credit which will be introduced through the welfare bill will mean that in every single case, no matter how few hours you are working you will always be better off in work and working more. and i think it's absolutely right and long overdue and i hope this issue will have support from right across the house oftm consumer price index something that will cost present and future pensioners, millions of pounds in lost incomes? how is that fair? how does that protect the vulnerable? >> the first point i'd make is that the state pension is under the triple lock going to be linked with whatever is highest but we are taking the step that the last government didn't for 10 years of relinking the state pension with earnings. and i think that is an absolutely vital step in giving

people the dignity and security that they deserve in old age. >> dr. julian. >> the government plans to ask this house to control the orders regime. i'm sure they wouldn't want to act without all the necessary information can he assure all honorable members that we will have the sight of the legislation before being asked to vote on the extension? >> my honorable friend makes an important point and obviously this is a very big change we are making from control orders to the new system and i'm sure the house will be consulted properly and proper prior site of what's being proposed will be made. but he can get involvede govern

meet the recommendations of your review and how it plans to do so with local authorities facing such huge cuts? >> well, she, i think, will see shortly the green paper on special education needs where we are giving priority to this area because as i know from my own experience often getting hold of a speech and language therapist is extremely difficult. now, of course, like every other area left lane be >> the british house of commons is in recess. you can find a video archive of

past pressures questions and links to the house of commons and prime ministers online. >> tomorrow, several guests discuss president obama's 2012 budget request. first, look at the low come home energy assistance program. then pete sepp and what he describes as in taxes in the budget. then a discussion of how past presidents have dealt with the fiscal budget with james thurber. >> one-quarter of all international internet traffic is basically involved in infringing on other people's intellectual property rights. >> virginia congressman bob

goodlatte. >> the c-span network provides coverage of politics, nonfiction books, and american history. it is available for you on television, radio, online, and on social media networking sites. we take c-span on the road with our digital us local content vehicle, britney resourced your community. it is washington your way, the c-span network, now more available in more than 1 million -- more than 100 million homes. up next, highlights from question period in the canadian house of commons. in this 25-minute program, cabinet ministers field questions on canada's border security policy.

also, questions on whether the government will freeze the canadian assets of the former tunisian president and his family. some family members of the leader are reportedly in canada. >> many have to use up their savings to meet obligations. they blow money on that extra tax cuts for the wealthiest 5% of corporations. why this in front of families? why do they hide corporate profits data like a state secret? >> let there be no doubt that the liberal had a plan to hike

taxes in canada. he is openly calling for a $6 billion tax increase. the liberal leader is demanding that the tax be included in the next budget. if we do not do this, it will be called for the next budget. >> the honorable member. >> mr. speaker, it just does not add up. conservative tax cuts are only going to the wealthiest 5% of canadian businesses, whose tax cuts have already been cut by 35% and are already globally competitive. for small business, there is no tax cut, only a tax increase. conservatives are putting a job-killing tax on every employer and employee in this country. why the unlimited march that for the privileged few but none for small businesses or families?

[applause] >> the honorable government house leader. >> the federation of business has spoken out in favor of our job creation taxation policy and spoken against the liberal leader's plan to increase taxes by $6 billion. this is a reckless tax increase. the liberal leader calls himself a tax and spend liberal. >> the honorable leader. >> this government refuses to give answers about their pet projects, there reckless spending schemes. $16 billion, up $20 billion, maybe more for stealth fighter jets. $13 billion for a u.s.-style

mega jail. $6 billion a year for tax cuts to the privileged few. nothing for early learning or for students or for skills? why do not hard-pressed families make it onto the conservative agenda? >> our pet project is job creation and economic growth. to liberal leader's plan blackmail this government into raising taxes by $6 billion, he will go against the budget. this is wrong for canada. we know that those taxes are a magnet for jobs and opportunity. we know raising $6 billion in taxes would kill jobs, kill hope, and kill opportunity. >> less than 24 hours going to switzerland would freeze the assets of mubarak.

switzerland acted quickly in freezing the assets of a tunisian dictator and his entourage. family members are here in canada and have been four weeks. we still do not know whether canada has frozen their assets. is the government able to tell us whether canada has frozen the assets of member of the entourage? there is a precondition, mr. speaker. i have said this many times to my colleagues. the request has come from the tunisian government. in the case of egypt, it came from egypt to a number of countries. the request has to come from the tunisian government. we will continue to work closely with tunisian authorities. my colleague, the justice member -- the justice minister, is looking at all options.

mr. speaker, here is another example of misinformation from this government. the minister of foreign affairs suggested to the house that there have been no request from tunisian authorities to have canada freeze the assets of a former dictator or his family members. that is not true. how can he deny the numerous requests made to the canadian government to do what was needed to do to freeze the assets? the honorable minister of foreign affairs. >> mr. speaker, i have always been clear in answering my colleague's questions. tunisian authorities have taken steps. we encourage them to take steps so that we could develop options together to provide for a freeze of the assets. >> how can the minister

maintained his version of the facts that there was no request, when there is a communication from the tunisian embassy dated january 26. the necessary steps have been taken by the embassy with canadian authorities to freeze and protect the assets held by deposed president and his family. what is the minister waiting for? what does he need to proceed with the freeze of the assets on his family? >> if my colleague was to look over the transcript from yesterday, he would see that he started by talking about egypt.

with respect to egypt, we still have the received any requests. i went on to specify that we were willing to work together with tunisian authorities to freeze the assets of those that are not welcome in canada. >> when the foreign affairs minister answered earlier that the question about freezing his assets was not clear, the question was, is canada going to freeze the assets? the minister cannot pretend that he did not understand the question. i have said many times that the request has to come from the tunisian government. since that request has come from the tunisian government, how does he explain the fact that he still has not done anything? my honorable colleague did not read the full preamble.

