and it must be preserved in our me. i call upon my colleagues to do just that, to preserve this right in our time. i call upon my colleagues to oppose this legislation, to uphold the val of fairness for our work force and to get to work putting american people back to work by bringing president obama's bill, the american jobs act, to committee and to the floor, to, again, again, give people hope and confidence and the dignity of a job. with that i yield back the balance of my time. the speaker pro tempore: the minority leader yields back. the gentleman from new jersey reserves. the gentleman from new jersey has 8 3/4 minutes remaining. the gentleman from minnesota has nine minutes remaining. the gentleman from minnesota. mr. kline: thank you, mr. speaker. i yield 2 1/2 minutes to a member of the committee, the

gentleman from florida, mr. ross. the speaker pro tempore: the gentleman from florida is recognized for 2 1/2 minutes. ros-lehtinen thank you, mr. speaker. -- mr. ross on behalf of those -- mr. ross: on behalf of those who give their hand to a neighbor in need, they have had enough. on behalf of boeing, whose innovation, entrepreneurship and technology ensures that more moms and dads will not have to witness a flag-draped coffin from a land far away, they too have had enough. the future that one gave to his children would be a future of freedom, for those, too, have had enough. mr. speaker, there is no defending the overzealous guys at the national labor relations board. it is a regulatory board gone amuck. in fact, the irony of this is

if the -- boeing wants to escape their rea, their jurisdiction. the only way to do is to move overseas which is contrary to what we want here. nowhere in america should your government tell you what you can or cannot do just because they believe what your intentions are. mr. speaker, this administration needs to stop reading minds and start reading the constitution. the boeing decision is a vivid reminder that absolute power corrupts absolutely and we could dismiss it if it were only an isolated case but it is not. americans have endured an administtion that fines american citizens for not buying a product. raids with guns on ameran guitar manufacturers. and orders federal employees mott to speak to members of congress. mr. speaker, free enterprise is not the problem. it is the solution. and, mr. speaker, contrary to

what the other side may say, labor is not the enemy. labor is the backbone of the american economy, but both should be aware of a government that can tell you what to do just because of what you think. and both should be aware of a government that can tell you what to buy just because they think that's what you need. i pray that this legislation is the cornerstone of a renewed free market. the rein of the regulator is -- the reign of the regulator is over. there are still patriots in this house. mr. speaker, i yield back. the speaker pro tempore: the gentleman yields back. the gentleman from minnesota reserves. the gentleman from new jersey. >> i'm sure -- mr. andrews: we think patriotism includes the right to freely and collectively bargain and we stand for it. i'm pleased at this time to yield to a widely respected advocate of the people of the state of washington, the gentleman from washington, mr. inslee, for one minute. the speaker pro tempore: the geleman from washington is

recognized for one minute. mr. inslee: permission to revise and extend. the speaker pro tempore: without objection. mr. inslee: mr. speaker, i'm very concerned about this outsourcing bill and it's tenor. if you want to change what's legal or illegal, then this body should address those issues. but this bill won't change what's legal or illegal. it will simply stop current law from being enforced. the nlrb is a law enforcement body. it follows an independented a jute can tif process -- independent adjucative process. now, i have taken a position on the case that brings us here today, but i don't intend to here. but i can say this firmly. elected officials should not be politicizing an ongoing adjutcative process. we should not interfere with

this or any other case. i won't support a bill that doesn't change the underlying w but those charging those enforcing it with the ability to do so. don't allow one controversy to solely uncle sam's ability for justice in this country. the speaker pro tempore: the gentleman's time has expired. the gentleman from new jersey reserves. the gentleman from minnesota. mr. kline: thank you, mr. speaker. at this time i yield 1 1/2 minutes to the gentleman from arkansas, mr. crawford. the eaker pro tempore: the gentleman from arkansas is recognized for 1 1/2 minutes. mr. crawford: thank you, mr. speaker. i thank the gentleman for yielding and i thank him for his leadership on this issue. mr. speaker, i rise today in strong support of this bill. i will start, mr. speaker, by making a comparison and contrasting the events recently in the great state of south carolina with that of my home state of arkansas. in arkansas aerospace is one of our top exports. we he more jobs affiliated with the aerospace industry than any other sector of our manufacturing economy.

thousands of arkansas families enjoy high-paying jobs. communities, schools and small businesses are all positively impacted by the aviation industry's choice to locate in arkansas. but, mr. speaker, if the nlrb had had their way, none of this would have ever been a reality in my home state of arkansas. the recent action by the nlrb is the case of massive overreach, overreach that tells a business when and where they should locate their business and who to employ. arkansas is a right work state. right to work states allow the private sector to create jobs and prosper. and, again, not a single job was lost as a result of boeing's decision to open another manufacturing plant in the state of south carolina. if the nlrb chose to attack the private sector once again, and that's just indicative of this admistration's economic agenda that focuses on growing government instead of creating jobs and growing our economy. in closing, mr. speaker, the nlrb decision sets a dangerous

precedent. this bill is the first step to limit the government overreach that threatens arkansas companies and regulators. i yield back. the speaker pro tempore: the gentleman from new jersey reserves. the gentleman from new jersey. mr. andrews: mr. speaker, i'm pleased to yield at thisime a person that understands the complications of -- implications of economic growth and collective bargaining, the gentleman from california, mr. berman, for one minute. the speaker pro tempore: the gentleman from california is recognized for one minute. mr. berman: thank you very much, mr. speaker, and, mr. andrews. i'd like the proponents of this legislation to look at this fact situation. let's assume there was compelling evidence that an employer decided to move a production line from one part of the country to another part of the country because he wanted to find a work force that was white and not african-american or not latino or there was more like -- or much more likely not to have women applying to work on that

manufacturing line than where he was located. would anyone here suggest there should be a bill that notwithstanding title 7 of the civil rights act should let that employer with a discriminatory motive and a racistntention move his plt for that reason? this is not a bill about what an employer can or cannot do. this is a bill about motivation. the civil rights act 1964, the right of an employer to organize, form unions, bargain collectively and to berate employers from retaliating 75 years ago. if you really want the job creators to do whateveyou want, as you like to say, get rid of the worker's right to choose, remove the protections against disgrim nation against unions but don't prete you're trying to do something for reasons that disguise the motivation for the reason. the speaker pro tempore: the

gentleman from new jersey reserves. the gentleman from minnesota. mr. kline: thank you, mr. speaker. i need to inquire again about the time remaining. the speaker pro tempore: the gentleman from new jersey controls 6 1/2 minutes remaining, and the gentleman from minnesota five. mr. kline: ok. we're expecting another speaker but not sure where is he, so at this time i'll reserve and let the gentleman from new jersey -- the speaker pro tempore: the gentleman reserves. the gentleman from new jersey. mr. andrews: i'm very pleased to yield to a passionate voice, the gentleman from maryland, mr. cummings, for two minutes. the speaker pro tempore: the gentleman from maryland is recognized for two minutes. mr. cummings: i thank the gentleman for yielding. i stand in strong opposition, mr. speaker, to this bill. the national labor relations board exists to ensure if companies do not discriminate against workers who exercises their rights under federal law. to -- the protection prevents the illegal offshong of american jobs. in 2000, for example, a california jewelry manufacturing company took aggressive action to discourage

its employees from organizing a right that iprotected under federal law. when the company faileit announced plans to relocate its operations to mexico. the board was able to prevent this from happening using the authority this bill would eliminate -- the board prevented the company from moving american jobs to mexico. h.r. 2587, if inen acted, companies will be able to ship jobs overseas in retaliation against american workers exercising their rights. unfortunately h.r. 2587 is part of a larger campaign to attack workers' rights. that campaign includes an investigation by the oversight committee into the board's ongoing prosecution of the boeing company for allegations of illegal retaliation against workerin washington state for exercising their rights under the law. a "washington post" editorial warned that the committee should not sabotage this

ongoing legal process, and 34 law professors urged the committee to let the board do its job without interference. instead, the committee issued a subpoena, threatened contempt and even intimidated nlrb attorneys trying to do their job. and h.r. 2587 -- if h.r. 2587 becomes law, even if boeing is found to violate workers' rights, it will -- nobody interested in protecting american jobs should support this bill. i urge my colleagues strongly to vote against 2587, and i yield back. the speaker pro tempore: the geleman's time has expired. the gentleman from new jersey reserves. the gentleman from minsota. mr. kline: i'll continue to reserve. the speaker pro tempore: the gentleman reserves. the gentleman from new jersey. mr. andrews: if i could inquire how much time each side has available? the speaker pro tempore: the gentleman from new jersey has 4 1/2 minutes remaining. the gentleman from minnesota five. mr. andrews: mr. speaker, i'm pleased to yield to a the

gentlelady who favors job creation versus outsourcing, the gentlelady from hawaii, ms. hanabusa, one minute. the speaker pro tempore: the gentlelady from hawaii is recognized for one minute. ms. hanabusa: i thank the gentleman for yielding. h.r. 2587 should really be called the death of the workers' rights act. this amends the national labor relations act of 1935. i remember why that act was created. we were in the great depression. so why was it then passed? because workers could join unions even back then but they could be fired for joining the union and for striking. does that sound familiar? this caused great labor unrest in this country, a country that was struggling to get back on its feet. remember, we are a country of workers, workers made this country and workers will continue to make us the great country that we are. what the nlrb said is workers could act in a concerted manner for mutual aid and protection. this act basically eliminates the remedies if that act, if

that right is violated. now, remember the nlrb must prove that these protected rights were violated. they just simply can't go in and act willy-nilly. they have to prove these allegations. there will be no rights for these workers if this bill is allowed to pass. thank you. the speaker pro tempore: the gentlelady's time has expired. the gentleman from new jersey reserves. the gentleman from minnesota. mr. kline: now, mr. speaker, it is apparent that we have two speakers, the gentleman from virginia and one from texas who apparently are not going to be able to get here on time so i will be closing when mr. andrews has allowed his speakers to speak so i'll reserve. the speaker pro tempore: the gentleman from minnesota reserves. the gentleman from new jersey. mr. andrews: mr. speaker, it's my honor to yield to a the gentlelady who has been a fierce advocate for jobs for new york city but more importantly for all of america, the gentlelady from new york, ms. clarke, for one minute. the speaker pro tempore: the gentlelady from new york is recognized for one minute.

ms. clarke: thank you, mr. speaker, and i tnk the gentleman from new jersey for yielding the time. today i rise in opposition to h.r. 2587. this bill, which was rammed through committee without so much as a legislative hearing, does not create or protect jobs in spite of its misleading title. what this bill does is give american workers an unfair choice -- your rights or your job. h.r. 2587 creates an open season for c.e.o.'s to punish works for exercising their rights. this bill allows companies to relocate or eliminate jobs in retaliation against employees who exercise their right to organize, strike or engage in collective bargaining activity. is republican sponsored bill accomplishes this by eliminating the national labor relations board's power to order -- be reinstated. in practical terms this would mean if a c.e.o. would want to punish workers for unionizing or striking, the employer could

relocate and thereby eliminating the worker without fear of being held accountable. i ask colleagues to vote -- to oppose this bill and vote it down today. thank you very much, mr. speaker. the speaker pro tempore: the gentlelady's time has expired. the gentleman from new jersey has 2 1/2 minutes remaining. the gentleman from minnesota continues to reser. mr. kline: i reserve. the speaker pro tempore: the gentleman from new jersey. mrandrews: i believe you just said we have 2 1/2 minutes left on our side? the speaker pro tempore: that is correct. andrew andrews our plan would be -- mr. andrews: our plan would be we would rest and the chairman would proceed. i ask unanimous consent to enter in the record the statement from the law professors referenced earlier. the speaker pro tempore: without objection. mr. andrews: thank you, mr. speaker. i yield myself the balance of our time. the speaker pro tempore: the gentleman is recognized. mr. andrews: mr. speaker, one listens to the back and forth on this debate, there's a lot of different points and i'm sure some confusion that flows from that. but the debate's really pretty

simple and it's about one question. if a group of people working at a business in this country choose to try to organize a union and bargain collectively for their wages and their working conditio and the ployer is discomforted by that, the employer comes in and says, i don't like the fact that you're trying to form a union and bargain collectively and insert your rights. so i'm moving. i'm out of here. should that be legal or not? we believe emphatically it should be illegal. to say to american workers that they dare to speak up for themselves, they dare to assert their rights, they dare to bargain collectively, therefore their jobs could be moved overseas is wrong. it is illegal today to do that. now in the boeing case a judge will decide whether or not

boeing did that. if the judge decides that boeing didn't, the case is over. if the judge decides that boeing did, then they'll be remedied. but this is what this case is really about. this issue is really about. this bill is really about. how many of our constituents are sick and tired of making a call about their credit card or some other account and realize that the person in the call center at the other end is in asia and has no idea what they're talking about? if you want more outsourcing, if you think the problem in america is that too many jobs are being created here and we do more for our chris around the world, then this is your bill. but if you've had it with outsourcing, if you want jobs to be created in america, what we ought to do is defeat this bill and rapidly bring to the floor the jobs plan the president of the united states stood in ts chamber last week and proposed. let's stop creating jobs around

the world and start creating jobs around america. let's stand up for collective bargaining and let's defeat this bill. i yield back the balance of my time. the speaker pro tempore: the gentleman from new jersey yields back the balance of his time. the gentleman from minnesota is recognized for five minutes. mr. kline: thank you, mr. speaker. i yield myself the remainder of our time. this is always an interesting debate on the floor. this has been another example. we have some fundamental differences in how we view the oblems and more importantly the solutions facing our country. both sides recognize that we have high unemployment, historally high, 30 months of unemployment over 8%, 14 million americans out of work. both sides want the economy to grow and people to get back to work. but one side believes that more regulations by the last account some 219 in the pipeline coming

from this administration, more regulations, more spending money that we don't have, more government interference will somehow get americans back to work. and the other side, mr. speaker, believes that employers, the private sector, small businesses, entrepreneurs, middle sized businesses and large businees create jobs. put americans to work. now, the national labor relations act haas, as has been discussed, has been around for a long time. neher side is suggesting that americans don't have the right to organize and to bargain. i beg to differ wi my colleagues on the other side. that's not what this is about. but what we have here is a case whe the act creates a board which by its nature changes back

and forth depending upon who's in the white house so it has more demrats one time and more republicans another and so i would argue and have argued that for some time the board in enforcing the act is causing some whipsaw of the economy. i concede that. but right now with this board i would argue that as one of my colleagues on thother side said, that there was an agenda over here, i agree, there is an agenda. the board has an agenda. there is a rainfall, a torrent of rulings coming out of this board that strike at theeart of american job creators to eate jobs. one of those, one of those rulings, and i agree that it's an interim ruling, it's a ruling by the actinging general

council, one guy -- acting general counsel, one guy, looks the actions a major company has taken to create more jobs, to spend $1 billion, build a plant in south carolina, hire 1,000 people, one guy says, no, i don't think so, i think, says he, this is a transfer of work and it's in retaliation. i think that. and so it's been pointed out this is an ongoing process and one of my colleagues in the committee said, well, nothing bad has really happened here. let's let this play out. no, no, i beg to differ. go to charleston, south carolina, talk to those 1,000 employees about their future and the uncertainty that this brings. talk to the companies who are looking at creating jobs, starting businesses in this country and are looking at this ruling, at the threat this poses and reconsidering their actions. so, mr. speaker, i believe we have a choice, we can stand, we

can sit, we can watch or we can step up and try to help americans get back to work in america by stopping this action and the threat that it poses to companies across america. so i encourage my colleagues to vote for this >> the house later voted 238- 136, mostly along party lines, to prevent any employer from shutting down plants even if they violate labor laws. the bill is not expected to get a vote in the democratic- controlled sat aenate. house speaker john boehner today called on washington to liberate the economy from deficit spending and outlined the house republicans jobs plan. that is next on c-span.

