that it would -- it would strengthen, so we're in favor of it. but in answer to your second question >> what other problems with having a single director is that they may say that credit unions do not provide service. the question was, if you saw a director who was taking this agency in a direction that would hurt your credit unions, would you be able to provide this service is too low and moderate income families? >> no, it was really -- it would really put a damper on the services i could provide. i am very concerned. i do not feel that 1 per cent -- i am in favor of 5 per it a think he will have a broader array. i think there would be some

confusion to having an examination. there would be confusion at my board of directors level, a staff management, we would not know who would reported to. >> you had some interesting comments in your testimony about some of the other overreaching things that the states could provide. could you go into a little more detail? you talked about the statutory language prohibiting states from imposing additional consumer protection. i would like to hear a little bit more about that. >> i think it is imperative that we have common regulation. we cannot have different regulation in one state over another. most all of us do business in more than one state. i am located in nebraska, relatively close to iowa. we have customers who have

vacation homes in florida. we need to have one comment regulatory died so that we understand the rules of the road. -- a regulatory guidance that we understand the rules of the road. >> critics of the occ think that the occ has been the most permissive other regulators. the permissiveness to the banks they regulated contributed greatly to the financial crisis of a few years ago. a big part of that was their assertion of preemption that banks that were subjects to the occ would not be subject to state laws. state legislators saw it, tried to pass laws to prohibit it. the occ kept them from applying

their laws. that contributed to the failure of the states being able to act and it contributed greatly to the financial crisis. mr. sharp, should the assertions pre-emption be subject to review? if not, why not? >> i am not here to testify about the occ. >> it is obviously parallel. why not the samples? if it affects safety and soundness, why should not be subject to review? >> that is why the concern is greater because they exist outside the safety and soundness.

>> how about -- they will be subject, why should they not be subject to the apa? >> i do not have an answer for you, but i am -- i would be happy to provide one in writing. >> the dodd-frank act initially proposed by the obama administration would required plane and a lip projects to be offered side-by-side. -- plain vanilla products to be offered side-by-side. the consumer advocates did not love it all that much either. pixar dropped fairly quickly. republicans offered an amendment in committee and democrats accepted it. they would not have the authority to permit -- to require any institution to offer any given practice.

they could not acquire, but they could forbid. they could require them to do something that was good for consumers. further, they do not have any authority to set interest rates. you can price products, however you want to, can you give me an example of a consumer practice that you have to do comment that you were afraid that they might forbid as abusive or unfair that you have to do this dam business? >> to stay in business, i have to serve my community. in serving my community, i can develop products for the consumers in my community that are helpful. one great example is that we have a large burmese refugees the community. we were to the regulator and

developed a product for them that allows them to buy homes. they could not qualify for a traditional secondary market loan because they have not lived in the united states for two years. they do not have to years of tax returns. we developed a program of financial education, a loan program for them to purchase a house. >> leaving this ibm likelihood that the -- >> i need to serve the needs of my community to stay in business. i do not believe that one person can understand the needs of my community and the service that i need to provide them. >> can you give me an example of a consumer practice that you are afraid that they might strike down as abusive and say

you cannot do that? but i financial institution would have to do that to stay in business. >> i cannot give you an instance of a particular problem -- product. the uncertainty is what is so concerning. we do not know what abuse of means, we do not know is unfair and deceptive is an escalation, if you can fully disclose the characteristics of a product and still be considered abusive. it is a term without much definition. >> with the passage of dodd- frank with the boat cfpb -- with the cfpb, did these additional

burdens ask -- add to the cost of compliance? >> because of the unemployment rate i was able to hire an attorney that got out of law school and i started her off at a salary of $40,000. i had her to do policies predictor years later, she is my compliance officer added except a lot of first-time british to spend a lot of part-time just doing complained to the credit unions. what has happened now is i do not know how long that will keeper because compliance is becoming such a big -- such a great deal of importance to the credit union industry. i cannot compete with larger credit union.

yes, i do have financial costs of i've had to incur. in addition to that, because of the credit card changed and the real estate changes, i've had to spend over $10,000 just to update forms to keep up. >> how large is your credit union? >> $80 million. >> we have had significant increased cost. just over the past few years of changes in regulation totally separate from dodd-frank. those regulations are not in place yet. but we are getting ready for them, we have seen them coming, we know that the costs will be there. we have to figure out a way to pay for them and we are a $60 million bank. much smaller. >> the think these regulations -- do you think these regulations will affect smaller

institutions at a greater cost basis per dollar that you have and your institution? >> yes, they will. when i came into the credit union over 20 years ago, there were over 12,000 credit unions. now there are roughly under 8000. we will see that number go down at. i am very concerned about the credit union industry and the survival because we have always been a lender of last resort. i can speak to that personally. >> i would agree completely. we do not have one person in charge of compliance. we may be having to move that way. or take more time away from my community, which i really do not want to do. >> how many employees to you have? >> 22. >> you are talking but adding a full-time compliance%. >> yes.

>> i.s.o. 17 and that does include one compliance person. >> -- i have 17 and that does include one compliance person. >> did these regulations increase access to credit and reduce the cost of credit? yes or no? >> no. >> i would say no. >> i would agree, no. >> i would say yes. >> house so? >> we have to market participants, that same law, -- >> what i am hearing is an argument about having to comply. quite frankly, what we saw under the lack of regulation, the american people were left hanging. >> my time is about to expire.

this idea that there is a lack of regulations is absurd. >> of digital black regulations five years ago? >> no, sir. >> -- did you lack of regulations five years ago? >> no, sir. >> interesting. the argument here is that there were no regulations. did you cause the crisis that we just faced? >> no, sir. >> that is interesting. you are regulated entity. how many regulators to you have? >> i am regulated by the state of nebraska and the federal reserve. >> in addition to what you see coming down line in washington, you will see further regulations. ok. thank you for your testimony. i certainly appreciate you making the point that this drives up the cost of lending. >> mr. scott, five minutes. >> thank you very much.

let me start with you, ms. anderson. could you give me some examples of how the consumer financial protection bureau and its function will dry up access to credit? >> this is a major concern and add to -- this is a major concern that many of you have raised. if we do this, it will dry up credit. could you tell us how? >> i believe that it will stifle innovation and a double make banks concerned -- and it will make banks concerned about how they will deal with their consumers going forward. that will dry up credit. >> i will have to put more

resources into compliance and if you are 17 employees strong, lending could suffer as a result of that. >> but thank you did agree that there is some -- there is some question here about a fear of an unknown. there is an uncertainty here. we do not know. is that a fair assumption? i think we really need to, in order to wade through this in a fair way, there to the financial services industry, we need to have concrete examples on how putting forward these protection agency would drive up access to credit. for the very people we are

trying to protect. that is the real core of what the issue is. >> speaking from experience, and granted we do not know exactly what the been the bureau will do, i can give you an example. the federal reserve has recently issued new rules on overdraft protection. those rules are -- requires a vivid and resources from a bank the size of mine. we had an overdraft protection program in place to protect our customers. we have discontinued that program so our customers have suffered, but we disappeared -- discontinue the program because we are too small to absorb the cost involved with the new rule making. >> ok. >> our customers are paying overdraft fees because we're bouncing our checks and they're paying fees at the merchant

because we bounce a check. they are having their names posted behind the checkout stands. our customers are suffering. >> ok, i cannot say that there is not an unknown. it is unknown. cfpb has said that credit cards and mortgages are two areas were my credit union has had to dedicate significant resources in the past two years. my concern is that it is working. we have made one revision to the mortgages and credit cards of the last two years, to have it redone does not, in my opinion, it is a waste of time. >> we have not on this for quite a bit of time grade last year,

but we were working on this bill, we went to this entire process. i think it is one that we will continue to move forward on because that is the issue. i would like to get a word -- i, too, have some concern about this commission. as he no, i represent atlanta and georgia -- as you know, i represent advanta and georgia and we have had serious problems in terms of predatory lending. in fact, these were very abusive practices. predatory lending, going all would back to -- i share that. my concern is that the very nature of the the reason we got so deep into this problem and with what happens with the

housing bubble, we did not act to move to correct these situations quickly enough. a commission went only a detour that. it is adding to the slowing down of the process. we still have to work on this issue some more and -- some more. >> thank you. >> the know anything that would dry up credit for now? >> i certainly think so. >> within the rules dry up credit to those people? >> they absolutely what. >> ok.

the charge different rates of interest to any of your consumers do you have different interest rates for any of your customers? >> no, we do not. everybody gets one interest rate on a mortgage loan. we offered second mortgage loans. >> if they have not paid their bills and the past, you will try to give them a little credit. >> if it is an unsecured or an automobile, it is risk rating. >> some able pay a little bit higher. >> yes, they do. >> when you said that you want same access to credit, is this what you are saying people are going to -- they are going to have different amounts of mortgage payments, a different

interest rates. does not qualify -- you do not disagree with the idea that risk should be related? when they're picking people out of the committee and targeting them with fast talk and fenty products and stuff like that, but your objection is not to a product that differentiate between people who are bad risks, that is my question. >> no, sir. >> you do not mind them pay more interest? >> risk assessment have to be made. >> what i would like to concentrate on was my friend from north carolina began to change the concept about what they're going to do. that is where the great alarm

is. most people say that the idea is to protect the american people, to protect a consumer. yet we suddenly ease the argument over, do you have to do this to stay in business? that is significantly different than protecting the consumer. i think he is giving us a heads up with where this thing is really going. if you cannot answer to the affirmative, i think he will be disavowed from greeting those products that rarely do deal with your communities. we have a very unusual circumstance that is never going to come to the attention of a federal regulator. there are 50 states, thousands of communities and the chance of them looking at this one little deal are not great. we're going to consider what you

have to do to stay in business and you do not have to do that. we see that every day in the federal government. they do not give approvals that are required bird right now, we are throwing jobs off the coast of louisiana. by not getting permits are required. there is no law that keeps them from doing that. about 100,000 people are out of ahmadinejad. -- are out of a job. we have to have a serious desire to move to africa and south america. those are not allowed and then to proceed ahead. as we visualize the protection of our consumers, i will tell you where the real access to credit is going to be denied. what is going to happen is that a product is not going to be approved because they may not be able to do and printer -- different shaped --

differentiate. the problem will be just simply disallowed. i will see that circumstance. >> i think the real issue is whether or not this would be a decent product -- this is made abusive product. when you look at some of the products to address and the first place, you were talking about trying to prevent people from being charged on an interest-rate through another name. we are talking about an oversight that provide some protection of the american consumer from the type of predatory nature. >> i understand that. it is just that we do have regulatory agencies that were supposed to be doing that not good they did not do its. the next regulatory agency -- my time is gone. >> thank you.

i would like to pick up on this discussion about the effect of putting together the bureau here on your bank practices. testimony that you gave earlier i did god -- that the dodd-frank bill itself would impose new hurdles and difficult conditions in the operations of your facility. i would like to know if you could be more specific about that. i am not as concerned about that one director or a five-person board, i am more concerned about some of the testimony you gave about provisions that would -- if you could be specific. everybody agrees that there should be consumer protections. that is what everybody practiced their remarks with. there are two things that caught

my attention grade one is the specific reference to specific things in dodd-frank that would impact businesses. this segment was gaps that exist for nonbank lenders. if you could either just detail of those for me, please. >> the legislation looks like we will have about 252 new regulations, 5000 pages of regulations to deal with. again, i have 22 employees. i will be happy to give you that answer it later. >> if there are specifics beyond the fear of the unknown, if

there are specifics, i would like to know of those. >> requiring the registration of municipal advisers is one of those. a potential issue. the final rules are not written on that yet, but the way it looks at the moment, anybody who has any contact municipality, it could be a teller. but the town car comes into my bank and as money to deposit and the teller says, if you put it in this account, you might earn all the more interest credit it would qualify it as a municipal adviser and that person would be required to register would be -- with the fcc. anybody who serves on those boards if they are not elected and providing a vice -- providing advice.

