across all asset classes. >> the reason i ask is that in 2008 -- are you aware that municipalities have defaulted at a higher rate than corporate bonds? >> as i mentioned, we are aiming to get comparability of all our asset class is. >> that would mean basically that you would now start reading what was once rated in to that a ba or bb up to a tripoli. they had approximately the same default rate, and i would argue that since the default rates are the only thing that really matters -- am i wrong to think that the only hot thing that really matters is the likelihood of getting repaid? if that is the only thing that matters, bba munis should be

rated aaa. you're telling me you have addressed that issue? >> we are looking towards it. we are be calibrating -- we have three calibrated a criteria across many areas including structured finance, sovereign government, and we are also read calibrating the criteria on municipals, with the aim and objective to have comparability of readings across all our sectors, all of our asset classes, and geographers. >> has moody's made progress in this as well? >> yes, i am aware that since 2008, moody's has formally recalibrate it all of the u.s. public finance readings and move them onto a scale that is comparable to corporate ratings, financial institutions. >> based on default rates? >> there was a research piece and a lot of analysis that i can assure is provided to you. >> my staff will be in touch

with both of you to try to catch up on some of the data. do you do governmental issues? >> we do not, but i would point out, and i'm not sure of the data you are referring to, but the lot of the municipal issuance were injured, so you definitely have a skewing of defaults statistics and readings. >> ashley, these are based on not insured. i believed then that munis were being chased into insurance that they did not need. >> i was just clarifying. >> do you do munis? >> yes, we do munis. we are just starting. we will release a study in september taking the 200 most liquid muni issues. many involve states or cities, and we are looking at the actual financials. we will not be using dated information to come up with

ratings of those. state to enforce september. >> looking forward to it. -- stay tuned for such member. >> looking forward to it. >> i want to follow up on a line of questions from the chairman earlier. in a letter sent to this subcommittee dated june 13, secretary geithner acknowledged that he, along with the deputy secretary, the omb director, and executive president of the vice president's office met with s&p personnel on april 13. are you aware of what was discussed at that meeting? >> no, i'm not. i know our team that you mentioned regularly meets with them, and i have started the process of trying to get a better understanding. i was not aware that they met with the treasury and the members you just said, but i know they had a meeting, and because i do not have privy to

people they meet once they are in the ratings process. >> according to documents obtained by this committee, two days after that meeting on april 15, david pierce reached out to the undersecretary to let treasury know the committees outcome. do you know what was discussed on that call? >> no, i do not. normally the process would be once the ratings committee makes a decision, we write up the decision. we also inform the issuer of the rating action if there is a change or an affirmation, and if there's any publication we are going to do, we do share it with them also. >> so you would have informed the issuer before the public would find out? >> we let them know that we would be taking a reading action, yes. >> shortly after, mary miller reached out to s&p for a draft press release on the outlook

change. this was three days before the actual press release occurred. what would be the purpose of sharing a draft press release with the issue were? >> it gives the issue were a chance if there are any factual errors or anything else in the press release, then there is an opportunity to correct that. we want to give the public completely error-free information. that is an opportunity for them. >> that is standard practice? >> that is standard operating process? >> do you know whether the department made any substantive changes to the release? >> i do not know that. >> two days before the actual press release, another treasury official reached out to john chambers and asked if there is a communications director the treasury's press people can connect with, and appears that a call actually did take place. do you know what happened on that call, what might have been discussed? >> i do not know specifically, but generally, they may have wanted to coordinate as to when

we would be releasing our information so they can plan their own releases of information that they may have intended to do. that is a normal process where if we are going to announce the rating action, which they believe is material, and they may want to coordinate with their own communications group as to what they may want to say to the public. >> you do not know what occurred on the telephone call? >> i do not. >> you do not know whether or not treasury ask for substantive changes? >> the purpose of sharing the draft released is only if there are factual errors. once the decision is made, we proceed along those lines. >> you believe that is an upper process? >> we believe it is because it allows any elimination of any errors that may occur by mistake or by any other reason, but once the rating action is done,

we follow the process, and we follow it very vigorously within our organization. >> i would ask that the secretary's letter dated june 13 in the attachments be made part of the record. >> without objection, so ordered. >> is the gentleman will yield for a minute? thank you. again, as i said, as a former mayor, i get phone calls from your agency before you gave up a rating. it is fairly common. everything you do, you give the individual being -- an opportunity to correct factual disparities. >> yes. >> does your company to the same thing? >> our company has the same policy, for the same purpose, to insure that there's not a material misstatement of fact or inadvertent disclosure. >> i know. moody's called me as well. do you do something similar? >> we have absolutely no contact with issuers of all. >> you do not make public statements of any kind in?

>> that is correct. >> on the issue were paid side of our business, because we also have a subscription business, we do the same thing. it is only about correcting factual errors that we may have. >> it is a standard practice in the industry? >> correct. >> correct. >> give back the gentleman's time? >> i want to thank this panel. appreciate your time and thought will testimony. just want to remind the its members have additional questions for this panel which they wish to submit in writing, the record will remain open for 30 days for members to submit rick -- written questions and place our responses into the record. if there's no further business, this hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> in some of the latest on the debt and deficit negotiations on capitol hill, both the house and senate are out. the house has adjourned until tomorrow at 10:00 a.m. eastern for morning business. they will turn to legislative business at noon. the senate is in recess. the vote was taken earlier on a

debt and deficit measure put forward by majority leader harry reid. it failed to move forward, 50- 49. it needed 60 votes to pass. the only republican who voted to move the bill forward was massachusetts senator scott brown. the senate recessed shortly thereafter. we will bring you updates on the negotiations as they arrive, and as always, when lawmakers gavel back in, you can watch the house here on c-span and the senate on our companion network, c-span 2. look now at the senate. and i think what's most disscourge the average person is asking, why would we inflict this pain in the midst after recession? why would we have the fear of dwawlgt on america's debt for the first time in our history? why would we lose or credit rating, the best in the world, aaa, because of a manufactured political debate here i washington? we'll pay for this for a long

time. for every 1% interest rates go up, our national debt goes up $1.3 trillion over ten years. as we talk about all the spending cuts we want, the fact is we end up in a position where we can't really keep up with increases in the interest rate. the majority time has expired. mr. mccain: mr. president? the presiding officer: the senator from arizona. mr. mccain: i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. mr. levin: continuing the colloquy on this side of the aisle -- and we would give up the floor -- mr. mccain: -- [inaudible] i used the time rather than have to listen to this. mr. president? how much time is remaining?

the presiding officer: does the senator withdraw or withhold the quorum call? mr. mccain: i suggest the -- suspend further proceedings under the quorum call. the presiding officer: without objection. mr. mccain: mr. president, how much time is remaining? the presiding officer: the minority has 14 minutes. mr. mccain: 14 minutes. i'll tell you what, i'll be glad to engage in a short colloquy with the senator from illinois if he would like. the senator from illinois, i believe that we are close to an agreement here? mr. durbin: i hope so. mr. mccain: does the senator from illinois agree that most likely that agreement will not have an increase in taxes associated with it, at least in the short term? mr. durbin: i hope is not. mr. mccain: you hope so. mr. durbin: i heard there is revenue included in the agreement. mr. mccain: everything i've heard, the agreement does not

have tax increases in it. mr. durbin: i honestly am not a party to this, but as gang of six and fiscal commission, we believe everything should be under consideration to reduce our national debt. mr. mccain: i assume that would also mean that the senator from illinois would advocate another stimulus package? mr. durbin: i want to make sure we have some stimulus to the economy to create jobs and help those out of work find work with training and education. mr. mccain: wufr -- one would have to assume that the senator from illinois believes the last package was successful, which counting interest, over $1 trillion, the senator from illinois and others who advocated the stimulus package said that if we pass this, unemployment will be a maximum of 8%. this will stimulate our economy and create jobs. and you know what the senator from illinois and others are saying now? it was not enough.

it was not enough. that we didn't spend enough. that we didn't make the deficit larger because certainly nothing in the stimulus package was paid for. so i hope that the senator from illinois understands, the american people understand that just spending more money has failed, and failed miserably when you look at the latest news -- and it's on the front page of the "wall street journal" and "the washington post" and "the new york times" -- that our economy is staggering back into a situation of stagnation. i'll be glad to let you respond. and the answer on the other side is, well, let's have some more spending and let's raise taxes. let's take some more money out of the taxpayers' pockets in the form of spending more money, their money. it's not the administration's money. it's not the senator from illinois' money. it's the people's money. take some more money of theirs.

this is the nobel prize -- anyway, take more money in taxes and more out of the taxpayers' pockets, and that will be the answer to our problems. i'll be glad to hear the senator from illinois' response. mr. durbin: first i want to thank my colleague from arizona. for those who are witnessing this this is almost a debate in the united states senate, and it rarely happens. and i thank you for coming to the floor. mr. mccain: rather than have you use all our time, i thought i would engage in a colloquy. mr. durbin: i enjoy doing this. mr. mccain: go ahead, please. mr. durbin: first, during the course of your presidency campaign, mark zandi, your economist, helped you formulate some positions. his opinion of president obama's stimulus is that it stopped a precipitous decline in our economy, that it a -- did it achieve all we hoped for? no. mr. mccain: can i interrupt on that particular point. mr. zandi was one of many advisors to my campaign.

the key advisor was douglas holtz-eakin, former head of the c.b.o., who had no brief whatsoever for that proposal. please go ahead. mr. durbin: the second point i'd like to ask the senator from arizona, i think one of the real bedrock beliefs among republicans is that if you cut taxes particularly on the healthiest -- wealthiest people in america the economy will pros puss. didn't the debt of the united states double under the president and he left a shambles behind him? 2.3 million jobs lost in the first three months of president obama administration because of this failed economic policy which you continue to espouse, that if we cut taxes on the rich, america is going to get wealthier. haven't we tried it? where are the jobs? mr. mccain: could i take a little trip down memory lane with my friend from illinois who i had great privilege many years ago -- i don't know if i should mention the 1982 election, he and i came to the house of

representatives together. you might recall that one of his own, then a democrat congressman from texas, got together with president reagan and guess what we did? we cut taxes and guess what? we had one of the strongest roeufrs in reece -- recoveries in recent history of this country because -- could i just -- because we didn't start spending and add spending without paying for them. and i would say to the senator from illinois. he is correct. the spending that went on in the previous administration was not acceptable and led to the deficit. let me just finish. but i would also say speaking for myself, i voted against the medicare part-d because it was not paid for. i voted against the earmark and pork barrel spending which were abundant, as every appropriations bill came to the floor and dramatically increased spending in the worst way, wasteful and corrupt way, i will say. and i'm proud that at least some of us said if you don't stop

this spending and get it under control, then you're going to face a serious problem. what i would also mention, and i've seen the chart, it's gotten a lot worse, gotten a lot worse since the last election. and you can't keep, biob, you can't keep up blame it on bush. mr. durbin: does he recall what happened with the reagan tax cuts? what happened was we tripled the national debt during that period of time. and president reagan came to congress 18 times to extend the debt ceiling. he holds the record. so to argue the reagan tax cuts led to great long-term prosperity is, i think, seriously in doubt if you're going to use the deficit as a measure. mr. mccain: if i could say we believe, and reagan believed, that cutting tax cuts would restore our economy, which was in the tank thanks to the practices of the previous administration before him, and

we -- reagan presided over probably one of the greatest job-creation periods in the history of this country. and those are numbers that i would be glad to insert in the record. compare that with what has happened since this administration took office with the promise that if we passed obamacare, if we passed tarp, if we passed all of these others that the economy would then be restored and grow. and again, it's hard for my dear friend from illinois to refute the fact that the categorically stated that if we passed the -- quote -- "stimulus package" that unemployment would be at a maximum of 8%. unemployment food is 9.2%. and if you look at any indicator, whether it be housing starts, whether it be the deficit, whether it be unemployed, whatever it is, it's gotten worse since the stimulus package was passed rather than

better. please go ahead. mr. durbin: would the senator yield for a question? mr. mccain: i'd be glad to just hear your comment. mr. durbin: i'm going to give you a clans to speak again. -- a chance to speak again. does the senator believe defaulting on our national debt for the first time in our history, the threat looming over from the house republicans and others for a long period, is good for america's economy? one of the senators on the floor here from the state of pennsylvania has come in and said defaulting on the debt is not that big a deal. it can be, quote in his words, easily managed. does the senator from arizona agree with that thinking? mr. mccain: as the senator may know, i came to the floor a couple of days ago and made that comment, and the senator from illinois and i are in agreement, point number one. you can prioritize -- i think the senator and every economist i know literally would agree. you can prioritize for awhile where you want what remaining money is left. but the message you send to the world, not just our markets but

to the world, that the united states of america is going to default on its debts is a totally unacceptable scenario and beneath a great nation. we are in agreement, number one. mr. durbin: amen. mr. mccain: number two is that to insist, to insist that any agreement is based on the passage through the united states senate of a balanced budget amendment to the constitution of the united states, as i said before, is not fair to the american people because, because the terrible obstructionists on this side of the aisle, the terrible people, their flawed philosophical views about the future of america is not going to allow to us get 20 additional votes from your side, assuming that you get all 47 since it requires 67 votes to pass a balanced budget amendment to the constitution. so i think it was not only wrong assessment, continuing's not fair to the american people to -- i think it's not fair to

the american people to say we can pass a balanced budget amendment to the constitution through the senate at this time. now maybe after the senator is defeated in the next election and we get rid of a lot of -- maybe that will happen. but certainly let's not tell the american people that that is a possibility today because i think it raises their expectations in a way that's not fair to them and, frankly, detracts from what i think is being done as we speak between the leaders, the president, democrat leaders and republican leaders, which is in a very short time frame. mr. durbin: i would say it pains me to say that i agree with the senator from arizona, but i do. we both feel threatening the debt ceiling is not in the best interest of the united states. and both of us feel that holding out the threat that if you don't pass a constitutional amendment, you can't let the economy continue is really not a good faith bargain. i wish senator byrd were here to respond to that particular suggestion. as for my prospects in the next election, i thank the senator

from arizona for campaigning against me last taoeufplt when he -- last time. when he did i almost got 60% of the vote. i welcome you back to the land of lincoln any time. mr. mccain: i did so well in the presidential campaign in the land of lincoln, i'm not surprised i had such a dramatic impact on the the senator from illinois' election as well. this kind of discussion i think is important, number one. number two is we should have this national debate on other forums besides just the sunday show and perhaps the floor of the senate is the best place to do that. and i want to continue to engage with the senator from illinois. but i hope that this agreement, i hope that this agreement will assure the american people that we will meet our obligations, that we'll meet our obligations not only physically but fiscally, but also meet our

obligations to them to govern, to govern, because they did send us here to govern. i think the senator from illinois would agree with me. the last approval rating of congress i saw, both sides of the aisle was about 16%. and i'm yet to encounter anyone in that 16% category in my travels back to my state. by the way, i would like to note the presence of the budget committee chairman here, senator conrad, who i think has made enormous good-faith efforts to reach an agreement on some of these issues. and i thank him for his work, and i want to assure him his reward will be in heaven, not here on earth. the senator from illinois? mr. durbin: i'd also like to thank the senator from arizona for the few minutes we shared on the floor. and i hope more members will do this rather than just taking turns and giving speeches. these exchanges even when we disagree are valuable.

