>> g.o.p. presidential candidate mitt romney was endorsed by former vice president dan quayle today, that's next on c-span. then president obama in kansas talks about jobs and the economy. and later a hearing on insider trading and congress. a house panel looks at legislation that would require all members of congress to place their stocks and bonds into a blind trust. . have no health care. the most expensive single element. have no environmental controls. have no retirement. you do not care about anything but making money. there will be a sound sucking sound. >> ross perot spoke out about

issues. he made two attempts for the presidency. the first time got over 19 million votes. that is more than any third- party candidates in history. he has had a lasting influence on american politics. he is our final candidates on "the contenders" live friday. go to c-span.org/ thecontenders. >> dan quayle endorsed mitt romney for president. this is about 50 minutes. minutes. >> thank you. thank you. thank you.

welcome, everyone. the american dream, you do not wake up one day and all your dreams become reality. in america, you have to earn it. that is the way that our country has made such great strides, not only of in freedom of speech, but economic freedom. this is what many of us who are now attracted to mitt romney understands. to be very a economy that has made america strong and kept us free must be preserved. when we look at the future of america and many of us see that it is uncertain and that we have a president to is wrong on the economy, we have so many candidates who are seeking the

office of president. there is only one that is where 25 years and the private sector that understand the essence of the free-market and about job creation. that is something that america needs desperately. at a time when there is uncertainty at a world, we look to leaders who have proven themselves not only an elective office but also in the economy and understand religious freedom and freedom of speech. and that we see our strength and the diversity of our race, color, origin. that has been threatened. i want to introduce to you someone who many of us here who many of us are fans of a. we know that if there is one man to stand up to represent the republican party, a speech to

the essence of freedom and economic freedom and understands that our american people, if we're on the same field as other countries, americans will win every time. [applause] i am introducing -- when he comes to the grand canyon state, we love mitt romney. [applause] we are going to be a part of that change of true hope that understand the proud history of america and will restore that help by putting people back to work and getting government out of the way and out of the private sector. i introduced you the former governor of massachusetts and the next president of the united states, mitt romney. >> thank you. i appreciated. thank you. thank you, my friends.

it is good to see you here today. old friends and new friends. thank you. i appreciate the chance to be with you. i know you're not here to see the. there is a favorite son of arizona that you want to see. i was surprised to see the president today in kansas giving a speech. he made an unusual comparison. he said he is like teddy roosevelt. i thought in what way? teddy roosevelt founded the bowull party. one of those words apply. -- applies. this election will be a fundamental choice about what path america is going to take. are we going to remain a nation

which is a merit based opportunity society, where people by virtue of their education, hard work, a little luck, risk-taking, pioneering, and enterprising spirit are able to earn rewards and create a stronger and more vibrant nation? or are we going to take a course that president obama has outlined, fundamental change, where we have an entitlement society where rewards are taken from sun to give to all -- some to give to all? there's certain that everyone is equal but pork. that is what happens in entitlements societies. will we have merit and opportunity or a nation of entitlement? we have a government that is so strong that it manages our lives and enterprises and our

economy? or will we have people so strong that they build their own enterprises? this is a nation and a place that is distinguished from any other in the world. this is a and unique nation. it is exceptional. the premise was written in the first words of the declaration of independence. we are endowed by certain unalienable rights. among them life, liberty, and the pursuit of happiness. it is not to have the government tell us how to do it. not for them to give us checks. it is to be able to pursue happiness. that is what makes us unique. our conviction that this is endowed by rights that did not come from government or kings of

rights that come from the creator himself. i love this country. i love the future. i am happy that people are recognizing how important this is and how it will be a watershed decision of which course we take. i take the course of freedom and opportunity. i happen to associate those values with a term you have heard time and again, conservatism. those who believe in the fundamental values and the fundamental previous that make america america. they are known as a conservative conservative, a person who is the conservative in his life and the values he lives. i had the privilege of seeing his boss last week.

what an inspiration they are. what wonderful people. what a wonderful man. what a wonderful man i stand next to, at a former senator, a former vice president. mr. vice president, dan quayle. >> thank you. thank you. welcome. welcome. thank you very much. welcome to the great state of arizona in this historic place. people know this very well. this is arizona. my grandfather lived about three blocks from here. it is down here. what a place i have called home for a long time. today we are here to give our

enthusiasm for the next president of the united states of america, mitt romney. step back just a moment with me and see where america is today. just last month, we learned that 300,000 americans dropped out of the workforce. unemployment is still at an all- time high. 80% of the american people say the country is headed in wrong direction. america around the world has lost respect and credibility. my friends, washington is a mess. we need to send mitt romney to

washington to fix the mess out there. under president obama's leadership, our nation's capital has become dysfunctional. we have to figure out to is the best person to go to washington and turn things around. this is not a washington politician. it is not a washington insider. it is someone who you have a balanced budget and comes from the private sector and knows how to create jobs and knows how to fix problems. there is one big problem in in washington, d.c. that these to be fixed. that is to get rid of president obama. [applause] in selecting the next president

of the united states, i think there are four important criteria that we should examine. first is leadership. second is character. third, a conservative philosophy. fourth, electability. let's take this one at a time. leadership. the governor romney has leadership in the private sector. he has balanced budgets, cut taxes, reduced regulations. in utah, he has a great record creating jobs. leaders make decisions. leaders have to have the courage to make decisions. you also have to have a vision. but you have to have the tools

to implement that. mitt romney is a leader. [applause] character. the most important virtue is its integrity. without integrity, you do not have integrity. if you do not have integrity, you do not have trustworthiness. the american people want to believe in their leaders. they want to see a man of integrity. he is here his whole life. he is mr. integrity. believe me. we need that more than ever in our nation's capital.

conservative values. our values are the same. we understand the importance of a limited government. we understand that reducing taxes create jobs. we understand the importance of a strong national defense. the values of ronald reagan, of my boss, who i spoke to the other day. he spent his very best. the conservative values need to return to the white house. mitt romney house those conservative values. -- has those conservative values. electability. who is our best hope to take on president obama? mitt romney. i tell you one thing. the obama people believe he is

the toughest competitor. they did not want to run against him. he is our best hope. he will change the direction of america. he will reach out to disenchanted democrats. to people from all walks of life. different religions. he will bring america together again. he is our best hope for the future. i am here today to give you my enthusiastic endorsements. i am confident that you will be our nominee. i am even more confident that you will be the next president of the united states of america.

>> thank you. that is quite a speaker. are you available to all over the country with me? thank you. i want to thank each of you for being here. i was very moved by the fis president. i hope to live up to his confidence. i look forward to be the nominee. i believe i can post against president obama. i believe i could represent the values we share. i will hold true to the values that americans love. i love my family. my faith. my country. i appreciate the spirit of enterprise and pioneering that keeps america economically strong. i love our men and women in uniform. it is important for us to provide for them.

the best equipment in the world. the best protection in the world. we owe them our greatest support. i am honored to be with you today to share this announcement. we have the vice president on our team. it is so good to be with you today. ♪ i was born free i was born free ♪ [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> we will have more road to the white house coverage tomorrow. live coverage get underway at 9:00 a.m. eastern on c-span [applause]

later in the day, remarks from newt gingrich, rick perry, and michele bocachmann. that will be live on c-span3. >> care what the candidates are saying from the campaign trail from the new website for campaign 2012. >> this is a time for america to get serious about our challenges. i will not go through all of them. the big one is our budget and are spending. >> if investment is not landing in market place, then it is landing somewhere else. this is a coward. it will flee were ever it is. if it is the landing in your marketplace, i am not an opponent. they have the idea of a consumption based tax. that is an interesting theory.

it makes sense. to go through that debate right now and have a two-year fix, we need to do something now. >> this is all as c- span.org/campaign2012. >> president obama was in kansas to discuss the economy and job legislation and the show tax. >> this is about one hour.

>> thank you, everybody. please, please have a seat. thank you so much. thank you. good afternoon, everybody. well, i want to start by thanking a few folks who've joined us today. we've got the mayor of osawatomie, phil dudley is here. we have your superintendent gary french in the house. and we have the principal of osawatomie high, doug chisam. and i have brought your former governor, who is doing now an outstanding job as secretary of health and human services -- kathleen sebelius is in the house.

we love kathleen. well, it is great to be back in the state of tex state of kansas. i was giving bill self a hard time, he was here a while back.

as many of you know, i have roots here. i'm sure you're all familiar with the obamas of osawatomie. actually, i like to say that i got my name from my father, but i got my accent -- and my values -- from my mother. she was born in wichita. her mother grew up in augusta. her father was from el dorado. so my kansas roots run deep. my grandparents served during world war ii. he was a soldier in patton's army, she was a worker on a bomber assembly line. and together, they shared the optimism of a nation that triumphed over the great depression and over fascism. they believed in an america

where hard work paid off, and responsibility was rewarded, and anyone could make it if they tried -- no matter who you were, no matter where you came from, no matter how you started out. and these values gave rise to the largest middle class and the strongest economy that the world has ever known. it was here in america that the most productive workers, the most innovative companies turned out the best products on earth. and you know what?

every american shared in that pride and in that success -- from those in the executive suites to those in middle management to those on the factory floor. so you could have some confidence that if you gave it your all, you'd take enough home to raise your family and send your kids to school and have your health care covered, put a little away for retirement. today, we're still home to the world's most productive workers. we're still home to the world's most innovative companies. but for most americans, the basic bargain that made this country great has eroded. long before the recession hit, hard work stopped paying off for too many people. fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success. those at the very top grew wealthier from their incomes and their investments -- wealthier than ever before.

but everybody else struggled with costs that were growing and paychecks that weren't -- and too many families found themselves racking up more and more debt just to keep up. now, for many years, credit cards and home equity loans papered over this harsh reality. but in 2008, the house of cards collapsed. we all know the story by now: mortgages sold to people who couldn't afford them, or even sometimes understand them. banks and investors allowed to keep packaging the risk and selling it off. huge bets -- and huge bonuses -- made with other people's money on the line. regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn't have the authority to look at all.

it was wrong. it combined the breathtaking greed of a few with irresponsibility all across the system. and it plunged our economy and the world into a crisis from which we're still fighting to recover. it claimed the jobs and the homes and the basic security of millions of people -- innocent, hardworking americans who had met their responsibilities but were still left holding the bag. and ever since, there's been a raging debate over the best way to restore growth and prosperity, restore balance, restore fairness. throughout the country, it's sparked protests and political movements -- from the tea party to the people who've been occupying the streets of new york and other cities.

it's left washington in a near- constant state of gridlock. it's been the topic of heated and sometimes colorful discussion among the men and women running for president. but, osawatomie, this is not just another political debate. this is the defining issue of our time. this is a make-or-break moment for the middle class, and for all those who are fighting to get into the middle class. because what's at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, secure their retirement. now, in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. after all that's happened, after the worst economic crisis, the worst financial crisis since the great depression, they want

to return to the same practices that got us into this mess. in fact, they want to go back to the same policies that stacked the deck against middle- class americans for way too many years. and their philosophy is simple: we are better off when everybody is left to fend for themselves and play by their own rules. i am here to say they are wrong. i'm here in kansas to reaffirm my deep conviction that we're greater together than we are on our own.

i believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share, when everyone plays by the same rules. these aren't democratic values or republican values. these aren't 1 percent values or 99 percent values. they're american values. and we have to reclaim them. [applause] you see, this isn't the first time america has faced this choice. at the turn of the last

century, when a nation of farmers was transitioning to become the world's industrial giant, we had to decide: would we settle for a country where most of the new railroads and factories were being controlled by a few giant monopolies that kept prices high and wages low? would we allow our citizens and even our children to work ungodly hours in conditions that were unsafe and unsanitary? would we restrict education to the privileged few? because there were people who thought massive inequality and exploitation of people was just the price you pay for progress.

theodore roosevelt disagreed. he was the republican son of a wealthy family. he praised what the titans of industry had done to create jobs and grow the economy. he believed then what we know is true today, that the free market is the greatest force for economic progress in human history. it's led to a prosperity and a standard of living unmatched by the rest of the world. but roosevelt also knew that the free market has never been a free license to take whatever you can from whomever you can. he understood the free market only works when there are rules of the road that ensure competition is fair and open and honest. and so he busted up monopolies, forcing those companies to compete for consumers with better services and better prices. and today, they still must. he fought to make sure businesses couldn't profit by exploiting children or selling food or medicine that wasn't

safe. and today, they still can't. and in 1910, teddy roosevelt came here to osawatomie and he laid out his vision for what he called a new nationalism. "our country," he said, ",means nothing unless it means the triumph of a real democracy, of an economic system under which each man shall be guaranteed the opportunity to show the best that there is in him." now, for this, roosevelt was called a radical.

he was called a socialist even a communist. but today, we are a richer nation and a stronger democracy because of what he fought for in his last campaign: an eight- hour work day and a minimum wage for women insurance for the unemployed and for the elderly, and those with disabilities, political reform and a progressive income tax. today, over 100 years later, our economy has gone through another transformation. over the last few decades, huge advances in technology have allowed businesses to do more with less, and it's made it easier for them to set up shop and hire workers anywhere they want in the world.

and many of you know firsthand the painful disruptions this has caused for a lot of americans. factories where people thought they would retire suddenly picked up and went overseas, where workers were cheaper. steel mills that needed 100 -- or 1,000 employees are now able to do the same work with 100 employees, so layoffs too often became permanent, not just a temporary part of the business cycle. and these changes didn't just affect blue-collar workers. if you were a bank teller or a phone operator or a travel agent, you saw many in your profession replaced by atms and the internet.

today, even higher-skilled jobs, like accountants and middle management can be outsourced to countries like china or india. and if you're somebody whose job can be done cheaper by a computer or someone in another country, you don't have a lot of leverage with your employer when it comes to asking for better wages or better benefits, especially since fewer americans today are part of a union. now, just as there was in teddy roosevelt's time, there is a certain crowd in washington who, for the last few decades, have said, let's respond to this economic challenge with the same old tune. "the market will take care of everything," they tell us. if we just cut more regulations and cut more taxes -- especially for the wealthy -- our economy will grow stronger. sure, they say, there will be winners and losers. but if the winners do really well, then jobs and prosperity will eventually trickle down to everybody else.

and, they argue, even if prosperity doesn't trickle down, well, that's the price of liberty. now, it's a simple theory. and we have to admit, it's one that speaks to our rugged individualism and our healthy skepticism of too much government. that's in america's dna. and that theory fits well on a bumper sticker. but here's the problem: it doesn't work. it has never worked. [applause]

it didn't work when it was tried in the decade before the great depression. it's not what led to the incredible postwar booms of the '50s and '60s. and it didn't work when we tried it during the last decade. i mean, understand, it's not as if we haven't tried this theory. remember in those years, in 2001 and 2003, congress passed two of the most expensive tax cuts for the wealthy in history. and what did it get us? the slowest job growth in half a century. massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of americans reach and stay in the middle class -- things like education and infrastructure, science and technology, medicare and social security.

remember that in those same years, thanks to some of the same folks who are now running congress, we had weak regulation, we had little oversight, and what did it get us? insurance companies that jacked up people's premiums with impunity and denied care to patients who were sick, mortgage lenders that tricked families into buying homes they couldn't afford, a financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy. we simply cannot return to this brand of "you're on your own" economics if we're serious about rebuilding the middle class in this country.

we know that it doesn't result in a strong economy. it results in an economy that invests too little in its people and in its future. we know it doesn't result in a prosperity that trickles down. it results in a prosperity that's enjoyed by fewer and fewer of our citizens. look at the statistics. in the last few decades, the average income of the top 1 percent has gone up by more than 250 percent to $1. 2 million per year. i'm not talking about millionaires, people who have a million dollars. i'm saying people who make a million dollars every single year. for the top one hundredth of 1 percent, the average income is now $27 million per year.