the people who provide financial advice to the schools are the bankers. they would then have to be registered. >> anything else? >> that is the one that comes to mind right now. i can get others for you. but that does not sound -- it sounds ridiculous. >> it is onerous to have yet another regulator involved. the annual fees to register or excessive. -- are excessive. it is just one more layer of regulation. >> thank you. >> one regulation comes into mind is the interchange priced. my credit union will definitely be devastated by the loss of the revenue from the proposed debit interchange. although we fall under the so-

called exemption because we are a lot less than $10 billion, the forces -- >> i am running out of time. we've had a lengthy discussion about interchange. there are a lot of things going on there. >> we can submit more information to you at a later date. >> i appreciate that. >> is there anything else you'd like to add to this discussion? i am wondering if the balance we are trying to strike between appropriate regulation and addressing the abusive practice of predatory lending. >> through the a thorough investigation done by this committee, by the senate banking committee on the challenges and the problems with the lack of regulation should prompt us to make sure that these new regulations are put in place. we are trying to avoid the

insanity issue here. we need to do things differently. what we did before did not work. we want to improve the process and allied protection and access to capital. >> we are out of time. >> thank you, madame chair. in your testimony, you quoted the spring of 2000 article that suggested if credit scoring resulted in higher project rates for certain minorities than for whites. his response was simply, yes. are you saying that the credit bureau's are being unfair

because of race or are you saying that banks and credit unions have different scores for different people. >> i was referring to the companies that do this credit scoring process. the black box is one that takes a consideration and concerns about the persons applying for the credit and assigned is or accordingly. however, that there was some racial and ethnic disparities in holiday come to the score. they will not tell us exactly what that is down go -- what that is. they argue that they do not have to tell us exactly how they come to the score. that is what we were talking about. >> you are not saying that miss anderson or miss smith or any of those are taken someone you has

a 658 and rejecting them based on their race rather than the credits or? >> we saw a different standard being applied to racial minorities and white americans. they were being steered to subprime loans if he were a person of color. they were eligible for a private loan in. that is what we were talking about. >> this same press corps? >> in some cases, the same credits or. -- the same credit score. >> add my credit union, it is not true. but that is not true at my bank either. >> i cannot say there particular

-- >> i do not want to see a 2000 report. this is 2011. do you think that cfpb is going to help gets everybody equal credit scores? >> it will help make sure that everyone is scored fairly. making sure the same -- prevent the kind of misdirection of those who should have gotten a better interest-rate and so forth. >> do you have some specifics accusations that you are making against some of the credit scoring folks? >> i do. >> in the next paragraph, you are talking about even after the

fair housing act, after the equal credit opportunity act, after the mortgage disclosure act, after it the community reinvestment act, racial and ethnic minorities are still treated disproportionately in the world of financial services. you think the cfpb or dodd-frank is going to straighten that out. >> it is certainly my hope. >> could you give me an example of what they need to do to straighten it out? >> it is the increased oversight. we were convinced that the chief regulatory -- >> what kind of oversight? to get a certain loan now, you have to do consumer financing education and how to buy a house. i want a specific from you about how this is going to help. >> it should outlaw exploding

arms. there were americans being sent into financial packages they could not sustain. anytime you have a product that would give you a mortgage that you could not support and the first place at an introductory rate, we had people given by mortgages at 4% for the first two years. dropping the escrow so people could not afford. >> i was in the construction business, but that was not because somebody -- their ethnicity or anything else. they made those stupid loans to a lot of people. a lot of that was from the community reinvestment act. >> i disagree with that. >> i appreciate all of you being here. i yelled back. >> mr. green for five minutes. >> -- i yield back.

>> i think that we should talk about legitimate concerns and i believe that the interchange feet is a legitimate concern. i think we have to do something about it. i think that flexibility is a legitimate concern. we will have to do something about it. i believe that personnel issues -- this is a legitimate concern. we have to do something about it. there are also other legitimate concerns that we have to do something about. three years of a teaser rate that you qualify for, the adjusted rate that you do not qualify for, or 27 years of a rate that might move up or down.

premium, read given a rate higher than a prime rate, never told that you are qualified for the prime rate. pushed into the subprime market. we need to do something about it. teaser rates that coincide with prepayment penalties, legitimate issues. we need to do something about them. ed shorts, did not mean to sound x-rated [laughter] . people planned the market not having the ability to cover. credit default swaps. there are some ways to have credit steve put swaps -- credit

default swaps, but when you take it to the level what we used to call participating in the numbers racket, portrait number two runner -- where a number runner, at least to have these guys come to the neighborhood. they would sell something called numbers. you had a big hit on one number. he would go to a fellow bookie and say, i have a big run on number 7 this week. give me $10,000 and i will give you $10,000 and its number 7 hits, used a loss with me. if it does not hit, you keep the $10,000. barely found a way to legitimize that kind of behavior -- they found a way to legitimize that kind of behavior. we have to do something about it. we have all of these issues that are legitimate and we have to do something about them.

because time is of the essence, i will ask one question. are any of you contending that we need to do away with the cfpb, the consumer financial protection bureau. are any of you contending that we have to endure? >> absolutely not. >> no, sir, we are not. >> no, sir. >> since we are not going to into it, and most people in this room agree, i plan to work with my friend on the other side, i think they will test to the fact that even though it is difficult for us to do it, we still work together. we tried as best as we can. i plan to work with people seated at the table and behind a table to get some of these things resolved. that is what this is all about.

how can we meant it -- mend it? all major legislation deals with challenges. the only piece of major legislation that we will ever pass that will not face a challenge that will be perfect is the one that i will draft. [laughter] given that i am now drafting this legislation, it will all have to be amended. that is a challenge. we have defined a way to mend it, rather than end it. madame chair, thank you for the time. i am late for another meeting, to buy. >> thank you. >> in your testimony, you talk about some discussion that

professor of war and had in some of her writings with regard to opinion of commission versus a board. -- whatthat is what's the bill is all about. in your discussion, you talk about a 2007 article that professor warren shows a commission is a cost-effective way to set up an agency. into a low 8, she indicates that a major challenge -- anbar -- in 2008, there minimizing the risk of capture, which means that if only one person can have the total control over to capture what is going on. can you elaborate on that a little bit? >> it certainly.

for more than 100 years, there has been a strong preference for regulatory agencies that there be bipartisan representation, that there be a multi member of leadership. i am glad that mr. green asked the question, proposing that it go away. the answer unanimously was no. it is important. there are a number of questions about what's we are concerned about in the credit market. unfortunately, the answer is that we do not know. what is the best way to prevent serious unintended consequences down the road as this new agency begins to put that regulation? the best way to mitigate that is at the top, to establish a structure, a framework, a way of

doing business at this new agency that incorporates diversity of views. it appears that she has agreed that the structure is sound. >> she is the leading candidate and she agrees with what we're trying to do here today. when she was here, i asked her about the regulations proposed by all the different groups as well as something she was suggesting that she take a look at. give me an example of when the cost is too much for regulation. i never got an answer. we talked about cost quite a bit today would miss anderson and miss smith. can you tell me what the cost of compliance, how much it has

increased in the last couple of years? >> just a percentage of your income? >> i do have a full-time employee. it probably is costing me about $80,000. >> you are looking at 6% increase? is that fair? >> approximately. >> very similar. i would estimate that we have 1.5 people committed. >> it is important to understand that it makes it difficult when you have to spread that much cost over all of your income. if you do not have quite a portfolio that the large institutions do, it makes it

difficult for you to continue to be in business. by increasing these costs, increases the danger of you continuing to be a viable, especially when you have to look at 5000 pages of regulations. this is where this all leads to. they come in with all these new rules and regulations and he made the comments -- and he made the comment about small banks been injured to with regards to the compliance cost. this goes back to answering another question that somebody asked earlier with regard to access to credit. part of this is -- it hurts in several respects. it is a fear of compliance. if you are going to get fined, you hesitate to make those loans

and provide the services. i am out of time >> at this time, i would like to excuse miss anderson from the panel. she has a flight, i believe, that she needs to catch. i want to thank you for your testimony. when you need to leave, just go ahead and make your exit. i want to be sure to thank you. >> thank you very much. >> thank you, madame chair. i will not take that much time. i was in real estate and development back a couple of years ago. my family is still involved in the construction industry. what little there is in michigan these days, unfortunately. one of the questions i had was, when i was in real-estate, i was taught that people are not black

or white or yellow, there green. their rain because, can they afford things? -- in they are green because, it can they afford things? this is the crux of this. we're talking about whether people can afford to purchase the homes that they have. if we want to talk about what has happened in the market, i've watched very closely and the state has been hit harder than michigan in this. a lot of its -- some of it may be generational. my 42 and i think i am on fourth house. mom and dad are in their second house and they had half of their down payment said that when they bought it. natalie and i wrote -- were not quite that far along. you are all smiling and nodding your head because it is a familiar story. we've just sort of overextended

ourselves as we have been pursuing what we thought was the american dream. it is the american dream, to own your little piece of america. so often, that is in a home. we have seen that destroyed in many ways because -- i am very concerned about that. i am concerned about those stories and i want to hear the stories, whether we can point to specific instances of people being pushed into products that they should not have then, that is very concerning to me. i think we are at a watershed here. how do we make sure that we get people products they can use? i also know that it used to not work very well.

there were so many artificial limits on people's ability to own a home. we had a threshold that work very difficult to achieve in many ways. we have both a cultural and regulatory structural problem. what i am curious about is whether you think the structure -- you will have said that to the consumer financial protection bureau is something that should not go away. a follow-up question is about the structure because that is really what we're talking about. do you believe that the structure of that particular program or euro -- bureau needs to be that one person? the leading contender, according to news reports this morning

coming out of michigan, from my former the governor, is also being looked at for that position. having worked with her for six years, she is a wonderful lady, there is marked -- a very smart. i want to make sure that we have a bureau on that. do you believe that somehow the structure of this would be impacted, whether it be a three- person or a five-person board? >> i think the structure of having a board or commission makes a lot more sense. you are able to have a broader representation, assuming that the board consists of people do have safety and soundness regulation experience as well

as consumer advocacy experience. >> thank you. >> yes, i agree. we do want to see a five-member board in place. i do not feel that 1 per cent should rana that organization. -- one person should run that organization. >> we definitely agree that a commission is superior. >> thank you. >> in this particular case, this person has the authority to convene smaller groups of advisers to address the concerns before them. blinged see no problem with having one director -- we see no problem with having one director in this particular case. >> do you believe that is superior to have that one person versus having a three-person commission? >> i would think that having one person having the flexibility to move very quickly.

many of these products into popping up like a wack-a-mole. >> the gentleman's time is expired. i think we are edging up toward the vote. i want to make sure that we get the panel. >> would you say that the fdic should also be a one-person director? >> they have more than one person. >> you would advocate that we should have one person? >> i would like for someone to have -- to carry out the responsibility. >> we can look to the federal trade commission and the u.s. consumer safety commission, both consumer protection agencies that you have

commissioned it -- that use commissioned as well. are they effective? >> if you want to address those agencies, as you would have to come back and testify. >> we should restructure the government to have one director? >> we think it would be a major improvement over the system we have right now. >> was your credit union one of the contending factors to the financial crisis? >> no, we're not. >> you have heard a lot about predatory lending today. were you engaged in predatory lending? >> no, i was not. >> as we have gone to these new dodd-frank regulations, is it fair to say that the regulations on your credit union have increased dramatically? >> yes, they have. >> are the new regulations that will come from the cfpb, they will also continue to increase the regulation? you are not opposed to smart

regulation of banking, are you? >> no, i am not. i is to feel that the gun regulation should be regulated. -- i just feel that the unregulated should be regulated. >> in the end, it drives up costs for your consumers, right? ok. you did not have anything to do with the financial crisis or anything to do with predatory lending. >> no, sir. >> but your consumers are paying the price for it? >> yes, they are. >> it is atrocious what happened in the marketplace. dire on the same page with that and it has to be addressed. you will not find any argument from me with regard to that. i want to talk about how the cfpb has been set up.