it clearly referred to egypt. i said that the first that has to be the country asking us to intervene. this applies to all countries, mr. speaker. as i have been saying for some days and some weeks, we are working very closely with the tunisian government to develop options to freeze the assets of those that are on welcome in canada. i will start my preamble over with egypt. switzerland, one day after mubarak falls, they froze the mubarak family's assets. we go to tunisia. for a long time, they have been asking for those assets to be frozen. forget about egypt, can he answer about tunisia? >> order. >> i will try to bring the block leader back down to more

extensible levels. if he wants to quote the preamble, that was about egypt. he could maybe take his head out of the sand. maybe that would do some good. >> mr. speaker, the parliamentary government office condemn the government's obsession with secrecy. they do not have the confidence to justify withholding documents that are essential to his work and hours. the expenditure reduction plan is an example. when will you get it through your cab that it is a basic principle. the parkland -- parliament authorizes spending. when will the government stop hiding this from cost? the honorable president of the

treasury board. >> it is an interesting question. just yesterday, i had another meeting with the parliamentary budget officer. if there is any document that it is hard for him to get, all that he has to do is give me a call and we will see if there are any documents. there are also speculation's established in the house. he just has to give me a call to get those documents. >> and he may be able to have a beer with kevin. he said that parliament needs greater transparency. as in 2005 and 2006, the government should release a list of cuts by department.

we need that to do our job. why is this confidential? what is the government trying to hide? >> mr. speaker, there was no fear yester day because we change policies from the previous government's on alcohol and hospitality. also, mr. speaker, the officer said just yesterday that our plan to reduce the deficit is advanced for $5 billion. that is not our opinion. it was his opinion that we are making headway and we are ahead

of schedule. >> the new office is being set up not in the biggest kate white, but 400 kilometers away. that will mean more guns and drugs crossing our borders. why are they putting political games in front of public safety. why will they not take responsibility for partisan interference? >> the honorable minister of public safety. >> the border services agency would be done to have a sufficiently save taxpayer money. he has been chosen -- this has been chosen as the location for the new headquarters office. our support the selection. >> the -- >> mr. speaker, people need more reassuring

about the securing of their borders. services at the border crossings will be reduced. some will simply be caught. as well as four offices. when will this government listen to reason? >> propaganda continues. careful considered -- consideration was given on continuing services as well as the proximity of another port of entry. cbsa has told hundred service points across the nation. over 91 million travelers

annually. they averaged " travelers a day and no commercial vehicles. there is a port of entry to 10 kilometers distant. a season average of 56 travelers per day. >> whether they're hiding the documents together from canadians, the conservatives are deceiving canadians. they are operating an agenda of deception. the conservatives said know. they refuse to provide the documents to parliament. why are the conservative stonewalling parliament? why are they trying to hide the true cost of their right wing agenda from canadian taxpayers? >> order. >> why is that honorable member

tried to hide the true position? a member of the house claim that the organization represents small businesses from all across canada. he is supporting a $6 billion increase on job creators. we found that was not their position. >> apologized. >> mr. speaker, our american neighbors have summoned the prime minister to discuss border security. this is an agreement that concerns canadians. they are poised to close three border crossings by april. can the minister say clearly if bay and tend to close the customs -- yes or no.

>> there are 1200 service points across canada. over 91 million travelers go through there annually. there is a season average of 12 travelers per day and no commercial vehicles. there is a 24/7 port of entry 10 kilometers distance. there is another that averages 56 travelers a day and three commercial vehicles. there is a 24/7 port of entry, 16 kilometers distance. >> actually reaching earthquake victims in haiti. could we update the house on the progress of the $250 million of matching funds that the government has committed? >> the honorable minister. order.

oerder, pl -- order, please. the minister has the floor. >> i am pleased to report on our work in haiti. canada has responded overwhelmingly. two-thirds of the commitment has been disbursed. we continue to work with the commission on behalf of the haitian people to improve their quality of life. >> a meeting between a minister and a lobbyist should never start with the words, here is a bag full of cash. that is michael sweeney holding a ritzy fund raiser. here is a sack full of cash. how about that clean energy fund that i needed? that is enough to make carl blush and he does not do that easily. my question is simple. why is she still in the front

row after this shakedown of conservative lobbyists? >> the prime minister. >> she is an outstanding minister. [applause] the commissioner said in the report, the minister did not undermine the conflict of interest act and went on to say that this minister was not involved in the recruitment of these volunteers and they therefore did not accept any services or contributions. she has followed all of the rules. >> mr. speaker, we are constantly undermining our international relations -- we have learned that the american administration intends to

introduce this to any canadian that goes to the united states by plane or boat. how did we get to that? >> the honorable minister of foreign affairs. >> mr. speaker, at a time of the global recovery, we find it in the best interests of -- of both cover countries to find interests that increase both of us. but the president and the prime minister decided on two weeks ago was prosperity -- this idea of an entry fee, it is just a jobs idea right now.

>> canadians have always been exempted from paying entry fees to our neighbors. this was based on our exceptional relationship with the united states. we are their main trading partner. the idea of doing away with this has a deterioration in our relationship with our neighbors and it is the first piece of bad news. why is the prime minister not protecting our interests? >> mr. speaker, i think my colleague was mistaken when he said that our relationship with our american neighbors is at their lowest point. he may recall the relationship

between the liberal government and the americans. i would say that we are at a stage -- we are talking about the budget of 2012 and the 2011 budget has not been passed yet. >> the cyber attack on the canadian government is truly disturbing. all the conservatives are trying to downplay the importance of this attack, it is obvious that they did not take this seriously. the hackers were able to in fact leave the very department just a week before the budget. we still do not know if anything else has been compromised. mr. speaker, will the government tell us what departments were infiltrated and what damage was caused? >> the honorable minister of public safety. >> we do not comment on the details of security-related