the typical ceo who used to earn about 30 times more than his or her worker now earns 110 times more. and yet, over the last decade the incomes of most americans have actually fallen by about 6 percent. now, this kind of inequality -- a level that we haven't seen since the great depression -- hurts us all. when middle-class families can no longer afford to buy the goods and services that businesses are selling, when people are slipping out of the middle class, it drags down the entire economy from top to bottom. america was built on the idea of broad-based prosperity, of strong consumers all across the country. that's why a ceo like henry ford made it his mission to pay his workers enough so that they

could buy the cars he made. it's also why a recent study showed that countries with less inequality tend to have stronger and steadier economic growth over the long run. inequality also distorts our democracy. it gives an outsized voice to the few who can afford high- priced lobbyists and unlimited campaign contributions, and it runs the risk of selling out our democracy to the highest bidder. it leaves everyone else rightly suspicious that the system in washington is rigged against them, that our elected representatives aren't looking out for the interests of most americans. but there's an even more fundamental issue at stake. this kind of gaping inequality gives lie to the promise that's at the very heart of america:

that this is a place where you can make it if you try. we tell people -- we tell our kids -- that in this country, even if you're born with nothing, work hard and you can get into the middle class. we tell them that your children will have a chance to do even better than you do. that's why immigrants from around the world historically have flocked to our shores. and yet, over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk. you know, a few years after

world war ii, a child who was born into poverty had a slightly better than 50-50 chance of becoming middle class as an adult. by 1980, that chance had fallen to around 40 percent. and if the trend of rising inequality over the last few decades continues, it's estimated that a child born today will only have a one-in- three chance of making it to the middle class -- 33 percent. it's heartbreaking enough that there are millions of working families in this country who are now forced to take their children to food banks for a decent meal. but the idea that those children might not have a chance to climb out of that situation and back into the middle class, no matter how hard they work? that's inexcusable.

it is wrong. it flies in the face of everything that we stand for. now, fortunately, that's not a future that we have to accept, because there's another view about how we build a strong middle class in this country -- a view that's truer to our history, a vision that's been embraced in the past by people of both parties for more than 200 years.

it's not a view that we should somehow turn back technology or put up walls around america. it's not a view that says we should punish profit or success or pretend that government knows how to fix all of society's problems. it is a view that says in america we are greater together -- when everyone engages in fair play and everybody gets a fair shot and everybody does their fair share. so what does that mean for restoring middle-class security in today's economy? well, it starts by making sure that everyone in america gets a fair shot at success. the truth is we'll never be able to compete with other countries when it comes to who's best at letting their businesses pay the lowest wages, who's best at busting unions, who's best at letting companies pollute as

much as they want. that's a race to the bottom that we can't win, and we shouldn't want to win that race. those countries don't have a strong middle class. they don't have our standard of living. the race we want to win, the race we can win is a race to the top -- the race for good jobs that pay well and offer middle-

class security. businesses will create those jobs in countries with the highest-skilled, highest- educated workers, the most advanced transportation and communication, the strongest commitment to research and technology. the world is shifting to an innovation economy and nobody does innovation better than america. nobody does it better. no one has better colleges. nobody has better universities. nobody has a greater diversity of talent and ingenuity. no one's workers or entrepreneurs are more driven or more daring. the things that have always been our strengths match up perfectly with the demands of the moment. but we need to meet the moment. we've got to up our game. we need to remember that we can only do that together. it starts by making education a national mission -- a national mission.

government and businesses, parents and citizens. in this economy, a higher education is the surest route to the middle class. the unemployment rate for americans with a college degree or more is about half the national average. and their incomes are twice as high as those who don't have a high school diploma. which means we shouldn't be laying off good teachers right now -- we should be hiring them.

we shouldn't be expecting less of our schools - we should be demanding more. we shouldn't be making it harder to afford college -- we should be a country where everyone has a chance to go and doesn't rack up $100,000 of debt just because they went. in today's innovation economy, we also need a world-class commitment to science and research, the next generation of

high-tech manufacturing. our factories and our workers shouldn't be idle. we should be giving people the chance to get new skills and training at community colleges so they can learn how to make wind turbines and semiconductors and high-powered batteries. and by the way, if we don't have an economy that's built on bubbles and financial speculation, our best and brightest won't all gravitate towards careers in banking and finance. because if we want an economy that's built to last, we need more of those young people in science and engineering. this country should not be known for bad debt and phony profits. we should be known for creating and selling products all around the world that are stamped with three proud words: made in america.

today, manufacturers and other companies are setting up shop in the places with the best infrastructure to ship their products, move their workers, communicate with the rest of the world. and that's why the over 1 million construction workers who lost their jobs when the housing market collapsed, they shouldn't be sitting at home with nothing to do. they should be rebuilding our roads and our bridges, laying down faster railroads and broadband, modernizing our schoolsall the things other countries are already doing to attract good jobs and businesses to their shores.

yes, business, and not government, will always be the primary generator of good jobs with incomes that lift people into the middle class and keep them there. but as a nation, we've always come together, through our government, to help create the conditions where both workers and businesses can succeed. and historically, that hasn't been a partisan idea. franklin roosevelt worked with democrats and republicans to give veterans of world war ii -- including my grandfather, stanley dunham -- the chance to

go to college on the g. i. bill. it was a republican president, dwight eisenhower, a proud son of kansaswho started the interstate highway system, and doubled down on science and research to stay ahead of the soviets. of course, those productive investments cost money. they're not free. and so we've also paid for these investments by asking everybody to do their fair share. look, if we had unlimited resources, no one would ever have to pay any taxes and we would never have to cut any spending.

but we don't have unlimited resources. and so we have to set priorities. if we want a strong middle class, then our tax code must reflect our values. we have to make choices. today that choice is very clear. to reduce our deficit, i've already signed nearly $1 trillion of spending cuts into law and i've proposed trillions more, including reforms that would lower the cost of medicare and medicaid. but in order to structurally close the deficit, get our fiscal house in order, we have to decide what our priorities are. now, most immediately, short term, we need to extend a payroll tax cut that's set to expire at the end of this month. if we don't do that, 160 million americans, including most of the people here, will see their taxes go up by an average of $1,000 starting in january and it would badly weaken our recovery. that's the short term. in the long term, we have to

rethink our tax system more fundamentally. we have to ask ourselves: do we want to make the investments we need in things like education and research and high-tech manufacturing -- all those things that helped make us an economic superpower? or do we want to keep in place the tax breaks for the wealthiest americans in our country? because we can't afford to do both. that is not politics. that's just math. [applause] now, so far, most of my republican friends in washington have refused under any circumstance to ask the wealthiest americans to go to the same tax rate they were paying when bill clinton was president. so let's just do a trip down memory lane here. keep in mind, when president clinton first proposed these tax increases, folks in congress predicted they would kill jobs and lead to another recession. instead, our economy created nearly 23 million jobs and we eliminated the deficit.

today, the wealthiest americans are paying the lowest taxes in over half a century. this isn't like in the early '50s, when the top tax rate was over 90 percent. this isn't even like the early '80s, when the top tax rate was about 70 percent. under president clinton, the top rate was only about 39 percent. today, thanks to loopholes and shelters, a quarter of all millionaires now pay lower tax rates than millions of you,

millions of middle-class families. some billionaires have a tax rate as low as 1 percent. one percent. that is the height of unfairness. it is wrong. it's wrong that in the united states of america, a teacher or a nurse or a construction worker, maybe earns $50,000 a year, should pay a higher tax rate than somebody raking in $50 million. it's wrong for warren buffett's secretary to pay a higher tax rate than warren buffett.

and by the way, warren buffett agrees with me. so do most americans -- democrats, independents and republicans. and i know that many of our wealthiest citizens would agree to contribute a little more if it meant reducing the deficit and strengthening the economy that made their success possible. this isn't about class warfare. this is about the nation's welfare. it's about making choices that benefit not just the people who've done fantastically well over the last few decades, but that benefits the middle class, and those fighting to get into the middle class, and the economy as a whole.

finally, a strong middle class can only exist in an economy where everyone plays by the same rules, from wall street to main street. as infuriating as it was for all of us, we rescued our major banks from collapse, not only because a full-blown financial meltdown would have sent us into a second depression, but because we need a strong, healthy financial sector in this country. but part of the deal was that we wouldn't go back to business as usual. and that's why last year we put in place new rules of the road that refocus the financial sector on what should be their

core purpose: getting capital to the entrepreneurs with the best ideas, and financing millions of families who want to buy a home or send their kids to college. now, we're not all the way there yet, and the banks are fighting us every inch of the way. if you are a big bank or risky financial institution, you have to ride out a giving well that he tells how you will pay the bill if you fail so the taxpayers are never on the hook for wall street's mistakes. there are also limits on the side of banks. new abilities to dismantle a

firm. the new law bans banks from making risky bets on deposits. it gives shareholders a say on executive salaries. this is the lot that we passed during the process of limiting it now. place as we speak. institution whose business model is built on breaking the law, cheating consumers and making risky bets that could damage the entire economy, you should have nothing to fear from these new rules. some of you may know, my grandmother worked as a banker for most of her life -- worked her way up, started as a secretary, ended up being a vice president of a bank. and i know from her, and i know from all the people that i've come in contact with, that the

vast majority of bankers and financial service professionals, they want to do right by their customers. they want to have rules in place that don't put them at a disadvantage for doing the right thing. and yet, republicans in congress are fighting as hard as they can to make sure that these rules aren't enforced. i'll give you a specific example. for the first time in history, the reforms that we passed put in place a consumer watchdog who is charged with protecting everyday americans from being taken advantage of by mortgage lenders or payday lenders or debt collectors. and the man we nominated for the post, richard cordray, is a former attorney general of ohio who has the support of most attorney generals, both democrat and republican, throughout the country. nobody claims he's not qualified. but the republicans in the

senate refuse to confirm him for the job, they refuse to let him do his job. why? does anybody here think that the problem that led to our financial crisis was too much oversight of mortgage lenders or debt collectors? of course not. every day we go without a consumer watchdog is another day when a student, or a senior citizen, or a member of our armed forces -- because they are very vulnerable to some of this stuff -- could be tricked into a loan that they can't afford -- something that happens all the time. and the fact is that financial institutions have plenty of lobbyists looking out for their interests. consumers deserve to have someone whose job it is to look out for them. and i intend to make sure they do.

and i want you to hear me, kansas: i will veto any effort to delay or defund or dismantle the new rules that we put in place. we shouldn't be weakening oversight and accountability. we should be strengthening oversight and accountability. i'll give you another example. too often, we've seen wall street firms violating major anti-fraud laws because the penalties are too weak and there's no price for being a repeat offender.

no more. i'll be calling for legislation that makes those penalties count so that firms don't see punishment for breaking the law as just the price of doing business. the fact is this crisis has left a huge deficit of trust between main street and wall street. and major banks that were rescued by the taxpayers have an obligation to go the extra mile in helping to close that deficit of trust. at minimum, they should be remedying past mortgage abuses that led to the financial crisis. they should be working to keep responsible homeowners in their home. we're going to keep pushing them to provide more time for unemployed homeowners to look for work without having to worry about immediately losing

their house. the big banks should increase access to refinancing opportunities to borrowers who haven't yet benefited from historically low interest rates. and the big banks should recognize that precisely because these steps are in the interest of middle-class families and the broader economy, it will also be in the banks' own long- term financial interest. what will be good for consumers over the long term will be good for the banks. investing in things like education that give everybody a chance to succeed. a tax code that makes sure everybody pays their fair share. and laws that make sure everybody follows the rules. that's what will transform our economy. that's what will grow our middle class again.

in the end, rebuilding this economy based on fair play, a fair shot, and a fair share will require all of us to see that we have a stake in each other's success. and it will require all of us to take some responsibility. it will require parents to get more involved in their children's education. it will require students to study harder. it will require some workers to start studying all over again. it will require greater responsibility from homeowners not to take out mortgages they can't afford. they need to remember that if something seems too good to be true, it probably is. it will require those of us in public service to make government more efficient and more effective, more consumer- friendly, more responsive to people's needs.

that's why we're cutting programs that we don't need to pay for those we do. that's why we've made hundreds of regulatory reforms that will save businesses billions of dollars. that's why we're not just throwing money at education, we're challenging schools to come up with the most innovative reforms and the best results. and it will require american business leaders to understand that their obligations don't just end with their shareholders. andy grove, the legendary former ceo of intel, put it best. he said, "there is another obligation i feel personally, given that everything i've achieved in my career, and a lot of what intel has achieved,were made possible by a climate of democracy, an economic climate

and investment climate provided by the united states." this broader obligation can take many forms. at a time when the cost of hiring workers in china is rising rapidly, it should mean more ceos deciding that it's time to bring jobs back to the united states not just because it's good for business, but because it's good for the country that made their business and their personal success possible. i think about the big three auto companies who, during recent negotiations, agreed to create more jobs and cars here in america, and then decided to

give bonuses not just to their executives, but to all their employees, so that everyone was invested in the company's success. i think about a company based in warroad, minnesota. it's called marvin windows and doors. during the recession, marvin's competitors closed dozens of plants, let hundreds of workers go. but marvin's did not lay off a single one of their 4,000 or so employees -- not one. in fact, they've only laid off workers once in over a hundred years. mr. marvin's grandfather even kept his eight employees during the great depression.

now, at marvin's when times get tough, the workers agree to give up some perks and some pay, and so do the owners. as one owner said, "you can't grow if you're cutting your lifeblood -- and that's the skills and experience your workforce delivers." for the ceo of marvin's, it's about the community. he said, "these are people we went to school with. we go to church with them. we see them in the same restaurants. indeed, a lot of us have married local girls and boys. we could be anywhere, but we are in warroad."

that's how america was built. that's why we're the greatest nation on earth. that's what our greatest companies understand. our success has never just been about survival of the fittest. it's about building a nation where we're all better off. we pull together. we pitch in. we do our part. we believe that hard work will pay off, that responsibility will be rewarded, and that our children will inherit a nation where those values live on. and it is that belief that rallied thousands of americans to osawatomie maybe even some of your ancestors -- on a rain- soaked day more than a century ago.

by train, by wagon, on buggy, bicycle, on foot, they came to hear the vision of a man who loved this country and was determined to perfect it. "we are all americans," teddy roosevelt told them that day. "our common interests are as broad as the continent." in the final years of his life, roosevelt took that same message all across this country, from tiny osawatomie to the heart of new york city, believing that no matter where he went, no matter who he was talking to, everybody would benefit from a country in which

everyone gets a fair chance. and well into our third century as a nation, we have grown and we've changed in many ways since roosevelt's time. the world is faster and the playing field is larger and the challenges are more complex. but what hasn't changed -- what can never change -- are the values that got us this far. we still have a stake in each other's success. we still believe that this should be a place where you can make it if you try. and we still believe, in the words of the man who called for a new nationalism all those years ago, "the fundamental rule of our national life," he said, "the rule which underlies all

others -- is that, on the whole, and in the long run, we shall go up or down together." and i believe america is on the way up. thank you. god bless you. god bless the united states of america. [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute]

