soundness and safety, we had a hearing last week on high frequency trading. some are claiming markets are perhaps rigged. if you talked to individuals in 2008 and told them we are going to go five years through a great recession and you'll see the stock market go from 6500 to 17,000, not too many people would have believed that. the question is, books are being written about this, individuals are going as far as to claim the markets are rigged. i want to get your feelings. do you believe the stock markets are rigged? >> well, i think there are a number of concerns that have been outlined about high frequency trading, and i believe it was in june mary jo white, the chair of the s.e.c. gave a very important and very detailed discussion of high frequency trading, outlining where she saw

problems and what potential solutions might be to those problems. >> the quantitative easing, do you believe the unintended consequences of qe-1, 2 and 3 with all the bond buying, that it's forcing people into the stock markets creating this bubble? >> i think an environment of low interest rates in general, which have been promoted by our, both our keeping the federal funds rate at zero and additional by our purchases, low rates do have an incentive to push individuals to look for yield, to reach for yield. that is both a good thing and a bad thing. on the one hand, we need healthy risk taking in order to spur a

recovery. and low interest rates, i think, have had a positive effect on helping the recovery, but of course we have to be careful about looking for situations where low rates may be incenting behavior that can be dangerous to financial stability. i particularly outlined in my remarks an area like leverage lending where we are seeing a marked deterioration in underwriting standards. it looks like it may be part of a reach for yielding. we are trying to deal with that through supervisory, through supervisory means. the kind of broad-based increase in leverage in the economy and maturity transformation and credit growth that one tends to see in this situation where there are intense financial stability risks, i don't think

we see those things. at this point, they are more isolated and not broad based in general, at least in my asse assessme assessment. thank you, i want to go back to senator johanns' question about quantitative easing. do you see when the federal reserve stops the bond buying program? >> as i indicated in my opening remarks, if things continue on the current course, and as the committee expects, the purchases would cease after october meeting. >> if they cease, my question today would be, would you ever see the restarting of quantitative easing? once it ends, do you believe this is now the new normal the federal government buys these bonds or would you commit to saying the quantitative easing has come and gone and we've seen the last of it? >> it really depends on what the

economy does. the economic outlook is very uncertain. i hope we're on a solid course of recovery and that it will continue and not encounter some serious setback. i wouldn't take it off the table forever as a tool the federal reserve might need to some day in some circumstances use again, but my hope is we're on a path of recovery and monetary policy will, over time, normalize, that our purchases will end, eventually our balance sheet will begin to shrink back toward more normal size. and when the time is right, that short-term interest rates will begin to move above their current very, very low levels, too. >> dr. yellen, thank you. >> senator brown. >> thank you, mr. chairman. madame chair, thank you for being here. these hearings so often focus when the fed will change its

policies so financial markets will rally and wall street lenders can make money. too often we forget about the human side of these issues. as federal reserve chair, you worked to put a face on economic numbers. we're appreciative of that. last february you talked about the toll on unemployed workers being simply terrible and mental and physical health on their workers, on their marriages and on their children. it seems too many people around here still view unemployed workers as lazy, shipless people who do not really want to work, so we simply don't extend programs like unemployment insurance. talk for a minute or two about the psychological effects unemployment has on workers, why the psychology is so important and why it should matter to all of us, even a senator who goes to work in a suit every day and speaks with an upper class accent.

>> well, i think when workers lose jobs they depend on for their livelihoods experience a special psychological trauma, and especially when the unemployment is a long duration has it has been for many individuals who find themselves unemployed now. first of all, there is a very significant loss in lifetime income. many studies have documented for workers who experience job loss when unemployment is as high as it has been and they find it difficult to get another job. of course, there's the fear that goes with that of how will i support my family? how will i take care of my children? i gave a speech in chicago in february and talked to a number of unemployed workers and heard

personal stories about individuals who were supporting children and concerned that because in some cases they could only find part-time low-paying jobs that they couldn't continue to support their children adequately. there are a number of studies. when i use those words, that it takes such a toll on families and children and psychologically that's based on a number of studies that have documented that, that there are health costs to workers who lose their jobs. that in terms of the progress of their children, there are losses to their children when a parent loses a job for a significant amount of time. in terms of the odds of divorce and break-up of family, that is obviously present, too.

for people the jobs are often their identities. when an individual can't find a job for a prolonged period of time, who am i and what is my role and how do i contribute to my community and to my family become real psychological toll. i think anyone who ever talked to people experiencing significant unemployment realizes what the psychological toll is and the ways it affects their well being and that of their community. >> thank you for realizing that's an important part of your job, to forcefully speak out about the human side, the human cost of economic policies. too many meshes look at washington's response to the financial crisis and feel nothing's changed. after all the four largest banks are 25% larger than they were in 2007. federal reserve vice chair said

last week what about breaking up the large financial institutions? there is no simply actively breaking up the largest banks would be a very complex task with uncertain pay-off. it's troubling to me that the largest banks are so complex. one of our nation's top regulators can't understand these institutions, particularly since he worked at one of them. dr. fisher liked your views expressed in 2009 that break up the banks is more of a slogan. governor torillo's views, he praised a plan i worked on with the senator from delaware. my question is, do you agree with vice chair fisher or do you believe with governor torillo?

>> i think one of the things vice chair fisher said that i certainly agree with with is that systemic risk in the financial system is not purely a question of too big to fail institutions. we shouldn't lull ourselves into thinking if we deal with ways to resolve or diminish the role of those institutions that systemic risk is not still a real phenomenon that we have to worry about. during the great depression when we had a financial crisis, it was mainly a large number of small banks that were affected, and then we saw runs on the banking system that had the potential to, and did cause a collapse of credit in the economy. so i think he pointed out and i agree that we have to worry about more than the too big to fail firms, and we could have

systemic risk if a large number of smaller institutions are hit for some reason. it is certainly, i agree with my colleague governor tirullo, we are committed with trying to deal with too big to fail. we have put into place numerous steps and have more in the works th that, reduce their odds of failure if they do fail, it's important to be able to resolve these firms. on one hand there will be much lower odds that a systemic firm

would fail. should that occur, we'll have better tools to deal with it. throughout living will prospect and other aspects of our supervision, we are trying to give these firms a feedback object ways in which they can alter their structure in order to resolve their ability. >> the living will processes for these 11 large firms, the issue of complex that we can't address the issues of complexity. thank you, madame chair. >> thank you, madame chair for joining us yet again. i think you know from our previous conversations, i've long been of the view that the risks associated with this unprecedented policy experiment outweigh the meager benefits. i disclose that upfront.

i want to understand better a different aspect of this. that is a movement towards normalization which arguably is under way now, necessarily depends on the projections that the fed makes. you discussed some of those projections, inflation, unemployment, gdp projections. what concerns me is that these things are hard to project. the fed doesn't have a great track record projecting these things. i don't think the fed anticipated, for instance, the extent to which a decline in the work force participation would drive unemployment rates lower. i have a little graph i know you can't see from where you are, i would ask it be included in the record. simply depicts the fed's projection of gdp one year out and then compares that to where gdp actually was. it's been pretty terribly wrong for ten years. it seems as though there is a systemic bias with a more optimistic outlook than what has actually come to pass.

so my question is, to what extent, how introspective is the fed being about their own limitations in making projections which ultimately are driving a movement in the direction of normalization? maybe more precisely, do fed members incorporate into your own decision-making process the fact that these projections haven't been so good? that's not to say you're unique getting these projections wrong. i understand how difficult they are. but don't they argue for a more conservative approach and a quicker move to normalization since you know that very frequently these projections have been wrong? >> i certainly agree that projecting future economic activity is very difficult business.