incidents. measures are in place to address these. i will point out that the next phase of our economic action plan is in development. budget security was not compromised. >> it is obvious that this cyber attack caught the conservatives completely unprepared. these are not the work of suburban kids in their bedrooms. they are sophisticated and organize. this government has been warned many times before including by the general years ago. we have seen similar attacks on the u.s. and u.k. and they have taken measures to protect themselves against these crimes. instead of bureaucrats working out of starbucks with for wifi, what measures will the government take to make sure that this never happens again? >> it appears that this member has finally woken up to this issue. that has been a talking point

for quite some time. secure cyberspace is vital to building canada's economic advantage. we are investing $90 million over five years including increased investment around the clock to combat all types of hackers and cyber attacks. >> the conservatives and up look like the president's doormat with every deal we make with the united states. the prime minister claim that this time, things would be different. president obama is try to slap a newfee on canadians crossing the border. is this why the prime minister is keeping this new deal secret? canadians deserve answers and accountability. why will they not get it? >> the honorable minister of foreign affairs. >> we think this is a very bad

idea, mr. speaker, particularly at a time when we are working on the global economic recovery. we know that remains fragile. that is one reason why the prime minister of the united states and -- prime minister and the president got together. we are finding ways to create new jobs in this country. mr. speaker, we will be able to make sure that that happens. >> on tuesday, a discussion on >> and look at the home energy assistance plan. then pete sepp outlined what he considers hidden taxes contained in the budget. later, a discussion on how past

presidents have dealt with fiscal matters with james thurber. that is live at 7:00 a.m. eastern here on c-span. on tuesday, a conference on the credit card accountability and disclosure act. elizabeth warren will lead the conference. participants include industry executives and leading advocates. you can watch live coverage2 at 9:00 a.m. eastern on coverage -- on c-span2. on tuesday, a discussion on the future of social security and one of the programs current trustees. it will hosted by the institute for women's policy research at the woodrow wilson international center for scholars.

watch a live coverage at 3:00 p.m. eastern on c-span2. >> this monday, is that the public and private spaces of america's most recognizable home, the white house. c-span's original documentary provides a look at the history of the presidential residence and takes you through the manchin and the lincoln bedroom, and focuses on the presidents and first families who most influence tallows today. bearing in high-definition and newly updated with interviews with the obamas and the bushes, inside america's most famous home this monday at 6:00 p.m. eastern here on c-span. >> you are watching c-span, bringing you politics and public affairs. every morning it is "washington journal," our live call-in program about the news of the day, connecting you with elected officials, policymakers, and journalists. weekdays, watch live coverage of the u.s. house, and on weeknights, congressional hearings and policy forums.

also supreme court oral arguments. on the weekends, you can see our signature interview programs. on saturdays, "the communicators," and on sundays, "newsmakers," "q&a," and prime minister's questions from the british house of commons. you can also watch our programming any time at c-span.org, and it is all searchable at our c-span video library. c-span -- washington your way, a public service created by america's cable companies. >> now of house financial- services as on how on new regulations might affect the business market. first remarks from the head of the commodities futures trading commission. also statements from business to deal with the regulations. this is two hours and 35 minutes.

>> i urge members to submit a brief statement so that we can move along. we will adhere to that 10 minutes on each side. without objection, all members written statements will be made a part of the record. i want to welcome our witnesses and look forward to your testimony. and what that, i recognize the ranking member for his opening statement. >> thank you, mr. chairman. i will be -- a last to be recognized within three minutes. the hearing today is a prelude

to an important set of decisions we will be making today on the floor. we have two very able and dedicated regulators who were seemingly cooperated with us, we actually have three, but he is not on the floor this week with his appropriations. the budget that we have been presented for the securities and exchange commission and the commodity futures trading commission prevent them from doing the job the american people need them to do. the cftc is a very small agency compared to the massive industry we have asked them to regulate. i believe it is clear we will hear from more about this, but the lack of regulation and derivatives and various aspects contributed greatly to the

financial crisis. we gave the commodity futures trading commission and the sec instructions for some latitude on how to deal with that. we are at this point bank in jeopardy of their not being able to carry out that mandate. they have other responsibilities that are in jeopardy. i hope that we will as we go through this hearing and talk about the importance that this be done awfully and in coordination between the sec and cftc, keep in mind that an absence of funding, it will make all of this invalid. agencies not well funded and are not going to do a good job. i would say to the people in the industry, laws and rules that have been adopted, the rules about to be promulgated, it is not in anyone's interest to have

agencies that are now well funded, not able to have the equipment they need, the personnel that they need to carry these out. and that, i think, is the overhanging question as we go through this hearing. we are about to debate a budget from my republican colleagues that will provide such inadequate funding for the sec and cftc as to make all of this academic. i will be offering an amendment to increase funding for the sec. the cftc did not come within the jurisdiction of this committee so i had no amendment. there are some proposals to increase its funding and i hope to adopt it. we will be voting on amendments to raise the sec, not to level that i think it should be at, but closer. even to those that are critical, on funding the rules

they remain in place is the worst of all approaches. >> i think the ranking member. you are recognized for one member -- for one minute. >> won the lessons, a great symbol of america's financial strength is that our markets are now competing against mature financial clubs throughout europe and asia. many of this competition comes because of the unfriendly business environment we have managed to create here in the united states. we have the second highest corporate tax rate in the developed world. we have the most active trial bar in the world. and we have our regulatory structure that burdens business without yielding many benefits. in the derivatives rum, if transaction costs to end-users of derivatives increased because of duplicative rules, because of

complex, unworkable prescriptions, because of damage to liquidity, then and users simply will send their business to european dealers, whether it is artless ord deutsche bank, a two-man -- with whom many already have trading relationships. a complex regulatory structure their recognize this will do little to protect investors but will benefit the is growing financial hubs around the world. title vii was not what i would like to obscene, but it gave the regulators the supposed grown- ups in the room the final say. unfortunately, all signs so far indicate that this too was a mistake. i look forward to hearing from the panel and i yield back. >

>> it is critical to work together to make sure that the implementation of title vii is done right. it will have an impact on our financial sector and overall economy. as we work our way through the rulemaking process, it is important that is accomplished in a thoughtful and transparent manner in that the necessary regulatory certainty be provided for all market precipitancy. -- participants. if more time is needed to adequately implement the law, we must ensure that the new rules are consistent with the congressional intent. i let all our to continuing this discussion in hearing from our witnesses and yield back.

