapidly -- included borrowers who defaulted on their mortgages so rapidly that is suggested they never had the intention of paying off. these same brokers put their loans together. lenders wrote loans borrowers could not afford. one estimate showed that losses due to fraud from loans between the years 2005 and 2007 climbed

to above $100 billion. when financial firms packaged risky mortgages and sold them off to investors, our investigation found critical information was not disclosed. yet, we believe the commissions conclusions must always be analytically.little lat it would be simplistic to pin this on human failings, such as greed and she burst. but rather, it was the failure to account for human weakness that proved relevant to this disaster. this report, through its case studies, describes specific firms and individuals who acted irresponsibly. yet, a crisis of this magnitude cannot be the work of a few bad actors and such was not the case here. at the same time, the breadth of the crisis does not mean that everyone is at fault. in fact, many firms and individuals did not participate

in the excesses' we chronicle in this report. we do place special responsibility in which the public leaders who are charged with protecting our financial system, those entrusted to run our regulatory agencies, and the chief executives of companies whose failures drove us to crisis. but we believe that we must also as a nation accepts responsibility for what we permitted to occur. collectively, though certainly not unanimously, we acquiesced and embraced a system, a set of policies and actions that gave rise to a serious crisis. while we were not charged with making policy recommendations, the very purpose of our report has been to take stock of what happened so we can plot a new course. based on our report and the works of others who have investigated the crisis, it now falls to us -- to each of us to make different choices if we want different results. thank you. i would like to turn it back over to our chairman, phil and the lngelides.

>> i would like to make some closing remarks. i would like to thank our nine colleagues for their hard work. i know i speak for all of us when i say how fortunate we are to have our executive director, together with a staff that has dedicated itself over the past year to this investigation. our report, along with two separate dissent, has been published in print and is available wherever books are sold. in fact, for some competitive booksellers and enterprising reporters, that appears to have been true as of last night. the record and many materials cited in it are also available online at fcic.gov. before the commission officially disbanded on february 13, we will post additional materials, including documents, audio recordings, transcripts, and

testimony gathered. as of this morning, there are 1200 documents already placed on this website. many of which are associated with the book. we expect to place approximately 700 additional documents, and about 300 audio transcripts and summaries of interviews this so that there is a historical record beyond what is sent to the national archives. this report should not be viewed as the end of this nation's examination of the small town. in many respects, our financial system is still on unchanged from what existed on the eve of this crisis. we believe there is still much to learn, much to investigate, and much to fix. not to questions. this -- if senator graham leaves before we are done it is because he has to catch a plane. let's go to questions.

maybe i can get some help from mr. warren. >> thank you. mr. chairman, if he was so much for your time. -- thank you so much for your time. we in the press have noticed the absence here of the republican appointed members of this commission. is the fact of their dissent likely to undermine how seriously the report is taken and whatever policy implications can be drawn from it? >> let me make a brief comment and then maybe i will ask one of my colleagues to comment. first of all, let me say we are here to present a report today. there are two separate decisions that were filed. it is my understanding that the public and the media will have the opportunity to hear from the

folks who dissented. i should also note that the dissent, at least that filed by three of the commissioners itself says that we find areas of agreement with the majority conclusion, the role of fannie mae and freddie mac, credit rating agencies, the seriousness of mortgage fraud. there are fundamental differences. we believe this crisis was avoidable. we believe it was a result of human action and inaction. our record speaks for itself. >> i was going to say i think it would be useful for the record for the questioners to say their name and their affiliation. >> i apologize. i am with "the new york times". >> i might mention on this one point, that in this report, almost the entirety of the report, 490 pages of report and

footnotes is dedicated to the facts of what happened to this country upon which we based our conclusion. we believe the report speaks for itself. i'll let the mike be handed. yes? >> hi. i am gw school of business. can you elaborate a bit more about the responsibility of the household sector. and maybe elaborate on the policy implications. it does not seem that a lot of the households were rescued and they carried the brunt of the cost of this crisis. >> the report itself does that make prescriptions for policy, but i do think that it adds an awful lot to the evaluation of responsibility within the whole system, including not only failures that occurred by our regulatory agencies with in

corporations, within mortgage boards, and within household. the use of this report to those who are making those decisions is to come back to a treasure trove of information that is inside and also on our website that relate specifically to the underlying investigation, analysis, and research that we did. >> next question? by the way, i encourage my colleagues, if you have something you want to note on this, please weigh in. >> i'm with cnbc. you talk about who is to blame for various aspects of the financial crisis, but i am wondering if i can get your thoughts on two key players that are still in power and still making decisions. what you say about the role of ben bernanke and tim geithner in the decisions they made in the run-up to the crisis? >> very quickly, then i will ask

perhaps mr. thompson or any other commissioner who wants to comment, first of all, ben bernanke admitted to us it was a very serious failure of the federal reserve not to estem the flow of toxic mortgages. mr. geithner has admitted that the federal reserve board of new york could have done more to curb the excesses' of citigroup. i think the report speaks for itself. there were failures, and there was a government that was ill- prepared for this crisis. mr. thompson? >> first and foremost, i think we should acknowledge the fact that those who were in power at the moment of the crisis had an extraordinary event and dealt with it in an unbelievable manner. and our country is in fact better off because of the actions that were taken there. however, our task was to look at what caused the crisis and on questionably, in our minds, there were actions that could

have been taken by regulators that would have forestalled or mitigated the impact of this crisis. the federal reserve was clearly this to word of lending standards in this country. they chose not to act -- the federal reserve was clearly the steeward of lending standards in this country. regulator after regulator, they chose not to act or turned a blind eye to what was etched going on. so it is less about a particular individual then a systemic sense of the regulation and inaction by those who were in power to take action. >> [inaudible] two individuals -- ben bernanke and tim geithner have learned the lessons of the financial crisis? >> that would be a better question pose of them but then me. >> mr. murren, you would like to comment. >> both the chairman and