>> and up next, a hearing on stock trading and the congress. they look at legislation double allow congress to place their stocks and bonds into a blind trust. and did that mitt romney is endorsed by quayle. mitt romney and rick santorum and jon huntsman at the republican jewish coalition

forum. let coverage at 9:00 eastern. later in the day, new gingrich, rick perry, and michelle kaufman. that is live at 2:00 eastern on c-span-3. it would prohibit lawmakers from stock trading based on information on capitol hill. this comes after "60 minutes" aired last month an episode about congress and insider trading. this hearing is over 3.5 hours. >> the hearing will come to order. the committee on financial services has been convened. today we will examine an issue that has received a significant

amount of information in recent weeks. the american people deserve an answer to questions that have been raised about whether insider-trading laws apply to members of congress or their staffs. they also have an absolute right to demand that people they elect to represent them in congress conduct themselves according to hawaii cells of standards and to do not seek to profit from their positions. during this hearing, we will address the concern. we will seek to learn whether members of congress or any citizen is exempt of the law. we will discuss h.r. 1148, to stop trading on congressional knowledge act. accordingly, we will hear from several witnesses today including the sponsors of h.r. 1148, our colleagues, the director of enforcement at the securities and exchange commission and other experts on

the subject. i think all of the witness for appearing today and look forward to hearing your testimony. i especially want to thank them for turning us to talk about the bill is sponsored. i will now recognize democratic member for the opening statement. miss maloney for one minute. i am proud to be a sponsor of hr 1148 as they have been at the

last congress. i am pleased to see we are moving with great speed to address this issue. it will hopefully passage into law. elected officials really should be like caesar's wife and avoiding the appearance of impropriety. the potential trading of insider information within these walls is undeniable. we needed to move to address it. while the sec has said recently that insider trading laws applies to members, i cannot remember the last prosecution under any existing laws. the house ethics committee has said house rules prohibit members and their staff from entering into personal transactions. we need it to ban this. it remains clear to me that the need to prohibit this activity in statute cannot be overstated.

this bill is needed and action on it is long overdue. i have a series of editorials i would like to place in the record, all of whom support this bill and say we should have passed that yesterday. i look forward to your testimony. >> thank you. >> thank you for calling this hearing. i think my colleagues on the panel for their leadership in this area. before we debate any policy, i think it is critical we get right the principles that apply here. with the exception of statutory compensation, the american people have to have confidence that members of congress will not profit from their office. second, with the exception of the speech and debate clause enshrined in our constitution, our constituents deserve to know members of congress are going to be living under the same laws

that apply to them. people need to know that these principles are a -- >> 60 minutes still enjoys pretty good ratings at least since i heard about this on several occasions. our constituents also deserve the facts. let me quote from one of our witnesses from the congressional research service, i think it is fairly clear to everyone following this issue that congress did not exempt itself from insider trading laws. i also note under our house ethics rules, we are prohibited from using their official positions for personal gain. the subject matter of today's hearing is very important. before we prescribe a remedy, let's make sure we have identified the root problems. the problem may be inadequate

disclosure. it may lie in state statutory definitions. it does not appear to like in a congressional extension. wherever it lies the american people demand accountability. we owe it to them to provide it. i yield back the balance of my time. >> mr. scott for three minutes. >> thank you injury much. i want to commend our fellow members of congress who have taken the bold leadership on this legislation. you are to be commended. i want to thank you, mr. chairman, for holding this hearing today on stock trading. it is very important that we honor the trust of the american people that is placed on members of congress. the stock act would bar members of congress and federal

employees from profiting from information that is not publicly available. the obtained from means of their elected positions. the stock act would affect from prohibiting somebody from buying or selling a commodity for future delivery or swap while in possession of material information that is not public. it is very important and should be the case. currently insider information is not required by law. there have been reports by congress and their staffs have been engaging. i find this troubling. i believe my house colleagues and i should be subject to the very same roles as those who are not directly affected by

congress. some have questioned the legislation's narrow scope. i think this deserves a particular mention. that is its application to all the material and nonpublic information relating to pending legislation and the omission of the executive branch. i will be happy to find out how our when this is the legislation and discussion today. what should be done to increase this narrow focus -- the focus and the effectiveness of that. if we feel is necessary. i look forward to this hearing. thank you very much. the american people are depending on us to do the right thing and play by the same rules that all of the american people are playing by when it comes to trading on the exchanges. thank you.

>> i want to see us strengthen the laws as it applies to insider-trading as it can be practiced. i think that many people look at the government today and see it is entered into every facet of the economy. we have massive federal spending. we have taxation -- >> we have the government intervene in the economy on behalf of some firms and not others. with that increase in size and increased influence, there is a heightened sense that political pull and insider knowledge are enriching a select few. it is that perception of chronic capitalism which threatens our free enterprise system and our republic. it is that perception will have to address in congress. washington must be held to a higher standard. whether this is achieved through

the stock act or mr. duffy's legislation which i am a co- sponsor, i believe at the end of the day now is the time to act. after this hearing we should mark up legislation. i look forward to hearing the witnesses with their testimony here this morning. i yield back. >> thank you. i want to express my admirers and for the efforts of my colleagues. i will acknowledge during the four years i chaired the committee, it was during that period i think his first surfaced. i did not see it incorrectly as an issue. it seemed inconceivable that members of congress would be doing that. i now accept the fact that has been happening and it is both a matter of right and a matter of what we owe the country to correct it. i think my colleagues for

persevering. i still think the best thing to do for members of congress is to be very cautious. to some extent there are going to be here is the knowledge that will be hard to capture under the law. our prediction of how i vote will go if you do not have all the commitments it signed in your pocket probably would not be inside information but is something that ought not to be there. i will say this had occurred to me some time ago as a potential issue. i say it the best i can. almost all of my investments are massachusetts municipal bonds, which also have done pretty good lady because the rating agencies under estimate the commitment of the states. if anything i have acted against interest because i have been urging the rating agencies to reduce the risk component which would make interest rates go down. iowa acknowledged the fact i and do it -- getting an unduly high

return because of the nonexistent possibility of default occurred i also thought that owning the bonds of the state that i am joined it to represent what minimize any effort of conflict of interest that i propose anything that would undermine the fiscal soundness of the state of represent. how would presume that would be considered to be ok. there is an area of ambiguity, i think it is important we passed a such a solution. i think my colleagues for doing it. i am skeptical of the blind trust. begot a last-minute entry into the -- to talk about mandatory blank trust. i think there is problems with trust being blind and supervising who the trustee is. i believe the press my colleagues have taken as a very thoughtful one. i will be working to sharpen the

legislation, most important legislative principle, redundancy is clearly preferable to ambiguity when you are passing laws. when we know some of these are telling us it is unnecessary. one would argue it was too ambiguous. let's clear this up. thank you. >> thank you. mr. duffy 40 dead minutes. >> thank you mr. chairman. i think there is a cloud over members of congress and the trade today make it. whether that is just a perception or whether there is really wrong doing, i do not know. i would commend him for introducing this bill. it is a first that in the right direction. i think we have to go a step for which it further, we cannot take

half of a step here. we have to take the full step and leave no gray area with what members of the house, members of the senate, the president, or the judicial branch do with regard to the trade. that is why i introduced house bill 3550. we mandate that each member have a blind trust. if they opt out of the blind trust, they have full disclosure of trades within three business days of that trade. if we do that, and will shed light on any trade that goes on with members of senior staff. if there was a meeting with a high ranking business of official and three days later or two days later a member was trading, we will be able to see that. i think that the media transparency is imperative if we will introduce legislation that will get the job done. my fear is if you only take half of a step, there will be too much gray for members of the public to see that members could

spurred a round in the do role. i think my bill goes the difference and makes sure there will be no doubt in the minds of the american people that members of congress, the executive branch, or the judiciary will use insider information. i will yield back. >> thank you, mr. duffy. mr. lynch for one minute. >> thank you. i want to thank our distinguished panel and sponsors of this legislation for coming forward. i certainly think reset legislations have -- revelations have created doubts in the integrity of the entire progress on whether members are capitalizing on insider information, so i am a co- sponsor of mr. walter's delaware. i think it needs to be addressed.

i think we need to do it quick and in a fashion i think restores in america oppose the confidence that we are operating aboveboard and not taking advantage of our position. i want to congratulate sponsors of this bill, mr. jones and mrs. slaughter as well. thank you very much. i yield back the balance of my time. hearing focuses on a specific piece of legislation, i feel the greater discussion revolves around the public perception of washington and the lack of trust with voters across the country have and their elected leaders. i think it is clear that if a member of congress trade off of nonpublic information as it is defined for private citizens to trade off of such information, there should be penalties and

accountability. we also must keep in mind innuendo and that research do not make for a justifiable allegations against members of congress. i feel the stock act offers a completely unworkable solution to the allegations. the bill would likely lead to political witch hunts. judging by language in section 3 could disavow a member of congress from ever getting in front of a camera again to discuss pending legislation. this would have a perverse effects of increasing transparency and rubbing the public's trust and watched it. i feel there are better ways to address this resolution. i have introduced a house bill that were required every member of congress plus assets and a blind trust or disclose all trading activity on a monthly basis for the public to see. the resolution bars insider trading by members of congress and krantz enforcement power to

the house committee on ethics. thereby avoiding constitutional problem of having an executive agency investigating the legislative branch. i yield back the balance of my time. >> thank you mr. chairman. in the 1960's when a americans were asked in polls, they believed their government officials could be counted on to do the right thing to try to do the right thing, the overwhelmingly said yes. they might not agree with decisions but they did that question the motives.

they thought the people held in positions of their democracy came from the people and wanted to do the right thing by their country. there are patriotic americans just like other americans. that trust is now on. in polling now, overwhelmingly americans do not think that people who hold their positions in government -- that is toxic for our democracy. we cannot survive this democracy unless there's more confidence in our elected officials that there is now. part of that is the effort to discredit everything the government does. part of that is the result of the financial crisis. most americans think everything done in the financial crisis was done to help specific institutions and specific people, not to help the economy. there is truth to that. part of it is a result of another story on 60 minutes -- although it has been widely reported is the carrier to prosecute in the face of what

appears to be clear evidence of criminal misconduct. certainly in a democracy nobody can be too big to prosecute. finally this. there has to be an understanding that people have to believe and has to be true -- it has to be true that people in responsible positions are not using positions to enrich themselves. we have got to restore the trust of the american people and their democracy. the first to restoring their trust is to be trustworthy. i yield back the time i do not have. >> we are completed with the opening statements. we have three of our colleagues here to testify, mr. walter johns. where -- representative lewis, and tim waltz. you are free to make an opening statement at this time.

walter, we will start with you. >> thank you. we are living in a time when the american people do not trust congress since the bailout of wall street, the party made off a scandal, the american people have been disappointed in its elected officials concerning financial issues. 60 minutes recently escalated speculation and it raised more questions about those in power not playing by the same rules as the american people. according to many experts, those at the top of the financial world manipulated information to the detriment of the american tax payer and investors big and small. as members of congress, it is our job to follow a strong honor code and it to hold those accountable who are profiting from positions of power.

the american people should never, ever have the slightest perception that we are using our office to patriate our own pockets. that is why i believe in support the start act. is it proper first step and maintained integrity of congress. the introduction of the bill states its purpose. to prohibit commodities and securities trading based on non- public information relating to congress to require additional reporting by members and employees of congress of securities transactions and for other purposes. or there may be some technicalities to the legislation that need to be addressed, i believe h.r. 1148 is a great starting point for this congress. too many people today think financial markets are and bricked casino. regular investors cannot when and where insiders virtually

cannot lose. why should they not think that, mr. chairman? here are three headlines from the last two weeks. secret federal loans gave banks $13 billion. the second to bloomberg reports -- i quote, how henry paulson give hedge funds in advance word of 2008 financial -- fannie mae rescue. this is why the american people are disenchanted with congress. i quote the third, the economic times -- and of global proves and rock era accounting lives on. three years after the financial crisis, the too big to fail banks are even bigger. :the accounting is still being used. backdoor bailouts are being favored. just yesterday i was asked by a

constituent why the banks that received a bailout continue to give millions of dollars in bonuses to their employees. it simply makes no sense. that is why h.r. 1148 is so important. this legislation proves to be a american people that if there is a problem, those of us in congress will fix it. it is of the upmost importance that members of congress maintain the integrity of this institution. we are given a privilege and an opportunity to serve the american people. they deserve to trust those who they like to represent them in washington. mr. chairman, i hope this committee will use this bill, the star act, as a vehicle to expand and build the american people oppose the confidence in this estimate -- institution which they have totally lost. i am pleased to be with my colleagues.

she has been fighting for this for three or four years. tim wants has picked up the ball and is running. let's score a touchdown for the american people. >> thank you, miscast slaughter or chairman slaughter. >> what ever. good morning everybody. thank you for holding this hearing this morning. i want to thank you for acknowledging the need for this legislation. your leadership will be best when you retire at the end of this term. i look forward to working with you and chairman baucus to get this bill passed. in other financial reform will be added to this committee is legacy. i think you for taking this up. the stock act has been a run for five years spurted never gained more than 14 co-sponsors spurted never had a sponsor that notice. we introduced it after increasing reports that members

of congress and staff for a piecing official status for private gain spirit to me it is one of the most important parts of this bill that never gets mentioned, i want to talk about that letter, using congressional nonpublic information to gain an advantage in the stock market. in addition, an academic field had developed a study or members of congress performed better than average in the 1980's and 1990's accurate it was reintroduced in the 110th and 111th congresses purred i testified in 2009 before this committee's oversight and investigations subcommittee. the bill never advanced at all. the bill supported by a broad base of groups, public citizen's, citizens for responsibility and ethics and washington, democracy 21, league of women voters, -- leading up

to the 60 minutes report, we added nine co-sponsors. i think him for the support that he has given us in the legislation. we now have 171 co-sponsors and accounting. it is truly a bipartisan bill. there is not one but two center counterparts -- counterparts. to make up for lost time, the senate held a meeting of the markup of this bill before the end of the year. concert with the other five house committees of jurisdiction. congressional approval as we all know is that 6%. it is hinted at that those are only 6% of people that know and love has personally. thousands of people across the country have been peacefully

protesting to break the intimate relationship between wall street and washington. enacting the stock act is proving that congress is capable of performing internal operations and making sure members are held to the same standards as everyone else when it comes to insider-trading. failing to pass it will send a signal to american people that we have no interest in gaining the approval or reforming a broken system. members of congress and staff have the unique opportunity and it means to make profound and changes in the economy and country and in the world per that comes with an obligation that we do not the train our own private gain. i believe the vast numbers of congress and at this that certain best interests only of their constituents. the two now become here, obviously.