>> mr. scott, two minutes. >> as we have seen from the recent financial crisis, derivatives bring with them and number of certain potential dangers, if not properly back with capital or at the market lacks specific -- transparency. but derivatives do serve a very valuable purses -- purpose for american businesses by protecting them against the legitimate risk. dodd-frank passed in large part by our committee aims to regulate credit defaults swabs and other derivatives. title vii requires central clearing and exchange trading for derivatives they can, and i emphasize can be clear, and provide the role of both regulator and clearing houses in determining which contracts should be cleared. in addition, the law adds financial safeguards by ensuring that dealers in major swap participants have adequate resources to meet their

responsibilities. regulators now have the authority to impose capital market requirements to swap dealers and major participants. these regulations on derivatives were passed as part of dodd-frank to increase accountability and transparency and to encourage stability in financial markets following the 2008 crisis. however, the effectiveness of this lot depends heavily on how such rules are implemented by the regulators. and i look forward to hearing opinions from today's witnesses on how the requirements enacted in the dodd-frank are being adhered to now, and how the regulatory processes are proceeding, and how they are encouraging to increase financial stability, which is the end result we all seek. thank you, mr. chairman. >> i thank the entire panel. over the last several months, there is been a tremendous volume of discussion on all the

rulemaking coming out of dodd- frank and the profound effects it will have on the derivative markets in the broader economy as well. when you look at this freight train of rulemaking that is running down the tracks to a july deadline, not enough alarm has been raised of the devastating impact that this rule making may have on the u.s.-based derivative marketplace. when i talk to participants, when they talk about rulemaking in his current form implemented, it could literally spell the end of u.s.-based derivatives markets. the negative consequences are many and far-reaching to make it prohibitively expensive for small companies to involved in risk litigation, making it possible for many of our -- impossible for our firms to compete around the world. the real world impacts will be failed and loss of jobs, lots of jobs.

we -- millions of manufacturing jobs have been lost over the last several years, but we still remain teased leader in financial-services. but these rules are implemented as is, that will no longer be the case. we will hemorrhaged million of excellent high-paying jobs to other localities around the world where there will be little real appetite apollo some of the outlandish rulemaking that are part of a grand, i would say unnecessary, expands to have massive consequence. it is bad enough that title vii was written middle -- in the middle of the last night of the dodd-frank conference back in june. let's not exacerbate the mistakes made that looked night by rushing through a rules making process than is even more far-reaching than contemplated by the bill's authors. derivatives have been a favorite whipping boy of many critics. if we continue down this road, and there is not a lot of time to change course, this literally may not be a u.s.-based market

to kick around in this country anymore. i yield back. >> mr. lynch for three minutes. >> i like to think the witnesses for coming to this committee today to help us with our work. the derivatives part of dodd- frank is central to reforming our markets. i think it caused a lot of difficulty in pain of the financial crisis. the interconnectedness of derivative products and their use magnified anonymous counterparties that concentrated risk outside the risk -- -- our regulatory framework. we have asked the sec and at dcc to begin the process of regulating the over-the-counter derivatives market. neither agency has held

jurisdiction over it in the past. unconcerned that these increased responsibilities, the that they have received klatt funding with the extension of the continuing resolution. the ability of the agencies to police the market and force commodities laws is severely limited under current funding levels. particularly concerning is that by holding these agencies to lower levels, neither has been able to hire the staff and expertise differing from their prior responsibilities. the republican puzzle for a full-year continuing resolution would cut millions from their budget, and that would force both of these agencies with new responsibilities to lay off staff. we need to ensure that they have the tools and resources needed to complete the objectives that congress has let up. do not run by a rigid worry about the market's running to

europe. they are trying to strengthen their markets the way that we are. this is a red herring. you think this regulation is costly, what about the trillions we just lost by not regulating the market? i look forward to your testimony. >> mr. mchenry for one minute. >> thank you for yielding time. over the past decades, the derivatives market is as sophisticated and essential market for businesses of all tied. it is vital that the regulators empowered under dodd-frank continue to allow american businesses to manage the risk and protect themselves against market volatility -- volatility. this is about jobs. higher capital requirements could cost end-users on main street billions of dollars each year and put up to 130,000 jobs at risk. that is something we simply

cannot afford to do while our economy is continue to regain its strong footing. i would encourage the regulators to keep this in mind, and the oversight hearings here in congress will keep that in mind. >> i'll yield back my time. >> miss hayworth. >> thank you. senior colleagues of rightly noted that united states is becoming increasingly hostile environment for investors. i am very concerned that our highest duty in this congress is to assure the security and freedom of our nation and our people. the specifics of what we do here at the material effect on jobs. and on prosperity. that is literally that dignity and sustenance of our families. if we in peed enterprise, as would be the case through excess

of regulation had in use of derivatives, one fortune 100 employer in my district would have to curtail investment to meet capital requirements as may be specified in dodd-frank, and then we will lose our mission as a congress and endanger our future as a nation. i look forward to hearing your comments on how we can relieve the burden from our american enterprise. i yield back my time. >> i want to thank the witnesses for their time for coming out today. i certainly share some of the concerns addressed by some of my colleagues today. derivatives have been efficiently used for significant periods of time. by reducing risk and price volatility, increasing stability, these derivative markets directly benefited