but i hope at the end of the day i agree completely with the senator from arizona, at the end of the day we cannot allow our economy to lapse into this default. it will be devastating to a lot of innocent families and businesses across america and will cost us dearly in terms of our national debt. so let us hope that we can find this bipartisan agreement that people are working on even at this moment, and i hope that we can do that soon. incidentally, i want to say for the record former senator alan simpson said -- and i quote -- "ronald reagan raised taxes 11 times in his administration. i was here. i was here. i knew him better than anybody in the room. he was a real friend and a total realist as to politics." i yield the floor. mr. mccain: in retrospect, the one thing president reagan said he regretted and he regretted was the agreement that was made with the democratic leadership that we would cut spending by $3 and increase taxes for $1 for

every cut in spending. that was the ironclad agreement. and guess what happened? we increased spending, and we did -- excuse me. the presiding officer: the senator's time has expired. mr. mccain: and the fact is we raised taxes and did not cut spending, and that was a direct violation of the commitment he got from the democratic leadership. i yield the floor. the presiding officer: the clerk will report the >> there was a vote earlier in the senate on the debt and deficit measure put forth by harry reid. it failed to move forward. needed 60 votes and only have 50. the senate has been in a special weekend session. lawmakers are out at the moment, but expect the senate to come back sometime today. you can watch live on our companion network, c-span2.

the house meanwhile debated the bill yesterday and voted it down. the house has adjourned until tomorrow morning at 10:00 eastern. members will take up legislative business at noon. you can find vote tallies online at c-span.org. there will also be continuing coverage of the house when members gavel back in here on c- span. texas governor for president in 20 call. friday, he criticized president obama for the nation's debt problem and discuss the issue of gay marriage. he made these remarks in denver at the western conservative summit organized by the colorado christian university centennial institute. this is about 25 minutes. [applause] >> thank you. thank you very much for your service to our country. thank you. [applause]

what a nice introduction. as governor, my highest responsibility was to serve as commander-in-chief for the colorado guard, so, lieutenant, i appreciate your service and that of your colleagues, men and women who protect our freedom every day. thank you. [applause] friends, i appreciate the chance to be here today and particularly the chance to introduce a very good friend and an outstanding governor, rick perry of texas. when you serve as governor, and his and my terms overlapped for seven years, you get to know who the doers are, you get to know with the talkers are. rick carey is a doer -- rick perry is a doer. we were close friends and allies, and that is not something that you always say about all of your colleagues. given that rick and i serve with, for example, rod

blagojevich and howard dean. [laughter] had my colleagues know that 1 m's first running, i would not have been elected, and i, too, as the lieutenant mentioned, am a native of texas. born and raised in fort worth, which is a little larger than rick perry's home town. not a lot of people know this. there were a number of years were three native texans were serving at one time as governors of three different states. rick perry, myself, and a gentleman named jeb bush of of florida. this means texas truly is an expansive state. one difference -- i was accepted into the university of texas.

he had to go to texas a&m. [laughter] rick perry has built a strong and consistent record as a conservative during his 11 years as governor of texas. he is a leader in emphasizing the role of states in our federal system. rick has frequently taken on the federal government cozy over reaching into our areas of state primacy. strong fiscal conservative. used his line-item veto to veto more than $3 billion of budgeted items. [applause] while cutting taxes tax rates for everybody. whether it is taking on the trial lawyers over tort reform or the teachers union over accountability, rick perry has shown himself time after time as being not afraid to use his political capital for the good of the people. texas today leads the country in terms of job growth, economic

growth, and i in no small part as to rick perry's 11 years governor of the great state of texas. so is my pleasure to introduce the governor of the second greatest day in the union, rick perry. give him a warm, colorado welcome. [applause] >> bill, thank you. he was fun to work with. i do not know where you're sitting, but waved at me. do not know where he went, but anyway. well done, sir. proud of you. you make all of us very proud of you. go with god and be safe. do your duty. thank you. god bless you. [applause]

as bill said, one of the most magnificent things we do as governors is have the opportunity to have young men and women like him, who selflessly serve. james, i cannot tell you what a feeling of pride it is as we go across afghanistan and iraq to visit those young guardsmen. truly, they are magnificent in how they serve, what they do. let me tell you, it is good to be in the mile high city. always good to get up on the high ground so you can survey what is going on around you. particularly when you are headed into a conflict. [laughter] conservatives already hold the high ground of ideas, but this conference provides a vantage point with a view of the

challenges that lay ahead for us as we go forward in this country. you know, over the next 17 months, i believe america will undergo some tough times as we begin the process of crawling and domesticating a beast known as the federal government. [applause] my concern is not only that washington has intruded upon the rights of the state's and individuals to make decisions about our own health care, our small businesses, our money, but that it is also advocating one of its most -- advocating one of its most basic duties, which is defending our borders. [applause] i always thought that government was supposed to do three things really well, which was deliver the mail, enforce our borders, and have a very bolsters military.

two out of three, i guess, eight bad for that bureaucracy, but they miss it that bad on two of those three. they get that one right. the finest young men and women in the world that are serving in our military. [applause] like any organism, though, government has got to be fed. it just thinks it must be fed. unfortunately, it develops a bigger and bigger appetite for our tax dollars and our freedoms, and over time, the people that government was created to protect become its subjects. the state it was devised to serve just becomes an name on another license plate. that is not what our founding fathers had in mind. they created a system of government that was clearly defined. they clearly defined their

responsibilities and the limits of its powers. it is best reflected in the 10th amendment of the united states constitution -- power is not delegated to the united states by the constitution, nor prohibited by it to the state or reserve for the states respectively or to the people. it is simple and elegant -- eloquent. it is to the point. the framers of our constitution had seen what happens when some distant, powerful government holds sway over our nation. unfortunately, there carefully designed limits have been obliterated over time by bureaucrats who want more power, more resources, more say over the essential details of our individual lives. our federal government has go well beyond its intended size and purpose so that now

threatens the liberties it was created to protect. we are now experiencing what happens when a country founded on the tenets of individual liberty is governed with no regard for that liberty. you see business owners who are hesitant to risk expansion because they do not know when the next regulatory issue is going to drop. when there is something that is going to come and of our resources. you see agencies running roughshod over states', and acting the restrictions that month counter to scientific proof and detrimental to entire industries. you see government owning a huge percentage of land out here in the western united states. them telling the folks next door on privately-held land what

they can do with their own private property. you see a federal government that writes 80 million checks per month, all the while piling up debts that will eventually crushed our country. folks, they are so handcuffed in washington, d.c., by the special interests, so addicted to the spending, they spend their time arguing about raising the debt ceiling instead of making cuts. then the president has the nerve to go on national television, look us in the face, and he says most of us do not know what the debt ceiling is. mr. president, we know what the debt ceiling is. [applause] i, for one, think it ought to be called the escalator ceiling because it just keeps going up all the time.

trust me, budget cutters are pretty popular during campaigns, but not so much when it gets time to do the hard work. the reason is because people's pet causes get cut. conservative leaders need to grow some real sick realthick -- real thick skin. in 2012, we need to redouble our efforts and send even more liberals into the private sector. [applause] including the president, who would be a whole lot better commentator on sunday morning talk shows then he is the nation's chief executive officer. [applause] fact of the matter is if we do not do that, we will get four years of and a administration

that clearly believes government is not only the answer to every need, but the most qualified to make essential decisions for every american and seemingly every area. the mix of arrogance and audacity that guides the obama administration is an affront to every freedom-loving american and a threat to just about every private sector job that is out there. [applause] whether they are seeking to publish a company like bowling for moving their operations into a right to work state or pressuring companies to change the leadership like they have with pharmaceutical companies, whether they oppose epa mandates that kill jobs, it is clear that they think they know best. let me tell you something -- i disagree strongly and vehemently. our nation was built on the

shoulders of working people who reached our shores in search of religious and economic freedom. as they and the generations that followed increase the risks and rewards of freedom, they killed the land, pursued innovation, helped create a nation like this earth has never seen before. we must do what we can to continue our nations for progress by electing genuine conservatives up and down the ballot with a singular focus on essential disciplines. texas is a tremendous example of what happens when you consistently applied those essential disciplines, which, i will tell you, they can be summed up in four very simple phrases. one, don't spend all the money. [laughter] two is keep your taxes low,

under control. three is to keep those regulations fair and predictable so business owners know what to expect from one quarter to the next. for your, reform the legal system so frivolous lawsuits do not paralyze lawyers trying to escalate their job and create jobs. [applause] over the last decade, that is the formula we have used in the state of texas, and it has produced in arguably the most powerful economy in the united states. at the same time, we have stood strong on our conservative social values as well, defending the unborn with parental notification laws, of holding the traditional definition of marriage with an amendment to our state constitution. i said the other day that the 10th amendment frees new york state to define marriage as they please, but the traditional

definition suits taxes and this governor just fine -- since taxes and this government just fine. another tradition we raise in taxes is job creation. we have added jobs while other states have lost them left and right. those jobs fleet other states because factors like excessive taxation and punitive regulation and frivolous litigation drive them away. across the nation last month, total payrolls decrease in 24 states. the national unemployment rate rose to 9.2%. in texas, our unemployment rate is a full point lower than that, and again, we added more jobs than any other states in the nation. this happens as our legislators were putting the finishing

touches on a balanced state budget. not only did they balance the budget, they maintain essential services without raising taxes, and we left more than $6 billion in our rainy day fund. [applause] in the same session we just finished, texas legislators hast loser pays tort reform so that we send another clear shot across the bout that frivolous lawsuits have even less chance of strangling job creation in the state of texas. to make sure that legal voters are never canceled out by illegal ones, we instituted a photo id requirement for every voter in the state of texas. [applause] voting is one of those precious

rights, and the fact of the matter is it is one of the most powerful freedoms we have in this country. i think it is just there to apply at least the same standard required to get a library card or to get on an airplane. our legislators also approved membership in the multi-state health care compaq to bring vital decisions closer to the people instead of something called the obamacare that this administration is going to try to foist upon america. i believe texas is still an example of what our founding fathers had in mind when our nation was taking shape. i think that may be why we are in the cross hairs of this administration so much. i think it causes some great consternation that we are being as successful as we are.

i tell my folks in texas -- i said, "what is it going to be? are we going to roll over? are we going to fold?" i think i can say that all across america. are we going to roll over? are we going to fold? or are we going to do what we have been doing what we have been doing for today was interest, and that is elect leaders who will restore the necessary boundaries. think about the 2012 elections and what is at stake. i happen to think the 2012 elections are going to be determined by the vision of the people of this country. it is up to us, up to us to arrest our nation's downward spiral brought on by too much spending, to which interfering, too much difference to special interests. it is time for us to stage another sagebrush rebellion, a

band together, push back on washington's endless overreach. fortunately, that effort is already under way, shown by the 2010 election results. the voters said conservatives to office in record numbers. since then, conservative leaders at the local, state, and federal level have been working overtime. they have been working to tide the unchecked spending and unbridled interference in state affairs. we all know that washington will never leave willingly give up an ounce of power if the american people do not force them to adopt reform. washington needs a refresher course on the 10th amendment. [applause] that happens to be the reason i wrote the book "fed up."

when states lead the way and create jobs, free market principles are allowed to act. great things happen. the states are proof that the best leadership is closest to the people, not hold up in washington d.c. issuing some one-size-fits-all mandate. if you agree -- matter of fact, get your phone out just a second. i'm going to give you the opportunity -- is okay. young man, you can take your phone out. i know your mother told you to put it up and make sure it was off, but you can take it out. i want you to put in the word " forward" and text it 295613. go ahead. i will give you time to do that. because when you do that, you send it to me. -- text it to 95613. i'm going to keep you informed of what we're doing, the efforts to restore the crucial balance of power between the states and washington d.c. get america moving forward to its rightful place and role of

leadership in the world. i know i'm preaching to the choir here when i talk about this, but america's greatness is not found in the size of its government. america's greatness resides in the hearts and minds of our people. their innovative approaches to solving problems, their ability to endure the toughest times. if we want to stimulate the economy, we don't need more government spending. we need to unleash the private sector in america, the individual citizens who put their hours in at the job and pay their taxes while doing the best to take care of their families. the coalition necessary to correct our course as a nation consists of those who understand the importance of faith and family and freedom. [applause] that is what inspires a healthy

free market, and the importance of assuming personal responsibility. without each of these groups, appreciating one another's importance, positive progress is going to be severely limited. together, we must keep america moving back to pre-eminence. our values and conservative ideas are the world's greatest hope. like you, i still believe this country is special. the america i know was built on a solid foundation of spiritual strength, individual liberty, self-determination. we must recapture that vision and begin the hard work of lighting the way for millions of americans adrift in the economic scene of misery. let's leave them to the safe harbor of american renewal and

the shores of american exceptional as imperialists anchor them in the future of good jobs and a country founded on good ideas, and that notion of government of the people, by the people, for the people. because if we do not, who will? if not now, when? there is no greater goal, no more crucial time than right now to make our stand, to restore our economy, our families, and our country, and i know that we can. god bless you, and thank you all for letting me come and participate. [applause] >> governor rick perry. governor, thank you so much.

>> just an update from capitol hill at this hour -- the senate is in recess after being in a special weekend session. we expect the senate to come back in some time today. you can watch that live on our companion network, c-span2. there was a vote earlier in the senate on the debt and deficit measure put forward by majority leader harry reid, and it failed to move forward. the house, meanwhile, debated the bill yesterday and voted it down 173-246. members of the house adjourned until tomorrow morning at 10:00 eastern. they will take legislative business at noon, and we will have live coverage when they return right here on c-span. next, the president of the world bank, robert selleck, says congress is playing with fire on the debt limit and that americans should be embarrassed. mr. zoellick served as trade

representative under president bush and spoke about international trade talks and world hunger. this event from friday was hosted by the society for international development in washington, d.c., and runs about 45 minutes. >> ok, it is a sincere privilege for me to introduce a conversation between two people i very much admire. michael is a former policy adviser and chief speech writer to president george w. bush, and was also -- is now a syndicated columnist. you often read him in the washington post -- the "washington post," and has been a clear voice of development over a long time. i was one of millions who was inspired on many occasions by his thoughts and words including the 2005 inaugural speech by president bush. i also have bought and recommended both of michael's books, most recently opened " city of man," which was written

with peter winter, and the book was about the role of faith of people in the square. the conversation is also, i think, going to be informed by what he calls a humanitarian conspiracy by the president's emergency plan for aids relief. he was one of the architects of that initiative. which has saved millions of lives. i'm going to turn the floor over to michael. >> it is really an honor to be with all of you and an honor to be with bob zelnick, president of the world bank. in our former allies, bob and i were colleagues -- an honor to be with bob zelnick -- zoellick. he is a voice for economic sanity and a voice for the world's poorest people, and that is a very important global role, particularly in a time of great

uncertainty, so it is great to be with you. [applause] bob, before we get into some of the substance on the development side, let me start with a subject in the news and probably on the minds of many people here. what effects are the current events in washington related to the debt limit having on global confidence in the u.s. economy, u.s. leadership, and in the u.s. political system? >> as i try to think about that answer, let me just start. mike was kind enough to talk about some of our work together. career is a wonderful example for those of you who wonder about the power of written words and speech writers. it is probably not generally known, but it should be that on issues such as hiv/aids, malaria, sudan, that mike was