rgdp projections have been for a number of years, too optimistic. i would say our projections about the labor market and unemployment, as well as inflation have come closer to the mark. so gdp stands out as someplace where our projections have been systemically off. of course, we have to gear monetary policy to what actually occurs in the economy, and not just what we expect will happen in the future to the economy. our forward guidance, for example, is very explicit in saying that the time of normalization of policy, the time at which we would begin to raise the federal funds rate above this zero to 0.25% raise which will depend on actual progress we can see that is not

a forecast, and our expectations about future progress in achieving both of those goals. so we are looking at what happens in the economy, and when we're wrong, we take that into account. as we see ourselves coming closer to our goals or failing to achieve our goals, that's real live data that we respond to and adjust our policy accordingly. i think that must be a feature of monetary policy is that it adjusts to actually unfolding events and not just what we expected. >> thank you. one other question. you know there is often a lot of discussion about the fed following some kind of well defined rule. obviously, many central banks do that. the fed itself has done it in the past. what is your reaction to the idea that the fed would be able to design its own rule, but it would be an objective

data-driven rule, the fed would be required to disclose the rule, and the fed would be allowed to deviate from the rule, but it would have to come to congress and explain when and why it was doing so? what are your thoughts on an arrangement of that nature? >> well, no central bank in the world follows mechanical mathematical rule. i think it would be a terrible mistake to ask the federal reserve to specify a mathematical rule. >> we've got central banks that peg their currency. that is a well-defined rule. >> well a currency board. >> or having a gold standard is a well defined rule. >> okay. if that's what you mean by a rule of gold standard, currency board, yes, that has happened. but given the goals that congress has assigned to us with respect to inflation and employment, i'm not aware of any, for example, inflation targeting country of which there

are many that has a mathematical rule. nevertheless, it makes perfect sense to behave in a relatively systemic way. in looking, when you have objectives, asking the question, how far are you from achieving those objectives, and how fast do you expect progress to be made in determining whether or not exactly how much accommodate is needed. a number of different factors come into play at different times if we were following a specific mathematical rule, i really think performance in this recovery would have been dreadful. most of the rules we would have used, first of all, we couldn't have followed in the depths of the down turn. they would have called for negative interest rates. if we had tightened monetary policy as some of those rules would have called forgiven the head winds we face, the recovery

would not be as far advanced as it is. there are special factors and structural changes that need to be taken into account that would make me very disinclined to follow a mathematical rule. but i think it is important a central bank behave in a systemic and predictable way and to explain what it's doing and how it sees itself as likely to respond to future economic developments as they unfold. and that is precisely what we are trying to do with our forward guidance. >> thank you. >> thank you, chairman yellen for the work you've done. i think in previous sessions we had, i think you agreed the fsoc and fed have authority to develop industry guidelines and metrics rather than forcing

insurers or asset manager firms into a regulatory mold. that is still your position, i assume? >> i believe with respect to designation that each unique company that's under consideration needs to be carefully evaluated in detail. >> thank you. in the past, some of us on this committee raised concerns that the fsoc seems to have a lack of transparency and the sifi session nation pr designation process. can you tell me why the process should not be transparent, if you think it should not be transparent? >> well, i think that it should be transparent what it is that the fsoc is considering and looking for and trying to

evaluate when it looks, evaluates any particular firm. and i believe the fsoc has made it clear that they are trying to identify entities that are responsible for systemic risk to the financial system, and the metrics that it looks to to evaluate that. but this great deal of confidential firm-specific information that comes into play in evaluating a particular firm that i don't think should be in the public domain, unless it is actually designated in which case it has been brought into public domain. >> you do believe the metric should be transparent? >> the criteria used to establish, to designate should be clear. >> do you believe they are now? >> i believe they are reasonably clear. >> okay. >> because there's some --

there's some, and i'm one of them that believe the process has not been transparent at all. what i would ask of you because i believe you think it should be. i agree with you. the information that is specific to a company doesn't need to be transparent, but i believe the metrics they are using so we know what they are looking for so quite frankly, everybody knows what they are looking for when it comes to designation is important. >> right. i believe they've indicated on what kinds of things they are taking into account. >> about six months ago when you were before this committee, we talked about clarifying the end user exemption from the margin included in the dodd-frank given minimal risk they posed in the overall market. you and former chairman bernanke all indicated comfort with exempting end users from the costly margin requirements.

is this still true today? do you still feel this way? >> yes. >> good. >> you indicated the rule would be out by the end of the year, the end user rule just wonder if you're still on schedule? >> i think that is correct, that we are. >> a few more head nods. thank you. that is very good. i want to talk a little bit about the assessment. when you are looking about the assessment of incoming information, when it comes to the economy and fed funds, labor market is one of them, gdp is one of them. i would assume housing is one of them. what are some other indicators you're looking at? >> we are trying to assess the

likely path of the labor market and employment and inflation which are the two goals congress told us to focus on. in trying to make those assessments. we have to look at a huge range of data. housing, consumer spending, what's happening in the global economy what do we expect will happen to our exports and imports? all of that figures into what will growth be in the economy, then in turn matters like productivity growth will affect how that translates into progress in the labor market. with respect to inflation, of course, we are looking at many different metrics. >> of all those things you listed, which is of the most concern?

>> of all those different metrics? >> yes. talking about the inputs you consider within the economy, what is of the most concern? >> at this moment what is of the most concern? >> yes. >> essentially the committee having looked at all these different factors holds the view we will enjoy moderate growth the next year and next couple of years and the labor market will improve, and so while we are concerned that housing is a sector where we expect to see better recovery, we are not. we are not many knowledgeable enough to know whether it will hold back recovery. appreciate your work and your interest. you gave a speech recently on the importance of macr

macro-prudential cools. the fed is taking the stance regulatory tools such as increase requirements, margining, central clearing, requirements for derivatives will improve. we are now taking the approach they are going to happen and we are going to deal with them. is that an accurate statement? >> i think the steps you indicated to strengthen the financial system do two things. they diminish the odds that bubbles will develop. for example, these rules

diminish the chance that leverage will build up as an economy strengthens. we've taken steps and will take further steps to diminish the likely buildup in leverage in the economy. >> you would agree zero interest rate policy is tending to make people reach for yield now, and is an impetuous toward bubble creation and certain asset classes? >> it can be. that's why we are watching very carefully. >> is there any one particular air yaur worrying about right now in terms of asset bubbles? >> i mentioned leverage lending and corporate debt markets, especially lower rated companies. i think we are seeing deterioration in lending standards. we are attentive to risks that can develop that banks or others

may be taking on interest rate risk. if interest rates, when interest rates ultimately begin to rise, that if firms or individuals have taken risks and aren't adequately prepared to deal with them, that can cause distress. among the institutions that we supervise we are certainly looking at management of interest rate risk. we are using stress testing in this latest round. we had specific scenarios designed to look at how large banking organizations would fare if interest rates were to increase rapidly. and we're focused on how firms are managing their own interest rate risk. i think there are some risks in a low interest rate environment.

i indicated that and we're aware of them, but i think the improvements we have put in place in terms of rig ulgs both d regulation both diminishes the odds risk will develop. if there is an asset bubble and it bursts, we are not going to be able to catch every asset bubble or everything that develops. >> i guess that goes to my core question. rather than have a policy that causes bubbles to create, why wouldn't we have a policy that doesn't cause that, one? and number two, it just seems to me now that we're kind of locked in this zero interest rate phenomenon, and one of the consequences of that is reaching for yield and now we're going to try to tenuate the response to the zero interest rate rather than change the policy so we

don't have the bubbles in the first place. >> so we have to recognize also that we're dealing with a real problem. the reason we have low interest rates is to deal with the very real problem, namely the economy is operating significantly short of its potential. employment is suppressed well below its maximum sustainable level, and inflation is running below our objectives. that's why we are holding interest rates low. were we to significantly raise interest rates to deal with the set of concerns that you indicated, we should expect even worse performance on those important goals that congress has established for the federal reserve. and if we were to weaken the economy, it's not even clear that we would be mitigating financial stability risks overall because --