then imf managing director kristine lagarde talks about the global economy. then at the head of the sec testified before congress about sec oversight and funding. >> the c-span networks. we provide coverage of politics, corporate affairs, and american history. this month, look for congress to consider federal spending, including funding for natural disasters. keep tabs on the deficit committee. and follow the presidential candidates as they continue to campaign across the country. it is all available on television, radio, on line, and social media sites. share all of our programs any time with the c-span video library. and we are on the road with our local content of vehicles, bringing resources to local communities. it is washington your way. the c-span networks, created by cable, provided as a public-

service. >> next, house speaker john boehner lays out the alternative to president obama's jobs plan. representative john boehner spoke at the economic club of washington, d.c. he is introduced by the organization's president at this 50-man it event. -- 50- minute event. >> can i have your attention, please? we're very honored today to have the 61st speaker of the house of representatives as our special guest, john boehner. [applause] as speaker of the house, he is second in line to succeed the president and is therefore one of the most important jobs and our government, but it got there

by humble roots. he grew up in cincinnati, and has 11 siblings, 12 children and the family, two-bedroom home, one bathroom. yes. i[laughter] he was a football player in high school and played for jerry faust, who later coached notre dame. he would do xavier university and worked his way through the school. after doing so, he went into the business world, i joined a small packaging company, and eventually rose to be caught -- president of the company. he got involved in civic affairs, was elected to the board of trustees in baltimore county, ohio, and was later elected 1985 to the house and ohio. in 1990, he was elected to the house of representatives in the u.s., and has now been reelected 10 consecutive terms. has not been recollected 10 consecutive terms street as a member o

he has had many different positions, serving as the house conference, the house education committee, has served as minority leader, and majority leader, and now is the 61st speaker of the house. ajority leader. we're very honored have as our guest today john boehner. thank you. [applause] >> david, thank you. and all their honored guests here today. thank you for the opportunity towe all know the economy is stalled, and it's been stalled. and it's not because the american people have lost their way. it's because their government has let them down. last week the president put forth a new set of proposals. the house will consider them, as the american people expect.

some of the president's proposals offer opportunities for common ground. but let's be honest with ourselves. the president's proposals are a poor substitute for the pro- growth policies that are needed to remove barriers to job creation in america...the policies that are needed to put america back to work. if we want job growth, we need to recognize who really creates jobs in america. it's the private-sector. this building is named in memory of president ronald reagan, who recognized that private sector job creators are the heart of our economy. th always have been. that was the america i was raised in. my father and grandfather were small businessmen. they ran a tavern in cincinnati that my grdpa started in the 1930's. i worked in that tavern growing up.

a lot of things you learned working a bar. i will tell you more about that later. i know what it takes to meet a create jobs in the private sector. there's a fundamental misunderstanding of the economy that leads to a lot of bad decisions in washington, d.c. the reality is that employers will hire if they have the right incentives, buthe incentives have to outweigh the costs. businesses are not going to hire someone for a $4000 tax credit if government mandates impose long-term costs on them that significantly exceed the

temporary credit. in recent years, such mandates have been overwhelming. private-sector job creators of all sizes have been pummeled by decisions made in washington. they've been slammed by uncertainty from the constant control spending, and unnecessary regulation from a government that is always micromanaging, meddling, and manipulating. they've been hurt by a government that offers short- term gimmicks rather than fundamental reforms that will encourage long-term economic growth. they've been hampered by a government that offers confusion to entrepreneurs and job creators when there needs to be clarity. they've been undercut by a government that favors crony capitalism and businesses deemed 'too big to fail,' over the small banks and small businesses that make our economy go. they've been antagonized by a

government that favors bureaucrats over market-based solutions. they've been demoralized by a government that causes despair when we need it to provide reassurance and inspire confidence. my worry is that even after all of this, much of the talk in washington right now is basically about more of the same. more initiatives that seem to have more to do with the next election than the next generation...initiatives that seem to be more about micromanaging economic decisions than liberating them. i think the american people are worried about this too. i can tell you the american people -- private-sector job creators in particular --- are rattled by what they've seen out of this to over the last few years. my worry is that for american job creators, all the uncertainty is turning to fear that this toxic environment for

job creation is a permanent state. job creators in america are essentially on strike. the problem is not confusion about the policies...the problem is the policies. the anger many americans have been feeling in recent years is beginning to turn into fear...fear of our future. that bothers me, and it should bother all of us. america is a land of opportunity. always has been. our economy has always been built on opportunity...on entrepreneurs, innovators and risk-takers willing to take a chance -- because they're confident if they work hard, they can succeed. over the past few years, government has made people less confident -- not more confident -- that they can succeed. more and more americans are realizing this, and they're speaking out about it. i've spent the past four to five weeks traveling through my district and across this

country, listening to the people outside of washington who are the key to making our economy work. my message to washington today on their behalf: this n't that hard. we need to liberate our economy from the shackles of washington. let our economy grow! we need to trust in the goo judgment of the american people. the instinct in government, always, is to get bigger, more intrusive, more meddlesome. and that instinct is directly atdds with the things that make the american economy move. job creation in america is facing what i would call a triple threat from government. the first pect of this threat is excessive regulation. during the joint session of congress last week, i hosted about a dozen job creators from the private sector in as my guests in the house gallery -- all of them with a common story: they're trying to help

create more american jobs, but the government is getting in their way. we all know some regulations are needed. we have a responsibility under the constitution to regulate interstate commerce. there are reasonable regulations that protect our children and help keep our environment clean. and th there are excessive regulations that unnecessarily increase costs for consumers and small businesses. those excessive regulations are making it harder for our economy to create jobs. over the last couple of months we've seen two vivid illustrations. last month federal agents raided the gibson guitar factories in tennessee. gibson is a well-respected american company that employs thousands of people. the company's costs as a result of the raid? an estimated $2 million to $3 million. why? because gibson bought wood overseas to make guitars in america.

the other example is in south carolina, where the boeing company recently completed a plant that will create thousands of new full-time jobs for american workers -- only to be sued by a federal agency that wants to shut it down. let make sure i have this straight: undecurrent rules, american companies are free to create jobs in china, but they aren't free to create them in south carolina? at this moment, the executive branch has 219 new rules in the works that will cost our economy at least $100 million. that means uerhe current washington agenda, our economy is poised to take a hit from the government of at least $100 million -- 219 times. i think it's reasonable to ask: is it wise to be doing all of this right now? the current regulatory burden coming out of washington far

exceeds the federal government's constitutional mandate. and it's hurting job creation in our country at a time when we can't afford it. government's threat to job creation has two other components. one is the current tax code, which is discourages investment and rewards special interests. it strikes me as odd that at a time when it's clear that the tax code needs to be fundamentally reformed, the first instinct out of washington is to come up with a host of new tax credits that make the tax code more complex. the final aspect of the threat is the spending binge in washington. it has created a massive debt crisis that poses a direct threat to our country's ability to cree jobs and prosper. there are some people in this town who still deny this...who still deny that the debt is a threat to jobs. but if you talk to anybody outside of washington who has to meet a payroll, they'll tell

you that out-of-controlpending in washington is one of the things that concerns them the most about our future. in new york city back in may, i warned that if we don't take action soon, the markets will do it for us. last month, the markets took action, in the forof a downgrade and the possibility of future downgrades that caused the markets to tumble. it's going to keep happening, until we act. the responsibility for fixing this toxic environment for job creation is a bipartisan one. the situation was created by washington's inability to let our economwork. it was created by government intrusion and micromanagement. we have a responsibility to work together in the coming months to remove these barriers and liberate our economy. this is what the american people are demanding of us. everything we do in the weeks

and months to come needs to start with asking: are we addressing these problems? or are we making them worse? the budget control act of 2011, signed into law last month, establishes a joint select committee of congress for the purpose of identifying $1.5 trillion in deficit reduction. many have expressed doubts about the joint committee's chances of success. the skepticism is understandable. a joint select committee is, after all, no substitute for a president who continues to control most of the arms of government. but i think the joint select committee has auge opportunity. it has a chance to lay the foundation for economic growth, by dealing with some of the obstacles that are standing in the way. the joint committee's mission is deficit reduction, and that has everything to do with jobs.

as the co-chairman of the joint committee, jeb hensarling, said last week at the committee's first meeting: 'our debt threatens our jobs...speak to any fortune 500 ceo or small business person. it is clear that our debt hangs like the sword of damocles over their hiring decisions...it should be obvious that deficit reduction and a path to fiscal sustainability are themselves a jobs program.' the joint select committee can tackle tax reform, and it should. it's probably not realistic to think the joint committee could rewrite the tax code by november 23. but it can certainly lay the groundwork by then for tax reform in the future that will enhance the environment for economic growth. the committee can develop principles for broad-based tax reform that will lower rates for individuals and corporations while closing deductions, credits, and special

carveouts in our tax code. yes, tax reform should include closing loopholes. not for purposes of bringing more money to the government. but beuse it's the right thing to do. and if we're going to tackle tax reform, we should do it all. making short-term fixes in exchange for long-term flawed policy is not tax reform. tax reform should deal with the whole tax code, both the personal side and the corporate side, and it should result in a code that is simpler and fairer to everyone. tax increases, however, are not a viable option for the joint committee. it's a very simple equation. tax increases destroy jobs. and the joint committee is a jobs committee. its mission is to reduce the deficit that is threatening job creation in our country. we should not make its task harder by asking it to do things that will make the

environment for job creationn america even worse. i hope the president will meet this standard when he puts forth his recommendations for the joint committee next week. when it comes to producing savings to reach its $1.5 trillion deficit reduction target, the joint select committee has only one option: spending cuts and entitlement reform. the joint committee can achieve real deficit reduction by reforming entitlements and taking real action to preserve and strengthen social security, medicare, and medicaid. there is a myth that spending reforms aren't 'real' unless they happen this year. that myth is built on a healthy skepticism that spending cuts made today are going to be implemented tomorrow. but it is a myth nonetheless, and we need to make sure it doesn't stop us from doing what needs to be done. most of the entitlement reforms in the house gop budget are phased in over time.

and that's the way the joint committee should do them as well. modest changes in spending programs today can have large effects tomorrow. gimmicks, however, are unacceptable. as i told the president's economic team during the debt limit negotiations: we're just not doing that anymore. deficit reduction shouldn't just be about quantity; it should be about quality. a billion dollars in imaginary savings from war spending that was never going to happen is not the same as a billion dollars in savings that strengthens our entitlement programs. there are plenty of skeptics about the joint select committee's ability to accomplish its mission, and that's to be expected. there are always skeptics. there were skeptics last spring when i said in new york that we should have spending cuts

larger than any debt limit hike we gave the president. but it happened. and this can happen, too. the joint committee can succeed, and it must succeed. and with success, it can help to lay the foundation for economic growth and job creation in america. if the joint committee does its work correctly -- addressing the structural problems in our entitlement programs that have put us in danger of more job- destroying downgrades, and setting the stage for fundamental tax reform that will help to support private investment -- it wilhave begun to remove some of the biggest barrierto job creation that exist in our country today. as the joint committee does its work, there is a lot ofther work in washington that also needs to be done. as i mentioned earlier, there are 219 major regulatory actions in the works by the federal bureaucracy right now. we know seven of them will each have an economic impact of $1

billioor more. the biggest is an epa rule that could have an impact of as much as $90 billion. the president acted wisely by halting the implementation of this rule. i would urge the white house to build on it by disclosing to the american people the cost estimas for the remaining 212 'economically significant' rules it has planned. i would also urge the president to call a cabinet meeting,nd tell every member of his cabinet: 'until further notice, i don't want anything that gets in the way of private-sector job creation. and i want you to report back to me in a month with how you've done.' the members of the president's cabinet are not doing their jobs if they aren't constantly focused on removing impediments to job growth.

if they're not focused on that, they should be fired. in the house, majority leader cantor has put together a fall legislative schedule that reflects the concerns we've heard from job creators across america about unnecessary federal relations that are hampering job growth. earlier i mentioned the situation in south carolina with boeing. today the house is working on a measure that will prevent the federal government from meddling in that situation, and similar ones. the senate needs to follow the house in passing this bill, and we need to send it to the president's desk. the nrlb bill is one of a whole series of meures we're working on this fall to reduce the burden of excessive regulation on job creators. we'll pass the reins act, which would require congressional review for any new regulation that has a major impact on the economy. house committees have identified dozens of job-

crushing regulations that are keeping our economy from producing jobs. we'll repeal the '3 percent withholding rule,' which serves as an effective tax increase on those who do business with the government. we'll stop excessive federal regulations that inhibit jobs in areas as varied as cement and farm dust. we'll work on other reforms such as removing barriers to increased domestic energy production and removing barriers to trade, many of which are in the house gop jobs agenda at jobs.gop.gov. the united states senate needs to act, too. the senate cannot continue to sit idle on jobs and the budget. the house has passed an array

of bills already this year to remove barriers to job creation, and those bills are piling up in the senate. the senate hasn't produced a budget, either. it must. there are a few other things i want to mention that we can do in the weeks and months ahead to free our economy and bolster confidence among our job creators. one is very simple. both parties can boost confidence and reassure job creators by being clear: there will be no shutdown of the federal government, and we aren't willing to default on our debt. the united states will meet its obligations tots citizens and to its creditors. in congress, i've been clear about these goals since the day i was elected speaker. and we've been true to ourord. another thing we can do is in the area of transportation and infrastructure. i'm not opposed to responsible spending to repair and improve infrastructure. but if we want to do it in a way that truly supports long- term econoc growth and job creation, let's li the next

highway bill to an expansion of american-made energy production. removing some of the unnecessary government barriers that prevent our country from utilizing its vt energy resources could create millions of new jobs. there's a natural link between the two: as we develop new sources of american energy, we're going to need modern infrastructure to bring that energy to the market. we can also boost confidence and reassure job creators by sending a banced budget amendment to the states. one of the most important things we did in the budget control act last month -- in addition to requiring a vote in both houses of congress this fall on a balanced budget amendment -- was establish caps on future spending. these caps are designed to hold back the growth of government while our economy expands and creates jobs. to ensure those spending caps are set in stone, we should ratify a balanced budget

amendment. if the president truly wants to make a difference and change the dynamic in washington, he should announce his support for a balanced budget amendment and call on the congress to send one to the states without delay. and lastly, if we want to create a better environment for job creation, politicians of all stripes can leave the 'my way or the highway' philosophy behind. the all-or-nothing approach is not a workable mindset if we're serious about getting our economy on its feet again. our economy is facing a broad based, systemic crisis. as such, it will require everyone coming to the tab with their best ideas first and leaving politics at the door, with the courage to listen to each other's critiques and questions. it means ending the name- calling, the yelling, and the

questioning of others' motives. leadership is about ending that nonsense, buckling down, and getting to work. thomas edison once said that opportunity is missed by most people because it is dressed in overalls and looks like work. we have an opportunity in front of us. the trick is to recognize it, and believe in it, and act on it. we know the challenges we face as a nation, and we have a chance to confront them. if we put election-year politics aside this year and focus on our work, we'll leave our country in a better place. getting it de will require a serious effort by both parties. there are some in both parties who would rather do nothing. they'd prefer to sit this one out, waiting to be dealt a better hand down the road, after the next election.

that's not what i was elected to do. this is the hand we've been dealt. instead of ducking from the challenge, we should rise to the occasion, and liberate our economy from the shales government has placed on it. i'm ready. and for the sake of our country, and our economy -- i hope all of us are ready. thank you for listening. i look forward to your questions. thank you very much. thank you. thank you. >> thank you very much. when you were negotiating on the debt limit extension, they you ever have doubt that an agreement would be reached, or

did you fear we with the fault? >> no, i was the one with a glass half full. if you were not an optimist like me, you would not be here. i believed we would be able to come to some kind of an agreement, and i made it clear all year that not meeting our debt obligations was unacceptable. >> the white house and others have said there was an agreement at one point, a grd bargain, between you and the present. was there ever an agreement, or not really? be not know, unfortunately not. there was a lot of discussion about what could happen, what may happen. the president wanted more revenue. i told president i would not put more revenue on the table. i thought we could get it from a flatter, more fair tax code, and a more efficient tax code. i thought there was about $880 worth of additional revenue that

would be available, bu i told the president i would only put it on the table if he were willing to make fundamental changes in our and, programs. unfortunately, we could never get the yes on those changes to the entitlement programs, and then the president decided he wanted more revenue, $400 billion more, which was more than any tax increases. it was unfortunate we were unable to agree because it would have averted a lot of what effect did happen. >> would you be in favor of resuming negotiations with the president to reach a grand bargain, or d you think the committee is in charge now? >> i think the committee is charged with doing that. i frankly think it is time to put up the dump the back together again. >> when you played golf with the president, it did not result with the bonding?