i looked at the review process. to have a situation where the only way outside cabinet review a rule is if we have a systemic rest in the marketplace -- brisk in the marketplace. the burden is incredibly high. would you agree with that? >> i am still not seeing the problem. >> you would agree that you are ok with the incredibly high burden? >> i would love to hear the argument. >> if at some point consumer protection is an affront to safety and soundness, shouldn't we revere those situations as well? even though it does not create the systemic risk in the whole financial industry? >> perhaps. >> ok, good. >> perhaps. >> if you look at the review process, the director of the

cfpb is one of the 10th grade do you think that the director should be one of the tent? >> i see no problem with that. >> do you think they will be impartial? the thing that the director will be impartial on the board? >> more important, they will be informed. >> you can be informed about having a vote. you can still present your case, but not be a voting member, right? >> you want that intervention, you want that involvement on making the deliberation. >> you can do that without giving the director a vote. this is my concern. we need a two-thirds majority to pass that trade with the two-

thirds majority, one of the voting members is the director of the bureau. this is a super majority. it's we are all on the same page and we want consumer protection grade but we also have a concern for safety and soundness. if there is an affront to safety and soundness, why don't we take the director out of play and had a 5-4 majority to overrule the ruling from the cfpb? >> that has been their responsibility. >> i am sorry that it's miss anderson is not here to answer some questions that i have. i think that i can start off by saying that i feel there is a trong impact that the cfpb's

regulatory authority could have on banks the ability to assess and adjust credit risk on an ongoing basis because badly implemented consumer financial protection regulation could hinder a bank's ability to maintain present credit. with that said, in your industry, at do you feel that is true? with regards to maintaining your credit risk? >> yes, i do. >> in my district, in texas, we have an enormous amount of upstart companies. a lot of them find that their sources of credit are sometimes a little bit diminished. they go to their own personal

credits to obtain that primary financing. i noticed that the chamber of commerce has estimated that 47% of small-business owners use personal and not business lines of credit in order to grow their businesses and create jobs. because the cfpb extracts consumer protection guidelines from other agencies and makes consumer protection its primary objective, the field there is a risk that small businesses and small business owners who are looking to create jobs and to build their businesses will be viewed as overextended consumers and be denied that credit? >> yes, we do have that concern. that figure is a small business administration figure as well. it comes from the government. bat is a big concern of ours. it is not just in the vault -- that is a big concern of ours.

it is not just individual access to credit. so many small businesses rely on consumer products to get their business is off the ground. if individual credit is harmed or limited, at there is an effect on the small-business world. that is a concern for us. >> the think there is a strong distinction to be made between consumer protection and safety and soundness? >> you cannot have one without the other. >> i concur. >> thank you. >> i would like to thank the panel for their testimony and their response to the questions. i appreciate your participation. i will dismiss the first panel and ask the second panel to assemble. so we can go ahead and move the testimony for. thank you very much.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> my name is noah wilcox. i'm a fourth generation banker, president and c.e.o. of grand bank and member of the independent bankers of america. grand rapid state bank is a state chartered bank

with $236 million in assets located in grand rapids, minnesota. i'm pleased to represent community bankers and icba's, nearly 5,000 members, at this important hearing today. community bankers are deeply rooted in the communities that they serve because we cannot compete with megabanks and margins are economy of scale. we focus, instead, on the individualized needs of customers. we practice relationship banking, not one-off transactional banking. our customers are our friends and neighbors. and any given loan or other service is part of a long-term relationship. our reputations in our communities are paramount and are a condition of our success. community bankers have an overriding incentive to treat each customer well and earn their trust. exempt from primary examination. because we will be subject to cfpb rules, we have a keen

interest in improving the structure and procedures of the bureau and the quality of the rules that they issue. we support chairman baucus' recently introduced bill which would restructure the cfpb so that it is governed by a five-member commission rather than a single direction. the commission governance to allow for a variety of views and expertise on issues before the bureau and thus building a system of checks and balances that a single director form of governance simply cannot match. the commission model, which has worked well for the fdic, f.d.c. and f.t.c. would help ensure that the actions are measured, nonpartisan, and result in balanced, high-quality rule and effective consumer protection. consistent with our support for commission structure, icba supports efforts to strengthen regulatory review of the cfpb rules which is extremely limited under the dodd-frank act.

icba supports congressman duffy's bill which would change the voting requirement for a from a 2/3 vote to a simple majority. excluding the cfpb director. the proposal would also change the standard to allow for a veto overrule that is inconsistent with the safe and sound operations of the united states financial institutions. the current rule puts at risk the soundness or stability of the financial system as a whole. this is nearly impossible to meet and would let rules extraordinary harmful to banks and consumers. while this change would improve cpf -- cfpb rule making this t would further the standard that could adversely impact the industry in a disproportionate way. we believe the standard would give regulators a more meaningful rule. the cfpb's far-reaching impact

over the financial sector, consumers, and economy should be matched by the highest standard of accountability. ultimately accountability for the actions resides with its director, appointed by the president, and confirm by the senate. this basic mechanism of good governance would be undermined if the cfpb were to be operative by the senate.d for this reason, icba supports the discussion draft that would postpone transfer of functions to the cfpb until its director is confirmed. the final discussion draft in which i will comment would prevent the cfpb from the examination of large banks on a sampling basis, before the transfer of functions to the cfpb. we appreciate your caution about cfpb exams. though this legislation would not affect community banks such as mine, we agree that sampling exams are not an innocuous exercise.

the so-called ride along provision allows the cfpb at their discretion to have input into every as pct of a small bank exam. eliminating this short would allow to focus on entities. thank you again for the opportunity to testify today. icba is fully committed to consumer protection for our customers, for customers of our competitors, and for the safety and soundness of the financial system. you. >> thank you mr. wilcox. our next witness, president and chief executive officer, secu of maryland on behalf of the credit union national association is recognized for the purpose of making a five-minute opening statement. >> to testify today. i'm rod statts. credit unions are the best way for consumers to conduct their financial services.

however, credit unions are facing tremendous regulatory burdens that will only get worse as dodd-frank is implemented. relieving credit unions's regulatory burden so they are able to serve their members in a safe and sound manner is our objective. cuna has consistently stated that consumers of financial products, especially those provided by unregulated entities need greater protections. we believe that a consumer financial protection agency could be an effective way to achieve that protection provided there are not unnecessary regulatories on credit unions. in order for such an agency to work, it should not add to the burdens of credit unions that have been regulated for decades and performed very well. the subcommittee is given consideration to several of our concerns regarding dodd-frank,

specifically debit interchange regulations. we appreciate the opportunity to testify today regarding the structure of the consumer financial protection bureau. we've had a number of conversations with the staff at treasury, which is working to establish the bureau. we are encouraged by the staff's outreach and especially by the establishment of the office of community banks and credit unions. still, credit unions remain concerned that regulatory change could work to the detriment of our members. been asked to present our views on h.r.1121. this legislation would replace the director with a 5% commission. if congress decides to pursue this legislation, we would encourage the size of the commission be expanded to include appropriate industry and regulator representation, including a seat specifically for a person with experience related to credit unions. this won hans the quality of regulation as promulgated by the bureau by ensuring that both the consumer and industry

perspectives are represented. cunis supports the intent of h.r. 1315 to achieve rules that balance consumer protection with safety and soundness. more specifically, we support the provision that would reduce from 2/3 to a majority the threshold to take action to set aside a bureau rule. h.r. 1315 also makes changes to the conditions in which counsel can stay or set aside bureau regulations. what is missing is the ability of the financial regulators to review euro regulation in the context of overall regulatory burden. we could support legislation to allow rule to be set aside if the counsel determines it would unreasonably -- be unreasonably burdensome for financial institutions and that that burden to financial institutions outweighs the benefit to consumers. we have been asked to present our views on two discussion graves related to the bureau's authorities prior to the

appointment of the director. we believe that much more important than details of how and when the bureau ramps up is how it will function once operational. we believe the bureau should conduct its consumer protection mission in a manner that minimizes regulatory burden on financial institutions. credit unions have not been the subject of widespread consumer complaints, and credit unions have credential regulators at the state and federal level that are in a position to enforce consumer protection and off laws. we ask the congress permit and encourage the bureau to sign the examination of larger institutions which have not had a history of consumer abuses to their credential regulators. we would like to recommend improvements to other areas of title 10. we ask congress to index the examination threshold for inflation. without indexing these thresholds, significant erosion of the exemptions will occur in a relatively short period of time. we ask congress to require the bureau to report to congress

annually on steps they have taken to reduce regulatory burden and hold a hearing to review the report and consider whether further action is needed. we also ask -- urge the subcommittee to work with the bureau to establish a meaningful exemption process for credit unions under section 1022. let me be clear. we are not advocating for the elimination of consumer protection regulations. rather, we seek a regulatory approach in which consumer protection is maximized and regulatory burden is minimized. chairman, on behalf of the americans credit unions and 93 million members, thank you very much for the opportunity to testify. and i am pleased to answer any questions. >> thank you, mr. staatz. the next witness, richard hunt recognized for the purpose of making a five-minute opening statement. >> hi. and a very good afternoon, ranking member maloney and member of the subcommittee. my name is richard hunt. i am serving as president of the

consumer bankers association. c.b.a. is the national traders association for retail banking, for fulfilling the financial needs of american consumers and small businesses. retail banking is where the cfpb will focus its broad authorities. we have had a long history of supporting improved consumer protection. it is no secret we opposed the creation of the cfpb. we believe the benefits are outweighed by the problems that in separating the agency from prudential banking regulators. nevertheless, c.b. a.'s focus on helping our members prepare for this new agency, which will be their primary regulator. and we have met on numerous occasions with those standing up, the bureau. we also nod the bureau will provide benefits, such as providing the first real opportunity to level the playing field and have comprehensive, federal oversight of tens of thousands of under regulated, non-depository financial providers. we also support the simplification of the

disclosures. if there's a theme, it is uncertainty. uncertainty creates risk, limits innovation, and does not promote competition which in the end hurts consumers and small businesses alike. this current transition period, the absence of a confirmed director, and the power of this new bureau has created a time of great uncertainty for retail banking. those required to coordinate without agencies to promote consistent regulatory treatment this concept is ill-defined. if another agency objects to a rule for any reason, the bureau is charged only with noting the objection in its final issuance. in short, there's nothing in dodd-frank according to the director of the bureau to refer to the views of the prudential regulator. and there is virtually nothing to stop rules from being enacted that might cause serious harm to banks or even small businesses or consumers. to minimize concern that a single, powerful director might adopt rules with harmful,

unintended consequences, we would support a commission-led model. a commission provides an opportunity forral easterntive perspectives to be discussed, and has been effective at a number of federal agencies. including the federal reserve, the f.t.d., the fdic, and the s.e.c. i will point out, even the consumer product safety commission which was the model for the cfpb -- cfpb. some have said -- factually correct but not realistic. there are two main concerns. first, the super majority needed to overturn a rule, and, second, the threshold for making such a decision. currently, seven out of the 10 members must vote for a stay or veto. since one of the 10 members is the actual director of the cfpb which was not a vote against itself, seven of the remaining nine would have to vote to set aside a rule.