>> we're in the trap. >> there are considerations in both directions. so we need to be very attentive to the financial stability risks. as i've indicated, if they were to become extreme and other tools were not available or were not successful, i wouldn't take monetary policy off the table as a tool to be used. but we should by no means think it would be costless because it could be very costly in terms of achieving other very important objectives. and a weak economy creates its own sets of financial stability risks. so it's not even clear that on balance we would be promoting financial stability. so this isn't a simple matter. there are complex trade-offs involved here. >> mr. chairman, i have additional questions for the record. >> yeah. >> thank you. >> the chair notes we have five

members and less than 20 minutes remaining to vote. senator warner. >> thank you, mr. chairman. thank you, chairman yellen for your good work. i'll try to make my questions quick and make one front end comment. as someone who advocated very strongly during dodd-frank that nonbanks could be sifis. i share senator tester's concerns about the transparencies. we've got to get it right. my concern for the nonbank sifi designation there is still a great question on transparency whether it is size or product component, and the more clarity we can get on this, the better. the two questions i want to get at, one is an issue that's not been raised yet. some of us on this side of the aisle have grave concerns around

student debt. $1.1 trillion, greater than credit card debt. i personally believe it is retarding recovery in the housing industry, retarding the growth of entrepreneurs, some of us proposed refinancing proposals. we looked at income-based repayment plans. there is a bipartisan opportunity out there that would allow an employer to take a portion of an employee's salary and apply it directly to the student debt, pretax, the same way we allow for tuition. but is this a subject that at the fed you've looked at and want to make a comment on in terms of this rising potential bubble in student debt and its affect on the economy? >> we are certainly looking at it and the growth in student debt has been dramatic. i think there has been some work that documents that it is probably having an effect on the

ability of young people to purchase homes. it certainly is a burden for those individuals that they'll be carrying through their lives. on the other hand, education is extremely important, and making available the financing that's necessary in this economy for individuals to acquire an education is of the first order of importance. i would be concerned, of course, that some of the decisions that students are making, they may not fully understand the burdens that they're assuming and how they will affect their lives. second of all, they may not be always accurately evaluating what the pay-offs are to the training that they're taking on, especially when there is inadequate information about the

performance of the schools or programs that they're enrolled in, what are the job finding and income prospects? >> we have bipartisan legislation. we ought to have a user-friendly website for housing. a zillow-type site for students. know before you go is the approach we have. i would point out we've seen student debt quadruple from $200 billion to well north of $240 billion in 2003 to $2.1 billion roughly now. i would urge you and even the fsoc level to look at this. if you've got additional suggestions, i want to use my last moment to get in a question i asked before. i want to prod you one more time. that's on excess reserves. when we were last before you, you gave the same answer chairman bernanke gave and the concern if you got rid of some

of these excess reserves, which you are currently paying 25 basis points and the excess reserves that have gone from $2.4 trillion close to $2.6 trillion, the european central bank has a negative ten basis points on their policy towards these excess reserves. i realize your concerns that the effect it might have on money market fund but with money market fund rates already so low, i still don't understand why reexamining this policy might push financial institutions to actually be willing to do more lending rather than to house these funds at the fed. >> i mean, it's a very legitimate question and it's something we have considered and debated. there have been mixed views in the committee on the desirability of doing that. we've been quite concerned about what it might mean given the structure of our money markets. >> money market funds are already pretty low.

>> yeah. >> my hope would be you continue that debate. at least this member believes this could be something that could be stimulated in the economy and get these banks taking this capital away from the fed and actually into the economy. thank you, madam chair. >> senator murkily. >> thank you, mr. chair. thank you for your testimony today. i'll try to be crisp in these questions given the time. insurance advocates have expressed concerns new regulations might be forth coming by national standard influenced by nations that do not have our state guarantee system and believe this may result in new capital requirements that are unnecessary and inappropriate for the structure of the industry in our nation. is there any thoughts you might have to share on that particular topic? >> so i would simply say that

the federal reserve is participating now in an international association of insurance supervisors discussing for internationally active insurance firms what might be appropriate capital standards for groups. you know, for essentially consolidated capital requirements for not legal entity insurance firms that are regulated by the states but the consolidated holding companies. nothing that happens in that context -- it's similar to our participation in the basil committee. we're, you know, looking to put in place appropriate standards here in the united states and

nothing decided in that international group has any force if the united states unless we propose rule, put them out for comment, and finalize them. i think it's helpful to get the perspectives of others and to the extent possible an appropriate internationally level playing field. >> thank you. i'm going to jump into the next point, which i wanted to double down on student loan question. because i feel like there's a huge amount of emerging information about the delay in home acquisition. this is certainly a drag in itself on our economy as well as an impact on the quality of life of our young folks. but it also has a significant extended effect through the decades to come because of the slow pace of wealth aggregation for families if they do not engage in homeownership earlier on. and it's actually shocking to see a reversal of a key statistic in which folks who are 25 to 30 who have gone to college are now less likely to own a home than folks who didn't

go to college. so i want to -- this issue really goes to the heart of the american dream because the cost of college is not only affecting those who went in to have this debt, but it's affecting the aspirations of our children in high school who are starting to get advice particularly in blue-collar communities like the one i live in that maybe you shouldn't risk carrying this mountain of debt in a context of such high uncertainty over jobs that might be able to have a monthly wage that could make those payments. >> i agree with you that when you look at the numbers on student debt, it has to be a significant concern for just the reasons you gave. >> thank you. i'll look forward to any work that the fed is doing in this area to understand the better the impacts on the economy. i want to turn to the financial reform rule making process. i know you've expressed concern with the frustratingly slow pace of some of the rule making.

we've still got quite a long list from dodd frank four years later that hasn't been completed on securitization of the issues that senator levin was so forceful in bringing forward during dodd frank. security based swaps, compensation structures and so forth. how do -- do we have kind of a crisis of confidence in our ability to make the rule-making system function? when we have in a law a goal for a rule and sometimes it's a year, sometimes it's two years and we just can't seem to get the rules completed and maybe even end up in never, neverland, appropriately named, because it seems like we're never going to get to final rules. is this a change from two decades ago? what do we do about it? >> i mean, i know it's been frustratingly slow. it's complicated, and we want to

take the time to get it right. we're involved in a lot of rule makings that involve multiple agencies with different perspectives, and we're also trying to coordinate with other countries to move forward together so we maintain in many areas a level playing field. and this is immensely time consuming work. i understand your frustration. i guess i see a bunch of rules in the pipeline that i hope will be completed in the not-too-distant future. the liquidity coverage ratio, qrm, other things that we can expect to come out of the pipeline, and i see a further agenda of rules that i really hope we will make a great deal of progress on this year. so to me the glass is more half full than half empty, and i

actually believe we have made substantial progress and will continue to push forward. >> thank you. >> senator hagan. >> thank you, mr. chairman. and chairman yellen, thank you for your service and for being here today. i wanted to follow up on a letter that i sent to the federal reserve, the occ and the fdic. it's regarding the liquidity coverage ratio standard. i've heard from a number of -- i've heard a number of concerns from communities in north carolina about the exclusion of the municipal securities from the high quality liquid assets designation. in particular, i'm concerned that this exclusion of the municipal securities could restrict the ability of state and local governments to raise the capital that they need to finance these public investments in schools and hospitals and roads, airport, and all the other infrastructure systems. and these projects are really the cornerstone of the u.s. economy.