[laughter] >> lesson, the president and i have a good relationship. we come from two different worlds. i come from -- came to this job as a small business person, and i still look at myself as that same person. the president comes from a different ideology. and while we have a good relationship, sometimes the conversations that we have would be like wo groups of people from two different planets who barely understand each other. i do not mean it in a derogatory way, but there is a reason why you have two major political parties with major digreements. >> you mentioned earlier that you grew up in modt

circumstances. what is it like to have a 11 brothers and sisters? >> chaos. same thing, every day. [laughter] i tell people, one of the lessons i learned growing up were the lessons i needed to do my job today -- to get along with each other, to get things done as a family. i grew up, i played every team support. yes, my grandfather, my dad owned a bar and i grew up there, too. i'm not floors, did dishes, waited tables, tended bar, and you have to deal with every jackass' that walks in the door. [laughter] trust me, i needed all the skills i learned growing up to do my job. , i understand you still mow your own lawn in ohio. ishat true?

>> it is true, but i have to a knowledge that i am not home all the me. so on monday, labor day, i cut the grass, and then i promptly sharpen the blade of the war and made sure it had ample oil in it because when i am not there my wife cuts the grass. [laughter] >> let me ask you about sequestration. under the agreement reached with the president, there will be sequestration if an agreement is not reached between -- among the committee. do you think there is a real chance of sequestration? >> the idea of building this fire wall behind the work of the joint committee is to make it so ugly that no one wants to go there. it is ugly. i am not agree -- i am a big believer in the committee process. in order to get something out how accomplished, by the senate

leaders especially, who wanted this joint committ, and it is established -- it will work, and i think it will work because the leaders look at each other in the eye and made a committment to make it work. >> one way of solving problems is you can pick up revenue by eliminating the bush tax cuts, which expire in 2012. would regard that as a tax increase, or your caucus regarded as a tax increase or you said it is not on the table? >> the current tax policy of the united states and policy would generate almost $35 trillion worth of revenue over the next 10 years. that is the current policies that are in effected a. the current law that is in effect would mean that revenues

would be at about $39 trillion of the next 10 years. that is because the law already assumes that the bush tax cut are gonna. it assumes that increases in the affordable care act will go into effect. so it is going to be very the vault for the committee -- very difficult for the committee to raise taxes because they would have to raise that beyond the $39 trillion. this the congressional business office, welcome to our world of the government doing accounting. the law already assumes those taxes -- all the bush tax cut are going to be eliminated. >> if they were eliminated, the republicans in the house without regard that as a tax increase, because they are going to be eliminated otherwise?

>> i would call it a tax increase. when you raise somebody's taxes, it is a tax increase. [laughter] [applause] >> on capital gains, the rate is now 15%. would you see any possibility of that being raised? >> i would not, becau taxing capital is not allowed to help create jobs. it will hurt job creation. a lot of people in this room remember when we had high capital gains taxes. what it does is it inhibits the efficient flow of capital to where it is most needed. that will not help our economy and will not help create jobs. >> the president proposed a jobs bill in his speech to the congress recently. is that bill going to be considered independent of the special committee, and is that jobs bill got to have any chance of pasng? >> i think there are components where you might seek common

ground between us. the congressional budget office is doing their job of looking at the president's proposal, and i would expect the committee congress would have hearings on that. i think it is too early to determine whether some of it ends ubeing the work of the select committee or whether we would do it separately. >> you have been speaker since the beginning of the year. what is the most difficult time aspeaker, the debt limit extension? >> i do not have many worries or concerns. people have asked me, are you ok? like i was in the middle of some death row. i sleep well every night, and i never worried about the outcome of this. i have been there, done that,

and i have done thiwrestling before. it does not publish anything. i'm a pretty simple guy. i know why i'm there, i know what i'm trying to accomplish, and i am trying to find a way to get there. and i think there is a way that, to do my job, where people can disagree without being disagreeable where as much as the president and i can disagree about things, we really do have a very good relationship. >> when you were a minority leader, you did not have as much influence as you do the white house operates as you do now. >> almost none. [laughter] >> how have you changed the with the speaker operates? do you involved the democrats more than you were involved? >> i will let others analyze speaker pelosi's speakership. i am a big believer in allowing

the house to its will. i have seen legislation get tighter and tighter to the point where in the last couple years about five members decided what the beginning of the bill was going to look like and the same five would look at what the end of the bill would look like. the rest of us would stand on the sidelines. i have always believed what i said in 1991 when i was a freshman, what do we have to fear in allowing the house to work its will prove to the extent possible, i am try to get a more open process on e floor of the house. i want the committees to be a real working zones of the congress, where they have been bypassed too much of the last 20 years. the committees have a responsibility to do real work. and the -- and there is a byproduct of all this. it is the way on the committee level to get members to work

together again. the committee chairman knows a bill is called to come to the floor under an open process, he is gone to find way to defend that bill. and build bipartisan support from the ground up. i can tell you so far, so good. members on both sides othe aisle are very happy about process. the majority leader has done a great job in reworking the schedules of the committees actually can meet. that we are actually going to vote during the daylight hours as opposed to spending half the night doing things in the dark. so far so good, and i think members are very pleased. >> pretty often people want jobs and when they get them they find they are not as good as they thought. are you happy you had your job? >> i am happy i got the job. people ask me, are you having

fun? [unintelligible] will somebody show me where the fun is? i'm glad i am there. and i went to washington with a mission as i outlined earlier. i have an opportunity to lead a mission. i came here not because of wanted to be a congressman, i came here to do something on behalf of my country. i did not want to be speaker because i needed some fancy title. i wanted to be speaker so i could lead an effort on behalf of our country. and it is that mission that drives me every day, keeps me excited, keeps me engaged, but i like to accomplish my mission and get the hell out of here. >> you are not thinkingf leaving? >> no, i'm not leaving any time soon. >> the nominee for president,

republican, whoever that might be, theou expect to support anybody before the convention? >> no, they are all great candidate and i love all the. some of them i love more than others. >> one of them said he did a great job, we would like you to be vice president, would you consider that? >> it is hard enough for me to go the funerals of people i know, much less people i do not know. [laughter] there is nothing that says you have to be boring. >> today, right now, you would see the biggest challenge that the country has is solving that thatroblem. is that what your main focus is, as well as the job creation? >> those would be near the top of the list.

>> in terms of national security issues, the you have any views on whether our troops should be back sooner? >> no, i think our greatest national security issue is our unsustainable debt. when it comes to our national securityi think we have to find a reasonable place working with the iraqi government on what the level of troops need to be there. it is clear that the iraqis are not in a position to be able to defend themselves. we have invested lives and our treasury in helping to build a democracy there. and we have obligations there

that we should not be% of this and put -- be precipitous and put this fledgling democracy at risk. i think the president by and large is on the right path in terms of drawing down the extra troops that were put there. but let's all understand that the threat that we faced from radical he hottest -- this threat is going to be going on long after everyone in this room is gone. and having success in afghanistan is critically important to the long-term future of oucountry. as difficult and uncomfortable as it is. >> today, if the election were held today, do you think your state, ohio, would go for the

president? >> you do not know what the presidential map make up is going to look like. you do not know who his opponent is going to be. you cannot beat somebody who is a nobody. i think the president will have a tough time in ohio today. >> you hav won a lot of seats, and it is often said these freshmen members are difficult for you to control. is that a fair statement? >> i was a rabble rousing freshman at one time, 20 years ago. they came upnd apogized to me for being difficult, and i look at them and say, you have no idea what difficult really mean-spirited but are freshmen have not been a big challenge a baptism ofve behad

fire. whether it was the continuing resolution to fund our government after march 9, whether it was the budget, and in theebt limit increase they have had a real baptism. i haveore senior members do, god bless them, whatever i do is never good enough. and i understand that. i have been around this process. there have always been set. they stir up problemanit is to be expected. >> you are one of the few people who have been minority leader and majority leader and became speaker. when of the most amazing things in reading your career is you were in the hou listened and then out. how di you get back in the house leadership? >> you mean, being thrown out of

the leadership and then coming back? [laughter] i never took what happened in 1998 personally. newt decided to leave. they tried to go after the majority leader and the whip. i should have raised the white flag. i decided when i walked out of that room, walked down the hall, i look at that my chief of staff who is now back as my chief of staff, and i told him we were going to work our way back, burnt our way back. i said i am never going to let them see the sweat, see an ounce of discipline on my face, i will t my work speak for itself. everybody else has already is left. i have stood on the house floor for a couple of years, and i was

not happy, i did not want to smile, but i just stood there and smile. and decided earn my way back. >> what is your relationship with mitch mcconnell? >> we have very different personalities. we are very close friends, and we have worked together for about four years of a and it is the first time in decades and decades that you have had leaders from the same political party in the house and senate who have had good relationships. i frankly think good for him and for us. we talked every couple days, our staff talks every day, and to the extent we are on the same page, i think it makes the process move more smoothly. >> if you had a republican

senate and republican house and republican president, you are the speaker and a republican president, is that going to be easy to do? >> i told you i was born with a glass half full. every day you wake up, get dealt a hand, like a hand of poker, and you got to play the cards you're dea. whether it was growing up, my business career, political reer -- you play the hand you're dealt. it would be nice to get dealt five aces every time. it does not happen very often. you still have to play the hand. it is not like poker. you have got to play the hand you're dealt, and i tried to be realistic about the hand i was up and make lemonade out of lemons. >> the process you have set up and the congress now to reach an agreement, the special

committee, do you think it will reach agreement before the deadline will will go up to the deadline? we will not know what the press this as is until the day before? is that likely the way things will get done? >> who knows? this is washington. there are things that are going to be the way they are, which means it is probably going to be closer to november 23 that it is going to be to november 22. [laughter] >> two final questions. was there any regret that you have as speaer, anything you would have done differently than the way you have done it a speaker, or are you happy the way that things that been handled? >> i feel pretty good about it so far. i do not really have any regrets. i tried to move this deficit reduction bill early, but some of my colleagues did not want to go along, and so i had to sit

down with a lot of the members and try to bring them along, gently, and nobo on my staff has evereard me screaming, i do not to edo anger. i have to rely on being straight up with people. but there were a couple of freshman, a couple of young whippersnappers who seem to have all the answers. so i brought them into my office and closed the door, and i know them pretty well, and i said boyd, that door is not open until you say yes. it can be 30 sonds, 30 minutes, it does not matter. it could be three hours. i have a week and a ha worth of cigartes in that just over there, so -- [laughr] i'm still thinking about 45

this i'm not heavy-handed with my collgues. the other thing i did not realize until somebody pointed it out was that en you look at that big deficit reduction deal, that we got past, typically that would have cost the leadership $10 billion or $2billion worth of goodies. a bridge here, money for a hospital here, but we got rid earmarks. i have never asked for one. if they thought my job was to come to washington and robbed theederal treasury on their behalf, they were voting for the wrong guy. i had this crazy idea when i was running for majority leader that if i could start a big fight rks that i could win the race for majority leader. i almost cut my throat because i realized everybody did earmarks.

the first time in our country's history that there will be no earmarks. pplause] it made getting the big deal harder, but i d not realize it at the time. just had to talk about the facts, and have a hold you up. >> when you were a high school linebacker plan for a famous coach, did you think you might be a college and professional athlete? >> no, that was way beyond -- this is a different era. all my brothers played sports th the. i wanted to be a salesman. eventually that is what i did. i was in the sales and marketing

business and in the plastics industry. i thought i was going to do that the rest of my life, but then i got involved in my neighborhood homeowners association, and i ended up in the united states congress. this too could happen to you. >> i want to thank you for your time and your thoughts and i appreciate your [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

tomorrow a discussion on u.s. national security. we would get from president obama's national security advisor. live coverage begins at 12:30 eastern. the head of the international monetary fund warned again thursday that the global economies are in a dangerous space because of the amount of debt to their taking on. christine lagarde's remarks and next. the headed the sec testifies before congress about sec oversight and funding. after that, a medal of honor ceremony. >> watch more video of the candidates.

check the latest campaign contributions to c-span's website for 2012. it helps you navigate the political landscape with the twitter feet and update from the campaigns and the latest polling data plus links to c-span media partners in the early caucus states. it is all at c- span.org/campaign2012. >> country should take courted in action. christine lagarde spoke at the woodrow wilson international center for about 55 minutes. this was a first major speech in washington since taking over as chief this summer. >> good morning. good morning.

i am director and ceo of the wilson center. we are honored to host christine lagarde, and the new chief of the international monetary fund for her first public speech in washington, d.c. i am pleased to recognize many of my congressional colleagues who joined director christine lagarde at breakfast earlier this morning. some of them are here. some of them had to go back to congress to a productive congress that will solve this economic crisis. they were there.

we're also a chilling by some of the wilson center for members. i want to recognize and chairman. and by a number of ambassadors. of haiti. it is a pleasure for me as the first president to host this in the 66 year history. this is not the first feeling they have shared. prior to becoming be minister of

finance, issues the first woman ever to become the finance minister of a large industrial country. shoes head of the international law firm. the ventilation became the first female chair. she took the helm during the greatest shock and our live time. the series of shots compared with post earthquake misery, political turmoil and the deeply worrying euro crisis has healed a worldwide slowdown. as a recovering politician, i am aware that while countries with

financial systems grapple with share problems their leaders often find themselves with few tools left in the box. forces are determined to prevent them from doing what really needs to be done. what in the world could i be talking about? the united states have been no exception. congress begins to debate the jobs that in the deficit. we must summon the courage and by partisanship to reach beyond the elections and make short and long-term decisions letter in the interest of our country. there is no great mystery surrounding what congress must do. nor must we start from scratch.

alice is still here in the front row. we must tackle the deficit, a future entitlements, and public spending. we must take measures. while lowering rates across the board. we should seriously consider a national effort structure bank which makes sense from every angle in terms of building the jobs. we must do so quickly and a bipartisan matter that gives them renewed confidence. next week we will meet in washington for the annual meeting. this is another chance to address these with urgency.

it'll be critically important next week. we are seeing that true global leadership, clear, positive and responsible. this morning we are anxious to hear more. holmium welcoming the what a woman u.s. shattered all ceilings to make her first public speech in washington, d.c.. i would like to thank the wilson center for their kind invitation, and i would like especially to express my deep appreciation to jane harman.

in her long and distinguished career, jane has worked in the executive branch, academia, law, and of course congress where she served nine terms in the house of representatives. she has been, and continues to be, a devoted public servant. thank you, jane. thank you for everything you do in having me this morning. there couldn't be a more appropriate venue for my first major speech in washington as imf managing director. more than anyone else, it was woodrow wilson who championed the cause of multilateralism and global fraternity. the seeds he planted bore fruit

in the postwar milieu that -- and and still does believe that was the objective of the math to major was for economic stability and a better future for all. this is at the heart of what the imf has to do and has to keep doing a much of what the circumstances are. the idea has never been more important. this is what i have been advocating for the last few weeks. collective, bold, courageous action is needed. it will not only be in the interest of those who conduct the actions and for the countries.

it before they could for the world. we are living their very troubled times. exactly three years ago, after the collapse of lehman brothers, the economics guys looked troubled, turbulence, as global activity slows and downside risk increases. we have entered into a dangerous phase of the crisis. without this collective resolve that president wilson was advocating, the confidence that the world so badly needs will not return. as we all know, at the heart of economic development and growth lies confidence. confidence in ourselves, in what the others can do as well. woodrow wilson once cautioned that "the thing to do is to supply light and not heat." the imf job is to see and show the lights when the picture

seems so dark and shined the light of core economic problems. it is not hard to turn on a little bit of the heat. even though you take it back. despite the very gloomy picture that we have at the moment, i believe that there is a path to recovery. it is a narrow one. it is narrower than it was three years ago. the volume and the amount of ammunition is different, lower. there is a path.