that is nearly impossible. also, would it be prudent for the cftd, who has no sker tees in consumer retail banking regulation, having to decide rules regarding the product? in all do respect, that would be like my telling someone how to comb their hair. both out of their league. as for the threshold, the so-called veto is really more of a catastrophic insurance policy to protect only against a rule that would threaten the safety and soundness of the u.s. banking industry or the stability of the financial system as a whole. while it is good to have a backstop against draconian rules, it is not address for risk. this threshold should be broadened to include a substantial impact on individual financial institutions. we also bring the authority to supervise large financial institutions and to issue regulations should not be

transferred to the bureau until a director has been confirmed by the senate. in closing, yes, we support a commission-led cfpb. but in the absence of any structural changes and because the cfpb will not have any authority to regulate institutionsy until a director is in place which, of course, leaves us with the current unlevel, and unfair, playing field, we would urge the appointment and confirmation of a director who possess a strong, comprehensive understanding of the banking industry and the management skills needed to lead a $500 million plus agency. the c.b.a. will continue to work with members of congress and the bureau on these issues. and i look forward to answering any questions you may have. thank you for the opportunity. >> thank you. our final witness is professor adam j.leviton, georgetown university law center. you are being recognized for five minutes. >> madam chairman, ranking member maloney and members of the subcommittee. i'm a professor of law at georgetown university.

i'm here today as an expert on consumer finance and as a scholar who's work is deeply concerned with the financial security of american families. the bills being considered at this hearing would apeek tore legislative tweaks to the structure of the bureau. let us not mistake what the hearing is about. the issue presented by this hearing is whether congress cares more about increasing the profits that banks or protecting the financial security of american families. which is more important? banks o or families? that is the question. the new cfpb has not yet had a chance to get up and running. yet already we are seeing attempts to strangle the new agency in its crib. if you want to understand what this hearing is about, look at who is here at this witness table. there are three bankers and me. at the previous -- on the previous panel there were three bankers and mr. shelton from the naacp. ask yourself who here likes the cfpb and who does not? the banks are opposed to the cfpb and want to see it hobbled if not eliminatedded.

but it is families, main street, and the real economy who like the cfpb and want somebody looking out for them, making sure banks don't run wild like they did in the runup to the financial crisis. because the other bank regulators, the prudential regulators failed us and we were stuck with the bill. again, does this subcommittee care more about the interest of banks or about the american families? i'm aware members of the committee are concerned that the cfpb will exercise its authority capriciously. this is misplaced. despite what you will hear from the banks in this chairman better, the cfpb is more accountable than any other agency in the federal government period. no other federal agency has as many limitations on its powers as the cfpb. the cfpb is subject to the procedures act, notice, and rule making. cfpb actions are subject to judicial review. the cfpb is one of only three federal agencies that are subject to small business flexibility review which would cover some of the concerns of

small, financial institutions. the cfpb has numerous strati limitations on rule making power and must make details if it wishes to exercise its power. the cfpb is prohibitive in imposing usury caps or regulating nonbank financial and nonfinancial businesses. the cfpb is the only bank regulator subject to a regulatory cap. every other is not going through option and does not have a cap. the banks in the chamber may this cap is too high, because it will enable the cfpb to be too effective. but i've never heard them complain about the lack of budgetary controls on the fed. it involves an agency task. the cfpb is the only federal bank regulator whose actions are subject to a veto by the financial stability oversight counsel. a veto of dubious

constitutionality. i have not heard any calls to subject the fed to similar vetoes. and it's south oversight by congress. as already shown, that's no small matter. no matter how the banks spin it, there's no escaping the fact that no other federal regulator to comparable limitations on this actions. turning to the bill, representative baucus' bill would replace the single director with a five-person commission. put differently, the baucus bill proposes paying five people to do one person's job. and then giving each of those five a staff and paying for office space for all of them. this is classic big government bloat and waste. what's more, by having five people doing one person's job, which seems to be the overriding concern about the cfpb, will be diminished and leadership less effective. there's no reason to adopt a five-person commission if a direct juror good enough for the -- [indiscernible] representative duffy's bill.

it's frankly astonishing that anyone would propose to strengthen the veto. the bank regulators given the veto are the very ones who failed to ensure both bank safety and soundness and consumer protection. in the private sector, these regulators would be out of a job. they would not be rewarded with the veto. the duffy bill would require a veto if the resume making were inconsistent with bank safety and soundness. let me explain it to the committee it means profitability. it's nothing more than profitability. a bank can only be safe and sound if it is profitable. but consumer protection is sometimes at lawinger heads with bank profits. banks don't do it out of spite. what this means is that any cfpb rule making that affected banks profitability would be inconsistent with safety and soundness and thus south a veto. thus under the duffy bill the credit card act of 2009 and

title 14 could not be implemented because they would both affect bank profitability and be inconsistent with safety and soundness. in conclusion, the bills before this committee today seek to improve the cfpb by destroying it by rendering it ineffective and incapable of performing the mission which congress tasked it with, protecting american families by ensuring they get the necessary information to make important decisions about their finances and financial products help consumers rather than induce financial distress. i urge you not to delay or diminish the cfpb's effectiveness. >> thank you. to thank all the. [whistle] s. i'd like to begin the questioning. i'd like to pivot off the professor's -- it shocked me a little bit. to say that the choices here are between banks and families. we heard ms. andersen in the first panel state e equivocally that

service to her customers is the blood of her institution. and she provided and i think gave some very good examples of targeted help. she talked about the burmese leavrefugees and other folks the been able to target in their own community so i would dispute that the choice is between banks or families. the but i'd like to give mr. wilcox a chance to weigh in on that statement. >> thank you. >> as a banker. >> sure. thank you, chairman capito. i appreciate that opportunity. i'd like to start by suggesting that there's a difference between banks and community banks. my bank is a $236 million community bank. and as i noted in my opening testimony, our success is dependent on the people that we take care of. you will not find community banks around this country that have taken advantage of the people they see at the grocery store go to church together, and otherwise see around town.

that is simply not the case. our success is dependent upon the success of the people that we serve and the vibrancy of the community that we operate in. and so that stewardship for the community is paramount to the success of community bankers from coast-to-coast. >> thank you. i'd like to ask mr. hunt to respond. i'll say this about you, professor, you changed my whole line of questioning when you made your statement. i'd like to ask on this question, that profitability equals safety and soundness what does safety and soundness mean to you? >> making sure that the bank is healthy to provide the need and financial services to their consumers. they're not exclusive. you must have safety and soundness. and you must have consumer protection. we have never advocated left consumer protection whatsoever. i am from louisiana. we have a saying in louisiana, if mama's not happy, nobody's not happy. >> i like it. >> thank you. if the customer is not happy, the bank does not survive.

period. if we do not protect consumers from getting loans, then they're to go to another bank. it is pure competition out there. we know they can virtually go across street. so it's imperative that we have an agency that is worried about safety and soundness and consumer protection. >> and mr. staatz, would you a comment on that in terms of the credit union, in terms of the profitability equals safety and soundness or banks, i suppose that could be slash credit unions if the choice is banks, credit unions, or family? because credit unions are families. we know they're members. if you'd like to make a statement. >> absolutely. we exist for those members. they own us. we have to perform for them each and every day. at the end of the day, there has to be a little profit to make sure that we're safe and we're sound. but we exist for them. and just like our banker friends here, you have to perform for them. we're in the community. it's -- we're directly

responsible to that. >> thank you. i'd like to also respond. you know, one of the bills is expanding -- and i'm on this bill -- expanding one to five in a commission. i think we've got plenty of testimony that show that that works for other government agencies. and there are some instances there's a singular director at the top, at the helm. but to say that creating a commission contributes to bloated waste when this bill creates 1,000 people in a new consumer financial protection agency, as we are finding and i'd like to dig deeper on this, the way professor has laid it out for us is that she's gone to all of these different agencies and said, ok, all of the consumer protection is now going to be under this same -- you know, same organization within the fed. but what we're finding is, yes, there's another 1,000 people there. some of them are coming from these agencies. but the agencies are still keeping their own consumer --

parts of their consumer protection and consumer investigative parts within that agency, duplicative government. and then fdic is going to create their own oversight to make sure that mr. wilcox's bank is -- whatever rules and regulations the cfpb put forward that they can answer for that. so i'm not sure that the lines that were drawn supposedly in this bill are going to exist if the behavior of the regulators that are in place -- i mean the consumer protection is in place in different agencies now are still existing there. a new agency here. and then another new oversight within the fdic, or at least someone watching over this. so with that i'll let miss maloney begin her question. >> i want to thank all of the panelists for being here.

professor, some of my colleagues expressed their concern that it will be an agency with unprecedented authority and reach. and in your statement -- you said that it has more limitations on its power than any other federal agency. so can you expand on these limitations? i listened to my colleagues all day long about how it has unprecedented reach, yet you say there are more limitations. would you clarify for us, please? >> with pleasure. we can compare the cfpb both to federal agencies in general and to other bank regulators in particular. we tend to structure bank regulators differently than other agencies. one thing we do with other bank regulators is we take their budgets and take them out of the appropriations process. and the reason we're concerned about that is we don't want political influence over safety and soundness issues.

the thinking was similarly we don't want influence over consumer protection. it's too important to the political process within election cycles. the cfpb, unlike any of the other federal bank regulators, has a cap on its budget. the o.c.c. if the o.c.c. wants to increase its budget, it increases assessments it charges on banks. it doesn't come to congress for a budget. similarly, the federal reserve if it wants continue to crease its budget it just warms up the printing press. the cfpb, though, is capped at a percentage of the federal reserves operating budget and has no ability to set what that operating budget is. it sinks and swims with the fed. and i think that's actually a very good structure. because it keeps -- it says that we are going make sure the consumer protection is at least going to be x percent of bank regulation. now, compared with other federal

regulatory agencies, cfpb is the only agency where there is a veto over its authority. was similar with pecaboo. within the last year the supreme court said the structure was unconstitutional. that was really not specifically on the veto but on some other aspects of the structure. it raises questions about the constitutionality of the veto. there is no other agency that's subject to a veto. no one can veto the o.c.c.'s actions. by statute, the treasury secretary is forbidden from telling the o.c.c. to take action or not to take action. if you want to find a rowing regulator, it's the o.c.c. not the cfpb. so on top of this, we have a whole range of regular safeguards on administrative agencies. and a lot of the complaints i'm hearing from the committee are complaints about the administrative state in general, not about the cfpb.