companies, employs, consumers, and our overall economy. in the past several years, serving companies have made mistakes in the derivative market, to be sure. they did not verify that there counterparties had sufficient collateral. they did not verify that counterparties at the ability to pay. they did not determine whether the counterparties had too much exposures and other derivative markets. as far as i can tell, the end users did not make these mistakes systematically. and now they're faced with an uncertain prospect of margin regulations that set on sufficiently changed their longstanding business models while focusing to deploy capital inefficiently. this will unnecessarily forced scarce capital to be unproductive lead on the sidelines. i believe it will lose jobs here in the united states and will damage our economy. instead of reducing risk and reducing price volatility and increasing stability for

businesses, employees, consumers, and i believe all americans will get the offset risk that would otherwise have been important to the derivative market. i think the chairman for the time and i yield back. >> ms. waters for one minute. >> dodd-frank was designed to address the lack of transparency and capital and the derivative markets, to prevent the industry and its clients from needing another taxpayer-funded bailout. it calls for the sec and cftc to regulate the otc derivatives market, the preapproved contracts, and to punish bad actors. dodd-frank charges the sec to promulgate seven rules to implement row forced to the otc market. some critics incorrectly say

that these reforms to the otc market will result in fewer jobs. on the country, creating the system of transparency and regulation allows market participants to know what the rules of the game are and protect them from the impact of reckless trading of the sort that led to the 2008 financial crisis. we saw that impact in 2008. two years later, we're still seeing high unemployment, lack of credit, and limited business investment the resulted from the 2008 financial crisis. dodd-frank will provide the transparency and regulation that the otc market needs to protect counterparties and taxpayers. in the process, it will save jobs. thank you, mr. chairman. >> 1.5 minutes. >> thank you for being here today, members of the panel.

the breadth of the rule making is extraordinary. they're making 10 times the amount of rules per year than they did before dodd-frank was passed. that amount of time it takes from a rule to get from propose to implementation has been halved at the sec. these two agencies along with the federal reserve and others have been asked to take on an incredible task that has serious implications for our financial markets and economies. dodd-frank left a great deal of discretion to the agencies. that is why today's hearing is so important. our job is to ensure that as the federal agencies like these rules, they do not negatively impact the ability to hedge risk in our economy. from my experience in the private sector where i worked with derivatives, i know have important the ability of a company to hedge its risks using its risks is to our economy

into are consummate. many of the benefits of derivatives are hidden to consumers. when our fellow citizens go to the store to buy gas, clothes, or whatever else, they sometimes do not realize that the affordability of these products is due in large part to the manufacturer's ability to hedge risk. i look forward to hearing from today's witnesses on this important issue and i yield back my time. >> mr. carson for one minute. >> i welcome the opportunity to review dodd-frank to ensure the bill accomplishes what we intended to do when it was written last year. i am deeply opposed to the fund in the bill because our friends on the other side proposed last year and continue to be opposed. the bottom line is that no legislation is perfect, and the opposition has a right to propose changes. however, banks and financial institutions have brought reform upon themselves.

it was for their carelessness and disregard for the rights of citizens that our economy nearly collapsed and spurred action by congress and the first place. >> the last speaker on our side for 1.5 minutes. >> thank you, mr. chairman. i would like to thank the witnesses for being here today. it is really important that we get title vii right. their companies in my district, including american electric power, who are end-users. that company has 4000 jobs in my district. many other companies use them to reduce risk in their business model. i'm concerned about the inconsistency between the sec and cftc on their rules and regulations, especially with regard to the definition of dealer or trader, as well as capital requirements. because this is so important, both to reducing risk in our system, the cost the consumer,

and jobs in our district, i really look forward to hearing from the witnesses and working with the witnesses to make sure we take a consistent approach and it does not affect jobs or increase prices, but looks out for the safety and soundness of the system. thank you so much, and think you, mr. chairman, for holding this hearing. >> thank you. and now we introduce our first panel. we have the honorable mary schapiro, the honorable gary gensler, and the honorable daniel tarullo, a member of the federal reserve board. i want to welcome all of our witnesses. without objection, your written statements will be made a part of the record. you will each be recognized for five minutes to give a summary of your testimony. chairman schapiro.

>> thank you for inviting me to testify on behalf of the security and exchange commission on our implementation of titles vii and viii. as you know, these provisions are intended to bring greater oversight and transparency to the derivatives market and the clearing, paving, and settling activity. to increase the stability of our financial system. while implementing these provisions are complex and challenging undertaking in light of our other regulatory responsibilities, we have recognized the importance of this task and we are committed to getting it right. these rules are intended to reduce counterparty risk by bringing transparency and centralized clearing to security-based law, reduce systemic risk, protect investors by increasing disclosure, and establish a regulatory framework that allows of otc derivatives markets to continue to develop in a transparent, efficient,

accessible, and competitive manner. since passage, we have been engaged in an open and transparent implementation process, seeking input on the various rules from interested parties even before issuing rule proposals. our staff has sought meetings with a broad cross-section of interested parties. we join with the cftc in holding public round tables and we have been meeting regularly with other financial regulators to ensure consistent and comparable definitions and requirements across the rulemaking landscape. to date, the sec has proposed nine swap-related rules, among them rose to adjust to a conference of interest at agencies come execution facilities, and exchanges that trade security-based swaps. rules that would specify who must report transactions, what information must be reported, and where and when it must be reported. rules that or require security- based swap data repositories to register with the sec, rules