this is about reforming the institution as a whole. by prohibiting the proper use of sensitive information, we will be taking an enormous step while strengthening their public if -- face in our democratic process. i believe some people do not think this is necessary. he will argue the rules could be applied to cases of trading using congressional material and nonpublic information. however, in practice we have never seen these rules apply to congress. this has made the public questioned the accuracy of the rules we have today. that is why this stock act as a multipronged effort to address insider-trading to reduce ambiguity about trading. this requires the sec and futures trading commission and how they can explicitly ban such

training and allow two to enforce the rules. timely financial disclosure similar to what it acquired of washington insiders. i cannot emphasize the pc enough. requires legislation a political intelligence firms similar to what is required by lobbyists. as the author of this bill, this part of this legislation has been totally ignored. let me tell you something about the importance of this bill. this is a whole group of people who survive of political intelligence. says the creation in the 1970's, the so-called political intelligence firms have operated quietly in the back ground without any regulation or oversight. recently the size of this industry has grown considerably drinking and $100 billion a year. these firms are not influenced

and congress are rather using congressional information to influence clients tortola folios. let me read to you a web page for one such group. this is terribly important to me. open up your ears. providing this service for clients who do not want to their interest in an issue publicly known his an activity that does not need to be reported under the lobbying disclosure act. thus providing an additional layer of confidentiality for our clients. how can we possibly allow that to continue? when we pass the stock act, we will be requiring all such lobbying firms to sign up with the house and the senate. for the first time, we will have some idea of what is they are too. the stock act is not banned as

political intelligence firms are requires they be as transparent as the rest of the lobbying industry. i do not -- so said the request is part of the bill has gone so much -- so little attention. it is one of the major parts we need to pass. i thank you hagen for holding this hearing. it is an important step forward. i look forward to working with you at all of the people in this wonderful committee. thank you for your time. >> thank you, congressman walt. >> especial thank you 2 congresswoman slaughter for being engaged in this. prior to congress i was a social studies teacher. i was also an enlisted member of

the national guard. i can hear it for the same reason you did to serve our country and try to make things better. talking about the issues at the american public was frustrated and a doctorate notches policy but how the system worked pretty cynicism that we all recognize. and i% approval rating, that is a disgrace to those who worked so hard to build democracy. it is our responsibility to restore faith. as i got here and started talking about disclosing their marks on line, i was approached by louise slaughter. they said days -- this started explaining the idea of trading on the college. i cannot believe it. that seemed it would be impossible. it seemed impossible anyone would do it. the studies that were done seem to show that low and behold members of congress outperformed the stock market by 6% to 10% on a regular basis that may be done

to the wisdom that presides in the halls. it could be to something different i do not know. my whole point was the idea of serving in congress is the greatest honor your neighbors can bestow upon you. our responsibility is not to have them agree with every political decision we make and have them think we are doing it in their best interest. we could be 100% wrong in their opinion. if they think we are doing give for the right reasons, the face in the democracy is solid. i took callus hours with the sec, professors of law, with powers -- esteemed retired college talking about ways to make it work. i do it with more pleasure. this is not about individuals. i do not think it has never been done before. the perception of how it is

being done is structured i will tell you they are talking about this because their faith in the system is not there. trying to restore this and get it right, and the suggestions are i can tell you if you think 9% approval rating is bad, try to get out and do not do anything. watch what happens. that is not about political reelection, it is about the american people becoming so cynical in the greatest system of governance in the world they are putting things at risk current i encourage you to take a look at this stock act. this is the bare minimum. for those of you saying to take another step, i agree with you. the problem is the first step took 60 is to take a half step. we need to get something done now. i agree with louise, the problem with the tippers' and tippees

has to be addressed in this. for those who say it is already there, that may hold true in a theoretical argument. to the american perception, it is not done. i believe the stock act is the most thoughtful and unequipped -- unintended consequence of bad luck and a greater danger. this is from the former sec chairman. our markets are because they enjoy the highest level of confidence. investors put capital to work in fortunes at risk because the trust the market places on us. they no laws require a fair and open transactions. i would substitute this for the american public. our democracy is a success because people believe they are open and fair and transparent. that is what we are asking to be. i can tell you newspapers in my district, this is a no-brainer. this bill is smart politics and policy and is a dose of what is needed to reduce rapid cynicism.

that is what this is about. it is trying to clarify for the american public their public servants are held not just to the sam law. i but argue we need to hold ourselves to a higher standard. we need to make it clear that when they hear our debates, they differ from us on the substance of the debate, not on our motives. i am thankful, mr. chairman. i look forward to working with each and every member of improving and perfecting this bill. i cannot stress enough that we have a senate counterpart. i would like to think the center spread they have moved forward and promised us a market. i think it is one of the rare occurrences were as congresswoman slaughter says, we are approaching the magic number of to 18. we have the momentum to move this. i look forward to any questions you might have. >> thank you.

i think that was an articulate and effective statement. thank you. i think it expresses a lot of our own views. it is absolutely essentials that we restore the public's trust. there have been some serious allegations. we are aware of that. i am personally aware of them. if this is the answer, so be it. i cannot speak to the committee. -- i cannot speak for the committee. after this hearing, i am perfectly appalling to schedule a markup. >> mr. chairman, in my experience when it comes to a market, yes you can speak for the committee. >> ok. easily have to consult the ranking members. so if you are with me? we will have a market.

>> excellent. happy to hear that. >> i have no questions. i will yield. you have>> i want to say, i wasf those not looking sufficiently at the intelligence. that is an important thing. i noticed this bill will be multiply referred. we have no distinction and that is not legislative over our rules and vice versa. there are first amendment considerations. i will say for people who will say it is a problem with political intelligence, you do not get any stronger than the

first amendment protection for lobbying. it is called the right to petition. regulation of that has been upheld. information has been upheld. i would think that doctrine is there to allow appropriate publicity of these activities because it is important for us to look at. i also wanted to note in the comment, we defer -- as a result, going forward, the power under which the drug reserve made some of those loans has been abolished. i will say i believe the fed acted appropriately. the federal government will make

money on those things. going forward, they will have to be done under more constraints. secondly, as a report of the legislation, no transaction between the federal reserve and many private entity will go unreported. i think what was happened was constructive. current expert opinion is that we went too far in the legislation. it has become too hard. indicative of the fact that we're never able to do anything right. it is either too much or too little. we have gone being accused of being tolerating to fill to fail to now too stingy to belt. -- bail./

we believe that is appropriate and that will affect their behavior. let me ask, of the last point i wanted to make. i heard references as i was coming and, i want to make a bipartisan criticism of the congressional leadership. they are inclined to overuse the full faith and credit clause to shelter as. there have been arguments made supported by the leadership " both parties that even taking bribes can be sheltered from criminal prosecution if the act for which it was taken could be put under the full faith and credit clause. i am telling members now, i will be asking we ought to have a

full discussion of how much we should use it. the clause had an important purpose in the late 1600's. it was to prevent queen elizabeth and king james from prosecuting members of the house of commons who said things they did not want them to say. that is why we cannot be arrested on the way to work. once in parliament, they could not get you. those provisions -- i think it is time to say we're probably safe from queen elizabeth. the first one is long gone. i believe there has been an over use. we will find people try to hide behind it. in addition to what we're doing, it is important to be ready.

we should have a section with our leadership, the narrower the cause is used, the better it will be. prosecuted for things they say on the floor. but it should not be a shield. i kept saying full faith and credit i meant speech and debate. [laughter] i asked for immunity for having made that statement. [laughter] >> i must tell you how much i appreciate your comments. we do not have a necessity for protecting germany from stalling. we need to look at things closely.

>> that has been protected. i have seen indications from both parties leaderships, people have argued that they immunize people. we cannot allow that. >> thank you, mr. chairman. i do not have too many questions. this is an important hearing. i am concerned about the fact that i hope we do not overreact. we have a tendency to do that. i think we have done that in a lot of things. one of them is the reporting requirement within 90 days of

the numbers of people who would have to file. i did not think it would have the knowledge of that within that 90 days. we seem to have a lot of myths around congress. for example, i go back to the district and people say you do not have to pay social security. you get a pension after one day of service. they do not understand the formulas. or with health care, we do not have to pay for health care. some of those things can be driven by the fact there is an understanding of how congress works. we have to be careful so we do not overreact. to bring this to our attention. we have to be careful of that we spell out specifically --

because it is not a normal thing. people come here with very high standards. it seems like it takes the stand. if anybody would like to respond. >> i could not agree more. my largest frustration with the 60 minutes story was if we had passed to this thing, it would have been cleared. my goal was to make sure we did have that. and then when we overreact, we give the impression that everyone is acting in an improper manner. that is not true. i appreciate your words of wisdom. i think he brought up good points in understanding and wanting to fix this in a

measured manner. there's going to be a cynicism among the public that now they are concerned because it was on tv. they have to believe there is a strong desire to make this right. as i said, i cannot speak for my colleagues. i am more than willing to make the changes to improve it. that is how the best legislation is done. we are open to those suggestions. i want to be clear, it is not about shame to the congress, it is being transparency. i think the flat side is, look at the members doing it correctly. that restores faith. >> i yield back.

>> our colleagues have agreed to answer questions from the committee. in deference to the demands on their time, i am hoping we can exercise some restraint and not keeping them all morning. >> thank you for that. i'm supposed to testify and 10 minutes. >> would anybody else like to ask questions? is there anybody on that the -- >> let me thank louise slaughter for initiating this legislation a long time ago. an understanding there may be a serious problem here. i picked up a book and i am reading the so-called accounts

on insider trading by members of congress. is there something to be able to separate owl -- separate out inadvertent action at practice that can be identified by a member? that is what concerns me a little bit. and i think it is important we know the difference between information that may have been picked up. one main and even know the meaning of it than someone who appears to have access to information to trade standards money. is there a difference? >> it says we will not do insider trading for members and staff. as a pointed out, the most important part of this bill is

what we have done in this whole industry. they give confidentiality of their clients because they do not have to report it. it is worth $100 million a we're in -- a year. register with the house on the senate. we do not going to the separation of who does what. it may come as a surprise we're not supposed to do this. i would imagine a staff person would be a delightful tenor companion. to tell what is going on in the committee. no matter how innocently they may do it. the fact other people can make money off that information is something that should give us pause. >> this is a question i asked,

some of these witnesses but our experts in the exchange acts, there is ambiguity how it is written in the first place. some of it is to make sure it could be by chance. but you're not putting somebody under jeopardy or something that was not insider trading. we are always very careful about that. maybe asking those questions is the one we asked of them. they say they have the ability to separate those acts. >> i yield back the balance of my time. >> thank you. the motives of the legislation, it is fine with me.

the issue is disclosure. the disclosure act that we fill out every year, it lists of the stocks and transactions. who is missing from this panel are people that handle mutual funds. i would hope we would have another hearing on this. my mutual funds -- i do not choose which ones they put the money into. every 90 days i get a report as to what the transactions or that take place. >> this is through personal trading. what the staff does. all of us have been some accounts. mutual funds. we're not expected to account for every trade they make. unless you have told them, it

will not be punished and the price of asbestos should go up. >>, i am saying -- >> that was one of the cases. >> what most members of congress do is put their money into mutual funds. i do not actively traded. i own one stock bettis worth $2,000. the rest is all mutual funds. the issue is on compliance. we fill out the annual form and the we get the transactions that took place during the course of the year. i do not have a problem with it but functionally you'll get the 90 day statement at the beginning of those transactions. are you with me? that is why -- we do not have

anybody here that runs an investment house. and be able to take an ordinary portfolio and say these are the functional problems that can happen with regard to disclosure. that is why -- >> [unintelligible] >> i am always hanging around for a halt. you can reach me any time. absolutely. thank you very much. >> my question is, the people who handle the transactions,

they have not been on the witness list. they cannot think of everything. my question is, would you be willing to have another hearing as to the people who would handle the portfolios to make sure they would be able to follow this legislation? i do not have the problem with the nature of it. but the mechanics of it. >> we can explore all sorts of different things. mr. scott? >> it might be helpful if you could get clarity on the question of the narrowness of the application of this legislation. it is limited to nonpublic

information relating to any pending legislation. second, there is an omission of tipping by members of congress and staff. if you could give us some indication as to how this works and why there is an omission of the concerns of tipping by members of congress, and why it is limited only to non-public information material on pending legislation. do we need to strengthen that? >> i think the questions you are bringing out is exactly right. that is why we look to the wisdom of this committee to craft this and bring something to the floor that works.

this narrowed this issue is one we struggled with. you will hear a compelling argument, one that we listened to from a professor on the second panel. some of this is the ambiguity that that went into affect in 42. our intent was to go where she was. instead of having a blanket to be very narrow on the types of behavior that were deemed to be inappropriate. and might the protected by the speech and debate clause. we narrowed in on the key aspect of, what as a member of congress benefit on the could be translated into trade? that becomes a difficult question. my standard is, i assume every information i get teaching

geography to be knowledges i gain from the job. my point is, it is not to jam someone up. not to make it so they cannot do what they need to do. if we are representation of the public, there should be people here. are they doing it in a fair manner? there is a great debate that as you narrow it, that she may cause more problems by being too narrow. i did not come to that conclusion but there is a school of thought out there. on the issue of tipping, this is where political intelligence firms -- this issue is addressed by the sec. inadvertently saying something at thanksgiving dinner your brother-in-law was able to use.

when there was no intention to profit by at but the information was passed forward. >> you are saying that the omission of the tipping, in your view, does not limit to the effectiveness of this bill? >> i think it is addressed. teaming with the idea, under the impression they are coming to gather that information to go and use that information they were paid to gather for someone else. about is a talking broader issue. information was passed on. this is where it gets whether the law is needed or not of that issue of tipping among and

fiduciary responsibility, that is already in the law. sec will go after you if you tip your brother-in-law. we think this uses the enforcement to apply here. >> i think that my understanding is, it cannot be enforced with legislation. that is a behavior -- how you police that? >> it is something i think it's a struggle with. are restricted by this debate on the ambiguity of the original law. we looked at court cases they law firm using insider information. it is difficult. what we are trying to do, set the bar higher.

but the public know it is going to be difficult to do this. if it is done, there are repercussions. it is not given to howard -- >> rabbit hole can you go. >> let me read the list on the republican side. we made a mistake but they're supposed to be an order. that would put him next. at this time, we recognize the speaker. mr. duffy? >> thank you. appreciate the witness is coming

in. i appreciate your passion. i want to run through some of the thought processes of what is included in the legislation. i know we have a thousand dollar trigger for the reporting period is that per trade or is that a threshold amount? horrified do $900 trades, or could i trade apple stock $950 a multiple in a day and i do not have to report? >> it is per trade. >> i could trade $50,000 if i'd do it under $950. that is one of my concerns. i commend you.

i think the leadership is fantastic. >> we do them for ease. your argument is well put. >> i think the american people want the sunshine. sunlight and disinfects. we should let that light shine into every corner. i appreciate your willingness to say, it might not be perfect. i'm open to suggestions. is there reason why we picked $1,000? >> the same reason we do these zones on the reporting requirement. the paper work. we're understand if we went -- the problem as we do not have the staff to handle that.

part of that was that was the threshold level. i am with you. one should be the number. >> i think it makes sense. >> i noticed you did not create a blind trust. i included a blind trust. if you really want to take it out of the hands of members and members want to protect themselves, they can put it in a blind trust. >> this was the bare minimum. it took us six years to get seven people. if we had gone to that level, we would have gotten the same seven. we tried to pass this before this came an issue. or it was palatable like most legislation. i am for it. you have to be careful that i do not want to in court -- incur a

fee because i do not need one. >> that is what this committee should do. we should do it is a right way. there are a lot of ideas that permeates throughout these buildings that do not come up. when there is a movement to move a bill, we should get the best bill possible. it sounds good and feels good but the american people look back a couple years from now and say, people are still getting around that act. >> i think it would work. it was not crafted overnight. there were a lot of conversations. i am willing to improve it. >> if things move quickly, why cannot -- if you will trade stocks, reported to the house.

this is the trade i have made. if there is news and you're going in a different direction, are you meeting with someone? >> you are preaching to acquire with me but you'll have to ask other members. >> we have the house and the senate. also his staff comes and to insider information as well. wise and the executive branch included? we should include their judiciary and their senior staff as well. >> they already have their rules. judiciary as well. is that consistent with what you propose to tax >> yes. >> if i could interrupt. i will be quick.

this is why this hearing shows exactly why we have an opportunity. i appreciate your bill going in. if nothing else comes from this but meaningful legislation, that congress knows what is right and what is wrong. then the american people will win. thank you for what you're doing. let's come together and make this something we can be proud of because the american people can see we care about integrity. >> i appreciate your openness. i would say there is a movement to get it down. we were stronger than we were last week. we are ready. >> thank you. and the other questions?

the panel is excused. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> our second panel is made up of roberts, director of division and enforcement. we welcome you and look forward to your opening statement.