there are reasons to be uncomfortable about delegation of authority to unelected officials. but we do this all the time. and we have things like the administrative procedures act which has notice and competent rule making provisions so that everyone has a chance to be heard about rule makings. and we have a judicial review making sure that agencies do not exceed the scope of their statutory authority. we have these features, and they apply to the cfpb just like any other agency. so when you look at the sum of the picture, the cfpb is subject to more restrictions than any other federal regulatory agency. >> as you know, there are four bills under consideration today and under debate. what do you believe the aggregate effect of these proposals would be on the cfpb? >> if these bills were passed it would delay the implementation of the cfbb and rend tear significantly -- render it significantly less effective and less accountable. >> and, mr. hunt, i was voting,

i didn't hear his testimony. but i read it. and he in his testimony wrote that the veto system is designed under current law, a veto would be nearly impossible hurdle to meet. do you agree? mr. levitin, professor levitin? >> i do. the current veto standard is a high threshold without doubt. but it's worth considering what the alternative that's being proposed is. and then also the further alternative being suggested. i think -- i can't remember which of the community banking lobbists is proposing it but there's a further extension of it that's being proposed. the current threshold is undoubtedly a high threshold to meet. i think that's actually the right threshold. you know, we want to make sure that we are not seeing regulation that cause systemic risk. but a threshold that simply says -- you know, effects safety and soundness is such a low threshold that pretty much every

rule making will be subject to challenge. an example. in august 2008, the comptroller of the currency wrote a letter to the federal reserve objecting to certain proposed federal reserve regulation that would have restricted credit card rate jacking a topic that was a particular concern to you. among the complaints -- >> if could you kind of -- make it quick. a few extra seconds so he may complete his statement. >> sure. >> among the concerns that the comptroller raised was that it would be inconsistent with safety and soundness. well, a couple of months later, congress went ahead and passed the credit card act of 2009, which, you know, took the federal reserve regulations and raised them a notch. so basically the bank regulators are likely to call anything safety andt with soundness to the extend that it negatively improducts the banks bylity of raising costs, etc. i think the current threshold is

probably the right place. and we should not think about extending it what the community bankers are arguing. every regulation has a at impact on small banks. that's the nature of the business. to be big, you know, in big it manages. >> thank you. >> thank you. >> thank you. >> professor levitin, you actually did change my direction of questioning, too. you talked about bank profitability. and you said -- i think one of your comments was that's what this is all about, bank profitability versus safety and soundness. do you believe that a bank losing money is better off going forward in providing safety and soundness to its customers. >> i apologize if you misunderstood my comments. what i said is bank safety and soundness means profitability. therefore, a bank that's not

profitable is not safe and sound. but a bank that is less profitable but still profitable is safe and sound if a bank is only earning a billion dollars a year not $1.5 billion, it is still profitable and still safe and sound. i think it's important to make that distinction. that less profitable as opposed to unprofitable. the exact level of bank profits i don't think should be a concern at all of the government as long as banks are profitable. but the exact levels should not be a concern for any us. that's the marketplace. >> you do agree, though, that some of the dodd-frank provisions will take away some of the profitability of the bank? >> without a doubt. to the sense that certain predatory lending practices have been very profitable for banks. and dodd-frank is going to curtail those, quite rightly. and to that extent, yes it affects safety and soundness if you say that it's affecting profitability. but a bank not able to lend on a

fair and un-- nondeceptive basis shouldn't be in basis. i don't think any of the banks here at this table are doing that. and i want to emphasize that. the issue really here is not about community banks and credit unions. there are some bad actors in both of those spaces. but generally they're the salt of the earth. the problem is the large banks. and we don't have any of the large banks on the panel today. and it worries me sometimes to see small banks toeing the line -- towing the line for the large banks. >> mr. wilcox, would you agree that some of these regulations will reduce your profitability and also reduce your ability to create jobs? >> i'd say without any question it will. it has already. still feeling the fallout of the last act. this dodd-frank thing is just getting started, and we're seeing the first bits of that come out. and certainly to the extent that there's an exemption in the

regulatory process, some of those things filter down and become interpreted and are used in the regulatory process. certainly it will challenge earnings and very well could create an issue with how do you continue to grow jobs and operate in a safe, sound, and profitable manner? >> mr. staatz, wouldn't you agree that some of the profitability that you're losing will be also a reduction of the potential jobs? >> without question. >> mr. hunt? >> sure. absolutely. even though the cost of compliance will go up, it will be a tremendous burden. we're already heavily regulated to begin with, going forward. if you don't mind, just going back to the veto question, the only way a veto can be sustained is if it threatens the safety and soundness of the banking system or the entire united states economy. who's going to determine that threshold, what will determine the safety and soundness of a bank or the entire financial economy going forth? know i mentioned in my earlier testimony about the cftc, but

also the s.e.c., the cftc and the federal housing agency has a seat at the table to determine retail banking. they have nothing to do with retail banking, no expertise whatsoever. why i would like to see five out of nine not seven out of 10 when it comes to a veto. >> mr. levitin, you spoke that you felt pretty strongly about a single director. does it make sense, then to consolidate all the federal consumer financial protection powers at the bureau on the designated transfer date if is no director? >> well, actually, sub title f of title 11 of the dodd-frank act does say that if there is no director who has been appointed by the president on the designated transfer date, the powers go to the treasury secretary as director. so we would have an acting -- we would have the treasury secretary who's been confirmed by the senate exercising the powers at least under sub title

f. >> madam chairman, i yield back. >> thank you. i would have to say that if that does, in fact, happen and the responsibilities go to the secretary of the treasury, i would question, is that not postponing, delaying, throwing the whole thing into a more chaotic position which is why i believe we ought to -- and part of my discussion draft, this is something that concerns me because of the length of time it takes to confirm anybody into one of these positions? >> thank you, madam chair. professor, since you have made the statement that none of the people at the table, the credit unions and the community baskers, are -- bankers, are responsible for this meltdown and crisis we have in banking, i would take it, then, that would you agree that they should be exempt from the consumer finance

protection bureau. >> no. quite to the contrary. first, i was making a specific statement about the members at this table. there are bad eggs in the community banking space and credit union space. and we should also note that there have been a lot of community banks and credit unions that failed. >> i understand that. and i want to reclaim my time, because it wasn't until octobe october 1, 2010, that the federal reserve published its financial rule that said -- are you ready for this, guys? if you make a mortgage application, you must have written proof of your income. now, to me, that's just so amazing, so elementary. mr. staatz, mr. hunt,

mr. wilcox, you've always, always had that provision. isn't that correct? whenever you made a loan on anything? >> in practice, absolutely. >> absolutely. and so here we have the fed, which has jurisdiction over most banks by the time you figure out what they do, that had the authority all along that could have stopped this stupid blunder in real estate. authority to do that all along and they didn't do it. why should we trust yet another organization with 1,000 new employees untested, untried, in theory? >> here's why. the cfpb has a single mission. and it will be judged on whether it succeeds in protecting consumers. >> judged by whom? >> the fed has multiple missions and they conflict. the cfpb would never be judged by the people elected in this country. and those are members of congress. and i find your statement to be

absolutely astounding, especially in light of the fact that you were special counsel on the tarp where you said that you find it offensive that this agency would be subjected to the appropriations process and therefore politicized. i mean, for goodness sakes, article 1 of the constitution gives the power of the purse to the united states congress. we are directly elected by people who want to see us -- see oversight on behalf of these agencies. and yet you make the statement that thank goodness we have the consumer financial protection bureau that's immune from this process. i'm just shocked at that. but i want to go on. >> if you're shocked, i would note that unfortunately there is a vigorous lobbying process in this room -- >> oh, come on! these are little guys. ok? >> there are big guys, too. they're not in the room here. >> i've been through a thousand

real estate transactions. and i practiced law just before respa came in. i would charge sometimes $75 to $100 to close a real estate transaction. and i could close it in 20 minutes. along came rspa, and there are seven full-time employees at hud that continue to work on rspa and screw it up. now you got the disclosures like this. one agency on top of the other. and all one had to do to stop the meltdown was say you can't give a loan unless you have written proof of your earnings. government doesn't work in these situations. rspa hasn't helped one individual and hasn't saved anything. because ultimately all people want to know is how much does it cost me a month? and you're going to have more regulations, more rules. and you don't look to the practitioners. people that have been through this thing from little bitty houses all the way through shopping centers. people who worked in towns with credit unions and community bankers like these little guys

here. and is there something wrong in the fact this they belonged to the association that they have a lobby? they're not entitled to be represented in washington? >> no one's making that argument. >> that's what you were saying. >> no. i beg your pardon, sir. that is not the argument that i am making. the argument that i am making is that the democratic process is sometimes influenced by campaign contributions and that we may want to be concerned about ensuring that consumer protection is insulated from financial influence. >> so there isn't anything in this town that's insulate the from anything. and the people that try to insulate themselves are the ones that isolate themselves and go beyond the reach of what americans want to do. this whole argument, if can i finish -- >> you can finish. >> i've been waiting a long time. >> you have. >> this whole argument that somehow the consumer finance protection bureau is above and beyond, has this great halo

that's better than all of these organizations, these people here seated to your right on a daily basis do several things. the first thing they do is they always check to make sure that the people with whom they have the financial transaction can afford it. they don't need government to do that. they sit down and look at income tax returns, they look at what their earnings are, and they give them advice on what to do. and somewhere out there you've got some people that really took advantage of the system, that people to buy homes that they couldn't make the first downpayment. people that were allowed to even call them cheater loans. when that practice went on, the fed winked at it and couldn't stop it. an existing government agency that was insulated from politics. and that's, the fed had the authority to stop this and didn't do anything. and you expect to us believe the consumer financial protection bureau will do anything better

than what the fed could have done. that's not going to happen. >> i think in light of that, giving the fed partial veto authority over the cfpb makes absolutely no sense. but i think it's important to note that the fed -- one of the reasons the fed failed is they had conflicting missions. it was told safety and soundness and consumer protection. >> there was no conflict. their mission was to keep the government from collapsing. and the cfpb will also fail. >> gentleman's time expired. anyquestions? >> yes, ma'am. mr. hunt, in your testimony, you noted that the requirement for the bureau to promote consistent regulatory treatment is ill defined. could you explain why you feel this is ill defined?

>> i think i was referring to the -- we don't know if abusive means when they charge your checking account now at a bank or if that means the interchange fee. we think it's totally inconsistent. that is why there have been mouse traps set and everything else. because we have fear of litigation and fear of being fined by regulators. we do everything we can to promote products that are beneficial to the consumer to the customer. but at the same time, we have one eye look at the regulator, and that's civil lawsuits going forward. so we have to make sure the provision is used correctly because it's a new addition to the dodd-frank bill. >> are you concerned that your small bank and other financial institutions will eventually find themselves caught in a trap with one federal agency trying to restrict their profits on certain products and another agency telling them to increase

their capital base? >> absolutely. we have three coming up real soon, it's going to take effect in a couple of years. quite frankly, sir, we're concerned about everything these days. for instance, look at overdraft. you had the fdic come out with guidelines, the fed came out with their guidelines. and what's to prohibit the cfpb to coming out with their flu guidelines as well. it is very important that we have the ability to continue to give consistent product to our customers without fear of retribution from the regulat. >> thank you. and mr. staatz in your testimony you advocate for replacing the cfpb director with a commission larger than what has been proposed. you envisioned this commission to have seats on the board that are designated for industry represenrepresentatives, includa seat specifically for an individual with experience related to credit unions. would you mind elaborating on your suggestion and underlying

concerns? >> first of all, as i said in the testimony in the oral that i gave today as well, one of our biggest concerns is undue, burdensome regulation. you know, earlier today i've heard all about the horrors that went on the past few years. obviously we as credit unions are not part of that, weren't it have to help clean it up but weren't parted of that. and i would think that any of the structures that were talked about today, under any of these structures, we could move very quickly to ban those sorts of products. ok? those that were truly abusive. but, i guess our problem is, is that when does it move from abusive into some bureaucrat's idea of what may or may not be right for the consumer. so i would like somebody, we would like somebody with industry experience to kind of you know when it starts to cross the line from is it abusive to just somebody's idea of a better way of doing

business. we think that's why somebody from the industry should be part of that oversight. >> and what criteria from the industry would you suggest that that person or those individuals have? should they be bank presidents? should they be small bank presidents? should they be credit union presidents? they be payday lender presidents? >> to the later, absolutely not. payday lenders. and i would suggest that obviously from our viewpoint we believe that credit unions should be representedded. why? because of who we are and who we represent. as a matter of fact, maybe the cfpb could learn a few things by spending more time in credit unions in figure out how do we serve members. maybe that could be the model. but, again that sort of sker tees might help all -- expertise might help all of us. >> thank you. i yield back. >> gentleman has yielded back. that concludes the testimony from this panel. i thank you for your testimony and for your response to our questions. the chair notes that some

members may have additional questions for this panel which they may wish to submit in writing. without objection, the hearing record will remain open for 30 days for members to submit written questions to those witnesses and to place their responses in the record. with that, the hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> the jobs story on wireless is frankly a bigger one for the impact on the economy at large as opposed to the microeconomic question of whether or not a given set of carriers builds out. >> the president's chief technology officer, aneesh chopra, on the demand for spectrum and expanding broadband in the u.s. joins a "the washington post" reporter tonight on "the communicators" on c-span2 c-span. every weekend experience "american history ." it's 48 hours of people and events telling the american story. hear first-person accounts from people who have shaped modern america, on oral history.