much more than a writer and counselor but really was a conscience driving many of these issues. but i respect as many people have these positions and take them day-to-day, but they do not go home at night and really ask what legacy they will leave, and this is something that all of you who know anything about mike and his faith in his beliefs was very contrary to his view of service, so he really served the american people extremely well in addition to being a great writer. >> i appreciate that, but you cannot avoid the question. [laughter] >> as with many events like this, i think there is a short term and may be a bigger -- bigger perspective. on a short-term perspective, people are playing with fire. the world bank, as all of you

know, is a pretty big and sophisticated financial institution, so we operate in markets all around the world. we, and i'm sure any other financial institution, has to be trying to come up with a series of contingency plans, not just the first, but the second and third order effects, and people have to recognize that this is taking place in a context where you still have the eurozone in serious difficulties. it put together package, but it is an ongoing and modeling process. and japan, which has been struggling for a long time, had a terrible natural calamity. you had an environment that was already fragile and uncertain coming out of the financial crisis, which many of you know was also before that of food and fuel prices. in an environment where the tools that people used in 2008, the standard tools of various spending policies and monetary policies -- they have basically

run their course. this is a context in which whatever once logic about the tactics, that it is a very dangerous environment. to be tactically blood, to have a debt default in the united states would not only be a financial calamity, but it should be an embarrassment for every american. but there is a medium and long term that i spend time reflecting on. because the bank has 187 shareholders in developed countries, but our clients are primary developing countries in an emerging market. what is striking is we are in an environment where the nature of recovery from crisis is multiple speeds. most of the developing companies with which i work, the challenge is now one that their growth has recovered so well that the danger is more overheating or asset price bubbles with developed countries

are struggling with spending, debt, a large scale unemployment. this creates a tension in the international system. the world bank came out of world war ii w -- world war ii were people were trying to learn the lessons of the calamities, so you needed some system that deals with trade, development, exchange rates and capital flows, with security, and in a sense, this system is now very much in a state of flux because these emerging markets now represents half of global growth where in the 1990's, they might have been 20%. this has happened relatively fast, and the relevance of what is going on in washington or europe or tokyo these days is people are trying to decide what should be the norms, the rules, the expectations of the system, and i just have to frankly say

that for people in the developing countries that i work with, it is a little bit of a disappointment and frightening to see the united states, which some people have an admiration for, some people say maybe it has been too pushy, but to see it basically side light -- sidelined itself is basically a troublesome prospect, whether you are in africa or china or india or others. so the bigger picture is a combination of dealing with the substantive challenges that the u.s. and europe and japan face, but also a sense about what role they would play in shaping this future international system that does, as everybody here working on development knows, have some incredible opportunities. one does not have to look at gloom and doom in this. africa has grown an average of about 5% for a decade. there's lots of opportunities there. we have private capital growing. china has grown 9.9%.

it depends how you look at the world, but there are great opportunities, but they have to be seized, and we have to figure out how developed and emerging markets were together in a different way than they did in the past. bob, another news item getting a lot of justified attention is the food crisis in eastern africa, where 11 million people are at some risk in the current drought.

this is everything from research on seats, including different conditions of climate change and drought and others, and we helped organize something that was actually started by april robert mcnamara in the 1970's. there is great potential. -- that was started by robert mcnamara. we estimate about half of the production is lost on the way to market. investment in storage facilities. this does not all have to be governmental. we have a private sector that is

looking at the value chain and trying to see how you can improve the production and productivity, depending on the country. in monetary terms the bank is probably investing $4 billion per year in agriculture and set of $6 million to $8 million. we coordinate some of the problems that they have put together in this area. there is also, i think, a phenomenon of how we deal with a risk and uncertainty in the system and price volatility. when people salt agricultural markets in 2008 and 2008 not only increasing level, but the sharp changes in prices. the first up on this, and this is one of the issue with the bank has been working on to try to come up with some ideas. step number one is government should make it worse. when you have a potential shortage, and then when country

put on export bans, you create a sense of crisis. countries will not give up their ability to do that totally, but at least we got an agreement recently that for humanitarian purchasers such as the world food program, that they would be able to access countries foods, even if people have export bans. during the crisis in 2007 and 2008, we were actually having to call governments to create exceptions so liberia could get access to food. some better information on stocks, the call quantity and quality. people are used to this the in the united states, but china and india we have not had this information. the information can lead to the panic and volatility situations. rather than try to control the prices, which will not work.

one of the things we started to learn after the bank after a 1997 financial crisis is that the macroeconomic stability was not enough. you could lose a generation if you did not have the appropriate food and nutrition. it affects the caucus of the ability of children to reach potential. we have been working with developing countries at different stages of development on basic safety net programs. just to give you one, mexico something -- started something. these are conditional transfer programs. they go to the 10% most-needy and on the condition that people send their children to school and people get checkups. has probably done for -- and more for women's health than anything else in the country. we then have taken the model,

and in one form or another helped for the countries develop this. the reason why it is important is that this is done in mexico and brazil for a half percent of gdp. this is a very basic effect of a well-run safety net for reasonable cost. for some countries, you may not have the capability to do that, so we work with unicef and others on world feeding half in my view, one of the ways you have to deal with the volatility and uncertainty is that every country should have basic efficient and effective safety net for those of the bottom. part of the lesson is they have very expensive programs. i am not saying throw money of the problem, but what we have learned from other developing countries how to develop an effective safety nets.

i'd think this will be important -- i think this will be important. food high prices and volatility of permanent situation? it is a good question, and i give it a lot. normally what people are used to is your price increase in you get a response, but i think the situation we're in now will remain with relatively higher prices with risk for a long period of time for the following reasons. first, what drove some of the prices in 2008 and 2007 is food stocks have become relatively low. you look at corn or maize or wheat stocks, and there is not a great deal of caution.

rice has gotten a little bit better, but the problem is it is a rather bleak -- rather thinly- traded commodity. what set off a crisis in 2007 and 2008 was the failure of the philippines rice tender. the rice market is better, but because of the thin trade some it is vulnerable. the basic grains have a relatively low stock. normally he would expect those to be replenished overtime. -- you would expect those to be replenished overtime. as people eat better and have two meals instead of one, you are seeing an increase in demand. it is not blaming anyone, it is an understandable process. that means even if you have a good harvest, you are not really replenishing stocks, because it is going into the increased demand. this is a gradual process. what that suggests to me is

that for a considerable amount of time we're somewhat at the whim of a weather event or some other -- what happened in 2008 is you have weather conditions in europe and north america and others. i think in a sense the pressure on prices in the volatility is going to be a factor that is with us for a while. there is one other dimension, which is we see a much closer connectivity between energy and food prices than 10 years ago. the correlation is very tight. some of this is biofuels. there is another phenomenon, and that is and talking about financial markets. they look at investments as a financial class. , equities, mortgages, and now you have commodities. this is a very debatable topic. these people who move in and out

of commodity markets will not necessarily change the trend. this could affect the movement and the volatility as money moves in and out of these markets. for all of these reasons, i have argued the g-20 needs to put food first. while we deal with their risks and uncertainties, let's also tried to make the opportunity on the production side. just to give people a sense of were a little creativity and innovation, you can take something that has a bad reputation and make it more possible. we work on rain index futures. in sub-saharan africa, only 5% of the crops are irrigated. south asia is more like 40%. good rains come a good harvest, a good year, no rain, you were in trouble.

you can figure out the rain levels you need to be able to have an assessment of whether they will have a good harvest. so in a sense, you can have an insurance policy. part of the change in role of the world bank is how we can also innovate in u.s. markets to help deal with some of these risks. let me switch topics to the political situation. there was a house market this week on assistance where ade took a huge hit. multilateral aid a particular hit in that context. it was a tough fiscal

environment for a lot of these issues. how you make the case, appeared to really to republicans, that american interests are implicated here, that cuts are dangerous. what is the best set of arguments right now? the one that i have been reflecting on is that if you go back to 1947 when another generation, harry truman, and gauge the united states in a war, and you look at levels of income per person or per family in the united states, they are about a quarter of what they are today. if you use gdp it is even less. americans, individual americans, about four times wealthier today than his mother or father was in

1947. in 1947 americans thought the world was important enough to engage it seriously in terms of economics, investment, trade, security. what does that say about a generation that is four times richer but says we have to pull back? at the big level, this is a fundamental decision about the country. what their priorities and brother -- priorities and role of the world. in another level, i make the point that the types of things the world bank and many others do is move beyond charity and definite sense -- self-interest. what does this mean? i talk about the fact that developing countries are now about half of the global growth. look at the u.s. companies that are doing well. they are benefiting from this growth in some fashion or

another, will it be the caterpillars comment on the ears, services industries and sectors. america is 4% of the world population. if we're going to grow, we want to be able to market to the rest of the world. what has really changed a lot is a there is increasing opportunities for investors, as well as on the trade side. there is another dimension of self interest. the world is an interconnected place. it may be diseases, and whether or avian flu and it may be a sense of value into we are as a people. do we care about what happens in liberia. increasingly, what one sees in the security area is the interconnection of the interest. we at the world bank published a major development report about the challenge of post-conflict

or abroad will states, the connection between security and roll a lot. the story of afghanistan is not just a question of soldiers fighting, it is a question of whether you can create economically sustainable system were the government essentially owns the challenges of its own country. from topic after topic what i find is -- the challenges when i talk to congress is there is different groups. there are people interested in security and economics. one of the great things about america is the religious community has got more deeply engaged in the issue is -- issues. for all of this there is a tremendous amount of misinformation. the u.s. foreign assistance contribution is meth -- less than 1% of the budget. we have to figure out how to take cuts. of the world bank we actually got capitalize and make revenue

and put money back into the developing world. we are in a different situation than the foreign assistance players. the money that was first invested in the world bank is leverage many many times pursuing u.s. interest. we are going to have opportunity for just a couple of questions at the end of this session. i think we will have housekeeping here to determine how that will take place. >> we have some many folks in the room, so the way we will manage is q&a is i will ask you to have a card and your table and please start thinking about your questions for presidents alike now, and we will collect those in three to five minutes. -- mr. zoellick and we will collect those in three to five minutes. >> in the current fiscal and

firemen come outcomes, transparency, accountability and never been more important. -- in the current fiscal environment, outcomes, transparency come and accountability has never been more important. this builds off what will we have seen in the developing world. in a way, the mid-20th century was the hierarchy of the world. that is gone. the concept of the thorold -- third world is gone. in minimum, the nature of the economy are much more you can learn from each other. there are in is resting things that developing economies can use as well, and areas such as private partnership and sector going into infrastructure. the key notion is we as an institution play a role that is much broader in providing

financing. we try to take the knowledge as i mentioned with safety net programs, thinking programs, and being able to share them around the world and help countries customize it in a way that builds market, institutions, capacity. to do that effectively, you have to reach out and get other people's ideas. this is democratization. this comes from a series of export -- expert sources. you have to create a broader dialogue engagement on these issues. one vehicle the bank has launched in recent years that may end up being the most important thing that i have been able to do there is we have created an open data and open information initiative. this is an interesting story, because i used to go to meetings like this, and sometimes the professor would come up and say you have great information sources at the bank's, but you charge them.

this is a lesson for all of you the deal in democracy. i go back to talk in the economics that and say why are we charging for this? they say we have some value and cost return. you finally realize, it was $3 million extra to help someone with the budget. what we finally said is this is the public good, we're making it open and available for everyone. we have opened up over 7000 data sets. we will be adding to them that go back decades. we and change the whole mind- set, because now we have the staff come up with different software applications where people can engage in use this. we of crated an application for development competition. we said to the world bring us your ideas in the only requirement is you use our data and related to the development millennium goals. we had over 115 different

contestants. you can see that it opens up to the software development community in some parts of africa. the ideas that people came up with about games, applicability, uses, were things that in 10 years with smart people in a room could never come up with. it opens the notion of democratizing development. if you start to share the information, start to engage people with their own perspective and solutions, you have a much better chance of learning what works and what does not having transparency because you are engaging the community in the process frankly, opening up the bank to hold that works of people that were not part of their broader set of partners it also serves

to drive how you think about things. we will be doing a very big report and not from autumn. we start to say it is hard to know the effect of people are not keeping the data on gender. we are now opening a data gender initiative. what i find most, just to give you an example of what this could be in real life, you cannot get on our web site, and you can punch up a country, and you can see all the projects in the country and learn what is going on in the project. by the end of the years so we will have this for lending as well. you can say we think this is what the results are, but this is what we see in the village. this is a whole transformational climbing of what was traditionally seen as a

hierarchal call system. i think it reflects what is happening more broadly. let's go to a couple of questions. in many developed countries there are issues with property items. people do not have documents on the property. how does this affect domestic and element -- development. the question is exactly right, property rights are fundamental. since i was making the point recently on gender, you not only have to think about basic property rights but who gets them? one of the issues in the denver area is in some countries women did not have access to property. that means it is harder to borrow and transform the whole economic development process. sometimes, and this is the point about learning from experience as opposed to just textbooks, one of the programs we did, and i think it was in ethiopia, with on the property rights document we simply created space for another name and picture, and

this vastly increase the registration. simple change. party rights issued -- we work with countries on registration 13th beams. these are all component of having use of property rights. at the same time, and this is where customers station is important some had different types of tenure. sometimes it was tribal or community tenure. syou have to figure out how to e issues asto those well. while we are a big financial player, the real affect this by building the institutions and

markets. it may be the property rights to have affected micromanages -- might refinance or credit or other aspects. ultimately it is an empowerment agenda, and the ultimate power for everyone is to own something and be able to build from it. >> can you share ideas of working on development in the context of civil strife? i was just in south sudan for the independence, which was a remarkable event after half a century of civil war. it has huge post-conflict challenges. i would also recommend the world development report on this topic for this year. what are some of the lesson to have learned about working in conflict in those situations? >> let me start off with a perspective on this. this is a topic that interests me.

on one of the trips you were with me. what i was always struck by was that he had people who focus on security issues, people focused on development issues. sometimes people focused on government issues, but they really were not interconnected. in the sense of the bank, our original name was the international bank for reconstruction and development. the first loan was to france. the challenge you just outlined is the reconstruction is you of the 21st century. how do we interconnect these topics better? as in a lot of problems in life, it is an art, not a science. one of the key dimensions would be the importance of basic security, creating inclusive

enough coalitions. you may not be able to get everyone in a society, but you have to be able to get a critical mass that is the issue forward. you have to be able to get early results. let me give you an example of where this seemed obvious but often hard to achieve. whenever i would talk to the security people in a country going to conflict, they wanted jobs. they wanted to show progress, they wanted to stop young men from going back to violence. you talk to economist and say we cannot do that. we have actually learned a fair amount, which we're trying to apply and north africa and other places, about ways you could do more rapid job creation in ways that does not interfere with building the private sector job creation over time. for example, they may be of food for work program. you get some basic sustenance

and help build local infrastructure. and the importance of local ownership. in the case of afghanistan, the u.s. and others have struggled with infrastructure projects and others. the project will help put together years ago has probably been the most successful is the national solidarity program where you have local councils that make their own decisions, and they may have small sums of money, but they decide it is small-scale irrigation from school. this develops a sense of ownership. frankly come in some of those situations people would be willing to stand up and protect their community against those who might otherwise threaten a school or operation. i think this is a field where it also requires the bank to integrate more effectively with some of the u.n. players, regional players, and i think on the security side we're seeing

the importance of regional security groups. so what i think -- what i find interesting is that i am finding that even at national defense university or others, these topics are very interesting to them. it reflects a problem that you see throughout development, which is that sometimes people operate in rather tunneled categories. i will give you another one that this audience is probably aware of. communitarian and development community still did not interconnect as affectively. people do humanitarian and in development. we need to figure out how some of their sourcing issues can

help us on the development side come even as they're buying humanitarian goods. another area is nutrition and agriculture. you talk about agriculture for people here who are knowledgeable that they're often left out. it is about connecting these issues without getting bogged down in people specialty. when i was in sudan, there is a lot i've -- there is a lot of use of oil and others to appoint people. it is often regarded as a form of corruption, but it is interesting when you have an armed population that those kind of programs prevent the emergence of militias. we look at that is not particularly good for economics or for reform, but it is rational and some of those context. to go to give you one other cents on this, often the

international aid community with the best of intentions overwhelms countries with very modest capacity. we have run a series of what are called multi-donor trust funds. there is one in southern sudan. these are critical because of a country as 40 donors and each one has their own program, these are countries that have a hard time getting basic staffing, so the get overwhelmed. it makes much more sense to put the money into one pot, have the country work with the country on its priorities so they own it and build the capacity. then be very careful in terms of trying to improve the governance and transparency and others so the money goes where it needs to go. >> what is the bank doing to promote this staff -- to promote the rights of women? >> i referenced a little bit about the gender report that we will have coming out in september.