what is the justification for excludeing these knmunicipal securities, which other types of debt, including foreign sovereign debt, are covered? it seems like a strange outcome to me for the debt of some foreign countries to be treated more favorably than the aaa-rated debt of states like north carolina. >> so let me say, this is a proposal we've put out for comment, and we'll look very carefully at the comments we receive on this and other topics. the rationale for excludeing them is that we're expecting firms to hold truly high-quality liquid assets, and the liquidity of municipal bonds is substantially lower than any of the assets that are included on that list. so the absence of liquid markets where those securities are

traded was reason for excludeing them, but we will be looking very carefully at comments before we come out with a final proposal. >> well, i ask that you consider the impact that this exclusion could have on infrastructure investments and in the ability of the states and local governments to actually manage their debt. >> we will look at those comments. >> thank you. and i also wanted to follow up on senator merkley's question concerning the new global standards for the insurance entities. i believe it's important that the insurance companies be protected and the state model for regulating the insurance also be respected. and as a member of the financial stability board and a participant in these meetings, can you explain in a little bit more detail what the federal reserve is doing to ensure that any international regulations do not harm these companies and respect the state-based model of the insurance regulation. >> well, we're working very

closely, and the state regulators are participating in these international discussions as well. nothing that's under consideration would affect the way in which legal entity insurance companies are regulated with respect to capital by the states. so we're looking at a separate set of capital requirements that would apply to the consolidated organization. again nothing that happens in this international forum has any affect on american firms until we have incorporated them into regulations which go out for comment and are ultimately finalized. >> thank you. thank you, mr. chairman. >> senator warren. >> thank you, mr. chairman. and thank you, chair yellen, for being here today. you know, one of the tools that congress has given the fed to combat too big to fail, section

165 of dodd frank, this is the section that requires large financial institutions to submit plans each year describing how they could be liquidated in a rapid and orderly fashion without bringing down the entire economy or needing a taxpayer bailout. now, the fed and the fdic must review these plans, and if they don't buy that the plan would actually result in the rabbit and orderly liquidation of the company, then they must order the company to submit a new plan. and here's the key part. as part of the order to submit a new plan, the fed and the fdic can require the company to simplify its structure or sell off some of its assets. in other words, break up the bank so that it could be more easily liquidated and not pose a risk to the economy. so let's consider what happened

during the lehman brothers' bankruptcy in 2008. that's the one that sparked the financial crisis, nearly melted down the economy, and triggered the bailout by the taxpayers. the court proceedings took three years. clearly not rapid or orderly. but lehman was tiny compared to today's biggest banks. when it failed, lehman had $639 billion in assets. today jpmorgan has nearly $2.5 trillion in assets. that's four times as big as lehman was when it failed. lehman had 209 registered subsidiaries when it failed. jpmorgan -- i really almost couldn't believe this when i read it. jpmorgan today has 3,391 subsidiaries. that's more than 15 times the

number of subsidiaries that lehman had when it failed. three years to resolve lehman. now, jpmorgan has filed resolution plans in each of the last three years, and the fed hasn't rejected any of them as not credible. given our recent experience with the bankruptcy of lehman brothers, can you honestly say that jpmorgan could be resolved in a rapid and orderly fashion as described in its plans with no threats to the economy and no need for a taxpayer bailout? >> so the living will process, as i understand it, is something that's intended to be iterative in the sense that the firms submit plans and will receive feedback from the regulators on whether or not we think the fed and the fdic regard these plans

as sufficient to enable resolution under the bankruptcy code. we have given feedback on the first round of plans that were submitted and are working actually to, at this point, to give feedback on the second round of plans. in fact, the firms have now submitted a third round of plans -- >> i'm sorry, chairman. i'm just a little bit confused. jpmorgan submitted a round of plans in 2012, and my understanding is that neither the fed nor the fdic said that those plans were not credible. it then submitted plans in 2013, and neither the fed nor the fdic said they were not credible. and it has submitted plans in 2014. so i'm not quite sure on whether you're saying the plans are not credible and you're continuing to talk with them and asking them to change their plans.

is that the case? >> well, we're working to give these firms feedback on their second round of submissions. and i think what we need to do is to give them a road map for where we see obstacles to orderly resolution under the bankruptcy code and to give them an opportunity to address those obstacles. >> i appreciate that you're doing that, but the statute, it seems to me, is pretty clear here. that it's mandatory these plans be submitted each year and that each year you determine whether or not the plans are credible. and i guess the question i'm asking is, have they ever gotten to a plan that you can say with a straight face is credible? >> well, i've understood this to be a process. these are extremely complex documents for these firms to

produce. our second round of submissions we're looking at plans that run into tens of thousands of pages. and i -- i think what was intended is that this determination you're talking about, about whether or not they're credible, do they -- the question is, do they facilitate an orderly resolution? and i think we need to give these firms feedback. >> i'll stop there because we're running out of time. but i have to say, chair yellen, i think the language in the statute is pretty clear. that you are required, the fed is required to call it every year on whether these institutions have a credible plan. and i remind you, there are very effective tools that you have available to you that you can use if those plans are not credible. including forcing these financial institutions to simplify their structure or

forcing them to liquidate some of their assets. in other words, break them up. and i just want to say one more thing about this process. the plans are designed not just to be reviewed by the fed and the fdic, but also to bring some kind of confidence to the marketplace and to the american taxpayer that, in fact, there really is a plan for doing something if one of these banks starts to implode. you said that these plans run to the tens of thousands of pages. all i can say is that what's been released to the public is 35 pages long. that's about one page for every hundred subsidiaries that have to be dealt with. i think that the plans that have been released by these companies have not been something that the public can look at and say, yeah, i see they've got a plan to get through this. so i hope you would urge greater transparency by these large financial institutions that are required to submit these plans,

and i hope the fed will be making a call on whether or not the fed under its statutory responsibility sees these plans as credible for resolving these financial institutions if they hit financial trouble. thank you. thank you, mr. chairman. >> chair yellen, i would like to thank you for your testimony. this hearing is adjourned. >> thank >> the "l.a. times" reports on the situation in gaza today. at least 13 israeli soldiers and 50 palestinians were killed today. troops intonding gaza to uncover a network of underground tunnels that were allegedly used by hamas to carry

out attacks. president discussed the situation with israeli prime minister benjamin netanyahu by phone. a white house read out of their conversation says that the president reaffirmed israel's right to defend itself, but raise concerns over the growing number of casualties. he also informed the prime minister that secretary of state john kerry would soon be traveling to cairo in our door work on arder to potential cease-fire agreement. ago, the watergate scandal led to the only resignation of latin american american president. throughout this month and early august, american history tv revisits 1974 and the final weeks of the nixon and administration. this weekend, opening statements from the house judiciary committee as members consider articles of impeachment against president nixon. >> the selection of the president occupies a very unique position within our political system. the one act with the entire

country participates and result in four years. the occupant of that office stands as a symbol of our national unity and commitment, people,udgment of the the majority will to be undone, if that symbol astutely replaced to the action of elected representatives, that must be for substantial and not trivial offenses, supported by facts. >> watergate, 40 years later, tonight at 8:00 eastern on american history tv on c-span3. senate, the transportation subcommittee hearing with attorney ken feinberg. he was on capitol hill to testify about the compensation program he is overseeing by those affected by a faulty calls.n switch in gm gm has recalled 2.6 million vehicles in relation to the problem. this is 50 minutes.