it will require strong political will across the world not just in one country but in many countries. it will require decisive action on the part of some central banks. they seem to be showing to us. it will require leadership. cooperation over competition, action overreaction. all three components are difficult. they have to be demonstrated, implemented by political leaders who may have to put aside not just their ego, we all have one, but also their partisan interest. did they will have to extend their agenda to beyond the next agenda.

let's have a quick look at the global situation. i apologize for how brief that will be. i want to get into a quick analysis of what the problems are as we see them and what kind of solutions they are. if we look at the global economic outlook at the moment, and i will not be specific on numbers, our revised outlook will be next week when we have our annual shareholder meeting. i will be general and not overly specific. overall, of growth is continuing to slow down. the advanced economies are facing an anemic recovery with higher levels of unemployment. the euro area debt crisis has worsened. financial strains are rising. there is the real risk that the major economies slip back into

the moving forward. while many are facing those headlines are facing over heating, inflation pressure, strong growth and rising counts. if we now turn to the low income companies, a day have been experiencing more reasonable growth. did they remain highly vulnerable to economic dislocation from elsewhere in the world because of their dependency of capital support. they suffered from the commodity price volatility, which comes with heavy social costs. that has an impact on their public finances. many have to put in place subsidies and programs to support the population. this is a bit of an aside. it is a problem. i would like to draw your attention to the human suffering that is taking place nakhodka horn of africa. -- placed in the horn of africa. aid is available.

the imf's stand ready to help. there is the ability to set aside political ambitions to allow supports to be sent to where they should be. i would like to end a cat that there is always hope. -- indicate that there's always hope. they brought together the finance ministers of the g eight countries plus they had of international institutions and countries like jordan and morocco. we can reach out to the population and governments that have the courage to put it in their hands. there is a time for building a strategy.

there's time for implementing a strategy. we will work together. it is a matter of development. it is a matter of organizing exchanges and demonstrating that market access can help the developments. it can develop economic appear turning to the roots of the problem, i suppose to deal with global challenges and solutions. i see three distinct groups of problems. the balance sheet pressures that sap growth. the instability of in core of the economic system and social tensions. they are little bit below the radar screen. first of all, the key short- term issue and in advanced

economies is that balance sheet pressures are knocking the wind out of the recovery. there is still too much debt in the system. uncertainty ways over sovereign advanced economies, banks and in europe, and households in the united states. we balance sheets and a weak growth of financial institutions, households, are feeding negatively to each other and holding back demand and job creation. this vicious cycle is gaining momentum and frankly it has been exacerbated by policy lack of

resolve and selected determination. that is for the first part. it is more of a long-term issue. it has to do it the rest of core instability. what we find in our economics said these is that the world is totally interconnected with a major conduit of connection generally in the financial system. this is clearly the result of what we have done with the spillover analysis and the combination of analysis of economies and the connections between them. in this interconnected world, economic tremors in one country can reverberate swiftly and powerfully across the globe, especially if they originate in the system economies and are channeled by the financial circuits.

these linkages are a key. they have to be addressed. the third issue rebate to the social tensions. it is bubbling below the surface. we do not see it well. if you look carefully at what is happening in chile, there is clearly social tensions. that is caused by a number of things. one is high unemployment. it is the case in this and many other countries. that affects the younger generation. there have been discussions of

the lost generation. we need to do our best to avoid that. with the loss of growth, we run the risk of a lost generation. fiscal austerity that chips away at social protections and the automatic stabilizers, perceptions of the and fairness -- perceptions of the on fairness where wall street is treated unfairly. it is not just the top 10%. on in face of all these problems, what are the solutions? are their solutions tax i am determined that there are rigid are their solutions?

i am determined that there are -- are there solutions? i am determined that there are. i wanted to address can delete the problems and their analysis. i'd like to start it with being able to remember what i preach. it to me those solutions are my four "r"'s the first is repair. before anything else, we must relieve some of the pressures that are suing the recovery and households and banks. on sovereigns, they need medium- term plans to stabilize and lower their public debt ratios to gdp. that must come first and foremost. if this is a precondition to

anything else. the degree to which it is done is something that is per the country analysis. consolidating to quickly and too heavily exposes to the risk of reducing the little growth that there is currently in our economy. the challenge is to navigate between losing credibility and undermining growth. there is a way to do this. credible measures that anger sinking south in the medium term will create the space in the short term for accommodating growth. we want to get out of the vicious circle i was describing earlier on by entering into a virtuous path.

that goes there a slower pace of consolidation and a much download did program in the medium and downturn. it will be needed to slow the debt, stabilize, and reduce it. this'll be difference on a per country basis. some have no choice but to cut deficits now. they simply did not have the luxury of trading this path which begins low and finishes high. there is no option but to do that. others should stick to their plans. many advanced economies have put together those plans. they have to stick to the plan. they have to be very attentive to the pace of growth at the moment and be prepared to relax a little bit.

in some countries, they allow for the growth measures provided that there is an anger the way of actually reducing those deficits and stabilizing the debt to reduce it in the long run. it is not what kind of adjustment there is. it is also how this is being produced. that is in relation to the short term measures that would allow the growth and in relation to the medium and long-term measures that anger this virtuous approach.

certainly it goes through entitlement reform. it goes through the kind of tax reforms that broadened the base. that need to happen in all advanced economies. it is happening in some. some have taken the decision to completely revise it said the entitlements is stabilized in the medium and long term. this is the kind of reform that we have in mind. they should also deal with households. incidently, i welcome president obama's addressing of unemployment. it remains clear that it has been associated with the trap that anchors the medium term actions and decisions that are so needed to stabilize the debt. it will certainly be important to burden households in

reduction programs. they should be able to take advantage of lower interest rates. turning to europe, that they must address firmly their financing problems they're credible rigid fiscal consolidation. -- they must address firmly their financing problems through a credible fiscal consolidation. they avoid the deleveraging that is the tendency to actions strengthen the institution. that is so much for repair. if we look at 34, reform is about a longer term. it is the immediate action that needs to be taken. you have to keep maintaining what they have produced. it is about much longer term. it is for a more stable

economic future tomorrow. i see two critical areas that need attention. the first one is the financial sector reform. there is some good news in that category. some will find discussions about liquidity ratios and the stability of institutions. although it had lasted over to divvy zero years, it is a lot faster than what has taken place in basel. basel3 has taken a lot less in this phase. it is good. substantial gaps remain. particularly across borders supervision in regard to international banking institutions.

cross border resolution is still to be tackled on a global basis and with proper regional ramifications when it comes to the legal system. the too important to fail issue and the development of the shadow banking systems.

the fact that some progress has been made but not enough to stay in the face of the depositors, the people who put their savings in the institutions, it is a question that needs to be addressed urgently. we need to fine-tune the tools to do guard against financial risk. banks need to hold more capital in good times so that they do have these capital buffers. it guards against housing prices. progress has been made. there is the doubt about it. denny's to be reinforced. he needs to be leveled. the general interest news the level playing field. it also include full dimension. employment must be central.

if jobs and not create a, it is a massive human waste. it is important among the young people who risk this lost generation syndrome that we should try to avoid. the third is rebalance. rebalancing. one might argue that this is really a general principle. i would argue that it is a critical point. there is this dole rebalancing that needs to take place. remove from public support to private investment. that has not really yet taken place. the second rebalancing is the rebalancing where the deficit economies operate differently. this coaster various measures. the rebalancing is held back by protective regulations are by the lack of appreciation.

it is a question for those countries that have massive deficits to be able to operate differently and save more. for those countries that have a massive search is to actually consume a bit more domestically and not just by investment but by domestic consumption. letting appreciation happen when it comes to this is very important. this occurs everyone. the thought that one country or a set of countries could be decoupled from the rest of the world is an illusion.

it is a total solution. if the advanced economies were to succumb, the emerging market cannot escape. it is in the global interests. it is in the interest of each and every economy of each and every country. i think woodrow wilson will have appreciated that. that would have been in his mantra. the fourth is "rebuild." i'm thinking of the low income countries including their

fiscal positions. they had offers from many of them. they had to use them at the time of the financial crisis. there has to be rebuilding so they can protect themselves. this will help public investment and social safety nets. allowing countries to develop subsidies to protect the poor from prices with minimal damage to fiscal sustainability. having gone through my four "r's" i will go through my fifth one. what is the role analogous. -- in all of this? we can help them appropriate national, regional, and global purveyance.

i have been a member of finance and trade. there are things you simply do not do for yourself. you are right in the middle of it in your trying to grow this boat. you do not necessarily have the distance to analyze the strength of your economy. this is how they interconnect. what is the spillover affect that will affect the others tax i have the skills and talent that was required. that is number one.

we have the ability to provide the level of technical assistance. i'm thinking of the country in the middle east and north africa to build their finance sector and to billed their tax system. we can do this in many corners of the world. those countries will continue to be the recipient of technical support. the third arm is our lending capacity and ability to respond to a moment of crisis. there's nobody else but the fund backing come to support its by way of lending and not just something money without some consideration the programs that are well established. everybody has a pitch. i would like to share it with you. the fund is critical for the

united states of america. in hard times there is a tendency to turn around the edges and think that is not really critical. the international monetary fund is a discipline on organized and well managed. that'll have to be demonstrated. i will do my best for that institution. i was a little bit. until i came here. the new rule based it is. and how the principles actually

matter over the arbour terry decisions. it is an institution where my main shareholder is the united states of america it is on the key decisions. i have heard this. why should we invest our money tax in the euro goes back to the number. they all get their money back. principal and interest. we're not in the business of subsidies and giving grants. we land. we land on very strict terms. we land with this.

these are the missions. they check that the reforms are taking place, that there is some support being given. it is not paid until there is completion. the third reason why it actually matters is that for the largest economic power in the world, it is very important that there is stability around the world. certainty is a key to share confidence. this is the reason why the imf is perfectly legit immense in being accountable for the money

that it receives and the money that it lends an the money that it pays back. thank you for a much for giving pitch.chance pa to [applause] >> on behalf of a very sophisticated in interest and audience, i want to thank director christine lagarde. she said at the g-8 meeting there was hope in the room. i would observe that there is hope in this room under the organized management of christine lagarde at the imf. we do have about 17 minutes

for questions. the session will be moderated to buy the washington bureau chief of the "new york times." he has been writing about economics since 2000. in 2003, they he was a team of reporters that covered corporate scandals. he won a pulitzer prize. he won an award for magazine writing in 2009. here is a winner of the society of business writers. in 2010 he is a finalist for the pulitzer prize in commentary for a prize he won this sierra. >> congratulations. he was appointed chief of the bureau.

he asks them a few questions. we're asking you to formulate your precise question and to identify yourself before you answer. it to be answered by her in a concise and precise fashion so that we can accommodate as many as you as possible. >> thank you. >> i have not been an in load -- i not been in vogue. >> you included some start talk. what do you see are the things that we have not done as well as we might have over the last two or three years? >> i am prepared to take some of

the blame for that. it if i look at here for instance, because of the cumbersome way in which it is implemented, and because it is based on 17 parliamentary process. personally those of the year's end. it impresses upon the market that the european thing is in this monetary zone. it shoulders the pain to get a fair.

in many corners, austerity has been decided at to the packages were put in place. in too harsh a way, it leaves a bit of space. the long-term loss of having not killed growth and having reduced it is a possibility to expand. moving very brutally from the financial crisis. there's the austerity. this could have been better. >> it is in many advanced economies.

s barney frank of massachusetts.

[inaudible conversations] [inaudible]

>> thank you. witnesses on the first panel are the of ma willry sh -- honorable mary shapiro who was not there during madoff. and mr. saumya. partner and managing director of boston consulting group. i welcome our witnesses. do we have two others/ ? we will have two other -- we will have michael shanahan, a

senior partner managing for the questions and answers, but not for opening statement. and to assist you with the -- and then shanderarshka hura, whatever. managing director of the boston consulting group. at this time, chairman shapiro, you are recognized for your opening statement which you don't have to limit to five minutes if you wish. get yourself in as much trouble as you need. i am kidding. [laughter] >> that is very good advice, mr. chairman. thank you chairman, ranking member, members of the committee. >> we are having trouble with our mics. pull that closer to you. >> thank you for the opportunity

to discuss the organizational assessment of the securities and exchange commission performed by the boston consulting group and other issues regarding the sec. when i arrived two years ago, the agency was reeling from a variety of economic events and emission failures that severely harmed the ability of the agency. >> i know it may sound and natural to you, there will be a new sound system installed during the christmas break. if you could pull the whole microphone closer. >> will perform the way the commission operates. we brought in new leadership and including the first chief operating officer and chief compliance officer. we've revitalized and restructured our operations. we took steps to break down in journal silos and create a collaboration.

we recruited more staff with specialized expertise in real world experience and expanded our training program. and enhanced safeguards to investor assets by new rules and leveraging public accounting firms. our goal throughout the many changes has been to create a more vigilant and agile organization to perform the critical mission of the agency. i believe our efforts are paying dividends. last year, the sec returned $2.2 billion to harmed investors, twice the budget for that year. last fiscal year, $2.8 billion in penalties ordered by enforcement actions. 176% increase over the amount than fiscal year 2008. we range and scope from complex cases against parties that played significant roles in the economic crisis to a lesser known cases involving harm to individual investors.

our examiners and investigators collaborate effectively resulting in a number of recent enforcement actions generated from the exam referrals. we continue to seek ways to improve our operations. last fall, as required by the bought-franc -- dodd-frank act, a consulting firm conducted a broad and independent assessment of the sec organization. they confirmed what we believed over the past few years, the sec has improved the effectiveness of its operation. nevertheless, we agree that the sec still has significant opportunities to further optimize its available resources. even assuming further optimization, bcg concludes that we will not have the personnel or resources to perform all of the activities within the

agency's responsibility. they also conclude that sufficient resources have contributed to a gap in the ability to develop information technology systems. beyond the resource issue, they provided useful insights into how the sec might continue efforts to ensure that it remains a vigilant, agile, and responsive organization. given the determining and executing the appropriate course of action, it will require internal coordination and a significant commitment of signif staff. that has already begun. we organized around the four principal goals, optimizing the structure, strengthening capability, improving controls, and enhancing our workforce. we have already implemented or are in the process of employment in an number of bcg

recommendations including clarifying the role of the officer and his ability to make changes, building staff skills, and establishing an improvement program, improving the office, optimizing the office of information technology, redesigning the office a human- resources, and prioritizing the responsibilities. it is important to note that bcg believes the upfront investments will be required was some can be paid for through the efficiency gains outlined in the report, the savings will not be sufficient to cover the investment needed to achieve our goals. the committee has requested my views on two pieces of legislation, the sec modernization act and the regulatory accountability act.

although i appreciate it, this describe some concerns on the structure and ability to deal with the change in market conditions. the regulatory accountability act requirement for cost-benefit analysis could undermine the ability to issue orders against wrongdoers until late exempted orders. and delay orders to companies. i would welcome the opportunity to work with the committee on both pieces of legislation to ensure any chilly improves the ability to achieve the mission. we recognize that implementation and many of the ideas in the report or require a long-term

commitment and sustained effort over several years to successfully implement. while we're still in the early stages, we're committed to an open and transparent process. thank you for the opportunity to testify. i'm happy to answer any questions he might have. >> thank you. >> perfect timing. i am a partner and managing director at the boston consulting group. a civic and under tinging

involving many professionals, i am accompanied by my colleagues who will be able to assist in responding. they were responsible for the organizational review. andrea villa extensive documentation, undertook analysis and conducted more than 25 discussion with current and former sec officials. and industry groups. we focused on these subjects that the sec identified. first, organizational structure.

second, personnel and resources. to carry out the mission, they have clear organizations. they fill the mandate. our study focused on the ladder. we found that what the sec has initiated steps to better fulfil its mission as well as its expanded mandate, they can do more to shape a better organizational structure and address gaps. we have a portfolio of initiatives. we recommended that they implement these initially on a no regret bases. they are foundational to the future. the senate to his fallen to four

major categories and are as follows. -- these fall into four major categories and are as follows. the sec should engage in a rigorous assessment of the highest needs and reallocate resources accordingly. reshape the organization. did the sec should reshape the structure, rolls, and governance to maximize efficiency, effectiveness, and collaboration. invests in enabling infrastructure. including technology, human resources, risk management, and high priority staff skills. and enhance the model. the sec should implement roles as both the regulator one.

they have a plan for these initiatives that carefully sequences them in a way as to create significant efficiencies that would help fund the investments. as an initial matter, will recommend they create an office to coordinate the immediate implementation of the initiatives. we also recommended that after the sec has implemented them, congress should reflect on whether or not it is resulting organization adequately meet the expectations for the efficiency and effectiveness. if they determine that it still does not meet the expectations, we recommend that it have increasing funding to allow them to better fill the current roll or change it to fit available funding. the proposed organization act of 2011 contains a number of

provisions which appear to be consistent with this spirit there are several ones of the modernization act which appear be honest those reports. in addition, several provisions appear to go beyond the scope of our steady. they address regulatory mandates that are beyond the scope of our study. thank you for your time and attention. we're happy to answer any questions you may have. >> thank you. what would you think would be the number one church road change that ought to be made at the sec? should it be made before additional funding or staff hires? what should that sequined be? -- sequence b?