secretary geithner arkansas during their interviews with us, themselves had noted that there were certain decisions that they had made that perhaps they wished they had made differently. i think it is admirable for them to have been able to articulate that. it was a rarity amongst all of those who came before us to actually have talked a little bit about their role in the financial crisis and to talk about how they might have changed the actions that they took. i think that is something there reflects well on their character. >> the only comment i would like to add is that i do want to emphasize, though, i think it is clear from our report that this government was ill-prepared for this crisis. when you read our report and you see that only a month to help from the crisis, the government is trying to figure out the exposures created by almost 1 million derivatives contracts that lehman brothers have, that is a very sobering. when they go in to try to find out, they are afraid to ask the

question -- they will set off a panic. when the subprime contagion started to spread in july, 2007, and it spread to many parts of the market, the federal reserve, the open market committee discussed this and they thought bear stearns was unique. there were big misses along the way. and we hope lessons can be learned. do you have something? >> very briefly. i think is important to focus not just on those who are currently in leadership positions, because our commission was exceedingly non- partisan in his criticism. their predecessors in the case of mr. tim geithner, mr. paulson and mr. greenspan received plenty of attention for the judgments they made in the course of the time it that they were at the helm of the responsible agencies. and so, this is just something that has been pervasive for

quite some time. >> thank you. next question? >> i'm with cnn. have you referred anything to law enforcement authorities for further investigation? and secondly, allegedly somewhere in here it says that goldman sachs received $2.90 billion in bailout money from aig. >> let me quickly take each of those very quickly. the commission was instructed in law, we have certain obligations, one of which was to provide this report. another was to examine the major institutions that failed or what have failed but for extraordinary government assistance, and we were also asked to refer to the attorney general of the united states and any corporate states attorney general any person the commission found it may have violated the laws of the united states in relation to the crisis. where the commission found those potential violations, it referred them to the

authorities. we will not comment on any specific referrals. secondly, let's talk about goldman sachs. >> [inaudible] >> b what i just said -- what i just said is where we found potential violations, we fulfilled our obligation and referred matters to the appropriate authorities. now, as to the matter of goldman sachs, if you look at page -- i will not spend a lot of time on this -- it is page 377 and 378 of the book. that goldmanil is aski sachs, i think many people notes through what were called the may transactions, got about $14 billion that pass through to other clients. what we found is that goldman sachs received another $3.4 billion from aig, of which $1.9 billion was received after the government bailout, and they

ended up retaining $2.90 billion. in fact, on like i think what might have been understood broadly that all of the bailout money passed through to others, in fact, investigation shows otherwise. that's on pages 377 and 378, >> from "corporate crime reporter." in listening to you today and flipping through the report, we hear words to describe the ceo's of these big companies, such as -- their activities such as risky, reckless, imprudent, irresponsible. we do not hear the word criminal. and i am wondering -- i just heard mr. angelides talk about referring cases, but did you find corporate criminal activity or individuals and corporations to have committed crimes? youif you did, why haven't

made that conclusion in this report. >> i will give you the easy question. >> as chair angelides said, our mandate was to refer to the attorney general or the state authorities and the individual that our investigation showed may have violated u.s. laws, whether civil or criminal. as he said, we did make several of those referrals, but we are not going to talk about any of the details of those referrals. >> with reutres. ers. are the public and the financial system better protected the kibecause the congress gave the sec the authority to regulate

derivatives? >> i hope the statutory powers of the sec are fully implemented and finance. >> [inaudible] >> i think a great deal of rule making is going on now. they have some resources, and they may well need additional resources for their additional responsibility. >> i am being told now that we are going to go to the phones. there are apparently on number of members of the media on the phone. snow day for those in washington, and some remote. >> your line is open. [no audio] >> kevin hall, your line is open to ask your question.

>> can you hear me? >> yes. >> during the new york h earing, you get a specific case where warren buffett was in front of you and you ask him specifically whether or not he and told by moody's employees that there were problems with the ratings and it was a crisis waiting to happen. he denied ever receiving that. it was our understanding that you actually have these documents, an e-mail in your possession, showing that he had been reached out to. do you touched on that and report? do talk a little bit about mr. buffet, who was shown to be pretty indifferent to the workings of moody's. >> we could not hear the last of that question? >> how much you touch on mr. in news testimony up

york, in which you showed him during the questioning clearly to be a large shareholder who seemed divorced from the workings of the company. the earlier part of the question, whether or not you had in your possession and e-mail showing that he had been reached out to about the problems in the structured finance division geared >> on the first question, i will have to ask the staff to get back to you as to the new exchange. i am aware of that, but i do not have that at my fingertips. we do talk about movies extensively. we do, in fact -- i do talk extensively.s we talk about berkshire hathaway's large ownership in that company. i will have the staff point that out to you. let's go to the next question. >> dave clark with reuters. your mandate was not to make

recommendation for policy changes, but congress already made those. i wonder if you think dodd-frank law, how that addresses the problems you uncovered? if they need to do more? >> we hope this will be a guidepost to policymakers and the public, as our financial system is reformed. that journey has just begun and is by no means ended. there are hundreds of rulemaking procedures that have to happen. and so the jury is still out. would you like to comment? >> not particularly. [laughter] i want to make sure. if any other commissioners have any comment heard >> i do not think we chose to take our work and shape it for dodd-frank at all. our task was to identify the

causes of the financial crisis, not necessarily to fit our investigation into a piece of legislation. so it was more circumstances that legislation in a vault -- evolves certifid during the same time. i hope we all lined in our report does become a guide. for what regulators will do as they move forward. but it was and not by any stretch of the imagination in tended to reinforce or support any particular piece of legislation. >> unaccustomed as i am not to pass of the opportunity to comment, i have changed my mind. i think it is important to recognize a couple of things. our financial system is really not very different today in 2011 and then it was in the run-up to this crisis in 2006 and 2007.