first, i want to acknowledge in my opening remarks, and then from my viewpoint, the ceo of general motors, mary barra, has stepped up, and with courage and conviction has confronted head on the problem and the corporate culture that caused it. some see the record number of recalls at general motors as a problem. i see it as a good sign. second, i want to briefly say that i think i speak on behalf of all members of congress who have asked very difficult questions surrounding these tragic events, that while we are asking tough questions, we have

great respect for the workers of general motors. i would like to take this moment the workers at general motors. you are terrific, you build the were the you also victims of outrageously incompetent management. management was the problem here, not the workers. the report i have spent some time with. i find it a ro thorough and damning. there was indifference, incompetence, and deceit among engineers in positions of important responsibility. second, it is very clear that andcoulter of lawyering up wack-a-mole to minimize individualn

lawsuits killed innocent customers of general motors. i have many questions about the failures of the legal department today. i am also interested today in hearing from mr. feinberg, who has been asked to put together a plan to compensate those who have suffered from these management failures. of theere independently witnesses from general motors. he is appearing independently of the witnesses of general motors, and he will exert independence in his role as he makes decisions about compensation to the many people who have suffered. rnd i certainly thank him fo being here today in that regard. interestedm more today in understanding how in

the aftermath of this report, however the world in the aftermath of this report did michael milliken keep his job? understand how the general counsel for a litigation department that had this massive of responsibility, how he would be allowed to continue in that important leadership role in this company. and the questions i asked today will be surrounding what he knew and why he did not know it and what kind of direction did he give a legal department that would allow them to do nothing in the face of the evidence they were confronting over by people who were trying to get the attention of general motors

about the fatal defect in the product they were selling. senator heller? >> chairman mccaskill, thank you. i would like to thank the witnesses here today for both , and also think chairman mccaskill for the second hearing on general motors. today based on the finding of the report, this is in fact one of the darkest chapters in the history of general motors. an ignition switch was approved although it failed to meet gm's own standard specifications for torque resistance. the ignition switch would slip from run to accessory with little more than the knee hitting the key or the car driving over a bump. the car's power shut off while it was being driven.

even for the most experienced drivers, there is nothing more terrifying than a loss of power while moving at high speeds. i can only imagine the sheer terror of the individual driving these vehicles the minute the ignition switched out of run. what those drivers did not know as their cars swerved across lanes on the hit walls, inclines, ravines and trees, was that the one thing they could've saved their lives, the airbag, was not going to deploy because the power to the airbag itself was shot off. if after a few crashes gm was able to understand the ignition switch problem, maybe more lives could have been saved. as the volukas report points out, gm failed to take action or acted too slowly for over a decade. two critical factors have been

identified as reasons for this. understand how its cars were built. understand how its cars were built. incredibly, the official findings pin the blame for the delay to recall the scar on the fact that gm did not understand how its own car was built. the same engineer who approved the original ignition switch approve the part in 2006 and did not inform any person at gm and did not change the part number. people died. millions more were put at risk because gm did not understand its own car. 54 frontal impact crashes and more than a dozen fatalities later, we find ourselves this

morning for a second hearing on this issue. it is truly a dark chapter in the history of general motors. we need to make sure that the volukas report is the whole story. is the volukas report accurate, is it definitive, or are there missing pieces? the ceo of delphi is with us today and it is my hope that he will help this subcommittee understand there is additional information that provides us with more of a complete picture. i hope this testimony today will be forthcoming, and not circle the wagons. we need to know what happened here, and delphi has a responsibility to the families and survivors to provide a complete picture. if delphi knows more than the , nowas report identified is the time to make those known. the report offers a strong

timeline. explore whether delphi was fully cooperative. thehe report it states delphi had numerous documents and other relevant material they did not supply. chairman, i am appreciative that we are holding this hearing. all americans deserve to know that for over a decade, general motors and delphi failed to demonstrate a basic level of corporate confidence. there will be a discussion of whether a changing of laws needs to be necessary. thank you, chairman. is -- first witness today and our first panel consists entirely of kenneth feinberg and ms. biros, who are in charge of

the fund that will compensate many of the people who have suffered tragically as a result of gm failures. we look forward to your testimony, and thank you for being here, mr. feinberg. for want to thank the chair her vigorous leadership in this matter. i want to thank all the members of this subcommittee. i particularly want to thank senator blumenthal and his staff. valuableided some constructive suggestions as to what this protocol should look like, and indirectly i must because thenator senator was critically important and very instrumental in the design and administration of the 9/11 victim compensation fund, which proved to be a precedent for much of what is in this protocol. i want to publicly thank the senator for his work many years ago in the drafting of the 9/11

victim compensation fund. miss camille by rose, who has worked at my side in the drafting, design, and administration of the 9/11 fund, the bp oil spill fund, one fund boston marathon, the virginia tech memorial fund, etc. anyis also here to answer questions the committee might have about the administration of this program. it's a bit premature to be talking about this program because we do not begin receiving claims until august 1, a few weeks from now. we are right on track. this protocol will form the basis for the submission of claims. i think lawyers around the for their input as to what this form might look like. i think various nonprofit

foundations interested in automotive safety for their input, and i also must say, i think general motors from the top down. and have been very helpful constructive interacting this protocol. this compensation protocol is entirely our corrective responsibility. i don't think there is anybody who provided this input that is entirely satisfied with all aspects of the protocol. i am optimistic that as the chair pointed out in her introductory comments, we will compensate. thisnnocent victims of tragedy, that is the purpose of this protocol and i am confident it will succeed.

claims can be submitted for the through augusts 31, december 31. intoll stay in active work 2015, processing claims that may come in late in the year. you're not going to disappear on december 31. disappearnot going to on december 31. there are some interesting features of this program that i can highlight in one minute. it is uncapped. we are authorized to pay as much money is required. the bankruptcy of gm is no barrier to compensation. if there were accidents that occurred before the bankruptcy, they are as eligible as accidents that occurred after the bankruptcy. people whoome

already settled their claims years ago was general motors, and signed a release that they will not sue. they can come into this program. if under our compensation rules of they are entitled to additional compensation, they will be paid. the contributory negligence of speeding, cell phone texting while driving, intoxication -- irrelevant. looking at the driver or the circumstances of the driver's negligence. we are looking only at the automobile to determine whether or not the defective ignition switch was the proximate cause of the accident. you never know on these programs. we have our fingers crossed and we are cautiously optimistic. we build on the success of past similar programs.

i believe that beginning august 1, we will be ready as the chair and others have insisted to begin receiving claims. we are finalizing the documentation, which we will deliver to the subcommittee. but we will be ready to receive claims. we will pay those claims within days after the claims are deemed substantially and finally, we have a very pervasive notice program to reach out to all eligible claimants, all those who think they might be eligible. we are determined to reach every driver or engine victim to make sure they know of this row graham. that thenfident program will work as intended. thank you. >> a couple of questions.

when they hired you to administer this compensation program, did general motors lay out any limitations on the program cost scope? if so, what were the limitations? >> the only limitation they really laid out was the limitation that only certain eligible vehicles are subject to this program. as the chair knows, in bp there were limitations in my jurisdiction. congressman blunt and others drafted that legislation, there were limitations. the only limitation in this program that gm insisted on were that only the eligible vehicles listed in page three of the compensation protocol are eligible for consideration. >> did you suggest any classes or coverage that should be included the general motors rejected? >> no. i am not an automotive engineer.

i asked general motors, what are the vehicles? what is the definition of an eligible vehicle that could give rise to a valid claim? this was their response, which is reflected expressly in the protocol. not deployirbags did but should have, if there is any evidence that the seat else pretension ours worked as designed, under your protocol, the victim is not eligible? >> that is right here at the victim is not eligible if the and the airbag did deploy. if the airbag deployed and the seatbelts were working, then a likelihood that the ignition switch could have been in the off position causing the accident is not possible. we concluded and i concluded that if that deployment renders the claim in eligible.