>> members of the committee, thank you for the opportunity to provide testimony. on the subject of the application of insider-trading prohibitions to members of congress. insider trading threatens the integrity of our markets, depriving investors of the fairness that comes with markets that are open and fair. and all citizens of economic growth and stability that comes with markets and operate on a level playing field. prosecution of insider trading has been a top priority. 8% of the average they brought 53 insider trading cases against 138 individuals, an increase in the number of cases

from the previous year. we filed 57 actions against 124 individuals and entities, an increase of the previous year. there is no definition of insider trading. rather, they prosecute it under the general anti-fraud provisions most commonly section 10 b and rule 10 b5 promulgated under that section. it declares it is a marked fall -- unlawful to "use any manipulative or deceptive device or contrivance." there is no reason why trading by members of congress could be considered exempt from the laws

including the prohibitions in application of such trading is without just as an and the other car -- inquiry there are questions that would drive the analysis of whether securities trading or tipping by a member of congress, based on information learned in an official capacity violates the section. the first is whether the communicating information reached day to read code although there is no precedent for staff, there are laws from another context regarding misappropriation -- this precedent is clear that staff members oppose a duty of trust and confidence to their employer.

it is potentially liable for insider trading just like any other employee. with respect to members, courts have held that members have fiduciary duties of public trust by virtue of their position. such duties exist as reinforced by rules applicable to members which provides member should not use information obtained with duties for personal gain or private profit. this is on tested. member learns an unofficial capacity. commentator stiffer on the reach of such duties. there is a likelihood that an investor will be important in

making a decision. materiality is a mixed question that depends on all of the circumstances. in some it may be clear that a coming action would be material to a particular issue while it may be less clear and other cases. the third question is whether the information is non-public. the commission has stated that information is non-public one and has not been descendant -- disseminated in a manner making a public to be in for the republic. and the extent to which the information has been disseminated to the public. as with all issues of liability, the conduct at issue must be intentional or reckless or not in good faith.

it is hard to come to any outcome of a scenario. or staff is not exempt, our legal and factual issues that may arise in any investigation of such cases. for example, investigations into tipping by members of congress or staff could pose unique issues including those that may arise under the speech and debate clause. in light of existing precedent, and the statutory changes should be carefully calibrated to ensure they do not narrow current law and make it more difficult to bring future actions against individuals outside of congress. thank you for the opportunity to testify.

>> thank you. >> on the next panel we're going to hear from a professor. i read her testimony and she says that congress could use this current controversy to diagnose the entire melody through the enactment of a new definition of insider trading of all individuals. do you believe congress should enact such an insider trading law? >> mr. chairman, my view is that there is a simpler way to get to the same now come without risking some of the dangers that would flow from a general statutory inquiry that attempted to cover the entire field.

the biggest issue is whether or not there exists a duty and others the it their fellow members, the institution, the citizenry. that duty is essential in war for -- one form or another to bring in an insider-trading case. from enforcement, the simplest way would be to declare that such a duty exists that members have a duty for private personal gain. cases could be brought assuming they met the other requirements mentioned which includes nonpublic, etc. those concepts are well

developed in the law and to not need to be included in a prohibition. you might have two sets of standards. one for every body else. it could breed of litigation or attempts to interpret what congress did as a changing existing laws. from my perspective, that is the simplest way to go. >> are you available to work with the sponsors of this bill to review the legislation and make revisions consistent with what you just testified to? >> absolutely. we have been involved in extensive discussions on the details. we would be happy to continue to do that.

>> thank you. there appears to be some consensus that members are subject to the same rules on insider trading as others. many questions remain as to applications to congress. would that sec post authority continued to apply? if not, how when the authority deferred? >> if the act narrows existing law and in other cases expands it, while we would still retain our authority to bring our cases under existing law, the fact they passed a new piece of legislation means it would be

the source of our authority to bring cases against members of congress. if you compare it to the existing authority, there are a couple of instances where it narrows existing authority. as was discussed in the last panel, and insider-trading is limited to material nonpublic information dealing with pending legislation. information that a member of congress might obtain from a briefing from a regulatory agency would not be covered because it would not deal with prospective legislation. that is a narrowing of the current law. it does not address tipping which was discussed in the last panel as well. that says if you have a duty to keep information confidential

and do pass it to somebody else, you can be liable for doing that as well as the person receiving the information. it is not addressed that issue directly. for that reason, to have one uniform set of standards that apply to everyone, highlighting and establishing a duty on behalf of members of congress not to use their information for personal gain and declaring that a duty would be the simplest way to go. >> i yield back the balance of my time. >> i recognize myself for five minutes. do you know anything about that ethics procedures we have? i served on the committee for

three terms. that is as long as you can stay on it. it is an important part of the congress. does that cover what you now? as an enforcement authority, our job is to investigate and file cases based on the violation of the law. we cannot file on the basis of ethics violations. anything that enhanced the ethical obligations of members of congress not to use informational for private gain helps us because they helped to establish this a duty of trust and confidence. if i were to go to court tomorrow, i would point to the

ethics rules as a basis to say a basis exists but the benefit of the legislation is that the cannot guarantee there might to rule one way or another. but there if there were legislation that made it clear there was such a duty all of that ambiguity would be resolved. >> would that be enough rather than having legislation? >> i do not think it would be. there is a law this has such a duty exists? that is clear. that would reduce the uncertainty a court might not find. >> there seems to me a swell from some people that because congress is not a corporation or

a company that they are not subject to the law. put that altogether? >> hearings such as today should make it clear there is no such exemption. your subjects to the same laws as everyone else leaving aside the speech and debate clause. >> i yield back and recognize the lady from new york for five minutes. >> thank you for your testimony. i want to go over what you were saying that you think it should be expanded to cover meetings with other agencies. would you also include the no- action letters and other actions like an act?

would that be broad enough? >> that action letters, along with some other means are designed to carve out certain safe harbors or give individual persons comfort that what they're about to do will not violate law law. -- the law. members could skid advice from their own counsel. take other steps to make sure they did not do something that inadvertently violated the law. that would be an important part of any regulation. that option already exists. >> if we do have a fiduciary duty with the citizens and an

ethics responsibility, how would the sec investigate in this category? how would they change what they were doing? >>, i am not sure i would necessarily characterize it as a fiduciary duty. kellogg also recognizes what would be a fiduciary light duty, if you will. a duty of trust and confidence. my view would be it should be added as one of the examples of a duty of trust and confidence that the academics and others are better versed to discuss that night. there could be consequences to claiming that which could not be foreseen. that would be my personal view as the way to approach it.

it would not affect our investigation. there would be less of a risk that a particular court would not decide it existed based on current circumstances. the other thing record began that is an important part is the disclosure portion. without disclosure of trading on a timely basis, it is difficult to get notification of circumstances that might justify investigation. we get referrals by all sorts of persons from the exchanges and from other sources. we give that on a real-time basis. it is important to get the information fresh. memories are still sharp. steps have not been taken to cover up activity. prompt disclosure would be the

most important thing there could be done. >> are there other approaches that you are aware of in this area? >> they tend to break down in between the narrow approach like establishing the duty and leaving it to lot to address the other elements or a statutory prohibition that it tends to define all of the terms. that is difficult to do. it was tried in 1980's. people gave up because it is difficult to write a law that covers all the possible circumstances to make sure that no one who should be captured is left to the side. but then you end up not providing the specificity you might like because it is so general.

you did not want to provide a road map for people to understand exactly what line they have to tap against to avoid liability. >> my time has expired. >> the gentleman from missouri is recognized for five minutes. >> i am curious, one of the things that concerns me is we can promulgate a lot of rules and regulations. if we do not enforce them, we have wasted our time my concern is, we have had that mf global situation. i say they apparently broke the law. if that is the case, they need to suffer punishment.

the rule is already in place. my question to you is, the rules are in place right now. is there an enforcement mechanism? >> yes. >> if we pass this bill, is there a mechanism in place? >> the ability to -- >> you will be able to enforce this law. is there a difference between your ability to enforce a law and the penalties verses the rules in place right now? >> it reduces the risk that comes with a lack of clarity as to whether or not there is a duty between members and congress or the citizens or others. there is a risk that to ignore it -- no court has decided that

the issue. a judge might say it does not exist where is a we had legislation, it would be eliminated. >> have there been enforcements of the rules in the past have there been cases broths? are they referred it to you by the ethics committee? by their outside groups? >> the come from all sources. from the exchanges, letters and e-mail and cooperating witnesses and things we read in the newspaper. >> he made the comment with regard to some things that could broaden or narrow your ability to do your job. i hope authors of the bill will work to make sure that happens. my comment from the standpoint that, while the american people

are outraged at things that they perceived, the enforcement of existing rules and laws is critical from the standpoint that if somebody does something wrong, there has to be punishment of some kind. the waiving of the want of forgiveness is not necessarily the way it should work. i am curious as to your perception of how you see this happening. your ability to enforce this and working with everybody. i appreciate your views. >> the gentle lady from new york, mrs. mccarthy. >> thank you for giving your testimony. in your testimony, you note that we have statutory changes needed to be crafted to ensure they do

not narrow. you talked about that in your opening statement, making it more difficult to pursue future violations of insider-trading. it requires your agency to help. how'd you envision them working together as well as ensuring the rules do not have an adverse effect on enforcement? how you pick somebody up that has done inside trading? one of the signals? >> have you detect the violations? they come from a number of sources. analyticsge's have a and software in which aberrational trading pops out of the systems so that if they see a spite that will jump out of

the system. then investigation will be done to trace back to see who is trading and whether or not those persons have connections to the source of inside information you'd expect to see such as the bankers are the lawyers or the insiders of the company. do they have a neighbor who worked for the investment bank that had the mandate of the deal? it is a painstaking process of tracing and layering together trading and events leading up to a corporate event and then the telephone calls and the meetings and you put it all together and you hope you put together a circumstantial case. you can then reach a region -- reasonable conclusion.

this person had a conversation and look what they did. they had never owned anything other than a mutual fund and all of a sudden they bought $20,000 worth of options. the day before the announcement. that is the kind of circumstances that they acted wrongfully. and other occasions, as we did with raj, the criminal authorities and work with us where we can detect conversations in real time or you capture the inside information being passed. we have witnesses to, maybe there are the -- they are in trouble. we have a whistleblower program as well. it comes from all sources. it is a piece by piece building of the case. >> to follow up on that, someone

who is calling their brokers to make these trades, you have two people? >> if the client making a phone call has material information that they are trading on, they will have violated the insider- trading laws. the broker has to know the information is coming in breach of duty. if all the persons that was by 100 shares of ibm, it would not do it. if they said 10,000 money options before noon, because i just heard something from my friend who works on the board, that is a different story. >> how do you see your agency working together to do this?

it is confusing for many of us. i am sure almost every member here puts in the same kind of hours i do. whether we are here or meeting with constituents. my concern is that we do compliance once a year. if they want to do $1,000 trade, we would have to report that. is it easier to report to it every three months instead of having -- i have no idea of what to the budget is or anything like that. we get statements once a month. that would mean i would have to go through every trade? >> it depends on -- that is

standard practice. in many situations, the disclosure is done not chronically. in some sense there is no greater burden to the file of $100 and the $5,000 trade. you can file electronically with your brokerage statement getting sent directly to whoever is maintaining the data base. i recognize the burden is associated with it. i want as much information. >> if it came to whoever maintains, whether it is ethics or whoever it might be, it would have to have the capacity to do that. it would not cost any more money for the brokerage. that would mean hitting a button.

generally we would not get it directly. >> i hope you will be able to work with the members. pulte lui will do something that is great. my personal belief is that this becomes a witch hunt and the majority of the members here are not out to make a quick buck. but they keep for your testimony. i yield back. >> thank you, mr. chairman. thank you for coming here and answering questions. on this very important issue. i personally am particularly concerned about section 3 of the stock act contradicts the speech clause. as you indicated in your testimony, the case of gavel versus the united states stated that the speaker debate clause

was designed to ensure coequal branch of government widespread demand -- why freedom of speech and deliberation without intimidation or threat from the executive branch. as members of congress go before cnn or msnbc or cnbc and other networks, at all times section 3 of the stock at could bar them from publicly saying anything that may or may not move markets in stocks. which really gags them from commenting on very important legislation for the american people. you feel that section 3 violates the debate clause? >> the speech and debate clause is for me a separate matter that will exist in respect of of what is done and with respect to the establishment of duty are passing legislation for insider- trading.

it is something that we have to navigate through and both respect -- oh, i'm sorry. thank you, thank you. i am probably not the best person to opine on that. i am happy to consider that and give back to you with the response to there's a marius where the speech and debate clause application is clear in their other areas where it is less so. i guess i would ask for the opportunity to get back for you -- to you on that. >> thank you very >> all the insider-trading laws require a intent. that is the single biggest thing that protect the unwary from being tracked in a violation that inadvertently occur. you have to be acting with

corrupt intent, knowledge, or recklessness. if you back in good faith, you cannot be guilty. >> which is the definition there. does the fec has a -- does the sec have an opinion on how they could determine exactly which public companies could have their trading affected by members comments and how would you determine this? >> in a typical insider-trading case, that really speaks to the issue of materiality. was the information's as defined in the car lot -- >> let me interrupt you. with regard to section 3 of the stock act, which is if i go out there in front of the microphone and tv and tell them what bill i am contemplating to push through the floor of the house? >> well, if that is all that you did as part of your congressional duties and acted in good faith, i think it would

be a difficult case to make from an insider-trading point you, particularly as you disseminated the information broadly to a wide audience. let me clarify this. section 3 states that a member or employee shall not disclose material nonpublic information relating to any pending or prospective legislation action relating to any publicly traded company if that member or employer has reasonably that the ever mission will be used to buy or sell. and that would include any kind of comments with regard to bills that are coming before the congress of the united states or that you're contemplating using under section 3 as a stock act. so aside from the fact that if i know some -- assuming that i do not but i do -- if i know something that is happening with some bill and i go back into my office and call my broker and say buy or sell or short or go along, that would obviously be a

part from section three. i am speaking specifically about speaking in public about a bill that could move the market. >> that is one of the reasons why, i think, that there were clearly defined duty with respect to that affirmation -- that information, that would clarify the law in this area and make it clear crosses the line and which kind of conduct not appeared in with respect to section 3 of the stock act, which is getting out in public and talking about a bill or legislation coming up. do you think is the duty of the sec to go out there and police 535 members of congress? >> no. looking for people that violate the law. >> and is a workable within the sec's enforcement office --

operations to go out there and oversee a and a 35 people of congress as to what they say publicly that may or may not move markets? >> note, i mean, our job would be to either identify our have brought to our attention trading that looks suspicious and then determine whether not all the elements of the offense had been satisfied. >> but i am speaking under the stock act, assuming that it is made into law. >> i do not think we would be generalizing and conducting a policing information of what 535 members of congress were doing. >> thank you very much. i see that my time has expired. and mr. scott. >> thank you, miss chairman. dealing with the stock market, trading on the new york stock

exchange, is sort of like the cornerstone for our entire economic system. and it is basically based upon seeking pertinent information. when you are trading in stocks, it is sort of like trying to be and the right area of listening to the right gossip about what is going on at the right time. as of the question becomes, how do you enforce this? how will we really enforce this? give me an example of what is nonpublic material. that is the core of this. where would i go wrong? give me an example of a member of congress -- gimme some examples of what i would be doing which would be in violation of this act. >> well, in general, if there is