in fact, the concentration of financial assets in the largest commercial and investment banks is really significantly higher today than it was in the run-up to the crisis as a result of the evisceration of certain of the institutions and the consolidation and merger of others into larger institutions. so, to the extent -- i think it would be, we would be remiss to suggest that whatever failings we have uncovered in this report have all been addressed by dodd- frank. it is our hope that what we have learned through an extraordinary process, led by a team here and an extraordinary staff, will in form of the debate going forward, not just having to do with the implementation of legislation that has been passed

up the possible need for other legislation or other regulatory modifications that may be addressed in the future appeared >> let's go to the next question. we're going to the phone. >> your line is open. >> hello. the times of lond here. on here. i would like to proceed further on the possible violation of laws and the united states. can you tell me how many cases you have researched the appropriate authorities? is it more than 10, less than 10? can you tell us also whether any chief -- >> more than one, less than 1,000. we have made our statement on this. we are not a prosecutorial body. we were given an obligation by congress where we found potential violations and referred those to the appropriate authorities. we have done that. as a matter of fairness, those that have been sent to the proper authorities to examine.

met is the right and fair thing to say, because -- that is the right and fair thing to say, because we are not prosecutors. that is all we will have to say on this matter. but we respect your efforts to continue to try to press us. let's go back into the room. >> to what extent were collateralized debt obligations a key factor in creating a crisis and secondarily, to what extent was a reliance on repos, which was estimated a market as large as $12 trillion, a contributing factor? >> one thing about gary gordon. he was talking about the shadow banking system. the on regulated, overnight lending market grew to $2.80 trillion. it was one of those big gaps that people did not see.

born tolike u.s. msto ask ms. comment. we have a lot of information thet how cdo's drove crisis. >> we certainly discussed at the cdo's world tharoel thle played in the housing bubble, in the inflation of mortgage related securities and in the later years, in the use of synthetic cdo's, which essentially consisted of credit defaults swaps or over the counter, unregulated derivatives. they continued this securitization process for a longer period of time and inflated securitization as the

mortgage market itself was beginning to flatten and then decline. and they certainly played all impact that the collapse of the house and bubble had on financial institutions. >> if you read this report in full, you will end up knowing more than most people would ever want to know about collateralized debt obligations. but we found them to be central in a variety of respects. the most significant of which, i think, is that, if he examined the structure of collateralized debt obligations, they were an attempt to convert the lowest rated traunches of the underlying mortgage-backed securities into higher rated instruments. they took the triple "b" rated

traunches of other mortgage- backed securities, which were the ones most likely to fail about equity, and by slicing and dicing them and putting them into another instrument called a collateralized debt obligation, they were then rated as super senior and received a triple a ratings from agencies. this is a conundrum that we labeled as all commitchemy. this went on really without anybody questioning the fundamentals of how you could essentially turn very risky securities into super safe securities simply by amalgamating them together. in fact, what those cdo's did is create layers of correlated risk, when the notion was that by somehow putting together, they were diversifying risks and making them stronger.

we now know from the downgrade of the securities and the failures of them, that they were not safe at all. but nobody really, fundamentally question them. the process went on that and lots of people are not at significant fees and the creation of them and reading them and so forth. there's very little questioning of them. more than anything else, they are emblematic of the type of head in the sand attitude that some people approach these issues with paired. >> the cdo's also touched one of the most import aspects of the crisis and that was a housing bubble in a variety of different ways. and one of the things that our report does extremely well is to lay out analytically the sequencing of events. if you look in particular at page 70, it walks through mortgage-backed securities from beginning to end and looking at

ways those markets were able to continue to fan the flames of the housing bubble, even >> it is certainly relevant and a variety of different ways for a dea. >> i think he mentioned 09% had been downgraded. you find firms are creating cdo's they are putting in their own cdo's. this is the first official government report on this crisis. what is also learned that we tied this together in a way that has not been done before.

clinton is like what really happened in the market place. >> i want to take new people if it is ok. >> the nature of the crisis was clear in the spring and the summer of 2007. what could the government have done after that introduction to prevent the crisis that really exploded in the fall of 2008? what was preordained? >> most of the damage had been

done by that time. let's keep the mines that from the third quarter of 2006 when housing prices were already in decline, wall street created another $1.70 trillion in mortgage-backed securities. the federal reserve had a chance to act on out of control lending even in 2001. it covered 1% prad. after the contagions start it, there is a lack of

understanding and interconnection. we you do have the federal reserve thinking they are relatively unique. they think they are relatively unique because not many have this position for their rigid position. -- because not many have this position. >> let me mention that in the timeframe you were talking about, people like chairman bernanke where assuring congress that there would be little systemic impact of the mortgage and housing decline.

i think that, if the regulators had more fully and stood the markets that they were dealing -- fully understood the markets that they were dealing with and regulated the institution exposures to them, they may have taken earlier steps. but i do not think they did understand that. >> one would have hoped that, at that particular moment in time, which is somewhat of an inflection point in retrospect, but there could have been a more examination on the variety of financial companies that held assets related to that. for example, the banks, the investment banks fannie and freddie, had the regulators and examiner's go in and understand more fully what exactly was on

the balance sheets at that time. >> i think it is also symptomatic of a lack of accountability in the system that we discovered in our investigation that a number of financial institutions, even though these particular instruments were being downgraded, continued to pile them on because they had the opportunities to do so and had who were originated them, for the consequences of their failure. that, it seems, is a problem that we have seen throughout the system. it imperil the number of major financial institutions. if you look on a section of the book on moody's, you'll see

that, at the same time that some of the ratings agencies were downgrading aaa rated securities, they were still in the current pipeline, rating the same types of securities as aaa at the same time that they were downgrading ones that they had paraded before. if you are compensated at the front end of the ratings process, at the front-end of the mortgage brokering process, without regard to the actual performance of the instruments that you are caused to create, that is incentive to continue the process and not to step back and modify them. >> let me pick up on the comments. as secretary paulson said to us when he testified, that the toothpaste was out of the tube, let's be clear. goldman sacks and other companies, which mr. paulson headed, all the way up to 2006 and 2007, were squeezing it a lot of toothpaste out of that tube. certainly, much of what created this crisis happened by 2006. but the uptick was very slow and the actions continued. for example, goldman continued to create tens of billions of dollars of securities and to put

them in the marketplace after 2006. in terms of government response, it is not until august 15 that secretary paulson gets the reports from the federal reserve and the office of the comptroller of the currency about the dire conditions that for any may and freddie mac rain. three weeks -- that fannie mae and freddie mac are in. it was three weeks for him to convince mr. low-carb, who used to be the overseer -- mr. lockhart, who used to be the overseer, to take action. >> i wanted to find out more about the extent of accounting fraud. we know about rigo 105 and rigo 108 -- repo 105 and repo 108.