or a claimdeployment in which the victim or his or her family say, we don't know whether the airbag deployed or not, eligible. filed a claim, and we will work with the claimant in that regard. if the airbag did not deploy, you are eligible if you are in one of the cars on the list? >> exactly. >> regardless of the seatbelt? >> exactly. >> the total decision here is what car it is, and whether or not the airbag deployed? >> and/or whether the seatbelts deployed. if the seatbelts deployed, the power is on, it could not have been the ignition switch. >> are you talking about whether or not a seatbelt is on? it is not the seatbelts per

se, it is the pretension ours, which are electronically controlled. if they were operational, it is unlikely that the cause of the accident was the ignition switch . >> you are saying if the pretensioners were working, there was not a shutdown of the electrical system that would have prevented the airbags from deploying. >> correct. >> what if there is a frontal crash and the airbag does not deploy, and seconds later there is a rear crash and the airbag is deployed? >> file the claim. if there is a frontal crash and the airbag did not deploy, we want to look into that claim. >> you are open to looking at each situation. that would be a situation where , but notg did deploy until the second crash. i want to make sure everyone is

clear that even if your airbag did not -- even if your airbag did deploy, it would depend on the facts of the case. >> i would like to take a look .t that claim >> this is the issue. the switch goes off and on easily. it slidesoff easily, back because there is not appropriate torque in it. things that bump it, move it -- just as easily as writing off the road could bump it, a frontal crash could move it from off to on, correct? areheoretically you correct. i have two answers to your hypothetical. first, it is highly unlikely that that circumstance occurs. i guess it could buried it is highly unlikely.

what i want to avoid with this program is being inundated rice thousands of -- by thousands of claims where the airbag deployed, making it extremely unlikely that it was the ignition switch causing a delay in getting money out the door to the vast number of claimants which clearly can demonstrate airbag non-deployment through police reports, photographs, etc. is whole key to this program getting money out the door as fast as possible to eligible claimants. that is why the airbag provision in the protocol is designed, frankly, to discourage thousands of people from filing a claim when in the overwhelming number of non-deployment is a certain step in the direction of finding eligibility.

>> i have questions about the amount of money that you have to punitived also about damages. i have a feeling my colleague will answer these questions. i will leave those questions to my colleague and turn it over to the senator. >> thanks for being here. i don't know that it is premature to have this discussion. i think this is the perfect time to have this discussion. thent to go back to what chairman was asking you. you are saying there is no scenario where the key could accessory,rom run to have an accident occur and still have the airbag deployed? >> that's right. senator mccaskill raises a hypothetical situation, but it's not the type a situation that is likely that would justify drafting a compensation program that would invite anybody with the airbag deployed to file a claim. >> it took 10 years to figure

out what the problem is and you are telling me that scenario cannot happen? >> it is so rare. discourageant to claims from being filed by the overwhelming cases where airbag non-deployment is a major step in the direction of finding eligibility. >> you said you will compensate all innocent victims. let me give you a scenario. cobalt,i'm driving a and the airbag does not deploy and the key goes from run to accessory. i walk away unscathed. but i destroy the car. am i compensated? >> that is a litigation matter. you are not compensated under a protocol limited to death and physical injury. you may very well be compensated. there are thousands of lawsuits pending on economic damage to the car, diminished value of the car, but that is not the scope of this death and physical injury program.

>> why would you stop there? isn't a loss a loss? >> in the very beginning, in my conversations with lawyers representing injured and deceased victims, it was always understood that this program, and like one fund boston common is limited to death and physical injury. i'm not saying those folks don't have a valid claim. they just don't. >> come to this program --come to this program. >> is there a way to appeal this decision, that a loss is a loss in this case? >> in the courts. >> can they appeal to gm? >> i guess they can appeal to gm as well. >> i don't know if you have performance indicators moving forward on what you and your staff will be -- based on your pay, it is important there is transparency of your and knowing here

that you are being compensated by gm, a think transparency is important. will you or your staff be paid based on a number of claims made or the number of that nature? >> absolutely not. the me talk you about bp. previous administrations of the bp oil spill victim compensation fund did receive some criticism. from some of the stakeholders that you are working for the oil company's interests, instead of being independent. i will say. >> how do we know that you will be accountable to the victims? criticism came my way, i asked former attorney of the michael mukasey

bush administration to review my whole compensation, the whole way we went about being paid, my independence, and he wrote an opinion letter which i made available, making it very clear and doing independent the type of work i was asked to do. the only real way that you blunt criticism that is sure to come about my compensation -- the only way -- is how fast you get money out the door to eligible claimants in a generous way so that they can see that the conduct of this program and the professed independence is back up by the way these claims are being processed. until these claims begin to come arend people see how they being processed and how they are being found eligible, i will always confront that criticism and that's the way you have to address it. >> thank you.

>> thank you very much, chairman mccaskill. thanks to both of you for being here. the investigation into the general motors ignition switch defect issue paints a picture of a company that for years showed indifference in the fact of mounting evidence, of risk and of danger. i believe there are still questions to be answered, and a key point for victims, mr. feinberg, and one of the reasons we are having hearings today are questions about how the fund and claims will work. i greatly appreciate the fact that the new gm ceo has stepped notnd taken this head-on, only with the recalls but also with setting up this fund and working with the victims. something very bad happened here, and we all know that. feinberg, only. the results and history will judge whether there is true justice for these victims.

i'm glad the chairman held the steering so quickly after our last one so we can continue to be informed and ask questions. in my case, i have a victim, a very young woman named natasha. she is out of minnesota. she was only 19 years old. wentied when her car barreling at 71 miles per hour into a grove of trees. she was a hockey goalie. she had a lovely little note she wrote to her dad right before she died about how she always knew he had her back and he was there. all they want now is to make sure that gm has their back. my first question is about these young victims, since many of these cars involve younger drivers. i am a saturn driver. i still have a 15-year-old , and the chevy cobalt,

that was the kind of car that she was killed in. that there will be fair compensation for these younger victims when it is often harder to assess what their earnings potential will be? >> absolutely. like 9/11, where many young people died on the planes at the world trade center and pentagon -- here even younger people -- we will make sure that compensation is generous and it is adequate and appropriate. in the protocol lays out in some detail how we will go out compensating nonwage earners who have not yet begun a professional career. allowo lay out rules that any younger victim or anybody who has died in the crash or who was terribly physically injured to come in and see us, and we will develop a tailored

compensation program, what i reflects the that unique circumstances of those younger people. we will be glad to do that under the rules of the protocol. >> you estimate a lower participation rate for young people because you have not seen this in the past? >> no. >> concerns have been raised about some safety groups about the documentation required, that it may be too burdensome. some say it may be difficult to prove that years ago and ignition switch failure caused the crash. how do you respond to that? than a lot less burdensome going to court to prove their claim. there is a provision in this protocol that makes absolutely clear that if anybody files a deficient claim, they cannot find the documentation, we will claimant to try and cure that deficiency.

there are various ways, a menu of options as to documentation, contemporary police report, the car, the black rocks in the car, insurance reports, warranty and maintenance reports, photographs. perhaps one of the best examples senatorboration, mccaskill's example of showing a photograph, a front end collision and no airbag deployment. that case is well along the way to eligibility. we will work with the claimant to make sure that even though some of these claims are very old, the accidents occurred over a decade ago. we will try and reconstruct that documentation. the 2009the terms of bankruptcy, gm is technically free from liability that occurred pre-bankruptcy. can you assure the plaintiffs that they will have equal opportunity to compensation regardless of whether and when

gm went through bankruptcy? >> yes. >> thank you very much. >> senator blunt. i, we have aan and number of gm employees in our state. we are grateful for those employees and the work that they do, and concerned about anything that reflects on their products, their future opportunities, their ability to make the good living that they make with the hard work that they do. looking at this is important to the country.t into mr. feinberg, i appreciate your comments. when you set up the model after 9/11, the idea is when you continue to pursue, which is victims are not subject to which judge they are assigned to, that a case is handled one way

somewhere and another way somewhere else. they still have the legal option if they want to take it, but if they want the assurance that these cases will be handled in a way that has a structure, they have that from you. in that structure, when it comes time to a settlement, you have the ultimate authority on what that settlement would be, am i right on that? >> that is correct. the program is entirely voluntary. no one has to come into this program. if they do come into the program, we will determine their eligibility. the amount of compensation, and only after they know what it is they will receive, how generous agree only then do they to waive going into court to receive this money. for mys no appeal cannotnation, and gm reject our final determination. they have agreed in advance to

abide by any final decision that is made. that i right in believing gm has no input on what your final determination on an individual case would be? the claimant, they can provide whatever information of myant in advance determination to complete the record, but once i have that record -- i have heard if gm has anything they want to add -- once we make that determination, they have no say, they have no right to appeal, they have no right to second-guess. they are bound by that determination that we make. >> at what point will you begin to deal with these individual cases? >> august 1, the claims start to come in. once the claim is deemed substantially complete and we have the documentation, within to processwill begin the claims, authorize payments,

and invite the claimant to accept that compensation. >> you said you were grateful to gm in helping draft the protocol . in addition to determining eligible vehicles, was there anything they added to the protocol or helped with in that protocol? >> yes. i asked gm and plaintiff lawyers and nonprofit foundations of the entire protocol, what do you think of the dollar levels? what do you think about the process, the procedures? motors,ay that general from the ceo to mr. milligan and down the line, extremely cooperative, constructive, wanting to do the right thing. i have only appreciation for general motors in assisting ms. the actualyself in drafting of the protocol. i doubt anybody likes all of it, except ms. biros and myself.