it features history writers of the past decade and travels to important battle fields that shaped an era during the 150th anniversary of the civil war. every weekend visit college classrooms across the nation as professors delve into america's past. "lectures in history." join curators behind the museums of exhibits and sites on american artifacts. and "the presidency," focusing on american president policies legacies as told through historic speech and personal insights from administration officials and experts. "american history tv" on c-span3 all weekend, every weekend. get our complete schedule online. and sign up to have them e-mailed to you using our c-span alert. >> today standard & poor's threatened to downgrade the united states triple-a credit rating unless the obama administration and congress find a way to reduce the deficit within two years. this week washington is looking

at the recommendations. tomorrow our guest is from kaiser health news. she will highlight proposals to cut health care costs. "washington journal" airs this week at 9:15 a.m. eastern here on c-span featuring "debt commission recommendations." >> this year's student cam competition asks students from across the country to consider washington, d.c., through their lens. today's second prize winner addressed an issue that better the roleem understand of the federal government. >> i want to be a dentist. >> i want to play piano. >> i want to be a video game programmer. >> i want to be eye vet. >> i want to be president. >> a football player. >> a mom. >> a policeman. >> an aunt. >> i'm going to be an artist when i grow up. >> there are few things as the americano dream or as essential for

americans' success as a good education. it's never been more true than it is today. at a time when our children are competing kids in china, india, the best job qualification you can have is a college degree or advanced training. and yet in a paradox of american life, at the very moment it's never been more important to have a quality higher education, the cost of that kind of education has never been higher. over the past few decades the cost of tuition in private colleges has more than doubled while costs in public institutions have nearly tripled. compounding the problem tuition has grown 10 times faster than a typical family's income, putting new pressure on family that are already strained and pushing far too many students out of college altogether. >> for a farm suital student -- pharmaceutical student, it's very expensive. i come from a middle class family. deciding on a college had a lot

involved. i was going to graduate with about $10,000 in debt still. it's a big burden. it would be nice if college was free. it would be nice if you had a lot more aid, federal aid, in form of pell grants and loans. but i don't know if that's the federal government's role. >> not a free ride but requirization. you can imagine the effort and initiative. but -- [inaudible] >> for a college to be affordable to someone there

needs to be things in place. we're a public institution. so a public institution is funded by taxpayer dollars. so we rely heavily on those appropriations from the state. but we have no other way of generating revenue to help support the institution. so beyond just paying for the classrooms' materials, we need to pay for the faculty, the cost of the overhead to operate the building, upkeep on the campus. everything. the only other revenue, revenue source is tuition. so if the appropriations from state continue to go down -- some of it is political, some of it is the economy. if it keeps going down, the only other source is tuition going up. >> for private institutions, escalated tuition costs are due to multiple factors, including having to maintain most student-to-faculty ratio and standards of excellence within programs and facilities. while the federal government has traditionally had a fairly

limited role in higher education, some feel they do have a responsibility to address this issue because it presents national concerns. >> it's absolutely critical for the nation if we're going to continue to be, you know, the or one of the primary economic powerhouses of the world for to us have first-class, best in the world education system, higher education. so one way or another it's really essential that the government ensure that we continue to have top-notch education in both graduate and undergraduate level. >> however some feel combating the issue directly by using price caps or by making college free would lead to difficult choices and would deviate from the federal government's historically limited role in higher education. >> regulation in the marketplace that we typically end up doing is to promote, you know, the efficient and fair functions of the marketplace.

we don't involve the government to that extent. of, you know, setting supply, price and demand in terms of the percentage of high school graduates that go off to college if we had that same percentage and we wanted to pay for it entirely through government money, we would have to massively raise taxes. so that's not going to happen. so we would then have to shift towards a decision of shrinking the percentage of high school graduates that go to college. and those are two really bad choices. >> right now we're involved mostly through pell grants and through guaranteed student loans. i'm involved, additionally as a member of the senate finance committee, with helping make

college more affordable through the deductibility of college tuition for middle income families. >> you're basically providing the money to the student. the appeal grant and direct loans go to the student. then the student has the choice of going to whatever college he or she wants. >> the federal government has taken a number of actions to address this issue. they have changed the way student loans are administered by making direct loans to students. they're investing the community colleges and increasing appeal grant funding in college tax credits. in addition, they have worked to simplify the financial aid and modify the income program. however, the issue still remains. though washington does not have the sole responsibility in addressing it. >> the people of the government. government is a very misused term at times. we are the government. there isn't a separate entity. if we as people feel like education is not getting the

type of support, funding, or whatever, it's our band-aid for the people to take action. >> i want to be an officer in the united states marine corps. >> i want to be a journalist for "the new york times." >> although we're headed down drastic index paths. >> there's no doubt that higher education will play a central role in our futures. >> while this may manifest >> as well as high school students and families around the nation. >> by undertaking this project we have learned is not the role the federal government in america in the is not their job to provide us with a free college education. it is, however, the role the federal government to provide the resources necessary for a college education to >> it allows us a valuable opportunity to allow us to be whatever we aspire to be.

>> or another words, to realize the american dream. >> 02 studentcam got or to watch all the winning videos, and continue the conversation on our facebook and twitter pages. >> that see one of our top winners in this year's studentcam competition. this year's theme times to produce a video about a topic that helps them understand the role of the federal government. today we go to waterloo, iowa and talk to sara gabriele. why did you choose the cost of college tuition as your topic? >> as you know, i actually worked with two other students. we are about as different from each other as you can get. daniel is heavily involved in the military, jarek with music,

and we were struggling to find a topic that pertain to all of our lives. after a lot of brainstorming, we realized as high school juniors and seniors, the issue of rising tuition costs were really was one that affected all of us. despite that we are all headed down really different paths. >> what challenges exist in addressing tuition cost issues? >> although it seems like a simple issue, as we found out for making our documentary, it is really complex. i think the reason for that is there isn't just one agreed upon cause for tuition increases. at public schools, at the state schools, it is a little more simple, because a lot of their tuition increases is due to lack of state funding. tuition is generally determined by the amount of funding they get from the states. however, within that, there are a lot of political complications

and even in terms of how the schools are spending their money. in recent years, there has definitely been more schools choosing to spend money on items that may be more desirable and competitive to get students to go there like new lounges, sports stadiums, etc. in terms of private schools, it gets even more complicated because these are the schools with this carrier price tags. oftentimes, -- with the scarier price tags. most didn't actually do not pay the sticker price. >> you spoke with both iowa senator's. what did you learn from those interviews? >> it was a really neat experience. among other things, the most surprising thing for me and my partners was that when we posed

the question of what is the role of the federal government, generally speaking, we did not receive the same answer, necessarily. both senators have differing approaches to answer our question. we also saw throughout all of our interview. >> what do people come away with having "watched the price tag of the american dream"? >> i hope they can understand how important this is to students and our country, but the huge implication the issue had, but then also understand the complexity of the issue, and may be why they are not so many simple, specific, immediate solutions to addressing the issue. >> thanks for joining us today. here's a brief portion of sara's documentary, "the price

tag of the american dream." >> i want to be a skeleton. >> i want to be president. >> a football player. >> imam. >> i want to be an artist when i grow up. >> there are a few things fundamental to the american dream, or essential for america's success, as a good education. this has never been more true than it is today. at a time when our children are competing with kids from china and india, the best job qualification you can have is a college degree are advanced training. and yet, in the paradox of american life, the very moment and has never been more important to have a quality high education, the cost of that education has never been higher. >> you can see this entire video and all the winning documentary's at studentcam dot or, and consider the commerce -- continue the conversation on

facebook and twitter. >> press secretary jay carney said today's report does not reflect current efforts in congress to reduce the deficit. other topics in today's briefing include the debate over raising the nation's debt ceiling and the one-year anniversary of the gulf of mexico oil spill. this is 55 minutes. >> good afternoon, everyone. before we get started with questions, i just wanted to give you a rielle of the president's call with the israeli prime minister -- are read out of the president's call with prime minister netanyahu. he noted he would host a seder at the white house and recall that the story of passover is one of liberation and freedom. he expressed hope that the israeli people would be able to celebrate in peace.

they discussed cooperation on counter-terrorism and how best to move forward, and the reason balas near the gaza strip. prime minister netanyahu expressed his deep appreciation for u.s. funding for the iron dome rocket and mortar defense system, which it he noted had successfully intercepted several rockets aimed at israeli communities. the president congratulated the prime minister on his been on this impressive technological achievement and expressed his pride with israeli cooperation which made it possible. with the signing of the budget appropriation, the president approved $205 million in funding for iron dome, which is above the annual package of foreign military financing for israel. the president and primary -- prime minister agreed to stay in close touch on the range of issues facing the united states and israel. that is all i have to start this

day. i will take your questions. >> standard and poor's downgraded its rating on u.s. long-term debt, indicating a real risk that washington will not be able to get a deal in addressing the deficit in the coming years. what is the president's reaction to that kind of bond rating? >> the bond rating remained the same. the s&p affirmed the aaa bond rating of the united states but emphasized the importance of timely bipartisan cooperation on fiscal reform. the same emphasis the president made when he gave his speech last wednesday. what the s&p analysis also said was that the american economy is strong. it is growing. it is diversified and dynamic and continues to be the most important and most powerful economy in the world. as for as its political analysis, we simply believe that

the prospects are better. we think the political process will outperform s&p expectations. the president is committed, as he made clear in his speech on wednesday, to moving forward in a bipartisan way to reach common ground on this important issue, the fiscal reform. he believes that the fact that republicans and he agree on a target of $4 trillion in deficit reduction over 10 to 12 years is an enormously positive development. the third part is the hard part, which is reaching a bipartisan agreement. two out of three is important, and it demonstrates progress. the statement that observes the fact that there is often gridlock in washington, and that the content and between the two parties sometimes prevents us from getting things done is not one we would

disagree with. but the fact is when the issues are important, history shows that both sides can come together and get things done. president ronald reagan did that with tip o'neill, democratic speaker of the house. president clinton did it with newt gingrich. president obama did 10 days ago with john boehner, republican speaker of the house. we can do it again. the president believes that is possible and that it will happen. >> i understand your point that the white house thinks washington will outperform this outlook. but does want to make sure i understand, when agency lowers the outlook on the norm --, long-term debt to negative, what is your view about the significance of that? >> we think it is a reminder that we reach agreement on fiscal reform, which is always valuable. it is another indication of the importance of both sides coming

together and grappling with this problem in getting to a resolution. again, republicans and democrats, the president all agree that there is a problem, that we need to do something about reducing our deficit. everyone agrees now on a target for deficit reduction. four trillion dollars over 10 to 12 years. that is significant. i would point you to moody's analysis in the wake of the president speak -- speech on wednesday. moody's gave a very positive assessment, and again today in its weekly report, made another positive assessment. the fact that both sides have the same or similar target, they have diagnosed the problem similarly, and that the president has begun a process that he hopes will lead to bipartisan negotiations that lead to some sort of bipartisan

agreement, i think it's all indication of the seriousness with which he takes this issue and the importance that he places on moving forward and addressing it. >> on the severe weather down in the south, dozens were killed by tornadoes across the south and the last few days. the president -- does the president have any plans to go to the region and talk to victims and assess the damage? >> i don't have a scheduling of day. the president spoke with governor perdue yesterday to express his condolences and make sure they know that the federal government stands ready for the federal emergency management agency to assist in recovery efforts of needed. fema, through its regional office in atlanta is monitoring conditions. it has dispatched a preliminary damage assessment teams to north

carolina, alabama, and mississippi, and we have folks on the ground assessing the situation and standing ready to provide assistance as necessary. >> staying with s&p, does the warning on the direction of the outlook for the long-term debt rating make a deal over the deficit more urgent? >> i would say that any call for a bipartisan agreement on deficit reduction, on fiscal reform, is a welcome one. in that context, i think that it adds to what we believe is some momentum towards that end. again, i would point to some important factors here, that even in the s&p analysis on the

economy, it said the economy of the united states is flexible and highly diversified. the current -- the country's monetary policies have contain inflationary pressures and a consistent global preference for the u.s. dollar over all other currencies gives the country unique external liquidity. our ratings rest on its high income, diversified and flexible economy, backed by strong track record of proven and credible monetary policy. there is a lot here that describes the strength of the united states economy and our recovery. on the political question of whether receiving, -- achieving compromises within reach, we believe is, and we rest our faith in those prospects on historical precedent which is as fresh as the recent agreement

between the speaker of the house and the president and other leaders on fiscal year 2011 budget, and on the seriousness with which the president and other parties are approaching this issue. >> the analysis is based on the fact that they shared the target of four dollars trillion, they shared an analysis of the problem and the fact that it needs to be addressed. these are important steps toward a deal. the fact that it is recognized as an important matter adds to the momentum, we believe. >> there is some sentiment on the hill that the talks on reform that the president called for last week have really undermine the work -- they are just a few weeks away from releasing their own results.