that would define security- spacewalk's facilities and establish requirements for their registration and ongoing operations, and rules that would specify information that clearing agencies would provide to the sec in order for us to determine if the swaps must be cleared and specified the steps that users must follow in the clearing requirements. we propose rules regarding the definition of many of the terms under the act. our staff also has worked closely with the federal reserve board and the cftc to develop a common framework to provide market utilities such as clearance agencies which are designated by the financial stability oversight council as systemically important. in the coming months, we have set proposed rule regarding standards and governing of clearing agencies, rules to establish registration procedures for security-based swap dealers and major

agencies, and regarding moderate-income segregation, and record-keeping requirements for dealers and participants. we will also propose joint rules with the cftc governing their security-space what and regulation of new swaps. we recognize the magnitude and interconnectedness of the derivatives market. so we intend to move forward at a deliberate pace, continuing to thoughtfully considered issues before posing and adopting any specific role. dodd-frank provides the fcc with important tools to better meet the challenges of today's financial marketplace, and fulfill our mission to protect investors, maintain fair, orderly, and efficient markets, and to facilitate capital formation. as we proceed with implementation, we look forward to working closely with congress, a fellow regulators, and members of the financial community and the investing public. thank you for inviting me to share our progress and i look forward to answering your

questions. >> chairman gensler. >> congratulations on your chairmanship. i thank you for inviting me here to speak about dodd-frank, and i am pleased to testify on behalf of the commodities futures trading commission. i want to thank my fellow commissioners and all of the staff at the cftc for their hard work and dedication for fulfilling the mission. i am pleased to testify along with chairman schapiro and governor turullo. this is the first time we are appearing in public together at a hearing. it reminds me in 2008 that the financial system and the financial regulatory system both failed the american public. it was not one or the other but i think it was in fact a. the effect of that crisis reverberated throughout the american economies and the u.s., hundreds of billions of taxpayer

dollars were put on the line to bail out the financial system. ultimately to secure the american public economy. but millions of jobs have been lost and are still lost. the the crisis has many causes, the unregulated swaps paid a central role and congress responded in passing dodd-frank specifically entitled vii to bring in transparency and lower risk in this swaps market. the cftc is working closely with the sec and other regulators to implement those procedures. we're coordinating our consultations internationally, and we have received thousands of commons from the public, both before we may propose rules and after we made some proposals, to inform the commission and yes, we will find -- change the final rules based on those comments. one area where we seek input is in regard to the implementation of various requirements of

margin, which many members here have raised with us. in dodd-frank, congress recognize different levels of risk posed by transactions between financial entities on the one hand and those involved with non-financial entities, what many people are calling end-users. consistent with this, with what congress said that the non- financial in users would be exempt from clearing, we believe that the cftc should focus only on transactions between financial entities rather than those transactions with the non- financial end-users that so many members have talked about in their opening statements. to adequately fulfill our statutory mandate, the cftc does require additional resources. the u.s. futures market today is $40 trillion notional size. the u.s. swaps market, roughly $300 trillion, far more complicated, very important for the end-users to have

transparency, openness, and competition. yesterday the president submits his fiscal 2012 budget which included funding for the cftc. this is essential for us to be able to fill our mission. in 1992, our agency had 634 people. it shrank down to 440 people in 2008, right in the middle of the crisis. only last year with the help of this committee and all of congress do we get back to our 1990 head count, about 680 people. but staff is not enough. technology is critical. the only way to regulate these gas markets is with sufficient funding and technology to beat each fission. our small agency has to be efficient, working closely with the sec and international regulators. furthermore, if it returns to the 2008 level when we were only 440 people, the agency would be unable to fulfill a statutory

mission. every program would be affected. enforcement, we could not pursue ponzi schemes and other fraud and market manipulation, we would have to develop a back log regulation applications and the like. the cftc is a good investment for the american people. its mission is to promote transparency, openness, competitive markets, with lower cost to end users and help promote economic activity. we will get this margin thing right. we understand congressional intent on that. the cftc is the cop on the beat that insures the markets are protected from fraud, manipulation, and other abuse. i look forward to working with congress to ensure that we can accomplish our mission to protect the public. thank you and i would be happy to take questions. >> thank you. governor? >> thank you, mr. chairman, ranking member frank, and other members of the committee. i appreciate the opportunity to

provide the federal reserve board's use of the implementation of titles vii of dodd-frank. the boards of responsibilities fall into three broad areas prefers, consultation and coordination with other parties, both foreign and domestic. dodd-frank requires the cftc to consult with the board dodd- frank to--- to implement title vii. we have familiarity with market and data sources to assist the commission. important coordination activities related to derivatives regulation are occurring internationally. most prominently, the group of 20, or g-20 leaders, set up commitments related to reforms of the otc derivatives markets that would form a broadly consistent international regulatory approach. the apostle committee on banking supervision has strengthened --

basel committee on banking supervision has increased liquidity standards. the committee on payment and settlement systems is working with the international organization of securities commissions to update international standards for systemically important clearing systems. including central counterparties the clear derivative instruments and trade repositories. the goal all these efforts is to ensure a level playing field that will promote both financial stability and fair competitive conditions by preventing activity from slowing -- falling to less regulated divisions. the second task of the federal reserve with respect to titled vii relates to the strengthening of the infrastructure. central counterparties are given an expanded role in the clearing and settlement of swap and security-based swap transactions. if properly designed to manage, and overseen, central counterparties offer an

important tools for managing counterparty credit risk and thus reduce risk the market participants and to the financial system. . vii title vii complement's this. this oversight is important because financial market utilities such as central counterparties concentrate risk and thus have the potential to transmit shop throughout the financial market. as part of title viii, the board was given new authority to provide emergency liquidity in unusual and exits and circumstances to systemically important market utilities. we are carefully considering how to implement this provision in a manner that protects taxpayers and limits the rise in moral hazard. the third task committed to the board by dodd-frank with respect to title vii is a provision for capital and margin requirements are essential to the provincial regulation of institutions