>> that is a publicly known case. the attorney general of new york has filed an action and we account the transaction. we do look at off-balance sheet positions. ok. >> ron oral, market watch. there was legislation that never made it to the final draft that would cap leverage of financial institutions at 15 to one. the argument was that it discouraged the u.s. to compete against financial institutions

in other countries. based on your research, are you disappointed that there is not a cap on the rich? do you feel that it would have been in force properly if there was a cap? what are your thoughts generally on the leverage situation of these large financial institutions. >> let's be clear. regulators had and have the authority to control leverage. the sec could have controlled leverage. other banks and regulators. citigroup, when you count their off balance sheet exposures, it grew to 43 to one. >> the ball will discussions are addressing some of these questions and with the permissible leverage ought to be. of course, the argument is commonly made that, if you

constrain american institutions, they will love able to compete internationally. -- they will not be able to compete internationally. and if you regulate the institutions, there will not be able to compete with unregulated institutions and others. if somebody operates a business with what turns out to be inadequate capital, in that a modest reduction of the asset base eliminates their capital, in the normal course, people are permitted to fail. that is part of what the economic system allows. and they go bankrupt and they go out of existence and others step up to the plate. the problem here is with institutions that have systemic importance in our society and to what extent we ought to permit them to operate within capital, such that, if and when they are

threatened with failure, they come to the taxpayers for relief. that is the conundrum that i think we face generally. >> ultimately, decisions about leverage, whether they are made by regulators or by corporations individually or by individual households, ultimately and get into the spectrum of action and inaction. there is the notion that this crisis was preventable in the regard that certain actions and inactions could have been changed. >> we will take one more question. i just promised them. [laughter] that is always a mistake. we will take one more question and we will wrap this up. >> thank you. mr. chairman and members of the

panel, did you look at secretary paulson's inaction while his former firm exited the subprime um market and even shorted it as a conflict of interest? >> in that regard, you can look at the book. we have the tell about what secretary paulson did in his role as secretary and with the firm did. i will advise you to look at the book, look at actions taken, and draw your own conclusions as to what occurred. but certainly the book details, in very specific terms, what goldman sacks did. it certainly details also, in very specific terms, what treasury did at that same time.

i want to thank everyone and i also want to remind everyone again in this room that this report is available through public affairs, a publisher and book stores and online in of an e-book version. if you go to our website, you will see how you can get the report. you can download the report for free. you can also see on there that what we have posted this thousands of footnotes in this extensive report. what we have posted on the web today are all the documents related to them. what has not been posted yet is the audio and the transcript. as we wrap up our work on february 13, we will be posting additional research documents,

audio transcriptions, to provide what we hope will be a good historical record. i want to close by thinking again all 10 commissioners for their work. want to thank my colleagues for being here today and thank you for your attention to what we believe is a critically important issue for this country. thank you so much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> kathleen sibelius testifies on capitol hill about the new healthcare law. janet the pullet, is the

address. -- janet napolitano gives the address of it tomorrow, john bolton talks about u.s. foreign policy. a macaquthe lively 20121 spoke a .olitics but ther as the beginning of a share, and tune into the road to the white house.

>> it will reduce the federal deficit brit. this is 1.5 >> the senate committee on health, education and pensions will pase come to order. today, we meet for the first in a series of hearings that this committee will hold on the affordable care act, hearings that will focus not only on the politics of health care reform but on the tangible, positive impact the reform is having on

americans' lives. we can all agree that what this debate needs more light and less heat. today's hearing will focus on the benefits of health reform that americans are experiencing right now, specifically the bundle of significant consumer protections that went into effect last september, known as the patients' bill of rights. these protections are a historic long awaited improvement in the quality and scope of health coverage for all americans. everyone who pays a premium is otected against some of the most egregious and abusive practices othe health insurance industry. thanks to health reform, americans now have protections that every senator on this dais has had for many years. before the affordable care act, many americans had lifetime limits and it was estimated that as my as 20,000 people annually could be denied coverage for care due to those limits. surprisingly, people in danger

of hitting a lifetime limit are seriously ill and their benefits run out. the affordable care act phases out annual limits by 2014. providing economic a health secuty for those who need coverage the most at critical times. one of tho folks, lisa grasshoff is here and will talk about her care for her son and her financial future. as i'm sure the secretary will discuss in her testimony, last week the department of health and human services released a report analyzing preexisting health conditions. the findings of strikinging. 129 million americans have preexisting conditions and millions more are much likely to develop such a condition ove the next eight years. before the affordable care act, these americans faced denial of coverage, restriction of benefits or higher premiums as a result of their preexisting condition. eir ability to take a new job,

start their own business or make other important life changes was limited. they were in effect locked into their original insurance coverage. because of health reform, insurance companies are now prohibited from restricting or denying coverage to chilen under 19 because of a preexisting condition. in 2014, this production will be extended to all americans. between now and 2014, the law establishes and insurance plan in every state taylored to adults with preexisting conditions who are currently uninsurable offering coverage at standard rates. another element of the patient's bill of rights a requirement for every insurance plan to cover evidence based preventive services that will head off many illnesses, that will address them in the nurse's office rather than the emergency room. this consumes 75% of health care spending annually.