a member of congress became aware of the accompanying -- a company that was going to be -- you learn that it would be subject to a piece of legislation that would have significant impact on their business, and as a result of an information, which was not public and a sense that it was only known to a small group of people and not shared generally with the public -- >> could you give me an example of what that information would be? >> let's say you learned about a contract that was to be awarded to a certain company. if you were to learn about legislation that might greatly restrict the business opportunities of a certain company, if you are going to do something to the fda drug approval process that might make

it harder for companies to -- specific companies that have drug approved, that have significant impact on the price of a company's stock. if he took that and then -- if you took that while it was non- public and traded on that information, you could have violated the insider-trading prohibitions. >> and under this legislation, what would happen to me? what would be the penalty? what is the real ax this legislation if i did that? >> and penalties from the sec's perspective are well- established. you could be subject to obviously an enforcement action filed against you, and you could be required to him to disgorge all of your ill-gotten gains or profits, and you could be assessed a penalty of up to

three times of the amount of that disgorgement. if you made $100, if you have to get that $100 back and be analyzed $300. >> so there are no criminal sanctions are misdemeanor or felony. you do not go that far with this project and we do not because we do not have criminal authority. however the department of justice in insider-trading cases on the same statute. they could charge a person under those circumstances. in which case, jail time and restitution and other remedies could be available. the criminal authority at a higher standard of approval. they have to prove beyond a reasonable doubt. we simply prove by a preponderance of the deference -- of the evidence. in this bill opens up another area that we need -- >> this bill opens up another area, the

concept of political intelligence. what is that? to in my understanding is that firms in the business of his finding clients to pay for their intelligence, which they in turn gathere from mining various sources about what is going on with respect to pending legislation and other developments in congress and in the federal government. >> and in -- at what point with a member of congress know -- what a member of congress know that what he was saying are responding to a constituent or anybody, which we do, he is engaging in political intelligence? >> if you are having a conversation with such a firm and just talking about what is going on, if you cannot have any insider-trading exposure if you are acting in good faith and you

did not purchase or sell securities on iran. -- on your own. i do not think it would be a chilling affect on a modified a legitimate conversations. -- on bonafide political -- gillette -- legitimate you could set up a member of congress and say, i got this bad here -- unbeknownst to the member of congress that he had been used. but the text that member of congress? he thinks he is doing a job of responding to a constituent. >> under those factors, you generally would not have liability for insider trading. you may have had -- passed some non-public information and that may have other repercussions, not from an enforcement

perspective, and i am not familiar with them, but from what you're insider trading perspective, that would not render you exposed to insider- trading liability. >> thank you. >> thank you, mr. chairman, and thank you for being here. if i stand right, i tried to be a good listener. today currently congress and their staffs are not exempt from the federal securities laws including insider-trading prohibitions, and this is from your testimony, and so today as it stands, congress is not exempt and their staff is not exempt from any insider-trading rules. >> correct. >> ok, with that being said, this bill that we are talking about really -- and i heard you saying this earlier -- just clarifies that. >> no, i think what i was saying is that the approach that i personally might prefer would be a narrower bill that simply

declares that there is such a duty by members of congress to keep information that they obtain in the course of their congressional services confidential and not use it for private gain. that is a simpler approach which accomplishes the same end. the stock act high tens of broader prescription to try and find the elements are many of the elements of insider-trading and i think in some cases, it may be at odds with the law, over inclusive are under inclusive. there is some danger in having that law exist as well as the law as currently developed. that is why i was saying that would clarify that. >> we could clarify this whole bill and another sentence that you just take it that when narrow it into a simple focus. >> are made to replace it. >> ok. the other thing this bill does

is require quarterly reporting of transactions of $1,000 or more. but every member of this congress today is required to report every stock transaction of $1,000 or more already on their annual report. so they are already reporting that very question i would ask is, where is that going? if every member is reporting it and they have been reporting for the last whatever, 20 years, what are you doing with that information? are you looking at it? he gets back to some of my colleagues that we can report everything we want to report but that there is never any enforcement, what the enforcement mechanisms when a member of congress reports every transaction that he has had for the last year? >> i think that the disclosure would be greatly beneficial from a pure enforcement perspective if it were made on a timely basis and was made electronically and searchable.

it just creates ease with which we can identify trading and determine whether or not any investigation is warranted. if it is not reported, it is just there is a long passage of time before you might have access to the information. members grow stale. and i do not mean to interrupt. it is reported every year. and every transaction you can pull off the internet. >> so those transactions of every congressperson already reportable and on the internet and can be picked up and looked at. >> a year or however long after the events in question. and what is normal with insider trading. you could still pick up insider trading is on file a report in april and you did something with it, you look at the report, all the members, and you saw unusual transactions in april of last year or june of last year. you could say, let's do an investigation on that.

is there anything being done in that regard? >> you could. it's just that investigations that take place as close in time to the events in question are just as a general matter more effective. members are sharper, information is easier to obtain, and there are fewer opportunities for concealing what took place. >> but if you're not looking at the 535 reports done today on an annual basis, are you going to look at the 535 times for reports that are done? that is what i'm trying to do if you already have those reports and you are not doing that, what would four reports * 535 people do for you? >> some of the trading would still potentially the referred to as if it took place on exchanges refer to us for the normal process that we get through the exchanges where the

trades occur. but the problem is that they are not -- if they are not reported over the long period of time, it is more difficult, and frankly, in addition, if you are trying to do, for example, track the process of a particular piece of legislation and understood when people knew certain things, it is much harder to do over the passage of time. and yet it would be more burdensome to do it four times rather than one. and for us as well, but potentially more effective more affected, but if there is no enforcement procedures in place today, maybe what we need to do is get the enforcement procedures in place, and use the information we're getting already. that is all i am getting at. if we give you four times the information and you do not have procedures to do checks and balances, it is no better than giving it to you one time. i am ok with the way that this act reads if we clarify more.

i am not sure throwing confirmation to you that you are already not using is appropriate for that is the question i am trying to ask. >> thank you. mr. green, i'm sorry. >> i thank you, mr. chairman. i think the witness for appearing today. using to be indicating, sir, that a single sentence can replace this bill. is this correct? >> i was not necessarily suggesting a single sentence but statute that defines and identifies the duty. >> that duty -- may use the phrase confidentiality? >> more effectively, a duty not to use information obtained in the course of congressional service for personal gain or private profit or words to that effect. >> as you have been performing your duties, and you assumed that such a duty consists -- incest, or have you been

performing investigations presuming the lack of such a duty? >> vf sooon -- we assume that one exists. we would not file the appropriate case simply because there is some ambiguity in the current law as to whether not such a duty exists. but we also has to recognize that because it is untested and uncertain, a court may not agree with us. and that is why there is some risk associated with such a theory. >> let me restate my question had you prior to this moment in time perform your duties assuming that such a duty exists? your question simply is, is there any investigation that you would not have pursued because you are not sure that a duty existed crush margin note. >> so as you perform your duties, you have assumed that the duty for congressional

representatives exists, not to disclose this type of information. true? >> that is correct. >> ok, so this is true. it is fair to assume that you would not perform investigations in the future to any greater extent than you do currently because you currently assume that it exists. >> well, the into that to be -- the answer that would be as all the disclosure aspect may encourage more investigation. and i understand aside from that -- >> the gravity of your testimony appears to be the duty. there are other things that are important, but the bottom line is the duty. if you have been proceeding assuming that it exists, i am just trying to ascertain whether

or not there would be some different behavior of your investigation in terms of how they are triggered, for example. you have indicated that your investigations are triggered by eight trade generally speaking. is that a fair statement? >> correct. >> and once you have a trade, you try to ascertain, a trade, one that stands out, once you have this trade, then what you try to do is ascertain whether or not the person who made the trade had some sort of insider information or communicated someone -- unique it with someone who may have had in sutter reformation, correct? >> yes. >> with this change if we codified the duty? >> no cumming would still take the same general investigative approach when you inquire into the facts of what happened. >> before my time expires, i

need to say this for edification purposes. i believe that no one should be above the law by virtue of their station in life. so -- and no one should be beneath the law. all law should apply to all equally. i am trying to find out whether there would be some change in the way that you conduct your investigations once this duty is established. i think i'm hearing you say not likely. i will give you some wiggle room. final comment. perhaps a question. when you perform this investigations, and this was triggered by something you said, my question, you indicated that the -- you check with nabors and phone records, you checked email, and do you do this with the person that you have focused on having knowledge of what you are doing? do you do this with a warrant? had the perfect the searches such that you can acquire the intelligence necessary to

prosecute properly? >> well, unfortunately, as a symbol of authority, we do not have the legal ability -- as a symbol of authority, we do not have the legal ability to conduct searches bridging -- civil authority, and we do not of the legal ability to conduct searches. and one cases, where wiretapper use, he were engaged in both types of activities and we get the benefits of some of that investigation. but for us, our investigations, although we are trying to change this as much as we can, are often overt. which means, we have to question witnesses with the knowledge -- with our target knowing that we are doing that. in can you use of litigation? didn't yes. >> and subpoenas. >> yes. >> i think you mr. chairman and i yield back.

>> thank you, mr. chairman. one of the questions that i have about a legislation is is there anything in the legislation that is not against law right now? in other words, we're just restating things -- is not legal for members of congress to do insider-trading, is a gross margin no, not in our view. >> anything in the bill knew that does not already exist in law as a prohibition? >> it changes some of the -- it narrows in some cases and expands and some other cases terms that are currently in use as the insider-trading laws are applied terrie >> could you tell me exactly what you're saying there? >> for example, is limited to

material nonpublic information dealing with pending legislation is the release such a restriction in the law in general. so in the case of members of congress, you have information from the executive branch or regulatory agency, it would not be covered by this legislation. it is limited to securities him or the swaps of certain issuers which means it does not cover options, it does not cover extreme traded funds or mutual funds. those things would generally be covered in insider-trading laws as it currently exists. there is no explicit provision. >> is there reason for this piece of legislation? >> again -- >> would you take this legislation in go to work on members of congress who have been getting by with things? with this open the door for you

that you will not take, now because she did not have enough power? >> no, i do not think that is the case. >> ok, what would you -- one of my suggestions is that the white house and the administration are completely not mentioned in here. they have far more impact -- in other words, the replacement technology on coal fired turbines, mack followers, those things have far more affect on the price of stocks that much of what we do. is there something in law like this that prevents members of the administration or members of the cabinet from doing the same thing for german because of regulations have greater immediate impact on stock prices than anything than 90% of the stuff that passes through this body. >> i do not know if there is anything on the at the goal

rules or other aspects that cover the executive branch or others. but we have brought cases -- we just brought and bridget we brought a case against an fda chemist who was trading on drug approval announcements, and that was based on primarily his agreeing to ethical rules where he agreed -- >> should we have something that specifically prohibits this? what possible actions by people in the congress and their employees? was it taken all washington because frankly the people of hong to not identified the congress and the senate been a problem. they see that washington is the problem. they see all rolled up. yes, no, maybe? didn't we do not draw any distinctions. >> when i consider abuses, i look back at global crossing. did you all do anything? there were a lot of people

making a lot of money, about $700 million appeared to have evacuated out of the price of that stock. that was not necessarily just members of congress but it was people who were associated with members of congress and people in the party structure. have you all ever taken a formal look at that? >> congressman, i have only been with the commission since march to a dozen 9. >> could you give me an answer on that? this is probably seven years ago. also, when you were here previously, i appreciate what we're trying to do to get transparency year, i am still wondering about the big fish are we doing anything on madoff? are we investigating him or putting him in jail? is he gone? did in the criminal authority -- >> he is serving a lengthy prison term. we have continued to charge a

number of individuals associated with him. >> my question though was inside the agency a lot of people were looking the other way. i know that we got mr. madoff, anything inside the agency? that is what i have never been able -- i say that my time has elapsed. if you could get with my office, we have asked this question before. what has happened internally? i know we got him. what about the part of the agency. i yield back. >> the gentleman from missouri mr. cleaver is riverside -- recognized for five minutes. >> thank you for being here. you know, this body in washington always overreacts to everything, and the way the system is designed is when someone enters as a bill like this, even if it is bad, people

look for it, because they do not want to be accused the next morning as being unethical and slam baggish -- that is my word. [laughter] we do things that create this never moving cloud that hangs over washington. not long ago, a member of this committee hold a fund-raiser and the bank appears before our committee, which also attend the fund-raiser, a sudden someone files an ethics charge against him. and he ashley end of voting against the measure. you mentioned it there is a difficult case you are responding to members, you say a difficult case to make.

that is irrelevant in this situation. because all that is needed is for someone to make an allegation. we are in congress. somebody makes an allegation, it is in the newspapers, it isn't irrelevant about whether it is a difficult case to make. is the allegation that the damage. and it ends up in the newspapers, and so political enemies use it to talk about how horrible washington is. it does not matter that they will spend several million >> trying to join washington. [laughter] we have another member they got into trouble because his staff did something and the committee said that he should have known. i sit in this committee and i get information and i am talking to congressman john doe, and i tell him what just happened in the committee, and he tells somebody and they end up taking advantage of some information,

and so then somebody is in trouble. right? someone goes and takes advantage of the information and now they are in trouble. am i right? >> u.s. the source of information, would you be in trouble in those circumstances? legally, no. again, because you have to of acted with corrupt intent. >> not if you are in congress. not if you are in congress. all you have to do is be in congress. >> i cannot speak to the court of public opinion. i can only speak to the legal court. but i understand your concern. if we're careful, our investigations are confidential and we do not make accusations of all we have done a full investigation. >> budget would -- i am sorry. that assembly. -- that is impolite. >> we understand the power of accusations and that is why we

are careful about confidentiality. >> is there another way for congress to deal with this issue? without passing a law that in my opinion is flawed and is going to create problems and then everybody -- look, we're going to vote for it because, if you know, that is what we did. we vote for things that probably the majority realize is as bad and the media is going to say is good. anytime you can do anything that holds people more accountable -- i'm just afraid dead this is one additional deal we're piling on ourselves that is flawed. and everybody knows it. and few are willing to say it. it is flawed. i hope that there's another way

of doing this you know, if we're going to do this and i do not know if a blind trust is the deal that we have to do, or -- i do not know. sec, no action is better, something, i think, it would be helpful if you could suggest something other than something that i think and others believe to be terribly, terribly flawed and will create problems for the image of congress. because there is no way that we can end up not talking about this issue among ourselves. thank you, madam chair. >> that gentleman from ohio is recognized for five minutes. >> thank you. i appreciate your testimony and i think we all take this issue very seriously. i think it is important that we address it in the proper manner.

i want to follow up on some statements and questions that mr. that others had -- that others had. can you state for the record that members of congress are exempt from insider trading laws? >> bair not. >> thank you. we need to keep this as simple as we can. i do have a concern for the constitutionality of section 3 of the stockact with regard to the speech and debate act and enforcement is really important. you have given us a solution earlier in your testimony and in your questions by just creating a duty that says that members of congress and i hope the administration would be included in that as well to not use information gained for other personal gain or private profit. do you think a duty like that would conflict with his speech and debate clause? because i do not think it sounds like it does.