>> the president has said and others have said that we wholly endorsed the fact that the serious minded lawmakers of both parties in that group and others have taken on this issue and approached it in a way that recognizes the importance of getting something done and the need to do it in a balanced way. the fact that the president has come out with his vision should be a positive reinforcement, another indication that this is important work that needs to be done, and the fact that the president built his vision by borrowing in many ways from the recommendations of the bipartisan commission, which a number of members of that group sat, and that is approaches been -- his approach has been praised by people in the field

of fiscal reform. it gives a good indication of the fact that there is a building consensus around the way to approach this problem. he thinks is very complementary to the process. >> you think creating another group does not undermine -- >> we need to build off of all the existing groups, if you will. we need to bring together through a process that has to involve the leadership those republicans and democrats who can find consensus and common ground on measures to reduce our deficit and begin to reform our fiscal policy in a way that makes us stronger for the 21st century. >> what is his message for the

american people? >> the message he is carrying 2 virginia tomorrow, the california wednesday, to nevada on thursday is very much the message that he laid out on wednesday. you cannot just say these things once. he very much looks forward to engaging with the americans outside of washington to talk about how we got here, why it is so important to deal with the need for fiscal reform, and what his vision is for getting there. it can be extremely arcane and esoteric stuff. americans are worried principally about the economy and job creation, gas prices, and he wants to explain why, for the sake of our economy, we need to move forward on fiscal

reform, share responsibility, and share the burden as we go forward to create an america that a stronger, creating more jobs in the future. >> on the s&p, it is being called a wake-up call, but as a wake-up call, republicans will only move forward on the president's request to increase the debt limit if it is accompanied by serious reforms that immediately reduce federal spending. they are clear that they are standing up all firm on their position of more spending cuts. is this something the president can agree to? >> as he laid out in his speech on wednesday, the president believes that part of the package in terms of long-term fiscal reform involves spending cuts. also involve reductions, savings in health-care spending. it involves savings in the tax code and savings in pentagon spending as well as interest for

-- interest payments. what i pointed to the state as the secretary of the treasury made over the weekend. he made very clear that what is reassuring an important is that the leaders of both parties in congress, as well as the president, agree that the debt ceiling will be raised. we cannot play chicken with our economy and the full faith and credit of the u.s. government. we meet our obligations. we are the united states, and we will do that. that will happen. concurrently, as the president urged, we will be engaged in bipartisan negotiations, aimed at reducing our deficit, cutting spending and taking other measures to reduce our deficit. those things can happen on parallel tracks, if you will, but regardless of how that process proceeds, and what agreements are reached a long

way and in what timeframe, it is absolutely a fact that congress will raise the debt ceiling. not to do that would be a catastrophic folly. >> also on friday the president issued a signing statement. lots of people have been talking about it. during the campaign he said endure for all -- he said in different venues that signing statements were not a good idea and said we would not use them to do an end run around congress. why the change in position? >> he made very clear the position he took during the campaign. has been a little bit misunderstood although most who reported on it over the weekend got it right. he never said he was opposed to signing statements. he made clear that every president should retain the right to have signing statements, to raise constitutional concerns and

objections with a law passed by congress that he is signing into law. this concern was with what he saw as an abuse of the signed statement by the previous administration, so that the positions he took on the budget bill are entirely consistent with that position. you need to retain the right as president to be able to issue those signing statements, but obviously they should not be abused. >> did that position evolves over time? >> on numerous occasions, including a question and answer session, made very clear, explicitly, that sign statements needed to be retained. but he would not and should not abuse them. >> this the administration have been more specific recommendations for reforming the tax code?

>> any more specific today? we have begun a process. the president is committed to individual tax reform as well as corporate tax reform. he believes that a simpler tax code is good for individual filers and good for business because it makes business more efficient. those are two goals he things are very important. i do not have any new proposals for you today. >> 40 -- 45% of americans did not pay any income tax. does that mean they do not have a stake in the system? >> there are many taxes besides income taxes, as you know. of course they are all americans and they very much have a stake in the system, and in the economic future of this country. for those who are out of work, they have a stake in this

process, which must not as we go forward take actions that undermine the recovery that is under way or that underlie -- undermine the job creation under way. the focus the present wakes up with every morning is, what can i do to continue job creation and the growth that we have seen as we emerge from this terrible recession that we suffer from. everybody has a stake in this ad in congress and the president reaching agreement on economic policy issues that allows for the economy to continue to grow and jobs to continue to be created for industries to thrive in this country and create jobs in this country. those are the policies the president feels most passionately about every day.

>> what we threw what happens if the nation comes up against this debt ceiling and how that is fundamentally different than us live in budget authority, for example. what makes it so catastrophically -- >> because we have the largest and most important economy in the world. the world looks to us for economic stability. the world has a great deal of faith in our currency and u.s. treasurys. failure to meet our obligations would be a grave mistake and would have great impact on the american economy and the global economy. you don't have to look to me for an analysis of this. there are plenty of credible economists independent of the white house and congress. the consensus is near universal that the impact would be very

negative and very severe. >> doesn't mean we are not paying the interest on treasurys to institutions or individuals that on them? >> i will refer you to the experts at treasury for this, but i think what happens is we have bills that come due that we cannot pay because we have not raise the debt ceiling. in plain language, we would default, and default is a terrible thing for an individual, but a catastrophic thing for the united states of america. >> talk to me about this aid to and anti-syrian government broadcast group that was revealed on wikileaks last week. it was reported that a better freshen -- administration officials were worried they could be targeted by the syrian government to >> we are not going to comment on alleged

leaks of classified material. the u.s. government provides support to human rights activists around the world, in line with our values. among them, respecting the fundamental human rights of free speech, peaceful assembly, and human dignity. the u.s. our reach to civil -- syrian society is consistent with those principles. >> i want to make sure i ought to understand the reason for drawing a line in the sand. are you worried that you have to have on two parallel tracks if you try to slow it down? >> the cleanliness of this bill is not the issue. i think we went through this a little bit when we were talking about the 2011 budget negotiations and riders, for

example. you could have an attachment to this that declared my favorite baseball team america's baseball team, if you will. that would be fine with me, maybe not everybody, but it would not interrupt the process. the issue here is the debt ceiling has to be raised, and it cannot be held hostage to a process that is very complicated and difficult. we hope we will reach an agreement on deficit reduction, a bipartisan agreement within the time frame. i think what the secretary of the treasury made clear over the weekend is that we cannot make it conditional. what if we don't? what if we are a week away or two weeks away. in the meantime, congress says we are not going to raise the debt ceiling, and even getting up to that deadline poses huge problems for the economy because the global economy begins to anticipate the possibility of

the unthinkable. the point is, we have to separate the two in the sense that we can make serious progress and great commitment on deficit reduction, but we must raise the debt ceiling. in many ways, not to do so would render all of our other efforts pointless because we would immediately address the recovery. we could potentially cause a global economic problem, and that would make everything else we need to do so much harder. >> we are coming up on the one- year anniversary since the deepwater horizon accident and subsequent oil spill. how confident is the it ministration now that that sort of incident could be avoided, and what is being done? >> this is an excellent question.

even since i have been press secretary we have discussed a lot about the process of granting new leases for offshore oil drilling in deep water, and what happened after this historically serious oil spill was that this administration insisted that before we grant permits for more deepwater drilling, that industry demonstrate its capacity to contain a spill like the one we saw in the gulf. the first permit was demonstrated by the first consortium of companies and was granted in february. we have now granted 10 deep water offshore permits, and we will continue to do that. it is of paramount importance that we continue to drill, but we drill safely. we need to maintain and when possible increase our domestic oil production, but we need to

do it in a safe way. it was not that long ago that we were witnessing this terrible oil spill, and we should not forget that it is important to take the measures necessary to make sure that industries that want to drill do it in the safeway. >> so your confident that it could not happen again? >> the procedures are in place. we obviously know there is more to be done and we are constantly in the process of improving the agency that oversees this process. on the issue of are we able to contain the spill if the same kind of spill happened, we are only issuing permits to those companies that demonstrate that capacity. >> when did the white house learned about the announcement?

>> friday afternoon. >> did anyone try to talk them out of -- >> i don't know what the discussions were like. they obviously have a process and i believe the treasury department -- you may ask them for more details about the conversation. i don't have any details. >> what was the president's reaction? >> i think the reaction of all of us is that the assessment of the state of the u.s. economy is one we agree with. the assessment of the potential for a bipartisan agreement is, we think, not as positive as we believe it is. that is why i say that we believe the process will outperform us.