dollars that could be used to build roads, create jobs. the prevention investments in the law are down payments on the project of transforming our sick care system into a genuine health care system, and first dollar coverage of preventive services like mammograms and immunizations are a vital part of that. before the affordable care act, millions of alt went without insurance because their jobs didn't offer it or they were ineligible for coverage on their parents' policy. these people had to largely fend for themselves in an unregulated market for individual coverage, the charges high preem yims for moddette benefits. health reform allows young people, more than 2 million of them to stay on their parents' policy until age 26. this reform relieves young people the burden of high health insurance costs. we'll learn more about this from one of our witnesses today, a

univerty of nebraska student. finally the affordable care act puts an end to one of the most outrageous insurance company abuses, canceling coverage when someone gets sick, and based on technical paperwork area. a california insurer using computer programs cancelled policies of pregnant women and chronically ill because they submitted expensive claims. another insurance company that submitted claims reaching a certain st level looking for reasons to cancel the policy. insurance companies paying bonuses on how many policies they cancelled. health reform puts an end to that sorry state of affairs. we'll hear from public officials from state and federal levels, as well as private citizens who will talk about how this has affected them. our first panel, of course, we welcome secretary health and

human services, kathleen sebelius to her first hearing of this new congress. in addition to experting implementing the private insurance market reforms, i want to applaud the secretary for her relentless work in eliminating the abuse in medicare and medicaid. we recovered more than $4 billion of fraud last year, the highest annual recovery ever. thank you very much. the department released new rules authorized by the affordable care act giving it more effective tools to detect and gatd fraud. oursecond panel is composed of three government witnesses. as always, i'm pleased to be joined by senator mckenzie, and before i turn to an opening statement, i have one administrative matter.

i request the record to stay open for statements to be submitted. >> thankyou, mr. chairman. i appreciate the secretary being here today. i was ve pleased at the state of the union that the president meiod that there are flaws in the health care bill that need fixing. he specifically mentioned tort reform. of course a year and a half ago at the american medical association conventio he promised that the health care bill would have tort reform and a permanent doc fix. neither one of those thgs wound up in there. today's hearing is designed as another marketing tool for the health care plan. i don't think we can fault the millions that have been spent on the marketing. it's been voluminous, but it's the policy that's flawed, not the marketing plan. it's easy to pick a few paragraphs out of a 2700 page law to find a few provisions that are popular. apparently the purpose of the hearing today is to identify those few issues in the law law that enjoy support.

that's often from both sides of the aisle. usually a hearing is to seek solutions. unfortunately, the reality is americans won't havethe luxury of only abiding by their vorite paragraphs of the new law. americans will be forced to comply with the entire law. that means, as direct result of the new law, millions of americans will see their health insurance premiums increase. plans like blue shield of california have announced premium increases of 59%, a portion of which they directly attribute to the mandates in the new law. as a result of new law, children in many states are not able to get child only health plans. i got a letter from a disabled veteran in wyoming he wrote to me because of the new law he can't get health insurance from his kids. he gets his from the va. he doesn't need a family policy. he needs a policy for his two kids. because of drafting errors in the new law, he's out of luck. no health insurance plans in wyoming are writing new child only policies.

i asked my staff to look into this, they found that to be the case in at least 19 other states. because of the new law, kids are not able to get health insurance. another problem that millions of seniors on medicare will see their out-of-pocket costs go up and benefits go down because more than $500 billion was cut from medicare and used to pay for a new entitlement program. because of the new law employers across the country will be forced to lay off workers and reduce wages at as their health care costs continue to increase as a result of all the new taxes in the law that will increase their health care costs. the new law forces 16 million americans into the medicaid program, one of the worst health care programs in the country that provides some of the lowest quality care. while at the same time, forcing cash strapped states to pay an additional 20 billion over the next ten years to expand the program. this is the reality that we face as a result of the new health care law. nothing in the testimony we will hear today is going to change

it. that's why survey after survey shows that the american people reject the policies set forth in this new law. we recognize there are individuals who will benefit from a few of the provisions in the law. many of those provisions do enjoy bipartisan support. there are many senators, both democrat and republican that support policies like prohibiting recisions and making it easier for parents to cover their children on their plans up to age 26. we could have enacted a plan last year that would have afforded those protections. instead the new law will force americans to buy the type of health insurance that washington thinks they should have. employers will be required to offer health insurance or pay $52 billion in new taxes. americans will not have the luxury of picking whicharts of the new law apply to them but instead will have to comply with the 2700 pages of new mandates, taxes and limitations on their freedoms. that couldn't count the pages of

new regulation. there is a sign in tside of a building that says as regulations grow, freedoms die. madam secretary, you have the job of writing the health care law. with each page you publish, you will be limiting the freedom of individuals, for example whether they pay their mortgage or health insurance premiums. americans have to pick health insurance, if you don't hav insurance, you are backe breaking the law. >> businesses that have more than 51 employ es will not have the freedom whether to increase a employ epay. if you don't provide health insurance, you have to pay 52 billion in new taxes. the freedoms of businesses to make decisions about how to run their companies are disappearing. americans who wish to pay lower health insurance premiums by picking a plan that has a higher

deductible will no longer have this freedom. the new law decrees that washington knows best. the administration will soon be publishing regulations capping the amount of out-of-pocket costs and limiting the deductible amount small businesses can offer their employees. madam secretary, i don't envy your job i do appreciate you are here today and you have been working on those regulations and meeting a lot of the deadlines. we will have the opportunity to ask some tough questions about the new law. i do believe this is your first time to appear before this committee since your nomination hearing roughly two years ago to perform proper oversight, this committee will need to hear more from you. i will ask you to reaffirm that commitment today. i'm glad this committee will have the opportunity to ask you questionabout the implementation of the new health care law, which impacts 1/6 of our nation's economy. i'm always interested in the

doughnut hole provision, 60% through the doughnut hole will get 100% from taxpayers once it gets through the doughnut hole because we no longer give incentive for people to go to generics. i have people from wyoming talking about medicare advantage because their rates have gone up so much or completely been eliminated that they're losing a part of what they considered to be health care and invaluable health care and there's some animosity towards the aarp because they helped to do that and are the ones supplying the med gap policy. i believe we can and should do better. i intend to focus on ways to eliminate the provisions in this law that limit our freedoms. i will work to enact reforms focusing on increasing consumer choices and decreasing health care costs. we must make health care more afrdable for both consumers and the federal taxpayer.