and again, i am not an expert but i would not believe so. >> with regard to testing, because that is the other piece that might be worth addressing here, wouldn't be easy to add to that duty some responsibility not to tip others as to the purpose of personal gain or private profit? >> you could easily draft language like that but that kind of -- the tipper/tippee liability has already established a lot. to establish another conflict in my view would that you have the legislation and you basically include in a savings clause orlando to that would say that this was not intended to affect other laws. >> ok. so simple legislative change that would create that duty and

then make sure that we enforce laws that are on the books, and i want to get in to enforcement in the second, it would not change or conflict with the insider-trading laws on the books today, correct? >> i think that is right. >> isn't there some risk of creating dual standards that no one knows how to enforce or what applies to whom? >> i think there is some risk of that. >> so let's get to enforcement for a second. do you think that you have enough -- you talked in the beginning of testimony about some of the statistics of your enforcement and how it is going up in your obviously doing more of it. do you have the resources you need to do the enforcement that is necessary to clean up insider-trading, whether it is a member of congress or someone else gore's remark >> -- or someone elspeth's? >> we do not have that power to do across the border enforcement

of the security laws. we have made great strides in terms of the number of cases, the quality of cases, particularly the case is over 80 individuals and entities, 40 ceo's and senior objectives. we're doing a lot of great things. but it is a significant challenge, given the additional thought frank burden, and just the numbers. we're 1300 people across the nation in the enforcement division in we are responsible for 35,000 regulated entities. broker-dealers, transfer agents, and others as well. any citizen that might choose to violate the law. resources are real challenge for us. we put more into insider trading, it is less somewhere else. it is a zero sum game. >> let me ask you about what happens to the ill-gotten gains that you are able to get back thru the process of insider trading, and is there a way to

help use those the way that we do drug profits, to go back into enforcement? >> it does not -- i mean, as a general matter in security cases, we often take disclose when of ill-gotten gains and penalties and returned it to the armed investors. we'll return $3.6 billion to harmed investors in the last three years. in insider trading, it is harder to identify the victim or it was to someone else on the side of the trade that did not have the information and because the amounts are so small, those numbers often end up going to treasury rather than being distributed to people on the other side. >> we only have 15 seconds left. what you think about the idea of insider trading using some of those gains to help you with your enforcement? >> a lot have -- we attempted to get self funding and it did not happen. we have some additional means man -- now. our budget does not come at the expense of other government agencies because it is funded

by transaction fees and other fees by wall street. i think that is appropriate. i would not want to see us funded directly from penalties or sanctions. i think that sets up a bad incentive. tirest tenement's expired. the gentleman from of a soda is recognized for fought -- that gentleman's time has expired. the gentleman from minnesota is recognized for five minutes. >> there was a big story on 60 minutes, a lot of people were probably given more attention than they wanted and the type of attention they did not want. and we came up with a bill and here we are. of course the billing system long before. i do not want to imply that it did not. i was intrigued by the idea that you think that this is already -- members of congress already cannot use inside nonpublic information in order to enrich themselves. can you expand on that? >> i think the point is that

law carly prohibits insider trading and there is no special exemption or carve out for members of congress. >> right. >> i think the point was trying to make is that while that is true, there is some legal uncertainty about how those principles that currently exist would be applied to the special situation of members of congress and that is why establishing this explicit duty would be very helpful. >> yes, and in that same vein, yet -- as members of congress, as you make the point, we have a public duty and our responsibility is to pursue the public interest. if we are doing something to pursue our private, narrow interest at the same time, it puts both of those interests at odds. and in the 60 minutes peace, of course, i do not want to attribute that as being absolutely accurate. it is media and entertainment, too. part of what they're saying is that one member was supposed to be stabilizing the economy at

the same time they were purchasing equities or options that could enrich them if the economy went down. if that could be believed or prove, there is already ample stuff to say that you cannot do that. specifying it may be degraded vantage and that is why my co- author of a stock aact. i think that the things that this news broadcast brought out, you cannot do already. let me ask this. how to the very designations of this term confidential information among member offices and committees affect the determination of material nonpublic information that it did disclose? >> how to the various

definitions? >> yes, how did that varying designations of confidential information among member offices in committees affect the determination when material nonpublic information has been disclosed question margin if there is an explicit agreement that the information is confidential, then that generally establishes the duty of trust and confidence between the teeth of partisan made that agreement. one of the parties who has that ever mentioned then turns around and uses that information for private gain, they have violated that duty of trust and confidence. >> do you think there is a problem with perhaps mobile understandings of how this term might be applied in various circumstances? you think their rules are you think one of the things we need to focus on is how weak, with perhaps a standard understanding? >> a more standardized -- the more standardization, the

better. it may not be possible but it is correct. >> yes. what kind of information would be regarded as relating to a commodity and futures contract within the context of members of congress? what kind of information would be regarded as related? >> what kind of insider trading? if you're talking about certain commodities, any legislation that might impact companies involved in the commodities business would certainly fit the definition. >> ok. and under what circumstances would a member or an employee of congress be considered to have reason to know that in person -- any person requesting the information would use the information obtained to trade securities or futures contracts? >> if that were the law, the new look at the circumstances. if you had a friend who was a

day trader and you secretly whispered to them some information in the course that you learned about some non- public legislation, you have a pretty good basis to say you should have known that this person was going to take that information and trade on it. other cases would be less clear. >> yes. at what point do prognostications as to the prospects of legislation become political intelligence? >> i am not sure -- that would be a difficult question to draw without knowing the facts and circumstances a particular circumstance. >> i am out of time and thank you for your cooperation. >> thank you. the tournament from michigan -- the gentleman from michigan is recognized for five minutes. >> thank you, madam chair. we are running out of time with

my colleagues across the lake here. maybe we can pursue that a little bit. as i was hearing that interchange, something struck me. it is called the farm bill. be realing to authorizing this thing soon. and whether it has to do with ethanol or indirect subsidies are payments or any of those things, it seems to me that this may cause some huge headaches for not just members but a number of others who are involved and engaged in the legislative process dealing with a major portion of our economy. it is not just wall street. this is main street, grain elevators out in michigan and nebraska and wherever else. we can keep unpacking got a little bit along with the whole

notion of political intelligence information, is it really just a judgment call what is or is not on your part? explain that a little bit, if you would. >> well, when something -- whether or not it farm bill legislation or corporate takeover -- at what point crosses the line from being just a very preliminary, at what point it crosses the line to be material, which means that it is an important matter to a reasonable investor and and investing decision, it is at the end of the day in a determination based on all the facts and circumstances of what happened. yeah, that is why in the course of our investigations, we spend a great deal of time trying to tease out every fact and every

event to make sure that we understand what had occurred and make our professional judgment as to whether not that factor has been satisfied enough as everything else was as well, as a matter of the case that we would file bear the same is true for intent. you have done -- you cannot look into someone's mind so you have to look at the circumstances under which they may have passed the information. he did it put down a taped telephone line and say it of yourself on and ask someone to call them back on and on tape of line and beat -- and speak critically or take some steps to conceal what they had done, you look at all these things to figure out whether or not people have acted with bad intent and whether or not it is material in order to decide whether or not you ever got the sufficient basis to file a case. >> to you see any problems with what we're trying to do here? i do think that this is a good

idea, but let myself and a number my colleagues, we have had previous lives. they follow was here. my family happens to be involved in construction back in michigan. i have real estate, i on a gravel co., i have three employees. but if i vote on a highway bill which means we're going to be using more concrete and suddenly sandstone is more expensive, and i somehow benefit from that, is there a pitfall here that would be unintended consequence to something like that, but i see that with the farm bill and the number of these things that are regular order and regular business here that may cause some problems. there is one proposal out that when you got elected to congress, you have 90 days to liquidate everything in the only thing you are allowed to hold

would be a government treasury bill. i can tell you, that is not something i would be interested in doing especially in this real estate market. how do we strike this balance? i think there is a real need here to make sure that we have transparency and that we are not unduly using information that is coming to us. >> there are a number of protections. proposed legislation struck openly becomes public. therefore if you are to discuss it, not nonpublic, therefore it would not give rise to any sort of liability. again, you have act without bad intent. if you hit me all those elements, you simply discussed proposed legislation with a group of people, and a wynn often traded and you were doing it consistent with your duties and obligations as a member of congress, it is hard to see how that would give rise to case. in some talking at the local

rotary is not going to get someone in trouble when suddenly they gives them an inside. thank you, madam chair. in the gentleman from colorado is recognized for five minutes. in thank you for sitting through this for so long. i am generally supportive of the legislation as it has been proposed. i bring the same concerns to the table that you do. in trying to define this, you end up by their exaggerating one piece and for getting another. you focused primarily on legislative activities of the congress. in the legislative arena, we have to the parts. we make policy and we either funded are we do not. we have oversight. of your organization and every other organization of the federal government. in which case, either in a public forum as today, you

provide us with information and in certain instances, we maybe have private briefings, a secretary comes to someone's officer whatever. then we have legislative family of oversight, and then we have constituent relations, which is what he was talking about, speaking to the rotary or someone comes to my office, and says, they are thinking about black last week, tracking -- we worse speaking about this last week, fracking. i know the sec is having to deal with subject like that. we have every subject under the sun, from farming to par in policy, etc.. -- to foreign policy, etc.. in trying to define all of this, i fear that we forget the activities that we face here in congress.

any comment on in? >> i would probably give the same answer that i gave previously. i think that there are a lot of protections that are inherent in the insider-trading law that prevents it from becoming a trap for the unwary because of the various legal requirements that have to be satisfied. and maybe that there are -- that that is not sufficient. you need some sort of carve out or no action letter that would you give you -- it would give you comfort going forward if you met the requirements. it would protect you from any sort of liability. i realize that it can be a challenge, and frankly a challenge on the corporate side as well, where you have corporate officers who are responsible for all sorts of communications and outreach to their shareholders and others.

and do not mean to underestimate the challenge but i hope that conscientious people can come together and figure out a solution. >> i think that the day we had tarp on the floor of the house of representatives, and that was one where you're going to pass it or not. now under this bill, that what the public because it was as public as possible, of that everybody here was transacting business on the market could see the war we going to pass a car were not. -- were we going to pass it or were we not. what if they are counting of votes and they realize it is not one to pass, and he realizes this is not going to pass, and he goes and sells whatever. what happens then? >> i would not want to speculate

about particulars. >> i know that you cannot but we are in a legislative arena and you have to. we have to look for things like this. and that is why this is a legislature as opposed to the judiciary. we have to look at the broad expanse. >> that set of circumstances, that would give rise to a case because it certainly was material to investors, and if the vote was that close, or there was uncertainty about it, certainly would be non-public and to trade on that could in fact be a violation. >> i could see that one as being, well, what we do now? it is right in front of everybody at the same time, this guy counted the votes an hour ago. >> it could also be the speech

and debate clause that occurred on the floor as well, i challenge on the grounds. >> in just a close, you're going to work with the sponsors of this bill to tighten it up? >> yes. in that would make me more comfortable. thanks. >> the tournament goes back. the judgment from delaware is recognized for five minutes. -- the gentleman from delaware is recognized for five minutes. >> not many questions that have not been asked. i have a few and i appreciate your forbearance for this long hearing. i am trying to understand your testimony. you said earlier that you would prefer -- i am a supporter of the bill and a co-sponsor and i was surprised that members of congress may not be conquered -- covered by their rules for insider trading. you say that you assume that they are. that we have some duty. i accept that and have the same assumption. i also think that members of

congress ought to be held to a higher standard. what ultimately passes, i hope it will set up a system that does all this to a higher standard just because we have a special trust with the public and the duties that we do. so do you think -- a narrow bill or the simpler approach is the better approach? >> i do, because i think it accomplishes everything that needs to be accomplished to make it clear and to eliminate uncertainty as to whether not such a duty excess, but at the same time avoids -- >> for use the big question is to eliminate the uncertainty. and we had a back-and-forth with mr. green about whether it would change anything that you do. have you prosecuted any of these cases, actually taken them to a court and had a prosecution to find out what might happen?

>> my time with this has not been a cloud case about a member of congress for insider trading occurred there have been cases against the members of the executive branch, fbi agents, and others, but now members of congress. >> given the attention that this case is gone right now, and it is purchased the reputation of this institution further which should be the people's house, and they should have trust in it, it is an opportunity to do something to improve that. how would you do that? and i appreciate the fact that you will work with the sponsors to do that. >> a couple of ways. one is the process to work on the legislation to clear these issues in the second is when any sort of special -- suspicious trading your activity is brought to our attention, insider trading or any aspect of the federal securities laws, we take a look at that and we conduct

our inquiries and determine whether not there is a basis for a violation of law. >> if i understood your testimony coming your coming through disclosure practices. this would require a 90-day disclosure compared to the one year annual disclosed that we do now. you mentioned in reference to the corporate directors what is inappropriate and what kind of trade would you be talking about for that kind of disclosure? >> what kind of what? our preference would be we would like to see the shortest time between the trade and the disclosure so that we have a better chance of getting the information and have it done an electronic format. we do look at trading if we have

a reason to look at this. he cannot search the database without a complaint. the aegis search it -- you just search it. paper would have the ability to combine the information to make your increase much murrah currently. >> it was not included. could you elaborate on that again? >> it is speaks to nonpublic information.

they see how non-public it is. >> be mention certain transactions. >> it is limited to swaps of issuers. it would not include this. >> no. would not include an e.t.f. that was traded by a dealer. mutual funds are diversified. it is not issued by investment companies. those would all be exempt. insider onesany and mutual-fund. options are typically insider trader first choices.

the offer great leverage opportunities. >> my time has run out. thank you for your testament. quite some members may have additional questions. they can cement n writing. they have responses in the record. thank you some much. thank you for giving us the time and the expertise. with that, i will call of the next panel. -- up the next panel.

i recognize the third panel. this could be made part of the record. we have mr. jack. he is a legislative attorney. professor donahagy and robert walker with council llp. thank you for your patience. >> thank you. thank you to the chairman and

of the committee. we have copies of legal memorandum. that ithe areas of losaw have covered this common interests. they use nonpublic information. we approached the information as a member of ethics. it may be a violation. an advisory opinion released has generally confirmed this approach. because of the allegations, the issue of insider trading has come to the floor.