on the political side of this, we have a certain amount of experience here in dealing with a divided congress and still getting things done. there is great historical precedent for that to happen. you can look out and hear the competing statements from members of both parties on things. there is no way these two sides are going to find common ground come together, and yet there is a way, because the american people demanded, and the american economy demands it. we need to address this issue. that is why the president takes it so seriously and there are a lot of serious lawmakers on capitol hill who agree that we need to do this. in many ways, as hard as this issue is, because of what we have been through in the economy and because of the fine work of the commission, the president's

commission, there is an atmosphere, if you will, that creates potential for agreement that did not exist in the past. we hope to capitalize on that and get something done for the american people. we may not agree on every item, but there is much we can agree on that we think will be good for the economy and good for our balance sheet. >> on the interviews the president is doing this afternoon, can you tell us the criteria used to select stations that get the exclusives? >> we do a lot of these, as you know. we look at different states, different markets where the president wants to carry his message. this is a continuing process. i am sure by the time my time is done here we will have a vast

array of regional tv markets we have hit. >> does the campaign weigh in on this? >> the campaign does not weigh in on it. we make our decisions about where the president should give interviews here at the white house, and i would note that the campaign i think you are referring to did not exist until a few days ago. the process is pretty simple. we look at where he has not spoken before and where the market is and proceed from there. >> does he think it's -- he gets better access to the american people than do in the news conference here? >> he shares our belief that there are many ways to speak to the american people. it would be nice, it would make our jobs a lot easier if these

were the days when a vast majority of the american audience tuned in to walter cronkite at night and we could just talk to uncle walter and get our message out there. that is just not the case anymore, as you well know. we reach out in numerous ways, through national media interviews, white house press conferences, regional media interviews, through facebook town halls, which we are doing this week, which were greatly looking forward to. it is a mix of traditional media, new media, national and regional media. you have to reach americans where they are. it remains the case that a lot of americans do not get along of their news from local television. >> did the president actually get briefed himself on the s&p report? >> i don't know specifically. i know he is aware of it but i don't know if he had abroad

briefing on it. >> will he use the report in any way to make his point tomorrow? >> i don't want to anticipate because these are town halls where people are asking him questions. he certainly stands ready to answer a question that makes a reference to that report. >> when the s&p said there was a material risk from long-term debt, does the white house agree or disagree with that? >> the fact that there is a long-term debt issue that we must confront as a nation is precisely why the president and other serious minded people in washington, lawmakers on capitol hill, have come forward with their visions of how to address it. again, if the assessment is that we have a problem, we agree. if the assessment is that we need to reach a bipartisan agreement to address the

problem, we agree with that. where we slightly disagree is that we think the prospects for bipartisan agreement remain high. it is at moments like these when the leaders of this country come together in a bipartisan way and find common ground to do what is right for the country. we believe that as possible. we have seen already. this president has, and we think we can do it again. >> one of the things that administration officials have warned about is not so much that the markets would react in a catastrophic way, but that they could start weighing in before if they don't think it is going to be done, which is what this seems to be. >> which is why it is reassuring that leaders of both parties

have said the debt ceiling will be raised. that is the same thing they said in their meeting with the president rejects but the fact that after the president gives this major speech, now the markets seem to have taken the exact opposite take away. they are pessimistic instead of optimistic about the two sides coming together, and they get a unique 0. markets don't have to wait until election day to vote. i am wondering if you think their pessimism could affect not just the economy and the stock market going down, but could make it harder for you to achieve the outcome that you want. >> is it a problem, would it be a problem if the markets prior to the deadline for raising the

debt ceiling believed it was not going to happen? yes, i think the secretary of the treasury said that and that is why it is important -- today's report was about the prospects for deficit reduction. that is why it is so important to move sooner rather than later. you don't want the instability caused by any doubt about congress's willingness to raise the debt ceiling. that is why it is so important that they do it. i point you to a lot of others out there who have made very positive statements about the president's speech and the prospects for bipartisan compromise. said this potential change in the direction of fiscal policy is credit positive

for the u.s. government, although it remains uncertain what sort of budget lushly be adopted. despite these uncertainties, we view the changed parameters of the debate with broadly similar goals as to government debt levels as a turning point that is positive for the long-term fiscal position of the u.s. federal government. that is moody's assessment. this is hard stuff, complicated stuff that requires some elbow grease by members of both republican and democratic parties to get these kind of agreements done, but we think there is reason to believe we can do it. i am not a market analyst. we believe in the strength of the u.s. economy, the fact that we are growing out of recession in creating jobs and if there is a focus by this president and members of congress on the need to deal with our long-term debt

and deficit issues. >> what is the president doing to spur congress and congressional leaders to name members of the debt reduction group that he called for in his speech? the two that centuried proposed are not exactly people you would associate with trying to remove he two that- teh senator reid proposed. what we have the grounds to believe that this will ever get off the ground? >> because it has to. congress is on recess, but we are at a staff level having

conversations, and the phones work around the world, so we are also having conversations with lawmakers in various places around the world about the need to move forward with this process. we remain confident that we can do that, and we will do that because it is essential that the american people see that its elected leaders in washington are addressing an important problem together. it is essential for them to see that serious members of both that in anyowledge situation like this, just as it was true with the fiscal year 2011 budget negotiations, neither side is going to get 100% of what they want. it is not a my way or the highway approach. president understands that, and we believe that everybody needs to understand that.

that will also help the process move forward. >> has the president has -- had conversations with either speaker boehner or senator mcconnell about naming the group? >> i don't believe president has had conversations with the leaders you mentioned in the last several days, but we are moving forward on this. >> did the president have any conversation with the speaker before he went to iraq and pakistan? >> i don't know if they spoke about this trip to iraq. they spoke in the wake of the agreement on the budget, a week ago friday. we think it is a good thing that the speaker of the house visited iraq to see the progress that has been made there, and the fact that our civilian and

military personnel continue to do extraordinary work there. a lot of people have taken their eye off that ball. understandably, because we have drawn down 100,000 american troops from iraq, and we are very much in a process of making transitions to the iraqis. we have been in a support system over there for a long time, as you know. >> the speaker said he would like to take money away from the justice department and give it to the house in the fence of the marriage tax. b g in defense of the marriage act. [unintelligible] >> i am not aware of that and do not have any comment specifically on funding. i know that from the day that we announced this year, we obviously will work with congress if congress so chooses to move forward and want to defend it.

i would direct that to the justice department. >> we are moving from a high stakes, high drama is a bit over spending to another high stakes, high drama dispute over raising the debt ceiling. it is a difficult environment. does the presidency the next two years as playing defense? >> we have learned since the midterm elections that deliver the house representatives to the republicans that despite prognostications to the contrary, we can get big things done. this president believes very strongly that yes, there is the potential for serious work to be done. it is not necessarily going to be easy. it will require compromise by both sides.

it is a divided government, but that is how our system works. goingeen a lot of time out around the country talking about his energy policy and the need to diversify our energy sources and pursue a clean energy standard address very directly the problems that americans are contending with because of the rise in oil prices. he believes that he can continue to talk about those issues and make progress on most issues because the american people expect us to. they don't think it is an excuse that one party controls the house and other party controls the senate and the president's party is not in control. that is not an excuse to the american people, and he certainly does not think it is. he began a process on wednesday that explicitly calls for bipartisan agreement. that is what we are here to do,

to get some work done for the american people. >> the president's time line for dealing with this through the end of june, the deadline for the dead limit before the debt limit, what happens [unintelligible] you are not in a position yet to put forward a package. what is the white house's expectation on what will happen? >> the treasury department has made it very clear about what the chronology looks like. i will leave it to them to analyze what those deadlines are and to provide that information to congress, which they have done and i am sure will continue to do.

you question goes to my earlier point and write to the statement that secretary geithner made yesterday, which is that we are pursuing deficit reduction aggressively, within the same time frame that congress needs to take action on raising the debt ceiling. it would be a mistake to have one be conditional upon the other, precisely for the reasons you mentioned. agreement is hard. we believe an agreement is possible by the end of june, and that it will be a positive thing in and of itself. you cannot play chicken with the economy, and to make raising the debt ceiling contingent upon the success of those negotiations is very risky behavior. it is plain chicken, and we don't think that is what congressional leaders meant when they reassured the president and the public that the debt ceiling would be raised.

>> i'd take them at their word that the debt ceiling will and must be raised and the president takes them at their word. we are cognizant of, we need knowledge what members of congress are saying and how they want to see progress on deficit reduction, and so do we. we will push that boulder up the hill because it is important, and we will demonstrate the president's commitment to doing that. >> if they cannot play chicken with the economy, but the economy is directly tied to prices at the pump. what conversations are happening right now about tapping the strategic oil reserves? ex-president a major speech talking about gas prices, and he spoke in a press conference about this. he has taken questions in the

past about this strategic petroleum reserve. we obviously look at the situation constantly and assess what our options are. it exists to deal with a literal destruction in the supply of oil. i believe the president said recently in an interview that you have to be very careful about the decision to make with regard to releasing the reserve, because you don't want to get caught in a situation where you release it because of a price issue and then find you have a disruption a new reserves are down. he obviously continues to look at it. the point he has made in his statements about our need to address our long term energy future is that there are no short-term fixes to this problem. this is what he talked about

before. we had a spike in 2008. a lot of people said a lot of things in washington about the need to deal with gas prices, and prices went back down and everybody forgot about it. we need a long-term energy policy that increases our production of fossil fuels and forms of clean energy, diversifying our energy sources, and does it in a way that cortex's in the future against the same things. >> if the president were to think about passing the petroleum reserves, it would not make a significant difference to the american people. >> i am just saying there are no short-term solutions to our overall problem of dependence on foreign oil. you have to have sustained energy policy and you have to look at diversifying your sources of energy, increasing production of energy at all times, and building clean energy

technology that will allow us to move off from our dependence. >> you are saying $4 a gallon and many pumps across the nation. is the country bracing for $5 a gallon and higher up this coming summer? >> it is a conversation we have every day about gas prices and the impact they have on americans. that is the conversation that americans are having around the country. they are concerned about deficits and debts and a lot of things, but far more, they are not talking about the s&p analysis today. they are talking about the price at the pump down the street and the impact is having on their wallets. that is why the president is committed to coming up with a long-term solution and not just trying to win the rhetorical debate about the problem of gas prices. he wants a policy that positions

america in the future in the way the reduces the impact of these price hikes. >> is the white house bracing for higher prices? >> we are not predicting higher or lower. we are not in that business. we know that prices are high and that has -- severely tests americans. we are grateful that congress and we were able to reach a tax cut agreement in december that provided a payroll tax cut for everybody, that it helped alleviate the impact of rising gas prices. we are very cognizant of it. we think of that and talk about it every day. >> of libya, there are reports that nato europe is running out of munitions. the european allies are running out of munitions to drop on

gaddafi's forces. apparently there is some pressure for the u.s. to take a larger role again. is there any consideration of that now at the white house? >> we believe that nato has the capability and capacity to fulfill the mission and has, taking the lead and command-and- control in enforcing un security council resolution 1973. our role is to support and assist, and remains an important role, but not a lead role. we provide capacities for jamming, for tanker refueling and intelligence gathering and the like. we continue to work with our partners to find out if there are other ways we can assist. but we have no plans to change your posture. we have a great deal of faith in nato's ability to fulfill its mission. the last 24 hours, there has been a dramatic increase in the number of sorties blown by nato

planes as the weather has cleared. >> to the european allies have enough musicians? >> i would address those questions to nato. we remain fully confident in nato's capabilities. thank you, everybody. >> one more. >> with the anniversary of the bp still, you have talked about sharing similar steps about what happened. i think you got all the way to unlimited damages. there is no movement on that in the congress. how can you be comfortable with

more drilling in the gulf when there still is a cap on economic damages at $75 billion, should a spill actually take place? >> i don't have any specifics with the issue of the cap on damages. the administration is committed and focused on making sure -- that have begun issuing new permits for deepwater drilling, but it only does so when industry demonstrates the capacity to deal with these kinds of spills. so that what happened in the gulf last year does not happen again. we feel confident that the procedures in place to demonstrate that industry can contain and deal with that kind of spill, which is why we have issued these leases. we think drilling is important as long as it is done safely.

>> going back to april's question, about $5 a gallon gas coming up in the summer, people are saying there are very concerned about this. they understand a long-term solution, but they are concerned about $5 a gallon gasoline in the summer. they are concerned about not going away this summer, and the like to know what the president can do to help them. we are talking about people who were supportive of the president's forces before looking around and saying, we will not be able to go anywhere this time. >> we are very focused on this, extremely aware of the burden it creates, and looking at ways we can help alleviate. the reality that you know and you weren't -- responsibly in forming your readers that there

are no silver bullets to alleviate this problem. the way to deal with it is to have a serious, long-term energy policy that increases the diversity of our supply of energy. that is how we get out of this mess in the long run. in the short term, we are looking at different measures we can take to alleviate the impact of this rise in oil prices. again, it is important for everyone here the talks and writes about this issue to acknowledge the fact that administrations and congresses in the past have not succeeded in addressing this issue for the long term, which is why continue to have these cycles of price hikes and a great deal of consternation, followed by a lull when everyone ignores the need for long-term energy policy because the prices at the pump have gone down. have gone down.