active in the derivatives market, as well as to the internal risk-management processes of those firms. the major rulemaking responsibility is to adopt capital and margin reckitt manners -- regulations for the non-clearing swaps of banks and other non-potentially regulated swap participants. the board in the other u.s. banking agencies played a role in the liquid year regime agreed to in the basel committee. these requirements will strengthen the prudential framework by increasing risk- based capital and leverage requirements, and by requiring banks to hold a higher buffer of high-quality liquid assets to address needs from their derivatives portfolio. it also requires regulators to adopt rules on non-cleared

swaps, to which swap dealers are major swap participants that they supervise our party. the staff to read these requirements be risk-based. within this has to rigid constraints, we are working to implement the marton provisions in a way that takes the appropriate account of the relatively low systemic risk posed by most and users. for example, one approach under consideration is to allow banking organization that is a dealer or a major participant to establish a threshold with respect to an end user counterparties, based on a credit exposure limit that is approved and monitored as part of the credit approval process. below which, the end user would not have to post margin. the board understands that posting margins can inhibit their ability to manage their risks. the board also believes that the margin regime should be applied

only to contracts entered into after the new requirement becomes effective. thank you for your attention and i would be pleased to answer any questions you might have. >> thank you. there were two presidents in region history -- in recent history to actually reduce the government's spending as a percentage of gdp, and that was president clinton and president reagan. so i say that in a bipartisan way, one on each side. part of that was a growing economy. i think that will be the key to us facing our national debt and deficit. i want to applaud chairman can serve -- gensler, your statement today, and that is all in user would be exempt from cftc clearing and margin requirements? on over-the-counter swaps?

>> consistent with how congress exempted the non-financial end- users from clearing, as we take up the rules that the cftc which we hope to in the near term, that the same end users, the 287 provision in the statute, they would not have any margin requirements consistent -- really consistent with what congress did with the clearing requirement. the transactions, the financial, anthony consistent with what congress did, and we are still sorting through the proposals to put them forward to the public and get commons. >> i know members on the majority feel it is critically important that we do not impose margin requirements for clearing requirements on end-users. and by end users, you said non- financial companies. those that hedge risk as part of their inherent business.

>> that is correct. hedging is important. tens of thousands of commercial end-users use these products, do so successfully, did so before 2008, and need for our economy to prosper. dodd-frank promote transparent and open, and competitive markets. and these markets that the lowest pricing. i believe dodd-frank will lower cost to these commercial end- users because of the transparency and competitiveness, and also because they will be less prone to risk. the american people did sign behind the $700 billion in the park. it is a balancing that actually congress put forward. >> the $700 billion, none of that was the result of commercial on non-financial and users. >> but it did at its core had the risk from the on regular is what marketplace, particularly

credit defaults watch, and we all know the story of aig. >> i appreciate you. do we need legislation to clarify that these over-the- counter swaps will not be required to have margin requirements? or clearing? >> with the cftc believe that as well written any gives a sufficient authority to ensure that such margin requirements on us what dillard does not cover the non-financial entities. that authority is there for us. of course always subject to notice and public comment. >> governor, you have looked at that provision. do you agree crush margins and what we have done is to read this at you as it is written. the statute as written tells us each regular stop partisan for

which there is a prudential regulators past and meet various marton -- martin and capital requirements. that applies broadly, and there is obviously no exception provided for any class of counterparty. however, the statute goes on to say that the standard shelby written. we shall be written. -- the standards shall be written. what we are thinking in terms of is a risk-based approach to margin requirement which would recognize that for and users generally, there is much restless associated with derivatives transactions -- much less risk associated with derivatives transaction. if this approach turns out to be the one that we adopt and 1

being worked on internal and now, it would create these thresholds within which or under which margins would not be required. precisely because and users in general present substantially less systemic risk, and in many cases no systemic risk, those monetary requirements -- the threshold for end-users would be substantially higher than those for financial market participants. >> let me very briefly -- i think the proper sequencing of your rules needs to have a definition of swap and commercial risk prior to some of your other definitions. are you aware that you will need to define those terms fairly soon? >> the statute defines many terms, and we've jointly with

the sec put up proposals in december on swap dealer, major part -- swap participant, and a lot. that closes february 22. we encourage the public and we oppose this on our website, if you have comments on any of our proposals at the cftc, even if the comment period is close, please include them in that definition, and said that we can consider them. we do have discretion even after commentary has close to get those comments to the right file. i know the commissioner will read them. >> but the definition of swap and commercial risk, the other definitions are going to depend on that. >> the definition of commercial risk, we put out in december. that is through the same period of february 22. we look forward to hearing brought the from the public whether we got that right consistent with what congress did. >> i think we all serious concern that week that the

sequencing right. those who have to comment need to understand the full scope of potential implications of all the rules on them. whether or not they are going to be determined to be a dealer or a major swap a participant or some other type of participant in the marketplace. we've gotten all lot of that done. the important issues of swap, security-space lot, the basic statutory definitions, but there is more work to do and we're very committed to getting those out quickly. >> ranking member frank. >> let me ask mr. gensler, utah about, and i assume this schapiro tested, we will not cede market requirements imposed on end-users and they do not have to clear. i want to address those and therefore nothing is changed. you mentioned transparency. what will be the effect with

regard to end-users? >> swaps have to be reported to the car trade repositories. -- to the trade repositories. >> i had visitation in my mind for a couple of people in the financial industry, one of the younger one. they said they had these problems. i said, we're not going after the end users. that is what they do not like. people could come in ahead of us. that meant he was afraid of competition. and his older colleagues said, we're not really advancing the argument. we're not talking about margin requirements and clearing requirements but reporting requirements. if i'm correct, he advantage kids the end users the ability to get a better price. they will not be captive. they will know what other people are charging. secondly, you will not have an unknown quantity in the economy.