thank you, mr. chairman. >> thank you, senator enzi. we have an exceptional group of witnesses today. i would like to thank all of you for taking the time and energy for being here on our first panel, of course, secretary of health and human services, kathleen sbe kathleen intel sebelius. she was a leading voice in the passage of the affordable care act. she's responsible for implementing many of the key provisions. prior to joining the cabinet, she served as the kansas insurance commissioner. she has a great deal of knowledge in that area and later of course as the honorable governor of the state of kansas whe she worked to expand access to quality, affordable health care and fought to prott consumers. madam secretary, thank you for your hard work. thank you for sharing your knowledge with the committee

today. i commends you for your work on this important issue. your statement will be made a part of the record in its entirety. please proceed as you so desire. >> thank you very much, mr. chairman. it's nice to have a chance to visit with the health committee on this important issue and i want to thank chairman harken and senator enzi for the opportunity to discuss the implementation of the affordable care act and talk a little bit about the enormous difference it's already making in the lives of americans since it was passed. as you know in the framework of the bill over the last ten months, our department has worked closely with two other departments, with treasury and secretary tim geithner and with labor and secretary hillda so lease, but we've been working with governors across the country, with my former colleague, state insurance commissioners, health care providers, doctors, nurses,

consumer advocates, eployers and other stake holders to deliver the key benefits that have already become available to the people of america. we've met deadlines. we've established strong working partnerships and begun laying the groundwork for the additional reforms that take place in the years to come. in that time, i've had the chance to see the new law through the eyes of people it helps every day. mr. chairman, you've aeady referenced the new patients's bill of rights. because of the enactment of those provisions, millions of americans don't have to worry about losing their health insurance when they need it most. many of the worst abuses of the insurance industry, like unfair and arbitrary recision practices and lifetime dollar limits on benefits have now been brought to an end. in adtion, the new law begins to free as many as 129 million

americans with preexisting health conditions, from the fear of discrimination by insurance companies. starting this year, it did prevent insurers from denying coverage to children because of adisability or illness. in 2014, all americans will be free from discrimination by companies based on their health status. the law is also beginning to slow down the rising health insurance costs for families and small business owners. there are new resources for states t review questionable premium hikes and new regulations that limit the amount of premium dollars that insurers can spend on marketing and ceo bonuses. beginning in 2014, individuals, families and small businesses will be able to pool their purchasing power and negotiate lower rates in new health insurance exchanges, which many states are already working on to design and implement. i've also seen how the new law

is impacting america's business owners. over 5,000 businesses, state and local governments and unionsare already using new funds to help maintain coverage for a very vulnerable population, folks between the age of 55 and 64 and their families, the so called early retire, 4 million small business owners are eligible for tax credits to help them provide insurance for their employees. thanks to the new law, seniors d those americans with disabilities enjoy stronger and more sustainable medicare. we've sent over 3 million checks to those who fell into the doughnut hole last year. they've received a one time $250 rebate check. this year, for those who reach the doughnut hole coverage in 2011, they will begin to receive a 50% discount on the covered

name brand prescription drugs. at the time the doughnut hole closes altogether. medicare beneficiaries are receiving critical preventive services and an annual wellness visit which has been added to their guaranteed benefits. in addition to giving americans more control over their health re, the new law is strengthening our economy. just recently, the congressional budget office reiterated their numbers that the new law will reducehe federal deficit by $230 billion over the next decade and over a trillion dollars in the folling decade. tuesday night, president obama laid out a vision to how america can inwin the future by building a foundation for long term growth that allows families and business owners to thrive. improving our health care system is vital to making that vision a reality. the affordable care act is an esseial component to this goal. by freeing family frs the worst

insurance company abuses, freeing entrepreneurs to start new businesses without worrying about losing thr coverage and freeing all of us from the burden of skyrocketing health care costs that make it hard for families to pay their bills, the law allows american companies to compete and allows the federal government to bring down the deficit. since march of last year, our department has focused on working with congress and our partners across the country to implement the law quickly and effectively. in the coming months, i look forward to working with all of you to continue all of those efforts and make sure americans can take full advantage of all that the law has to offer. i again thank you for this opportunity and look forward to our discussion. >> thank you, madam secretary. we'll start our round of questions peagreement between the ranking member and myself. earlier on, the order will be the chair, ranking member and senators in order of appearance

and my staff, so it would be senator mccain, franken, bennett, roberts, reid, ice akson and sanders in that order. madam secretary, could you descri describe, getting to this child only issue, can you describe the new protections that the health reform bill provides to children in the private market and how it differs from the status quo before the affordable care act was passed? >> mr. chairman, before the affordable care act, what a number of companies did is offer child only policies, but eliminated any child with a preexisting health condition. so the parents who really desperately needed coverage for their children with anything from asthma to diabetes to cancer survivor were blocked from getting coverage. the affordable care act says

that if you are going to offer child only policies, they must be open to all children. no longer can you only offer policies to children who don't have a health condition that may require them to have health insurance. what we have found companies doing is some companies may be changing the kind of policy offerings. what most companies are doing are keeping in place their coverage fochildren like those referred to by senator enzi and selecting whether or not to offer policies going forward, prospective policies. a number of states have taken action, i think 19 or 20 so far, to say cpanies who want to offer policies to children must offer them across the board. feeling that the discrimination against children with preexisting health condition is

the worst of all worlds for parents, and particularly, when you have a sick child, to not be able to find affordable coverage is just untenable. children are also available -- eligible for the new high risk insurance pools that are run in states across the country, in addition to the private health market. >> so it's kind of a situation saying we experienced in other areas of insurance, that if you are really healthy, you can get a health insurance plan. >> the promise not to get sick. >> that's right, if you have no preexisting conditions. one other thing that i wanted to just ask is the first dollar coverage for proven cost effective preventive services. as you know, that's something i worked very hard on, with others to get into this bill. senator byrd was also very active on that also, to focus on preventive measures. that has also started.