>be? >> there are a number that we made. we consider this issue. the markets dynamics are made broken dealers. separately -- >> would we need to know he was going to be the primary regulator?

>> we did note that there was a lot of dialogue on that topic. in the set of options, one option was presuming that you have it. >> i think they could be combined irregardless. i think the sec would continue to have oversight and accountability even if he had an sro or something. >> there have to oversee a pair.

>> right now it is a separate division here. they have had several pluses by raising the standard of the exam. there is potentially an added advantage of independent from enforcement. this separates exam. if you lose the information flow between the two. it can go back to rose.

it is loss if you separate them. >> thank you. >> you have had the report since march. i am sure you have reviewed it. has the agency undertaken any of the recommendations today? >> we have. understandably, a lot of these are longer-term process. some are quite massive. it should take as some time. we have consolidated the office of the director. we have eliminated a director. we have established a the improvement program. sore looking for cost-saving we can redeploy the savings and other activities.

we are and the process of training all of our employees for a full rollout of our new performance management system which was highlighted by a bcg. we have reorganize the office of information technology. we have new information. it is yielding dividends. we have gone the full review of the other parts. the word should be done in november. then we will be able to go forward with that. we have offloaded some responsibilities we think can be done more efficiently by outsourced agencies. our financial management program is being outsourced to a federal service provider. of releasing information has been outsourced. we have reorganized enforcement

to great results. the other works streams. >> thank you. >> thank you. you have been very reasonable. i am prepared to reconsider the extent to where we borrow last year. we can find ways to convey our sense of particular activities without having is separate entity. it has been badly treated by this. with regard to the rating agency, they are extraordinary.

they have systematically overrated securities. i'm not talking about the u.s.. i'm talking about operation bonds. i asked them why. they said they are not going to depart. we're saying they are more likely to default. it is like saying if you live in iowa you have more chance of being eaten by a sharp than if you live in montana. that might be statistically the case. we set up. we have the problem of municipalities. we did in hants the advisers. it may have gone too far. i am prepared to work with the

agency. we can make sure it is the importance. on raising the bar for adopting regulations, and he makes a very interesting point. we should not be telling you to decide whether not to do things we said you had to do. if you read the bill, it is to give them the option of deciding to regain. more seriously, they take this back. and maybe perhaps more intensive, it covers not just regulation but orders it. before you do that, am i correct

index would it mean that an enforcement order would have to go through cost/benefit? what would that mean for you? >> it would require a cost- benefit analysis-. it would have securities fraud. it enabled them to bring profits more quickly. it to operate by virtue of a sense of order. >> i appreciate that. the notion seems really quite odd. >> it to be very damaging. >> i really appreciate the quality of the report and the way you presented it.

what you're saying is that there are ways to be made more efficient. continue itsoing to major new responsibilities, the biggest single response ability is that we gave them derivatives. is there any way for them to ?ake on this ta >> as we described, as the sec is currently constructed, and given the productivity of the resources, the workload of leaves them at a capacity cap. we also identified the initiatives which we recommended they adopt. we restructure the organization in a way that will clarify roles

and improve productivity. it goes toward addressing a capacity cap. the challenge to know how far it that it is determined by the agenda. this is a big issue. depending on where the agency is, it should be increased. it has a very material impact. >> a man at the about to come back. he had one thing in there in which she talked about how logical it would be if we're

able to merge them. to which i say i wish. if i was making a new country, there would be one such entity. i will say that is a little .eyond its peer there is the real emphasis of this self funding operation. that is something within our grasp. that that defeated by turf. they felt so strongly about that that we lost it. there are ways to make that confirm. thank you. >> thank you. our staff is working on the question.

they have determined it would be a fresh water swim either way. but ask for clarification. it asks for the cost benefit before even a role is proposed. >> that would be before? under the security laws or issuing any one person went. >> before it proposes. the cracks that would be tough to do. -- >> that would be tough to do. >> that gets into the cost- benefit analysis.

these are things he has asked that the to a caught carrying be continued and that the two witnesses have agreed. their only two witnesses out there. they will hold the hearing to examine the impact that they have on the national security to a later date. this has been rescheduled. >> thank you. i hope i'm not off message. he required the sec -- that was to study the current standard of the care for broker-dealers and investment in pfizer's. -- investment advisers.

i am not happy with the outcome of that. that was to harmonize the different standards that currently exist. can you point to any economic resources showed the need? >> this study did go through some economic analysis. we did see the data from common shares about that. the enormous provide our analysis, proposed to roll. what the staff is sinking through what it may look like, continuing to meet with industries and investors that have interest in it, we have asked our economists to gather whatever data is available in that process. we cannot propose to go forward. >> no.

there has been talk about this. so much is involved. oversight of investment advisers. it is suggested that there be this. you're very familiar with that. what you think would happen? >> i did not participate because of my affiliation with the staff study. i was within the refusal time frame. i think we can agree that covering or examining 9% of investment advisers, only examining nine some a year is not sufficient. there might be a mechanism for of pfizer's to pay for them to be able to examine. they be given the authority to

do at least examination of the broker-dealers. unless there is sufficient funds, we have to look closely at about an sr0. we have to find a way to have better oversight. this is one of the vehicles to do that. >> despite your efforts, i was concerned that the department of labor king complected any one may propose. i know there was some talk about getting together and working together. i was surprised that they came

out. it was the head of what you decide it. i do not know there is any real coordination. he tried to get together. >> we reached up to the department of labour. we participated in some of their round tables. they have responsibility for the its ministration. the sec is just not have that responsibility. it is not with regard to the standards. >> thank you. >> i yield back. >> thank you. >> thank you.

>> in the bcg report, your estimate it range from 200 million to $300 million and gave a sharp fall needed to but still the current mess in -- the current mission. we are all aware that the funding level is 1.18 5 billion paren. did you consider the effects of limiting the sec's budget to 1.18 5 billion? >> as we looked at the sec as constructive, we analyze the

workload and said there is a capacity gap. we laid out a set of plans against that. it will create material efficiencies. we also recommended that given the circumstance the agency should look hard at the resources to the most important activities. it indicates what activities it will have to scale back or stop and ordered to do this. >> you did not recommend what they should not do? there is quite of a gap when you need $203 million.

people need to do the job. this is quite a gap. i would like to ask, how will investor protections be impacted by the funding proposal and the cap when the report says the you need three to 400 more just to get what is required to do the job? did you do an investigation of how it will be impacted by this cap that limits the number of people you can hire? clearly you have more to do than the resources that are there before you. did you look at how it will impact investor protection stacks the personnel is not reduce protection -- did you

look at how little impact protection? the personnel is not there. >> depending on what they choose to emphasize, that would have impact. the agency is best suited to address that. it includes a lot capital. this is a budget increase. this sets up a lot of productivity. >> did you break this down in your report? >> we identified a number of areas where money would have to be sent. there's never again upgrades and need to be made for individual systems and capabilities. >> that would be helpful if he

gave as a clear break down. >> how will investor protections be impeded by a funding level proposed by the house that is 1.18 5 billion even though your responsibilities have grown? >> what we are engaged, our responsibilities about what is important for this agency is important to do. the cast aside whole areas of responsibility. we will not be doing them any more. we do not have the funding. under the house budget proposal, there are a couple of areas i would focus on. this is one of them.

there are nine clearing houses. we have 10 dedicated examiners. will not be able to of rationalize the derivatives role. we would get them done. will not able to do this. i think we'll see the number and scope of the decline. the may decline to prosecute some or it is too high. -- it may decline to prosecute it or it is too high. coverage is already inadequate. it shall suffer. 1/3 of examiners have never been examined. we do not have it for hedge fund

advisers. even in areas we will have to cut i.t. spending. that would be unfortunate. we need to modernize systems. this is used by the public and the staff. it is a critical system. ourl also be hindered in ability to hire expertise. it to be under the house number. something that business cares much about is our ability to quickly and efficiently review the increase in flow of ipos. across the agency, you will find there are real impact on investor protection. >> much time has expired.

>> thank you. very quickly, i'm curious to follow up on the comments and questions with regard to the role. have you been working with him too shy and resolve the situation? -- to try and resolve the situation that >> we have been talking and trying to educate the securities laws and how investors are protected their i their fiduciary duties or other requirements. there's the panoply of regulatory requirements. as i said at the end of the day, we do not administrate the law. it has to be their call.

>> is it your assertion that the ruling does not infringe on an area of the juicier responsibility? -- of judiciary responsibility- quite are some ones that they have responsibility for. they could be advising them about the ira accounts. >> you're not concerned about that? >> i know the industries concerned about that. they need to do what they need to do. we have no capability with respect to it. >> don't you think you should work with them to let them know that they have overstepped? they cannot hide behind that

authority and make a debt rules here that will affect other things that they should not have any ability to impact. >> they do have the ability. did the most the sec can do is to see how would protect investors. the people subject to regulation may also be subject to state insurance regulation and deregulation by the subject urging and subjects. -- deregulation and the subject. >> my concern is that we're certainly going to limit the ability of individuals to have the expertise to revise them

predict to advise them purities the only gentlemen in the entire county that has been his security license. he continued to allow them to get into security advising situations. i think it will continue to impact individuals to get the expertise to make the wise decisions. >> i share that concern. we are sensitive. we have to be careful about being business model neutral to the extent we can. access to financial services is something that all citizens should have at a reasonable cost and in a reasonable way. we're very sensitive to those. >> i would urge you to be working with the treasury to find to find a way to roll.

i'm not against trying to make sure that they are protected. i think a pen dimon went in a long way. we have to bring these together. we have to have the best common ground to allow them to be sold by the individual so consumers can get what they need. i and the sponsor of the search staff with an independent group of bankers. we are wanting to raise the threshold on some small companies. i know raising this is why you do not have to have as many to examine. we're taking a little burden off the shoulders. crisis is very important to us.

i leave the community banks sur's on this committee. we were to the number of bankers have raised this issue. there are burdens better place in the community. -- that are placed in the community. we have a number of issues around small-business capital formation. the 500 shareholder limit is well advanced in our deliberations. iran looking at a number of other issues like crab funding and the general solicitation. we have a full menu. we are anxious to get our first meeting called. >> i'm anxious to see results. thank you. >> thank you.

when we drafted the dodd/frank bill and pass it in the house and senate, one of the things we did was say that there would be a steady so we could streamline the securities and exchange commission. one of the bills they had before us today would codify the recommendations made by the study group. it would help you streamline and improve the security and exchange commission. >> there are some things in the bell that -- bill that are worth exploring. it did not evolve quickly and rapidly enough.

we need the flexibility to organize the sec on an ongoing basis of overtime to be responsive for a market place. this a probably be my primary concern with the bill. there are some other issues for which i would also disagree. we would also be willing to work with the committee to see if there was some legislative a person made sense. when we know we have a long way to go.

>> let me follow up with a following. what my you need to respond and failures you have come to address t? >> they have to be achievable and consistent with our mission. i feel the way this is structured almost no agency of government could be all of these requirements. we already do cost-benefit analysis. we look at the effect on competition of our rulemaking.

we consider the impact on small business. we estimate the paperwork burden. we look at whether the rule making will promote capital formation. we do extensive cost-benefit analysis. we know we can do better. we're committed to doing it better. this at some any new provisions and factors -- >> 11 new factors before you can do what? >> regulations and orders tur a orders approving self-regulatory organization roles.

>> they're always speaking about new requirements and new standards. they are advocating for smaller, less government and fewer regulations. when it comes to the agency accused major purpose is the security and exchange commission to watch, they want to hamper it. they want to tie it up and not. i do not understand how it comes to government in general when it comes to the business community.

we have a group that this supposed to monitor that. we will want more regulation. in a society in which something as simple as a credit card for 25,000 miles, i did get it. at the 25,000 miles. the only ticket i could get was from chicago to milwaukee, a 90 minute drive. apart from that, i did not get any other benefit. but those to the consequences to me, imagine the other kinds of things consumers aren't subjected to. thank you for your time here today and your commitment. >> thank you. milwaukee feels a little despair's right now.

>> i am a republican here defending more regulation. let me read something. did the american people deserve a system that works for them. the recognized that the policies are the best economic growth. this is all the way back to 1993. it is with a piece of legislation that we're discussing. i know a couple of issues came up through the ranking member. one pertains to our legislation dealing with the issue applying to orders. since this is a discussion draft, this is a reason why we're going to regular order. we would like to go their -- regulatory order.

that is long where most happy to discuss. the second point was the issue with regard to the cart before the horse. you have to identify the problem first. tois what you're going potentially address. it seems to be the reverse order. let me go back to the executive order of bill clinton. that is something you have to identify. each agency shall identify the problem. >> this only makes sense. to begin doing it and that matter. you did say that you already do

have assessment analysis. the d.c. circuit court of appeals of begs to differ with the nature and quality of the rulemaking. what is your reaction to that? what steps are you going to take with reaction to the decision? >> we are disappointed by the decision. they vacated the role. we thought it important that it be important for an economic stake for them to have this. we take very seriously our obligation. i believe if you were to look at

the roles compared to many other financial regulatory agencies, you would see that we do much more extensive cost-benefit analysis. >> i do not mean this flippantly. if you have information on other agencies, out be happy to take a look with them. i know it sounds that way. we should be making sure that we agree on the same level. >> i think it is important that everyone do cost-benefit analysis. i think our staff has done a very good job. as some to reevaluate the whole process for conducting the analysis. it is assuring that we better integrate their economic analysis throughout the course of the rulemaking process.

we are expanding our risk in. we have more economic firepower. we're taking more care to explain the choices we make. >> use of our legislation would have this. our legislation says that he may consider those things. >> they are not mandatory. they are contained in statute. they're highly likely to be used in the next roll. finally, we want to explain more clearly. i think this is learning. this is how we found this.

>> much time is really up. there's a city that comes out of that. it is the adjusted number of examinations but the actual nature of the examinations. >> i'm sure we could do ballpark figures. >> they had a few provisions.