will there be mechanisms for keeping track of what the totals are out there? >> i think the transparency is a critical piece there. it allows market participants to understand, the price that the transactions have occurred, and they will encourage price competition. there is a provision that will allow for block trades to be disseminated on a delayed basis, so that the concern about for a large -- the front running for the hedging of a large position to be dealt with the the delay dissemination. >> we are talking about making a more pro-competitive. i want to ask you about the budget proposal. to be more thorough, at the levels that had been proposed in the budget came out of the

appropriations committee, mr. gensler, what affect will that have on your ability to do this? >> the number, i believe, will take this from $168 million in the continuing resolution down to $112 million. we have to have significant curtailment of our staff and resources. we would not be able to police or ensure transparency markets in futures or swaps. >> the new responsibilities you get for the derivative markets, and the financial part, the aig part, you would not be will the undertake those responsibilities? >> there is no doubt in my mind. we would have to go from 680 staff -- actually smaller than 444 the whole year, because we are already halfway through the year. we would have to shrink further than that. >> you get the new

responsibilities. what would be the effect of the proposed budget be on your ability to carry those out? >> it will have a very real effect on the sec possibility, not just with respect to dodd- frank, but also our core mission, already impacted by the continuing resolution. but we have responsibilities now for a hedge fund examinations after they are registered in july. we have to build the registration capability, we have to be able to examine and have examiners' dealing with hedge funds. the recipients of large amount of data required under the act for hedge funds, we need a mechanism -- >> i did not want to go over time. the systemic risk and the data is important. >> and derivatives surveillance. .e cannot rely on and sro

>> i remember when mr. bernanke told us that he would have to dance $80 billion to aig, and a week later, they needed another $100 billion. no one and aig had any idea what the exposure was. i guess that would no longer be the case. but for hedge funds in derivatives, many of us believe they were insufficiently, not just regulated, but we did not have much information about them. they were a blank slate. we have had funds with registration and monitoring with derivatives and financial regulatory -- entities regulated. but i take it to get the budget levels proposed in the bill that came out of the appropriations committee, neither one of your agencies would be able to do anything significant regarding new responsibilities involving derivatives and hedge funds. is that correct?

>> that is correct. we would be involved in a large reduction of force, about 65%. they end users would not benefit from any transparency. >> i do not know what the reduction of force of technology would be. but we would certainly not be able to offer rationalize many of the rules that we are implementing project operational -- operationalize many of the rules that we are implementing. we were offered $1.4 billion. >> in 2012, to under $61 million. >> how much money does the sec taken to the federal government which a margin last year we brought in to the treasury just from transaction fees of about $1.3 billion. >> we are going to turn you into

a profit center. thank you. >> mr. chairman, mr. kessler -- mr. gensler, you said that unregulated swap markets played a central role in our economic crisis. i assume you're alluding to aig. >> yes, but also it helped accelerate the bubble in housing. >> to remind us all for the record, in march 2009, the head of the of t.s. testified to a question that i asked. it was not the lack of a partisan, not the lack of resources, and without the lack of expertise, they just flat out made a mistake. is that correct assessment? in 2004, we pay up to assess how bad the real estate economy would come in 2008. the regulator in question

thought they had the authority and the expertise. i looked into the testimony of the panel the following years. to some extent i want to force a bit of a conversation here. you will hear from a gentleman with the miller course company, and according to his company, the requirement for end-users to propose march into its counterparties would have a serious impact on our ability to invest in and grow our business. though in users and not directly subject to the trading requirements except as capital requirements imposed on counterparties aimed at forcing in users on to regulated exchanges, is accused of platforms, and clearing houses, could significantly increase our costs. mr. gensler, a provision supposedly aimed at wall street may be increasing the cost of a six-pack. i think you just got the

attention of the american people. has your agency considered the cost concerns in your economic analysis is to develop these new rules? >> i read very closely the testimony. they focused on the cost of a on-parck because we focus the agricultural markets. we do not want that applied to an end user like miller coors. we're very focused on his testimony and his concerns. >> we will be monitoring your progress at the local convenience store. i also saw the testimony from the executive chairman of the cme group. we often cannot fully anticipate the meaning of our proposed

rule, if it is reliant on another role that is not yet in its final form. for example, rules dealing with the definition of swaps, security-based swaps. security dealers, you know, the list goes on. mr. duffy goes on to say, they must be established before interested parties can meaningfully addressed other proposed rules. your commission, i believe, has proposed some roles. comment periods have closed and other roles, and yet many commentators do not even know without the proper definition and clarity whether or not certain rules will apply to them. how can you have a meaning like -- a meaningful comment periods? >> i read mr. duffy's testimony closely as well. we are meeting with him at 2:45 p.m. today and we want them to comment on these rules.

we are humans and we need to move them out. but if you have comments on earlier proposals, and they relate to this definition's rule, include them. send them and then we'll use our discretion and distribute them and get them into the right file. just like this entire hearing, we will put in our comment file, everything you have to say is important to our process as well. >> i think the gentleman makes a good argument. i hope you can find a better way to run a railroad. i think we're dealing with trillions of dollars come in dealing with capital, dealing with jobs. i think it is so critical that we have an effective rule making process. my time is winding down. one more question for you, mr. gensler. i understand you advocate the adoption of position limits even for passive investors such as commodity index funds. is that correct? >> consistent with dodd-frank, we've put out a proposal in

january and we are looking for comments. it is consistent. >> had indicated how the proposed position limit rule would affect the operation of these passive firms? >> we published data regularly on passive funds or index investments in the marketplace. that is on our website. we've included some of that data in the preamble on the rule, but we look for the public comments in this proposed rule for an agricultural energy limit. to in my time is expired. >> miss waters. >> thank you, mr. chairman. i am very concerned about the representation that dodd-frank will lead to fewer jobs. i understand that many critics have been cited a study