i just wanted to again ask you how the mandated coverage of these services are affecting americans' health and how the provision is being implemented on the preventi end right now? how is that being implemented right now? >> mr. chairman, i know that prevention efforts are an area where you have spent a lot of time and energy over the years and one that i think has the potential of yielding huge results in terms of not only lowering overall health costs, as you say 75 cents of every dollar is spent onhronic diseases, most of which are preventible, but also on a healthier workforce. the new law has a couple of provisions. medicare beneficiaries have eligibility for mammograms, cancer screenings, variety of preventive coverage without co-pays. that's a big step forward in

terms of taking down a cost barrier. in new plans offered, beginning after january 1st of 2011, the private insurers will also offer preventive services that are covering a wide range of care without co-pays to encourage, again, people to have regular checkups, get screenings, find problems much before they get to be acute issues and deal with them in a much more cost effective and frankly life saving strategy before people get acutely ill and spend that time in hospitals or in a condition where their lifespan is reduced and their health costs skyrocket. >> very simply, do you feel the department has the wherewithal to implement this right now? in other words, to really implement these provisions? >> we're finding that, yes, as

we go forward, we are moving ahead and those policies are becoming effective. >> i appreciate that. thk you, madam secretary. senator enzi. >> thank you, mr. chairman. i want to go back to the child only plans question a little bit, because we did take a look and found that there are at least 20 states where you can't buy child only insurance anymore. if they already have it, they can keep it, but there's not any new policies being issued. consequently, they're getting out of that market. for parents like the disabled veteran in wyoming that i mentioned in my opening statement who need to buy a plan, it's absolutely devastating. the outcomes unfortunately predictable as a result of the drafting, one of which things would allow a person to buy a policy on the way to the emergency room. so there's se incorrect drafting and incorrect

implementation. do you have any specific steps that you're going to take to fix the problem in those 20 states? does congress need to change the law? >> well, senator, we have done a lot of outreach with insurers across the country, and while there was an initial flury of announcements, many insurance companies are reconsider iing their initial plans t leave the marketplace. i would suggest it was, in some cases, a pretty cynical notion that you would only insures a health insurer, children without a preexisting health condition. and keep those policies in place. rents' coverage is often available to many of the children who had child only policies. we are finding that a lot of children are being insured again through their parents' coverage, which has now been extended as you know to the age of 26, which

has been a huge boon to a lot of families. a number of children are also eligible for chip coverage and the new high risk plan, so there are a variety of strategies in place to make sure that children have coverage. we are continuing to work closely with insurance companies to help rethink the strategies between now and 2014. 2014 there won't any longer be any ma barriers for anyone with preexisting condition to have coverage. the child only provisions kicked in initially this year. >> you're saying there is no need for changes? >> ll, senator, we will continue to look at the situation, particularly in states like wyoming, if all the companies have moved out. i think it's untenable for parents not to have coverage, but i would suggest, i would hope that we could call on the companies who have made ample profit selling child only policy s to children who were not ill

or had any preexisting condition to reconsider their efforts to leave the market and a whole series of companies have indeed done that. >> i would hope that we could make a fix in the law as well so that people don't buy their insurance on the way to the emergency room. yesterday, before the house budget committee, your department's chief medicare actuary, richard foster testified that the new health care law will not hold down health care costs and will not allow everyone to keep their current coverage. specifically when asked about the claim that the law reduces cost, mr. cofoster described its false more so than true, regarding the claim people would be allowed to keep their current coverage, mr. foster described that claim as not true in all cases. is mr. foster wrong in his analysis? what information do you have to counter the detailed analysis he's done of the new law? >> well, senator, i have not had ray chance to thoroughly analyze

mr. foer's testimony. i know in the past, when he has testifd about the quarter of a trillion dollars in deficit reduction, he has speculated that if indeed the laws change somewhere in the next ten years and if indeed congress does not implement the law as is, then the quarter of a trillion dollar savings would t be realized. we are standing by the congressional budget office analysis, your budget office analysis which has had a series of numbers about not only the impact on families and says the cost will go down, the impact on individual business owner's premiums that says the cost will go down, but the impact on the deficit. the budget office says the costs will go down. >> you and i know that the congressional budget office is limited by what documents we give them to make their maanalys on. the doc fix alone creates a

substantial loss but they weren't allowed to consider that in the testimony. in your testimony, you noted the new laws strengthen the economy. my time has expired. i will be submitting some questions if we don't go additional rounds. >> thank you. >> senator mccain? >> thank you, mr. chairman. madam secretary, the president said on tuesday night that he was in favor of repeal of 1099 and also believes that medic malpractice should be an issue that we should be addressing. do you agree with the president? >> yes, sir. >> would you submit perhaps for the record some idea of what the parameters of medical malpractice reform might be that suggestions the department might have? >> well, senator, as you know, the department has had

authority -- >> would you -- the question is would you submit for the record? >> would i submit them? sure. >> thank you very much, since we tried repeatedly over a year to get some kind of addressing in the 2,700 some page document some action on what most experts agree contributes sometime 20, 30% to the additional costs of health care. you have granted over 700 waivers. now for employers and union plans from the "annual benefit limit restrictions in health reform bill." why not make those permanent? >> senator, the goal of the law in the area of the annual limit benefit granted our department the discretion to look at situations which would cause not