>> i regard this as pretty consequential. they made this part of the bill. you're not even going to change the boxes. you have the two existing boxes talk to each other. it makes it even less consequential. my concern is that there's a very consequential provisions. it requires the sec to create a system to assign the credit rating agency.

the wonder what the analogy would be if they still like to the umpire. it might not been done over backward. they get paid $1 million or more. if there's nothing about this undertaking a, is this close to undertaking it? is this report simply irrelevant? >> i will have my colleagues address this as well. we think it is a tremendous consequential park. >> i am referring to the reorganization tax cuts i am referring to the study.

there is a business model that might be explored. the staff can proceed. it does not close to the one- year deadline. it to get place behind other things. we expect the office. the work is ongoing. >> the answer seems to be that they do this study and that you are free to redefine the status quo. i think he are required to --

you are required to dramatically change it. >> we are required to either implement the proposal or come up with another proposal. this study is a privilege to our being able to do that. as an annualing it exam. we have created the office that is not reporting directly to the chairman. we do not have the authority to do that. >> who reports to whom? >> these charts here do not mean that you are ready to implemented the result of that study.

maybe they can comment. is your proposal envisioning that bit would be for each debt issue were? is the organizational chart for them to undertake it? >> it was not part of our scope of that work. they have been made. existing functions have been there. to recognize the importance of that. we were laying our options of how best they would be organized. >> you seem to be saying your report ignored the possibility

of the mandate. the issue report layout a program for organizing the sec that would be selecting the credit rating agencies for debt issuers? >> i report says that the agency will follow what is required under the legislation. this was an organizational design issue that we reform this -- that we were focused on. >> my reading is that you simply ignored that they would undertake that function. >> at the time to study was completed and they determine what the rights

structure is, it is what ever we determined to be the optimal new business. we will have to restructure them to accommodate that. >> hopefully the group will cover any additional work necessary. i yield back. >> he has a motion and then we will move. >> you say to enter the record to the commission with regard to ownership reporting rules and how the mayor may not be changing. >> unanimous consent. >> thank you very much. a colleague came up to me and said the sec is crazy.

-- is frakking crazy. i thought they needed a vocabulary lesson. they said that they will regulate frakking in the mining issues. with all the victim's and citizens that are at risk for securities, why in the world would they feel it is necessary to go into the environmental business now. there's so much work yet to be done. there were warning about not having enough money in the budget now. they can involve themselves in what appears the most to be

their responsibility of an environmental agency. >> they're not in the business akking.ting fr when they change their rules for public companies to report their oil and gas reserves, as a result of them being liberalized to allow for reporting of potential reserves as opposed to only proven reserves, that companies were exaggerating where they were. were that investors rely upon. i believe our review group for that industry and corporation finance division have comment letters as they send them back and forth to companies as far as their methodology for estimating their research. i would be happy to get more

information for you. i want to assure you that we are fracking in anyfrankin way. >> generally, i trust what they're right in "the wall street journal." when you get back to the office, if anyone tells you do for me or there is in the light shed on that, please let me know. i will take your comments as the absolute gospel and i will engage anyone that indicates that you're doing anything other than just your find reserves. >> i do not know that we are asking more questions than just the verification of reserves. there may be other agents and

comment letters. but what i was trying to make clear is that we were not telling people they cannot cannot engage in fracking or any of those kinds of issues. but we do have questions to have complete disclosure about risks, about reserves, proven or estimated, and so forth. >> the space between not regulating fracking and merely making sure the disclosure requirements are correct under reserves is big enough to drive a million space shuttles through. i think that would be important. i think that you would respond to me and anyone else who has an interest here in writing within the next week. >> would be happy to do that. >> anything else? thank you.

mr. kearnecarney. >> first, to the bcg folks, how would you accommodate the concerns that mr. hynes particular? >> this issue was outside the scope of our city. >> i am not asking you -- and if you do not want to offer an opinion -- you do cost-benefit analyses for clients? >> yes. >> how would you envision accommodating some of the concerns that he had about

getting low probability the facts that have cataclysmic impacts on the financial system in this instance? do you have any thoughts on that? >> we will have to reflect on this and come back to you. >> all right. if mr. garrett's bill were to pass, how would you implement that? how will you accommodate the concerns articulated which i think our real concerns. but you look at the financial crises we have had historically that have been created by some of these things that are not expected? >> i think it is a difficult question. the costs are easier to quantify them the benefits. we struggle with that and we try as we can to quantify the benefits and discuss as fully as we can what we believe benefits will be and balance from there.

>> but that is an essential part of doing analysis. you have to enumerate costs and benefits and what they are and assign values to them. as was pointed out, that is sometimes difficult to do. >> failure to act as its costs as well. i think that a cost-benefit analysis would be more useful if we did talk sometimes about if we do not act with the potential ramifications are of that if other events come to pass. >> do you have a view of how you might implement something like this in a way that would result in what is in legislation? >> while we have not done it perfectly, i think what we do

now is geared toward getting a recent judgment about whether a rule benefits will outweigh the costs. i fear about this legislation is that it layers so many analyses on top of what we already do. that we were said to fail. but there's no way that this agency or any other agency can possibly view of these things, some of which conflict, some of which seek to protect market participants. sometimes we need to protect market investors from market participants. we would be happy to work through these issues in this legislation as constructively as possible. but i think there's policy that make it very difficult for us. >> in concert, mr. garrett's idea makes sense, but the limitation is difficult to do,

particularly to accommodate the concerns that mr. hynes has. i only have a minute ago and there has been a discussion about priorities. there are things you do not think are getting the priorities that you think they ought to. you think you can go over that again? i agree that we need to have a discussion over what those priorities are and so that congress knows what those priorities ought to be a new can geladas or tell us what you think they ought to be and -- and you can challenge us or tell us what you think they ought to be. hindering of hiring expertise and one other that you mentioned -- >> building the necessary investechnology and infrastructo be more efficient, derivatives rules, and i would add that our ability to ensure that we have a

stable equity market structure in this country so that market companies can be efficiently and transparently have their stock traded and investors feel like they are participating in a market that is built for them. it is an area where we have to have data and it will to really do a good job and those costs money. >> i see my time has expired. i do believe that we should extend this conversation for some time in the future to go over these priorities and had to implement some of these things you're trying to implement. >> thank you. mr. pierce. >> thank you, mr. chairman. i agree that this conversation should be longer. if we get to visit with mr. shapiro did, that would be good. -- with ms. shapiro again, that would be good.

i seeing your report, page 10, page 11, twice on page 11, resources constrained, resources to not permit, and you're drifting off into this environmental question. i wonder if you are asking the same questions of the manufacturers of windmills, the electric generating windmills in new mexico. they kill birds and are affecting the environment. are you asking for the same environmental impact on those companies? >> i would like to get back to you with more detail. our goal is not to address any environmental issues. >> i would appreciate it if you would get back with me. $2.8 billion, how much of it came from the settlement of mr. madoff? >> i do not believe any of that. >> has any investor been

compensated anything from your efforts and from the efforts of the sec? >> i would have to get back to whether any fines or penalties went into a specific fund. >> so we have the most highly visible investor defrauding that has ever occurred and you do not know the answer to that? >> because our goal would be enough to take money to the treasury and deprive -- >> i asked if any payments have been made back to investors. >> i am sorry. i just not know that. >> you understand that, from my point of view, how outstanding that is? back in 2008, and as the company had assets of two billion dollars. they had solar cells.

they had public money and went bankrupt. do you have that on your radar scope? >> i am not familiar with it. i will have to get back to you. >> spectra inc. spun off from intel. they took money from goldman sacks, who you do have. specter was a private firm, but it took lots of money from goldman sacks. they also took money from new york state. i wonder, after they filed for bankruptcy, did you have any insights on them? >> again, we have thousands of investigations ongoing at any one time. i am happy to find any information for you. >> but your agency does have the time to go in and worry about fracking. i am not saying that we do or do not have investigations going

on those companies. >> what i am saying is that you do have a front-page article about those companies doing these activities. i am saying you should do your business instead of the epa's business. >> i understand. >> is very visible firm named solendra -- given the events of the last two days to three days, have you done anything to look at that company and warn the american people before you gave them $4 million or $5 million? >> i cannot comment on the open investigation. >> do you have an investigation? are you looking at that? >> i cannot comment on whether or not we have an investigation. >> ok.

we have begun to get information from the small investment advisers. they are facing standards that maybe the big guys do not face. again, i would like to hear your observations. we do not have time today. but i would like to hear your observations on why you'd be concentrating more efforts on the small fish than the made off fish -- than the madoff fish. i worry that we will implement regulation on mom-and-pop organizations across the country that do not having to do with the big ones off of wall street. i expect you will be considered of where the big fish are to fry. thank you. >> i was not going to get this, but i want to respond to my friend from new mexico.

chairmanship here, you are familiar with a company called the reserve fund. >> yes. >> the reserve fund probably cost state government and zillions.istrictand the sec was all over it and helped recover the mexico's special districts who had a lot of money it help them recover on average 95 cents on the dollar. that was a big one. it affected each state. and they were all over it. i do not know the specifics of all little questions you were just asking. in defense, i want to say that could let's get to the guts of this thing. i appreciate the gentleman from boston consulting and your study. the question is should there be more private, in effect,

assistance and enforcement and oversight within an umbrella kind of -- i mean, what we are saying is that there is not enough money to do all the jobs that are assigned to the sec at this point. there may be other ways to do it, using finran or of -- using finra or other sources. a study found that on average, the federal government paid contractors two hundred $60,000 for computed while government workers made $136,000. human resources was 228484 contractors, more the than twice the 1100 thousand dollars for the same services done in the house. i have no problem with the

private sector making a lot of money. we have testimony saying they wanted to be fully accountable to the congress. i am sure he does not mean all of that. but the salaries are substantial. whoever it is, whether it is the public organization, the sec, or signing it to somebody else to help, there is responsibility. i mentioned earlier about 6000 drop on the stock market translates to $7.80 trillion, which is a lot of money. that is a huge user fee for a lot of people. so explain to me, if you would, there is responsibility with or without dodd-frank, can this be done on the budget that you have today?

>> i have been pretty consistent with the appropriations and testimony over the past year that we cannot operational lies they dodd-frank rules without further resources. we are looking for savings wherever we can find them. we have some opportunities to do things differently that we think will free up some resources. at the end of the day, we are taking a piece of a $6 trillion -- hedge fund regulation, credit rating agencies, municipal advisers, large new areas of responsibility that the congress and frankly the american people will expect us to do well and without significant additional resources -- that simply will not happen, even if we become very efficient, very effective, very agile. all the things we're working towards, at the end of the day, there is a gap. >> in preparing this report -- i do not know if we asked you to

look at it -- but you consider the catastrophic losses. we're talking about hard-benefit analysis and i think we ask for that in our study, but maybe not. did you consider the catastrophic losses we saw in the fall of 2008 when the sec at that point had not been doing its job? >> our focus was looking at the organization structure of people technology and how they work. we took the sec as we found it when we arrived and looked ahead at what capabilities they need to have to deliver against their mandate and mission. our focus was forward-looking. >> thank you. >> dr. heyward. >> thank you mr. chairman. chairman shapiro, i know that the sec is forming an advisory committee on small and emerging companies. i think that is an important

step in the direction of facilitating enterprise. we want our small businesses to be able to acquire capital. we want investors to be able to engage in that marketplace more fully. one of the questions the procedure one of the challenges that proceeds from that action is that we need a market for those stocks once they are issued. as you know, right now, we really lack that kind of a marketplace in the united states for various reasons. but a marketplace helps investors to observe and to set a market value for these sorts of investments. would you be willing to work -- my office has taken a particular interest in try to facilitate the united states-based market

place -- could we work with you to see what we can do to facilitate setting up the kind of a market? >> absolutely. we would be happy to do that. the nasdaq has created a venture market place from the roots of the boston stock exchange that they bought. while i do not think it is fully up and running yet, the commission did approve that. it is one of our efforts to try to create a better and more transparent trading market for lower priced securities. but we would be happy to work with you. >> great. i appreciate that. we look forward to working with you. our staff will get in touch with yours and we will continue to move forward on that. i do have another question regarding revisiting the williams act and regulations 13 thd.

a lawsuit is requesting that the time frame for disclosure is to be reduced from 10 days to one day. that could have a substantial effect on that sort of investor engagement. and many an ankle and -- and many unintended consequences. it does strike me that the division of financial innovation should be dissolved and the potentiald, effects. are you looking at the the costnimplications with benefit? >> yes. they will be very involved. >> great.

i appreciate that. clearly, we are functioning in an environment in which everybody is exceedingly concerned about our being a destination for working capital in this country. i know your dedicated to doing the right things in that regard. i appreciate hearing that. i think that is a great and thoughtful approach. i yield back, mr. chairman. >> thank you. >> i want to thank the chairman and all of the witnesses today for being here. one of the things that concerns us the most in my rural southern virginia district is jobs, of course. i think it is on the top of everybody's mind. i was pleased that the president last week to it is had to capital formation as something that is important to get this economy going. one of the bills that has been passed out of this committee is a bill that would extend the

same exemption to private equity that has been given to venture capital. it would repeal the part of dodd-frank dealing with that issue. in my mind, that is a mainstream issue. i know hundreds of jobs, if not thousands, in virginia's fifth district and across the comments -- across the commonwealth and in this country that have been created by the capital formation provided by private equity i was wondering, chairmanship your -- chairman shapiro, if you could articulate any benefits to requiring advisers to private equity to register with the sec and what could possibly be the benefits of the quarterly and sometimes monthly evaluation reports. with its strapped resources,

what to the sec do to improve what private equity is done for the economy, especially at a time when our economy is failing and private equity has proved again and again to be able to create jobs at a time when we are losing jobs. let's talk about the benefits first and then we will talk about the cost. what possible benefits can you see? >> i am familiar with the bill that would basically exempt private equity. i think that is an interesting .pproach th the commission followed the requirements of dogdodd-frank. our obligations there with respect to -- or with respect to reporting only.

it is our understanding the broad scope to participate in financial services industry and the economy that have the potential to impact other financial institutions and investors in a fundamental way. >> the reason i ask is a couple of reasons. most people agree and i think the view of this committee was the private equity is different. it is not the leveraged. you have highly sophisticated investors. and for foes, by design, are not necessarily diversified. -- and portfolios, by design, are not necessarily diversified. there is no systemic risk to be concerned with. the stock about the cost. i am glad that you brought up the cost-benefit analysis. obviously, the costs, in my opinion, are significant. we had one witness who

testified that it would cost their company's $750,000 and up to $1 million to register. and then the ongoing cost of hundreds of thousands of dollars to continue to file these reports. in my view, my main street view, southern virginia view, that is money that could be invested in the district. that creates jobs. i'm wondering if you believe that that is what i would call and a sister reporting and registration that would negatively affect private equity firms that would have to comply with this. >> i would have to look at the analysis with the rulemaking was promulgated to perhaps answer that more completely. i've happy to do that. we met with a number of middle-

market firms. one of the things they asked for was a delay in the registration of a year. i think we have done those. we have some opportunity to continue to crotalk. i would be happy to continue the conversation. >> it would appear to me that you have the authority to exempt >> we were very conscious of the fact that congress made an explicit choice. sometimes these things do not happen. but there seemed to be an explicit choice for registration. that is something we could talk about. ng we can talk about. >> thank you very much. >> thank you. >> i yield back. >> i know there is a vote that has been called. i was hoping i could draw a couple questions and then you get to abandon us speaking both for the chairman and everyone

here, we really appreciate your time. chairman shapiro, you were kind enough to mention the 500 shareholder rule. and of the sec has been looking at that for a while. a, what do you know about your rulemaking or your discussions internally? if you have warm and fuzzy things to say about my legislation, we can talk about that. only if warm and fuzzy. >> i think of two pieces of legislation in this arena. one would requires to raise it from 5 million most to $55 million. then the 500-holder chairman, whether that would be limited or

the number of investors ought to be raised. even employees could be on the threshold. those are values that the staff is looking at right now. i would say that the 500- shareholder limit is probably the first item on the agenda that we hope to bring to the small business advisory committee to get their thoughts and perspectives on it and in the burdens of reporting, whether there are any other alternatives. but we are moving very -- forcefully it may be too strong moving to do we're what we have to do. there had been years of study and it was carefully calibrated. i think we do not want to just toss it out the window. we want to do an analysis, perhaps a cost-benefit analysis as well. but we're committed to moving ahead on this. >> this is one of those moments

on the republican side where you have been very kind working with our staff, particularly the reggae issue. in regards to the 500, in many ways, that is more about capital formation, particularly for small and the coming businesses. it is sort of modeling access to capital. >> right. >> i have an offshoot and you will have to help me a little bit on this one. municipal advisers -- i hear a lot for my banking communities saying that we are regulated by everyone and there is this sort of sense of concern. will they get another layer, particularly when they're doing some of the advisor practices within those banks? >> when we proposed the principle of visors, we brought in to that definition otherwise regulated person who probably we

ought not include at the end of the day. the final recommendation will be coming to the commission very soon. we have gotten 11,000 comment letters. >> you have heard from the other 11,000. >> i think we have heard from almost every member of congress as well. we understand the issue. we cast a very wide net, perhaps inappropriately one, and we're working on those issues. >> i appreciate the "wide net" phrase. i know we're trying to move forward with another hundred million dollars in '90 and technology money, believing that and itcess to technology - will make your ability to do your job easier.

i had this great fear taking on something that was actually a the banking sector and huge and almost untenable in the current budget situation. with that, if there is any burning comment left, if not, thank you for spending time with us. thank you. we are in recess and we will be moving to the second panel. [captioning performed by national cap

>> the financial services committee will come to order for purposes of hearing testimony from our esteemed second panel which includes the honorable paul atkins, a visiting scholar of the american enterprise institute and former commissioner of the u.s. securities and exchange commission. it is great to have you back. a good friend and i look forward to your testimony. mr. stephen crimmins, a former deputy chief litigation counsel, division of enforcement for the sec. >> thank you, mr. chairman. >> glad to have you here. i have read all of your testimony and i believe it is all of value as we try to determine, with the sec, what the best approach will be. mr. johnathan katz. >> good afternoon, mr. chairman.

thank you for inviting me. >> we have assembled this panel because we believe all of you have a valuable insight into which direction both the commission should go in and how congress should address it. the honorable harvey pitt, former chairman of the u.s. securities and exchange commission. it is good to have you back. we always enjoy your insight. and mr. jw verret, assistant professor at the george mason university school of law. this is the first time to testify as a majority witness?