i hope this will move us to another stage, but over the past few years we have been trying to get people around the world to understand the basic concept, which is that gender equality is smart economics. so let's start with the basic concept. if you take 50% of your people and do not allow them to reach the potential, it is probably not good for your economy. the reason i start with smart economics is that in societies around the world what different concepts of roles and men and women, but i have found it can be the poorest villagers in afghanistan or someone in europe are really realizes that the facts show you that this leads to better economic development. this leads to more income for a family. that start to drive a whole series of willingness to engage women more effectively.

from looking at issues everything from the effect on role schooling, and for mortality issues, maternal health issues, which obviously is a critical aspect for women in developing countries with opportunity. some of the topics about property ownership and the ability to borrow. it varies, but as we do more research, we also start to learn things about the benefits of working through women head of household. the data is now quite extraordinary and compelling from a variety of sources, and this was driven by the traditional cash transfer programs and that america. the use of the money for children for the family and community is many multiples of the male head of household. being gender attentive is not

only issues for girls and women. you talk about the problem of young boys soldiers and many of these environments. we have tried to do pilots to learn more about these things. wheat institutionally -- we have tried to figure out it is not a check the box issue. we have what are called casting leaders. we have tried to create a fund to allow the testing leaders to work on projects that have particular gender dimensions because i want to build it into the dna of people doing these. any time you face a challenge like this, you always have to decide to build it as a separate capacity or try to learn and integrate it through the organization. we have tried to use pilots and specialized aspects. we're trying use research to of -- increase the attentiveness. the real goal is how to integrate it. >> one more question.

can you briefly comment on the latest demise of the world trade talks? >> i did this recently. what i will say is this, the general environment is that it is doomed and people are looking beyond it. i believe this would be an extreme tragedy for the international system, because at the time we talk about pro- growth trade, we have seen it can be one of the most historical drivers of growth. my own belief is that the u.s. and talking about tariffs and subsidies and other kinds about agricultural subsidies, could put together a package that could not do it by its own, and we're in the world of emerging- market, but can play a leadership role in driving it forward. i realize these are hard

choices and complex policies, but i was trying to make the case that simply looking at the u.s. position, if the u.s. is still a leader in the world, it there is still an opportunity to push this. if not, then what? what will you do to open markets and create additional opportunities? having said this, it would require the europeans to be very supportive. it would require brazil, china come into india to no longer protest predict pretend that there is of syrian africa. -- some sub-saharan african country. and i was making the case for being bold and more aggressive. i know the u.s. constitutional system says you have to bring this back to congress. i honestly think if you're not on offense, the congress will not do it for you. maybe the discussions about the

limits are the best suggestions of all. you will not get a trade deal driven by congress. you need someone in the united states to be able to organize this with the vision and offensive direction. we have to help people adjust to change. the other thing where i think the united states has not kept up its we have an unemployment insurance system that is 80 years old. we have a work force and best actor this 30 years old. why not take these literally tens and tens of millions of dollars and ask yourself, is this the system we would design to get people back into jobs in an economy that is changing? i think you'll find out you will want a different system that can help people adjust to change? e. >> thank you for being with us. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> in some of the latest

developments on the debt and that is a talk on capitol hill, the house debated harry reid bill yesterday and voted it down. 11 democrats turning republicans in voting against it. the house as -- has adjourned until tomorrow morning at 10:00 for legislative hour. the senate is in recess, but it is suspected to come back and at some point today. they took a vote earlier on the meat -- lead manager. -- reid measure. now, a look at the senate and are rare colloquy between richard burton and john mccain of arizona talking to each other across the aisle. and i think what's most disscourge the average person is asking, why would we inflict this pain in the midst after recession?

why would we have the fear of dwawlgt on america's debt for the first time in our history? why would we lose or credit rating, the best in the world, aaa, because of a manufactured political debate here i washington? we'll pay for this for a long time. for every 1% interest rates go up, our national debt goes up $1.3 trillion over ten years. as we talk about all the spending cuts we want, the fact is we end up in a position where we can't really keep up with increases in the interest rate. the majority time has expired. mr. mccain: mr. president? the presiding officer: the senator from arizona. mr. mccain: i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. mr. levin: continuing the colloquy on this side of the

aisle -- and we would give up the floor -- mr mccain: -- [inaudible] i used the time rather than have to listen to this. mr. president? how much tim is remaining? the presiding officer: does the senator withdraw or withhold the quorum call? mr. mccain: i suggest the -- suspend further proceedings under the quorum call. the presiding officer: without objection. mr. mccain: mr. president, how much time is remaining? the presiding officer: the minority has 14 minutes. mr. mccain: 14 minutes. i'll tell you what, i'll be glad to engage in a short cloquy with the senator from illinois if he would like. the senator from illinois, i believe that we arelose to an agreement here? mr. durbin: i hope so. mr. mccain: does the senator from illinois agree that most likely that agreement will not have an increase in taxes associated with it, at least in the short term? mr. durbin: i hope is not.

mr. mccain: you hope so. mr. durbin: i heard there is revenue included in the agreement. mr. mccain: everything i've heard, the agreement does not have tax increases in it. mr. durbin: i honestly am not a party to this, but as gang of six and fiscal commission, we believe everything should be under consideration to reduce our national debt. mr. mccain: i assume that would also mean that the senator from illinois would advocate another stimulus package? mr. durbin: i want to make sure we have some stimulus to the economy to create jobs and help those out of work find work with training and education. mr. mccain: wufr -- one would have to assume that the senator from illinois believes the last package was successful, wch counting interest, over $1 trillion, the senator from illinois and others who advocated the stimulus package

said that if we pass this, unemployment will be a maximum of 8%. this will stimulate our economy and create jobs. and you know what the senator from illinois and others are saying now? it was not enough. it was not enough. that we didn't spend enough. that we didn't make the deficit larger because certainly nothing in the stimulus package was paid for. so i hope that the senator from illinois underands, the american people understand that just spending more money has failed, and failed miserably when you look at the latest news -- d it's on the front page of the "wall street journal" and "the washington post" and "the new york times" -- that our economy is staggering back into a situation of stagnation. i'll be glad to let you respond. and the answer on the other side is, well, let's have some more

spending and let's raise taxes. let's takeome more money out of the taxpayers' pockets in the form of spending more money, their money. it's not the administration's money. it's not the senator from illinois' money. it's the people's money. take some more money of theirs. this is the nobel prize -- anyway, take more money in taxes and more out of the taxpayers' pockets, and that will be the answer to our problems. i'll be glad to hear e senator from illinois' response. mr. durbin: first i want to thank my colleague from arizona. for those who are witnessing this this is almost date in the united states senate, and it raly happens. and i thank you for coming to the floor. mr.ccain: rather than have you use all our time, i thought i would engage in a colloquy. mr. durbin: i enjoy doing this. mr. mccain: go ahead, please. mr. durbin: first, during the course of your presidency campaign, mark zandi, your economist, helped you formulate some positions. his opinion of president obama's stimulus is that it stopped a

precipitous decline in our economy, that it a -- did it achieve all we hoped for? no. mr. mccain: can i interrupt on that particular point. mr. zandi was one of many advisors to my campaign. the key advisor was douglas holtz-eakin, former head of the c.b.o., who had no brief whatever for that proposal. please go ahead. mr. durbin: the second point i'd like to ask the senator from arizona, i think one of the real bedrock beliefs among republicans is that if you cut taxes particularly on the healthiest -- wealthiest people in america the economy will pros puss. didn't the debt of the united states double under the president and he left a shambles behind him? 2.3 million jobs lost in the first three months of president obama administration because of this failed economic policy which you continue to espouse, that if we cut taxes on the rich, america is going to get

wealthier. haven't we tried it? where are the jobs? mr. mccain: could i take a little trip down memory lane with my friend from illinois who i had great privilege many years ago -- i don't know if i should mention the 1982 election, he and i ce to the house of representatives together. you might recall that one of his own, then a democrat congressman from texas, got together with president reagan and guess what we did? we cut taxes and guess what? we had one of the strongest roeufrs in reece -- recoveries in recent history of this country because -- could i just -- bause we didn't start spending and add spending without paying for them. and i would say to the senator from illinois. he is correct. the spending that went on in the previo administration was not acceptable anded to the deficit. let me just finish. but i would also say speaking for myself, i voted against the medicare part- because it was not paid for. i voted against the earmark and

pork barrel spending which were abundant, as every appropriations bill came to the floor and dramatically increased spending in the worst way, wasteful and corrupt way, i will say. and i'm proud that at least some of us said if you don't stop this spending and get it under control, then you're going to face a serious problem. what i would also mention, and i've seen the chart, it's gotten a lot worse, gotten a lot worse since the last election. and youan't keep, biob, you can't keep up blame it on bush. mr. durbin: does he recall what happened with the reagan tax cuts? what happened was we tripled the national debt during that period of time. and president reagan came to congress 18 times to extd t debt ceiling. he holds the record. so to argue the reagan tax cuts led to great long-term prosperity is, i think, seriously in doubt if you're

going to use the deficit as a measure. mr. mccn: if i could say we believe, and reagan believed, that cutting tax cuts would restore our economy, which was the tank thanks to the practices of the previous administration before him, and we -- reagan presided over probably one of the greatest job-creation periods in the history of this country. and those are numbers that i would be glad to insert in the record. compare that with what has happened since this administration took office with the promise that if we passed obamacare, if we passed tarp, if we passed all of these others that the economy would then be restored a grow. and again, it's hard for my dear iend from illinois to refute the fact that the categorically stated that if we passed the -- quote -- "stul package" that unemployment would be at a maximum of 8%. unemployment food is 9.2%.

and if you look at any indicator, whether it be housing starts, whether it be the deficit, whether it be unemployed, whatever it is, it's gotten worse since the stimulus package was passed rather than better. please go ahead. mr. durbin: would the senator yield for a question? mr. mccain: i'd be glad to just hear your comment. mr. durbin: i going to give you a clans to speak again. -- a chance to speak again. does the senator believe defaulting on our national debt for the first time in our history, the threat looming over from the house republicans and others for a long period, is good for america's economy? one of the senators on the floor here from the state of pennsylvia has come in and said defaulting the debt is not that big a deal. it can be, quote in his words, easily managed. does the senator from arizona agree with that thinking? mr. mccain: as the senator may know, i came to the floor a couple of days ago and mad that comment, and the senator from illinois and i are in agreement, point number one. you can prioritize -- i think

the senator and every economist i know literally would agree. you can prioritize for awhile where you want what remaining money is left. but the message you send to the world, not just our markets but to the world, that the united states of america is going to default on its debts is a totally unacceptable scenario and beneath a great nation. we are in agreement, number one. mr. durbin: amen. mr. mccain: number two is that to insist, to insist that any agement is based on the passage through the united states senate of a baland budget amendment to the constitution of the united states, as i said before, is not fair to the american people because, because the terrible obstructionists on this side of the aisle, the terrible people, their flawed philosophical views about the future of america is not going to allow to us get 20 additional votes from your side,

assuming that you get all 47 since it requires 67 votes to pass a balanced budget amendment to the constitution. so i think it was not only wrong assessment, continuing's not fair to the american people to -- i thi it's not fair to the american people to say we can pass a balanced budget amendment to the constitution through the senate at this time. now maybe afterhe senator is defeated in the next election and we get rid of a lot of -- maybe that will happen. but certainly let's not tell the american people that that is a possibility today because i think it raises their expectations in a way that's not fair to them and, frankly, detracts from what i think is being done as we speak between the leaders, the president, democrat leaders and republican leaders, which is in a very short time frame. mr. durbin: i would say it pains me to say that i agree with the senator from arizona, but i do. we both feel threatening the debt ceiling is not in the best interest of the united states. and both of us feel that holding

out the threat that if you don't pass a constitutional amendment, you can't let the economy continue is really not a good faith bargain. i wish senator byrd were here to respond to that particular suggestion. as for my prospects in the next election, i thank the senator from arizona for campaigning against me last taoeufplt when he -- last time. when he did i almost got 60% of the vote. i welcome you back to the land of lincoln any time. mr. mccain: iid so well in the presidential campaign in the land of lincoln, i'm not surprised i had such a dramatic impact on the the senator from illinois' election as well. this kind of discussion i think is important, number one. number two is we should have this natiol debate on other forums besides just the sunday show and perhaps the floor of the senate is the best place to do that. and i want to continue to engage with the senator from illinois. but i hope that this agreement, i hope that this agreement will

assure the american people that we will meet our obligations, that we'll meet our obligations not only physically but fiscally, but also meet our obligations to them to govern, to govern, because they did send us here to govern. i think the senator from illinois would agree with me. the last approval rating of congress i saw, both sides of the aisle was about 16%. and i'm yet to encounter anyone in that 16% category in my travels back to my state. by theay, i would like to note the presence of the budget committee chairman here, senator conrad, who i think has made enormous good-faith efforts to reach an agreement on some of these issues. and i thank him for his work, and i want to assure him his reward will be in heaven, not here on earth.

the senator from illinois? mr. durbin: i'd also like to thank the senator from arizona for the few minutes we shared on the floor. and i hope more members will do this rather than just taking turns and giving seches. these exchanges even when we disagree are valuable. but i hope at the end of the day i agree completely with the senator from arizona, at the end of the day we cannot allow our economto lapse into this default. it will be devastating to a lot of innocent families and businesses across america and will cost us dearly in terms of our national debt. so let us hope that we can find this bipartisan agreement that people are working on even at this moment, and i hope that we can do that soon. incidentally, i want to say for the record former senator alan simpson sai-- and i quote -- "ronald reagan raised taxes 11 times in his administration. i was here. i w here. i knew him better than anybody in the room. he was a real friend and a total realist as to politics."

i yield the floor. mr. mccain: in retrospect, the one thing president reagan said he regretted and he regretted was the agreement that was made with the democratic leadership that we would cut spending by $3 and increase taxes for $1 for every cut in spending. that was the ironclad agreement. and guess what happened? we increased spending, and we did -- excuse me. the presiding officer: the senator's time has expired. mr. mccain: and the fact is we raised taxes and did not cut spending, and that was a direct violation of the commitment he got from the democratic leadership. i yield the floor. the pr >> on tuesday the treasury department has estimated the government will go into default on its loans if nothing is done. the senate right now is in

recess. they have been meeting all week and to try to get a board -- a bill supported by harry reid through the senate. it did not move forward. the senate is expected to come back in session sometime today. over on the house side members voted the read measure down yesterday. the gaveled in this morning for a very brief pro-war recession. the house has adjourned and will be in tomorrow morning at 10:00 eastern with the display the business at noon. we will continue to bring you updates on the c-span networks. up next, a look at the senate banking committee as it reviewed the nominations of three financial regulators, including president obama's traces to head the federal insurance -- the fdic. this runs and 90 minutes.