only market disruption but a dramatic increase in premiums. what we have done on a case by case basis is receive information, particularly about the so called mini med plans that are employer based coverage throughout the country. grant waivers where the employer indicated that there would be an enormous rate increase. >> i understand w it works. i'm asking why you wouldn't make them permanent. i appreciate if youake your answer short. >> why wouldn't we want to make them permanent? >> yes. >> we're taking a look at the marketplace. they assured us they could gradually phase into -- >> they've assured you of that? >> that's my understanding, yes, sir. >> as you knw, the states are having great difficulty with their budgets and there is some conversations about some states even having to go into some kind

of bankruptcy, et cetera. there are a number of states that have great difficulty in complying with the act, as you know. in my home state of arizona, we are facing a serious budget crisis. our governor has written you a letter asking for a waiver. she believes she's asking for your assistance in providing arizona with a waiver from the maintenae of effort requirements of the patient protection and affordable care act. she goes on to say "i'm respectfully requesting that arizona be allowed to reduce its medicaid eligibility for certain nondisabled adults in order to preserve its underlying medicaid program." would you give serious consideration to the governor and i'm sure other governors' requests that states be able to

exercise the flexibility that they need to meet their compelling budget requirements and probably know best in the view of many of us, how to provide the best health care at the least possible cost for our constituents? >> senator, we're working very closely with governors across the country. i just received yesterday governor brewer's request, which we are taking a very careful look at and also taking a very careful look at the law. i can tell you tt we are actively working with states around the country with new governors particularly about the flexibility that they have many of them aren't aware of the wide range of flexibility that they have to have cost savings in their medicaid programs and we are actively working to pvide teams of folks to go through the potential cost savings that other states have already implemented. >> i'm told that you have given a full waiver to three states. is that correct?

>> not of the maintenance of effort, no, sir. that has not ever been raised before. >> thank you. again, senator enzi raised this, but something we all knew about cbo garbage in, garbage out, but the people we give the responsibilities to, medical expert said both assertions that the cost will be brought down and let people keep their current health insurance if they like it, he strongly disagrees. i of course disagree, since there's 300,000 citizens in my state on medicare advantage. there's no doubt that their benefits under that program will be significantly changed, if not eliminated. i see my time has expired. i look forward, secretary -- madam secretary, on this issue

of medical malpractice reform. president told the american people tuesday night that he recognizes that this is an issue that needs to be addressed. we're going to find out whether the trial lawyers run this place or whether the american people and affordable health care is reachable for them, because without medical malpractice reform it makes that issue, if not impossible, certainly extremely difficult. we look forward to hearing your proposals as to how we can implement, such as been implemented in the state of texas. i thank you. >> i next will turn to senator franken. >> thank you, mr. chairman. speaking of the state taxes, just to pick up from senator mccain. my understanding is at the state of texas has this pretty dramatic rt reform, health care there is much, much more expensive than it is in my stat?

>> i think that is correct, senator. >> i want to address the ranking member who said that there's just like a few paragraphs tat people like in the bill. that's what we keep talking about. and as -- no, that is what i heard from the ranking member. if you go back and look at your opening statement, you'll see that, that that's what you said was in the marketing. is one of those paragraphs, i would think that people do like is getting rid of preexisting conditions is a reason to discriminate against achild or patient, right? that's pretty popular, isn't it? >> i think it's very popular with the american public, yes, sir. >> then the ranking member talked about the ability to buy the policy on the way to the emergency room. now, i've heard that and what that is about is, well, if you have preexisting condition, you don't have to buy a policy until

you get sick. that's what that characterization is, isn't it? i mean, is that your understanding of it? >> i think that's what the senator is referring to, that you can opt in and out of the market and only purchase coverage when you were sick. >> so isn't that the reason for the mandate? so in other words, when i he hear -- when i hear my friends who are opposed to this reform say people like -- we really like the nondiscrimination against people with preexisting conditions, but you can -- then you can buy a health policy on the way to the emergency room. well that's why you have the mandate, isn't it? >> well, the idea is to have a stable insurance pool and to pool risk. as a former regulator, that's important to have folks who have

coverage and some use it and some are not using it simultaneously. it would be like buying car insurance after you've had the wreck. >> right. so if you think of health care reform as a three legged stool, tell me if you agree with this analysis. first leg is you can't discriminate against people with preexisting conditions. i hear everyone say that they want that. the second part is, since that means that you could buy an insurance policy on the way to the emergency room, if -- you need a mandate so that everyone has insurance, so you can't buy insurance policy on the way to the emergency room, everyone would have it, right? the third part is subsidizing people who can't afford it.

that's why weave a sliding scale? is that a good analysis of what comprehensivhealth care reform is? >> i think if you look at the parts of the market that don't function very well right now, for individuals buying coverage and for a lot of the small business owners, having a much larger purchasing pool, having more people involved eliminating the preexisting condition limitation and then having everybody in is certainly the way to stabilize the private insurance market. as you know, that was a discussion that the insurers had and since this plan is built around the private insurer's market, it adopts that strategy. you can get rid of the preexisting condition if everyone is in thepool. >> exactly. i think this is really a discussion about a comprehensive health care reform and not just cherry picking certain paragraphs. i want to ask you about the medical loss ratio and the implementation of that. as you know, i fought for that, which basically says that

insurance companies that have large group policies have to use 85% of the premiums that they get on actual health care. 15% can go to marketing and administration and profits and 80% if it's an individual or small group. can you tell me a little bit about the implementation of this provision? >> senator, the provision has just been outlined. as you know, the congress and the affordable care act directed the nation's insurance commissioners who are elected and appointmented across the country and who regulate the private market to recommend a policy to us about the medical loss rio provision whh you've just outlined. they had a unanimous recommendation about what were the categories of health costs that should be included as medical costs, what should be outside and how it should be