for your leadership on this, and so many other funds like this. i wish you well, and certainly everybody involved well as you move forward, trying to deal with these claims in the best possible way. in terms of the company, better late than never. for those people who were dramatically impacted and who ses they will never recover from, that note from a. her to her father is a sad, last, and only thing to have in the last moments of that young girl's life. the company made a good choice, and look forward to watching as this progresses. >> thank you, sir. >> senator blumenthal? >> thank you, madam chairman. i want to thank you for having this hearing, which i think is very important. mr. feinberg, for your work,

very challenging work in this area. i have only five minutes here, but you have spent many more than five minutes here -- more than five hours talking to me and my staff. i hope we can continue to work on many of these very profoundly important details. in theil here is details, and in the discretion that you will have. one area ask you about of what i hope is within your discretion. year, whenof this you announce the details of your compensation protocol, gm announced the recall of more that hadllion cars ignition defects, defective ignition switches. the company acknowledged those defective ignition switches

beyond the models involved in your compensation fund so far caused at least three deaths and numerous injuries. added to the list of the chevrolet cobalt and saturn ions, among others. chevrolet, oldsmobile, pontiac cars. gm has now recalled more than 14 million cars in 2014. recallsons for these are defects in the same part, the ignition switch. killed andhat injured people in the matter that you are providing your compensation fund. i happen to believe that the compensation fund has to be expanded. i berlin -- believe strongly expanded fund must be to include those victims of death, injuries and damage in

those other recalls. would you agree with me? >> i cannot agree or disagree. i have no jurisdiction, senator. i can be very clear on this. just as with these other compensation programs, where policymakers tell me in drafting your protocol, this is what is eligible. i have no authority to go beyond the list of automobiles listed in this compensation program. >> would you recommend to gm that it expand the fund? >> that is entirely up to gm. i am not an automotive engineer. is that when gm asked me to create a fund, and for ms. biros and myself to administer that fund, they made ,t clear that the only models this problem and the context of the problem gave rise to this special compensation.

bp, i must1 and with abide by the delegation of authority. >> let me move to another topic. i can tell you about instances deployed, andags the crashes resulted from this defective ignition switch. the hypothetical scenario we have been discussing here is a real fact. i talked to people who drove those cars. were ableed, and they to turn them on. i can present to you specific instances of crashes. will you consider them and make refunds? >> i want to see those claims. i have talked in the last three or four months to automotive engineers, two lawyers, to gm officials. it is such an unlikely possibility -- but if it is -- i

would like to see that claim. i'm inspired to read this -- racist point by the observation made by senator mccaskill -- by thee this point observations made by senator mccaskill. they are supposed be the ones who make sure that corporations comply with the law in spirit and letter. here, the lawyers for gm cover-up,nabled concealment, deceit, and even fraud. and i believe although we use the word alleged as lawyers all the time, that the criminal investigation now under way by the department of justice will find culpability on the part of those lawyers. would you agree with me as someone who has been a member of this profession and done it with

great distinction for a long that the lawyers here failed the public and failed to gm? >> i agree that the lawyers work in the public interest or should. i don't know enough about the underlying circumstances that give rise to this. i don't know the answer to that question. >> thank you, mr. feinberg. senator baldwin, welcome. senator baldwin is here as a special guest of this committee today. we welcome your questions. >> thank you, chairman mccaskill, for allowing me to join you today. i'm not a member of the commerce but i have had discussions with family members, and let me just share by way of an opening statement that on the

night of october 24, 2006, three girlfriends -- natasha, who you heard about earlier -- amy, and megan were returning from a trip to a walmart in st. croix county, wisconsin. think wright county is one of the border counties between county is-- st. croix one of the border counties between wisconsin. into a careened telephone pole. the airbags never deployed. the accident killed natasha and amy and left megan seriously injured. as you heard from the senator, natasha was a goalie on her hockey team. her parents could count on one hand the number of times they had seen her in a dress. had an artistic side that impressed her art teachers with her drawing and her parents with her poetry.

the first thing that comes to mind when amy's parents, teachers and friends remember her is her last. it was infectious. going, here got whole class could not help but join in. she loved playing with her nieces and nephews and dreamed of one day opening a day care to work with kids professionally. officer keith young, a member of wisconsin state patrol technical reconstruction unit, was one of the first officers to arrive on the scene that night. constructionident veteran, officer young was able to correctly identify the cause of the crash, that the ignition had been turned from the run to the accessory position, shutting off the car's engine and disabling the airbags. officer young sent his report to the national highway -- highway traffic safety administration, and subsequently to gm.

despite the careful analysis, neither took action. for the parents of these this hearing is of little soulless. nothing we do here today can repair the damage that has been done. the best we can do is work to ensure that no other family has to endure what they have. and rankingchair member for allowing me to join this. mr. feinberg, for you i have one very simple question. one of the victims in the october 2006 accident was sitting in the backseat of the cobalt. expressed concerns to my staff in preparation for this hearing that gm did not consider this victim one of the official 13 victims because there is no haveeat airbag that could

been failed to deploy. mr. feinberg, can you shed some on if the backseat passengers will be included in this compensation program. >> the answer is absolutely yes. not only the backseat passenger, pedestrians, occupants of a second vehicle that collided all the defective vehicle included. all can file a claim. based on your summary, it sounds like an eligible claim great whether you are a driver, passenger, pedestrian, or occupant of another vehicle, all are eligible to file under this program. >> thank you. >> i have one question, and the need to move on to the other panel because we have a series of votes coming up midday. mr. feinberg, there is no punitive damages in this. and guta very difficult wrenching decision for lawyers. i want to make sure i understand this procedurally.

if for example a victim for missouri is 81 years old, her damages in terms of compensation are going to be smaller because she was near the end of her life. her case is such that i think factually there would be a strong case for punitive damages. claim and gets an award from you, is she then , orgated to take that award can she leave it on the table and allow her attorneys the opportunity to litigate the here as to whether or not claim could still be heard because of misrepresentations that were made in bankruptcy around the gm bankruptcy filing? >> if i understand your question, the compensation will remain on the table for 90 days, during which time the claimant can decide whether to accept that compensation, release her

right to litigate for punitive i think i'mdecide, going to go the litigation route and try and not only get competent tory -- compensatory but punitive damages. that is up to the claimant. >> it is a difficult choice for a lawyer, which i know you appreciate based on your background because typically the bar to overcome a bankruptcy decision as to what claims are discharged is difficult to overcome because you have to show that there was fraud. that is a high bar in the law. on the other hand, it seems hollow to many of these victim'' because theirjust loved one was at a certain age or had a certain income level, general motors will really never feel the brunt of what punitive damages are designed to do.