>> good morning. i will call this meeting to order. i want to think all of you joining us. today we will debate a key role that protect consumers. we need strong leadership at all of our financial regulations, and i am glad the president has sent as 3-well-qualified individuals to -- three well- qualified individuals.

especially at this point in our economic and financial recovery, we are extremely -- these are extremely important positions to be filled. the fdic was given new authorities that put an end to too big to fail by allowing orderly resolution of the large, complex financial institutions. those authorities are a key part of making sure taxpayers are never again forced to bail out wall street and is vital that the fdic have a current set of -- have a confirmed chairman to implement the rules. the fdic and the sec plays a crucial roles in our nation's ongoing housing recovery. recent reports expose that these

processes the market -- a form of excessive fees the fdic also s ensure consumers and small businesses have access to credit. from a stable market to protecting small businesses, access to capital, to help create jobs to promoting small community banks ability to provide credit to consumers in areas where big banks simply will not go, both these agencies have their work cut out for them. i will look to our nominees to place a priority on all of these issues. the financial stability

oversight council is a key pillar of the wall street reform act. it was created to identify systemic risks posed by large, complex of financial institutions. i am pleased to consider the toination of mr. waddeoodall be the voting insurance expert on the stock. aig shows how interconnected the insurance industry is. i am sure he will be invaluable. the stability of our financial system and of our economy is vitally important. so i would hope we could move quickly on these nominations. now i will open it up for any opening remarks. senator shelby. >> thank you, mr. senator.

today's committee will consider several important nominations. martin greenberg. he is no stranger to the banking committee, having served right here with us on this back over 19 years. for the past six years he served as vice chair of the federal deposit insurance corporation. as chairman, he would oversee the fdic at a challenging time. the financial crisis and bank failures continue at a steady pace. it will be no easy task for the fdic to resolve these failed banks in a manner that protect the deposit insurance fund. the fdic must also decide how we will undertake the new regulatory responsibilities that it acquired under the dodd/frank act. i hope to hear how you would approach both of these tasks. in particular, i would like to learn his views on whether the new resolution of authority will

be sufficient to end too big to fail and to prevent further government bailout. also before us today is thomas curry, who has been nominated to be the comptroller of the currency. as a regulator of the largest banks, the comptroller plays a key role in ensuring the safety and soundness oftoday his view l requirements. one of the lessons of the financial crisis should be the importance of maintaining strong capital requirements, especially for large global basis. odall wouldywooda be the first person to hold the next edition. he will be working on a council that includes the treasury secretary, but but reserve chairman, and all of the heads of the major financial regulatory industries.

i am interested in hearing how he believes he can most effectively expressed his views and help the council monitors systemic risk. the federal betterment is -- has historically paid little attention to ensure worse. and express his views of counsel. the federal government has historically done this. demonstrating that the federal government as a far better job. hopefully, he can conclude the understanding and in subduing help. mr. chairman, i look forward to this. >> the former chairman of the senate banking committee will introduce.

>> chairman johnson, thank you very much. senator shelby and others. i am pleased to be back in the committee room, and i am mindful of the chairman's gentle admonition when he introduced me, when he said brief introduction. [laughter] i will do my best to abide by that. it is hard for a former senator when he gets the microphone to do that, but i am very pleased to have the opportunity to come before the committee to introduce the president's nominee. marty worked as the senior

counsel, and i think we would all agree that he did a great job. i would like to take a moment to recognize all staff to do a terrific job day in and day out. i have enormous respect and admiration for those, and this committee has had very high standards over the years. during his time of the committee, he was involved in all of the legislation enacted by the banking. including the federal deposit insurance corporation improvement act, highly relevant to this nomination, sarbanes- oxley and so forth. in august 2005, he was appointed by president george w. bush to the fdic as a vice chairman. he was, of course, confirmed,

recommended out by this committee and confirmed by the senate. responding to the financial crises we have and counters, the also served as acting chairman of the fdic for eight months shortly after he went on the board until june 2006 because a close friend of presidents bush left to go coordinates -- coordinate in the aftermath of hurricane katrina. i call them up and i said, " marty, i read that you are the active chairman of the fdic in

four months' time." he laughed, and i said, "marty, is this a great country, or what? >> given his experience on the banking committee and at the fdic, he is extremely well prepared to serve as its chairman. he would bring stability and continuity to the work of the fdic, which both the chairman and ranking member indicated as a very important consideration. i say to members of the committee that i know marty to be a person of exceptional ability and character and i strongly commend him to this position. thank you very much. >> thank you, senator sarbanes. thomas took office on january

12, 2004, as a member of the board of directors of the fdic for a six-year term. he also serves as a german of the work america board of directors. prior, he served as a commonwealth -- of banks. he also served from 2000 to 2001. note -- >> good morning, mr. chairman and ranking member shall be and members of the committee. thank you for giving me the opportunity. he has been nominated to be a

member of the oversight council. roy and i go back some. when we knew each other, "the sound of music" won the academy award, and the first television episode of "star trek" aired, and the cost to send a letter was 5 cents. it was 45 years ago. i met him in 1966 when he was appointed commissioner of the kentucky insurance department and i was working in the nebraska department of insurance at that time. over these years, we have kept in touch, and we have many common friends. as all know, the dodd-frank block all calls for an independent insurance expert to make sure the insurance

viewpoint and the oversight cancel or works. i can think of no one better than roy. he possesses a sharp mind and has the knowledge needed to do the job well. equally important, he has the wisdom, too. he brings in valuable perspective. he has worked at the state level as an insurance attorney and help to rehabilitate the troubled insurance company. he has been a national leader serving for the national association of life company zapata and served as a senior official in the american council of life insurance. in more recent years, he was of the department of treasury. mr. chairman, i would ask that the committee work towards the

confirmation. he will fulfill their duties with great success. >> thank you, senator nelson. i will look forward to hearing your nominee's testimony. will the nominee please rise and raise your right hand? do you swear or affirm that the testimony you are about to give is the truth, the whole truth, and nothing but the truth, so help you god? please be seated. please be sure that your written statement will be part of the record and that members of this committee meeting submit written questions to you for the record, and you should respond to these

questions promptly in order for the committee to proceed on your nomination. i invite all of the witnesses to introduce your family and friends in attendance before beginning your statement. mr. gurenberg, if you would begin? >> thank you, mr. chairman. i like to introduce my wife donna behind me. chairman, mr. shelby, it is my honor. i would like to thank president obama for the honor of this nomination and chairman johnson and ranking member show before scheduling this confirmation hearing. i have had the privilege of serving as vice chairman and board member of the fdic since 2005, having been nominated by president bush and confirmed by the senate.

from november 2005 to june 2006, as senator sarbanes indicated, i served as acting chairman following the departure of the previous chairman, and i am again serving as acting chairman following the recent departure of chairman sheila bair. i worked for senator sarbanes on the staff of the senate committee on banking, housing, and urban affairs from january 1987 until august 2005. during the period, i had the opportunity to work on the major legislation acted on by the committee, including the interstate banking act and others, and the sarbanes-oxley act. in addition to working on some of the key pieces of legislation governing operations of the fdic, i have had the opportunity to serve on the board as it

responded to the most severe crisis in the united states since the 1930's. i think it is fair to say that the functions of the fdic proved critical to maintaining public confidence and financial stability during the crisis. the experiences of serving on the staff of the senate aging committee and on the board of the fdic have been good preparation to serve as acting chairman, and if confirmed, chairman of the fdic, during what remains a challenge in period ahead? there are positive signs. although 880 insured institutions remained on the fdic's problem bank list, we believe that number may have peaked and may start heading down in the near future. similarly, although the fdic closed 157 failed banks last year, we are projecting a substantially smaller number of bank failures this year.

58 banks have failed thus far this year as compared to 103 at this time last year. this is as a result of the costs of the bank failures, and actually moved into positive territory. in terms of priorities, the fdic will us in the begin new responsibilities to implement under the dodd-frank act, covert or the responsibility of this crucial aspect. at the pump finally, fdic, and will play a leading roll call -- a leading role period -- and

leading role. i have deep respect zapata for the dedication and staff of the fdic. as chairman of the fdic and to be considered by this committee for confirmation. thank you very much. i will be pleased to respond to your question. >> thank you, mr. gruenberg. >> chairman johnson, ranking

member chevy, and members of the committee. the key for this opportunity to appear before you today. i am honored that president obama has nominated me to the comptroller of the currency. eight years ago, i came before this committee for confirmation hearings. it has been a pleasure to serve during one of the most tumultuous periods in our history. dedicated staff of maintain the american people's trust. independent and professional bank regulatory agencies, like the fdic and the office of the comptroller of the currency are one of the strengths of our

financial system. prior to my federal service, i served five success of massachusetts governor's as the commonwealth commissioner of banks -- i served five successive massachusetts governors. -- during this period of regional vote destruction and subsequent recovery, i gained invaluable experience and perspective, which served me well as an fdic board member. my 25 years of experience as a federal and state bank supervisor has underscored the financial importance of a safe and sound banking industry, but jiverly in times of stress. economic recovery that has both

the financial capacity and the confidence to extend credit to individuals and businesses. in sum, i believe my experience has given the experience and judgment to get the reserve as the comptroller of the currency if confirmed. should the senate she is to confirm me, i look forward to the opportunity to leave the office of the comptroller of currency as it serves the individuals, businesses, and communities that benefit from a safe, sound, and fair national bank system. thank you, chairman johnson and ranking member shelby for this opportunity, and i look forward

to your questions. >> thank you, mr. curry. mr. woodall, you may begin. >> i am deeply honored to be forident obama's nominee this position, and i think you for helping to move my nomination forward. with me today is my wife jane, my best friend and my partner of 53 years. along with my sons and their families. my wife now serves as the manager of the smithsonian chamber music society. our sons, in chronological order, sam, the oldest, is an attorney in washington. another is a hardwood floor contractor in georgia.

another word for the v.a. national heritage program in abington, va., and our young this is an intelligence analyst for the fbi. when we get together with our daughter is alive and grandchildren, there are 19 of us, and most of them are here today filling up this space. if i am confirmed by the senate, i know the support and guidance of this family will continue to enlighten my thoughts and actions as a carrier up the job. to identify risks u.s. financial stability, market discipline, in response to emerging threats. both marty and tom would be

serving as the heads of the two agencies. however, since there is no existing financial service regulator in the insurance field, the bill provided for presidential appointment of this independent person with insurance expertise, in order to ensure that insurance which represents a substantial proportion of the united state'' financial system is appropriately recognized, and it culminated with in the new framework. i frankly know of no one who could technically qualify as an undeniable expert in all aspects of the highly diversified and constantly changing insurance industry, as well as its state-based regulatory system and its international position. i do believe my half century of experience in insurance would provide fsoc with what was

envisioned by dodd-frank. insurance is in my blood. my grandfather started selling insurance from a mule drawn wide and in 1904 and continues to be a leading insurance producer in princeton and kentucky for years. my father started his own agency in kentucky in the 1920's and ran it until he retired in 1973. i was first introduced to the regulatory side of insurance as a law student. and the summer of 1961 at the university of kentucky, when i was an intern at the kentucky insurance department. after getting my law degree in 1962, i continued to work for the department and became general counsel and was appointed commissioner in 1966. after the completion of my term, a practice law with a firm in louisville, kentucky, until 1972, at which time i became a

court-appointed rehabilitator of three publicly owned life insurance companies that had been seized by the state. the rehabilitation was concluded successfully in 1976, and until 1980, i worked as an assistant to the presence of a family load insurance company -- a family of insurance company. i was with a trade association, the national association of life companies, which merged in 1993. i did this and to my retirement in 1999. i plan on continuing that type of work for the rest of my life,

but then 9/11 hit, and that changed the focus of my life and my career. i became an insurance consultant as it address the needs of congress in developing the insurance act. following the passage of that, i was asked by treasury to assist in the new law. i continue to serve as a policy analyst for eight years, and monitoring all types of insurance issues and the state insurance regulatory system. in all of these insurance- related areas, my experience taught me lasting lessons of the various aspects of insurance. i believe this qualified me to be the nominee. i pledge to work closely with other members of fsoc and to continue my passion for and knowledge in the insurance and the substantial role but it

plays in our financial system. thank you again for the opportunity to appear before you today, and a look forward to a answering any questions you may have. >> thank you. we now have member's questions. mr. gruenberg? >> the new key responsibility is for the financial companies, and we have a responsibility and

boat -- under title one for this in the big companies that will be required to prepare. these are really new responsibilities and authorities created under this act, and implementing them in a credible way is really the major new challenge for the agency. in sum, it is a major new challenge for any agency for financial regulators around the world, and to undertake this, as you indicated, we established an office which will have three key responsibilities. first, there will be a group within that office responsible for monitoring the condition of the largest systemically a significant companies. second will be overseen the development of the revolution plants that will be required of all systemically significant companies under the act.

that is a joint authority that the fdic shares under the law with the federal reserve, and we're in the process of developing rules for the implementation of that responsibility. those have to meet the bankruptcy code. in addition to the plans of the institutions will prepare, they will be preparing plans. finally, they will be responsible for dealing with the cross border relations with the foreign supervisors for the operations of the systema cos. these are extensive activities, and the effective resolution of these companies really will require cooperation and coordination across borders.

this is a major new challenge. we're in the process of setting this office up. >> mr. curry, as comptroller, you will be expected to exercise independent judgment and act independently from the treasury department. can you act independently and use your own judgment? >> senator, yes, i believe so. i did a 25-year history of acting independently as both the fdic and with united states and as a commissioner for the commonwealth of massachusetts, as a commissioner about

affecting individual institutions and communities. many times, those decisions are unpopular. however, i believe in my past history and experience, i have demonstrated reasonably applying the rules and the laws that govern the bank regulation. but -- >> as fsoc works to designate financial institutions, you will be the loan insurance voice in this role. how we will approach this crisis -- how will you approach this crisis? >> the members, even though they

are not voting, one is the director of the federal insurance office which was created by dodd-frank, and the other was a state regulator from missouri who represents the state regulators, so there are really three of us that would be working on insurance issues appointed position that i had been nominated for is the only voting member. .this is with cooperation with the other two members and all members of fsoc. as far as the question as to whether they are systemic, i think that has to be done on the case-by-case basis and looking under the hood to see whether or not they are systemic, but i think generally, most people agree, and i agree, if the company follows the traditional core model of insurance practices, they are likely not to be systemic.