it is fairly clear that congress did not defend itself from the insider-trading laws. to cut through what i wanted to say, let me speak to two. want to make. -- two points i want to make. the characterization that a member of congress is one that does not involve the public trust is wrong is a matter of both law and ethics. i'm not the first to say that it involves a public trust. even before the adoption of a constitution, madison noticed this what keeping them virtuous. this is recognized explicitly in the house and the senate. it denotes the member of congress or wheeled public

powder -- congress wielded public power. public offices and trust signified the officer has been entrusted with public power and that they hold this to be used only for their benefit and never for the benefit for themselves. this duty is one that has been recognized by federal court .piri it is from the second circuit. they apply beef judiciary theory in which the government moved to have it between the member of the house and a private party. the court agreed to impose a

trust of money. there are specific ethic rules that have been in charted. -- that have been interpreted. it provides expressly that any federal official may never use information coming to him confidentially. these factors create this public trust. the executive branch are similar to these legislative branches. you are probably familiar with

the guilty plea to insider- trading charges by federal employee that word for the fda. they are under similar ethical guidelines. i want to make a point about potential issues. there is the debate privilege that says members cannot be questioned in any other place. i wanted to point out that section 3 would be a house rule and would be interpreted internally by the house ethics committee. there may not be a problem at all. they're being questioned in this place. if you expect that the securities and exchange commission will come in and regulate legislative conduct and

a look at information that congress may receive, you may run into evidentiary issues. there will be practical considerations that any one prosecuting that kind of provision will run into. i am not saying do not enacted the law. be aware that the privilege is where it could enter fear -- could interfere. thank you. i will be here to answer questions. >> thank you. i am honored with the information to testify. i have researched and taught in areas including litigation and insider trading for over 17 years. i published an article on congressional insider trading. at the time it was born on urban

myth. congress has exempted itself or was immune from the existing law that prohibits the insider- trading. my article concluded that congressional trading is already illegal under existing law because it violates the broad antifraud provisions and the federal wire fraud statutes. i acknowledge that many distinguished security scholars see gray areas in existing law and some believe a court would likely rule the other way in prosecution. the controversy surrounding the application of existing law to congress stems from the fact that congress has never enacted a federal securities statutes that explicitly prohibits anyone from insider-trading. the act addresses one manifestation of this much larger problem. an explicit definition which

would apply equally to everyone congress included would be the most equitable and appropriate solution. in absence, insider trading is legal only insofar as it is fraudulent. the vast majority of insider- trading prosecution and balls quintessential judiciary like steps. the supreme court has never implied let alone stated that the relationship has to be strictly a fiduciary one for a duty of disclosure to attach under rule 10 b-5. the supreme court uses the term interchangeably with a duty of trust and confidence. the sec and justice department

passed a wide net premised on the misappropriation theory. dozens of those caught have been family members or business associated with nonpublic information that was entrusted to them. the security and exchange commission have proven themselves adept at convincing courts at feigning fidelity. i very much in doubt they would have the temerity to conclude that a member of congress lacks a duty of confidence for purposes of the missing misappropriation theory. the constitution refers to public office is being of trust. members also take an oath of

office to discharge their duties. there should be little doubt that a member's undisclosed, self-serving use of knowledge constitution -- constitutes a misappropriation. i recognize that a member of congress has never been prosecuted for insider trading based on non-public congressional knowledge. the justice department has used the wire fraud statutes to discuss -- successfully prosecute officials for defrauding the united states and public there the sun disclose misappropriation of funds and tangible properties. my final point relates to one consequence. i endorse the motivation behind the proposed legislation. i am concerned that it could be

viewed as the only insider trading law that applies to congress. this is troubling. the proposed legislation failed to reach a host of possible insider training ones that would fall within the existing wall. i would be honored to work with the committee and the staff to remedy this concern and to clarify some of the other drafting issues. it relates to the act and over includes events. thank you very much for giving me this opportunity to share my thoughts. >> welcome. thank you. good afternoon. thank you for this opportunity to discuss the insider trading

on congressional knowledge act with you. as a former chief counsel and as a former prosecutor, i will add my voice to the voice. this does apply fully to members and employees of congress under the misappropriation theory of trading. i understand the view that not what fans standing rigid notwithstanding the fact that they are enforceable, passage would give more specific and explicit authority or direction to the sec and department of justice to prosecute. with regard to the provisions of the act addressed en liability, i do read the act as a dressing such instances. i believe that caution is advisable to make sure the

provisions do not chill the necessary extremes between members and staff and individuals and activities outside of congress. proof is not easy in any context. there is a complicating factor. at the debate clause provides not all actions and activities. this provision may limit admissible evidence. the important thing to keep the mind with respect to speech or debate privilege is that no

matter how carefully the act is drafted, it cannot trump the constitutional privilege where it applies. it does not apply and investigations or proceedings. they could apply to capture unsanctioned insider trading. this provision states that a person and federal government should never do it confidentially in the performance of governmental duties as a means for making private profit. it is whether it is issued at any given instance and was confidential under applicable committee roles and if it could

be problematic. it is addressed under the overarching standard. it includes the securities trading by a member it based on material, nonpublic information and more to come between the house or senate. it would be investigated fully by those offices as constituting conduct for reflecting discredit. these provisions are consistent with and would extend the

general approach with the conflict of interest. public disclosure is emphasized and investment are disfavored. it applies the registration one. this has been acknowledged. they would raise first amendment concerns. the act imposes a trigger threshold for registration and reporting. just one contact and reporting requirements would kick in. the definition of political

contacts in the act is very broad. it would seem to capture communications that would have nothing to do with security trade. thank you very much for the opportunity to speak with you today. i look for to answer questions. >> thank you. normally we have republican and democratic witnesses. this is an extreme complemented each of you. and this case the committee agree that you were probably the most knowledgeable expert witnesses. we invited the three of you unanimously. i want to thank you for your testimony which i read last night. i thought it was very thorough. as a backdrop, many members of

congress have been accused of some and a sensible -- indefensible acts. it has created a public perception. as a result of that, the number one misconception and is an insider trading laws and not apply to members of congress. i do believe that we can clarify that. it has an affect.

you are requiring all members of congress to place their assets on a blind trust and eliminate the they're violating the public trust by trading stocks. would that be a good idea? >> the short answer is that it would. there are other concerns that would enter into whether it was a good approach from a practical point of view. listening to your fellow members discuss their proposals today, i understand that proposals would either require them to place their ones and a blind trust or have security transactions. some of the practical concerns that i had with the respect requirement with everyone would

be eliminated. a blind trust is an option for people who have a considerable number of assets to begin with. there are administrative costs that run in connection with that. it is not practical for a member to upend their financial lives. they speak in terms of their election to congress. it would not -- members who had few assests would not be able to trade at all without the provision to up for disclosure trade. >> you stated that congress

should use this controversy to diagnose and treat the entire malady of a statuary definition. given that the sec testified that the changes should be carefully calibrated to ensure they do not narrowed the current law and make it more difficult to bring trader action against any such person, how would you suggest we go about drafting the insider-trading law? >> there are a number of approaches they could take for this. congress has never enacted a

federal security statute that prohibits anyone from insider trading. congress would not be starting on a blank state if they chose to undertake that today. in 1987 there was a proposal that came relatively close. the prescriptions act of 1987 would prohibit the wrongful use of material. there is information that has been wrongfully obtained. did the attempt would be to bring all existing law under an express statutory prohibition. in the advantage would be a takes insider trading out of fraud.

it is not displace the anti- fraud the view of it. someone who abstains information and uses it to trade securities but does not breach any fiduciary light duty would have a very difficult time being prosecuted by the sec or the justice department. government prosecutors are creative. did they should be applied did. there's a case involving a computer hacker where the hacking is deemed to be the subjects. we can all imagine situations where information is not obtained in any deceptive matter. a broad prohibition would be a place to start spiri.

we do not need to end right there. bring the congressional officials and federal employees and making it clear that there is a duty of trust in confidence would be a simpler way of going about this. i can talk more about this. >> thank you. i appreciate the work that you do. they are highly professional group. please explain the fiduciary duty you say members of congress bowed the american public. >> i believe that in certain circumstances that duty can give

rise to a violation of insider- trading law. it will yield this public power for the benefit of the general public. i explained that they rose up to the second circuit and the court went back into the transaction of which they have received money. but since you have a fiduciary relationship, we consider the money you took was not yours but belong to the people, the government. the court allows them to come in

and recover that $50,000 on behalf of the government because of this relationship that the court recognized. i think it could be strong enough. i agree unanimously with everyone that it can be clarified. it could be useful. have made yourself available to the sponsors of this bill. he worked to do just that. the make certain that the public is certain that these laws apply to the trading and is measured by that. thank you.

>> thank you very much. i would like to thank our panelists for staying here to share with us their expert knowledge about this very complicated subject. i have listened very carefully to our representatives here today. one thing there is a consensus on is that legislators are not exempted from insider trading. that is very clear based on everybody's testimony. i think it is important to go out among the members of congress. i do believe there was a belief by members of congress that there was an exemption that somehow you do have access to

information that may are may not be privileged. somehow un not be held accountable through dick -- you cannot be held accountable for it. what is not clear to me is how the details would be worked out. and who will have oversight responsibility, what roles the sec plays. even the justice department as a look at all of this. that does have to be out. it has to be thought through. i have been trying to think about all of these circumstances that members of

congress could be involved in that could be either or. i am focusing on the discussions that go along between staffs. in members of democratic staffs of members of the republicans get together, they're trying to work out problems with legislation. perhaps there are lobbyists involved as they try to work through how to resolve differences. facts beginis, some ta to emerge. they can see how certain actions could advantage and company.

based on the information that they are concluding, one person may be concluding even there there are no facts to support it. they can say we are working on this legislation. these companies are involved. i believe if we go this way the company will lose a lot of money. there are going to go gain a lot of money. i've been thinking it through. this is what i believed. the staff member does not act upon that information and go out and start trading. do they become a tipster? that person is very smart.

i've always listen to what that person has to say. they say this will lead to the company. to i am going to invest. i'm going to trade. what is that? is that tipping? is the undermining the fiduciary responsibility? how would one calculates that? >> under this rule, whether it is the sec or the justice department, the government would have to show that the person who communicated the information breached a duty of trust and confidence. what the supreme court has interpreted that to mean is the communicator it needs to have

made it for a personal benefits. without the personal benefit, there is no motivation. if there is no improper motivation, there is no liability for either the tipper or the tippy. the well-intentioned communication would not be illegal insider trading. i would encourage kong bridge -- congress not to go beyond that. it works reasonably well. it is the motivation of the person communicating the information that is going to be the linchpin. >> let me complicate this a little bit more. the tipper and who was not a conscious one, who would receive

benefits has communicated the general information and thought to someone who could be a relative and that crowd. that relative could be someone who shares profits or lends money to zero would designate that person to be a part of their business. does that mean that the would-be tipper has violated some law? in protracted way, they could be the beneficiaries of the game of the person who actually made the investment without even knowing that they would be a beneficiary.

how is that dealt with? >> the example that you give touts the intention to assist the friends or relatives. the communicator would not have liability because the communicator would not be breaching a duty of trust and confidence. the liability is derivative of the temper. i would submit current law. it would reach it not so much as a tipper but as a misappropriation situation. i mentioned the government passed a very wide net. your hypothetical might be a situation where a knowledgeable

source was sharing information with family members at the dinner table. the supreme court when not be the knowledgeable source. current case law would view it as a person defrauded. the information around the dinner table would be viewed as allowing a trust and confidence to the person sharing that information. such that if the can use that information in your own trading, the government could bring an action against the yen for defrauding.

it establishes three non exclusive circumstances for finding a duty of trust and confidence. the third category is one appertains to family members. she would not be covered for that section of the role. she would be covered under a second section which says that anyone who has a history pattern or practice can be deemed to have a duty of trust and confidence. if the history practice was to respect the confidentiality, the current law could cover that as a fraud on the communicator.

>> would it change your answer? >> is there a lot more scrutiny of our financial disclosure? when we filed the financial disclosures, we include spouses and dependent children. would this be something that whatever our spouses trade.

>> the answer is yes. it is currently applied to this. i think it would. i do not believe the legislation addresses that specifically. >> anybody else have any comment? >> they amended this. spouse and dependent children are covered.

i remember filing one of the first financial disclosures. i got a call. when you do not have time to it wast these fouthings, a railroad car. sometimes we do not pay as much attention. we have somebody to do this. it makes it hard. we have to be very careful. we have to be careful. i am not sure when you're

talking about speech and debate. if they could explain it but a little more. >> if you have something going on you have two parts. you have a member or other individuals making a transaction and telling the broker to buy or sell stocks. on the other hand, it is based on certain information that the person received within their congressional employment. there's not going to be a problem. to be able to prove that they made an order, that is outside of the legislative spare and process. -- this year and process. or they got that information, they may have a practical issue

with outside enforcement and someone to say a member sits on the committee. the member traded on that. he may run into problems. you cannot introduce that evidence. it speaks to a legislative activity covered under the speech and debate clause. he just look back in the recent history. members of congress will be prosecuted for things. they have evidence and other ways. if it is on where people got information, let me tell you about one case. the member of congress from georgia was indicted on 10 counts of perjury related to money laundering.

he was convicted on nine counts. they threw out three of the convictions. this idea. this is protected by speech and debate privilege. you expect an outside group to enforce it. there could be evidenciary issues. the ethics committee says you violated the commission that we enacted. we do not have any problems with this. we are at this place. we can enforce this on to the standard that rob mentioned. you caused the institution to

be denigrated. >> somebody engages in transactions might do 100 transactions on a hunch. 99 times they lose money. society says he must have had insider knowledge. and members of congress should be subject to these rules, and we should, the question is what steps should members of congress take said that we do not bring this institution into further disrepute. in the private sector, if you are officer of one corporation. you know you need legal advice to trade into the stock. i have colleagues who invest in

hundreds of different companies. they're buying and selling every day. you are trading their own stock once every few months. you're getting careful of the vice versa i got colleagues trading from the ipad. does it make sense for members of congress to own shares of individual stock knowing that every one of the companies is affected by congressional action? you could go to a caucus meeting and find out that everybody is talking about x y and z instead of a b and c so companies are safe. have any of you advised those with insider knowledge how to avoid violating these rules?

have we ever had to it by somebody with their knowledge to not relate to just one company but they had insider knowledge affecting everything? >> there is a rule that provides a safe harbor for pre-existing trading plans. >> you can have a pre-existing plan with one company. you may own 20% of it. you will retire. you will sell to% of your shares every month. of your shares every month. >> want that have a pre-existing

plan for mutual fund investments where you purchased. as long as the person who set up a plan is not communicating with the portfolio managers. the portfolio manager can sell individual securities. >> your almost arguing for what i am arguing for, let them invest in mutual funds. i was lucky to provide each witness who wants to with the answers. what steps do we have to take with regard to the bill we are considering to make sure it makes things tougher and clearer rather than service to allow members of congress to do that which is pretty clearly illegal?

what prophylactic policy should be imposed on members to make sure not only that they are not trading on inside information, one of my colleagues makes 10 grand that they should not that worries me. what worries me more is we're down to 9%. if everyone of my colleagues just plays their hunches, there will be one out of every hundred trades that you can say is another reason to hate or mistress congress. should we have a policy that says do not put your money only into mutual funds.

what would you suggest not to give us the maximum flexibility but to give us the minimum likelihood of opening up congress to attack? thee's the trust of american people. it is a scarce and viable commodity that can be degraded by true and false charges. >> certainly in the measures you suggested and the potential of requiring blind trusts are more prompt disclosure. including the one you talk to. i think it may be an unattainable goal to avoid ever

raising public concern. maybe it would tighten up the approach of these things. i think the approach of disclosure that is currently in the act is consistent with the current framework. it would have a fax. -- effects. >> i would be happy to provide a list of steps that could be taken to eliminate the under inclusiveness and to some extent be overinclusiveness as well. i believe the stock act should

make unmistakably clear that it builds on existing law and that nothing in the act should be read to displace law. in this way, it will be there as a baseline. it makes unmistakably clear how current law applies in the context of congress. >> thank you. >> i want to make sure i am understanding the description. is this legislation really necessary? i am hearing that it may not be necessary.

>> when i wrote my article last spring, a question have been raised over whether members of congress owed this for purposes of the ferry. to be candid, i was surprised that there was some difference of opinion. it would strike me -- de bring

that involved relationship that are by no means necessary or fiduciary like wines. i would have thought this was an issue that would not generate much debate. that is what i tremendously respect. it is an issue. some go even further. i am now at a point where i can see much use and clarity that can come from a declaration that members of congress owe a duty of trust and confidence for purposes of existing. i would see this as a defender. my concern would be the defenders is not viewed as

eliminating this. i think we would have taken a step backwards. as long as it is clear if that they are both defenders i think we could make a good chance at making this as tight as they could be. >> my colleague is in front of me. they do not change anything else. the key bit internal. it is a resolution a better direction to go? maybe he has an opinion on that. >> i would not say it is a better way to go. i would say it is an alternative

way to go that can make the same kind of points about the duty of trust. he could have more specificity in the house rules. that would be a way to go. i have never said that it was unnecessary. i would not say that. >> i did not apply the you're saying that but i was hearing it in the context. it may not, because of rule 10- b-5 that we already have established the fiduciary responsibility. you're starting to talk about

that political intel. is this a problem? is this a major problem? is this something we need to tackle and address as well? >> it is interesting. what is the problem? the main a problem in political intelligence? >> is there a problem? thatm not going to say instances of abuse has never occurred. i would say to the extent a member was involved, it was brought to the attention of the ethics committee appropriately through a complaint or a letter or a news article. it would have been addressed in that fashion. that fashion.