and that is to penalize a corporation for exactly the kind of conduct that was present at general motors. i'm sure you acknowledge this is a very difficult decision for the family. >> i do acknowledge that. you and i can agree that if a claimant decides that 100% compensation leaves open the question of a punitive damage verdict against gm, there will certainly be some lawyers and some claimants who will opt to seek punitive damages. it is not as if a claimant decides to accept full compensation -- it is not as if there is no option for somebody else to go and seek those punitive damages. other, one way or the your hypothetical is true, senator. somebody is certainly going to go after gm for punitive damages. just under the hypothetical he

would not be this claimant who decides i want 100% of this money right now. >> i wish we could leave this open longer so there would be time for that issue to be litigated, so the lawyers were making their advice based on what decisions the court had made. >> you know how long that would be. if there is going to be litigation over punitive damages, you are talking about years and years of uncertainty in that regard. >> i do understand that right thank you, mr. feinberg. -- that. thank you, mr. feinberg. >> two weeks are left before congress takes its scheduled august recess. the house returns tuesday at noon eastern. will vote on a series of suspension bills. the senate is in session monday beginning at 2:00. they are scheduled to vote on the confirmation of three nominations. what's the house live on c-span, the senate live on c-span2 -- w

atch the house live on c-span, the senate live on c-span2. several members of congress taking to twitter today. congressman mike fitzpatrick tweets -- tweet back to share your story. c-span spoke with the former astronaut buzz aldrin, who was aboard the apollo mission this "washington journal." you can watch it online at www.c-span.org or later tonight here on c-span. internetessional

caucus advisory committee hosted a discussion on the impact of nsa surveillance programs on u.s. commercial interests and global credibility. former nsa general counsel stewart baker and open internet advocates were among the speakers. this is just over an hour. >> i'm going to start with stewart baker. it is fascinating to know what you know and be where you are now. i'm going to open with stewart and a little shout out, he has got a great book. stilts.ng on you can download it for free. you can give it to your friends

for holidays. there is a blog that goes with it. ago in thelong 1990's the general counsel of the national security agency. i know them well. i have to say that this entire thing is -- i would call it a tragedy if it had not been so carefully orchestrated by people who had an agenda. the folks who control this data are determined to cause as much damage as they can to the national security agency, and they have done many of the things they accuse the intelligence community of doing. managing information, withholding information from the public that does not fit their narrative. they did that with the very first disclosure when they told us that nsa was collecting phone metadata for everybody in the

country, and withheld for two weeks any information which they had about all of the limitations on what nsa could do with that information and on their ability to actually look at it. and that has been consistent with the journalist approach. asr since, they have come close to mr. presenting this data as they could read the only people who control this data are people who are deeply hostile to the national security agency and in many cases, the national security of the united states. it is a tragedy. it raises some interesting issues for congress. the hard problem we are debating is how you do oversight of intelligence. it has got to be obvious to everyone that you cannot do intelligence by disclosing all your intelligence programs. you just won't have any

intelligence programs left if you do that. if you want to grant that proposition, it is hard to imagine what further oversight would have been appropriate. it does seem to me that there has been quite a bit of effective oversight in this context. i would be glad to talk more about the details of the oversight or how we ended up in the position we are in today. thanks. next we have kevin bankston, policy director of the open technology institute at the new american foundation and previously at the center for democracy and technology. have been following this area for a long time. kevin recently wrote an article -- was it the "washington post" -- that was on the anniversary, and it is a great read, which is on his website. kevin, why don't you give us your perspective on what is going on here? >> kevin bankston, open

technology institute, formerly aclunff. i come from a civil libertarian perspective when it comes to government surveillance. but i want to talk about today is the fact that however you fall on the national security versus personal privacy and , i thinkerties debate there can be arguments made, a very strong argument made that we need to see substantial reforms in the way we do surveillance to address all the other issues that are being revealed.the programs this is not just about national security, fairly unproven national security benefits versus civil liberties. it is about surveillance, national security versus privacy and civil liberties and versus the internet economy and versus the security of the internet and the openness of internet

architecture. it is about the continuing viability of our internet agenda abroad, the continued health of relations with our allies, and emerging governments abroad. even if you don't care about privacy and civil liberties, there are a lot of minuses in the plus minus columns when we're talking about these programs and how we need to respond to them. 1.i have heard that -- one point i have heard is a semantic one. information is out there, the damage has been done, and the u.s. government has to act in a way to address the credibility concerns it has now raised in regards to its own behavior and the security and functioning of the internet as a whole. in addition to the short piece

we did in cnn, we actually have a short paper that you can find on the desk out front that has been handed around that actually runs through the variety of costs that have been reported on since the snowden revelations first began, and runs through many of the things i just spoke advance ofthat is in a much longer paper that will be published before the end of the month. suffice to say on the economic impact, we have protections of billions of dollars lost to the u.s. internet industry. we are starting to hear numbers of particular companies saying things like, we have lost half of our international hosting business in the past year. there is a real impact coming from this, and we need to act to address it. >> thanks, kevin. director of policy at the business alliance. he is a fellow nebraskan. from ayou come at this

different perspective. you have a long history in doing technology policy and looking at of your member companies. do you want to address that? >> absolutely. where i ended up here, physically not in the middle between the two of you, is perhaps unfortunate current -- u nfortunate. it is where the technology industry has ended up, caught in the middle of a much larger debate about what should be seen as a new era of privacy. we are entering a new era of technology. i appreciate that kevin came are realhat consequences for the technology industry. is obviously a huge debate about privacy, about the balance

of law enforcement and surveillance interests, and national security. also should be seen as an economic debate because of the huge impact this will have on the technology sector moving forward. your companies are seeing ramifications after a year. they feel that they have seen an impact. can you elaborate on that? >> absolutely. is -- represents traditionalh of software and hardware companies in the i.t. sector. i not speaking for anyone of those members. at times i will probably be speaking for myself. it has been pretty widely reported, there has been a real impact on this.

you have seen probably most recently the news that verizon lost the contract with the german government, and that your governmenthe german specifically cited security concerns and wanting to keep its network domestic. we are hearing anecdotally a lot of examples of countries, customers, and users raising security concerns as to whether or not they should use us-based company to further services -- companies for their services. we are absolutely hearing a lot of examples of concerns from customers around the world. trade for an the moment, the impact on the u.s. government's credibility, we think this is real and not just a whole string issue are being used as a [indiscernible]

i am not sure about a trade lever as much as a lever to influence and grow economies around the world. the we're seeing is companies who have been drawn into this debate are u.s. companies. u.s. companies in many places are the leading providers of technology products an increasingly technology services around the world. what we have here is an inflection point, a moment for other countries, other companies to close the gap and to use this as an opportunity to really catch up to the i.t. industry in the united states. therere is no doubt that are some genuine privacy concerns here, but there's also no doubt that there are

mercantilist motivations on the part of the governments. the impact -- the biggest impact is in cloud. people say, we want our stuff stored there. the desire to have stuff stored locally has a lot of motivations. one is more jobs locally. this move by -- i'm sure kevin has been enthusiastic about it -- encrypting, communications, encrypt and -- encrypting the link to the e-mail provider, that has cut off access by local law enforcement to a whole bunch of information that they can only get now by coming to the united states and asking, pretty please, the u.s. will give us the information. they would rather force all of that e-mail to be stored in that theirermany so

law enforcement agencies can just walk in and take it, which is the general rule. motivationt of the in demanding that there be more vocalization -- localization of the cloud. >> if i might add to that, in some instances we agree on this, stu, several of the trends we're sending now preexisted the stoweden revelations but the revelations hastonned them, given am nickses to them. on the issue of data localization. prior to snowden, there were certain governments very focused trying to get american companies to locally both private data and data youtube videos and the like so local governments could exert greater control over content and have easier access to data. snowden revelations have much strengthened the hand of governments that are pushing for that kind of data localization.