however, you do not know that until you see what types of products they are selling, what sort of interconnectedness there may be with other insurance companies or non insurance companies, and i think that is why that has to be done on a case by case basis. >> senator shelby? >> thank you, mr. chairman. basel iii. there are important roles in insuring that our nation's banks have sufficient capital to guard against another crisis. recently, the basel committee reached an agreement on the basel ii accords on the holding requirements. do you support higher capital requirements for larger financial institutions, and what

is your assessment of the new basel iii capital accords? will they work, and will they be sufficient? >> thank you, mr. shelby. we do support them. the fdic is a member of the delegation to the basel committee, and i think we of view the agreement -- we view that as an important step for the united states and, quite frankly, international. historically, u.s. institutions have had larger than some of the larger foreign institutions, and basel iii will apply the standards internationally for both a leverage ratio and the risk-based capital standards, so from both a domestic standpoint

an international standpoint, it seems to us to be a significant step forward. >> mr. curry. >> senator, i would agree. capital is a critically important to the health of our financial system. we have a demonstrated position of looking for both higher quantity and quality of capital. i would also offer that this post-crisis and earlier crisis have demonstrated that when institutions or the banking system needs capital, that is when it is the hardest to obtain it, so loving is strong capital level in place in advance of an economic downturn is critically important. with respect to basel iii, i think it achieves those goals of stronger capital on an international basis and will work to potentially eliminate any unlevel playing field

between domestic banking institutions and foreign institutions. the members of dodd-frank have taken one position. the treasury department has disagreed with that view. mr. curry, what are your thoughts about this? >> i understand that the actual language of dodd-frank is a matter of some controversy between interested parties. generally speaking, i think the principle is clear from the constitution that federal law supersedes conflicting state laws, and that is an important concept to remember. >> is that the position the

comptroller's office takes? >> i believe so. it is a federal agency. >> are you aware of the position that the treasury department is taking? >> i understand of the treasury department did 5 the public position --the occ's did file a public comment. but ultimately, i think it is incumbent on the occ to remain independent and to remain free from any undue influence from any external source. >> a report by the government accountability office, which we call gao, which you know, says it has not prevented sizable losses to the insurance fund. they found that every bank that underwent prompt corrective action but because of capital

deficiencies and failed since 2008 is lost to the deposit fund. they also found, and i will quote, that they were inconsistent, their words. for example, more than 80% of the banks that failed were on the regulatory watchlist that you alluded to form more than one year on average before failing. do you agree with their findings, and what steps would you take as chairman to protect the deposit insurance funds? what would you do differently than what we have been doing? >> thank you, senator. i do agree with the findings of the report. i think one of the lessons we've learned from this crisis is that capital tends to be a lagging indicator, and capital is the trigger for prompt corrective action, so during the course of this crisis, to the extent that

we were relying on capitol as an early-warning device for problems of institutions, it did not proved as effective as we would have liked. i should point out that it's still proved important because it established once an institution reaches a critical undercapitalized level of 2%, it provides for certainty in terms of the resolution process, which is quite important, but in terms of an early warning indicator, it really has not proven as effective as it could have been. i should note that for each failing institution, the inspector general of the fdic has to prepare a report on the causes of the failure, and it was felt in review, and these are called material reviews, the inspector general in the course of conducting these reviews identified three key factors common to phillie institutions. one was rapid growth.

two was concentration in commercial real estate, and three was reliance on brokered deposits and other volatile deposits. we have asked, i actually cheer the audit committee which oversees this, we have asked them to prepare a set of recommendations for us based on these material loss reviews as to help from corrective action could be improved, and we actually expect to receive the report in the region receive that report in the near future, and will be happy to share that with you. >> thank you. >> thank you, mr. chairman. chairman bernanke a few weeks ago or weeks said that the federal reserve is committed to rulemaking on the so-called living wills for large financial institutions by late this summer. what is the fdic schedule for

this? >> we have been working in tandem with the federal reserve. it has actually been a very cooperative process. we are fairly complete. we issued a joint world earlier this year, and i think we are near completion, and we do expect to issue the final rule in august. >> very good. thank you so much. community banks are vital to our economy. they are usually the ones doing the most aggressive lending to small business and have the best record in terms of lending to small business, and that creates jobs. your view of the impact of dodd- frank on the community banks and community banking, many of the provisions of dodd-frank were specifically excluded from applications for small banks,

given that they were not the major cause and this dynamic contribution they make to local economies, but can you give us a brief view of where you think they stand at the moment? >> padilla yes, senator. as you know, fdic as the primary regulator of the community banks in this country, so i think it is fair to say we bear a particular responsibility of that important segment of our financial industry. i would note community banks account for about 11% of the banking assets in the united states but account for nearly 40% of the small business funding done by all insured institutions in the u.s., so they really occupy a very important mischa in the financial system. -- niche in the financial system. they have been impacted. of the three and hundred 87 and ian snell institutions that have

failed in the course of this episode, over 300 of them have been institutions with assets over $1 billion, but even with that, we still have nearly 7000 community banks in the united states, and most of them have worked their way through this difficult period in good shape and are really position now to play a very important role. in regard to dodd-frank, you noted accurately that there are many of the provisions that are applied to the larger institutions, smaller institutions are excluded, and i would note to in particular the deposit insurance provisions of dodd-frank. on to, i think they are actually help for two community banks. the increase of the limits to 250 those in dollars is something the community banks have sought, and it does prove to be during the course of this crisis and a valuable source of attractive liquidity to

community banks, which proved quite stable. in addition, the act changes the assessment base on which deposit insurance premiums are charged from deposits to assets. the consequence of that is to shift the burden of funding deposit insurance more to institutions with assets over $100 billion, and for institutions with assets under $10 billion, they will actually in the aggregate receive a 30% reduction in their deposit insurance premiums under the act, so it will mean real money for community banks and should be helpful to them, so on balance, and to convey those provisions are a thing or positive. >> thank you very much. mr. curry, furs, a quick comment. you have served under a number

of governors, both republicans and democrats, so you have been essentially recognized on both sides of the aisle as a consummate professional, and i think that is a quality we are looking for in our next comptroller. the other factor, too, is i think you bring a valuable perspective to the efforts, because a lot of the issues, which of the suggested by some of the questions, involve the sort of cause a discussion of and rebalancing of the lines between appropriate national authority and local-state banking regulations. so i am particularly pleased that you have been nominated. i wish you well. i also, too, want to join senator shelby, who has been one of the most vigorous advocates for strong capital rules, to

reinforce his point about the need as you, i hope, the occ comptroller to of capital in place. >> thank you. >> and because my time has expired, mr. woodall, you are going to provide double expertise, because this is not a federal role, but internationally. i know in great britain, 30% of their assets are held by insurance companies, not by financial institutions. 15% in the united states, so both looking within the united states and looking internationally, your views are going to be very important, and i hope we move quickly to confirm you and get you there. thank you for your service. thank you. >> senator? >> thank you all for being here

today and being willing to serve the way you have offered yourselves, and i think your families for being here. you certainly will not receive very tough questions with all of these family members in the audience, so we are glad to see them. i will start with you, mr. vice chairman, soon-to-be chairman. paul when dodd-frank was being debated and discussed, the previous chairman did an outstanding job of convincing a majority of members of the senate and house to turn you into a super entity with abilities. as we were leading up to that, many of the rating agencies began saying because they really thought that too big to fail was going to end, they were thinking about a downgrading these institutions. now that the law is flawed, and people have interpreted what it really says, the big four

institutions in our country are receiving disproportionately higher ratings and benefits, so it is evident that most of the world if does not believe that we have and it too big to fail, and i am wondering if there's anything you're going to come see us about it. >> that is critically important. it is our view that this is under title one entitled two. they really are sufficient to deal with the issue. the challenge to us, and i think what we're going to have to demonstrate with credibility to the financial markets is our capabilities to implement the authorities we have been given, and that was really the basis of my response to the question that

chairman johnson asked earlier. we have to demonstrate the capability to close a systemically significant financial company without creating facing the disruption to the financial system as a whole. there is no greater priority for us. it does not surprise me that much that the markets are in some sense taking a show me attitude. providing an authority is not a demonstration of a capability and willingness to carry it out. i think the challenge to the fdic in particular will be to demonstrate both we have the capacity and the willingness to implement it. >> do you think the code should be tremendously expanded so that people know that unless there is some really unusual situation there is a better vehicle for institutions through bankruptcy? >> i think the way the law is structured -- structured, the

premise is that the bankruptcy code is still the first recourse for dealing with the failure of and financial company. it is only in this circumstance, and, frankly, i hoped and expected to be rare, where a determination is made where going to the bankruptcy process could present issues for the system as a whole, in which case you would return as a father result to the orderly the traditional authority under title two. i think it is the last measure to avoid disruption to the system, and i think that is as it should be. >> would you be willing to work with us to tighten up orderly liquidation and make sure that these large institutions are not enjoying significant benefits because people believe they are too big to fail, and to work with us on streamlining the bankruptcy code so that it will actually work better for these large, highly complex institutions could >> yes, sir.

>> so the ok, thank you. we talked in office on. but i think you are with that one of the complaints is the lack of consistency with examiners in charge. you know is a problem. a big part of your job is, and i think you know this, is to get the culture better. i am in no way criticizing the former chairman. we had the similar conversations, but examiners in charge, in order to make sure their careers are not interrupted by making their -- making mistakes are no doubt being overly zealous and are creating a self-fulfilling process around our country. i think you are aware of that and will work to and that. >> senator, i will have no higher priority than community bank responsibilities, and we will work with our examiners to make sure that examinations are dumb and as balanced and fair a way as possible. >> pecan -- mr. curry.

state you're a commissioner for banking back in 2000 and made a quote, and i just want you to reaffirm that this is not where you are. we suggest that federal preemption has the unintended consequence of limiting states' ability to ensure a healthy banking industry. many states responded to the statute or regulation to protect consumers from predatory practices. however, it has been perhaps the unintended consequence that federal preemption has made it difficult for states to offer the protection of their consumers, so you will be in a position, obviously, of making sure that we have uniform national standards, and yet seem to have in the past indicated that you question that, and we just want you to a firm that you

are going to be independent, you are not going to let treasury grubby you fit to their position and that you're denouncing his former position. >> i want to assure you senator that i will zealously of poled and enforce the national bank act, and particularly where it relates to federal preemption. what i would want to point out is where i think that the dodd- frank act provisions actually resolve some of the issues that i was hiding in a statement, if there is now much more clarity in terms of the wall of the state attorneys general, the applicability of federal law in its relation but to state consumer financial laws, and you also of a group to address any gaps in terms of consumer protection, so i do think, yes, my statement in the past is

actually addressed by dodd- frank. >> thank you, both, and mr. woodall, you are apparently universally loved. [laughter] i may have a question for you later. >> let me strike a bipartisan note and sega his observation about community banks and banks in general, we are sitting on the committee saying to those institutions, -- only those that we saved in 2008, "we would like to see you lens." then we are listening to a chorus of voices that says that everything that you're telling us to do, we're being told inspectors. we're not talking about speculative lending. we do not want to see 2008

began, but by the same token, many of us have the observation that the pendulum has swung so far but we're creating a crisis in terms of getting access to capital and creating an economy that can thrive again. without that access to capital, it is not going to happen. if i listen to one board of directors after another, i get a common thread, and when i get a common thread, i do not always believe is contrived. we have performing assets that are being asked to be recapitalized. we have areas where lenders are basically saying, "do not do it, so a understand that there are some that were not the clock on the beach when they needed to be, but that does not now made them the total opposite. -- not the cop on the beat when

they needed to be. >> think you, senator. that is really one of the key questions. the fdic has six offices in the country. i had the opportunity to visit each of the reason offices, and at each office, i met with a group of our examiners without senior management present, except for one or the senior manager kind of snuck in, but the rest, it was without management's present, to try to hear from them what they were seeing in terms of the institutions they were examining. i will tell you, and what we tried to communicate to them was the need for balance and the need to work with the institutions to enable them to the maximum extent that they can to kerria their basic mission, which was extending credit to creditworthy borrowers. i will tell you, for what it is

worth, it is my sense that most of our examiners are career professionals who tried to carry out their job in a balanced way. if i have no doubt that there are some that go too far, go overboard. i think most are trying to do their best in a difficult environment. what i will say to you is that we are staying in close touch. people often talk about a disconnect between the policy- makers in washington and the examiners in the field. we will do our best to maintain horsey that connection is followed through, to stay in close touch with our examiners, and to encourage them to exercise discretion and judgment to allow these institutions to carry of their basic purpose. that is certainly going to be one of my top priorities. >> i appreciate that. let me ask both mr. curry and

yourself. that this is not broad enough, then it can hurt the housing market that is already suffering enormously in terms of being part of our national economic recovery, especially if you perceive high down payments of 20% or more. can you comment on that? >> boof i would be happy to, senator. we are in the process at the fdic, and the other bank leg -- bank regulatory agencies are reviewing the letters on the retention proposal and the qualified residential mortgage exemption provision. the issues you phrased of whether or not the proposal appropriately excludes a large number of american families and households from home ownership is an issue of that we are looking at very carefully and are mindful to the consequences to those families and individuals as well as our economy.

>> senator, i just might add, you may notice that they went forward with proposed whorl making on this issue. when the fdic board approved this, i commented that the time that we will have to strike a balance between having to address the problem is made evident in this crisis, with access to mortgage credit for creditworthy borrowers. i think of is the challenge of the rule. we extended the comment period. we're expecting to get additional comment and are expanding it. >> will be looking at it with great interest. finally, mr. curry, we have sent

colleagues to the occ and other agencies. the mortgage modifications, this continues to be a reality, which is not acceptable. it is not taxable under the law. it should not be acceptable for the regulatory agencies. we have been told by the regulatory agencies and that practice has ended, that there are reports that it has not, question is, the question before, all of you that have jurisdiction in the field, will you disclose the results of the foreclosure reviews on a bank i think bases, including the letters of engagement for the individual consultants performing those reviews and the application from the mortgage servicers?