>> yes, i have done nine times as a minority witness. >> it will probably be a similar experience. we welcome all of you. this five minute clock -- if you need to take six minutes or seven minutes, feel free. we are not going to limit you. if you get up to eight or nine minutes, we might suggest that you wrap up. commissioner atkins, we will start with your testimony. and our mics -- we are getting new microphones. if you could pull it up to where it is almost hitting you in the mouth, i know it is awkward, but it will help. we will try to jazz up the --

>> thank you very much, mr. chairman, honorable member frank, and members of the committee who appear before you. it is an honor and privilege for me to be able to provide information regarding the organizational issues at the sec. i would like to congratulate this committee for taking up this issue of improving the sec. i have had the privilege of working there for 10 years, first as a staffer and then as a commissioner under three chairmen, including chairman pitt. because the public sector lacks the crucible of competition to weed out inefficiencies, it is periodically necessary for the congress and president to step in and do so. a good example of this is what the congress of the truman administration took with administration plan no. 10 of 1950. in about one page, it gave the chairman of the sec clear

authority over executive and administrative functions and radically reconfigured the sec in the process. in contrast to number 10, dodd- frank's 3000 pages haphazardly addressed too many things not very well. it created ideas that, through micromanagement, has made management of the sec more difficult. it added four statutory mandated reports to the chairman. because these provisions are statutory, the chairman has little alternative to do things differently, especially since the chairman party has more direct reports than is practical. this is one way of doing things to the exclusion of others. under section 967, the sec was supposed to do an independent

review of its management and organization. this review does not appear to be independent and does not appear to be well done. mr. katz will give you a better report in his testimony. the taxpayer ought to get a refund of the $5 million the sec spent on that report. i commend the committee for taking a fresh look at the organizational structure of the sec with the legislation under discussion today. i commend chairman bachus for considering openly the best approach. the committee correctly perceives that the sec desperately needs organizational and management philosophy changes to increase efficiency and improve regulation of markets.

it is tasked with regulating the markets, considering how drastically they have evolved over the last decade or more. i would caution against being too prescriptive of the internal organization of the sec. times and circumstances change. the example of your plan demonstrates the general guidelines deliver a firm sense of what the sense of congress may be sufficient. of course, much depends on good managerial experience to lead the agency, which cannot be legislated. the draft bill contains many good ideas. for example, recognizing the second-class status of economists of the sec and seeking to enhance their participation in policy-making and promote them to first-class status is badly needed. the endemic problem of economic analysis performed at the sec is a post hoc exercise.

the policy for rulemaking is determined first by its lawyers and only near the end of the process are economists brought in to justify the actions on the cost-benefit basis. in this vein, the economic credibility act is a good proposed step forward. this is whether or not to oppose the regulation only after considering the cost of the benefits. the criteria are common sensical and any economist should take them into account. the problem is that the sec cost-benefit analyses are done by lawyers in their rule- writing division and are only shown to economists at a much later stage. the sec is an agency of, by, and for lawyers. this morning, others raised the

point regarding the applicability to enforcement cases of this draft legislation. i think that is a very good point. it is an easy fix by carving out administrative orders and other things so we can look at it. even regulations mandated by congress could benefit from such an analysis outlining the draft legislation because the devil is always in the details and the challenge is always to do the most for the least cost, because the investor always pays for regulation through higher prices or diminished choices. another area of potential reform required by dodd-frank is the sec oversight and reliance on sro's. the committee held a hearing a couple of days ago regarding this issue. although the subject of an sro

is not necessarily the subject of this hearing, in my written submission i raised concerns about expanding the empire without a fundamental re- evaluation of its statutory functions. the subject of sec funding often comes up in the context of discussing management failures. it is far from a problem that is easily addressed by money or by creating new offices as dodd-frank has done. madoff and stanford did not result from parsimonious funding. if the sec cannot handle leasing, as the chairman asserted in a hearing a couple of months ago, how in the world can it handle self-funding. there are many intelligent, hard-working people in the sec. it is the management system and how it has determined priorities of the past decade that has let them down.

the system is unchanged today. i salute this committee for taking on this issue and continuing public discussion. in the past decade, the sec budget has increased threefold and fundamental problems remain. everyone at the current economic environment has to do more with less and before the sec gets any more money, i think it needs to show that it has garnered efficiencies and can use its more than $1 billion well. for the city of investors who have lost billions in fraudulent schemes that could have been discovered earlier, it is high time that these organizational issues be addressed. thank you again for the invitation. >> thank you. mr crimmins. >> thank you, mr. chairman. by last summer, most of the criticisms that are being drawn by many at the sec were already out on the table.

all of this long before we heard of bernie madoff, employees viewing internet pornography on company time, about the sec having the same quality bookkeeping systems that the private sector has, but we also hear that every year, through thick and thin, they manages to file almost 700 complex securities cases against almost two dozen defendants. with just 3700 employees, they produced tens of thousands of disclosure documents each year while writing over 11,000 investment advisories, 7500 mutual funds, a large collection of trading agencies, sro's, and a market trading almost eight billion shares a day. having already heard most of the same criticisms we are hearing today and facing the worst financial crisis in 80 years, what did congress decide

to do? last summer they enacted legislation to double the sec budget in specified steps over five years. as you have noted, since 1996, the sec has always been run entirely on non-controversial wall street things, not spending a dime of taxpayer money. after running the sec on a shoestring, even with increases to funding, they wisely realized that to get out of the worst term since the 1930's, to promote growth, to create jobs, we need a securities market that has the resources to make a difference. 12 months later, we still know pretty much what we knew last summer. instead of actually moving forward and getting that doubled sec budget in place, we are hearing from consultants,

sophisticated, talented consultants, about things like optimization initiatives, time- phased multi-year implementation, cross- workstream implementation points. we are forgetting that a wall- to-wall restructuring like this will affect the sec for two years or longer. endless meetings to plan and replan. reallocations of authority among sec offices. staff obsessing over resumes and how to handle internal job interviews. i suggest that you got it right when you said earlier this morning, "heal thyself." having heard mary this morning, they get it. they get what has to be changed. you referred to some of the changes that she has effected. i say let's let them

concentrate on their core missions. we know what those are. capital formation, market surveillance, and fraud detection. this is the worst of all possible times to do this comprehensive reorganization. at the same time, we cannot freeze things in time. chairman schapiro talked about her concerns that the modernization act was very well-intentioned but might have that effect. but it would take an act of congress to change things. your comment that you are looking for flexibility and this is something that you want to consider further, you and mr. frank have commented about the need for flexibility and we appreciate that. another point -- in last week's joint session, the president urged us all to cut away the red tape. cut away the red tape that prevents start up companies,

those people in garages, warehouses, so forth, preventing them from raising capital. we want them to write those rules so they can provide cheap and efficient procedures for america's small businesses to raise capital, to give us the growth we need, the jobs we need. the procedures still ensure that their investors get the information they need on their own to make informed investment decisions. mr. chairman, i have a concern. i am concerned that we can forget about this kind of streamlined capital formation if we keep handing opponents of all ideological persuasions more tools to block anything that the sec tries to do. mr. garrett's bill is well- intentioned. it would have an unintended

consequence. it would let opponents file lawsuits to block any new rule by arguing that the sec had failed to appropriately consider a whole laundry list of, and this is the key point, vague factors that any plaintiff lawyer can easily exploited. things like, is it good for society? sure we want to be good to society, we want cost-benefit analysis, that is a given. but do we want to give that to the plaintiff as a tool, regardless of what their persuasion is on a particular issue? do we want to give them that as a tool to tie things up? what has not been mentioned is, if you look at any sec rulemaking, the second half is about benefits.

they have a whole bunch of stuff which holds their feet to the fire and makes them do this kind of stuff. the court of appeals case we talked about this morning -- unfortunate. maybe economic analysis should have been better. the point is the execution is not dependent on more requirements. cost-benefit is clearly a requirement, something they do to execute better in particular instances. absolutely right. mr. chairman, a back to basics focus on the sec core missions of capital formation, market surveillance, and anti-fraud enforcement is what needs to be done. not micromanaging the sec. not paralyzing or piling on mandated, multi-year reorganization studies. new requirements and procedures. it is time to let the sec get to work. in conclusion, last summer, with all the recent criticisms

already on the table, they made a sound decision to double the sec budget using wall street's fees that are available if wall street is willing to supply. they are peanuts compared with the user fee i supply. wall street is ok with that. using those and no tax dollars, no deficit impact, to help get us out of this crisis and do what we can to avoid future crises. i would respectfully suggest to the committee that it is time to deliver on that promise and give the sec that doubled budget. thank you very much. >> thank you. mr. katz. >> thank you. good afternoon. thank you for giving me the opportunity to participate in this hearing. as you may know, i spent most of

my professional career at the sec until i retired in 2006. i believe very strongly in its mission and i care deeply about its future. since my retirement, i have had an association with the center of market competitiveness at the u.s. chamber of commerce and it has provided me with an opportunity to express my views and do what i can to support the agency. i believe that the sec must change in many ways. for this reason, i consider the bcg report to be a missed opportunity. the analysis and findings of the report are conclusions. they lack insight, empirical foundation. simply put, i think the report ends with recommendations that should have been the starting point of the report. for example, it recommends the agency should consider reorganization. it recommends the agency should re-examine its priorities.

and then consider how to realign its staff with these priorities. these statements should have been the starting point for the study, not its findings. during the past two years under schapiro, they have initiated some significant changes in its operation. the report fails to assess what has been accomplished, if anything. it restates the changes in a general and uncritical manner. it fails to give a full assessment and it has done a disservice to the commission and to the people at the commission who spearheaded these changes. if these changes have had a positive impact, a report that documented the benefits of these changes would have been really useful in restoring the credibility of the commission. given the way i feel, i applaud chairman bachus for focusing

attention on the need for reorganization of the sec. it is long overdue. the current structure is antiquated and cumbersome. it is largely based on a design to regulate the u.s. capital markets from the 1970's, not the markets of today. in addition to being antiquated, it places an unrealistic burden on the chairman. the ceo of any organization should not have 20 direct reports. reorganization is not going to solve all of these problems. an intelligent reorganization, structured properly, can really contribute immeasurably to a stronger agency. while i support the objectives of your proposal, i believe that the focus of the legislation should be reorienting. i think congress must be responsible for determining the authority and power of a government agency, for monitoring agency performance, for holding the agency

accountable for its actions. it is irresponsible of the government agency for execution of those policies and implantation of its responsibilities. this should encompass organizational structure and duties. i believe that the dodd-frank provisions requiring the creation of five new offices is a mistake that should be corrected. i have a second concern with a reorganization through legislation. the reality is no organizational chart is ever perfect. organizations must change over time. if the structure of the sec can only be changed by an act of congress, we would be exacerbating the problem. an agency that is already slow to adopt a change to markets would become even slower to change. i have a similar perspective on congressman garrett's bill. i support his efforts to improve the quality of sec rule making by clearly specifying the components of a careful analysis of costs and benefits.

but i worry that a pre-adoption of cost-benefit analysis will always be fundamentally limited in what they can achieve. it requires the staff to estimate the impact of the events that have not yet happened. the regulator rarely has the capacity to predict with certainty how individuals or firms will respond to a new rule. if the regulators cannot predict the response, it is difficult to accurately quantify the cost or benefits. for this reason, i believe in a different approach. i would combine the pre- adoption cost-benefit analysis with a post-adoption look back requirement for the sec. in my written statement, i have a detailed description of how this could be implemented. my written statement also has several other suggestions for how congress could act to facilitate and contribute to an sec turnaround.

in closing, i want to briefly mentioned a couple things. the first is an amendment to the government act that would permit two or more commissioners to meet formally with staff, to monitor staff activities, and participate in yearly discussions where the action really is concerning formulation of rule-making policy. in 20 years, the commission secretary, i had the privilege of working for almost 20 commissioners. everyone of them, at some point in time, expressed deep frustration with how the sunshine act was preventing them from doing their jobs to the best of their abilities. his second recommendation that i want to highlight is the need for creation of a special study team to engage in a systematic and comprehensive review of u.s. capital markets in our regulatory system. the first special study was completed in 1963. in an 18-month span, it

published a five-volume report that was the basis for the development of our current national market system. the study provided what i consider the intellectual touchstone for the next 20 years of enlightened progressive and dramatically changed sec regulation. i think the time is right now for another special study. thank you for this opportunity to speak today. >> thank you. mr. pitt. >> thank you for your invitation to discuss the legislative proposals that are clearly intended to improve and enhance the performance of the securities and exchange commission. and the performance needs to be enhanced. i commend you and the members of this committee for holding this kind of a hearing and for the important consideration

this committee has given to ways to improve the sec's effectiveness. to assist the committee yet stay within this time restraints that you have asked us to respect, i would like to briefly raise five overarching points for your consideration. and i leave the details in my written statement. first, the sec is vital to the proper functioning of this country's economy and capital markets and has been given an extraordinary and ever- increasing mandate over the past 77 years. these days, the agency mission is often overlooked and its successes are often ignored. instead, the sec has been converted into an institutional pinata.

attacked for whatever it does or does not do. the sec has made some significant and serious mistakes. but it is taking steps to correct the perceived weaknesses. second, enhancing the commission's effectiveness is a proper and important goal. the agency must improve its organization structure and efficacy, but it cannot and should not do so without the constructive assistance and oversight of this committee. and yet, accountability, efficiency, and effectiveness, while concepts for which the agency must strive, and i encourage those efforts, can also be an effective euphemism for creating impediments to the agency's ability to meet these goals. third, sustainable change in

agencies as well as individuals can only come about if the agency embraces the need for change and the proposed way in which change should be affected. this does not give the agency the right to thwart congress' directives, but no amount of legislation can force a change in the agency's culture, or performance, unless the agency and its employees embrace both. fourth, without ignoring the instances in which the agency failed to meet legitimate expectations, public attacks on the agency's bonafides, the potential failure to give it inappropriate resources, and the assumption that the agency cannot even get wrong right can

demoralize those whose participation in sustainable change is crucial and ultimately prevent this committee from achieving its very laudatory objectives. fifth, the sec must do better and change. it has too important a role to play. principal among the requirements, i think, is for the agency to be creative in figuring out how to meet its new responsibilities, including those under the dodd-frank act, without receiving any additional funding. one such way is effectively for the agency to improve its compliance examination function. the very function that did not capture the madoff and stanford ponzi schemes. it can do this if congress

gives it the authority to require every money manager to be examined either yearly or, in the case of smaller firms, every other year. at no cost to the taxpayer by an independent expert group that would do an examination pursuant to standards the sec could create. we proposed this policy in february of 2003 when i was chairman. it will offer some very valuable opportunities to get better examinations and perform what i would call compliance audits in the same way financial audits are performed. of course, we have financial audits and that does not prevent financial frauds and compliance audits will not

prevent compliance frauds. but this will allow the agency, if it gets reports on all of these examinations, to focus its attention, to see new trends as they are rising and effectively be able to do the kind of oversight it should do with no burden placed on the american taxpayer. that is the kind of creativity that the agency has to now come up with and be in the forefront of efforts to achieve. i appreciate this opportunity to discuss these important issues and i will try to respond to any questions you have. i also offer, without meaning to sound presumptuous, to make myself available if there is any way in which i can assist this committee in its very important work. thank you.