it can, in fact, be released in the public interest. there has to be some medium by which you can assure those of us who are both policymakers as well as the public that this has ended. >> senator, i think the robo signing affects both individual families and the mortgage finance industry. i think it is critically important that we work to restore credibility to a system. i think that the framework that is under the cease and desist orders that were issued by the occ and other federal regulatory agencies, where it is important to restore that credibility, i think, as well, the greater transparency that the agencies

can show in how failures in the system are being corrected and individuals to have been harmed will find redress is critically important, and i think, particularly, if i were confirmed, we should work to be as transparent as possible, consistent with and a governing person. >> thank you, mr. chairman. >> senator marin? >> thank you very much. mr. curry, mr. woodall, mr. gruenberg, thank you. i only have to suggest that you must be a good person because your grandchildren are so well behaved. [laughter] congratulations. i want to focus on community

banks. at least as has been a conversation today, a topic of conversation, you indicated, mr. gruenberg, the fdic carries a particular responsibility for the future of this crucial segment of our financial industry. i have a genuine concern that community banks are on the verge of becoming a thing of the past, and in large part, i believe upper because of the increase in regulatory burden that is being placed upon those banks. i do not know whether you know a number, but i would be interested in knowing what the percentage of regulatory costs is in comparison to assets or loans, deposits, as compared to a larger financial institutions, but but in my view, they are the ones as you outlined, in making loans, it's a different kind of

environment. if you are asking, seeking a loan at a community bank, and you are in someplace in a larger city with a larger financial institution, those personal relationships are important in rural states like mine. and i've had this conversation with every regulator that set in this room. and i would admit you've been in this room much longer than i have. but i've had this conversation at every opportunity. and i always get the same answer, which is we take special consideration, we account for community banks, we understand their importance. but there's virtually no end to the concern or criticism raised by our commercial banks about the regulatory environment in which they are in and the amount of money which is being spent to comply with regulations, the additional staff that's necessary. and it would be one thing, i suppose, if community banks were not succeeding because they no longer serve an economic purpose, but that's not the

case. the number is much more related to finding themselves having to work. one of the larger banks in our state, their c.e.o. told me earlier this year the community banks for the first time in history are calling the large bank asking are you at all interested in buying us. it's no longer any fun. the environment and cost we encounter no longer make this a profitable venture. so you see continued consolidation. the numbers are out there. we have fewer community banks as a result of some of the closures. but in large part it seems to me because they are consolidating with other banks in order to spread the regulatory costs among more assets and more loans. and so while i appreciate your reassurance, it's somewhat like you said, about the too big to fail in response to mr. corker, we're waiting for the evidence

that something is different in regard of those community banks. and so in particular i want -- and i certainly agree with you that the fdic insurance issues that you raise i think are a positive development. but let me particularly raise with you the disparate treatment of capital standards between community banks and large financial institutions. the definition of well capitalized seems to have a different definition in regard to whether or not you're a large or small bank. and many of our community banks are being regulated in which they're required to have a much higher percentage of capital than our smaller banks -- i'm sorry, than our larger banks, many of which those larger banks are under other regulatory restrictions as a result of their financial condition so my point is there's a double standard, in my view, between the capital requirements that

small banks, community banks are required to have, and that of larger financial institutions across the country, including on wall street. and so my question is, will you continue to regulate higher capital levels for the so-called too small to save community banks? and in a sense let wall street -- i don't want to say that. in a sense have the double standard, a disparate standard compared to wall street financial institutions. >> sam, let me try to respond to that. it's my understanding that it's a matter of the rules that apply today. they are the same across the board. >> think it's fair to say that community banks as a general matter itemly have higher capital -- actually have higher capital than larger institutions. i think for my own perspective one of the important authorities

of the new law is to impose enhanced prudential requirements on our largest systemically significant institutions. for precisely the point that you make. they do derive and implicit benefit from their size. and to a certain extent their capital requirements have not fully reflected those benefits. and that approach is reflected in the accord that senator she will shelby asked burlier. and in addition provision to oppose what, in effect, is an adissal surcharge at -- additional surcharge in our largest institutions. this new agreement to impose a particular additional level of capital on our largest banks in an effort to both have them account for their systemic risk

that they pose, and to bring about some greater leveling of the playing field with the smaller institutions. i agree with you that that playing field has not been leveled. we should make efforts to try to bring great herbal to it -- balance to it. in addition to the porns of requirement is to develop a capacity to place these large institutions into receivership. because until can you do that, that also contributes to the funding advantage that they have. >> true. >> so on that end of it, i think the fdic carries a responsibility in regard to the large institution. and as you noted and i noted earlier, we have a responsibility for the small institutions. is a belief among bankers that there's an attitude at the fdic that small banks are more difficult to regulate, takes more assets. the sense that you don't believe -- not you personally, but the fdic doesn't believe the

management skills and capabilities are there. so i assume that in this setting you're going to tell me that's not the case. but i would just reaffirm what i continually hear about a belief that the fdic has -- i wouldn't say a policy, but an approach that says it would be a lot easier -- a lot better for our economy if there were a lot fewer financial institutions. you for the economy of kansas, that would not be the case. >> senator, i appreciate you raising that point. you're right, i would say to you -- we -- it's my view we don't have that attitude toward community banks. quite the contrary, we think they are really quite different in operation in a positive way from the large institutions. in some sense their business model if anything has been validated during the course of its crisis. they stay close to their customers. they rely on core deposits.

they generally are a sources of -- source of stability during difficult times. and they serve a function in their communities that's quite unique and quite important for small business, for small towns that otherwise might not have access to financial services. i will note we do have a community bank advisory committee. it's made up of 14 community banks from around the country. our board meets with those bankers three times a year to hear directly from them what they and their colleagues are encountering in the field. we are endeavoring to stay close to this issue i know we're less than perfect. but i did commit to you this is something that will be a matter of continuing attention for us. >> thank you. thank you, there. >> mr. gruenberg and mr. currie, it seems to me that when producing a cost benefit

analysis of each individual rule your agency writes, you must also take into account the cost of the financial crisis and the harm infected on consumers, investors, and the overall academy. how will you ensure that your agencies are taking into account the cost of this crisis when weighing the costs and the benefits of the new rules? >> thank you, chairman johnson. i think it's critically important that all the agencies, the fdic and the o.c.c. particular, identify in an appropriate way all the costs as well as the benefits for any proposed rule making. as you identified, the cost of the crisis i think is the appropriate factor to be weighed in that price, the long-term cost especially. what's critical, i think to any

rule making is to have an open process and to encourage input from all affected sources. i think the fdic which i've been associated with from the last eight years -- almost eight years -- has been very effective in reaching out to interested parties to hear their views and to help assess the costs as well as the benefits of any rule that comes before the agency. >> mr. chairman, i would just add to that, when the fdic has a rule making to do, we put together an interdivisional team to oversee that process. and the way that works is that with a series of options for implementing the regulation. and the whole purpose of the exercise is to evaluate the different options, in effect to

weigh the balance between the cost and effectiveness. and when we come out with a proposed rule, quite often in our notice of proposed rule making not only do we put the proposal that's agreed to for that working group, but we will also ask for comment on the other options that are developed by that group, in some sense to get a full airing of the different approaches for implementation to get the benefit of public comment for the series of options. and i would note that our inspector general undertook a review of three of our rule makingings pursuant to the dodd-frank act, in effect to evaluate the economic analysis that we do. and i refer to you that report. i think it's fair to say that that report found our process pretty credible and balanced. so i think we do a pretty good job. i'm sure we could do better.

>> mr. curry, to anticipate a good and effective partnership partnership -- [indiscernible] >> i think there's an important opportunity to collaborate between the bank regulatory agencies and the cfpb. i think that issues and rule makings in this area really toned have elements of both disciplines at stake. i would use as an example the gym applications from a financial, safety and soundness or risk management standpoint of the not traditional mortgage loan products. they have both elements of consumer protection and also significant as we saw in the financial crisis, significant financial consequences to our banking system so that the extent to which the banking

agencies and the o.c.c., if i were to be confirmed, i think would be beneficial as a two-way street for the o.c.c. to communicate to the cfpb, the financial context in which a proposal would operate and also for the o.c.c., who will retain the ability -- or the responsibility to supervise institutions under $10 billion, the opportunity to be aware of an emerging or potential consumer protection issues. so in summary i think there really is a need for a close collaboration and communication between the o.c.c., the bank agencies, and the cfpb. >> senator shelby? >> i'd like to pick up on senator corker's question about too big to fail and so forth.

i would think that the ideal situation would be a message from the regulators that nobody's too big to fail. and that if you do reckless things and you're the comptroller, fdic and the fed, the big regulators here, that we're going to close you down no matter who you are. of course, we're going to prevent, as regulators, you from getting into this kind of trouble if you're hands on. but we all realize that not everything but a lot of the blame for the financial crisis, a lot of it came from the regulators right here. when i was chairman of this committee, i asked questions of the regulators. not you, but the others, the federal reserve chairman, the fdic chairman at that time, the comptroller. what are the conditions of the

bank? we had a hearing on this. i hope the chairman will continue this, to hold a hearing specifically on the condition of our banking system. and what was the answer right here? right here in this committee? banks are in good shape. but they weren't. they were under capitalized. and often in a lot of instances well managed. hands off instead of hands on. you do have the capacity now -- i think you could have had it then, more capacity. but i agree with mr. gruenberg here, that you've got to have the will and you've got to send a message. part of it is a message, but they won't believe you. what's the old story, if you tell somebody, you're going to shoot them. and if they cross the line and you don't shoot them, they've got you. you know? the question is, what are you as

regulators are going to do your job. you got the capacity, but do you have the will? i hope you do. i think the regulatory environment is tough. the senator from kansas got into that. i've never worried -- maybe i should -- a lot of the small banks bringing systemic risk on this country. i mean to this country. but some of the biggest will have and will again. i do worry about europe. as the chairman said, the acting chairman, a lot of our european banks are under capitalized much more so than us. i think you've got the framework. the question is, will you as regulators implement it. my question to both of you if a foreign bank -- let's say it's a

german bank, a french bank, british bank doing business in this country, if they're under capitalized, do you have any power over them at all as to their capital standards doing business in this country? because they could cause systemic risk here. marty? >> senator, to the extent the foreign bank has the subsidiary here subject to our regulatory authorities, the answer to that is yes. >> and what does that mean? does that mean you have the capacity to deal with their capital, overall capital? because the overall cap stall what matters. >> to the extent we're dealing with their foreign -- the capitalization of their foreign is something we do not have direct authority over. and that's, frankly, why these international agreements are very important. not only to reach them but to monitor compliance with them.

and we really need to develop to monitor not only our own compliance but what the major institutions are doing. because at the end of the day it does all come together and risk there, poses risks here as well. >> mr. curry, do you have any on that? some of those big foreign banks are doing business here. of them, as you know, had shaky foundations just a few years ago. >> i would have to agree with vice chairman gruenberg that with respect to the o.c.c. they would have to be a supervised entity by the o.c.c. to take action. i would comment that i agree with you that can you not legislate superrise fortitude -- supervisory fortitude. it's something you have to bring to the table. and i would hope if confirmed, that i would do that. and i also believe that it's appropriate for all the banking

agencies to look at, as the vice chairman mentioned, with the material loss reviews, how we could have done better and to learn from the lessons of this recent crisis. i know you've, gotten by here today, but i think that we basically believe you're well qualified for this position. you do have a well-behaved, nice-looking family that doesn't hurt anything. [laughing] but this position is unique here, as you pointed out and we know. position you've been nominated to serve on. you would be the first person to hold the insurance seat on the financial stability oversight council. and how you carry out your duties would set important precedence for the role of this position that we'll have in the future on the council. what contributions do you see -- and i know you don't see every crisis because it hasn't emerged

yet. -- can this position mike improve -- make to improve from the perspective of the insurance companies? you will be, as you well know, in the company of some very powerful people, including two here, perhaps, and also the chairman of the federal reserve and others, the treasury. how do you see your position there? i don't believe you're going to be a shrinking violet. you didn't take that position for that. >> no. don't intend to be a shrinking violet. >> i don't believe you're a shrinking violet. i see four sons behind you. >> as far as trying to bring the per speaker tick of the insurance world, it's not just the insurance industry or just the regulators or the international part. it's all of that. >> and a lot of financial products through the insurance company just like banks, in

different ways. >> that's right. as i said, those products sometimes when they veer away from what the normal model is and take on more risk, than they could -- you know some way have systemic risks involved. but that's what we have to look at. we have to look at it from a company by company aspect. but fact that the insurance industry is such a large part of financial services, i think in all the issues that come, there essentially is an insurance element as far as what is the total picture of financial services. this is a new creation. and i am an independent voice. i won't be speaking for the administration or for the industry or for the state regulators. i have to take all of that into account along with what's happening at the international level and vote my conscience. >> but there are some big insurance companies that could cause systemic risk to this

country. i hope they don't. but, you know, they're such a size they could. but they, too, have got to have standards of counsel capital and working capital and everything that goes with it have they not? >> you've been talking about basil. >> right. and prevent another a.i.g. we don't want to go down that road. >> i think i tried to address that. >> you did. >> history showed us that when the insurance company, that one in particular, went beyond what the traditional model was, they got us in trouble. and you have to look under the hood and make sure there aren't any regulatory gaps in there that would bring that. that's why the f.i.o. was set up, too, to help identify any sort of regulatory gap and to help develop within the federal government positions, both nationally and internationally, on the international issues, insurance issues.

>> well, thank you, mr. chairman. thank the witnesses for your testimony and for your willingness to serve our nation. i ask all members of this committee to submit questions for the record by noon this friday, july 29. i request that the witnesses submit your answers to us by close of business on tuesday, august 2 so that we can move your nominations forward as quickly as possible. this hearing is adjourned. [captions copyright national cable satellite corp. 2011]

>> lawmakers on capitol hill are still in last-minute negotiations on how to deal with the debt and deficit. we expect the senate to come back into session at some point today. democratic leaders came out of minority leader pelosi's office a bit ago. and a spokesman for senator reid says the majority leader has signed off on a debt ceiling deal pending his caucus' approval. senate right now in recess. they've been meeting all weekend to try to get a bill supported by leader harry reid through the senate that bill did not move forward it would have needed 60 votes and only got 50. on the other side of the capitol, in the house, members voted on the reid measure yesterday. it was voted down 173-246. they gaveled in for a very brief

pro forma session earlier today. and the house has adjourned and will be back in tomorrow morning at 10:00 eastern with legislative business at noon. there's a new deal being talked about for the debt and deficit that would cut spending by $3 trillion over the next decade, and it would raise the debt ceiling through 2012 in a two-stage process. we'll continue to bring you updates here on the c-span networks. on tuesday, the treasury department has estimated the government will go into default on its loans if a deal is not reached. next, a discussion on what would happen if that default occurs and its impact on consumers. from today's "washington journal." this runs about 35 minutes. host: an economic supporter with "the new york times." thank you for joining us. guest: good to be here. host: we should point out that based on all accounts from what we've been hearing, that there will be some sort of an agreement raise the debt limit

by tuesday. but if that does not happen, what impact would that have on u.s. consumers? guest: it could have all sorts of impacts. everything from making it it harder to buy a house to making it harder to make your car payments to maybe actually boosting their retirement savings if they're in savings accounts or treasuries, for that matter. of effects that could come because either the united states defaults on its debt, which is a very unlikely outcome, or even if we get downgraded and investors start charging higher interest rates. host: in one of the many stories you have posted for the "new york times," you point out that in 1979, the u.s. and congress was debating raising the debt limit to $830 billion. guest: those were the good old days, right? host: we are now at $14.30

trillion. guest: there have been countless showdowns over the debt limit. to my knowledge, none of them has occurred in an economic situation quite as precarious as this one. that is, a situation where there was 9.3% unemployment, a very lackluster recovery, and as sort of thing, but this is not entirely unprecedented in that respect. in the past, there have been discussions about under what conditions the united states should -- or congress should be raising the debt limit as well as what we are discussing today, what kinds of spending cuts or tax increases, although that seems to be ruled out, should go along with any increase in the debt limit. in the past, there have been ncerns about a default, but to my knowledge, none of them were quite as crisis-prone as the discussions going on right now. host: what impact does this have

on municipalitieand states, if any? guest: it could have a serious impact for several reasons. one is that state and local governments depend heavily on federal funds to keep their cash flow going. if there is a problem where the united states has some kind of selective default on its debt, that is its stops paying at least some of its bills, there could be huge interruptions to the payments that go out tohe states. the states themselves are already in a very delicate situation in that they are dealing with their own budget crises, and as a result, they are having a lot of problems keeping the funds flowing as it is. on the one hand, you could have problems with interactive projects, infrastructure projects, unemployment benefits or whatever, all sorts of things administered by the states but that rely on federal funds. on the other hand, and much more

serious consequence, is that should there be some sort of financial crisis that erupts from all of this, that what had a huge impact across the economy. when i say a financial crisis, i mean people start to get worried about whether the united states government is able to pay its debt. as i mentioned before, interes rates will go up because of people do not trust a bar work, they say they're going to make it more expensive to borrow, and there are countless interest rates across the economy through all sorts of different financial markets that are pegged to the costf borrowing for long-term treasuries. that is what i wasetting at before when i was saying that the cost of a mortgage could go up. because of aar loan could go up. student loans. all sorts of things. what happens is if interest rates go up for the federal government, that sort of has this reverberating effect where everybody else starts raising interest rates, and that freezes up credit markets. that freezes up the economy, and could have the potentially dire

consequence of plunging us back into recession, which, of course, is good for no one. >> our guest is katherine -- catherine rampell, a graduate of princeton university, worked for the "washington post," now works for "new york times." you spend some time in china. >> we owe china a large amount, and they know this, and i think they are getting very concerned about what's going on within the united states and our ability -- as i said, i think it is unlikely that we would actually default on our debt payments. there is a larger likely that, given where things are going, that we might not be able to pay some of our other bills, but i think united states will try to put off a default on interest payments to our creditors and basically all costs. that said, even if we continue to pay our interest payments to

our creditors like china, if people start to get very worried in the long run abouthat -- about the dollar, that will cause people to start dumping dollars and making the value of the dollar fall. that hurts us, but it also hurts china because it means all this money they have stalked away in dollars, it is not what was, but it is not nearly as valuable, and they are in the delicate situation of wondering if they should continue to invest in u.s. currency, which has lots of nice effects for the united states, or try to put money elsewhere where it is safer? the world so interconnected.