>> thank you. let me say this to all witnesses. we plan to give all of you an opportunity to not only give your testimony today, but to continue to advise us as we go forward. mr. verret. professor verret. >> thank you. i appreciate the opportunity to testify. we will focus on two important and necessary reforms. first, i will argue that clarifying the sec's legislative mandate to conduct economic analysis and the commitment of the authority to economists are both vital to ensure that new rules work for investors rather than against them. second, i will urge that the sec be required to consider the impact of new rules, particularly corporate

governance, on the system of business and corporations. every president since reagan has requested that agencies like the sec commit to sincere cost- benefit analysis of new rules. like other agencies, the sec is subject to a legislative mandate that they could effect most new rules on investor protection, efficiency, competition, and capital formation. the latter three principles have been interpreted as requiring a sort of cost-benefit economic analysis using empirical evidence, economic theory, and compliance cost data. these tools help to determine rule impact on stock prices, and stock exchange competitiveness. also, measure the compliance costs are passed on to investors. three times in the last 10 years private parties have successfully challenged sec

rules for failure to meet these requirements. over the three cases, no less than five distinguished judges on the d.c. circuit appointed during the administrations of both republican and democratic presidents found the sec's economic analysis insufficient. one failure might have been an aberration. three failures out of three challenges is a dangerous pattern. many sec rules have treated economic analysis requirements as a mere afterthought. this is a consequence of the low priority the commission places on economic analysis, evidenced by the fact that economists have no significant authority in the rulemaking process or enforcement process. i realize the rules have a section called cost-benefit analysis, but having it there is no substitute for having quality analysis. as an example of the level of analysis typically given to

significant rulemaking, consider the sec's final release of the implementation of a controversial rule, section 4- 4b. the commission estimated the rule would impose an annual cost of $91,000 for a publicly traded company on average. in fact, a subsequent sec study five years later found average costs up to $2.87 million. that is a large misjudgment. they gave no consideration to the more important category of indirect costs and the much larger category of indirect costs, like the impact of the rule on the volume of new offerings on u.s. exchanges. the most recent challenge, the

sec estimates it dedicated over $2.5 million in staff hours to erode rules struck down. that represents an estimate of about $100 per hour for sec time. for security lawyers of that experience, i think most would agree that $100 per hour is a very conservative estimate of the hourly opportunity costs of their time. let's assume that estimate. an honest commitment to empower economists in the rulemaking process would be a vital for step to ensure the stakes are not replicated in future rules. i also support the goal in hr2308 to further elaborate on the heat requirements. in light of the importance and pervasiveness of a state-based system of corporate governance, that the bill system requiring the impact of new rules on states. touching on issues of corporate governance. the u.s. supreme court has

noted that no principle of corporate law and practice is more firmly established that a state's authority to regulate domestic corporations. delaware is one prominent example and is the state of incorporation for half of all publicly traded companies. it is so highly valuable among shareholders that the mere fact of delaware earns a trading company a 2-8% increase in value. many other states are strong like new york, california, texas. in order to appreciate this fundamental characteristic of our market system, i would urge adding the following language to hr2308. the commission is to consider the impact of new rules on the traditional role of states and whether it can achieve its stated objective without preempting state law. the sec can comply with this requirement by taking into account reports from state governors and state secretaries of state during the open comment. and to minimize the pre-emptive

effect of new rules by including references to stay law where appropriate, similar to one already found in another section. it can commit to a process for seeking guidance for state corporate law issues by creating a mandatory state court certification procedure similar to the one that was voluntarily used by the sec in 2008. we have heard a number of comments from some members about the importance of the financial crisis, the importance of tail risk. i would know that regardless of really getting the merits of items of the dodd-frank act, a number of items in the act were unrelated to the financial crisis, and related to issues of systemic regress. the dodd-frank act was a big bus coming to congress and there were a lot of old ideas that had been germinating for 10 years. proxy access was a union- driven, special interest item

that managed to get tagged on. i have done some independent analysis -- we studied the impact on a small subset of firms, a few hundred firms, and the proxy access caused a few hundred million dollars of losses. i would submit that full study to this committee. i think this is very important to consider and i appreciate the opportunity to testify. i want to clarify, on a personal note, and correct a very serious error in a prior testimony during the dfa hearing on this issue. i represented to congressman frank that i was a red sox fan and in the interim, i have been lucky to marry a phillies fan. i want to go on the record as saying that i am a phillies fan and correct a prior error in my testimony. thank you.

>> he would say you went over to the dark side. thank you. most of your testimony was pretty clear. i do not have any questions about what you testified. one thing that i do want to ask you, and this is sort of -- you have not testified about this, but i think you are all -- i would like an answer to it. the stanford case -- we have talked about the sec and the failure of the sec in the stanford case. as i understand, it was a financial product, not a security. it was advertised as a foreign based product. what effect did that have on the sec?

their jurisdiction on it was somewhat clouded, i would think. i am trying to get a handle on that. can anybody comment on that? i'm not sure i articulated that right. it was not a security, it was a financial instrument. >> certainly when the issues came up, the claim was that they were banking with financial entities, not brokerage firms, therefore there was no coverage. if i'm not mistaken, the sec did file a lawsuit in which it alleged fraud on the part of an entity it claimed was acting as a broker dealer. i think the sec found jurisdiction. the real issue was, what happened between the years when

this ponzi scheme was going and when it finally came to light and whether or not the process used was ineffective. i think they came up with sufficient authority. >> they obviously did have jurisdiction. but did that cloud some of the initial investigation or enforcement? if you look at the perspective, it has been some time. there was a representation that they were buying something foreign. >> if i could add something. i have always believed that stanford was actually, from the perspective of what happened in the sec, a far more troubling instance than madoff. for madoff, the staff were

presented with information and they dropped the ball. they did not figure it out. what troubles me about stanford is, if you look at the facts as they have been made public, in the examination of the fort worth regional office, they spotted it, recognized it as a potential ponzi scheme through their examination program and they tried hard to get the enforcement staff to follow up. for a variety of reasons, the enforcement staff had no interest in it. for that reason, this was not a legal issue, this was not a question of authority. this was a question of staff making a bad decision when other staff in the commission were saying this could be a serious problem. >> in fact, some of the staff was then let go that made the

recommendation to go forward. i do believe there is something there. >> if i could tie it into a broader theme. metrics count. staff do what they are evaluated on. i have written a review article a couple of years ago that one of the problems in the enforcement division was using the most simplistic measure of performance -- how many cases did you bring? a nickel and dime case was one stat. a massive investigation was one stat. their offices knew how to break the system and they realized they could devote 45 people to a really complex, difficult case, and have one case to show for it. or we can bring five, 10, 15, 20 smaller cases and knock the ball out of the park when it

comes to our evaluation. that was what i think happened in stanford. they looked at it and saw it was a huge, complicated case. we are a small office. if we try and take this case on, we are not going to bring as many cases. to me, that is a management problem at the sec that stanford eliminates. >> right. >> i am not up-to-date on the stanford case. obviously, it is being litigated. i do agree with what he was just saying. a real problem which the bcg report did not address is, how does one gauge whether enforcement programs are successful?

what does success mean? how do you measure what the sec does? what do you look at? simple number of cases brought is not really a fair gauge for the reasons jack said. it is easy to use the numbers every year. there are cases where the sec brings account status statistics and that is where a company should no longer be listed and is delisted. every year, that is 100 or more cases that add to the -- it is a good way to make the numbers look better. i think that is one that challenge with respect to how to run the enforcement program. >> if i could just weigh in also. i think you are exactly right in terms of overlapping jurisdiction. if you have a stanford where maybe the securities

jurisdiction, if you posture it the right way -- but there are also banking agencies and various other financial services agencies. things can fall between the cracks. one agency can figure the other agency is getting most of it. you hit the nail on the head. when you have overlapping jurisdiction, there can be issues. the other sure point i would make is competing priorities. in the midst of other stuff, we had the enron crisis, we had trading mutual funds as a big deal, we had back dating sweeping corporate america. we have to keep up with the new york attorney general. when somebody walks in the door, diligent and hard working and sincere and says, "i have a hot one for you." it is the former chairman of

finra, the former chairman of the industry commission, and he is a fraud. that is in the midst of running to catch up with other regulators and keep up with other regulators on late trading and market timing. it is a question about competing priorities at an agency run on a shoestring, half the budget it should have. especially in 1996, when we took it off the taxpayer back and made it wall street funded. it needs to deal with those competing priorities. that's how it will deal with madoff and stanford going forward. >> one thing. i'm going to give a whole question or 10 minutes. several of you have referred to people who do not know what

their job is. one of my concerns has been that day and all the federal agencies have been papered and run to death. they are spending a tremendous amount of resources just reporting to congress. which is a legitimate function of congress, but in the legislation, the draft that i proposed, it would allow the chairman, several of you have indicated he should be able to do his job or her job and we have reduced from 24 to 14 the people who report to her.

it is a problem. you do see that the ceo or the chairman ought to focus on fewer things and more important things. let me ask each of you this. does anyone disagree that because of the added jurisdiction, there is a need for more money? i know there is a need -- there is expanded jurisdiction. we all agree there is an expanded jurisdiction. i think there is a consensus.

however it comes, through an appropriation or through user fees, can a reform happen without money? without additional funding? i would ask that. and i am not saying -- i am saying that a condition to additional funds ought to be reform. but just give me a comment there. >> i do think the reform can happen without additional funds. we are talking about managerial reforms, we are talking about how do you manage an agency to try to incentivize people to do the best? i remember sitting in a senior staff meeting one year where the senior staffers from certain divisions asserted that everyone in their division ought

to get a merit bonus. regardless of -- it had to be equal throughout. interesting concept that i do not think is duplicated in the private sector. that is just one indication of how managerial attitudes probably need to change. things like that -- >> i'm sure the employees' union presents some challenges. >> perhaps, but this was coming from senior staff people who were saying that in their division, they thought it would be untenable to differentiate between people. other divisions disagreed, of course. some were taking the tack. >> i disagree, too. [laughter] >> i would express agreement with that and also add that

reform can save money. with respect to the debate over funding, i would note also that the taxpayers do not fund the sec through taxes, they are the residual beneficiaries of user fees. it is a relevant discussion and there is some debate over funding the sec and how much. part of the discussion is that the taxpayer is a residual beneficiary. the debt discussion does play into that discussion. >> obviously, if they do not have the resource areas, often a cost from not doing something. >> the difficulty, i think, is there is no agency that is separately created that will not tell you that they could use more money. they all want it.

one of the issues is, how do you manage what you have? i think first the sec's increasing responsibilities has been so large that there is a huge gap. i think that there are ways in which the agency can save money, such as the one i mentioned on the examination process that would actually do better for america as investors than what the sec is able to do. somebody has to be thinking creatively to try to come up with those ways. i think both things have to be done in order to make sure that the resources the agency does have are used appropriately. we are at $1.1 billion. when i took over, our budget was about $300 million.

it was a lot of money. although we needed more, of course. >> if i could echo and expand on what harvey just said. i was at the commission a long time. through the fat times and the lean times. i remember in 1986, the budget doubled. there was a period in the early 1990's, the commission got a huge increase in funding. harvey mentioned when he was there and there was a similar increase. economists have a phrase. they refer to something as being necessary but not sufficient. my problem with increased funding is that i absolutely believe it is necessary and i absolutely believe it is not sufficient. what i saw happen when the agency got this huge budget increase was, it enabled them to avoid taking a hard look at what it was doing well and what it was doing poorly so that when the enforcement division

got a massive increase in staff, everybody said they will have the resources to do more complex, difficult cases, and they will do them faster. that is not what happened. more staff meant they brought more cases, not necessarily better cases. additional funding is absolutely essential, but it is absolutely essential that it be coupled with substantive internal change. his idea is just one of a number of examples of ways that the agency could be imaginative in its use of resources. >> i will say this. i think it is a very important point. it is very important that funding, increased funding, can actually mask the need for reform or retard reform.

that is true not only of a government agency or corporation, but also a family. >> i would say that is an area where the commission would benefit from outside help. when we would look at the budget, the first thing that the chairman told us was that is sacred. we cannot touch that. if you start to ask questions about why it is sacred and why you cannot touch it, you do not find that you always get great answers. i think that it is important to have somebody outside the agency look at how the agency can use its resources more efficiently. not change the resources, but use them more efficiently and

determine whether or not subsequent increases are going to be necessary. >> thank you. congressman frank has indicated earlier in this hearing that he realizes there needs to be some rollbacks on some of the charges or responsibilities that have been assigned to the commission by dodd-frank. he has acknowledged that that could be reviewed. >> if i could just add, it is certainly something to consider to do. the new jurisdiction, expanded jurisdiction, the new duties and burdens put on the sec by dodd-frank. as you have indicated and mr. frank has indicated, i would ask the committee to consider how the old stuff that the sec has to deal with has radically changed in the last 10 years. what i'm talking about is highspeed computerized trading.

we just did not have that 10 or 20 years ago where computers, without consulting a human being, can put in huge orders, change them, test price, change them again. they get so far ahead of the average retail investment, it is a totally different investment. they cost a lot of money to get this investigation and the people you need on top of it so you can see the markets in real time. not only that, 8.5 billion shares daily is a hugely bigger market than we had before. also, the complex new products that we have had. all kinds of complex new products. complicated stuff that the people who create them do not even understand them. that is the old stuff and how it is radically changed. again, thank you for being open to these additional resources that this commission really needs. >> you are obviously right. we are dealing with products

that it is hard for people that were trading them or constructing them to explain what they were. mr. frank, you have 20 minutes. >> do i have to use it? >> as much as you can. >> maybe i will take six or seven. i thank you for staying with us. it has been a very useful hearing. i am trying to go back -- mr. pitt, was it your statement i am trying to find? as i read this, maybe i misread, but it has some concerns about finra. i am interested in your concerns. one of the key questions for us is -- what is the appropriate

devolution and relationship between the public agency and self-regulatory agencies? there are advantages to self- regulatory agencies, but there are some limitations. would you expand on that? >> thank you. i put that in. i was not at the last hearing. we need to look at how self- regulatory agencies operate. you have sro's in the various markets. now the markets are for-profit companies. a lot needs to be done to step back and look at -- should a for-profit company be categorized as an sro with all the paraphernalia that goes with that as far as rule approvals and that sort of thing?

especially when you compare to the cftc and our rules are approved or not. with respect to finra, it is a monolithic, monopolistic regulator of broker-dealers. everyone has to be a member of finra. in the old days, you could be an sec-backed only registered broker. the world has really changed. my point is that before you designate an sro like finra, if it is still indeed an sro, you need to take a step back and look at that. >> would it be that you would find some of these, if there were for-profit, inherently inappropriate to be given these responsibilities or would you write a code of conduct that would be binding from the sec that protected the rights of the state?

which general direction would you go in? >> for the most part, the for- profit agencies have bifurcated their enforcement arms and a lot has gone over to finra. they still retain oversight over the market itself. they are still subject to sro- type regulation. >> would you tighten them? >> you could do the opposite of tighten them. you can have the sec oversee it and ultimately wield the regulatory hammer if things are not competitive or something like that. to make things more streamlined, you could take a page from the futures industry. with respect to state action of finra, the closer that it gets to being -- >> how close is it now? >> how close is it now?