global financial markets are so interconnected that whatever we do this week has huge consequences globally. host: there is a story posted on line with the headline -- "need the debt plan protects the nation's aaa credit rating -- neither debt plan." the story points out that neither plan being put forth could provide the credence that they think would be possible among democrats and republicans to keep the aaa rating. there's the point that moody's is confident it will not have to downgrade the nation's reading because of defaults. it did me and that the long- term debt and deficit problems will continue to weigh on the aaa mark. guest: right. the main problem facing the united states is our health care

commitments. health care costs are spiralling out of control we also have an aging population. people consume more health-care costs, which is true across the developed world, but it is especially true in the united states, for whatever reason, and you can credit it to multiple different factors. united states spends much more per capita on health care than other countries, even countries with all the populations. so that is a huge concern, right? we have not really done much to try t bend the cost curve, to .se obama's phrasing one of the primary goals, in the minds of these credit ratings agencies and presumably other investors that rely on them, is that we should be able to get that trajectory of spending commitments under control. unfortunately, if you look at

what congress has been talking about in terms of how to get or how to manage these fiscal austerity measures, they have basically ruled out entitlement reform. they are mostly talking about discretionary spending. to some extent, that means military. to some extent, that means education or infrastructure or whatever else. so i think that to credibly tell the world that we are tackling our fiscal concerns, that would require going -- taking a stab at some of this much more politically sensitive issues. i think that is what s&p, moody's, and fitch are expressing concern about. they are saying, "you probably are not going to default. you're talking about some austerity measures, but you are sort of looking at the wrong areas." also, the magnitude of the cuts

are at least not what s&p said they were looking for. s&p said ty wanted $4 trillion of cuts over the next decade, and needethe boehner plan or the -- neitr the boehner plant nor the reid plan addresses that. .

again, investors that are looking at the very same issue. host: and the u.s. debt clock now has in excess of $14.5 trillion. james is joining us. good morning. caller: good morning. i want to talk about the federal balanced budget. people want the government to maintain their budget like a private citizen would do their own. well, the federal government is like the head of the household, and the u.s. people are their family. now, the federal government takes in people every day due to new immigration, new retirees on social security, disability. their family grows, and it grows larger. and their budget grows larger through no fault of their own. now, if the private family was

mandated to increase their family by one person every week, they could not maintain their budget without increasing their income. so how can the federal government be expected to maintain a balanced budget if their family is growing three million to four million people every year? host: thank you. the debate over tax increases. e. guest: when we talk about the united states and what would that mean for a household, we have expectations for consistent growth long term, that is something that the united states generally has been able to count on. that's one way in which the country has been able to,

essentially, continue borrowing more -- it is actually spending more than it takes in. there is an expectation that the country will grow enough in the future that that will look dwsh hook tax revenues and be able to pay off the money we borrow in the past. the fact we have taken in so many immigrants has been good for our economy for a lot of reasons. not just because many of the immigrants coming into the country, undocumented or otherwise, are working and being productive members of society. and reasonable people can agree with whether they are supposed to be here or not and whether that is good for the economy or not, but in terms of the budget crisis thehave been good because we have an aging population. a much larger share of native-born americans today are not working than what the case

-- than was the case in decades past. so social security, as you probably know, worked by having today's workers essentially pay yesterday's workers to keep them getting a steady income, essentially, a pension. one way the social security has been able to ay stay solvept is bause we have this influx of younger imgrents -- immigrants who are paying into security and are picking up the -- into social security and are picking up the slack of this shift where you have a lot more native americans not working. because of the baby boom, the baby that -- babies that replaced them is much smaller. in that way, having a lot of immigration has been good for our nation's finances by being able to keep social security solvent.

>> your work is available online at new yorktimes.com. let me ask you about those who have money in the sck market. based on the uncertainty that we have been seeing, what recommendations have you been seeing from financial experts? keep it in? take it out? >> i would say because there is so much uncertainty, not only about what the outcome of these debt talks would be, but what the implications of those outcomes are, and the multiple peutations of what could happen to the economy, it is hard to have a strict and reliable financial plan. for example, if interest rates go up, if they go up a little bit, that can actually be good for people who are retired or who are approacng retirement because if they have their money

in savings accounts, that means they are getting more in terms of interest on their savings. of of course, fp interest rates go up way too much and that causes another recession, then it is sort of self-defeating and it doesn't help very much. so, again, you know, depending on what your expectation rs for the quenses of a downgrade, default, whatever, and depending what your expectations are for how the markets react, that has a very different implication. host: gene is joining us on the washington democrats line. good morning. caller: good morning. with all this debate and with all this rang ling between the two houses, i've mentioned this before, and other people have brought this up, and i don't understand -- i followed this throughout my life.

i'm 76. i've watched them and congress even at midnight rse their wages up to as high as 50%. not once have i heard anything about rolling back. they want the people to step up and do their fair share, but i haven't heard anything about them rolling back their wages back to, say, the 1980's, which would create a pothole of money that they could put back into the national debt. >> we'll get a response. guest: he's talking about rolling back congressmen's wages. you know, i think this matters more symbolically rather than

economically. yes, it is frustrating to see congress giving itself a raise when there has been so much wage stagnation in the united states. for that reason there have been a number of years where congress has decided not to give itself a raise, which has all sorts of other effects which are not quite desirable, for example, judicial salaries are sort of tied to salaries across the federal government or other sort of senior positions. so judges are not getting raises either, and federal judges have been very ups about that. but that said, symbolcally, i think it is important in erms of how much money that would free up. it is not going to solve our budget problems. it's just not. it would be nice to think that congress shares in both the successes and failures of the american populous and american workers, and for that matter, maybe there is an argument to be

said for tying their wages in some respect or their pennings to the state of the onomy. but that seems very unlikely. and in any case, like i said, even if you did that, even if you had all congress working for nothing, it is not going to produce trillions trillions of dollars. host: you can weigh in on this conversation on our site at facebook. facebook.com/cspan. can you also spend us a tweet at cspan.com. >> i would like to ask if anyone knows how long these ponds are issued for, because i don't see the debt falls on a 10-year problem as being presented by the democrats. it is a 40-year problem like a morton your house.

borrowing a dollar on your house does not give you a dollar owed. it means you will pay probably three times that much just like buying your morton your home. another thing i would like to point out, social security is not an entitlement. congress passed a law they would take the money out of your pay, your employer would match it, d you would get that money back later. that's money you paid taxes on. now th want you to pay taxes on your social security, and if you're retired, like i'm about to be in six months, any money i make on my meager capital gains, they want me to pay extra money on my capital agains. are you hearing all these people calling in saying they are k-401's are tanking bhaws of all the taxes they are having to pay. >> any response? >> well, we can talk about a few issues that were brought up here, including the entitlements question. that's really a matter of semantics.

the way that the social security system works and all sorts of other entitlements, that's a technical term people use, is that people pay and get out money later. but the amount of money they get out later is not necessarily exact amount that they take when they were having money deducted, payroll taxes deducted in the past. because suddenly that would not be able to work. then you would have a defined contribution plan as opposed to a defined benefits plan. because of inplace -- inflation and l sorts of other things, and the increase in most workers wages, not everybody's wages, it is just not a one-to-one ratio and that was president put in, you get out. you get out what effectively people who are ctemporaneous

with you, when you are retired, are putting in. if we were talking about just taking out what you put in, again, and you probabl wouldn't demeed the government to manage it. you could have a 401-k. i think there are semantic issues here. there are accounting issues here, and so on. the second question was -- >> the second question was what people are getting in terms of their benefits. this goes into a tweet we got as well. "seniorsnd the disabled only received a 3.2% c.o. l.a. total over three years. food is up at least 20%." how do you deal with that disparity? guest: food is based on all -- it is not just base on food or housing. if we were basing the cost-of-living adjustment on

housing alone, then seniors would be rich, right? effectively because housing costs have dropped a lot. so they should maybe be getting less now. soed idea is to see what prices are doing economy-wise. what a typical am would be for the typical american household. so if you are just looking at one component, that's a bit misleading. you can also argue about well maybe the balance, the waiting of all of these different types of pricing -- the weighting of these different types of pricing is not fair andaybe there should be more weight given to food and less weight to housing or electronics or other areas that are falling. but, you know, is -- 100% of a

senior's budget is not food. seniors consume a lot of other goods and services besides that. it is not really fair to look at one particular component, even if that might be the most salient component because people are noticing the changing in prices. host: and the final point, the impact and the issue of bond holders. if the u.s. does not raise the debt ceiling, where does the money come from? who does the u.s. pay first? is it the bondholders? guest: that's very unclear. treasury said earlier this week, they were not sure they had the authority to determine how to prioritize payments. it is not clear if they will start paying bills as they become due. whether they are the most important. it's not clear. i think that forinancial

reasons, it is important to not prior dies paying back bond holders, why should we be paying bondholders and not our troops in afghanistan or our impoverished seniors or whatever? it sounds like there is sort of a moral val implicit in making those choices. i think probably what economists are worried about, in any case, is that if you don't pay back the bond holders immediately, it has all these ripple effects in that it freezes up markets across the cannot trip, it freezes up markets across the world. people start dumping bonds and other assets that they have, and it could pnge us back into resession. so even if popularly, morally it sounds like, well,hy should we pay back investors before we pay

back poor people, the longe term quenses of prioritizing basically noninterest paints over -- non-interest payments over interest pamentse payments could be devastating. host: good morning. caller: good morning. i'll be real quick. i'm questioning section 4 of the 14th amendment in regard to the validity of public debt. th debt that we have is real. it was created by the congress. it was passed by the congress. it says it has to be paid off. so all these politicians, representatives and so forth, they are supposed to be doing this, and if they are not doing this, or if itoes into default, scaring the hell out of everybody, isn't it mall feasans of office where they are not

upholding the constitution which they swore to uphold? host: "the validity of the public debt authorized by law including payment of debt -- por payment of pensions shall not be questioned." guest: i am not a constitutional scholar, so i cannot comment with any authority on any of those issues. i can tell you what the president has said. the presidentas basically said that he has consulted can his in-house attorney and they are not persuaded by the 14th amendment argument, and that obama has the authority to just say forget it, i don't need permission. congre has authorized these payments. why are they now saying we can't pay them? that said, i don't have

information to know whether or not obama really means that. to some extent, it could mean that he would look like he was not negotiating in good faith if he really had this 14th amendment card he could pull out of his back pocket and say, you know what? i don't like you -- like what you are doing and'm going to raise it on my own. who knows. a lot of constitutional attorneys have weighed in and said obama has this power. oers have said no, obamaoes t have this power. ultimately whether he decides to use is it, that is anybody's guess. >> democrat's line. good morning. >> thank you for taking my call. obviously most people here watching your program know that the debt ceiling needs to be raised. this is just my thoughts on it. it is just two tier. one ihow to take care of the

spending cuts and how to crease revenue. if we over a 16-year period, say that's the time period, and then we had four quarters in each period making four years per each quarter, we could do a 10% spending cut just through technology and fast streaming items in the government. l we will have 40% tax cuts. i think we can deal with that. the second thing is a revenue string, where the republicans wouldn't argue. any corporation, eble, same thing, over the course of 15 years, break it down into quarters, there is a 10% tax on the employees of the corporations that have the employees overseas.

it would increase then the following quarter or the next four years to 20%, then et following -- then the following 30%, then the following 40%. if that wouldn't get jobs back into this country. none of the rich would be taxed. we would have a revenue strain. i want to know what you think about my proposal. host: thank you. guest: i think this are a lot of proposals out there. some of them really smart, some of them less smamplet -- smart. it is hard to know what all these effects will have. in the examplof the caller's suggestion of tacking corporations based on their employees overseas, i think the concern would be, maybe we'll just drive these companies out

of the united states to begin with. if they are already seeing cause to invest overseas and they don't want incur additional costs for those investments because they think they are profitable, maybe they will leave the united states to begin with. everything has drawbacks. most of the economists i have talked to about these issues have basically said, there are a lot of essentially savings we can get by making the tax code more efficient because there are so many loopholes, because the internal revenue code and the statutes relating to taxation are so unbeliefably complicated and long. these are dozens of thousands of pagesline long. is are dozens of pages that can be mined simply by smoothing that out, by making things more uniform, actually lowering statchtri tax rates but

broadening the base. effectively brink bringing in more taxes because companies are not able to sort of mine the tax code for whatever fortuitous loopholes there might be in them. there are a lot of things the government can do. there are a lot of interesting proposals on the table. my few -- view is that our budget problems, our deficit problems, are not the fault of a deficit in ingenuity, it is a deficit of political will. every year they put out a book that says all theotential revenue spendings congress could take up to change the money we're taking in and putting out each year and exactly, or at least an estimate of dactly how effective each of those would

be, whether it is raising a tax rate or getting rid of the department of education, or other sort of bombastic ideas like that. they do put out this massive guide saying here are the different options available to you, so everybody knows what the general options are. potentially, this gentleman's suggestion for taxing workers overseas may be part of the c.b.o.'s annual project. i don't know. but the problem is, they are all so very controversial. and so painful for the most part inhehort run, politicians are unable to endorse any of them. >> how are y today, sir? >> please go ahead. we're short on time. >> ok. i want to say that i think there is a problem with the debt

negotiation. that is that the congress is not going to do any revenues because they don't want to sabotage the big businesses that are helping th stay in political office. it is easier for them to discuss entitlements because that deals with the middle income and the po. they are not going to cut the rates of people that help them stay? office. >> thanks for the call, leo. do you want to respond? guest: sure. whoever has influence in washington has always been a concern. whether it is because they are

donating money or spending money on lobbying or whatever. that said, in terms of the entitlement issue, i would say congress is paying relatively little attention to those concerns, even though health care entitlements are really the biggest concern i would say for our deficit going forward. that's because even though they do not have nbers behind them, they do vote. older people voted much more